REG - Property FranchiseGp - Final Results
23/04/2024 07:00
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RNS Number : 5915L Property Franchise Group PLC (The) 23 April 2024
23 April 2024
THE PROPERTY FRANCHISE GROUP PLC
(the "Company" or the "Group")
Final Results
Outstanding financial performance in a challenging market, with the
post-period Belvoir merger creating the UK's leading property franchise
business
The Property Franchise Group PLC, the UK's largest multi-brand property
franchisor, is pleased to announce its Final Results for the year ended 31
December 2023 ("FY23").
Financial Highlights
· Group revenue increased to £27.3m (2022: £27.2m)
· Management Service Fees ("MSF") increased to £16.1m (2022: £15.9m)
· Adjusted EBITDA increased to £12.1m (2022: £11.8m)
· Adjusted operating margin of 42% (2022: 41%)
· Profit before tax increased to £9.0m (2022: £8.8m).
· Adjusted diluted earnings per share was 28.4p (2022: 28.4p)
· Net cash of £5.1m at 31 December 2023 (2022: £1.7m)
· Dividend paid and declared for FY23 of 14p (2022: 13.0p)
· TPFG has delivered sustained growth over the last 11 years in profit before
tax (CAGR +23.5%) and dividends (+23.3%)
Operational Highlights
· Recurring revenues contributed 56% of total revenue underpinned by double
digit growth in lettings revenue with lettings MSF up to 60% of total MSF
(2022: 55%)
· Lettings MSF increased 11% to £9.9m, a new record for the Group (2022:
£8.9m)
· Sales outperformed a 19% reduction in UK sales completions year on year with
the year-end sales agreed pipeline increasing 4% to £23.1m (2022: £22.2m)
· Managed portfolio up 3% to 78,000 rental properties (2022: 76,000)
· 22 acquisitions at the franchisee level (2022: 19), added 1,879 managed
properties (2022: 1,890)
· EweMove sold 31 new territories (2022: 44), with total territories under
contract 189 (2022: 189)
· Completed the installation of new operating systems and platforms across the
Group to enable more digital interaction with our customer database and to
improve efficiency
Belvoir merger
· Transformational merger with Belvoir Group plc completed on 7 March 2024,
creating one of the UK's largest multi-brand lettings and estate agency
groups, with an established and growing financial services business
· The Combined Group will benefit from increased scale and geographic reach,
operating more than 910 outlets in franchised territories, managing in excess
of 153,000 tenanted residential properties across the UK, selling more than
28,000 properties per year and advising on the completion of over 21,000
mortgages through its network of approximately 310 advisers
Q1 Trading and Outlook
· Q1 has been ahead of management's expectations in terms of both revenue and
profitability
· Lettings market continues to grow at pace, with anticipated growth in sales
revenue in 2024 amidst an improving sales market
Gareth Samples, Chief Executive Officer of The Property Franchise Group, said:
"FY23 represents yet another year of record performance in which we have
improved the quality of our revenue and adeptly executed our strategic
roadmap, whilst continuing to navigate a challenging macroeconomic backdrop.
This is testament to the quality and hard work of our team, with the progress
made in the year leaving us with a solid foundation on which to grow further,
bolstered by increasing revenue visibility for 2024 across a broader base.
"We are delighted to have completed the post-period transformational merger
with Belvoir, marking a significant milestone in our journey to become one of
the leading players in the UK property market. We see a huge opportunity for
the Group, with increased scale, breadth of offering and diversity of brands,
as well as enhanced geographic reach, whilst also providing us with a clear
opportunity to accelerate growth in our Financial Services division."
Analyst presentation
An analyst presentation will be held at 10.00am today, and those wishing to
join the presentation should contact propertyfranchise@almastrategic.com
(mailto:propertyfranchise@almastrategic.com) for joining details.
Investor presentation and Overview Video
The Company is hosting a live private investor presentation on Wednesday 24
April 2024 at 12.15pm on the Investor Meet Company platform. All existing and
potential private investors interested in attending are asked to register
using the following link:
https://www.investormeetcompany.com/property-franchise-group-plc-the/register-investor
(https://www.investormeetcompany.com/property-franchise-group-plc-the/register-investor)
A video overview of the results featuring CEO Gareth Samples and CFO David
Raggett is available to view here: https://bit.ly/TPFG_FY23
(https://bit.ly/TPFG_FY23)
For further information, please contact:
The Property Franchise Group PLC 01202 405549
Gareth Samples, Chief Executive Officer
David Raggett, Chief Financial Officer
Canaccord Genuity Limited (Nominated Adviser and Joint Broker) 020 7523 8000
Max Hartley
Harry Rees
Singer Capital Markets (Joint Broker) 020 7496 3000
Rick Thompson
James Fischer
Alma Strategic Communications 020 3405 0209
Justine James propertyfranchise@almastrategic.com
(mailto:propertyfranchise@almastrategic.com)
Joe Pederzolli
Kinvara Verdon
About The Property Franchise Group PLC:
The Property Franchise Group PLC (AIM: TPFG) is the UK's largest multi-brand
property franchisor, with a network of over 910 lettings and estate agency
businesses delivering high quality services to residential clients, combined
with an established Financial Services business.
The Company was founded in 1986 and has since strategically grown to a diverse
portfolio of 15 brands operating throughout the UK, comprising longstanding
high-street focused brands and two hybrid brands.,. The Property Franchise
Group also includes one of the UK's leading networks for mortgage
intermediaries, Mortgage Advice Bureau.
The Property Franchise Group's brands are Belvoir, CJ Hole, Country
Properties, Ellis & Co, EweMove, Hunters, Lovelle, Martin & Co, Mr and
Mrs Clarke, Mullucks, Newton Fallowell, Nicholas Humphreys, Northwood,
Parkers, and Whitegates.
Headquartered in Bournemouth, the Company was listed on AIM on the London
Stock Exchange in 2013. More information is available
at www.propertyfranchise.co.uk (http://www.propertyfranchise.co.uk/)
Chairman's statement
Overview of performance
I am delighted to report on a period in which the Group achieved yet another
outstanding financial performance and ongoing execution of our strategy.
The business delivered record profits despite a challenging trading
environment and significant market headwinds, demonstrating the resilience of
our business model. TPFG has now delivered continued and sustained growth over
the last 11 years in profit before tax (CAGR +23.5%) and dividends (+23.3%).
The results are underpinned by the strength of our lettings book; our
outstanding franchisees; and the success of our acquisitions. This provides
visibility to future earnings and confidence moving forward across a broader
base following the completion of the Belvoir merger.
Transformational acquisition
On 7 March 2024, the Group completed the transformational merger with Belvoir
Group plc ("Belvoir"), creating one of the UK's largest multi-brand lettings
and estate agency groups, combined with an established and growing financial
services business.
The coming together of these two great businesses has been the subject of
intense work by both parties over the course of many months. We have long held
the view that the strengths of the franchise model are ideally suited to the
residential property market allowing business owners to prosper and
facilitating high quality services to be delivered to consumers by local
experts. This merger represents our continuing belief that this business model
will continue to grow in importance within the sector.
The merger significantly increased the scale and reach of The Property
Franchise Group, positioning ourselves for accelerated growth and enhancing
our position as the UK's leading property franchisor. The merger marks a
significant milestone for the Group and consolidation is a natural progression
on our journey, which started when we changed our name from MartinCo Plc to
The Property Franchise Group Plc in 2017.
Belvoir is a complementary business which, like us, has demonstrated the
robustness of its business model and strategy in the face of adverse
residential and economic conditions on several occasions over the last decade.
It has performed at a similar financial level to TPFG, with good earnings
quality and strong conversion of EBITDA to cash. The Group now has increased
scale and geographic reach, operating more than 910 outlets in franchised
territories, managing in excess of 153,000 tenanted residential properties
across the UK, selling more than 28,000 properties per year and advising on
the completion of over 21,000 mortgages through its network of c310 advisers.
Group pro-forma income statement highlights
(£000's) TPFG Belvoir Combined
2022 2023 2022 2023 2022 2023
Revenue 27,158 27,278 33,718 34,182 60,876 61,460
Gross Profit 21,583 21,878 20,269 20,480 41,852 42,358
Adjusted EBITDA 11,809 12,090 10,596 11,139 22,405 23,229
PBT 8,833 9,014 9,118 9,116 17,951 18,130
Going forward, we will continue to seek to exploit the existing and additional
income streams that our increased scale presents to us and to assist our
franchisees in growing their businesses. One such example is the established
Financial Services business, led by Michelle Brook. This presents a great
opportunity to scale across the broader footprint with the new focus and
leadership.
I would like to take this opportunity to extend my gratitude to our
shareholders, employees, customers, suppliers, and other stakeholders for
their support and commitment during the merger process and look forward to
getting to know our new colleagues in the year ahead.
Cash generation
The highly cash generative nature of the Group has ensured our ability to
retain a robust balance sheet with the remaining £2.5m of bank debt repaid
post period end and the delivery of a progressive dividend policy for our
shareholders. I am pleased to report on the ongoing strength of our business
model with free cash flow generated of £8.7m (2022: £8.8m) and net cash of
£5.1m (2022: £1.7m) at the year end.
Dividends
The Board is pleased to announce a 7.7% increase in our total dividend to
14.0p per share (2022: 13.0p). Having paid an interim dividend of 4.6p in
October 2023 and a special dividend of 2.0p in February 2024, the proposed
final dividend for 2023 will be 7.4p per share and this will be paid on 12
June 2024 to all shareholders on the register at the close of business on 17
May 2024 subject to shareholders' approval on 7 June 2024.
ESG
TPFG has a strong ESG focus and is committed to prioritising environmental,
social, and governance to deliver sustainable growth. Integrating
sustainability into our business practices aligns with our beliefs and
enhances long-term value creation for our stakeholders and the broader
community. In June of last year, I was delighted to invite Claire Noyce to
join our Board. As Deputy Chair of the QCA, Claire brings a wealth of
experience to our Board and will Chair our ESG Committee.
In 2023, we selected Inspired to work alongside us as our ESG partner to help
evaluate our current practices and build a strategy and roadmap that would
drive meaningful impact. We aim to publish our strategy this year,
incorporating aspects of Belvoir's own progress with sustainability and ESG,
which will include our areas of focus and the measurements we will use to
track our progress.
The Board promotes a culture of good governance, and we continue to apply the
2018 Quoted Companies Alliance Corporate Governance Code (the "QCA Code") as
the basis of the Group's governance framework and work has already begun on
updates following the revised 2023 QCA Code.
Board changes
Post period end, Belvoir's Michelle Brook was appointed as an Executive
Director and Jon Di-Stefano and Paul George, also from Belvoir, were appointed
as Non-Executive Directors. At the same time Phil Crooks and our founder
Richard Martin left our Board.
I am most grateful to Phil for the considerable insight and expertise he has
offered our Board throughout his almost 9-year tenure as an independent
Non-Executive Director and Chair of our Audit and Risk Committee.
I would also like to extend my gratitude to Richard Martin, the founder of The
Property Franchise Group, for his services to the Group and for his
stewardship as he steps down from the Board and assumes his new role as
Lifetime President.
Outlook
We remain focused on delivering further value to shareholders and driving
profitable growth. The transformational merger with Belvoir provides us with
the platform to achieve this and I am very excited about the opportunities
that lie ahead for the Group. Pleasingly, the sales market has started
strongly and with a broader base of tenanted properties following the merger,
we can be confident of further growth in 2024.
Paul Latham
Non-Executive Chairman
22 April 2024
CEO statement
Since joining as CEO in April 2020, the business has grown from revenues and
adjusted EBITDA of £11.3m and £5.3m respectively for FY19 to £27.3m and
£12.1m for FY23, representing a compound annual growth rate ("CAGR") of 24.5%
in revenue and 22.7% in adjusted EBITDA. Taking into account the pro forma
financials for FY23 following the merger with Belvoir, this CAGR would be
52.5% and 44.4% respectively. This growth has largely come via acquisition,
but organic growth has been, and will continue to be, a contributor.
Our business model has proven its strength and resilience time and time again,
while our franchise model, with its focus on lettings and the continued
diversification of income is improving the resilience of our network.
FY23 represents yet another year of record performance where we have improved
the quality of our revenue and adeptly executed our strategic roadmap whilst
continuing to navigate a challenging macroeconomic backdrop.
In the year ended 31 December 2023, we grew our recurring revenues from 51% of
total revenue to 56% of total revenue and increased adjusted PBT by 4% from
£10.7m to £11.2m. In addition, following the repayment of the £2.5m owed
to Barclays post period end, the Group is debt free with cash of approximately
£4.7m as at 31 March 2024.
The exceptional results achieved in 2023 are testament to the quality and hard
work of our team. I would like to take this opportunity to thank them and our
franchisees for their continued efforts in delivering this growth. The
progress made in the year leaves us with a solid foundation on which to grow
further, bolstered by increasing revenue visibility for 2024 across a broader
base.
Post-period end, in March, we completed the transformational merger with
Belvoir Group, marking a significant milestone in our journey to become one of
the leading players in the UK property market. We see a huge opportunity for
the Group, with increased scale, breadth of offering and diversity of brands,
as well as enhanced geographic reach. Additionally, it provides us with a
clear opportunity to accelerate growth in our Financial Services division.
The market
As anticipated, in 2023 we continued to see a strong lettings market which
underpinned the Group's financial performance. Rental rates continued to rise
driven by demand and increasing costs for landlords. Whilst annual rent
increases have historically tracked inflation, new lets in 2022 saw increases
of over 10% and in 2023 of 8%. The upcoming introduction of more regulation is
expected to drive more landlords to opt to use a letting agent in the future.
Conversely the sales market was subdued in 2023 compared to the prior year,
which was an exceptional comparative period. We saw a slight uptick in sales
rates in the second half of 2023, having seen lower activity as a result of
rising interest rates, the year ended down 19% on 2022 with around 1.0 million
sales completions in the UK. We have seen signs of sales activity picking up
and are expecting 1.1 million sales completions in 2024.
Despite varying year-on-year market conditions, there is an enduring demand
for both rented housing and home ownership, which continues to outstrip
supply, enhancing the profitability of both lettings and estate agencies.
Operational review
Acquisitions
Activity under the assisted acquisitions programme is continuing to build with
22 (2022: 19) of our franchise owners having completed the acquisition of a
local competitor adding 1,879 tenanted properties (2022: 1,883). The
pipeline of assisted acquisitions continues to be a focus as we continue to
seek ways to help our franchisees grow.
As detailed above, the merger with Belvoir was successfully negotiated in
2023, completing in March 2024, which immediately added significant scale and
provides increased opportunities for growth in the current year and beyond.
The merger has significantly increased our borrowing capacity and ability to
fund earnings accretive acquisitions. We continue to evaluate further
accretive acquisition opportunities which would deliver brand expansion and
geographic growth and are committed to doing so with limited or no dilution.
Lettings
Lettings is at the very core of our business. It has been another strong year
with the portfolio of managed tenanted properties increasing by 3% to over
78,000. Lettings MSF achieved a new record, growing by 11% to £9.9m (2022:
£8.9m) and, in our owned offices, lettings income grew by 13% to £3.4m
(2022: £3.0m). Lettings MSF represented 61% of total MSF and 53% of total
revenue in the year. As a result, recurring revenues increased to 56% of total
revenue.
The Group also successfully executed digitally driven campaigns to win private
landlords' business, retain existing landlords and win back lost landlords in
the year. This year has had the lowest level of attrition in the Group's
history.
Sales
Against a challenging backdrop, with UK sales completions reducing by 19% over
2022, TPFG outperformed the market. Sales MSF reduced by 11% and our owned
offices reported a 15% drop in sales revenue.
Encouragingly, the sales market has improved in Q1 2024, with house prices
starting to rise, and the Group is well positioned to capitalise from this
recovery.
Financial Services
As for Sales, the environment was challenging for financial services, yet we
increased the number of franchisees signed up to our service offerings and
increased the number of mortgages written as a result. Improved activity in Q1
2024 and a return to writing more new mortgages will assist growth in our
financial services' revenues together with the significantly enlarged division
now benefitting from the leadership of Michelle Brook.
Recruitment
TPFG delivered against its objective to attract new franchisees to the Group,
increasing its UK coverage and enabling the resales of existing franchise
territories. In the year, 46 new franchise owners were recruited, 15 as
traditional agents and 31 to our hybrid model. Then, to bring in new impetus
to a mature network, the Group facilitated 21 resales of existing franchises.
Prior to the merger TPFG operated in over 580 franchised outlets and,
following the merger, it now operates over 910 franchised outlets. The year
has started well, especially in EweMove, and the Board expects an improved
performance in 2024.
Digital marketing
Specific milestones in the year included completing the installation of a new
operating system for EweMove, the installation of a new operating platform to
enable more digital interaction and developing a portal to give our
franchisees access to a wealth of information to improve efficiency. We have
had positive feedback from franchisees on these operating systems and expect
to roll the portal out and further enhancements in 2024 to drive growth.
Creating the UKs largest multi-brand property network
Both Belvoir and TPFG traded well during the year and demonstrated ability to
drive earnings. In FY23, the pro forma financials for the Group showed
revenue in excess of £61m and adjusted EBITDA of £23m.
We are working on a comprehensive integration strategy with the assistance of
Dorian Gonsalves and Louise George which will be completed towards the end of
H1 2024. We are delighted that Dorian Gonsalves, former CEO of Belvoir, and
Louise George, former CFO of Belvoir, have stayed on for up to a year, to
share their expertise and support in the integration of the businesses.
Enlarged Group Strategy
In September 2020, having had 6 months in the Group, I set out 6 key strategic
initiatives which have driven our growth since:
· Lettings growth
· Develop sales activity in the high street-led brands
· Financial services growth
· EweMove recruitment
· Acquisitions (franchisee and franchisor level)
· Digital marketing
It is pleasing to see that significant advances have been made on each of
these initiatives. Growth opportunities remain for each. Some are developing
into far more reaching initiatives such as for financial services and digital
marketing.
The scale of the Group has changed materially since I joined, and we now have
a much stronger and broader platform from which to grow with yet greater
resilience should we need it. In so doing, we aim to hold on to key financial
fundamentals like our 40% operating margin.
Current Trading and Outlook
FY24 has started well with lettings' revenues continuing to grow at similar
rates to last year and sales revenues ahead of management's expectations in
Q1. There are strong indications of further growth in revenue and
profitability during 2024.
March 2024 was a pivotal month for TPFG with the completion of the Belvoir
merger which is transformational for the business. We are delighted Dorian
Gonsalves and Louise George are working with us on the integration of the
business which is progressing well with exciting opportunities for the Group
and the addition of an established Financial Services business.
Despite some broader headwinds, our high levels of recurring revenue and
resilient business model has demonstrated, time and time again, that we can
continue to grow profitability regardless of market cycles. For this reason, I
look to the future with confidence and excitement about the further value we
can deliver for all stakeholders from our increased scale and ongoing
ambition.
Gareth Samples
CEO
22 April 2024
Financial Review
Percentage 2023 2022
change
Revenue +0% £27.3m £27.2m
Management Service Fees +1% £16.1m £15.9m
Cost of sales -3% £5.4m £5.6m
Administrative expenses -0% £11.8m £11.9m
Adjusted operating profit* +3% £11.5m £11.1m
Operating profit +0% £9.3m £9.3m
Adjusted profit before tax** +4% £11.2m £10.7m
Profit before tax +2% £9.0m £8.8m
Adjusted EBITDA** +2% £12.1m £11.8m
Dividend +8% 14.0p 13.0p
Diluted EPS -2% 22.0p 22.5p
Adjusted diluted EPS** 0% 28.4p 28.4p
*Before exceptional costs, amortisation of acquired intangibles and
share-based payment charges.
** Before exceptional costs, share-based payment charges and losses/gains on
listed investments.
Another year of profit growth against a background of challenging market
conditions, with our reliable recurring lettings stream growing and more than
offsetting the decline in sales income. With further cost synergies being
realised from the acquisition of Hunters, it meant profit increased by more
than the uplift in revenue.
Lettings income growth was driven by an increase in our managed portfolio of
3% and the significant increases in rents for new lets seen across the
industry, which reached close to 9% increase in 2023. Our revenue from sales
transactions was slow in the first half of the year but activity picked up in
the second half of the year as inflation started to fall and interest rates
peaked.
We have once again increased the dividends paid to shareholders, demonstrating
our cash generation and our commitment to following a progressive dividend
policy.
Revenue
Group revenue for the financial year ended 31 December 2023 was £27.3m (2022:
£27.2m), an increase of £0.1m over the prior year.
Management Service Fees ("MSF"), our key underlying revenue stream, increased
2% from £15.9m to £16.1m and represented 59% (2022: 58%) of the Group's
revenue. Lettings contributed 60% of MSF (2022: 55%), sales contributed 39% of
MSF (2022: 44%) and financial services contributed 1% of MSF (2022: 1%).
Lettings MSF increased by 11% in the year, excluding the amortisation of
prepaid assisted acquisitions support, and sales MSF decreased by 11%.
Our franchise sales activity was a mix of sales to new entrants and
experienced franchise owners in the high street-led brands and encouraging new
entrants into EweMove. Territory sales in EweMove were 31 (2022: 44), which
was a great achievement in a challenging sales market.
Financial services suffered from significant mortgage rate increases,
uncertainty in the direction of these rates and a reduction in residential
sales. Revenue reduced by £0.2m (13%) to £1.5m (2022: £1.7m).
Operating profit
Headline operating profit remained unchanged on the prior year at £9.3m
(2022: £9.3m) with an operating margin of 34% (2022: 34%). Adjusted operating
profit before exceptional items, amortisation of acquired intangibles and
share-based payments charges increased 3% from £11.1m to £11.5m and the
resulting operating margin increased to 42% (2022: 41%).
Our cost of sales reduced by 3% to £5.4m (2022: £5.6m) which was due to the
lower sales transaction in the owned offices this year but also some further
synergies achieved from the Hunters acquisition. Headline administrative
expenses decreased by 0.4% to £11.8m (2022: £11.9m).
Share options were granted to the Executive Directors in 2023 over a maximum
of 172,619 ordinary shares. There were also share options granted to senior
employees in 2023 amounting to a maximum of 83,334 ordinary shares on the same
conditions as those applying to the Executive Directors. Total shares under
option at 31 December 2023 were 2,100,453.
An assessment of the share-based payment charges resulting from the options
granted was made on 31 December 2023 resulting in £0.8m being charged to the
profit and loss account (2022: £0.4m).
Adjusted EBIDTA
Adjusted EBITDA for 2023 was £12.1m (2022: £11.8m), an increase of £0.3m
(2%) over the prior year.
Profit before tax
Profit before tax increased to £9.0m (2022: £8.8m). Excluding amortisation
arising on acquired intangibles of £1.4m (2022: £1.4m), the share-based
payment charges of £0.8m (2022: £0.4m) and the gain on revaluation of the
listed investment of £0.09m (2022: loss on revaluation £0.03m), the
adjusted profit before tax increased by 4% from £10.7m to £11.2m.
Taxation
The effective rate of corporation tax for the year was 18% (2022: 18%). The
total tax charge for 2023 was £1.6m (2022: £1.6m).
Earnings per share
Basic earnings per share ("EPS") for the year was 23.0p (2022: 22.6p), an
increase of 2%.
Diluted EPS for the year was 22.0p (2022: 22.5p), a decrease of 2% based on
the average number of shares in issue for the period plus an estimate for the
dilutive effect of option grants vesting, being 33,561,469 (2022: 32,141,592).
Adjusted basic EPS for the year was 29.7p (2022: 28.4p), an increase of 5%
based on the average number of shares in issue for the period of 32,142,942
(2022: 32,041,966).
Adjusted diluted EPS for the year was 28.4p (2022: 28.4p), unchanged from last
year, based on an estimate of diluted shares in issue of 33,561,469 (2022:
32,141,592).
The adjustments to earnings to derive the adjusted EPS figures total £2.1m
(2022: £1.9m) and mainly result from the share-based payment charge of £0.8m
and amortisation of acquired intangibles of £1.4m.
The profit attributable to owners increased 2% to £7.4m (2022: £7.2m).
Dividends
The Board remains committed to its progressive dividend policy whilst
maintaining strong dividend cover as part of its overall capital allocation
policy.
The Group has grown significantly over the last three years and is generating
significantly more cash than ever before. As a result, the Board is pleased to
announce a proposed final dividend of 7.4p (2022: 8.8p), after already paying
a special dividend of 2.0p, which together with the first interim dividend of
4.6p, brings the total dividend for 2023 to 14.0p (2022: 13.0p). It will be
paid on 12 June 2024 to all shareholders on the register on 17 May 2024
conditional on shareholder approval at the AGM. Our shares will be marked
ex-dividend on 16 May 2024. The total amount payable is £4.6m (2022: £2.8m),
the significant increase over last year being as a result in the increase in
share capital of 30.1m shares in March 2024 following the Belvoir Group
PLC acquisition.
Cash flow
The Group is strongly operationally cash generative. The net cash inflow from
operating activities in 2023 was £9.0m (2022: £9.0m).
The net cash outflow from investing activities was £0.4m (2022: £0.2m).
The Group borrowed £12.5m from Barclays to fund the majority of the cash
element of the consideration for Hunters Property plc in 2021. This was made
up of a revolving credit facility ("RCF") of £5.0m and a term loan of £7.5m
repayable over 4 years. The term loan was fully repaid in 2022 with an outflow
of £6.1m. In 2023, the Group repaid £2.5m of the RCF with the remaining
£2.5m being repaid in January 2024 leaving the Group with no debt.
Dividend payments totalling £4.3m were paid in the year (2022: £3.8m).
Liquidity
The Group had cash balances of £7.6m on 31 December 2023 (2022: £6.7m) and
after deducting the RCF of £2.5m (2022: £5.0m) mentioned above, net cash was
£5.1m (2022: £1.7m).
The RCF expired and was replaced by a £5m overdraft facility in January 2024
providing the Group with sufficient funds together with its existing cash to
meet the costs of the merger with Belvoir and ongoing working capital
requirements.
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.
Financial position
The Consolidated Statement of Financial Position remains strong with total
assets of £57.7m (2022: £57.8m), the decrease being impacted by amortisation
and cash used to pay off the RCF.
Liabilities reduced from £20.6m to £16.9m mainly as a result of the
repayment of the £2.5m RCF during the period.
The Group finished the year with the total equity attributable to owners of
£40.8m, an increase of £3.6m or 10% over the prior year. It achieved a ROCE
of 21% (2022: 20%) and a ROCI of 28% (2022: 27%).
The Group again generated strong cash inflows in 2023 due to growth in
lettings revenues and its operating margins.
This put the Group in a strong position to execute on the merger with Belvoir
and is expected to provide the Group with an increased predictability of free
cash flow generation going forward.
David Raggett
Chief Financial Officer
22 April 2024
Belvoir Merger
Terms of the Merger
Effective on 7 March 2024, The Property Franchise Group Plc acquired the
entire issued share capital of Belvoir Group Plc in exchange 30,073,051
ordinary shares of 1p each in TPFG, valuing Belvoir at £103.5m.
Financial performance in FY23
· FY23 revenue of £34.2m, adjusted EBITDA of £11.2m and adjusted PBT of
£11.0m
· MSF, the key underlying revenue from franchisees, increased by 5% to £11.5
million (2022: £11.0 million)
· The strong lettings market gave rise to an increase of 8% in lettings MSF
against a UK rental index for 2023 of 6.2%
· 10% lower sales MSF compared favourably with a reduction of 18% in UK housing
transactions
Belvoir Audited Performance
2023 2022 Change (%)
Turnover (£m) 34.2 33.7 1%
Adjusted* EBITDA (£m) 11.1 10.6 5%
PBT (£m) 9.0 9.1 (1%)
Adjusted* PBT (£m) 11.0 10.2 8%
Basic EPS (p) 18.7 19.9 (6%)
Basic adjusted* EPS 22.6 22.1 2%
Net cash (£m) 1.7 1.2 43%
* Before exceptional costs, amortisation of acquired intangibles and
share-based payment charges.
Belvoir Non-Financial KPIs
2023 2022 Change (%)
Number of property franchise offices 331 338 (2%)
Average MSF per franchised office £35,800 £34,000 2%
Number of managed properties 75,200 75,500 -
MSF p.a. from assisted acquisitions £400,000 £300,000 33%
Number of advisers 308 284 8%
Number of mortgages arranged 19,682 18,329 7%
Consolidated statement of comprehensive income
for the year ended 31 December 2023
Notes 2023 2022
£'000 £'000
Revenue 7 27,278 27,158
Cost of sales (5,400) (5,575)
Gross profit 21,878 21,583
Administrative expenses 8 (11,831) (11,876)
Share-based payments charge 9, 30 (783) (411)
Operating profit 10 9,264 9,296
Finance income 11 20 39
Finance costs 11 (357) (470)
Other gains and losses 19 87 (32)
Profit before income tax expense 9,014 8,833
Income tax expense 12 (1,644) (1,588)
Profit and total comprehensive income for the year 7,370 7,245
Profit and total comprehensive income for the year attributable to:
Owners of the parent 7,395 7,229
Non-controlling interest (25) 16
7,370 7,245
Earnings per share attributable to owners of parent 13 23.0p 22.6p
Diluted Earnings per share attributable to owners of parent 13 22.0p 22.5p
Consolidated statement of financial position
31 December 2023
Notes 2023 2022
£'000 £'000
Assets
Non-current assets
Intangible assets 15 43,757 44,958
Property, plant and equipment 16 181 162
Right-of-use assets 17 1,525 1,613
Prepaid assisted acquisitions support 18 230 297
Investments 19 -- 137
Other receivables 20 210 240
45,903 47,407
Current assets
Trade and other receivables 20 4,134 3,718
Cash and cash equivalents 7,642 6,684
11,776 10,402
Total assets 57,679 57,809
Equity
Shareholders' equity
Called up share capital 21 323 320
Share premium 22 4,129 4,129
Own share reserve 24 (420) (348)
Merger reserve 23 14,345 14,345
Other reserves 24 1,673 1,316
Retained earnings 20,765 17,399
40,815 37,161
Non-controlling interest (3) 22
Total equity attributable to owners 40,812 37,183
Liabilities
Non-current liabilities
Borrowings 25 -- 5,000
Lease liabilities 17 1,647 1,856
Deferred tax 27 4,394 5,168
Provisions 28 181 212
6,222 12,236
Current liabilities
Borrowings 25 2,500 --
Trade and other payables 26 6,319 6,724
Lease liabilities 17 395 506
Tax payable 1,431 1,160
10,645 8,390
Total liabilities 16,867 20,626
Total equity and liabilities 57,679 57,809
The financial statements were approved and authorised for issue by the Board
of Directors on 22 April 2024 and were signed on its behalf by:
David Raggett
Chief Financial Officer
Company statement of financial position
31 December 2023 (Company No: 08721920)
Notes 2023 2022
£'000 £'000
Assets
Non-current assets
Investments 19 60,966 60,773
Deferred tax asset 27 820 412
61,786 61,185
Current assets
Trade and other receivables 20 1,476 1,065
Cash and cash equivalents 2,337 1,539
3,813 2,604
Total assets 65,599 63,789
Equity
Shareholders' equity
Called up share capital 21 323 320
Share premium 22 4,129 4,129
Own share reserve 24 (420) (348)
Merger reserve 23 32,335 32,335
Other reserves 24 1,673 1,316
Retained earnings 23,371 19,276
Total equity 61,411 57,028
Liabilities
Non-current liabilities
Borrowings 25 -- 5,000
-- 5,000
Current liabilities
Borrowings 25 2,500 --
Trade and other payables 26 1,688 1,761
4,188 1,761
Total liabilities 4,188 6,761
Total equity and liabilities 65,599 63,789
As permitted by Section 408 of the Companies Act 2006, the income statement of
the Parent Company is not presented as part of these financial statements. The
Parent Company's profit for the financial year was £8.1m (2022: £6.4m).
The financial statements were approved and authorised for issue by the Board
of Directors on 22 April 2024 and were signed on its behalf by:
David Raggett
Chief Financial Officer
Consolidated statement of changes in equity
for the year ended 31 December 2023
Attributable to owners
Called up share Retained Share Own share Merger Other Total Non-controlling Total
capital earnings premium reserve reserve reserves equity interest equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 320 13,999 4,129 (348) 14,345 905 33,350 6 33,356
Profit and total comprehensive income -- 7,229 -- -- -- -- 7,229 16 7,245
Dividends -- (3,829) -- -- -- -- (3,829) -- (3,829)
Share-based payments charge -- -- -- -- -- 411 411 -- 411
Total transactions with owners -- (3,829) -- -- -- 411 (3,418) -- (3,418)
Balance at 31 December 2022 320 17,399 4,129 (348) 14,345 1,316 37,161 22 37,183
Profit and total comprehensive income -- 7,395 -- -- -- -- 7,395 (25) 7,370
Dividends -- (4,283) -- -- -- -- (4,283) -- (4,283)
Shares issued - share option exercises 3 254 -- -- -- (524) (267) -- (267)
Share-based payments charge -- -- -- -- -- 783 783 -- 783
Purchase of shares by Employee Benefit Trust -- -- -- (72) -- -- (72) -- (72)
Deferred tax on share-based payments -- -- -- -- -- 98 98 -- 98
Total transactions with owners 3 (4,029) -- (72) -- 357 (3,741) -- (3,741)
Balance at 31 December 2023 323 20,765 4,129 (420) 14,345 1,673 40,817 (3) 40,812
Company statement of changes in equity
for the year ended 31 December 2023
Called up share Retained Share Own share reserve Merger Other Total
capital earnings premium £'000 reserve reserves equity
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 320 16,668 4,129 (348) 32,335 905 54,009
Profit and total comprehensive income -- 6,437 -- -- -- -- 6,437
Dividends -- (3,829) -- -- -- -- (3,829)
Share-based payments charge -- -- -- -- -- 411 411
Total transactions with owners -- (3,829) -- -- -- 411 (3,418)
Balance at 31 December 2022 320 19,276 4,129 (348) 32,335 1,316 57,028
Profit and total comprehensive income - 8,124 - - - - 8,124
Dividends - (4,283) - - - - (4,283)
Shares issued - share option exercises 3 254 -- - - (524) (267)
Purchase of shares by Employee Benefit Trust - - - (72) - - (72)
Deferred tax on share-based payments - - - - - 98 98
Share-based payments charge - - - - - 783 783
Total transactions with owners 3 (4,029) -- (72) -- 357 (3,741)
Balance at 31 December 2023 323 23,371 4,129 (420) 32,335 1,673 61,411
Consolidated statement of cash flows
for the year ended 31 December 2023
Notes 2023 2022
£'000 £'000
Cash flows from operating activities
Cash generated from operations A 11,324 11,295
Interest paid (255) (359)
Tax paid (2,048) (1,962)
Net cash from operating activities 9,021 8,974
Cash flows from investing activities
Purchase of intangible assets - Customer lists (201) (387)
Disposal of investment in shares 81 --
The Mortgage Genie deferred consideration (138) --
Disposal of intangible assets - FDGs and rebrands 53 143
Disposal of intangible assets - Customer lists -- 150
Purchase of tangible assets (114) (38)
Assisted acquisitions support (115) (102)
Interest received 20 39
Net cash used in investing activities (414) (195)
Cash flows from financing activities
Issue of ordinary shares 3 --
Equity dividends paid (4,283) (3,829)
Purchase of shares by Employee Benefit Trust (72) --
Net settlement of share options (270) --
Bank loan repaid (2,500) (6,094)
Principal paid on lease liabilities (431) (473)
Interest paid on lease liabilities (96) (112)
Net cash used in financing activities (7,649) (10,508)
Increase/(decrease) in cash and cash equivalents 958 (1,729)
Cash and cash equivalents at beginning of year 6,684 8,413
Cash and cash equivalents at end of year 7,642 6,684
Notes to the consolidated statement of cash flows
for the year ended 31 December 2023
A. Reconciliation of profit before income tax to cash generated from
operations
2023 2022
£'000 £'000
Cash flows from operating activities
Profit before income tax 9,014 8,833
Depreciation of property, plant and equipment 95 91
Amortisation of intangibles 1,531 1,477
Amortisation of prepaid assisted acquisitions support 183 229
Amortisation of right-of-use assets 234 305
Profit on disposal of FDGs and rebrands (89) (195)
Share-based payments charge 783 411
(Gain)/loss on revaluation of listed investment (87) 32
Finance costs 357 471
Finance income (20) (39)
Operating cash flow before changes in working capital 12,001 11,615
Increase in trade and other receivables (319) (837)
(Decrease)/increase in trade and other payables (358) 517
Cash generated from operations 11,324 11,295
Company statement of cash flows
for the year ended 31 December 2023
Notes 2023 2022
£'000 £'000
Cash flows from operating activities
Cash generated from operations B (1,337) (764)
Interest paid (256) (359)
Net cash used in operating activities (1,593) (1,123)
Cash flows from investing activities
The Mortgage Genie - deferred consideration (138) --
Equity dividends received 9,651 7,950
Net cash generated from investing activities 9,513 7,950
Cash flows from financing activities
Issue of ordinary shares 3 --
Equity dividends paid (4,283) (3,829)
Purchase of shares by Employee Benefit Trust (72) --
Net settlement of share options (270) --
Bank loan repaid (2,500) (6,094)
Net cash used in financing activities (7,122) (9,923)
Increase / (decrease) in cash and cash equivalents 798 (3,096)
Cash and cash equivalents at beginning of year 1,539 4,635
Cash and cash equivalents at end of year 2,337 1,539
Notes to the company statement of cash flows
for the year ended 31 December 2023
B. Reconciliation of profit before income tax to cash generated from
operations
2023 2022
£'000 £'000
Cash flows from operating activities
Profit before income tax 7,555 6,120
Share-based payments charge 613 366
(Gain)/loss on revaluation of listed investment (22) 15
Finance costs 261 358
Equity dividend received (9,651) (7,950)
Operating cash flow before changes in working capital (1,244) (1,091)
(Increase)/decrease in trade and other receivables (94) 28
Increase in trade and other payables 1 299
Cash used in operations (1,337) (764)
Notes to the consolidated and company financial statements
for the year ended 31 December 2023
1. General information
The principal activity of The Property Franchise Group PLC and its
subsidiaries is that of a UK residential property franchise business. The
Group operates in the UK. The Company is a public limited company incorporated
and domiciled in the UK and listed on AIM. The address of its head office and
registered office is 2 St Stephen's Court, St Stephen's Road, Bournemouth,
Dorset, BH2 6LA, UK.
2. Basis of preparation
These consolidated financial statements have been prepared in accordance with
UK adopted international accounting standards and, as regards the Parent
Company financial statements, as applied in accordance with the provisions of
the Companies Act 2006. The consolidated financial statements have been
prepared under the historical cost convention modified to include the
revaluation of certain investments at fair value.
The preparation of financial statements in accordance with UK adopted
international accounting standards requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in
the process of applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the consolidated financial statements are
disclosed in note 5.
The presentational currency of the financial statements is in British pounds
and amounts are rounded to the nearest thousand pounds.
Going concern
The Group has produced detailed budgets, projections and cash flow forecasts,
which incorporate the recently acquired Belvoir Group PLC. These have been
stress tested to understand the impacts of reductions in revenue and costs.
The Directors have concluded after reviewing these budgets, projections and
forecasts, making appropriate enquiries of the business, that there is a
reasonable expectation that the Group has adequate resources to continue in
operation for the foreseeable future. Accordingly, they have adopted the going
concern basis in preparing the financial statements.
Changes in accounting policies
a) New standards, amendments and interpretations effective from 1 January 2023
We do not consider there to be any relevant new standards, amendments to
standards or interpretations, that are effective for the financial year
beginning on 1 January 2023, which would have had a material impact on the
financial statements.
b) New standards, amendments and interpretations not yet effective
We do not consider there to be any relevant new standards, amendments to
standards or interpretations that have been issued, but are not effective for
the financial year beginning on 1 January 2023, which would have had a
material impact on the financial statements.
The principal accounting policies applied in the preparation of these
financial statements are set out below. These policies have been consistently
applied to all the years presented, unless otherwise stated.
3. Basis of consolidation
The Group financial statements include those of the Parent Company and its
subsidiaries, drawn up to 31 December 2023. Subsidiaries are all entities over
which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its power over the
entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control
ceases.
The Group applies the acquisition method to account for business combinations.
The consideration transferred for the acquisition of a subsidiary is the fair
values of the assets transferred, the liabilities incurred to the former
owners of the acquiree and the equity interests issued by the Group.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values
at the acquisition date. Acquisition-related costs are expensed as incurred.
Inter-company transactions, balances and unrealised gains on transactions
between Group companies are eliminated. Unrealised losses are also eliminated.
When necessary, amounts reported by subsidiaries have been adjusted to conform
to the Group's accounting policies.
4. Significant accounting policies
Revenue recognition
Performance obligations and the timing of revenue recognition
Revenue represents income, net of VAT, from the sale of franchise agreements,
resale fees and Management Service Fees levied to franchisees monthly based on
their turnover, and other income being the provision of ad hoc services and
ongoing support to franchisees. In addition there is lettings and residential
sales income, net of VAT, from a small number of Hunters' owned offices and
financial services commissions.
Franchises excluding EweMove:
Fees from the sale of franchise agreements are not refundable. These fees are
for the use of the brand along with initial training and support and promotion
during the opening phase of the new office. As such, the Group has some
initial obligations that extend beyond the receipt of funds and signing of the
franchise agreement so an element of the fee is deferred and released as the
obligations are discharged, usually between 1 to 4 months after receipt of
funds, which is the typical period of on-boarding for new franchisees.
Resale fees are recognised in the month that a contract for the resale of a
franchise is signed. Upon signing of the contract all obligations have been
completed.
Management Service Fees are recognised on a monthly basis and other income is
recognised when the services and support is provided to the franchisee. There
are no performance obligations associated with levying the Management Service
Fees. For ad hoc services and support, all performance obligations have been
fulfilled at the time of revenue recognition.
EweMove:
Fees from the sale of franchise agreements for the EweMove brand are not
refundable. Some new franchisees pay a higher fee to include the first 12
months' licence fee; in this scenario, the licence fee element of the initial
fee is deferred and released over the first 12 months of trading of the
franchise where no monthly licence fees are payable. The franchise fee is for
the use of the brand along with initial support and promotion during the
opening phase of the new franchise. As such, the Group has some initial
obligations that extend beyond the receipt of funds and signing of the
franchise agreement so an element of the fee is deferred and released as the
obligations are discharged, usually between 1 to 4 months after receipt of
funds, which is the typical period of on-boarding for new franchisees.
Management Service Fees consist of monthly licence fees and completion fees.
Licence fees are recognised on a monthly basis, completion fees are recognised
when sales or lettings transactions complete and other income is recognised
when the services and support are provided to the franchisee. There are no
additional performance obligations associated with levying the licence fee and
completion fees beyond providing access to the systems, brand and marketing
support. For ad hoc services and support, all performance obligations have
been fulfilled at the time of revenue recognition.
Hunters' owned offices:
Revenue from the sale of residential property is recognised, net of vat, at
the point the Group has performed its performance obligation to see the
transaction through to the exchange of contracts between a buyer and a vendor.
Revenue from lettings represents commission earned from operating as a
lettings agent, net of vat. Where the performance obligation relates to the
letting of a property, the revenue is recognised at the point the property has
been let. Where the performance obligation relates to the management of a
lettings property, revenue is recognised over the period the property is
managed.
Financial services commissions:
Financial services commissions received are recognised upon receipt, being a
point in time when the Group has met its obligations in delivering a customer
to the mortgage and / or insurance partners. A provision is made for the best
estimate of future clawbacks resulting from insurance policies being
subsequently cancelled; however, this is not material to the financial
statements. There is no vat applicable to financial services commissions.
Rental income:
Rental income represents rent received from short-term licensing arrangements
entered into to make use of vacant office space. The Group's obligation is to
provide office accommodation through the period of the licence. Revenue is
recognised over the period of the licence.
Operating profit
Profit from operations is stated before finance income, finance costs and tax
expense.
Intangible assets
Intangible assets with a finite life are carried at cost less amortisation and
any impairment losses. Intangible assets represent items which meet the
recognition criteria of IAS 38, in that it is probable that future economic
benefits attributable to the assets will flow to the entity and the cost can
be measured reliably.
In accordance with IFRS 3 Business Combinations, an intangible asset acquired
in a business combination is deemed to have a cost to the Group of its fair
value at the acquisition date. The fair value of the intangible asset reflects
market expectations about the probability that the future economic benefits
embodied in the asset will flow to the Group.
Amortisation charges are included in administrative expenses in the Statement
of Comprehensive Income. Amortisation begins when the intangible asset is
first available for use and is provided at rates calculated to write-off the
cost of each intangible asset over its expected useful life, on a
straight-line basis, as follows:
Brands - CJ Hole, Parkers, Ellis & Co Indefinite life
Brands - EweMove 21 years
Brands - Hunters 20 years
Customer lists - lettings books 12 years
Customer lists - franchise development grants 15 years
Master franchise agreements - Whitegates, CJ Hole, Parkers, Ellis & Co 25 years
Master franchise agreements - Hunters 21 years
Master franchise agreements - EweMove 15 years
Technology - Ewereka 5 years
Technology - websites, CRM system and software 3 years
Acquired trade names are identified as separate intangible assets where they
can be reliably measured by valuation of future cash flows. The trade names CJ
Hole, Parkers and Ellis & Co are assessed as having indefinite lives due
to their long trading histories.
Acquired customer lists are identified as a separate intangible asset as they
are separable and can be reliably measured by valuation of future cash flows.
This valuation also assesses the life of the particular relationship. The life
of the relationship is assessed annually.
Customer lists acquired as part of the Hunters acquisition relate to lettings
books and are being written off over an expected useful life of 12 years.
Acquired master franchise agreements are identified as a separate intangible
asset as they are separable and can be reliably measured by valuation of
future cash flows. The life of the relationship is assessed annually. Master
franchise agreements are being written off over an expected useful life of
15-25 years as historical analyses shows that, on average, 4%-10% of
franchises will change ownership per annum.
Subsequent to initial recognition, intangible assets are stated at deemed cost
less accumulated amortisation and impairment charges, with the exception of
indefinite life intangibles.
Impairment of non-financial assets
In respect of goodwill and intangible assets that have indefinite useful
lives, management is required to assess whether the recoverable amount of each
exceeds their respective carrying values at the end of each accounting period.
In respect of intangible assets with definite lives, management is required to
assess whether the recoverable amount exceeds the carrying value where an
indicator of impairment exists at the end of each accounting period.
The recoverable amount is the higher of fair value less costs to sell and
value in use.
Impairment losses represent the amount by which the carrying value exceeds the
recoverable amount; they are recognised in the income statement. Impairment
losses recognised in respect of cash generating units are allocated first to
reduce the carrying amount of any goodwill allocated to the cash generating
unit and then to reduce the carrying amount of the other assets in the unit on
a pro-rata basis. Where an indicator of impairment exists against a definite
life asset and a subsequent valuation determines there to be impairment, the
intangible asset to which it relates is impaired by the amount determined.
An impairment loss in respect of goodwill is not reversed should the valuation
subsequently recover. In respect of other assets, an impairment loss is
reversed if there has been a change in the estimates used to determine the
recoverable amount.
An impairment loss is reversed only to the extent that the asset's carrying
amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortisation, if no impairment loss had been
recognised.
The master franchise agreement is assessed separately for impairment as an
independent asset that generates cash inflows that are largely independent of
those from other assets.
Investment in subsidiaries
Investments in subsidiaries are stated in the Parent Company's balance sheet
at cost less any provisions for impairments.
Equity investments
Investments in the Group balance sheet represent listed investments which are
measured at market value and unlisted investments which are measured at cost.
Listed investments are revalued at fair value through the profit and loss
account based on the quoted share price.
Property, plant and equipment
Items of property, plant and equipment are stated at cost of acquisition less
accumulated depreciation and impairment losses. Depreciation is charged so as
to write-off the cost of assets over their estimated useful lives on the
following bases:
Fixtures, fittings and office equipment 15% - 25% reducing balance or 10% - 33% straight line
Computer equipment over 3 years
Leasehold buildings and short leasehold improvements over the lease term
Right-of-use assets
Right of use assets relate to operating leases that have been brought onto the
balance sheet under IFRS 16. They are initially measured at the amount of the
lease liability, reduced for any lease incentives received, and increased for:
• lease payments made at or before commencement of the lease;
• initial direct costs incurred; and
• the amount of any provision recognised where the Group is contractually
required to dismantle, remove or restore the leased asset
Subsequent to initial measurement, right-of-use assets are amortised on a
straight-line basis over the remaining term of the lease or over the remaining
economic life of the asset if, rarely, this is judged to be shorter than the
lease term.
Lease liabilities
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease unless (as is
typically the case) this is not readily determinable, in which case the
Group's incremental borrowing rate on commencement of the lease is used.
Variable lease payments are only included in the measurement of the lease
liability if they depend on an index or rate. In such cases, the initial
measurement of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
Subsequent to initial measurement lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
for lease payments made.
Prepaid assisted acquisitions support
Prepaid assisted acquisitions support represents amounts payable to
franchisees in relation to their acquisition of qualifying managed property
portfolios and amounts payable to brokers for assisting with the acquisition
of those portfolios. The payments are recognised as an asset and amortised to
the profit and loss account over 5 years. The amounts payable to franchisees
are amortised as a reduction in revenue, whereas amounts payable to brokers
are amortised through cost of sales.
Income taxes
Income tax currently payable is calculated using the tax rates in force or
substantively enacted at the reporting date. Taxable profit differs from
accounting profit either because some income and expenses are never taxable or
deductible, or because the time pattern that they are taxable or deductible
differs between tax law and their accounting treatment.
The tax expense for the period comprises current and deferred tax. Tax is
recognised in profit or loss, except if it arises from transactions or events
that are recognised in other comprehensive income or directly in equity.
Deferred tax
Deferred income taxes are calculated using the liability method on temporary
differences, at the tax rate that is substantively enacted at the balance
sheet date. On 24 May 2021, the Finance Bill 2021 was substantively enacted
which amended the corporation tax rate from 19% to 25% with effect from 1
April 2023. Deferred tax is generally provided on the difference between the
carrying amount of assets and liabilities and their tax bases. However,
deferred tax is not provided on the initial recognition of goodwill, nor on
the initial recognition of an asset or liability unless the related
transaction is a business combination or affects tax or accounting profit. Tax
losses available to be carried forward as well as other income tax credits to
the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred
tax assets are recognised to the extent that it is probable that the
underlying deductible temporary differences will be able to be offset against
future taxable income. Current and deferred tax assets and liabilities are
calculated at tax rates that are expected to apply to their respective period
of realisation, provided they are enacted or substantively enacted at the
balance sheet date. Changes in deferred tax assets or liabilities are
recognised as a component of the tax expense in the income statement. For
share-based payments the deferred tax credit is recognised in the income
statement to the extent that it offsets the share-based payments charge, with
any remaining element after offset being shown in the Statement of Changes in
Equity.
Cash and cash equivalents
Cash and cash equivalents are defined as cash balances in hand and in the bank
(including short-term cash deposits).
Financial assets
The Group and Company only have financial assets comprising trade and other
receivables and cash and cash equivalents in the Consolidated Statement of
Financial Position.
These assets arise principally from the provision of goods and services to
customers (e.g. trade receivables), but also incorporate other types of
financial assets where the objective is to hold these assets in order to
collect contractual cash flows and the contractual cash flows are solely
payments of principal and interest. They are initially recognised at fair
value plus transaction costs that are directly attributable to their
acquisition or issue, and are subsequently carried at amortised cost using the
effective interest rate method, less provision. for impairment.
Impairment of financial assets
Impairment provisions for current and non-current trade receivables are
recognised based on the simplified approach within IFRS 9 using a provision
matrix in the determination of the lifetime expected credit losses. During
this process, the probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the expected
loss arising from default to determine the lifetime expected credit loss for
the trade receivables. For trade receivables, which are reported net, such
provisions are recorded in a separate provision account with the loss being
recognised within administrative expenses in the Consolidated Statement of
Comprehensive Income. On confirmation that the trade receivable will not be
collectable, the gross carrying value of the asset is written off against the
associated provision.
Impairment provisions for receivables from related parties and loans to
related parties are recognised based on a forward looking expected credit loss
model. The methodology used to determine the amount of the provision is based
on whether there has been a significant increase in credit risk since initial
recognition of the financial asset. For those where the credit risk has not
increased significantly since initial recognition of the financial asset, 12
month expected credit losses along with gross interest income are recognised.
For those for which credit risk has increased significantly, lifetime expected
credit losses along with the gross interest income are recognised. For those
that are determined to be credit impaired, lifetime expected credit losses
along with interest income on a net basis are recognised.
Financial liabilities
Financial liabilities are comprised of trade and other payables, borrowings
and other short-term monetary liabilities, which are recognised at amortised
cost.
Trade payables, other payables and other short-term monetary liabilities are
initially recognised at fair value and subsequently carried at amortised cost
using the effective interest method.
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently carried at amortised cost; any
difference between the proceeds (net of transaction costs) and the redemption
value is recognised in the income statement over the period of the borrowings
using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is probable that some or
all of the facility will be drawn down. In this case, the fee is deferred
until the draw-down occurs. To the extent there is no evidence that it is
probable that some or all of the facility will be drawn down, the fee is
capitalised as a pre-payment for liquidity services and amortised over the
period of the facility to which it relates.
Share-based payments
The Group and Company issue equity-settled share-based payments to employees.
Equity-settled share-based payments are measured at fair value at the date of
grant. The fair value determined at the grant date of the equity-settled
share-based payments is amortised through the Consolidated Statement of
Comprehensive Income over the vesting period of the options, together with a
corresponding increase in equity, based upon the Group and Company's estimate
of the shares that will eventually vest.
Fair value is measured using the Black-Scholes option pricing model taking
into account the following inputs:
the exercise price of the option;
the life of the option;
the market price on the date of the grant of the option;
the expected volatility of the share price;
the dividends expected on the shares; and
the risk free interest rate for the life of the option.
The expected life used in the model has been adjusted, based on management's
best estimate, for the effects of non-transferability, exercise restrictions
and behavioural considerations.
At the end of each reporting period, the Group and Company revise its
estimates of the number of options that are expected to vest based on the
non-market conditions and recognise the impact of the revision to original
estimates, if any, in the income statement, with a corresponding adjustment to
equity.
5. Critical accounting estimates and judgements and key sources of estimation
uncertainty
The Company makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. In the future, actual
experience may differ from these estimates and assumptions. The estimates and
assumptions that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next financial year
are discussed below.
Impairment of intangible assets
The Group is required to test, where indicators of impairment exist or there
are intangible assets with indefinite lives, whether intangible assets have
suffered any impairment. The recoverable amount is determined based on value
in use calculations. The use of this method requires the estimation of future
cash flows and the choice of a discount rate in order to calculate the present
value of the cash flows. Key assumptions for the value in use calculation are
described in note 15.
Share-based payment charge ("SBPC")
The aggregate fair value expense of each grant is determined through using the
Black Scholes model and an estimate for the attainment of the performance
conditions, where they exist. All the options granted have a non-market-based
performance condition, earnings per share, and a market-based performance
condition, total shareholder return.
In order to estimate the likely achievement of the performance conditions,
management has used the actual results for FY23, the budget for FY24 and
projections of earnings for future years as well as taking into account
available market data, performance trends and listed company valuation
metrics.
The share-based payment charge in relation to the performance-based options
granted in 2021 assumes that the EPS performance condition will generate
vesting of 100% of the maximum number of shares available under those options
because the performance measurement period has ended and, subject to approval
by the Board, full vesting has been achieved. The charge is £0.5m.
The share-based payment charge in relation to the performance-based options
granted in 2022 assumes that performance will generate vesting of 55.5% of the
maximum number of shares available under those options. The charge is £0.2m.
If the adjusted EPS performance condition was 100% achieved, the cumulative
charge would increase by £0.1m and if the adjusted EPS performance condition
was not achieved at all, so 0%, the cumulative charge would decrease by
£0.1m.
The share-based payment charge in relation to the performance-based options
granted in 2023 assumes that performance will generate vesting of 23% of the
maximum number of shares available under those options. The charge is £0.03m.
If the adjusted EPS performance condition was 100% achieved, the cumulative
charge would increase by £0.06m and if the adjusted EPS condition was not
achieved at all, so 0%, the cumulative charge would decrease by £nil.
6. Segmental reporting
The Directors consider there to be 2 operating segments in 2023 and 2022,
being Property Franchising and Financial Services.
For the year ended 31 December 2023:
Property
Franchising Financial Services Total
£'000 £'000 £'000
Revenue 25,776 1,502 27,278
Segment profit before tax 8,662 352 9,014
For the year ended 31 December 2022:
Property
Franchising Financial Services Total
£'000 £'000 £'000
Revenue 25,429 1,729 27,158
Segment profit before tax 8,379 454 8,833
There was no inter-segment revenue in any period.
7. Revenue
2023 2022
£'000 £'000
Property Franchising segment: 16,099 15,882
Management Service Fees
Owned offices - lettings and sales fees 4,902 5,157
Franchise sales 458 318
Franchisee support and similar services 4,317 4,072
25,776 25,429
Financial Services segment:
Financial Services commissions 1,502 1,729
27,278 27,158
All revenue is earned in the UK and no customer represents greater than 10% of
total revenue in either of the years reported.
See note 20 for details of accrued income and note 26 for details of deferred
income.
See note 18 for the value of prepaid assisted acquisitions support amortised
as a deduction from Management Service Fees.
8. Administrative expenses
Administrative expenses relate to those expenses that are not directly
attributable to any specific sales activity.
Administrative expenses for the year were as follows:
2023 2022
£'000 £'000
Employee costs 6,526 6,563
Marketing and digital costs 1,032 1,004
Property costs 513 408
Amortisation 1,766 1,782
Other administrative costs 1,994 2,119
11,831 11,876
9. Employees and Directors
Average numbers of employees (including Executive Directors), employed during
the year:
Group Company
2023 2022 2023 2022
Administration 164 173 - -
Management 12 12 2 2
176 185 2 2
Employee costs (including Directors) during the year amounted to:
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Wages and salaries 7,939 8,302 1,151 929
Social security costs 842 946 150 126
Pension costs 175 193 48 45
Private medical insurance 24 22 -- --
8,980 9,463 1,349 1,100
Share-based payments charge 783 411 613 366
Key management personnel is defined as Executive Directors and members of the
Senior Leadership Team of the Group. Details of the remuneration of the key
management personnel are shown below:
2023 2022
£'000 £'000
Wages and salaries 2,535 2,293
Social security costs 408 314
Pension costs 34 63
2,977 2,670
Share-based payments charge 613 372
The share-based payments charge for the current year has been charged to the
Statement of Comprehensive Income, of this £0.58m (2022: £0.36m) relates to
Directors.
10. Breakdown of expenses by nature
2023 2022
£'000 £'000
The operating profit is stated after charging:
Depreciation 95 91
Amortisation - intangibles 1,531 1,477
Amortisation - prepaid assisted acquisitions support 183 229
Amortisation - leases 234 305
Share-based payments charge 783 411
Auditor's remuneration (see below) 137 127
Staff costs (note 9) 8,980 8,791
Audit services
- Audit of the company and consolidated accounts 137 127
137 127
11. Finance income and costs
2023 2022
£'000 £'000
Finance income:
Bank interest 9 37
Other similar income 11 2
20 39
2023 2022
£'000 £'000
Finance costs:
Bank interest 261 358
Interest expense on lease liabilities 96 112
357 470
12. Taxation
2023 2022
£'000 £'000
Current tax 2,439 1,930
Adjustments in respect of previous periods (120) 60
Current tax total 2,319 1,990
Deferred tax on acquired business combinations (366) (366)
Deferred tax on share-based payments (309) (36)
Deferred tax total (675) (402)
Total tax charge in Statement of Comprehensive Income 1,644 1,588
The tax rate assessed for the period is lower (2022: lower) than the standard
rate of corporation tax in the UK. The difference is explained below.
2023 2022
£ £
Profit on ordinary activities before tax 9,014 8,833
Profit on ordinary activities multiplied by the effective standard rate of 2,118 1,678
corporation tax in the UK of 23.5% (2022: 19%)
Effects of:
Expenses not deductible for tax purposes 453 253
Depreciation in excess of capital allowances 3 (1)
Deferred tax provision (675) (402)
Exercise of share options (135) --
Adjustments in respect of previous periods (120) 60
Total tax charge in respect of continuing activities 1,644 1,588
Tax rate changes
The corporation tax rate in the UK changed from 19% to 25% effective from 1
April 2023, meaning the rate applicable for the financial year ended 31
December 2023 was 23.5% and the rate applicable for next year will be 25%. The
value of the deferred tax asset at the statement of financial position date in
2023 and 2022 has been calculated using the applicable rate when the asset is
expected to be realised.
13. Earnings per share
Earnings per share is calculated by dividing the profit for the financial year
by the weighted average number of shares during the year.
2023 2022
£'000 £'000
Profit for the financial year attributable to owners of the parent 7,395 7,229
Amortisation on acquired intangibles 1,443 1,443
Share-based payments charge 783 411
(Gain)/loss on revaluation of listed investment (87) 32
Adjusted profit for the financial year 9,534 9,115
Weighted average number of shares
Number used in basic earnings per share 32,142,942 32,041,966
Dilutive effect of share options on ordinary shares 1,418,527 99,626
Number used in diluted earnings per share 33,561,469 32,141,592
Basic earnings per share 23.0p 22.6p
Diluted earnings per share 22.0p 22.5p
Adjusted basic earnings per share 29.7p 28.4p
Adjusted diluted earnings per share 28.4p 28.4p
There were options over 2,100,453 ordinary shares outstanding at 31 December
2023; 676,953 had not vested and have performance conditions which determine
whether they vest or not in future; it can be determined that 1,423,500
options under the 2021 scheme will vest in full based on these financial
statements.The average share price during the year ended 31 December 2023 was
above the exercise price of the 1,423,500 options that are due to vest based
on these financial statements; for this reason, in 2023 there is a dilutive
effect of share options on the earnings per share calculation.
There were options over 2,213,000 ordinary shares outstanding at 31 December
2022; an option over 100,000 did not have performance conditions attached to
it. The average share price during the year ended 31 December 2022 was above
the exercise price of the 100,000 options without performance conditions; for
this reason, in 2022 there was a dilutive effect of share options on the
earnings per share calculation.
14. Dividends
2023 2022
£'000 £'000
Final dividend for 2022
8.8p per share paid 9 June 2023 (2022: 7.8p per share paid 27 May 2022) 2,807 2,489
Interim dividend for 2023
4.6p per share paid 6 October 2023 (2022: 4.2p per share paid 7 October 2022) 1,476 1,340
Total dividend paid 4,283 3,829
On 10 January 2024 the Board declared a special dividend of 2p per share
payable to those shareholders on the register on 19 January 2024. It was paid
on 2 February 2024 and amounted to £0.6m in total.
The Directors propose a final dividend for 2023 of 7.4p per share totalling
£4.6m, which they expect will be paid on 12 June 2024. As this is subject to
approval by the shareholders, no provision has been made for this in these
financial statements.
15. Intangible assets
Master franchise Brands Technology Customer lists Goodwill Total
agreement £'000 £'000 £'000 £'000 £'000
£'000
Cost
Brought forward at 1 January 2022 18,592 5,032 403 3,846 23,243 51,116
Additions - - 387 -- -- 387
Disposals - - - (527) -- (527)
Carried forward 31 December 2022 18,592 5,032 790 3,319 23,243 50,976
Additions -- -- -- 254 76 330
Carried forward 31 December 2023 18,592 5,032 790 3,573 23,319 51,306
Amortisation and Impairment
Brought forward at 1 January 2022 3,363 470 344 441 - 4,618
Charge for year 927 220 31 299 -- 1,477
Amortisation on disposals -- -- -- (77) -- (77)
Carried forward 31 December 2022 4,290 690 375 663 -- 6,018
Charge for the year 927 220 60 324 -- 1,531
Carried forward 31 December 2023 5,217 910 435 987 -- 7,549
Net book value
At 31 December 2023 13,375 4,122 355 2,586 23,319 43,757
At 31 December 2022 14,302 4,342 415 2,656 23,243 44,958
The carrying amount of goodwill relates to 6 (2022: 6) cash generating units
and reflects the difference between the fair value of consideration
transferred and the fair value of assets and liabilities purchased.
Business combinations completed in October 2014 - Xperience and Whitegates
Goodwill is assessed for impairment by comparing the carrying value to the
value in use calculations. The value in use of the goodwill arising on the
acquisitions of Xperience Franchising Limited ("XFL") and Whitegates Estate
Agency Limited ("WEAL") is based on the cash flows derived from the actual
revenues and operating margins for 2023 and projections through to 31 December
2028. Thereafter, projected revenue growth was assumed to decline linearly to
a long-term growth rate of 2.2%.
The cash flows arising were discounted by the weighted average cost of capital
which included a small companies' risk premium to allow for factors such as
illiquidity in the shares. These discount rates were 13.5% for XFL and 15.0%
for WEAL, the latter higher rate reflecting WEAL's smaller size and more
volatile earnings. This resulted in a total value for each company of the
identifiable intangible assets that exceeded the carrying values of the
respective companies' goodwill.
The Directors do not consider goodwill to be impaired. The Directors believe
that no reasonably possible change in assumptions at the year end will cause
the value in use to fall below the carrying value and hence impair the
goodwill.
The master franchise agreements are being amortised over 25 years. The period
of amortisation remaining at 31 December 2023 was 15 years 10 months.
The brand names under which XFL trades of CJ Hole, Parkers and Ellis & Co
have been in existence for between 75 years and 173 years. Management sees
them as strong brands with significant future value and has deemed them to
have indefinite useful lives as there is no foreseeable limit to the period
over which the assets are expected to generate net cash inflows for the Group.
As a consequence, management annually assesses whether the carrying value of
these brands has been impaired.
The Directors believe that no reasonably possible change in assumptions at the
year end will cause the value in use of the brands names CJ Hole, Parkers and
Ellis & Co to fall below their carrying values and hence impair their
intangible values.
The Whitegates brand was valued in a similar manner and deemed to have an
immaterial value when the acquisition was made principally due to its lack of
profitability over preceding years. It is therefore not recognised separately.
Business combination completed in September 2016 - EweMove
Goodwill is assessed for impairment by comparing the carrying value to the
value in use calculations. The value in use of the goodwill arising on the
acquisition of EweMove Sales & Lettings Ltd ("ESL") is based on the cash
flows derived from the actual revenues and operating margins for 2023 and
projections through to 31 December 2028. Thereafter, projected revenue growth
was assumed to be 2.2% per annum.
The revenue growth rates used in the valuation range from 11% in FY24 to 4% in
FY27.
The cash flows arising were discounted by the weighted average cost of capital
being 15.17% which included a small companies' risk premium to allow for
factors such as illiquidity in the shares. This resulted in the value in use
exceeding the carrying value of the goodwill and separately identifiable
intangible assets. The enterprise's overall value exceeds the cash generating
unit's carrying value.
The useful life of the master franchise agreement was assessed as 15 years and
remains unchanged. The period of amortisation remaining at 31 December 2023
was 7 years 8 months.
The remaining useful life of the brand name was also reviewed. It continues to
attract and recruit a similar level of franchisees as in previous years and to
attract higher numbers of customers. Given these 2 factors, the remaining
useful life of the brand was considered to be unaltered at 21 years. The
period of amortisation remaining at 31 December 2023 was 13 years and 8
months.
The carrying value of EweMove, the identified cash generating unit, was £8.0m
at 31 December 2023 whereas the recoverable amount was assessed to be £13.0m
at the same date. Headroom of £5.0m therefore existed at the year end.
The cumulative effect of an increase in the discount rate to 19.8% and a 75%
reduction in the assumed growth rate of the free cash flows would result in a
carrying value of £8m.
Business combination completed in March 2021 - Hunters
Goodwill is assessed for impairment by comparing the carrying value to the
value in use calculations. The value in use of the goodwill arising on the
acquisitions of Hunters is based on the cash flows derived from the actual
revenues and operating margins for 2023 and projections through to 31 December
2028. Thereafter, projected revenue growth was assumed to be 2.0% per annum.
The annual revenue growth rates used in the valuation for FY24 to FY28 ranged
from 3% to 7%.
The cash flows arising were discounted by the weighted cost of capital being
10.1%. This resulted in the value in use exceeding the carrying value of the
goodwill and separately identifiable intangible assets. The enterprise's
overall value exceeds the carrying value.
The useful life of the master franchise agreement was assessed as 21 years and
remains unchanged. The period of amortisation remaining at 31 December 2023
was 18 years 3 months.
The useful life of the brand name was also reviewed. There have been no
significant changes since acquisition so as such it is considered to be
unaltered at 20 years. The period of amortisation remaining at 31 December
2023 was 17 years and 3 months.
The useful life of the lettings books was assessed as 12 years and remains
unchanged. The period of amortisation remaining at 31 December 2023 was 9
years 3 months.
The carrying value of Hunters, the identified cash generating unit, was
£25.0m at 31 December 2023 whereas the recoverable amount was assessed to be
£41m at the same date. Headroom of £16m therefore existed at the year end.
The cumulative effect of limiting growth in free cash flow to 2% and
increasing the discount rate to 13.6% would result in a carrying value of
£25.0m.
Business combination completed in September 2021 - The Mortgage Genie
Goodwill is assessed for impairment by comparing the carrying value to the
value in use calculations. The value in use of the goodwill arising on the
acquisitions of The Mortgage Genie Limited and The Genie Group UK Limited is
based on the cash flows derived from the actual revenues and operating margins
for 2023 and projections through to 31 December 2028. Thereafter, projected
revenue growth was assumed to decline linearly to a long-term growth rate of
2.2%.
The Directors do not consider goodwill to be impaired despite the poorer
trading performance in 2023 resulting from the Liz Truss government at the end
of 2022, the continued uncertainty over the direction of mortgage rates in
2023 and the general economic uncertainty. Another year of the same could
cause the Board to take a view that the carrying value of the goodwill is
impaired. However, the mortgage market started to improve in the second half
of 2023 and that has continued into 2024. As a result, the Board expects an
improvement in the financial performance of The Mortgage Genie in 2024.
Goodwill and indefinite life intangible assets have been allocated for
impairment testing purposes to the following cash generating units.
The carrying values are as follows:
Goodwill Brands
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Xperience Franchising Limited 912 912 571 571
Whitegates Estate Agency Limited 401 401 - -
Martin & Co (UK) Limited 75 75 - -
EweMove Sales & Lettings Ltd 5,838 5,838 - -
Hunters Property Limited 15,871 15,871 - -
The Mortgage Genie Limited & The Genie Group UK Ltd 222 146 - -
23,319 23,243 571 571
Company
No goodwill or customer lists exist in the Parent Company.
16. Property, plant and equipment
Group
Short leasehold Office Motor Fixtures and Total
improvements equipment vehicles fittings £'000
£'000 £'000 £'000 £'000
Cost
Brought forward 1 January 2022 44 267 -- 162 473
Additions -- 29 -- 8 37
Disposals -- (1) -- -- (1)
Carried forward 31 December 2022 44 295 -- 170 509
Additions -- 21 66 27 114
Carried forward 31 December 2023 44 316 66 197 623
Depreciation
Brought forward 1 January 2022 39 154 -- 63 256
Charge for year 3 59 -- 29 91
Carried forward 31 December 2022 42 213 -- 92 347
Charge for year 2 51 14 28 95
Carried forward 31 December 2023 44 264 14 120 442
Net book value
At 31 December 2023 -- 52 52 77 181
At 31 December 2022 2 82 -- 78 162
17. Leases
The Group has several operating leases relating to office premises and motor
vehicles. Under IFRS 16, which was adopted on 1 January 2019, these operating
leases are accounted for by recognising a right-of-use asset and a lease
liability.
Right-of-use assets:
Land and Buildings Motor Total
£'000 vehicles £'000
£'000
At 1 January 2022 1,506 62 1,568
Reclassification from Investment Properties 256 -- 256
Additions 94 -- 94
Amortisation (277) (28) (305)
Carried forward 31 December 2022 1,579 34 1,613
Additions 146 -- 146
Amortisation (211) (23) (234)
Carried forward 31 December 2023 1,514 11 1,525
Lease liabilities:
Land and Buildings Motor Total
£'000 vehicles £'000
£'000
At 1 January 2022 2,693 47 2,740
Additions 95 -- 95
Interest expenses 109 3 112
Lease payments (555) (30) (585)
Carried forward 31 December 2022 2,342 20 2,362
Additions 143 -- 143
Interest expenses 95 1 96
Disposals (32) -- (32)
Lease payments (506) (21) (527)
Carried forward 31 December 2023 2,042 -- 2,042
18. Prepaid assisted acquisitions support
Group
Total
£'000
Cost
Brought forward 1 January 2022 1,166
Additions 102
Carried forward 31 December 2022 1,268
Additions 115
Carried forward 31 December 2023 1,383
Amortisation
Brought forward 1 January 2022 742
Charge for year - to revenue 185
Charge for year - to cost of sales 44
Carried forward 31 December 2022 971
Charge for year - to revenue 148
Charge for year - to cost of sales 34
Carried forward 31 December 2023 1,153
Net book value
At 31 December 2023 230
At 31 December 2022 297
Cashback and broker's commission is presented as prepaid assisted acquisitions
support
The additions represent sums provided to franchisees that have made qualifying
acquisitions to grow their lettings portfolios. The cashback sum provided is
based on a calculation of the estimated increase in MSF as a result of the
acquisition and the sum provided for broker's commission is based on the
charge payable to the broker. In providing these sums, the Group ensures that
franchisees are contractually bound to the relevant franchisor for a period in
excess of that required for the economic benefits to exceed the sums provided.
Company
No prepaid assisted acquisitions support exists in the Parent Company.
19. Investments
Group
Shares in listed and unlisted companies Total
£'000
£'000
Cost
At 1 January 2022 169 169
Movement in fair value of listed investment (32) (32)
At 31 December 2022 137 137
Movement in fair value of listed investment 87 87
Disposal of listed investment (224) (224)
At 31 December 2023 -- --
Net book value
At 31 December 2023 -- --
At 31 December 2022 137 137
Company
Shares in Group Shares in listed company Total
undertakings £'000
£'000 £'000
Cost
At 1 January 2022 60,675 68 60,743
Movement in fair value of listed investment -- (15) (15)
Capital contribution to subsidiaries - share options 45 -- 45
At 31 December 2022 60,720 53 60,773
The Mortgage Genie additional consideration 76 -- 76
Movement in fair value of listed investment -- 22 22
Disposal of listed investment -- (75) (75)
Capital contribution to subsidiaries - share options 170 -- 170
At 31 December 2023 60,966 -- 60,966
Net book value
At 31 December 2023 60,966 -- 60,966
At 31 December 2022 60,720 53 60,773
The Property Franchise Group PLC was incorporated on 7 October 2013. On 10
December 2013, a share for share exchange acquisition took place with Martin
& Co (UK) Limited; 17,990,000 ordinary shares in The Property Franchise
Group PLC were exchanged for 100% of the issued share capital in Martin &
Co (UK) Limited.
On 31 October 2014, the Company acquired the entire issued share capital of
Xperience Franchising Limited and Whitegates Estate Agency Limited for a
consideration of £6.1m.
On 5 September 2016, the Company acquired the entire issued share capital of
EweMove Sales & Lettings Ltd, and its dormant subsidiary Ewesheep Ltd, for
an initial consideration of £8m. Of the total consideration, £2.1m
represented contingent consideration, of which £0.5m was paid out on 30 July
2017 and £0.5m was paid out on 31 December 2017. No further sums are due.
On 19 March 2021, the Company acquired the entire issued share capital of
Hunters Property plc for a total consideration of £26.1m.
On 6 September 2021, the Company acquired the entire issued share capital of
The Genie Group UK Ltd and 80% of the issued share capital of The Mortgage
Genie Limited for £0.5m which comprised an initial cash consideration of
£0.4m and a deferred consideration of £0.1m, which was settled in the year
ended 31 December 2023.
The carrying value of the investment in EweMove has been considered for
impairment through value in use calculations and it was determined that no
impairment was required in the year ended 31 December 2023.
The carrying value of the investment in Hunters Property Limited has been
considered for impairment through value in use calculations and it was
determined that no impairment was required in the year ended 31 December 2023.
The carrying values of the other investments (all companies except for EweMove
and Hunters) have been considered for impairment and it has been determined
that the value of the discounted future cash inflows exceeds the carrying
value. Thus, there is no impairment charge.
The listed investments at 31 December 2022 comprised a 0.2% holding of
ordinary shares in OnTheMarket plc, a company listed on the Alternative
Investment Market. The shares were sold in 2023.
The Company's investments at the balance sheet date in the share capital of
companies include the following, which all have their registered offices at
the same address as the Company:
Subsidiaries
Share class % ownership and voting rights Country of incorporation
Company number
Martin & Co (UK) Limited 02999803 Ordinary 100 England
Xperience Franchising Limited 02334260 Ordinary 100 England
Whitegates Estate Agency Limited 00757788 Ordinary 100 England
EweMove Sales & Lettings Ltd 07191403 Ordinary 100 England
Ewesheep Ltd* 08191713 Ordinary 100 England
MartinCo Limited 09724369 Ordinary 100 England
Hunters Property Limited 09448465 Ordinary 100 England
Hunters Property Group Limited* 03947557 Ordinary 100 England
Greenrose Network (Franchise) Limited* 02934219 Ordinary 100 England
Hunters Franchising Limited* 05537909 Ordinary 100 England
Hunters (Midlands) Limited* 02587709 Ordinary 100 England
Hunters Financial Services Limited* 02604278 Ordinary 100 England
Hapollo Limited* 08008359 Ordinary 100 England
RealCube Limited* 07736494 Ordinary 100 England
Hunters Group Limited* 02965842 Ordinary 100 England
Hunters Land & New Homes Limited* 06292723 Ordinary 100 England
Maddison James Limited* 05920686 Ordinary 100 England
Herriot Cottages Limited* 04452874 Ordinary 100 England
Hunters Partners Limited* 03777494 Ordinary 100 England
Hunters Survey & Valuation Limited* 02602087 Ordinary 100 England
RealCube Technology Limited* 08139888 Ordinary 100 England
The Genie Group UK Ltd 12372201 Ordinary 100 England
The Mortgage Genie Limited 09803176 Ordinary 80 England
Michael Searchers Property Management Ltd* 03056834 Ordinary 100 England
* Indirectly owned.
All companies in the subsidiaries list above are exempt from the requirements
of the Companies Act 2006 relating to the audit of accounts under section 479A
of the Companies Act 2006.
On 31 January 2023 Hunters (Midlands) Limited acquired Michael Searchers
Property Management Ltd, having applied the concentration test in IFRS 3 it
was concluded that the transaction was in substance the purchase of a customer
list rather than a business combination.
At the year end, The Property Franchise Group plc has guaranteed all
liabilities of all companies in the subsidiaries list above. The value of the
contingent liability resulting from this guarantee is unknown at the year end.
20. Trade and other receivables
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Trade receivables 2,792 1,856 1 11
Less: provision for impairment of trade receivables (892) (420) - -
Trade receivables - net of impairment provisions 1,900 1,436 1 11
Loans to franchisees 433 319 - -
Other receivables 248 60 96 -
Amounts due from Group undertakings - - 952 770
Prepayments and accrued income 1,763 2,143 38 9
Tax receivable - - 389 275
Total trade and other receivables 4,344 3,958 1,476 1,065
Less: non-current portion - Loans to franchisees (210) (240) - -
Current portion 4,134 3,718 1,476 1,065
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade receivables.
To measure expected credit losses on a collective basis, trade receivables are
grouped based on similar credit risk and ageing. The expected loss rates are
based on the Group's historical credit losses experienced over the previous
year. Forward-looking factors are considered to the extent that they are
deemed material.
The Group is entitled to the revenue by virtue of the terms in the franchise
agreements and can force the sale of a franchise to recover a debt if
necessary.
Ageing of trade receivables
The following is an analysis of trade receivables that are past due date but
not impaired. These relate to a number of customers for whom there is no
recent history of defaults or where a sale of a franchise could be forced to
recover debt. The ageing analysis of these trade receivables is as follows:
2023 2022
£'000 £'000
Group
Not more than 3 months 186 72
More than 3 months but not more than 6 months 106 --
More than 6 months but not more than 1 year 148 --
440 72
The Directors consider that the carrying value of trade and other receivables
represents their fair value.
Loans to franchisees are secured against the franchise and the franchisees
give personal guarantees over all debts. If a loan payment default occurs, the
franchisor could force immediate repayment, pursue the personal guarantees or
force a resale of the franchise.
Included within "Prepayments and accrued income" is accrued income of £1.2m
(2022: £1.1m) in relation to Management Service Fees for some of our brands
that are invoiced at the beginning of the month following the month to which
they relate and EweMove licence fees. Hunters invoices to franchisees are
dated the same month to which they relate; therefore, their December month
balance is included in trade receivables rather than accrued income at the
year end.
21. Called up share capital
2023 2022
Number £'000 Number £'000
Group
Authorised, allotted, issued and fully paid ordinary shares of 1p each 32,255,107 323 32,041,966 320
Company
Authorised, allotted, issued and fully paid ordinary shares of 1p each 32,255,107 323 32,041,966 320
On 10 July 2023, 213,041 shares were issued at £0.01 to the 2 Executive
Directors following the exercise of share options.
22. Share premium
Number of shares Share capital Share premium
£'000 £'000
At 31 December 2023 32,255,107 323 4,129
At 31 December 2022 32,041,966 320 4,129
Share premium is the amount subscribed for share capital in excess of nominal
value.
23. Merger reserve
Merger
reserve
£'000
Group
At 1 January 2022 14,345
At 1 January 2023 and 31 December 2023 14,345
Company
At 1 January 2022 32,335
At 1 January 2023 and 31 December 2023 32,335
Acquisition of Martin & Co (UK) Limited
The acquisition of Martin & Co (UK) Limited by The Property Franchise
Group PLC did not meet the definition of a business combination and therefore,
falls outside of the scope of IFRS 3. This transaction was in 2013 and
accounted for in accordance with the principles of merger accounting.
The consideration paid to the shareholders of the subsidiary was £17.99m (the
value of the investment). As these shares had a nominal value of £179,900,
the merger reserve in the Company is £17.81m.
On consolidation, the investment value of £17.99m is eliminated so that the
nominal value of the shares remaining is £0.1799m and, as there is a
difference between the Company value of the investment and the nominal value
of the shares purchased in the subsidiary of £100, this is also eliminated,
to generate a merger reserve in the Group of £0.1798m.
Acquisition of EweMove Sales & Lettings Ltd
The consideration for the acquisition of EweMove Sales & Lettings Ltd
included the issue of 2,321,550 shares to the vendors at market price. A
merger reserve of £2.797m is recognised in the Group and the Company being
the difference between the value of the consideration and the nominal value of
the shares issued as consideration.
Acquisition of Hunters Property plc
The consideration for the acquisition of Hunters Property plc included the
issue of 5,551,916 shares to the vendors at market price. A merger reserve of
£11.548m is recognised in the Group and the Company being the difference
between the value of the consideration and the nominal value of the shares
issued as consideration.
24. Own share reserve and other reserves
Own share reserve
Weighted average cost of own shares held in the Employee Benefit Trust.
Other reserves
Share-based Other reserve Total
payment reserve £'000
£'000 £'000
Group
At 1 January 2022 905 -- 905
Share-based payment charge 411 - 411
At 1 January 2023 1,316 - 1,316
Share-based payment charge 783 - 783
Release of reserve - share options exercised (524) -- (524)
Deferred tax on share-based payments -- 98 98
At 31 December 2023 1,575 98 1,673
Company
At 1 January 2022 905 - 905
Share-based payment charge 411 - 411
At 1 January 2023 1,316 - 1,316
Share-based payment charge 783 - 783
Release of reserve - share options exercised (524) -- (524)
Deferred tax on share-based payments -- 98 98
At 31 December 2023 1,575 98 1,673
Share-based payment reserve
The share-based payment reserve comprises charges made to the income statement
in respect of share-based payments.
25. Borrowings
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Repayable within 1 year:
Bank loan (revolving credit facility) 2,500 -- 2,500 --
Repayable in more than 1 year:
Bank loan (revolving credit facility) -- 5,000 -- 5,000
Bank loans due after more than 1 year are repayable as follows:
Between 1 and 2 years (revolving credit facility) -- 5,000 -- 5,000
On 30 March 2021, the Company drew down a £12.5m loan facility provided by
Barclays to partially fund the purchase consideration for the acquisition of
Hunters Property plc. This loan facility comprised:
Term loan - £7.5m drawn down on 30 March 2021 and was repaid early on 28
November 2022.
Revolving credit facility ("RCF") - £5m drawn down on 30 March 2021. £2.5m
was repaid on 30 June 2023 and £2.5m was repaid on 3 January 2024. The
facility ended on 26 January 2024. Interest was charged quarterly on the
outstanding amount; the rate was variable during the term at 2.2% above the
Bank of England base rate. The amount outstanding at 31 December 2023 was
£2.5m (2022: £5.0m).
The loans are secured with a fixed and floating charge over the Group's assets
and a cross guarantee across all companies in the Group.
The cash outflow for borrowings arising from financing activities during the
year was £2.5m (2022: £6.1m).
26. Trade and other payables
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Trade payables 1,546 1,627 12 51
Other taxes and social security 1,223 1,231 93 92
Other payables 315 230 71 -
Amounts due to Group undertakings - - -- 257
Accruals and deferred income 3,235 3,636 1,512 1,361
6,319 6,724 1,688 1,761
The Directors consider that the carrying value of trade and other payables
approximates their fair value.
Included in "Accruals and deferred income" is deferred income of £0.4m (2022:
£0.6m) in relation to revenue received in advance which will be recognised
over the next 2 years.
27. Deferred tax
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Balance at beginning of year (5,168) (5,570) 412 377
Movement during the year:
Statement of changes in equity 98 -- 98 --
Statement of comprehensive income 823 402 457 35
Release of deferred tax balance relating to share options exercised in year (148) -- (148) --
Balance at end of year (4,394) (5,168) 820 412
Deferred taxation has been provided as follows:
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Accelerated capital allowances 6 6 10 10
Share-based payments 853 445 810 402
Acquired business combinations (5,253) (5,619) -- --
(4,394) (5,168) 820 412
28. Provisions
The provisions relate to dilapidations on office buildings of £0.18m (2022:
£0.21m) in relation to Hunters.
29. Financial instruments
Financial instruments - risk management
The Group is exposed through its operations to the following financial risks:
credit risk;
liquidity risk; and
interest rate risk.
In common with all other businesses, the Group is exposed to risks that arise
from its use of financial instruments. This note describes the Group's
objectives, policies and processes for managing those risks and the methods
used to measure them.
There have been no substantive changes in the Group's exposure to financial
instrument risks, its objectives, policies and processes for managing those
risks or the methods used to measure them from previous periods unless
otherwise stated in this note.
Principal financial instruments
The principal financial instruments used by the Group and Company, from which
financial instrument risk arises, are as follows:
receivables;
loans to franchisees;
cash at bank;
trade and other payables; and
borrowings.
Financial assets
Financial assets measured at amortised cost:
Group Company
2023 2022 2023 2022
£'000 £'000 £'000 £'000
Loans and receivables:
Trade receivables 1,900 1,435 - -
Loans to franchisees 433 319 - -
Other receivables 248 60 - -
Cash and cash equivalents 7,642 6,684 2,337 1,539
Accrued income 1,209 1,093 - -
Amount owed by Group undertakings - - 819 20
11,432 9,591 3,156 1,559
Financial liabilities
Financial liabilities measured at amortised cost:
Group Company
2023 2022 2023 2022
£'000
£'000
£'000
£'000
Other financial liabilities:
Trade payables 1,546 1,627 11 51
Other payables 315 230 461 92
Accruals 2,845 3,028 1,124 751
Amounts owed to Group undertakings - - -- 257
4,706 4,885 1,596 1,151
All of the financial assets and liabilities above are recorded in the
Statement of Financial Position at amortised cost.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group's risk
management objectives and policies and, whilst retaining ultimate
responsibility for them, it has delegated the authority for designing and
operating processes that ensure the effective implementation of the objectives
and policies to the finance function. The Board receives monthly reports from
the finance function through which it reviews the effectiveness of the
processes put in place and the appropriateness of the objectives and policies
it sets.
The overall objective of the Board is to set policies that seek to reduce risk
as far as possible without unduly affecting the Group's competitiveness and
flexibility. Further details regarding these policies are set out below:
Capital management policy
The Board considers capital to be the carrying amount of equity and debt. Its
capital objective is to maintain a strong and efficient capital base to
support the Group's strategic objectives, provide progressive returns for
shareholders and safeguard the Group's status as a going concern. The
principal financial risks faced by the Group are liquidity risk and interest
rate risk. The Directors review and agree policies for managing each of these
risks. These policies remain unchanged from previous years.
The Board monitors a broad range of financial metrics including growth in MSF,
operating margin, EBITDA, return on capital employed and balance sheet
gearing.
It manages the capital structure and makes changes in light of changes in
economic conditions. In order to maintain or adjust the capital structure, it
may adjust the amount of dividends paid to shareholders.
Credit risk
Credit risk is the risk of financial loss to the Group if a franchisee or
counterparty to a financial instrument fails to meet its contractual
obligations. It is Group policy to assess the credit risk of new franchisees
before entering contracts and to obtain credit information during the
franchise agreement to highlight potential credit risks.
The highest risk exposure is in relation to loans to franchises and their
ability to service their debt. The Directors have established a credit policy
under which franchisees are analysed for creditworthiness before a loan is
offered. The Group's review includes external ratings, when available, and in
some cases bank references. The Group does not consider that it currently has
significant concentration of credit risk with loans extended to franchisees of
£433k.
The Group does not offer credit terms with regards to sales and lettings
transactions occurring in the offices it operates itself, revenue is typically
recognised at the sale's completion date for a property or upon receipt of
rent from a tenant.
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the
finance charges and principal repayments on its debt instruments. It is the
risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due.
In order to maintain liquidity to ensure that sufficient funds are available
for ongoing operations and future development, the Group monitors forecast
cash inflows and outflows on a monthly basis.
The following table sets out the contractual maturities (representing
undiscounted contractual cash-flows) of financial liabilities, including
future interest charges, which may differ from the carrying value of the
liabilities as at the reporting date:
Up to 3 months Between 3 and 12 months Between 1 and 2 years Between 2 and 5 years Over 5 years
As at 31 December 2023 £'000 £'000 £'000 £'000 £'000
Trade and other payables -- -- -- --
1,861
Loans and borrowings 2,500 -- -- -- --
Lease liabilities 83 249 295 892 525
Total 4,444 249 295 892 525
Interest rate risk
The Group's exposure to changes in interest rate risk relates primarily to
interest earning financial assets and interest-bearing financial liabilities.
Interest rate risk is managed by the Group on an ongoing basis with the
primary objective of limiting the effect of an adverse movement in interest
rates. The Group has bank borrowings with a variable interest rate linked to
the Bank of England base rate (see note 25). The recent rate increases are in
line with expectations and the Group has factored in further changes to its
forecasts.
Fair values of financial instruments
The fair value of financial assets and liabilities is considered the same as
the carrying values.
30. Share-based payments
There are a number of share options schemes in place which aim to incentivise
Executive Directors and senior management. For each of the schemes, the
estimated fair value of the option is calculated at the year ended 31 December
2023 (or at the vesting date if earlier) and the fair value, moderated for the
extent to which the option is expected to vest, is spread as a charge between
grant and the assumed vesting date. Accordingly, a share-based payments charge
is recognised in the Statement of Comprehensive Income in the year ended 31
December 2023.
Share Option Scheme 2023
On 17 May 2023, options over 255,953 ordinary shares were granted to the 2
Executive Directors and certain senior managers. All options have an exercise
price of £0.01.
These options have a vesting condition based on 2 performance conditions:
adjusted basic earnings per share adjusted for exceptional income/costs,
amortisation arising on consolidation and share-based payment charges
("adjusted EPS"); and total shareholder return ("TSR") over the 3 years to 31
December 2025. Each performance condition will apply to 50% of the award being
made.
In respect of both performance conditions, growth of 20% in adjusted EPS and
48% in TSR over the 3-year period will be required for threshold vesting of
the awards (the "collar"), with growth of 42% or higher in adjusted EPS and
72% or higher in TSR required for all of the awards to vest (the "cap").
Straight-line vesting applies between the collar and the cap.
The following principal assumptions were used in the valuation of the grant
made in the year ended 31 December 2023 using the Black Scholes option pricing
model:
Assumptions
Date of vesting 30/04/2026
Share price at grant £3.13
Exercise price £0.01
Risk free rate 4.50%
Dividend yield 4.50%
Expected life 3 years
Share price volatility 31.00%
Expected volatility is a measure of the amount by which a share price is
expected to fluctuate during a period. The assumptions used in valuing each
grant are based on the daily historical volatility of the share price over a
period commensurate with the expected term assumption.
The risk-free rate of return is the implied yield at the date of grant for a
zero coupon UK government bond with a remaining term equal to the expected
term of the options.
It's expected that with an exercise price of £0.01, should the EPS condition
be met, the holder will exercise as soon as the option vests. The Group
announces its results usually in April. So, it has been assumed that the
options will be exercised on 30 April 2026.
EPS is measured as the basic earnings per share excluding any exceptional
income/costs and any share-based payments charges.
Management has used the budget for FY24 and the market outlook and projections
for FY25 to determine, at 31 December 2023, the achievement of the EPS
condition. The expectation is that 23% of the options will vest.
A share-based payment charge of £29,765 has been recognised in the Statement
of Comprehensive Income in the year ended 31 December 2023.
The weighted average contractual life remaining of this option is 2 year and 4
months.
Share Option Scheme 2022
On 9 August 2022, an option over 175,000 ordinary shares was granted to the
Chief Executive Officer, an option over 115,000 ordinary shares was granted to
the Chief Financial Officer and options over 175,000 ordinary shares were
granted to senior management. All options have an exercise price of £0.01.
These options have a vesting condition based on 2 performance conditions:
adjusted basic earnings per share adjusted for exceptional income/costs,
amortisation arising on consolidation and share-based payment charges
("adjusted EPS"); and total shareholder return ("TSR") over the 3 years to 31
December 2024. Each performance condition will apply to 50% of the award being
made.
In respect of both performance conditions, growth of 20% in adjusted EPS and
20% in TSR over the 3-year period will be required for threshold vesting of
the awards, with growth of 42% or higher in adjusted EPS and 42% or higher in
TSR required for all of the awards to vest. Straight-line vesting applies
between the floor and the cap.
Management has used the budget for FY24 and the market outlook and projections
for FY25 to determine, at 31 December 2023, the achievement of the EPS
condition. The expectation is that 55.5% of the options will vest.
A share-based payments charge of £225,556 has been recognised in the
Statement of Comprehensive Income in the year ended 31 December 2023.
The weighted average contractual life remaining of this option is 1 year and 4
months.
Share Option Scheme 2021
On 24 April 2021, an option over 700,000 ordinary shares was granted to the
Chief Executive Officer and an option over 400,000 ordinary shares was granted
to the Chief Financial Officer under this scheme. On 7 July 2021, options over
425,500 ordinary shares were granted to a Director and senior management under
this scheme. All the options issued had an exercise price of £0.01.
These options have a vesting condition based on 2 performance conditions:
adjusted basic earnings per share adjusted for exceptional income/costs,
amortisation arising on consolidation and share-based payment charges
("adjusted EPS"); and total shareholder return ("TSR") over the 3 years to 31
December 2023. Each performance condition will apply to 50% of the award being
made.
In respect of both performance conditions, growth of 60% in adjusted EPS and
80% in TSR over the 3-year period will be required for threshold vesting of
the awards, with growth of 65% or higher in adjusted EPS and 90% or higher in
TSR required for all of the awards to vest. At threshold vesting, 75% of the
shares subject to each performance condition will vest.
A share-based payments charge of £466,511 has been recognised in the
Statement of Comprehensive Income in the year ended 31 December 2023, this has
been calculated on the basis of 100% of the EPS condition being met and 0% of
the TSR condition being met (as a market-based condition whose fair value was
measured at the grant date as zero and not revisited).
Post period end 100% of the share options vested.
The weighted average contractual life remaining of this option is 4 months.
Share Option Scheme - CEO bonus deferral
On 24 March 2021, the Chief Executive Officer was granted an option over
100,000 ordinary shares. The award of the nil cost option was in substitution
for two thirds of the total £150,000 performance-based cash bonus payable
to the Chief Executive Officer for the financial year to 31 December
2020, with a 100% uplift based on a 30-day VWAP applied to the deferred
element, and became exercisable 2 years' after being granted, subject to
continued employment, vesting criteria and malus conditions. Under the award,
the Chief Executive Officer is not be able to dispose of any of the acquired
shares for a further period of 2 years (save as required to pay tax due on
exercise).
This option vested in full and was exercised in the year ended 31 December
2023.
A share-based payments charge of £23,785 has been recognised in the Statement
of Comprehensive Income in the year ended 31 December 2023.
Enterprise Management Incentive ("EMI") Share Option Scheme 2020
There were options over 200,000 ordinary shares granted which fully vested and
were exercised in 2023.
A share-based payments charge of £37,091 has been recognised in the Statement
of Comprehensive Income in the year ended 31 December 2023.
Movement in the number of ordinary shares under options for all schemes was as
follows:
2023 2022
'000 Weighted '000 Weighted
average average
exercise price exercise price
Number of share options
Outstanding at the beginning of the year 2,213 £0.01 1,826 £0.01
Exercised (300) £0.01 -- --
Forfeited (69) £0.01 (116) £0.01
Granted 256 £0.01 503 £0.01
Outstanding at the end of the year 2,100 £0.01 2,213 £0.01
During the year ended 31 December 2023:
- 200,000 options were exercised under the 2020 scheme;
- 100,000 options were exercised under the 2020 deferred bonus
scheme; and
- 255,953 options were granted under the 2023 scheme.
The outstanding options at 31 December 2023 comprised 1,423,500 options under
the 2021 scheme which will vest in full upon the announcement of these
financial statements. There were also 421,000 options under the 2022 scheme
and 255,953 options under the 2023 scheme whose vesting is subject to
conditions and, to the extent those conditions are achieved, will vest in 2025
and 2026 respectively.
The weighted average remaining contractual life of options is 0.8 years (2022:
1.4 years).
31. Related party disclosures
Transactions with Directors
Dividends
During the year, the total interim and final dividends paid to the Directors
and their spouses were as follows:
2023 2022
£'000
£'000
Interim and final dividend (ordinary shares of £0.01 each)
Richard Martin 943 845
Paul Latham 11 9
Phil Crooks 2 1
Dean Fielding 5 5
David Raggett 55 46
Gareth Samples 7 -
Glynis Frew - 37
1,023 943
Directors' emoluments
Included within the remuneration of key management and personnel detailed in
note 9, the following amounts were paid to the Directors:
2023 2022
£'000 £'000
Wages and salaries 1,151 1,098
Social security costs 150 145
Pension contribution 48 45
1,349 1,288
32. Events after the reporting date
Effective 7 March 2024, the Group acquired the entire issued share capital of
Belvoir Group PLC, a competitor property franchisor with a network of over 300
franchised offices across the UK operating under 6 brands which also has a
significant financial services division comprising a network of over 300
mortgage advisers. The consideration was £107.2m, being £103.5m in relation
to a share for share exchange whereby each Belvoir shareholder was issued
0.806377 new shares in The Property Franchise Group PLC and £3.7m cash
consideration which was used to settle share option obligations. It is likely
that the majority of consideration will be attributed to intangible fixed
assets including master franchise agreements, brands, customer relationships
and goodwill.
Due to the proximity of the acquisition to the date the financial statements
were authorised for issue by the Board, it has not been possible to provide
all of the information required for disclosure in accordance with IFRS 3
'Business Combinations'. The main areas of non-disclosure include a
qualitative description of the factors which make up goodwill and a fair value
of the amounts recognised as of the acquisition date for each major class of
assets acquired and liabilities assumed. Further disclosure of the items
required under IFRS 3 will be included in the June 2024 half year report.
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