Property Franchise Group eyes further growth after Belvoir merger

The results for Property Franchise Group (TPFG) were largely for future anthropological interest as the company’s merger with its biggest rival Belvoir, which completed on 7 March, created the largest franchised property letting and sales agent in the UK and rendered current comparisons superfluous. The company’s coup, which comes a couple of years after the acquisition of Yorkshire-based estate agency Hunters, is a clear bid to attract the market’s attention.

The management team, chief executive Gareth Samples and chief finance officer David Raggett, talked at length about the rationale for the merger and where the combined group goes from here. “From our point of view, the merger is a case of two-plus-two equalling five,” Samples told the Investors’ Chronicle. “Our feeling was that the resilience of both businesses was not reflected in the market cap, which struggled to break above £110mn. We hope now that this will be recognised.” The combined company has 9mn customers on its books.

Raggett felt that future expansion was a priority for the company, “We are actually investing in more staff, currently, rather than combing through for synergies. That process can be highly disruptive, as well as hellish if you are living through it,” he said. Management set raising the dividend as a clear priority, with a target of 20p a share for 2025.

The company is also prepared to use the balance sheet to finance future purchases. “Our main priority is to look at businesses that are immediately earnings accretive, but which avoid shareholder dilution,” Raggett said.

The merger looks a smart piece of business for TPFG, with Belvoir’s northern focus largely complementing TPFG's southern England base. Forecasts are currently being updated to reflect the combined group. In the meantime, we stick with buy.

Last IC view: Buy, 330p, 27 Mar 2023