Interim Results

RNS Number : 2767Y
Property Franchise Group PLC (The)
08 September 2020
 

8 September 2020

 

This announcement contains inside information.

 

THE PROPERTY FRANCHISE GROUP PLC

(the "Company" or the "Group")  

 

Interim Results for the six months ended 30 June 2020

Resilience shown through lockdown, followed by strong rebound in activity post easing

 

The Property Franchise Group, one of the UK's largest property franchises, is pleased to announce its interim results for the period ended 30 June 2020, and an update on current trading.

 

Highlights

· Robust revenue of £5.4m (H1 2019: £5.4m), despite the closure and challenges caused by Covid-19

· Management Service Fees ("royalties") of £4.2m (H1 2019: £4.6m)

· Operating margin held at 37% (H1 2019: 37%), demonstrating careful cost management 

· Adjusted EBITDA* of £2.5m (H1 2019: £2.4m)

· Profit before tax remained stable at £2.0m (H1 2019: £2.0m)

· Very strong balance sheet with a net cash position of £6.1m at 30 June 2020 (30 June 2019: £2.8m). Net cash generated from operations of £2.2m (H1 2019: £2.2m)

· Interim dividend reinstated at 2.1p per share

· Tenanted managed properties increased to 58,000 (H1 2019: 56,000)

· Group remains heavily weighted towards lettings, accounting for 73% of Management Service Fees (H1 2019: 70%)

 

Current trading

· The traditional brands saw an extremely strong increase in activity in July:

Sales agreed pipeline increased 25% over June 2020

Total lets increased by 28% over June 2020

· EweMove also recorded very high levels of activity across the board in July, beating previous records:

Sales listings increased 36% month-on month to reach 728 in July 2020, setting a new record

Sales agreed increased 28% month-on-month to reach 519, another new record for the brand

Website visits were double normal rates in July 2020 and actions taken, once on-site, more than doubled

· Management's confidence underpins its decision to build momentum behind strategic growth initiatives, re-initiate forecasts and set out a number of mid-term strategic objectives

 

*After adding back the share-based payments charge

 

Gareth Samples, Chief Executive Officer of The Property Franchise Group, said:

 

"Whilst the first half of this year was unlike any other, I am delighted with the resilience our business has shown and the first-rate performance of our franchisees who responded decisively and navigated well through the unprecedented environment. 

 

"Despite nearly two months of the first half spent operating under severe restrictions, and impacted by the tenant fee ban which came into force on 1 June 2019, we have demonstrated the true strength of our busines model. We have continued to generate high levels of revenue, held profit before tax stable at £2.0m, increased our cash balances and subsequently reinstated an interim dividend.

 

"The substantial increase in activity we recorded in June has continued, with record performances continuing to be set across both the lettings and sales markets in July. Whilst the future remains uncertain, what this period of volatility has shown is that we are both a robust business in the face of adversity as well as a market leader able to reap the rewards in better times. We are focussed on maximising the opportunities that the market currently presents with a clear focus to deliver on the execution of our key strategic growth initiatives."

 

 

The Company will be hosting a live private investor presentation on Wednesday 9 September 2020 at 14.00 BST. All existing and potential private investors interested in attending are asked to register for free using the following link:  https://bit.ly/TPFG_R

 

 

For further information, please contact:

 

The Property Franchise Group PLC  

Gareth Samples, Chief Executive Officer

David Raggett, Chief Financial Officer

 01202 292829

 

 

 

Cenkos Securities plc

Max Hartley, Callum Davidson (Nominated Adviser)

Julian Morse (Sales)

 

 0207 397 8900

 

 

Alma PR 

Susie Hudson

Justine James

Harriet Jackson

 

 0203 405 0205

 

 

 

About The Property Franchise Group PLC:

 

The Property Franchise Group PLC (AIM: TPFG) is one of the largest property franchises in the UK.

 

The Company was founded in 1986 and has grown substantially. Per annum, the Group's franchised network currently lets circa 32,000 properties, sells circa 11,000 properties, and manages circa 58,000 properties. The network generated revenues of £93m in FY 2019 and employed roughly 2,250 people at the end of 2019.

 

The Property Franchise Group's brands include its traditional portfolio: Martin & Co, CJ Hole, Ellis & Co, Parkers and Whitegates, and its   digitally enabled hybrid brand: EweMove.

 

Headquartered in Bournemouth, UK, the Company was listed on AIM on the London Stock Exchange in 2013. More information is available at   www.propertyfranchise.co.uk

 

 

 


Chief Executive Officer's Statement

 

I am very pleased to be reporting on my first half year as CEO, having commenced the role in April. I joined the business at a time of significant change and challenge, however, this has allowed me to get to know the team and understand the business very well over a short period of time. I have been delighted with the strong fundamentals which I have seen within the business, as well as the talent and dedication of our people.

 

The strength of the business is clearly demonstrated in the resilient results announced today. Revenue levels have remained robust, with £5.4 million being significantly ahead of management's initial expectation at the commencement of lockdown. We have also held our operating margin at 37%, a great achievement and an example of the Group's focus on careful management of costs. We are particularly pleased to have generated £2.0m in profit before tax again this period, in line with H1 2019, despite all of the external challenges faced and taking into account the impact of the tenant fee ban, which was not yet in force in the same period of the prior year.

 

We remain strongly cash generative and our cash balance increased to £6.1m as at 30 June 2020, with net cash generated from operations of £2.2m. The strength of our balance sheet provides the stability needed to now build further momentum behind our growth strategy, as well as to re-instate our progressive dividend policy.

 

The market for residential property sales has changed significantly throughout the year. Confidence increased in the early months of the year, driven by the election result, followed by a sharp decline in activity as a result of the Covid-19 housing market restrictions imposed in late March. Since the easing of restrictions in May there has been a   resurgence of activity driven largely by pent up demand and the stamp duty holiday. Throughout these ups and downs our franchisees have worked tirelessly to adapt to changing requirements and to capitalise on arising opportunities, demonstrating the adaptability and ingenuity of entrepreneurs, backed by the support of the Group.

 

Traditional brands demonstrate resilience and agility

 

Our traditional brands have performed resiliently during the period, generating MSF of £3.3m (H1 2019: £3.5m). This reflects our strategic weighting towards lettings and particularly the recurring nature of the lettings management service fees (MSF) revenue stream. Traditional brands' lettings MSF declined only 4% to £2.7m (H1 2019: £2.8m) over the period.

 

Property management activity remained strong throughout the first half, with the use of virtual viewings throughout the lockdown period allowing continued, albeit reduced, transactional lettings activity. From the end of May onwards our traditional brands have recorded a significantly increased demand for rentals with the time from instruction to let decreased in comparison to historic averages. To date there has been no material increase in rent arrears.

 

Sales activity was inevitably dormant whilst under restrictions, but thanks to a good performance before and after this period, the traditional brands generated £0.6m of sales MSF over the half (H1 2019: £0.7m).

 

Our ongoing focus on quality digital marketing has continued, with pay-per-click advertising delivering a good level of new business leads when being used, and cost per lead falling over the lockdown period.

 

Excellent performance from EweMove

 

EweMove has again demonstrated over this period the benefits of its unique, hybrid, highly customer centric and flexible cost based model. It delivered MSF of £0.9m in the half (H1 2019: £1.1m) and, with a similar reduction in costs, continued profitability which was ahead of H1 2019. The hybrid estate agency model continues to be an appealing option for estate agents and buyers alike who want to do things differently. We believe in the longer term that one impact of Covid-19 will be to increase interest in this type of model.

 

During the period of restrictions on physical sales activity, the brand benefitted from its franchise model with each individual business owner able to manage costs very effectively. The entirety of the EweMove footprint, which has now reached 230 people across 110 territories, was sustained over this challenging period, and since restrictions have eased our franchisees have been able to move rapidly to take advantage of the rising market.

 

We achieved record performances in June, beaten again in July with sales listings and sales agreed in July up 36% and 28% on June 2020 respectively. Having performed strongly and proven beyond doubt its resilience and adaptability, we are confident there is a significant opportunity to recruit new franchisees into EweMove, growing the brand's reach and taking market share. This will become a core part of the Group's growth strategy going forward.  

 

Our Covid-19 response

 

Throughout this period, and as previously communicated, our top priority has been the health, safety and wellbeing of our people and customers. We have provided consistent, high levels of support and guidance to our franchisees, building strong relationships and re-affirming our position as one team within one Group. Thorough PPE and risk assessments were undertaken when required and all viewings continue to be carried out in line with Government guidelines.

 

Prudent cost management has been a key focus with the Group moving quickly to implement a number of cost saving measures in March. These included the furlough of a small amount of head office staff and voluntary salary reductions for central office staff, including Board directors. New growth initiatives were deferred.

 

Pleasingly, the majority of these measures have now been reversed or eased, with almost all staff having returned from furlough and franchisees having resumed marketing spend to normal levels. New growth projects have recommenced.

 

All franchisees now have the capability in place to offer virtual viewings, and those that have adopted the technology into their core business model are seeing good results produced. 

 

Through both the guidance provided to franchisees and its financial management, the Group has worked to not only mitigate the negative impact but also to ensure it is well-positioned to take advantage of opportunities as they arise.

 

Strategic growth opportunities

 

Our business has clearly demonstrated over the period the strength of its existing model and operations; however, we are excited to have now resumed building momentum behind our strategic growth initiatives as we believe a great opportunity exists to further grow the Group.

 

Financial Services growth

We are committed to the strategic growth of our Financial Services division and see a healthy pipeline of potential acquisition opportunities. It is our intention to grow the number of financial services advisers serving our network to over 100 across all brands by the end of 2021. 

 

Developing residential sales activities in the traditional brands

Through the provision of additional support and training, we believe there is a good opportunity to increase the level of sales activity executed by our traditional brands. Sales and Financial Services activity goes hand in hand and through driving their growth in parallel there is scope to generate considerable additional revenue for the Group.

 

EweMove recruitment

Following several periods of growth and recent outstanding performance, the Group plans to invest in a recruitment campaign for the brand. EweMove is established as a leading hybrid operator, which continues to be highly relevant and which we believe will become even more so in a post-lockdown environment. The medium-term ambition is to double the number of territories in the footprint.

 

Acquisitions

The acquisition by our franchisees of local competitors' lettings books can increase the stability and profitability of their businesses. We continue to offer support to any franchisee looking to execute on an acquisition and believe there may be increasing numbers of potential opportunities in the current market environment.

 

We also continue to look for any larger acquisitions of franchise brands in our space, where it is clear this would bring significant additional value to the Group.

 

Digital marketing

Best-in-class digital marketing is essential to running a successful estate and/or lettings agency business and we continue to invest in our capabilities.

 

Outlook

 

Whilst uncertainty and potential challenges remain on the horizon and we continue to be alert to shifts in the external environment including changes in Government support, we have proven that the Group is truly resilient and can adapt with agility.

 

With a strong balance sheet in place and a significant rebound in activity seen post-period end I am excited to now begin looking towards the future and the pursuit of growth, pursuing those strategic initiatives already in place and reviewing potential new opportunities. Current trading has shown good momentum and the Board currently expects results for the full year to be in line with its pre-Covid expectations for the full year.

 

It is very clear to me that the Group has a substantial growth opportunity ahead of it and I look forward to updating shareholders further on our progress towards the aim of expansion in due course.

 

 

Gareth Samples

Chief Executive Officer

 

 

 

 

 

 

Financial Review

 

Revenue

 

Revenue for the six months ended 30 June 2020 was £5.4m (H1 2019: £5.4m) after adjustments for IFRS15. This was significantly more turnover than the Board expected when the lockdown begun and demonstrates both the stability created by managing a large number of properties for landlords, the ability to generate income in a crisis and, to some extent, the speed with which transactional activity in the lettings market has been restored since mid-May. The increased activity in the sales market has yet to feed through significantly to revenues due to the time taken to complete the purchase of a residential property. The Group expects to see this uplift in MSF from September 2020 onwards.

 

As a result, Management Service Fees ("MSF") from lettings represented 73% of total MSF in the period (2019: 70%).

 

Traditional Brands' MSF

Overall, the traditional brands generated MSF of £3.3m (H1 2019: £3.5m) reflecting the reduced transactional activity from the beginning of the lockdown in March 2020 until the easing of restrictions in May 2020. Lettings MSF declined 4% to £2.7m (H1 2019: £2.8m) whilst sales MSF declined 16% to £0.6m (H1 2019: £0.7m).

 

Lettings MSF for the prior period included MSF on tenants' fees of £0.3m due to the ban being implemented from 1 June 2019. This has been recovered in the current period through growth in the managed lettings portfolio generating £0.1m of additional MSF and growth in landlords' fees of £0.2m.

 

EweMove's MSF

EweMove franchisees pay a monthly licence fee and a completion fee per transaction. The total of the licence fees and completion fees for the six months ended 30 June 2020 was £0.9m (H1 2019: £1.1m). A 10% decline, once the rounding is factored out, on the same period of 2019 due to the impact of Covid-19. This was compensated for by a similar reduction in cost of sales.

 

Franchise Sales

Franchise sales income was £0.3m (H1 2019: £0.1m) with the growth coming from fees earned through the continued rationalisation of the traditional brands network. New recruits in the first half of this year for EweMove were 4 compared to 8 for the comparative period as the Group took the decision to suspend recruitment during the lockdown. EweMove reinstated its recruitment drive during June 2020. 

 

Other

Other income was £0.6m (H1 2019: £0.7m), down 16% on the six months ended 30 June 2019 mainly due to a reduction in the user charges paid by Martin & Co franchisees for Jupix, their operating software, where first line support is provided by the franchisor.

 

Financial Services

On 7 January 2020 the Company purchased an 72.25% share in Auxilium Partnership Limited ("Auxilium") from Mark Graves. Auxilium is a life assurance buying club providing brokers with more attractive commission rates for the transactions they generate. The Company has an option to buy out Mark's remaining shares in April 2022.

 

In its first 6 months of trading under the Company's ownership it generated £0.26m of turnover and a profit before tax of £0.03m. The Board sees Auxilium as an important element in its strategy to earn an enhanced return from financial services and, having suspended its financial services initiatives at the onset of the lockdown, has begun again to actively pursue that strategy.

 

Administrative expenses

 

Administrative expenses were almost identical to the same period for 2019 at £2.9m.

 

All employees agreed to a 20% reduction in basic salary and to bonuses/commissions being withdrawn from 1 April 2020. Salaries were returned to 100% of basic salary on 1 July 2020 for non-furloughed employees and it is the Group's expectation that bonuses will be paid in H2 due to the current trading performance. A few members of staff remained furloughed at 30 June 2020 but, due to the speed of recovery and the need to prepare for offices opening again, flexible furloughing was implemented in May and furloughed employees started to return to work. 

 

The Group scaled back and ended arrangements with third party contractors towards the end of March 2020. The savings were minimal because shortly after the termination periods ended the activity started to return.

 

The reductions resulting from negotiations with key suppliers have been passed straight on to franchisees in order to support their own businesses during these challenging times.

 

The Group also saw the change of CEO during this period which resulted in additional costs of £0.2m over the same period for 2019.

 

EBITDA

 

The Group's EBITDA was £2.5m (H1 2019: £2.4m). There were no exceptional items in either period but there was a share-based payment charge in the first half of 2020 of £68,023 compared to the comparative period where none existed which, once allowed for to calculate the adjusted EBITDA, results in adjusted EBITDA of £2.5m (H1 2019 £2.4m).

 

Operating profit

 

Operating profit was £2.0m (H1 2019: £2.0m) and operating margin was 37% (H1 2019: 37%).

 

Earnings per share

 

Earnings per share for the six months ended 30 June 2020 was 6.4p (H1 2019:  6.3p). The income attributable to owners was £1.6m (H1 2019: £1.6m).

 

Profit before income tax

 

Profit before tax was £2.0m (H1 2019: £2.0m).

 

Dividends

 

The Board has pursued a progressive dividend policy since the IPO. Its only deviation from this policy being the suspension of the final dividend for 2019 when the Board decided that it was prudent to retain the funds earmarked due to the onset of the lockdown and the significant uncertainty that existed about future performance.

 

To some extent, the uncertainty has reduced as the impact starts to be quantified by official statistics and the short-term performance looks very encouraging. Given this fact, together with the strength of the Group's cash generation even throughout the crisis period, the Board has decided to cautiously re-commence the progressive dividend policy once more. Accordingly, an interim dividend of 2.1p per share (H1 2019: 2.6p) will be paid on 23 September 2020 to shareholders on the register on 11 September 2020, being the record date, details of which have previously been announced. The ex-dividend date will be 10 September 2020.

 

Cash flow

 

At an operational level, the Group remains highly cash generative and its cash flow has annuity like characteristics. The net cash inflow from operating activities in the first six months of 2020 was to £2.2m (H1 2019: £2.2m).

 

The Group purchased a majority stake of Auxilium Partnership Limited on 7 January 2020 for £83,250 net of cash acquired and saw the full repayment of its temporary loan to Mark Graves of £0.2m.

 

The payments of assisted acquisitions support amounted to £0.1m (H1 2019: £0.1m) and are explained by incentives targeted at encouraging franchisees to acquire portfolios of tenanted managed properties.

 

In the first six months of 2019 the Group made bank loan repayments of £0.45m before paying off the remaining loans in H2 2019 to leave the Group with no bank debt.

 

As explained above, the Company did not pay a dividend in the first 6 months of 2020 whereas in the comparative period it paid a final dividend of £1.5m or 6.0p per share.

 

Overall cash balances increased by £2.2m to £6.1m (H1 2019: £3.9m).

 

Liquidity

 

The Group had a net cash balance of £6.1m at the end of the period (H1 2019: net cash £2.8m).

 

As previously disclosed, the Group considers it prudent to put in place additional bank facilities and, given the changing external environment, is now evaluating the potential for a new revolving cashflow facility which will initially provide £5m of new funds.

 

Financial position

 

The Company has consistently reported on its strong cash generating capabilities since IPO. This is no more evident than in these set of results where the Board was confident that the Group would not need to resort to external finance and that, with prudent management, could weather the impacts of Covid-19.

 

Whilst the residential property market has improved significantly since the lockdown began in March 2020, the Group has yet to see these improvements fully flow through to its cash flow and yet it generated the same cash from operations in the first half of 2020 as it did in the comparative period. This proven resilience and enhanced net cash position affords the Group headroom as the Board begins again to pursue its progressive dividend policy and generate an attractive yield for investors. At the same time, the strong balance sheet enables considerable latitude to weather the continuing uncertainty and to fulfil the Group's strategic plan.

 

 

David Raggett

Chief Financial Officer

 

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

FOR THE SIX MONTHS ENDED 30 JUNE 2020

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

6 Months Ended

 

6 Months Ended

 

12 Months Ended

 

 

 

30.06.20

30.06.19

 

31.12.19

 

Notes

 

£

 

£

 

£

CONTINUING OPERATIONS

 

 

 

 

 

 

 

Revenue

3

 

5,388,067

 

5,403,446

 

11,350,327

Cost of sales

 

 

(441,071)

 

(524,140)

 

(1,066,849)

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

4,946,996

 

4,879,306

 

10,283,478

Administrative expenses

 

 

(2,870,693)

 

(2,846,388)

 

(5,820,277)

Share-based payments charge

 

 

(68,023)

 

-

 

(441,709)

 

 

 

 

 

 

 

 

OPERATING PROFIT

 

 

2,008,280

 

2,032,918

 

4,021,492

Finance income

 

 

5,629

 

4,235

 

11,012

Finance costs

 

 

(482)

 

(24,432)

 

(38,310)

 

 

 

 

 

 

 

 

PROFIT BEFORE INCOME TAX EXPENSE

 

 

2,013,427

 

2,012,721

 

3,994,194

 

 

 

 

 

 

 

 

Income tax expense

4

 

(358,597)

 

(379,607)

 

(761,788)

 

 

 

 

 

 

 

 

 

PROFIT AND TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

 

 

 

 

 

 

 

 

1,654,830

1,633,114

 

3,232,406

 

 

 

 

 

 

 

 

PROFIT AND TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Owners of the parent

 

 

1,647,591

 

1,633,114

 

3,232,406

Non-controlling minority interest

 

 

7,239

 

 

-

 

-

 

 

 

1,654,830

 

1,633,114

 

3,232,406

 

Statutory:

Earnings per share attributable to owners of the parent

  5

 

6.4p

 

6.3p

 

12.5p

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to owners of the parent

5

 

6.3p

 

6.3p

 

12.1p

 

 

 

 

 

 

 

 

 

Adjusted:

Earnings per share attributable to owners of the parent

  5

 

7.6p

 

7.3p

 

16.2p

 

 

 

 

 

 

 

 

 

Diluted earnings per share attributable to owners

5

 

7.5p

 

7.3p

 

15.6p

            

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

AS AT 30 JUNE 2020

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

 

As at

 

As at

 

As at

 

 

 

 

 

30.06.20

30.06.19

31.12.19

 

 

Notes

 

£

 

£

 

£

 

ASSETS

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS

 

 

 

 

 

 

 

 

Intangible assets

 

7

 

14,662,878

 

15,033,021

 

14,786,402

 

Property, plant and equipment

 

 

 

76,120

 

88,549

 

77,555

 

Right of use asset

 

 

 

44,150

 

-

 

74,580

 

Prepaid assisted acquisitions support

 

 

 

681,535

 

483,325

 

657,948

 

 

 

 

 

 

15,464,683

 

15,604,895

 

15,596,485

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

 

Trade and other receivables

 

8

 

1,120,385

 

1,189,127

 

1,483,009

 

Cash and cash equivalents

 

 

 

6,125,378

 

3,917,335

 

4,011,463

 

 

 

 

 

7,245,763

 

5,106,462

 

5,494,472

 

TOTAL ASSETS

 

 

 

22,710,446

 

20,711,357

 

21,090,957

 

 

 

 

 

 

 

 

 

 

 

ISSUED CAPITAL AND RESERVES

 

 

 

 

 

 

 

 

 

ATTRIBUTABLE TO OWNERS OF PARENT

 

 

 

 

 

 

 

 

 

Share capital

 

9

 

258,228

 

258,228

 

258,228

 

Share premium

 

 

 

4,039,800

 

4,039,800

 

4,039,800

 

Other reserves

 

10

 

3,574,915

 

2,983,861

 

3,506,892

 

Retained earnings

 

 

 

11,097,266

 

8,526,709

 

9,449,675

 

 

 

 

 

18,970,209

 

15,808,598

 

17,254,595

 

NON-CONTROLLING INTEREST

 

 

 

7,239

 

-

 

-

 

TOTAL EQUITY

 

 

 

18,977,448

 

15,808,598

 

17,254,595

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

Borrowings

 

11

 

-

 

500,000

 

-

 

Lease liabilities

 

 

 

18,395

 

-

 

25,089

 

Deferred tax

 

 

 

1,082,994

 

1,327,888

 

1,140,227

 

 

 

 

 

1,101,389

 

1,827,888

 

1,165,316

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

 

Borrowings

 

11

 

-

 

650,000

 

-

 

Trade and other payables

 

12

 

1,944,360

 

1,534,323

 

2,000,175

 

Lease liabilities

 

 

 

27,254

 

-

 

52,660

 

Tax payable

 

 

 

659,995

 

890,548

 

618,211

 

 

 

 

 

2,631,609

 

3,074,871

 

2,671,046

 

TOTAL LIABILITIES

 

 

 

3,732,998

 

4,902,759

 

3,836,362

 

TOTAL EQUITY AND LIABILITIES

 

 

 

22,710,446

 

20,711,357

 

21,090,957

 

              

 

 

  CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

  FOR THE SIX MONTHS ENDED 30 JUNE 2020

 

 

Called up share capital

(note 9)

Retained earnings

Share premium

Other reserves

(note 10)

  Total

Non-controlling interest

Total

equity

 

£

£

£

£

£

£

£

Balance at 1 January 2019 (audited)

258,228

8,442,960

4,039,800

 2,983,861

15,724,849

-

15,724,849

Profit and total comprehensive income

-

1,633,114

-

-

1,633,114

-

1,633,114

Dividends paid (note 6)

-

(1,549,365)

-

-

(1,549,365)

-

(1,549,365)

Total transactions with owners

-

(1,549,365)

-

-

(1,549,365)

-

(1,549,365)

Balance at 30 June 2019 (unaudited)

258,228

8,526,709

4,039,800

2,983,861

15,808,598

-

15,808,598

Effect of adoption of IFRS 16 (net of tax)

-

(4,933)

-

-

(4,933)

-

(4,933)

Balance at 1 July 2019 as restated

258,228

8,521,776

4,039,800

2,983,861

15,803,665

-

15,803,665

Profit and total comprehensive income

-

1,599,291

-

-

1,599,291

-

1,599,291

Dividends paid (note 6)

-

(671,392)

-

-

(671,392)

-

(671,392)

Deferred tax on share-based payments

-

-

-

81,322

81,322

-

81,322

Share-based payments charge

-

-

-

441,709

441,709

-

441,709

Total transactions with owners

-

(671,392)

-

523,031

(148,361)

-

(148,361)

Balance at 31 December 2019 (audited) 

258,228

9,449,675

4,039,800

3,506,892

17,254,595

-

17,254,595

Profit and total comprehensive income

-

1,647,591

-

-

1,647,591

7,239

1,654,830

Share-based payments charge

-

-

-

68,023

68,023

-

68,023

Total transactions with owners

-

-

-

68,023

68,023

-

68,023

Balance at 30 June 2020 (unaudited)

258,228

11,097,266

4,039,800

3,574,915

18,970,209

7,239

18,977,448

                 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

FOR THE SIX MONTHS ENDED 30 JUNE 2020

 

 

Unaudited

 

Unaudited

 

Audited

 

6 Months Ended

 

6 Months Ended

 

12 Months Ended

 

30.06.20

30.06.19

 

31.12.19

 

£

 

£

 

£

Cash flows from operating activities

 

 

 

 

 

Profit before income tax

2,013,427

 

2,012,721

 

3,994,194

Depreciation and amortisation charges

453,990

 

384,193

 

874,727

Share-based payments charge

68,023

 

-

 

441,709

Finance costs

482

 

24,432

 

38,310

Finance income

(5,629)

 

(4,235)

 

(11,012)

 

 

 

 

 

 

Operating cash flow before changes in working capital

2,530,293

 

2,417,111

 

5,337,928

 

 

 

 

 

 

Decrease / (Increase) in trade and other receivables

169,735

 

(92,853)

 

(186,734)

(Decrease) / Increase in trade and other payables

(214,594)

 

59,642

 

554,049

 

 

 

 

 

 

Cash generated from operations

2,485,434

 

2,383,900

 

5,705,243

 

 

 

 

 

 

Interest paid

-

 

(26,568)

 

(41,380)

Tax paid

(325,554)

 

(195,943)

 

(973,361)

 

 

 

 

 

 

Net cash generated from operations

2,159,880

 

2,161,389

 

4,690,502

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchase of subsidiary net of cash acquired

(83,250)

 

-

 

-

Purchase of intangible assets

-

 

-

 

(73,467)

Purchase of tangible assets

(13,570)

 

(2,053)

 

(7,960)

Payment of assisted acquisitions support

(122,192)

 

(104,859)

 

(386,332)

Loan repayment received / (payment made)

200,000

 

-

 

(200,000)

Interest received

5,629

 

4,235

 

11,012

 

 

 

 

 

 

Net cash used in investing activities

(13,383)

 

(102,677)

 

(656,747)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Repayment of borrowings

-

 

(450,000)

 

(1,600,000)

Equity dividends paid (note 6)

-

 

(1,549,365)

 

(2,220,757)

Principal paid on lease liabilities

(32,100)

 

-

 

(56,533)

Interest paid on lease liabilities

(482)

 

 

 

(2,990)

Net cash used in financing activities

(32,582)

 

(1,999,365)

 

(3,880,280)

 

 

 

 

 

 

Increase in cash and cash equivalents

2,113,915

 

59,347

 

153,475

 

 

 

 

 

 

Cash and cash equivalents at the beginning of the period

4,011,463

 

3,857,988

 

3,857,988

 

 

 

 

 

 

Cash and cash equivalents at end of the period

6,125,378

 

3,917,335

 

4,011,463

             

 

 

 

  THE PROPERTY FRANCHISE GROUP PLC

 

NOTES TO THE INTERIM RESULTS

 

FOR THE SIX MONTHS ENDED 30 JUNE 2020

 

 

1.  GENERAL INFORMATION

The principal activity of The Property Franchise Group plc and its subsidiaries continues to be that of a UK residential property franchise business. In January 2020 the Group acquired a majority shareholding in a financial services business. The Group operates in the UK. The company is a public limited company incorporated and domiciled in the UK. The address of its head office and registered office is 2 St Stephen's Court, St Stephen's Road, Bournemouth, Dorset, UK.

2.  BASIS OF PREPARATION

The consolidated interim financial information for the six months ended 30 June 2020 was approved by the Board and authorised for issue on 8 September 2020. The results for 30 June 2020 and 30 June 2019 are unaudited. The disclosed figures are not statutory accounts in terms of Section 435 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2019 on which the auditors gave an audit report which was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006, have been filed with the Registrar of Companies. The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

This interim report has been prepared on a basis consistent with the accounting policies expected to be applied for the year ending 31 December 2020, and uses the same accounting policies and methods of computation applied for the year ended 31 December 2019.  

Going concern

Due to the uncertainty created by Covid-19, the decision was taken in March 2020 to create a working capital model focused on the potential impacts of Covid-19 and the actions that the Board could take to mitigate those impacts. This used as its basis the budget for 2020, the management accounts for the first two months of trading in 2020 and the actual results for 2019. The initial time period reviewed was from 1 March 2020 to 31 March 2021. Better than expected trading since May 2020, has meant performance has exceeded the outcomes modelled with the first half year's overall trading performance in 2020 strongly aligned to the same period for 2019. Whilst the Covid-19 model is still being used to inform decisions, the Board is now seeing a set of different outcomes with a more positive cash generation.

When assessing the foreseeable future the directors have looked at a period of 12 months from the date of approval of the interim financial information. The directors have a reasonable expectation that the Group has adequate resources to continue to trade for the foreseeable future and, therefore, consider it appropriate to prepare the Group's interim financial information on a going concern basis.

Significant accounting policies

The Group's interim financial information includes those of the parent company and its subsidiaries, drawn up to 30 June 2020. Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

 

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are expensed as incurred.

IFRS 16 Leases applied to the financial year beginning 1 January 2019 but was not been applied in the interim report for 2019 because the impact of IFRS 16 was immaterial to the Group's interim financial information. IFRS 16 was applied in the interim report 2020 and also in the financial statements for the year ended 31 December 2019.

 

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies.

 

 

 

3.  REVENUE

 

 

Unaudited

 

Audited

 

6 Months Ended

 

6 Months Ended

 

12 Months Ended

 

 

30.06.20

 

30.06.19

 

31.12.19

 

£

 

£

 

£

Management service fee

4,224,659

 

4,586,135

 

9,661,737

Franchise sales

279,108

 

79,842

 

194,702

Other

884,300

 

737,469

 

1,493,888

 

 

 

 

 

 

 

5,388,067

 

5,403,446

 

11,350,327

             

 

  All revenue is earned in the UK and no customer represents greater than 10 per cent of total revenue in the periods reported.

 

 

 

4.  TAXATION

The underlying tax charge is based on the expected effective tax rate for the full year to December 2020. The majority of the tax arises from applying this effective tax rate to the profit on ordinary activities.

 

 

 

 

5.  EARNINGS PER SHARE

Earnings per share is calculated by dividing the profit for the financial period by the weighted average number of shares during the period.

 

 

 

 

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

6 Months Ended

 

6 Months Ended

 

12 Months Ended

 

 

 

30.06.20

 

30.06.19

 

31.12.19

 

 

 

 

 

 

 

 

 

Profit for the period attributable to owners of parent

 

1,647,591

 

1,633,114

 

3,232,406

 

Amortisation on acquired intangibles

 

249,220

 

249,220

 

498,411

 

Share-based payments charge

 

68,023

 

-

 

441,709

 

 

 

 

 

 

 

 

 

Adjusted profit for the period

 

1,964,834

 

1,882,334

 

4,172,526

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares

 

25,822,750

 

25,822,750

 

25,822,750

 

 

 

 

 

 

 

 

 

Dilutive effect of share options on ordinary shares

 

 

546,515

 

-

 

870,179

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

 

6.4p

 

6.3p

 

12.5p

 

Diluted earnings per share

 

6.3p

 

6.3p

 

12.1p

 

 

 

 

 

 

 

 

 

Adjusted basic earnings per share

 

7.6p

 

7.3p

 

16.2p

 

Adjusted diluted earnings per share

 

7.5p

 

7.3p

 

15.6p

 

           

 

 

6.  DIVIDENDS

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

As at

 

As at

 

As at

 

 

 

30.06.20

30.06.19

31.12.19

 

 

 

£

 

£

 

£

Dividends (ordinary share of £0.01 each)

 

 

-

 

1,549.365

 

2,220,757

Dividend per share paid

 

 

-

 

6.0p

 

8.6p

 

     

An interim dividend for 2020 of 2.1p per share has been declared and will be paid on 23 September 2020. The total amount payable is £542,278.

 

 

 

 

 

 

7.  INTANGIBLE ASSETS

 

Master Franchise Agreement

 

Brands

 

Technology

 

 

Customer Lists

 

Goodwill

 

  Total

 

£

 

£

 

£

 

£

 

£

 

£

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2019 (Audited) and at 30 June 2019 (Unaudited)

7,803,436

 

1,972,239

 

274,210

 

214,940

 

7,226,160

 

17,490,985

Additions

-

 

-

 

63,467

 

10,000

 

-

 

73,467

Balance at 31 December 2019 (Audited) 

7,803,436

 

1,972,239

 

337,677

 

224,940

 

7,226,160

 

17,564,452

Additions

-

 

-

 

-

 

-

 

186,426

 

186,426

Balance at 30 June 2020

(Unaudited)

7,803,436

 

1,972,239

 

337,677

 

224,940

 

7,412,586

 

17,750,878

 

 

 

 

 

 

 

 

 

 

 

 

Amortisation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2019 (Audited)

1,738,702

 

155,694

 

128,155

 

143,679

 

-

 

2,166,230

Charge for period

206,587

 

33,363

 

39,518

 

12,266

 

-

 

291,734

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 30 June 2019 (Unaudited)

1,945,289

 

189,057

 

167,673

 

155,945

 

-

 

2,457,964

Charge for period

206,587

 

33,363

 

70,124

 

10,012

 

-

 

320,086

Balance at 31 December 2019 (Audited)

2,151,876

 

222,420

 

237,797

 

165,957

 

-

 

2,778,050

Charge for period

206,587

 

33,363

 

45,989

 

24,011

 

-

 

309,950

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 30 June 2020 (Unaudited)

2,358,463

 

255,783

 

283,786

 

189,968

 

-

 

3,088,000

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30 June 2019 (Unaudited)

5,858,147

 

1,783,182

 

106,537

 

58,995

 

7,226,160

 

15,033,021

31 December 2019 (Audited)

5,651,560

 

1,749,819

 

99,880

 

58,983

 

7,226,160

 

14,786,402

30 June 2020 (Unaudited)

 

5,444,973

 

1,716,456

 

53,891

 

34,972

 

7,412,586

 

14,662,878

 

 

Acquisition of Auxilium Partnership Limited

 

On 7 January 2020 The Property Franchise Group plc took an 85% share in Aux Group Limited, a newly incorporated holding company, which on the same date bought an 85% share in Auxilium Partnership Limited, a financial services business. The Property Franchise Group plc paid a cash consideration of £202,000 and the net assets acquired were £15,574, which resulted in goodwill of £186,426 being recognised in these financial statements. Aside from goodwill, there were not considered to be any other material intangible assets to be recognised.

 

 

 

 

8.  TRADE AND OTHER RECEIVABLES

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

As at

 

As at

 

As at

 

 

 

30.06.20

30.06.19

31.12.19

 

 

 

£

 

£

 

£

 

 

 

 

 

 

 

 

Trade receivables

 

 

35,103

 

237,304

 

79,787

Loans to franchisees

 

 

58,538

 

80,227

 

78,411

Other receivables

 

 

19,780

 

10,113

 

202,607

Prepayments and accrued income

 

 

1,006,964

 

861,483

 

1,122,204

 

 

 

 

 

 

 

 

 

 

 

1,120,385

 

1,189,127

 

1,483,009

         

 

9.  CALLED UP SHARE CAPITAL

 

 

Unaudited

As at

30.06.20

 

Unaudited

As at

30.06.19

 

Audited

As at

31.12.19

 

 

£

 

£

 

£

Group

 

 

 

 

 

 

25,822,750 allotted issued and fully paid Ordinary Shares of 1p each

 

 

258,228

 

 

 

258,228

 

 

 

258,228

10.  OTHER RESERVES

 

 

Merger

 Reserve

 

Share Based Payment Reserve

Other Reserve

 

Total

 

 

 

£

 

 

  £

 

  £

  £

1 January 2019 (Audited)

 

  2,796,984

 

186,877

-

2,983,861

30 June 2019

 

  2,796,984

 

186,877

-

2,983,861

31 December 2019 (Audited)

 

 

2,796,984

 

 

628,586

 

81,322

 

3,506,892

30 June 2020

 

2,796,984

 

696,609

81,322

3,574,915

 

  Merger reserve

The merger reserve relates to the acquisition of Martin & Co (UK) Limited by The Property Franchise Group plc.  This did not meet the definition of a business combination and therefore, falls outside of the scope of IFRS 3. This transaction was accounted for in accordance with the principles of merger accounting as set out in Financial Reporting Standard 6 - Acquisitions and Mergers.

 

  Share-based payment reserve

The share-based payments reserve comprises charges made to the income statement in respect of share-based payments and related deferred tax impacts under the Group's equity compensation scheme.

 

 

                     

 

11.  BORROWINGS

 

 

Unaudited

 

Unaudited

 

Audited

 

 

As at

 

As at

 

As at

 

 

30.06.20

 

30.06.19

 

31.12.19

 

 

£

 

£

 

£

Repayable within 1 year:

 

 

 

 

 

 

Bank loan (term loan)

 

-

 

650,000

 

-

 

 

 

 

 

 

 

Repayable in more than 1 year:

 

 

 

 

 

 

Bank loan (term loan)

 

-

 

500,000

 

-

 

 

 

 

 

 

 

Bank loans due after more than 1 year are repayable as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Between 1 and 2 years

 

-

 

400,000

 

-

Between 2 and 5 years

 

-

 

100,000

 

-

 

As at 30 June 2020 and 31 December 2019 the Group had no outstanding borrowings. All loans were repaid in full in October 2019.

 

 

12.  TRADE AND OTHER PAYABLES

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

As at

 

As at

 

As at

 

 

 

30.06.20

30.06.19

31.12.19

 

 

 

£

 

£

 

£

Trade payables

 

 

327,504

 

152,596

 

741,576

Other taxes and social security

 

 

875,703

 

540,404

 

575,600

Other payables

 

 

249,231

 

119,545

 

118,546

Accruals and deferred income

 

 

491,922

 

721,778

 

564,453

 

 

 

1,944,360

 

1,534,323

 

2,000,175

 

 

 

 

 

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