Interim Results

Released : 14 Sep 2017 07:00

RNS Number : 6872Q
Property Franchise Group PLC (The)
14 September 2017
 

THE PROPERTY FRANCHISE GROUP PLC

(the "Company" or the "Group") 

 

 

Interim Results for the six months ended 30 June 2017

 

Group revenue up 28%

 

Interim dividend increased by 5%

 

The Property Franchise Group, one of the UK's largest property franchises, today announces its interim results for the period ended 30 June 2017.

 

Financial Highlights

·              Revenue increased by 28% to £4.7m (H1 2016: £3.7m)

·              Management Service Fees (royalties) increased by 19% to £3.8m (H1 2016: £3.2m)

·              Operating margin* of 31% (H1 2016: 42%) 

·              Profit before tax** increased by 36% to £2.1m (H1 2016: £1.6m)

·              Strong balance sheet with a cash position of £2.3m (H1 2016: £4.5m) and debt of £3m (H1 2016: £1.8m)

·              Basic earnings per share** increased by 30% to 7.4p per share (H1 2016: 5.7p)

·              Interim dividend increased by 5% to 2.1p per share (H1 2016: 2.0p)

 

Operational Highlights 

·              383 trading offices up 94 from H1 2016

·              Tenanted managed properties increased to 50,000 (H1 2016: 46,000)

·              20 new franchisees recruited (H1 2016: 7)

·              18 new offices opened (H1 2016: 4)

·              Group remains heavily weighted towards lettings, accounting for 70% of Management Service Fees (H1 2016 74%)

 

* excludes exceptional items

** includes exceptional items

 

Ian Wilson, Chief Executive Officer of The Property Franchise Group, commented:

 

"We have delivered a strong performance at our traditional high street brands, which grew market share despite the general challenging market backdrop.

 

"In line with our strategy, we have also invested in experienced individuals and technology capabilities, translating insights gained from our online business, EweMove, to our five traditional high street brands.   The Company has continued to support our franchisees operationally and financially with local acquisition opportunities, as smaller competitors decide to exit the lettings market.

 

"With the appointment of a new Managing Director for EweMove and a new focus on recruiting experienced estate agents as EweMove's local franchisees, management is confident of rapidly improving trading performance in this strategically important subsidiary."

 

For further information, please contact:

 

The Property Franchise Group PLC     

Ian Wilson, Chief Executive Officer

David Raggett, Chief Financial Officer

 01202 292829

 

 

 

Cenkos Securities plc

Max Hartley (Nominated Adviser), Alex Aylen (Sales)

 0207 397 8900

 

 

Bell Pottinger   

David Rydell

Eve Kirmatzis

 

 

020 3772 2500

07825 521 527 

 

 

 

 

Chief Executive's Review

 

The Group has delivered a robust performance during the first half of the year and the board is pleased to announce a 5% increase in the interim dividend to 2.1p per share in line with our progressive dividend policy. 

 

Growth across our traditional high street brands has been strong with revenue growing 4% year-on-year to £3.8m. We have maintained tight cost controls in the traditional brand businesses, where profits are up 22% to £2.0m.  Lettings Management Service Fees ("MSF") increased by 5% (£0.1m) and sales MSF remained unchanged despite a higher comparative following the Stamp Duty induced "spike" in transactions in April 2016.  Group revenue remains heavily weighted towards lettings at 70% with sales and financial services representing 29% and 1% respectively.

 

Our franchisees have completed on seven local acquisitions in the period from 1 January to 31 August 2017, adding 1,482 to the Group's portfolio of tenanted managed properties.  An additional four offices have been added to the franchise network as at 31 August 2017 as a result of re-branding these acquired businesses.  This has resulted in additional fee income (at a franchisee level) of approximately £2m over a full 12-months based on the trading run rate.

 

As announced on 6 September 2017, the disruption caused by the early departure of the EweMove co-founders on 30 June 2017, has meant that EweMove's trading position is behind management expectations.  EweMove has recorded losses at the half year to 30 June of £0.3m against a target loss of £0.1m, on revenues of £0.9m.  Despite this, the Board remains committed to its strategy of rapidly scaling EweMove, which the Board believes will contribute significantly to earnings in the medium term.  The appointment of a new Managing Director in Nick Neill, a successful EweMove franchisee, means the brand now has focused and dedicated leadership.

 

EweMove has over 100 franchisees. Progress so far has been promising with the brand recruiting 18 new franchisees in the first six months of 2017 and recording MSF up 35% year-on-year to £0.6m.

 

Investment in our technology is an important part of our strategy and during the period we launched new brand websites for Whitegates, Parkers and Martin & Co, representing 85% of our total traditional office network. The new sites were designed in conjunction with Fountain, a Google Award Winning Business Partner agency.

 

We have also invested in experienced individuals to improve the leadership of our franchisees, including the appointment of two Managing Directors, one for Martin & Co and one for the Xperience & Whitegates brands, as well as a Group Marketing Director, all of whom bring a wealth of experience. 

 

The Group has a strong operating margin of 31% and a solid balance sheet with net debt of £0.7m. The board remains confident about the outlook for the lettings market in relation to maintaining its ability to meet its objective of progressive dividend payments. In the first half of this year dividend cover was 3.5 (H1 2016: 2.8).

 

The lettings market faces a changing commercial environment with Government initiatives increasing the tax burden on private buy-to-let landlords taking effect in April 2018 and an intended total ban on tenant fees in England & Wales. However, we successfully managed to navigate our business through the Scottish total tenant fee ban in 2012 and we are engaged in several initiatives to ensure that Group revenue continues to grow both organically, from improved digital marketing and through local acquisitions by assisting franchisees operationally and financially.  With regard to our past experience, we feel confident that the Group will be able to ameliorate the changing conditions to ensure minimal long term impact to the Group.

 

Ian Wilson, Chief Executive Officer

 

 

Financial Review

 

Revenue

 

Revenue for the six months ended 30 June 2017 was £4.71m (H1 2016: £3.67m), an increase of £1.04m (28%) over the comparative period. The addition of EweMove contributed £0.91m (24%) to the increase in revenue and the traditional brands contributed £0.13m (4%) to the increase.

 

Traditional brands

 

MSF for the traditional brands were split 78% from Lettings, 21% from Sales and 1% from Financial Services. Lettings MSF increased by 5% (£0.13m) in the six months to 30 June 2017 compared to the same period of 2016. Sales MSF was unchanged compared to the same period of 2016, which is a good result given the comparative period included the spike in sales prior to the stamp duty increase in April 2016 (H1 2016 increased by 24% over H1 2015).

 

Other income increased by £0.1m (15%) from the previous period, comprising of a £0.2m increase in revenue from support services provided to franchisees and a £0.1m decrease in Franchise Sales revenue.

 

EweMove

 

EweMove franchisees pay a monthly licence fee and a completion fee per transaction. The total of the licence fees and completion fees for the six months ended 30 June 2017 was £0.55m, which is a 35% increase on the same period of 2016 (prior to our acquisition). We refer to these licence fees and completion fees as MSF.

 

Franchise Sales income was £0.2m, unchanged from the six months ended 30 June 2016, from 18 new franchisees recruited.

 

Administrative expenses

 

Administrative expenses have increased by £0.75m. The main elements of this increase are £0.8m costs relating to the EweMove business, £0.2m amortisation relating to EweMove and a £0.3m reduction in traditional brand costs (mainly staff costs).

 

Exceptional items

 

The net exceptional income of £0.7m in the six months ended 30 June 2017 all relates to EweMove.

 

On acquisition, the Founders of EweMove received £5m in cash and £3m via the issue of ordinary shares in the Group. The Founders were entitled to a further £7m conditional upon the achievement of Group targets in the financial year ended 31st December 2018. However, following the decision by the Founders to depart, the Group is paying the Founders £1m in total via two instalments payable on 31 July 2017 and 31 December 2017 in full and final settlement. 

 

Management assessed the likelihood of the targets being achieved at last year end and valued the deferred consideration at £2.2m. As a result of crystallising the deferred consideration at £1m, an exceptional gain of £1.2m has been recognised.

 

Following evidence suggesting that the business value of EweMove may have been impaired, a revaluation was undertaken. This has resulted in an impairment charge of £0.5m against goodwill.

 

Operating profit

 

Operating profit includes exceptional items, share based payment charges and amortisation charges relating to acquired businesses. It has increased by 38% to £2.15m (H1 2016: £1.56m), 

 

Operating profit before exceptional items decreased 5% to £1.47m (H1 2016 £1.56m) and operating margin, on the same basis, was 31% (H1 2016: 42%). Underlying this reduction is the fact that EweMove has yet to scale up its revenues and generate a profit. That said, the underlying trends and actions the management have instigated do mean we are confident in improving the revenue contribution from EweMove hereon.

 

EBITDA

 

The Group's EBITDA before exceptional items was £1.8m (H1 2016: £1.7m), an increase of £0.1m (5%) over the comparative period. 

 

Earnings per share

 

Earnings per share for the six months ended 30 June 2017 was 7.4p (H1 2016:  5.7p). The income attributable to owners was £1.9m (H1 2016: £1.2m).

 

Dividends

 

The Board intends to continue to pursue a progressive dividend policy providing an attractive yield to shareholders. The Group has increased the interim dividend by 5% over last year and intends to make an interim dividend payment of 2.1p per share on 6 October 2017 to shareholders on the register on 22 September 2017.

 

Cash flow

 

The net cash inflow from operating activities in the first six months of 2017 was £1.8m (H1 2016: £1.3m).

 

In the first 6 months of 2017 the Group made bank loan repayments of £0.45m (H1 2016: £0.25m) and paid a final dividend of £1.2m for the year ended 31 December 2016 (H1 2016: £0.9m for the year ended 31 December 2015).

 

Overall cash increased in the first six months of 2017 by £0.2m (H1 2016: £0.2m).

 

Liquidity

 

The Group had cash balances of £2.3m at 30 June 2017 compared to £4.5m at 30 June 2016. The reduction being mainly due to the acquisition of EweMove on 5 September 2016 which resulted in a net cash outflow of £3m; the cash consideration was £5m of which £2m was drawn down on the Santander loan facility.

 

The Group had unutilised bank loan facilities of £2.05m at 30 June 2017 (30 June 2016: £3.25m).

 

Financial position

 

The Group continues to be strongly cash generative. This combined with its robust balance sheet and unutilised bank loan facility puts it in a strong position to continue to fulfil the acquisition element of its strategic plan and to pursue the fulfilment of EweMove's potential

 

 

David Raggett, Chief Financial Officer

 

 

THE PROPERTY FRANCHISE GROUP PLC

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                                                                                                                                                                                          

FOR THE SIX MONTHS ENDED 30 JUNE 2017

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

6 Months Ended

 

6 Months Ended

 

12 Months Ended

 

 

 

30.06.17

30.06.16

 

31.12.16

 

Notes

 

£

 

£

 

£

CONTINUING OPERATIONS

 

 

 

 

 

 

 

Revenue

6

 

4,714,186

 

3,669,836

 

8,301,375

Cost of sales

 

 

(540,670)

 

(161,286)

 

(570,912)

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

4,173,516

 

3,508,550

 

7,730,463

Administrative expenses

 

 

(2,702,565)

 

(1,950,127)

 

(4,217,399)

 

 

 

 

 

 

 

 

 

 

 

1,470,951

 

1,558,423

 

3,513,064

Exceptional items

7

 

679,146

 

-

 

(254,945)

OPERATING PROFIT

 

 

2,150,097

 

1,558,423

 

3,258,119

Finance income

 

 

20,086

 

32,039

 

52,909

Finance costs

 

 

(52,641)

 

(37,697)

 

(119,106)

 

 

 

 

 

 

 

 

PROFIT BEFORE INCOME TAX

 

 

2,117,542

 

1,552,765

 

3,191,922

 

 

 

 

 

 

 

 

Tax expense

8

 

(233,232)

 

(307,804)

 

(197,576)

 

 

 

 

 

 

 

 

PROFIT AND TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO OWNERS

 

 

 

 

 

 

 

 

1,884,310

1,244,961

 

2,994,346

 

 

Earnings per share (pence)

            9

 

7.4p

 

5.7p

 

13.0p

 

 

 

 

 

 

 

 

 

Diluted earnings per share (pence)

9

 

7.4p

 

5.4p

 

12.8p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THE PROPERTY FRANCHISE GROUP PLC

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                                                                                                                                                          

AS AT 30 JUNE 2017

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

 

As at

 

As at

 

As at

 

 

 

 

30.06.17

30.06.16

31.12.16

 

Notes

 

£

 

£

 

£

ASSETS

 

 

 

 

 

 

 

 

NON-CURRENT ASSETS

 

 

 

 

 

 

 

 

Intangible assets

 

11

 

16,125,244

 

5,898,112

 

16,820,336

Property, plant and equipment

 

 

 

118,265

 

134,981

 

125,984

 

 

 

 

 

16,243,509

 

6,033,093

 

16,946,320

CURRENT ASSETS

 

 

 

 

 

 

 

 

Trade and other receivables

 

12

 

1,156,232

 

994,976

 

1,477,047

Cash and cash equivalents

 

 

 

2,256,750

 

4,507,698

 

2,045,621

 

 

 

 

3,412,982

 

5,502,674

 

3,522,668

TOTAL ASSETS

 

 

 

19,656,491

 

11,535,767

 

20,468,988

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Share capital

 

13

 

258,228

 

220,000

 

253,008

Share premium

 

 

 

7,016,584

 

3,790,000

 

6,929,723

Other reserves

 

14

 

(138,483)

 

116,665

 

(75,422)

Retained earnings

 

 

 

5,809,528

 

3,835,214

 

5,078,584

TOTAL EQUITY

 

 

 

12,945,857

 

7,961,879

 

12,185,893

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

NON-CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Borrowings

 

15

 

2,050,000

 

1,250,000

 

2,500,000

Deferred tax

 

 

 

1,524,045

 

557,312

 

1,475,481

Provisions

 

17

 

-

 

-

 

2,179,146

 

 

 

 

3,574,045

 

1,807,312

 

6,154,627

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Borrowings

 

15

 

900,000

 

500,000

 

900,000

Trade and other payables

 

16

 

2,038,468

 

903,822

 

1,150,243

Tax payable

 

 

 

198,121

 

362,754

 

78,225

 

 

 

 

3,136,589

 

1,766,576

 

2,128,468

TOTAL LIABILITIES

 

 

 

6,710,634

 

3,573,888

 

8,283,095

TOTAL EQUITY AND LIABILITIES

 

 

 

19,656,491

 

11,535,767

 

20,468,988

 

 

THE PROPERTY FRANCHISE GROUP PLC

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                                                                                                                                                                          

FOR THE SIX MONTHS ENDED 30 JUNE 2017

 

 

Called up share capital

(note 13)

Retained earnings

Share premium

Other reserves

(note 14)

 

   Total equity

 

 

£

£

£

£

 

£

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2016 (audited)

220,000

3,492,253

3,790,000

134,560

 

7,636,813

Profit and total comprehensive income

-

1,244,961

-

-

 

1,244,961

Dividends paid (note 10)

-

(902,000)

-

-

 

(902,000)

Deferred tax on share based payments

-

-

-

(17,895)

 

(17,895)

Total transactions with owners

-

(902,000)

-

(17,895)

 

(919,895)

Balance at 30 June 2016 (unaudited)

220,000

3,835,214

3,790,000

116,665

 

7,961,879

Profit and total comprehensive income

-

1,749,385

-

-

 

1,749,385

Issue of share capital

 

 

 

 

 

 

Share capital - acquisition consideration

23,216

-

2,976,784

-

 

3,000,000

Share capital - exercise of options

9,792

-

162,939

-

 

172,731

Dividends paid (note 10)

-

(506,015)

-

-

 

(506,015)

Deferred tax on share based payments

-

-

-

(192,087)

 

(192,087)

Total transactions with owners

33,008

(506,015)

3,139,723

(192,087)

 

2,474,629

Balance at 31 December 2016 (audited)

253,008

5,078,584

6,929,723

(75,422)

 

12,185,893

Profit and total comprehensive income

-

1,884,310

-

-

 

1,884,310

Issue of share capital

Share capital - exercise of options

5,220

-

86,861

-

 

92,081

Dividends paid (note 10)

-

(1,153,366)

-

-

 

(1,153,366)

Deferred tax on share based payments

-

-

-

(93,061)

 

(93,061)

Share option charge

-

-

-

30,000

 

30,000

Total transactions with owners

5,220

(1,153,366)

86,861

(63,061)

 

(1,124,346)

Balance at 30 June 2017 (unaudited)

258,228

5,809,528

7,016,584

(138,483)

 

12,945,857

 

 

THE PROPERTY FRANCHISE GROUP PLC

 

CONSOLIDATED STATEMENT OF CASH FLOWS

                                                                                                                                                                                          

FOR THE SIX MONTHS ENDED 30 JUNE 2017

 

               

 

Unaudited

 

Unaudited

 

Audited

 

 

6 Months Ended

 

6 Months Ended

 

12 Months Ended

 

 

30.06.17

30.06.16

 

31.12.16

 

 

£

 

£

 

£

Cash flows from operating activities

 

 

 

 

 

 

Profit before income tax

 

2,117,542

 

1,552,765

 

3,191,922

Depreciation and amortisation charges

 

307,171

 

133,013

 

354,247

Profit on disposal of intangible assets

 

-

 

-

 

7,811

Net exceptional income

 

(679,146)

 

-

 

-

Share option charge

 

30,000

 

-

 

-

Finance costs

 

52,641

 

37,697

 

119,106

Finance income

 

(20,088)

 

(32,039)

 

(52,909)

 

 

 

 

 

 

 

Operating cash flow before changes in working capital

 

1,808,120

 

1,691,436

 

3,620,177

 

 

 

 

 

 

 

Decrease/(increase) in trade and other receivables

 

320,815

 

(101,092)

 

(504,453)

Decrease in trade and other payables

 

(110,058)

 

(11,415)

 

(52,309)

 

 

 

 

 

 

 

Cash generated from operations

 

2,018,877

 

1,578,929

 

3,063,415

 

 

 

 

 

 

 

Interest paid

 

(60,835)

 

(39,416)

 

(88,668)

Tax paid

 

(153,030)

 

(264,709)

 

(602,833)

 

 

 

 

 

Net cash generated from operations

 

1,805,012

 

1,274,804

 

2,371,914

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Purchase of subsidiary undertakings net of cash acquired

 

-

 

-

 

(4,821,051)

Purchase of intangible assets

 

(96,517)

 

(2,990)

 

(91,621)

Purchase of tangible assets

 

(6,168)

 

(8,539)

 

(13,960)

Proceeds from sale of intangible assets

 

-

 

18,330

 

36,660

Interest received

 

20,088

 

32,039

 

52,909

 

 

 

 

 

 

 

Net cash (used in)/generated from investing activities

 

(82,597)

 

38,840

 

(4,837,063)

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Issue of ordinary shares

 

92,080

 

-

 

172,731

Repayment of borrowings

 

(450,000)

 

(250,000)

 

(600,000)

Drawdown of bank loan

 

-

 

-

 

2,000,000

Equity dividends paid

 

(1,153,366)

 

(902,000)

 

(1,408,015)

 

 

 

 

 

 

 

Net cash (used in)/generated from financing activities

 

(1,511,286)

 

(1,152,000)

 

164,716

 

 

 

 

 

 

 

Increase/(decrease) in cash and cash equivalents

 

211,129

 

161,644

 

(2,300,433)

 

 

 

 

 

 

 

Cash and cash equivalents at the beginning of the period

 

2,045,621

 

4,346,054

 

4,346,054

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

2,256,750

 

4,507,698

 

2,045,621

 

THE PROPERTY FRANCHISE GROUP PLC

 

NOTES TO THE INTERIM RESULTS

                                                                                                                                                                                          

FOR THE SIX MONTHS ENDED 30 JUNE 2017

 

 

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. The address of its head office and registered office is 2 St Stephen's Court, St Stephen's Road, Bournemouth, Dorset, UK.

2.         GOING CONCERN

The interim financial information has been prepared on the basis that the Group is a going concern.

When assessing the foreseeable future the directors have looked at a period of 12 months from the date of approval of the interim financial information. The directors have a reasonable expectation that the Group has adequate resources to continue to trade for the foreseeable future and, therefore, consider it appropriate to prepare the Group's interim financial information on a going concern basis.

3.         BASIS OF PREPARATION

The consolidated interim financial information for the six months ended 30 June 2017 was approved by the Board and authorised for issue on 13 September 2017. The results for 30 June 2017 and 30 June 2016 are unaudited. The disclosed figures are not statutory accounts in terms of Section 435 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2016 on which the auditors gave an audit report which was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006, have been filed with the Registrar of Companies. The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

This interim report has been prepared on a basis consistent with the accounting policies expected to be applied for the year ending 31 December 2017, and uses the same accounting policies and methods of computation applied for the year ended 31 December 2016.

4.         BASIS OF CONSOLIDATION

The Group's interim financial information includes those of the parent company and its subsidiaries, drawn up to 30 June 2017. 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 with the Group's accounting policies.

5.         SEGMENTAL REPORTING

The board of Directors, as the chief operating decision-making body, review financial information for and make decisions about the Group's overall franchising business and have identified a single operating segment, that of property franchising.

                    

                     THE PROPERTY FRANCHISE GROUP PLC

 

NOTES TO THE INTERIM RESULTS

                                                                                                                                                                                          

                     FOR THE SIX MONTHS ENDED 30 JUNE 2017

 

6.         REVENUE

The Directors believe there to be three material income streams relevant to property franchising which are split as follows:

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

6 Months Ended

 

6 Months Ended

 

12 Months Ended

 

 

 

 

30.06.17

 

30.06.16

 

31.12.16

 

 

 

£

 

£

 

£

Management service fee

 

 

3,815,842

 

3,199,985

 

6,874,542

Franchise sales

 

 

261,668

 

195,266

 

412,448

Other

 

 

636,676

 

274,585

 

1,014,385

 

 

 

4,714,186

 

3,669,836

 

8,301,375

 

                All revenue is earned in the UK and no customer represents greater than 10 per cent of total revenue in the periods reported.

                               

7.         EXCEPTIONAL ITEMS

The net exceptional income in the six months ended 30 June 2017 of £679,146 all relates to EweMove. It consists of the reduction in deferred consideration payable of £1,179,146 and an impairment charge of £500,000 against goodwill following a revaluation due to evidence suggesting that the business's value may have been impaired.

The exceptional costs in the year ended 31 December 2016 consist of £149,598 acquisition costs for Ewemove and £105,347 redundancy costs as a result of restructuring the Group.

8.         TAXATION

The underlying tax charge is based on the expected effective tax rate for the full year to December 2017. The majority of the tax arises from applying this effective tax rate to the profit on ordinary activities.

THE PROPERTY FRANCHISE GROUP PLC

 

NOTES TO THE INTERIM RESULTS

                                                                                                                                                                                         

FOR THE SIX MONTHS ENDED 30 JUNE 2017

 

9.         EARNINGS PER SHARE

Earnings per share is calculated by dividing the profit for the financial period by the weighted average number of shares during the period.

 

 

 

 

 

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

6 Months Ended

 

6 Months Ended

 

12 Months Ended

 

 

30.06.17

 

30.06.16

 

31.12.16

Basic earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares

 

25,477,256

 

22,000,000

 

23,017,702

Profit for the period (£)

 

1,884,310

 

1,244,961

 

2,994,346

Earnings per share (pence)

 

7.4p

 

5.7p

 

13.0p

 

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

6 Months Ended

 

6 Months Ended

 

12 Months Ended

 

 

30.06.17

 

30.06.16

 

31.12.16

Diluted earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares

 

25,477,256

 

22,000,000

 

23,017,702

Dilutive effect of share options on ordinary shares

 

2,518

 

857,644

 

457,132

 

 

25,479,774

 

22,857,644

 

23,474,834

Diluted earnings per share (pence)

 

7.4p

 

5.4p

 

12.8p

 

                    

10.       DIVIDENDS

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

As at

 

As at

 

As at

 

 

 

30.06.17

30.06.16

31.12.16

 

 

 

£

 

£

 

£

Dividends (ordinary share of £0.01 each)

 

 

1,153,366

 

902,000

 

1,408,015

Dividend per share

 

 

4.5p

 

4.1p

 

6.1p

 

                                 

THE PROPERTY FRANCHISE GROUP PLC

 

NOTES TO THE INTERIM RESULTS

                                                                                                                                                                                          

                     FOR THE SIX MONTHS ENDED 30 JUNE 2017

 

11.       INTANGIBLE ASSETS

 

Master Franchise Agreement

 

Brands

 

Technology

 

 

Customer Lists

 

Goodwill

 

    Total

 

£

 

£

 

£

 

£

 

£

 

£

Cost

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2016 (Audited)

4,075,085

 

571,000

 

-

 

261,254

 

1,388,217

 

6,295,556

Additions

-

 

-

 

-

 

2,990

 

-

 

2,990

Balance at 30 June 2016 (Unaudited) 

4,075,085

 

571,000

 

-

 

264,244

 

1,388,217

 

6,298,546

Additions

- acquired separately

-

 

-

 

-

 

88,631

 

-

 

88,631

Additions

- acquired business combinations

3,728,351

 

1,401,239

 

92,704

 

-

 

5,837,943

 

11,060,237

Disposals

-

 

-

 

-

 

(36,050)

 

-

 

(36,050)

Balance at 31 December 2016 (Audited) 

7,803,436

 

1,972,239

 

92,704

 

316,825

 

7,226,160

 

17,411,364

Additions

-acquired separately

-

 

-

 

96,517

 

-

 

-

 

96,517

Disposals

-

 

-

 

-

 

(20,585)

 

-

 

(20,585)

Impairment

-

 

-

 

-

 

-

 

(500,000)

 

(500,000)

Balance at 30 June 2017

(Unaudited)

7,803,436

 

1,972,239

 

189,221

 

296,240

 

6,726,160

 

16,987,296

 

 

 

 

 

 

 

 

 

 

 

 

Amortisation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2016 (Audited)

190,170

 

-

 

-

 

91,050

 

-

 

281,220

Charge for period

81,502

 

-

 

-

 

37,712

 

-

 

119,214

Balance at 30 June 2016 (Unaudited)

271,672

 

-

 

-

 

128,762

 

-

 

400,434

Charge for period

140,682

 

22,242

 

6,180

 

37,712

 

-

 

206,816

Eliminated on disposals

-

 

-

 

-

 

(16,222)

 

-

 

(16,222)

Balance at 31 December 2016 (Audited)

412,354

 

22,242

 

6,180

 

150,252

 

-

 

591,028

Charge for period

205,780

 

33,363

 

9,270

 

40,552

 

-

 

288,965

Disposals

-

 

-

 

-

 

(17,941)

 

-

 

(17,941)

Balance at 30 June 2017 (Unaudited)

618,134

 

55,605

 

15,450

 

172,863

 

-

 

862,052

                    

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

30 June 2016 (Unaudited)

3,803,413

 

571,000

 

-

 

135,482

 

1,388,217

 

5,898,112

31 December 2016 (Audited)

7,391,082

 

1,949,997

 

86,524

 

166,573

 

7,226,160

 

16,820,336

30 June 2017 (Unaudited)

 

7,185,302

 

1,916,634

 

173,771

 

123,377

 

6,726,160

 

16,125,244

 

 

 

                     THE PROPERTY FRANCHISE GROUP PLC

 

NOTES TO THE INTERIM RESULTS

                                                                                                                                                                                          

                     FOR THE SIX MONTHS ENDED 30 JUNE 2017

 

11.  INTANGIBLE ASSETS (CONTINUED)

                     Business combinations acquired September 2016

 

At 30 June 2017, in light of evidence suggesting that EweMove's carrying value may have been impaired a revaluation was undertaken. As a result, an impairment charge of £500,000 was made against the goodwill arising on acquisition.

                    

12.  TRADE AND OTHER RECEIVABLES

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

As at

 

As at

 

As at

 

 

 

30.06.17

30.06.16

31.12.16

 

 

 

£

 

£

 

£

Trade receivables

 

 

149,169

 

119,995

 

280,637

Loans to franchisees

 

 

49,900

 

215,276

 

203,036

Prepayments and accrued income

 

 

909,845

 

636,108

 

987,197

Other receivables

 

 

47,318

 

23,597

 

6,177

 

 

 

 

 

 

 

 

 

 

 

1,156,232

 

994,976

 

1,477,047

 

13.  CALLED UP SHARE CAPITAL

 

 

Unaudited

As at

30.06.17

 

Unaudited

As at

30.06.16

 

Audited

As at

31.12.16

Group

 

£

  £  

£

25,822,750 allotted issued and fully paid Ordinary Shares of 1p each

 

258,228

  220,000  

253,008

 

 

On 9 June 2017 options over 1,500,000 shares were granted to two executive directors at an exercise price of 1 pence per share.         The options are exercisable after the approval of the financial statements for the year ending 31 December 2019, and subject to meeting certain targets for Earnings per Share.

 

                    

 

                     THE PROPERTY FRANCHISE GROUP PLC

 

NOTES TO THE INTERIM RESULTS

                                                                                                                                                                                          

                     FOR THE SIX MONTHS ENDED 30 JUNE 2017

 

14.  OTHER RESERVES

 

 

Merger

 Reserve

 

Share Based Payment Reserve

 

 

Total

 

 

£

 

                            £

 

                       £

1 January 2016 (Audited)

 

(179,800)

 

314,360

 

134,560

30 June 2016

 

(179,800)

 

296,465

 

116,665

31 December 2016 (Audited)

 

        (179,800)

 

104,378

 

(75,422)

30 June 2017

 

(179,800)

 

41,317

 

(138,483)

 

 

 

 

 

 

 

               

Merger reserve

 

The merger reserve relates to the acquisition of Martin & Co (UK) Limited by The Property Franchise Group PLC.  This did not meet the definition of a business combination and therefore, falls outside of the scope of IFRS 3. This transaction was accounted for in accordance with the principles of merger accounting as set out in Financial Reporting Standard 6 - Acquisitions and Mergers.

 

Share-based payment reserve

 

The share based payments reserve comprises charges made to the income statement in respect of share-based payments and related deferred tax impacts under the Group's equity compensation scheme.

 

            

15.  BORROWINGS

 

 

Unaudited

 

Unaudited

 

Audited

 

 

As at

 

As at

 

As at

 

 

30.06.17

 

30.06.16

 

31.12.16

 

 

£

 

£

 

£

Repayable within 1 year:

 

 

 

 

 

 

Bank loan (term loan)

 

900,000

 

500,000

 

900,000

 

 

 

 

 

 

 

Repayable in more than 1 year:

 

 

 

 

 

 

Bank loan (term loan)

 

2,050,000

 

1,250,000

 

2,500,000

 

 

 

 

 

 

 

Bank loans due after more than 1 year are repayable as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Between 1 and 2 years

 

900,000

 

500,000

 

900,000

Between 2 and 5 years

 

1,150,000

 

750,000

 

1,600,000

 

The term loan of £2.95m (31.12.16: £3.4m) is secured with a fixed and floating charge over the Group's assets and a cross guarantee across all companies in the Group.

 

The Company has a loan facility of £5m, and has drawn down two terms loans under this facility, referred to below as 'Loan 1' and 'Loan 2'.

 

Loan 1 - £2.5m drawn down on 30 October 2014 and is repayable over 5 years in equal instalments. Interest is charged quarterly on the outstanding amount and the rate is fixed at 4.08%. The amount outstanding at 30 June 2007 was £1.25m (2016: £1.75m).

 

Loan 2 - £2m drawn down on 5 September 2016 and is repayable over 5 years in equal instalments. Interest is charged quarterly on the outstanding amount, the rate is variable during the term at 2.5% above LIBOR, at 30 June 2017 the rate was 2.8%. The amount outstanding at 30 June 2017 was £1.7m

 

At 31 December 2016 the unutilised amount of the facility was £1.6m and on 30 June 2017 the unutilised amount of the facility was £2.05m.

 

 

 

THE PROPERTY FRANCHISE GROUP PLC

 

NOTES TO THE INTERIM RESULTS

                                                                                         

FOR THE SIX MONTHS ENDED 30 JUNE 2017

 

16.       TRADE AND OTHER PAYABLES

 

 

 

Unaudited

 

Unaudited

 

Audited

 

 

 

As at

 

As at

 

As at

 

 

 

30.06.17

30.06.16

31.12.16

 

 

 

£

 

£

 

£

Trade payables

 

 

252,878

 

166,034

 

253,027

Accruals and deferred income

 

 

344,130

 

346,277

 

447,016

Other taxes and social security

 

 

405,631

 

367,920

 

423,475

Other payables

 

 

35,829

 

23,591

 

26,725

Deferred consideration

 

 

1,000,000

 

-

 

-

 

 

 

2,038,468

 

903,822

 

1,150,243

                    

 

17.  PROVISIONS

On 5 September 2016 the Group acquired 100% of the issued share capital of Ewemove .  The initial consideration was £5m in cash and £3m via the issue of ordinary shares in the Group. A further amount of up to £7m ( the "Deferred Consideration") was due to the vendors upon approval of the financial results for the year ended 31 December 2018 and subject to various targets for Group financial performance being met.

A renegotiation has taken place and the deferred consideration will now be £1m, with £0.5m payable on 31 July 2017 and £0.5m payable on 31 December 2017. This has now been recognised in trade and other payables.

 

 

 


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