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Property Franchise (LON:TPFG)

  • Share price: 169.5p (+2%)
  • No. of shares: 26 million
  • Market cap: £44 million

(I have a long position in TPFG.)

Half Year Trading Update and Directorate Change

This is a collection of estate agent brands, from whom TPFG collects management service fees, which we can think of as royalties. The standout brand is probably Martin & Co. It also has a small, hybrid agency called Ewemove (like Purplebricks (LON:PURP), but much smaller and managed more carefully).

I've had a tiny stake in TPFG since April, to give me a chance to study it more fully and decide if I want to promote it to a full-size position. Please note that these shares are illiquid - if you take out the top shareholders, what's left for private investors is tiny.

Also, the dividend yield is quite high (>5%), which creates a tax problem for me. So I'm probably just going to keep my tiny stake in it, for now. I'll have to reflect on it some more.

Apart from paying too much for the acquisition of Ewemove, it has been disciplined when it comes to capital allocation and has generated a nice stream of cash flows for shareholders.

Today's update shows a small increase in total revenues. Reduced sales market activity has been offset by improvements in lettings and by 11% growth at Ewemove.

Within total revenues, management service fees are "the Group's key, recurring revenue stream", and these are up from £4.4 million to £4.6 million. Trading is in line with expectations.

Balance sheet and cash flows are a big attraction with this one. Despite paying out healthy dividends, TPFG's cash position has increased by £2.3 million to £2.8 million over the past 12 months.

CEO retirement - the long-standing CEO intends to retire at the end of the calendar year 2020, giving TPFG 17 months to find a replacement. This is a great length of time to work on the succession plan and it reflects well…

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