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'Exceptionally strong' trading continues for Belvoir
3rd Aug 2021 11:42
(Sharecast News) - Franchised property and financial services company Belvoir Group said in an update on Tuesday that trading had continued to be "exceptionally strong" in the first half, with group revenue up 41% on 2020, which was impacted by the Covid-19 pandemic, and 53% higher than 2019.
The AIM-traded firm said it saw "substantial" revenue growth across both divisions on the back of a "very buoyant" housing market.
In comparison to the first half of 2019, the property division achieved revenue growth of 45% in the six months ended 30 June, of which 25% represented growth in the underlying business and 20% from its investment in two additional franchise networks, Lovelle in January 2020 and Nicholas Humphreys in March 2021.
Meanwhile, the financial services division reported revenue growth of 62% on the first half of 2019, through organic growth in its adviser network.
Management service fees (MSF), the core franchise revenue stream, from residential sales was up 100% on the first six months of 2020, reflecting the lower transaction level in the second quarter of last year due to the first national lockdown, by contrast to an "exceptional level" of house sales in the first half of 2021, driven by the stamp duty holiday and the "race for space".
By comparison to the first half of 2019 on a like-for-like basis, sales MSF was up 68%.
The shortage of available property to meet current levels of demand had resulted in the UK house price index reaching 10.0% for the year to May, compared with 2.2% at the end of 2019 prior to the start of the Covid-19 pandemic.
Current pipelines and the ongoing demand for property suggested that the transitional approach to ending the stamp duty holiday, which finally ends on 30 September, had succeeded in avoiding the "cliff edge" feared at the start of 2021, with a gradual return to a more normal transaction level expected in the fourth quarter instead.
MSF from lettings, meanwhile, which had been much less impacted by the first national lockdown and operated on par with the first half of 2019, was up 13% over the first half of 2020.
Of that, 3% was attributable to the acquisition of the Nicholas Humphreys network on 31 March and the franchising of certain previously corporate-owned Lovelle offices.
The underlying growth of 10% compared "favourably" with the overall UK rental index to June 2021 of 1.2%, which rose to 1.8% excluding London, and to 2.4% in the East and West Midlands, where Belvoir was particularly strong.
There were signs of more substantial rental increases on the horizon, the board noted, with rental growth from new tenancies reportedly running at 5.9% UK-wide, and 8.0% excluding London.
Revenue growth from the financial services division, up 51% over the first six months of 2020, benefited from demand for mortgages to fund house purchases, as well as from a 21% increase in the Belvoir adviser network, which was up to 221 advisers at the end of June.
The subsequent acquisition of Nottingham Mortgage Services, the mortgage arm of the Nottingham Building Society, completed on 30 July, had taken Belvoir's number of advisers up to 242.
It said the strengthening of the strategic partnership with the Nottingham would extend the financial services division in the first instance from servicing the building society's existing members and branch customers, as well as longer-term from servicing its "fast-growing" base of more than 50,000 Lifetime ISA online account holders through the Beehive Money app, many of whom were saving for their first home.
The group said it was still achieving a high rate of cash conversion, maintaining a "strong" balance sheet with cash balances of £5.1m, up from £4.3m a year earlier, and bank loans narrowing to £9.1m from £10m at the end of June.
Net debt of £4.0m, up £0.3m since the end of 2020, was after having acquired Nicholas Humphreys for £4.0m cash.
Given the group's growth in the first half over both 2019 and 2020, its earnings-enhancing investments to expand both the property and the financial services divisions, and the current market conditions reflecting a sustained underlying demand for homes and mortgages, the board said it was confident of achieving a "strong" trading performance for the full financial year.
"We continue to see exceptionally strong trading across the group, well ahead of our expectations as at the start of the year," said chief executive officer Dorian Gonsalves.
"Our residential property sales hit a peak in June and pipelines remain strong.
"Lettings has achieved growth from increased rental activity and tenant demand creating an upward pressure on rents."
Gonsalves said the company's financial services division was going "from strength to strength", benefitting from a strong sales market and its enlarged network of advisers.
"The board has continued to pursue its growth strategy in the first half through the acquisition of Nicholas Humphreys, increasing the footprint of our property franchise division, along with the strengthening of our long-term strategic partnership with the Nottingham Building Society through the acquisition of its mortgage business, Nottingham Mortgage Services.
"Both acquisitions will be highly accretive in 2021 and demonstrate the Board's commitment to enhancing shareholder value further."
Belvoir said it would announce its half-year results for the six months ended 30 June on 6 September.
At 1124 BST, shares in Belvoir Group were up 3.89% at 307.5p.
The AIM-traded firm said it saw "substantial" revenue growth across both divisions on the back of a "very buoyant" housing market.
In comparison to the first half of 2019, the property division achieved revenue growth of 45% in the six months ended 30 June, of which 25% represented growth in the underlying business and 20% from its investment in two additional franchise networks, Lovelle in January 2020 and Nicholas Humphreys in March 2021.
Meanwhile, the financial services division reported revenue growth of 62% on the first half of 2019, through organic growth in its adviser network.
Management service fees (MSF), the core franchise revenue stream, from residential sales was up 100% on the first six months of 2020, reflecting the lower transaction level in the second quarter of last year due to the first national lockdown, by contrast to an "exceptional level" of house sales in the first half of 2021, driven by the stamp duty holiday and the "race for space".
By comparison to the first half of 2019 on a like-for-like basis, sales MSF was up 68%.
The shortage of available property to meet current levels of demand had resulted in the UK house price index reaching 10.0% for the year to May, compared with 2.2% at the end of 2019 prior to the start of the Covid-19 pandemic.
Current pipelines and the ongoing demand for property suggested that the transitional approach to ending the stamp duty holiday, which finally ends on 30 September, had succeeded in avoiding the "cliff edge" feared at the start of 2021, with a gradual return to a more normal transaction level expected in the fourth quarter instead.
MSF from lettings, meanwhile, which had been much less impacted by the first national lockdown and operated on par with the first half of 2019, was up 13% over the first half of 2020.
Of that, 3% was attributable to the acquisition of the Nicholas Humphreys network on 31 March and the franchising of certain previously corporate-owned Lovelle offices.
The underlying growth of 10% compared "favourably" with the overall UK rental index to June 2021 of 1.2%, which rose to 1.8% excluding London, and to 2.4% in the East and West Midlands, where Belvoir was particularly strong.
There were signs of more substantial rental increases on the horizon, the board noted, with rental growth from new tenancies reportedly running at 5.9% UK-wide, and 8.0% excluding London.
Revenue growth from the financial services division, up 51% over the first six months of 2020, benefited from demand for mortgages to fund house purchases, as well as from a 21% increase in the Belvoir adviser network, which was up to 221 advisers at the end of June.
The subsequent acquisition of Nottingham Mortgage Services, the mortgage arm of the Nottingham Building Society, completed on 30 July, had taken Belvoir's number of advisers up to 242.
It said the strengthening of the strategic partnership with the Nottingham would extend the financial services division in the first instance from servicing the building society's existing members and branch customers, as well as longer-term from servicing its "fast-growing" base of more than 50,000 Lifetime ISA online account holders through the Beehive Money app, many of whom were saving for their first home.
The group said it was still achieving a high rate of cash conversion, maintaining a "strong" balance sheet with cash balances of £5.1m, up from £4.3m a year earlier, and bank loans narrowing to £9.1m from £10m at the end of June.
Net debt of £4.0m, up £0.3m since the end of 2020, was after having acquired Nicholas Humphreys for £4.0m cash.
Given the group's growth in the first half over both 2019 and 2020, its earnings-enhancing investments to expand both the property and the financial services divisions, and the current market conditions reflecting a sustained underlying demand for homes and mortgages, the board said it was confident of achieving a "strong" trading performance for the full financial year.
"We continue to see exceptionally strong trading across the group, well ahead of our expectations as at the start of the year," said chief executive officer Dorian Gonsalves.
"Our residential property sales hit a peak in June and pipelines remain strong.
"Lettings has achieved growth from increased rental activity and tenant demand creating an upward pressure on rents."
Gonsalves said the company's financial services division was going "from strength to strength", benefitting from a strong sales market and its enlarged network of advisers.
"The board has continued to pursue its growth strategy in the first half through the acquisition of Nicholas Humphreys, increasing the footprint of our property franchise division, along with the strengthening of our long-term strategic partnership with the Nottingham Building Society through the acquisition of its mortgage business, Nottingham Mortgage Services.
"Both acquisitions will be highly accretive in 2021 and demonstrate the Board's commitment to enhancing shareholder value further."
Belvoir said it would announce its half-year results for the six months ended 30 June on 6 September.
At 1124 BST, shares in Belvoir Group were up 3.89% at 307.5p.