Property Franchise Group performs better than expected after fees ban
UK-based property company, the Property Franchise Group, updated the market on its trading on Wednesday, reporting that the second half of the financial year to date had remained strong, with management said to be confident that the group remained in line to achieve market expectations for the full year.
The AIM-traded firm said it had set a new record for lettings revenue at a franchisee level in the trading month of October, with franchisees reported lettings income of £5.96m.
Its board said significantly, that was achieved despite the loss of tenant fee income, following the ban on charging tenant fees coming into effect in England and Wales on 1 June.
Tenant fees had previously represented 16% of franchisee lettings revenue in those two countries.
The company put the performance largely down to mitigating actions encouraged by the group as a franchisor, that its franchisees had managed to alleviate the impact of the tenant fee ban, alongside “some pent-up tenant demand” feeding through.
It said that was a “clear demonstration” of the benefits of the franchise business model.
Growth in management commission - the recurring monthly fees which franchisees charge landlords for property management services - had increased 10% year-on-year from £3.88m in October 2018 to £4.28m this October.
The group said it believed it was the “high level of satisfaction” of its landlord clients that lay behind its better-than-expected progress in shifting the burden of cost from tenants to landlords, as clients of its franchisees would rather retain their services than do it themselves or instruct another agent.
It had previously advised investors that it could take until the end of 2020 to fully mitigate the lost revenue from the ban, but its management said it was now confident that the objective of full mitigation would be attained by June 2020 - one year after the introduction of the ban.
“We are delighted that the mitigating actions we've recommended to our franchisees have taken effect as hoped and at a good pace,” said chief executive officer Ian Wilson.
“We now expect to achieve full mitigation of the impact of the tenant fee ban a full six months earlier than originally hoped.”
Wilson said the firm’s ability to draw on its “wealth of industry experience” and act quickly to support its franchisee members provided it with an advantage in the market.
“At a challenging time for the industry, where many independent lettings agencies are considering leaving the sector, our group continues to show its strength.
“The sales market has softened further in the second half, however our lettings business is outperforming our budgeted expectations.
“Our franchise business model has proven to be remarkably resilient in these testing conditions and we expect this to continue.”
At 1423 GMT, shares in the Property Franchise Group were up 11.48% at 170p.