The Property Franchise Group PLC (TPFG) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Property Franchise Group PLC Final Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received in the meeting itself. However, the company can review the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to CEO, Gareth Samples. Good afternoon to you sir.

Good afternoon. Thank you. Good afternoon, everybody, and welcome to our final results of 2024 in what was a really transformational year for the group, with significantly enhanced scale and most pleasing, the ability to pay a 29% increase on our full year dividend. Some of the things we're going to take you through today, if you look at the agenda, we're going to look at the highlights for the year. Ben Dodds, our new CFO, who will take you through a financial review of the year. We're going to look at our strategy moving forward over '25 and '26, the outlook and how 2025 started and then give you the ability to ask any questions that we'll endeavor to answer. So without further ado into our key highlights slide, and already touched on this, a transformational year completing to sizable acquisitions. The Belvoir Group, our largest competitor and the Gildan finding country some 2 months later, has really transformed the group from GBP 100 million market cap business to close on a GBP 300 million market cap business. So 2024 was pretty busy for us all. In terms of the financial highlights, GBP 67.3 million revenue, adjusted EBITDA increasing to GBP 24.1 million. And as I've already touched on a 29% increase in full year dividend to 18p. I think the main sort of positive of the group is this recurring income. I'm delighted to say that with those acquisitions, we're still over 50% recurring income, 52% and highly cash generative as a group, GBP 14.7 million cash generated from operations in 2024, and that will increase in 2025. We're now the U.K.'s largest property franchise business on one of the largest property groups in the U.K. We look after 153,000 properties on behalf of landlords. We've got a huge financial service business ran by Michelle Brook as a result of the acquisition of Belvoir than last year, the facilitated lending of GBP 4 billion worth of mortgages. And we've got our highest ever sales pipeline of GBP 33.4 million at the end of last year. And I guess what have we been working on the integration of the businesses, which was no mean feat that will continue through 2025 and then it's been about leveraging the scale, understanding what opportunities exist within the enlarged group and putting in plans to make sure that we can execute on those scale opportunities along with working on what synergies we can take out of the group through cost savings. So look at the 3 businesses and look at how they came together. If I look at TPFG in 2023, we have a total revenue of GBP 27.3 million, adjusted profit before tax of GBP 11.2 million and a market cap of about GBP 112 million. Compare that to the Belvoir Group, so GBP 34.2 million in turnover, a little bit less on profit, GBP 11 million on adjusted profit before tax at a market cap of GBP 107 million. And then GPEA, GBP 13 million in total revenue, GBP 3 million in the adjusted profit before tax, and we paid GBP 15 million in May of last year, plus GBP 5 million in deferred interest that will be paid -- sorry, deferred consideration that will be paid in May of this year. So a total purchase price of GBP 20 million. So that gives you some idea about the scale of the business. We're still predominantly a franchise business, which is really important. So 60% of our revenue comes from franchising, 29% comes from financial services and 11% of our revenue comes from licensing. That will change slightly in 2025 because that's only 9 months of Belvoir's numbers or 10 months of Belvoir's numbers and 7 months of Fine & Country and The Guild's numbers. But that gives you an idea of how we will report going forward in 3 distinct divisions: franchising, financial services and licensing. Operational highlights touched on some of these already, but 153,000 properties under management, up from 78,000 at the end of 2023. Increase in the sales pipeline from GBP 23.1 million to GBP 33.4 million, stimulated in some part by the stamp duty break that ended at the end of last month. Financial Services division that delivered 23,000 mortgages in 2024 after the acquisition of Brook Financial Services by the Belvoir deal, a licensing division that now includes 1,043 licensees, add that to the 900-or-so territories that we have with our franchisees, and we've got 1,950 businesses operating within the group. We've got an enhanced board. So some of the Belvoir board came across some of the TPFG board were retained. And in the second 6 months of last year, we put together a sort of best-in-class senior leadership team that will drive the business on a daily basis in terms of the growth initiatives and the organic growth that we see there's opportunities over the next 2 or 3 years. And we've also invested over the last 6 months, a lot of time and effort and some money in understanding how AI, automation, machine learning and digital marketing tools can help the group really unlock the significant value that's held within the 14 million data records that we now have hold as a group. So working on that, that's really exciting. It's moving at pace and offer significant opportunity for the group to drive its revenues forward in the future. So they are the operational highlights. I'm now delighted to welcome Ben Dodds, our new CFO, who's going to take you through the financial review for 2024. Ben, over to you.

Perfect. Thanks, Gareth. So just starting out with the kind of key financial highlights that I really wanted to take away from the presentation today. Gareth already talked about revenue that GBP 67.3 million is that the group is reporting for the year, a 147% increase year-over-year, 52% of that being recurring. Now that's dropped very slightly versus 2023 as a result of the financial services business that we've acquired through Belvoir, which has lower levels of recurring revenue but still really, really strong. Adjusted PBT GBP 22.3 million, which is an almost 100% increase again year-over-year. So again, fantastic results, very happy with that. And all of that led to, I suppose, a position in terms of the dividend that is being proposed at 18p, which is a 29% increase year-over-year. Looking more at the balance sheet and cash that we ended the year at a net debt position of GBP 9.1 million, that is a movement versus last year, which was net cash, but very much driven by the fact that we took out loans in order to be able to support the acquisitions above and principally GPEA within the year. But we also look to try and pay down as much of that debt as we possibly could, leaving the net debt position you see there and ultimately, a leverage of 0.4x, which is obviously extremely healthy. From a cash from operations perspective, we generated GBP 14.7 million on a net basis. Again, an increase over year-over-year of 63%. And from a cash conversion perspective, again, really positive at 145%, again, improving versus the prior year. So just to break down the revenue and the profitability by division. And as Gareth kind of alluded to at the start, really trying to give going forward that kind of divisional split in terms of our measure of performance. And you can see that certainly on the revenue side, franchising continues to be a strong driver of our total revenue, making up 61% of that GBP 40 million. And then we've got financial services at 28% and then licensing as well. You can see on the right-hand side, actually the adjusted operating profit by division, again, is very heavily weighted towards franchising, and we then got the financial services and licensing. And I think actually, we'll see that weighting probably shift a little bit more healthily towards a bit better balance once we get into full year results of both the Belvoir acquisition and GPEA in the year, which obviously have the financial services and the licensing profitability that sits within that. So just to deep dive a little bit into the individual divisions and probably franchising, probably the most well-known to work here, obviously, to our investors. And principally, that business model being franchisees, offering, lettings, sales and financial services to their clients with a core focus on lettings. And ultimately, the TPFG financial benefit of that being we earn management service fees, which are directly linked to those individual franchisees business. You can see on the right-hand side, 2023 compared to 2024, what that franchise revenue kind of look like in terms of split. And again, lettings remaining a very strong element of that revenue with GBP 19 million in 2024, sales making up GBP 9 million of that revenue. And you can see the increase year-over-year is not quite to the same proportion as lettings. And again, that being indicative of the fact that the Belvoir business was not as strong from a sales perspective as TPFG was historically. So therefore, not adding almost pound to pound as the lettings business has. But we'll talk a little bit more about that and the opportunity that brings us later on. And then we've got the owned business -- sorry, the owned offices, which again increased from GBP 5 million to GBP 7 million, so again really positive. We'll talk more about the priorities as we kind of go through this and Gareth will touch on it later on. But again, some of the kind of the key things from a franchising perspective, we've talked about continuing the need to integrate Belvoir franchising and look at that opportunity from a sales perspective and looking at some of the mitigation actions we've put in place already for the renters right, and that's the key focus is really for this division. Financial Services. So again, same approach, just trying to provide a little bit of clarity on what that business model actually is. We have a network of about 300 financial advisers who under the networks of Mortgage Advice Bureau and Primis are able to sell mortgage and protection products to own consumers. And that's split between business partners and employed advisers. And that's a really key distinction because the business model between the 2 is very slightly different in the respect that an employee adviser, as you can probably imagine, is generating commission off of the back of the work, and we see that benefit come through to us in full. When it comes to business partners, they're probably more akin to a franchisee in the respect that actually, they're operating are often their single individuals or potentially small businesses who are utilizing our status as an authorized representative of, say, Mortgage Advice Bureau or Primis and also accessing the products that are available to be able to sell in terms of mortgage and protection products made available by mortgage advice Bureau. Ultimately, they are generating their leads and selling those products, but we're getting a cut as that kind of filters through. So in effect, a percentage of the value of income that's coming through. You can see the split from a revenue perspective is broadly kind of comparable, so GBP 10 million from business partners in 2024 and GBP 9 million from employed advisers in 2024. And we expect that broadly to remain consistent as we go forward. Again, very briefly touching on priorities going forward, principally certainly from my perspective, it's about driving that productivity per adviser. We can continue to look to recruit. But looking at that productivity, how we improve that at all stages of the process will just help to again drive overall profitability for this division. And just finally, licensing. So obviously, very much a new division for us in 2024 with the acquisition of GPEA. And actually, really important perhaps to explain why we felt it appropriate to separate it out as a separate division. And that comes down to the economic drivers for growth and what drives this business. And on the licensing model, it's effectively a fixed license over a period of time. So a fixed monthly license. And so what drives that business is very much pricing and volume, which is actually quite -- or it's different to the franchising model where, yes, volume is a driver, but actually, it's the performance of that franchisee itself, which ultimately drives the revenue that we receive. And so actually, the strategic initiatives for the licensing division versus the franchising division actually needs to be slightly different in order to make sure that we are generating the best out of those divisions and why are we therefore kind of kept it separate in order to give that kind of transparency. And what I suppose is within the licensing division. So as we've talked previously, we've got Fine & Country. So that kind of premium brand operating within the U.K. and internationally. And then you've got The Guild, the property professionals, which is the membership organization of circa 800 independent estate agents, which again gives us kind of access that we've never had before into that independent estate agency market. But ultimately, the model being the receiving of regular recurring and license fee income. You can see that split on the right-hand side, again, broadly kind of composite between the 2 Fine & Country making up about GBP 4 million of revenue with The Guild making up about GBP 3 million of that GBP 7 million in total. And again, we will see those numbers increase in the year because this GBP 7 million is only on the basis of 7 months rather than a full 12 months. So just to pivot almost the P&L a little bit. We've talked about the divisional performance, certainly from a revenue perspective. What I thought it was really important to be able to give a bit of clarity on was to look at it from an acquisitions perspective. So what this table is trying to demonstrate is what the original TPFG's business has achieved in terms of revenue, gross profit and adjusted operating profit. And then what the Belvoir and GPEA acquisitions have added on to that within 2024. So you can see the breakdown of, say, the overall GBP 67 million of revenue we've had in the year and the adjusted operating profit as we show there. But what I think is a really important message that this slide is trying to demonstrate is that despite all of the impact and destruction of completing those 2 acquisitions within the year, the underlying TPFG business when you compare it to 2023 has grown on all of those metrics, whether you're looking at revenue, gross profit or adjusted operating profit, it's at a value of 14%, which we think is fantastic kind of growth and improvement given, as I say, the level of destruction in the end. Just moving on to cash. So obviously, our simplified cash flow statement on the left-hand side. Just walking us from the cash flow we started the year with the net cash that we had from -- that we generated from operations at GBP 14.7 million. The cash that exited the business from acquisitions, which was sort of value of GBP 16 million. You'll remember that actually GPEA was an acquisition at a total value of GBP 20 million. GBP 5 million of that is actually deferred consideration, and we'll see that coming out in 2025, hence why it's less than GBP 20 million. We did draw down bank loans within the year of GBP 20 million. But you can see there that -- and as I mentioned earlier on, it was really key for us to try and see what level of bank loans we could repay within the year with the cash generation that we have and that value being GBP 9.3 million in the year, paid GBP 9 million of dividends and also paid GBP 3.4 million out in respect of the employee benefit trust loan that we should see reverse back in 2025. The graphs on the right-hand side, I suppose, just demonstrating over time, the cash-generative nature of the business, both in absolute terms in terms of the net cash generated from operations and that level of growth since 2016, but also actually on a free cash flow per share basis, again, improving year-over-year since 2016, which I think is a fantastic story. So just moving to capital allocation. And I suppose just talking through the strategy of the business and how 2024 is applied to that. So obviously, financial resilience has been a key, continuing to invest in organic growth, really being second to that. Continuing to make sure that the business is paying a progressive dividend has absolutely always been key to the Board's strategy going forward and obviously, supporting M&A activity with any surplus capital being returned. Now 2024, I suppose, absolutely kind of emulated that strategy. We paid -- whilst we took out the debt in order to be able to support some of the M&A activity, we look to pay that down as quickly as we possibly could. We kept leverage still at a very low rate at 0.4x. We've continued to invest in the organic growth of the business and that being in things such as the digital marketing and AI programs that Gareth will touch on again later on. We continue to try and progress the dividend level, not just in absolute terms. It got to 18p but also in terms of the payout ratio increasing to 57%. And obviously, we did the acquisitions of both Belvoir and GPEA in the year. So very much, I suppose, in line with the strategy as previously discussed. And probably just the last one for me to finish on and just again trying to, I suppose, demonstrate the growth over the 10-year period and the resilience of the business. So the chart on the right-hand side, really kind of setting out both dividend, earnings per share and the adjusted profit before tax growth over the last 10 years and almost without exception and only, in fact, on the dividend in 2019 as a result of COVID, every single one of those metrics has increased year-over-year, which as I said, demonstrates the resilience of the business, the growth of the business. And actually, if you think about what's happened over that time period, both from a macroeconomic perspective in terms of COVID, in terms of Brexit, but also at an industry level. So the tenant fee ban that happened in 2019, which there was some concern around, this business has continued to grow throughout all of those concerns, throughout all of those challenges, and we will do so going forward. And probably the final number, just to leave you with is the bottom right 3-year cash conversion. So we had a look at the level of cash that was being generated by TPFG as was the Belvoir business and GPEA in the years 2021 through to 2023. And that amounted to GBP 64 million worth of cash being generated from operations. That number would have only increased in 2024 and obviously through into 2025 as well. And I think probably gives an idea of the fantastic opportunities that we have available to us going forward in terms of either supporting further acquisition activity, continuing to support the progressive dividend policy that has been put into place historically and this year as well and potentially, obviously, depending on the values there, also give us opportunity to be able to return more to shareholders in other means as well. So something -- I think it's fantastic, really exciting for us in terms of looking forward. And probably with that, I'll hand back to Gareth.

Great. Thanks, Ben. We're now going to talk about market update and strategy. So go to the next slide, please, Ben. Marketing '25 slide really robustly, but looking back on 2024. From a sales perspective, we always talk about a normal market being 1.1 million transactions. And you'll remember those of you that are with us in '23, that fell short in 2023, came in at about 1.05 million. 2024 feels like a 1.1 million maybe a few more and 2025 seems like it's going to be better than 1.1 million. So house prices are forecast to rise by about 2.5% in 2025. We think transactions will be greater than 1.1 million that normal market in 2025. And certainly, the first 3 months of 2025 have been pretty active, partly stimulated by the stamp duty holiday, but front-end activity in January, February and March ahead of our expectation. And in the sales market is good. It normally means the financial services market is good on a transaction basis, and we've seen really good start to the year in Financial Services. Lending's forecast to increase by 11% in 2025. And that's really a real tick in the box for us. And also in 2026, it is predicted to move forward to GBP 320 billion in terms of market lending. So about another 20% lift. So sales and financial service markets look really good. Lettings, which is a big part of what we do. We sort of talked about last year the rent inflation beginning to slow down, and we predicted that rent inflation would be around about 3% to 4% moving forward. It is slightly better than that in 2025 or certainly the first quarter and finished 2024 at about 8% up. There's still a mismatch in terms of supply and demand, and that's not going to go away anytime soon. Number of homes in the private rent sector remain stable at present. But we are seeing pressure with the Renters' Rights Bill. I'm going to talk about in a little bit of detail on that. So what is the Renters' Rights Bill? So it's the end of fixed-term tenancies. So it removes no-fault evictions and brings in hefty fines for noncompliant landlords, and is expected to be implemented in autumn 2025. So it will affect this year. It is affecting this year. What's the result of that? So we're already seeing some landlords saying I have had enough, I don't want to be a landlord anymore and I am going to sell my property. And that's one of the negatives of the Renters' Rights Bill. One of the positives and something we've been working on really, really hard is 50% of the private rented sector self-manage, okay? So you look after their own properties. So we've been as a group for the last 4 months getting out to the sort of regions and holding landlord evenings where we're inviting private landlords to come and understand the implications of the Renters' Rights Bill. And what's been really interesting is it wasn't their lack of knowledge. They had no idea these things are coming in, in May, and they're sort of horror about having to manage their own properties going forward to the point where at the end of every one of these evenings, we've got landlords coming to us and saying can you just look after my property for me? Because they don't want to expose themselves to high fines, the value of a letting agent for paying 10% of the revenue is significantly enhanced with the increased regulation. So that's going really well. We need to speed up or we can't get round and do see everybody at evening. So we're going to run a webinar series with again, the intent of disturbing the landlords to having a conversation about coming across and allowing one of our brands to manage the properties on their behalf. But I go back to, yes, there are people leaving the sector. I gave an example last year and I'm going to give it again this year. We had our Cheltenham franchisee have 600 properties under management. And in 2024, he had 24 landlords indicate they wanted to sell their property, and they wanted to get out of renting property. Of those 24 properties, the franchisee was able to sell 21 of those properties to existing landlords and retain those instructions. And 3 of those instructions went to first-time buyers or the secondhand market. Okay? So we've educated all of our franchisees that, that's the way they need to handle any landlord looking to exit the market, try and sell it to one of your existing landlords first, and that's having great success, okay? But again saying, Renters' Rights Bill, we see as an opportunity, but there's also some threats there and landlords are leaving the space. But we'll continue to work on those 2 initiatives to drive the best result possible. And then we come to our growth strategy and Ben talked about a 14% growth in the TPFG for 2024. I was delighted with that. We had a lot of distractions going on. So to be able to demonstrate the growth strategies, robustness in delivering that 14% growth was really pleasing to see. And we're going to stick with the growth strategy has served us really, really well over the last sort of 4 years. And that sits in 6 distinct sort of buckets, lettings being at the top of that because it's our biggest income stream, our biggest, our most valuable income stream, and we are supporting our franchisees in their ambitions to acquire local portfolios and grow their market share of their local lettings market. We've agreed a financing deal with Barclays on behalf of our franchisees that will hopefully accelerate the number of acquisitions we can do in '25 and beyond. The group over the last 3 years has delivered about 4,000 units a year. I think with the new finance package in place for franchisees, we can get that to 6,000, maybe 8,000 in time. We've also launched a new innovative brand guarantee product at a price they couldn't buy anywhere else that sort of money, and that gives them significant opportunity to upsell to landlords and make a margin on the cost of that policy. And that will drive profitability into our franchisees. We've talked every single year for the last 3 about us being underperforming in the sales arena, and this is still an opportunity, albeit we are seeing a good increase in market share across the old TPFG brands. We want to put all of that into our Belvoir group, and we believe we can drive the Belvoir sales results similar to what we've done in TPFG. Financial Services is a massive opportunity. We now have a database of 14 million contracts. We only do 5% of our mortgages through our franchise network and we do nothing from our licensee network. So huge opportunity. It's not going to be easy, but to be able to get hold of that data, communicate with that data, drive leads back into our Financial Services business is a key aim during 2025. Recruitment, always refreshing with the new franchisees coming in and taking over a business, is an important part of a franchisors role. And I am delighted to say that 80 resales already in 2025, which is the best start to a year we've ever had. Along with Nick Neil's business, YuMOVE, recruiting personal agents into the YuMOVE brand is the other important recruitment angle that we've got. Also refreshing and renewing the value proposition for The Guild membership to make that easier to sell to members going forward. So recruitments is the fourth elements of our growth strategy. Acquisitions, I did say after May last year, I'd never do another one, but probably forgotten the pain already. So there are acquisition targets. There's 2 in the franchise space, but we don't own and that's Winkworth and LSL franchising, neither for sale at the moment. Would we be interested? Absolutely, we'd have a look. They're both good businesses, so they fit our business really, really well. Belvoir has the really successful financial services buy-and-build strategy and we're going to continue with that supporting. Michelle is to acquire decent-sized financial services businesses. The criteria for those is there must be at least 20 financial consultants working within the business and they've got to be profitable. But I think we can do at least one of those this year or maybe 2. And I think that would be franchise acquisitions at the moment. But the clear bit is from Ben's slides, we're going to have loads of cash. We generate loads of cash quite quickly. So that debt will be paid down really quickly. And the cash reserves will grow. So we either continue with our M&A strategy or we return to shareholders. So yes, we will always look at acquisition opportunities. The final part from an acquisition perspective is looking at complementary businesses. So now we've got a network of 2,000 estate agency businesses. They all buy products from a variety of different companies. So if we could find a profitable business that offered services that our members wanted, it would be worthwhile is looking at our business, acquiring it and then rolling them out across 2,000 offices. So we will look at that as the sort of store we developed. And then the final growth strategy and I've touched on this already, is AI, digital marketing tools, automation, machine learning and AI. And a number of you will have looks at the sort of speed in which AI seems to be coming into our everyday lives and that's no different for us. And we've spent the last 9 months working with some AI specialists looking at some specific areas we believe it can add significant value. And we've just launched the first of 3 trials that will take place between now and September. Some of its automation to give you some idea about one of the projects, all of our lettings franchisees manage a number of properties. My reigning franchisee manages nearly 2,000 properties. To manage 2,000 properties, he needs more property managers. And they work really hard every single day working on the sort of dissatisfaction of tenants who are ringing in with their complaints. And most of those complaints are quite predictable. So it's -- I've lost my keys. My boiler is not working. I've got a dripping tap. My shower has stopped working. Someone smashed a window. So they're predictable and through AI and automation, we believe we can make a number of efficiencies to that sort of property manager base that we will be able to pass the benefits of that onto the franchisees. So that's one of the projects we're working on. Another one of the projects is Financial Services appointments by WhatsApp. So we get a number of leads that go unfulfilled every single day, but we can now use WhatsApp live chat to communicate with a customer in those early stages to understand how urgent is their request, how quick do they want to take a mortgage out and sort of qualify a big number down to a more manageable number before it then goes to a human. So one of the great bits of the AI is delivering better quality leads to the people that cost you a lot of money. So if we can get each financial consultant more leads but of a better quality, we'll be able to ramp their individual productivity and profitability. And that technology is really, really close. So we're really excited about AI. We're really excited about automating and driving savings for both us and our franchisees. And we're also really excited about the lead generation that these tools can give us. So I'm really excited. So that gives you a little bit of color into our growth strategy moving forward. In terms of outlook, 2025 has been good so far. We're happy. Quarter 1 trading is in line with management expectations. We've got a high level of recurring revenue, which supports a very resilient business model. We're focused on completing the integration. There's still work to do. We still need to drive some synergies out. We still need to integrate the business. We've made huge strides in what feels like a really short space of time, but we're coming up to the 1-year anniversary. So still lots of work to do in that. The level of cash generation is really exciting and provides opportunities going forward. And I think we're really well positioned to take advantage of market conditions in '25 and beyond. And I think the market for us in '25, '26, '27 is going to be really, really positive. I think the work we're putting into our growth initiatives, the investment we've made into our growth initiatives and the team of people we've assembled in the last 12 months, give us the bandwidth to really take opportunity and turn that into increased revenue and increased profitability. So we're really bullish about the future and it's really exciting. So with that comes to the end of the presentation. So thanks for listening. We'll now hand over for questions and answers. So thank you.

Perfect. That's great, Gareth. And thank you very much for your presentation. [Operator Instructions] We have received a number of questions throughout today's presentation, and I'll start the Q&A session for the first one which reads as follows. What is the difference between franchising and licensing.

So franchise, very similar, franchising percentage of turnover and a 5-year contract. Licensing, a fixed monthly payment for a range of products and services on a 12-month contract. So both recurring income streams: one is on a 1-year contract, albeit with a 94% retention rate and one is on a 5-year renewable contract.

Perfect. That's great. Thank you, Gareth. The next question here, I know you touched on AI in the presentation. But the question reads as follows. Can you give a little bit color on the opportunities you're excited about through data analysis and AI?

Yes. So going back 9, 10 months, when it was sort of quite embryonic and looking at voice. So we heard a pretty awful American accent doing digital fulfillment. And it wasn't very good. The latency was poor. But what it told you is they are the possible, I suppose. So we stuck with it. And 3 weeks later, we had another demo and it was a slightly better accent and slightly less latency. And then 3 weeks later, we had a restaurant call where someone was trying to book a table with a robot, and it was again all right, a bit awkward. But in the last 3 months, it's accelerated at pace. So the technology 9 months ago was interesting, but we wouldn't have used it. The technology today on voice we are starting the trial -- we started the trial last Monday. So that's how much it's developed and it will get better and better and better. I think what I've noticed through that period. So initially, I was really excited about what it's been, the answer to everything and may have an digital twin and being able to spend time in Spain and nobody noticed sort of thing. But that didn't happen. So you then looked at automation and WhatsApp. So what's really interesting is, customers potentially will complain about a robot talking to them, whereas if you're communicating via WhatsApp even though it's a robot, they probably won't. So it's understanding what can be fulfilled via text and WhatsApp and there's a lot of studies being done about how people like to be communicated with. And I'm still quite an old sort of, I like the phone. But everybody is sort of younger than me doesn't like the phone, they like text and WhatsApp. So fulfilling it in the right way, I think it's really important. So WhatsApp take property management. So I am a Russian or a Ukrainian or a Chinese person in one of the properties, I want to communicate in my own language, I can do that. It's translated in the middle, goes to the property manager in English. They answer in English, goes back as translated in Chinese. So the customer satisfaction piece goes up exponentially. So I think utilizing the tools, some of which are already there in the way we currently do the job would actually enhance the way we do the job, but also increase the number of people we can deal with and therefore, increase the number of leads we can generate and pass back to our franchisees who can have more quality, meaningful conversations that will drive income as opposed to trying to sift through a sort of needle-in-a-haystack piece. So to get the technology to do the sifting present really good quality conversations to the people you pay a lot of money to, who then convert that into commission from letting, sales, financial services, insurance sales. That's the vision. So we will be spending an awful lot of time on this over the next 6 to 9 months and believe it can absolutely transform our business because we've got 14 million data reports. So scale provides that opportunity. So if I'm a single business, I'm not sure I'm going to get as excited as I get about AI because I only got 1 office and -- but as a franchise group, with 14 million data reports, it's hugely exciting.

That's great. That's really interesting. Another question here is the withdrawal of stamp duty relief and the present market turbulence likely to create a downturn in the property market?

So normally, after a stamp duty holiday, there would be a little bit of a lapse. What was really interesting, January, February, March, front-end business. So the number of properties coming to market, the number of sales being agreed was much higher than we expected because they were never going to meet the stamp duty deadline. So the front-end activity is very, very good. Clearly, the stamp duty holiday built our pipeline towards the back end of last year, and we've seen a big number of change out in quarter 1. But actually front-end activity in Q1 is really good. So that suggests quarter 2 is going to be really good as well.

That's great. And another question that kind of follows on from that. Property prices are allegedly far too high in this country, and the Labor government allegedly wants to engineer house price to clients to encourage social and labor mobility. If they succeed in building 300,000 homes, would that impact your lettings and sales business?

Okay. Good question. So I don't think they will be able to build 300,000 homes anytime soon. I don't think there's the electricians, the plasterers, the plumbers which is why they're going to go down an apprentice room. So you get to 2029 and you're still at 150,000, which has been the sort of normal for the last 10 years. Last year was actually the worst year, I think, for a long time. So if we build 300,000 houses, once we got past the excess demand price, which might be another 5 years, if that was to happen, would that have an impact on prices? Probably. But one is I don't think we can get 300,000 houses build; two, there's still far too much demand, the supply is there currently. So I don't know how far you want to look out, but it's at least 10 years, I would have thought you'd agree with that.

Yes. And I think the other point is, obviously, if there are more houses being built, there's more houses to be sold. So there are also opportunities that come about from that within our businesses that we can capitalize on as well. So it may have a bit of an impact in terms of inflation in regards to house prices or even rental prices. But our history would tell us it's very unlikely to go backwards. And actually, if that creates more transaction flow that should be beneficial to us rather than negative.

And take away the business actually there's a moral piece, the number of homeless is awful. I've got kids, they've got kids. I would love a solution to be found that made the current situation and the current lack of supply better than it is. But it's going to take a lot of hard work and a lot of thought. And unfortunately, politicians, they work in those 5-year terms. And I think that's restrictive when you're trying to solve a long-term problem that's been here forever, similar to the NHS, but it undoubtedly is getting worse. So as a father and a grandfather, I want a better world for them to grow up in.

Another question here. How is the FCA started their study of the protection market and how this affect the Mortgage Advice Bureau/Primis advisers?

So yes, they have started. Obviously, with us being one of the largest appointed representatives in the U.K. in terms of this space. We also look to engage with the FCA on it, which we have done. We've already done some kind of initial meetings. And I think really important for us to be able to demonstrate how our practices work, how they, I suppose, interlink with mortgage advice but in terms of what they're setting down as the directly authorized party and being able to kind of share that clarity with the FCA, they went very well. And actually, I think just to provide you a bit of color in terms of, let's say, the exposure or the risk if the absolute worst were to happen in the FCA were to say now you absolutely can't sell protection products in that way. Selling protection amounts to about 1/3 of our total revenue and about 1/3 of our profitability. So at an adjusted operating profit level, that's about GBP 1 million out of the GBP 22 million, GBP 23 million of adjusted operating profit that we talked about earlier on. So as a proportion, and I suppose, risk towards as TPFG, it's really quite small. And obviously, that would be on the basis that it is removed completely. The view, I think, from us internally based on the feedback we've had from the FCA informally and through conversations that we've had with Mortgage Advice Bureau and Mortgage Advice Bureau's own kind of view on this is the practices that we follow are in line -- or appropriate. We don't incentivize our advisers in any way to go to one product or the other and it's very much consistent no matter what is being sold. So I think all of these things hold us in good stead as part of the review, and we'll just have to see what the FCA obviously comes out with as we progress the engagement with them.

That's great. The next question here. Can you talk a little bit about competitive landscape regarding letting book acquisitions? Lomond and LRG appear to be very active. Is this impacting multiples?

So they've been about for the last 3 years to be fair. So it does -- have they impacted multiples? Definitely. Do they buy where we buy and they don't. Our sweet spot is small lettings books, local lettings operators with 50 to 200 properties to sell. Lomond buying and Leaders to be fair, much bigger businesses like KFH in town. Yes, so much bigger businesses are going to Lomond and Leaders. It's affecting prices a little bit, but there's still more than enough smaller opportunities for us to consider. I think we've done 6 or 7 acquisitions this year and ahead of last year. So yes, it's -- yes, it's not a space we play in.

Another question. You mentioned the retention rate for the 1-year licensing deals. What's the retention rate for the 5-year franchising agreements?

Like 100% because within the franchise agreement, they would give their business back to us, which no one is going to do. People leave by selling their business, which is the resell part of our business. So they decide -- they come -- they get to an age where they don't want to do it anymore. And there's 3 scenarios that happen. They bring family into the business, which we're not a big fan of, doesn't normally work. They incentivize management which worked quite well through giving them some equity or they look to sell their business to a brand new franchisee, which we prefer because study shows that a new franchisee grows that business by about 30% in year 1, partly because they're motivated, partly because they embrace all the new initiatives and partly because they've got a debt service because they've paid money for the asset. So no, they don't give it up, they sell it and they go into their happy retirement, and we're bringing new franchisees in.

From a risk perspective do all franchisees and licenses carry professional indemnity insurance? And if so, is it by choice or are they compelled to do so under the terms of the agreement?

So all of them do have to carry professional indemnity insurance, and it is compelled under our agreements. We obviously, as much as we possibly can actually look to see if we can create group-wide deals which support the cost of that and make sure it's as low as possible, which actually we've just recently completed their exit. So yes, they all have professional indemnity insurance.

That's great. Potentially time just for one more question. As you're probably aware, there are ongoing issues in respect of commissions related to can loans. Is there any risk of similar issues in mortgage finance initiatives?

I think this ultimately is perhaps what they are reviewing as part of the protection study. I think it's quite different, though, the car loans issue was as a result of commissions not being very clear in terms of what commissions were being paid out in that loan. Now it's different in the respect of the way that mortgages and protection has to be sold. There is a very clear kind of statements set out in terms of the commissions and who those commissions are being payable to, what's available. And so quite different because actually, there is full transparency, which there was not in the car finance issue.

Got it. Thank you very much for answering those questions for investors. Of course, the company can review the questions submitted today, and we will publish responses on the Investor Meet Company platform. Just before redirecting investors to provide you their feedback, Gareth, could I just ask you for a few closing comments.

Absolutely. So 2024 has been an unbelievable year for the group. As always, I'm really thankful for everybody who's joined today, taking an interest in the group. We're really excited about what the future offers. And we look forward to updating you in September about how 2025 is panning out. So thank you very much for your interest and your time today.

That's great, Gareth. And thank you once again for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations. On behalf of the management team of the Property Franchise Group PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.