MIDAS SHARE TIPS UPDATE: Belvoir reaping rewards of boom in property
When estate agency group Belvoir unveiled its 2019 figures on March 30, 2020, Britain had just entered into its first lockdown and chief executive Dorian Gonsalves said he thought Covid-19 would have a significant effect on trading for the rest of the year, so much so that the final dividend was axed.
In the event, Gonsalves – and Belvoir’s shareholders – were pleasantly surprised. The company proved far more resilient than anyone had hoped.
Revenues and profits rose substantially, the dividend was reinstated and the company continued to expand organically and through acquisition.
Growth has continued at pace ever since. Last week, Gonsalves said first-half revenues were 41 per cent higher than in 2020 and 53 per cent ahead of 2019, driven by strong demand across every part of the business.
On the move: Soaring demand for new homes has boosted revenues for estate agency Belvoir
Belvoir differs from many peers because it operates a franchise model, with 243 franchisees effectively acting as small businesses, supported by Gonsalves and his team.
This makes the group nimbler and more entrepreneurial than many large property firms, a particular bonus during the ups and downs of the pandemic.
The company also derives around 90 per cent of its revenues from rentals, rather than sales.
Commercial property landlords have had a tough time during the pandemic, as tenants suffered from closures and lockdowns. But the residential rental market held its own.
Belvoir suffered from virtually no arrears last year and in the first half of this year, underlying rental revenues rose 10 per cent, with further strong growth expected through 2021 and beyond.
On the sales side, Belvoir has benefited from soaring demand for new homes, as people rush to find larger properties more in keeping with flexible working lifestyles.
Headquartered in Grantham, Lincolnshire, the company is well located too, with a strong presence in the Midlands and the North, where activity has been buoyant for both sales and rentals.
Belvoir derives around 90 per cent of its revenues from rentals, rather than sales
In recent years, Belvoir has moved into financial services as well, offering mortgage advice through 242 independent advisers. In June, this business was bolstered with the acquisition of Nottingham Building Society’s mortgage advice division.
A small deal right now, this should drive future growth, as the building society has been building a name for itself in the Lifetime ISA space, with savers likely to turn to Belvoir’s advisers when they want to use their cash to buy a home.
Brokers expect that group revenues for 2021 will climb by 25 per cent to £27million, with profits rising at a similar pace to £9.3million. Belvoir is a decent dividend payer too.
The dividend for 2020 was 7.2p and this year, 7.4p is forecast, although that may well increase if the group continues to exceed expectations.
Midas recommended Belvoir in 2016 when the shares were £1.21 and we looked at the business again just before the first lockdown, by which time, the price had risen to £1.78. It slumped to below 100p in March last year but has since soared to £3.
Brokers believe there is further to go and Gonsalves is certainly optimistic, actively seeking acquisitions and helping franchisees to expand as well.
Midas verdict: Belvoir shareholders have been well rewarded and may choose to reduce their holdings, now that the price has reached £3.00. But they should retain at least 50 per cent of their stock.
Belvoir is well positioned to benefit from continued demand for new homes, the financial services business should accelerate growth and the dividend offers a decent income too.
Traded on: AIM Ticker: BLV Contact: belvoirgroup.com or 0370 707 1762