03:00 Tue 02 Apr 2019
Belvoir Lettings PLC - Preliminary results
BELVOIR!
(the "Company", the "Group" or "Belvoir")
Preliminary results for the year ended
Record Results and 22nd year of Continued Growth
Financial highlights
· 21% increase in Group revenue to
· Growth in management service fees (MSF) of 7% to
· Strong lettings bias reflected in gross profit ratio of 71% lettings:18% sales:11% financial services (2017: 74%:19%:7%)
· Exceptional credit of
· 40% increase in profit before tax to
· Strong cash flow from operating activities of
· Increased year-end bank balance of
· Net debt of
· Adjusted fully diluted EPS of 11.7p (2017: 10.7p)
· Recommended final dividend up 9% to 3.8p (2017: 3.5p) giving total dividend for the year of 7.2p (2017: 6.9p)
Operational highlights
· Acquisition of MAB Glos, a network of 87 financial services advisers operating through 64 offices
· Further integration of Northwood into Group functions, reducing cost base by
· 26 (2017: 23) franchisee assisted acquisitions completed, adding over
· 8% increase in properties under management at 62,780 (2017: 58,020)
· Average MSF per office up 8% to
· Recruitment of ten (2017: six) new franchise owners
· Net increase of 94 financial service advisers (including 87 MAB Glos advisers) to 123 (2017: 29)
· Number of offices up to 365 (2017: 300)
· Encouraging start to 2019
Dorian Gonsalves, Chief Executive Officer of Belvoir Lettings, commented:
"The Group achieved another year of significant growth with revenue up 21% to
2018 saw the Group invest further into financial services with the acquisition of MAB Glos which has provided a platform for Belvoir to build a nationwide network of financial advisers to work with our franchise owners to maximise the sales of mortgages and other property-related financial services to our customers.
Belvoir is uniquely positioned within the property sector, benefiting from the agility of a franchise business model compared with the larger corporate players, whilst providing our networks with the Central Office systems and support, not available to the smaller independent agents. Our value creating strategy has enabled us to consistently deliver profit growth for over two decades and achieve a threefold increase in profit before tax since 2014. Belvoir is a strongly cash generative business with revenues underpinned by the recurring 'annuity-style' lettings income stream coupled with the diversification into complementary property-related services, which will enable the Group to overcome changes and outperform in the sector over the coming year."
For further details:
Dorian Gonsalves, Chief Executive Officer |
01476 584900 |
Cantor Fitzgerald Europe Rick Thompson, Phil Davies, Will Goode |
0207 894 7000 |
|
|
Buchanan Charles Ryland, Victoria Hayns, Maddie Seacombe, Tilly Abraham |
0207 466 5000 |
Note to Editors:
About
Founded in 1995 and listed on AIM in 2012 (BLV.L), Belvoir operates a nationwide property franchise group with 365 offices across four brands specialising in residential lettings, property management, residential sales and property-related financial services. With its Central Office in Grantham, Lincolnshire, the Group manages 62,780 properties and reported revenue of
Chairman's statement
Belvoir achieved a 22nd year of uninterrupted profit growth despite the backdrop of another challenging year for the property industry with a flat sales market, the ongoing threat of the tenant fee ban and the uncertainties surrounding Brexit.
I am pleased to report that the
Performance
In 2018 revenue increased by 21% and profit before tax by 40% driven by a strong performance from our property franchise network and additional contributions from our recent financial services acquisitions. These are impressive figures in a flat property market which saw a modest UK rental index growth and a small increase in house prices offset by a reduction in residential property transactions. The Group's franchise owners continue to thrive by taking advantage of the numerous growth opportunities available to them, including the roll out of property sales, the assisted acquisitions programme, the use of our strong branding and marketing materials, and our growing financial services offering. Whilst closures have been witnessed elsewhere in the sector, the number of high street offices within our property network remains at 300 with the average MSF per franchise office up to
Governance
During the year the Board adopted the 2018 Quoted Companies Alliance Corporate Governance Code (the "QCA Code") as the basis of the Group's governance framework, in line with the
Within the
Board changes
Since my report last April, Andrew Borkowski has stepped down as Non-Executive Director. I would like to thank Andrew for his considerable contribution to the growth strategy of the Group over the last four years. At the same time, I am delighted to welcome Paul George who joined the Board last June as a Non-Executive Director. Paul currently has executive responsibilities for corporate governance and corporate reporting at the
The Group has a stable and highly skilled team of Directors and senior managers and as Chairman, I am indebted to them for their leadership, loyalty, hard work and professionalism. Indeed, it is this longevity and stability of the senior team that provides the strong base from which the Group continues to grow and prosper in this competitive environment.
Shareholder returns
The Group aims to offer a reliable income stream to investors whilst also investing in the business to further its strategic growth objectives. I am delighted to announce that our proposed final dividend payment for 2018 will be 3.8p (2017: 3.5p) giving a total dividend for the year of 7.2p (2017: 6.9p) in line with our progressive dividend policy.
Outlook
The Board is confident that 2019 will see further opportunities for growth for the
Mike Goddard
Chairman
Operating review
The Group achieved another year of significant growth outperforming both the sales and lettings elements of the housing market and the property-related financial services market.
Performance
Management service fees (MSF), our main source of revenue from our property franchisees, increased by 7.3% with growth across all three brands both from lettings and sales. Our like-for-like lettings growth of 2.6% was more than double the rental index of 1%1. Lettings were further boosted by 4.5% from our successful assisted acquisition strategy. Against a backdrop of a 2%2 decrease in the number of UK property transactions and a modest increase of 2.5%3 in house prices, our MSF from sales increased by 8.4%.
Financial services are of growing importance to the Group following our acquisition of Brook and MAB Glos, and now represents 10% of gross profit. Brook, on a full-year comparative basis, increased its revenue from financial services by 20% compared with a 3.7%4 increase in the value of gross mortgage advances.
The Group's network revenue, this being total revenue across all our Group companies, franchisees and advisers, now stands at
Our strategic priorities
Our Group strategy is to develop individual businesses operating within a network supported by a Central Office function. In recent years, we have migrated from operating solely through our original franchise network, Belvoir, to encompassing Newton Fallowell and Northwood as part of a multi-brand strategy, and we still see further strategic opportunities from bringing other significant franchise networks into the Group.
Having built a platform of 300 franchised offices across our three brands, we have targeted growth of those offices through organic growth and franchisee-led acquisitions and additional property-related income streams, and this is evidenced by the significant average MSF per office growth.
Our assisted acquisitions strategy has proved to be an incredible success story. In 2018 we processed 26 (2017: 23) deals bringing on board a total of
Financial services is the first step in our broader strategy of bringing other property-related services into the Group. Brook and MAB Glos provide the platform for building a nationwide network of financial advisers to maximise the penetration of mortgages and other property-related financial services to our customers, to the mutual benefit of the advisers themselves, our franchisees and the wider Group.
Creating value
We believe that the creation of value for our shareholders is deliverable through the creation of value for our franchisees and financial advisers, and it is this belief that underpins the strategies outlined above. There are economies of scale in operating a larger network and our focus on the growth of existing offices can be achieved with minimal increase in overheads. The Group has consistently delivered profit growth, and since 2014 adjusted profit before tax has increased three-fold to
Our marketplace
House price increases and rental growth were both at historically low levels nationally. House price inflation of 2.5%3 was the lowest annual growth since
The proportion of households in the private rented rector (PRS) has remained static and whilst the changes to the tax regime for landlords has seen landlord instructions decline, this has not been at the rate expected. Further legislative changes including the tenant fee ban, compulsory client money protection for lettings agents, and, in the longer term, the introduction of a redress scheme for tenants of the 52% of private landlords managing their own portfolio will undoubtedly impact on the lettings market in the coming years.
Belvoir is well prepared for the tenant fee ban, which comes into force on
Outlook
Belvoir is uniquely positioned within the property sector benefiting from the agility of a franchise business model compared with the larger corporate players, whilst providing our networks with the Central Office systems and support not available to the smaller independent agents. Our revenue is underpinned by the recurring "annuity-style" lettings income stream, and coupled with this we have diversified into complementary property-related services, which will enable the Group to overcome changes in the sector over the forthcoming year.
Dorian Gonsalves
Chief Executive Officer
4https://www.fca.org.uk/data/mortgage-lending-statistics
Financial review
Revenue
Group revenue in 2018 increased by 21% to
MSF, our key underlying revenue stream, increased by 7.3% to
Income from corporate-owned offices was down
Within our property franchise division the ratio of lettings to sales remains at 80:20 (2017: 80:20).
Revenue from franchise sales in 2018 was
Revenue from financial services benefited from a full year ownership of Brook acquired
Gross profit
The inclusion of financial services over the past two years has introduced gross profit into our reporting due to the commission paid to the financial advisers being a direct cost. Gross profit increased by 5% to
The greater significance of financial services to the Group is evidenced by our gross profit ratio by business activity of lettings to sales to financial services being 71%:18%:11% (2017: 74%:19%:7%).
Administrative expenses
Non-exceptional administrative expenses increased by
Exceptional administrative expenses of
Operating profit
Operating profit was
Other income
Other income of
Exceptional items
Exceptional items include a credit of
Profit before taxation
Profit before taxation of
Taxation
The effective rate of corporation tax for the year was 20.2% (2017: 24.2%). In 2017 the effective rate of corporation tax was higher due to
Earnings per share
Basic earnings per share was up 45% to 12.5p (2017: 8.6p) based on an average number of shares in issue in the year of 34,938,606 (2017: 34,638,939). When diluted to incorporate 2,171,073 (2017: 1,830,399) share options, the earnings per share was 11.8p (2017: 8.1p).
Adjusted basic earnings per share of 12.4p (2017: 11.3p) reflects net adjustments of
The profit attributable to owners was up 48% to
Dividends
The Board is proposing a final dividend for 2018 of 3.8p per share (2017: 3.5p). Together with the interim dividend of 3.4p paid to shareholders on
Subject to shareholders' approval at the AGM on
Cash flow
The net cash inflow from operations was
The net cash used in investing activities was
· On
· The Newton Fallowell Grantham lettings franchise was acquired for
· The deferred and contingent consideration of
·
· During the year the net cash inflow from the franchise loan book was
·
During the year, loans advanced by the HSBC totalled
Liquidity and capital resources
At the year end the Group had cash balances of
Financial position
The Group continues to operate from a sound financial platform and is strongly cash generative. This, together with the
Key performance indicators
The Group uses a number of key financial and non-financial performance indicators to measure performance. The Group also uses alternative performance measures to improve comparability of information between reporting periods and across the sector for uncontrollable and one-off factors, which impact upon IFRS measures, to aid the users of the annual report in understanding the activity taking place across the Group's portfolio.
The Board has reviewed and updated the KPIs below to ensure that they remain relevant to the Group's operations. Following the Group's investment in two financial services businesses, the Board has recognised the need to introduce new KPIs to track the performance of the financial services division. Also, the assisted acquisitions growth strategy is achieving increased success in the territories affected, and so the average size of the franchise offices is deemed by the Board to be as important an indicator of progress as the number of offices itself. As such, the key performance indicators have been extended to include the net financial services commission as a key financial indicator, and the average MSF per franchise office, the number of financial advisers and the average commission per adviser as new key non-financial indicators.
The key financial indicators are as follows:
· management service fees;
· net financial services commission;
· adjusted net profit before tax; and
· adjusted earnings per share.
The key non-financial indicators are as follows:
· number of franchised offices;
· number of managed properties;
· average MSF per franchised office;
· additional MSF arising from assisted acquisitions;
· number of financial advisers; and
· average commission per adviser.
The KPIs will be reported on in further detail in the Annual Report.
Louise George
Chief Financial Officer
Group statement of comprehensive income
For the financial year ended
|
Notes |
2018 £'000 |
2017 £'000 |
Continuing operations |
|
|
|
Revenue |
3 |
13,702 |
11,299 |
Cost of sales |
4 |
(2,372) |
(510) |
Gross profit |
|
11,330 |
10,789 |
Administrative expenses |
|
|
|
Non-exceptional |
4 |
(6,616) |
(6,540) |
Exceptional |
6 |
(169) |
(326) |
|
|
(6,785) |
(6,866) |
Operating profit |
|
4,545 |
3,923 |
Changes in fair value to contingent consideration |
6 |
809 |
(134) |
Finance costs |
|
(226) |
(192) |
Finance income |
|
265 |
313 |
Other income |
|
87 |
- |
Profit before taxation |
|
5,480 |
3,910 |
Taxation |
|
(1,106) |
(948) |
Profit and total comprehensive income for the financial year |
|
4,374 |
2,962 |
Profit for the year attributable to the equity holders of the parent company |
|
4,374 |
2,962 |
Basic earnings per share from continuing operations |
8 |
12.5p |
8.6p |
Diluted earnings per share from continuing operations |
8 |
11.8p |
8.1p |
The Group's results shown above are derived entirely from continuing operations.
The accompanying notes form an integral part of these condensed consolidated financial statements.
Statements of financial position
As at
|
Notes |
Group |
|
Company |
|
||
2018 £'000 |
Restated 2017 £'000 |
|
2018 £'000 |
2017 £'000 |
|
||
Assets |
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
Intangible assets |
|
29,156 |
26,162 |
|
- |
- |
|
Investments |
|
- |
- |
|
39,722 |
39,533 |
|
Financial assets |
|
159 |
- |
|
- |
- |
|
Property, plant and equipment |
|
646 |
635 |
|
35 |
45 |
|
Trade and other receivables |
|
2,768 |
3,617 |
|
- |
- |
|
|
|
32,729 |
30,414 |
|
39,757 |
39,578 |
|
Current assets |
|
|
|
|
|
|
|
Trade and other receivables |
|
3,729 |
2,813 |
|
6,490 |
4,931 |
|
Cash and cash equivalents |
|
1,798 |
1,350 |
|
214 |
226 |
|
|
|
5,527 |
4,163 |
|
6,704 |
5,157 |
|
Total assets |
|
38,256 |
34,577 |
|
46,461 |
44,735 |
|
Liabilities |
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
Trade and other payables |
|
- |
- |
|
- |
- |
|
Interest-bearing loans and borrowings |
9 |
10,452 |
5,578 |
|
10,452 |
5,578 |
|
Deferred tax |
|
2,018 |
1,989 |
|
6 |
8 |
|
|
|
12,470 |
7,567 |
|
10,458 |
5,586 |
|
Current liabilities |
|
|
|
|
|
|
|
Trade and other payables |
|
2,499 |
6,137 |
|
1,169 |
5,657 |
|
Interest-bearing loans and borrowings |
9 |
925 |
866 |
|
925 |
866 |
|
Tax payable |
|
769 |
566 |
|
- |
- |
|
|
|
4,193 |
7,569 |
|
2,094 |
6,523 |
|
Total liabilities |
|
16,663 |
15,136 |
|
12,552 |
12,109 |
|
Total net assets |
|
21,593 |
19,441 |
|
33,909 |
32,626 |
|
Equity |
|
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
|
|
Share capital |
10 |
349 |
349 |
|
349 |
349 |
|
Share premium |
10 |
12,006 |
12,006 |
|
12,006 |
12,006 |
|
Share-based payments reserve |
|
337 |
148 |
|
337 |
148 |
|
Revaluation reserve |
|
162 |
162 |
|
(50) |
(50) |
|
Merger reserve |
|
(5,774) |
(5,774) |
|
8,101 |
8,101 |
|
Retained earnings |
|
14,513 |
12,550 |
|
13,166 |
12,072 |
|
Total equity |
|
21,593 |
19,441 |
|
33,909 |
32,626 |
|
The Company made a profit after tax of
The accompanying notes form an integral part of these condensed consolidated financial statements.
Statements of changes in equity
For the financial year ended
Group
|
Notes |
Share capital £'000 |
Share premium £'000 |
Share-based payments reserve £'000 |
Revaluation reserve £'000 |
Merger reserve £'000 |
Retained earnings £'000 |
Total equity £'000 |
Balance at |
|
336 |
10,583 |
76 |
162 |
(5,774) |
11,948 |
17,331 |
Changes in equity |
|
|
|
|
|
|
|
|
Issue of equity share capital |
10 |
13 |
1,423 |
- |
- |
- |
- |
1,436 |
Share-based payments |
5 |
- |
- |
72 |
- |
- |
- |
72 |
Dividends |
7 |
- |
- |
- |
- |
- |
(2,360) |
(2,360) |
Transactions with owners |
|
13 |
1,423 |
72 |
- |
- |
(2,360) |
(852) |
Profit and total comprehensive income for the financial year |
|
- |
- |
- |
- |
- |
2,962 |
2,962 |
Balance at |
|
349 |
12,006 |
148 |
162 |
(5,774) |
12,550 |
19,441 |
Issue of equity share capital |
10 |
- |
- |
- |
- |
- |
- |
- |
Share-based payments |
5 |
- |
- |
189 |
- |
- |
- |
189 |
Dividends |
7 |
- |
- |
- |
- |
- |
(2,411) |
(2,411) |
Transactions with owners |
|
- |
- |
189 |
- |
- |
(2,411) |
(2,222) |
Profit and total comprehensive income for the financial year |
|
- |
- |
- |
- |
- |
4,374 |
4,374 |
Balance at |
|
349 |
12,006 |
337 |
162 |
(5,774) |
14,513 |
21,593 |
Company
|
Notes |
Share capital £'000 |
Share premium £'000 |
Share-based payments reserve £'000 |
Revaluation reserve £'000 |
Merger reserve £'000 |
Retained earnings £'000 |
Total equity £'000 |
Balance at |
|
336 |
10,583 |
76 |
(50) |
8,101 |
10,924 |
29,970 |
Changes in equity |
|
|
|
|
|
|
|
|
Issue of equity share capital |
10 |
13 |
1,423 |
- |
- |
- |
- |
1,436 |
Share-based payments |
5 |
- |
- |
72 |
- |
- |
- |
72 |
Dividends |
7 |
- |
- |
- |
- |
- |
(2,360) |
(2,360) |
Transactions with owners |
|
13 |
1,423 |
72 |
- |
- |
(2,360) |
(852) |
Profit and total comprehensive income for the financial year |
|
- |
- |
- |
- |
- |
3,508 |
3,508 |
Balance at |
|
349 |
12,006 |
148 |
(50) |
8,101 |
12,072 |
32,626 |
Issue of equity share capital |
10 |
- |
- |
- |
- |
- |
- |
- |
Share-based payments |
5 |
- |
- |
189 |
- |
- |
- |
189 |
Dividends |
7 |
- |
- |
- |
- |
- |
(2,411) |
(2,411) |
Transactions with owners |
|
- |
- |
189 |
- |
- |
(2,411) |
(2,222) |
Profit and total comprehensive income for the financial year |
|
- |
- |
- |
- |
- |
3,505 |
3,505 |
Balance at |
|
349 |
12,006 |
337 |
(50) |
8,101 |
13,166 |
33,909 |
The accompanying notes form an integral part of these condensed consolidated financial statements.
Statements of cash flows
For the financial year ended
|
Notes |
Group |
|
Company |
||
2018 £'000 |
2017 £'000 |
|
2018 £'000 |
2017 £'000 |
||
Operating activities |
|
|
|
|
|
|
Cash generated from/(used in) operating activities |
11 |
5,612 |
4,612 |
|
(2,216) |
2,183 |
Tax paid |
|
(1,018) |
(912) |
|
- |
- |
Net cash flows generated from/(used in) operating activities |
|
4,594 |
3,700 |
|
(2,216) |
2,183 |
Investing activities |
|
|
|
|
|
|
Acquisitions net of cash acquired |
12 |
(3,595) |
(1,854) |
|
- |
(3,647) |
Working capital and cash introduced by companies acquired |
|
- |
29 |
|
- |
- |
Deferred and contingent consideration |
|
(4,236) |
(76) |
|
(4,236) |
(76) |
Capital expenditure on property, plant and equipment |
|
(140) |
(114) |
|
(2) |
(52) |
Disposal of corporate offices |
|
45 |
324 |
|
- |
- |
Franchisee loans granted |
|
(729) |
(681) |
|
- |
- |
Loans repaid by franchisees |
|
1,806 |
761 |
|
- |
- |
Finance income received |
|
265 |
313 |
|
4 |
- |
Return of funds from escrow |
|
145 |
434 |
|
145 |
434 |
Dividends received |
|
- |
- |
|
4,000 |
4,445 |
Net cash flows (used in)/generated from investing activities |
|
(6,439) |
(864) |
|
(89) |
1,104 |
Financing activities |
|
|
|
|
|
|
Bank loan advance |
|
12,000 |
- |
|
12,000 |
- |
Loan repayments |
|
(7,000) |
(525) |
|
(7,000) |
(525) |
Equity dividends paid |
7 |
(2,411) |
(2,360) |
|
(2,411) |
(2,360) |
Finance costs |
|
(296) |
(192) |
|
(296) |
(192) |
Net cash generated from/(used in) financing activities |
|
2,293 |
(3,077) |
|
2,293 |
(3,077) |
Net change in cash and cash equivalents |
|
448 |
(241) |
|
(12) |
210 |
Cash and cash equivalents at the beginning of the financial year |
|
1,350 |
1,591 |
|
226 |
16 |
Cash and cash equivalents at the end of the financial year |
|
1,798 |
1,350 |
|
214 |
226 |
The accompanying notes form an integral part of these condensed consolidated financial statements.
Notes to the condensed consolidated financial statements
For the financial year ended
1 Approval
This announcement was approved by the Board of Directors on
2 Basis of preparation
The financial information set out above does not constitute the Company's statutory accounts for the years ended
The finalisation of the fair value exercise carried out on the acquisition of Brook has resulted in an adjustment to reverse an accrual of
Standards adopted for the first time
A number of new and revised standards, including IFRS 9 and 15, are effective for annual periods beginning on or after
· IFRS 9 Financial Instruments came into effect on
· IFRS 15 Revenue from Contracts with Customers came into effect on
Standards, amendments and interpretations to existing standards that are not yet effective
There is one new standard effective for annual periods beginning after
IFRS 16 Leases addresses the definition of a lease, recognition and measurement of leases, and establishes principles for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising from IFRS 16 is that most operating leases will be accounted for on balance sheet for lessees. The Directors have reviewed the contracts for all property, vehicle and equipment leases held by the Group to identify any additional lease arrangements that would need to be recognised under IFRS 16. As a result, approximately
There are no other new standards, amendments to existing standards or interpretations that are effective as at
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
The Directors consider gross profit as the key performance measure. The reported segment is consistent with the Group's internal reporting for performance measurement and resources allocation.
Management does not report on a geographical basis and no customer represents greater than 10% of total revenue in either of the periods reported. The Directors believe there to be: three material 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 |
|||
2018 £'000 |
2017 £'000 |
|
2018 £'000 |
2017 £'000 |
|
2018 £'000 |
2017 £'000 |
|
Management service fees |
7,107 |
6,634 |
|
1,349 |
1,244 |
|
8,456 |
7,878 |
Corporate-owned offices |
481 |
756 |
|
540 |
646 |
|
1,021 |
1,402 |
|
7,588 |
7,390 |
|
1,889 |
1,890 |
|
9,477 |
9,280 |
Initial franchise fees and other resale commissions |
|
|
|
|
|
|
198 |
310 |
Other income |
|
|
|
|
|
|
468 |
514 |
Franchise property division |
|
|
|
|
|
|
10,143 |
10,104 |
Commission receivable on financial services |
|
|
|
|
|
|
3,559 |
1,195 |
Financial services division |
|
|
|
|
|
|
3,559 |
1,195 |
Total revenue |
|
|
|
|
|
|
13,702 |
11,299 |
Gross profit for the two divisions is split as follows:
|
|
|
|
|
Gross profit |
|||
|
|
|
|
|
|
2018 £'000 |
2017 £'000 |
|
Property franchise division |
|
|
|
|
|
|
10,143 |
10,104 |
Financial services division |
|
|
|
|
|
|
1,187 |
685 |
Total gross profit |
|
|
|
|
|
|
11,330 |
10,789 |
Profit for the financial year
The parent company has taken advantage of Section 408 of the Companies Act 2006 and has not included its own statement of comprehensive income in these financial statements. The profit on ordinary activities after taxation of the Company for the year was
4 Cost of sales and administrative expenses
Group
Cost of sales and administrative expenses (non-exceptional) by nature:
|
2018 £'000 |
2017 £'000 |
Staff costs |
3,880 |
4,013 |
Depreciation and amortisation |
581 |
619 |
Marketing |
326 |
365 |
Auditor's remuneration |
|
|
- Fees payable to the Company's auditor for the audit of the Company's annual accounts |
53 |
46 |
- Tax compliance services |
16 |
14 |
- Statutory audit of subsidiaries |
45 |
42 |
Operating lease expenditure |
247 |
235 |
Financial services commission |
1,694 |
363 |
Other cost of sales and administrative expenses |
2,146 |
1,353 |
|
8,988 |
7,050 |
5 Share-based payments
Administrative expenses includes a charge of
6 Exceptional items
Group
A total credit of
|
2018 £'000 |
2017 £'000 |
Transaction costs on acquisition |
104 |
87 |
Transaction costs on abortive merger offer |
- |
191 |
Restructuring costs |
65 |
48 |
Exceptional administration costs |
169 |
326 |
Changes in fair value to contingent consideration |
(809) |
134 |
|
(640) |
460 |
Exceptional administration costs include
Other exceptional items comprise a
These costs are deemed to be non-recurring.
7 Dividends
Group
|
2018 £'000 |
2017 £'000 |
Final dividend for 2017 |
|
|
3.5p per share paid |
1,223 |
1,172 |
Interim dividends for 2018 |
|
|
3.4p per share paid |
1,188 |
1,188 |
Total dividend paid |
2,411 |
2,360 |
The Directors propose a final dividend of 3.8p per share totalling
8 Earnings per share
Group
Basic earnings per share is calculated by dividing the profit for the financial year by the weighted average number of ordinary shares in issue during the year. Options over ordinary shares and rights of conversion are described in note 28. The calculation of diluted earnings per share is derived from the basic earnings per share, adjusted to allow for the issue of shares under these instruments.
The Directors use adjusted earnings before exceptional items, amortisation of acquired intangibles and share-based payment expense as a measure of ongoing profitability and performance. In this way, the adjusted measure eliminates non-recurring transactions and significant non-cash charges which can disproportionately affect the interpretation of ongoing performance and profitability.
Adjusted earnings per share and diluted adjusted earnings per share are calculated in the same way as basic and diluted earnings per share but using the adjusted earnings instead of the profit for the financial year.
|
2018 £'000 |
2017 £'000 |
Profit for the financial year |
4,374 |
2,962 |
Exceptional items |
(640) |
460 |
Amortisation of acquired intangibles |
422 |
422 |
Share-based payment charge |
189 |
72 |
Tax on deductible exceptional items |
(10) |
(10) |
Adjusted profit for the financial year |
4,335 |
3,906 |
Weighted average number of ordinary shares - basic |
34,939 |
34,639 |
Weighted average number of ordinary shares - diluted |
37,110 |
36,469 |
Basic earnings per share |
12.5p |
8.6p |
Diluted earnings per share |
11.8p |
8.1p |
Adjusted basic earnings per share |
12.4p |
11.3p |
Adjusted diluted earnings per share |
11.7p |
10.7p |
9 Maturity of borrowings and net debt
|
2018 £'000 |
2017 £'000 |
Group and Company |
|
|
Repayable in less than six months |
658 |
615 |
Repayable in seven to twelve months |
572 |
434 |
Current portion of long-term borrowings |
1,230 |
1,049 |
Repayable in years one to five |
11,279 |
5,938 |
Total borrowings |
12,509 |
6,987 |
Less: interest included |
(1,132) |
(543) |
Total debt |
11,377 |
6,444 |
Less: cash and cash equivalents |
(1,798) |
(1,350) |
Net debt |
9,579 |
5,094 |
Borrowings comprise a term loan of
10 Called up share capital
|
2018 |
|
2017 |
||
Number |
£'000 |
|
Number |
£'000 |
|
Group and Company |
|
|
|
|
|
Allotted, issued and fully paid |
|
|
|
|
|
Ordinary shares of 1p each |
34,938,606 |
349 |
|
34,938,606 |
349 |
|
Group and Company Number |
Nominal share capital £'000 |
Share premium £'000 |
At 1 January 2017 |
33,660,160 |
336 |
10,583 |
Issue of shares during the year: |
|
|
|
23 January 2017 - share price 117p |
803,284 |
8 |
928 |
12 July 2017 - share price 105p |
475,162 |
5 |
495 |
At 31 December 2017 |
34,938,606 |
349 |
12,006 |
At 31 December 2018 |
34,938,606 |
349 |
12,006 |
11 Reconciliation of profit before taxation to cash generated from operations
Group
|
2018 £'000 |
2017 £'000 |
Profit before taxation |
5,480 |
3,910 |
Depreciation and amortisation charges (including impairment) |
581 |
619 |
Share-based payment charge |
189 |
72 |
Impairment of franchisee loan book |
272 |
- |
Impairment on sale of Newton Fallowell Newark trade and assets (note 26) |
88 |
- |
Loss on disposal of corporate offices |
15 |
- |
Changes in fair value to contingent consideration |
(809) |
134 |
Amortisation of debt costs |
52 |
- |
Finance costs |
226 |
192 |
Finance income |
(265) |
(313) |
MAB share option recognition and related income |
(87) |
- |
|
5,742 |
4,614 |
(Increase)/decrease in trade and other receivables |
(1,393) |
176 |
Increase/(decrease) in trade and other payables |
1,263 |
(178) |
Cash generated from operations |
5,612 |
4,612 |
Company
|
2018 £'000 |
2017 £'000 |
Profit before taxation |
3,504 |
3,516 |
Dividend received |
(4,000) |
(4,445) |
Changes in fair value to contingent consideration |
(809) |
134 |
Finance costs |
223 |
192 |
Depreciation and amortisation charges |
12 |
10 |
|
(1,070) |
(593) |
(Increase)/decrease in trade and other receivables |
(1,559) |
3,356 |
Increase/(decrease)/increase in trade and other payables |
413 |
(580) |
Cash (used in)/generated from operations |
(2,216) |
2,183 |
12 Acquisitions
On 21 September 2018 Newton Fallowell Limited, a Group subsidiary, acquired Uplong Limited for £370,000, which operated the Newton Fallowell lettings franchise for Grantham and Newark. The assets and trade of the Newark lettings portfolio were immediately sold to Belvoir Newark for £88,000 and the remaining assets and trade relating to the Grantham lettings portfolio were hived up into Newton Fallowell Limited. The Newton Fallowell corporate office in Grantham now operates both sales and lettings out of the same premises.
On 26 November 2018 Brook, a Group subsidiary, acquired 100% of the equity of MAB (Gloucester) Limited ("MAB Glos"), which, like Brook, trades as an appointed representative of Mortgage Advice Bureau, one of the UK's leading networks for mortgage intermediaries. As part of the Belvoir Group financial services division, MAB Glos will develop its network of financial advisers to offer mortgage products and services across all Group networks, increasing the Group's presence in the franchised property sector and opening up additional growth opportunities. Total consideration was £4,228,000. Net assets acquired included certain vendor-related balances that were settled on completion leaving acquired cash of £692,000. The acquisition was satisfied from existing cash resources and the drawdown of existing bank facilities.
In October 2018 Belvoir Property Management (UK) Limited took back the Leeds South franchise which is now being managed on behalf of the Group by a neighbouring franchise owner for a period of time until a new franchise owner is appointed.
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 book values which have been, in general, assessed as also being the provisional fair values at acquisition. The exceptions relate to the acquisition of MAB Glos for which fair value adjustments were made of a £109,000 accrual for the provision of unearned indemnity commission and £29,000 in recognition of the valuation of MAB share options. There were no adjustments required on trade debtors on acquisition.
|
Leeds South £'000 |
Uplong £'000 |
MAB Glos £'000 |
Total £'000 |
Intangible assets |
47 |
200 |
- |
247 |
Financial assets |
- |
- |
29 |
29 |
Trade and other receivables |
- |
32 |
568 |
600 |
Cash and cash equivalents |
- |
27 |
692 |
719 |
Deferred tax liabilities |
- |
(38) |
- |
(38) |
Trade and other payables |
- |
(44) |
(258) |
(302) |
Identifiable net assets acquired |
47 |
177 |
1,031 |
1,255 |
Goodwill on acquisition |
- |
105 |
3,197 |
3,302 |
Consideration |
47 |
282 |
4,228 |
4,557 |
Consideration settled in cash |
47 |
262 |
4,005 |
4,314 |
Deferred consideration |
- |
20 |
223 |
243 |
Total consideration |
47 |
282 |
4,228 |
4,557 |
The goodwill represents the value attributable to the new businesses and the assembled and trained workforce. Deferred tax at 17% has been provided on the value of intangible assets defined as customer contracts. Acquisition costs of £104,000 were incurred and charged to exceptional items in the consolidated statement of comprehensive income.
|
Uplong £'000 |
MAB Glos £'000 |
Total £'000 |
Post acquisition financial results |
|
|
|
Revenue |
57 |
544 |
601 |
Profit before tax |
27 |
91 |
118 |
If the acquisitions had completed on the first day of the financial year, Group revenues would have been £17.3m and Group profit before tax would have been £6.3m.
13 Posting of accounts
It is intended that the financial statements for the year ended 31 December 2018 will be made available to shareholders on the company's website www.belvoirlettingsplc.com by 16 April 2019 and will also be available thereafter at the registered office, The Old Courthouse, 61a London Road, Grantham, NG31 6HR.
14 Annual General Meeting
The Annual General Meeting will be held at 10.00am on Thursday 16 May 2019 at the registered office, The Old Courthouse, 61a London Road, Grantham, NG31 6HR
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