Earnings-enhancing Acquisition11 Nov 2014 12:08
http://www.hubinvest.com/AIMPDFNovember2014_62.pdf
Property lettings franchise company MartinCo is acquiring the property franchise business of Legal & General and this deal should be immediately earnings enhancing. MartinCo will pay £5m plus a further figure of around £1m depending on the net assets of the acquired business, while its managing director, Michael Stoop, will become group managing director of MartinCo.
MartinCo recently secured a £5m five-year loan facility with Santander and it had £5.46m in the bank at the end of June 2014. There is also a ten-year agreement with Legal & General for access to its mortgage, life assurance and general insurance products for all of the MartinCo group’s franchisees
The acquisition brings with it 89 offices and 75 franchisees, under the brands CJ Hole, Ellis and Co, Parkers and hitegates. MartinCo says that each of its five brands can be developed although the MartinCo brand is the national one. The other four are regionally focused and they have more of a mix of property lettings and estate agency business – MartinCo recently started offering estate agency services. In the first half of 2014, the number of MartinCo offices offering estate agency services increased from 97 to 145 and the revenue generated from this activity by franchisees was more than £1m in the period. In September, it started an online estate agency service, which charges a flat fee. The enlarged group will generate 19% of its revenues from estate agency.
MartinCo did not previously trade in 44 of the acquired franchise areas, particularly in regions around Bristol,
the M4 corridor, Yorkshire, Lancashire & Merseyside and in London. There will be 46 offices in Greater London,
out of a total of 283 offices. There are more than 43,000 managed properties in the group. There should be a £300,000 contribution to revenues in the last two months of 2014. In 2013, the business made a pre-tax profit of
£600,000 on revenues of £1.8m.
Bournemouth-based MartinCo was founded in 1986 and started franchising under the Martin & Co brand in 1995. MartinCo joined AIM at the end of 2013. The shares are trading on 15 times previous forecast earnings for 2015 but this figure will be reduced by the acquisition.
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