Acquisitions help to boost growth at Belvoir Lettings

2nd Apr 2019 10:55

(Sharecast News) - Property franchise group Belvoir Lettings announced a 21% improvement in group revenue in its preliminary results on Tuesday, to £13.7m.The AIM-traded firm said it saw growth of 7% in management service fees in the year ended 31 December, to £8.5m, adding that its strong lettings bias was reflected in its gross profit ratio of 71% lettings to 18% sales to 11% financial services.It noted an exceptional credit of £0.8m on the finalisation of the Northwood earn out.Profit before tax was up 40% year-on-year at £5.5m, with the board also reporting a "strong" cash flow from operating activities of £4.6m, rising from £3.7m.Its year-end bank balance was £1.8m, compared to £1.4m a year earlier.Net debt stood at £9.6m at year-end, widening from £5.1m at the same time in 2017, following the £4.2m Northwood earn out settled in cash and the £4.0m MAB Glos cash consideration.Belvoir's net debt-to-adjusted EBITDA ratio was 1.8x.Adjusted fully diluted earnings per share were 11.7p, up from 10.7p, with the directors recommending a final dividend of 3.8p - up 9% - which would give total distributions for the year of 7.2p, compared to 6.9p in the prior year.On the operational front, Belvoir acquired MAB Glos - a network of 87 financial services advisers operating through 64 offices - during the year, and further integrated Northwood into its own group functions, reducing its cost base by £0.2m per annum.A total of 26 franchisee-assisted acquisitions were completed - up from 23 year-on-year - which added more than £6.9m of network revenue, which was ahead of the £6.6m target and far larger than the £3.3m figure reported for 2017.Properties under management were ahead 8% at 62,780, while average management service fees per office were also 8% higher at £28,333.Belvoir Lettings managed to recruit 10 new franchise owners during the period, up from six, while it reported a net increase of 94 financial service advisers - including 87 MAB Glos advisers - to a total of 123.The total number of offices rose to 365 from 300, with the board also reporting that the company had made an "encouraging" start to 2019."The group achieved another year of significant growth, outperforming both the sales and lettings elements of the housing market and the financial services market," said chief executive officer Dorian Gonsalves."The increase in our like-for-like lettings management service fees of 2.6% outstripped the 1% rental index, and lettings were boosted further by a 4.5% uplift from our assisted acquisitions programme which performed ahead of our expectations.Meanwhile, our sales management service fees increased by 8.4% against the backdrop of a flat sales market in which a 2% fall in the number of UK property transactions was compensated by a modest increase of 2.5% in house prices."Gonsalves said revenue from Brook - the company's 2017 financial services acquisition - increased by 20% on a full year basis, compared with a 3.7% increase in the value of gross mortgage advances."2018 saw the group invest further into financial services with the acquisition of MAB Glos which has provided a platform for Belvoir to build a nationwide network of financial advisers to work with our franchise owners to maximise the sales of mortgages and other property-related financial services to our customers."Belvoir is uniquely positioned within the property sector, benefiting from the agility of a franchise business model compared with the larger corporate players, whilst providing our networks with the central office systems and support, not available to the smaller independent agents."Gonsalves said the firm's value creating strategy had enabled it to consistently deliver profit growth for more than two decades, and achieve a threefold increase in profit before tax since 2014."Belvoir is a strongly cash-generative business with revenues underpinned by the recurring 'annuity-style' lettings income stream coupled with the diversification into complementary property-related services, which will enable the group to overcome changes and outperform in the sector over the coming year."