REG - Property FranchiseGp - Pre-Close Trading Update and Notice of Results

Property FranchiseAnnouncement

31/01/2023 07:00

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RNS Number : 3269O  Property Franchise Group PLC (The)  31 January 2023

 

31 January 2023

 

THE PROPERTY FRANCHISE GROUP PLC

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

 

Pre-Close Trading Update and Notice of Preliminary Results

 

Profit anticipated to be ahead of market expectations

 

The Property Franchise Group PLC, the UK's largest property franchisor, is
pleased to provide a trading update for the year ended 31 December 2022.

 

The Group achieved a strong performance in 2022 through organic growth in
lettings and the full impact of the acquisition of Hunters Property PLC
("Hunters") in March 2021. Revenue and Management Service Fees increased
significantly against the economic backdrop and expected reduction in house
sales transactions. As a result, profit is now anticipated to be ahead of
market expectations.

 

Highlights

 

·      Group revenue increased 13% to £27.1m (2021: £24.1m)(2)

o  7% like for like increase on 2021 to £14.9m(1)

·      Management Service Fees ("royalties") increased 8% to £15.9 m
(2021: £14.7m)

o  5% like for like increase on 2021 to £11.8m(1)

·      EweMove sold 44 new territories (2021: 58) taking the total
number under contract to 189

·      Sales agreed pipeline remained strong at £22.2m at 31 December
2022 (2021: £26.5m)

·      Managing 76,000 rental properties at 31 December 2022 (2021:
74,000)

·      The Group generated £8.2m of free cash flow enabling the
repayment of the £7.5m term loan

·      Net cash of £1.7m on 31 December 2022 (2021: net debt £2.7m)

 

(1) Like for like comparisons exclude the acquisitions of Hunters, The
Mortgage Genie Ltd, and The Genie Group UK Ltd and the disposals of Aux Group
Ltd and Auxilium Partnership Ltd

 

(2) Group revenue for 2021 excludes Aux Group Ltd and Auxilium Partnership Ltd
which were sold in July 21

 

 

The Group now manages over 76,000 rental properties on behalf of landlords,
with much of the growth in the year coming from the assisted acquisitions
program. This factor together with a full year's trading from Hunters in
2022 and rental inflation has generated total growth in Managed Service Fees
('MSF') from lettings of 13% over 2021 (of which Hunters contributed 4%).

 

Whilst total residential sales transactions in the UK fell back from circa
1.50m in 2021 to circa 1.25m in 2022*, the slow down in the time from sale
agreed to completion was unexpected in H1 2022. Fortunately, this conversion
time improved in H2 helping sales MSF to perform strongly in the second half
of the year.

 

EweMove, the Group's hybrid estate agency, had a strong year as it continued
to build on its brand positioning and scale. The sale of 44 new territories
versus 58 in 2021 helped set a new record for the total number of territories
under contract which now stands at 189 with over 200 expected during 2023.

 

It is too early to tell where the number of residential sales transactions
will end up this year although early signs of more normal stock levels and
instructions along with the improved conversion times suggests the market for
second hand residential properties is likely to align with that of 2019.

 

The Group and the broader UK lettings market saw double digit growth in rents
for new lets in 2022, the Homelet Index recording 10.8%. However, in-tenancy
rent increases for the Group were, on average, much more modest. We expect
more substantial in-tenancy rent increases during 2023.

 

Overall, the Group's strength in lettings has more than offset the significant
reduction in residential sales transactions in 2022. Whilst we expect
residential sales transactions to reduce in 2023 to perhaps 1.1m in line with
forecasts by Zoopla, we also expect recurring lettings revenues to continue to
grow at or above the levels seen in 2022.

During 2022, the Group generated £8.2m of free cash flow which enabled it to
repay the £7.5m term loan originally drawn in 2021 providing a strong balance
sheet for opportunistic growth.  Furthermore, the strong operating
performance underpins the expected FY dividend to be declared alongside the
preliminary results in April.

* UK monthly property transactions commentary - GOV.UK (www.gov.uk)

 

Notice of results

All 2022 reported financial figures remain subject to audit and we expect to
release our preliminary results for the year ended 31 December 2022 on Tuesday
18 April 2023.

Chief Executive Officer, Gareth Samples, commented:

 

"The Board and I are delighted to report that H2 performed strongly against a
difficult backdrop and, combined with solid trading in H1, resulted in profit
anticipated to be ahead of market expectations.

 

MSF accounted for 60% of Group revenue, whilst lettings, our most significant
recurring revenue stream generated by our franchise network and our owned
offices, accounted for 43% of Group revenue. We remain focused on increasing
the contribution from lettings in line with our strategic initiatives.

 

We achieved the net cash position we expected at year end paying off our term
loan early. This was an important step in proving the successful integration
of Hunters and underpins our ongoing success, no matter how the external
conditions develop.

 

As a highly cash generative Group with a strong balance sheet, we look forward
to the opportunities that 2023 may bring."

 

 

The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulations (EU) No.
596/2014. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.

 

 

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 Broker)   0207 523 8000

 Max Hartley

 Tom Diehl

 Alma PR                                                   020 3405 0205

 Justine James                                             propertyfranchise@almapr.co.uk

 Joe Pederzolli

 

About The Property Franchise Group PLC:

The Property Franchise Group PLC (AIM: TPFG) is the largest property
franchisor in the UK and manages the second largest estate agency network and
portfolio of lettings properties in the UK.

The Company was founded in 1986 and has since grown to a diverse portfolio of
nine brands operating throughout the UK, comprising longstanding high-street
focused brands and a hybrid, no sale no fee agency.

The Property Franchise Group's brands are Martin & Co, EweMove, Hunters,
CJ Hole, Ellis & Co, Parkers, Whitegates, Mullucks & Country
Properties.

Headquartered in Bournemouth, UK, 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/)

 

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