Propty Franchis Regulatory News (TPFG)

The Property Franchise Group PLC ("TPFG" or the "Group")

Final Results for the Year Ended 31 December 2016

Strong results trend continues

The Property Franchise Group PLC, the UK's largest property franchisor with 6 brands across a network of 377 offices, today announces its full year results for the year ended 31 December 2016.

The Directors' vision is to leverage TPFG's proven franchisor infrastructure, underpinned by its strong regional and national property brands, to build a significant share of the UK residential lettings and estate agency market. The Group's multi-brand strategy, which allows more than one brand of franchise to operate in a given location, means it is able to appeal to different market sectors and maximise its potential overall share of local market sales and lettings transactions.

Financial Highlights

*Before exceptional costs

Operational Highlights

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

"2016 marked our third full year on AIM and I am delighted to report that the Group has delivered another strong set of results for the year. Our scalable multi-brand platform has resulted in the continued organic growth of our brands and enabled us to realise operational efficiencies borne out of the consolidation of the four brands acquired through "Xperience".

"The year also saw us acquire EweMove, the on-line "hybrid" with a unique customer service proposition, which provides us with a strategically important foothold in the rapidly developing market for on-line lettings and estate agency services".

"Looking ahead, we remain confident in the outlook for the business and believe the fundamental drivers for continued expansion of the private rented sector remain in place. Our multi-brand strategy, weighting towards lettings, together with our exposure to on-line through EweMove, leaves us well placed to grow our market share and continue to deliver returns for shareholders."

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Chairman's statement

2016 was another year of solid growth for the Group despite headwinds for the housing market from tax changes and uncertainty surrounding the vote to leave the European Union. The additional rate of stamp duty on second homes and buy-to-let purchases for individuals had the consequence of a rush to complete transactions before the April 2016 deadline. This resulted in a surge in Group sales in March followed by a comparatively quieter period.

Summer uncertainty around the vote to leave the European Union appeared to undermine consumer confidence and instruction levels fell for both sales and lettings before recovering in the final quarter.

In the autumn, the Government announced its intention to limit or possibly ban tenant fees in England, which it subsequently tempered with an offer of consultation with trade bodies. At the time of writing, the timetable and the extent of any ban remains unclear. In Scotland, where a ban has existed since November 2012, our experience has been that the impacts on revenue were mitigated in just over one year.

Given these recent changes and the resultant increase in the level of uncertainty within the property market, it would be reasonable for the Group to adopt a cautious approach. However, the Board has observed a shift in the traditionally conservative estate agency and lettings sector, with the growth (albeit from a low base) of on-line agents.

On-line agents have no physical office premises and their pricing models are typically based on listing fees rather than completions. Estate agency services are becoming commoditised on the internet and consumers' expectations may now be to interact with their agent on a 24/7 basis, or at least outside of normal office hours.

We purchased EweMove in September 2016, a relative newcomer by the standards of other brands in the Group, having started trading in late 2013. Its consciously consumer centric culture, adoption of cutting edge internet marketing techniques and 24/7 manned call centre make it unique within our brand stable. In accordance with other on-line agents, the model eschews the need for high street premises.

Its franchisees charge broadly in line with other high street estate agents, on a traditional success fee basis. It's service and not price which differentiate its offering, as EweMove is the No.1 most trusted estate agent and letting agent on TrustPilot.

Much of the innovative on-line marketing used by EweMove is being imported for the benefit of our traditional high street brands, and we will keep under review EweMove's pricing model to align it with customer preferences.

This strategic move signals the Group's intention to be well-positioned for all eventualities and developments in the estate agency and letting agency space. Despite the challenges set out above, the Group has delivered another strong set of results in this, its third full year on AIM.

My thanks go to the executive, their teams and my fellow Board members for their outstanding efforts over the last year.

I am delighted to announce that the Board has recommended a final dividend of 4.5p per ordinary share for 2016.

Richard Martin 

Chairman 

4 April 2017

Chief Executive's statement

Benefits of a multiple brand strategy

With our acquisition of four regional property brands (Ellis & Co, Parkers, CJ Hole and Whitegates, together "Xperience") from Legal & General in October 2014 we set out a vision for the Group as owner of multiple property brands, within a franchise model, where previously our efforts had been focused on Martin & Co solely, our national, letting specialist franchised business, and the only brand which we owned at our launch on AIM in December 2013.

In 2015 the story was of consolidation, driving out duplicate costs and leveraging economies of scale. By 2016 we reaped the fruits of that approach - the Xperience business delivered £1m of after tax earnings against its net cash consideration of £5.1m.

The Xperience brands were tilted 54% to 46% estate agency over lettings revenue and we saw the potential to import our Martin & Co "know-how" and grow their lettings income stream. And so it proved, with lettings revenue at Xperience now 54% versus sales revenue at 46%. Xperience lettings revenue growth was 12% in 2016 against 4% growth in lettings revenue at Martin & Co, the more mature model.

However, recognising that consolidation has its natural limits we actively searched for other acquisition opportunities at the franchisor level. We identified a number of targets, and considered which would best complement our stable of brands.

The fastest growing property franchise in 2014 and 2015 had been EweMove, based in Cleckheaton. Its "tongue in cheek" sheep brand theme, the antithesis of a stereotypical public view of predatory estate agents. Its powerful central technology hub generating on-line leads, 24/7 call handling and administration support proved enormously appealing to the franchise buying public.

Ranked No. 1 on Trust Pilot for both Estate Agency and Lettings, EweMove occupied 90 franchise territories by September 2016. EweMove is a "hybrid" rather than "on-line" operation because while local franchisees do not require commercial premises, the model does not disavow premises either.

EweMove was beginning to generate (modest) positive cashflow. The Board considered both the potential to scale EweMove into a truly national brand, and the opportunity to import EweMove expertise on-line (founders and key suppliers) to complement the off-line traditional high street brand presence. We acquired EweMove on 5 September 2016.

We have a clear brand strategy as we enter 2017. Martin & Co is our national lettings brand, and has appeal to landlords letting, buying and selling investment properties. Ellis & Co, Parkers, CJ Hole & Whitegates are strong regional brands and have particular expertise with estate agency services. Collectively these are our "traditional" brands and operate from high street premises. EweMove is our "challenger" brand.

We remain positive about the outlook for our core lettings business, from which 74% of our management service fee income is derived.

We do not envisage the Government's recent interventions in the buy-to-let sector significantly impacting our business. Buy-to-let investors have generally reduced gearing in their portfolios over the years since 2008 and are believed to be able to absorb rising interest rates. We are well positioned to sell investment properties if investors decide to exit, and our research suggests that larger buy-to-let investors would purchase this stock. Early indications from the mortgage industry show that investors are beginning to incorporate their activities into trading companies to avoid the stamp duty surcharge and to retain the benefit of interest tax relief on buy-to-let loans.

We have rolled out financial services to two thirds of our traditional brand offices during 2016. The proposition is an across the market selection of mortgages and fee-free advice from our business partner London & Country. General Insurance products will be tied to Legal & General. The benefits of this strategy will be to add another revenue stream (currently sub-1% of Group revenues) and to develop a greater understanding of our customers.

Ian Wilson

Chief Executive Officer

4 April 2017

Chief Financial Officer's Review

Our multi-franchise strategy has delivered improvements in operating margin, EBITDA and PBT.

In what turned out to be another flat housing market in 2016 with 1.2m transactions* (2015 and 2014: 1.2m transactions) our focus has been on maintaining our share of sales (up 8%), growing our lettings revenue (up 9%), implementing our financial services offering and our next strategic acquisition.

* HMRC UK Property Transaction Statistics 21 February 2017

Group revenue for the financial year to 31 December 2016 was £8.3m (2015: £7.1m), an increase of £1.2m (16%) over the prior year. The incorporation of 4 month's revenue from the EweMove acquisition in September 2016 contributed £0.7m (58%) of this increase.

Management Service Fees ("MSF") increased 11% from £6.2m to £6.9m and represented 83% (2015: 87%) of Group revenue with the remainder being from franchise sales and ancillary services to support MSF generation.

Lettings contributed 74% of MSF (2015: 76%), sales contributed 25% of MSF (2015: 23%) and financial services contributed 1% of MSF (2015: 1%). Lettings MSF grew by 9% in the year and sales MSF grew by 19%.

Operating profit

Operating profit before exceptional items increased from £2.9m to £3.5m (21%) and the margin increased from 41% to 42%. Including exceptional items the operating margin increased from 38% to 39%.

Administration expenses, including the 4 months of the EweMove acquisition, increased by £0.3m. EweMove's administration expenses were £0.4m.  

EBITDA

EBITDA before exceptional costs for 2016 was £3.9m (2015: £3.2m) an increase of £0.7m (23%) over the prior year. EweMove contributed 2% of the increase.

Exceptional items

The exceptional costs for 2016 are £0.3m (2015: £0.2m) and relate to the acquisition costs for EweMove and redundancy payments (2015: Xperience redundancy costs).

Profit before tax

The profit before tax was £3.2m for 2016, an increase of £0.5m (19%) over the prior year.

Taxation

The effective rate of corporation tax for the year was 20% (2015: 20.25%). The total tax charge for 2016 is £0.2m (2015: £0.5m).

Earnings per share

Earnings per share for the year was 13.0p (2015: 9.8p), an increase of 33%. The profit attributable to owners increased to £3.0m (2015: £2.2m).

Dividends

The Board is proposing a final dividend of 4.5p per share for 2016 which, together with the interim dividend of 2.0p per share paid to shareholders on 7 October 2016, equates to a total dividend for the financial year of 6.5p (2015: 5.9p) an increase of 10%.

Cash flow

The Group is highly operationally cash generative.

The net cash inflow from operating activities in 2016 was £2.4m (2015: £2.2m) as the Group continues to generate strong operating cash inflows.

The net cash outflow from investing activities was £4.8m (2015: inflow £0.3m) due principally to the acquisition of Ewemove in September 2016 (2015: sale of Saltaire portfolio).

Loan repayments totaling £0.6m (2015: £0.5m) plus interest payments of £0.1m (2015: £0.1m) were made on the Santander UK plc loan during 2016. Dividend payments were £1.4m (2015: £1.0m).

Liquidity

The Group had cash balances of £2.0m at 31 December 2016 (2015: £4.3m).

Financial position

The Group is strongly operationally cash generative which, together with the undrawn facility from Santander UK plc of £1.6m, puts it in a strong position to fulfil its strategic plan.

David Raggett

Chief Financial Officer

4 April 2017

Consolidated statement of comprehensive  income

for the year ended 31 December 2016

Consolidated statement of financial  position

31 December 2016

Company statement of financial position

31 December 2016

(Company No: 08721920)

Consolidated statement of changes in equity

for the year ended 31 December 2016

Attibutable to owners

Company statement of changes in equity

for the year ended 31 December 2016

Consolidated statement of cash flows

for the year ended 31 December 2016

Notes to the consolidated statement of cash flows

for the year ended 31 December 2016

B. Purchase of Subsidiary undertakings net of cash acquired

On 5 September 2016 the Group obtained control of Ewemove Sales & Lettings Ltd "ESLL" and its dormant subsidiary Ewesheep Ltd "EL".

Company statement of cash flows

for the year ended 31 December 2016

Notes to the Company statement of cash flows

for the year ended 31 December 2016

Notes to the consolidated financial  statements

for the year ended 31 December 2016

1. General information

The principal activity of The Property Franchise Group PLC (formerly MartinCo 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

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2016 or 2015, but is derived from those accounts. Statutory accounts for 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts: their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under Sections 498(2) or (3) of the Companies Act 2006. 

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention

The preparation of financial statements in conformity with IFRS 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 pound.

Going Concern

The Group has produced detailed budgets, projections and cash flow forecasts. The Directors have concluded after reviewing these budgets, projections and forecasts, making appropriate enquiries of the business and having considered uncertainties under the current economic environment, 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.

New standards, amendments and interpretations issued

The following relevant new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning on 1 January 2016, as endorsed by the European Union, and have not been early adopted:

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group when the relevant standards and interpretations come into effect. 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.

The following standards have been issued by the IASB but have not yet been endorsed by the EU:

While the above standards have not been adopted by the EU the company is currently assessing their impact.

Notes to the consolidated financial  statements

for the year ended 31 December 2016

3. Basis of consolidation

The Group financial statements include those of the parent company and its subsidiaries, drawn up to 31 December 2016. Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by- acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred.

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

4. Significant accounting policies

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 the provision of training and ongoing support to franchisees.

Fees from the sale of franchise agreements are not refundable and are recognised upon the earlier of the receipt of funds or the signing of the franchise agreement. 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. Resale fees are recognised in the month that a contract for the resale of a franchise is signed. Management service fees are recognised on a monthly basis, with other fees recognised when the training and support is provided to the franchisee.

Fees from the sale of franchise agreements for the Ewemove brand are treated differently to the other brands, because an element of the initial fee is deferred and released over the first 12 months of trading of the franchise, where no monthly license fees are payable.

Operating profit

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

Intangible assets - goodwill

Goodwill (being the difference between the fair value of consideration paid and the fair value of the identifiable assets at the date of acquisition) is capitalised. Goodwill is not amortised, but subject to an annual review for impairment (or more frequently if necessary). Any impairment is charged to the profit or loss as it arises.

An impairment loss is recognised for the amount by which the carrying value of goodwill exceeds its recoverable amount, which the Directors assess on a 'value in use' basis. To determine the value in use, management estimates expected future cash flows from trading operations, each business being one cash generating unit, and determines a suitable growth rate in order to calculate the present value of those cash flows. The discount factor reflects management's assessment of the risk profile of the business.

 Notes to the consolidated financial  statements

for the year ended 31 December 2016 

4. Significant accounting policies continued

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, as follows:

Brands - CJ Hole, Parkers, Ellis & Co Indefinite life

Brands - Ewemove 21 years

Customer lists 5 years

Master franchise agreements - Whitegates, CJ Hole, Parkers, Ellis & Co 25 years

Master franchise agreements - Ewemove 21 years

Technology 5 years

Acquired customer relationships 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 relationship assets are being written off over a remaining life of 5 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 21-25 years as historical analyses shows that, on average, 4-5% of franchises will change ownership per annum.

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.

Subsequent to initial recognition, intangible assets are stated at deemed cost less accumulated amortisation and impairment charges.

Investment in subsidiaries

Investments in subsidiaries are stated in the parent company's balance sheet at cost less any provisions for impairments.

 Notes to the consolidated financial  statements

for the year ended 31 December 2016 

4. Significant accounting policies (continued)

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 15% reducing balance

Computer equipment over 3 years

Short leasehold improvements over the lease term

Income taxes

Current tax is the tax currently payable based on the taxable profit for the year.

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. 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 tax expense in the income statement.

Operating lease commitments

Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged to profit/loss on a straight-line basis over the period of the lease.

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 only has financial assets classified as loans and receivables. The loans and receivables comprise trade and other receivables and cash and cash equivalents in the Consolidated Statement of Financial Position. Cash and cash equivalents (which exclude any client account monies) include cash in hand and deposits held at call with banks.

Loans and receivables

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of services to franchisees (e.g. trade receivables), but also incorporate other types of contractual monetary asset. 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.

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms of the receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the income statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

Notes to the consolidated financial statements

for the year ended 31 December 2016 

4. Significant accounting policies (continued)

Financial liabilities

Financial liabilities are comprised of trade payables, borrowings and other short-term monetary liabilities, which are recognised at amortised cost.

Trade 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 options

The Company issues equity-settled share-based payments to certain 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 is expensed on a straight- line basis over the vesting period, together with a corresponding increase in equity, based upon the 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:

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 behavioral considerations.

Provisions

A provision is recognised in the Statement of Financial Position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The increase in the provision due to the passage of time is recognised in finance costs.

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.

Impairment of intangibles

The Group is required to test, where indicators of impairment exist, whether intangibles 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.

Valuation of separable intangibles 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 £5.2m (2015: £nil) as detailed further in note 17.

Notes to the consolidated financial statements

for the year ended 31 December 2016

 6.Segmental reporting

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

 7.Revenue

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

All revenue is earned in the UK and no customer represents greater than 10 per cent of total revenue in either of the years reported. Other revenue relates to training and ongoing support to franchisees.

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:

9.Employees and Directors

Average numbers of employees (including Directors), employed during the year:

Notes to the consolidated financial  statements

for the year ended 31 December 2016