TIDMTPFG
RNS Number : 5092W
Property Franchise Group PLC (The)
18 April 2023
18 April 2023
THE PROPERTY FRANCHISE GROUP PLC
(the "Company" or the "Group")
Final Results
Profit ahead of market expectations
The Property Franchise Group PLC, the UK's largest property
franchisor, is pleased to announce its final results for the year
ended 31 December 2022 ("FY22").
The Group achieved a strong financial performance in FY22
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, driving profits and earnings forward.
Financial Highlights
-- Group revenue increased 13% to GBP27.2m (2021: GBP24.0m)(1)
o 8% like for like increase on 2021 to GBP14.9m(2)
-- Management Service Fees ("royalties") increased 8% to GBP15.9m (2021: GBP14.7m)
o 5% like for like increase on 2021 to GBP11.8m(2)
-- Adjusted EBITDA(3) increased 14% to GBP11.8m (2021: GBP10.4m)
o 13% like for like increase on 2021 to GBP7.7m(2)
-- Adjusted operating margin(4) of 41% (2021: 40%)
-- Profit before tax increased 38 % to GBP8.8m (2021: GBP6.4m)
-- Adjusted diluted earnings per share increased 6% to 28.4p (2021: 26.9p)
-- Group generated GBP8.2 m of free cash flow in FY22 enabling
the repayment of the GBP7.5m term loan
-- Net cash of GBP1.7m on 31 December 2022 (2021: net debt GBP2.7m)
-- Dividends paid and declared for FY22 of 13.0p (FY21: 11.6p)
(1) Group revenue for 2021 excludes Aux Group Ltd and Auxilium
Partnership Ltd which were sold in July 21.
(2) Like for like comparisons exclude the acquisitions of
Hunters, Mortgage Genie and the disposals in note 1.
(3) Before share-based payments charge, losses/gains on listed
investment and exceptional costs.
(4) Before amortisation arising on consolidation and the items
in note 3.
Operational Highlights
-- Managed portfolio up 2% to 76,000 (2021: 74,000)
-- EweMove sold 44 new territories (2021: 58); total number of territories under contract 189
-- Sales agreed pipeline remained strong at GBP22.2m at 31 December 2022 (2021: GBP26.5m)
-- The number of assisted acquisitions by franchisees increased
75% to 19 (2021: 11) adding GBP2.1m to annualised network revenue
(2021: GBP1.4m) and 1,890 (2021: 1,270) tenanted managed
properties
-- The largest acquisition to date, Hunters, was fully integrated and the synergies achieved
-- Installation of up-to-date CRM systems in Hunters and EweMove with Martin & Co next
Q1 Trading and Outlook
-- Seasonally quiet Q1 has been slightly ahead of management's
expectations with regards to both revenue and profitability
-- Residential market is expected to align with that of 2019 as
we move through the year and we expect residential sales to achieve
approximately 1.06m transactions in line with forecasts by
Zoopla
-- 2023 is anticipated to be another year of strong organic
growth in lettings revenues. A lack of stock, unprecedented demand,
and rising mortgage costs have all driven rental inflation in 2022
and are continuing to do so in 2023
-- The Board remains confident of delivering growth in 2023 and beyond
Gareth Samples, Chief Executive Officer of The Property
Franchise Group, said:
"We have delivered another strong set of record results in 2022.
Particularly pleasing given the economic backdrop and contraction
in residential sales transactions. In two years, we have grown
group revenue almost 2.5 times, maintained recurring revenues at
half of group revenue, doubled adjusted profit before tax and grown
adjusted fully diluted earnings per share by two-thirds. We have
also put ourselves back in a net cash position within eighteen
months of our largest acquisition to date, Hunters, giving us a
strong platform for future growth.
"As a result, the Board is recommending a final dividend for
2022 of 8.8p bringing the total dividend to 13.0p for the financial
year. In two years, if approved at our AGM, the total dividend per
year will have grown sustainably by 1.5 times.
"Our focus on building EweMove resulted in the second highest
recruitment year ever and it's on course to achieve the doubling in
territories begun two years ago. We also gained momentum with
assisted acquisitions as completions increased by three quarters on
2021.
"As we grow, so does our data and the opportunity that presents.
It is core to our digital marketing initiatives and so, in 2022, we
began to replace our CRM systems within our national brands with
the aim of completing this project within the next 12 months.
"We continued with our plans to invest in a senior management
team to support our network encouraged by excellent feedback from
franchisees and them making clear improvements in key metrics as a
result. Our overriding aim being to make them more successful.
"Whilst remaining cognisant of the external environment, we
remain confident in the resilience of our business model, the
capabilities of our franchise owners, the investments in our
people, our long established multi brand strategy and the execution
of our strategic plan. We have an excellent team in place,
continuing to support a very experienced group of franchisees and a
proven strategy which we expect to continue delivering growth in
2023 and beyond."
Investor presentation
The Company is hosting a private investor presentation on
Tuesday 18 April 2023 at 13:00. All existing and potential private
investors interested in attending are asked to register using the
following link: https://bit.ly/TPFG_FY_results_webinar
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
Gareth Samples, Chief Executive Officer
David Raggett, Chief Financial Officer 01202 405549
Canaccord Genuity Limited (Nominated
Adviser and Broker)
Max Hartley
Tom Diehl 0207 523 8000
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
CHAIRMAN'S STATEMENT
2022 has proved to be another outstanding year for the
Group.
Before getting into the detail of why that's the case during my
first year as Chairman, I want to say a few words of thank you to
our founder, Richard Martin, who retired as Chairman in May
2022.
Richard espouses all of the virtues of TPFG. The requirements
for strong leadership, entrepreneurial drive, tight cost control
and creative vision. As a direct result of Richard's outstanding
leadership, the Group today benefits from each of these virtues
being embodied in our Executives supported by a vastly experienced
Senior Leadership Team. Working closely together they are capable
of identifying and assessing the merits of acquisition
opportunities whilst ensuring that the knitting of the day job has
their full and appropriate attention.
I am very pleased that Richard agreed to remain on our Board as
a Non-Executive Director and we are extremely grateful for his
continued encouragement and insight.
Throughout the year we continued to work hard to fully integrate
Hunters and this process was completed by year-end - some three
months ahead of our original timetable. As with previous
acquisitions, we have demonstrated our ability to achieve the
planned synergies and our capability to successfully manage such
acquisitions for the benefit of all our stakeholders. This was
especially pleasing given the scale of the acquisition.
Our financial results this year have confirmed the success of
our acquisition of Hunters in 2021. Our headline profit before tax
being ahead of market expectations at GBP8.8m (2021: GBP6.4m) and
the more insightful adjusted profit before tax being higher than
market expectations at GBP10.7m (2021: GBP9.4m). In turn we also
improved our return on capital employed to 20% (2021: 17%) and our
return on capital invested to 27% (2021: 24%).
The Group's shareholders will be aware of the highly cash
generative nature of our activity. It is, therefore, very pleasing
to report that after using a debt facility of GBP12.5m and cash of
GBP2.5m to fund the acquisition of Hunters as well as paying
increased dividends of GBP3.8m, the Group has swiftly returned to a
net cash position of GBP1.7m at 31 December 2022.
As a result of our financial progress in 2022, I am particularly
pleased to announce that the Board has approved a final dividend
for FY22 of 8.8p (2021: 7.8p) bringing the total dividend for FY22
to 13.0p, an increase of 12% over the 11.6p paid for 2021.
Despite our record financial performance in 2022, the year was
operationally challenging for our more sales reliant businesses.
The housing market was affected by the macro-economic issues facing
the UK and reacted to the increase in interest rates with a
noticeable decline in agreed sales transactions as mortgage deals
became more expensive and stuttered through the political
uncertainty of Q4. From a sales perspective, 2022 was a year of two
halves with good levels of sales agreed but slow conversion into
completed transactions in H1 and slowing levels of sales agreed but
much better conversion into completed transactions in H2. We ended
the year with a sales' agreed pipeline of GBP22.2m (2021: GBP26.5m)
which still represents a good start to our 2023 financial
objectives.
2022 was a year where our strength in lettings showed its
considerable influence on our financial results. Our heritage and
focus have always been in lettings. We managed 76,000 tenanted
properties for landlords at 31 December 2022. Our total lettings
revenues represented 47% of total revenue and lettings accounted
for 55% of management service fees. It is a recurring revenue
stream, annuity like in nature, that grew in 2022, largely as a
result of rental inflation. The early signs are showing a similar
trend in 2023.
The growth of our portfolio of managed properties together with
an improvement in the lettings revenues in Hunters are at the core
of our plans for 2023. Whilst there are clear signs that there may
well be more economic stability than we expected in Q4 2022, which
invariably translates into an improved housing market, any
headwinds faced are also likely to create opportunities for the
Group given our balance sheet strength and growing net cash
position.
The Group is today the largest property franchisor in the UK.
The resilience of the franchise model to weather periods of
economic uncertainty backed by an underlying recurring revenue
stream, predominantly from our portfolio of managed properties,
allows the Group to actively pursue the development of
complementary revenue streams. Three such streams under development
being financial services, conveyancing and block management.
By way of conclusion, I would like to thank my Board colleagues,
the dedicated head office teams in Bournemouth, York and
Cleckheaton and our many excellent franchisees and their staff for
all their efforts over the last year. Similarly, I extend my thanks
to all our shareholders and business partners for their continued
support. We could not achieve what we do without all these
stakeholders striving to help us achieve our strong vision and
clearly defined strategic initiatives.
Paul Latham
Chairman
17 April 2023
CEO STATEMENT
I am delighted to report that 2022 produced another strong set
of record results as we delivered on our investment and growth
objectives. We achieved material revenue growth, up 13% to GBP27.2m
and a significant increase of 38% in reported profit before tax to
GBP8.8m.
As we continue to navigate an unpredictable UK property market
which saw a drop in sales activity in 2022, in line with our
expectations, the strength of our franchise business model and our
commitment to lettings activities has come to the fore in achieving
these results. I would like to take this opportunity to thank our
team for their continued commitment to the business and hard work
in supporting our franchisees.
Following a transformational year in 2021 with the acquisition
of Hunters, a key focus for us during the period was to fully
integrate the business which was achieved ahead of target. We are
now benefitting financially, operationally and strategically from
being an enlarged Group.
Our performance has been particularly pleasing when compared
against the economic backdrop and reduction in house sales
transactions across the UK property market. Our business model has
proven its robustness with the growth in lettings' revenues which
more than offset the impact of the market-led reduction in sales
transactions. Looking ahead, we don't envisage this abating. We
expect residential sales transactions to continue to reduce in
2023. We also expect recurring lettings' revenues to continue to
grow at or above the levels seen in 2022, which is particularly
encouraging for the Group with such a strong lettings heritage and
performance.
We have continued to strengthen our senior leadership team and
the team dedicated to supporting franchisees during 2022, as well
as investing in new operating systems for EweMove and Hunters to
further their growth. By leveraging our position, we believe
opportunities exist to continue our strategic initiatives over the
next 12 months.
Financial performance
I am very proud of our franchisees, who collectively contributed
to the delivery of another year of growth in Management Service
Fees ("MSF"), up 8% to GBP15.9m (2021: GBP14.7m) and our Group for
maintaining its strong operating margin and, thereby, achieving an
adjusted profit before tax increase of 14% to GBP10.7m (2021:
GBP9.4m), ahead of market expectations.
We continue to be strongly cash generative, generating net cash
from operations of GBP8.6m (2021: GBP8.9m). As a result, we fully
repaid the outstanding balance of the GBP7.5m term loan in November
2022 that formed part of the GBP12.5m debt facility used to fund
the Hunters acquisition in March 2021, paid an increased interim
dividend and ended the year with a net cash position of GBP1.7m
(2021: net debt GBP2.7m). We are delighted to have put ourselves
back into a net cash position within 18 months of our largest
acquisition to date which gives us a strong platform for further
growth.
As a result of our continued financial progress and our
commitment to a progressive dividend policy, we are pleased to
announce a final dividend of 8.8p for 2022 (2021: 7.8p). Its
approval at our AGM in June will mean an increase in the full year
dividend of 12% to 13.0p (2021: 11.6p).
Our network's lettings performance
A lack of stock, unprecedented demand, in part driven by
continuing high levels of long-term net migration, and rising
mortgage costs have all driven rental inflation in 2022 and
continue to do so into 2023.
The Group and the broader UK lettings market saw double digit
growth in new tenancy rents in 2022, with the Homelet Index
recording growth of 10.8%. For the 75% of renters who do not move
every year, rent increases were 4.2% in the 12 months to December
2022, representing the largest annual percentage change since the
ONS UK Index began in January 2016.
Whilst pursuing a mix of revenues, the lettings side of our
business, with 76,000 rental properties under management, remains
at the core of our activities. We remain committed to this being
the most significant element of our revenue and MSF. Lettings
represented 47% of total revenue (2021: 48%) and 55% of total MSF
(2021: 53%) in the period.
The above factors, together with a full year's contribution from
Hunters and some progress in assisted acquisition numbers, have
generated total growth in lettings revenues of 9% and lettings MSF
of 13% over 2021 (of which Hunters contributed 3% and 4%
respectively).
Amidst an uncertain trading environment, it is the lettings
market which underpins our prospects for growth in 2023.
Our network's sales performance
Total residential sales transactions in the UK declined from
c.1.5m in 2021 to c.1.25m in 2022*, a trend reflected in the
Group's overall performance with the notable exception being Martin
& Co where sales completions were almost unchanged year on
year. This reflects the continued work to grow the brand's sales
capabilities.
In 2022, the Group listed over 37,000 homes for sale, agreed
sales on over 31,000 homes and helped buyers complete on over
24,000 homes.
Whilst the sales transaction market is notoriously difficult to
predict, early signs of stock levels and instructions, coupled with
improved conversion times, indicate that the market for residential
properties is likely to align with that of 2019 as we move through
the year. Whilst realigning, we expect residential sales
transactions to reduce and 2023 to perhaps achieve 1.06m
transactions in line with forecasts by Zoopla.
* UK monthly property transactions commentary - GOV.UK (
www.gov.uk )
Strategic initiatives delivering growth
We made progress in 2022 with all our strategic initiatives with
economic uncertainty and challenges brought about by that impacting
the initiatives to various degrees.
Lettings growth - Our assisted acquisitions programme brought
1,890 tenanted properties into the network, in turn adding GBP2.1m
of network income on an annualised basis. We aim to grow this
further in FY23.
Develop sales activity in the high street-led brands - All of
our long-standing brands performed strongly showing a 9% reduction
in sales transactions overall against a UK market reduction of 16%
in 2022. As a result, we gained market share, led by the
initiatives within Martin & Co.
Financial services growth - H2 2022 presented a significant
challenge for financial services in this sector and that has
continued into 2023. Mortgage Genie made progress but MSF from this
activity remains at 1% of the Group total against a longer-term
objective of 5%.
EweMove recruitment - 2022 was yet another good year for EweMove
as it continued to build on its brand positioning and scale,
selling 44 new territories and finishing the year with 189
territories under contract.
Acquisitions - We continue to assess potential targets primarily
with the aim of adding managed properties to our nine owned offices
in 2023.
Digital marketing - We provide local solutions for franchisees
and Group-wide customer journey management. New campaigns are
driving pleasing levels of results for the network as we improve
our customer for life journeys and invest in more capable operating
systems.
Outlook
Whilst remaining cognisant of the external environment, we
remain confident in the execution of our strategic plan moving
forwards. We have an excellent team in place, continuing to support
a very experienced group of franchisees and a proven strategy,
which we expect to continue delivering growth into 2023 and
beyond.
Gareth Samples
CEO
17 April 2023
FINANCIAL REVIEW
Whilst we rightly took a more cautious approach in 2022, our
commitment to long-term sustained growth meant that by year end, we
had delivered all the strategic ambitions we set out to achieve.
Namely changes required to fully achieve our acquisition synergies,
added to our team supporting franchisees, commenced the integration
of Mortgage Genie into our financial services offering and begun
the installation of new operating systems for all three national
brands.
Whilst the organic growth in lettings revenue continued where it
had left off in 2021, our revenue from sales transactions was slow
to materialise, eventually coming through towards the back end of
2022. With a slower market for sales instructions in Q4 2022, our
sales agreed fee pipeline fell back to GBP22.2m (2021: GBP26.5m).
Still strong but down 16%.
Revenue
Group revenue for the financial year ended 31 December 2022 was
GBP27.2m (2021: GBP24.0m), an increase of GBP3.1m (13%) over the
prior year. Hunters contributed GBP10.9m to revenue (2021: GBP9.8m)
and Mortgage Genie contributed GBP1.4m (2021: GBP0.4m). There was
like for like growth (excluding the acquisitions in 2021) of 8% in
revenue, delivering GBP14.9m (2021: GBP13.9m).
Management Service Fees ("MSF"), our key underlying revenue
stream, increased 8% from GBP14.7m to GBP15.9m and represented 58%
(2021: 61%) of the Group's revenue. Hunters contributed GBP4.1m of
MSF (2021: GBP3.5m). There was like for like growth (excluding
Hunters) of 5% to GBP11.8m (2021: GBP11.2m).
Lettings contributed 55% of MSF (2021: 53%), sales contributed
44% of MSF (2021: 46%) and financial services contributed 1% of MSF
(2021: 1%). Lettings MSF increased by 12% in the year, excluding
the amortisation of prepaid assisted acquisitions support, and
sales MSF increased by 2%.
Our franchise sales activity was again predominantly focused on
reselling existing franchises to experienced franchise owners in
the high street-led brands and encouraging new entrants into
EweMove. Territory sales in EweMove were 44 (2021: 58), the second
highest in EweMove's history.
Operating profit
Headline operating profit increased by 40% for the second year
in a row to GBP9.3m (2021: GBP6.7m) with an improved operating
margin of 34% (2021: 27%). Adjusted operating profit before
exceptional items, amortisation of acquired intangibles and
share-based payments charges increased 15% from GBP9.7m to GBP11.1m
and the resulting operating margin remained strong at 41% (2021:
40%).
As a result of our acquisitions in 2021, our cost of sales
increased by 51% to GBP5.6m (2021: GBP3.7m). Headline
administrative expenses decreased by 7% to GBP11.9m (2021:
GBP12.7m) and, excluding exceptional costs incurred in 2021 of
GBP0.9m, administrative expenses were unchanged year on year.
There were no exceptional costs incurred in the year (2021:
GBP0.9m due to the acquisitions).
Share options were granted to the Executive Directors in 2022
over a maximum of 290,000 ordinary shares. There were also share
options granted to senior employees in 2022 amounting to a maximum
of 212,500 ordinary shares on the same conditions as those applying
to the Executive Directors. Total shares under option at 31
December 2022 were 2,213,000.
An assessment of the share-based payment charges resulting from
the options granted was made on 31 December 2022 resulting in
GBP0.4m being charged to the profit and loss account (2021:
GBP1.0m). Further details can be found in notes 4, 5 and 33 to the
consolidated financial statements.
Adjusted EBITDA
Adjusted EBITDA for 2022 was GBP11.8m (2021: GBP10.4m), an
increase of GBP1.4m (14%) over the prior year.
Profit before tax
Profit before tax increased to GBP8.8m (2021: GBP6.4m).
Excluding exceptional costs of GBPnil (2021: GBP0.9m), amortisation
arising on acquired intangibles of GBP1.4m (2021: GBP1.2m), the
share-based payment charges of GBP0.4m (2021: GBP1.0m) and the loss
on the listed investment of GBP0.03m (2021: gain GBP0.1m), the
adjusted profit before tax increased by 14% from GBP9.4m to
GBP10.7m.
2022 2021 % Change
----------------------------- ---------- ---------- ----------
Revenue GBP27.2m GBP24.0m +13%
----------------------------- ---------- ---------- ----------
Management Service Fees GBP15.9m GBP14.7m +8%
----------------------------- ---------- ---------- ----------
Cost of sales GBP5.6m GBP3.7m +51%
----------------------------- ---------- ---------- ----------
Administrative expenses GBP11.9m GBP12.7m -7%
----------------------------- ---------- ---------- ----------
Adjusted operating profit* GBP11.1m GBP9.7m +15%
----------------------------- ---------- ---------- ----------
Operating profit GBP9.3m GBP6.7m +40%
----------------------------- ---------- ---------- ----------
Adjusted profit before
tax** GBP10.7m GBP9.4m +14%
----------------------------- ---------- ---------- ----------
Profit before tax GBP8.8m GBP6.4m +38%
----------------------------- ---------- ---------- ----------
Adjusted EBITDA** GBP11.8m GBP10.4m +14%
----------------------------- ---------- ---------- ----------
Dividend 13.0p 11.6p +12%
----------------------------- ---------- ---------- ----------
Diluted EPS 22.5p 11.3p +99%
----------------------------- ---------- ---------- ----------
Adjusted diluted EPS** 28.4p 26.9p +6%
----------------------------- ---------- ---------- ----------
* Before exceptional costs, amortisation of acquired intangibles
and share-based payment charges.
** Before exceptional costs, share-based payment charges and
loss/gain on listed investment
Taxation
The effective rate of corporation tax for the year was 18.0%
(2021: 42.7%) with the rate in 2021 due to the increase in
corporation tax from 19% to 25% in April 2023 which caused a
deferred tax charge of GBP1.5m. The total tax charge for 2022 was
GBP1.6m (2021: GBP2.7m).
Discontinued operations
On 22 July 2021 the Group disposed of its majority shareholding
in Aux Group Limited. This resulted from the decision to partner
with LSL so as to scale up more quickly without the regulatory
burdens. A cost of GBP0.2m was recognised under discontinued
operations in 2021 being the loss on disposal of GBP0.3m less the
profit after tax up to the point of disposal of GBP0.1m.
Earnings per share
Basic earnings per share ("EPS") for the year was 22.6p (2021:
11.3p), an increase of 100%. This reflects the remaining dilution
impact flowing through from the acquisition of Hunters in 2021 into
the calculation with the average number of shares in issue for the
period to 32,041,966 (2021: 30,622,102).
Diluted EPS for the year was 22.5p (2021: 11.3p) an increase of
99% based on the average number of shares in issue for the period
plus an estimate for the dilutive effect of option grants vesting,
being 32,141,592 (2021: 30,721,692).
The impact of the deferred tax rate change of GBP1.5m in 2021
was to reduce basic EPS and diluted EPS from 16.3p to 11.3p in
2021. Without the charge in 2021, the increase in basic EPS and
diluted EPS for 2022 would have been 38%.
Adjusted basic EPS for the year was 28,4p (2021: 27.0p), an
increase of 5% based on the average number of shares in issue for
the period of 32,041,966 (2021: 30,622,102).
Adjusted diluted EPS for the year was 28.4p (2021: 26.9p), an
increase of 6% based on an estimate of diluted shares in issue of
32,141,592 (2021: 30,721,692).
The adjustments to earnings to derive the adjusted EPS figures
total GBP1.9m (2021: GBP4.8m) and mainly result from the
share-based payment charge of GBP0.4m and amortisation of acquired
intangibles of GBP1.4m.
The profit attributable to owners increased 108% to GBP7.2m
(2021: GBP3.5m).
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 two years and is
generating significantly more cash than ever before. As a result,
the Board is pleased to announce a final dividend of 8.8p (2021:
7.8p), an increase of 13%, bringing the total dividend for 2021 to
13.0p (2021: 11.6p). It will be paid on 9(th) June 2023 to all
shareholders on the register on 12(th) May 2023. Our shares will be
marked ex-dividend on 11(th) May 2023. The total amount payable is
GBP2.8m (2021: GBP2.5m).
Cash flow
The Group is strongly operationally cash generative. The net
cash inflow from operating activities in 2022 was GBP9.0m (2021:
GBP8.9m).
The net cash inflow from investing activities was GBP0.1m (2021:
outflow GBP13.7m). This results from acquisitions and disposals of
intangible assets. In 2021 the net outflow consisted of GBP13.0m
for the purchase of Hunters Property plc, GBP0.1m for the purchase
of The Mortgage Genie Limited and its sister company, GBP0.3m on
the disposal of Auxilium and GBP0.3m for the purchase of
assets.
The Group borrowed GBP12.5m 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 of GBP5.0m
and a term loan of GBP7.5m repayable over 4 years. The term loan
was fully repaid in 2022 with an outflow of GBP6.1m. In 2021, the
Group made repayments against the term loan of GBP1.4m and repaid
loans that Hunters had with HSBC of GBP3.0m.
Dividend payments totalling GBP3.8m were paid in the year (2021:
GBP2.9m).
Liquidity
The Group had cash balances of GBP6.7m on 31 December 2022
(2021: GBP8.4m) and after deducting the revolving credit facility
of GBP5.0m mentioned above, net cash was GBP1.7m (2021: net debt
GBP2.7m).
Financial position
The consolidated statement of financial position remains strong
with total assets of GBP57.8m (2021: GBP60.4m), the decrease being
mainly due amortisation and cash used to pay off the term loan.
Liabilities reduced from GBP27.0m to GBP20.6m mainly as a result
of the repayment of the term loan.
The Group finished the year with the total equity attributable
to owners of GBP37.2m, an increase of GBP3.8m or 11% over the prior
year. It achieved a ROCE of 20% and an ROCI of 27%.
The Group again generated strong cash inflows in 2022 due to
growth in lettings revenues and its operating margins. It returned
to a net cash position by year end after its largest acquisition to
date in 2021 leaving it well positioned to continue to deliver on
its strategic initiatives.
David Raggett
CFO
17 April 2023
Consolidated statement of comprehensive income for the year
ended 31 December 2022
2022 2021
Notes GBP'000 GBP'000
------------------------------------------ ------- ---------- ----------
Revenue 7 27,158 24,042
------------------------------------------ ------- ---------- ----------
Cost of sales (5,575) (3,697)
------------------------------------------ ------- ---------- ----------
Gross profit 21,583 20,345
------------------------------------------ ------- ---------- ----------
Administrative expenses 8 (11,876) (12,719)
------------------------------------------ ------- ---------- ----------
Share-based payments charge 9, 33 (411) (970)
------------------------------------------ ------- ---------- ----------
Operating profit 11 9,296 6,656
------------------------------------------ ------- ---------- ----------
Finance income 12 39 4
------------------------------------------ ------- ---------- ----------
Finance costs 12 (470) (320)
------------------------------------------ ------- ---------- ----------
Other gains and losses 21 (32) 83
------------------------------------------ ------- ---------- ----------
Profit before income tax expense 8,833 6,423
------------------------------------------ ------- ---------- ----------
Income tax expense 13 (1,588) (2,745)
------------------------------------------ ------- ---------- ----------
Profit for the year from continuing
operations 7,245 3,678
------------------------------------------ ------- ---------- ----------
Discontinued operations 14 - (169)
------------------------------------------ ------- ---------- ----------
Profit and total comprehensive income
for the year 7,245 3,509
------------------------------------------ ------- ---------- ----------
Profit and total comprehensive income
for the year attributable to:
------------------------------------------ ------- ---------- ----------
Owners of the parent 7,229 3,469
------------------------------------------ ------- ---------- ----------
Non-controlling interest 16 40
------------------------------------------ ------- ---------- ----------
7,245 3,509
------------------------------------------ ------- ---------- ----------
Earnings per share attributable to
owners of parent 15 22.6p 11.3p
------------------------------------------ ------- ---------- ----------
Diluted Earnings per share attributable
to owners of parent 15 22.5p 11.3p
------------------------------------------ ------- ---------- ----------
Consolidated statement of financial position
31 December 2022
2022 2021
Notes GBP'000 GBP'000
---------------------------------------- ------- ---------- ----------
Assets
---------------------------------------- ------- ---------- ----------
Non-current assets
---------------------------------------- ------- ---------- ----------
Intangible assets 17 44,958 46,498
---------------------------------------- ------- ---------- ----------
Property, plant and equipment 18 162 217
---------------------------------------- ------- ---------- ----------
Right-of-use assets 19 1,613 1,568
---------------------------------------- ------- ---------- ----------
Prepaid assisted acquisitions support 20 297 424
---------------------------------------- ------- ---------- ----------
Investments 21 137 169
---------------------------------------- ------- ---------- ----------
Investment properties 22 - 256
---------------------------------------- ------- ---------- ----------
Other receivables 23 240 -
---------------------------------------- ------- ---------- ----------
47,407 49,132
---------------------------------------- ------- ---------- ----------
Current assets
---------------------------------------- ------- ---------- ----------
Trade and other receivables 23 3,718 2,820
---------------------------------------- ------- ---------- ----------
Cash and cash equivalents 6,684 8,413
---------------------------------------- ------- ---------- ----------
10,402 11,233
---------------------------------------- ------- ---------- ----------
Total assets 57,809 60,365
---------------------------------------- ------- ---------- ----------
Equity
---------------------------------------- ------- ---------- ----------
Shareholders' equity
---------------------------------------- ------- ---------- ----------
Called up share capital 24 320 320
---------------------------------------- ------- ---------- ----------
Share premium 25 4,129 4,129
---------------------------------------- ------- ---------- ----------
Own share reserve 27 (348) (348)
---------------------------------------- ------- ---------- ----------
Merger reserve 26 14,345 14,345
---------------------------------------- ------- ---------- ----------
Other reserves 27 1,316 905
---------------------------------------- ------- ---------- ----------
Retained earnings 17,399 13,999
---------------------------------------- ------- ---------- ----------
37,161 33,350
---------------------------------------- ------- ---------- ----------
Non-controlling interest 22 6
---------------------------------------- ------- ---------- ----------
Total equity attributable to owners 37,183 33,356
---------------------------------------- ------- ---------- ----------
Liabilities
---------------------------------------- ------- ---------- ----------
Non-current liabilities
---------------------------------------- ------- ---------- ----------
Borrowings 28 5,000 9,219
---------------------------------------- ------- ---------- ----------
Lease liabilities 19 1,856 2,275
---------------------------------------- ------- ---------- ----------
Deferred tax 30 5,168 5,570
---------------------------------------- ------- ---------- ----------
Provisions 31 212 212
---------------------------------------- ------- ---------- ----------
12,236 17,276
---------------------------------------- ------- ---------- ----------
Current liabilities
---------------------------------------- ------- ---------- ----------
Borrowings 28 - 1,875
---------------------------------------- ------- ---------- ----------
Trade and other payables 29 6,724 6,280
---------------------------------------- ------- ---------- ----------
Lease liabilities 19 506 465
---------------------------------------- ------- ---------- ----------
Tax payable 1,160 1,113
---------------------------------------- ------- ---------- ----------
8,390 9,733
---------------------------------------- ------- ---------- ----------
Total liabilities 20,626 27,009
---------------------------------------- ------- ---------- ----------
Total equity and liabilities 57,809 60,365
---------------------------------------- ------- ---------- ----------
The financial statements were approved and authorised for issue
by the Board of Directors on 17 April 2023 and were signed on its
behalf by:
David Raggett
Chief Financial Officer
Company statement of financial position
31 December 2022 (Company No: 08721920)
2022 2021
Notes GBP'000 GBP'000
------------------------------- ------- ---------- ----------
Assets
------------------------------- ------- ---------- ----------
Non-current assets
------------------------------- ------- ---------- ----------
Investments 21 60,773 60,743
------------------------------- ------- ---------- ----------
Deferred tax asset 30 412 377
------------------------------- ------- ---------- ----------
61,185 61,120
------------------------------- ------- ---------- ----------
Current assets
------------------------------- ------- ---------- ----------
Trade and other receivables 23 1,065 811
------------------------------- ------- ---------- ----------
Cash and cash equivalents 1,539 4,635
------------------------------- ------- ---------- ----------
2,604 5,446
------------------------------- ------- ---------- ----------
Total assets 63,789 66,566
------------------------------- ------- ---------- ----------
Equity
------------------------------- ------- ---------- ----------
Shareholders' equity
------------------------------- ------- ---------- ----------
Called up share capital 24 320 320
------------------------------- ------- ---------- ----------
Share premium 25 4,129 4,129
------------------------------- ------- ---------- ----------
Own share reserve 27 (348) (348)
------------------------------- ------- ---------- ----------
Merger reserve 26 32,335 32,335
------------------------------- ------- ---------- ----------
Other reserves 27 1,316 905
------------------------------- ------- ---------- ----------
Retained earnings 19,276 16,668
------------------------------- ------- ---------- ----------
Total equity 57,028 54,009
------------------------------- ------- ---------- ----------
Liabilities
------------------------------- ------- ---------- ----------
Non-current liabilities
------------------------------- ------- ---------- ----------
Borrowings 28 5,000 9,219
------------------------------- ------- ---------- ----------
5,000 9,219
------------------------------- ------- ---------- ----------
Current liabilities
------------------------------- ------- ---------- ----------
Borrowings 28 - 1,875
------------------------------- ------- ---------- ----------
Trade and other payables 29 1,761 1,463
------------------------------- ------- ---------- ----------
1,761 3,338
------------------------------- ------- ---------- ----------
Total liabilities 6,761 12,557
------------------------------- ------- ---------- ----------
Total equity and liabilities 63,789 66,566
------------------------------- ------- ---------- ----------
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 GBP6.4m (2021: GBP5.7m).
The financial statements were approved and authorised for issue
by the Board of Directors on 17 April 2023 and were signed on its
behalf by:
David Raggett
Chief Financial Officer
Consolidated statement of changes in equity
for the year ended 31 December 2022
Attributable to owners
---------------- ------------------------------------------------------------------------------------------------------------
Called
up Own
share Retained Share share Merger Other Total Non-controlling Total
capital earnings premium reserve reserve reserves equity interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- --------- ---------- --------- --------- --------- ---------- --------- ----------------- ----------
Balance at 1
January
2021 258 12,690 4,040 - 2,797 778 20,563 9 20,572
---------------- --------- ---------- --------- --------- --------- ---------- --------- ----------------- ----------
Profit and
total
comprehensive
income - 3,469 - - - - 3,469 40 3,509
---------------- --------- ---------- --------- --------- --------- ---------- --------- ----------------- ----------
Disposal of
subsidiary - - - - - - - (43) (43)
---------------- --------- ---------- --------- --------- --------- ---------- --------- ----------------- ----------
Dividends - (2,922) - - - - (2,922) - (2,922)
---------------- --------- ---------- --------- --------- --------- ---------- --------- ----------------- ----------
Shares issued
-
acquisition
consideration 55 - - - 11,548 - 11,603 - 11,603
---------------- --------- ---------- --------- --------- --------- ---------- --------- ----------------- ----------
Shares issued
-
share option
exercises 7 762 89 - - (762) 96 - 96
---------------- --------- ---------- --------- --------- --------- ---------- --------- ----------------- ----------
Purchase of
shares
by Employee
Benefit
Trust - - - (348) - - (348) - (348)
---------------- --------- ---------- --------- --------- --------- ---------- --------- ----------------- ----------
Release of
deferred
tax on share
based
payments - - - - - (81) (81) - (81)
---------------- --------- ---------- --------- --------- --------- ---------- --------- ----------------- ----------
Share-based
payments
charge - - - - - 970 970 - 970
---------------- --------- ---------- --------- --------- --------- ---------- --------- ----------------- ----------
Total
transactions
with owners 62 (2,160) 89 (348) 11,548 127 9,318 - 9,318
---------------- --------- ---------- --------- --------- --------- ---------- --------- ----------------- ----------
Balance at 31
December
2021 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
---------------- --------- ---------- --------- --------- --------- ---------- --------- ----------------- ----------
Company statement of changes in equity
for the year ended 31 December 2022
Called
up share Retained Share Own share Merger Other Total
capital earnings premium reserve reserve reserves equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ----------- ----------- ---------- ----------- ---------- ----------- ----------
Balance as at 1 January 2021 258 13,123 4,040 - 20,787 778 38,986
------------------------------ ----------- ----------- ---------- ----------- ---------- ----------- ----------
Profit and total
comprehensive
income - 5,705 - - - - 5,705
------------------------------ ----------- ----------- ---------- ----------- ---------- ----------- ----------
Dividends - (2,922) - - - - (2,922)
------------------------------ ----------- ----------- ---------- ----------- ---------- ----------- ----------
Shares issued - acquisition
consideration 55 - - - 11,548 - 11,603
------------------------------ ----------- ----------- ---------- ----------- ---------- ----------- ----------
Shares issued - share option
exercises 7 762 89 - - (762) 96
------------------------------ ----------- ----------- ---------- ----------- ---------- ----------- ----------
Purchase of shares by
Employee
Benefit Trust - - - (348) - - (348)
------------------------------ ----------- ----------- ---------- ----------- ---------- ----------- ----------
Release of deferred tax on
share based payments - - - - - (81) (81)
------------------------------ ----------- ----------- ---------- ----------- ---------- ----------- ----------
Share-based payments charge - - - - - 970 970
------------------------------ ----------- ----------- ---------- ----------- ---------- ----------- ----------
Total transactions with
owners 62 (2,160) 89 (348) 11,548 127 9,318
------------------------------ ----------- ----------- ---------- ----------- ---------- ----------- ----------
Balance as at 31 December
2021 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 as at 31 December
2022 320 19,276 4,129 (348) 32,335 1,316 57,028
------------------------------ ----------- ----------- ---------- ----------- ---------- ----------- ----------
Consolidated statement of cash flows
for the year ended 31 December 2022
2022 2021
Notes GBP'000 GBP'000
------------------------------------------- -------- ---------- ----------
Cash flows from operating activities
------------------------------------------- -------- ---------- ----------
Cash generated from operations A 11,295 10,856
------------------------------------------- -------- ---------- ----------
Interest paid (359) (232)
----------------------------------------------------- ---------- ----------
Tax paid (1,962) (1,679)
----------------------------------------------------- ---------- ----------
Net cash from operating activities 8,974 8,945
----------------------------------------------------- ---------- ----------
Cash flows from investing activities
------------------------------------------- -------- ---------- ----------
Acquisition of subsidiary net of cash
acquired - Hunters B - (13,041)
------------------------------------------- -------- ---------- ----------
Acquisition of subsidiary net of cash
acquired - The Mortgage Genie C - (103)
------------------------------------------- -------- ---------- ----------
Disposal of subsidiary net of cash
disposed of - Auxilium D - (323)
------------------------------------------- -------- ---------- ----------
Purchase of intangible assets (387) (116)
----------------------------------------------------- ---------- ----------
Disposal of intangible assets - FDGs
and rebrands 143 -
------------------------------------------- -------- ---------- ----------
Disposal of intangible assets - Customer
lists 150 -
------------------------------------------- -------- ---------- ----------
Purchase of tangible assets (38) (87)
----------------------------------------------------- ---------- ----------
Assisted acquisitions support (102) (57)
----------------------------------------------------- ---------- ----------
Interest received 39 4
----------------------------------------------------- ---------- ----------
Net cash generated from / (used in)
investing activities (195) (13,723)
----------------------------------------------------- ---------- ----------
Cash flows from financing activities
------------------------------------------- -------- ---------- ----------
Issue of ordinary shares - 96
----------------------------------------------------- ---------- ----------
Equity dividends paid (3,829) (2,922)
----------------------------------------------------- ---------- ----------
Purchase of shares by Employee Benefit
Trust - (348)
----------------------------------------------------- ---------- ----------
Bank loan drawn - 12,500
----------------------------------------------------- ---------- ----------
Bank loan repaid (6,094) (4,419)
----------------------------------------------------- ---------- ----------
Principal paid on lease liabilities (473) (399)
----------------------------------------------------- ---------- ----------
Interest paid on lease liabilities (112) (88)
----------------------------------------------------- ---------- ----------
Net cash (used in) / generated from
financing activities (10,508) 4,420
----------------------------------------------------- ---------- ----------
(Decrease) / Increase in cash and cash
equivalents (1,729) (358)
----------------------------------------------------- ---------- ----------
Cash and cash equivalents at beginning
of year 8,413 8,771
----------------------------------------------------- ---------- ----------
Cash and cash equivalents at end of
year 6,684 8,413
----------------------------------------------------- ---------- ----------
Notes to the consolidated statement of cash flows
for the year ended 31 December 2022
A. Reconciliation of profit before income tax to cash generated
from operations
2022 2021
GBP'000 GBP'000
----------------------------------------------------- ---------- ----------
Cash flows from operating activities
----------------------------------------------------- ---------- ----------
Profit before income tax 8,833 6,423
----------------------------------------------------- ---------- ----------
Profit before income tax - discontinued - 152
----------------------------------------------------- ---------- ----------
Depreciation of property, plant and equipment 91 79
----------------------------------------------------- ---------- ----------
Amortisation of intangibles 1,477 1,249
----------------------------------------------------- ---------- ----------
Amortisation of prepaid assisted acquisitions
support 229 233
----------------------------------------------------- ---------- ----------
Amortisation of right-of-use assets 305 317
----------------------------------------------------- ---------- ----------
Profit on disposal of FDGs and rebrands (195) -
----------------------------------------------------- ---------- ----------
Share-based payments charge 411 970
----------------------------------------------------- ---------- ----------
Gain on revaluation of listed investment 32 (83)
----------------------------------------------------- ---------- ----------
Finance costs 471 320
----------------------------------------------------- ---------- ----------
Finance income (39) (4)
----------------------------------------------------- ---------- ----------
Operating cash flow before changes in working
capital 11,615 9,656
----------------------------------------------------- ---------- ----------
(Increase)/decrease in trade and other receivables (837) 247
----------------------------------------------------- ---------- ----------
Increase in trade and other payables 517 953
----------------------------------------------------- ---------- ----------
Cash generated from operations 11,295 10,856
----------------------------------------------------- ---------- ----------
B. Acquisition of Subsidiary undertakings net of cash
acquired
On 19 March 2021 the Group obtained control of Hunters Property
plc and it's subsidiaries.
2022 2021
GBP'000 GBP'000
------------------------------------------------ ----------- ----------
Consideration - cash element - 14,531
------------------------------------------------ ----------- ----------
Less: Cash acquired - (1,490)
------------------------------------------------ ----------- ----------
Acquisition of subsidiary undertakings net of
cash acquired - 13,041
------------------------------------------------ ----------- ----------
C. Acquisition of Subsidiary undertakings net of cash
acquired
On 6 September 2021 the Group obtained control of The Mortgage
Genie Limited and The Genie Group UK Ltd.
2022 2021
GBP'000 GBP'000
------------------------------------------------ ----------- ----------
Consideration - cash element - 400
------------------------------------------------ ----------- ----------
Less: Cash acquired - (297)
------------------------------------------------ ----------- ----------
Acquisition of subsidiary undertakings net of
cash acquired - 103
------------------------------------------------ ----------- ----------
D. Disposal of Subsidiary undertakings net of cash disposed
of
On 22 July 2021 the Group disposed of its controlling interest
in Aux Group Limited and Auxilium Partnership Limited
2022 2021
GBP'000 GBP'000
-------------------------------------------------- ----------- ----------
Consideration - cash element - 20
-------------------------------------------------- ----------- ----------
Less: Cash disposed of - (343)
-------------------------------------------------- ----------- ----------
Disposal of subsidiary undertakings net of cash
disposed of - (323)
-------------------------------------------------- ----------- ----------
Company statement of cash flows
for the year ended 31 December 2022
2022 2021
Notes GBP'000 GBP'000
------------------------------------------- -------- ---------- ----------
Cash flows from operating activities
------------------------------------------- -------- ---------- ----------
Cash generated from operations E (764) (1,005)
------------------------------------------- -------- ---------- ----------
Interest paid (359) (220)
----------------------------------------------------- ---------- ----------
Net cash used in operating activities (1,123) (1,225)
----------------------------------------------------- ---------- ----------
Cash flows from investing activities
------------------------------------------- -------- ---------- ----------
Acquisition of subsidiary - Hunters - (14,531)
----------------------------------------------------- ---------- ----------
Acquisition of subsidiary - The Mortgage
Genie - (400)
----------------------------------------------------- ---------- ----------
Disposal of subsidiary - Auxilium - 20
----------------------------------------------------- ---------- ----------
Equity dividends received 7,950 8,250
----------------------------------------------------- ---------- ----------
Net cash generated from / (used in)
investing activities 7,950 (6,661)
----------------------------------------------------- ---------- ----------
Cash flows from financing activities
------------------------------------------- -------- ---------- ----------
Issue of ordinary shares - 96
----------------------------------------------------- ---------- ----------
Equity dividends paid (3,829) (2,922)
----------------------------------------------------- ---------- ----------
Purchase of own shares by Employee
Benefit Trust - (348)
----------------------------------------------------- ---------- ----------
Bank loan drawn - 12,500
----------------------------------------------------- ---------- ----------
Bank loan repaid (6,094) (1,406)
----------------------------------------------------- ---------- ----------
Net cash (used in) / generated from
financing activities (9,923) 7,920
----------------------------------------------------- ---------- ----------
Decrease / (increase) in cash and cash
equivalents (3,096) 34
----------------------------------------------------- ---------- ----------
Cash and cash equivalents at beginning
of year 4,635 4,601
----------------------------------------------------- ---------- ----------
Cash and cash equivalents at end of
year 1,539 4,635
----------------------------------------------------- ---------- ----------
E. Reconciliation of profit before income tax to cash generated
from operations
2022 2021
GBP'000 GBP'000
----------------------------------------------------- ---------- ----------
Cash flows from operating activities
----------------------------------------------------- ---------- ----------
Profit before income tax 6,120 4,846
----------------------------------------------------- ---------- ----------
Share-based payments charge 366 773
----------------------------------------------------- ---------- ----------
Gain on revaluation of listed investment 15 (68)
----------------------------------------------------- ---------- ----------
Loss on disposal of subsidiary - 180
----------------------------------------------------- ---------- ----------
Finance costs 358 220
----------------------------------------------------- ---------- ----------
Equity dividend received (7,950) (8,250)
----------------------------------------------------- ---------- ----------
Operating cash flow before changes in working
capital (1,091) (2,299)
----------------------------------------------------- ---------- ----------
Decrease/(increase) in trade and other receivables 28 (8)
----------------------------------------------------- ---------- ----------
Increase in trade and other payables 299 1,302
----------------------------------------------------- ---------- ----------
Cash used in operations (764) (1,005)
----------------------------------------------------- ---------- ----------
Notes to the consolidated and company financial statements for
the year ended 31 December 2022
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, 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 include a forecast of future bank covenant
compliance. 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 2022
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 2022, which would have 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
2022, which would have 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 2022.
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 license. Revenue is recognised over the period of the
license.
Operating profit
Profit from operations is stated before finance income, finance
costs and tax expense.
Business combinations
On the acquisition of a business, fair values are attributed to
the identifiable assets and liabilities and contingent liabilities
unless the fair value cannot be measured reliably in which case the
value is subsumed into goodwill. Where the fair values of acquired
contingent liabilities cannot be measured reliably, the assumed
contingent liability is not recognised but is disclosed in the same
manner as other contingent liabilities.
Goodwill is the difference between the fair value of the
consideration and the fair value of identifiable assets acquired.
Goodwill arising on acquisitions is capitalised and subject to an
impairment review, both annually and when there is an indication
that the carrying value may not be recoverable.
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 a remaining
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 a remaining 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 an
indefinite useful lives, management are 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
are 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 profit
or loss. 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. 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:
15% - 25% reducing balance or 10%
Fixtures, fittings and office equipment - 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.
Investment properties
Investment property comprises a property held under a lease by
Hunters which is subleased to an independent third party. The
investment property is held at historic cost less accumulated
depreciation, and is being depreciated over the term of the lease
as set out in the Property, plant and equipment note above. It is
recognised on this basis because it is a short term lease and as
such it is not possible to reliably determine a fair value.
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 amends 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 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 (eg. 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 are 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 recognises 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.
Valuation of separable intangible assets on acquisition
When valuing the intangibles acquired in a business combination,
management estimate the expected future cash flows from the asset
and choose a suitable discount rate in order to calculate the
present value of those cash flows. Separable intangibles valued on
acquisitions made in year were GBPnil (2021: GBP17.4m) as detailed
further in note 17.
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 17.
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 but not vested bar the option granted to Gareth
Samples in March 2021 as a result of deferring bonus, have a
non-market based performance condition, earnings per share, and a
total shareholder return performance condition.
In order to estimate the likely achievement of the performance
conditions. management have used the actual results for FY22, the
budget for FY23 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 performance
will generate vesting of 50% of the maximum number of shares
available under those options. The charge is GBP0.15m. If the
performance assumptions generated vesting of 100%, the cumulative
charge would increase by GBP0.8m and if the performance assumptions
generated vesting of 0%, the cumulative charge would decrease by
GBP0.8m.
The share-based payment charge in relation to the
performance-based options granted in 2022 assumes that performance
will generate vesting of 27% of the maximum number of shares
available under those options. The charge is GBP0.04m. If the
performance assumptions generated vesting of 100% the cumulative
charge would increase by GBP0.1m and if the performance assumptions
generated vesting of 0% the cumulative charge would decrease by
GBP0.04m.
6. Segmental reporting
The directors consider there to be two operating segments in
2022 and 2021 being Property Franchising and Financial
Services.
For the year ended 31 December 2022:
Property Financial
Franchising Services Total
Continuing GBP'000 GBP'000 GBP'000
---------------------------- -------------- ------------ -----------
Revenue 25,429 1,729 27,158
---------------------------- -------------- ------------ -----------
Segment profit before tax 8,379 454 8,833
---------------------------- -------------- ------------ -----------
Property Financial
Franchising Services Total
Discontinued GBP'000 GBP'000 GBP'000
---------------------------- -------------- ------------ -----------
Revenue - - -
---------------------------- -------------- ------------ -----------
Segment profit before tax - - -
---------------------------- -------------- ------------ -----------
For the year ended 31 December 2021:
Property Financial
Franchising Services Total
Continuing GBP'000 GBP'000 GBP'000
---------------------------- -------------- ------------ -----------
Revenue 23,595 447 24,042
---------------------------- -------------- ------------ -----------
Segment profit before tax 6,363 60 6,423
---------------------------- -------------- ------------ -----------
Property Financial
Franchising Services Total
Discontinued GBP'000 GBP'000 GBP'000
---------------------------- --------------- ------------ -----------
Revenue - 267 267
---------------------------- --------------- ------------ -----------
Segment profit before tax - 153 153
---------------------------- --------------- ------------ -----------
There was no inter-segment revenue in any period. See note 14
for details of discontinued operations.
7. Revenue
2022 2021
GBP'000 GBP'000
------------------------------------------ ---------- ----------
Property Franchising segment:
------------------------------------------ ---------- ----------
Management Service Fees 15,882 14,706
------------------------------------------ ---------- ----------
Owned offices - lettings and sales fees 5,157 4,708
------------------------------------------ ---------- ----------
Franchise sales 318 589
------------------------------------------ ---------- ----------
Franchisee support and similar services 4,072 3,592
------------------------------------------ ---------- ----------
25,429 23,595
------------------------------------------ ---------- ----------
Financial Services segment:
------------------------------------------ ---------- ----------
Financial Services commissions 1,729 447
------------------------------------------ ---------- ----------
27,158 24,042
------------------------------------------ ---------- ----------
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 23 for details of accrued income and note 29 for
details of deferred income.
See note 20 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:
2022 2021
GBP'000 GBP'000
------------------------------ ---------- ----------
Employee costs 6,563 6,301
------------------------------ ---------- ----------
Marketing and digital costs 1,004 995
------------------------------ ---------- ----------
Property costs 408 547
------------------------------ ---------- ----------
Amortisation 1,782 1,567
------------------------------ ---------- ----------
Exceptional costs (note 10) - 853
------------------------------ ---------- ----------
Other administrative costs 2,119 2,456
------------------------------ ---------- ----------
11,876 12,719
------------------------------ ---------- ----------
9. Employees and Directors
Average numbers of employees (including Directors), employed
during the year:
Group Company
----------------- -------------- --------------
2022 2021 2022 2021
----------------- ------ ------ ------ ------
Administration 173 171 - 1
----------------- ------ ------ ------ ------
Management 12 12 2 2
----------------- ------ ------ ------ ------
185 183 2 3
----------------- ------ ------ ------ ------
Employee costs (including Directors) during the year amounted
to:
Group Company
------------------------------ ---------------------- ----------------------
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- ---------- ---------- ----------
Wages and salaries 8,302 6,785 929 731
------------------------------ ---------- ---------- ---------- ----------
Social security costs 946 1,117 126 263
------------------------------ ---------- ---------- ---------- ----------
Pension costs 193 194 45 19
------------------------------ ---------- ---------- ---------- ----------
Private medical insurance 22 19 - -
------------------------------ ---------- ---------- ---------- ----------
9,463 8,115 1,100 1,013
------------------------------ ---------- ---------- ---------- ----------
Share-based payments charge 411 970 366 773
------------------------------ ---------- ---------- ---------- ----------
Key management personnel are defined as Directors and executives
of the Group. Details of the remuneration of the key management
personnel are shown below:
2022 2021
GBP'000 GBP'000
------------------------------ ---------- ----------
Wages and salaries 2,293 2,218
------------------------------ ---------- ----------
Social security costs 314 456
------------------------------ ---------- ----------
Pension costs 63 97
------------------------------ ---------- ----------
2,670 2,771
------------------------------ ---------- ----------
Share-based payments charge 372 902
------------------------------ ---------- ----------
Details of the Directors' emoluments are disclosed in the
Directors' remuneration report on pages 38 to 40. The share-based
payments charge for the current year has been charged to the
Statement of Comprehensive Income, of this GBP0.36m (2021:
GBP0.77m) relates to Directors.
10. Exceptional costs
Exceptional costs of GBP0.85m are included in administrative
expenses for the year ended 31 December 2021 which comprised costs
associated with the acquisition of Hunters Property plc. There were
no exceptional costs in the year ended 31 December 2022.
11. Breakdown of expenses by nature
2022 2021
GBP'000 GBP'000
------------------------------------------------------- ---------- ----------
The operating profit is stated after charging:
------------------------------------------------------- ---------- ----------
Depreciation 91 79
------------------------------------------------------- ---------- ----------
Amortisation - intangibles 1,477 1,249
------------------------------------------------------- ---------- ----------
Amortisation - prepaid assisted acquisitions support 229 233
------------------------------------------------------- ---------- ----------
Amortisation - leases 305 317
------------------------------------------------------- ---------- ----------
Share-based payments charge 411 970
------------------------------------------------------- ---------- ----------
Auditor's remuneration (see below) 127 113
------------------------------------------------------- ---------- ----------
Staff costs (note 9) 8,791 8,115
------------------------------------------------------- ---------- ----------
Exceptional costs (note 10) - 853
------------------------------------------------------- ---------- ----------
Audit services
------------------------------------------------------- ---------- ----------
- Audit of the Company and consolidated accounts 127 113
------------------------------------------------------- ---------- ----------
127 113
------------------------------------------------------- ---------- ----------
12. Finance income and costs
2022 2021
GBP'000 GBP'000
----------------------- ---------- ----------
'Finance income:
----------------------- ---------- ----------
Bank interest 37 2
----------------------- ---------- ----------
Other similar income 2 2
----------------------- ---------- ----------
39 4
----------------------- ---------- ----------
2022 2021
GBP'000 GBP'000
---------------------------------------- ---------- ----------
Finance costs:
---------------------------------------- ---------- ----------
Bank interest 358 232
---------------------------------------- ---------- ----------
Interest expense on lease liabilities 112 88
---------------------------------------- ---------- ----------
470 320
---------------------------------------- ---------- ----------
13. Taxation
2022 2021
GBP'000 GBP'000
------------------------------------------------- ---------- ----------
Current tax 1,930 1,680
------------------------------------------------- ---------- ----------
Adjustments in respect of previous periods 60 29
------------------------------------------------- ---------- ----------
Current tax total 1,990 1,709
------------------------------------------------- ---------- ----------
Deferred tax on acquired business combinations (366) 1,245
------------------------------------------------- ---------- ----------
Deferred tax on share-based payments (36) (209)
------------------------------------------------- ---------- ----------
Deferred tax total (402) 1,036
------------------------------------------------- ---------- ----------
Total tax charge in statement of comprehensive
income 1,588 2,745
------------------------------------------------- ---------- ----------
The tax assessed for the period is lower (2021: higher) than the
standard rate of corporation tax in the UK. The difference is
explained below.
2022 2021
GBP GBP
------------------------------------------------------- ------- -------
Profit on ordinary activities before tax 8,833 6,423
------------------------------------------------------- ------- -------
Profit on ordinary activities multiplied by the
effective standard rate of corporation tax
in the UK of 19% 1,678 1,220
------------------------------------------------------- ------- -------
Effects of:
------------------------------------------------------- ------- -------
Expenses not deductible for tax purposes 253 448
------------------------------------------------------- ------- -------
Depreciation in excess of capital allowances (1) 12
------------------------------------------------------- ------- -------
Effect of change in deferred tax rate - 1,540
------------------------------------------------------- ------- -------
Deferred tax provision (402) (504)
------------------------------------------------------- ------- -------
Adjustments in respect of previous periods 60 29
------------------------------------------------------- ------- -------
Total tax charge in respect of continuing activities 1,588 2,745
------------------------------------------------------- ------- -------
Factors that may affect future tax charges
Increases in the corporation tax rate in the UK from 19% to 25%
(19% effective from 1 April 2017, and 25% effective from 1 April
2023) have been substantively enacted. This will impact the Group's
future tax charge accordingly. The value of the deferred tax asset
at the statement of financial position date in 2022 and 2021 have
been calculated using the applicable rate when the asset is
expected to be realised.
14. Discontinued operations
On 22 July 2021 the Group sold it's majority shareholdings in
Aux Group Limited and Auxilium Partnership Limited. Auxilium was a
financial services business operating as life assurance buyers
club. The Group took the decision to pursue a different approach to
delivering its financial services strategy so no longer operates a
life assurance buyers club.
The profit of Aux Group Limited and Auxilium Partnership Limited
for the period up to 22 July 2021, net of tax, has been included in
discontinued operations and the profit net of tax for the
comparative period has been moved to discontinued operations. The
difference between the proceeds received on sale, GBP0.02m and the
assets to be disposed of, GBP0.29m, resulted in an impairment loss
of GBP0.27m, which has been included in discontinued operations.
The profit for the period to 22 July 2021, net of tax, was
GBP0.1m.
15. 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.
2022 2021
GBP'000 GBP'000
------------------------------------------------------ ------------ ------------
Profit for the financial year attributable to
owners of the parent 7,229 3,469
------------------------------------------------------ ------------ ------------
Amortisation on acquired intangibles 1,443 1,214
------------------------------------------------------ ------------ ------------
Share-based payments charge 411 970
------------------------------------------------------ ------------ ------------
Exceptional costs (note 10) - 853
------------------------------------------------------ ------------ ------------
Deferred tax rate change from 19% to 25% - 1,540
------------------------------------------------------ ------------ ------------
Discontinued operations - loss on disposal - 293
------------------------------------------------------ ------------ ------------
Loss/(gain) on revaluation of listed investment 32 (83)
------------------------------------------------------ ------------ ------------
Adjusted profit for the financial year 9,115 8,256
------------------------------------------------------ ------------ ------------
Weighted average number of shares
------------------------------------------------------ ------------ ------------
Number used in basic earnings per share 32,041,966 30,622,102
------------------------------------------------------ ------------ ------------
Dilutive effect of share options on ordinary shares 99,626 99,590
------------------------------------------------------ ------------ ------------
Number used in diluted earnings per share 32,141,592 30,721,692
------------------------------------------------------ ------------ ------------
Basic earnings per share 22.6p 11.3p
------------------------------------------------------ ------------ ------------
Diluted earnings per share 22.5p 11.3p
------------------------------------------------------ ------------ ------------
Adjusted basic earnings per share 28.4p 27.0p
------------------------------------------------------ ------------ ------------
Adjusted diluted earnings per share 28.4p 26.9p
------------------------------------------------------ ------------ ------------
There were options over 2,213,000 ordinary shares outstanding at
31 December 2022; 100,000 do not have performance conditions
attached to them. The average share price during the year ended 31
December 2022 was above exercise price of the 100,000 options
without performance conditions, for this reason in 2022 there is a
dilutive effect of share options on the earnings per share
calculation.
There were options over 1,825,500 ordinary shares outstanding at
31 December 2021; 100,000 do not have performance conditions
attached to them. The average share price during the year ended 31
December 2021 was above exercise price of the 100,000 options
without performance conditions, for this reason in 2021 there was a
dilutive effect of share options on the earnings per share
calculation.
The charge relating to share-based payments that have a dilutive
effect is immaterial and therefore the earnings used in the diluted
earnings per ordinary share calculation are the earning per
ordinary share calculation before dilution.
16. Dividends
2022 2021
GBP'000 GBP'000
-------------------------------------------------- ---------- ----------
Final dividend for 2021
-------------------------------------------------- ---------- ----------
7.8p per share paid 27 May 2022 (2021: 6.6p per
share paid 23 February 2021) 2,489 1,704
-------------------------------------------------- ---------- ----------
Interim dividend for 2022
-------------------------------------------------- ---------- ----------
4.2p per share paid 7 October 2022 (2021: 3.8p
per share paid 11 October 2021) 1,340 1,218
-------------------------------------------------- ---------- ----------
Total dividend paid 3,829 2,922
-------------------------------------------------- ---------- ----------
The Directors propose a final dividend for 2022 of 8.8p per
share totalling GBP2.82m, which they expect will be paid on 9 June
2023. As this is subject to approval by the shareholders no
provision has been made for this in these financial statements.
17. Intangible assets
Master
Franchise Customer
Agreement Brands Technology lists Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
Cost
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
Brought forward at 1 January
2021 7,803 1,972 338 225 7,411 17,749
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
Acquisitions (note 35) 10,789 3,060 14 3,556 16,017 33,436
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
Additions - - 51 65 - 116
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
Disposals - - - - (185) (185)
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
Carried forward 31 December
2021 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
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
Amortisation & Impairment
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
Brought forward at 1 January
2021 2,565 289 314 201 - 3,369
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
Charge for year 798 181 30 240 - 1,249
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
Carried forward 31 December
2021 3,363 470 344 441 - 4,618
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
Charge for the year 927 220 31 299 - 1,477
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
Amortisation on disposals - - - (77) - (77)
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
Carried forward 31 December
2022 4,290 690 375 663 - 6,018
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
Net book value
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
At 31 December 2022 14,302 4,342 415 2,656 23,243 44,958
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
At 31 December 2021 15,229 4,562 59 3,405 23,243 46,498
------------------------------- ------------ ---------- ------------ ---------- ---------- ----------
The carrying amount of goodwill relates to 6 (2021: 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
& 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 2022 and projections through to 31 December
2027. 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 2022 was
16 years 10 months.
The brand names under which XFL trades of C J Hole, Parkers and
Ellis & Co have been in existence for between 73 years and 171
years. Management see 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 assess whether the carrying value
of these brands have 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 2022 and projections through to
31 December 2027. Thereafter projected revenue growth was assumed
to be 2.2% per annum.
The revenue growth rates used in the valuation range from 26% in
FY23 to 4% in FY27. The high rate in FY23 is as result of increased
activity from the significant number of recruits that joined in
FY21 and FY22.
The cash flows arising were discounted by the weighted average
cost of capital being 17.33% 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 2022 was 8 years 8 months.
The remaining useful life of the brand name was also reviewed.
It continues to attract and recruit the same 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 2022 was 14 years and 8 months.
The carrying value of EweMove the identified cash generating
unit, was GBP7.7m at 31 December 2022 whereas the recoverable
amount was assessed to be GBP13.1m at the same date. Headroom of
GBP5.4m therefore existed at the year end.
The following table reflects the level of movements required in
revenue or costs which could result in a potential impairment per
the value in use calculation of goodwill. A further percentage
(fall)/increase, of the magnitude indicated in the table below, in
any one of the key assumptions set out above would result in a
removal of the headroom in the value in use calculation for
goodwill in 2022. Thus, if the discount rate increased by 76% to
30%, an impairment change would result against goodwill, all other
assumptions remaining unchanged.
Assumption Judgement Sensitivity
---------------------- --------------------------------------------- -------------
Discount rate As indicated above the rate used is 17.33% 76%
---------------------- --------------------------------------------- -------------
Revenue - FY23 to The range of growth rates for FY23 to
FY27 FY27 are stated above (142%)
---------------------- --------------------------------------------- -------------
Direct costs - all Assumed to be 22% of revenue in FY23 and
years then 21% of revenue for all years 77%
---------------------- --------------------------------------------- -------------
Indirect costs -
all years Assumed to be 79% of revenue in all years 41%
---------------------- --------------------------------------------- -------------
Direct and indirect As indicated above for direct and indirect
costs - all years costs 27%
---------------------- --------------------------------------------- -------------
Business combination completed in January 2020 - Auxilium
Auxilium Partnership Limited was acquired in January 2020 and
disposed of in July 2021.
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 2022 and projections through to 31 December 2027. Thereafter
projected revenue growth was assumed to be 2.0% per annum.
The revenue growth rates used in the valuation range from (5%)
in FY23 to 4% in FY26.
The cash flows arising were discounted by the weighted cost of
capital being 12.23%. This resulted in the value in use exceeding
the carrying value of the goodwill and separately identifiable
intangible assets. The enterprise's overall value exceed 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 2022 was 19 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 2022 was 18 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 2022 was 10 years 3 months.
The carrying value of Hunters the identified cash generating
unit, was GBP25.5m at 31 December 2022 whereas the recoverable
amount was assessed to be GBP29.0m at the same date. Headroom of
GBP3.5m therefore existed at the year end.
The following table reflects the level of movements required in
revenue or costs which could result in a potential impairment per
the value in use calculation of goodwill. A further percentage
(fall)/increase, of the magnitude indicated in the table below, in
any one of the key assumptions set out above would result in a
removal of the headroom in the value in use calculation for
goodwill in 2022. Thus, if the discount rate increased by 11% to
13.6%, an impairment change would result against goodwill, all
other assumptions remaining unchanged.
Assumption Judgement Sensitivity
---------------------- --------------------------------------------- -------------
Weighted average cost of capital used
Discount rate of 12.2% 11%
---------------------- --------------------------------------------- -------------
Revenue - FY22 to The range of growth rates for FY23 (5%)
FY27 to FY27 4% (52%)
---------------------- --------------------------------------------- -------------
Direct costs - all
years Assumed to be 40% of revenue 64%
---------------------- --------------------------------------------- -------------
Indirect costs -
all years Assumed to be 28% of revenue 39%
---------------------- --------------------------------------------- -------------
Direct and indirect As indicated above for direct and indirect
costs - all years costs 25%
---------------------- --------------------------------------------- -------------
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 2022 and
projections through to 31 December 2027. 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. The
Directors believe that there are no change in assumptions at the
year end that will cause the value in use to fall below the
carrying value and hence impair the goodwill.
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
-------------------------------- ---------------------- ----------------------
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'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 146 146 - -
-------------------------------- ---------- ---------- ---------- ----------
23,243 23,243 571 571
-------------------------------- ---------- ---------- ---------- ----------
Website costs included in technology
In 2017 new websites were launched for each of the 5 traditional
brands. The costs associated with these websites have been
capitalised as intangible assets as the purpose of the websites is
to generate leads and revenue for the network.
Company
No goodwill or customer lists exist in the Parent Company.
18. Property, plant and equipment
Group
Short leasehold Office Fixtures &
improvements equipment fittings Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ----------------- ------------ ------------ ----------
Cost
------------------------------ ----------------- ------------ ------------ ----------
Brought forward 1 January
2021 37 155 163 355
------------------------------ ----------------- ------------ ------------ ----------
Acquisitions - 62 99 161
------------------------------ ----------------- ------------ ------------ ----------
Additions 7 64 16 87
------------------------------ ----------------- ------------ ------------ ----------
Disposals - (14) (116) (130)
------------------------------ ----------------- ------------ ------------ ----------
Carried forward 31 December
2021 44 267 162 473
------------------------------ ----------------- ------------ ------------ ----------
Additions - 29 8 37
------------------------------ ----------------- ------------ ------------ ----------
Disposals - (1) - (1)
------------------------------ ----------------- ------------ ------------ ----------
Carried forward 31 December
2022 44 295 170 509
------------------------------ ----------------- ------------ ------------ ----------
Depreciation
------------------------------ ----------------- ------------ ------------ ----------
Brought forward 1 January
2021 33 112 142 287
------------------------------ ----------------- ------------ ------------ ----------
Charge for year 6 48 25 79
------------------------------ ----------------- ------------ ------------ ----------
Depreciation on disposals - (6) (104) (110)
------------------------------ ----------------- ------------ ------------ ----------
Carried forward 31 December
2021 39 154 63 256
------------------------------ ----------------- ------------ ------------ ----------
Charge for year 3 59 29 91
------------------------------ ----------------- ------------ ------------ ----------
Carried forward 31 December
2022 42 213 92 347
------------------------------ ----------------- ------------ ------------ ----------
Net book value
------------------------------ ----------------- ------------ ------------ ----------
At 31 December 2022 2 82 78 162
------------------------------ ----------------- ------------ ------------ ----------
At 31 December 2021 5 113 99 217
------------------------------ ----------------- ------------ ------------ ----------
19. Leases
The Group has several operating leases relating to office
premises and motor vehicles. Under IFRS16, 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 Motor
Buildings vehicles Total
GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------ ----------- ----------
At 1 January 2021 86 - 86
---------------------------------------------- ------------ ----------- ----------
Acquisitions 1,579 22 1,601
---------------------------------------------- ------------ ----------- ----------
Additions 145 53 198
---------------------------------------------- ------------ ----------- ----------
Amortisation (304) (13) (317)
---------------------------------------------- ------------ ----------- ----------
Carried forward 31 December 2021 1,506 62 1,568
---------------------------------------------- ------------ ----------- ----------
Reclassification from Investment Properties
(see note 22) 256 - 256
---------------------------------------------- ------------ ----------- ----------
Additions 94 - 94
---------------------------------------------- ------------ ----------- ----------
Amortisation (277) (28) (305)
---------------------------------------------- ------------ ----------- ----------
Carried forward 31 December 2022 1,579 34 1,613
---------------------------------------------- ------------ ----------- ----------
Lease liabilities
Land and Motor
Buildings vehicles Total
GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ----------- ----------
At 1 January 2021 86 - 86
----------------------------------- ------------ ----------- ----------
Acquisitions 2,833 22 2,855
----------------------------------- ------------ ----------- ----------
Additions 145 53 198
----------------------------------- ------------ ----------- ----------
Interest expenses 86 2 88
----------------------------------- ------------ ----------- ----------
Lease payments (457) (30) (487)
----------------------------------- ------------ ----------- ----------
Carried forward 31 December 2021 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
----------------------------------- ------------ ----------- ----------
20. Prepaid assisted acquisitions support
Group
Total
GBP'000
------------------------------------- ----------
Cost
------------------------------------- ----------
Brought forward 1 January 2021 1,109
------------------------------------- ----------
Additions 57
------------------------------------- ----------
Carried forward 31 December 2021 1,166
------------------------------------- ----------
Additions 102
------------------------------------- ----------
Carried forward 31 December 2022 1,268
------------------------------------- ----------
Amortisation
------------------------------------- ----------
Brought forward 1 January 2021 509
------------------------------------- ----------
Charge for year - to revenue 188
------------------------------------- ----------
Charge for year - to cost of sales 45
------------------------------------- ----------
Carried forward 31 December 2021 742
------------------------------------- ----------
Charge for year - to revenue 185
------------------------------------- ----------
Charge for year - to cost of sales 44
------------------------------------- ----------
Carried forward 31 December 2022 971
------------------------------------- ----------
Net book value
------------------------------------- ----------
At 31 December 2022 297
------------------------------------- ----------
At 31 December 2021 424
------------------------------------- ----------
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.
21. Investments
Shares in
listed and
unlisted companies Total
Group GBP'000 GBP'000
---------------------------------------------- --------------------- ----------
Cost
---------------------------------------------- --------------------- ----------
At 1 January 2021 - -
---------------------------------------------- --------------------- ----------
Acquisitions 61 61
---------------------------------------------- --------------------- ----------
Additions 25 25
---------------------------------------------- --------------------- ----------
Movement in fair value of listed investment 83 83
---------------------------------------------- --------------------- ----------
At 31 December 2021 169 169
---------------------------------------------- --------------------- ----------
Movement in fair value of listed investment (32) (32)
---------------------------------------------- --------------------- ----------
At 31 December 2022 137 137
---------------------------------------------- --------------------- ----------
Net book value
---------------------------------------------- --------------------- ----------
At 31 December 2022 137 137
---------------------------------------------- --------------------- ----------
At 31 December 2021 169 169
---------------------------------------------- --------------------- ----------
Shares in Shares in
Group undertakings listed company Total
Company GBP'000 GBP'000 GBP'000
---------------------------------------------- --------------------- ----------------- ----------
Cost
---------------------------------------------- --------------------- ----------------- ----------
At 1 January 2021 34,083 - 34,083
---------------------------------------------- --------------------- ----------------- ----------
Disposal of Auxilium Partnership Limited (200) - (200)
---------------------------------------------- --------------------- ----------------- ----------
Acquisition of Hunters Property plc 26,134 - 26,134
---------------------------------------------- --------------------- ----------------- ----------
Acquisition of The Mortgage Genie Limited
and The Genie Group UK Ltd 461 - 461
---------------------------------------------- --------------------- ----------------- ----------
Capital contribution to subsidiaries
- share options 197 - 197
---------------------------------------------- --------------------- ----------------- ----------
Movement in fair value of listed investment - 68 68
---------------------------------------------- --------------------- ----------------- ----------
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
---------------------------------------------- --------------------- ----------------- ----------
Net book value
---------------------------------------------- --------------------- ----------------- ----------
At 31 December 2022 60,720 53 60,773
---------------------------------------------- --------------------- ----------------- ----------
At 31 December 2021 60,675 68 60,743
---------------------------------------------- --------------------- ----------------- ----------
The Property Franchise Group PLC was incorporated on 7 October
2013. On the 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 GBP6.1m.
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 GBP8m. Of
the total consideration, GBP2.1m represented contingent
consideration, of which GBP0.5m was paid out on 30 July 2017 and
GBP0.5m was paid out on 31 December 2017. No further sums are
due.
On 7 January 2020 the Company acquired a majority share of
Auxilium Partnership Limited for a total cash consideration of
GBP0.2m. The Company disposed of this on 22 July 2021.
On 19 March 2021 the Company acquired the entire issued share
capital of Hunters Property plc for a total consideration of
GBP26.1m.
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 an initial cash
consideration of GBP0.4m. A further consideration of GBP0.06m is
due which was based on working capital at the time of
acquisition.
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 2022.
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 2022.
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 comprise a 0.2% holding of ordinary
shares in OnTheMarket plc, a company listed on the Alternative
Investment Market. The movement in fair value of listed investment
represents the difference between the market value at 31 December
2022 and 31 December 2021.
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:
% ownership
and voting Country of
Subsidiaries Company number Share class rights incorporation
---------------------------------- ---------------- ------------- ------------- ----------------
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
---------------------------------- ---------------- ------------- ------------- ----------------
* 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.
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.
22. Investment properties
Total
Group GBP'000
-------------------------------------------------------- ----------
Cost
-------------------------------------------------------- ----------
Brought forward 1 January 2021 -
-------------------------------------------------------- ----------
Acquisitions 292
-------------------------------------------------------- ----------
Carried forward 31 December 2021 292
-------------------------------------------------------- ----------
Reclassification to Right of Use Assets (see note 19) (292)
-------------------------------------------------------- ----------
Carried forward 31 December 2022 -
-------------------------------------------------------- ----------
Depreciation
-------------------------------------------------------- ----------
Brought forward 1 January 2021 -
-------------------------------------------------------- ----------
Charge for year 36
-------------------------------------------------------- ----------
Carried forward 31 December 2021 36
-------------------------------------------------------- ----------
Reclassification to Right of Use Assets (see note 19) (36)
-------------------------------------------------------- ----------
Carried forward 31 December 2022 -
-------------------------------------------------------- ----------
Net book value
-------------------------------------------------------- ----------
At 31 December 2022 -
-------------------------------------------------------- ----------
At 31 December 2021 256
-------------------------------------------------------- ----------
In the year ended 31 December 2021 Investment Properties
comprised a property held under operating lease within Hunters
Property Group Limited which is subleased to an independent third
party. The investment property was held at historic cost less
accumulated depreciation. This accounting treatment was consistent
with that used by Hunters Property Group Limited prior to its
acquisition by The Property Franchise Group plc in March 2021. In
the year ended 31 December 2022 the asset was reclassified as a
Right of Use Asset which management consider to be a more accurate
representation of the asset.
23. Trade and other receivables
Group Company
-------------------------------------- ---------------------- ----------------------
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- ---------- ---------- ---------- ----------
Trade receivables 1,856 1,193 11 -
-------------------------------------- ---------- ---------- ---------- ----------
Less: provision for impairment
of trade receivables (420) (323) - -
-------------------------------------- ---------- ---------- ---------- ----------
Trade receivables - net
of impairment provisions 1,436 870 11 -
-------------------------------------- ---------- ---------- ---------- ----------
Loans to franchisees 319 31 - -
-------------------------------------- ---------- ---------- ---------- ----------
Other receivables 60 137 - -
-------------------------------------- ---------- ---------- ---------- ----------
Amounts due from Group undertakings - - 770 21
-------------------------------------- ---------- ---------- ---------- ----------
Prepayments and accrued
income 2,143 1,782 9 47
-------------------------------------- ---------- ---------- ---------- ----------
Tax receivable - - 275 743
-------------------------------------- ---------- ---------- ---------- ----------
Total trade and other receivables 3,958 2,820 1,065 811
-------------------------------------- ---------- ---------- ---------- ----------
Less: non-current portion
- Loans to franchisees (240) - - -
-------------------------------------- ---------- ---------- ---------- ----------
Current portion 3,718 2,820 1,065 811
-------------------------------------- ---------- ---------- ---------- ----------
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 aging. 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. The ageing
analysis of these trade receivables is as follows:
2022 2021
GBP'000 GBP'000
------------------------------------------------ ---------- ----------
Group
------------------------------------------------ ---------- ----------
Not more than 3 months 72 137
------------------------------------------------ ---------- ----------
More than 3 months but not more than 6 months - 7
------------------------------------------------ ---------- ----------
More than 6 months but not more than 1 year - 13
------------------------------------------------ ---------- ----------
72 157
------------------------------------------------ ---------- ----------
The Directors consider that the carrying value of trade and
other receivables represents their fair value.
The Group does not hold any collateral as security for its trade
and other receivables.
Included within "Prepayments and accrued income" is accrued
income of GBP1.1m (2021: GBP1.11m) 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 license 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.
24. Called up share capital
2022 2021
--------------------------------------------- ----------------------- -----------------------
Number GBP'000 Number GBP'000
--------------------------------------------- ------------ --------- ------------ ---------
Group
--------------------------------------------- ------------ --------- ------------ ---------
Authorised, allotted issued and fully paid
ordinary shares of 1p each 32,041,966 320 32,041,966 320
--------------------------------------------- ------------ --------- ------------ ---------
Company
--------------------------------------------- ------------ --------- ------------ ---------
Authorised, allotted issued and fully paid
ordinary shares of 1p each 32,041,966 320 32,041,966 320
--------------------------------------------- ------------ --------- ------------ ---------
25. Share premium
Number Share capital Share premium
of shares GBP'000 GBP'000
---------------------- ------------ --------------- ---------------
At 31 December 2022 32,041,966 320 4,129
---------------------- ------------ --------------- ---------------
At 31 December 2021 32,041,966 320 4,129
---------------------- ------------ --------------- ---------------
Share premium is the amount subscribed for share capital in
excess of nominal value.
26. Merger reserve
Merger
reserve
GBP'000
----------------------------------------- ----------
Group
----------------------------------------- ----------
At 1 January 2021 2,797
----------------------------------------- ----------
Acquisition of Hunters Property plc 11,548
----------------------------------------- ----------
At 1 January 2022 and 31 December 2022 14,345
----------------------------------------- ----------
Company
----------------------------------------- ----------
At 1 January 2021 20,787
----------------------------------------- ----------
Acquisition of Hunters Property plc 11,548
----------------------------------------- ----------
At 1 January 2022 and 31 December 2022 32,335
----------------------------------------- ----------
Merger reserve
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
GBP17.99m (the value of the investment). As these shares had a
nominal value of GBP179,900, the merger reserve in the Company is
GBP17.81m.
On consolidation the investment value of GBP17.99m is eliminated
so that the nominal value of the shares remaining is GBP0.1799m
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 GBP100, this is also eliminated, to generate a merger
reserve in the Group of GBP0.1798m.
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 GBP2.797m 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 GBP11.548m 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.
27. 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
payment reserve reserve Total
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------------ ---------- ----------
Group
--------------------------------------- ------------------ ---------- ----------
At 1 January 2021 697 81 778
--------------------------------------- ------------------ ---------- ----------
Share-based payment charge 970 - 970
--------------------------------------- ------------------ ---------- ----------
Release of reserve - share options
exercised (762) - (762)
--------------------------------------- ------------------ ---------- ----------
Deferred tax on share-based payments - (81) (81)
--------------------------------------- ------------------ ---------- ----------
At 1 January 2022 905 - 905
--------------------------------------- ------------------ ---------- ----------
Share-based payment charge 411 - 411
--------------------------------------- ------------------ ---------- ----------
At 31 December 2022 1,316 - 1,316
--------------------------------------- ------------------ ---------- ----------
Company
--------------------------------------- ------------------ ---------- ----------
At 1 January 2021 697 81 778
--------------------------------------- ------------------ ---------- ----------
Share-based payment charge 970 - 970
--------------------------------------- ------------------ ---------- ----------
Release of reserve - share options
exercised (762) - (762)
--------------------------------------- ------------------ ---------- ----------
Deferred tax on share-based payments - (81) (81)
--------------------------------------- ------------------ ---------- ----------
At 1 January 2022 905 - 905
--------------------------------------- ------------------ ---------- ----------
Share-based payment charge 411 - 411
--------------------------------------- ------------------ ---------- ----------
At 31 December 2022 1,316 - 1,316
--------------------------------------- ------------------ ---------- ----------
Share-based payment reserve
The share-based payments reserve comprises charges made to the
income statement in respect of share-based payments.
28. Borrowings
Group Company
-------------------------------------------- ---------------------- ----------------------
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------------- ---------- ---------- ---------- ----------
Repayable within 1 year:
-------------------------------------------- ---------- ---------- ---------- ----------
Bank loan (term loan) - 1,875 - 1,875
-------------------------------------------- ---------- ---------- ---------- ----------
Repayable in more than 1 year:
-------------------------------------------- ---------- ---------- ---------- ----------
Bank loan (term loan) - 4,219 - 4,219
-------------------------------------------- ---------- ---------- ---------- ----------
Bank loan (revolving credit facility) 5,000 5,000 5,000 5,000
-------------------------------------------- ---------- ---------- ---------- ----------
Bank loans due after more than 1 year are
repayable as follows:
-------------------------------------------- ---------- ---------- ---------- ----------
Between 1 and 2 years 5,000 1,875 5,000 1,875
-------------------------------------------- ---------- ---------- ---------- ----------
Between 2 and 5 years - 7,344 - 7,344
-------------------------------------------- ---------- ---------- ---------- ----------
On 30 March 2021 the Company drew down a GBP12.5m loan facility
provided by Barclays to partially fund the purchase consideration
for the acquisition of Hunters Property plc. This loan facility
comprised:
Term loan - GBP7.5m drawn down on 30 March 2021 and was
repayable over 4 years in equal instalments. Interest was charged
quarterly on the outstanding amount and the rate is 2.4% above Bank
of England base rate. The term loan was repaid early on 28 November
2022. The amount outstanding at 31 December 2022 was GBPnil (2021:
GBP6.1m).
Revolving credit facility ("RCF") - GBP5m drawn down on 30 March
2021 and is repayable on 27 January 2024 being the third
anniversary of the date of facility agreement. Interest is charged
quarterly on the outstanding amount, the rate is variable during
the term at 2.2% above Bank of England base rate. The amount
outstanding at 31 December 2022 was GBP5m (2021: GBP5m).
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 GBP6.1m (2021: GBP4.4m), in the year
ended 31 December 2021 this included the repayment of GBP3.0m in
relation to a Hunters loan balance at acquisition.
29. Trade and other payables
Group Company
------------------------------------ ---------------------- ----------------------
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ---------- ---------- ---------- ----------
Trade payables 1,627 850 51 39
------------------------------------ ---------- ---------- ---------- ----------
Other taxes and social security 1,231 1,387 92 134
------------------------------------ ---------- ---------- ---------- ----------
Other payables 230 159 - -
------------------------------------ ---------- ---------- ---------- ----------
Amounts due to Group undertakings - - 257 102
------------------------------------ ---------- ---------- ---------- ----------
Accruals and deferred income 3,636 3,884 1,361 1,188
------------------------------------ ---------- ---------- ---------- ----------
6,724 6,280 1,761 1,463
------------------------------------ ---------- ---------- ---------- ----------
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
GBP0.6m (2021: GBP0.7m) in relation to revenue received in advance
which will be recognised over the next 3 years.
30. Deferred tax
Group Company
----------------------------- ---------------------- ----------------------
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ---------- ---------- ---------- ----------
Balance at beginning of
year (5,570) (1,115) 377 228
----------------------------- ---------- ---------- ---------- ----------
Movement during the year:
----------------------------- ---------- ---------- ---------- ----------
Acquisitions - (3,419) - -
----------------------------- ---------- ---------- ---------- ----------
Adjustment to deferred tax
rate from 19% to 25% - (1,540) - 15
----------------------------- ---------- ---------- ---------- ----------
Statement of comprehensive
income 402 657 35 287
----------------------------- ---------- ---------- ---------- ----------
Release of deferred tax
balance relating to share
options exercised in year - (153) - (153)
----------------------------- ---------- ---------- ---------- ----------
Balance at end of year (5,168) (5,570) 412 377
----------------------------- ---------- ---------- ---------- ----------
Deferred taxation has been provided as follows:
Group Company
--------------------------------- ---------------------- ----------------------
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ---------- ---------- ---------- ----------
Accelerated capital allowances 6 6 10 10
--------------------------------- ---------- ---------- ---------- ----------
Share-based payments 445 409 402 367
--------------------------------- ---------- ---------- ---------- ----------
Acquired business combinations (5,619) (5,985) - -
--------------------------------- ---------- ---------- ---------- ----------
(5,168) (5,570) 412 377
--------------------------------- ---------- ---------- ---------- ----------
31. Provisions
The provisions relate to dilapidations on office buildings
GBP0.21m (2021: GBP0.21m) in relation to Hunters.
32. Financial instruments
Financial instruments - risk management
The Group is exposed through its operations to the following
financial risks:
-- Credit risk
-- Liquidity risk
-- 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
-- Borrowings
Financial assets
Financial assets measured
at amortised cost: Group Company
------------------------------------ ---------------------- ----------------------
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ---------- ---------- ---------- ----------
Loans and receivables:
------------------------------------ ---------- ---------- ---------- ----------
Trade receivables 1,435 870 - -
------------------------------------ ---------- ---------- ---------- ----------
Loans to franchisees 319 31 - -
------------------------------------ ---------- ---------- ---------- ----------
Other receivables 60 137 - -
------------------------------------ ---------- ---------- ---------- ----------
Cash and cash equivalents 6,684 8,413 1,539 4,635
------------------------------------ ---------- ---------- ---------- ----------
Accrued income 1,093 1,107 - -
------------------------------------ ---------- ---------- ---------- ----------
Amount owed by Group undertakings - - 20 21
------------------------------------ ---------- ---------- ---------- ----------
9,591 10,558 1,559 4,656
------------------------------------ ---------- ---------- ---------- ----------
Financial liabilities
Financial liabilities measured
at amortised cost: Group Company
------------------------------------- ---------------------- ----------------------
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ---------- ---------- ---------- ----------
Other financial liabilities:
------------------------------------- ---------- ---------- ---------- ----------
Trade payables 1,627 850 51 39
------------------------------------- ---------- ---------- ---------- ----------
Other payables 230 159 92 134
------------------------------------- ---------- ---------- ---------- ----------
Accruals 3,028 3,172 751 526
------------------------------------- ---------- ---------- ---------- ----------
Amounts owed to Group undertakings - - 257 102
------------------------------------- ---------- ---------- ---------- ----------
4,885 4,181 1,151 801
------------------------------------- ---------- ---------- ---------- ----------
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 GBP319k.
The Group does not offer credit terms with regards sales and
lettings transactions occurring in the offices it operates itself,
revenue is typically recognised at the completion date of property
or upon receipt of rent from tenants.
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:
Between
Up to 3 and 12 Between Between Over
As at 31 December 3 months months 1 and 2 years 2 and 5 years 5 years
2022 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ----------- ----------- ---------------- ---------------- ----------
Trade and other
payables 1,857 - - - -
----------------------- ----------- ----------- ---------------- ---------------- ----------
Loans and borrowings - - 5,000 - -
----------------------- ----------- ----------- ---------------- ---------------- ----------
Lease liabilities 130 376 300 773 783
----------------------- ----------- ----------- ---------------- ---------------- ----------
Total 1,987 376 5,300 773 783
----------------------- ----------- ----------- ---------------- ---------------- ----------
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 28). 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.
33. Share-based payments
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 GBP0.01.
This option has a vesting condition based on two 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 three-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.
The following principal assumptions were used in the valuation
of the grant made in the year ended 31 December 2022 using the
Black-Scholes option pricing model:
Assumptions
------------------------- ------------
Date of vesting 30/04/2025
------------------------- ------------
Share price at grant GBP2.78
------------------------- ------------
Exercise price GBP0.01
------------------------- ------------
Risk free rate 3.50%
------------------------- ------------
Dividend yield 4.50%
------------------------- ------------
Expected life 3 years
------------------------- ------------
Share price volatility 31.00%
------------------------- ------------
The weighted average contractual life remaining of this option
is 2 year and 4 months.
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 GBP0.01, should the
EPS condition be met, the holder will exercise as soon as the
option vests. The Group announces its results usually within the
first 10 days of April. So, it has been assumed that the options
will be exercised on 30 April 2025.
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 FY23, the market outlook and
projections for FY24 to determine, at 31 December 2022, the
achievement of the EPS condition. The expectation is that 27% of
the options will vest.
The estimated fair value of the option over 443,000 ordinary
shares at 31 December 2022 was GBP978,144. This 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 of GBP38,221 has been
recognised in the Statement of Comprehensive Income in the year
ended 31 December 2022.
Share Option Scheme 2021
On 24 April 2021 a new Share Option Scheme 2021 was introduced,
all options under this scheme have an exercise price of GBP0.01. 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.
This option has a vesting condition based on two 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 three-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.
The weighted average contractual life remaining of this option
is 1 year and 4 months.
Management has used the budget for FY23, the market outlook and
projections for FY23, to determine, at 31 December 2022, the
achievement of the EPS condition. The expectation is that 100% of
the EPS target measure will be achieved. At this juncture the TSR
condition is not expected to be achieved. Accordingly Management
expect 50% of the options to vest.
The estimated fair value of the option over 1,470,000 ordinary
shares at 31 December 2022 was GBP3,016,974. This 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 of GBP153,657 has been
recognised in the Statement of Comprehensive Income in the year
ended 31 December 2022.
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 GBP150,000
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 will
become exercisable two 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 two years (save
as required to pay tax due on exercise).
The weighted average contractual life remaining of this option
is 3 months.
The estimated fair value of the option over 100,000 ordinary
shares at 31 December 2022 was GBP211,455. This 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 of GBP105,873 has been
recognised in the Statement of Comprehensive Income in the year
ended 31 December 2022.
Enterprise Management Incentive ("EMI") Share Option Scheme
2020
On 23 July 2020 a new EMI Share Option Scheme 2020 was
introduced and an option over 100,000 ordinary shares each at an
exercise price of GBP0.01 each was granted to two directors under
this scheme.
This option has a vesting condition based on two performance
conditions; basic earnings per share adjusted for exceptional
income/costs and share based payments ("adjusted EPS") and total
shareholder return over the 3 years to 31 December 2022. Each
performance condition will apply to 50% of the award being made. In
respect of both performance conditions, growth of 15% over the
three year period will be required for threshold vesting of the
awards, with growth of 35% or higher required for all of the awards
to vest. The shares will be awarded on a sliding scale for growth
between 15% and 35%. None of the awards will vest for adjusted EPS
growth below 15% over the period.
The weighted average contractual life remaining of this option
is 4 months.
It's expected that with an exercise price of GBP0.01, should the
EPS condition be met, the holder will exercise as soon as the
option vests. The Group announces its results usually within the
first 10 days of April. So, it has been assumed that the options
will be exercised on 30 April 2023.
Management has used the actual results for FY22, to determine,
at 31 December 2022, that it expects 100% of the options will
vest.
The estimated fair value of the option over 200,000 ordinary
shares at 31 December 2022 was GBP312,800. This 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 of GBP112,818 has been
recognised in the Statement of Comprehensive Income in the year
ended 31 December 2022.
Enterprise Management Incentive ("EMI") Share Option Schemes
2013, 2017, 2018 and 2019
There are no options remaining under these schemes as all vested
options were exercised during 2021. Share-based payments charges
totalling GBP97,389 were recognised in the Statement of
Comprehensive Income in the year ended 31 December 2021 in relation
to share options that were exercised.
Movement in the number of ordinary shares under options for all
schemes was as follows:
2022 2021
------------------------------- --------------------------- -----------------------------
Weighted average Weighted average
'000 exercise price '000 exercise price
------------------------------- ------- ------------------ --------- ------------------
Number of share options
------------------------------- ------- ------------------ --------- ------------------
Outstanding at the beginning
of the year 1,826 GBP0.01 2,380 GBP0.0474
------------------------------- ------- ------------------ --------- ------------------
Exercised - - (667) GBP0.14
------------------------------- ------- ------------------ --------- ------------------
Forfeited (116) GBP0.01 (1,513) GBP0.01
------------------------------- ------- ------------------ --------- ------------------
Granted 503 GBP0.01 1,626 GBP0.01
------------------------------- ------- ------------------ --------- ------------------
Outstanding at the end of
the year 2,213 GBP0.01 1,826 GBP0.01
------------------------------- ------- ------------------ --------- ------------------
The outstanding options at 31 December 2022 comprised 2,213,000
options with an exercise price of GBP0.01.100,000 are exercisable
on 23/03/2023, 200,000 are exercisable on 30/4/2023, 1,470,000 are
exercisable on 30/04/2024 and 443,000 are exercisable on
30/04/2025.
The outstanding options at 31 December 2021 comprised 1,825,500
options with an exercise price of GBP0.01.100,000 are exercisable
on 23/03/2023, 200,000 are exercisable on 30/4/2023 and 1,525,500
are exercisable on 30/04/2024.
During the year ended 31 December 2022:
-- 37,500 options were granted under the 2021 scheme
-- 465,000 options were granted under the 2022 scheme
The weighted average remaining contractual life of options is
1.4 years (2021: 2.3 years).
34. 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:
2022 2021
GBP'000 GBP'000
------------------------------------------------- ---------- ----------
Interim and final dividend (ordinary shares of
GBP0.01 each)
------------------------------------------------- ---------- ----------
Richard Martin 845 836
------------------------------------------------- ---------- ----------
Paul Latham 9 8
------------------------------------------------- ---------- ----------
Phil Crooks 1 0
------------------------------------------------- ---------- ----------
Dean Fielding 5 1
------------------------------------------------- ---------- ----------
David Raggett 46 29
------------------------------------------------- ---------- ----------
Glynis Frew 37 12
------------------------------------------------- ---------- ----------
943 886
------------------------------------------------- ---------- ----------
Directors' emoluments
Included within the remuneration of key management and personnel
detailed in note 9, the following amounts were paid to the
Directors:
2022 2021
GBP'000 GBP'000
------------------------ ---------- ----------
Wages and salaries 1,098 1,096
------------------------ ---------- ----------
Social security costs 145 291
------------------------ ---------- ----------
Pension contribution 45 76
------------------------ ---------- ----------
1,288 1,463
------------------------ ---------- ----------
Details of Directors' interests in share options are disclosed
in the Directors' remuneration report on pages 38 to 40.
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