("Martin & Co", the "Company" or the "Group")
Trading Update for Financial Year Ended 31 December 2015
MartinCo Plc, one of the UK's largest property franchises, today issues the following trading update for the year ended 31 December 2015, ahead of reporting its final results for the 12 month period on 5th April 2016.
· Strong 53% year-on-year growth in Management Service Fees revenue
· Group revenue up 38% to £7.1m* (2014: £5.2m)
· Expanding UK wide footprint - now trading from 287 offices (2014: 282)
· 12 new franchisees recruited for both the resale of existing franchises and start-ups
· Serving c.45,000 tenanted managed properties (2014: c.42,000)
· Group remains heavily weighted towards lettings, which accounts for 76% of Management Service Fees revenue
· Strong balance sheet with a net cash position of £2.3m*
· Current trading in line with expectations
Following the acquisition of "Xperience", the property franchise business of Legal & General in October 2014, the past 12 months have been focused on the integration of Xperience, realising operational efficiencies at a head office level and leveraging the MartinCo management team's expertise with lettings across the whole network.
The four established Xperience brands have seen year-on-year growth in lettings revenue of 10.5% and Martin & Co has seen 76% year-on-year growth in estate agency. Additionally, ongoing operational economies of £0.4m per annum have been realised and the one-off restructuring costs fully absorbed in 2015 trading.
The Group has provided operational assistance to its franchisees and in some cases financial support with smaller scale acquisitions. Throughout the year this has resulted in 11 acquisitions adding approximately 900 properties to the tenanted managed portfolio. The Board remains confident in its acquisition strategy and will look to progress further acquisitions where it can see potential for value creation.
Cash reserves increased to £4.3m and with unused loan facilities of £3.0m means that the Group is in a strong financial position at the period end. The Board believes the performance of the Company is in line with market expectations. The Board reaffirms its commitment to a progressive Dividend policy.
Government intervention in the "buy-to-let" sector will result in an increased tax burden for smaller investors with mortgage debt or for those who plan to purchase additional properties to add to their portfolio, although mitigation strategies exist for larger investors. However, the fundamental drivers for expansion of the UK private rented sector over the past decade remain in place: high net migration, a restricted supply of new housing stock with affordability and deposit hurdles for first time buyers and pension reform in early 2015 which unlocked pension funds for over-55 year olds. Total returns from Buy-To-Let investment over the past decade has outperformed most other asset classes as the prospect of owning a privately rented property to generate income in retirement and benefit from rising capital values remains attractive.
Commenting on Group performance, MartinCo Chief Executive Officer, Ian Wilson, said:
"In 2015 we demonstrated our ability to extract value from acquisitions with the successful integration of the Xperience business. We have consolidated all franchise support functions into our head office in Bournemouth and eliminated duplicate costs. We have also leveraged the increased buying power of the enlarged Group for the benefit of all of our franchisees by negotiating better rates with key suppliers.
"We do not envisage the Government's recent changes to the buy-to-let sector significantly impacting on our business. We are well positioned to sell investment properties if investors do decide to exit, and our research suggests that larger investors will purchase this stock. Buy-to-let investors have generally reduced gearing in their portfolios over the years since 2008 and are well positioned to absorb rising interest rates.
"We remain positive about the outlook for our core lettings business, from which 76% of our franchise royalty income is derived. I look forward to providing a further update at our full year results in April."
For further information, please contact:
Ian Wilson, Chief Executive Officer
David Raggett, Chief Financial Officer
Cenkos Securities plc
Max Hartley (Nomad)
Alex Aylen (Sales)
0207 397 8925
David Rydell, Henry Lerwill
020 3772 2500
MartinCo Group operates one of the UK's largest property franchise businesses through its 287 offices and 5 franchise brands Martin & Co, CJ Hole, Parkers, Ellis & Co and Whitegates.
The Group's franchisees manage approximately 45,000 properties on behalf of private clients. The Group added an estate agency service in 2013 and offers this service at 287 of its offices.
MartinCo is a multiple award winning business and the Directors and senior management have over 100 years of combined residential letting and estate agency experience.
This information is provided by RNS