Belvoir Group PLC PLC Group Belvoir Annual report and accounts 2019 and accounts Annual report Belvoir Group PLC Annual report and accounts 2019 We operate the largest franchised property group in the UK, supporting a network of 396 individual businesses across five distinct brands, specialising in residential lettings, property sales and property‑related financial services. The Belvoir vision We aim to extend our market share of the UK property sector through our model of operating multi-brand property franchise networks alongside other complementary property-related services. Revenue (£m) MSF (£m) Profit before tax (£m) EPS (p) 2 2 13.3 5.6 19.3 8.8 12.9 5.5 8.5 £19.3m £8.8m 7.9 £5.6m 13.3p +2%2 +3%2 +43% +4% 6.4 3.9 13.4 8.6 11.3 9.9 6.5 4.0 5.7 2.4 2.2 6.9 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Operational highlights Financial highlights • Exchanged on the acquisition of 17-office franchised • Group revenue increased by 43% to £19.3m (2018: £13.4m) estate agency network Lovelle in December 2019, • Growth in MSF of 4% to £8.8m (2018: £8.5m) with completion in January 2020 • Profit before tax of £5.6m (2018: £5.5m including • 24 (2018: 26) assisted acquisitions adding over net exceptional credit of £0.6m) £6.6m (2018: £6.9m) to franchisee network revenue • Strong lettings bias reflected in gross profit ratio • The Group now manages 68,5501 of 61% lettings:16% sales:19% financial services:4% other (2018: 62,780) properties (2018: 67%:17%:10%:6%) • Average management service fees (MSF) per franchise • Year-end cash of £3.6m (2018: £1.8m) office up 35% in four years • Net debt down significantly to £6.9m (2018: £9.6m) • 35% net increase in financial service advisers to 166 (2018: 123) • Number of offices up to 3961 (2018: 365) 1. Includes Lovelle network of 17 offices and 1,550 managed properties. 2. 2018 included net exceptional credit of £0.6m. Why invest in Belvoir? Strategic report IFC Highlights 2019 Belvoir has a proven track record in delivering growth 02 At a glance built around a business model of supporting networks 04 Chairman’s statement of entrepreneurial business owners. This is underpinned 06 Chief Executive Officer’s statement by a strong bias towards lettings, providing a reliable recurring revenue stream. 08 Our markets 12 Our business model 14 Our strategy Proven multi-brand franchise 16 Our key performance indicators (KPIs) 1 network model 18 Our people 20 Risk management 5 22 Financial review brands Corporate governance Harnessing entrepreneurial self-motivated franchisees coupled with central support 24 Introduction to corporate governance from franchisor 25 Board of Directors 26 Statement of corporate governance Learn more about our brands from page 2 31 Audit Committee report 32 Directors’ remuneration report History of strong financial growth 34 Directors’ report 2 23 Financial statements years of unbroken profit growth with 36 Independent auditor’s report EPS more than doubled in 4 years 40 Group statement of comprehensive income Learn more about our performance from page 22 41 Statements of financial position 42 Statements of changes in equity High degree of recurring revenue 43 Statements of cash flows 3 44 Notes to the financial statements 61% Shareholder information gross profit from lettings/16% sales/ 19% financial services/4% other 64 Notice of Annual General Meeting Highly cash generative underpinned 65 Corporate information by recurring gross profit from core 65 Corporate calendar lettings business Learn more about our risks from page 20 Stay up to date with the latest investor videos and Diversification presentations at belvoirgroup.com/investors 4 Learn more about our stakeholder £2.5m engagement from page 29 gross profit contribution from financial services in 2019 Up from £0.3m in 2016 Learn more about our business model from page 12 Long-serving, experienced 5 leadership team 11 years average length of service Stable management team with 27 years average industry experience Learn more about our leadership from page 24 Annual report and accounts 2019 01 At a glance Supporting our customers throughout their property journey We are the UK’s largest property franchise group delivering residential lettings and sales, and property-related financial services through 396 individual businesses nationwide. We operate through two divisions: a network of property franchisees and a network of financial advisers, which combine to support our customers throughout their property journey. About the Group Belvoir was founded in 1995 as a specialist franchised lettings agent and extended its services to offer estate agency in 2014. Since 2015 Scotland the Belvoir Group has embarked on 11 5 a multi-brand franchise strategy by acquiring the Newton Fallowell and Goodchilds networks in 2015, the Northwood network in 2016 and, very recently, the Lovelle network in January 2020. In 2017 we broadened our property-related services to encompass financial services through North the acquisition of Brook Financial East Services in 2017 and MAB (Gloucester) in 2018, such that we now operate a 3 1 network of specialist financial advisers Northern providing customers with mortgage Ireland and property-related financial 5 North services products. West Yorkshire and Our 313 property franchisees and 23 the Humber 166 financial service advisers operate through 396 individual business units 15 9 6 1 nationwide with a portfolio of 68,550 1 8 2 managed properties, making Belvoir the UK’s largest property franchise East group with total revenue of £19.3m. Midlands 26 6 29 Nationwide reach West Belvoir operates in the residential 172 Midlands 9 8 East of lettings, sales and financial services Belvoir 27 8 5 24 England markets through 396 individual Wales 20 11 1 1 business units across the UK. 88 4 2 17 Northwood London offi ces 14 7 36 South South East Newton Fallowell West 22 17 5 396 17 8 10 25 Lovelle na e tionwid 83 Financial services 02 Belvoir Group PLC Strategic Corporate Financial Shareholder report governance statements information E S G RTI S UN USE AL RT AGE PE D O ES O S O E H M R R P 68,550 7,433 9,342 M T C A N O D A NAGEME MPLETE RRANGED Our nationwide networks Property franchises Financial services Belvoir Northwood Brook Established in 1995 Established in 1995 Established in 2010 Historically a lettings franchise, Belvoir Northwood also started as a specialist Brook trades as the largest appointed now offers both sales and lettings services lettings franchise and now has nationwide representative of the Mortgage Advice across the UK. coverage offering both sales and lettings. Bureau (MAB), one of the UK’s leading networks for mortgage intermediaries. Brook manages a team of 48 mortgage and financial service advisers in Barnsley, and a network of 118 advisers who were brought onboard when the Group acquired MAB (Gloucester), based primarily in South Wales, the South West and the Midlands. Brook leverages its expertise to introduce new mortgage products and financial services across all Group networks, whilst also building its client list through partnership with independent agents. Newton Fallowell Lovelle Established in 1999 Established in 2006 Originally an East Midlands-based Originally a single office estate agent estate agent but, with the Goodchilds in Grimsby, Lovelle restructured into offices rebranding to Newton Fallowell, a franchise network in 2006 primarily this network is now a strong regional offering sales. property brand covering both the East and West Midlands. Annual report and accounts 2019 03 Chairman’s statement Leading the way in the property and franchising industries ­­—Michael Stoop, Chairman As we enter a period of of financial services. Meanwhile, our network Covid-19, dividend and outlook of financial advisers is up to 166 from just 13 Whilst trading in the year to date had been extreme economic uncertainty, in 2016, demonstrating the effectiveness encouraging and in line with management I will report on both our of our financial services strategy. expectations, Covid-19 has introduced huge strong performance in 2019 uncertainty in the year ahead for our industry Governance and the wider economy. Despite the resilience and our assessment of the The Board continues to apply the 2018 of our core lettings business, we will not be impact of Covid-19 on our Quoted Companies Alliance Corporate immune to the effects of reduced levels of Governance Code (the “QCA Code”) as the property sales and mortgage transactions, business and the actions that basis of the Group’s governance framework and the higher risk of bad debts and we are taking to weather as adopted last year. Within the Belvoir Group non-payment of rent. we promote a culture of good governance In accordance with the UK Government’s the storm. and we recognise how important our people guidance, with effect from 24 March our are to the success of the Group. Our corporate corporate offices have closed and our franchise Performance governance structures and processes and and financial services offices have been On the positive side, I can start by reporting how we engage with our stakeholders are advised to do likewise. We have considered that in 2019 Belvoir achieved its 23rd year reported upon in full later in this report. the risk to the critical services we provide to of uninterrupted profit growth despite the franchisees and are satisfied that, even with introduction of the tenant fee ban, the Learn more about our our teams working remotely from home, turmoil surrounding Brexit and the build-up governance from page 24 we will still be able to provide the necessary to the general election in December 2019.