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Belvoir Group PLC: Resilience of the franchise model

Belvoir Group PLC is a major UK property franchise group, supporting a network of 487 offices across seven distinct brands, specialising in residential lettings, property sales and property-related financial services. The company is listed on the AIM market and has a market cap of £77m.


We were delighted to welcome the CEO, Dorian Gonsalves and CFO Louise George, to a webinar for private investors to introduce the company and talk about the opportunities that lie ahead. A recording of the webinar is available here.

By way of introduction Dorian has been at Belvoir for 18 years and has been in the property sector for over 25 years. He has a deep knowledge of franchising, people management and property. His interests are very much aligned with shareholders as he owns 646k shares and options over a further 348k shares. Louise has 20+ years’ experience working at board level at AIM companies and 9 years at Belvoir. She owns 418k shares and holds options over a further 300k shares. Her expertise covers financial management and franchising. In total management own 5% of the shares with institutions accounting for 50% and private investors 45%.





Belvoir group operates in three areas: Residential Lettings; Financial Services and Estate Agency. Residential Lettings is the core of the group and accounts for 60% of gross profit. The key brands here are Belvoir and Northwood. A typical landlord client will own 1-5 properties and wants someone to manage these for them. On average Belvoir will charge a fee of 10%-12% for this service. Estate Agency contributes 20% of gross profits and is represented by Newton Fallowell and Lovelle. Humphreys was acquired in 2021 and serves the student lettings market and Mr & Mrs Clarke was acquired in 2022 and is a home-managed estate agent. Financial Services also accounts for 20% of gross profits and the company is the largest appointed representative of the Mortgage Advice Bureau.


The Belvoir Group has a strategy of both organic and acquisitive growth and has acquired 6 property businesses and 4 financial Services Businesses. They also help their own franchisees make acquisitions by finding suitable deals, putting the deal together and generally facilitating the transaction. The two covid years saw little activity on this front but the number of transactions doubled to 14 in 2022 and added £300k in Managed Service Fees (MSF). The level of assisted franchise acquisitions is expected to increase again in 2023 and Belvoir have an inhouse team of 5 working on this.


2022 was a year of good progress for Belvoir despite the difficult market conditions: Revenue grew 14% to £33.7m, Profit before tax fell 2% to £9.1m, Cash flow from operations was up 5% to £10.8m and the company ended the year with £1.2m of net cash. The group now manages 75,500 properties (+5%), from 487 locations (+14%), completed 10,970 house sales (-11%) and has 284 financial advisers. One of the key strengths of the group is the high degree of recurring revenue from managing properties.


Looking at the results in more detail, property revenue was up 2% to £15.6m and within this there was a 4% LFL increase in lettings income, franchise fees grew 17% and property sales income fell 15%. The financial services income grew 26% to £18.1m made up of LFL growth of 4% and acquisitions added 22%. Gross profits grew 6% to £20.3m and the GP margin fell by 4% from 64% to 60% due to the increased financial services income in the mix. Profit after tax was marginally ahead at £7.4m.


The long-term record of growth since the company floated in 2012 is very impressive. Originally just a lettings business, Belvoir diversified into house sales in 2013 and into financial services in 2016 and all three areas have grown strongly. In the last 8 years gross profit has grown £13.8m to £20.3m. Organic growth has contributed £4.1m and acquisitive growth has contributed £9.7m.


The Belvoir group footprint now covers 338 franchise territories and each franchise contributed an average of £34k in managed service fees in 2022, an increase of 2%. Franchise owners are an extremely motivated group and want to grow their businesses. The number of managed properties has grown steadily over the last 5 years and in 2022 there were 75,500 managed properties, an increase of 4% on 2021. House sales are more cyclical and Belvoir sold 10,970 houses in 2022, a decline of 11%. The average Belvoir franchisee generates revenues of £316k per office and across the group 4 franchise offices generate more than £1m of revenue. There are 16 franchise owners who generate more than a £1m of revenue from their individual networks.


On the Financial Services side the number of mortgage advisers has grown steadily to 284 in 2022, an increase of 17% on 2021 and is expected to grow again in the current year. Net financial services commission has grown every year and in 2022 grew 22% to £4.7m from 18,329 mortgages written, an increase of 11%. The mortgage market was impacted by the increase in interest rates last year but the company is seeing an increase in activity again. The company has taken a cautious approach to their financial services revenue this year, taking numbers down 20% which may prove too pessimistic. If bank rates top out or even fall during the latter part of the year this could lead to a rise in overall activity.


In terms of the market the rental sector is growing according to the ONS with a further 170k properties added to the rental market. There is also increased demand, with a further 2m individuals living in the UK since 2016 which helped drive rental prices up 10% last year. Belvoir is seeing the benefits of this with franchisee rental income up c7% in the first 3 months of the year. The property sales market is more cyclical and Belvoir are anticipating volumes falling 10%-20% this year. Again this may prove too pessimistic. House purchase mortgages follow the picture of house sales but remortgages have a slightly different pattern and are now picking up. Individuals who might have looked to fix a rate at the tail end of 2022 might have been offered rates of 6.5% or 7% and are now being offered fixed rates of 3.9% which is encouraging borrowers to remortgage again.


In summary the Belvoir group performed strongly in 2022 in tough markets. One of its great strengths is the predictable recurring revenue from the core lettings business which accounts for 60% of gross profit. There is diversification too from a range of 7 different brands and through participation in the estate agency and financial services markets. The business is strongly cash generative and has used this cash to make a number of successful acquisitions over the years and further growth through acquisitions is likely. Performance in the current year is in line with expectations and with this experienced management team in charge investors should feel comfortable about the future growth prospects of the group.


A recording of the webinar is available here. If you would like further information on other webinars organised by Yellowstone Advisory, please contact info@yellowstoneadvisory.com

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