The Property Franchise Group (TPFG) saw profit rise 38% off the back of a 13% hike in revenue for the year to the end of December, the final results for the year ended 31 December 2022 show.
The Group achieved a strong financial performance in FY22 through organic growth in lettings and the full impact of the acquisition of Hunters in March 2021, with revenue and management service fees increasing significantly against the economic backdrop, driving profits and earnings forward.
TPFG said a weaker sales market would lead to a stronger lettings business this year.
Pre-tax profit came in at £8.8m compared with £6.4m a year earlier, while group revenue shot up from £24m to £27.2m.
The estate agency group, with which includes several brands including EweMove, Ellis & Co, Hunters and Martin & Co, also saw its operating margin edge up from 40% to 41% during 2022.
Adjusted diluted earnings per share increased 6% to 28.4p, and investors will benefit from a dividend of 13p compared with 11.6p a year earlier.
Looking ahead, the group said Q1 2023 had performed “slightly ahead of management’s expectations” with regards to both revenue and profitability.
The company added that it expected higher interest rates and a lack of homes coming on to the sales market would result in a strong year in terms of lettings revenues.
Gareth Samples, chief executive of TPFG, commented: “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.”
Financial Highlights
· Group revenue increased 13% to £27.2m (2021: £24.0m)1
o 8% like for like increase on 2021 to £14.9m2
· Management Service Fees (“royalties”) increased 8% to £15.9m (2021: £14.7m)
o 5% like for like increase on 2021 to £11.8m2
· Adjusted EBITDA3 increased 14% to £11.8m (2021: £10.4m)
o 13% like for like increase on 2021 to £7.7m2
· Adjusted operating margin4 of 41% (2021: 40%)
· Profit before tax increased 38% to £8.8m (2021: £6.4m)
· Adjusted diluted earnings per share increased 6% to 28.4p (2021: 26.9p)
· Group generated £8.2m of free cash flow in FY22 enabling the repayment of the £7.5m term loan
· Net cash of £1.7m on 31 December 2022 (2021: net debt £2.7m)
· Dividends paid and declared for FY22 of 13.0p (FY21: 11.6p)
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 £22.2m at 31 December 2022 (2021: £26.5m)
· The number of assisted acquisitions by franchisees increased 75% to 19 (2021: 11) adding £2.1m to annualised network revenue (2021: £1.4m) 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
