Propty Franchis Regulatory News (TPFG)

MARTINCO PLC

("MartinCo", the "Company" or the "Group") 

Trading Update for Financial Year Ended 31 December 2016 

MartinCo Plc, one of the UK's largest property franchises, today issues the following trading update for the year ended 31 December 2016, ahead of reporting its final results for the 12 month period on 5 April 2017.

Highlights:

· Revenue increased by 15% to £8.2m* (2015: £7.1m)

· Expanding UK wide footprint - now trading from 377 offices (2015: 287)

· 16 new franchisees recruited for both the resale of existing franchises and start-ups

· Serving c.48,000 tenanted managed properties (2015: c.45,000)

· Acquisition of EweMove in September 2016 with 96 franchisees at the year-end

· Group remains heavily weighted towards lettings, which account for 74% of Management Service Fees (2015: 76%)

· Strong balance sheet with a cash position of £2.0m* (2015: £4.3m)

· Current trading in line with expectations

* Unaudited

Trading performance in the final months of 2016 has been robust, despite challenging market conditions during the immediate aftermath of the Brexit vote. This performance has been driven by organic growth in Management Services Fees, an expanding network of franchisees and tight cost control measures. EweMove made a modest contribution to Group EBITDA with 96 franchisees at the year end.

In September 2016, MartinCo acquired EweMove, a "hybrid" estate agency and letting agency model using an online platform and modern digital marketing techniques. It offers franchisees a low cost model as there is no requirement for commercial premises or staff. It is currently targeting experienced estate agents and business proprietors as potential franchise recruits to rapidly expand its network footprint in 2017.The Group is also importing some of the intellectual capital of EweMove into its five traditional high street brands, and will be launching new websites with a facility for customers to book valuation appointments in real time. EweMove is the No.1 Estate Agent and the No. 1 Letting Agent on Trustpilot.

The Group maintains a strong balance sheet with cash reserves of approximately £2.0m. During the period the Group used £3m of cash to partly fund the initial consideration paid for EweMove of £8m. The Group remains highly cash generative and with unused loan facilities of £1.6m it remains in a strong financial position at the period end. The Board reaffirms its commitment to a progressive Dividend policy with the next dividend expected to be declared in May 2017.

Outlook

The fundamental drivers for expansion of the UK private rented sector remain in place: high net migration, a restricted supply of new housing stock with affordability and deposit hurdles for first time buyers and pension reform in early 2015 which unlocked pension funds for over-55 year olds. Total returns from Buy-To-Let investment over the past decade have outperformed most other asset classes and the prospect of owning a privately rented property to generate income in retirement and benefit from rising capital values remains attractive.

There is no timetable for implementation of the Government's proposal to ban or restrict the charging of fees to tenants in England. A total tenant fee ban in Scotland, in 2012 was successfully overcome by the Group, winning market share at the expense of smaller, less financially stable letting businesses, many of whom withdrew from the market.

Commenting on Group performance, MartinCo Chief Executive Officer, Ian Wilson, said:

"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 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 in estate agency services. Collectively these are our "traditional" brands and operate from high street premises.

The acquisition of EweMove marked an important milestone for the Group and means we now have a national estate agency "challenger" brand. It's deliberately designed to be "non-traditional" and has its own distinctive culture built around exemplary customer service.

We remain positive about the outlook for our core lettings business, from which 74% of our franchise royalty income is derived. I look forward to providing a further update at our full year results in April."

-Ends-

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

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About MartinCo

MartinCo Group operates one of the UK's largest property franchise businesses through its 377 offices and 6 franchise brands Martin & Co, CJ Hole, Parkers, Ellis & Co, Whitegates and EweMove.

The Group's franchisees manage approximately 48,000 properties on behalf of private clients. The Group added an estate agency service in 2013 and offers this service at 370 of its offices.

MartinCo is a multiple award winning business and the Directors and senior management have over 100 years of combined residential letting and estate agency experience.

www.martinco.com