Interim Results

RNS Number : 6872Q

Property Franchise Group PLC (The)

14 September 2017

 

THE PROPERTY FRANCHISE GROUP PLC

(the "Company" or the "Group") 

Interim Results for the six months ended 30 June 2017

Group revenue up 28%

Interim dividend increased by 5%

The Property Franchise Group, one of the UK's largest property franchises, today announces its interim results for the period ended 30 June 2017.

Financial Highlights

·              Revenue increased by 28% to £4.7m (H1 2016: £3.7m)

·              Management Service Fees (royalties) increased by 19% to £3.8m (H1 2016: £3.2m)

·              Operating margin* of 31% (H1 2016: 42%) 

·              Profit before tax** increased by 36% to £2.1m (H1 2016: £1.6m)

·              Strong balance sheet with a cash position of £2.3m (H1 2016: £4.5m) and debt of £3m (H1 2016: £1.8m)

·              Basic earnings per share** increased by 30% to 7.4p per share (H1 2016: 5.7p)

·              Interim dividend increased by 5% to 2.1p per share (H1 2016: 2.0p)

Operational Highlights 

·              383 trading offices up 94 from H1 2016

·              Tenanted managed properties increased to 50,000 (H1 2016: 46,000)

·              20 new franchisees recruited (H1 2016: 7)

·              18 new offices opened (H1 2016: 4)

·              Group remains heavily weighted towards lettings, accounting for 70% of Management Service Fees (H1 2016 74%)

* excludes exceptional items

** includes exceptional items

Ian Wilson, Chief Executive Officer of The Property Franchise Group, commented:

"We have delivered a strong performance at our traditional high street brands, which grew market share despite the general challenging market backdrop.

"In line with our strategy, we have also invested in experienced individuals and technology capabilities, translating insights gained from our online business, EweMove, to our five traditional high street brands.   The Company has continued to support our franchisees operationally and financially with local acquisition opportunities, as smaller competitors decide to exit the lettings market.

"With the appointment of a new Managing Director for EweMove and a new focus on recruiting experienced estate agents as EweMove's local franchisees, management is confident of rapidly improving trading performance in this strategically important subsidiary."

For further information, please contact:

The Property Franchise Group PLC      Ian Wilson, Chief Executive Officer David Raggett, Chief Financial Officer	01202 292829
Cenkos Securities plc Max Hartley (Nominated Adviser), Alex Aylen (Sales)	0207 397 8900
Bell Pottinger    David Rydell Eve Kirmatzis	020 3772 2500 07825 521 527

Chief Executive's Review

The Group has delivered a robust performance during the first half of the year and the board is pleased to announce a 5% increase in the interim dividend to 2.1p per share in line with our progressive dividend policy. 

Growth across our traditional high street brands has been strong with revenue growing 4% year-on-year to £3.8m. We have maintained tight cost controls in the traditional brand businesses, where profits are up 22% to £2.0m.  Lettings Management Service Fees ("MSF") increased by 5% (£0.1m) and sales MSF remained unchanged despite a higher comparative following the Stamp Duty induced "spike" in transactions in April 2016.  Group revenue remains heavily weighted towards lettings at 70% with sales and financial services representing 29% and 1% respectively.

Our franchisees have completed on seven local acquisitions in the period from 1 January to 31 August 2017, adding 1,482 to the Group's portfolio of tenanted managed properties.  An additional four offices have been added to the franchise network as at 31 August 2017 as a result of re-branding these acquired businesses.  This has resulted in additional fee income (at a franchisee level) of approximately £2m over a full 12-months based on the trading run rate.

As announced on 6 September 2017, the disruption caused by the early departure of the EweMove co-founders on 30 June 2017, has meant that EweMove's trading position is behind management expectations.  EweMove has recorded losses at the half year to 30 June of £0.3m against a target loss of £0.1m, on revenues of £0.9m.  Despite this, the Board remains committed to its strategy of rapidly scaling EweMove, which the Board believes will contribute significantly to earnings in the medium term.  The appointment of a new Managing Director in Nick Neill, a successful EweMove franchisee, means the brand now has focused and dedicated leadership.

EweMove has over 100 franchisees. Progress so far has been promising with the brand recruiting 18 new franchisees in the first six months of 2017 and recording MSF up 35% year-on-year to £0.6m.

Investment in our technology is an important part of our strategy and during the period we launched new brand websites for Whitegates, Parkers and Martin & Co, representing 85% of our total traditional office network. The new sites were designed in conjunction with Fountain, a Google Award Winning Business Partner agency.

We have also invested in experienced individuals to improve the leadership of our franchisees, including the appointment of two Managing Directors, one for Martin & Co and one for the Xperience & Whitegates brands, as well as a Group Marketing Director, all of whom bring a wealth of experience. 

The Group has a strong operating margin of 31% and a solid balance sheet with net debt of £0.7m. The board remains confident about the outlook for the lettings market in relation to maintaining its ability to meet its objective of progressive dividend payments. In the first half of this year dividend cover was 3.5 (H1 2016: 2.8).

The lettings market faces a changing commercial environment with Government initiatives increasing the tax burden on private buy-to-let landlords taking effect in April 2018 and an intended total ban on tenant fees in England & Wales. However, we successfully managed to navigate our business through the Scottish total tenant fee ban in 2012 and we are engaged in several initiatives to ensure that Group revenue continues to grow both organically, from improved digital marketing and through local acquisitions by assisting franchisees operationally and financially.  With regard to our past experience, we feel confident that the Group will be able to ameliorate the changing conditions to ensure minimal long term impact to the Group.

Ian Wilson, Chief Executive Officer

Financial Review

Revenue

Revenue for the six months ended 30 June 2017 was £4.71m (H1 2016: £3.67m), an increase of £1.04m (28%) over the comparative period. The addition of EweMove contributed £0.91m (24%) to the increase in revenue and the traditional brands contributed £0.13m (4%) to the increase.

Traditional brands

MSF for the traditional brands were split 78% from Lettings, 21% from Sales and 1% from Financial Services. Lettings MSF increased by 5% (£0.13m) in the six months to 30 June 2017 compared to the same period of 2016. Sales MSF was unchanged compared to the same period of 2016, which is a good result given the comparative period included the spike in sales prior to the stamp duty increase in April 2016 (H1 2016 increased by 24% over H1 2015).

Other income increased by £0.1m (15%) from the previous period, comprising of a £0.2m increase in revenue from support services provided to franchisees and a £0.1m decrease in Franchise Sales revenue.

EweMove

EweMove franchisees pay a monthly licence fee and a completion fee per transaction. The total of the licence fees and completion fees for the six months ended 30 June 2017 was £0.55m, which is a 35% increase on the same period of 2016 (prior to our acquisition). We refer to these licence fees and completion fees as MSF.

Franchise Sales income was £0.2m, unchanged from the six months ended 30 June 2016, from 18 new franchisees recruited.

Administrative expenses

Administrative expenses have increased by £0.75m. The main elements of this increase are £0.8m costs relating to the EweMove business, £0.2m amortisation relating to EweMove and a £0.3m reduction in traditional brand costs (mainly staff costs).

Exceptional items

The net exceptional income of £0.7m in the six months ended 30 June 2017 all relates to EweMove.

On acquisition, the Founders of EweMove received £5m in cash and £3m via the issue of ordinary shares in the Group. The Founders were entitled to a further £7m conditional upon the achievement of Group targets in the financial year ended 31^st December 2018. However, following the decision by the Founders to depart, the Group is paying the Founders £1m in total via two instalments payable on 31 July 2017 and 31 December 2017 in full and final settlement. 

Management assessed the likelihood of the targets being achieved at last year end and valued the deferred consideration at £2.2m. As a result of crystallising the deferred consideration at £1m, an exceptional gain of £1.2m has been recognised.

Following evidence suggesting that the business value of EweMove may have been impaired, a revaluation was undertaken. This has resulted in an impairment charge of £0.5m against goodwill.

Operating profit

Operating profit includes exceptional items, share based payment charges and amortisation charges relating to acquired businesses. It has increased by 38% to £2.15m (H1 2016: £1.56m), 

Operating profit before exceptional items decreased 5% to £1.47m (H1 2016 £1.56m) and operating margin, on the same basis, was 31% (H1 2016: 42%). Underlying this reduction is the fact that EweMove has yet to scale up its revenues and generate a profit. That said, the underlying trends and actions the management have instigated do mean we are confident in improving the revenue contribution from EweMove hereon.

EBITDA

The Group's EBITDA before exceptional items was £1.8m (H1 2016: £1.7m), an increase of £0.1m (5%) over the comparative period. 

Earnings per share

Earnings per share for the six months ended 30 June 2017 was 7.4p (H1 2016:  5.7p). The income attributable to owners was £1.9m (H1 2016: £1.2m).

Dividends

The Board intends to continue to pursue a progressive dividend policy providing an attractive yield to shareholders. The Group has increased the interim dividend by 5% over last year and intends to make an interim dividend payment of 2.1p per share on 6 October 2017 to shareholders on the register on 22 September 2017.

Cash flow

The net cash inflow from operating activities in the first six months of 2017 was £1.8m (H1 2016: £1.3m).

In the first 6 months of 2017 the Group made bank loan repayments of £0.45m (H1 2016: £0.25m) and paid a final dividend of £1.2m for the year ended 31 December 2016 (H1 2016: £0.9m for the year ended 31 December 2015).

Overall cash increased in the first six months of 2017 by £0.2m (H1 2016: £0.2m).

Liquidity

The Group had cash balances of £2.3m at 30 June 2017 compared to £4.5m at 30 June 2016. The reduction being mainly due to the acquisition of EweMove on 5 September 2016 which resulted in a net cash outflow of £3m; the cash consideration was £5m of which £2m was drawn down on the Santander loan facility.

The Group had unutilised bank loan facilities of £2.05m at 30 June 2017 (30 June 2016: £3.25m).

Financial position

The Group continues to be strongly cash generative. This combined with its robust balance sheet and unutilised bank loan facility puts it in a strong position to continue to fulfil the acquisition element of its strategic plan and to pursue the fulfilment of EweMove's potential

David Raggett, Chief Financial Officer

THE PROPERTY FRANCHISE GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX MONTHS ENDED 30 JUNE 2017

			Unaudited		Unaudited		Audited
			6 Months Ended		6 Months Ended		12 Months Ended
			30.06.17		30.06.16		31.12.16
	Notes		£		£		£
CONTINUING OPERATIONS
Revenue	6		4,714,186		3,669,836		8,301,375
Cost of sales			(540,670)		(161,286)		(570,912)
GROSS PROFIT			4,173,516		3,508,550		7,730,463
Administrative expenses			(2,702,565)		(1,950,127)		(4,217,399)
			1,470,951		1,558,423		3,513,064
Exceptional items	7		679,146		-		(254,945)
OPERATING PROFIT			2,150,097		1,558,423		3,258,119
Finance income			20,086		32,039		52,909
Finance costs			(52,641)		(37,697)		(119,106)
PROFIT BEFORE INCOME TAX			2,117,542		1,552,765		3,191,922
Tax expense	8		(233,232)		(307,804)		(197,576)
PROFIT AND TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO OWNERS
			1,884,310		1,244,961		2,994,346
Earnings per share (pence)	9		7.4p		5.7p		13.0p
Diluted earnings per share (pence)	9		7.4p		5.4p		12.8p

THE PROPERTY FRANCHISE GROUP PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2017

				Unaudited		Unaudited		Audited
				As at		As at		As at
				30.06.17		30.06.16		31.12.16
	Notes			£		£		£
ASSETS
NON-CURRENT ASSETS
Intangible assets		11		16,125,244		5,898,112		16,820,336
Property, plant and equipment				118,265		134,981		125,984
				16,243,509		6,033,093		16,946,320
CURRENT ASSETS
Trade and other receivables		12		1,156,232		994,976		1,477,047
Cash and cash equivalents				2,256,750		4,507,698		2,045,621
				3,412,982		5,502,674		3,522,668
TOTAL ASSETS				19,656,491		11,535,767		20,468,988
EQUITY
SHAREHOLDERS' EQUITY
Share capital		13		258,228		220,000		253,008
Share premium				7,016,584		3,790,000		6,929,723
Other reserves		14		(138,483)		116,665		(75,422)
Retained earnings				5,809,528		3,835,214		5,078,584
TOTAL EQUITY				12,945,857		7,961,879		12,185,893
LIABILITIES
NON-CURRENT LIABILITIES
Borrowings		15		2,050,000		1,250,000		2,500,000
Deferred tax				1,524,045		557,312		1,475,481
Provisions		17		-		-		2,179,146
				3,574,045		1,807,312		6,154,627
CURRENT LIABILITIES
Borrowings		15		900,000		500,000		900,000
Trade and other payables		16		2,038,468		903,822		1,150,243
Tax payable				198,121		362,754		78,225
				3,136,589		1,766,576		2,128,468
TOTAL LIABILITIES				6,710,634		3,573,888		8,283,095
TOTAL EQUITY AND LIABILITIES				19,656,491		11,535,767		20,468,988

THE PROPERTY FRANCHISE GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED 30 JUNE 2017

	Called up share capital (note 13)	Retained earnings	Share premium	Other reserves (note 14)		Total equity
	£	£	£	£		£
Balance at 1 January 2016 (audited)	220,000	3,492,253	3,790,000	134,560		7,636,813
Profit and total comprehensive income	-	1,244,961	-	-		1,244,961
Dividends paid (note 10)	-	(902,000)	-	-		(902,000)
Deferred tax on share based payments	-	-	-	(17,895)		(17,895)
Total transactions with owners	-	(902,000)	-	(17,895)		(919,895)
Balance at 30 June 2016 (unaudited)	220,000	3,835,214	3,790,000	116,665		7,961,879
Profit and total comprehensive income	-	1,749,385	-	-		1,749,385
Issue of share capital
Share capital - acquisition consideration	23,216	-	2,976,784	-		3,000,000
Share capital - exercise of options	9,792	-	162,939	-		172,731
Dividends paid (note 10)	-	(506,015)	-	-		(506,015)
Deferred tax on share based payments	-	-	-	(192,087)		(192,087)
Total transactions with owners	33,008	(506,015)	3,139,723	(192,087)		2,474,629
Balance at 31 December 2016 (audited)	253,008	5,078,584	6,929,723	(75,422)		12,185,893
Profit and total comprehensive income	-	1,884,310	-	-		1,884,310
Issue of share capital Share capital - exercise of options	5,220	-	86,861	-		92,081
Dividends paid (note 10)	-	(1,153,366)	-	-		(1,153,366)
Deferred tax on share based payments	-	-	-	(93,061)		(93,061)
Share option charge	-	-	-	30,000		30,000
Total transactions with owners	5,220	(1,153,366)	86,861	(63,061)		(1,124,346)
Balance at 30 June 2017 (unaudited)	258,228	5,809,528	7,016,584	(138,483)		12,945,857

THE PROPERTY FRANCHISE GROUP PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX MONTHS ENDED 30 JUNE 2017

		Unaudited		Unaudited		Audited
		6 Months Ended		6 Months Ended		12 Months Ended
		30.06.17		30.06.16		31.12.16
		£		£		£
Cash flows from operating activities
Profit before income tax		2,117,542		1,552,765		3,191,922
Depreciation and amortisation charges		307,171		133,013		354,247
Profit on disposal of intangible assets		-		-		7,811
Net exceptional income		(679,146)		-		-
Share option charge		30,000		-		-
Finance costs		52,641		37,697		119,106
Finance income		(20,088)		(32,039)		(52,909)
Operating cash flow before changes in working capital		1,808,120		1,691,436		3,620,177
Decrease/(increase) in trade and other receivables		320,815		(101,092)		(504,453)
Decrease in trade and other payables		(110,058)		(11,415)		(52,309)
Cash generated from operations		2,018,877		1,578,929		3,063,415
Interest paid		(60,835)		(39,416)		(88,668)
Tax paid		(153,030)		(264,709)		(602,833)
Net cash generated from operations		1,805,012		1,274,804		2,371,914
Cash flows from investing activities
Purchase of subsidiary undertakings net of cash acquired		-		-		(4,821,051)
Purchase of intangible assets		(96,517)		(2,990)		(91,621)
Purchase of tangible assets		(6,168)		(8,539)		(13,960)
Proceeds from sale of intangible assets		-		18,330		36,660
Interest received		20,088		32,039		52,909
Net cash (used in)/generated from investing activities		(82,597)		38,840		(4,837,063)
Cash flows from financing activities
Issue of ordinary shares		92,080		-		172,731
Repayment of borrowings		(450,000)		(250,000)		(600,000)
Drawdown of bank loan		-		-		2,000,000
Equity dividends paid		(1,153,366)		(902,000)		(1,408,015)
Net cash (used in)/generated from financing activities		(1,511,286)		(1,152,000)		164,716
Increase/(decrease) in cash and cash equivalents		211,129		161,644		(2,300,433)
Cash and cash equivalents at the beginning of the period		2,045,621		4,346,054		4,346,054
Cash and cash equivalents at end of period		2,256,750		4,507,698		2,045,621

THE PROPERTY FRANCHISE GROUP PLC

NOTES TO THE INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2017

1.          GENERAL INFORMATION

The principal activity of The Property Franchise Group plc and its subsidiaries is that of a UK residential property franchise business. The Group operates in the UK. The company is a public limited company incorporated and domiciled in the UK. The address of its head office and registered office is 2 St Stephen's Court, St Stephen's Road, Bournemouth, Dorset, UK.

2.         GOING CONCERN

The interim financial information has been prepared on the basis that the Group is a going concern.

When assessing the foreseeable future the directors have looked at a period of 12 months from the date of approval of the interim financial information. The directors have a reasonable expectation that the Group has adequate resources to continue to trade for the foreseeable future and, therefore, consider it appropriate to prepare the Group's interim financial information on a going concern basis.

3.         BASIS OF PREPARATION

The consolidated interim financial information for the six months ended 30 June 2017 was approved by the Board and authorised for issue on 13 September 2017. The results for 30 June 2017 and 30 June 2016 are unaudited. The disclosed figures are not statutory accounts in terms of Section 435 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2016 on which the auditors gave an audit report which was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006, have been filed with the Registrar of Companies. The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union.

This interim report has been prepared on a basis consistent with the accounting policies expected to be applied for the year ending 31 December 2017, and uses the same accounting policies and methods of computation applied for the year ended 31 December 2016.

4.         BASIS OF CONSOLIDATION

The Group's interim financial information includes those of the parent company and its subsidiaries, drawn up to 30 June 2017. Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are expensed as incurred.

Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. When necessary amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies.

5.         SEGMENTAL REPORTING

The board of Directors, as the chief operating decision-making body, review financial information for and make decisions about the Group's overall franchising business and have identified a single operating segment, that of property franchising.

                     THE PROPERTY FRANCHISE GROUP PLC

NOTES TO THE INTERIM RESULTS

                     FOR THE SIX MONTHS ENDED 30 JUNE 2017

6.         REVENUE

The Directors believe there to be three material income streams relevant to property franchising which are split as follows:

			Unaudited		Unaudited		Audited
			6 Months Ended		6 Months Ended		12 Months Ended
			30.06.17		30.06.16		31.12.16
			£		£		£
Management service fee			3,815,842		3,199,985		6,874,542
Franchise sales			261,668		195,266		412,448
Other			636,676		274,585		1,014,385
			4,714,186		3,669,836		8,301,375

                All revenue is earned in the UK and no customer represents greater than 10 per cent of total revenue in the periods reported.

7.         EXCEPTIONAL ITEMS

The net exceptional income in the six months ended 30 June 2017 of £679,146 all relates to EweMove. It consists of the reduction in deferred consideration payable of £1,179,146 and an impairment charge of £500,000 against goodwill following a revaluation due to evidence suggesting that the business's value may have been impaired.

The exceptional costs in the year ended 31 December 2016 consist of £149,598 acquisition costs for Ewemove and £105,347 redundancy costs as a result of restructuring the Group.

8.         TAXATION

The underlying tax charge is based on the expected effective tax rate for the full year to December 2017. The majority of the tax arises from applying this effective tax rate to the profit on ordinary activities.

THE PROPERTY FRANCHISE GROUP PLC

NOTES TO THE INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2017

9.         EARNINGS PER SHARE

Earnings per share is calculated by dividing the profit for the financial period by the weighted average number of shares during the period.

		Unaudited		Unaudited		Audited
		6 Months Ended		6 Months Ended		12 Months Ended
		30.06.17		30.06.16		31.12.16
Basic earnings per share
Weighted average number of shares		25,477,256		22,000,000		23,017,702
Profit for the period (£)		1,884,310		1,244,961		2,994,346
Earnings per share (pence)		7.4p		5.7p		13.0p

		Unaudited		Unaudited		Audited
		6 Months Ended		6 Months Ended		12 Months Ended
		30.06.17		30.06.16		31.12.16
Diluted earnings per share
Weighted average number of shares		25,477,256		22,000,000		23,017,702
Dilutive effect of share options on ordinary shares		2,518		857,644		457,132
		25,479,774		22,857,644		23,474,834
Diluted earnings per share (pence)		7.4p		5.4p		12.8p

10.       DIVIDENDS

			Unaudited		Unaudited		Audited
			As at		As at		As at
			30.06.17		30.06.16		31.12.16
			£		£		£
Dividends (ordinary share of £0.01 each)			1,153,366		902,000		1,408,015
Dividend per share			4.5p		4.1p		6.1p

THE PROPERTY FRANCHISE GROUP PLC

NOTES TO THE INTERIM RESULTS

                     FOR THE SIX MONTHS ENDED 30 JUNE 2017

11.       INTANGIBLE ASSETS

	Master Franchise Agreement		Brands		Technology		Customer Lists		Goodwill		Total
	£		£		£		£		£		£
Cost
Balance at 1 January 2016 (Audited)	4,075,085		571,000		-		261,254		1,388,217		6,295,556
Additions	-		-		-		2,990		-		2,990
Balance at 30 June 2016 (Unaudited)	4,075,085		571,000		-		264,244		1,388,217		6,298,546
Additions - acquired separately	-		-		-		88,631		-		88,631
Additions - acquired business combinations	3,728,351		1,401,239		92,704		-		5,837,943		11,060,237
Disposals	-		-		-		(36,050)		-		(36,050)
Balance at 31 December 2016 (Audited)	7,803,436		1,972,239		92,704		316,825		7,226,160		17,411,364
Additions -acquired separately	-		-		96,517		-		-		96,517
Disposals	-		-		-		(20,585)		-		(20,585)
Impairment	-		-		-		-		(500,000)		(500,000)
Balance at 30 June 2017 (Unaudited)	7,803,436		1,972,239		189,221		296,240		6,726,160		16,987,296
Amortisation
Balance at 1 January 2016 (Audited)	190,170		-		-		91,050		-		281,220
Charge for period	81,502		-		-		37,712		-		119,214
Balance at 30 June 2016 (Unaudited)	271,672		-		-		128,762		-		400,434
Charge for period	140,682		22,242		6,180		37,712		-		206,816
Eliminated on disposals	-		-		-		(16,222)		-		(16,222)
Balance at 31 December 2016 (Audited)	412,354		22,242		6,180		150,252		-		591,028
Charge for period	205,780		33,363		9,270		40,552		-		288,965
Disposals	-		-		-		(17,941)		-		(17,941)
Balance at 30 June 2017 (Unaudited)	618,134		55,605		15,450		172,863		-		862,052

Net book value
30 June 2016 (Unaudited)	3,803,413		571,000		-		135,482		1,388,217		5,898,112
31 December 2016 (Audited)	7,391,082		1,949,997		86,524		166,573		7,226,160		16,820,336
30 June 2017 (Unaudited)	7,185,302		1,916,634		173,771		123,377		6,726,160		16,125,244

                     THE PROPERTY FRANCHISE GROUP PLC

NOTES TO THE INTERIM RESULTS

                     FOR THE SIX MONTHS ENDED 30 JUNE 2017

11.  INTANGIBLE ASSETS (CONTINUED)

                     Business combinations acquired September 2016

At 30 June 2017, in light of evidence suggesting that EweMove's carrying value may have been impaired a revaluation was undertaken. As a result, an impairment charge of £500,000 was made against the goodwill arising on acquisition.

12.  TRADE AND OTHER RECEIVABLES

			Unaudited		Unaudited		Audited
			As at		As at		As at
			30.06.17		30.06.16		31.12.16
			£		£		£
Trade receivables			149,169		119,995		280,637
Loans to franchisees			49,900		215,276		203,036
Prepayments and accrued income			909,845		636,108		987,197
Other receivables			47,318		23,597		6,177
			1,156,232		994,976		1,477,047

13.  CALLED UP SHARE CAPITAL

		Unaudited As at 30.06.17		Unaudited As at 30.06.16		Audited As at 31.12.16
Group		£		£		£
25,822,750 allotted issued and fully paid Ordinary Shares of 1p each		258,228		220,000		253,008

On 9 June 2017 options over 1,500,000 shares were granted to two executive directors at an exercise price of 1 pence per share.         The options are exercisable after the approval of the financial statements for the year ending 31 December 2019, and subject to meeting certain targets for Earnings per Share.

                     THE PROPERTY FRANCHISE GROUP PLC

NOTES TO THE INTERIM RESULTS

                     FOR THE SIX MONTHS ENDED 30 JUNE 2017

14.  OTHER RESERVES

		Merger  Reserve		Share Based Payment Reserve			Total
		£		£			£
1 January 2016 (Audited)		(179,800)			314,360		134,560
30 June 2016		(179,800)			296,465		116,665
31 December 2016 (Audited)		(179,800)			104,378		(75,422)
30 June 2017		(179,800)			41,317		(138,483)

Merger reserve

The merger reserve relates to the acquisition of Martin & Co (UK) Limited by The Property Franchise Group PLC.  This did not meet the definition of a business combination and therefore, falls outside of the scope of IFRS 3. This transaction was accounted for in accordance with the principles of merger accounting as set out in Financial Reporting Standard 6 - Acquisitions and Mergers.

Share-based payment reserve

The share based payments reserve comprises charges made to the income statement in respect of share-based payments and related deferred tax impacts under the Group's equity compensation scheme.

15.  BORROWINGS

		Unaudited		Unaudited		Audited
		As at		As at		As at
		30.06.17		30.06.16		31.12.16
		£		£		£
Repayable within 1 year:
Bank loan (term loan)		900,000		500,000		900,000
Repayable in more than 1 year:
Bank loan (term loan)		2,050,000		1,250,000		2,500,000
Bank loans due after more than 1 year are repayable as follows:
Between 1 and 2 years		900,000		500,000		900,000
Between 2 and 5 years		1,150,000		750,000		1,600,000

The term loan of £2.95m (31.12.16: £3.4m) is secured with a fixed and floating charge over the Group's assets and a cross guarantee across all companies in the Group.

The Company has a loan facility of £5m, and has drawn down two terms loans under this facility, referred to below as 'Loan 1' and 'Loan 2'.

Loan 1 - £2.5m drawn down on 30 October 2014 and is repayable over 5 years in equal instalments. Interest is charged quarterly on the outstanding amount and the rate is fixed at 4.08%. The amount outstanding at 30 June 2007 was £1.25m (2016: £1.75m).

Loan 2 - £2m drawn down on 5 September 2016 and is repayable over 5 years in equal instalments. Interest is charged quarterly on the outstanding amount, the rate is variable during the term at 2.5% above LIBOR, at 30 June 2017 the rate was 2.8%. The amount outstanding at 30 June 2017 was £1.7m. 

At 31 December 2016 the unutilised amount of the facility was £1.6m and on 30 June 2017 the unutilised amount of the facility was £2.05m.

THE PROPERTY FRANCHISE GROUP PLC

NOTES TO THE INTERIM RESULTS

FOR THE SIX MONTHS ENDED 30 JUNE 2017

16.       TRADE AND OTHER PAYABLES

			Unaudited		Unaudited		Audited
			As at		As at		As at
			30.06.17		30.06.16		31.12.16
			£		£		£
Trade payables			252,878		166,034		253,027
Accruals and deferred income			344,130		346,277		447,016
Other taxes and social security			405,631		367,920		423,475
Other payables			35,829		23,591		26,725
Deferred consideration			1,000,000		-		-
			2,038,468		903,822		1,150,243

17.  PROVISIONS

On 5 September 2016 the Group acquired 100% of the issued share capital of Ewemove .  The initial consideration was £5m in cash and £3m via the issue of ordinary shares in the Group. A further amount of up to £7m ( the "Deferred Consideration") was due to the vendors upon approval of the financial results for the year ended 31 December 2018 and subject to various targets for Group financial performance being met.

A renegotiation has taken place and the deferred consideration will now be £1m, with £0.5m payable on 31 July 2017 and £0.5m payable on 31 December 2017. This has now been recognised in trade and other payables.

 

END

 

 

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