Consolidation opportunities for Belvoir

Lettings and estate agency business Belvoir Group (LON: BLV) reports its interim figures on Tuesday. The letting fees ban came into force at the end of the first half so it will have a limited effect on the period.

However, there should be news about how the ban is affecting the business and how the plans to offset that affect are working.

Belvoir is a franchised business and it has more than one franchise brand. They are Belvoir, Newton Fallowell and Northwood. The combined brands make Belvoir one of the largest letting agency groups. This makes it better placed to adapt to changes in regulations.

Belvoir is therefore likely to benefit from market share gains either by helping franchisees to acquire smaller letting agents or just by taking business from them. Many smaller agencies have been put on the market because of the difficulty in competing with larger groups when regulation is tightening.

There should also be indications of how the lettings market is performing. Many of the franchisees also offer estate agency services and this has been a tough market. Lettings business holds better than the more volatile property sales business.

Financial services

The way that Belvoir has accelerated its growth is by building up a finance business via acquisition. Brook was acquired in 2017 and a further acquisition was made last year.

Brook is growing organically at an impressive rate. First half growth of 23% has already been indicated. This has been achieved by offering mortgage services to the clients of the letting agents.


In 2018, lettings generated 55% of revenues, property sales 14% and financial services 26%. The rest comes from selling franchises. Financials services will grow in importance and could generate approaching 50% of revenues by 2021.

Belvoir receives a management service fee of 10-12% of a franchisee’s sales. The average per office is more than £25,000.

There are a small number of corporate sites that generate around £1m of income.


Belvoir is a cash generative business and it uses some of its cash to lend to franchisees so they can acquire additional businesses in their franchise areas. That totalled £3.4m at the end of 2018 and more money has been lent since then.

There is limited capital investment, although there has been cash spent on IT. Debt has been built up because of acquisitions.

Net debt is set to fall from £9.6m to £7.9m by the end of 2019. That is after paying £2.5m in dividends.


Belvoir maintained its dividend at 6.8p a share for multiple years as it rebuilt earnings cover. A small increase to 6.9p a share in 2017 was followed by an improvement to 7.2p a share last year. That was covered 1.6 times.

The interims will give an indication of dividend growth this year. Management is likely to want to edge up the dividend but won’t want cover to come down. The yield is likely to be near to 7%.


Even with the headwind of the letting fees ban, finnCap expects full year pre-tax profit to improve from £5.5m to £5.7m. At 108.5p, that would put the shares on nine times prospective earnings.

The share price still reflects the concerns about the tenant fee ban and not the long-term prospects for this well run, cash generative company.

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Andrew Hore
Andrew Hore is the publisher of AIM Journal, which is an online monthly publication covering the Alternative Investment Market.