Property Franchise Group Annual Report 2021

FY2021 Annual Report · Property Franchise Group

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The
Property
Franchise
Group PLC

National footprint,
local expertise

— ANNu AL REPORT ANd A CCOuNTS 2021

The
Property
Franchise
Group PLC

We are the UK’s largest
multi-brand property
franchisor, with a network
approaching 600 lettings
and estate agency
businesses delivering
high quality services to
residential clients.

As legislation changes and technology evolves, our
central team innovate to keep our franchise owners
ahead of the game.

Find out more at thepropertyfranchisegroup.co.uk

CONTENTS

STRATEGIC REPORT

Financial and Operational highlights

At a glance

Chairman’s statement

Investment case

CEO’s statement

Our market

Business model

Strategy

Strategy in focus – EweMove

Strategy in focus – Hunters

CFO statement and KPIs

Case study

Stakeholder engagement

Responsible business / ESG

Risk management

Principal risks and uncertainties

GOVERNANCE

Chairman’s introduction to Governance 38

Corporate Governance Statement

The Board

Audit & Risk Committee

Remuneration Committee

Directors’ report

FINANCIAL STATEMENTS

Independent auditor’s report

Consolidated statement
of comprehensive income

Consolidated statement
of financial position

Company statement
of financial position

Consolidated statement
of changes in equity

Company statement of changes
in equity

Consolidated statement of cash flows

Notes to the consolidated statement
of cash flows

Company statement of cash flows

Notes to the Company statement
of cash flows

Notes to the consolidated and
Company financial statements

Shareholder information

— F I N A N C I A L H I G H L I G H T S

— OPERATIONAL HIGHLIGHTS

The Property Franchise Group PLC
Annual Report and Accounts 2021

R E VE N U E

M ANAG E M E NT
S E RVI C E FE E S

£24.0m

£14.7m

+118%

+57%

2021

£24.0m

2020 £11.0m

2019

£11.4m

2018 £11.2m

2017 £10.1m

£14.7m

2021

2020

2019

2018

2017

£9.4m

£9.7m

£9.4m

£8.3m

AD J U STE D E B ITDA*

P RO FIT B E FO R E TA X

£10.4m

£6.4m

£10.4m

+81%

2021

2020

2019

£5.7m

£5.3m

2018

£5.1m

2017 £4.4m

+35%

2021

2020

2019

2018

2017

£4.8m

£4.0m

£4.3m

• Acquisition of Hunters Property plc,
a network of 208 franchised offices

• Group has a portfolio of 74,000
tenanted managed properties
(2020: 58,000), providing a reliable,
regular income stream

• The Group became the second

largest estate agency network in
the UK

• Buoyant sales market due to stamp

duty holiday and reprioritised
homeowner needs

• EweMove sold 58 new territories

• Five-year strategic partnership on

financial services with LSL Property
Services plc

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£6.4m

• Acquisition of The Mortgage Genie,

a mortgage broker, to add
consultant capacity

D IVI D E N DS

N E T (D E BT ) / C A S H

11.6p

+33% 2020: 8.7p

2021

2020

2019

2.6p

2018

2017

8.7p

8.4p

7.5p

£(2.7)m

11.6p

2021

£(2.7)m

2020

2019

£8.8m

£4.0m

2018

£2.3m

2017

£0.1m

Before exceptional items, share based payment charges and gain on
listed investment

— O U R S T R AT EG I C G R OW T H I N I T I AT I V E S

Lettings
growth

Develop sales
activity in the
traditional
brands

Financial
services
growth

EweMove
recruitment

Acquisitions

Digital
marketing

— O U R V I S I O N

To achieve an increasing UK market share of lettings, estate agency and
financial service transactions, using a proven franchise model with multiple,
and clearly differentiated, brands. The Property Franchise Group PLC intends
to develop both the depth and breadth of its network, supporting our
franchise owners to grow their local market shares.

See more
on pages
16-17

The Property Franchise Group PLC
Annual Report and Accounts 2021

— AT A G L A N C E

Providing responsive local
residential sales and lettings
expertise across the nation
through our award-winning
brands.

— O U R N E T WO R K

We have representation stretching from Falmouth to Aberdeen with a presence
in most major towns and cities including 60 offices in London. We achieve this
both through traditional high street offices and through virtual offices where the
franchisee typically works from home or a serviced office.

— O U R B R A N D S

Our brands are household names in their local communities,
regions and nationally. Whilst the majority of franchisees operate
through high street offices, a growing number of new franchisees
choose to offer a 24/7 hybrid service through EweMove and,
from 2022, will be able to offer a hybrid service through Hunters.

FR AN C H I S E N E T WO R K
TU R N OVE R

£157m

(2020: £94m)

FR AN C H I S E N E T WO R K
E M P LOYE E S

3,750

(2020: 2,300)

NATI O NAL P RO P E RT Y FR AN C H I S E B R AN DS

The national network of independently
owned property agents

Here to get you there

The UK’s trusted agent

Martin & Co was established in 1986 and has
151 high street offices serving England, Wales
and Scotland with offices from Falmouth to
Aberdeen. It is one of the major residential
letting agents in the UK with over 41,000
properties under management, deriving 83%
of its Management Service Fees from lettings
services. A multi-award winning agency, it
specialises in residential lettings, property
management, property investment and sales.

Hunters opened its first office in York in
1992. It was established on the principles
of excellent customer service, unrivalled
pro-activity and achieving the best possible
results for its customers. 2005 saw the
start of expansion with the creation of a
franchising model. It has also grown its
franchising business organically and through
the acquisition other businesses. It operates
10 of the offices itself.

Launched in late 2013, EweMove has grown
to a network of 167 territories at the year end.
The EweMove franchise model combines
the recruitment of local property experts
(“LPEs”), typically serving micro territories of
20,000 households through a centralised
24/7 technology platform, with the traditional
features of a full estate agency service and a
consumer fee predicated on completed sales,
rather than listings. It continues to be ranked
at the top of Trustpilot, a position its held
since 2015.

TE R R ITO R I E S

151

TE R R ITO R I E S

190

TE R R ITO R I E S

167

The Property Franchise Group PLC
Annual Report and Accounts 2021

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R EG I O NAL P RO P E RT Y FR AN C H I S E B R AN DS

FI NAN C IAL S E RVI C E S
B R AN DS

Unrivalled local knowledge,
for all your property needs

Property experts providing
service and value for London
communities since 1850

Whitegates has been trading
in the Midlands and North of
England since 1978. It was one of
the first estate agents to advertise
on TV. Today its activities are
evenly split across sales and
lettings with 28 high street
offices.

Ellis & Co has 16 high street
offices, 15 within London. It
shares complementary branding
with Martin & Co offices in
London and the two brands,
with a combined strength of
29 offices, work together to
serve London.

Taking the hassle out of
property, for communities
across southern England, since
1948

Parkers has 14 high street offices
located along the M4 corridor
west of Maidenhead with a
strong presence around Reading.

Your online mortgage broker

The Mortgage Genie is an online
mortgage broker based in
Newcastle and was established
in 2016. It has a team of financial
advisers offering products from a
panel of over 90 lenders.

TE R R ITO R I E S

Providing expertise in sales
and lettings to communities
across the South West of
England and Wales for over
150 years

CJ Hole was established in
1867. An award winning brand
with strong local brand heritage
operated through 15 high street
offices in Avon, Somerset,
Gloucestershire and Gwent.

When you’re ready to move,
Mullucks will get you moving

Local Agent, a network of
smiles

Mullucks has been established in
Hertfordshire and Essex for over
30 years and has a long-standing
reputation for professionalism
and local expertise. It joined the
Hunters network in 2019.

Country Properties operates
15 high street offices across
Hertfordshire and Bedfordshire, it
was acquired by Hunters in 2015.

TE R R ITO R I E S

You can find out more about
all our brands on our website
thepropertyfranchisegroup.co.uk

— O U R S U CC E S S

Our brands have achieved
many awards over the
years demonstrating their
capabilities.

Notably, our youngest property franchising
brand, EweMove has continued to win
awards and establish itself nationally.
EweMove appeared in the HSBC top
100 UK franchised businesses of 2021 at
number 34.

It exceeded 14,000 5-star reviews on
Trustpilot during the year and won best
National Lettings Agency at the EA Masters
awards for the third year in a row.

The Property Franchise Group PLC
Annual Report and Accounts 2021

— C H A I R M A N ’ S S TAT E M E N T

It has been an inspiring year for us, as
we drove towards aspirational targets
far quicker than envisaged and reset
our future expectations upwards.

Teamwork, business
partnering, and a
strong vision have
been at the core of our
success. I am pleased
to report that we have
made strong progress
as a Group and
achieved a significant
improvement in
headline profit before
tax, up 35% to £6.4m vs
last year’s £4.8m.

— Richard Martin | Chairman

P RO FIT B E FO R E TA X

£6.4m

D IVI D E N D FO R F Y21

11.6p

The Property Franchise Group PLC
Annual Report and Accounts 2021

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In those 36 years since founding Martin &
Co, we have built a leading national business,
which has proven its ability time and again by
outperforming the sector. The foundations I
began have been built on by two inspirational
leaders. Ian Wilson joined me to see what
he could achieve in a few years and stayed
for sixteen years until April 2020. He led
Martin & Co to be the leading lettings brand
in the UK before seeing us through IPO and
into the development of our very successful
multi-brand strategy. Gareth Samples joined
us in February 2020 and became CEO in
April 2020. He has re-invigorated our passion
for helping our franchisees to be more
successful with very clearly defined strategic
growth initiatives which are at the core of
everything we do and the recruitment of
additional sector experienced specialists into
an already strong leadership team.

Of course, none of this would have occurred
without the hard work of our franchisees and
head office staff. The skill and dedication of a
team of experts in their various fields, coupled
to the ambitions of people who want to build
a business and future for themselves is a
powerful force.

In this my final Chairman’s Statement before
stepping down I cannot think of any more
appropriate time to reflect on how we have
achieved our current position.

Martin & Co opened its doors for trading in
May 1986 in South Somerset. My franchisor
epiphany came when in 1993 I read a copy
of ‘Behind the Golden Arches’, the story
of how Ray Kroc succeeded in building
McDonald’s into the world’s largest franchise
network. It was clear to me that his focused
adherence to proven uniform procedures
and passion for ensuring his franchisees’
success were key. Moreover, that many of the
strategies and processes could be used to
great effect in our residential lettings business.
In the months that followed I set about
designing the systems and procedures of our
franchise model.

We launched Martin & Co as a franchise
offering in May 1995. We were convinced
that provided we focused our efforts on our
franchisees’ success, and the franchisees
focused their efforts on the quality of the
services they were delivering to customers,
then our success should duly follow.

Having built a substantial national lettings
portfolio and a 180-branch network, 2012
saw our return to the residential sales market
in order to build a second major revenue
stream for our franchisees.

In December 2013, through an IPO, we
became an AIM listed company. A true
milestone moment for me, my family and
the business. Soon after, in October 2014
we acquired four franchise brands and

their franchisees from Legal & General –
Whitegates, Ellis & Co, CJ Hole & Parkers –
our vision being to substantially improve their
franchisees’ lettings revenues and leverage
our group resources more effectively and
efficiently.

With margins, profits and cash improving,
we looked for our next acquisition. After
watching a period of sustained growth
by EweMove in a growing “hybrid/online”
segment of the residential sales market, we
acquired it in September 2016. It’s proven
customer service credentials, coupled with
a sizeable “flock” and the ability to fund
growth from operating cash flows gave us
confidence in its long-term potential.

Being a multi-brand franchisor, we felt the
time was right in 2017 to re-brand to The
Property Franchise Group.

We thought we had a resilient business
model and, when put to the test, by Brexit
and Covid-19, it behaved in that way. In
March 2021 we acquired Hunters, Country
Properties and Mullucks. Then to support
an expansion into financial services across
a network heading towards 600 outlets,
we signed a five-year strategic partnership
with LSL Property Services in April 2021 and
acquired a mortgage broker, Mortgage
Genie, in September 2021.

It has been a truly exciting journey, meeting
people who were seeking a platform to
build their own financial success, to achieve
their ambitions, shed the 9-5 job, or just
provide themselves with an early worry-
free retirement. From the very start, the
satisfaction of helping those people on their
journey has been enormously rewarding.

The Property Franchise Group PLC
Annual Report and Accounts 2021

— C H A I R M A N ’ S S TAT E M E N T CONTINUED

We have also delivered
revenues significantly ahead
of last year and built a
platform for future growth.

Board focus during 2021
It’s been a busy year for our Board given the
two acquisitions completed in the year,
the strategic partnership with LSL, sale of
Aux Group, and the evaluation of existing
and potential new operating systems for
our franchisees.

We also saw Board changes this year as
Glynis Frew and Dean Fielding joined us
from Hunters in March providing us with
continuity of management for Hunters and
further insight into our sector and the market.
Since the year end Glynis has stepped down
from our Board and taken up the post of
Group Franchise Training and Development
Director. This role addresses our objective to
develop the next generation of leaders within
the Group and our franchise network as well
as to be at the forefront of the Regulation
of Property Agents (”RoPA”). Glynis has both
the experience and tremendous passion
necessary to achieve this objective. We are
very grateful for her continued service and
desire to take on a challenging remit.

We have been adjusting to being the
largest UK property franchise business and
the second largest agency network in the
sector. This has brought with it additional
opportunities such as to partner with third
parties, acquire complementary businesses
and attract talented people. Of course, it has
also brought with it new risks which we need
to assess to ensure we continue to generate
class leading service and returns.

We continued to prioritise stakeholder
engagement in 2021, with our Executive
Directors spending more time presenting to
franchisees, investors, employees, suppliers,
and lenders on progress, our strategic
initiatives, and our vision.

Market developments
We entered 2021 with a significant sales
agreed pipeline as homeowners decided to
move for a myriad of reasons including the
stamp duty holiday. However, it became clear
from March onwards that stamp duty alone

was not fuelling the market and our sales
pipeline remained strong. Having bought one
of the largest brands in residential sales we
reaped the benefits from selling over 26,000
homes compared to 9,000 homes in 2020.

In the residential lettings market we saw less
movement by tenants. However, following
the tenant fee ban, the evictions ban coming
to an end, the increase in house prices and
other inflationary pressures, rents have risen.
Typically, rent increases of 6% to 8% were
seen during 2021, a trend that is continuing
into the current financial year.

Looking forward, I continue to believe that
the housing market represents a strong
investment opportunity. The UK government
has demonstrated that the housing market is
integral to a strong economy and that it will
implement initiatives to support its continued
strength. We need further properties to rent
to satisfy our labour shortages and ensure
capacity exists where that labour is required.
Demand for rental properties remains strong
and returns should increase. In addition, early
evidence in 2022 suggests a healthy
appetite remains to buy homes to satisfy post
Covid lifestyle changes.

Dividend
We committed to a progressive dividend
policy at the time of IPO, confident that
we could generate the earnings to both
maintain a strong dividend cover and
yield. I am very proud of our record and
confident that the Group can continue to
fulfill on this commitment. Since IPO we
have paid out 47.4p in dividends to our
supportive shareholders.

2021 has seen a step change in our
profitability and net operating cash
generation. The Board has felt it only right to
reflect that in the dividends being paid. I am
therefore pleased to announce that the Board
has approved a final dividend for 2021 of 7.8p
(second interim for 2020: 6.6p) bringing the
total dividend for 2021 to 11.6p, an increase of
33% over the 8.7p paid for 2020.

Outlook
We are currently making strong progress
with our strategic initiatives and I have every
confidence that the executive will be able to
further report positive and quantifiable results
from this work in the near future.

We now have a Group which is capable of
more rapid scaling up and we believe our
network of local business professionals will
soon challenge the largest of corporate
networks.. Our year-on-year financial
performance and returns are testament to
the capital-light strength of our franchise
model and, as it has in the US, we believe that
franchising will become the dominant model
in residential agency with TPFG augmenting
its position as a leading player.

I am extremely proud of the Group that we
have built. It’s been a fascinating and inspiring
journey made possible by our talented team,
committed franchisees, the support of my
fellow Board members in shaping today’s
business and by investors backing us. All have
made a huge contribution to our success.

I extend my sincere thanks and gratitude to
all of them.

I am delighted to be passing the baton to
Paul Latham. With many years of relevant
commercial and Board experience, I am
confident that he will successfully lead
the Board to deliver further value for
our stakeholders.

As for myself, whilst standing down as Chair,
I have every confidence in our potential
for ongoing growth and can assure all
stakeholders that our vision for the future is
every bit as exciting and ambitious as it was
back in May 1995.

Richard Martin
Non-Executive Chairman
4 April 2022

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The Property Franchise Group PLC
Annual Report and Accounts 2021

— I N V E S TM E N T C A S E

Why invest in
The Property
Franchise Group?

We are a robust business in the face of adversity as well
as a market leader able to reap the rewards in better
times. Since listing on AIM in 2013 we have acquired
a number of complementary property franchising
businesses and become the largest lettings and estate
agency franchise business in the UK.

We have rewarded our shareholders with a progressive
dividend policy.

M O D E L:

1 P ROVE N FR AN C H I S E
+25

years in franchising

O F G ROW TH :

3 TR AC K R ECO R D
+715%

growth in adjusted
diluted EPS since 2013

S I N C E 2 01 3 TO DATE :

5 S IX ACQ U I S ITI O N S
Nine

franchise brands

R ECU R R I N G R E VE N U E :

2 H I G H D EG R E E O F
52%

of total revenue in 2021

4 EXP E R I E N C E D

LE AD E R S H I P TE A M :

23 years

average industry experience

P O LI C Y:

6 P RO G R E SS IVE D IVI D E N D
+33%

on 2020 at 11.6p for 2021

7 STRO N G C A S H G E N E R ATI O N :

+65%

on 2020 at £8.9m for 2021

8 C AP ITAL LI G HT M O D E L:

17% 24%

ROCE
in 2021

ROCI
in 2021

Net Operating Cash Generation

Cash Flow Return - Assets & Equity

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9
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4.4

4.5

4.7

5.4

8.9

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40%

30%

20%

10%

31.2

32.4

24.2

25.5

30.9

27.1

27.8

25.3

31.1

17.9

2017

2018

2019

2020

2021

2017

2018

2019

2020

2021

CFROA

CROCI

The Property Franchise Group PLC
Annual Report and Accounts 2021

— C EO ’ S S TAT E M E N T

Focus on our strategic
initiatives delivering returns.

A resurgent sales market has helped Hunters’
performance exceed our expectations and
EweMove further its network ambitions.

TU R N OVE R

£24.0m

N E T C A S H G E N E R ATE D
FRO M O P E R ATI O N S

£8.9m

— Gareth Samples | Chief Executive

It has been a transformational year for TPFG.
Seeing our network enthused by the buoyancy
of the market, and having strengthened our
franchisee-franchisor relationships, our team
has worked hard to support franchisees to
reach their goals.

We supported more franchisees this year than
in the last decade, to grow multiple revenue
streams and expand geographically. We have
seen eight franchisees open new offices and
17 open spokes, the latter intended to exploit
more of their existing territories whilst using the
resources of the supporting office.

In line with our acquisitions’ strategy, the
Group completed the acquisitions of Hunters
and Mortgage Genie as well as launching a
five-year strategic partnership with LSL. The
Hunters acquisition was our most significant
to date and has delivered significant financial
and strategic benefits. Mortgage Genie and
the LSL partnership are additional milestones
for the Group and both bring exciting potential
growth opportunities.

The year ahead provides further ground
for optimism. The backdrop of more
normalised sales market conditions will
allow us and our franchisees more time to
focus on implementing our stated strategic
initiatives, underpinning our long-term
sustainable success.

Financial overview
We have increased our revenue every year
since IPO and this was our eighth consecutive
year with revenue up 118% to £24.0m (2020:
£11.0m) largely driven by the acquisition of
Hunters which contributed £9.8m. The Group
achieved an adjusted operating margin of 40%
(2020: 48%) compared to the 3-year average
pre-2020 of 43% reflecting good progress
with the post-acquisition synergies and a
lower operating margin from Hunters owned
offices. Profit before tax increased 35% to
£6.4m (2020: £4.8m).

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We came into 2021 with our sales agreed
pipeline double the prior year end and,
following the acquisition of Hunters, the Group
had a sales’ agreed pipeline of £31.0m as at 31
March 2021.

The market continued to be strong across the
remainder of the year and we ended 2021
with a sales agreed pipeline of £26.5m, 55%
higher than at 31 December 2019 (a pre-
Covid comparator). The high-street led brands
delivered an increase of 65% and EweMove
an increase of 76% against the pre-Covid
comparator. Although we did not own Hunters
in 2019, the pre-Covid comparator for Hunters
was a 44% increase.

During 2021, the Group listed over 31,000
homes for sale, agreed sales on over 32,000
homes and helped buyers complete on almost
26,000 homes.

•

Management service fees from sales were up
145% to £6.9m (2020: £2.8m) of which Hunters
contributed £2.6m of the increase, high-street
led brands £0.9m and EweMove £0.6m.

Our view is that the re-prioritisation of housing
needs will continue to be a factor in 2022 but
the supply of stock will be the critical factor and
therefore a similar market to 2019 is likely. That’s
just under 1.2m transactions or a 20% reduction
over 2021. So far, however, 2022 has started
better than we expected.

Strategic initiatives delivering growth
We have made significant progress this year
with our strategic initiatives as first set out in
September 2020.

•

Lettings growth
Our assisted acquisitions programme
brought another 1,270 tenanted managed
properties into the network. This should
add a further £1.2m to network income on
an annualised basis. We have also increased
our expertise and the funds committed to
this initiative with the aim of accelerating
our progress.

• Develop sales activity in the high

street-led brands
In 2021 we encouraged franchisees to
build their sales activities and benefit
from the buoyant market. Our success is
evident from average sales per franchisee
being 42% higher in the high-street led
brands for 2021 compared to 2019.

The Property Franchise Group PLC
Annual Report and Accounts 2021

•

Financial services growth
It is our intention for all our network’s
end customers to have access to a full-
service lettings and estate agency service,
and financial services provision is part of
that offering.

Pleasingly, we signed a 5-year strategic
partnership with LSL in April 21 and
whilst market conditions initially limited
our capacity to recruit financial advisers
(against an initial target of 100 by the end
of 2021), these have been improving in
recent months.

We also had our first block of franchisees
start on the journey to run their own
mortgage brokerages.

EweMove recruitment
We sold a record 58 new territories in 2021,
finishing the year with 167 territories under
contract. We have experienced continued
strong lead flow in 2022.

We are aiming to double the number
of territories occupied by EweMove
franchisees to 230 by the end of 2022.

• Acquisitions

We acquired Hunters Property plc on
19 March 2021. It operates under three
brands from 208 high street offices:
Hunters, Country Properties and Mullucks.
The acquisition has been materially
integrated into the Group and has delivered
significant financial and strategic benefits.
We will help its franchisees grow their
lettings revenues to a more balanced
level to improve their financial stability and
increase the resale value of their franchises.

In September 2021 we bought Mortgage
Genie, a mortgage broker supporting our
commitment to developing a financial
services income stream and providing
capacity to service our franchisees
requirements. We will continue to consider
the acquisition of further financial services
businesses which can enhance our
offering.

• Digital marketing

Best-in-class digital marketing is essential to
running a successful estate and/or lettings
agency business and we continue to invest
in our capabilities.

Towards the end of 2021 we saw the
completion of our new websites with
additional consumer functionality and, in
co-operation with an experienced partner,
a new CRM platform.

We are a strongly cash generative business and
2021 was no different with net cash generated
from operations of £8.9m (2020: £5.4m).
Hence, despite borrowing £12.5m to part
fund the cash element of the consideration
for Hunters of £14.5m, the £0.9m of costs for
that acquisition and assuming Hunters bank
debt of £3.0m, our net debt was only £2.7m
at 31 December 2021 (2020: net cash £8.8m).
Moreover, the continued strength of our
balance sheet provides the stability needed to
build further momentum behind our ongoing
growth initiatives.

Our network’s lettings performance
Whilst we have grown our sales capabilities this
year, lettings remains at the core of our DNA
and represented 53% of Group MSF with our
expectations being 60% in a less buoyant
sales market.

I am delighted to report that the network
started the year with 58,000 tenanted managed
properties and finished it with 74,000, an
increase of 27%. Much of the increase came
from the acquisition of Hunters, with the
remainder being attributable to acquisitions
by franchisees. Our franchisees acquired 1,270
(2020: 1,305) tenanted managed properties
though our assisted acquisition initiative during
the year. While external factors have suppressed
acquisition opportunities in recent years we
expect there to be more acquisitions in 2022
and are already seeing increased activity.

We let 40,000 properties in 2021 up from
28,000 in 2020. The increase was entirely
from Hunters.

We have seen rents rising on new lets and
renewed tenancies between approximately
6% to 8%. Zoopla reported the fastest growth
in rents in Q4 2021 than at any time over the
last 13 years. Across the UK rents increased
8.3% in 2021 to an average of £969 per calendar
month. Yet affordability as a percentage of a
single earner’s income was broadly in line with
the 10-year average of 36%.

Management service fees from lettings were up
18% to £7.9m (2020: £6.6m) of which Hunters
contributed £0.9m of the increase, high-street
led brands £0.2m and EweMove £0.2m.

Our network’s sales performance
We experienced a surge in demand for
residential property in 2021, reaching a level
I have not experienced before during my
30 years in the sector. The latest figures from
HMRC show sales completions of 1.47m
(non-seasonally adjusted) for 2021 against our
pre-Covid comparator of 1.18m in 2019.

The Property Franchise Group PLC
Annual Report and Accounts 2021

— C EO ’ S S TAT E M E N T CONTINUED

Supporting our franchisees
A key focus for the leadership team has been
developing the support we provide to our
franchisees. Our internal approach, culture and
attitude, clearly recognises that our purpose as a
business, and every individual role within that, is
to support the franchisees and to help them to
become more successful.

We have more franchisees than ever to support
and as such we have been enhancing our
leadership team. We welcomed Ellie Hall to us
in September as Managing Director of Martin &
Co (Midlands and North). Her specialism is the
acquisition of lettings businesses which she has
performed very successfully for our competitors
over many years. Towards the end of 2021 we
started to build additional training capabilities,
and post-period end announced that these will
be led by Glynis Frew once she has fully handed
over Hunters’ MD reins to Gareth Williams. We
also recruited 3 further regional managers.

The feedback received from franchisees
clearly indicates that we are heading in the
right direction. There is a renewed sense of
advocacy in our network and pride in what has
been achieved. We are sought out more often
for advice and the progress we have made
is typified by the strong reputation that our
team holds. That provides me with the energy
and passion to ensure we keep delivering on
our commitment.

Outlook
In 2022, we expect a similar residential sales
market to 2019 and will therefore be focusing
on encouraging franchisees to drive the
activities which underpin our strategic initiatives.
We have assembled the team to support them
and we are confident in our ability to execute.

Whilst uncertainties continue, we appear to
have weathered the worst of the pandemic
but none of us currently understand the
implications of conflict in Ukraine and the
increasing cost of living. What we do know
is that the Government has thus far been
supportive of our sector, rental inflation is
happening, and we are seeing greater sales
activity then we were expecting so far this year.

With a significant lettings business, a hybrid
model with a flexible cost base, the strength
from our network of committed franchisees,
and a platform capable of scaling faster, we
remain confident in our ability to grow the
Group and continue to deliver value for our
shareholders.

Gareth Samples
Chief Executive
4 April 2022

EweMove grows ever stronger
EweMove delivered a record performance
in 2021 as it continues to demonstrate the
benefits of its unique, hybrid, highly customer
centric and flexible cost based model.

EweMove’s revenue increased by 41% to £4.1m
(2020: £2.9m) and its adjusted profit before
tax which excludes exceptional items, share
based payment charges, amortisation arising
on consolidation increased by 67% to £1.5m
(2020: £0.9m). Its operating margin increased
from 31% in 2020 to 37% in 2021. Importantly,
profit before tax has quadrupled since 2018.

Milestone year for Hunters
Whilst our financial statements and
commentary above focuses on Hunters since
we acquired it on 19 March, I’d like to touch on
its entire year here.

Hunters opened 6 offices in 2021 (2020: 9).
Revenue was £12.8m (2020: £12.5m) and
adjusted profit before tax which excludes
exceptional items, share based payment
charges, and amortisation on consolidation
increased by 29% to £3.6m (2020: £2.8m). The
results from streamlining costs post acquisition
accounted for circa £0.4m of the increase.

Following a strategic review, Hunters launched
a hybrid offering post-period end - Hunters
Personal - which is nascent but has so far been
well received.

Looking forward in 2022, final integration
continues with consolidation into Group
functions which will generate further cost
savings. Alongside this we’ll be driving revenue
growth opportunities with the development of
more lettings income, a new hybrid offering to
promote, and the continued roll-out of financial
services to the network.

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The Property Franchise Group PLC
Annual Report and Accounts 2021

— O U R M A R K E T

Our understanding of the macro-economic
drivers of the residential property market.

Residential property has established itself
as an investment asset class and the
economic need for residential agency
remains as strong as ever.

Market drivers
• People will always need somewhere to live

• Population growth/increased life expectancy means more

UK households in the future

•

Social housing provision has declined significantly over the
last 30 years

• The private rental sector has grown significantly

to almost 20% of total housing stock

• Residential property has become an investment asset class

• Demand continues to outstrip supply

— K E Y M AC R O - ECO N O M I C FAC TO R S

Immigration to UK
Ordinarily we would provide net migration statistics,
but this was based on International Passenger Surveys
until the pandemic began. Instead, we look at visas
granted by the UK. There has been an increase in work,
study and mainly family visas connected to work and
study of 66% over 2019. With the majority moving into
rental accommodation, it’s no surprise that Knight Frank
reported tenant demand 44% higher in November 2021
over November 2019.

UK Visas Granted

2019

2020

2021

)
s
d
n
a
s
u
o
h
t
(

s
a
s

o
N

1200

1000

800

600

400

200

Work

Study

Family

Total

Source: ONS March 2022

Low interest rates
The official bank rate has been below 1.0% since
February 2009 and forecasts suggest that it may rise
to near 2.0% by the year end before plateauing.

Interest Rates

2.5

2.0

1.5

1.0

0.5

Mar 22

Jun 22

Sep 22

Dec 22

Mar 23

Jun 23

Sep 23

Dec 23

Sources: Bank of England, British Chamber of Commerce forecasts Q1 2022

Inflation
Consumer price inflation was 5.5% in the 12 months to
February 22. Whilst the current gap between inflation and
interest rates is more pronounced than it has been for some
time, forecasts by the Office for Budget Responsibility show
inflation falling back to around 2% in 2024.

Inflation Rates

)

(

e
t
a
r
n
o

i
t
a
fl
n

2020

2021

2022

2023

2024

Sources: OBR, British Chamber of Commerce forecast Q1 2022

The Property Franchise Group PLC
Annual Report and Accounts 2021

— O U R M A R K E T CONTINUED

— K E Y M A R K E T T R E N D S A N D O P P O RT U N I T I E S CONTINUED

Time at Current Address
Homeowners have been on the move. The average
length of time at their current address has dropped from
18.1 years in 2019 to 16 years in 2021. At the same time,
the change for private renters has been from 4.4 years to
4.2 years underlining the stability of income for landlords.

Younger Adults Living With Parents
In 2010, 50% of people aged 20 lived with their parents.
By 2020, 50% of people aged 23 still lived with their
parents. The number and proportion of young people
living at home with their parents for longer is likely due to
affordability constraints and high housing costs inhibiting
people from moving out of the family home.

Time at Current Address

Proportion of Young Adults living with their parents

s
r
a
e
Y

100

2017

2018

2019

2020

2021

30 31

Owner Occupiers

Private Renters

2000

2005

2010

2015

2020

Source: DhULHC, English Housing Survey 2020-21

Source: Zoopla

Gross Mortgage Lending
Gross mortgage lending has been increasing for the last decade
and is expected to have more than doubled between 2011 and
2021. Homeowner mortgage lending is expected to fall back
in 2022 before rising back to 2021 levels in 2023 driven by
remortgages. Buy-to-let lending has more than tripled between
2011 and 2021. Growth has been slower since 2017 reflecting
the amount of cash purchases and deleveraging by landlords.
That said, remortgaging is a key service to offer landlords.

House Building in England
House building in England has been falling short of
Government targets and forecasts suggests that will
remain the case. The target is currently 300,000 homes
pa. Starts were down significantly in 2021 over 2020.
Building the right properties in the right locations may
prove difficult. Supply constraints will continue to be a
factor in house prices and rents for many years to come.

Gross Mortgage Lending

House Building in England

n
o

i
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l
i

b
£

350

300

250

200

150

100

250,000

200,000

150,000

100,000

50,000

t
l
i

u
B
s
e
m
o
H

2017

2018

2019

2020

2021

2022

2023

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

Total Lending

Homeowner

Buy to let

Total Homes

Help to buy (other sales support)

Build to rent

Source: UK Finance

Source: DfLUHC and Savills UK

The Residential Market
Demand significantly outstripped supply in 2021, driving house prices up. New sales instructions, sellers putting their homes on the market,
began to improve as we headed into 2022. Fewer instructions have been seen in the market in part because agents already have lists of
clients waiting for such properties.

Buyer and seller numbers, % change versus the five year average

125

100

-25

-50

-75

Jan

Apr

Jul
2020

Oct

Jan

Apr

Jul
2021

Oct

Jan

End of full stamp duty holiday

15.0

12.5

10.0

7.5

5.0

2.5

0.0

New prospective
buyers, lhs

New sales
instructions, lhs

Nationwide UK
house price
index, rhs

2022

Source: Knight Frank

The Property Franchise Group PLC
Annual Report and Accounts 2021

UK Rental Inflation
Zoopla reports that average rents rose 3.7% in Q4 2021
taking the annual rate of rental growth across the UK to
+8.3%. Whilst some rental recalibration may have taken
place in Q4, a significant rise in demand coupled with no
overall growth in the PRS, and landlords having absorbed
costs in recent years implies rental inflation at similar
levels may continue for some time. Indeed, the Homelet
Index for February 2022 showed average rents + 8.6% on
February 2021.

UK Residential Sales
Cash buyers account for circa 36% of sales and the majority
of rental properties are bought wholly from cash resources.
Landlords have deleveraged over the last decade. Savills UK
reported that buy-to-let investors and cash buyers accounted
for 31% of the increase in sales transactions in the year to
June 21 compared to the average number purchased by
them between June 2017 and May 2019, a trend we expect
continued in 2021. This evidence suggests that a reduction in
stamp duty would help increase the number of properties in
the private rental sector.

Rents Rising Across the UK

UK Residential Property Transactions

h
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G

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15%

10%

-5%

-10%

-15%

£1,000
£900
£800
£700
£600
£500
£400
£300
£200
£100
0
May08 Feb 10 Nov 11 Aug 13 May15 Feb 17 Nov 18 Aug 20

London rental growth

UK excl London rental growth
UK excl London rent pcm

m
c
p
t
n
e
R
e
g
a
r
e
v
A

n
o

i
l
l
i

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0

2019 A

2020 A

2021 A

2022 F

2023 F

2024 F

Cash buyer

Mortgaged but-to-let investor

Mortgaged home owners

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Source: Zoopla

Sources: HMRC, UK Finance, Savills UK

Home Owners vs Private Renters
The private rented sector (“PRS”) in England has been falling
slightly as the number of homeowners increased. Over the
last 10 years private renters aged 25 – 34 decreased from 42%
to 37% whilst home ownership increased from 41% to 47%.
A similar trend has been seen in the 35 – 44 age group. The
Help to Buy scheme is being phased out and with increasing
house prices and interest rates we expect some reversal in
these trends.

Increased regulation – RoPA (Regulation
of Property Agents)
The government is expected to introduce legislation within
the next 2-3 years which will require all property agents to
be regulated by an independent regulator, with mandatory
qualifications and a code of practice, in order to raise
standards in the industry. This will benefit networks such as
ours where we can roll out the training and provide support
to ensure compliance with the legislation.

Home Owners vs Private Renters

n
o

i
l
l
i

18
16
14
12
10
8
6
4
2
0

2012

2013

2014

2015

2016

2017

2018 2019 2020

2021

Owner Occupiers

Private Renters

Sources: DfULHC, English Housing Survey 2020-21

The Property Franchise Group PLC
Annual Report and Accounts 2021

— B U S I N E S S M O D E L

We have established a proven franchise
model with clearly differentiated property
brands, creating a solid platform for value
creation and further growth opportunities.

W H AT W E D O

H OW W E A D D VA LU E

LETTINGS AND PROPERTY
MANAGEMENT
We are one of the largest managing agents of residential
properties in the UK with a deep understanding of
lettings and a clear view of how to develop value in the
long-term from a portfolio. Our franchisees are fully
insured members of professional bodies, supported by
specialist software, who know their local rental market
and manage all properties locally.

ESTATE AGENCY
We operate on a no sale no fee basis. We cater both for
the majority of sellers who prefer to instruct an agent
operating from high street premises and for those sellers
who choose to use a more technologically enabled
agent without a high street office. Two of our brands
have been engaged in estate agency for more than 150
years.

FINANCIAL SERVICES
Whilst some of our franchisees have been offering their
clients access to property related financial services for
many years, this was identified as a growth area for us
as a large proportion of franchisees do not engage in
this activity. Hence, the development of a full financial
services offering is one of our strategic initiatives.

ACQUISITIONS
The assisted acquisitions programme, whereby we
provide the expertise to our franchisees to assist with
finding the sellers of managed property portfolios,
negotiating the sales, funding the acquisitions and
integrating those acquisitions, is a primary focus for us.
Franchisees buying managed portfolios of properties
improve their chances of successful future growth.

ESTABLISHED FRANCHISE MODEL
At our core, all our brands operate exactly the same
franchise model. It’s a model that’s been developed over
the last 25 years, based around long-term commitment
by franchisor and franchisee to the development of
the franchisees’ revenue streams. Franchisees sign a
five-year agreement and agree to put all their efforts into
developing the franchise brand in their territory.

EXPERTISE AND SCALE
We have significant expertise in buying, letting and
managing rental properties. In the last seven years,
aided by the acquisition of some more sales-dominated
businesses, we have developed our expertise in selling
homes. We have grown to be the second largest branch
network for residential sales and the second largest
manager of rental properties through the acquisition of
Hunters Property plc.

CENTRAL SUPPORT
The support required by franchisees changes as their
franchises mature and as the economic environment
changes. We continue to evolve and invest in our central
support through IT, marketing, assisted acquisitions,
compliance and to invest in business advice through the
growth of our leadership team.

HARNESSING TECHNOLOGY
The use of technology is evolving in our sector. The
acquisition of EweMove helped us understand how
important it was to embrace new technologies. Having
improved lead generation through providing useful
information and improved websites, we built a customer
relationship management (“CRM”) platform to be able
to engage at the right times with customers and have
redeveloped both our websites and CRM in the last
year. Live chat was implemented on a 24/7 basis along
with virtual viewings and online appointments. Online
meetings with clients are now common place. We will
continue to enhance our offering through the use of
new technologies.

The Property Franchise Group PLC
Annual Report and Accounts 2021

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H OW W E S U P P O RT O U R F R A N C H I S E E S

T H E VA LU E O U R M O D E L C R E AT E S

We rely on people who are committed to operating
franchises under our brands. A franchisor’s role is to
research, gain insight into the future environment and
determine those factors likely to impact franchisees’
businesses in the future. We recognise that experienced
franchise owners have an important role to play and
we engage with them through various franchise
committees, regional business meetings and through
the MD-led operations teams.

We pride ourselves on the comprehensive start-up
training and support we offer. As the success of our
franchise is very important to us we support them
throughout their initial five-year franchise agreement
and beyond.

• Ongoing support through regional training, online
training, the acquisitions team and our business
development team.

• All offices have unlimited access to our business
systems, helpdesk and to specialist “market
intelligence” tools.

• Marketing campaigns and collaterals are developed in
coordination with the brands’ marketing committees
and made available through a digital hub.

• We build, update and optimise our brand websites.

• We support our franchisees with regular

customer targeted mailings/messages, PR and
monthly newsletters.

• We use specialist operational software and work

with our providers to ensure all franchisees and their
staff are competent users.

• We have an internal audit team and conduct regular
checks on the financial practices of our franchisees.

SHAREHOLDERS
• A stable earnings’ stream due to the size of the

managed portfolio of properties.

• A growing dividend through the success of
acquisitions and diversifying income.

FRANCHISEES
• At the forefront of technology and digital

marketing in our sector.

• Central expertise to steer franchisees through

the business challenges.

• Opportunities to achieve scale and ambitions

through expansion of territory, assisted
acquisitions or buying outgoing franchises’
businesses.

LANDLORDS
• One of the largest letting agents in the UK with

a deep understanding of lettings.

•

Franchisees supported by the best operational
software available.

• High standards of compliance that meet or

exceed the legal requirements.

TENANTS
•

Local service and extensive local knowledge to
help find the right property.

•

Long established and far reaching landlord
relationships.

• A full redress scheme when needs arise.

SELLERS
• A service more suited to customers, having the

choice of traditional or hybrid.

• No sale no fee across all our brands.

• Deep understanding of local markets, some

brands with +150 years of operation.

EMPLOYEES
• Over 3,750 people are employed within

the network and are given access to high
quality training and career development
opportunities.

The Property Franchise Group PLC
Annual Report and Accounts 2021

— O U R S T R AT EGY

We are pursuing a strategy
to deliver growth which
is summarised into six
key elements:

S T R AT E G I C G R O W T H I N I T I AT I V E

AC T I O N S

Lettings growth

We intend to continue to grow the portfolio of tenanted
properties managed by our franchise network through
acquisition (our own and assisting franchisees),
through more engaging and informing services for our
landlords, and by addressing the causes of attrition.

Develop sales
activity in the high-
street led brands

Our high-street led brands are heavily weighted towards
lettings. For some offices this is their primary focus. So
there is a significant opportunity to increase sales activity.

Financial services
growth

We want to build a financial services business with
100+ financial services consultants servicing our brands.

Growing our sales activity will help drive
our financial services business.

EweMove
Recruitment

We want to accelerate the recruitment of franchisees
into EweMove, aiming for the brand to have over
200 franchised territories by the end of 2022 with
500 people working in those franchises (2020:
115 franchised territories with 275 people).

We want to replicate the EweMove hybrid model in
Hunters with the introduction of Hunters Personal.

Acquisitions

We will continue to grow the Group through acquisitions
of the same, similar and complementary businesses.

Digital marketing

Our digital marketing strategy underpins all our other strategic
growth initiatives. We will continually develop our digital
marketing, delivering an intuitive and engaging customer
journey with the right communications at the right time.

The Property Franchise Group PLC
Annual Report and Accounts 2021

See pgs 25 and
26 for details
of our KPIs

P R O G R E S S TO DAT E

P R I N C I PA L R I S K S

• The majority of our franchisees have expressed a desire to buy a
portfolio and we have a larger network of opportunities after the
Hunters acquisition.

•

Franchisees have continued to carry out acquisitions acquiring 1,270
tenanted managed properties in 2021.

• The brands’ managing directors are actively working with franchisees

to source opportunities.

• Digitally driven campaigns to win private landlords’ business, retain

existing landlords and win back lost landlords have been put in place.

Acquisitions may not be available as has
been seen over the last 3 years or we may
lose out to other buyers following the
same strategy.

• We have started on our journey of upskilling franchisees who don’t

currently undertake any / many sales.

Some franchisees do not currently have
the resources and training to execute.

• Average sales per franchisee were 42% higher in the high-street led

brands in 2021 compared to 2019.

No guarantee of growth.

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In April 2021 we agreed a 5-year strategic partnership with LSL Property
Services Plc to develop financial services and have access to their team
of financial consultants to provide the advice to clients.

Franchisees do not except that this income
stream can improve the value of their franchises
and apathy continues.

•

In September 2021 we bought a majority share in The Mortgage Genie,
a mortgage broker.

• We are working with franchisees to refer leads to LSL and / or
help them to recruit their own advisers and/or start their own
mortgage broker.

•

58 territories sold in EweMove during 2021 bringing the year end
total to 167 territories under contract. Having over 200 franchised
territories by the end of 2022 is a realistic target.

• Hunters Personal , a hybrid offering, was launched in early 2022 with
the aim of providing a franchising solution with lower set up costs for
new franchisees.

Training and support fails to establish a culture
of one-stop advice for clients and those clients
don’t receive financial services support from
our franchisees.

More competitors are entering the market.

• Acquisition of Hunters Property plc in March 2021 and The Mortgage

Genie in September 2021.

• Continued search for other suitable targets.

• Bank facility in place with Barclays Bank Plc to mirror our

growth plans.

Suitable acquisitions that enhance
shareholder value may not exist or
become available or we lose out to other
buyers following the same strategy.

•

In 2021 improvements have been made to websites to
enhance the customer journey.

Further assessments were carried out to assist the
development roadmap.

Our messages being lost in the swathe of
daily digital communications that many
of our customers will receive and/or our
messages lacking relevance.

The Property Franchise Group PLC
Annual Report and Accounts 2021

— S T R AT EGY I N F O C U S

Acquisitions

A clear vision

EweMove – Acquired September 2016

— Nick Neill |

Managing Director – EweMove
Joined EweMove in 2013 as franchise owner
of EweMove York and became MD in 2017.

EweMove was launched as a
nationwide Sales & Lettings
franchise in 2013, with a clear
vision to…

Be the UK’s most trusted sales and
lettings agent
Provide customers with unrivalled
support, 24 hours a day, 7 days a week
Have a EweMove sales and lettings
branch in every major town and city in
the UK

With almost 170 territories signed up, there
are still plenty of areas available. We estimate
that there is room for at least 800 territories
in the UK. EweMove franchise recruitment is
one of the Group’s strategic growth initiatives
(see page 16) with the aim of growing to over
200 territories by the end of 2022 before
pushing on again.

EweMove is a hybrid model where
technology is coupled with traditional
techniques. Franchisees do not need to
operate from high street branches, with most
operating from a home or serviced office.

The EweMove brand uses the green sheep
logo affectionately known as Ewenice. It was
purposefully designed to stand out and
make clear that EweMove was a different
type of estate agent with something new
to offer customers.

The result is over 14,000 5 star reviews on the
ratings site Trustpilot, with EweMove having
often been in No1 spot as the UKs Most
Trusted Estate Agent since 2015.

The benchmark industry awards programme
– EA Masters – has awarded EweMove
the No1 National Lettings Agency Award
for 3 years running – 2019, 2020, 2021. At
the same time EweMove has appeared in
the top 5% of all UK Sales Agencies and
achieved No 1 spot in 2020 for the Best
National Sales Agency award. Adding to its
standing EweMove was awarded Best Hybrid
Agency by the industry’s Negotiator award
programme in 2020.

The Property Franchise Group PLC
Annual Report and Accounts 2021

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Achievements in 2021
•

58 new territories signed up in 2021
bringing the total to 167

• Revenue increased by 41% to £4.1m

(2020: £2.9m)

• PBT increased by 67% to £1.5m (2020

£0.9m); quadrupling over the last 3 years.

• New seller and landlord opportunities
grew by 37% compared to 2020.

•

Sales Completions grew by 61%
over 2020

Lettings completions increased by
18% over 2020 and the tenanted
managed portfolio grew by 32%
to over 3,100 units.

What’s next?
•

Further recruitment to over 200 territories
enabling the brand to become a more
recognised household name

•

Increase the market share of our
franchisees through continued training
and support, increasing earnings for both
franchisees and the Group

Further expansion into lettings through
organic growth and acquisition

• Continue to embrace new technologies
to remain ahead of the competition and
leverage the new operating system being
rolled out in 2022

The Property Franchise Group PLC
Annual Report and Accounts 2021

— S T R AT EGY I N F O C U S

Acquisitions

Enhancing earnings
and expertise
Hunters – Acquired March 2021

— Glynis Frew |
Managing Director – Hunters
(until 31 March 2022).

Financial Performance for 2021 (full year)
2021 saw a very strong performance against
a backdrop of a buoyant sales market. The
franchise network continued to embrace the
improved conditions, resulting in the Hunters
achieving another record year for profitability
and improving its customer service rating to
98% (2020: 97%).

Hunters entered 2021 with a record sales
pipeline of £17.3m, which together with a
significant number of new sales being agreed,
meant it finished 2021 with a sales agreed
pipeline of £13.5m, 83% higher than our pre-
Covid comparator of 2019. This resulted in
exchange fees invoiced for the Hunters group
of £42.7m, 54% higher than 2020 and 2019.

In 2021 Hunters grew its portfolio of tenanted
managed properties from just over 14,000 to
just over 15,000. It let 17,535 properties and its
network generated lettings income of £17.4m.
Lettings MSF accounted for 27% of the MSF
generated by the Hunters network.

Terms of the Acquisition

Effective on 19 March 2021, The Property
Franchise Group plc (“TPFG”) acquired the
entire issued share capital of Hunters Property
plc in exchange for £14.53m in cash and
5,551,916 ordinary shares of 1p each in TPFG,
valuing the acquired group at £26.1m.

Launched in 1992, Hunters is a widely
respected national sales brand and a
developing lettings business with high levels
of customer satisfaction. Hunters had a
network of 208 offices at the year-end.

HUNTERS PROMISE IS THAT IT’S
“HERE TO GET YOU THERE” AND
CHAMPIONS 5 VALUES

DRIVE
Be passionate and deliver the customer’s goal

PROGRESSIVE
Deliver a modern and relevant service to our
customers

INVOLVED
Invest time and care so that the customers
understand their business is important to us

EMPATHY
Stand in our customers shoes and truly
understand their aims and challenges

INTEGRITY
Respect others, truly listen and provide
relevant and appropriate advice

The Property Franchise Group PLC
Annual Report and Accounts 2021

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Network income

29%

34%

2021

2020 and 2019

71%

66%

Sales

Lettings

Hunters Performance

Post

acquisition
2021
£’m

Turnover
Adjusted PBT

9.78
3.00

Full Year
2021
£

12.76
3.64

Full Year
2020
£’m

12.46
2.81

Full Year
2019
£’m

13.99
2.06

Change %
’21v’19

(8)%
77%

Hunters Non-Financial KPIs

Customer service rating
Number of locations
Offices opened
Exchange fees invoiced
Lettings income
Pipeline (sales agreed)
Managed properties

Full Year
2021

98%
208
6
£42.7m
£17.4m
£13.5m
15,172

Full Year
2020

97%
209
9
£27.7m
£15.5m
£17.3m
14,588

Full Year
2019

96%
206
20
£27.7m
£14.6m
£9.4m
13,842

Change %
’21v’19

1%
1%
(70)%
54%
19%
83%
10%

OPERATIONS
Training continues to be a focus for the group
as we look to build on our training programs
and offer these out across the wider Group.
During 2021 we ran 76 classroom and
web-based courses with 464 delegates.
5,694 e-learning modules were completed
culminating in a further 199 completing the
Hunters National Qualification, endorsed by
Propertymark. We are delighted that we have
been able to offer this training facility out to
the wider TPFG network, which has proved
popular. A further 2014 delegates from
across the wider network have joined
the training academy, completing 2,423
e-learning modules.

The integration into the TPFG wider business
continues to go well with cost synergies
being realised and alignment of policies
and procedures being achieved. Glynis
Frew stepped down as managing director
of Hunters and from the TPFG Board on
31 March 2022. She will lead the Group
in a new role as Franchise Training and
Development Director. Gareth Williams, an
established member of the Group’s senior
management team, has taken on the role
of Hunters’ managing director.

FO R TH E FU LL YE AR
H U NTE R S D E LIVE R E D

39%

increase in network income at
£60.1m (2020: £43.2m)

30%

increase in adjusted PBT at
£3.64m (2020: £2.81m)

The Property Franchise Group PLC
Annual Report and Accounts 2021

— F I N A N C I A L R E V I E W A N D K E Y P E R F O R M A N C E I N D I C ATO R S ( K P I S )

Transformational
performance resulting
from increased scale.

O P E R ATI N G
P RO FIT

£6.7m

M ANAG E M E NT
S E RVI C E FE E S

£14.7m

— David Raggett | Chief Financial Officer

In 2021 we forged ahead with our six strategic
initiatives alongside a buoyant sales market
mindful that it might not last. Our progress was
undoubtedly helped by our investment in a
new leadership team in late 2020 and further
investment in 2021 giving us the bandwidth
and expertise to implement and develop all
our initiatives.

We added 17 companies in the year through
the acquisitions of Hunters on 19 March
and Mortgage Genie on 6 September. The
former putting us at the forefront of sales
agency networks in the UK and growing our
tenanted managed portfolio by 25%. The
latter complementing our 5-year strategic

partnership with LSL Property Services to
develop a meaningful third revenue stream,
financial services.

Our scale allowed us to use Group
functions more efficiently, start to eliminate
operational resource duplication and agree
several beneficial long-term partnership
arrangements. That on top of saving
duplicated PLC costs meant an initial £0.4m
of annualised cost savings were achieved.

On a like for like basis including Hunters
(artificial because we did not own Hunters until
March 2021), the sales agreed pipeline was
£32.6m at the start of the year and finished

Revenue
Management Service Fees
Administrative expenses
Adjusted operating profit*
Operating profit
Adjusted profit before tax*
Profit before tax
Adjusted EBITDA**
Dividend

2021

£24.0m
£14.7m
£12.7m
£9.7m
£6.7m
£9.4m
£6.4m
£10.4m
11.6p

2020

£11.0m
£9.4m
£5.3m
£5.3m
£4.8m
£5.3m
£4.8m
£5.7m
8.7p

* Before exceptional costs, amortisation of acquired intangibles and share-based payment charges.

** Before exceptional costs, share-based payment charges and gain on listed investment

2021 at £26.5m. Whilst the conversion of sales
agreed into completion income started slowly
in the year, the volume of transactions and
longevity have taken us by surprise and the
benefits of this will continue to be felt for at
least Q1 2022.

By the year-end we had exceeded 74,000
tenanted managed properties and rents were
rising by circa 8% per annum by the end of
the year. These two factors drove our lettings
result in 2021 and as the latter will take several
years to be substantially reflected across the
portfolio, it should drive growth in income in
2022 and beyond.

Revenue
Group revenue for the financial year to
31 December 2021 was £24.0m (2020:
£11.0m), an increase of £13m (118%) over
the prior year. Hunters contributed £9.8m
to revenue. There was like for like growth
(excluding Hunters) of 26% to £13.9m.

Management Service Fees (“MSF”), our key
underlying revenue stream, increased 57%
from £9.4m to £14.7m and represented 61%
(2020: 85%) of the Group’s revenue. Hunters
contributed £3.5m of MSF. There was like
for like growth (excluding Hunters) of 19%
to £11.2m.

Lettings contributed 53% of MSF (2020: 70%),
sales contributed 46% of MSF (2020: 29%) and
financial services contributed 1% of MSF (2020:
1%). Lettings MSF increased by 19% in the year,
excluding the amortisation of prepaid assisted
acquisitions support, and sales MSF increased
by 145%.

Our franchise sales activity was predominantly
focused on reselling existing franchises to
experienced franchise owners in the high
street-led brands, and to encouraging new
entrants into EweMove. Resale activity
recovered in 2021. Territory sales in EweMove
set a new record of 58 (2020: 11).

The Property Franchise Group PLC
Annual Report and Accounts 2021

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Operating profit
Headline operating profit increased 40%
to £6.7m (2020: £4.8m) with an operating
margin of 27% (2020: 43%). Adjusted operating
profit before exceptional items, amortisation
of acquired intangibles and share-based
payments charges increased 82% from £5.3m
to £9.7m and the resulting operating margin
was 40% (2020: 48%).

The average adjusted operating margin
for the 3 years prior to 2020 was 43%. The
operating margin for 2021 is lower than prior
years due to Hunters operating some of its
offices itself, which is a lower margin activity.
There has been good progress with the initial
post-acquisition synergies realising £0.4m of
cost savings and we continue to seek further
synergies in 2022.

As a result of the acquisitions in 2021, cost
of sales increased by 297% to £3.7m (2020:
£0.9m) and administrative expenses increased
by 147% to £13.0m (2020: £5.3m), which
included exceptional costs and the cost of
repaying the furlough money back to HMRC
in full of £0.09m.

Exceptional costs were £0.9m due to the
acquisition of Hunters Property plc.

Share options were granted to the Executive
Directors in 2021 over a maximum of
1,200,000 shares, with 100,000 arising
through a deferred bonus plan, adding to
those granted in 2020 over a maximum
of 200,000 shares. There were also share
options granted to senior employees in 2021
amounting to a maximum of 425,500 shares
on the same conditions as those applying to
the Executive Directors. All other grants for
previous years vested during 2021.

An assessment of the share-based payment
charges resulting from the options granted
was made on 31 December 2021 resulting in
£1.0m being charged to the profit and loss
account (2020: £0.1m). Further details can be
found in notes 4, 5 and 33 to the consolidated
financial statements.

Adjusted EBITDA
Adjusted EBITDA for 2021 was £10.4m
(2020: £5.7m), an increase of £4.7m (81%)
over the prior year. The high street-led brands
contributed £5.2m (includes PLC costs),
Hunters contributed £3.6m, and EweMove
contributed £1.6m.

Profit before tax
Profit before tax was £6.4m for 2021 (2020:
£4.8m). Excluding exceptional costs of £0.9m
(2020: nil), amortisation arising on acquired
intangibles of £1.2m (2020: £0.5m), the share-
based payment charges of £1.0m (2020:
£0.1m) and the gain on the listed investment
of £0.1m (2020: nil), the adjusted profit before
tax increased by 76% from £5.3m to £9.4m.
The high-street led brands contributed £4.9m
(included PLC costs), Hunters contributed
£3.0m and EweMove contributed £1.5m.

Taxation
The effective rate of corporation tax for the
year was 42.7% (2020: 21.2%) due to the
Government increasing corporation tax from
19% to 25% from April 2023 which has caused
a deferred tax adjustment of £1.5m. The total
tax charge for 2021 was £2.74m (2020: £1.0m).

Discontinued operations
On 22 July 2021 the Group disposed of
its majority shareholding in Aux Group
Limited. This resulted from the decision
to partner with LSL so as to scale up more
quickly without the regulatory burdens.
A cost of £0.2m has been recognised under
discontinued operations being the loss on
disposal of £0.3m less the profit after tax up
to the point of disposal of £0.1m.

Earnings per share
Basic earnings per share (“EPS”) for the year
was 11.3p (2020: 14.6p), a decrease of 23%
based on an 19% increase in the average
number of shares in issue for the period
to 30,622,102 (2020: 25,822,750). EPS is
significantly impacted in the year by the
deferred tax rate change from 19% to 25% that
was substantially enacted on 24 May 2021,
reducing earnings by £1.5m.

Diluted EPS for the year was 11.3p (2020:
14.4p) a decrease of 22% based on the average
number of shares in issue for the period plus
an estimate for the dilutive effect of option
grants vesting, being 30,721,692 (2020:
26,342,567). Again, this is also impacted by the
deferred tax rate change reducing earnings by
£1.5m in 2021.

The impact of the deferred tax rate change
of £1.5m is to reduce basic EPS from 16.3p to
11.3p in the year and diluted EPS from 16.3p
to 11.3p in the year.

Adjusted basic EPS for the year was 27.0p
(2020: 16.8p), an increase of 61% based on
the average number of shares in issue for the
period of 30,622,102 (2020: 25,822,750).

Adjusted diluted EPS for the year was 26.9p
(2020: 16.5p), an increase of 63% based
on an estimate of diluted shares in issue of
30,721,692 (2020: 26,342,567).

The adjustments to earnings to derive the
adjusted EPS figures total £4.8m (2020: £0.6m)
and result from the share-based payment
charge of £1.0m, amortisation of acquired
intangibles of £1.2m, exceptional costs of
£0.9m, a deferred tax rate change generating
a charge of £1.5m, and a loss on disposal of
subsidiary of £0.2m.

The profit attributable to owners was £3.5m
(2020: £3.8m).

Dividends
The Board remains committed to its
progressive dividend policy whilst maintaining
strong dividend cover as part of its overall cash
allocation policy.

The Group has made significant progress
with its strategic initiatives and is generating
significantly more cash than ever before. As
a result, the Board is pleased to announce a
final dividend of 7.8p (second interim dividend
for 2020: 6.6p), an increase of 18%, bringing
the total dividend for 2021 to 11.6p (2020:
8.7p). It will be paid on 27 May 2022 to all
shareholders on the register on 29 April 2022.
Our shares will be marked ex-dividend on 28
April 2022. The total amount payable is £2.5m.

The Property Franchise Group PLC
Annual Report and Accounts 2021

— F I N A N C I A L R E V I E W A N D K E Y P E R F O R M A N C E I N D I C ATO R S ( K P I S )
CONTINUED

Cash flow
The Group is strongly operationally cash
generative. The net cash inflow from operating
activities in 2021 was £8.9m (2020: £5.4m).

The net cash outflow from investing activities
was £13.7m (2020: outflow £0.1m). This
consisted of £13.0m for the purchase of
Hunters Property PLC, £0.1m for the purchase
of Mortgage Genie Limited and its sister
company, £0.3m on the disposal of Auxilium
and £0.3m for the purchase of assets. In 2020,
£0.2m was paid to franchisees following their
purchase of tenanted managed properties
and the acquisition of Auxilium Partnership Ltd
netted to a cash inflow of £0.1m following a
loan repayment of £0.2m.

The Group borrowed £12.5m from Barclays
to fund all bar £2.0m of the cash element
of the consideration for Hunters Property
Plc. This was made up of a revolving credit
facility of £5.0m and a term loan of £7.5m
repayable over 4 years. The Group had no
bank borrowings in the prior year. It made
repayments against the term loan of £1.4m
during 2021. In addition, the Group repaid
loans that Hunters had with HSBC of 3.0m.

Dividend payments totalling £2.9m were paid
in the year (2020: £0.5m).

Shares were purchased by the TPFG EBT for
£0.3m (2020: £nil).

Liquidity
The Group had cash balances of £8.4m on
31 December 2021 (2020: £8.8m) and due to
the bank loans mentioned above its net debt
was £2.7m (2020: net cash £8.8m).

Key performance indicators
The Group uses a number of key financial
and non-financial performance indicators to
measure performance. The Group also adjusts
certain well-known financial performance
measures for share-based payments charges,
amortisation on acquired intangibles and
exceptional items so as to aid comparability
between reporting periods.

The key financial measures are as follows:
• Management Service Fees per franchisee

• Adjusted EBITDA

• Profit before tax

• Adjusted profit before tax

• Adjusted earnings per share

• Net cash generated from operations

These have been discussed below in further
detail.

The key non-financial measure focus on some
long-standing drivers of financial performance.
There are also non-financial measures being
reported on with regards to the strategic
initiatives which can be found in the strategy
section on page 16:
• Number of properties listed for sale

• Number of properties let

• Number of properties sold

• Number of managed properties

• Number of managed properties acquired

through assisted acquisitions

•

EweMove territories sold

Financial position
The consolidated statement of financial
position remains strong with total assets
of £60.4m (2020: £25.2m), the significant
increase being mainly due to the acquisition of
Hunters Property plc.

There was an increase of £22.4m in liabilities
during the year due to the new bank loan which
contributed £11.1m of the increase as well as
from an increase in the deferred tax liability of
£4.5m resulting from the Hunters acquisition
and the increase in the deferred tax rate, and an
increase in other liabilities mainly resulting from
the Hunters acquisition of £6.8m.

The Group finished the year with the total
equity attributable to owners of £33.6m, an
increase of £13.1m or 64% over the prior year.

The Group generated stronger cash inflows
than ever before in 2021 due to its operating
margins, acquisitions and the strength of
the residential sales market. This has quickly
brought the net debt down from a high of
£7.3m following the acquisition of Hunters to
a net debt of £2.7m at the year end.

David Raggett
Chief Financial Officer
4 April 2022

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The Property Franchise Group PLC
Annual Report and Accounts 2021

Measuring our
performance

The Group tracks a series of financial and
non-financial metrics that demonstrate the
progress we are making. These have been
discussed in further detail throughout
the Strategic report.

S T R AT E G I C G R O W T H I N I T I AT I V E

1 Lettings growth

2 Sales activity in the traditional brands

3 Financial services growth

4 EweMove recruitment

5 Acquisitions

6 Digital marketing

* Profit after tax before share-based

payment charges, amortisation of acquired
intangibles, exceptional gains/costs,
losses/gains on listed investments and the
impact of the deferred tax rate change.

See more
on pages
16-17

— FINANCIAL KPIS

M S F P E R FR AN C H I S E –
ALL B R AN DS (£K)

AD J U STE D E AR N I N G S
P E R S HAR E – FU LLY
D I LUTE D (P E N C E )

£28k

+3% (2020: £27k)

26.9p

+63% (2020: 16.5p)

2021

2020

2019

2018

2017

26.9p

£28k

£27k

£26k

£25k

2021

2020

2019

2018

16.5p

15.9p

13.3p

£21k

2017

11.1p

Definition
Total management service fees
“MSF” for all brands for the year
divided by the total number of
franchised trading territories at the
end of the year.

Definition
Adjusted profit for the year*
divided by the weighted average
number of shares in issue,
including the dilutive effect of
share options.

Comments
The average MSF per franchised
trading territory was unchanged
due to the significant number of
new recruits into EweMove in
2021 and the Hunters network
being more recently established
compared to our other high-
street led brands.

Comments
Adjusted earnings per share has
significantly increased due to
underlying profitability generated
through the acquisition of
Hunters.

Links to strategy

N E T C A S H G E N E R ATE D
FROM OPERATIONS (£M)

P RO FIT B E FO R E TA X
(£M )

AD J U S TE D E B ITDA
(£M )

AD J U STE D P BT
(£M )

£8.9m £6.4m £10.4m £9.4m

+65% (2020: £5.4m)

+35% (2020: £4.8m)

+81% (2020: £5.7m)

+76% (2020: £5.3m)

£8.9m

2021

2020

2019

2018

2017

£5.4m

£4.7m

£4.5m

£4.4m

2021

2020

2019

2018

2017

£6.4m

£4.8m

£4.0m

£4.3m

2021

2020

£5.7m

2019

£5.3m

2018

£5.1m

2017

£3.7m

£10.4m

2021

2020

2019

2018

£5.3m

£4.9m

£4.8m

2017

£4.4m

£9.4m

Definition
Cash generated from the
day-to-day trading activities
of the business.

Definition
Total revenue minus total
costs, before the deduction of
corporation tax.

Comments
The franchise model continues
to be highly cash generative and
the acquisition of Hunters has
significantly contributed to the
increase in 2021.

Comments
Profit before tax increased by
£1.6m in 2021 due in the main to
the acquisition of Hunters.

Definition
Adjusted earnings before interest,
tax, depreciation, amortisation,
exceptional items, gains and
losses from investments and
share based payments charges.

Comments
Adjusted earnings have
significantly increased due to
underlying profitability generated
through the acquisition
of Hunters.

Definition
Adjusted profit before tax,
amortisation arising on
consolidation, exceptional items,
gains/losses from investments and
share based payments charges.

Comments
Adjusted PBT has significantly
increased due to underlying
profitability generated through
the acquisition of Hunters.

Links to strategy

The Property Franchise Group PLC
Annual Report and Accounts 2021

— O U R K E Y P E R F O R M A N C E I N D I C ATO R S ( K P I S ) CONTINUED

— NON-FINANCIAL KPIS

TE NANTE D M ANAG E D
P RO P E RTI E S

P RO P E RTI E S SO LD
I N TH E YE AR

M ANAG E D P RO P E RTI E S
ACQ U I R E D BY FR AN C H I S E E S

74,000

+27% (2020: 58,000)

26,200

+176% (2020: 9,500)

2021

2020

2019

2018

2017

74,000

58,000

55,000

52,000

2021

2020

2019

2018

2017

9,500

10,800

10,400

26,200

Definition
Total number of rental properties being fully
managed by our network.

Definition
Total number of property sales completed by
our network in the year.

Comments
Revenue from managed properties is a
reliable income stream as the landlord is
charged a % fee based on the rent paid
each month.

Comments
Residential sales were driven by homeowners
reprioritising their needs and the stamp
duty holiday which came to an end in
September 2021.

1,270

-3% (2020: 1,305)

1,270

1,305

2021

2020

2019

2018

2017

2,381

3,115

2,012

Definition
Total number of tenanted fully managed rental
properties acquired by a franchisee from an
independent property agent.

Comments
The supply of suitable businesses for
franchisees to acquire has been lower in the
last few years for a number of economic and
market factors. In 2021 we put the lack of
supply down to potential sellers making the
most of the buoyant sales market.

Links to strategy

P RO P E RTI E S LE T
I N TH E YE AR

40,300

+43% (2020: 28,100)

+427% (2020: 11)

EWE M OVE TE R R ITO R I E S
SO LD

P RO P E RTI E S LI STE D
FO R SALE

2021

2020

2019

2018

2017

40,300

2021

28,100

2020

32,300

31,700

31,400

2019

2018

2017

Definition
Total number of new lets or re-lets completed
by the network in the year.

Definition
The number of new territories sold by
EweMove in the year.

Comments
The increase resulted from the acquisition of
Hunters. The rental market did not appear to
be driven in the same way as the sales market
by the reprioritisation of housing needs
in 2021.

Comments
Interest in starting a franchised business in the
sector has been stronger than for many years.
The hybrid agents’ offerings clearly appealing
to those looking for a different type of career.

Links to strategy

31,100

+67% (2020: 18,600)

2021

2020

2019

2018

2017

18,600

19,700

18,600

31,100

Definition
The total number of properties listed for sale
by our network.

Comments
Residential listings were driven in the main
by upsizers.

The Property Franchise Group PLC
Annual Report and Accounts 2021

OUR
STRATEGY
IN ACTION

For Erica Townend, life (in property at least)
really did begin at 40!

After reaching a plateau in her career in IT, age 40,
Erica joined her father’s property business.

Lettings growth

Develop sales
activity in the
high-street led
brands

Financial
services growth

She progressed quickly, putting her degree in building
surveying to good use by project managing a 42-unit
development, setting up a buy-to-let operation,
property consultancy and managing a 200-room
student development.

With the property bug taking hold, a stroll past Martin &
Co’s flagship Chelsea branch, Erica decided to approach
The Property Franchise Group.

“My previous business
experience had taught
me to maximise every
sales opportunity, and
to treat every customer
as an individual, as I
would like to be treated.
Teamwork and great
communication are
keys to our progress, as
well as the excellent support, marketing and training we
receive from head office.

“I was always left unimpressed by the sales and lettings
agents I’d dealt with in the past,” she says. “I felt I could
do better. I wanted to transfer my skills from IT and
property to my own business – with the support of a
franchise tagged on.”

“Our branch is a one-stop-shop for all our clients’
needs across sales, lettings, financial services and
conveyancing. It’s also the combination of experience,
knowledge and customer service that creates a more
loyal customer base within the local community.”

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See more
on pages
16-17

That was in 2015. This last year, Erica and husband Mike
have grown their lettings business by 35% and the sales
side of their branch by 44% – as well as launching a very
popular financial services offering.

“We brought in an experienced sales manager with
more than 25 years’ industry,” says Erica. “That move
allowed the whole estate agency to deliver exceptional
customer service.

The Martin & Co Wokingham office is a landmark listed building
known locally as ‘The Old Pet Shop’

Official opening by the mayor in 2015

The Property Franchise Group PLC
Annual Report and Accounts 2021

— S TA K E H O L D E R E N G AG E M E N T

The relationships we build with stakeholders
contribute to our long term success

O U R E M P LOY E E S
The relationship we have with our
employees is key to our success. We aim
to provide them with an environment
where they feel part of the bigger picture
and are able to fulfil their potential.

O U R F R A N C H I S E E S
We see our relationship with our
franchisees as a partnership; we give
them the tools to grow their business
which brings rewards for both parties.
Many have been franchisees for more
than 10 years and a growing number
for more than 20 years.

O U R S H A R E H O L D E R S
As a listed business we recognise the
important role that shareholders play in
providing capital and support for new
initiatives. In addition, our institutional
investors provide insight into successful
strategies, advice on risks and support
with monitoring and safeguarding the
governance of the Group.

M AT E R I A L TO P I C S

•
Inclusion in decision making
• Opportunities to share ideas
• Roll-out of new initiatives to the network
• Opportunities for career development
• Flexible working

• Compliance with new regulations
• Leveraging new revenue streams
• Sharing ideas
• Continual roll-out of new initiatives
• Engagement with digital marketing

• Financial and operational performance
• Business strategy and model
• Market conditions
• Capital allocation
• Dividend

H OW W E E N G AG E

Face to face meetings were replaced with
digital communication during the pandemic.
As restrictions have been removed we have
carried out more face to face meetings to
promote a sense of ‘one team’ despite people
being based in different locations across
the UK.

Day to day our employees feel comfortable
engaging directly with the most appropriate
person in the business without necessarily
needing to follow hierarchical lines.

O U R B A N K S
Our banking partners play an important
role in our business, enabling us to take
advantage of opportunities when they
arise. We maintain close and supportive
relationships through openness and
mutual understanding.

Our regular face-to-face Regional Business
meetings with franchisees were replaced with
virtual meetings when restrictions applied but
face-to-face meetings have now resumed.
We also hold brand marketing meetings and
one-to-one meetings.

Regular newsletters highlight any changes in
the law, processes, third-party services, our
services, training events and new offerings.

We maintain regular communications with
shareholders in line with our regulatory duties.
We have twice yearly results roadshows, our
Non-Executive Directors hold meetings on
governance matters, we hold an AGM and
provide updates in between via RNSs, our
website and contact through our advisors.

O U R R EG U L ATO R S
There is a continual push by consumers,
society and government to formally
regulate the property industry.

O U R CO M M U N I T Y
We are mindful that our franchise
owners live in the local communities
that they serve and, thereby, have an
interest in ensuring that their landlords
provide suitable accommodation, that
tenants meet acceptable standards and
that their knowledge is put to good use
in serving house sellers and buyers.

M AT E R I A L TO P I C S

• Financial and operational performance
• Strategy
• Market and opportunities
• Cash generation

• Compliance with the legislation
• Maintain high standards
• Franchisees encouraged to hold a prop-

erty-related qualification even though it is
not yet mandatory in the industry

•
Involvement in local organisations
• Providing valuable local insight to cus-

tomers
• Sponsorship
• Compliance with regulations

H OW W E E N G AG E

We have regular update meetings with our
banking partners on our current performance
after investor roadshows. Where loans exist
we regularly supply financial information
and commentary.

As a leading player in the industry we
maintain good relationships with trade bodies
such as The Property Ombudsman, Deposit
Protection Scheme, and Propertymark
(ARLA). We also aim to be at the front of
new regulations and requirements including
the much talked about Regulation of
Property Agents.

Actively engaging in social media and using
the digital marketing techniques to provide
useful information to local communities.

The Property Franchise Group PLC
Annual Report and Accounts 2021

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S 1 7 2 S TAT E M E N T

As required by s172 of the Companies Act 2006, a director of a
company must act in the way he or she considers, in good faith,
would most likely promote the success of the company for the
benefit of its shareholders. In so doing, the director must have
regards amongst other matters to the:

P R I N C I PA L D EC I S I O N S I N 2 0 2 1

We have considered the decisions taken
by the Board which will have an impact
on the longer-term performance and
prospects for our Group.

SIGNIFICANT DECISION
In early 2021 we took the decision to change our Financial Services
strategy which involved selling our shareholding in Aux Group
Limited which owned Auxilium Partnership Limited and entering
into a 5-year strategic partnership with LSL Property Services plc
“LSL”. We subsequently took the decision to buy The Mortgage
Genie Limited and its sister company, The Genie Group UK Ltd,
in September 2021.

STAKEHOLDERS AFFECTED AND ENGAGEMENT
•

Shareholders – from previous discussions we were already
aware that shareholders had an appetite for us to grow our
financial services revenue stream

• Banks – although we did not need bank funding for these

activities we kept the bank informed due to us having an
existing loan facility

• Regulators – advisors assisted with the regulatory requirements

of buying Mortgage Genie and its sister company

•

Employees – we timed our announcement to employees
to occur at the same time as the news of our intentions
became public

Franchisees – a newsletter was sent to franchisees on the
morning of the news becoming public. Since then we have
explained the opportunities of our partnership with LSL at
regional events and through newsletters and face-to face
meetings with members of each brand’s regional team

REASON FOR DECISION
Acceleration of our financial services strategic initiative to grow
the number of financial services’ advisers serving our network.

LSL is one of the largest providers of services to mortgage
intermediaries and mortgage and protection advice to estate
agency customers. Financial services products are potentially
relevant to all viewers, sellers and purchasers that interact with
our franchises so there is huge scope to generate additional
business and secure additional revenue streams.

•

Likely consequences of any decision in the long term

Interests of the company’s employees

• Need to foster the company’s business relationships with

suppliers, customers and others

•

Impact of the company’s actions on the community and
environment

• Desirability of the company maintaining a reputation for high

standards of business conduct

• Need to act fairly between members of the company

The strategic partnership with LSL gives our franchisees
•

access to the PRIMIS Mortgage Network, a well-established
mortgage and protection advice services network whereby they
can have the benefits of advisers working in their offices serving
their clients. Clients can benefit from expert advice, delivered
in an informal way, through a natural flow of questions and
answers where rapport and trust is built. As well as benefiting
from a wide range of competitive deals on mortgages and
life insurance.

•

the ability to set up their own mortgage brokerage through
PRIMIS. They become a PRIMIS Mortgage Network member
choosing either to recruit an employed adviser or to train up a
member of their own staff with PRIMIS’s assistance. The client
benefiting in the same way as listed in point 1.

access to EMBRACE, the call centre mortgage broking arm of
LSL to whom they can pass leads if they feel that their sales
activity levels are not sufficient to partake in the other two
options already outlined above. Technology being substituted
in part for face-to-face advice and with clients still benefiting
from a wide range of competitive products delivered by experts.

The purchase of an 80% shareholding in The Mortgage Genie
Limited in September 21 brought with it a team of advisers which
we plan to grow. Its primarily a call centre based brokerage. This
team was already serving the EweMove franchise network and will
be expanded to serve its growing needs as well as to win a greater
share of mortgage business conducted in the market.

ANTICIPATED EFFECTS
Increased income for franchisees from a third revenue stream
and increased MSF for the Group.

A more rounded service offering by our franchisees to their
clients to support them with mortgage and insurance advice which
in turn can help speed up the completion of sales transactions,
develop their relationships with their landlord clients and win
further instructions.

Shareholders will benefit from increased earnings.

PROGRESS
•

Signed Strategic Partnership agreement with LSL Property
Services plc in April 2021

•

Sold Aux Group Limited in July 2021

• Acquired an 80% shareholding in The Mortgage Genie Limited

in September 2021

The Property Franchise Group PLC
Annual Report and Accounts 2021

— R E S P O N S I B L E B U S I N E S S

Understanding our
social, environmental
and economic impacts
TPFG is committed to the management
and development of its business in a
socially responsible way.

— E N V I R O N M E N TA L

— S T E E R I N G G R O U P

M AT T E R S

We operate a franchise model which
means that the Group does not have
a significant environmental impact.

However, an increasing element our
franchising reputation and the value that our
brands enjoy will be determined by how we
make a difference to our environment. Our
Board is mindful of the need to determine
where it and its franchisees can make more
of a difference and to provide the necessary
leadership and support to establish good
environmental practices. At the same time,
it believes in learning through experiences
and will be actively encouraging our owned
businesses alongside our franchisees to share
their experiences and develop best practices
to continually improve our contribution to
a better future.

We have formed a team initially
composed of the Executives and
members of the leadership team
supported by third parties to
examine where we impact the
environment, to look at good
environmental practices in these
areas, to consider how we might
help promote better environmental
practices in areas where we don’t
ourselves impact the environment,
and ultimately to develop a
sustainability strategy supported by
an Environmental Policy.

The 2030 agenda for sustainable development
adopted by the UN provides a globally
recognised guide. We will consider the UN
sustainable development goals as part of this
teams work with a focus on those that are
most relevant to our business and where we
can make the largest impact.

Our Environmental Policy will set out our
environmental objectives, our responsibilities
and those of our franchisees. Once established
with targets we will consider how best to
review progress and to identify opportunities
for improvement.

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The Property Franchise Group PLC
Annual Report and Accounts 2021

— E S TA B L I S H E D P R O C E S S E S

G O O D H E ALTH
AN D WE LL- B E I N G

We have refurbished our
buildings mindful of the
colours that can create
a positive environment.
The same thoughts have
gone into our choices of
furniture, our kitchens and
our meeting areas.

R EC YC LI N G

We have been recycling
paper, cardboard and
reusable plastic waste for
years. Our kitchens are
stocked with glasses
and mugs negating the
need for plastic cups.
We encourage employees
to use reusable
drinking containers.

We have promoted
the use of electronic
documents, sharing
documents and greater
electronic storage of
documents throughout
our Group to reduce print
and paper wastage.

E N E RGY
E FFI C I E N C Y

G E T TI N G
TO WO R K

As we have refurbished
our leased properties,
we have installed energy
efficient lighting and
appliances. We have
also improved our
thermal efficiency.

We have always had a few
employees who cycle to
work and we signed up to
the cycle to work scheme
to encourage this activity.

We have a growing
regionally based team
supporting the franchisees
and more owned
businesses that our
teams travel between.
An increasing number of
journeys are being made
by train.

We have also fully
embraced virtual meeting
technology to reduce
the need to travel
where practicable.

— C U R R E N T CO N S I D E R AT I O N S

G O O D H E ALTH
AN D WE LL- B E I N G

We are aware of growing
issues with mental health
and general well-being
and are exploring
arrangements with third
party suppliers to provide
these support services.

L AN D LO R DS

We are looking at how we
and our franchisees can
become more informed
about thermal insulation
issues. With the ever-
increasing standards
and the challenges of
retrospectively upgrading
homes to meet these
standards we recognise
that our landlords
need supporting.

E LEC TR I C
VE H I C LE S

Whilst still in its infancy,
there appear to be
opportunities to use
electric vehicles for
journeys and we are
looking at where we can
practically do so. This
would require electric
charging point installations
at employees’ homes and
at our offices.

O FFI C E R E FITS

We are looking at
sustainable materials
that can be used in the
refurbishment of our
offices and set out in the
refurbishment policies for
our franchisees.

E N E RGY
E FFI C I E N C Y

We are exploring a
transition of our modest
energy supplies to green
energy contracts.

The Property Franchise Group PLC
Annual Report and Accounts 2021

— R E S P O N S I B L E B U S I N E S S CONTINUED

N I KKI WATE R H O U S E
TR U ST D O NATI O N 2 021

£20,000

We are looking at ways to provide more and
improved support of these activities so that our
franchisees and our own employees can enjoy
the benefits and positive re-enforcement that
such activities can bring. Its also the case that
we could share these success stories more
widely and thereby encourage others in our
network to step forward. With that in mind, we
will be looking at ways of using social media.

— S O C I A L M AT T E R S

Being a franchised business,
we have many local
businesspeople and their
teams up and down the
country engaged in charitable
causes, social groups and
business organisations.

They are raising funds and making financial
donations to both support the local
communities that they live and work in
as well as national charities. These vary
from supporting local schools, clubs,
hospices, foodbanks to specific charities
for mental health.

It’s the same culture that exists within our
own Group and we endeavour to support
good causes locally and nationally. One of
our national charities, The Nikki Waterhouse
Trust established in 2015 donated £20,000
in 2021 to several childrens hospices
throughout the UK; £5000 each have been
sent to Martin House Wetherby, The Acorn
Childrens Hospice Birmingham, The Rainbow
Trust Loughborough and The Forget Me Not
Childrens Hospice in Huddersfield as well
as supporting individual children nationally
suffering with life limiting conditions. We have
various sponsorship events throughout the
year but our main fundraising activity is the
National Golf Day usually held in September.

A helping hand for children and families in times of needThe Nikki Waterhouse TrustApollo House, Eboracum Way, York, YO31 7REenquiries@thenikkiwaterhousetrust.org thenikkiwaterhousetrust.orgRegistered Charity Number 1160492Nikki Waterhouse TrustI am pleased to confirm we have recently donated £20,000 to several childrens hospices throughout the UK. Donations of £5000 each have been sent to Martin House Wetherby, The Acorn Childrens Hospice Birmingham, The Rainbow Trust, Loughborough and The Forget Me Not Childrens Hospice in Huddersfield.Monies were raised by various events by franchisees and employee – salary sacrifice donations throughout the year. We are always in need of more donations to assist the hospices which we have undertaken to support. These Hospices rely on over 80% of their income from charitable support. It’s unbelievable that they receive so little income from government. When organising your next charity event please consider the Nikki Waterhouse Trust. These hospices are giving end of life care to children and supporting families at a very difficult time. Its heart breaking to witness the pain and suffering of these young children. We want to do more to help and with your assistance we can.The NWT trust was set up in 2013 in memory of Nikki who died in terrible circumstances at the age of just 32 years. She worked for Hunters from the age of 17. At our York office. We have raised over £100,000 and supported many projects throughout the years.ChairmanNWT Mr John Waterhouse Trustee The Nikki Waterhouse Trust Pollo House Eboracum Way York YO31 7RE 10th March 2021 Dear John, Somewhere in the UK, a child’s world is being changed forever because of encephalitis. From the hospital ward to the rehabilitation centre, from their first day home to their first day back at school, children affected by encephalitis face a host of confusing and stressful challenges. Because of you, they won’t be alone on the journey. I am writing to say a big thank you to the trustees of the Nikki Waterhouse Trust for your gift of £2,450 to the Encephalitis Society. Encephalitis is truly a devastating illness, and your generous gift means children affected by encephalitis, and their siblings and friends, will be able to watch age-appropriate animations that help them understand what encephalitis is and how it may affect their life. They will hear the stories of other children and young people affected and realise they are not on their own. Our team is looking forward to meeting with Kevin Hollinrake to thank him as a representative of the trustees for your generosity. I would also welcome the opportunity to share updates on the difference you are making or answer any questions you have about how we will use your gift. Just give me a call on 01653 692583 or email stephanie@encephalitis.info. Thank you again for making the quality of life for children affected by encephalitis better, and their futures’ brighter. Yours sincerely, Stephanie Dalton Trust Fundraising Manager A helping hand for children and families in times of needThe Nikki Waterhouse TrustApollo House, Eboracum Way, York, YO31 7REenquiries@thenikkiwaterhousetrust.org thenikkiwaterhousetrust.orgRegistered Charity Number 1160492Nikki Waterhouse TrustI am pleased to confirm we have recently donated £20,000 to several childrens hospices throughout the UK. Donations of £5000 each have been sent to Martin House Wetherby, The Acorn Childrens Hospice Birmingham, The Rainbow Trust, Loughborough and The Forget Me Not Childrens Hospice in Huddersfield.Monies were raised by various events by franchisees and employee – salary sacrifice donations throughout the year. We are always in need of more donations to assist the hospices which we have undertaken to support. These Hospices rely on over 80% of their income from charitable support. It’s unbelievable that they receive so little income from government. When organising your next charity event please consider the Nikki Waterhouse Trust. These hospices are giving end of life care to children and supporting families at a very difficult time. Its heart breaking to witness the pain and suffering of these young children. We want to do more to help and with your assistance we can.The NWT trust was set up in 2013 in memory of Nikki who died in terrible circumstances at the age of just 32 years. She worked for Hunters from the age of 17. At our York office. We have raised over £100,000 and supported many projects throughout the years.ChairmanNWTThe Property Franchise Group PLC
Annual Report and Accounts 2021

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Community engagement

Whitegates Dewsbury

Led by business owner Camran Ishaq, Whitegates Dewsbury have worked tirelessly
to support their local community and local up and coming sports talent. They run a
weekly outreach programme to provide hot food to the vulnerable and those in need
as well as emergency food parcels to local families. Through sponsorship, they have
helped support grassroot sports activities and holiday camps for young people in the
local area as well as rising local sporting talent.

Martin & Co Poole

Steve Ballam of Martin & Co Poole has worked with Carbon Neutral Britain to
calculate his business’ carbon footprint. Supported by Carbon Neutral Britain, the
Martin & Co Poole team have reduced their carbon emissions and supported certified
projects in Britain and around the world that reduce the amount of CO2e in the earths
atmosphere to gain accreditation as a Carbon Neutral business.

Martin & Co Wakefield

In October 2021, the Martin & Co Wakefield team did a Step- Up Challenge to raise
money for ‘Cuddle Cots’ at their local hospital which provides families the opportunity
to spend more precious time with their baby when they have sadly passed. Over the
course of 7 days, each member took on the challenge of achieving 70,000 steps
resulting in a total of 357,728 steps raising over £1,000.

Parkers Reading, Caversham, Earley,
Woodley, Twyford

Craig Pearson and his team across five branches have been actively supporting
their local community in a wide variety of ways. To help reduce single use of plastic
bottles, they donated reusable water bottles to local schools and youth groups.
They have been working with local art and creative studios to encourage both
children and adults to visit and engage as they reopened post pandemic closures.
The team have partnered with mortrees.eco programme, planting a tree for every
property sold resulting in 11.7 tonnes of CO2 emissions offset in January alone,
with all other Parkers branches now joining the programme.

Parkers Burghfield Common, Theale,
Tilehurst, Tadley & Spencers Wood

Throughout the Covid pandemic, Simon Gregory and his team launched a number
of community initiatives to help local schools and parents. Across his six branches,
they offered a free printing service that parents could use to assist with children’s
school work whilst working from home. In addition to this, to help ease the financial
stress for families when home learning, they donated top of the range educational
PC’s to seven different schools in the area. At the end of the Summer, they launched
a ‘Schools out for summer’ campaign which gave members of the local community
the chance to win a complete back to school kit, consisting of £280 worth of
vouchers for school supplies. This was handed out to five different families across
their local area.

In January, each branch pledged to raise a minimum of £1,000 for a charity chosen
by the local community through a number of fundraising efforts. They have already
raised money by hosting a charity photoshoot fundraiser and taking part in fundraising
events such as the Thames Path Challenge, The Reading Marathon. They have plans
for a number of local fundraiser events throughout the course of the year.

The Property Franchise Group PLC
Annual Report and Accounts 2021

— R E S P O N S I B L E B U S I N E S S CONTINUED

— O U R P EO P L E

Our people strategy
is focused on training,
motivating and engaging
our employees in a fairly
flat hierarchical structure to
deliver the highest standards
of customer service.

In doing so we:

• Recognise that we are stronger together

• Believe that a rewarding environment

inspires and motivates

•

Encourage an open and supportive
culture where every individual
is respected

Share success, reward achievement
and remember to say thank you

• Provide appropriate training

and development

Employee turnover is extremely low with many
employees specialising in specific aspects of
our businesses and leading those particular
areas. We recognise the strength in this and
are also aware of the need to develop the
next leaders in a growing business. With this
in mind, Glynis Frew has taken on the role of
Director of Training and Development.

We firmly believe in developing future talent
within our Group who share our values and
the same goes for our franchisees. We want
people to grow their careers like those who
have gone before them in both our own
Group and the franchised network.

Motivated and highly engaged teams with the
appropriate skills for the Group as it is today
and for the future growth are fundamental
to our success. We have been continually
investing in the growth of a leadership team
and regional team capable of not only
supporting our own employees to develop
but our franchisees and their teams since
September 2020.

Upskilling our people and our franchised
network is important in the ever-changing
business environment and ever-growing
use of new technologies. We also have the
impacts of increased regulation and the
prospects of further regulation including
RoPA. Hunters has had an established training
academy and National Qualification endorsed
by Propertymark for many years. Hunters
already have over 1,300 staff members who
have individually attained the Hunters National
Qualification and over 120 branches with full
branch accreditation. Since acquisition, 2,014
employees in the other franchised brands
have joined the academy and completed
2,423 e-learning modules. Shortly, a new and
improved training portal will be launched to
encourage even more engagement.

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The Property Franchise Group PLC
Annual Report and Accounts 2021

— R I S K M A N AG E M E N T

The Group’s approach to effective
risk management is to identify
principal risks through regular
reviews, evaluations and prioritising
of risks.

We then develop actions or
processes within the business
to eliminate or mitigate
those risks to an acceptable
level. Responsibility for
the management of risk
is detailed in our risk
management framework,
as presented here.

— R I S K M A N AG E M E N T F R A M E WO R K

THE BOARD
The Board has overall responsibility
for the management of risk, defining
the Group’s risk appetite and setting
key risk management policies.

AUDIT AND RISK
COMMITTEE
The Audit and Risk Committee
assists the Board in fulfilling
its oversight responsibilities by
reviewing and monitoring the
integrity of the Group’s systems
of internal control and
risk management.

FRANCHISE AUDITS AND
COMPLIANCE
An internal team is responsible
for auditing franchises in rotation.
Audit work is geared towards
mitigating financial risks. A
compliance dashboard enables
us to monitor franchisees’
adherence to relevant standards
such as having the correct
insurances in place.

ANNUAL RISK REVIEW
The Group carries out a risk review
annually. The document sets out the
name of the risk as well as describing it,
considering the effect on the business,
looking at the controls in place, looking
for additional mitigating factors, and
deciding its seriousness by considering
the probability of it occurring and
what damage it would cause if the
event occurred.

Board members and senior management
all contribute to the drawing up of
the risk review. The Audit and Risk
Committee review the document,
examine the risks, decide on the actions
to recommend and then pass it on to
the Board for approval. Once a risk has
been determined as requiring action, the
Board allocates the responsibility to the
appropriate Board member.

See more
on pages
44-45

The Property Franchise Group PLC
Annual Report and Accounts 2021

— P R I N C I PA L R I S K S A N D U N C E RTA I N T I E S

The Board considers that the risks detailed below represent the key risks to achieving the Group’s strategy. There could be additional risks and
uncertainties which are not known to the Board and there are risks and uncertainties which are currently deemed to be less material, which may
adversely impact on the achievement of the Group’s strategy and objectives.

R I S K A R E A

NO
GUARANTEE
OF GROWTH

The Group’s main source of revenue is Management
Service Fees (“MSF”) derived from franchise network
turnover. MSF is dependent on market conditions
and the experience, expertise and commitment of
the franchisees.

P OT E N T I A L I M PAC T

Reduced growth in MSF,
especially from sales,
which are more prone to
economic uncertainty.

Reduced market share
and representation.

Poor or no profit
growth from the
franchise model.

Less attractive to new
franchisees for which a
growth track record is an
essential element.

LEGISLATIVE
CHANGES AND
GOVERNMENT
POLICY

The residential property market is continually influenced
by changes in UK legislation and government policy.
This can cause short-term changes in the behaviour
of our clients and lead to inefficiencies in the way we
operate as we get to grips with complying with new
requirements. There is also a move towards bringing in
greater regulation of the industry in the next few years.

Landlords could resort
to selling their properties
after having to suffer
an ever-growing list of
regulations and a greater
tax burden.

Entry into Financial
Services could be more
difficult and costly
than envisaged with
increasing FCA levies
and insurance charges
already seen recently.

ABILITY
TO GROW
PORTFOLIO
OF MANAGED
PROPERTIES

ABILITY TO
FIND, RECRUIT,
RETAIN AND
SCALE UP
SKILLED
FRANCHISEES

REPUTATIONAL
RISK TO OUR
BRAND

Financial Services legislation provides a barrier to new
entrants both in regulatory requirements and the cost
of compliance.

It has become increasingly difficult to win new business
to replace properties lost.

The Group needs to continue to find suitable portfolios
of managed properties for its franchisees to buy to
meet its targets. We are not the only franchisor in
our sector pursuing this strategy and we also face
competition from well-known estate agents.

Tight lending criteria of major lenders may limit
the external funding available to our franchisees.
Franchisees may not have the appetite to buy portfolios.

Franchisees may be
unable to complete
on deals for lack of
external funding.

With fewer opportunities
to win letting
instructions due to the
increased length of
tenancies franchisees’
revenue may decline
which in turn impacts
on the income for
the group.

An inability of the Group to attract new franchisees
with the necessary skills, expertise and resources to
cold start or purchase resales of existing territories
and/ or an unwillingness for existing franchisees
to take on further opportunities would impact on
our growth.

There may be slower
growth through an
inability to increase
market representation or
achieve a timely exit for
a franchisee.

Lower resale values may
result and discourage
new entrants.

A strong brand is key to being successful in any sector
and central to that is the reputation of the Group and
its franchisees. Our combined ability to provide our
service commitments and the way in which we do that
is central to our reputation.

Failure by the franchisees
to meet the expectations
of landlords, tenants,
buyers and sellers or to
fall short of the standards
set by the Group may
have a material impact
on reputation. As a result,
franchisees may lose

clients and revenue.
We may lose MSF and
find it difficult to recruit
franchisees.

Failure to manage social
media could lead to
brand damage.

The success of the
business relies on robust
IT systems. Interference
by third parties could

impact the ability
of those systems
to operate.

ONLINE & IT
THREATS

Cyber threats could affect our business systems.

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The Property Franchise Group PLC
Annual Report and Accounts 2021

Increase

Decrease

No change

M I T I G AT I O N

I N D I C ATO R

S T R AT EGY

The acquisition of Hunters helped to increase
market share.

The leadership team and Board continually
monitor revenue from MSF, the underlying KPIs
and variances to expectations. This informs key
focuses for the leadership team and roll out of
actions to the network of franchisees.

EweMove’s proposition is a lower cost model
and has proved successful in attracting new
franchisees. A similar model ‘Hunters Personal’
is now being rolled out under the Hunters brand.

There is the opportunity to use the data we
hold and the customer relationships we have
established to offer other products and services
that increase franchisees’ revenue and our MSF.

The property management service offered by the
network aims to free landlords from the burden of
legislation where it can.

We have entered into a strategic partnership with
LSL, a respected partner, which means they take
care of the FCA requirements.

We have in-house resource and tools to ensure
our network is compliant.

We have several compliance experts in the Group
some of whom assist the regulatory bodies.

In-house experienced team assists throughout
the whole process. It was enhanced still further in
2021 by the recruitment of a well-known and very
experienced acquisitions specialist.

The Group has expanded its relationships with
alternative lenders to give franchisees more
options. In addition many contracts are now being
signed with some consideration deferred over a
longer period.

The Group has earmarked funds to help
franchisees buy portfolios in 2022.

Acquisitions is one of the strategic growth
initiatives and a key focus for the leadership team.

In-house experienced franchise sales team.

The recent launch of the “hub and spoke” model
has encouraged new entrants to work with existing
franchisees to deliver our services in previously
unexploited areas of the UK.

EweMove has continued to be a very successful
recruiter of franchisees. The hybrid model has
become more understood and popular as a result
of the pandemic and it is now being rolled out to
the Hunters brand as ‘Hunters Personal’.

Minimum standards are set out to franchisees
and their compliance is monitored.

Increased focus on social media by the
central team.

Increased leadership team supported by Regional
Operations Managers.

PR agencies are retained to monitor, assist and
advise on strategies to minimise these risks.

Two-factor authentication has been adopted
by the business.

Ewemove operating system security is being
improved by the migration to a new provider.

Additional development engineers have
been recruited.

The Strategic Report is contained on pages 1 to 37. It was approved by the Board on 4 April 2022 and signed on its behalf by:

David Raggett
Chief Financial Officer

The Property Franchise Group PLC
Annual Report and Accounts 2021

— C H A I R M A N ’ S I N T R O D U C T I O N TO G OV E R N A N C E

High standards of
corporate governance
contribute to our success.

Since our IPO in December 2013, we have stated that
the Directors recognise the importance of applying
sound corporate governance guidelines, to the
extent appropriate for a Company of our nature and
size, and we have observed and complied with the
Corporate Governance Guidelines devised by the
Quoted Companies Alliance (“QCA”). The London
Stock Exchange now requires AIM-listed companies
to state which recognised corporate governance code
they have adopted, our Board continues to confirm
its commitment by adopting the Quoted Companies
Alliance Corporate Governance Code (Edition 2018)
which contains 10 principles. We believe this code
provides us with the most appropriate governance code
to allow us to successfully develop our business. Our full
statement of compliance with the Quoted Companies
Alliance Corporate Governance Code is set out on our
website at www.thepropertyfranchisegroup.co.uk/our-
business/governance.

We continually review the framework within which we
operate, reflecting upon the updated guidelines and
research published by the QCA so as to ensure we have
a framework reflecting the complexities of our business
which is capable of adding value as we grow.

The Board sets the strategic direction, regularly reviews
performance and ensures that there are sufficient
and appropriate resources available to support its
achievement. It is satisfied that there are the necessary
controls and resources in place to discharge these
responsibilities.

Our primary objective is to enhance shareholder value
and to ensure that the Company and Group is managed
for the long-term benefit of its shareholders. We do
recognise our responsibilities to all stakeholders in our
Group and the importance these relationships play in the
delivery of our vision. The Board promotes a culture of
good governance in dealing with all stakeholders.

Corporate governance regime
We confirm that our governance structures and
practices continue to be in agreement with the Quoted
Companies Alliance Corporate Governance Code
(Edition 2018).

Richard Martin
Chairman

— Richard Martin | Chairman

My main function is to manage
the Board, so the Company and
Group are run in the best interests
of stakeholders. As part of my role
as Chairman I am responsible for
overseeing the adoption, delivery
and communication of the
Company’s corporate governance
model. Corporate governance
is an important element of the
management of long-term
shareholder value, mitigating the
risks and helping to create
sustainable growth.

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The Property Franchise Group PLC
Annual Report and Accounts 2021

— Q C A CO D E CO Mp lI A N C E

Our full statement of compliance
with the Quoted Companies Alliance
Corporate Governance Code
is set out on our website at
www.thepropertyfranchisegroup.co.uk/
our-business/governance

GOVERNANCE PRINCIPLE

EXPLANATION

Establish a strategy and business
model which promotes long-
term value for shareholders.

Our strategy can be summarised as to buy and build,
diversify our income streams, maintain operational
efficiency and support our franchisees’ growth. Our growth
will principally be achieved through our franchise model.

Seek to understand and
meet shareholder needs and
expectations.

Take into account wider
stakeholder and social
responsibilities and their
implications for long-term
success.

The Board is committed to ensuring that its shareholders
and potential shareholders have opportunities to express
their expectations through roadshows, investor platforms,
the AGM, its advisors’ organised feedback sessions and
ensuring that their contact details are easily available.

Wider stakeholders start with our people, our franchise
owners and their staff. Then those who support and
partner our franchise model to deliver products and
services to end-customers. We are intent on binding them
together in a fair and respectful partnership to deliver our
long-term success.

Embed effective risk
management, considering
both opportunities and threats,
throughout the organisation.

Board meetings have been even more focused on threats and
opportunities, and deciding on how to mitigate threats and
exploit opportunities, following the global pandemic, Brexit and
now conflict in Ukraine.

Maintain the Board as a well-
functioning, balanced team led
by the Chair.

Ensure that between them the
Directors have the necessary
up-to-date experience, skills and
capabilities.

Evaluate Board performance
based on clear and relevant
objectives, seeking continuous
improvement.

With the acquisition of Hunters in March 2021 the Board was
expanded by one Non Executive Director and one Executive
Director (resigned 31 March 2022) which assisted with the
integration of the new business. The Board now consists of
four Non Executive Directors and two Executive Directors.

The Board consists of members with extensive property
franchising and listed company experience. They are
encouraged to keep their skills up to date.

Our strategy, franchise model and size allow us to
have greater freedom to discuss our performance and
effectiveness than many organisations enjoy. We are
continually improving what we do, how we do it and, at
times, how we correct underperformance.

Promote a corporate culture that
is based on ethical values and
behaviours.

We are a people business led by hard working executives
mindful of the need to work ethically. Our teams home-
worked through the pandemic and some hybrid working
has continued since the return to office based working.

Maintain governance structures
and processes that are fit for
purpose and support good
decision making by the Board.

We have the appropriate size specific structures
recommended by the QCA. We have recruited a full-time
in-house lawyer and Company Secretary to help support
the Board.

Communicate how the Company
is governed and is performing
by maintaining a dialogue with
shareholders and other relevant
stakeholders.

We engage in investor roadshows, an active financial PR
process, and dialogue with analysts following our sector. We
have continued to focus more resource on engaging with
retail investors and making research more easily accessible to
them. At the same time, we keep our people, our franchisees
and their staff, our suppliers and our lenders regularly
informed about our performance.

COMPLIANT FURTHER READING

✔ See more on pgs 16-17

✔ See more on pgs 28-29

✔ See more on pgs 35-37

✔ See more on pgs 42-43

✔ See more on pgs 16-17

✔ See more on pg 30-34

✔ See more on pg 40

✔ See more on pgs 28-29

The Property Franchise Group PLC
Annual Report and Accounts 2021

— CO RpO R AT E G OV E R N A N C E S TAT E M E N T

The Board
The Board comprises the non-independent
Non-Executive Chairman, 3 independent
Non-Executive Directors and 2 Executive
Directors who are the Chief Executive
Officer and the Chief Financial Officer of the
Company. It has established an Audit and Risk
Committee and a Remuneration Committee.

The Board is responsible for the overall
performance of the Group, which includes
the broad strategic direction, development
and control of the Group. The policies and
strategies of the Group are formulated by the
Board and the detailed considerations about
the day-to-day operations are delegated
to a senior management team under the
leadership of the Executive Directors.

The Board of Directors meets at least 9
times a year to review the implementation of
strategy and policy decisions and to review
the Group’s progress to ensure that the
operation of the Group is at all times in line
with the Group’s objectives.

The Board has regular contact with its
advisers to keep up to date with corporate
governance matters. The Group purchases
appropriate insurance cover in respect of
legal action against its Directors.

The Chairman’s main function is to manage
the Board so that the Group is run in the
best interests of its stakeholders. It is also
the Chairman’s responsibility to ensure the
Board’s integrity and effectiveness.

The Chief Executive Officer is responsible for
the running of the Group’s businesses. There
is a schedule of matters specifically reserved
for the Board’s decision to ensure that the
management and direction of the Group are
under its control. Each Executive Director has
his own sphere of responsibility. Decisions
relating to strategy, major contracts,
acquisitions, internal controls, for example,
are taken at Board level.

The Board has an appropriate balance of
skills, capabilities and experience, including in
areas of residential property sales and lettings,
franchising, finance and marketing. Each
Directors’ biography is set out on pages 42-43
which demonstrates the experience mix.

The Board are supported by a strong senior
management team which contains the
managing directors for franchisors, a group
marketing director, head of legal, head of
franchising and several qualified accountants
alongside the Chief Executive Officer and
Chief Financial Officer.

During the years ended 2020 and 2021,
the Remuneration Committee has sought
advice from Deloitte LLP in relation to
share option schemes and other employee
reward mechanisms.

All Directors are able to take independent
professional advice in the furtherance of their
duties and to attend seminars and training
to assist them with the development of their
own knowledge and expertise.

Non-Executive Directors/Board
independence
The Company has 3 independent Non-
Executive Directors, Paul Latham, Phil Crooks
and Dean Fielding (appointed 22 March 2021),
who provide an important contribution to its
strategic development. These three Non-
Executive Directors meet the independence
criteria which are set out in the UK Corporate
Governance Code.

Board Committees
The Board has delegated specific
responsibilities to the Audit & Risk and
Remuneration Committees. The Board
considers that all the members of each
Committee have the appropriate experience.
All Board Committees have their own terms
of reference which are available on request.

All Directors have access to the advice
and services of the Company Secretary,
who is responsible to the Board for ensuring
that Board procedures are followed and
the applicable rules and regulations are
complied with.

Remuneration Committee
The Remuneration Committee is chaired by
Paul Latham and its other members are Phil
Crooks and Dean Fielding. It met 3 times in
2021 and will continue to meet at least twice
a year.

Evaluation of Board performance
The Board reviews its effectiveness
internally by discussion, members suggest
improvements and where agreed upon, these
are implemented. However, the Board does
not consider it appropriate for a company of
its size to carry out regular formal evaluations
of its performance as a unit.

Directors’ time commitments
The Executive Directors are employed on a
Monday to Friday 8.30 am to 5.30 pm basis
and such additional hours as may be required
for proper performance of their duties and
responsibilities. Non-Executive Directors
are required to allocate sufficient time to
properly carry out their duties and perform
their roles as the circumstances will dictate.
This includes attendance at monthly Board
meetings, Committee meetings, meetings
to consider acquisitions and major contracts
and the AGM. Non-Executive Directors are
required to devote appropriate preparation
time ahead of each meeting.

The Remuneration Committee has
responsibility for determining, within agreed
terms of reference, the Group’s policy on
the remuneration of senior executives and
specific remuneration packages for Executive
Directors including pension payments and
compensation rights. It is also responsible
for making recommendations for grants of
options under the Share Option Plans.

The remuneration of Non-Executive Directors
is a matter for the Board. No Director may be
involved in any discussions as to their own
remuneration.

Details of the level and composition of the
Directors’ remuneration are disclosed in the
Directors’ Remuneration Report on pages
46 to 48.

Audit and Risk Committee
Phil Crooks is the Chair of the Audit and Risk
Committee. Paul Latham and Dean Fielding
are its other members. It met 3 times in 2021
and will continue to meet at least twice a year.

The Property Franchise Group PLC
Annual Report and Accounts 2021

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During the course of the year the Board reviews progress against the risks set out in the risk
review. The key risks are set out in the section of principal risks and uncertainties on pages
36 and 37.

Directors attendance at meetings held during the financial year ended 31 December 2021:

Number of meetings
Richard Martin
Gareth Samples
David Raggett
Glynis Frew (appointed 22 March 2021 and
resigned 31 March 2022)
Paul Latham
Phil Crooks
Dean Fielding (appointed 22 March 2021)

Board

Audit
Committee

Remuneration
Committee

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13
13
13

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13
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7/7

3
—
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3
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3
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3
3
1/1

Internal control
The Board acknowledges that it is responsible for the Group’s system of internal control and
for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the
risk of failure to achieve business objectives and can only provide reasonable and not absolute
assurance against material misstatement or loss.

The Board has established clear operating procedures and responsibility structures. These
procedures include:

• monthly financial reporting against budget and the prior year;

• day-to-day financial control of operations;

•

annual budgeting, half-yearly forecasting and monthly outturn review;

the monitoring and assessment of risk;

• performance monitoring and the taking of remedial action; and

• planning, reviewing, approving and monitoring major projects.

Relations with shareholders
The Board is committed to maintaining good communications with shareholders and the
website thepropertyfranchisegroup.co.uk provides up-to-date information on the Group.

The AGM is an important opportunity to meet and communicate with its investors and for
them to raise with the Board any issues or concerns they may have. The Group dispatches
the Notice of AGM at least 21 days before the meeting. Registered shareholders have direct
access to the Group and receive a copy of the Annual Report, which contains the full financial
statements of the Group.

The Audit and Risk Committee has the
primary responsibility for ensuring that
the financial performance of the Group
is properly measured, reported on and
monitored. These responsibilities extend to:

•

the Group’s draft financial statements and
interim results statement prior to Board
approval and reviewing the external
auditor’s detailed reports thereon;

the appropriateness of the Group’s
accounting policies;

the potential impact on the Group’s
financial statements of certain events
and risks;

the external auditor’s plan for the audit
of the Group’s accounts, which includes
key areas of audit focus, key risks, the
proposed audit fee and approving the
terms of engagement for the audit;

•

internal assurance reporting;

• non-audit services;

•

the dividend policy;

the processes for identifying the risks to
the business and managing those risks;
and

•

its terms of reference.

For more information on the work of the
Audit and Risk Committee during the year
please refer to its report on pages 44 and 45.

Risk management
The Board carries out a risk review annually.
Board Directors and senior management
all contribute to the drawing up of the risk
review. The Audit and Risk Committee review
the document, examine the risks, decide on
the actions to recommend and then pass it
on to the Board for approval. The document
sets out the name of the risk as well as
describing it, considering the effect on the
business, looking at the controls in place,
looking for additional mitigating factors, and
deciding its seriousness by considering the
probability of it occurring and what damage
it would cause if the event occurred. Once a
risk has been determined as requiring action,
the Board allocates the responsibility to the
appropriate Board member.

The Property Franchise Group PLC
Annual Report and Accounts 2021

— O U R B OA R D O F D I R EC TO R S

Committed to the development of the
business in a socially responsible way.

Our Board is responsible for the overall performance of the Group, which
includes the broad strategic direction, development and control of the Group.
The policies and strategies of the Group are formulated by the Board and the
detailed considerations about the day-to-day operations are delegated to a
senior management team under the leadership of the Executive Directors.

— Richard Martin
Non-Independent
Non-Executive Chairman

After leaving Bristol Technical School,
Richard became an apprentice stereotyper
for the Bristol Evening Post in 1967. In 1975
he moved to The Western Gazette, another
newspaper in the same group based in Yeovil.
Ahead of the introduction of computerisation
into the industry, Richard moved into the
commercial side and in 1981, became trained
in advertising design and sales. After a few
years he gained promotion to Advertising
Manager for the group's free press titles
distributed throughout Somerset, Dorset,
Devon and Wiltshire.

Following the profitable sale of a retail
business in early 1986, which Richard set up
and was managed by his wife Kathy, he left
the newspaper business to pursue his interest
in property and forge a career in estate
agency. Richard founded Martin & Co in 1986
in Yeovil. In 1995, Martin & Co became a
franchise operation and the brand has grown
from strength to strength since.

— Gareth Samples
Chief Executive Officer

— David Raggett
Chief Financial Officer

With 30 years’ industry experience, Gareth
brings a wealth of Estate Agency, Financial
Services and digital marketing knowledge to
the Group.

In his 21 year career at LSL Gareth was
appointed Managing Director of the Your
Move brand, which was the largest single
brand estate agency in the UK at the time. In
this role he was responsible for Your Move’s
franchise operation as well as having overall
control of Financial Services and Lettings and
the strategy of the brand.

Following his successful career at LSL,
Gareth became Managing Director of
Briefyourmarket.com where he gained
significant digital marketing experience and
knowledge and since 2014 he has served
as Chairman of Legalforlandlords. Gareth
formally joined the Group as CEO on
30 April 2020.

Since qualifying with PwC as a Chartered
Accountant David has spent his whole
working life in franchising as franchisor
and franchisee. Initially David held financial
responsibility for several Ford franchises
before, in the mid 90s, moving to Porsche's
UK headquarters. Here he held financial
responsibility for its distribution, retail and
financial services businesses at various times,
as well as being their company secretary and,
for several years, Head of Legal.

In 2007 David took up the role of Finance
Director for the Motability Scooter and
Powered Wheelchair Scheme to restore
its financial stability, to improve its offering
and to expand its customer base. After
successfully turning the scheme around and
leading it into new ownership, David joined
the Group in February 2013.

The Property Franchise Group PLC
Annual Report and Accounts 2021

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— Paul Latham
Independent
Non-Executive Director

— Phil Crooks
Independent
Non-Executive Director

— Dean Fielding
Independent
Non-Executive Director

Dean joined GA Property Services in 1995
and became Finance Director of Your Move
in 2002. He subsequently served as Group
Finance Director of LSL Property Services plc
from 2004 to 2010. Since 2010 Dean has
performed a variety of consultancy and NED
roles. He was appointed a Non-Executive
Director of Hunters Property plc in April 2015.

Dean joined TPFG when it acquired Hunters
in March 2021.

Paul is a Chartered Surveyor. Until 2014, he
sat on the Residential Board for the Royal
Institution of Chartered Surveyors of which he
was Chair until 2011.

Paul served as Deputy Group CEO of LSL
Property Services plc until 2010 having
been part of the management buyout in
2004, which ultimately saw the business
successfully list on the London Stock
Exchange in 2006. During this period Paul
was managing director of a number of the
LSL Group’s subsidiary businesses including
e.surv Chartered Surveyors and also sat on
a number of external company boards and
trade bodies.

Subsequently Paul served as a Non-Executive
Director of LSL until 2012. Paul was appointed
as an Independent non-executive director of
The Property Franchise Group PLC’s Board
and Chair of its Remuneration Committee in
December 2013.

Phil is a Chartered Accountant. He has
over 40 years’ experience in accounting,
auditing and investigations and is currently
a Managing Director at Berkeley Research
Group. He retired as a partner in Forensic and
Investigations Services at Grant Thornton
UK LLP in June 2019. He was previously UK
Head of Audit for 6 years and a member of
the International Assurance Advisory Board
at Grant Thornton. Prior to that he spent 15
years at Price Waterhouse. Phil has extensive
audit and advisory experience, addressing
financial reporting and accounting issues and
has worked with a wide range of listed and
private international companies.

Phil was appointed as an independent Non-
Executive Director of The Property Franchise
Group PLC’s Board and Chair of its Audit and
Risk Committee in May 2015.

Chair of the Remuneration Committee

Chair of the Audit and Risk Committee

The Property Franchise Group PLC
Annual Report and Accounts 2021

— AU D I T A N D R I S K CO M M I T T E E R EpO RT

Ensuring effective
controls are maintained
across the business.

I present our Audit and Risk
Committee (“ARC”) report which
summarises the work we have
undertaken during the year and how
we have fulfilled our responsibilities.

We were delighted to welcome Dean Fielding
to the ARC to join Paul Latham and myself who
have worked together on the ARC for the last
6 ½ years. The three of us are independent
Non-Executive Directors with extensive general
business and management experience. Dean
also brings a wealth of experience in the industry
and of Hunters in particular, complementing
my experience in accounting, audit and forensic
investigations and Paul’s sector knowledge.

Regular meeting attendees include Paul, Dean
and myself as well as our Chief Financial Officer,
Group Financial Controller and representatives of
our external auditor, BDO LLP.

We undertake to meet at least twice a year and in
the last year we met formally 3 times to continue
our rolling process of reviewing matters during
the year. We aim to ensure that actions are both
being undertaken in a timely manner and, as
importantly, supported with necessary expertise.
Details of attendance at meetings can be found
on page 41.

Purpose
The ARC operates under written terms of
reference which set out its role and the
authorities delegated to it by the Board.

The main responsibilities are summarised below:

•

review and monitor the integrity of
the financial information provided to
shareholders,

review and, where appropriate, make
recommendations to the Board on the
adequacy of the Group’s internal control and
risk management systems,

review and monitor the external auditor’s
independence and objectivity, and the
effectiveness of the Group’s external
audit process,

— Phil Crooks |

Chairman of the Audit and Risk Committee

Members
Phil Crooks (Chairman)

Paul Latham

Dean Fielding

Objectives
• Maintain vigilance
over our business

• Pay appropriate
attention to the
general and specific
risks that our
business faces

Achievements in 2021
• Review of potential

impact and risks and
opportunities arising
from the acquisition
of Hunters and
the subsequent
judgements made
in accounting for
the acquisition.

The Property Franchise Group PLC
Annual Report and Accounts 2021

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review and monitor the effectiveness of
Group’s internal audit function,

report to the Board on how it has
discharged its responsibilities

Activity in 2021
Financial information
The ARC has taken a leading role in ensuring,
on behalf of the Board, that the Annual
Report remains fair, balanced, understandable
and provides the information required
by shareholders to assess the Group’s
performance, business model and strategy.

During the year we reviewed the Interim
Results and Trading Updates to ensure the
integrity of the financial information being
presented. The ARC also reviewed the budget
assumptions ahead of it being presented to
the Board for approval.

A specific focus during 2021 was the Hunters
acquisition. The acquisition was made at a
time when there was continuing uncertainty
regarding the potential impact of Covid –
19 and the ARC considered the risks and
opportunities arising from the acquisition.
Subsequent to the acquisition and specifically
at the half year and year end consideration
was given to the accounting judgements
made in accounting for the acquisition. This
was in addition to monitoring the recurring
judgements made in respect of the LTIP and
the potential impairment of intangibles.

Risk management and internal control
On an annual basis the Group draws up an
updated risk review. This risk review includes
contributions from Directors and senior
management. Once the ARC has reviewed
the risk review documentation it is then
presented to our Board for their approval.

The ARC considers the auditor’s report on
findings from the audit and any comments on
controls within the business. The ARC ensures
that the Company responds appropriately.

Covid-19 continued to generate uncertainty
and, with that, risk and as such we have
continued to monitor this situation closely.

External audit
The effectiveness of the external audit
process is dependent on the appropriate
audit risk identification at the start of the audit
cycle. A detailed audit plan was received from
BDO which set out the key risks identified.
The ARC approved this plan and the
auditor’s remuneration.

The independence and objectivity of the
external audit function is a fundamental
safeguard to the Company’s shareholders. In
order to ensure audit independence, the ARC
restricts the engagements of BDO in relation
to non-audit work. No non-audit work was
undertaken by BDO in the year.

The effectiveness of the external audit
process is currently assessed by the
ARC based on discussions with those
involved in the process. The ARC has
made a recommendation to the Board
to reappoint BDO as the Company’s
auditors for the 2022 financial year. In
making that recommendation the ARC
has also considered the independence
and objectivity of the auditors as well as
the cost effectiveness of the external audit.
Accordingly, a resolution proposing the
reappointment of BDO will be tabled at the
AGM in 2022.

Internal audit
We continue to take an interest in internal
audit and discuss any adverse audit results
at our ARC meetings. We seek to ensure
the function remains effective and adapts to
current circumstances.

The year ahead
In the year ahead the ARC will continue to
focus on key risks and accounting matters.
This specifically includes information
security, the results of our internal audits of
franchisees, the roll-out of EweMove’s new
operating platform and our year-end audit.

I would like to thank the attendees of our
ARC meetings for their time and valuable
contributions during the year.

Phil Crooks
Chairman of the Audit and Risk Committee
4 April 2022

The Property Franchise Group PLC
Annual Report and Accounts 2021

— R E M U N E R AT I O N CO M M I T T E E R EpO RT

Rewarding the efforts of those
responsible for the successful
growth of the Group.

As Remuneration Committee Chair, I
am pleased to present its report for the
year. This report sets out the Group’s
remuneration policy for Directors and
explains how this policy was applied during
the financial year to 31 December 2021

The Remuneration Committee comprises Phil Crooks, Dean
Fielding and me. Dean joined the committee in March following
the acquisition of Hunters. We are all independent and combine
extensive industry knowledge with a deep understanding of
corporate reporting governance. The Committee seeks external
advice from various sources including Deloitte LLP.

The Remuneration Committee has two scheduled meetings a year
however as a result of the Hunters acquisition the Committee met
formally on four occasions and also held a number of informal
meetings. Apart from Phil, Dean and myself, our Chief Financial
Officer is a regular attendee of our meetings, supporting us with
papers and analysis.

Purpose
The Committee operates under written terms of reference which
set out its role and the authorities delegated to it by the Board. Its
main responsibilities are to: -

•

ensure that the Executive Directors and other key employees of
the Group are fairly rewarded for their individual contributions
to the overall performance of the Group.

• demonstrate to the shareholders of the Company that the
remuneration of the Executives is set by a committee of
the Board whose members have no personal interest in the
outcome of the decisions of the Committee and who will have
due regard to the interests of shareholders of the Company.

• oversee any major changes in employee benefit structures

throughout the Group.

Activity in 2021
The Committee believes that the entire senior team, and in particular
the Executive Directors, have continued to provide extraordinary,
inspiring and resourceful leadership during these challenging times
as the restrictions imposed by the pandemic were eased.

The Committee considered the remuneration arrangements for the
Executive Directors and other key employees and satisfied itself
that they are aligned to the Group’s strategic goals and properly
incorporate the key performance indicators. Further, the Committee
is satisfied that the remuneration outcomes for 2021 were aligned
to performance and the Committee believes that the arrangements
continue to promote the long-term success of the Group and
incentivise the delivery of strong, sustainable, financial results.

— Paul Latham |

Chairman of the Remuneration Committee

Members
Paul Latham (Chairman)

Objectives
• To ensure the

Phil Crooks

Dean Fielding

Remuneration Policy
is aligned to the
long-term success
of the Group

• To ensure executive
remuneration
is competitive
to aid retention,
recruitment and
motivation

The Property Franchise Group PLC
Annual Report and Accounts 2021

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Policy on remuneration of Directors
The Remuneration Committee has
responsibility for determining, within agreed
terms of reference, the Group’s policy on the
remuneration of senior management and
specific remuneration packages for Executive
Directors including pension payments and
compensation rights. It is also responsible
for making recommendations for grants of
options under the Share Option Plan.

The remuneration of Non-Executive Directors
is a matter for the Board. It consists of fees
for their services in connection with Board
and Committee meetings. No Director may
be involved in any discussions as to their
own remuneration.

The remuneration policy is designed to
shape the Group’s remuneration strategy
for an anticipated 3 years, ensuring that the
structure and levels of remuneration continue
to remain appropriate for the Group. The
policy aims to:

• pay competitive salaries to aid

recruitment, retention and motivation
being reflective of the person’s
experience and importance to the Group.

• pay annual bonuses to incentivise the

delivery of stretching short-term business
targets whilst maintaining an element of
variability allowing flexible control of the
cost base and being able to respond to
market conditions.

• provide long-term share incentive plans
designed to incentivise long-term value
creation, reward execution of strategy,
align Directors’ interests with the long-
term interests of investors and promote
retention.

Components of Directors’ remuneration
Basic salary or fees
Basic salary or fees for each Director are
determined by considering the performance
of the individual and information from
independent sources on the rates of salary
and fees for similar posts. The salaries and
fees paid to Directors by the Group were
£716,000 (2020: £721,000).

Annual bonus
The Company has a formal bonus scheme
for its Executive Directors. Bonuses were paid
to the Executive Directors by the Group of
£464,000 (2020: £297,000).

Pension
Contributions made to Executive Directors’
pensions in the year were £70,000
(2020: £40,000).

Share options
On 22 July 2020, the Board granted new
options to the Chief Executive Officer and
the Chief Financial Officer over a maximum
of 100,000 ordinary shares each in the
Company with an exercise price of £0.01.
The options are subject to two performance
conditions; basic earnings per share adjusted
for exceptional income/ costs and share-
based payment charges (“adjusted EPS”) and
total shareholder return. Each performance
condition applies to 50% of the award being
made. The measurement period is for the 3
years ended 31 December 2022. In respect of
both performance conditions, growth of 15%
over the performance period is required for
threshold vesting of the awards, with growth
of 35% or higher required for all the awards
to vest. The shares are awarded on a sliding
scale for growth between 15% and 35%.

Our Chief Executive Officer was entitled to
a maximum bonus of £150,000 in 2020
of which £100,000 was delivered on 24
March 2021 via the granting of a nil cost
option, with a 100% uplift based on a 30-day
VWAP applied. This resulted in an option
over 100,000 ordinary shares. The option
is exercisable two years' after being granted
subject to continued employment, vesting
criteria, malus and clawback conditions.
Under the award, the Chief Executive
Officer is not be able to dispose of any of
the acquired shares for a further period of
two years (save as required to pay tax due
on exercise).

On 24 April 2021 an option over 700,000
ordinary shares was granted to the Chief
Executive Officer and an option over 400,000
ordinary shares was granted to the Chief
Financial Officer these options have an
exercise price of £0.01. The options have a
vesting condition based on two performance

conditions; adjusted basic earnings per
share adjusted for exceptional income/costs,
amortisation arising on consolidation and
share-based payment charges ("adjusted
EPS") and total shareholder return ("TSR")
over the 3 years to 31 December 2023. Each
performance condition will apply to 50%
of the award being made. In respect of both
performance conditions, growth of 60% in
adjusted EPS and 80% in TSR over the three-
year period will be required for threshold
vesting of the awards, with growth of 65% or
higher in adjusted EPS and 90% or higher in
TSR required for all of the awards to vest. At
threshold vesting, 75% of the shares subject
to each performance condition, will vest.

Company policy on contracts of service
The Executive Directors of the Company
do not have a notice period in excess of
12 months under the terms of their service
contracts. Their service contracts contain no
provisions for pre-determined compensation
on termination, which exceeds 12 months’
salary and benefits in kind. Non-Executive
Directors do not have service contracts
with the Company but have letters of
appointment which can be terminated on
3-months’ notice.

Termination date
Richard Martin
Gareth Samples
David Raggett
Paul Latham
Phil Crooks
Dean Fielding
Glynis Frew

3-months’ notice
12-months’ notice
12-months’ notice
3-months’ notice
3-months’ notice
3-months’ notice
3-months’ notice.

Company policy on external appointments
The Company recognises that its Executive
Directors are likely to be invited to become
non-executive directors of other companies
and that exposure to such non-executive
duties can broaden their experience and
knowledge, which will benefit the Group.
Executive and Non-Executive Directors
are, therefore, subject to approval of the
Company’s Board, allowed to accept non-
executive appointments, as long as these are
not with competing companies and are not
likely to lead to conflicts of interest. Executive
and Non-Executive Directors are allowed to
retain the fees paid.

The Property Franchise Group PLC
Annual Report and Accounts 2021

— R E M U N E R AT I O N CO M M I T T E E R EpO RT CONTINUED

Taxable benefits
The Executive Directors were not entitled to taxable benefits such as a company car or private
medical insurance during the year.

Directors’ emoluments
The figures below represent emoluments earned by the Executive Directors and Non-
Executive Directors from the Group during the financial year and relate to the period of each
Director’s membership of the Company’s and Subsidiaries’ Boards.

Executive Directors:
Gareth Samples
David Raggett
Glynis Frew (appointed 22 March 2021,
resigned 31 March 2022)
Ian Wilson (retired 30 April 2020)

Non-Executive Directors:
Richard Martin
Paul Latham
Phil Crooks
Dean Fielding (appointed 22 March 2021)

Total remuneration

Salary & fees
£’000

Bonus
£’000

Total 2021
£’000

Total 2020
£’000

220
200

106

526

55
50
50
35

190

716

220
125

119

464
–
–
–
–
–

—

464

440
325

225

990

55
50
50
35

190

1,180

347
300

—
251

898

40
40
40
—

120

1,018

Vesting of options
On 17 May our Chief Financial Officer exercised options which resulted in him receiving
225,000 shares of which 71,299 were sold to the TPFG Employee Benefit Trust and he retained
153,701. On the day of exercise, the share price was 264p giving a notional gain of £594,000.

Changes to Board members
Glynis Frew and Dean Fielding both were appointed to the Board on 22 March 2021.

Directors’ interests
The interests of the Executive Directors, Non-Executive Directors and their spouses in the
shares of the Company were as follows as at 31 December 2021:

The Property Franchise Group PLC ordinary 1 pence shares.

Directors:
Richard Martin
Gareth Samples
David Raggett
Paul Latham
Phil Crooks
Dean Fielding
Glynis Frew

2021

2020

Options

7,039,950
—
383,101
75,000
9,351
37,874
317,400

— 8,039,950
—
227,400
50,000
—
—
—

900,000
500,000
—
—
—
50,000

—
100,000
325,000
—
—
—
—

The dividends paid to the Executive Directors, Non-Executive Directors and their spouses
during the year are disclosed in note 34 to the Financial Statements.

By order of the Board

Paul Latham
Chairman of the Remuneration Committee
4 April 2022

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The Property Franchise Group PLC
Annual Report and Accounts 2021

— D I R EC TO R S ’ R EpO RT

Delivering value to
our stakeholders.

Principal activities
The principal activity of the Group during the year was the sale of
franchises and the support of franchisees in supplying residential
letting, sales and property management services within the UK.

Results for the financial year and business review
The Group achieved a profit before tax of £6.4m in the financial year
as compared to £4.8m for the prior year and a profit after tax of £3.5m
(2020: £3.8m). The change in the deferred tax rate from 19% to 25%,
due to an increase in the corporation tax rate in April 2023 to 25%,
has had a significant impact on the profit after tax in 2021, reducing
it by £1.5m. The results are shown in the Consolidated Statement
of Comprehensive Income on page 56. A full review of the Group’s
business is included in the Strategic Report on pages 1 to 37.

The Group’s profit before tax was £1.6m higher than the previous year.
Excluding exceptional costs of £0.9m (2020: nil), amortisation arising
on acquired intangibles of £1.2m (2020: £0.5m), the share-based
payment charges of £1.0m (2020: £0.1m) and the gain on the listed
investment of £0.1m (2020: nil), the adjusted profit before tax increased
by 76% from £5.3m to £9.4m.

Financial risk management
The Group’s objectives and policies with regards to financial risk
management are set out in note 32 to the consolidated financial
statements.

Future developments
The Group intends to pursue the following over the next few years:

•

Lettings growth through assisting franchisees to acquire portfolios
of tenanted managed properties and by helping the Group’s more
sales dominated brands to grow their lettings revenue streams.

• The further development of its residential sales activity in the high

street led brands.

•

Financial services growth through participation of the network in
the partnership with LSL and through the Group’s development of
its owned mortgage broking subsidiaries.

• The accelerated recruitment of franchisees through its hybrid

offerings.

• The search for suitable corporate acquisitions so as to continue to

buy and build.

•

Improved use of digital marketing to win business for all our brands
and to track attribution

More details on the progress made to date with these key areas of
focus can be found in the Strategic Report on pages 16 and 17.

Dividends
The Group paid a second interim dividend of 6.6p per share on
23 February 2021 in lieu of a final dividend for the financial year ended
31 December 2020 and an interim dividend for the financial year
ended 31 December 2021 of 3.8p per share on 8 October 2021.

— David Raggett | Chief Financial Officer

The Directors present their Annual
Report and audited financial
statements for the financial
year ended 31 December 2021.
Information that would normally
be presented in the Directors’
Report has been presented in
the Group’s Strategic Report in
accordance with s414C(11) of the
Companies Act 2006.

The Property Franchise Group PLC
Annual Report and Accounts 2021

— D I R EC TO R S ’ R EpO RT CONTINUED

The Board recommends a final dividend for
the financial year ended 31 December 2021
of 7.8p per share (2020: 6.6p per share) to
be paid on 27 May 2022 to all shareholders
on the register at the close of business
on 28 April 2022 subject to shareholders
approval on 19 May 2022.

Directors
The Directors shown below have held office
throughout the year unless otherwise stated:

R W Martin
G M Samples
D A Raggett
G J Frew (appointed 22 March 2021, resigned
31 March 2022)
P M Latham
P J Crooks
D A Fielding (appointed 22 March 2021)

The Directors’ remuneration and the
Directors’ interests in the Group are disclosed
in the Directors’ Remuneration Report on
pages 46 to 48.

The Group maintains Directors and Officers
liability insurance, which gives appropriate
cover against any legal action that may
be brought.

Going concern
The Group has produced detailed budgets,
projections and cash flow forecasts, which
include a forecast of future bank covenant
compliance. These have been stress tested
to understand the impacts of reductions
in revenue and costs. The Directors have
concluded after reviewing these budgets,
projections and forecasts and making
appropriate enquiries of the business, that
there is a reasonable expectation that
the Group has adequate resources to
continue in operation for the foreseeable
future. Accordingly, they have adopted
the going concern basis in preparing the
financial statements.

The Group maintains a strong cash position
at the year-end of £8.4m (2020: £8.8m)
with bank debt of £11.1m (2020: nil) after
borrowing £12.5m to fund the acquisition
of Hunters Property plc in March 2021. The
borrowing consists of a revolving credit

facility of £5m for 3 years and a term loan of
£7.5m repayable in quarterly instalments over
4 years of which three instalments had been
paid by the year end.

Auditor
BDO LLP has expressed its willingness to
continue in office. In accordance with section
489 of the Companies Act 2006; a resolution
to reappoint BDO LLP will be proposed at the
Annual General Meeting.

The Directors confirm that:
•

so far as each Director is aware, there is
no relevant audit information of which
the Group and Company’s auditor is
unaware; and

•

the Directors have taken all the steps
that they ought to have taken as Directors
in order to make themselves aware of
any relevant audit information and
to establish that the auditors are aware
of that information.

Statement of Directors’ responsibilities
The Directors are responsible for preparing
the Strategic Report and the Directors’ Report
and the financial statements in accordance
with applicable law and regulations.

Company law requires the Directors to
prepare Group and Company financial
statements for each financial year. The
Directors are required by the AIM Rules of
the London Stock Exchange to prepare
Group financial statements in accordance
with UK adopted international accounting
standards in conformity with requirements of
the Companies Act 2006 and have elected
under company law to prepare the Company
financial statements in accordance with UK
adopted international accounting standards.

The financial statements are required by law
and UK adopted international accounting
standards to present fairly the financial
position of the Group and the Company
and the financial performance of the Group.
The Companies Act 2006 provides in
relation to such financial statements that
references in the relevant part of that Act
to financial statements giving a true and
fair view are references to their achieving
a fair presentation.

Under company law the Directors must not
approve the financial statements unless they
are satisfied that they give a true and fair
view of the state of affairs of the Group and
the Company and of the profit or loss of the
Group for that period.

In preparing the Group and Company
financial statements, the Directors are
required to:

•

select suitable accounting policies and
then apply them consistently;

• make judgements and accounting
estimates that are reasonable
and prudent;

•

state whether they have been prepared
in accordance with UK adopted
international accounting standards; and

• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Group and the Company will continue
in business.

The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group’s
and the Company’s transactions and
disclose with reasonable accuracy at any
time the financial position of the Group and
the Company and enable them to ensure
that the financial statements comply with
the Companies Act 2006. They are also
responsible for safeguarding the assets of
the Group and the Company and hence for
taking reasonable steps for the prevention
and detection of fraud and other irregularities.

The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.

By order of the Board

David Raggett
Chief Financial Officer
4 April 2022

The Property Franchise Group PLC
Annual Report and Accounts 2021

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— i nDe p e nDe n t a U Di to r’ S r e p o rt

Independent auditor’s report to the members of The Property Franchise Group plc

Opinion on the financial statements
In our opinion:

•

the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 December 2021 and
of the Group’s profit for the year then ended;

the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;

the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting standards
and as applied in accordance with the provisions of the Companies Act 2006; and

•

the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements of The Property Franchise Group plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for
the year ended 31 December 2021 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of
Financial Position, the Company Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Company Statement of
Changes in Equity, the Consolidated Statement of Cash Flows, the Company Statement of Cash Flows, and notes to the financial statements,
including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable
law and UK adopted international accounting standards and, as regards the Parent Company financial statements, as applied in accordance with
the provisions of the Companies Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence
We remain independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit
of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.

Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and the Parent Company’s ability to continue to
adopt the going concern basis of accounting included:

• Gaining an understanding of the Directors’ method for assessing going concern, including evaluating the relevance and reliability of

underlying data used to make the assessment, and whether assumptions and changes to assumptions from prior years are appropriate
and where relevant consistent with each other. This included the Directors’ assessment that the Ukraine conflict is not expected to have
a material impact on the cash flows of the Group during the going concern period of assessment due to the nature and location of the
Group’s operations, its ownership and supply chains

• Considering the accuracy of historic forecasting and carrying out sensitivity analysis

• The Directors’ stress-testing of the forecasts to the extent of reasonable worst-case scenarios, which included modelling significant

downturns in both the sales and lettings markets and associated costs. We have assessed these assumptions against recent sector
performance and the Group’s results for the financial year to date

• The compliance with covenants relating to the financing obtained to fund the acquisition of Hunters Property plc (“Hunters”), including

checking the calculations with reference to the loan agreement and determining whether the calculations have been appropriately applied
in the sensitised scenario

• The adequacy and appropriateness of disclosures in the financial statements regarding the going concern assessment.

We carried out the above procedures through using our understanding of the business model, objectives, strategies and related business risk, the
measurement and review of the Group’s financial performance, forecasting and budgeting processes and the entity’s risk assessment process.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

Overview

Coverage (subject to full scope audit by
the Group engagement team)

98% (2020: 100%) of Group revenue
97% (2020: 99%) of Group profit before tax
100% (2020: 99%) of Group total assets

Key audit matters

Materiality

Acquisition accounting – Hunters

Goodwill and intangible asset impairment risk – Ewemove CGU

Revenue recognition

Group financial statements as a whole
£480,000 (2020: £230,000) based on 5% (2020: 5%) of adjusted
profit before tax

2021

2020

The Property Franchise Group PLC
Annual Report and Accounts 2021

— i nDe p e nDe n t a U Di to r’ S r e p o rt CONTINUED

An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control,
and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal
controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.

The Group’s operations are based in Bournemouth, York and Cleckheaton United Kingdom.

We identified eight components, seven of which were considered significant and subject to full-scope audits by BDO LLP. The other non-
significant component was subject to a desktop review and specified scope procedures in areas such as revenue, which was carried out by the
Group audit team.

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including
those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.

Key audit matter

Acquisition accounting –
Hunters

The accounting policy in
respect of the accounting
for business combinations
is included within the
accounting policy on
page 67; the accounting
judgement and estimate in
respect of the valuation of
intangible assets as part of
the acquisition is included
within the accounting
estimates and judgements
note on page 69.

As detailed in the accounting policies and also
note 35 to the financial statements, the Group
undertook an acquisition during the financial
year. Consequently, management had to exercise
judgement in determining the fair value of the
consideration and the assets and liabilities acquired.

Management has recognised on acquisition,
separately identifiable intangible assets in respect
of master franchise agreements, brands and
technology, exercising judgement in estimating
the fair value for each one.

There is also complexity in complying with the
disclosure requirements of IFRS 3: Business
Combinations.

Due to the level of judgement and estimation involved
and allocation of resources of senior team members,
this was considered to be a key audit matter.

How the scope of our audit addressed the key audit matter

In respect of the fair value of the consideration, we
reviewed management’s calculation with reference to
the sale and purchase agreement and agreed the initial
cash and share consideration to the sale and purchase
documentation

We checked that the acquisition accounting exercise
had been carried out in accordance with applicable
accounting standards and carried out audit procedures
on the acquired assets and liabilities in the completion
accounts. This included assessing the completeness
of liabilities through testing transactions in the month
post completion; checking the key inputs into the
right-of-use asset and lease liability calculations through
use of information such as the lease agreements and
considering the sensitivity of the incremental borrowing
rate; and assessing the recoverability of debtors based
on post-acquisition recovery.

In relation to management’s estimates in respect of
the fair value of the assets and liabilities acquired, we
assessed the valuation of the intangible assets that were
considered separately identifiable on acquisition, testing
the key inputs in the valuation model with reference
to data such as management’s forecasts and, with the
assistance of our internal valuations experts, reviewed
the key assumptions, such as estimated royalty rates
and discount rates, and the methodology applied in the
model. We also considered management’s assessment
of the completeness of the separately identifiable
intangible assets with reference to our understanding of
the business and key motivations of the transaction.

In respect of the disclosures, we assessed the relevant
notes in accordance with the requirements of IFRS 3.

Key observations:
Based on the procedures performed, we consider
that the acquisition has been appropriately recognised
and disclosed in accordance with the requirements of
applicable accounting standards.

Key audit matter

Goodwill and intangible
asset impairment risk –
Ewemove CGU

The accounting policy in
respect of the accounting
for intangible assets
is included within the
accounting policy on
page 66; the accounting
estimate in respect of the
impairment of intangible
assets is included within
the accounting estimates
and judgements note on
page 69.

The risk that goodwill and intangible assets may
be impaired is considered to lie in the Ewemove
CGU – as the conclusion is dependent on achieving
forecast growth – and is significant due to the level
of judgement involved in the impairment review and
the opportunity for management bias within the
impairment model assumptions. We considered this
to be a key audit matter due to the inherent level
of judgement.

Management’s review found no evidence of
impairment in the Ewemove or other cash-
generating units, nor indicators of impairment in
relation to other intangible assets.

Revenue recognition

The accounting policy in
respect of the accounting
for revenue recognition
is included within the
accounting policy on
page 65.

As detailed in the accounting policies and also
note 7 to the financial statements, the Group earns
revenue principally in the form of Managed Service
Fees (“MSF”), which are derived as a percentage of
the franchisees’ income or directly in the case of
owned and operated sites.

The Managed Service Fees are recorded in separate
sales systems and imported into the accounting
system on a monthly basis.

Due to the need to transfer data across the systems,
we consider there to be a significant risk that revenue
may not be accurately recognised or recorded in the
wrong period due to error or manipulation. Through
the need to reconcile data between the two systems
and ensure that revenues had been fully recorded
in the nominal ledger, the procedures on revenue
recognition also represented a significant part of
our audit strategy in terms of the level of direction
and supervision and allocation of resources and so,
consequently, revenue recognition is considered a
key audit matter.

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The Property Franchise Group PLC
Annual Report and Accounts 2021

How the scope of our audit addressed the key audit matter

We assessed the impairment review of the Group’s
goodwill and intangible assets prepared by
management, specifically checking the integrity of
management’s value-in-use model and, with the
assistance of our valuation specialists, we challenged
the key inputs – being forecast growth rates, operating
cash flows and the discount rate. We also checked if
the Cash-Generating Unit (“CGU”) was appropriately
determined and the correct assets included in its
carrying value. Our audit procedures relating to the
operating cash flows and forecast growth rates included,
amongst others, comparing the forecast to recent
financial performance and budgets approved by the
Board, including checking for consistency with forecasts
prepared for the purposes of the going concern
assessment. We used market data to independently
calculate a discount rate for comparison and also
performed our own sensitivity analysis upon the key
valuation inputs. We also considered whether significant
events during the year – such as the ongoing impact of
the COVID-19 pandemic on the housing market – have
been appropriately considered by management within
the impairment assessment.

Key observations:
We found management’s judgements in this area to be
reasonable and found no evidence of management bias
in the assumptions used.

We obtained and tested management’s reconciliation
between the underlying sales systems to which
the lettings/sales data was uploaded and the MSF
recorded in the nominal ledger. We witnessed the data
extraction from the underlying systems and engaged
our technology and systems experts to reperform a
full reconciliation of the two data sets. We investigated
and corroborated any reconciling items such as
manual journals to revenue including year-end cut-off
adjustments to accrue revenues for the final month
of the year.

We tested the integrity of the data in the underlying
sales systems by tracing a sample from submission,
ensuring that the correct MSF rate had been applied in
accordance with the relevant contractual arrangement,
through to invoice issued and ultimately cash collection.

In considering the completeness of the data in the
underlying sales systems, we selected a sample of
contractual agreements and ensured that the MSF had
been appropriately included in the sales system and at
the appropriate rate.

Key observations:
Based on the procedures performed, we have not
identified any instances that may suggest that revenue
has been inappropriately recognised.

Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that
are taken on the basis of the financial statements.

The Property Franchise Group PLC
Annual Report and Accounts 2021

— i nDe p e nDe n t a U Di to r’ S r e p o rt CONTINUED

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence,
when evaluating their effect on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows:

Materiality

Group financial statements

Parent company financial statements

2021
£000

480

2020
£000

230

2021
£000

460

2020
£000

215

Basis for determining materiality

5% of the adjusted profit before tax

95% of Group materiality

Rationale for the benchmark applied

Performance materiality

Basis for determining performance
materiality

Adjusted profit before tax is considered to be
one of the principal considerations for the users
of the financial statements in assessing the
financial performance of the Group.

Capped 95% (2020: 95%) of Group materiality
given the assessment of the components
aggregation risk.

360

173

345

161

75% of materiality based on a low expected total value
of known and likely misstatements.

Component materiality
We set materiality for each significant component of the Group based on a percentage of between 6% and 95% (2020: 7% and 95%) of
Group materiality dependent on the size and our assessment of the risk of material misstatement of that component. Component materiality
ranged from £27,000 to £460,000 (2020: £15,000 to £215,000). In the audit of each significant component, we further applied performance
materiality levels of 75% (75%) of the component materiality to our testing to ensure that the risk of errors exceeding component materiality was
appropriately mitigated.

Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £15,000 (2020: £9,200).
We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.

Other information
The Directors are responsible for the other information. The other information comprises the information included in the Annual Report and
Accounts other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in
the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.

We have nothing to report in this regard.

Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act
2006 and ISAs (UK) to report on certain opinions and matters as described below.

Strategic report and
Directors’ report

In our opinion, based on the work undertaken in the course of the audit:

• the information given in the Strategic report and the Directors’ report for the financial year for which the financial

statements are prepared is consistent with the financial statements; and

• the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in
the course of the audit, we have not identified material misstatements in the Strategic report or the Directors’ report.

Matters on which we
are required to report
by exception

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:

• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have

not been received from branches not visited by us; or

• the Parent Company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

The Property Franchise Group PLC
Annual Report and Accounts 2021

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Responsibilities of Directors
As explained more fully in the Statement of Directors’ responsibilities, the Directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.

Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below:

We focused on laws and regulations that could give rise to a material misstatement in the Group financial statements and the susceptibility of the
entity’s financial statements to material misstatement including fraud. Our procedures included, but were not limited to:

•

Evaluation of management incentives, including the extent to which remuneration is influenced by reported results, and opportunities for
fraudulent manipulation of the financial statements such as management override;

• This evaluation involved a particular focus on the judgements and estimates inherent in the key audit matter and exercising professional

scepticism in considering the impact of those estimates and judgements on the reported results and key performance measures such as the
profit before tax;

• Discussions with Management and the Audit and Risk Committee regarding known or suspected instances of non-compliance with laws

and regulations including tax and data protection legislation;

• Obtaining and understanding of controls designed to prevent and detect irregularities, including the reconciliation of customer monies held

in client account balances;

• Review of board meeting minutes for any evidence of fraud or non-compliance with laws and regulations including health and safety and

taxation regulations; and

• Assessment of journal entries to accounts that were considered to carry a greater risk of fraud as part of our planned audit approach.

We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained alert to
any indications of fraud or non-compliance with laws and regulations throughout the audit.

Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not
detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate
concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed
and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the
less likely we are to become aware of it.

A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.

Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Malcolm Thixton
Senior Statutory Auditor
For and on behalf of BDO LLP, Statutory Auditor
Southampton
United Kingdom

4 April 2022

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

The Property Franchise Group PLC
Annual Report and Accounts 2021

co nSo l iD at eD S tat e m e n t oF co m p r eHe nSi v e i n co m e

for the year ended 31 December 2021

Revenue
Cost of sales

Gross profit
Administrative expenses
Share-based payments charge

Operating profit
Finance income
Finance costs
Other gains and losses

Profit before income tax expense
Income tax expense

Profit for the year from continuing operations

Discontinued operations

Profit and total comprehensive income for the year

Profit and total comprehensive income for the year attributable to:
Owners of the parent
Non-controlling interest

Earnings per share attributable to owners of parent
Diluted Earnings per share attributable to owners of parent

Adjusted results
Adjusted profit for the financial year 1
Earnings per share attributable to owners of parent
Diluted Earnings per share attributable to owners of parent

Notes

8
9, 33

11
12
12
21

15
15

15
15
15

2021
£’000

24,042
(3,697)

20,345
(12,719)
(970)

6,656
4
(320)
83

6,423
(2,745)

3,678

(169)

3,509

3,469
40

3,509

11.3p
11.3p

8,256
27.0p
26.9p

2020
£’000

11,017
(933)

10,084
(5,257)
(68)

4,759
11
(3)
–

4,767
(1,008)

3,759

3,792

3,783
9

3,792

14.6p
14.4p

4,349
16.8p
16.5p

1. Adjusted profit for the financial year is reconciled to the statutory profit for the year in note 15. Adjusted profit for 2021 is the profit before charging £1.5m deferred tax

rate adjustment, £1.2m amortisation on acquired intangibles, £1.0m share based payments charge, £0.85m exceptional costs, and £0.2m other items.

The Property Franchise Group PLC
Annual Report and Accounts 2021

co nSo l iD at eD S tat e m e n t oF Fi n a n c i a l p o Si t i o n

31 December 2021

Assets
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use assets
Prepaid assisted acquisitions support
Investments
Investment properties

Current assets
Trade and other receivables
Cash and cash equivalents

Total assets

Equity
Shareholders’ equity
Called up share capital
Share premium
Own share reserve
Merger reserve
Other reserves
Retained earnings

Non-controlling interest

Total equity attributable to owners

Liabilities
Non-current liabilities
Borrowings
Lease liabilities
Deferred tax
Provisions

Current liabilities
Borrowings
Trade and other payables
Lease liabilities
Tax payable

Total liabilities

Total equity and liabilities

Notes

17
18
19
20
21
22

24
25
27
26
27

28
19
30
31

28
29
19

2021
£’000

46,498
217
1,568
424
169
256

49,132

2,820
8,413

11,233

60,365

320
4,129
(348)
14,345
905
13,999

33,350
6

33,356

9,219
2,275
5,570
212

17,276

1,875
6,280
465
1,113

9,733

27,009

60,365

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2020
£’000

14,380
68
86
600
–
–

15,134

1,291
8,771

10,062

25,196

258
4,040
–
2,797
778
12,690

20,563
9

20,572

–
45
1,115
–

1,160

–
2,750
41
673

3,464

4,624

25,196

The financial statements were approved and authorised for issue by the Board of Directors on 4 April 2022 and were signed on its behalf by:

David Raggett
Chief Financial Officer

The Property Franchise Group PLC
Annual Report and Accounts 2021

co m pa nY S tat e m e n t oF Fi n a n c i a l p o Si t i o n

31 December 2021 (Company No: 08721920)

Assets
Non-current assets
Investments
Deferred tax asset

Current assets
Trade and other receivables
Cash and cash equivalents

Total assets

Equity
Shareholders’ equity
Called up share capital
Share premium
Own share reserve
Merger reserve
Other reserves
Retained earnings

Total equity

Liabilities
Non-current liabilities
Borrowings

Current liabilities
Borrowings
Trade and other payables

Total liabilities

Total equity and liabilities

Notes

21
30

24
25
27
26
27

28
29

2021
£’000

60,743
377

61,120

811
4,635

5,446

66,566

320
4,129
(348)
32,335
905
16,668

54,009

9,219

1,875
1,463

3,338

12,557

66,566

2020
£’000

34,083
228

34,311

221
4,601

4,822

39,133

258
4,040
–
20,787
778
13,123

38,986

–

–
147

147

39,133

As permitted by Section 408 of the Companies Act 2006, the income statement of the Parent Company is not presented as part of these
financial statements. The Parent Company’s profit for the financial year was £5.705m (2020: £4.025m).

The financial statements were approved and authorised for issue by the Board of Directors on 4 April 2022 and were signed on its behalf by:

David Raggett
Chief Financial Officer

The Property Franchise Group PLC
Annual Report and Accounts 2021

co nSo l iD at eD S tat e m e n t oF cHa n g e S i n e Q Ui tY

for the year ended 31 December 2021

Attributable to owners

Called up
share
capital
£’000

Retained
earnings
£’000

Share
premium
£’000

Own share
reserve
£’000

Other
reserves
£’000

Total
equity
£’000

Non-
controlling
interest
£’000

Balance as at 1 January 2020

258

9,449

4,040

Profit and total comprehensive
income

Dividends
Share-based payments charge

Total transactions with owners

–

–
–

–

3,783

(542)
–

(542)

–

–
–

–

Balance as at 31 December 2020

258

12,690

4,040

Profit and total comprehensive
income
Disposal of subsidiary

Dividends
Shares issued – acquisition
consideration
Shares issued – share option
exercises
Purchase of shares by Employee
Benefit Trust
Release of deferred tax on share-
based payments
Share-based payments charge

Total transactions with owners

Balance as at 31 December 2021

–
–

–

–
–

320

3,469
–

(2,922)

–

762

–

–
–

–

–
–

2,797

778

20,563

Merger
reserve
£’000

2,797

–

–
–

–

11,548

–

–
–

–

–
–

–

(348)

–
–

710

17,254

–

–
68

3,783

(542)
68

(474)

–
–

–

3,469
–

(2,922)

11,603

(762)

–

(348)

(81)
970

127

(81)
970

9.318

(2,160)

(348)

11,548

13,999

4,129

(348)

14,345

905

33,350

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Total
equity
£’000

17,254

3,792

(542)
68

(474)

20,572

3,509
(43)

(2,922)

11,603

(348)

(81)
970

9,318

33,356

–

–
–

–

40
(43)

–

–
–

–

The Property Franchise Group PLC
Annual Report and Accounts 2021

co m pa nY S tat e m e n t oF cHa n g e S i n e Q Ui tY

for the year ended 31 December 2021

Balance as at 1 January 2020

Profit and total comprehensive income

Dividends
Share-based payments charge

Total transactions with owners

Balance as at 31 December 2020

Profit and total comprehensive income

Dividends
Shares issued – acquisition consideration
Shares issued – share option exercises
Purchase of shares by Employee
Benefit Trust
Release of deferred tax on share-based
payments
Share-based payments charge

Total transactions with owners

Balance as at 31 December 2021

Called up share
capital
£’000

258

–

–
–

–

258

–

–
55
7

–

–
–

320

Retained
earnings
£’000

9,640

4,025

(542)
–

(542)

13,123

5,705

(2,922)
–
762

–

–
–

(2,160)

16,668

Share
premium
£’000

4,040

–

–
–

–

4,040

–

–
–
89

–

–
–

4,129

Own share
reserve
£’000

–

–
–

–

–
–
–

(348)

–
–

(348)

Merger
reserve
£’000

20,787

–

–
–

–

20,787

–

–
11,548
–

–

–
–

11,548

32,335

Other
reserves
£’000

710

–

–
68

778

–

–
–
(762)

Total
equity
£’000

35,435

4,025

(542)
68

(474)

38,986

5,705

(2,922)
11,603
96

–

(348)

(81)
970

127

905

(81)
970

9,318

54,009

The Property Franchise Group PLC
Annual Report and Accounts 2021

co nSo l iD at eD S tat e m e n t oF c aS H Flo W S

for the year ended 31 December 2021

Cash flows from operating activities
Cash generated from operations
Interest paid
Tax paid

Net cash from operating activities

Cash flows from investing activities
Acquisition of subsidiary net of cash acquired – Hunters
Acquisition of subsidiary net of cash acquired – The Mortgage Genie
Acquisition of subsidiary net of cash acquired – Auxilium
Disposal of subsidiary net of cash disposed of – Auxilium
Purchase of intangible assets
Purchase of tangible assets
Assisted acquisitions support
Loan repaid
Interest received

Net cash used in investing activities

Cash flows from financing activities
Issue of ordinary shares
Equity dividends paid
Purchase of shares by Employee Benefit Trust
Bank loan drawn
Bank loan repaid
Principal paid on lease liabilities
Interest paid on lease liabilities

Net cash used in financing activities

(Decrease) / Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Notes

B
C

2021
£’000

10,856
(232)
(1,679)

8,945

(13,041)
(103)
–
(323)
(116)
(87)
(57)
–
4

(13,723)

96
(2,922)
(348)
12,500
(4,419)
(399)
(88)

4,420

(358)
8,771

8,413

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2020
£’000

6,378
–
(972)

5,406

–
–
(81)
–
–
(18)
(155)
200
11

(43)

–
(542)
–
–
–
(59)
(3)

(604)

4,759
4,012

8,771

The Property Franchise Group PLC
Annual Report and Accounts 2021

n ot e S to tHe co nSo l iD at eD S tat e m e n t oF c aS H Flo W S

for the year ended 31 December 2021

A. Reconciliation of profit before income tax to cash generated from operations

Cash flows from operating activities
Profit before income tax
Profit before income tax – discontinued
Depreciation of property, plant and equipment
Amortisation of intangibles
Amortisation of prepaid assisted acquisitions support
Amortisation of right-of-use assets
Share-based payments charge
Gain on revaluation of listed investment
Finance costs
Finance income

Operating cash flow before changes in working capital
Decrease/(increase) in trade and other receivables
Increase in trade and other payables

Cash generated from operations

B. Acquisition of Subsidiary undertakings net of cash acquired
On 19 March 2021 the Group obtained control of Hunters Property plc and it’s subsidiaries.

Consideration – cash element
Less: Cash acquired

Acquisition of subsidiary undertakings net of cash acquired

C. Acquisition of Subsidiary undertakings net of cash acquired
On 6 September 2021 the Group obtained control of The Mortgage Genie Limited and The Genie Group UK Ltd.

Consideration – cash element
Less: Cash acquired

Acquisition of subsidiary undertakings net of cash acquired

2021
£’000

6,423
152
79
1,249
233
317
970
(83)
320
(4)

9,656
247
953

10,856

2021
£’000

14,531
(1,490)

13,041

2021
£’000

400
(297)

103

D. Disposal of Subsidiary undertakings net of cash disposed of
On 22 July 2021 the Group disposed of its controlling interest in Aux Group Limited and Auxilium Partnership Limited

Consideration – cash element
Less: Cash disposed of

Disposal of subsidiary undertakings net of cash disposed of

2021
£’000

20
(343)

(323)

2020
£’000

4,767
38
28
591
213
56
68
–
3
(11)

5,753
(18)
643

6,378

2020
£’000

–
–

–

2020
£’000

–
–

–

2020
£’000

–
–

–

co m pa nY S tat e m e n t oF c aS H Flo W S

for the year ended 31 December 2021

Cash flows from operating activities
Cash generated from operations
Interest paid

Net cash used in operating activities

Cash flows from investing activities
Acquisition of subsidiary – Hunters
Acquisition of subsidiary – The Mortgage Genie
Disposal of subsidiary – Auxilium
Loan repaid
Equity dividends received

Net cash generated from investing activities

Cash flows from financing activities
Issue of ordinary shares
Equity dividends paid
Purchase of shares by Employee Benefit Trust
Bank loan drawn
Bank loan repaid

Net cash used in financing activities

Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

The Property Franchise Group PLC
Annual Report and Accounts 2021

Notes

2021
£’000

(1,005)
(220)

(1,225)

(14,531)
(400)
20
–
8,250

(6,661)

96
(2,922)
(348)
12,500
(1,406)

7,920

34
4,601

4,635

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a
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a
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m
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t
S

2020
£’000

(660)
–

(660)

(81)
–
–
200
4,610

4,729

–
(542)
–
–
–

(542)

3,527
1,074

4,601

The Property Franchise Group PLC
Annual Report and Accounts 2021

n ot e S to tHe co m pa nY S tat e m e n t oF c aS H Flo W S

for the year ended 31 December 2021

E. Reconciliation of profit before income tax to cash generated from operations

Cash flows from operating activities
Profit before income tax
Share-based payments charge
Gain on revaluation of listed investment
Loss on disposal of subsidiary
Finance costs
Finance income
Equity dividend received

Operating cash flow before changes in working capital
Increase in trade and other receivables
Increase in trade and other payables

Cash used in operations

2021
£’000

4,846
773
(68)
180
220
–
(8,250)

(2,299)
(8)
1,302

(1,005)

2020
£’000

3,898
85
–
–
–
–
(4,610)

(627)
(163)
130

(660)

The Property Franchise Group PLC
Annual Report and Accounts 2021

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noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

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 and listed on AIM. The address of its head
office and registered office is 2 St Stephen’s Court, St Stephen’s Road, Bournemouth, Dorset, UK.

2. Basis of preparation
These consolidated financial statements have been prepared in accordance with UK adopted international accounting standards and, as regards
the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. The consolidated financial
statements have been prepared under the historical cost convention modified to include the revaluation of certain investments at fair value.

The preparation of financial statements in accordance with UK adopted international accounting standards requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies.
The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated
financial statements are disclosed in note 5.

The presentational currency of the financial statements is in British pounds and amounts are rounded to the nearest thousand pounds.

Going concern
The Group has produced detailed budgets, projections and cash flow forecasts, which include a forecast of future bank covenant compliance.
These have been stress tested to understand the impacts of reductions in revenue and costs. The Directors have concluded after reviewing
these budgets, projections and forecasts, making appropriate enquiries of the business, that there is a reasonable expectation that the Group has
adequate resources to continue in operation for the foreseeable future. Accordingly, they have adopted the going concern basis in preparing the
financial statements.

Changes in accounting policies
a) New standards, amendments and interpretations effective from 1 January 2021
We do not consider there to be any relevant new standards, amendments to standards or interpretations, that are effective for the financial year
beginning on 1 January 2021, which would have a material impact on the financial statements.

b) New standards, amendments and interpretations not yet effective
We do not consider there to be any relevant new standards, amendments to standards or interpretations that have been issued, but are not
effective for the financial year beginning on 1 January 2021, which would have a material impact on the financial statements.

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.

3. Basis of consolidation
The Group financial statements include those of the Parent Company and its Subsidiaries, drawn up to 31 December 2021. 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 acquire 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 to the Group’s accounting policies.

4. Significant accounting policies
Revenue recognition
Performance obligations and the timing of revenue recognition
Revenue represents income, net of VAT, from the sale of franchise agreements, resale fees and Management Service Fees levied to franchisees
monthly based on their turnover, and other income being the provision of ad hoc services and ongoing support to franchisees. In addition there
is lettings and residential sales income, net of VAT, from a small number of Hunters’ owned offices and financial services commissions.

Franchises excluding EweMove:
Fees from the sale of franchise agreements are not refundable. These 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 has some initial obligations that extend beyond the receipt of funds
and signing of the franchise agreement so an element of the fee is deferred and released as the obligations are discharged, usually between 1 to
4 months after receipt of funds, which is the typical period of on-boarding for new franchisees.

Resale fees are recognised in the month that a contract for the resale of a franchise is signed. Upon signing of the contract all obligations have
been completed.

Management Service Fees are recognised on a monthly basis and other income is recognised when the services and support is provided to the
franchisee. There are no performance obligations associated with levying the Management Service Fees. For ad hoc services and support all
performance obligations have been fulfilled at the time of revenue recognition.

The Property Franchise Group PLC
Annual Report and Accounts 2021

noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

4. Significant accounting policies continued
EweMove:
Fees from the sale of franchise agreements for the EweMove brand are not refundable. Some new franchisees pay a higher fee to include the
first 12 months’ licence fee, in this scenario the licence fee element of the initial fee is deferred and released over the first 12 months of trading of
the franchise where no monthly licence fees are payable. The franchise fee is for the use of the brand along with initial support and promotion
during the opening phase of the new franchise. As such the Group has some initial obligations that extend beyond the receipt of funds and
signing of the franchise agreement so an element of the fee is deferred and released as the obligations are discharged, usually between 1 to 4
months after receipt of funds, which is the typical period of on-boarding for new franchisees.

Management Service Fees consist of monthly licence fees and completion fees. Licence fees are recognised on a monthly basis, completion
fees are recognised when sales or lettings transactions complete and other income is recognised when the services and support are provided to
the franchisee. There are no additional performance obligations associated with levying the licence fee and completion fees beyond providing
access to the systems, brand and marketing support. For ad hoc services and support all performance obligations have been fulfilled at the time
of revenue recognition.

Hunters owned offices:
Revenue from the sale of residential property is recognised, net of vat, at the point the Group has performed its performance obligation to see
the transaction through to the exchange of contracts between a buyer and a vendor.

Revenue from lettings represents commission earned from operating as a lettings agent, net of vat. Where the performance obligation relates
to the letting of a property the revenue is recognised at the point the property has been let. Where the performance obligation relates to the
management of a lettings property revenue is recognised over the period the property is managed.

Financial services commissions:
Financial services commissions received are recognised upon receipt, being a point in time when the Group has met its obligations in delivering
a customer to the mortgage and / or insurance partners. A provision is made for the best estimate of future clawbacks resulting from insurance
policies being subsequently cancelled, however this is not material to the financial statements. There is no vat applicable to financial services
commissions.

Rental income:
Rental income represents rent received from short term licensing arrangements entered into to make use of vacant office space. The Group’s
obligation is to provide office accommodation through the period of the license. Revenue is recognised over the period of the license.

Operating profit
Profit from operations is stated before finance income, finance costs and tax expense.

Business combinations
On the acquisition of a business, fair values are attributed to the identifiable assets and liabilities and contingent liabilities unless the fair value
cannot be measured reliably in which case the value is subsumed into goodwill. Where the fair values of acquired contingent liabilities cannot be
measured reliably, the assumed contingent liability is not recognised but is disclosed in the same manner as other contingent liabilities.

Goodwill is the difference between the fair value of the consideration and the fair value of identifiable assets acquired. Goodwill arising on
acquisitions is capitalised and subject to an impairment review, both annually and when there is an indication that the carrying value may not be
recoverable.

Intangible assets
Intangible assets with a finite life are carried at cost less amortisation and any impairment losses. Intangible assets represent items which meet
the recognition criteria of IAS 38, in that it is probable that future economic benefits attributable to the assets will flow to the entity and the cost
can be measured reliably.

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 in administrative expenses 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, on a straight-line basis, as follows:

Brands – CJ Hole, Parkers, Ellis & Co
Brands – EweMove
Brands – Hunters
Customer lists – lettings books
Customer lists – franchise development grants
Master franchise agreements – Whitegates, CJ Hole, Parkers, Ellis & Co
Master franchise agreements – Hunters
Master franchise agreements – EweMove
Technology – Ewereka
Technology – Websites, CRM system and Software

Indefinite life
21 years
20 years
12 years
15 years
25 years
21 years
15 years
5 years
3 years

The Property Franchise Group PLC
Annual Report and Accounts 2021

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for the year ended 31 December 2021

Acquired trade names are identified as separate intangible assets where they can be reliably measured by valuation of future cash flows.
The trade names CJ Hole, Parkers and Ellis & Co are assessed as having indefinite lives due to their long trading histories.

Acquired customer lists are identified as a separate intangible asset as they are separable and can be reliably measured by valuation of future
cash flows. This valuation also assesses the life of the particular relationship. The life of the relationship is assessed annually.

Customer lists acquired as part of the Hunters acquisition relate to Lettings books and are being written off over a remaining life of 12 years.

Acquired master franchise agreements are identified as a separate intangible asset as they are separable and can be reliably measured by
valuation of future cash flows. The life of the relationship is assessed annually. Master franchise agreements are being written off over a
remaining life of 15-25 years as historical analyses shows that, on average, 4% – 10% of franchises will change ownership per annum.

Subsequent to initial recognition, intangible assets are stated at deemed cost less accumulated amortisation and impairment charges, with the
exception of indefinite life intangibles.

Impairment of non-financial assets
In respect of goodwill and intangible assets that have an indefinite useful lives, management are required to assess whether the recoverable
amount of each exceeds their respective carrying values at the end of each accounting period.

In respect of intangible assets with definite lives, management are required to assess whether the recoverable amount exceeds the carrying
value where an indicator of impairment exists at the end of each accounting period.

The recoverable amount is the higher of fair value less costs to sell and value in use.

Impairment losses represent the amount by which the carrying value exceeds the recoverable amount; they are recognised in profit or loss.
Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated
to the cash generating unit and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis. Where an indicator of
impairment exists against a definite life asset and a subsequent valuation determines there to be impairment, the intangible asset to which it
relates is impaired by the amount determined.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been a change in
the estimates used to determine the recoverable amount.

An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depreciation or amortisation, if no impairment loss had been recognised.

The master franchise agreement is assessed separately for impairment as an independent asset that generates cash inflows that are largely
independent of those from other assets.

Investment in subsidiaries
Investments in subsidiaries are stated in the Parent Company’s balance sheet at cost less any provisions for impairments.

Equity investments
Investments in the Group balance sheet represent listed investments which are measured at market value and unlisted investments which are
measured at cost. Listed investments are revalued at fair value through the profit and loss account based on the quoted share price.

Property, plant and equipment
Items of property, plant and equipment are stated at cost of acquisition less accumulated depreciation and impairment losses. Depreciation is
charged so as to write-off the cost of assets over their estimated useful lives on the following bases:

Fixtures, fittings and office equipment
Computer equipment
Leasehold buildings and short leasehold improvements

15% – 25% reducing balance or 10% – 33% straight line
over 3 years
over the lease term

Right-of-use assets
Right of use assets relate to operating leases that have been brought onto the balance sheet under IFRS 16. They are initially measured at the
amount of the lease liability, reduced for any lease incentives received, and increased for:

•

lease payments made at or before commencement of the lease;

initial direct costs incurred; and

the amount of any provision recognised where the group is contractually required to dismantle, remove or restore the leased asset.

Subsequent to initial measurement right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the
remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.

The Property Franchise Group PLC
Annual Report and Accounts 2021

noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

4. Significant accounting policies continued
Lease liabilities
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the
Group’s incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of
the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will
remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.

Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are
reduced for lease payments made.

Prepaid assisted acquisitions support
Prepaid assisted acquisitions support represents amounts payable to franchisees in relation to their acquisition of qualifying managed property
portfolios and amounts payable to brokers for assisting with the acquisition of those portfolios. The payments are recognised as an asset and
amortised to the profit and loss account over 5 years. The amounts payable to franchisees are amortised as a reduction in revenue, whereas
amounts payable to brokers are amortised through cost of sales.

Investment properties
Investment property comprises a property held under a lease by Hunters which is subleased to an independent third party. The investment
property is held at historic cost less accumulated depreciation, and is being depreciated over the term of the lease as set out in the Property,
plant and equipment note above. It is recognised on this basis because it is a short term lease and as such it is not possible to reliably determine
a fair value.

Income taxes
Income tax currently payable is calculated using the tax rates in force or substantively enacted at the reporting date. Taxable profit differs from
accounting profit either because some income and expenses are never taxable or deductible, or because the time pattern that they are taxable
or deductible differs between tax law and their accounting treatment.

The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or loss, except if it arises from transactions or
events that are recognised in other comprehensive income or directly in equity.

Deferred tax
Deferred income taxes are calculated using the liability method on temporary differences, at the tax rate that is substantively enacted at the
balance sheet date. On 24 May 2021 the Finance Bill 2021 was substantively enacted which amends the corporation tax rate from 19% to 25%
with effect from 1 April 2023. 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 Group 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 be 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 balance sheet date. Changes in deferred tax assets or liabilities are recognised as a component of the tax expense in the income
statement. For share-based payments the deferred tax credit is recognised in the income statement to the extent that it offsets the share-based
charge, with any remaining element after offset being shown in the statement of changes in equity.

Cash and cash equivalents
Cash and cash equivalents are defined as cash balances in hand and in the bank (including short-term cash deposits).

Financial assets
The Group and Company only have financial assets comprising trade and other receivables and cash and cash equivalents in the Consolidated
Statement of Financial Position.

These assets arise principally from the provision of goods and services to customers (eg. trade receivables), but also incorporate other types of
financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely
payments of principal and interest. 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.

The Property Franchise Group PLC
Annual Report and Accounts 2021

noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

Impairment of financial assets
Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using
a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the
trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the
lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate
provision account with the loss being recognised within administrative expenses in the consolidated 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.

Impairment provisions for receivables from related parties and loans to related parties are recognised based on a forward looking expected credit
loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit
risk since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the
financial asset, 12 month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased
significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit
impaired, lifetime expected credit losses along with interest income on a net basis are recognised.

Financial liabilities
Financial liabilities are comprised of trade and other payables, borrowings and other short-term monetary liabilities, which are recognised at
amortised cost.

Trade payables, other payables and other short-term monetary liabilities, are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method.

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any
difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of
the borrowings using the effective interest method.

Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of
the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable
that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of
the facility to which it relates.

Share-based payments
The Group and Company issue equity-settled share-based payments to employees. Equity-settled share-based payments are measured at fair
value at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments are amortised through the
Consolidated Statement of Comprehensive Income over the vesting period of the options, together with a corresponding increase in equity,
based upon the Group and Company’s estimate of the shares that will eventually vest.

Fair value is measured using the Black-Scholes option pricing model taking into account the following inputs:

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•

the exercise price of the option;

the life of the option;

the market price on the date of the grant of the option;

the expected volatility of the share price;

the dividends expected on the shares; and

the risk free interest rate for the life of the option.

The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise
restrictions and behavioural considerations.

At the end of each reporting period, the Group and Company revise its estimates of the number of options that are expected to vest based on
the non-market conditions and recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding
adjustment to equity.

5. Critical accounting estimates and judgements and key sources of estimation uncertainty
The Company 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.

Valuation of separable intangible assets on acquisition
When valuing the intangibles acquired in a business combination, management estimate the expected future cash flows from the asset and
choose a suitable discount rate in order to calculate the present value of those cash flows. Separable intangibles valued on acquisitions made in
year were £17.4m (2020: £nil) as detailed further in note 17 and note 35.

The Property Franchise Group PLC
Annual Report and Accounts 2021

noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

5. Critical accounting estimates and judgements and key sources of estimation uncertainty continued
Impairment of intangible assets
The Group is required to test, where indicators of impairment exist or there are intangible assets with indefinite lives, whether intangible assets
have suffered any impairment. The recoverable amount is determined based on value in use calculations. The use of this method requires the
estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. Key assumptions for
the value in use calculation are described in note 17.

Share-based payment charge (“SBPC”)
The aggregate fair value expense of each grant is determined through using the Black-Scholes model and an estimate for the attainment of the
performance condition. The estimate of earnings per share (“EPS”) for FY22 was based on budget and FY23 relies on a projection of earnings
taking into account available market data and performance trends. At this juncture 100% of the options are expected to vest and the share based
payment charge has been calculated on this basis.

The vesting of the options granted in 2020 is dependent on adjusted EPS and total shareholder return for FY22, 100% of these options are
expected to vest and a share based payment of £0.13m has been calculated on this basis and recognised in the statement of comprehensive
income in the year.

The vesting of the options granted in 2021 is dependent on adjusted EPS and total shareholder return for FY23. The base adjusted EPS for the
2021 scheme is 16.84p. If adjusted EPS reaches 26.95p in 2023 then 75% vesting is achieved. If adjusted EPS reaches 27.79p then 100% vesting is
achieved. A share based payment charge of £0.33m has been calculated on the basis of 100% vesting and has been recognised in the statement
of comprehensive income in the year. At this juncture 100% of the options are expected to vest. If the assumption was changed to 75% vesting
the charge would have been £0.28m. If it were lower than 75% then the charge would be £nil.

The base share price for the 2021 scheme is 192p. If a combination of share price growth and dividends paid reaches 154p then 75% vesting is
achieved. If a combination of share price growth and dividends paid reaches 173p then 100% vesting is achieved. A share based payment charge
of £0.33m has been calculated on the basis of 100% vesting and has been recognised in the statement of comprehensive income in the year. At
this juncture 100% of the options are expected to vest. If the assumption was changed to 75% vesting the charge would have been £0.28m. If it
were lower than 75% then the charge would be £nil.

6. Segmental reporting
The directors consider there to be two operating segments in 2021 and 2020 being Property Franchising and Other.

For the year ended 31 December 2021:

Continuing

Revenue
Segment profit before tax

Discontinued

Revenue
Segment profit before tax

For the year ended 31 December 2020:

Continuing

Revenue
Segment profit before tax

Discontinued

Revenue
Segment profit before tax

Property
Franchising
£’000

23,595
6,363

Property
Franchising
£’000

–
–

Property
Franchising
£’000

11,017
4,767

Property
Franchising
£’000

–
–

Other
£’000

447
60

Other
£’000

267
153

Other
£’000

–
–

Other
£’000

448
38

Total
£’000

24,042
6,423

Total
£’000

267
153

Total
£’000

11,017
4,767

Total
£’000

448
38

The Other segment related to Financial Services in both years. There was no inter-segment revenue in any period. See note 14 for details of
discontinued operations.

noteS to tHe conSoliD ateD anD companY Financial S tatementS

The Property Franchise Group PLC
Annual Report and Accounts 2021

for the year ended 31 December 2021

7. Revenue

Property Franchising segment:
Management Service Fees
Owned offices – lettings and sales fees
Franchise sales
Other

Other segment:
Financial Services commissions

2021
£’000

14,706
4,708
589
3,592

23,595

447

24,042

All revenue is earned in the UK and no customer represents greater than 10% of total revenue in either of the years reported.

Other revenue relates to ad hoc services and ongoing support to franchisees.

See note 23 for details of accrued income and note 29 for details of deferred income.

See note 20 for the value of prepaid assisted acquisitions support amortised as a deduction from Management Service Fees.

8. Administrative expenses
Administrative expenses relate to those expenses that are not directly attributable to any specific sales activity.

Administrative expenses for the year were as follows:

Employee costs
Marketing and digital costs
Property costs
Amortisation
Exceptional costs (note 10)
Other administrative costs

2021
£’000

6,301
995
547
1,567
853
2,456

12,719

9. Employees and Directors
Average numbers of employees (including Directors), employed during the year:

Group

Company

2020
£’000

9,365
–
145
1,507

11,017

–

11,017

2020
£’000

3,370
334
130
646
–
777

5,257

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Administration
Management

Employee costs (including Directors) during the year amounted to:

2021

171
12

183

2020

2021

2020

41
10

1
2

Wages and salaries
Social security costs
Pension costs
Private medical insurance

Share-based payments charge

Group

Company

2021
£’000

6,785
1,117
194
19

8,115

970

2020
£’000

2,945
358
67
–

3,370

2021
£’000

731
263
19
–

1,013

773

–
2

2020
£’000

580
67
15
–

662

The Property Franchise Group PLC
Annual Report and Accounts 2021

noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

9. Employees and Directors continued
Key management personnel are defined as Directors and executives of the Group. Details of the remuneration of the key management
personnel are shown below:

Wages and salaries
Social security costs
Pension costs

Share-based payments charge

2021
£’000

2,218
456
97

2,771

902

2020
£’000

1,953
251
43

2,247

Details of the Directors’ emoluments are disclosed in the Directors’ remuneration report on pages 46 to 48. The share-based payments charge
for the current year has been charged to the Statement of Comprehensive Income, of this £0.77m (2020: £0.09m) relates to Directors.

10. Exceptional costs
Exceptional costs of £0.85m are included in administrative expenses for the year ended 31 December 2021 which comprised costs associated
with the acquisition of Hunters Property plc.

11.Operating profit

The operating profit is stated after charging:
Depreciation
Amortisation – intangibles
Amortisation – prepaid assisted acquisitions support
Amortisation – leases
Share-based payments charge
Auditor’s remuneration (see below)
Staff costs (note 9)
Exceptional costs (note 10)

Audit services
– Audit of the Company and consolidated accounts

12. Finance income and costs

Finance income:
Bank interest
Other similar income

Finance costs:
Bank interest
Interest expense on lease liabilities

13. Taxation

Current tax
Adjustments in respect of previous periods

Current tax total

Deferred tax credit on acquired business combinations
Deferred tax credit on share-based payments

Deferred tax total

Total tax charge in statement of comprehensive income

2021
£’000

79
1,249
233
317
970
113
8,115
853

113

2021
£’000

2
2

2021
£’000

232
88

320

2021
£’000

1,680
29

1,709

1,245
(209)

1,036

2,745

2020
£’000

28
591
213
56
68
58
3,737
–

2020
£’000

6
5

2020
£’000

–
3

2020
£’000

1,031
3

1,034

(13)
(13)

(26)

1,008

The Property Franchise Group PLC
Annual Report and Accounts 2021

noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

The tax assessed for the period is higher (2020: higher) than the standard rate of corporation tax in the UK. The difference is explained below.

Profit on ordinary activities before tax
Profit on ordinary activities multiplied by the effective standard rate of corporation tax in the UK of 19%
Effects of:
Expenses not deductible for tax purposes
Depreciation in excess of capital allowances
Effect of change in deferred tax rate
Deferred tax provision
Adjustments in respect of previous periods

Total tax charge in respect of continuing activities

2021
£’000

6,423
1,220

448
12
1,540
(504)
29

2,745

2020
£’000

4,767
906

2
13
83
–
4

1,008

14. Discontinued operations
On 22 July 2021 the Group sold its majority shareholdings in Aux Group Limited and Auxilium Partnership Limited. Auxilium was a financial
services business operating as life assurance buyers club. The Group took the decision to pursue a different approach to delivering its financial
services strategy so no longer operates a life assurance buyers club.

The profit of Aux Group Limited and Auxilium Partnership Limited for the period up to 22 July 2021, net of tax, has been included in discontinued
operations and the profit net of tax for the comparative period has been moved to discontinued operations. The difference between the
proceeds received on sale, £0.02m and the assets to be disposed of, £0.29m, resulted in an impairment loss of £0.27m, which has been
included in discontinued operations. The profit for the period to 22 July 2021, net of tax, was £0.1m.

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

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Profit for the financial year attributable to owners of the parent
Amortisation on acquired intangibles
Share-based payments charge
Exceptional costs (note 10)
Deferred tax rate change from 19% to 25%
Discontinued operations – loss on disposal
Gain on revaluation of listed investment

Adjusted profit for the financial year

Weighted average number of shares
Number used in basic earnings per share
Dilutive effect of share options on ordinary shares

Number used in diluted earnings per share

Basic earnings per share
Diluted earnings per share

Adjusted basic earnings per share
Adjusted diluted earnings per share

2021
£’000

3,469
1,214
970
853
1,540
293
(83)

8,256

2020
£’000

3,783
498
68
–
–
–
–

4,349

30,622,102
99,590

30,721,692

25,822,750
519,817

26,342,567

11.3p
11.3p

27.0p
26.9p

14.6p
14.4p

16.8p
16.5p

There were options over 1,825,500 ordinary shares outstanding at 31 December 2021; 100,000 do not have performance conditions attached to
them. The average share price during the year ended 31 December 2021 was above exercise price of the 100,000 options without performance
conditions, for this reason in 2021 there is a dilutive effect of share options on the earnings per share calculation.

In 2020 there were options over 2,379,800 ordinary shares outstanding at 31 December 2020; 300,000 had not yet vested and had
performance conditions that determined whether they would vest or not in the future; 64,800 vested in a previous year and were exercisable
at 31 December 2020, and it was determined that 503,750 of the remaining 2,015,000 options (25%) would vest. The average share price during
the year ended 31 December 2020 was above exercise price of the options that had either vested or were due to vest based on the 2020
financial statements. For these reasons in 2020 there is a dilutive effect of share options on the earnings per share calculation.

The charge relating to share-based payments that have a dilutive effect is immaterial and therefore the earnings used in the diluted earnings per
ordinary share calculation are the earning per ordinary share calculation before dilution.

The Property Franchise Group PLC
Annual Report and Accounts 2021

noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

16. Dividends

Final dividend for 2020
6.6p per share paid 23 February 2021 (2020: No final dividend paid)
Interim dividend for 2021
3.8p per share paid 11 October 2021 (2020: 2.1p per share paid 23 September 2020)

Total dividend paid

2021
£’000

1,704

1,218

2,922

2020
£’000

–

542

The Directors propose a final dividend for 2021 of 7.8p per share totalling £2.488m, which they expect will be paid on 27 May 2022.
As this is subject to approval by the shareholders no provision has been made for this in these financial statements.

17. Intangible assets

Cost
Brought forward 1 January 2020
Additions

Carried forward 31 December 2020
Acquisitions (note 35)
Additions
Disposals

Carried forward 31 December 2021

Amortisation & Impairment
Brought forward at 1 January 2020
Charge for year

Carried forward 31 December 2020
Charge for year

Carried forward 31 December 2021

Net book value
At 31 December 2021

At 31 December 2020

Master
Franchise
Agreement
£’000

7,803
–

7,803
10,789
–
–

18,592

2,152
413

2,565
798

3,363

15,229

5,238

Brands
£’000

Technology
£’000

Customer lists
£’000

Goodwill
£’000

Total
£’000

1,972
–

1,972
3,060
–
–

5,032

222
67

289
181

470

4,562

1,683

338
–

338
14
51
–

403

238
76

314
30

344

225
–

225
3,556
65
–

3,846

166
35

201
240

441

7,226
185

7,411
16,017
–
(185)

23,243

–
–

–

17,564
185

17,749
33,436
116
(185)

51,116

2,778
591

3,369
1,249

4,618

3,405

23,243

7,411

46,498

14,380

The carrying amount of goodwill relates to 6 (2020: 5) cash generating units and reflects the difference between the fair value of consideration
transferred and the fair value of assets and liabilities purchased.

Business combinations completed in October 2014 – Xperience & Whitegates
Goodwill is assessed for impairment by comparing the carrying value to the value in use calculations. The value in use of the goodwill arising on
the acquisitions of Xperience Franchising Limited (“XFL”) and Whitegates Estate Agency Limited (“WEAL”) is based on the cash flows derived from
the actual revenues and operating margins for 2021 and projections through to 31 December 2022. Thereafter projected revenue growth was
assumed to decline linearly to a long-term growth rate of 2.2%.

The cash flows arising were discounted by the weighted average cost of capital which included a small companies’ risk premium to allow for
factors such as illiquidity in the shares. These discount rates were 13.5% for XFL and 15.0% for WEAL, the latter higher rate reflecting WEAL’s
smaller size and more volatile earnings. This resulted in a total value for each company of the identifiable intangible assets that exceeded the
carrying values of the respective companies’ goodwill.

The Directors do not consider goodwill to be impaired. The Directors believe that no reasonably possible change in assumptions at the year
end will cause the value in use to fall below the carrying value and hence impair the goodwill.

The master franchise agreements are being amortised over 25 years. The period of amortisation remaining at 31 December 2021 was 17 years
10 months.

The brand names under which XFL trades of C J Hole, Parkers and Ellis & Co have been in existence for between 72 years and 170 years.
Management see them as strong brands with significant future value and has deemed them to have indefinite useful lives as there is no
foreseeable limit to the period over which the assets are expected to generate net cash inflows for the Group. As a consequence, management
annually assess whether the carrying value of these brands have been impaired.

The Relief-from-Royalty-Method was used to value the brand names. Looking at independent research of royalty rates, management selected
pre-tax royalty rates of between 3% and 5% for the above brand names.

The Property Franchise Group PLC
Annual Report and Accounts 2021

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for the year ended 31 December 2021

17. Intangible assets continued
The after tax royalty rates were then applied to the projected cash flows of each brand. The projected cash flows being the forecast growth in
current revenues using market data through to 31 December 2022. Thereafter projected revenue growth was assumed to decline linearly to a
long-term growth rate of 2.2%. The after tax cash flows determined through this process were then discounted at 13.5% to determine a value
for each brand name. This discount rate approximated the Company’s WACC as the risk profile of the brand names was seen as commensurate
with that of the overall Company. The values derived exceeded their carrying values.

The Directors believe that no reasonably possible change in assumptions at the year end will cause the value in use of the brands names CJ
Hole, Parkers and Ellis & Co to fall below their carrying values and hence impair their intangible values.

The Whitegates brand was valued in a similar manner and deemed to have an immaterial value when the acquisition was made principally due
to its lack of profitability over preceding years. It is therefore not recognised separately.

Business combination completed in September 2016 – EweMove
Goodwill is assessed for impairment by comparing the carrying value to the value in use calculations. The value in use of the goodwill arising on
the acquisition of EweMove Sales & Lettings Ltd (“ESL”) is based on the cash flows derived from the actual revenues and operating margins for
2021 and projections through to 31 December 2025. Thereafter projected revenue growth was assumed to be 2.2% per annum.

A period of projected cash flows exceeding 5 years was deemed appropriate because the business has only been operating for 7 years, is
continuing to recruit relatively high levels of new franchisees, each new franchisee should grow significantly in the first 5 years of operation and
it has yet to develop the operational efficiencies of a mature franchisor.

The revenue growth rates used in the valuation range from 32% in FY22 to 4% in FY25.The growth rate in FY22 is high because of the significant
number of new franchisees recruited in FY21.

The cash flows arising were discounted by the weighted average cost of capital being 13.72% which included a small companies’ risk premium
to allow for factors such as illiquidity in the shares. This resulted in the value in use exceeding the carrying value of the goodwill and separately
identifiable intangible assets. The enterprise’s overall value exceeds the cash generating unit’s carrying value.

The useful life of the master franchise agreement was assessed as 15 years and remains unchanged. The period of amortisation remaining at 31
December 2021 was 9 years 8 months.

The remaining useful life of the brand name was also reviewed. It continues to attract and recruit the same level of franchisees as in previous
years and to attract higher numbers of customers. Given these 2 factors the remaining useful life of the brand was considered to be unaltered at
21 years. The period of amortisation remaining at 31 December 2021 was 15 years and 8 months.

The carrying value of EweMove the identified cash generating unit, was £9.1m at 31 December 2021 whereas the recoverable amount was
assessed to be £16.9m at the same date. Headroom of £7.8m therefore existed at the year end.

The following table reflects the level of movements required in revenue or costs which could result in a potential impairment per the value in
use calculation of goodwill. A further percentage (fall)/increase, of the magnitude indicated in the table below, in any one of the key assumptions
set out above would result in a removal of the headroom in the value in use calculation for goodwill in 2021. Thus, if the discount rate increased
by 82% to 25%, an impairment change would result against goodwill, all other assumptions remaining unchanged.

Assumption

Judgement

Discount rate
Revenue – FY22 to FY25
Direct costs – all years
Indirect costs – all years
Direct and indirect costs – all years

As indicated above the rate used is 13.72%
The range of growth rates for FY22 to FY25 are stated above
Assumed to be 21% of revenue for all years
Assumed to be 38% of revenue in FY22 but 40% previous average in FY23 onwards
As indicated above for direct and indirect costs

Sensitivity

82%
(133%)
88%
47%
31%

Business combination completed in January 2020 – Auxilium
Auxilium Partnership Limited was acquired in January 2020 and disposed of in July 2021.

Business combination completed in March 2021 – Hunters
Details of the Acquisition of Hunters Property plc can be found in note 35.

The value of the master franchise agreement was based on the value of the cash flows derived from the actual revenue and operating margins
for 2021, projections of revenue through to 2042 applying historic attrition rates of 4% and growth rate of 2%. The revenue streams represent the
return from all the assets employed in generating those revenues. Thus, to value the franchise rights separately, the fair value and expected rate
of return of these other assets, known as the contributory asset charge, was determined and deducted.

A discount rate of 9.5% was applied which represented a 2% reduction on the company’s WACC as the risk profile of the master franchise rights
was seen as slightly less than that of the overall company. The resulting present value was not increased by the tax adjusted benefit as the
amortisation of master franchise rights are not deductible for UK corporation tax. The master franchise rights are being amortised over 21 years.
The period of amortisation remaining at 31 December 2021 was 20 years 3 months.

The Property Franchise Group PLC
Annual Report and Accounts 2021

noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

17. Intangible assets continued
Business combination completed in March 2021 – Hunters continued
Hunters was founded in 1992 and in the following 30 years has established a widely recognised brand within the estate agency sector, which
attracts a significant number of franchise enquiries and has a significant fixed element to its royalties. Management expects to derive income
from the brand for the next 20 years and, with this as the assets’ useful life, the period of amortisation remaining at 31 December 2021 was
19 years 3 months.

The Relief-from-Royalty-Method was used to value the brand name. Looking at independent research of royalty rates and taking into account
the factors highlighted in the last paragraph, management selected a pre-tax royalty rate of 5%.

The after tax royalty rate was then applied to the projected cash flows of the brand up until December 2042. The projected cash flows being
the forecast growth in revenues of 2% through to 2042. The after tax cash flows determined through this process were then discounted at 11.5%.
This discount rate approximated the company’s WACC as the risk profile of the brand names was seen as commensurate with that of the
overall company.

The value of the lettings books was based on the value of the cash flows derived from the actual revenue and operating margins for 2021,
projections of revenue through to 2033 applying historic attrition rates of 4% and growth rate of 2%. The revenue streams represent the return
from all the assets employed in generating those revenues. Thus, to value the lettings books separately, the fair value and expected rate of return
of these other assets, known as the contributory asset charge, was determined and deducted.

A discount rate of 9.5% was applied which represented a 2% discount over the company’s WACC as the risk profile of the lettings books was seen
as slightly less than that of the overall company. The resulting present value was not increased by the tax adjusted benefit as the amortisation
of lettings books are not deductible for UK corporation tax. The lettings books are being amortised over 12 years. The period of amortisation
remaining at 31 December 2021 was 11 years 3 months.

Goodwill is assessed for impairment by comparing the carrying value to the value in use calculations. The value in use of the goodwill arising on
the acquisitions of Hunters is based on the cash flows derived from the actual revenues and operating margins for 2021 and projected revenue
growth of 2% assumed through 2042.

The cash flows arising were discounted by between 9.5% and 11.5% based on the weighted average cost of capital for Hunters. This resulted in a
total value for the company of the identifiable intangible assets that exceeded the carrying values of the company’s goodwill.

The Directors do not consider goodwill to be impaired. The Directors believe that no reasonably possible change in assumptions at the year end
will cause the value in use to fall below the carrying value and hence impair the goodwill.

The useful life of the master franchise agreement was assessed as 21 years and remains unchanged. The period of amortisation remaining at 31
December 2021 was 20 years 3 months.

The Relief-from-Royalty-Method was used to value the brand names. Looking at independent research of royalty rates, management selected a
pre-tax royalty rate of 5% for the Hunters brand.

The Directors believe that no reasonably possible change in assumptions at the year end will cause the value in use of the Hunters brand to fall
below its carrying value and hence impair its intangible values.

The useful life of the lettings books was assessed as 12 years and remains unchanged. The period of amortisation remaining at 31 December
2021 was 11 years 3 months.

The Directors believe that no reasonably possible change in assumptions at the year end will cause the value in use to fall below the carrying
value and hence impair this intangible.

The following table reflects the level of movements required in revenue or costs which could result in a potential impairment per the value in
use calculation of goodwill. A further percentage (fall)/increase, of the magnitude indicated in the table below, in any one of the key assumptions
set out above would result in a removal of the headroom in the value in use calculation for goodwill in 2021. Thus, if the discount rate increased
by 12% to 12.9%%, an impairment change would result against goodwill, all other assumptions remaining unchanged.

Assumption

Judgement

Discount rate
Revenue – FY22 to FY25
Indirect costs – all years

Weighted average cost of capital used of 11.5%
The range of growth rates for FY22 (10%), FY23 to FY25 2%
Assumed to be 66% of revenue

Sensitivity

12%
(196%)
7%

Business combination completed in September 2021 – The Mortgage Genie
Details of the Acquisition of The Mortgage Genie Limited and The Genie Group UK Ltd can be found in note 35.

Goodwill and indefinite life intangible assets have been allocated for impairment testing purposes to the following cash generating units.

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The Property Franchise Group PLC
Annual Report and Accounts 2021

for the year ended 31 December 2021

The carrying values are as follows:

Xperience Franchising Limited
Whitegates Estate Agency Limited
Martin & Co (UK) Limited
EweMove Sales & Lettings Ltd
Hunters Property Limited
The Mortgage Genie Limited & The Genie Group UK Ltd
Auxilium Partnership Limited

Goodwill

Brands

2021
£’000

912
401
75
5,838
15,871
146
–

23,243

2020
£’000

912
401
75
5,838
–
–
185

7,411

2021
£’000

571
–
–
–
–
–
–

571

Website costs included in technology
In 2017 new websites were launched for each of the 5 traditional brands. The costs associated with these websites have been capitalised
as intangible assets as the purpose of the websites is to generate leads and revenue for the network.

Company
No goodwill or customer lists exist in the Parent Company.

18. Property, plant and equipment
Group

Cost
Brought forward 1 January 2020
Acquisitions
Additions

Carried forward 31 December 2020

Acquisitions (note 35)
Additions
Disposals

Carried forward 31 December 2021

Depreciation
Brought forward 1 January 2020
Charge for year

Carried forward 31 December 2020

Charge for year
Depreciation on disposals

Carried forward 31 December 2021

Net book value
At 31 December 2021

At 31 December 2020

Short leasehold
improvements
£’000

Office
equipment
£’000

Fixtures &
fittings
£’000

37
–
–

–
7
–

29
4

6
–

138
2
15

155

62
64
(14)

267

92
20

112

48
(6)

154

113

162
1
–

163

99
16
(116)

162

138
4

142

25
(104)

2020
£’000

571
–
–
–
–
–
–

571

Total
£’000

337
3
15

355

161
87
(130)

473

259
28

287

79
(110)

256

217

The Property Franchise Group PLC
Annual Report and Accounts 2021

noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

19. Leases
The Group’s has several operating leases relating to office premises and motor vehicles. Under IFRS16, which was adopted on 1 January 2019
these operating leases are accounted for by recognising a right-of-use asset and a lease liability.

Right-of-use assets

At 1 January 2020
Additions
Amortisation

Carried forward 31 December 2020

Acquisitions (note 35)
Additions
Amortisation

Carried forward 31 December 2021

Lease liabilities

At 1 January 2020
Additions
Interest expenses
Lease payments

Carried forward 31 December 2020

Acquisitions (note 35)
Additions
Interest expenses
Lease payments

Carried forward 31 December 2021

20. Prepaid assisted acquisitions support
Group

Cost
Brought forward 1 January 2020
Additions

Carried forward 31 December 2020
Additions

Carried forward 31 December 2021

Amortisation
Brought forward 1 January 2020
Charge for year – to revenue
Charge for year – to cost of sales

Carried forward 31 December 2020
Charge for year – to revenue
Charge for year – to cost of sales

Carried forward 31 December 2021

Net book value
At 31 December 2021

At 31 December 2020

Land and Buildings
£’000

Motor vehicles
£’000

75
67
(56)

1,579
145
(304)

1,506

–
–
–

–

22
53
(13)

Land and Buildings
£’000

Motor vehicles
£’000

77
67
3
(61)

2,833
145
86
(457)

2,693

–
–
–
–

–

22
53
2
(30)

Total
£’000

75
67
(56)

1,601
198
(317)

1,568

Total
£’000

77
67
3
(61)

2,855
198
88
(487)

2,740

Total
£’000

954
155

1,109
57

1,166

296
169
44

509
188
45

742

424

600

Cashback and broker’s commission is presented as prepaid assisted acquisitions support
The additions represent sums provided to franchisees that have made qualifying acquisitions to grow their lettings’ portfolios. The cashback sum
provided is based on a calculation of the estimated increase in MSF as a result of the acquisition and the sum provided for broker’s commission
is based on the charge payable to the broker. In providing these sums the Group ensures that franchisees are contractually bound to the relevant
franchisor for a period in excess of that required for the economic benefits to exceed the sums provided.

Company
No prepaid assisted acquisitions support exists in the Parent Company.

noteS to tHe conSoliD ateD anD companY Financial S tatementS

The Property Franchise Group PLC
Annual Report and Accounts 2021

for the year ended 31 December 2021

21. Investments
Group

Cost
At 1 January 2020 and 1 January 2021
Acquisitions (note 35)
Additions
Movement in fair value of listed investment

At 31 December 2021

Net book value
At 31 December 2021

At 31 December 2020

Company

Shares in listed and
unlisted companies
£’000

–
61
25
83

169

–

Shares in Group
undertakings
£’000

Shares in listed
company
£’000

Cost
At 1 January 2020
Acquisition of Auxilium Partnership Limited
Capital contribution to subsidiaries – share options

At 31 December 2020

Disposal of Auxilium Partnership Limited
Acquisition of Hunters Property plc
Acquisition of The Mortgage Genie Limited and The Genie Group UK Ltd
Capital contribution to subsidiaries – share options
Movement in fair value of listed investment

At 31 December 2021

Net book value
At 31 December 2021

At 31 December 2020

33,900
200
(17)

34,083

(200)
26,134
461
197
–

60,675

34,083

–
–
–

–

–
–
–
–
68

–

Total
£’000

–
61
25
83

169

–

Total
£’000

33,900
200
(17)

34,083

(200)
26,134
461
197
68

60,743

34,083

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The Property Franchise Group PLC was incorporated on 7 October 2013. On the 10 December 2013 a share for share exchange acquisition took
place with Martin & Co (UK) Limited; 17,990,000 ordinary shares in The Property Franchise Group PLC were exchanged for 100% of the issued
share capital in Martin & Co (UK) Limited.

On 31 October 2014 the Company acquired the entire issued share capital of Xperience Franchising Limited and Whitegates Estate Agency
Limited for a consideration of £6,110,284.

On 5 September 2016 the Company acquired the entire issued share capital of EweMove Sales & Lettings Ltd, and its dormant subsidiary
Ewesheep Ltd, for an initial consideration of £8m. Of the total consideration, £2.1m represented contingent consideration, of which £0.5m
was paid out on 30 July 2017 and £0.5m was paid out on 31 December 2017. No further sums are due.

On 7 January 2020 the Company acquired a majority share of Auxilium Partnership Limited for a total cash consideration of £0.2m.
The Company disposed of this on 22 July 2021.

On 19 March 2021 the Company acquired the entire issued share capital of Hunters Property plc for a total consideration of £26.1m.

On 6 September 2021 the Company acquired the entire issued share capital of The Genie Group UK Ltd and 80% of the issued share capital of
The Mortgage Genie Limited for an initial cash consideration of £0.4m. A further consideration of £0.06m is due which was based on working
capital at the time of acquisition.

The carrying value of the investment in EweMove has been considered for impairment through value in use calculations and it was determined
that no impairment was required in the year ended 31 December 2021.

The carrying value of the investment in Hunters Property Limited has been considered for impairment through value in use calculations and
it was determined that no impairment was required in the year ended 31 December 2021.

The carrying values of the other investments (all companies except for EweMove and Hunters) have been considered for impairment and
it has been determined that the value of the discounted future cash inflows exceeds the carrying value. Thus, there is no impairment charge.

The Property Franchise Group PLC
Annual Report and Accounts 2021

noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

21. Investments continued
The listed investments comprise shareholdings in OnTheMarket plc, a company listed on the Alternative Investment Market. The movement in
fair value of listed investment represents the difference between original cost and market value. A decision was taken to measure at fair value
going forwards.

The Company’s investments at the balance sheet date in the share capital of companies include the following, which all have their registered
offices at the same address as the Company:

Subsidiaries

Martin & Co (UK) Limited
Xperience Franchising Limited
Whitegates Estate Agency Limited
EweMove Sales & Lettings Ltd
Ewesheep Ltd*
MartinCo Limited
Hunters Property Limited
Hunters Property Group Limited*
Greenrose Network (Franchise) Limited*
Hunters Franchising Limited*
Hunters (Midlands) Limited*
Hunters Financial Services Limited*
Hapollo Limited*
RealCube Limited*
Hunters Group Limited*
Hunters Land & New Homes Limited*
Maddison James Limited*
Herriot Cottages Limited*
Hunters Partners Limited*
Hunters Survey & Valuation Limited*
RealCube Technology Limited*
The Genie Group UK Ltd
The Mortgage Genie Limited

indirectly owned

Company number

Share class

% ownership and voting rights Country of incorporation

02999803
02334260
00757788
07191403
08191713
09724369
09448465
03947557
02934219
05537909
02587709
02604278
08008359
07736494
02965842
06292723
05920686
04452874
03777494
02602087
08139888
12372201
09803176

Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary

100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
80

England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England

All companies in the Subsidiaries list above are exempt from the requirements of the Companies Act 2006 relating to the audit of accounts
under section 479A of the Companies Act 2006.

At the year-end The Property Franchise Group plc has guaranteed all liabilities of all companies in the Subsidiaries list above. The value of the
contingent liability resulting from this guarantee is unknown at the year-end.

22. Investment properties
Group

Cost
Brought forward 1 January 2020 and 1 January 2021
Acquisitions

Carried forward 31 December 2021

Depreciation
Brought forward 1 January 2020 and 1 January 2021
Charge for year

Carried forward 31 December 2021

Net book value
At 31 December 2021

At 31 December 2020

Total
£’000

–
292

292

–
36

256

–

Investment property comprises a property held under operating lease within Hunters Property Group Limited which is subleased to an independent
third party. The investment property is held at historic cost less accumulated depreciation.

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The Property Franchise Group PLC
Annual Report and Accounts 2021

for the year ended 31 December 2021

23. Trade and other receivables

Trade receivables
Less: provision for impairment of trade receivables

Trade receivables – net of impairment provisions
Loans to franchisees
Other receivables
Amounts due from Group undertakings
Prepayments and accrued income
Tax receivable

Group

Company

2021
£’000

1,193
(323)

870
31
137
–
1,782
–

2,820

2020
£’000

212
(155)

57
49
4
–
1,181
–

1,291

2021
£’000

–
–

–
–
–
21
47
743

811

2020
£’000

3
–

3
–
–
45
36
137

221

The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade
receivables. To measure expected credit losses on a collective basis, trade receivables are grouped based on similar credit risk and aging. The
expected loss rates are based on the Group’s historical credit losses experienced over the previous year. Forward looking factors are considered
to the extent that they are deemed material.

The Group is entitled to the revenue by virtue of the terms in the franchise agreements and can force the sale of a franchise to recover a debt
if necessary.

Ageing of trade receivables
The following is an analysis of trade receivables that are past due date but not impaired. These relate to a number of customers for whom there
is no recent history of defaults. The ageing analysis of these trade receivables is as follows:

Group
Not more than 3 months
More than 3 months but not more than 6 months
More than 6 months but not more than 1 year

2021
£’000

137
7
13

157

2020
£’000

32
–
–

The Directors consider that the carrying value of trade and other receivables represents their fair value.

The Group does not hold any collateral as security for its trade and other receivables.

Included within “Prepayments and accrued income” is accrued income of £1.11m (2020: £0.84m) in relation to Management Service Fees
for some of our brands that are invoiced at the beginning of the month following the month to which they relate and EweMove license fees.
Hunters invoices to franchisees are dated the same month to which they relate therefore their December month balance is included in trade
receivables rather than accrued income at the year end.

24. Called up share capital

Group
Authorised, allotted issued and fully paid ordinary shares of 1p each

Company
Authorised, allotted issued and fully paid ordinary shares of 1p each

2021

2020

Number

£’000

Number

£’000

32,041,966

320

25,822,750

32,041,966

320

25,822,750

258

On 19 March 2021 5,551,916 shares were issued to the owners of Hunters Property plc at market price of £2.09 as part of the purchase
consideration relating to the acquisition. The premium on the shares issued is included in the merger reserve rather than share premium in line
with accounting principles.

On 19 May 2021 667,300 shares were issued to certain employees and directors following the exercise of share options. 602,500 shares were
issued at £0.01 and 64,800 shares were issued at £1.385. The premium on the 64,800 shares is included in share premium.

The Property Franchise Group PLC
Annual Report and Accounts 2021

noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

25. Share premium

At 31 December 2021

At 31 December 2020

Details of the movements in shares can be found in note 23.

26. Merger reserve

Group
At 1 January 2020 and 1 January 2021
Acquisition of Hunters Property plc

At 31 December 2021

Company
At 1 January 2020 and 1 January 2021
Acquisition of Hunters Property plc

At 31 December 2021

Number of shares

32,041,966

25,822,750

Share capital
£’000

Share premium
£’000

320

258

4,129

4,040

Merger reserve
£’000

2,797
11,548

14,345

20,787
11,548

32,335

Merger reserve
Acquisition of Martin & Co (UK) Limited
The acquisition of Martin & Co (UK) Limited by The Property Franchise Group PLC did not meet the definition of a business combination and therefore,
falls outside of the scope of IFRS 3. This transaction was in 2013 and accounted for in accordance with the principles of merger accounting.

The consideration paid to the shareholders of the subsidiary was £17.99m (the value of the investment). As these shares had a nominal value
of £179,900, the merger reserve in the Company is £17.81m.

On consolidation the investment value of £17.99m is eliminated so that the nominal value of the shares remaining is £0.1799m and, as there is
a difference between the Company value of the investment and the nominal value of the shares purchased in the subsidiary of £100, this is also
eliminated, to generate a merger reserve in the Group of £0.1798m.

Acquisition of EweMove Sales & Lettings Ltd
The consideration for the acquisition of EweMove Sales & Lettings Ltd included the issue of 2,321,550 shares to the vendors at market price.
A merger reserve of £2.797m is recognised in the Group and the Company being the difference between the value of the consideration and
the nominal value of the shares issued as consideration.

Acquisition of Hunters Property plc
The consideration for the acquisition of Hunters Property plc included the issue of 5,551,916 shares to the vendors at market price. A merger
reserve of £11.548m is recognised in the Group and the Company being the difference between the value of the consideration and the nominal
value of the shares issued as consideration.

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The Property Franchise Group PLC
Annual Report and Accounts 2021

for the year ended 31 December 2021

27. Own share reserve and Other reserves

Own share reserve
Weighted average cost of own shares held in the Employee Benefit Trust.

Other reserves

Group
At 1 January 2020
Share-based payment charge

At 1 January 2021
Share-based payment charge
Release of reserve – share options exercised
Deferred tax on share-based payments

At 31 December 2021

Company
At 1 January 2020
Share-based payment charge

At 1 January 2021
Share-based payment charge
Release of reserve – share options exercised
Deferred tax on share-based payments

At 31 December 2021

Share-based
payment reserve
£’000

Other reserve
£’000

629
68

697
970
(762)
–

905

629
68

697
970
(762)
–

905

81
–

81
–
–
(81)

–

81
–

81
–
–
(81)

–

Share-based payment reserve
The share-based payments reserve comprises charges made to the income statement in respect of share-based payments.

28. Borrowings

Repayable within 1 year:
Bank loan (term loan)
Repayable in more than 1 year:
Bank loan (term loan)
Bank loans due after more than 1 year are repayable as follows:
Between 1 and 2 years
Between 2 and 5 years

Group

Company

2021
£’000

1,875

9,219

1,875
7,344

2020
£’000

–

–
–

2021
£’000

1,875

9,219

1,875
7,344

Total
£’000

710
68

778
970
(762)
(81)

905

710
68

778
970
(762)
(81)

905

2020
£’000

–

–
–

On 30 March 2021 the Company drew down a £12.5m loan facility provided by Barclays to partially fund the purchase consideration for the
acquisition of Hunters Property plc. This loan facility comprises:

Term loan – £7.5m drawn down on 30 March 2021 and is repayable over 4 years in equal instalments. Interest was charged quarterly on the
outstanding amount and the rate is 2.4% above Bank of England base rate. The amount outstanding at 31 December 2021 was £6.1m (2020: £nil).

Revolving credit facility (“RCF”) – £5m drawn down on 30 March 2021 and is repayable on 26 January 2024 being the third anniversary of the
date of facility agreement. Interest is charged quarterly on the outstanding amount, the rate is variable during the term at 2.2% above Bank of
England base rate. The amount outstanding at 31 December 2021 was £5m (2020: £nil).

The loans are secured with a fixed and floating charge over the Group’s assets and a cross guarantee across all companies in the Group.

The cash outflow for borrowings arising from financing activities during the year was £4.4m (2020: £nil), this included the repayment of £3.0m
in relation to a Hunters loan balance at acquisition.

As at 31 December 2020 the Company had no loans outstanding.

The Property Franchise Group PLC
Annual Report and Accounts 2021

noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

29. Trade and other payables

Trade payables
Other taxes and social security
Other payables
Amounts due to Group undertakings
Accruals and deferred income

Group

Company

2021
£’000

850
1,387
159
–
3,884

6,280

2020
£’000

176
1,274
248
–
1,052

2,750

2021
£’000

39
134
–
102
1,188

1,463

2020
£’000

37
–
–
–
110

147

The Directors consider that the carrying value of trade and other payables approximates their fair value.

Included in “Accruals and deferred income” is deferred income of £0.7m (2020: £nil) in relation to revenue received in advance which will be
recognised over the next 4 years.

30. Deferred tax

Balance at beginning of year
Movement during the year:
Acquisitions
Adjustment to deferred tax rate from 19% to 25%
Statement of changes in equity
Statement of comprehensive income
Release of deferred tax balance relating to share options exercised in year
Other

Balance at end of year

Deferred taxation has been provided as follows:

Accelerated capital allowances
Share-based payments
Acquired business combinations

Group

Company

2021
£’000

(1,115)

(3,419)
(1,540)
–
657
(153)
–

(5,570)

2020
£’000

(1,140)

–
–
–
25

–

(1,115)

2021
£’000

228

–
15
–
287
(153)
–

377

Group

Company

2021
£’000

6
409
(5,985)

(5,570)

2020
£’000

7
199
(1,321)

(1,115)

2021
£’000

10
367
–

377

2020
£’000

215

–
–
–
13
–
–

228

2020
£’000

29
199
–

228

31. Provisions
The provisions relate to dilapidations on office buildings £0.21m (2020: £nil) in relation to Hunters.

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The Property Franchise Group PLC
Annual Report and Accounts 2021

32. Financial instruments
Financial instruments – risk management
The Group is exposed through its operations to the following financial risks:

• Credit risk

•

Liquidity risk

Interest rate 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.

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 and Company, from which financial instrument risk arises, are as follows:

• Receivables

•

Loans to franchisees

• Cash at bank

• Trade and other payables

• Borrowings

Financial assets
Financial assets measured at amortised cost:

Loans and receivables:
Trade receivables
Loans to franchisees
Other receivables
Cash and cash equivalents
Accrued income
Amount owed by Group undertakings

Financial liabilities
Financial liabilities measured at amortised cost:

Other financial liabilities:
Trade payables
Other payables
Accruals
Amounts owed to Group undertakings

Group

Company

2021
£’000

870
31
137
8,413
1,107
–

10,558

2020
£’000

57
49
5
8,771
840
–

9,722

2021
£’000

–
–
–
4,635
–
21

4,656

Group

Company

2021
£’000

850
159
3,172
–

4,181

2020
£’000

176
248
1,052
–

1,476

2021
£’000

39
134
526
102

801

2020
£’000

3
–
–
4,601
–
45

4,649

2020
£’000

37
–
110
–

147

All of the financial assets and liabilities above are recorded in the statement of financial position at amortised cost.

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 finance function. The Board receives monthly reports from the finance function 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:

The Property Franchise Group PLC
Annual Report and Accounts 2021

noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

32. Financial instruments continued
Capital management policy
The Board considers capital to be the carrying amount of equity and debt. Its capital objective is to maintain a strong and efficient capital base
to support the Group’s strategic objectives, provide progressive returns for shareholders and safeguard the Group’s status as a going concern.
The principal financial risks faced by the Group are liquidity risk and interest rate risk. The Directors review and agree policies for managing each
of these risks. These policies remain unchanged from previous years.

The Board monitors a broad range of financial metrics including growth in MSF, operating margin, EBITDA, return on capital employed, and
balance sheet gearing.

It manages the capital structure and makes changes in light of changes in economic conditions. In order to maintain or adjust the capital
structure, it may adjust the amount of dividends paid to shareholders.

Credit risk
Credit risk is the risk of financial loss to the Group if a franchisee or counterparty 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 and to obtain credit information during the franchise
agreement to highlight potential credit risks.

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 franchisees are analysed for creditworthiness before a loan is offered. The Group’s review includes external ratings, when available,
and in some cases bank references. The Group does not consider that it currently has significant concentration of credit risk with loans extended
to franchisees of £31k.

The Group does not offer credit terms with regards sales and lettings transactions occurring in the offices it operates itself, revenue is typically
recognised at the completion date of property or upon receipt of rent from tenants.

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 development, the Group monitors
forecast cash inflows and outflows on a monthly basis.

The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities, including future
interest charges, which may differ from the carrying value of the liabilities as at the reporting date:

As at 31 December 2021

Trade and other payables
Loans and borrowings
Lease liabilities

Total

Up to

Between 3

3 months
£’000

and 12 months
£’000

Between 1
and 2 years
£’000

Between 2
and 5 years
£’000

1,009
469
151

1,629

–
1,406
420

1,826

–
1,875
524

2,399

–
7,344
971

8,315

Over

5 years
£’000

–
–
1,144

1,144

Interest rate risk
The Group’s exposure to changes in interest rate risk relates primarily to interest earning financial assets and interest bearing financial liabilities.
Interest rate risk is managed by the Group on an ongoing basis with the primary objective of limiting the effect of an adverse movement in
interest rates. The Group has bank borrowings with a variable interest rate linked to the Bank of England base rate (see note 28). The recent rate
increases are in line with expectations and the Group has factored in further changes to its forecasts.

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

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Annual Report and Accounts 2021

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for the year ended 31 December 2021

33. Share-based payments
Enterprise Management Incentive (“EMI”) Share Option Scheme 2021
On 24 April 2021 a new EMI Share Option Scheme 2021 was introduced, all options under this scheme have an exercise price of £0.01.

This option has a vesting condition based on two performance conditions; adjusted basic earnings per share adjusted for exceptional income/
costs, amortisation arising on consolidation and share-based payment charges ("adjusted EPS") and total shareholder return ("TSR") over the
3 years to 31 December 2023. Each performance condition will apply to 50% of the award being made.

In respect of both performance conditions, growth of 60% in adjusted EPS and 80% in TSR over the three-year period will be required for
threshold vesting of the awards, with growth of 65% or higher in adjusted EPS and 90% or higher in TSR required for all of the awards to vest.
At threshold vesting, 75% of the shares subject to each performance condition, will vest.

Grant – 24 April 2021
On 24 April 2021 an option over 700,000 ordinary shares was granted to the Chief Executive Officer and an option over 400,000 ordinary shares
was granted to the Chief Financial Officer under this scheme.

The following principal assumptions were used in the valuation of the grant made in the year ended 31 December 2021 using the Black-Scholes
option pricing model:

Assumptions

Date of vesting
Share price at grant
Exercise price
Risk free rate
Dividend yield
Expected life
Share price volatility

30/04/2024
£2.15
£0.01
0.1%
4.90%
3 years
31.00%

The weighted average contractual life remaining of this option is 2 year and 4 months.

Expected volatility is a measure of the amount by which a share price is expected to fluctuate during a period. The assumptions used in valuing
each grant are based on the daily historical volatility of the share price over a period commensurate with the expected term assumption.

The risk free rate of return is the implied yield at the date of grant for a zero coupon UK government bond with a remaining term equal to the
expected term of the options.

It’s expected that with an exercise price of £0.01, should the EPS condition be met, the holder will exercise as soon as the option vests. The
Group announces its results usually within the first 10 days of April. So, it has been assumed that the options will be exercised on 30 April 2024.

EPS is measured as the basic earnings per share excluding any exceptional income/costs and any share-based payments charges.

Management has used the budget for FY22, the market outlook and projections for FY23 to determine, at 31 December 2021, the achievement
of the EPS condition. The expectation is that 100% of the options will vest.

The estimated fair value of the option over 1,100,000 ordinary shares at 31 December 2021 was £2,035,015. This fair value, moderated for the
extent to which the option is expected to vest, is spread as a charge between grant and the assumed vesting date. Accordingly, a share-based
payments charge of £459,221 has been recognised in the Statement of Comprehensive Income in the year ended 31 December 2021.

Grant – 2 July 2021
On 2 July 2021 options over 425,500 ordinary shares were granted to a director and senior management under this scheme.

Assumptions

Date of vesting
Share price at grant
Exercise price
Risk free rate
Dividend yield
Expected life
Share price volatility

30/04/2024
£2.99
£0.01
0.1%
4.90%
2.83 years
31.00%

The weighted average contractual life remaining of this option is 2 years and 4 months.

The Property Franchise Group PLC
Annual Report and Accounts 2021

noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

33. Share-based payments continued
The risk free rate of return is the implied yield at the date of grant for a zero coupon UK government bond with a remaining term equal to the
expected term of the options.

EPS is measured as the basic earnings per share excluding any exceptional income/costs and any share-based payments charges.

The estimated fair value of the option over 425,500 ordinary shares at 31 December 2021 was £1,141,535. This fair value, moderated for the
extent to which the option is expected to vest, is spread as a charge between grant and the assumed vesting date. Accordingly, a share-based
payments charge of £201,122 has been recognised in the Statement of Comprehensive Income in the year ended 31 December 2021.

Enterprise Management Incentive (“EMI”) Share Option Scheme – CEO bonus deferral
On 24 March 2021 the Chief Executive Officer was granted an option over 100,000 ordinary shares. The award of the nil cost option was in
substitution for two thirds of the total £150,000 performance-based cash bonus payable to the Chief Executive Officer for the financial year to
31 December 2020, with a 100% uplift based on a 30-day VWAP applied to the deferred element, and will become exercisable two years’ after
being granted subject to continued employment, vesting criteria and malus conditions. Under the award, the Chief Executive Officer is not be
able to dispose of any of the acquired shares for a further period of two years (save as required to pay tax due on exercise).

The following principal assumptions were used in the valuation of the grant made in the year ended 31 December 2021 using the Black-Scholes
option pricing model:

Assumptions

Date of vesting
Share price at grant
Exercise price
Risk free rate
Dividend yield
Expected life
Share price volatility

23/03/2023
£2.34
£0.01
0.1%
4.90%
2 years
31.00%

The weighted average contractual life remaining of this option is 1 year and 3 months.

The estimated fair value of the option over 100,000 ordinary shares at 31 December 2021 was £211,455. This fair value, moderated for the extent
to which the option is expected to vest, is spread as a charge between grant and the assumed vesting date. Accordingly, a share-based payments
charge of £81,797 has been recognised in the Statement of Comprehensive Income in the year ended 31 December 2021.

Enterprise Management Incentive (“EMI”) Share Option Scheme 2020
On 23 July 2020 a new EMI Share Option Scheme 2020 was introduced and an option over 100,000 ordinary shares each at an exercise price
of £0.01 each was granted to two directors under this scheme.

This option has a vesting condition based on two performance conditions; basic earnings per share adjusted for exceptional income/costs and
share based payments ("adjusted EPS") and total shareholder return over the 3 years to 31 December 2022. Each performance condition will
apply to 50% of the award being made. In respect of both performance conditions, growth of 15% over the three year period will be required for
threshold vesting of the awards, with growth of 35% or higher required for all of the awards to vest. The shares will be awarded on a sliding scale
for growth between 15% and 35%. None of the awards will vest for adjusted EPS growth below 15% over the period.

The weighted average contractual life remaining of this option is 1 year and 4 months.

Management has used the budget for FY22, to determine, at 31 December 2021, that it expects 100% of the options will vest.

The estimated fair value of the option over 200,000 ordinary shares at 31 December 2021 was £312,800. This fair value, moderated for the
extent to which the option is expected to vest, is spread as a charge between grant and the assumed vesting date. Accordingly, a share-based
payments charge of £130,275 has been recognised in the Statement of Comprehensive Income in the year ended 31 December 2021.

The Property Franchise Group PLC
Annual Report and Accounts 2021

noteS to tHe conSoliD ateD anD companY Financial S tatementS

for the year ended 31 December 2021

Enterprise Management Incentive (“EMI”) Share Option Schemes 2013, 2017, 2018 and 2019
There are no options remaining under these schemes as all vested options were exercised during 2021. Share-based payments charges totalling
£97,389 were recognised in the Statement of Comprehensive Income in the year ended 31 December 2021 in relation to share options that
were exercised

Movement in the number of ordinary shares under options for all schemes was as follows:

Number of share options
Outstanding at the beginning of the year
Exercised
Forfeited
Granted

Outstanding at the end of the year

2021

2020

Weighted
average
exercise price

£0.0474
£0.14
£0.01
£0.01

Weighted
average
exercise price

£0.0503
–
£0.01
£0.01

’000

2,210
–
(30)
200

£0.01

2,380

£0.0474

’000

2,380
(667)
(1,513)
1,626

1,826

The outstanding options at 31 December 2021 comprised 1,825,500 options with an exercise price of £0.01.
100,000 are exercisable on 23/03/2023, 200,000 are exercisable on 30/4/2023 and 1,525,500 are exercisable on 30/04/2024.

The outstanding options at 31 December 2020 comprised 2,315,000 options with an exercise price of £0.01 and 64,800 options with an
exercise price of £1.385. The 64,800 options were exercisable at 31 December 2020, 2,015,000 were exercisable on the announcement
of the financial statements for the year ended 31 December 2020 and the remaining 300,000 options were not yet exercisable.

During the year ended 31 December 2021:

• The 64,800 options were exercised on 19 May 2021

•

5,000 of the 2,015,000 options were forfeited leaving 2,010,000 remaining, 25% of these vested (502,500) and were exercised
on 19 May 2021 resulting in 1,507,500 being forfeited.

100,000 of the 300,000 options mentioned above vested in full and were exercised on 19 May 2021.

1,625,500 options were granted under the 2021 scheme and the CEO bonus deferral scheme

The weighted average remaining contractual life of options is 2.3 years (2020: 0.4 years).

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The Property Franchise Group PLC
Annual Report and Accounts 2021

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for the year ended 31 December 2021

34. Related party disclosures
Transactions with Directors
Dividends
During the year the total interim and final dividends paid to the Directors and their spouses were as follows:

Interim and final dividend (ordinary shares of £0.01 each)
Richard Martin
Paul Latham
Phil Crooks
Dean Fielding
David Raggett
Glynis Frew

2021
£’000

836
8
0
1
29
12

886

2020
£’000

169
1
–
–
5
–

175

Directors’ emoluments
Included within the remuneration of key management and personnel detailed in note 9, the following amounts were paid to the Directors:

Wages and salaries
Social security costs
Pension contribution

2021
£’000

1,096
291
76

1,463

2020
£’000

1,040
134
19

1,193

Details of Directors’ interests in share options are disclosed in the Directors’ remuneration report on pages 46 to 48.

35. Acquisitions
Acquisition of Hunters Property plc
Effective 19 March 2021 the Group acquired the entire issued share capital of Hunters Property plc, a competitor property franchisor with a network
of 211 offices across the UK. Consideration of £26.1m was paid which comprised of each Hunters shareholder receiving 0.1655 New shares in
The Property Franchise Group PLC and 43.2 pence in cash. In addition the Group took over loans of £3.0m which it repaid post completion,
bringing total consideration to £29.1m.

The fair value of the identifiable assets and liabilities acquired and the consideration paid and payable are set out below:

Master franchise agreements
Brands
Lettings book
Right of use assets
Property, plant and equipment
Investments
Trade and other receivables
Cash
Trade and other payables
Lease liabilities
Provisions
Deferred tax

Net assets acquired

Goodwill

Consideration

Satisfied by:
New shares in The Property Franchise Group plc issued to Hunters shareholders
Cash paid to Hunters shareholders
Hunters loans repaid by The Property Franchise Group plc post completion

Total

£’000

10,789
3,060
3,556
1,601
161
353
1,561
1,490
(2,824)
(2,855)
(197)
(3,419)

13,276

15,871

29,147

11,604
14,531
3,012

29,147

noteS to tHe conSoliD ateD anD companY Financial S tatementS

The Property Franchise Group PLC
Annual Report and Accounts 2021

for the year ended 31 December 2021

Post acquisition results

Revenue
Profit before tax since acquisition included in the Consolidated statement of comprehensive income

Total
£’000

9,776
3,014

Acquisition of The Mortgage Genie Limited and The Genie Group UK Ltd
The Board are pursuing a strategy to develop financial services as a revenue stream to complement lettings and sales MSF. On 6 September 2021
the Group took an 80% share in The Mortgage Genie Limited and acquired the entire share capital of The Genie Group UK Limited. The minority
shareholder of The Mortgage Genie Limited is Matthew Stevens who continues as a director. Both companies operate under the name The
Mortgage Genie, an online mortgage broker.

The initial consideration was £400,000 and a further consideration of £61,400 was payable post completion based on opening balances,
bringing the total consideration to £461,400.

The fair value of the identifiable assets and liabilities acquired and the consideration paid and payable are set out below:

Intangible asset – software
Trade and other receivables
Cash
Trade and other payables

Net assets acquired

Goodwill

Consideration

Satisfied by:
Initial consideration paid on completion
Deferred consideration paid post 31 December 2021

Total

Post acquisition results

Revenue
Profit before tax since acquisition included in the Consolidated statement of comprehensive income

£’000

14
182
297
(178)

315

146

461

400
61

461

Total
£’000

421
35

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The Property Franchise Group PLC
Annual Report and Accounts 2021

SHareHolDer inF ormation

Financial calendar
Announcement of results – 5 April 2022
Annual General Meeting – 19 May 2022
Half year results – 30 September 2022
Interim dividend – October 2022

Registered office address
The Property Franchise Group PLC
2 St Stephen’s Court
St Stephen’s Road
Bournemouth
BH2 6LA

Company No. 08721920
01202 614 614
www.propertyfranchise.co.uk

Auditors
BDO LLP
Arcadia House
Maritime Walk – Ocean Village
Southampton
SO14 3TL

Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS13 8AE

The Property Franchise Group PLC
2 St. Stephen’s Court
St. Stephen’s Road
Bournemouth
Dorset
BH2 6LA