Chairman’s statement

Continued delivery of growth and strong results

I am pleased to report that 2016 has been another year of significant growth for the Belvoir Group.

Introduction

Opportunities continue to arise at all levels for the Group to increase its presence throughout the UK, despite the background of uncertainty due to Brexit, the Government’s intervention in the BTL sector and continuing consolidation within our market. This has enabled the Group to significantly improve on all its key performance indicators and to meet market expectations.

Strategy

The Group continues to deliver growth through its multi-brand strategy, the acquisition of individual businesses at franchise owner level, organic growth through proactive marketing at local and national level, and the franchising of a number of corporately owned outlets.

In particular, the acquisition of Northwood GB Ltd, the largest remaining independent property franchise network, brought another strong and reputable brand to the Group and increased its high street presence across the whole of the UK to 302 offices, and the number of managed properties to 55,756 (2015: 37,000). The Group’s stable of brands now stands at four: Belvoir, Northwood, Newton Fallowell and Goodchilds. The Board is continuing to look for economies of scale across the back office operations of the Group whilst maintaining investment in brand recognition and franchisee support.

The Assisted Acquisition programme, providing growth opportunities for our franchise owners, was extended to franchisees across all four brands. A total of £1.5m of acquisitions were completed under the programme in 2016, supported by group lending of £551,000, and will increase MSF to the Group by £243,000 p.a. This strategy is particularly successful since it provides both the franchise owner and the franchisor with an instant uplift in fee income, with a relatively modest increase in overheads. Where the Group provides partial funding, this facilitates the deal as well as generating further interest income for the Group.

Organic growth, including the recruitment of new franchise owners, is a key element of our growth strategy and is facilitated through a strong Group marketing team as well as strong recruitment teams at brand level. This area is challenging and the Board continues to look for innovative and cost-effective ways to attract new franchise owners into the network through cold starts, enhanced starts where a new franchisee takes on a portfolio acquisition at the outset, and resales of existing territories to new franchisees.

Finally, the franchising out of certain under-performing corporately-owned outlets, which commenced in 2016 and will conclude in 2017, will allow the Central Office team to focus entirely on its franchising operations.

Growth

The Group achieved growth across all financial metrics with revenue up 43% to £9.9m (2015: £6.9m) underpinned by MSF growth of 59% to £6.4m (2015: £4.0m), adjusted profit before tax up by 28% to £3.1m (2015: £2.4m) and adjusted EPS up by 5% to 7.7p (2015: 7.3p).

The Belvoir Group has traditionally been a lettings-focused business (indeed it only entered the sales arena in 2014) and it continues to be so with a lettings to sales ratio of 76:24 in 2016. However, the potential for further growth from property sales is significant given the strong lettings background of most of our franchise owners. By the end of 2016, over two-thirds of our outlets were able to offer a sales service, and revenue from sales had increased by 58% to £2.1m (2015: £1.4m).

Outlook

I continue to see business format franchising as a unique and highly successful avenue to growth in the property service industry, with franchisees benefiting from the marketing, business support and cost-saving opportunities afforded by operating under the umbrella of a large national brand, whilst also building a business with a growing asset value. In 2016 our Peterborough and Cambridge franchise was sold to a new franchise owner for a figure in excess of £1.5m. The franchise partnership thus created a compelling incentive to do well for the franchisee, and for the franchisor to deliver success for all stakeholders, franchise owners and shareholders.

The Belvoir Group will look to take advantage of the many further expansion opportunities that are apparent in 2017. As well as consolidating the current acquisitions with a view to further network efficiencies, the Group will look to leverage on its large managed property portfolio, grow property sales volume and adapt to the technology changes in our industry.

It is vital we have the right people to take the Belvoir Group into 2017 and beyond and I am delighted to report we have a dedicated and loyal team of directors, staff and franchise owners across the whole Group, and that they are the very best in the franchising and property industry. We are extremely lucky in this respect and I am confident that we enter 2017 with a bright future.

Michael Goddard
Chairman