REG - Belvoir Group PLC - Final Results
04/04/2022 07:00
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RNS Number : 0615H Belvoir Group PLC 04 April 2022
4 April 2022
BELVOIR GROUP PLC
(the "Company", the "Group" or "Belvoir")
Final Results for the year ended 31 December 2021
25 YEARS OF UNBROKEN PROFIT GROWTH
Belvoir Group PLC (AIM: BLV), a leading UK property franchise and financial
services group, is pleased to announce its audited Final Results for the year
ended 31 December 2021, another year of strong growth, marking 25 years of
unbroken profit growth.
Financial highlights
• Group revenue increased by 37% to £29.6m (2020: £21.7m), a
record level, with 12% attributable to acquired businesses and 25% to
like-for-like growth
• Management service fees ('MSF'), the key underlying return from
franchisees, grew by 18% to £10.7m (2020: £9.1m)
• 39% increase in profit before tax to £9.3m (2020: £6.7m),
marking 25 years of consecutive profit growth
• Continued strong lettings bias reflected in gross profit ratio of
56% lettings: 19% sales: 20% financial services: 5% other (2020:
60%:17%:19%:4%)
• Year-end cash of £7.4m (2020: £5.9m)
• Net debt significantly reduced by 65% to £1.3m (2020: £3.7m)
despite deploying £4.4m on two corporate acquisitions
• Total dividend per share for the year up 18% to 8.5p (2020: 7.2p)
Operational highlights
• Achieved growth across all three markets: lettings, sales and
financial services
• Acquired Nicholas Humphreys, a national network of 20 offices
specialising in student lettings, in March 2021
• Acquired the mortgage advisory arm of The Nottingham Building
Society (NBS) in July 2021, and dual-branded a further 26 NBS branches
• Expanded Belvoir's mortgage adviser network by 20% to 243 advisers
(2020: 202)
• Greater reach with number of offices up 11% to 463 (2020: 418)
• Managed portfolio up 12% to 72,900 (2020: 65,065) properties
• Number of written mortgages up 37% to 16,585 (2020: 12,094)
• Number of house sales up 54% to 12,320 (2020: 8,003)
Post period end highlights
· Acquisition of a personal agent network, Mr and Mrs Clarke
Limited, for £0.2m net cash on 11 March 2022 opening up a new home-based
agency option for franchisees joining the Group
Dorian Gonsalves, Chief Executive Officer, commented:
"2021 was the busiest year for our sector in recent times with residential
property sales transactions at their highest level since 2007, which boosted
both our growing estate agency and financial services businesses. We worked
closely with our property franchisees and financial services advisers to
ensure that they were best placed to respond to the strong market conditions,
which drove significant organic growth of 25%.
"In addition to benefitting from the strong market conditions, we took the
opportunity to make two strategic acquisitions. Adding the national Nicholas
Humphreys franchise network to the Group has enabled us to extend our
professional lettings service to encompass the specialist student lettings
market. We also further strengthened our strategic alliance with the
Nottingham Building Society, through the acquisition of its mortgage advisory
arm, giving us access to its online savers who we hope will be our future
mortgage clients.
"Since the year end, the Group has added a home-based agency network to its
stable of property franchise brands, demonstrating the Board's ongoing
commitment to identifying suitable acquisition targets to support Belvoir's
continued growth.
"Given our significant recurring and reliable lettings revenue stream and our
substantial financial services client base to draw upon during what is
currently a strong market for remortgages, we remain confident that we will
continue to perform well relative to the market as a whole, and that our
business model and growth strategy will continue to deliver enhanced value for
all our stakeholders."
Retail investor presentation
Dorian Gonsalves, CEO, and Louise George, CFO, will present live to retail
investors reporting on the Group's final results via the Investor Meet Company
platform today at 4.30pm. Investors can sign up for free and register to
participate
via: https://www.investormeetcompany.com/belvoir-group-plc/register-investor
(https://protect-eu.mimecast.com/s/T4ClC4zn6tY6wJvsOQc5u)
For further details:
Belvoir Group PLC 01476 584 900
Dorian Gonsalves, Chief Executive Officer investorrelations@belvoirgroup.com
Louise George, Chief Financial Officer
www.belvoirgroup.co (http://www.belvoirgroup.co) m
finnCap +44 (0) 20 7220 0500
Julian Blunt, Teddy Whiley (Corporate Finance)
Tim Redfern, Charlotte Sutcliffe (ECM)
www.finncap.com (http://www.finncap.com)
Buchanan +44 (0) 20 7466 5000
Charles Ryland, Kim van Beeck, Tilly Abraham
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 463 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 72,900 properties and reported record revenues
of £29.6m in 2021 marking Belvoir's 25(th) year of unbroken profit growth.
For further information, please visit: www.belvoirgroup.com
Chairman's statement
Overview of performance
I am delighted to report that in 2021 the Belvoir Group continued its record
of uninterrupted profit growth, now running to 25 years, which is a remarkable
achievement. The Group benefited from the strongest residential sales market
since 2007, boosting the performance of both our estate agency and financial
services businesses. Meanwhile, after a number of years of very low rental
growth, the excess demand for properties within the residential lettings
market gave rise to substantial increases in rent for new tenancies.
All three of Belvoir's main income streams performed exceptionally well,
resulting in a 37% increase in Group revenues to £29.6m (2020: £21.7m). In
addition to achieving strong growth in the underlying business, the Group
expanded both its property and financial services networks during the year
through the strategic acquisitions of Nicholas Humphreys and Nottingham
Mortgage Services.
Profit before tax increased to £9.3m (2020: £6.7m), up £2.6m. The Group now
supports 363 franchised estate and lettings agencies operating through
physical high street shops and 100 financial services businesses, comprising
243 (2020: 202) individual advisers.
Board and senior management
The Senior Management Team remained focused on the principal aim of supporting
our franchise and mortgage adviser networks to maximise the opportunities for
all stakeholders available from a strong housing market. At the same time
the Board continued to pursue its growth strategy by identifying suitable
acquisition targets that would enlarge our existing footprint or expand our
service offering. The longevity, experience and commitment of Belvoir's
Board and Senior Management Team undoubtedly underpin the continued success of
the Group
At the start of 2022, we announced three Board changes. Mark Newton retired
from his executive role to become a Non-Executive Director, continuing to add
value through his considerable expertise in estate agency. At the same time
Michelle Brook joined the Board as Financial Services Director, underlining
the increasing importance of the financial services division to the Group's
growth strategy. The Board was strengthened further through the appointment
of an additional independent Non-Executive Director, Jon Di-Stefano, who
brings a wealth of knowledge of the property sector, including areas very
complementary to Belvoir's existing business, and of strategic business
growth.
Governance
The Board promotes a culture of good governance and recognises how important
our people are to the success of the Group. We continue to apply the 2018
Quoted Companies Alliance Corporate Governance Code (the "QCA Code") as the
basis of the Group's governance framework.
Sustainability and ESG
With sustainability and other environmental, social and governance (ESG)
issues becoming of increasing importance to the Belvoir Group and its
stakeholders, we undertook a detailed ESG materiality assessment in 2021 as
part of a full strategic review, and, based on its findings, developed a new
ESG strategy for the Group. As a result of this, we aim to set a net zero
target and are working towards understanding our impacts in order to put a
suitable timeline in place to achieve this goal.
Covid-19
The Group continued to operate effectively under the various Covid-19
restrictions during 2021, with the property sector remaining open throughout
the year. During the third national lockdown in the first half of 2021, the
Group was able to quickly revert to the practices adopted in 2020 as necessary
to ensure that all our office and central support team staff operated safely
and within Government guidelines.
Dividends
As a result of another outstanding year, the Board is pleased to announce an
18% increase in our total dividend up to 8.5p (2020: 7.2p) per share. There
will be a final dividend for 2021 of 4.5p per share payable on 30 May 2022.
Outlook
Even before the invasion of the Ukraine, the property market entered 2022 amid
greater economic uncertainty and inflationary pressures. The devastation
wreaked by the war on the Ukrainian people is shocking and our thoughts are
with those who have been affected; we hope for a peaceful resolution to the
crisis. It is too early to predict the full economic impact of the war, but
it has already resulted in further inflationary pressure on energy bills that
will affect the UK economy. As has been demonstrated during other turbulent
periods in recent years, the Group has a proven resilient business model and a
successful growth strategy that enable it to outperform market conditions. I
am confident that a combination of our dedicated staff and the entrepreneurial
spirit of our franchisees and advisers will continue to support the further
development of the Group to the benefit of all stakeholders.
Finally, I would like to thank our exceptional Executive Team, staff,
franchisees and advisers for their hard work in making 2021 another successful
year for the Group. Despite the challenges presented by Covid-19 during the
year, our people remained committed to delivering the very best service to all
our customers throughout the Group.
Michael Stoop
Non-Executive Chairman
Chief Executive Officer's statement
Overview of performance
Group revenue increased by 37% to £29.6m (2020: £21.7m), a record level.
2021 was one of the busiest years in recent times for estate agents, with UK
residential property sales transactions up 41% on 2020 and 22% ahead of the
six-year average to 2019. The Group worked closely with its franchisees and
mortgage adviser networks to ensure that they were best placed to take
advantage of the strong market conditions, which gave rise to organic growth
of 25% in the underlying business. The Group added a further 12% to revenue
from the expansion of both its property and financial services networks
through two strategic acquisitions.
The financial services division achieved revenue growth of 49% to £14.4m
(2020: £9.7m), 44% of which arose from the underlying business. The
acquisition of Nottingham Mortgage Services, the mortgage advisory arm of the
Nottingham Building Society ("The Nottingham"), increased revenue by 5%. Our
network of advisers has grown by 41 advisers to 243 (2020: 202), 17 of whom
are dedicated to servicing The Nottingham's members. Financial services
clearly benefited from the buoyancy in the residential property sales market
throughout most of 2021, and towards the end of the year was sustained by a
busy period for remortgages and associated insurance products.
Revenue from the property division was up 27% to £15.2m (2020: £12.0m) with
like-for-like growth at 16%. The acquisition of Nicholas Humphreys, a
national specialist student lettings franchise network, accounted for 18% of
growth in the property division from its 17 franchised and three
corporate-owned offices. Meanwhile, the planned franchising of five of the
Lovelle corporate-owned offices, in line with our franchising strategy,
reduced revenue by 7%.
Management service fees (MSF), the key underlying return from franchisees,
were up 18% for the year to £10.7m (2020: £9.1m) and revenue from
corporate-owned offices was up 61% to £3.6m (2020: £2.3m). The
exceptionally strong residential property sales market in 2021 temporarily
shifted the lettings to sales ratio from its more traditional 80:20 split to
74:26.
Revenue from property sales, both MSF and corporate, increased by 49% to
£3.7m (2020: £2.5m) with the extension of the stamp duty holiday ensuring
that the residential sales market remained highly active until September, and
thereafter returned to more normal transaction levels with unfulfilled demand
continuing to fuel house price inflation. Like-for-like sales growth was
46%.
Lettings revenue increased by 21% to £10.7m (2020: £8.8m), benefiting from
the acquisition of the predominantly student lettings-focused Nicholas
Humphreys network. The underlying lettings increase of 7% reflected a strong
lettings market in which the demand for more space and a return of young
people to UK cities as offices reopened post lockdown resulted in an
insufficient supply of available properties to rent. As a result, rents on
new tenancies were seen to rise by around 8%.
All three markets continued to grow throughout 2021 with revenue from lettings
up 21%, sales up 49% and financial services up 49%, combining to deliver an
excellent year for the Group. Belvoir now has a portfolio of 72,900 (2020:
65,065) managed properties, and in 2021 Group house sales were up 54% to
12,320 (2020: 8,003) and the number of mortgages arranged by Belvoir's
advisers was up 37% to 16,585 (2020: 12,094). The Group's network revenue,
being the total revenue across all our Group companies, our franchisees and
our advisers, totalled £112m (2020: £96m).
Our strategic priorities
The majority of our mortgage business is currently being introduced from
non-Group sources, i.e. national contracts serviced in partnership with MAB
and independent estate agency businesses, and leads generated by our online
marketing activities or from our extensive client database. A key focus for
2022 is to drive further collaboration between our property and our financial
services networks, so that we can maximise the earnings potential for our
franchisees and advisers from offering financial services through all Group
offices.
Our two corporate acquisitions in 2021 are further evidence of our successful
growth strategy of investing in similar businesses that expand the footprint
of both our franchise and financial services networks, and where there is
scope for greater future growth as part of the Belvoir Group. The acquisition
of Nicholas Humphreys in March 2021 opened up the specialist student lettings
market for the Group, and provides a platform for extending the network into
other university towns. Having partnered with the Nottingham Building
Society in 2020 to undertake all estate agency and lettings services through
its branch network, Belvoir strengthened this strategic alliance further
through the acquisition of Nottingham Mortgage Services in July 2021. In
addition to providing mortgage advice to The Nottingham's branch members, this
partnership provides access to its lifetime ISA members who will be saving for
their first home through the Beehive Money app, a new digital savings platform
launched at the end of 2021. With the Government adding 25% to savings up to
a maximum of £1,000 per year, this will be a popular savings product for many
first-time buyers.
Creating value
The Group is highly cash generative and the Board aims to deploy its cash
reserves by acquiring businesses that meet its strategic investment criteria,
as demonstrated by its investment in corporate acquisitions every year since
2015, including a further corporate transaction completed post year end.
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 138% in profit before tax
to £9.3m (2017: £3.9m) and 137% in EPS to 20.4p (2017: 8.6p) over the last
four years.
Our marketplace
The property sector had its busiest year for transactions since 2007, with
almost 1.5 million properties passing onto new homeowners in 2021, compared
with a yearly average of 1.2 million since 2010. The requirement to work
from home during the pandemic and the subsequent hybrid home and office
arrangements for many have caused many homeowners and tenants to reassess
their lifestyle and housing needs. With many seeking larger suburban homes
with gardens, there has been 'a race for space' which has impacted both the
sales and the lettings market. At the same time the stamp duty holiday
stimulated demand further enabling those with properties of a higher value to
move with little or no stamp duty payment. The market returned to more
traditional transaction levels towards the end of 2021 and the challenge at
the start of 2022 is a lack of stock in both the lettings and sales markets.
This is anticipated to ease as we move into spring, which is traditionally the
most active time of the year for homeowners starting to look to move.
The financial services sector anticipates increased remortgage activity by
both home-owners and buy-to-let (BTL) landlords whose mortgages, fixed amid
robust property markets in 2017 and at the start of 2020, are coming to an end
of their two and five-year deals. With further stimulus stemming from
predicted interest rate rises in 2022, transfers and remortgages are forecast
to increase. As a result, our financial services division will benefit from
having a substantial client bank to service, and this will mitigate some of
the fall in the house purchase mortgage activity.
Outlook
Our significant recurring and reliable lettings revenue stream, our
substantial financial services client base and the diversity and resilience of
our business model are expected to insulate the Group from what could be a
more uncertain market in 2022, especially given economic pressures and
geo-political turmoil.
We remain confident that we will continue to perform well relative to the
market as a whole, and that our business model and growth strategy will
continue to deliver enhanced value for all our stakeholders.
Dorian Gonsalves
Chief Executive Officer
Financial review
Revenue
Group revenue in 2021 increased by £7.9m to £29.6m (2020: £21.7m).
Corporate acquisitions and disposals during the year added net £1.8m, whilst
revenue on a like-for-like basis increased by £6.1m.
Revenue from our financial services division was up £4.7m to £14.4m (2020:
£9.7m) resulting from growth generated both organically and by acquisition.
On 29 July 2021 the Group acquired Nottingham Mortgage Services Limited,
renamed Brook Mortgage Services Limited (BMS), which added 17 advisers and
£0.5m of revenue in the last five months of 2021. Revenue growth of £4.2m
from the underlying financial services business was generated from an
additional 24 advisers and a strong mortgage market.
Revenue from the property division was up £3.2m to £15.2m (2020: £12.0m).
The acquisition of White Kite Group 2021 Limited, which trades as Nicholas
Humphreys through 17 franchised and three corporate-owned offices, added
£2.1m to revenue. Meanwhile, the planned franchising of five Lovelle
corporate-owned offices between August 2020 and January 2021 reduced revenue
by £0.8m. On a like-for-like basis, the property division achieved growth
of £1.9m.
Income streams in the property division comprise: management services fees
(MSF), these being our key underlying revenue stream from franchisees; revenue
generated by corporate-owned offices; franchise sales, which include fees
charged to franchisees joining the Group and renewal fees from existing
franchisees; and other fees.
MSF increased by £1.6m to £10.7m (2020: £9.1m) with £0.3m arising from the
17 Nicholas Humphreys franchise offices and the five newly franchised Lovelle
offices. Lettings MSF were up £0.7m, of which £0.4m arose from the
underlying network. MSF from property sales were up £0.9m to £2.5m (2020:
£1.6m), which arose predominantly from the pre-existing business.
Income from corporate-owned offices was up £1.4m. The three Nicholas
Humphreys corporate-owned offices added revenue of £1.9m. Meanwhile, the
franchising of five Lovelle corporate-owned offices reduced revenue from
corporate-owned offices by £0.9m, against which there was a compensatory
impact from an increase of £0.1m in MSF and a £0.8m reduction in
overheads. The Group continues to operate two corporate-owned offices in
Grantham, which contributed additional revenue of £0.4m in 2021, up 18% on
2020. With the exception of these two offices, the Group will generally look
to identify a franchise solution in line with its franchise business model at
an appropriate time.
Revenue from franchise sales in 2021 was £0.3m (2020: £0.2m). Five (2020:
seven) new offices opened in 2021, all of which resulted from an existing
franchise owner opening an additional office. A further 16 (2020: three)
existing franchise offices were resold, seven of which were to a new franchise
owner joining the Group and nine to an existing franchise owner taking on an
additional territory.
Other income was unchanged at £0.4m (2020: £0.4m).
Gross profit
Gross profit increased by 29% to £19.0m (2020: £14.8m) with the gross profit
ratio by business activity being lettings 56%, sales 19%, financial services
20% and other 5% (2020: 60%:17%:19%:4%), reflecting the significant bias
towards our recurring lettings income stream.
The lower gross profit margin from financial services of 27% (2020: 29%)
resulted in the Group gross margin of 64% (2020: 68%). These shifts reflect
the greater proportion of independent Business Partners operating within the
financial services network, some of whom join together in 'hubs', and who earn
a higher rate. This operating model does not require a comparable increase
in overheads, and as such has contributed to the improvement in the Group
operating profit margin to 32% (2020: 31%).
Administrative expenses
Administrative expenses increased by £1.5m to £9.7m (2020: £8.2m). This
comprised:
• Increase of £1.7m from operating Nicholas Humphreys
• Increase of £0.1m from operating Brook Mortgage Services
• Increase of £0.2m resulting from professional fees associated
with corporate acquisitions
• Reduction of £0.8m from franchising of five Lovelle
corporate-owned offices
• Reduction of £0.2m in share-based payments
• Increase of £0.5m in underlying overheads associated with
increased headcount and other operating costs
Operating profit
Operating profit was up £2.7m to £9.3m (2020: £6.6m), an increase of 41%
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 2020 and a gain of £0.1m
was recognised in other income within the prior year.
Profit before taxation
Profit before taxation of £9.3m (2020: £6.7m) is after interest receivable
on franchisee loans of £0.2m (2020: £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 20.6% (2020: 20.3%).
The March 2021 Budget commitment to increase corporation tax to 25% with
effect from April 2023 was substantially enacted in May 2021. As a result,
deferred tax balances expected to reverse after April 2023 have been
remeasured at 25% and £0.5m is reflected in the 2021 tax charge. This was
mitigated by a credit of £0.5m arising from the difference between the
deferred tax asset release and the corporation tax deduction on share options
exercised during the year. The difference reflected a stronger share price
at the time of exercise compared to the price at the end of 2020, on which the
deferred tax asset was based.
Earnings per share
Basic earnings per share was up 35% to 20.4p (2020: 15.1p) based on an average
number of shares in issue in the year of 36,142,000 (2020: 35,101,000). When
the dilutive effect of share options is incorporated, the earnings per share
was 20.3p (2020: 14.6p).
Profit attributable to owners was £7.4m (2020: £5.3m).
Dividends
The Board is proposing a final dividend for 2021 of 4.5p per share (2020:
5.1p, which included a catch-up of 1.3p on the final 2019 dividend). Subject
to shareholders' approval at the AGM on 26 May 2022, this dividend will be
paid on 30 May 2022, based upon the register on 19 April 2022. The ex-dividend
date is 14 April 2022.
In total, the 2021 dividend for the year will be 8.5p (2020: 10.5p including
the catch-up on the final 2019 dividend of 3.3p) with dividend cover at 2.3x.
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
activities with 100% (2020: 110%) of EBITDA converting into cash of £10.3m
(2020: £8.2m). The net cash inflow from operations was £8.5m (2020: £6.8m)
reflecting the enlarged Group.
The net cash used in investing activities was £3.5m (2020: £1.4m):
• On 15 January 2021 the sale of the Lovelle Grimsby Lettings
corporate office held for resale generated proceeds of £0.6m.
• On 31 March 2021 the Company acquired the entire share capital of
White Kite Holdings 2021 Limited for £4.0m cash consideration, net of cash
acquired.
• On 29 July 2021 Brook Financial Services Ltd acquired the entire
share capital of Nottingham Mortgage Services Limited for £0.4m cash
consideration, net of cash acquired.
• The cash outflow of franchisee loans granted was £0.8m (2020:
£0.7m) with the level of assisted acquisitions activity remaining low
compared to the period pre-pandemic.
• The cash inflow from repayments to the franchise loan book was
£1.0m (2020: £0.8m) with a Covid-19-related capital repayment holiday
reducing cash inflow in 2020 by £0.4m.
• Interest received on the franchise loan book was £0.2m (2020:
£0.2m).
During 2021 £0.9m (2020: £0.9m) was repaid against the HSBC loan and
associated finance costs were £0.2m (2020: £0.3m). Dividend payments
totalled £3.3m (2020: £1.9m), of which £0.5m was a catch-up of the
suspended final 2019 dividend payment. As a result, net cash outflow from
financing activities totalled £3.6m (2020: £3.1m).
Liquidity and capital resources
At the year end the Group had cash balances of £7.4m (2020: £5.9m) and a
term loan of £8.7m (2020: £9.6m). 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
net effect of which is £0.7m (2020: £0.5m):
• 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 £1.6m (2020: £1.3m).
• 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 £1.5m (2020: £1.3m).
• Also, on a weekly basis the estimated clawback of commission
recoverable from our advisers is accounted for within other debtors. At the
year end this balance was £0.6m (2020: £0.5m).
Post-year-end acquisition
On 10 March 2022 the Group acquired Mr and Mrs Clarke Limited, a personal
agent network offering estate agency services nationwide. Consideration
comprised an initial payment of £23,000 satisfied in cash from existing cash
reserves, and a three-year earnout at 6x EBITDA. A further £177,000 was
applied to the settlement of certain liabilities at completion. In the year
to 31 August 2021 Mr and Mrs Clarke Limited recorded revenue of £600,000 and
operating profit of £13,000 and at that date had net assets of approximately
£61,000.
Financial position
The Group continues to operate from a sound financial platform with net assets
of £33.6m (2020: £28.3m), with the main change being the additional
intangible assets arising from the acquisitions of White Kite Holdings 2021
Limited and Nottingham Mortgage Services Limited, which were funded from
existing cash reserves.
Louise George
Chief Financial Officer
Group statement of comprehensive income
For the financial year ended 31 December 2021
Notes 2021 2020
£'000 £'000
Total Total
Revenue 3 29,647 21,692
Cost of sales (10,602) (6,896)
Gross profit 19,045 14,796
Administrative expenses (9,705) (8,169)
Operating profit 9,340 6,627
Finance costs (211) (261)
Finance income 167 181
Other income - 123
Profit before taxation 9,296 6,670
Taxation (1,912) (1,353)
Profit and total comprehensive income for the financial year 7,384 5,317
Profit for the year attributable to the equity holders of the parent company 7,384 5,317
Earnings per share attributable to equity holders of the parent company
Basic 6 20.4p 15.1p
Diluted 6 20.3p 14.6p
The accompanying notes form an integral part of these condensed consolidated
financial statements.
Statement of financial position
As at 31 December 2021
Group
2021 2020
£'000 £'000
Assets
Non-current assets
Intangible assets 34,761 29,942
Investments - -
Property, plant and equipment 501 511
Right-of-use assets 699 455
Trade and other receivables 1,788 1,970
37,749 32,878
Current assets
Trade and other receivables 5,605 5,063
Assets held for sale - 591
Cash and cash equivalents 7,413 5,934
13,018 11,588
Total assets 50,767 44,466
Liabilities
Non-current liabilities
Lease liabilities 522 289
Interest-bearing loans and borrowings 7,867 8,728
Deferred tax liability 2,872 1,446
11,261 10,463
Current liabilities
Trade and other payables 4,526 3,849
Lease liabilities 191 175
Interest-bearing loans and borrowings 861 861
Corporation tax liability 281 821
5,859 5,706
Total liabilities 17,120 16,169
Total net assets 33,647 28,297
Equity
Shareholders' equity
Share capital 373 351
Share premium 13,159 12,150
Share-based payments reserve 238 968
Revaluation reserve 162 162
Merger reserve (5,774) (5,774)
Retained earnings 25,489 20,440
Total equity 33,647 28,297
The accompanying notes form an integral part of these condensed consolidated
financial statements.
Statement of changes in equity
For the financial year ended 31 December 2021
Group
Notes Share Share Share-based Revaluation Merger Retained Total
capital premium payments reserve reserve earnings equity
£'000 £'000 reserve £'000 £'000 £'000 £'000
£'000
Balance at 1 January 2020 349 12,006 524 162 (5,774) 17,020 24,287
Changes in equity
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
Issue of equity share capital 22 1,009 - - - - 1,031
Share-based payments 4 - - 223 - - - 223
Transfer upon exercise or cancellation of share options - - (953) - - 953 -
Dividends 5 - - - - - (3,288) (3,288)
Transactions with owners 22 1,009 (730) - - (2,335) (2,034)
Profit and total comprehensive income for the financial year - - - - - 7,384 7,384
Balance at 31 December 2021 373 13,159 238 162 (5,774) 25,489 33,647
The accompanying notes form an integral part of these condensed consolidated
financial statements.
Statement of cash flows
For the financial year ended 31 December 2021
Group
Notes 2021 2020
£'000 £'000
Operating activities
Cash generated from/(used in) operating activities 7 10,338 8,198
Tax paid (1,782) (1,379)
Net cash flows generated from operating activities 8,556 6,819
Investing activities
Acquisitions net of cash acquired 8 (4,374) (2,039)
Sale of assets held for sale 591 176
Deferred and contingent consideration - (37)
Capital expenditure on property, plant and equipment (101) (46)
Disposal of corporate offices - 25
Franchisee loans granted (796) (653)
Loans repaid by franchisees 1,015 758
Finance income received 167 181
Sale of MAB shares - 271
Dividends received - -
Net cash flows used in investing activities (3,498) (1,364)
Financing activities
Proceeds from share issue 1,031 146
Loan repayments (890) (890)
Equity dividends paid (3,288) (1,897)
Lease payments (221) (205)
Finance costs (211) (261)
Net cash used in financing activities (3,579) (3,107)
Net change in cash and cash equivalents 1,479 2,348
Cash and cash equivalents at the beginning of the financial year 5,934 3,586
Cash and cash equivalents at the end of the financial year 7,413 5,934
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 31 December 2021
1 Approval
This announcement was approved by the Board of Directors on 1 April 2022.
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
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
Whilst the financial information included in this annual financial results
announcement has been prepared in accordance with the recognition and
measurement principles of UK-adopted International Accounting Standards and
with those parts of the Companies Act 2006 applicable to companies reporting
under International Financial Reporting Standards (IFRS), this announcement
does not contain sufficient information to comply therewith.
The financial information set out herein does not constitute the Company's
statutory accounts for the years ended 31 December 2021 or 2020 but is derived
from those accounts. Statutory accounts for the year ended 31 December 2020
have been delivered to the Registrar of Companies and those for the year ended
31 December 2021 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 2021 and 31 December 2020 did not contain
statements under s498 (2) or (3) of the Companies Act 2006.
Going concern and Covid-19
The Group continues to operate from a sound financial platform and is strongly
cash generative. The bank balance as at the date of this report is £8.3m.
Whilst the Group continues to generate profit and cash, demonstrating
excellent resilience despite the ongoing impact of the pandemic, the Board has
nonetheless revisited its forecasts against a range of possible downside
outcomes for the period to 31 December 2023. These include the possible
impact on the economy of post-pandemic easing of restrictions; higher energy
prices; increased tax and interest rates; and political uncertainty both home
and abroad on trading.
Sensitivities have been applied to the base case model to reflect 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 reasonably foreseeable circumstances, the Board has concluded that
the Group has adequate resources to continue in operational existence and to
meet its financial obligations as they fall due, whilst operating within its
bank covenants, in the period to 28 March 2023.
The final bank loan repayment of £7,868,000 is due on 28 March 2023. The base
case forecasts indicate the cash to repay the loan will be available and other
mitigating actions remain available to ensure cash is maximised in any
reasonably foreseeable downside scenarios. However, the Group's growth
ambitions, both organically and though acquisition, will require additional
facilities if growth is not to be constrained. Negotiations to secure a new
facility are expected to commence during 2022 and initial indications from the
Group's bankers suggest that they are supportive, both in relation to
extending the existing facilities or providing a new, larger facility.
In conclusion, the Board are satisfied that it remains appropriate to prepare
these financial statements on a going concern basis and that no material
uncertainties exist.
Standards adopted for the first time
One amendment to accounting standards impacting the Group that has been
adopted in the annual financial statements for the year ended 31 December 2021
is the Interest Rate Benchmark Reform - IBOR "Phase 2" (Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16).
This amendment is mandatorily effective for reporting periods beginning on or
after 1 January 2021. The amendments provide relief to the Group in respect of
certain loans whose contractual terms are affected by interest rate benchmark
reform.
Standards, amendments and interpretations to existing standards that are not
yet effective
There are a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods that the Group has decided not to adopt early.
The following amendments are effective for the period beginning 1 January
2022:
• Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
• Property, Plant and Equipment: Proceeds before Intended Use (Amendments to
IAS 16);
• Annual Improvements to IFRS Standards 2018 - 2020 (Amendments to IFRS 1,
IFRS 9, IFRS 16 and IAS 41); and
• References to the Conceptual Framework (Amendments to IFRS 3).
The following amendments are effective for the period beginning 1 January
2023:
• Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2);
• Definition of Accounting Estimates (Amendments to IAS 8); and
• Deferred Tax Related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12).
In January 2020, the IASB issued amendments to IAS 1, which clarify the
criteria used to determine whether liabilities are classified as current or
non-current. These amendments clarify that current or non-current
classification is based on whether an entity has a right at the end of the
reporting period to defer settlement of the liability for at least twelve
months after the reporting period. The amendments also clarify that
"settlement" includes the transfer of cash, goods, services, or equity
instruments unless the obligation to transfer equity instruments arises from a
conversion feature classified as an equity instrument separately from the
liability component of a compound financial instrument. The amendments were
originally effective for annual reporting periods beginning on or after 1
January 2022. However, in May 2020, the effective date was deferred to annual
reporting periods beginning on or after 1 January 2023.
In response to feedback and enquiries from stakeholders, in December 2020, the
IFRS Interpretations Committee (IFRIC) issued a tentative agenda decision,
analysing the applicability of the amendments to three scenarios. However,
given the comments received and concerns raised on some aspects of the
amendments, in April 2021, IFRIC decided not to finalise the agenda decision
and referred the matter to the IASB. In its June 2021 meeting, the IASB
tentatively decided to amend the requirements of IAS 1 with respect to the
classification of liabilities subject to conditions and disclosure of
information about such conditions and to defer the effective date of the 2020
amendment by at least one year.
The Group is currently assessing the impact of these new accounting standards
and amendments. The Group will assess the impact of the final amendments to
IAS 1 on classification of its liabilities once they are issued by the IASB.
The Group does not believe that the amendments to IAS 1, in their present
form, will have a significant impact on the classification of its liabilities,
as the conversion feature in its convertible debt instruments is classified as
an equity instrument, and therefore, does not affect the classification of its
convertible debt as a non-current liability.
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 business. In the year ended 31 December 2021 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 resource 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
2021 2020 2021 2020 2021 2020
£'000 £'000 £'000 £'000 £'000 £'000
Management service fees 8,227 7,467 2,483 1,589 10,710 9,056
Corporate-owned offices 2,431 1,360 1,200 890 3,631 2,250
10,658 8,827 3,683 2,479 14,341 11,306
Initial franchise fees and other resale commissions 314 242
Other income 555 449
Property franchise division 15,210 11,997
Financial services division 14,437 9,695
Total revenue 29,647 21,692
Revenue from corporate-owned offices of £3,631,000 (2020: £2,250,000)
includes £14,000 (2020: £933,000) relating to one Lovelle corporate-owned
office (2020: five Lovelle corporate-owned offices and the Northwood Glossop
portfolio) that was held as an asset for sale pending being franchised out.
This comprises £14,000 (2020: £578,000) of lettings revenue and £nil (2020:
£355,000) of sales revenue.
Gross profit for the two divisions is split as follows:
Gross profit
2021 2020
£'000 £'000
Property franchise division 15,210 11,997
Financial services division 3,835 2,799
Total gross profit 19,045 14,796
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 £7,418,000 (2020: £5,904,000).
4 Share-based payments
Administrative expenses include a charge of £223,000 (2020: £444,000) 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
2021 2020
£'000 £'000
Final dividend for 2020
5.1p per share paid 16 June 2021 (2020: £nil) 1,796 -
Interim dividend for 2021
4.0p per share paid 29 October 2021 (2020: 5.4p per share paid 30 October 1,492 1,897
2020)
Total dividend paid 3,288 1,897
The Directors propose a final dividend of 4.5p per share totalling £1,678,000
for 2021, payable 30 May 2022, to shareholders on the register on 19 April
2021. As this remains conditional on shareholders' approval, provision has not
been made in these financial statements.
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.
Options over ordinary shares and rights of conversion are described in note
27. The calculation of diluted earnings per share is derived from earnings per
share, adjusted to allow for the issue of shares under these instruments.
2021 2020
£'000 £'000
Profit for the financial year 7,384 5,317
Weighted average number of ordinary shares Number Number
Basic 36,142 35,101
Diluted 36,434 36,314
Earnings per share Pence Pence
Basic 20.4p 15.1p
Diluted 20.3p 14.6p
7 Reconciliation of profit before taxation to cash generated from operations
Group
2021 2020
£'000 £'000
Profit before taxation 9,296 6,670
Depreciation and amortisation charges 967 843
Share-based payment charge 223 444
Impairment of franchisee loan book 85 68
Amortisation of debt costs 29 29
Finance costs 191 244
Interest paid on lease liabilities 20 17
Finance income (167) (181)
MAB share option recognition and related income - (112)
10,644 8,022
Increase in trade and other receivables (186) (569)
Increase in trade and other payables (120) 745
Cash generated from operations 10,338 8,198
8 Acquisitions
Belvoir Group PLC acquired White Kite Holdings 2021 Limited on 31 March 2021,
for cash consideration of £4,078,000. White Kite trades as Nicholas
Humphreys, a network of 17 franchised estate agencies and three
corporate-owned estate and lettings agencies.
Brook Financial Services Ltd acquired Nottingham Mortgages Services Limited,
the mortgage business operated by the Nottingham Building Society ("The
Nottingham" or "NBS") for cash consideration of £730,000. Renamed Brook
Mortgage Services on completion, the mortgage business acquired operated a
team of 27 advisers and administrators servicing The Nottingham's branch
members.
For both acquisitions, the goodwill represents the value attributable to the
new businesses and the assembled and trained workforce.
Deferred tax at 25% has been provided on the value of the separable intangible
assets. In respect of White Kite, initial deferred tax liability has been
recognised on the customer relationships, brand and master franchise agreement
acquired which is reduced subsequently in line with the amortisation period.
Whilst the initial book value of goodwill is higher than the tax base, no
deferred liability is recognised on goodwill.
In October 2021 Belvoir Property (UK) Limited took back four London franchises
which are now being managed by our Central Office in Grantham 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 provisional fair values as at
acquisition.
Belvoir London White Kite NMS Total
£'000
£'000 £'000 £'000
Intangible assets - customer relationships 161 1,763 - 1,924
Intangible assets - master franchise agreement - 373 - 373
Intangible assets - trade names - 211 - 211
Trade and receivables - 535 36 571
Cash - 56 378 434
Trade and other payables - (575) (221) (796)
Deferred tax liabilities (44) (587) - (631)
Identifiable net assets acquired 117 1,776 193 2,086
Goodwill on acquisition 98 2,302 537 2,937
Consideration 215 4,078 730 5,023
Consideration settled in cash - 4,078 730 4,808
Post-acquisition financial results
Nicholas Humphreys Brook Mortgage Services Total
£'000
£'000
£'000
Revenue 2,147 520 2,667
Profit and loss 579 61 640
If the acquisitions had completed on the first day of the financial year,
Group revenues would have been £31.1m and Group profit before tax would have
been £9.6m.
9 Post-balance sheet events
Acquisition of Mr and Mrs Clarke
On 10 March 2022, Belvoir Group PLC acquired the entire share capital of Mr
and Mrs Clarke Limited, which operates a national network of ten partners and
associates operating a personal estate agency model. This transaction meets
the definition of a business combination and will be accounted for using the
acquisition method under IFRS 3.
The initial consideration of £0.023m was settled in cash from existing
reserves post year end, and comprised substantially intangible assets and
goodwill. A further £0.177m of cash was applied to the settlement of certain
liabilities at completion.
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.
10 Posting of accounts
It is intended that the financial statements for the year ended 31 December
2021 will be made available to shareholders on the company's
website www.belvoirgroup.com by 7 April 2022 and will also be available
thereafter at the registered office, The Old Courthouse, 60a London Road,
Grantham, NG31 6HR.
11 Annual General Meeting
The Annual General Meeting will be held at 10am on 26 May 2022 at the
registered office, The Old Courthouse, 60a London Road, Grantham, NG31 6HR.
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