Full Year Results

RNS Number : 1840D

Belvoir Lettings PLC

26 March 2014

 



For Immediate Release                                                                                                                                                26 March 2014                                                                                                                                  

BELVOIR LETTINGS PLC

(the "Company" or "Belvoir")

Full Year Results for the year ending 31 December 2013 and

Notice of Annual General Meeting

Belvoir Lettings PLC (AIM: BLV), one of the UK's largest lettings franchises, is pleased to announce full year results for the financial year ended 31 December 2013.

Financial Highlights

·     Profit before tax and exceptional items of £1.6m, an increase of 16% (2012: £1.4m)

·     Revenue up 44%  to £5.8m (2012: £4.0m)

·     Profit from operations margin of 26.5% (2012: 47.4%)

·     Recommended final dividend up 17% to 3.4p per share (2012: 2.9p). A total of 6.8p for the year

·     Over subscribed equity fundraising of £5.35m

Operational Highlights

·     160 franchise outlets at 31 December 2013 (2012: 149)

·     10 significant acquisitions completed by Belvoir franchisees in 2013 (2012: 5)
New franchises sold: 6 (2012: 11)

·     Number of owned outlets 6 (2012: 4)

·     Management Service Fee Income of £3.10m (2012: £2.85m)

Current trading and market

·     15% of all UK homes now in the Private Rented sector

·     Government estimates expect rental properties to rise a further 33% over the next eight years

·     Initiatives such as 'Help To Buy' have had negligible impact on the continued demand for rental property

Commenting on the results and outlook, Mike Goddard, Chairman of Belvoir Lettings, commented:

"This year has been a momentous year for Belvoir, not only have we grown through a significant number of acquisitions and organically, but have also expanded our offering by trialling Estate Agency. This progress to date as well as our potential for further growth was reflected in our oversubscribed placing of shares last year.

The rental market continues to show significant strength and we are confident that this will underpin our future growth and add further value to our shareholders."

The Annual Report and Accounts for the financial year ended 31 December 2013 and notice of the Annual General Meeting ("AGM") of the Company have been posted to shareholders and will be available on the Company's website at www.belvoirlettingsplc.com shortly. The Company's AGM will be held at 10.00 on 17 April 2014 at the offices of Buchanan, 107 Cheapside, EC2V 6DN.

For further details:

Belvoir Lettings PLC Mike Goddard, Executive Chairman Carl Chadwick, Chief Executive Officer	01476 584900
Cantor Fitzgerald Europe Richard Thompson or David Foreman, Corporate Finance David Banks, Corporate Broking	0207 894 7000
Buchanan Charles Ryland, Gabriella Clinkard	0207 466 5000

Chairman's Report

2013 has seen further progress at Belvoir, mainly through acquisitions and a further successful fund raising towards the end of the year.  Our revenue rose to £5.8m, up 44% compared to the previous year, and our profit before tax was £1.6m, an increase of 16% on 2012's £1.4m.

We have been able to declare an interim dividend of 3.4p per share and intend to announce a final dividend of 3.4p making a total of 6.8p per share for the year, an increase of 17% on 2012.  In addition, our shares have appreciated from 75p at IPO to 181p at year end, a growth of 141% since IPO.

Using funds raised at the IPO and at a subsequent share issue in November 2013, we continue to make acquisitions.  In September 2013, following on from the purchase of a chain of estate agents in Hampshire, we announced the launch of a new estate agency sales pilot, providing the opportunity for a number of franchisees to offer estate agency services.  These initiatives create further opportunities for our franchise owners to grow.

Our management team is focused on making acquisitions for franchisees, 10 being achieved in 2013 compared to five in the previous year. The same team also continue to appraise larger acquisitions that may be invaluable as corporate branches.

Significant management changes were announced at our annual franchise conference on 21 March, and I am pleased to see our management team strengthened. Two members of staff have achieved well deserved promotions, Ian Maclean and Cheryl Watts, and a new non statutory operations director, Lucy Noonan, joined the group in February.

Mike Goddard

Executive Chairman

Operational Review

Overview

I am delighted to report that we achieved a 44.3% increase in revenue for 2013. Our profit before tax was £1.6m but was lower than forecast. This is partly due to the investment in our acquisition strategy and our newly acquired network of corporate offices. We are now well placed to benefit from increased profits going forward.

Our network of 160 offices continues to increase in terms of numbers of outlets. Franchisees increased their turnover by a healthy 11% which compares favourably to other similar franchise models and resulted in our underlying Management Service Fee income increasing by 9% to £3.1m.

Following a successful fundraise in November 2013 our strategy is to continue to grow our network by means of both acquisition and organic growth. In addition, we launched an Estate Agency sales pilot in September 2013 with a view to offering additional services to our landlord clients. If successful, property sales will be available to our franchise network in Q4 2014.

The rental market

In recent years there has been a rapid growth in the residential lettings market with over 15% of all UK homes (3.2m) now in the private rented sector. Some Government estimates expect a further rise of 33% in the residential rental market over the next eight years - taking private rented property to 20% of all UK homes by 2021.

Over the past year the private rented sector has remained on a firm footing and despite Government 'pump priming' initiatives such as the 'Help To Buy' scheme there has been no real impact on the continued demand for rental property. All of our predictions show that in 2014 the number of people choosing to rent will continue to drive up demand. There are real indications of a recovery in the housing market with property prices predicted to rise, along with a projected 25% increase in buy to let mortgage lending.  With this we expect to see the re-emergence of more and more investment minded landlords looking to capitalise on this trend.

The Belvoir Difference

Our business model is very much that we are a service business that first and foremost has the needs of our tenants and landlords at its core. Our longstanding lettings specialism and expertise means that our Franchisees have the key skills to be able to establish the relationship that landlords and tenants need from their lettings agent. Our Franchisees all have that all important local knowledge and are often called upon to advise landlords on their property portfolio or where to place a buy to let investment, meaning they are very much thought of as the local property experts in their local areas. Our 151 strong network of fully trained, motivated and committed franchise owners across the UK has all helped to increase our market share nationally.

Our gold award at the Lettings Franchise of the Year Awards in association with The Times and The Sunday Times marks our third win and demonstrates the great work Central Office and our franchisees carry out on a daily basis.

Expanding our offering

This past year we have looked to establish ourselves further as local property experts and have focused on buy to let in particular. This is a great area for us to become more involved in as we already have the local knowledge and landlords trust our advice because they know we will be going on that journey with them as a lettings agent. We have also produced a buy to let guide to further support this initiative. Many of our agents have hosted very successful buy to let seminars inviting their landlords as well as the general interested public to advise on buy to let in their local area. The seminars involve independent experts such as a TV / Which? Magazine property expert to back up our advice and a wealth management expert. These events have been very successful and help our franchisees to build more of a presence in the community.

We are also piloting property sales within 10 franchised offices as there are clear indications that property transactions and property prices are increasing. With our existing infrastructure of offices and with around 30,000 residential properties under management, we feel this is an opportunity to offer additional services to our landlord clients. If the pilot proves to be successful, property sales will form part of our strategy to further develop revenues and increase the rate of growth of our underlying managed property portfolio.

A growing business

We appointed six new franchise owners in six new territories. In addition, we acquired 10 independent lettings agencies and incorporated them into our existing network.

Our strategy of growing our network organically and by acquisition continues and a successful fundraise of £5.35m in November 2013 means we are in a strong position to expand and secure new acquisitions going forward.

Dorian Gonsalves

Commercial & Franchising Director

Financial Review

Revenue

Group revenue for the financial year ended 31 December 2013 was £5.8m, an increase of £1.8m (up 44% on the prior year). This was driven by a number of events: Firstly, the acquisition of Claygold Property Limited which enabled the Group to enter the estate agency market.  This business generated £604k of estate agency fees, a new source of revenue for the group.  Secondly, lettings income from central office outlets was £1,488k. The lettings business in Grantham generated £453k. The lettings income generated from the outlets acquired in 2012 was £614k as a full 12 months of income was earned in 2013 (2012: £162k as acquisitions took place part way through the year).

New franchise fees of £135k were received as a result of taking on six new franchisees compared to 11 in the previous year, at the current fee of £22,500. This income was, however, supplemented by £509k generated when some of our existing franchises were sold to new owners and hence generated training and other fees.

The Group was also extremely pleased with the franchisee renewal revenue of £15k (2012: £11k) which is a 32% increase on the prior year. This was a result of 30 existing franchisees taking on new agreements (2012: 21).

Operating profit

Operating profit before tax was £1.6m for the year ended 31 December 2013 compared to £1.4m for the previous year. Refit and reorganisation costs in the acquired corporate outlets reduced their contribution to profit in the year but they are now well placed to contribute in 2014.

Operating incurred in relation to company owned offices; mainly property rental and staff wages of those who generate lettings or sales commission.

Wages and salaries at central office for the year ended 31 December 2013 amounted to £1,061k which was £10k above forecast for the year (2012: £966k), an increase of 9.8% caused by staff numbers increasing modestly as the business grows.

Costs have been incurred in carrying out the estate agency pilot which commenced in September 2013 but these have been offset by a pleasing initial performance of the estate agency business acquired in Hampshire.

Exceptional Items

There were no exceptional items to be reported in the Group Statement of Comprehensive Income for 2013, compared to flotation costs of £394k in 2012. 

Costs in relation to the fund raising of £5.35m to fund acquisitions in November 2013 have been taken to the share premium reserve.

No share based payment charge arose during the year to 31 December 2013 (2012: £108k).

Profit before tax

Profit before tax rose from £1,394k in 2012 to £1,616k in 2013, an increase of 16%. This is assisted by increased interest received on franchisee loans of £134k where loans have been made to franchisees (2012: £26k).

Taxation

The effective rate of corporation tax for year was 23.5% (2012: 24.5%).

Earnings per share

Earnings per share for the year were 5.9p (2012: 6.3p).

During the year the number of shares in issue rose from 20,666,667 to 24,010,417 shares following the share issue in November 2013.

Dividends

The Board is proposing a final dividend for 2013 of 3.4 pence per share. Together with the interim dividend of 3.4 pence per share paid to shareholders on 30 September 2013, this equates to a total dividend for the financial year of 6.8pence per share.

Subject to shareholders' approval on 17 April 2014, the dividend will be paid on 24 April 2014. The ex-dividend date will be 2 April 2014.

Cash flow and net debt

The net cash inflow from operations was £984k (2012: £1,393k), but needs to be reviewed in conjunction with note 21 to understand fully. It is stated after paying £169k of deferred consideration on the acquisitions and is reduced by £256k of interest received which is predominantly franchisee loans.

Loans repaid to the bank were £1,455k in the year (2012 £448k).

The bank debt position set out in notes 17 and 18 shows the new bank revolving credit facility received in the year of £2,500k (£1,000k of which was repaid before the year end) (2012: £nil). The proceeds of the share issue in November 2013 of £5,004k were held on deposit at the year end.

Liquidity and capital resources

The Group had cash balances of £5.0m at 31 December 2013 (2012: £1.8m).

Financial position

The Group stands on a robust financial platform and is strongly cash generative and this, together with the £5.35m raised at the share issue in November 2013, will enable the on-going funding of the acquisition programme.

Key performance indicators

The Group's key performance indicators include a range of financial and non-financial measures:

Management Service Fee Income

2013                                       £3.10m

2012                                       £2.85m

New franchises sold in the year

2013                                       6

2012                                       11                          

Total number of outlets

2013                                       160

2012                                       149

Number of owned outlets

2013                                       9

2012                                       4             

Carl B Chadwick

 Chief Executive Officer

Group Statement of Comprehensive Income

For the Financial Year ended 31 December 2013

	Notes	2013	2012
		£'000	£'000
Continuing operations
Revenue	2	5,840	4,048
Operating expenses		(4,293)	(2,129)
Profit from operations		1,547	1,919
Exceptional items Flotation costs	3	-	(394)
Share based payment charge		-	(108)
Operating profit	4	1,547	1,417
Finance costs	7	(87)	(75)
Finance income	7	156	52
Profit before taxation		1,616	1,394
Taxation	8	(377)	(215)
Profit and total comprehensive income for the financial year		1,239	1,179
Profit for the year attributable to the equity holders of the parent company		1,239	1,179
Earnings per share (basic and diluted) from continuing operations	10	5.9p	6.3p
The Group's results shown above are derived entirely from continuing operations.

Statements of Financial Position

As at 31 December 2013

		Group		Company
	Notes	2013	2012	2013	2012
		£'000	£'000	£'000	£'000
Assets
Non-current  assets
Intangible assets	11	2,884	857	-	-
Investments in subsidiaries	12	-	-	12,450	12,450
Property, plant and equipment	13	674	482	-	-
Trade and other receivables	14	1,875	583	-	-
		5,433	1,922	12,450	12,450
Current       assets
Trade and other receivables	14	1,577	857	4,280	1,788
Cash and cash equivalents	15	5,047	1,843	4,095	1,437
Tax Repayable		-	-	86	-
		6,624	2,700	8,461	3,225
Total  assets		12,057	4,622	20,911	15,675
Equity
Shareholders' equity
Share capital	20	240	207	240	207
Share premium		11,742	6,772	11,742	6,772
Other components of equity		162	162	(50)	(50)
Merger reserve		(5,774)	(5,774)	8,101	8,101
Retained earnings		880	943	860	642
Total equity		7,250	2,310	20,893	15,672
Liabilities
Non current liabilities
Interest bearing loans and borrowings	18	330	791	-	-
Deferred tax	24	316	118	-	-
		646	909	-	-
Current liabilities					-
Trade and other payables	16	2,045	769	18	3
Interest bearing loans and borrowings	17	1,897	461	-	-
Tax payable		219	173	-	-
		4,161	1,403		3
Total liabilities		4,807	2,312		3
Total equity and liabilities		12,057	4,622	20,911	15,675

Statements of Changes in Shareholders' equity

For the financial year ended 31 December 2013

Group
	Share capital	Share premium	Share based payments reserve	Other components of equity	Merger reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2012	109	-	63	162	(5,774)	193	(5,247)
Changes in equity
Share based payment release	-	-	(171)	-	-	171	-
Share based payment	-	-	108	-	-	-	108
Issue of equity share capital	98	6,772	-	-	-	-	6,870
Dividends	-	-	-	-	-	(600)	(600)
Transactions with owners	98	6,772	(63)	-	-	(429)	(6,378)
Profit and total comprehensive income for the financial year	-	-	-	-	-	1,179	1,179
Balance at 31 December 2012	207	6,772	-	162	(5,774)	943	2,310
Issue of equity share capital	33	4,970	-	-	-	-	5,003
Dividends	-	-	-	-	-	(1,302)	(1,302)
Transactions with owners	33	4,970	-	-	-	(1,302)	3,701
Profit and total comprehensive income for the financial year	-	-	-	-	-	1,239	1,239
Balance at 31 December 2013	240	11,742	-	162	(5,774)	880	7,250

Statements of Cash Flows

For the Financial Year ended 31 December 2013

		Group		Company
	Notes	2013	2012	2013	2012
		£'000	£'000	£'000	£'000
Operating activities
Cash generated from operating activities	21	984	1,393	(2,665)	(1,820)
Tax paid		(294)	(553)	-	-
		690	840	(2,665)	(1,820)
Investing activities
Dividends received		-	-	1,600	1,650
Capital expenditure on property, plant and equipment		(120)	(69)	-	-
Acquisitions		(1,878)	(334)	-	-
Loans granted to Directors		-	(199)	-	-
Franchisee loans granted		(852)	(462)	-	-
Loan repaid by Directors		199	-	-	-
Loans repaid by Franchisees		349	79	-	-
Finance income		156	52	21	20
Net cash flows from investing activities		(2,146)	(933)	1,621	1,670
Financing activities
Finance costs		(87)	(75)	-	-
Purchase of shares		-	(4,289)	-	(4,289)
Flotation costs		-	(394)	-	(394)
New loans in the period		2,500	-	-	-
Loan repayments in the period		(1,455)	(448)	-	-
Proceeds from share issue		5,004	6,870	5,004	6,870
Equity dividends paid		(1,302)	(600)	(1,302)	(600)
Net cash used in financing activities		4,660	1,064	3,702	1,587
Net change in cash and cash equivalents		3,204	971	2,658	1,437
Cash and cash equivalents at the beginning of the financial year		1,843	872	1,437	-
Cash and cash equivalents at the end of the financial year		5,047	1,843	4,095	1,437

Notes to the Financial Statements

1 Accounting  policies

General information

Belvoir Lettings Plc is the ultimate parent company of the Group, whose principal activity during the year under review was that of selling, supporting and training residential lettings franchises. In addition, a new revenue line was established in the year of Estate Agency. 

Registered office

The address of the registered office and principal place of business of Belvoir Lettings Plc is The Old Courthouse, 60A London Road, Grantham, Lincolnshire, NG31 6HR.

Basis of preparation

The Group and Company only financial statements have been prepared under the historical cost convention. Being listed on the Alternative Investment Market of the London Stock Exchange, the company is required to present its consolidated financial statements in accordance with International Financial reporting Standards (IFRS) as adopted by the European Union. Accordingly, these financial statements have been prepared in accordance with the accounting policies set out below which are based on the IFRS in issue as adopted by the European Union (EU) and in effect at 31 December 2013.

Going concern

After consideration of forecasts and making appropriate enquiries, the directors have a reasonable expectation that the company has adequate resources to continue in operational existence, and execute its plan for acquisition growth, for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts. There are no material uncertainties, of which directors are aware, that may cast doubt on the entity's ability to continue as a going concern by reference to the guidance issued by the Financial Reporting Council on going concern assessment.

Standards adopted for the first time

IFRS 13 'Fair Value Measurement' (IFRS 13)

IFRS 13 clarifies the definition of fair value and provides related guidance and enhanced disclosures about fair value measurements. It does not affect which items are required to be fair-valued. The scope of IFRS 13 is broad and it applies for both financial and non-financial items for which other IFRSs require or permit fair value measurements or disclosures about fair value measurements except in certain circumstances.

IFRS 13 applies prospectively for annual periods beginning on or after 1 January 2013. Its

disclosure requirements need not be applied to comparative information in the first year of application. The Group has, however, included as comparative information the IFRS 13

disclosures that were required previously by IFRS 7 'Financial Instruments: Disclosures'.

The Group has applied IFRS 13 for the first time in the current year, see Notes 19 and 23.

Standards, amendments and interpretations to existing standards that are not yet effective

At the date ofauthorisation of these financial statements the following new standards and interpretations have been issued but are not yet effective and have not been applied in these financial statements:

·     IFRS 10 Consolidated Financial Statements (EU effective date 1 January 2014)

·     IFRS 11 Joint Arrangements (EU effective date 1 January 2014)

·     IFRS 12 Disclosure of Interests in Other Entities (EU effective date 1 January 2014)

·     IAS 27 (Revised), Separate Financial Statements (EU effective date 1 January 2014)

·     IAS 28 (Revised), Investments in Associates and Joint Ventures (EU effective date 1 January 2014)

·     Transition Guidance - Amendments to IFRS 10, IFRS 11 and IFRS 12 (EU effective date 1 January 2014)

·     Investment Entities - Amendments to IFRS 10, IFRS 12 and IAS 27 (effective 1 January 2014)

·     Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32 (effective 1 January 2014)

·     IFRIC Interpretation 21 Levies (effective 1 January 2014)

·     Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36) (effective 1 January 2014)

·     Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39) (effective 1 January 2014)

·     Defined Benefit Plans: Employee Contributions (Amendments to IAS 19) (IASB effective date 1 July 2014)

·     IFRS 9 Financial Instruments (no mandatory effective date)

At this point in time it is not expected that these standards will have a significant impact on the Group financial statements. However management will continue to review their potential effect on an ongoing basis.

Basis of consolidation

The Group financial statements include those of the parent company and its subsidiaries, drawn up to 31 December 2013. Subsidiaries are entities over which the Group obtains and exercises control through voting rights. Income, expenditure, unrealised gains and intra-group balances arising from transactions within the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

The acquisition of its principal subsidiaries by the Group in prior years was a common control business combination, which falls outside the scope of IFRS 3 and we therefore developed an accounting policy based on the pooling of interests method.  Under this method, the financial statements of the parties to the combination are aggregated and presented as though the combining entities had always been part of the same Group.

As a result of the pooling of interests method, a number of accounting adjustments arose. The parent company Statement of Financial Position shows a merger reserve of £8,101k and an investment of £12,450k. On a group basis, the investment by Belvoir Lettings Plc in Belvoir Property Solutions Limited and the investment by Belvoir Property Solutions Limited in Belvoir Property Management (UK) Limited were restated at the nominal value of shares issued and cash paid rather than at fair value. This results in a merger reserve with a debit balance of £5,774k in the Group Statement of Financial Position.

Subsequent acquisitions of subsidiaries are dealt with by the acquisition method. The acquisition method involves recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition.

Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of acquisition cost over the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the date of acquisition. Acquisition related transaction costs arerecorded as an expense in the Group Statement of Comprehensive Income.

Goodwill is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment losses. Negative goodwill (where the fair value of the assets acquired exceeds the purchase price) is recognised immediately after the acquisition in the Group Statement of Comprehensive Income.

Revenue recognition

Revenue represents income from the sale of franchise licences (initial franchise fees), provision of training, and ongoing support of the franchisees.

Management Service Fees are invoiced to individual franchisees on a monthly basis in relation to a percentage of their turnover for any given month. They are recognised at the point of invoice.

Revenue also includes fees generated by franchises operated within the Group. These internal franchises invoice landlords on a monthly basis and so recognise the income during the period in which the work is carried out.

A new revenue line recognised in the year is that of estate agency fees.  Revenue from fees in the estate agency business is recognised by reference to the legal exchange date of the housing transaction as the group has fulfilled all its obligations at that point.

Initial franchise fees are recognised upon signing of the contract as it is at this point that the new franchisee has a legal obligation to make good the terms of the contract. The initial fees are for the use of the brand along with initial training and support and promotion during the opening phase of the new office. As such the Group regard this as a separate initial transaction for which they have fulfilled their obligations.

National Promotional Fund is invoiced to franchise owners on a monthly basis and is calculated based on a percentage of the turnover of individual franchises. The fund is held internally in the Statement of Financial Position (as agent for the franchise) for the purposes of promoting the brand to the benefit of all franchises. 20% of the National Promotional Fund is recognised as income each month (under the terms of the franchise agreements) in respect of management fees for promoting the brand. No other element of receipt is recognised as revenue.

Exceptional items

Exceptional items are those which by reason of their size or nature are considered by the directors to be necessary to be disclosed separately so as to inform users of the financial statements.

Intangible assets

In accordance with IFRS 3 Business Combinations, an intangible asset acquired in a business combination is deemed to have a cost to the group of its fair value at the acquisition date.  The fair value of the intangible asset reflects market expectations about the probability that the future economic benefits embodied in the asset will flow to the group.

Amortisation charges are included as adjusting items in operating costs in the Statement of Comprehensive Income.  Amortisation begins when the intangible asset is first available for use and is provided at rates calculated to write off the cost of each intangible asset over its expected useful life, as follows:

Customer contracts        - Between 10 and 25 years

Subsequent to initial recognition, intangible assets are stated at deemed cost less accumulated amortisation and impairment charges.

Property, plant and equipment

Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment.

Depreciation is calculated so as to write off the cost or revaluation of an asset, less its estimated residual value, over the useful economic life of that asset as follows:

Freehold Property - 2% Straight line on cost

Plant & Machinery - 20% on written down value

Fixtures & Fittings - 20% on written down value

Equipment  - 20% on written down value

Material residual value estimates and expected useful lives are updated as required but at least annually.

The Group has elected to use a previous revaluation of the freehold property before the date of transition as the deemed cost at the date of transition. The buildings element of this cost is subsequently depreciated from this date. The net book value of the property as at the date of transition was £375,892.

Impairment testing of goodwill, other intangible assets and property, plant and equipment.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash flows (cash generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which the management monitors goodwill.

Cash generating units to which goodwill has been allocated are tested for impairment at least annually.  All other individual assets or cash generating units are tested whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset's or cash generating unit's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on estimated future cash flows from each cash-generating unit, discounted at a suitable rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures is directly linked to the Group's latest approved budgets, adjusted as necessary to exclude any future restructuring to which the Group is not yet committed.

Discount rates are determined individually for each cash generating unit and reflect their respective risk profiles as assessed by the directors.

Impairment losses for cash generating units reduce first the carrying value of any goodwill allocated to that cash generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Impairment charges are included in operating costs in the Statement of Comprehensive Income.

Investments

Investments in subsidiaries are stated at cost less provision for impairment.

Taxation

Current tax is the tax currently payable based on the taxable profit for the year.

Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amount of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit.

Tax losses available to be carried forward as well as other income tax credits to the company are assessed for recognition as deferred tax assets.

Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to offset against future taxable income. Current and deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of

realisation, provided they are enacted or substantively enacted at the reporting date.

Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the statement of comprehensive income, except where they relate to items that are charged or credited directly to equity, in which case the related deferred tax is also charged or credited directly to equity.

Cash and cash equivalents

Cash and cash equivalents are defined as cash balances in hand and in the bank including short term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

Operating lease commitments

Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged to the statement of comprehensive income on a straight line basis over the period of the lease.

Finance lease commitments

Leases which transfer substantially all of the risks and rewards of ownership to the lessee are classified as finance leases. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets of the Group at their fair value or, if lower, at the present value of the minimum leases payments, determined at the inception of the lease, and depreciation is provided accordingly. The liability to the lessor is included in the statement of financial position as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant effective rate of interest on the remaining balance of the liability.  

Financial assets

The Group has only financial assets classified as loans and receivables. The Group's loans and receivables as stated in the statements of financial position comprise trade and other receivables and cash and cash equivalents.

Cash and cash equivalents include cash in hand and deposits held at call with banks.

Loans and receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of services to franchisees (e.g. trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that

are directly attributable to their acquisition or issue, and are subsequently carried at amortised cost using

the effective interest rate method, less provision for impairment.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net; such provisions are recorded in a separate allowance account with the loss being recognised within operating expenses in the Statement of Comprehensive Income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. From time to time, the Group elects to renegotiate the terms of trade receivables due from franchisees. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts owed and, in consequence, where material the new expected cash flows are discounted at the original effective interest rate.

Financial liabilities

Financial liabilities comprise trade payables, borrowings and other short-term monetary liabilities, which are initially recognised at fair value net of transaction costs and subsequently carried at amortised cost using the effective interest method.

Share-based employee remuneration

Prior to The Group's listing on AIM on 19 February 2012, it operated an EMI scheme for employee share options, all of which were exercised prior to the Group reorganisation and flotation.

The Group intends to operate an equity-settled share-based remuneration plan for its senior management. The planned scheme is an HMRC approved Company Share Ownership Plan intended to issue shares equivalent to 1% of the fully diluted share capital of Belvoir Lettings Plc The fair value of awards to employees that take the form of shares or rights to shares in the parent company will be recognised as an expense within this Group, as the employer, with a corresponding increase in equity. The fair value will be measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted will be measured using an option valuation model; taking into accounts the terms and conditions upon which the options are proposed to be were granted.

In addition to the above noted planned scheme for staff there is an unapproved share option scheme which allows Dorian Gonsalves to take up 161,812 shares at the float price of 75p. No value attaches to this option for the purposes of the employee share based remuneration rules.

There are currently no other share option schemes for the Directors.

Equity

Equity comprises the following:

-     share capital represents the nominal value of equity share

-     share premium represents the excess over nominal value of the fair value of consideration received for shares, net of expenses of the share issue

-     share based payments reserve represents the reserve arising from the fair value of the share options charge

-     other components of equity represents the revaluation reserve, being the accumulated net surplus on revaluation of property assets

-     merger reserve represents the reserve arising in the Group accounts following the application of merger accounting in the treatment of the reorganisation and flotation of the Group

-     retained earnings represents retained profits and losses

Significant judgements and key sources of estimation uncertainty

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. 

In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets

and liabilities within the next financial year are discussed below.

Initial recognition and useful lives of intangible assets

The fair value of customer contracts is recognised on each individual acquisition and requires the exercise of management judgement in each case, Customer contracts are amortised over their useful lives. Useful lives are based on the management's estimates of the period that the assets will generate revenue and are periodically reviewed for continued appropriateness. Changes to estimates can result in significant variations in the carrying value and amounts charged to the statement of comprehensive income in specific periods.

The movement on intangible assets is presented in note 11.

Revenue recognition

Initial franchise fees are recognised upon signing of the contract as it is at this point the new franchisee has a legal obligation to make good the terms of the contract. The initial fees are for the use of the brand along with initial training and support and promotion of the new office. The directors therefore believe that the benefits are transferred upon signing the contract and so revenue is recognised at this point. Future benefits from the contract are dealt with in the continued monthly Management Service Fee which is spread across the term of the franchise agreement.

Revenue from fees in the estate agency business is recognised by reference to the legal exchange date of the housing transaction as the group has fulfilled all obligations at that point.  The directors therefore believe this to be appropriate as the contract has completed with a property being transferred to a new owner and therefore revenue is recognised at this point.

Basis of consolidation

The acquisition of its principal subsidiaries by the Group was a common control business combination, which falls outside the scope of IFRS 3 and we have therefore developed an accounting policy based on the pooling of interest method.  Under this method, the financial statements of the parties to the combination are aggregated and presented as though the combining entities had always been part of the same Group.

2 Segmental information

The Executive Committee of The Board, as the chief operating decision maker, reviews financial information for and makes decisions about the Group's overall franchising business. In the year to 31 December 2013 the Board identified a single operating segment, that of property lettings, estate agency and franchising. A new material income stream in the year is that of estate agency fees.

The segmental information is, therefore, the same as that set out in the consolidated statement of comprehensive income.   The directors do not consider the presentation of gross profit within the Group Statement of Comprehensive Income to reflect a true position of the Group's activities and core operations, which is that of a property letting and sales franchisor.  Therefore, the directors disclose operating profit as the key performance measure.  The reported segment is consistent with the Group's internal reporting for performance measurement and resources allocation.

Management do not report on a geographical basis and no customer represents greater than 10% of total revenue in either of the periods reported.  The directors believe there to be four material income streams which are split as follows:

	2013	2012
	£'000	£'000
Management service fee	3,104	2,851
Own operated franchises- Lettings income	1,488	709
Own operated franchises- Estate Agency fees	604	-
Initial fees and other income	644	488
	5,840	4,048

3 Exceptional items

Flotation costs

The costs in the prior year represent the professional fees and associated costs incurred in relation to the listing of the Group on the Alternative Investment Market.

Share based payment charge

Details of the share based payment charge in the prior year are included at note 27 to these financial statements.

4 Operating profit

Operating profit is stated after charging:

															2013	2012
															£'000	£'000
Depreciation - owned assets Depreciation - financed assets Amortisation of customer contracts Auditor's remuneration															46 13	35 -
															41	21
-Audit of company's annual accounts -Tax and other advisory -Reporting accountant work -Statutory audit of subsidiaries															13 45 -	13 1 44
Operating lease expenditure															17	17
-Land and property -Other															53 50	22 43

Profit for the financial year

The parent company has taken advantage of section 408 of the Companies Act 2006 and has not included its own Statement of Comprehensive income in these financial statements.  The profit on ordinary activities after taxation of the company for the year was £1,520,000 (2012: £1,242,000).

5 Employees

Employment costs	Group
	2013	2012
	£'000	£'000
Wages and salaries	953	873
Social security costs	103	91
Pension costs	5	2
Share based payment charge	-	108
	1,061	1,074

The average monthly number of employees during the year was as follows:

Management and administration

60

40

6 Emoluments of directors and key management personnel

Key management personnel are defined as directors of the Group. Details of the remuneration of key management personnel are shown below.

Details of directors' emoluments are disclosed in the Director's Remuneration Report.

Remuneration in respect of the directors was as follows:

Total directors' emoluments

Short term employee benefits	2013	2012
	£'000	£'000
Directors' emoluments	382	298
Social security costs	6	32
Share based payment charge	-	108
	388	438

	2013 £'000	2012 £'000
Executive directors	348	416
Non-executive directors	50	22
	388	438

During the year no directors (2012: two directors) exercised share options.

6 Emoluments of directors and key management personnel

Employees and directors

Emoluments of the highest paid director were as follows:

	2013 £'000	2012 £'000
Short term employee benefits:
Salary & fees including bonuses	121	111
Benefits in kind	18	17
Share based remuneration	-	61
	139	189

7 Finance income and costs

Finance costs	2013	2012
	£'000	£'000
Bank interest	87	75
	87	75

Finance income	2013	2012
	£'000	£'000
Deposit account interest	22	26
Other similar income	134	26
	156	52

8 Taxation

		2013		2012
		£'000		£'000
UK Corporation tax at 23.5% (2012:  24.5%)
Current taxation		337		215
Deferred taxation		40		-
Total tax charge in the statement of comprehensive income		377		215
Factors affecting the tax charge for the year:
		2013		2012
		£		£
Profit before taxation		1,616		1,394
Profit before taxation multiplied by the standard rate of corporation tax in the UK of 23.5% (2012: 24.5%)		380		342
Effects of:
Expenses not deductible for tax purposes		16		48
EMI scheme deduction		-		(140)
Capital allowances in excess of depreciation		(17)		-
Adjustment in respect of prior year		-		(35)
Small Companies rate		(2)		-
Total tax charge in statement of comprehensive income		377		215

9 Dividends

	2013	2012
	£	£
Final dividend for 2012	600	-
Interim dividends paid on ordinary shares of £0.01 each in the current year	702	600
Total dividend paid	1,302	600
Final dividend for 2012 per share paid in 2013 were as follows:
	Dividend per share	Dividend £'000
	£
19 April 2013	0.029	600
Interim dividends per share paid in the year were as follows:	Dividend per share	Dividend
	£	£'000
30 September 2013	0.034	702
Interim dividend per share paid in 2012 were as follows:
	Dividend per share	Dividend £'000
	£
28 September 2012	0.029	600

The directors will propose a final dividend 3.4p per share amounting to £816k for payment on 24 April 2014. As this remains conditional on shareholders' approval, provision has not been made in these financial statements.

10 Earnings per share

Earnings per share is calculated by dividing the profit for the financial year by the weighted average number of ordinary shares during the year. Earnings per ordinary share have been calculated by dividing the profit after tax for the year, by the weighted average number of shares deemed to be in issue in the year.

			2013
			£'000
Profit for the financial year		1,239
Weighted average number of ordinary shares		21,023,944
Earnings per share		5.9p

		2012
		£'000
Profit for the financial year		1,179
Exceptional losses		502
Weighted average number of ordinary shares		18,776,528
Earnings per share		6.3p
Adjusted earnings per share (excluding exceptional items)		8.9p

11 Intangible assets

	Goodwill		Customer contracts		Total
	£'000		£'000		£'000
Group
Gross carrying amount
At January 2012	-		323		323
Additions	289		547		836
As at 31 December 2012	289		870		1,159
Additions	821		1,247		2,068
As at 31 December 2013	1,110		2,117		3,227
Amortisation and impairment
At January 2012	-		281		281
Amortisation for the year	-		21		21
As at 31 December 2012	-		302		302
Amortisation for the year	-		41		41
As at 31 December 2013	-		343		343
Net book value
At 31 December 2013	1,110		1,774		2,884
At 31 December 2012	289		568		857
At 1 January 2012	-		42		42

Goodwill

The goodwill arising in the year relates to the acquisitions of Claygold Property Limited, a sales and lettings business based in Hampshire, certain trade and assets of Victoria Soames Limited (Belvoir Belgravia) and the purchase of an additional portfolio for Burton. See note 26 for further details of the acquisitions.  

There have been no impairment charges in 2013. Goodwill is tested annually for impairment by reference to the value in use of the relevant cash generating units, which are the group's business segments. This is calculated on the basis of projected cash flows for the following five years derived from detailed budgets for the ensuing year based on past experience, with subsequent years including modest nominal rates of sales and cost growth of 10% per annum and generally steady levels of overhead. These cash flows are adjusted to present day values at a discount rate based on a weighted average cost of capital of 10% per annum, calculated by reference to year-end data on equity values and interest, dividend and tax rates. The residual value at the end of the five years, computed by reference to projected year six cash flows and discounted, is also included. There was no requirement for any impairment provision at 31 December 2013.

The directors have considered the sensitivity of the key assumptions and have concluded that any possible changes that may be reasonably contemplated in these key assumptions would not result in the value in use falling below the carrying value of goodwill, given the amount of headroom available.

Intangibles - customer contracts

The additions to other intangible assets during 2013 relate to the acquisition of Claygold Property Limited, trade and assets from Victoria Soames Limited and the purchase of a new lettings portfolio in Burton.

12 Investments

Investments in subsidiaries

	Company
	£'000
Cost
At 1 January 2012	-
Additions in year	12,450
At 31 December 2012 and 31 December 2013	12,450
Amortisation
As at 1 January 2012, 31 December 2012 and December 2013	-
Net book value
At 31 December 2012 and 31 December 2013	12,450
At 1 January 2012	-

As at 31 December 2013 the company owns 100% of the ordinary share capital and voting rights of the following companies:

Subsidiary	Country of incorporation		Principal Activity
Belvoir Property Solutions Limited	England & Wales		Holding Company
Belvoir Property Management (UK) Limited **	England  & Wales		Property letting franchising
Belvoir London Central Limited ***	England & Wales		Letting agency
Staffordshire Estates Lettings Limited ***	England  & Wales		Letting agency
Claygold Property Limited * Cedar Andover Limited *** Cedar Basingstoke Limited *** Burton Lettings Limited *** Belvoir Lettings (Cumbria) Limited ***	England & Wales England & Wales England & Wales England & Wales England & Wales		Sales agency Sales agency Sales agency Letting agency Letting agency
Redwoods Lettings Limited*** Redwoods Estate Agents Limited*** Redwoods of Tadley Limited*** Redwoods Financial Services Limited***	England & Wales England & Wales England & Wales England & Wales		Dormant Dormant Dormant Dormant

*Purchased in the year by subsidiary Belvoir Property Management (UK) Limited.  For details of the acquisitions, see note 26.

** subsidiary of Belvoir Property Solutions Limited.

*** subsidiary of Belvoir Property Management (UK) Limited

The carrying value of the investment has been considered for impairment. As the market capitalisation of the Group is considerably in excess of the cost of investment, and the trade of the Group is solely attributable to the trading subsidiaries, no impairment has been recognised in the year.

13 Property, plant and equipment

	Freehold  property	Plant and machinery	Fixtures and fittings	Office equipment	Total
Group	£'000	£'000	£'000	£'000	£'000
Cost/deemed cost
At 1 January 2012	385	181	62	12	640
Acquisitions	-	-	18	-	18
Additions	-	23	46	-	69
As at 31 December 2012	385	204	126	12	727
Acquisitions	-	-	517	-	517
Additions	-	47	73	-	120
As at 31 December 2013	385	251	716	12	1,364
Depreciation
At 1 January 2012	19	140	46	5	210
Charge for the year	4	11	19	1	35
As at 31 December 2012	23	151	65	6	245
Acquisitions	-	-	386		386
Charge for the year	4	16	38	1	59
As at 31 December 2013	27	167	489	7	690
Net book value
As at 31 December 2013	358	84	227	5	674
As at 31 December 2012	362	53	61	6	482
As at 1 January 2012	366	41	16	7	430

As at 31 December 2013, the Group included in fixtures and fittings motor vehicles held under finance leases with a net book value of £62k (2012: £nil).This is as a result of the acquisition of Claygold Property Limited in the year (see note 26).

The Company has no property, plant or equipment held under finance leases.

14 Trade and other receivables

	Group		Company
	2013	2012	2013	2012
	£'000	£'000	£'000	£'000
Current
Trade receivables	308	247	-	-
Amounts owed by Group undertakings	-	-	4,269	1,762
Loans to franchisees due in less than one year	462	171	-	-
Other debtors	161	59	-	5
Prepayments and accrued income	649	380	11	21
	1,577	857	4,280	1,788

	Group		Company
	2013	2012	2013	2012
	£'000	£'000	£'000	£'000
Non-current
Loans to franchisees and employees due in more than one year	1,875	583	-	-

Trade receivables are stated net of bad debt provisions of £nil (2012: £nil).

Loans to franchisees are spread across varying terms and the agreements do not include any collateral on behalf of the franchisees.

Ageing of trade receivables

Some of the unimpaired trade receivables are past due at the reporting date.  Information on financial assets past due not impaired is as follows:

	Group		Company
	2013	2012	2013	2012
	£'000	£'000	£'000	£'000
Of which:
Not more than three months	222	132	-	-
More than three months but not more than six months	20	24	-	-
More than six months but not more than one year	53	4	-	-
More than one year	13	5	-	-
	308	165	-	-

Other debtors and loans to franchisees do not contain impaired assets.

There is no movement in bad debt provisions during the year in the Group or the Company

15 Cash and cash equivalents

	Group		Company
	2013	2012	2013	2012
	£'000	£'000	£'000	£'000
Bank accounts	5,047	1,843	4,095	1,437
Cash and cash equivalents	5,047	1,843	4,095	1,437

16 Trade and other payables

	Group		Company
	2013	2012	2013	2012
	£'000	£'000	£'000	£'000
Current
Trade payables	226	141	15	3
Other taxes and social security	235	207	-	-
Accruals and deferred income	1,584	421	3	-
	2,045	769	18	3

Included within accruals and deferred income is a balance of £146,452 (2012: £143,688) relating to the National Promotional Fund (NPF) for the promotion of the Belvoir brand. The business collects the funds on a monthly basis from the franchises based on a percentage of their turnover and takes the balance directly to the statement of financial position. Any subsequent expenditure in relation to promoting the company is offset against this pool of funds. Each month, a management charge of 20% of that month's total NPF is recognised as revenue in the Group.

17 Current portion of long term borrowings

	Group		Company
	2013	2012	2013	2012
	£'000	£'000	£'000	£'000
Current
Bank loans ( mortgage )	46	46	-	-
Bank loans ( term loan )	1,851	415	-	-
	1,897	461	-	-

All amounts are short term and their carrying values are considered reasonable approximations of fair value.

18 Long term borrowings

	Group		Company
	2013	2012	2013	2012
	£'000	£'000	£'000	£'000
Long term			-
Bank loans ( mortgage )	21	67	-	-
Bank loans ( term loan)	309	724	-	-
	330	791	-	-

Borrowings comprise £2,227,211 (2012: £1,252,150) secured on assets of the Group. The repayment profile of borrowings is as set out in note 19.

Term loan 1, balance outstanding of £721k as at 31 December 2013 (2012: £1,139k)  is repayable in quarterly instalments over the period ending September 2015 and bears interest at 4.5% above LIBOR related rates.

Revolving credit facility loan 2 balance outstanding of £1,439k (2012:£nil) is repayable in full in the period ending 20 May 2016 and bears interest at 4.25% above LIBOR related rates.

Revolving credit facility of £1,439k is included within current liabilities as it was technically repayable on demand because of a breach of a covenant at the balance sheet date. The bank has since waived its rights to take any action as a results of this breach.

The mortgage is repayable in monthly instalments over the period ending May 2015 and bears interest at 2.35% over bank base rate.

19 Maturity of borrowings and net debt

			2013
	Mortgage	Term Loans	Total
31 December 2013	£'000	£'000	£'000
Group
Repayable in less than six months	24	1,658	1,682
Repayable in months seven to twelve months	24	219	243
Current portion of long term borrowings	48	1,877	1,925
Repayable in years one to five	21-	330	351
Total borrowings	69	2,207	2,276
Less: interest included	(2)	(47)	(49)
Total net debt	67	2,160	2,227

			2012
	Mortgage	Term Loans	Total
31 December 2012	£'000	£'000	£'000
Group
Repayable in less than six months	25	233	258
Payable in seven to twelve months	25	229	254
Current portion of long term borrowings	50	462	512
Repayable in years one to five	71	758	829
Total borrowings	121	1,220	1341
Less: interest included	(8)	(81)	(89)
Total net debt	113	1,139	1,252

Bank loans and overdrafts are secured with a fixed and floating charge over the Group assets.  The loans are being repaid over four years in equal instalments.  Interest is charged monthly on the outstanding amount of the loans at rates which track 2.35% above Bank of England base rate and 4.5% above LIBOR. The bank loans are shown net of associated loan arrangement costs which are being amortised over the terms of the loans.

The second term loan is interest only at 4.25% above LIBOR and is fully repayable on 20 May 2016.

20 Called up share capital

	2013		2012
	Number	£'000	Number	£'000
Group Authorised, allotted, issued and fully paid Ordinary shares of 1p each	24,010,417	240	20,666,667	207
Company Authorised, allotted, issued and fully paid Ordinary shares of 1p each	24,010,417	240	20,666,667	207

		Group Number	Company Number
As at 1 January 2012 (under pooling of interests method)		10,947,713	-
Issued in the year
Redenomination & shares issued at fair value to acquire Belvoir Property Solutions Limited		-	5,947,713
Initial allotment		-	5,000,000
First admission (21 February 2012 - share price 75p)		4,000,000	4,000,000
Second admission (22 February 2012 - share price 75p)		5,718,954	5,718,954
As at 31 December 2012		20,666,667	20,666,667
Third admission (22 November 2013 - share price 160p)
		3,343,750	3,343,750
As at 31 December 2013		24,010,417	24,010,417

The new shares issued in the year were as a result of the Company offering a third admission on the Alternative Investment Market (AIM) in the year.

21 Reconciliation of profit before taxation to cash generated from operations

Group	2013	2012
	£'000	£'000
Profit before taxation	1,616	1,394
Depreciation and amortisation charges	100	56
Share based payment charge	-	108
Flotation costs	-	394
Finance costs	87	75
Finance income	(156)	(52)
	1,647	1,975
Increase in trade and other receivables	(467)	(267)
Cash outflow from deferred consideration paid in year	(169)	-
Decrease in trade and other payables	(27)	(315)
Cash generated from operations	984	1,393

Company	2013	2012
	£'000	£'000
Profit before taxation	1,533	1,242
Flotation costs	-	394
Dividend received	(1,700)	(1,650)
Finance income	(21)	(20)
	(188)	(34)
Increase in trade and other receivables	(2,692)	(1,789)
Increase in trade and other payables	15	3
Cash consumed in operations	(2,665)	(1,820)

22 Operating lease commitments

	2013	2012
	£'000	£'000
Operating lease payments expensed during the year:
Land and property	53	22
Motor vehicles	41	41
Other	9	2
	103	65
Minimum operating lease commitments falling due:
Within one year Land and property Motor vehicles Other	203 38 3	17 47 3
Between one and five years Land and property Motor vehicles Other	244 747 26 1	67 4 34 3
	774	41
More than five years
Land and property	276	-
Total commitment	1,294	108

22 Operating lease commitments (continued)

The increase in leasing commitments is due to the acquisition of Claygold Property and the renewal of leases in the year.

Land and property leases comprise sites in Grantham, Cumbria, Lichfield and Burton. The earliest exits to these leases fall due during 2014.

23 Financial instruments

Capital management policy

The Group manages its capital to ensure its operations are adequately provided for as described below. The principal risks faced by the Group are detailed below. The Group's objective when managing capital is to safeguard its ability to continue as a going concern and so provide returns for shareholders; The Group is meeting its objective by aiming to achieve growth which will generate regular and increasing returns to the shareholder.

The capital structure of the Group consists of cash and cash equivalents and equity attributable to the shareholder comprising issued capital, reserves and retained earnings as disclosed in the statement of changes in equity.

Financial instruments - Risk Management

The Group is exposed through its operations to the following financial risks:

-     Interest rate risk

-     Credit risk

-     Liquidity risk

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group's objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

Principal financial instruments

The principal financial instruments used by the Group, from which financial instrument risk arises, are included in the summary below.

Summary of financial assets and financial liabilities by category:

	Group		Company
	2013	2012	2013	2012
	£'000	£'000	£'000	£'000
Financial assets - loans and receivables
Trade receivables	308	247	-	-
Other receivables	807	439	4,269	1,762
Loans to franchisees	2,337	754	-	-
Cash and cash equivalents	5,047	1,843	4,095	1,437
	8,499	3,283	8,364	3,199

	Group		Company
	2013	2012	2013	2012
	£'000	£'000	£'000	£'000
Financial liabilities
Financial liabilities measured at amortised cost
Other financial liabilities
Trade payables	226	141	15	3
Loans and  borrowings	2,226	1,341	-	-
Accruals	1,584	421	3	-
	4,036	1,903	18	3
Maturity analysis of financial liabilities
In less than one year:
Trade payables	226	141	14	3
Loans and  borrowings	1,925	512	-	-
Accruals	1,584	421	-	-
	3,735	1,074	14	3
In more than one year:
Long term borrowings	351	829	-	-
	351	829	-	-

All of the financial assets and liabilities above are carried in the statement of financial position at amortised cost.  The above amounts reflect the contractual undiscounted cash flows, including future interest charges, which may differ from carrying values of the liabilities at the reporting date.

General objectives, policies and processes

The Board has overall responsibility for the determination of the Group's risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group's finance function. The Board receives monthly reports through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group's competitiveness and flexibility. Further details regarding these policies are set out below:

Interest rate risk

Interest rate risk arises from the Group's management of interest bearing assets and liabilities. 

The Group does not use hedging products to manage interest rate risk but uses treasury products for deposits until such time as required for acquisitions as part of the Group's acquisition strategy.

Credit risk

Credit risk is the risk of financial loss to the Group if a franchisee or a counterpart to a financial instrument fails to meet its contractual obligations. It is Group policy to assess the credit risk of new franchisees before entering contracts.

The highest risk exposure is in relation to loans to franchises and their ability to service their debt. The directors have established a credit policy under which each new franchisee is analysed individually for creditworthiness before a franchise is offered. The company's review includes external ratings, when available, and in some cases bank references. The Group does not consider that it has significant concentration of credit risk.

The credit risk for liquid funds and other short term financial assets is considered small.  The substantial majority of these assets are deposited with Investec and Natwest.

Liquidity risk

Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and future developments, the Group monitors forecast cash inflows and outflows on a monthly basis.

Fair values of financial instruments

The fair value of financial assets and liabilities is considered the same as the carrying values.

24 Deferred taxation

	Group		Company
	2013	2012	2013	2012
	£'000	£'000	£'000	£'000
Balance at 1 January	118	10	-	-
Acquisition in the year	40	2	-	-
Acquisition in the year - attributable to intangible assets	158	106	-	-
Balance at 31 December	316	118	-	-

	2013	2012	2013	2012
Deferred taxation has been provided as follows:	£'000	£'000	£'000	£'000
Attributable to intangible assets	304	106	-	-
Accelerated capital allowances	12	12	-	-
	316	118	-	-

Amounts provided in respect of deferred tax are computed at 20% (2012: 23%)

There are no temporary differences for which deferred tax balances are recognised.

25 Related party disclosures

During the year the Group paid sponsorship fees of £4,800 (2012: £4,800) to James Goddard, son of
Michael S Goddard, company director. At the year end £nil (2012: £nil) remained outstanding.

During the year the company paid £23,499 (2012: £1,000) to Leeming Investments Limited, a company controlled by Nick Leeming, a director of the Group. At the year end £nil (2012: £nil) remained outstanding.

During the year Michael S Goddard, a director of the company, provided consultancy services to the company through his employment with an independent firm of consultants. The total value of the consultancy service provided was £67,750 (2012: £nil). This transaction was conducted on an arm's length basis, and under normal commercial terms. At the year end an amount of £nil (2012: £nil) was outstanding. 

During the year Carl B Chadwick, a director of the company, provided consultancy services to the company through his employment with an independent firm of consultants. The total value of the consultancy service provided was £70,750 (2012: £nil). This transaction was conducted on an arm's length basis, and under normal commercial terms. At the year end an amount of £nil (2012: £nil) was outstanding. 

During the year Dorian Gonsalves, a director of the company, provided consultancy services to the company through his employment with an independent firm of consultants. The total value of the consultancy service provided was £68,252 (2012: £nil). This transaction was conducted on an arm's length basis, and under normal commercial terms. At the year end an amount of £nil (2012: £nil) was outstanding. 

During the year the Group paid professional fees of £65,538 (2012: £63,567) to Sunaxis Limited, a company wholly owned by company director Carl B Chadwick. At the period end £6,663 (2012:  £2,644) remained outstanding.

During the year the Group paid professional fees of £16,296 (2012: £6,820) to McGregors Corporate Limited, a company in which Carl B Chadwick is also a director. At the period end £960 (2012:  £480) remained outstanding.

During the year the Group charged £90,000 (2012: £110,000) in management fees to Belvoir Financial Services Limited, a company in which Michael S Goddard, Carl B Chadwick and Dorian Gonsalves are also directors. At the period end £12,483 (2012: £4,622) remained outstanding.

During the prior year Carl B Chadwick was granted a loan of £85,500 to enable him to exercise his share options. Interest is charged at the Government Official Rate of Interest (4% at 8 February 2013). This loan was repaid in full during the financial year ended 31 December 2013.

During the prior year Dorian Gonsalves was granted a loan of £114,000 to enable him to exercise his share options. Interest is charged at the Government Official Rate of Interest (4% at 8 February 2013). This loan was repaid in full during the financial year ended 31 December 2013.

During the year the directors received the following dividends from their shareholding:                                                            

	30 Sept 2013 2013 Interim £'000	19 April 2013 2012 Final £'000	28 Sept 2012 2012 Interim £'000
Michael S Goddard	305	260	267
Dorian Gonsalves	15	20	20
Carl B Chadwick	12	14	14
Karen Bach	1	1	1
Total Dividends	333	295	302

26 Acquisitions

During the year Belvoir Property Management (UK) Limited, a wholly owned subsidiary of Belvoir Lettings Plc, acquired a company based in the UK and the trade and certain assets of an unincorporated business as part of the Group's acquisition strategy as follows:

On 17 May 2013 Belvoir Property Management (UK) Limited, acquired 100% of the equity instruments of Claygold Property Limited, a company incorporated in England and Wales, therefore obtaining control.  The acquisition was made to enhance the Group's position in the regional area.

On 1 July 2013 the Group acquired certain trade and assets from Victoria Soames Limited (Belvoir Central), an incorporated London Estate Agency. The acquisition was made to enhance the Group's position in the London Estate Agency markets/business.

On 1 October 2013 the Group acquired a portfolio in Burton to further enhance the Group's position in Lichfield and Burton.

The details of the business combinations in aggregate are as follows:

	Pre-acquisition carrying amount	Adjustment to fair value	Recognised at acquisition date
	£'000	£'000	£'000
Fair value of consideration transferred
Amount settled in cash	1,891	-	1,891
Fair value of contingent consideration	141	-	141
Total	2,032	-	2,032
Recognised amounts of identifiable net assets
Plant and equipment	132	-	132
Customer contracts	-	1,247	1,247
Total non-current assets	132	1,247	1,379
Trade and other receivables	134	8	142
Cash and cash equivalents	13	-	13
Total current assets	147	8	155
Deferred tax liabilities	-	(158)	(158)
Total non-current liabilities	-	(158)	(158)
Trade and other payables	(198)	(8)	(206)
Total current liabilities	(198)	(8)	(206)
Identifiable net assets	81	1,089	1,170
Goodwill on acquisition			862
Consideration transferred settled in cash			1,891
Cash and cash equivalents acquired			(13)
Net cash paid relating to acquisitions			1,878

The goodwill arising on the acquisitions can be attributed to the strengthening of the Belvoir brand in new locations. The contingent consideration included above is stated at fair value at the acquisition date. It is linked to the lettings income of Victoria Soames Limited (London Central) for 12 months post acquisition. Any variation arising may lead to an adjustment to goodwill in the next years financial statement.  Included in these financial statements is an adjustment to the goodwill of Belvoir London Central (formally Aldine Honey & Co. Limited) following the agreement and final payment of deferred consideration.

Since acquisition, the acquisitions have contributed the following to the consolidated results of Belvoir Lettings plc:

	Claygold Property Limited £'000	Soames £'000	Burton Portfolio £'000
Revenue since acquisition included in the Group Statement of Comprehensive Income	747	52	6
Operating profit since acquisition included in the Group Statement of Comprehensive Income	39	3	3

27 Share based employee remuneration

Options Granted to the Directors

No options were granted to the Directors during the year.

Details of Company Share Ownership Plan (CSOP)

The Directors believe that the Company's success is highly dependent on the quality and loyalty of its Directors and of its future directors and employees. The Directors consider that to assist in the recruitment, retention and motivation of high quality staff, as necessary, the Company must have an effective remuneration strategy and that an important part of this remuneration strategy is the ability to award equity incentives and, in particular, share options.

The Company also intends to grant options to employees during the three years following Admission if approved by the Remuneration Committee. Options granted under such an employee share option scheme would not exceed, in aggregate, 1 per cent of the issued share capital of the Company. Future options granted will have an exercise price not less than the market value of an Ordinary Share at the date of grant and will require the satisfaction of such performance or other exercise conditions as the Board (or, if one is in place, the Remuneration Committee) considers appropriate in each case. The Directors intend that the total number of shares subject to options will not exceed 10 per cent of the issued share capital of the Company from time to time.

No options have yet been granted under this plan.

Movement in the number of share options were as follows:	2013	2012
Number of share options
Outstanding at the beginning of the year	-	7
Granted	-	-
Fortfeited	-	-
Exercised	-	7
Expired	-	-
Outstanding at the end of the year	-	-

Exercisable at the end of the year	-	2
Weighted average exercise price*
Outstanding at the beginning of the year	-	£28,500
Granted
Fortfeited	-	-
Exercised	-	£(28,500)
Expired	-	-
Outstanding at the end of the year	-	-
Exercisable at the end of the year	-	-

28 Contingent liabilities

Belvoir Lettings Plc and its subsidiaries have a cross company guarantee, which creates a fixed and floating charge on the assets of each company. As at 31 December 2013 the outstanding contingent liability under this agreement amounted to £2,227,211 (2012: £1,252,150).

 

END

 

 

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