Property Franchise Group (LSE:TPFG) — Investor Presentation

0:00 Good afternoon, and welcome to the PROPERTY FRANCHISE GROUP PLC investor presentation. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you

0:32 over to CEO, Gareth Samples. Good afternoon to you. Good afternoon, Alex, and and thanks for that. Good afternoon, everybody. Delighted to be able to present to you today our full year results for 2023 and and give a little bit more color about our recent merger with the BELLOWA Group PLC, which I'm sure everybody's interested in. Just for some sort of context, the property franchise group is The UK's largest multi brand property franchisor, and we're gonna touch on some of the sort of key components of the group during this presentation. In in terms of, you know, the size of the business, there's some numbers down the left hand side that David will cover off a little bit later. But t p t TPFG, as I've said, is The UK's largest property franchisor.

1:20 We are most of our income comes from lettings. About two thirds of our MSF comes from lettings. We also do a state agency financial services and conveyancing. The business was established in 1986, and it's grown both organically and through acquisition. It's now a national business throughout The UK. We operate now through 15 unique property brands with over 910 franchised outlets. In terms of, you know, our income streams, they're resilient. They're recurring. I think the numbers 2023 really demonstrate that with, as I say, lettings at the core of our business. But we also believe there's some really strong organic growth drivers that we're really focused on.

2:05 We've got the market drivers in terms of rental increases, rental inflation. We've got franchisee recruitment, new people coming into the business. We've got our assist assisted acquisitions program for franchisees. And we've got, you know, big acquisitions at a franchisor level that, obviously, we've demonstrated in the first quarter of this year. The business is highly cash generative and debt free, and and, you know, we're really focused on a sustainable growth in our dividend policy, and and that's, you know, grown by 23.3% each year over the last eleven years. In terms of 2023, and this is the PROPERTY FRANCHISE GROUP before the BELBOUR merger, full year '23 was another year of record performance.

2:53 In what was a challenging market, 2023 sales market was probably the most challenging I've experienced in my tenure with the group excluding COVID lockdown. So 2023, you know, only a million transactions took place in the year set against 2021 when there was 1,500,000 sales transactions. So tough year, I think, to deliver the results we have have been have been absolutely incredible. I think the business model has proven its strength and resilience. A lot of people ask us about the cyclical nature of the property market and and, you know, with us being a franchise, it's a much more stable income stream. I think we've demonstrated that in 2023.

3:36 Franchise model with with huge focus on nettings and diversification of income is is improving network resilience, which I think is a really important point. And then, of course, there's the transformational merger that took place on March 7 with Belvoir, which creates The UK's largest multi brand lettings and estate agency business with with what is now a very large financial services business run by Michelle Brook. And the combined group will benefit from increased scale and geographical reach. I think in the early days of ownership, last four weeks, we've been incredibly positive about the opportunities that exist with that wider group and the the discussions and the meetings we've already had, which would be great for the future.

4:24 In terms of just giving some context about the new group, you know, we now, as I said earlier, operate out of 15 property brands. There there there's there's national brands, Martin and Co, Hunters, UMO, Belvoir, Northwood, and Nicholas Humphreys. So six national brands sorry. And mister and missus Clark, seven national brands, and then we've got eight regional brands, Widegates, Parkers, CJ Hull, Ella's and Co, Country Properties, Mullets, Lavelle's, and Newton Farrower. And, actually, they're all dotted around the country, it gives us strength within most parts, most regions across The UK. We're also representing Scotland and Wales and for the first time Northern Ireland.

5:15 In terms of financials, I'm now gonna hand you over to my CFO, David Raggett, who's gonna talk you through some of the numbers. David? Good afternoon, everybody. This next slide you're gonna see is a bit busy, busy for all of us, but I I need to set a scene on how we we came into 2023. And in fact, I'm gonna step back a bit further and just talk about 2021 because 2021 was fantastic sales year, and we started to see lettings growth mainly driven by by rental inflation. Come 2022, the sales market was starting to dip away and rental inflation was was, you know, taking hold in the marketplace. And 2023, we've got about as far as we think we're going to go in terms of reductions in in sales completions.

6:01 So UK market now, 2023, about just over a million transactions completed, sales transactions. And we are seeing about eight to 10% increase in rents on new lets and in tenancy rental inflation running at at about five percent. And what do we so, you know, we came into 2023 expecting the drop in the sales market, expecting 5% in tenancy increases in rents, and eight to 10% on new lets. And we ended up with a a result of twenty seven point three million of turnover and against 27.2 for the the same time prior year or same year. The the difference is is small, but the quality is quite different in terms of where the revenue came from with an increase in lettings revenues both across our network and in our owned offices and a natural reduction in in sales MSF and sales income across our offices.

7:03 The net result of a good lettings market and a poorer sales market was that the growth in lettings MSF offset the the reduction in sales MSF, but we was a result of 16,100,000 for for MSF overall, up to a 100,000. But within that, the the quality is different. Know, 60% of all our MSF came from lettings in 2023, up from 55% the prior year. And that's important to us because that's our recurring income within that number. And our recurring income from from lettings alone across the group was 53% of all turnover. One of the things that we've held onto right throughout my eleven years here in the business is operating margins. So when I say held onto, we've always had a view, what I have, that should be over 40%.

7:51 And we always work on that to make sure that we are between forty and forty five. We had the the one year in 2020 because of COVID is a bit unique. But otherwise, we're within those bands, up a little bit in 2023 to forty two percent. And then profit before tax moved on again a little bit from 8,800,000 to to £9,000,000 to just 200,000. During that time, of course, the the corporation tax rates change. So we've gone from a 19% environment to a 25% environment, which naturally will come off of those numbers when you get to earnings per share. So earnings per share was 28.4 p fully diluted in 2023, the same as 2022. And, you know, it's still in in in the main because, you know, the the tax rate's gone up at this moment in time.

8:39 But it's something we do need to drive forward and to drive that forward, we need to drive that revenue whilst holding up our costs as constant as we can. So that's the p and l. And then balance sheet wise, in 2023, we had 5,100,000 of net cash in TPFG of old. Just a comparative, Bellwell had 1,700,000. And so between us, we had 6,800,000 when we came into this year. And at the moment, at the end of March, we had 4,700,000 net cash between us. A little bit more of the acquisition cost to go through about a million pounds. So really, that's a 3,700,000 number. But that's probably about as low as we're going to go at the end of the day. Now it's all about generating cash again and build and building that back up and what we do with it. Free cash flow per share, 27 p this year, 27 p last year, 27 p in 2021.

9:33 That's two two factors there. One, you know, really, profit growth, but two, tax rates changing, and, you know, unless need to contribute more to the treasury in order to progress the plans of either party coming into this year, then we should start to move that forward. And and we do. We need to move that to 35, 36, 37 p. There's a reason for that because the next slide, dividend. Dividend per share in in 2023 was 14 p. Gareth and I Gareth and I have been talking about this. We'd like to see that at twenty five p. So we need if we're to move that on, we need to move our free cash flow on. If we're to move free cash flow on, we need to move revenue on to generate greater profits.

10:19 And then two metrics that we just keep a good eye on, return on capital employed. We are in the cycle at the moment. We're building up from the low of of the acquisition of Hunters. So I hope the 20% return on capital employed and that will head towards 25% and unless we have a a further acquisition, which we'll we'll see. And then it will go through a similar climb again from a low building back up to 25%, and the return on capital invested, which if we continue on that trend, will end up about 30% for 2024. So good returns off of capital employed and return on capital invested. And if you were to look at our growth rate with its revenue, profits, dividends, look at any of those, and you look at them over the last seven years since we've been on the market, you'll find cumulative annualized growth rate or compound annual growth rate, sorry, running around about 22, 23% right the way across the period.

11:16 Next slide, please, Gareth. For those who don't know us, we we we we do have a mix of revenue like most businesses, and so, you know, roughly 60% of our revenue is coming from our management service fees, royalties we charge our franchisees. 19% from owned offices. We own nine offices in the Hunters brand in The Midlands and the middle of the country. And so, you know, naturally, we try to drive those forward, and and that that's where that income comes from. Financial services running about the same year on year, but it's it's it's around 6% of total revenue. There was a time when we said if it was 5% of total revenue, we'd be happy. But now in a new environment, six percent's nowhere near enough and we need to move that on. Franchise sales, a small part of our business every year. We do have franchisees who retire or choose to do something else and sell their franchise, and we take some fillings from doing so.

12:17 We also charge new entrants mainly to uMove a fee for joining, and that's where the franchise sales income comes from. And then other is combination of two things. It's assisting franchisees in the management of their portfolios of tenants and properties, which we do essentially in a number of locations. And it's from the licenses that we hold for the operating system. So we're the main licensee and then we sublicense down to the franchisees. That's that's our sources of income. GROUP MSF split, I've touched on this. We're we're we're up from 55% of all MSF coming from lettings to 60% now. And as a consequence of that and the sales market being where it is, that that slipped away.

13:02 When we bring Belfar into this chart because it's predominantly a a lettings business when it comes to the franchise network, this whole metric will change again, and we will sit somewhere between 7075% of all our MSF coming from lettings.

13:24 Cash in the year. So it started off 6,700,000. We generated from operations 9,000,000. We paid back half of our RCF to Barclays. It was 2,500,000 that output went out. Paid dividends of 4,300,000, and we had a few other movements in financing and investing, and we ended up with cash at the end of the year of 7,600,000. And if you take the 2.5 what we still owe Barclays and pay them back in January 2024, we ourselves had net cash of £5,100,000. We've grown our cash generated from operations. It's, you know, as you can see, there's a step change. And now we're looking for that next step change up. And that's, you know, what will take us from, you know, from that 9,000,000. We we know the combined number with BellBall would be 18,000,000. So, you know, what takes us to 20, well, that bit further.

14:13 That that's that's the challenge for us. And consequently, as we move that on, we'll see our free cash flow per share move 1,000,000.

14:23 Okay. Thanks, David. So so, you know, we're talk about a period of significant growth. I think I think, you know, if you look at 2023, and, again, this is just TPFG's result, nothing to do with Belvoir. You can see each month last year on lettings that they outperformed the year before. And and and the really good news is 2024 has started exactly the same. So every month so far in 2024 has been ahead of its the same month last year. Sales MSF, you can see the the flip of that story. The 2021, obviously, stamp duty whole late peak, 1,500,000 transactions. 2022, a little bit flatter, but 1,250,000 transactions. And then 2023, a million transactions well below '23 sorry, '22 and '21.

15:14 Good news, and I'll touch on this later, is first three months of 2024 are ahead of last year. So it's looking like the transaction market will be around 1,100,000, which is back to a sort of normalized market from 2012 to 2019. So 1,100,000 transactions will be about a 10 lift year on year. So market update, really, really strong market for lettings in 2023. Demand for every property coming to the market, you know, ten, twelve, 15 people looking to view every letting property that came to the market, outstripping supply for, you know, the the the tenth year on on the trough, and rising rental rates is increasing cost for landlords. So, you know, landlords were actually quite sympathetic during COVID and during a low interest rate environment.

16:07 And, actually, you know, rents lagged behind a little bit because the landlords didn't need any more money. I think what's happened since the interest rates started to rise and landlords' costs started to increase is they now need that income. So over the last eighteen months, two years, we've seen landlords getting much keen at to to address their rents and to increase their rents for tenants. And I think there's just an element of catch up. And we think that will go this year and probably into next year. As we said at the beginning, we look after 78,000 properties as old TPFG, a 152,000 in the combined group, and it takes a long time to wash rental increases on every property through that through that portfolio.

16:54 So there's still work to do on that at a local level, and that will be that will come through in terms of a more positive result on on on rental inflation for twenty twenty four's result. Touched on this subdued sales market in 2023, really challenging market. It did improve in the second half year as the interest rate started to not go up so much. But the good news from a TPFG perspective is although the market was down 19%, we were only down 16% and therefore slightly outperformed the market. And there's reasons for that that I'll go into later when we start talking about the growth initiatives that we've got. And then 2024 so far, improving sales market, lettings continuing to grow at high single digits, and we're expecting 1,100,000 completions in 2024.

17:49 So it gives you some color in terms of of of the market and and and the fast start to the year. Back in September 2020, six months after joining the group and and and coming out of lockdown, we set in place the the

18:04 growth the initiatives of strategy that's seen us through over the last couple of years. And I wanna give you an update on that, and and it's very likely that we'll implement this into the Belvoir Group as well. We've just gone into our our new five year growth strategy with the objective within TPFG of increasing profits organically by a million pounds a year, and our intention is to do exactly the same in the Belvoir Group. So a million pound in TPFG, million pound in Belvoir, so £2,000,000 for the enlarged group. And, you know, big question is how are we gonna do that? So we see the opportunity still within lettings. We we think inflation will continue to impact on the result over over the next two or three years. We had double digit digit growth last year, and and and 53% of our total revenue came from lettings.

18:56 And we ended the year with 78,000 managed properties. Sales, we've touched on. We outperformed the market in 2023. There's still an incredible opportunity about across both groups to sell more houses. So within TPFG, we do about 22,000 exchanges a year. Within Belvoir, eight to 10,000. But we still have a number of offices that don't do any house sales. So our operations team and our managing directors are working very hard to improve those results, and we see that very much as an opportunity for the future. Financial services, Bellevue had a really, really strong financial services business headed up by Michelle Brook. TPFG had a small mortgage business, and and we acquired Mortgage Genie in 2021.

19:47 So the combination of bringing those two businesses together, I think, still creates a huge opportunity. If I look at the penetration into those 30,000 house sales units the group does, we still only do at franchise level about 3,000 mortgages. If I looked at that into a corporate environment, they'd expect to do about 15,000 mortgages from those those house sales. So still a lot of work to do. Delighted to have Michelle's expertise within the group, and and, you know, we will start to execute on those plans to drive a better result out of financial services within the franchise businesses over the next eighteen months. Recruitment, really, really important part of the

20:34 group's long term strategy. We we, recruited 46 new franchise owners in 2023, 15 as traditional agents and 31 in our hybrid estate agency business, UMove. We extended the UMove footprint territories to a 182, which was a small increase on the previous year, but last year was a very tough year. Pleased to say that 2024 started really briskly. I think we've got 15 new territories sold already this year. And we did 21 resales, which is becoming an know, a really important component of of of both businesses. You know, we have a aging population of franchisees, and it's really important that we bring new blood into the group when people wanna exit and retire and spend less time in the business. So so so going forward, both across the Bellbar network and the TPFG network, it's really important that we bring this this new blood in who who hopefully, you know, have that motivation to take those businesses further forward.

21:48 Acquisitions, and I always talk about acquisitions in in sort of two stages. There's the franchisee acquisitions across both businesses where, you know, our franchisees buy local lettings books off of their competition, and we support that from a from a a a implementation a perspective and a financial perspective. And last year, TPFG did just short of 2,000 units, 1,879, and Bellwild did just over 2,000 units. So across the group, about 4,000 new portfolio units brought into the group, and our intention is to continue that and and and hope this try and move it forward. And then there's the acquisition piece of a franchisor level of which, obviously, we've done the Belvoir merger.

22:45 Shell Brooks bought two financial services businesses last year that added about 600,000 to profit

22:54 before tax, and and we're committed to continue to support Michelle in growing that business along with looking at any of the acquisitions that, you know, are profitable and are accretive to shareholders. So, you know, if we could pull off another acquisition in 2024 that was accretive and profitable, we would look to do that. And then the big piece is the digital marketing strategy. You know, we now, as as an enlarged group, look after 9,000,000 data records, which is huge. Okay?

23:31 We've invested significantly in technology to become best in class digital marketeers across the estate agency and financial services space. And, you know, quite a lot of investment went into TPFG last year in terms of getting that digital platform built. There's still some work to do in Belvoir, but, again, they're quite a way down that road as well. And and our intention is to, you know, understand, you know, the customers that we have, communicate them at relevant times, offering relative relevant services, and become almost the lead generation system for our franchisees. So we wanna be able to pass valuation leads, lettings leads, insurance leads, financial services leads back to our franchisees to to drive their

24:22 income and their profitability by utilizing the data that we now hold in in a in a centralized way. So that talks you about the the the the six growth strategies that we're really focused on that we're investing in across the group that will drive that million pounds worth of growth out of each side of the business over the next five years. In terms of taking that step further, the growth drivers so so so how are we gonna do this in the five years? So we wanna increase our market penetration, and keep lettings at our core. So we've talked about lettings acquisitions, lettings inflation, but there's also more regulation coming into the lettings side of the business. And we very much see that as an opportunity with the renters reform bill as opposed to a sort of barrier.

25:12 And what we're doing across the group is running landlord seminars to inform, you know, private landlords about the changes and the impact of the rents reform bill. And having run, you know, ten, twelve of those over the last four or five months, what's become really clear is the landlords that self manage are a little bit in the dark, and they're very, very grateful for the sessions that we've run. And all of the sessions that we've run has resulted in landlords who would normally manage their own properties deciding to use an agent. So we see that very much as an opportunity. Now we can't just run seminars. We've gotta do webinars. We've gotta do digital marketing. So there's a a strategy to become, if you like, the expert in the lettings market to inform private landlords about the changes that let the

26:08 the rents reform bill will drive out. So that's an important opportunity. Sales, touched on this already. We are underperforming in the sales market as a business in the main. We've got some very good sales offices, but we are performing from a market share perspective across the whole network, and we've got a management team that will work with our franchisees to drive that side of the business. So so that's going on at the moment. And some of the results you can see through the results I talked about earlier, we've seen, you know, market share gains in 2023. Financial services, you know, is about building Michelle's business, supporting her in her acquisitions, but more importantly, increasing the productivity of each of the 308 financial advisers that we've we've got employed. Last year was really, really tough. Most of the mortgage activity came from product transfers and remortgages as opposed to new transactions.

27:07 And and, of course, product transfers and remortgages earn US money. So you gotta run harder to deliver the results that the financial services business did last year, which actually were astounding given the the the the sort of landscape that Michelle was navigating through last year. But our intention is looking at increasing that transactional business that will increase the productivity of each of those 300 main financial advisers. So that's where the growth is gonna come from the financial services business. In terms of recruitment, big piece on attracting new franchisees to increase our UK coverage, develop the brands further, and enable the resell of existing franchise territories. I touched on earlier that the the the the the the aging population of both networks means bringing this fresh blood we perceive as a real opportunity. They'll embrace all the new income streams, and they'll do it, if you like, in a modern way. So so really important part of our strategy going forward, the recruitment of of of new franchisees.

28:13 Acquisitions, we're really acquisitive. We do another deal this year if the right business came up. And and I guess the metric for us is, as I've discussed,

28:24 profitability and earnings accretive to shareholders with no dilution. And then digital marketing, 9,000,000 customers, you know, we've we've invested in the technology. We've got the websites. We've got the lead generation tools. We've got the referral system in place so we can spot the opportunities and serve them up to our franchisees to close. And, you know, the the the the amazing piece is this is before AI plays its part. And I, you know, I'm I'm seeing demos of technology at the moment that is nothing like I've seen before. AI will play a massive part in this dealing with the 9,000,000 customers, understanding where the opportunities exist, and maximizing the revenue that's driven from that digital marketing strategy. So so we're really excited about the future, and the growth drivers that we're gonna focus on in in in 2024.

29:26 In terms of the Belvoir Group, talking specifically about Belvoir, Merger Creates, The UK's largest mallee brand and property franchisor, which is great news for us. It's a great business. You know, we we we said at the time that, you know, it had a certain inevitability that the two businesses at some point would come together, And and 2023, the stars aligned to enable that to happen. But but, you know, both TPFG and Bellwild sort of tracked each other since since since being founded really in 1995. They listed at a similar time. They've both done acquisitions. Since they listed, those acquisitions have been integrated really, really well. Darwin and Louise did an incredible job for a long period of time. David's been here eleven years. Again, did an incredible job with Ian Wilson, my predecessor, and we've grown again since since I came on board. So two really well run businesses, two profitable businesses, two resilient businesses, And our belief is that two and two can equal five or six. Yeah? The opportunity this large group has to really drive forward now is is really exciting, and we're looking forward to the next twelve months working with Dorit and Louise and then beyond identifying those opportunities and starting to, you know, really drive value to our shareholders to, yeah, make sure that everybody gets the return they deserve.

30:57 In terms of what does it give us? Enhanced scale and geographical reach. You know, we've already identified some some some really interesting opportunities that we'll be working on in the second half of the year. You know, we'll operate at 910 locations. We'll look after a 153,000 properties on behalf of landlords, which is the biggest in the country.

31:22 And and we're expected to sell more than 28,000 properties. I think they'll go over 30,000 this year, actually. And I think, you know, what what it enables us to do is that, you know, in large group, can enhance its value proposition to franchisees and consumers. You know, we've got great reach. We've got great technology. We've got huge database and, you know, the the the the, you know, the the the the customer for life journey that we can do through our data marketing and the leads that we can pass back to our franchisees is is is gonna be significant. Earnings accretion and and and annual synergies, I think the earnings accretion piece is certainly the bit that we're most interested in. You know, the annual synergies will come, but both businesses are actually well run. So it's not like loads of fat that we're gonna cut out. I think, you know, investing in that opportunity is is is where we see our focus over the next six months.

32:20 We wanna accelerate the financial services strategy. Michelle, as say, runs a really good business. We do, you know, 20,000 mortgages, or we did 20,000 mortgages in 2023 from the 308 advisers. And if we can continue on that acquisition track and increase the productivity of each of those advisers, then that that that puts that business in really good shape from a profitability perspective. And then great news, you know, we've got a strengthened management team. Michelle has joined the board as executive director with responsibility for all things financial services. Belvoir's ex chairman, John Di Stefano, has joined us as a non exec. And Paul George is is joined us and will head up the audit committee replacing Phil Brooks who had come to the end of his time.

33:08 So really good board. Met with him a couple of times, you know, really, really supportive and really excited about the future. I'm now gonna hand you back to Dave. He's gonna talk you through some of the Bell of our financial numbers for 2023. Yeah. The overriding not the impression, not the overriding memory I want to you to take away from this is that the start of the year, Belvoir 2023, Belvoir faced the struggle of financial services and quite what impact that would have on revenue and profitability. And come the end of the year, they managed to come out with a result which reflected where they thought they would be at the start of the year, which is quite something. And it all really hinged on financial services.

33:54 There were two acquisitions, small ones during the year, which added some revenue and profitability. And then it worked its back book quite hard. So well done to Michelle because that made up the difference. And we need to understand more about that back book, but we we will do in time. So where where it was turnover? Just turnover, like ourselves, just up slightly, 34,200,000 in 2023. PBT, headline PBT, same as the prior year. Adjusted PBT up £500,000. That's important because that's telling you what's happening on the underlying business and the potential that's there on on adjusted EBITDA and adjusted PBT. So you're seeing good growth there, and that will come through. That should be sustained in in future years. Basic adjusted EPS up slightly to 22,600,000.

34:41 I mentioned the net cash they have at 1,700,000. And then other side of the coin, how how do they compare to us? Well, the old TPFG is was, you know, was 331 offices at the end of twenty twenty three with and the old TPFG would be about 580. Average MSF per franchise office is almost £36,000 offices. It's higher than the old TPFG. The reason for that is we've got a reasonably young brand in New Move which is growing quite well. And then by the very nature of it, that dilutes our our own averages. Number of managed properties, very similar. You know, they ended up at 75,000 just over on on OTPFG at 78,000. Where they've always done well well while compared to the OTPFG is on MSF from assisted acquisitions.

35:32 And £400,000 would be considerably different to that being achieved in TPFG at this moment in time. So we've got some some something to learn there and something to build up on. Number of advisers, well, old TPFG had about eight, you know, there's 308 there. So it's a completely different scale of operation, and and clearly, we need as much as, we understand financial services moment in time. Michelle will, drive that forward and and bring our knowledge up to speed. And the number of mortgages arranged for just under 20,000. And to put that in scale, you added in what TPFG as was achieved in 2023, you'd be up just over about 21,000. So you can see how much bigger that operation is than the operation we had.

36:18 Next slide, please, Karen. Revenue wise, if you if you well, let's think about this. If you think about it on a network scale, the whole network generated on a pro form a basis £261,000,000 worth of revenue in 2023. It's not that long ago that TPFG was showing network revenue of £90,000,000. And from that, I mean, that's the main driver at the end of the day for the revenue that you you see on a pro form a basis here alongside the financial services business. You know, we we see 60 just over £61,000,000 worth of combined revenue in 2023, gross profit of just over 42,000,000, Adjusted EBITDA, just over 23,000,000. If you were to take 25% off that roughly as the tax rate, you'll come down to very close what the free cash flow was.

37:10 That was 18,000,000. And then behold, PBT in 2023 for the combined group was 18,000,000. But just to the left hand side, that's the important result for me. Belvoir came in, as you can see, almost bang on the same numbers of the prior year and hit all its expectations in 2023. And against the background that it had to work with, that was a far we thought we were challenged, but clearly, they were more challenged. And that really does underline the the how good that result was and just how resilient that business is. Over to you, Gan. Thanks, David. So now looking towards 2024 and the outlook, quarter one's ahead of management expectations across both businesses in terms of both revenue and profitability.

37:57 So, you know, I look back last year when when, you know, sort of the impact of the lease trust budget and the interest rate rises were starting to kick in and, you know, that that worried us all about 2023. 2024 is in a a much more positive environment, a head on revenue, head on profitability. Really, really pleased to have the year started. In terms of lettings, every month upon the same period last year, so still ticking along really, really nicely. Improving site sales market, and we've we've we've focused on that. But, you know, an improving sales market will mean an improving financial services services market. So each of the three major income streams, lessing, sales, financial services, are all ahead of 2023 so far, and that's driven our profitability up as well.

38:47 But there's a general general election, and and we don't know when that's gonna be called, but we believe it will be called in 2024. And it normally goes a bit quieter for four or five weeks leading up to the election. So that's the only sort of bit on the horizon that that gives us some concern. All I would say is if it is gonna be November and it's looking more and more likely that it's gonna be November and it's cold in October, then actually our sales market and our financial services pipeline has already been established for 2024. So it won't actually affect twenty twenty four's result. It might have some impact in twenty twenty five's early result. And, you know, with the merger of the size of Belleville, we have a transformational year ahead of us. We're really excited about the opportunity.

39:35 We're really pleased to have brought those two businesses together. And and, you know, the the the commitment is we will work as hard as we need to in 2024 to get the business in real shape to move into 2025 as a combined group. So that's the outlook. Now over to you. Thanks for listening. We'll now take questions. Perfect. Gareth, David, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via investor dashboard. I'm Gareth David. We have received a number of questions throughout today's presentation.

40:23 And if I may start the q and a session with the first question, which reads as follows. Do you plan to franchise the company owned branches at some point? Yes. In the main. I think we'll always have a few if the truth be known, but but but I think, you know, David and I have the same opinion if we could reduce the number of owned offices down, and we've got just for for context, I think, 12 13 at the moment. But, you know, I think we'll always have five, but but if we could franchise the other eight, we would do. Perfect. Thank you, Gareth. Turning on to the next question. What are your return hurdles for acquisitions? I think it depends whether you're talking about our acquisitions or you're talking about those that the franchisee undertake.

41:12 So our acquisitions, well, they're quite unique, aren't they, in the ones that we've done so far. So, you know, there's no set criteria apart from the fact that first year, I'd like it to be earnings accretive at least into early double digits. That would be that's important. Conditioned a little bit to try to get to a point where there's a in in cash terms, there's a five year payback, but clearly that has to be appropriate to the the business that we're we're buying at the end of the day. It needs well, in in time gone by, we recall we accepted less recurring revenue, but now we like businesses with recurring revenue even more. So they're the ones that we would be more focused on right now in our journey. And certainly, we can see over 50% recurring revenue. That would be what we'd be looking for.

41:57 When it comes to franchisees, there's some set metrics in in the markets what is paid for a portfolio and and that runs anything from depending on its quality from 1.4 times the annual revenue. So 2.2 or 2.3 times depending where it is. So, you know, the market kind of dictates the price. But what we do look for when we're advising our franchisees is payback and again, five to seven years in cash terms. That that's where we would would sit at the end of the day. Certainly, if we thought I mean, they most acquisitions add a lot of profitability to a to a franchise business just by the very nature of you don't have to increase the back office too much. But we we still go through that process and advise our franchisees on the quality of the return. Just as we talked about return on capital employed were invested, we go through that same process with them just to make them aware of it before they make the decision to proceed or not.

42:55 Thank you, David. The next question is on the Belva merger, which I will break into four different questions. First part of the question, any unforeseen setbacks in the Belvoir integration? What is going well, and where are the challenges? So so no unforeseen setbacks apart from not being able to go home that often, but but, you know, it's a huge, huge business. And and getting to understand the business is is obviously taken all of the last sort of three, four weeks along with getting ready for these presentations. So Darwin and Louise are very much involved still in the day to day running of the group. The the the integration is more project based at the moment in terms of identifying what that integration and what those opportunities look like.

43:40 I think what's going well is, you know, the the teams are working really, really well together. We're learning, you know, an awful lot of good stuff about the Bellevue business and, you know, what they do well and what we do well and, you know, bringing that together is really, really exciting. And the challenge, I guess, is the scale and and the amount of opportunity. You know, we've identified probably three or four big projects that we need to undertake over the next couple of months that that that financially could be really productive for the group overall. And, you know, we've gotta make sure we've got the correct resource to be able to, you know, understand that opportunity and and and and turn that opportunity into into cash for the group.

44:27 In terms of synergies, again, you know, we're looking at them. And, of course, there will be synergies, but I take everybody back to what I said in the presentation. They are well run groups. There wasn't a lot of fat in Bellevue. There wasn't a lot of fat in TPFG. Bringing departments together may indeed create synergies, but what we've also got then is the opportunity and how do we resource those opportunities. And I think, you know, three, four weeks in is too early to say. You know, marketing group marketing services, digital marketing that I talked about, AI, will that mean that we do more marketing and need more people, or will AI mean that we need less people? You know, there are lots of questions that haven't got necessarily definitive answers yet.

45:13 So I think, you know, we'll keep working away. We've got September results update that I think will have a lot more clarity on both the projects, the opportunity, the types of money those opportunities could drive out, and the the the synergies that have been realized ready for 2025. So it's a work in progress. So that's the first two parts of the question. I think the third part of the question is probably for David. Sorry. Can we just repeat the question then? Third part? Yes. Of course. So the third part of the question is, do you expect to change your capital allocation strategy following the Belvoir merger? I can imagine that it's hard to do further acquisitions in the next twelve to eighteen months as you integrate Belvoir.

46:00 So could you shift more cash flows towards dividends and share buybacks given that you're also net cash? Can I answer the first part, David? We will definitely do more acquisitions in the next twelve to eighteen months. You know, we are keen to do another accretive, profitable acquisition in 2024. So so we will do that, but then David will ask answer the rest of the question. Once we get through that, then then that's speculate this moment in time. Let's say we achieve that. Well, whether we do or we don't, you know, the fact of the matter is that we are going to generate more free cash flow in future years than we have in the past, and and therefore we've got to think about what to do with it. It's always, you know, we can continue track record of investing in businesses that earnings are creative and turning on 20 plus cumulative growth rates in in profits and dividends, then, of course, we will.

46:52 But, you know, if if we if we can't, then we have two choices. We we either, in my way, send that money back to you as shareholders while we're at dividends. We can buy back shares. We we probably won't change the amount of money we invest organically in the business. So I think it's worth one of those two, increase the dividends or or start a share buyback program. And I wouldn't wanna get ahead of ourselves on that, but we would need to sit down on share buybacks and just look at what's really worked effectively for other businesses that being gazed in The UK market as as UK quoted businesses in in doing that before we set out on that journey. But we we certainly would look to buybacks in the future assuming, you know, I mean, it could well be on share price starts to really move forward, and we think that's not a sensible use of our cash. But where we are today and where we see the value of the business, there is a mismatch. And so, you know, we'd certainly look to do it.

47:49 Thank you, David. And the last part of the question is what is your target leverage net debt to EBITDA? I don't think we've ever been beyond about 1.2 times EBITDA. You know, you can probably safely go to two times. But, you know, our appetite has been around the one times. So, you know, they are. That's it'll sit somewhere between one and two times depending on the acquisition. Perfect. Moving on. Congratulations on the good results. Love the consistency and return on capital employed while the while quite many acquisitions are happening. The question is, please, could you provide us with numbers of over the past few years if we exclude acquisitions effect, especially for the lettings m MSF part of the business? Thank you.

48:36 I think that was the hard question to answer in in in this session. But let me, you know if if we had a look at this when we were thinking about the Billboard merger and and starting to put together the documents and what have you, and and organic growth to us has been about a third of our overall growth rates over the last five years. But if you if you step back a bit further, sort of don't give you a history lesson on this, but but if I look at the businesses we have acquired, when we acquired the brands from Legal and General, we tripled their, you know, at least tripled their earnings after tax in the first two years. When we bought U Move, it was just breaking even. So that makes, you know, between 1,500,000 and £2,000,000 before tax. So, you know, 1.2, so 1,500,000 after tax spent within time.

49:28 Hunters, you know, we bought it in '21. I mean, 2020 wasn't a great year for them, but for good reason, was COVID. 2021 was a fantastic year for them, and that generated a lot of cash for us. That result hasn't actually changed too much year on year, which against the backdrop of it being a sales dominated brand, where the market's gone, where the market's dropped a third in terms of the number of transactions completed, you'd be surprised and sure to learn that we've managed to maintain the the the return, the EBITDA of that business, almost the same number through synergies. So there there we bought businesses at different times and we've gone through different cycles, but we've we've always organically grown them from where where they are. And as I say, if you just look at the piece up until the pre merger with with Bellbard, about a third of our growth's come organically.

50:19 Thank you, David. Turning to the next question. What impact do you foresee from the new regulations in the lettings industry? I mean, they keep getting watered down, so the impact sort of gets less and less. But I think know, the rents reform bill we see very much as an opportunity. You know, those landlords that have one to sort of six, ten properties, I think will really question whether the time is right to to to employ a specialist as opposed to try and do it themselves. The the the fines that the rents as reform bill drive for getting stuff wrong, 5,000, I think they start at, and then if you make the same mistake, it it doubles.

51:05 So, you know, it's a heavy price to pay for getting it wrong. You can pay a letting agent, you know, £80 a month to look after your property. So I think, you know, we see that as an opportunity, and I think I touched on in the presentation, we've been running these landlord evenings. And what what's be what's really apparent is they are desperate for help. They're desperate to understand, and they're really grateful for us putting on those events. And what we've got to do is ramp them up, you know, and I think we're gonna do them a sort of webinar series that that that people can join. And I think that will, you know, create a good value of business. I think we'll win business as a result, you know, educating, taking that place as the expert letting agent in that locality to help landlords. So definitely see regulation as an opportunity.

52:02 But, again, if you look at BBC News today, Michael GROUP is now saying he doesn't think he'll get no fault evictions through till the election. So so, you know, it's changed quite a lot over the last year, eighteen months, and it's been watered down significantly. Thank you, David. Perhaps one last question here. Are there are there big segment segments of the market where you should be more active? Okay. Segments of the market. So so I'll take this as opportunity. I I know and I might not be answering the question here, Alex. So apologies if I'm not. But other areas that we can that we underperform in. So I think lettings insurances. I think, you know, big opportunity that we've seen across the group now with so big are, you know, there are a range of services that our franchisees use different companies for that actually we could get involved with probably do it slightly cheaper and still make sort of a margin. So I think, you know, that's part of this analysis where where where could we do better. I think the other bit that probably is a segment is buy select mortgages.

53:12 So so throughout the group, you know, we've got a 155,000 landlords looking towards us managing their property, plus all of the tenant find only landlords, which is probably similar number. So 300,000 landlords across the group, at least half of which will will have finance on their portfolio and currently neither business does anything from a from a buy to buy mortgage perspective. So we've we've we've been talking about some really, really clever technology that enables, you know, through an app or through laptop a to manage your portfolio and have that updated in value terms and yield terms in real time so you can carry about your portfolio on your phone, which is quite nice and see what the current value is.

54:05 And we're gonna develop that app in terms of having a sale site so that if a landlord wants to sell, we'd much prefer they sell to another landlord as opposed to a first time buyer. So encouraging, you know, selling a buy select property with a tenant in situ to another landlord, offering the finance to be able to do that both from an individual perspective and a company vehicle perspective, so it's slightly different. I've been able to, you know, fire out headline rates as the buy select mark market changes. So the last twelve months has been pretty tough, the buy select financing. There's much more choice available in 2024 with lower fees because the fees just spiked incredibly in 2023.

54:53 So we see that as a massive opportunity and something that I wanna work with Michelle in terms of understanding and and and then building for our landlords. It's not just about FS. It's sort of landlord concierge service. So there are a number of things that we can offer wealth management. We can offer buy select mortgages, insurances. So so but but not not in a way where they feel like we're just selling stuff to them. You know? I wanna be able to provide them with a service with an app, which is informative, but offers them products that they're gonna need. And and the size of that opportunity, think, is significant, which is one of the projects which is gonna take some time to really sort of, you know, percolate and get that get that that proposition defined before we can launch.

55:43 That's great, Gareth. David, that concludes the q and a session for today. And, of course, any further questions that come through, the company can review all questions submitted today, and we'll publish those responses on the Investor Me company platform. But before we direct investors to provide you with their feedback, which I know is particularly important to the company, Gareth, could I please ask you for a few closing comments? Absolutely. Thank you for taking an interest. We're delighted that you're interested in our results, look forward to updating you again in September. Thank you very much. Gareth, David, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of the PROPERTY FRANCHISE GROUP PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.