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Belvoir Group PLC (BLV)

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Monday 12 April, 2021

Belvoir Group PLC

Final Results

RNS Number : 0493V
Belvoir Group PLC
12 April 2021
 

12 April 2021

BELVOIR!
 


BELVOIR GROUP PLC

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

 

Statement of audited Final Results for the year ended 31 December 2020

Resilient business model delivers another year of strong growth

Belvoir Group PLC (AIM: BLV), one of the UK's largest property franchise groups, is pleased to announce its Final Results for the year ended 31 December 2020.

Financial highlights

· Group revenue increased by 13% to £21.7m (2019: £19.3m) with 6% attributable to the acquisition of Lovelle

· Management Service Fees (MSF), the Group's core income from franchisees, grew by 3% to £9.1m (2019: £8.8m)

· 20% increase in profit before tax to £6.7m (2019: £5.6m), marking 24 years of consecutive profit growth

· Strong lettings bias reflected in gross profit ratio of 60% lettings: 17% sales: 19% financial services: 4% other (2019: 61%:16%:19%:4%)

· Year-end cash increased noticeably to £5.9m (2019: £3.6m)

· Net debt significantly reduced to £3.7m (2019: £6.9m) despite deploying £2.0m to acquire Lovelle

· Progressive dividend policy reinstated with total dividend for the year of 7.2p (2019: 6.7p including the catch-up final dividend of 3.3p) and dividend cover of 2.1x

· Full repayment of the £260,000 Government Covid-19 financial support received under the Coronavirus Job Retention Scheme and small business grants

Operational highlights

· Achieved growth across all three markets: lettings, sales and financial services, despite Covid-19 disruption

· Entered into strategic alliance with The Nottingham Building Society now with 11 dual-branded branches

· Franchised out all five of the Lovelle corporate-owned offices by January 2021

· Exceeded the 200 financial advisers milestone ending the year on 202 (2019: 166)

· Successfully progressed the strategic goal of pairing financial advisers and franchisees, with 141 of the Group's agencies now offering financial services through a Brook financial adviser (2019: 95)

· Expanded number of offices to 418 (2019: 396)

Post period end acquisition

· Earnings enhancing acquisition of the Nicholas Humphreys network of 18 franchise and 3 corporate-owned estate and lettings agencies for £4.0m in cash, adding around £2.8m of revenue and £1.0m of operating profit p.a.

Dorian Gonsalves, Chief Executive Officer, commented:

"Whilst the property sector was adversely affected by Covid-19 lockdowns, when it reopened in May following the first lockdown, demand across both sales and lettings was exceptionally strong and fuelled further still by the Government's announcement of the stamp duty holiday in July 2020.  The recent Budget announcement of an extension of the higher stamp duty thresholds through to the end of September 2021, albeit at a lower level from July, will do much to stimulate housing transactions further in 2021.

 

"Our franchise model proved its resilience once again.  The entrepreneurial spirit of our franchisees and advisers ensured that they made the most of the market opportunities as soon as the property sector opened up and started moving again.  Through a combination of strong trading in H2 and a reduction in overheads as we entered the pandemic, the Group was able to achieve a performance during 2020 that exceeded the Board's pre-Covid-19 expectations.

 

"Alongside organic growth, Belvoir's acquisition strategy continues to focus on investing in successful businesses that either expand our franchise footprint or introduce additional revenue streams to our franchisees, where there is scope for greater growth as part of the Group.  2020 saw the Belvoir Group enter into a strategic alliance with the Nottingham Building Society announced in July 2020 and more recently we added Nicholas Humphreys to our franchise network.  The Board continues to identify suitable targets that meet its acquisition criteria and which can deliver healthy returns on investment."

 

 

For further details:

 

Belvoir Group PLC

Dorian Gonsalves, Chief Executive Officer

Louise George, Chief Financial Officer

www.belvoirgroup.co m

 

 01476 584900

[email protected]

finnCap

Julian Blunt & Teddy Whiley (Corporate Finance)

Tim Redfern (ECM)

www.finncap.com

 

+44 (0) 20 7220 0500

Buchanan

Charles Ryland, Kim Looringh-van Beeck & Tilly Abraham

 +44 (0) 20 7466 5000

     

Notes for editors:

About Belvoir Group PLC

Founded in 1995 and listed on AIM in 2012 (BLV.L), Belvoir operates a nationwide property franchise group with 439 offices across six brands specialising in residential lettings, property management, residential sales and property-related financial services. With its Central Office in Grantham, Lincolnshire, the Group manages over 71,000 properties and reported record revenues of £21.7m in 2020 marking Belvoir's 24th year of unbroken profit growth.

 

For further information, please visit: www.belvoirgroup.com

 

 

Chairman's statement

 

In a year of managing the business through the unprecedented times of Covid-19, as a Board, we have had to act quickly and decisively in adapting to Government guidelines whilst ensuring our staff, and our franchisees, financial advisers and their staff, remained safe at all times. 

Performance

In 2020 Belvoir achieved its 24th year of uninterrupted profit growth which, when considering the challenges of lockdowns and economic uncertainty, is a tremendous result. Revenue increased by an impressive 13%, with both our property franchise and our financial services divisions holding up remarkably well, achieving growth of 12% and 14% respectively. Profit before tax increased 20% to £6.7m (2019: £5.6m), up £1.1m.

The Group now operates through 418 individual businesses comprising 318 (2019: 313) estate and lettings offices and 100 (2019: 83) financial services businesses.  We continue to help franchisees with their strategic growth through our assisted acquisitions programme and by encouraging greater diversity into sales and financial services. Our network of financial advisers exceeded its milestone of 200 advisers, ending 2020 with 202 (2019: 166) advisers, up 22%.   

Board and senior management

Belvoir continues to benefit from the loyalty, longevity and stability of its highly skilled Board and senior managers in providing unrivalled knowledge and experience.  Their measured approach prevailed throughout 2020, achieving an exceptional set of results in uncertain times.

Governance

The Board applies the 2018 Quoted Companies Alliance Corporate Governance Code (the "QCA Code") as the basis of the Group's governance framework.  We continue to promote a culture of good governance and we recognise how important our people are to the success of the Group.

Covid-19

At the start of the pandemic, the Board took the necessary steps to safeguard shareholder value by mitigating the potential shortfall in income through a thorough review of our cost base.  Measures taken included the temporary furloughing of 22% of our workforce, all of whom have now returned to work, and an agreed senior staff temporary salary reduction.  The Board was extremely grateful to employees for the sacrifices made during this period of uncertainty and to the Government for its Covid-19 financial support as these measures enabled the Group to retain staff during this very difficult period. Given the Group's resilient trading during 2020, we ensured that all staff were fully reimbursed for the salaries which were sacrificed.  Also, recognising our wider stakeholders, the Board took the socially responsible decision to repay in full to the Government the £260,000 received under the Coronavirus Job Retention Scheme and small business grants. 

Dividends

Having suspended the 2019 final dividend due to uncertainty at the start of the Covid-19 lockdown, the Board subsequently reinstated its progressive dividend policy and paid a catch-up dividend of 2.0p together with the 2020 interim dividend of 3.4p (2019: 3.4p).  I am pleased to confirm that the Board is proposing a further catch-up dividend of 1.3p per share to coincide with the final 2020 dividend of 3.8p. This represents a total dividend for the year of 7.2p (2019: 6.7p including the reinstated final dividend of 3.3p). 

Outlook

Trading in the year to date has been encouraging and in line with management expectations.  The lettings market remains resilient as demonstrated throughout the pandemic. The sales and financial services markets are expected to remain buoyant following the extension of the stamp duty holiday until 30 September, and will be boosted further by the recent Government's announcement of a new 95% mortgage guarantee scheme.

Whilst the successful roll out of the current vaccination programme provides "light at the end of the tunnel" in terms of pandemic restrictions, the Board is mindful of the uncertainty over the longer-term implications for the economy.  However, having traded successfully through 2020 and given the Government's initiatives to support the housing market, the Board has confidence in the resilience of the business model and the strength of the balance sheet.

Finally, I would like to thank all our franchisees, advisers and staff for their contribution in achieving such a strong set of results in 2020 and for their support during the Covid-19 crisis. Our people have played a pivotal role in ensuring that they kept, as best they could, a "business as usual service" to all their vendors, borrowers, buyers, landlords and tenants alike.

Michael Stoop

Non-Executive Chairman

 

 

 

Chief Executive Officer's statement

 

Responsive and resilient

- Dorian Gonsalves, Chief Executive Officer

 

2020 was a rollercoaster of a year with the Group being quick to respond to the changing circumstances and proving once again the resilience of the Belvoir business model, with a strong performance from the property franchise and financial services divisions alike.

Performance

The Group exceeded its pre-Covid-19 expectations with revenue increasing 13% to £21.7m (2019: £19.3m), of which 6% was attributable to the acquired Lovelle network comprising twelve franchised and five corporate-owned branches.  Of the underlying business, our property division was up 2% and our financial services division was up 14%, demonstrating that both successfully overcame the challenges faced by the pandemic, particularly during the first lockdown when the sector was all but closed from 25 March to 13 May.

Management Service Fees ("MSF"), the Company's core income from franchisees, was up 3% to £9.1m (2019: £8.8m).  The first national lockdown had minimal impact on lettings MSF, which increased by 2%, due to the strong recurring nature of this revenue stream. Meanwhile the more significant impact on sales MSF was partially mitigated by the exceptional recovery in house transactions in Q4 stimulated by the stamp duty holiday, which together with the acquisition of the Lovelle estate agency franchise network, helped sales MSF to achieve 9% growth.

The Group's diversification into financial services has continued to deliver growth with revenue from this division up £1.2m to £9.7m (2019: £8.5m) and gross profit up £0.3m to £2.8m (2019: £2.5m).  As with estate agency, the financial services market was adversely impacted by the first national lockdown, but the shortfall in new mortgage products was partially mitigated by shifting the focus to remortgages and life protection products.  The surge in house sales in H2 provided a significant boost to the mortgage market, resulting in record levels of commission from mortgages in Q4.

Despite Covid-19, all three markets continued to grow in 2020 with lettings up 10%, sales up 21% and financial services up 14%, demonstrating the resilience of the Belvoir franchise business model. Belvoir now has a portfolio of 65,065 (2019: 63,975) managed properties, and in 2020 Group house sales were up 8% to 8,003 (2019: 7,433) and the number of mortgages arranged was up 29% to 12,094 (2019: 9,342). The Group's network revenue, being the total revenue across all our Group companies, our franchisees and our financial advisers, totalled £96m (2019: £93m).

Covid-19

During 2020 our focus was on the safety of our staff and other stakeholders as well as on safeguarding the business.  We invested in Covid-19 safety measures and implemented a rota to reduce staff numbers in our offices at any one time.  Staff who are able to carry out their jobs from home did so throughout most of 2020 and from 13 May our corporate-owned branches operated on a locked door basis, accessible to members of the public by appointment only.  Our franchisees and financial advisers followed similar safety procedures and demonstrated that they were able to operate effectively having embraced digital practices that minimised face-to-face contact.

In March 2020 we launched our franchisee financial support package which included a six-month capital repayment holiday to franchisees who had borrowed funds from Belvoir under our assisted acquisitions programme and the waiver of monthly minimum fees so that MSF payable by franchisees were wholly percentage based.  These two measures reduced payments from franchisees by £0.5m between April and September 2020 giving those franchisees most severely affected by the pandemic some much needed financial flexibility.  During the year we delivered 86 free training webinars, providing valuable advice on how our franchisees and advisers could operate safely within Government guidelines and how to maximise the opportunities from a buoyant sales market.

Our strategic priorities

Our growth strategy continues to focus on investing in successful businesses that either expand our franchise footprint or introduce additional revenue streams to our franchisees, and where there is scope for greater growth as part of the Belvoir Group.  This has been demonstrated by the acquisition of five additional franchise networks to the Belvoir Group since 2015, the latest being the acquisition of Nicholas Humphreys in March 2021, and the acquisition of two financial services businesses to provide the platform for our growing financial services division.  The Board will continue to identify suitable targets that meet its acquisition criteria, deliver healthy returns on investment and are earnings enhancing.

Having launched the assisted acquisitions programme at the end of 2013, in 2020 the Belvoir Group reached the milestone of its 100th assisted acquisition having orchestrated eleven (2019: 24) such deals in 2020.  Although temporarily disrupted by Covid-19 with less appetite from both buyers and sellers to transact, we have seen renewed interest from our franchisees and more opportunities coming back to the market in 2021. 

The Group has made progress in its strategic goal of pairing financial advisers and franchisees, with 141, around 45%, of the Group's agencies now offering financial services through a Brook financial adviser, up from 95 at the end of 2019.  Clearly, there is further opportunity to roll out to the remaining Group offices as the financial services network continues to grow towards its objective of achieving full coverage across the UK. 

A highlight of 2020 was entering into a strategic alliance with The Nottingham Building Society, which has seen Belvoir's established network of franchisees, trading under the brands Belvoir, Northwood, Newton Fallowell and Lovelle, extending their estate agency and lettings services to eleven co-branded existing building society branches.  We expect this relationship to present further opportunities in 2021.

Creating value

The Group's continued success in acquiring and assimilating additional franchise and financial services businesses alongside organic growth in our networks has helped to deliver an increase of over 175% in profit before tax to £6.7m (2016: £2.4m) and 165% in EPS to 15.1p (2016: 5.7p) over four years. 

Our marketplace

The property sector was one of the first to be "unlocked" and since reopening, pent-up demand, fuelled further in July by the temporary reduction in stamp duty, gave rise to a surge of activity that continued throughout the remainder of the year.  As a result, and contrary to predictions at the outset of the pandemic of a property market collapse, the number of house transactions in 2020 fell by only 11% and the house price index increased by 8.5% in 2020 whilst the rental index was up 1.4%.

 

2021 started with unusually high pipelines of agreed sales and approved mortgages with a drive to get transactions completed before stamp duty bands returned to the normal levels, the timescales for which were extended to September in the UK Government's recent Budget.  Also announced in the Budget, the Government's 95% mortgage guarantee scheme will do much to meet the pent-up demand from first-time buyers, who were locked out of the market by the withdrawal of high loan-to-value mortgage lending in 2020.

 

Outlook

Whilst we are confident that the business will continue to operate effectively given the Government's policies to keep the housing sector moving, we are also hopeful that the successful roll out of the Covid-19 vaccine will see the return of some semblance of normality and stability in 2021, which will further benefit the Group and its markets. 

 

Dorian Gonsalves

Chief Executive Officer

 

 

Financial review

 

Providing clear guidance

- Louise George, Chief Financial Officer

 

In what was a difficult year to forecast, we aimed to give clear guidance throughout the year, ultimately delivering a strong set of financial results.

Revenue

Group revenue in 2020 increased by £2.4m to £21.7m (2019: £19.3m), of which £1.1m reflected the acquisition of Lovelle in January 2020 and £1.3m arose from growth in the underlying business.

MSF, our key underlying revenue stream from franchisees, increased by 3% to £9.1m (2019: £8.8m) with lettings MSF up 2% to £7.5m (2019: £7.3m) and MSF from property sales up 9% to £1.6m (2019: £1.5m).  Our Covid-19 financial support package for franchisees included the waiver of our monthly minimum fees to franchisees which reduced total MSF income in 2020 by £0.1m.

Income from corporate-owned offices was up £0.9m, which resulted from the acquisition of the Lovelle network comprising five corporate-owned offices.  As stated at the time of acquisition, it was the Board's intention to find a franchise solution for these offices.  All but one was franchised during the year with Lovelle Grimsby Lettings being franchised mid-January 2021. Of these, four were sold to the respective branch managers and one was rebranded to Newton Fallowell.  Also in 2020 we resold the Northwood Glossop portfolio, which had been brought back in-house in 2019, to an adjacent franchisee. As a result, revenue from these offices has been reported as £0.9m from assets held for sale.  Going forward, the contribution from these offices will be in the form of MSF and reported as part of our continuing operations.  The Group continues to operate two corporate-owned offices, Belvoir Grantham and Newton Fallowell Grantham, both of which remain profitable and will be retained long term.

Revenue from franchise sales in 2020 was £0.3m (2019: £0.2m). We opened seven (2019: six) new offices in 2020, of which five resulted from an existing franchise owner opening an additional office, one from a conversion by an independent agent and one from an assisted acquisition by a new franchise owner.  We also saw three (2019: eight) existing franchisees sell their business to a new franchise owner and four Lovelle corporate-owned offices being acquired by an existing franchisee or the branch manager.

Other income was relatively unchanged at £0.4m (2019: £0.5m).

Overall, our property division achieved 12% revenue growth with the ratio of lettings to sales at 78:22 (2019: 80:20) with the slight shift towards sales reflecting the acquisition of Lovelle, a predominantly estate agency network.

Revenue from our financial services division was up 14% to £9.7m (2019: £8.5m) resulting from the expansion of our network; this increased by 66 advisers to 202 (2019: 166) with over 70% of the recruitment achieved in the second half of the year.

Gross profit

Gross profit increased by 12% to £14.8m (2019: £13.2m) with the gross profit ratio by business activity, lettings 60%, sales 17%, financial services 19% and other 4% (2019: 61%:16%:19%:4%), reflecting the significant bias towards our recurring lettings income stream.

Administrative expenses

Administrative expenses increased by £0.6m to £8.2m (2019: £7.6m) including £0.9m of additional costs associated with the Lovelle acquisition.  This comprised £0.8m incurred operating five Lovelle corporate-owned estate and lettings agencies, and £0.06m amortisation charge in respect of the associated acquired intangibles.

Within administrative expenses there is a charge of £0.4m (2019: £0.2m) associated with the share options issued to Directors and certain staff between 2014 and 2020.

The underlying Belvoir business reported overheads savings of £0.5m resulting from a reduction in headcount at the start of the pandemic to match foreseeable needs, home-based working, travel limited to essential only, negotiated discounts from suppliers on services during the lockdown that benefited both the Group and our franchisees and general tight cost control. 

In H1 overheads were reduced by £0.3m as a result of a voluntary lockdown salary reduction for senior personnel and Government Covid-19 financial support through the Coronavirus Job Retention Scheme and small business grants.  All staff were reimbursed and all furlough monies and grants were repaid to the Government in H2.

Operating profit

Operating profit was £6.6m (2019: £5.7m), an increase of 17% over the prior year.

Other income

In May 2020, options over 40,000 shares in Mortgage Advice Bureau, an AIM-listed company, vested.  These were sold during the year and a gain of £0.1m was recognised in other income.

 

Profit before taxation

Profit before taxation of £6.7m (2019: £5.6m) is after interest receivable on franchisee loans of £0.2m (2019: £0.2m), which is regarded by the Group as part of its ongoing operations to extend the network reach.

Taxation

The effective rate of corporation tax for the year was 20.3% (2019: 16.6%).  The higher rate of effective tax is in part due to the Government's decision to maintain corporation tax at 19% rather than reduce to 17% as reflected in deferred tax calculations at the end of 2019. 

Earnings per share

Basic earnings per share was up 14% to 15.1p (2019: 13.3p) based on an average number of shares in issue in the year of 35,100,979 (2019: 34,938,606). When the dilutive effect of share options is incorporated, the earnings per share was 14.6p (2019: 12.9p).

Profit attributable to owners was £5.3m (2019: £4.7m).

Dividends

Following the Board's prudent decision to suspend the 2019 final dividend at the start of the Covid-19 lockdown, the Board reinstated its progressive dividend policy at the time of the 2020 interim results.  The interim dividend of 5.4p (2019: 3.4p), which was paid to shareholders on 30 October 2020, included 2.0p as a partial reinstatement of the final dividend for 2019.

The Board is proposing a final dividend for 2020 of 5.1p per share (2019: nil) which includes a further catch-up dividend of 1.3p per share and brings the total reinstated 2019 final dividend to 3.3p per share.  Subject to shareholders' approval at the AGM on 27 May 2021, this dividend will be paid on 1 June 2021, based upon the register on 23 April 2021.  The ex-dividend date is 22 April 2021.

In total, the 2020 dividend for the year will be 7.2p (2019: 6.7p including the catch-up final dividend of 3.3p) with dividend cover at 2.1x.  The Board aims to offer a reliable and growing income stream to investors whilst retaining sufficient funds for further investment to meet its strategic growth objectives.

Cash flow

The Group continues to achieve a high conversion of cash from operations with cash of £8.2m from operating activities at 110% of EBITDA (2019: 113%).  The net cash inflow from operations was £6.8m (2019: £6.0m) reflecting the enlarged Group. 

The net cash used in investing activities was £1.4m (2019: £0.3m):

· Newton Fallowell Limited acquired the trade and assets of the Lovelle network which comprised five corporate-owned offices and twelve franchised offices, for £2.0m cash consideration.

· Proceeds from the sale of corporate offices held for resale was £0.2m.

· The cash outflow of franchisee loans granted was £0.7m (2019: £1.2m) and reflects the lower level of assisted acquisitions activity in 2020.

· The cash inflow from repayments to the franchise loan book was £0.8m (2019: £1.4m).  Our financial support package for franchisees included a six-month capital repayment holiday to those franchisees who have borrowed funds from Belvoir to grow through our assisted acquisitions programme.  This reduced cash inflow by £0.4m.

· Interest received on the franchise loan book was £0.2m (2019: £0.2m).

· Proceeds from the sale of shares in MAB was £0.3m

During 2020 £0.9m (2019: £0.9m) was repaid against the HSBC loan and associated finance costs were £0.3m (2019: £0.3m). Dividend payments totalled £1.9m (2019: £2.5m). As a result, net cash outflow from financing activities totalled £3.1m (2019: net cash outflow of £4.0m).

Liquidity and capital resources

At the year end the Group had cash balances of £5.9m (2019: £3.6m) and a term loan of £9.6m (2019: £10.5m). The HSBC facility is repayable at £0.9m per year in half yearly repayments until March 2023 followed by a final repayment of £7.9m.  Bank covenants are set at dividend cover of greater than 4.0 and the debt service ratio at greater than 1.2, within which the business is forecast to operate with substantial headroom.

Unearned indemnity commission

Associated with our growing financial services division is the accounting treatment of unearned indemnity commission. This comprises three elements:

· The Group accounts for amounts withheld by Mortgage Advice Bureau from weekly commission payments in respect of unearned indemnity commission within other debtors. At the year end this balance was £1.3m (2019: £1.2m).

· Revenue is reduced to reflect the estimated clawback of commission by Mortgage Advice Bureau arising on the cancellation of life assurance policies within four years following inception and a refund liability is recognised for unearned indemnity commission. At the year end the refund liability was £1.3m (2019: £1.1m).

· Also, on a weekly basis the estimated clawback of commission recoverable from our financial advisers is accounted for within other debtors. At the year end this balance was £0.5m (2019: £0.4m).

Post-year-end acquisition

In March 2021 the Group acquired White Kite Holdings 2021 Limited, the holding company of White Kite Limited and Nicholas Humphreys Franchise Limited, which together operate "Nicholas Humphreys", a predominantly franchised lettings network of 18 franchised and three corporate-owned offices operating nationwide. The overall consideration for the acquisition was £4.0m which was satisfied in cash from existing cash reserves. In the year to 31 March 2020 Nicholas Humphreys, as acquired, recorded revenue of £2.8m and operating profit of £1.0m and at that date had net assets of approximately £0.1m.

Going concern

The Group continues to operate from a sound financial platform and is strongly cash generative. The opening cash balance of £5.9m enabled the Group to acquire the Nicholas Humphreys network in March 2021 for cash. Whilst the Group has demonstrated excellent resilience during the Covid-19 pandemic, the Board has nonetheless revisited its forecasts against a range of possible downside outcomes and has concluded that the Group has adequate resources to continue in operational existence, to meet its financial obligations including the 2020 bank loan repayment of £0.9m and to operate within its bank covenants for the foreseeable future.

Key performance indicators

The Group uses a number of key financial and non-financial performance indicators to measure performance, which are regularly reviewed by the Board to ensure that they remain relevant to the Group's operations.

 

Louise George

Chief Financial Officer

 

 

Group statement of comprehensive income

For the financial year ended 31 December 2020

 

 

Notes

2020

£'000

 

Continuing

operations

2020

£'000

Operations from assets held for sale

2020

£'000

 


Total

2019

£'000


Continuing operations

Revenue

3

20,759

933

21,692

19,252

Cost of sales

 

(6,896)

-

(6,896)

(6,036)

Gross profit

 

13,863

933

14,796

13,216

Administrative expenses

 

(7,377)

(792)

(8,169)

(7,556)

Operating profit

 

6,486

141

6,627

5,660

Finance costs

 

(261)

-

(261)

(342)

Finance income

 

181

-

181

230

Other income

 

123

-

123

32

Profit before taxation

 

6,529

141

6,670

5,580

Taxation

 

(1,326)

(27)

(1,353)

(928)

Profit and total comprehensive income for the financial year

 

5,203

114

5,317

4,652

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

 

 

5,203

 

114

5,317

4,652

Earnings per share attributable to equity holders of the parent company

 

 

 

 

 

Basic

6

 

 

15.1p

13.3p

Diluted

6

 

 

14.6p

12.9p

 

The accompanying notes form an integral part of these condensed consolidated financial statements.

 

 

Statements of financial position

As at 31 December 2020

 

 

Notes 

 

Group

 

2020

£'000

2019

£'000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Intangible assets

 

 

29,942

29,069

Investments

 

 

-

-

Financial assets

 

 

-

159

Property, plant and equipment

 

 

511

593

Right-of-use assets

 

 

455

616

Trade and other receivables

 

 

1,970

2,053

 

 

 

32,878

32,490

Current assets

 

 

 

 

Trade and other receivables

 

 

5,063

4,575

Assets held for sale

7

 

591

-

Cash and cash equivalents

 

 

5,934

3,586

 

 

 

11,588

8,161

Total assets

 

 

44,466

40,651

Liabilities

 

 

 

 

Non-current liabilities

 

 

 

 

Lease liabilities

 

 

289

442

Interest-bearing loans and borrowings

 

 

8,728

9,591

Deferred tax liability

 

 

1,446

1,440

 

 

 

10,463

11,473

Current liabilities

 

 

 

 

Trade and other payables

 

 

3,849

3,141

Lease liabilities

 

 

175

178

Interest-bearing loans and borrowings

 

 

861

861

Corporation tax liability

 

 

821

711

 

 

 

5,706

4,891

Total liabilities

 

 

16,169

16,364

Total net assets

 

 

28,297

24,287

Equity

 

 

 

 

Shareholders' equity

 

 

 

 

Share capital

 

 

351

349

Share premium

 

 

12,150

12,006

Share-based payments reserve

 

 

968

524

Revaluation reserve

 

 

162

162

Merger reserve

 

 

(5,774)

(5,774)

Retained earnings

 

 

20,440

17,020

Total equity

 

 

28,297

24,287

 

The accompanying notes form an integral part of these condensed consolidated financial statements.

 

 

Statements of changes in equity

For the financial year ended 31 December 2020

 

Group

 

Notes

Share

capital

£'000

Share

premium

£'000

Share-based

payments

reserve

£'000

Revaluation

reserve

£'000

Merger

reserve

£'000

Retained

earnings

£'000

As restated

Total

equity

£'000

As restated

Balance at 1 January 2019

 

349

12,006

337

162

(5,774)

14,884

21,964

Changes in equity

 

 

 

 

 

 

 

 

Issue of equity share capital

 

-

-

-

-

-

-

-

Share-based payments

4

-

-

187

-

-

-

187

Dividends

5

-

-

-

-

-

(2,516)

(2,516)

Transactions with owners

 

-

-

187

-

-

(2,516)

(2,329)

Profit and total comprehensive income for the financial year

 

-

-

-

-

-

4,652

4,652

Balance at 31 December 2019

 

349

12,006

524

162

(5,774)

17,020

24,287

Issue of equity share capital

 

2

144

-

-

-

-

146

Share-based payments

4

-

-

444

-

-

-

444

Dividends

5

-

-

-

-

-

(1,897)

(1,897)

Transactions with owners

 

2

144

444

-

-

(1,897)

(1,307)

Profit and total comprehensive income for the financial year

 

-

-

-

-

-

5,317

5,317

Balance at 31 December 2020

 

351

12,150

968

162

(5,774)

20,440

28,297

 

The accompanying notes form an integral part of these condensed consolidated financial statements.

 

 

Statements of cash flows

For the financial year ended 31 December 2020

 

 

 

 

Group

 

 

Notes

 

2020

£'000

2019

£'000

Operating activities

 

 

 

 

Cash generated from/(used in) operating activities

8

 

8,198

7,285

Tax paid

 

 

(1,379)

(1,237)

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

 

 

6,819

6,048

Investing activities

 

 

 

 

Acquisitions net of cash acquired

9

 

(2,039)

(338)

Sale of assets held for sale

7

 

176

-

Deferred and contingent consideration

 

 

(37)

(243)

Capital expenditure on property, plant and equipment

 

 

(46)

(99)

Disposal of corporate offices

 

 

25

54

Franchisee loans granted

 

 

(653)

(1,242)

Loans repaid by franchisees

 

 

758

1,380

Finance income received

 

 

181

230

Sale of MAB share options

 

 

271

-

Dividends received

 

 

-

-

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

 

 

(1,364)

(258)

Financing activities

 

 

 

 

Proceeds from share issue

 

 

146

-

Loan repayments

 

 

(890)

(938)

Equity dividends paid

 

 

(1,897)

(2,516)

Lease payments

 

 

(222)

(212)

Finance costs

 

 

(244)

(336)

Net cash used in financing activities

 

 

(3,107)

(4,002)

Net change in cash and cash equivalents

 

 

2,348

1,788

Cash and cash equivalents at the beginning of the financial year

 

 

3,586

1,798

Cash and cash equivalents at the end of the financial year

 

 

5,934

3,586

 

The accompanying notes form an integral part of these condensed consolidated financial statements.

 

 

Notes to the financial statements

For the financial year ended 31 December 2020

 

1 Approval

This announcement was approved by the Board of Directors on 9 April 2021.

 

2 Accounting policies

General information

Belvoir Group PLC is the ultimate parent company of the Group, whose principal activity during the year under review was that of selling, supporting and training residential property franchises. The Group also operates a network of financial service advisers who, through our franchise property networks, provide advice to our residential property clients.

Belvoir Group PLC, a public company limited by shares listed on AIM, is incorporated and domiciled in the United Kingdom.

Registered office

The address of the registered office and principal place of business of Belvoir Group PLC is The Old Courthouse, 60A London Road, Grantham, Lincolnshire NG31 6HR.

Basis of preparation

While the financial information included in this annual financial results announcement has been prepared in accordance with the recognition and measurement principles of International Accounting Standards in conformity of the requirements of the Companies Act 2006, this announcement does not contain sufficient information to comply therewith.

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2020 or 2019 but is derived from those accounts. Statutory accounts for the year ended 31 December 2019 have been delivered to the Registrar of Companies and those for the year ended 31 December 2020 will be delivered following the Company's annual general meeting.

The auditors have reported on those accounts; their reports were unqualified and did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports. Their reports for the year end 31 December 2020 and 31 December 2019 did not contain statements under s498 (2) or (3) of the Companies Act 2006.

Going concern and Covid-19

The ongoing impact of the Covid-19 pandemic has been considered by the Directors in light of the operating resilience demonstrated by the business during 2020, the expectation that all UK Covid-19 restrictions will have been lifted by mid-June and concerns over the possible long-term impact on the wider economy.  The Directors have revised the forecasts for the Group taking into account the potential ongoing impact of Covid-19 on trading over the twelve months from the date of signing the financial statements. Sensitivities have been applied to the base case model to reflect the possibility of an ongoing lockdown scenario with minimal impact on lettings income and moderately lower levels of income from sales and mortgage activity but no reduction in headcount or other overheads and no change in terms of business with franchisees.  Under all scenarios, which incorporate the acquisition of Nicholas Humphreys for cash, there is substantial headroom above that needed to continue operating within the banking facilities and in compliance with covenants.

Furthermore, a reverse stress test has been carried out against the base case model which demonstrates that, even without changing other parameters such as overheads and dividend payments, it would require a very substantial reduction in revenue, inconsistent with the recurring revenue nature of the business model, for the bank covenants to be breached.

After consideration of these forecasts and making appropriate enquiries, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due.

Standards adopted for the first time

There are no new or revised standards effective for annual periods beginning on or after 1 January 2020.

Standards, amendments and interpretations to existing standards that are not yet effective

There are no new standards, amendments to existing standards or interpretations that are effective as at 31 December 2020 relevant to the Group.  After Brexit, the UK will continue to apply International Accounting Standards in conformity with the requirements of the Companies Act 2006.

 

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 2020 the Board identified two operating segments, that of franchisor of property agents and property-related financial services.

The Directors consider gross profit as the key performance measure. The reported segments are 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 property franchise income streams, which are management service fees, revenue from corporate-owned offices and fees on the sale or resale of franchise territory fees; and one material financial services income stream, which is commission receivable on financial services. These revenue streams are split as follows:

 

Lettings

 

Property sales

 

Total revenue

 

2020

£'000

2019

£'000

 

2020

£'000

2019

£'000

 

2020

£'000

2019

£'000

Management service fees

7,467

7,292

 

1,589

1,464

 

9,056

8,756

Corporate-owned offices

1,360

725

 

890

586

 

2,250

1,311

 

8,827

8,017

 

2,479

2,050

 

11,306

10,067

Initial franchise fees and other resale commissions

 

 

 

 

 

 

242

176

Other income

 

 

 

 

 

 

449

476

Franchise property division

 

 

 

 

 

 

11,997

10,719

Commission receivable on financial services

 

 

 

 

 

 

9,695

8,533

Financial services division

 

 

 

 

 

 

9,695

8,533

Total revenue

 

 

 

 

 

 

21,692

19,252

 

Revenue from corporate-owned offices of £2,250,000 includes £933,000 relating to five Lovelle corporate-owned offices and the Northwood Glossop portfolio that were held as assets for sale pending being franchised out.  This comprises £578,000 of lettings revenue and £355,000 of sales revenue. 

Gross profit for the two divisions is split as follows:

 

Gross profit

 

2020

£'000

2019

£'000

Property franchise division

11,997

10,719

Financial services division

2,799

2,497

Total gross profit

14,796

13,216

 

4 Share-based payments

Administrative expenses include a charge of £444,000 (2019: £187,000) 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.

 

5 Dividends

Group

 

2020

£'000

2019

£'000

Final dividend for 2019

 

 

No final dividend was paid for 2019 (2019: 3.8p per share paid 26 May 2019)

-

1,328

Interim dividend for 2020

 

 

5.4p per share paid 30 October 2020 (2019: 3.4p per share paid 24 October 2019)

1,897

1,188

Total dividend paid

1,897

2,516

 

In March 2020, the Board decided that it would be prudent not to recommend a final dividend for the financial year ended 31 December 2019 given the uncertainty caused by Covid-19.  The 2020 interim dividend of 5.4p included a catch-up of 2.0p against the suspended final 2019 dividend.

The Directors propose a final dividend of 5.1p per share totalling £1,796,000 for 2020, payable 1 June 2021, to shareholders on the register on 23 April 2021.  As this remains conditional on shareholders' approval, provision has not been made in these financial statements.  Thisincludes a further catch-up of 1.3p, giving a total of 3.3p against the suspended final 2019 dividend.

6 Earnings per share

Group

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 earnings per share, adjusted to allow for the issue of shares under these instruments.

 

2020

£'000

2019

£'000

Profit for the financial year

5,317

4,652

 

 

 

Weighted average number of ordinary shares

Number

Number

Basic

35,101

34,939

Diluted

36,314

35,934

 

 

 

Earnings per share

Pence

Pence

Basic

15.1p

13.3p

Diluted

14.6p

12.9p

 

7 Assets held for sale

Group

 

Total

£'000

Additions

767

Disposals

(176)

At 31 December 2020

591

 

The acquisition of Lovelle included five corporate-owned offices that have been held for resale.  During the year the Horncastle office was franchised to the adjacent Newton Fallowell franchisee, and Hessle, Skegness and Grimsby Sales were franchised to the respective branch managers.  Total consideration was £176,000 in respect of these disposals.  On 15 January 2021, the remaining Grimsby Lettings office was franchised to the branch manager for £591,000.

 

8 Reconciliation of profit before taxation to cash generated from operations

Group

 

2020

£'000

2019

£'000

Profit before taxation

6,670

5,580

Depreciation and amortisation charges

843

819

Share-based payment charge

444

187

Impairment of franchisee loan book

68

158

Profit on disposal of corporate offices

-

(2)

Amortisation of debt costs

29

29

Finance costs

244

321

Interest paid on lease liabilities

17

21

Finance income

(181)

(230)

MAB share option recognition and related income

(112)

(32)

 

8,022

6,851

Increase in trade and other receivables

(569)

(145)

Increase in trade and other payables

745

579

Cash generated from operations

8,198

7,285

 

9 Acquisitions

Newton Fallowell Limited, a wholly owned subsidiary, acquired the trade and assets of the estate agency business operated by Lovelle Estate Agency Limited and Lovelle Bacons LLP (collectively referred to as "Lovelle") on 6 and 20 January 2020 respectively, for cash consideration of £2,007,000.  Lovelle comprised a network of twelve franchised estate agencies and five corporate-owned estate and lettings agencies.  The corporate-owned offices were franchised out by 15 January 2021 as planned, and these have been recognised at their net realisable value of £767,000, which is not materially different to the consideration as at acquisition.

The goodwill represents the value attributable to the new businesses and the assembled and trained workforce.

Deferred tax at 19% has been provided on the value of intangible assets defined as customer contracts.  No tax relief is available on the brand, the goodwill or the master franchise agreement acquired. Whilst the initial book value of goodwill is higher than the tax base, no deferred liability is accounted for and any subsequent impairments should be treated as permanent differences for tax and have no impact on deferred tax. The value of the acquired master franchise is amortised over 25 years. An initial deferred tax liability is recognised and reduced subsequently in line with amortisation creating a deferred tax credit.

During the year a further £8,000 was paid in respect of the Northwood Glossop portfolio.

Under the strategic alliance entered into with The Nottingham Building Society (NBS), Belvoir Property Management (UK) Limited acquired a small portfolio of managed properties for total consideration of £24,000.

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

 

NW Glossop

£'000

NBS

£'000

Lovelle

£'000

Total

£'000

Intangible assets

8

24

802

834

Assets held for sale

-

-

767

767

Deferred tax liabilities

-

-

(151)

(151)

Identifiable net assets acquired

8

24

1,418

1,450

Goodwill on acquisition

-

-

589

589

Consideration

8

24

2,007

2,039

Consideration settled in cash

8

24

2,007

2,039

 

Post-acquisition financial results

The acquisition of Lovelle was sufficiently close to the start of the year such that had completion taken place on the first day of the financial year, Group revenues and Group profit before tax would have been unaffected.  The five corporate-owned offices were categorised as assets held for sale and as such operations from these five offices has been reported as separately on the face of the Group statement of comprehensive income.

The acquisitions of the NW Glossop and NBS portfolios were immaterial to the Group results.

10 Post balance sheet events

Acquisition of Nicholas Humphreys

On 31 March 2021, Belvoir Group PLC acquired the entire share capital of White Kite Holdings 2021 Limited and its two subsidiaries, White Kite Limited and Nicholas Humphreys Franchise Limited, collectively referred to as Nicholas Humphreys.

Nicholas Humphreys, operates a national network of 18 franchised and three corporate-owned primarily lettings agencies. This transaction meets the definition of a business combination and will be accounted for using the acquisition method under IFRS 3.

The combined consideration of £4.0m was settled in cash from existing reserves post year end and comprises around £100,000 in tangible assets with the remainder being intangible assets and goodwill.

At the time that the financial statements have been authorised for issue, the initial accounting for this business combination is incomplete. As such the full disclosure of this business combination cannot be made at this time.

11 Posting of accounts

It is intended that the financial statements for the year ended 31 December 2020 will be made available to shareholders on the company's website www.belvoirgroup.com by 22 April 2021 and will also be available thereafter at the registered office, The Old Courthouse, 60a London Road, Grantham, NG31 6HR.

12 Annual General Meeting

The Annual General Meeting will be held at 10am on 27 May 2021 at the registered office, The Old Courthouse, 60a London Road, Grantham, NG31 6HR

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