Final Results

Embargoed 7.00a.m. - 4 April 2019

Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR).

Hunters Property Plc

Notice of Results

For the year ended 31 December 2018

Hunters Property Plc ("Hunters" or the "Company" or the "Group"), one of the UK's largest franchised sales and lettings agency businesses, is pleased to announce its results for the year ended 31 December 2018.

Financial highlights

· Network Income rose 1% to £39.4m (2017: £38.9m);

· EBITDA increased by 2% to £2.28m (2017: £2.23m);

· Adjusted Profit Before Tax (*adjusted to exclude amortisation, profit/loss on disposal of intangibles, acquisition costs, share-based payments, other gains and losses, investment income and notional finance costs) increased by 5% to £2.01m (2017: £1.92m);

· Adjusted EPS increased by 3% to 5.91p (2017: 5.76p);

· Net Assets stood at £7.7m (2017: £7.6m);

· Proposed 7% increase in Final dividend to 1.60p, increasing full year then by 9% to 2.40p (2017: 2.20p) for the year.

Operational highlights

· 201 branches as at 28 February 2019 (31 December 2017: 213)

· 124 new franchisee branches in the last five years. Average Network Income per converting branch has risen to £186,000 (2017: £173,000)

· Independent agents that have converted to Hunters, during the four years to 2017, have increased their revenue by 21%. Average Network Income per branch has risen 10% to £200,000 (2017: £182,000)

· Customer satisfaction rating 96% (2017: 95%)

Kevin Hollinrake, Chairman, commented:

"We are delighted to report another strong set of results in what has been a challenging market. In 2018, we increased Network Income, Income per branch, Customer Service Rating and adjusted both profit before tax and earnings per share under our strategy to attract and improve businesses. For 2019 we expect activity levels to remain subdued and the impact of the tenant fee ban disruptive in the short term. We see the developments in the sector as providing further opportunities and it remains our intention to invest in our technology to keep us in the best place to benefit for the longer term. We have opened seven branches already this year and I am pleased that we are seeing an increasing number of high quality independent businesses. I look forward to updating you further during the year."

For further details, please contact:

Chairman's statement

We are pleased to report that the Group has delivered another set of strong results in 2018. Average branch income has increased by 10% despite subdued market conditions resulting in overall Network Income increasing by 1.4%.

The Group continued its expansion and progress towards becoming the nation's favourite estate agent. Organically, we believe we are the fastest growing listed business in our sector having opened 124 branches, including converting 92 independent agency businesses over the last five years and a further 46 branches through acquisition in that period. Our total branch network numbers 201 branches (28th Feb 2019).

We have had a positive response from the network to our lettings book acquisition fund, which to the year-end had completed on thirteen lettings agency portfolios including four in the second half of last year. This assisted acquisition strategy as well as our focus and systems helped the lettings side of the network grow by 13% last year. The average combined income per independent business converting to the Hunters brand has risen by 22% to £186,000 from £153,000 in 2016. We continue to attract good quality independent businesses who see the benefits of a national brand, marketing and best-in-class training, business support, purchasing power, reduced operating costs and opportunities to grow their income.

Gross revenue for the Group's network ("Network Income") reached £39.4 million in 2018 (2017: £38.9 million) a 1.4% increase on the previous year. Our average branch revenue reached £200,000 (2017: £182,000). This was an impressive achievement against the background of national activity having reduced by 7% for the year1.

The Group's network has out-performed the market each year over the last four years by on average of 12%. Our EBITDA reached £2.28 million (2017: £2.23 million) an increase of 2% on the previous year, whilst Adjusted EPS is 5.91p (2017: 5.76p restated).

Our business model focuses on supporting independent agents and our success is measured by both the number we retain and the underlying performance of those branches. We invest a great deal of time and resource helping to improve each branch's revenue. Our out-performance against the market per branch reflects that investment. This is not just a short-term success but a long-term strategy. Independent agents that converted to the Hunters brand during the four years to December 2017 have grown their revenue by 21%; confirmation of our ability to improve revenue for our network partners even in a challenging market. Our economies of scale and purchasing power, particularly network deals with Rightmove, Zoopla and OnTheMarket with discounts of around 60% from list prices, can also significantly reduce key operating costs. 

Customer satisfaction remains high with a 96% customer satisfaction rating over the year (2017: 95%), our seventh year in a row over 90%, which remains significantly higher than the industry average of 73%2. Our business and our network partners commit to delivering for our customers. This understanding underpins our belief that business owners paid on results will work harder and deliver better results than a network of employees, self-employed operatives on short-term contracts or those engaged to simply list a home rather than actually selling or letting a property.

On behalf of the Board, I would like to thank everyone in the network who has worked so hard to deliver these excellent results and in what has been a challenging market and also thank our customer support and service teams for working with our clients to help us 'get them there'. We are also, of course, very grateful to our record numbers of loyal customers, our sellers, landlords, buyers and renters right across the network.

CURRENT TRADING & OUTLOOK

We expect the current subdued levels of transactions to continue in 2019. Hunters' 2019 performance to date is in line with the Board's expectations. Given our limited London exposure we are not expecting to be as affected as our competitors, some of whom have reported already3. We are pleased to report that the impact of the tenant fee ban is likely to be less than we had expected and have workable and working plans in place to minimise its impact. We expect this market, the newly-implemented regulatory changes and the Government plans to effectively license all sales and letting agencies to provide us with even more opportunities to expand our branch network further and strengthen our brand. We are seeing an improved level of enquiries from high quality independent businesses. Our robust balance sheet and relatively low level of gearing will enable us to both expand our network and look to reward shareholders with an attractive dividend.

During the first two months of the year we have already opened 7 branches. Our pipeline of new outlets remains healthy and I look forward to updating you as the year progresses.

DIVIDEND

The Company is committed to a progressive dividend policy and proposes an increased final dividend of 1.60p per share, making 2.40p for the year, an increase of 9%.

On behalf of the Board

Kevin HollinrakeChairman3 April 2019

1 Source: Price Paid Data to November 2018, Land Registry.

2 Source: 2015 survey by The Property Academy.

3 Source: CW - RNS 7th March 2019, Foxtons - RNS 28th February 2019, LSL - RNS 5th March 2019.

Chief Executive's statement

We're delighted to report that despite a challenging market, our strategy has delivered an improved performance with an increase in branch performance and a strong set of results.

The Group has grown its market share of homes sold and let in 2018. So, despite market transaction volumes having reduced by 7%, Network Income, EBITDA, adjusted pre-tax profitability and adjusted EPS have each increased. This was aided by a number of factors. Our limited exposure to the London market, a 13% increase in Network Income from Lettings, including that from our branch assisted acquisition programme and by the additional branches added to the network. 2018 was also our first full year with the Besley Hill network.

We have started the year with uncertain customer demand and a Government seeking a viable solution with regards to Brexit. This factor, coupled with the tenant fee ban, will be disruptive but against that backdrop we are looking set to deliver another successful year.

Delivering outstanding customer service is at the heart of our operation. At exchange of a property or at the let of a property a vendor or landlord is contacted by a member of our customer service team. In 2018, 6,032 (2017: 4,155) customers provided feedback resulting in a 96% (2017: 95%) customer satisfaction rating. Our customer satisfaction ratio has been over 90% since 2011.

Maintenance in the quality of the network is key to our success. We started the year with 213 branch locations. We received 215 (2017: 228) enquiries resulting in 10 (2017: 21) new openings under the Hunters brand. These openings consisted of 10 (2017: 15) conversions of existing independent estate agency businesses. We were delighted that we have converted some stronger independents this year with the average of their incomes before conversion at £186,000 (2017: £173,000) being a 22% increase on the £153,000 average in 2016, a sign of our increasing strength attracting increasingly stronger businesses.

The Group implements a rigorous franchisee selection process. This ensures, as far as possible, that new franchisees are committed to the Group's high standards. Approximately 80% are rejected at an early stage.

We continue to invest in our people and our technology, marketing and networks. We have devoted over £500,000 this year in training and have provided 107 courses, resulting in 74% of the network completing training courses through the Hunters Vocational Qualification, endorsed by Propertymark. We intend to continue to develop and invest in our in-house, market leading software to enhance the digital side of the business, for example we launched our customer portals in October 2018 to further enhance the customer experience. This complements our online valuation booking capability which has already directed over £13m of property to the network. Just as importantly we retain the levels of service that our customers require so as to secure and safeguard a long-term future. We are working on the next stage in developing our technology to make the entire process more efficient and effective for our customers. In terms of marketing we augmented our national campaign around both our brand promise 'Here to get you there' and local ownership and local expertise. This will continue to be our message in the year ahead.

I am pleased to report that a number of our franchisees have consolidated branches this year, a pattern we expect to continue as franchisees look to gain efficiencies. I am also delighted to report that we have already opened an additional 7 branches with new franchisees since the 1 January 2019, bringing our branch number to 201 as at the end of February. Numbers themselves only tell part of the story. The number must be taken in context with both average branch performance and improvement or otherwise against previous years and as against the market's level of activities. Against a market down 7% in 2018 (2017: down 15%) I am delighted to be able to announce that the average revenue per branch has increased by 10% to £200,000 (2017: £182,000). Branches that joined in the four years to December 2017 are up, on average, by 21%. Improvement is not just short-term, those who have been converted for 7 years are up, on average, by 91%. All in the Network Income has increased over the last ten-year period 2008 to 2018 on average at a Compound Annualised Growth Rate ("CAGR") of 21%.

Franchise prospects for 2019 have started well, in part reflecting the wider market sentiment. We retain a proceeding pipeline of 32 (2017: 27) new branches being processed and enquiry levels on target to exceed those of 2018. We have expanded the team further to improve the process and allow more ongoing support. Our franchise marketing plan is heavily weighted on direct marketing to suitable independent businesses, this along with increased online presence are integral elements of this growth.

It is expected that 2019 will see continued network growth, especially through conversions of existing businesses which we expect to account for an increasing portion of branch growth. We see the uncertainty and impact of the proposed tenant fee ban, Client Money Protection and increased regulation as driving both consolidation and enquiries towards Hunters' market leading conversion package. This is designed to allow independent agencies to join with minimal cost, whilst benefiting from both a full estate agency package and retention of the key parts of their independence. We offer the ability to market on all three major portals at a significant discount to independent market rates. This arrangement enhances the services branches can offer to vendors and landlords with the branch being able to market properties to the widest possible audience for buyers and tenants. The scale of the discount means, as is increasingly important, branches receive help to keep on top of their costs. We are delighted to have been one of the first in the industry to offer this service.

We have an outstanding and experienced team who are committed to Hunters and our quest to become the Nation's Favourite Estate Agent. This could not be achieved without their sterling efforts. We believe that we have some truly outstanding industry professionals associated with the business and are grateful to them for their dedication to Hunters.

Glynis FrewChief Executive

Financial review

REVENUE

Group revenue for the financial year ended 31 December 2018 decreased by 1.3% to £14.0 million (2017: £14.2 million). This included the following factors:

· Revenue from franchisees increased due to the 37 new franchisee branches that joined the Group in 2017 and a further 10 new franchisee branches that joined the Group in 2018;

· Lettings revenue grew as we introduced lettings to new franchisees and continued to grow our existing lettings offices. Network Income for Lettings grew 13% (2017: 16%); and

· Residential Sales revenue reduced against the backdrop of a market down 7% during the year.

EBITDA (Operating profit before depreciation, amortisation, impairments and profit/loss on disposal of non-current assets, acquisition & share-basedpayment expenses) 

EBITDA provides a key measure of progress made. EBITDA for the year to December 2018 was £2.28 million, an increase of 2.3% on the same period last year (2017: £2.23 million).

Administrative expenses decreased by £0.2 million during the year. Lower costs in 2018 were in part due to integration activities completed during the year.

ADJUSTED EARNINGS (Profit after tax adjusted to exclude amortisation and profit/loss on disposal of intangibles, time-value interest costs, business combination acquisition expenses, share-based payments, other gains and losses and finance income)

Adjusted earnings was £1.25 million, an increase of 4% over the prior period (2017: £1.79 million). Amortisation and disposal costs increased significantly during the period, including a full year regarding Besley Hill, as the Group continued to accelerate its growth through the build and improve elements of its strategy.

EARNINGS PER SHARE

Basic earnings per share for the year ended 31 December 2018 was 2.65p (2017: 2.89p) based on a weighted average of 31,822,604 shares (2017: 31,022,076) in issue during the year.

ADJUSTED EARNINGS PER SHARE

Adjusted earnings per share was 5.91p (2017: 5.76p) an increase of 3%. 

DIVIDENDS

The Board is proposing a final dividend of 1.60p per share for 2018, which subject to shareholder approval at the AGM on the 17 May 2019, will be paid to shareholders by 22 May 2019 based on the register of shareholders as at 26 April 2019. Taking this together with the interim dividend of 0.8p (2017: 0.7p) paid to shareholders on 19 October 2018, this equates to a total dividend for the year of 2.40p an increase of 9% and providing dividend cover of 2.4 times. The Company intends to pay a progressive dividend going forwards.

LIQUIDITY

The Group had cash balances of £1.7 million at 31 December 2018 (2017: £1.6 million). The Group retains a £6 million facility to support its plans. The facility includes quarterly repayments of £22,500. Total bank facilities available to the Group at 31 December 2018 stood at £5.8 million (2017: £6 million) of which £4.1 million (2017: £3.8 million) is drawn.

FINANCIAL POSITION

The Group has generated strong cashflow from operations of £1.7m (2017: £1.6m) which are expected ordinarily to continue. These cashflows, together with undrawn facilities available, ensure the Group is in a strong financial position from which to carry out its strategy to grow the franchise business both organically and through acquisition in the coming year.

Ed Jones Chief Financial Officer

Consolidated statement of comprehensive income

For the year ended 31 December 2018

Consolidated statement of financial position

As at 31 December 2018

The financial statements were approved by the Board of Directors and authorised for issue on 3 April 2019 and are signed on its behalf by:

Mr E A Jones

Director

Company Registration No. 09448465

Company statement of financial position

As at 31 December 2018

As permitted by s408 Companies Act 2006, the Company has not presented its own Statement of Comprehensive Income. The Company's profit for the year was £1.240 million.

The financial statements were approved by the Board of Directors and authorised for issue on 3 April 2019 and are signed on its behalf by:

Mr E A Jones

Director

Company Registration No. 09448465

Consolidated statement of changes in equity

For the year ended 31 December 2018

Company Statement of Changes in Equity

For the year ended 31 December 2018

Consolidated statement of cash flows

For the year ended 31 December 2018

Changes in liabilities arising from financing activities

The table below details changes in the Group's liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group's Consolidated Statement of Cash Flows as cash flows from financing activities.

Major non-cash transactions

During the year the Group entered into a number of non-cash transactions as follows:

The Group was issued 30,303 shares in a listed entity as part of an ongoing negotiation with a third party property portal entity whom the Group use as part of their trading, as disclosed more fully in note 14.

Company Statement of Cash Flows

The Company has not held any cash and cash-equivalents during the year or the comparative year. During the prior year the Company entered into a number of equity transactions which were enacted via intercompany accounts. Accordingly, the Directors have not presented a Company Statement of Cash Flow

RESTRICTED CASH BALANCES

Included within cash and cash equivalents are cash balances which the Group consider to be restricted due to delegation of control totalling £69,000 (2017 - £47,000). The balance can be contractually withheld from the Group for a period of up to 5 years

Notes to the financial statements

For the year ended 31 December 2018

1 Accounting policies

Company information

Hunters Property Plc ("the Company") is a public limited company domiciled and incorporated in England and Wales. The registered office is Apollo House, Eboracum Way, York, North Yorkshire, YO31 7RE. The consolidated financial information (or "financial statements") incorporate the financial information of the Company and entities (its subsidiaries) controlled by the Company (collectively comprising the "Group").

The principal activity of the Group is the provision of property services to consumers and businesses which include sales, lettings, franchising and related services.

1.1 Accounting convention

The financial information set out above does not constitute the Company's statutory accounts for the years ended 31 December 2018 or 2017, but is derived from those accounts. Statutory accounts for 2017 have been delivered to the Registrar of Companies and those for 2018 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, modified to include the revaluation of certain financial instruments at fair value.

1.2 Basis of consolidation

The Group financial information consolidates those of the Company and the subsidiaries that the Company has control of. Control is established when the Company is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary.

Where a subsidiary undertaking, or unincorporated business, is acquired/disposed of during the year, the consolidated profits or losses are recognised from/until the effective date of the acquisition/disposal.

All inter-company balances and transactions between Group companies have been eliminated on consolidation.

Where necessary, adjustments are made to the financial information of subsidiaries to bring the accounting policies used into line with those used by the Group.

Business combinations

The Group applies the acquisition method of accounting for business combinations enacted after the date of creation of the Group following incorporation of Hunters Property Plc, as detailed further in note 1.11. The consideration transferred by the Group to obtain control of a subsidiary or unincorporated business is calculated as the sum of the acquisition-date fair value of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interest issued by the Group. Acquisition costs are expensed as incurred.

The Group recognises identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognised in an acquired subsidiary's (or unincorporated business's) financial information prior to the acquisition. Assets acquired and liabilities assumed are measured at their acquisition-date fair values.

Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the fair value of consideration transferred, over the Group's share of the acquisition-date fair values of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately.

A change in the ownership interest of a subsidiary or unincorporated business, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary or unincorporated business, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

1.3 Going concern

As at the year end the Group has net current assets. The nature of the Group's trade is that there exist intangibles which generate significant cashflows, and are expected to continue doing so. The Group has sufficient unused facilities available in its bank financing as disclosed in note 17.

The Directors have considered 12 month cashflow forecasts from the date of approval of the financial statements, and do not foresee any cashflow issues arising. Taking these factors into account, as at the time of approving the financial statements, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus Directors continue to adopt the going concern basis of accounting in preparing the financial statements.

1.4 Revenue

The Group has applied IFRS 15 'Revenue from contracts with customers' for the first time in the current reporting period. Under IFRS 15, the Group applies the 5-step method to identify contracts with its customers, determine performance obligations arising under those contracts, set an expected transaction price, allocate that price to the performance obligations, and then recognises revenues as and when those obligations are satisfied. Under the previous standard (IAS 18) the Group recognised revenue when the risks and rewards of the service were transferred to the customer.

The Group has reviewed its contracts with customers and the performance obligations within those contracts and has concluded that no change is required to previously reported revenue. However, the Group has revised its accounting policies compared to those disclosed in the prior year Financial Statements to reflect the differences between IFRS 15 and IAS 18. The policies below reflect these revisions.

Revenue from residential, commercial and land sales

This represents revenue from the sale of residential property, sale of commercial property or the sale of land. The revenue is recognised at the point the Group has performed its performance obligation to see the transaction through to the exchange of contracts between a buyer and a vendor. This results in revenue recognition consistent with the previous accounting policy.

Lettings revenue

This represents revenue from commission earned as letting agents. The Group's performance obligations under these contracts are to provide services to manage the letting of properties. Where the performance obligation relates to letting of a property the revenue is recognised at the point the property has been let. Where the performance obligation relates to the management of a lettings property, revenue is recognised over the period the property is managed. This results in revenue recognition consistent with the previous accounting policy.

Franchise revenue

Upfront fees - This represents revenue at the inception of a franchisee contract. The Group's performance obligation is to provide time, knowledge and expertise required to be able to set up a functioning franchised branch. This involves but is not limited to; finding and assessing suitable premises, providing support and training to the new franchisee prior to launching the new office, providing branding services and marketing materials. This results in revenue recognition consistent with the previous accounting policy.

Management service fees - This represents revenue from franchisee management service fees charged for operating a Group's franchise. Revenue is recognised monthly in arrears, calculated by reference to the terms of the contract and the value of sales attributable to each franchisee. This results in revenue recognition consistent with the previous accounting policy.

Central marketing fund - This represents revenue earned from franchisees for providing marketing services. The Group's performance obligation is to arrange for the provision of services to promote the franchisees businesses through national marketing campaigns. The Group does not control the specified service provided to the franchisees so is considered an agent under IFRS 15. As such the revenue is recognised net of the cost of the services provided.

Other

Financial services revenue represents commission receivable from partner customers from the sale financial products associated with the sale or let of a property. The Group's performance obligation under the contract is to provide an introduction of prospective policyholders to partners. The performance obligation has been satisfied at the point of successful placement or renewal of a financial product. This results in revenue recognition consistent with the previous accounting policy.

Software sales represents revenue from the provision of estate agency software. The Group's obligation is to provide the franchisees with access to the software throughout the term of the agreement. Revenue is recognised in the month the service is provided and is consistent with the previous revenue recognition accounting policy.

Survey revenue represents fees earned from Survey and Valuation work. The Group's obligation is to provide a professional survey or valuation by a surveyor. Revenue is recognised when the professional survey or valuation has been completed. This results in revenue recognition consistent with the previous accounting policy.

Rental income represents rent received from short term licensing arrangements, entered into to make use of vacant office space. The Group's obligation is to provide office accommodation throughout the period of the contract. Revenue is recognised over the period of the licence. This results in revenue recognition consistent with the previous accounting policy.

Deferred income arises where services are invoiced in advance of performance. The amount is released to the profit or loss in subsequent periods in reference to the stage of completion of the transaction at the reporting date.

Where the Group identifies rights to the economic benefits of other sources of income through fulfilment of certain performance criteria, the income is recognised in the relevant accounting period when those conditions are fulfilled, net of VAT.

1.5 Intangible fixed assets Ð goodwill

Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identifiable and separately recognised. After initial recognition, goodwill is measured at cost less accumulated impairment losses. See note 1.9 for a description of impairment testing procedures.

1.6 Intangible fixed assets other than goodwill

Intangible assets are initially measured at cost. Where intangible assets are acquired as part of a business combination, cost is determined by reference to a fair value estimation technique as disclosed further in note 15. After initial recognition, intangible assets are recognised at cost less any accumulated amortisation and any accumulated impairment losses.

The depreciable amount of an intangible asset with a finite useful life is allocated on a systematic basis over its useful life. Amortisation begins when the asset is available for use, i.e. when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.

The amortisation period and the amortisation method for intangible assets with a finite useful life is reviewed each financial year-end. If the expected useful life of the asset is different from previous estimates, the amortisation period is changed accordingly.

Research expenditure is written off against profits in the year in which it is incurred. Identifiable development expenditure is capitalised to the extent that the technical, commercial and financial feasibility can be demonstrated.

Amortisation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:

Software 3-7 years or over the life of the license

Franchise development grants Over the life of the franchise contract (typically 10-15 years)

Brands 10 years

Customer lists 5-15 years

1.7 Property, plant and equipment

Property, plant and equipment are recognised as an asset only if it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.

An item of property, plant and equipment that qualifies for recognition as an asset is measured at its cost. Cost of an item of property, plant and equipment comprises the purchase price, any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

After recognition, all property, plant and equipment are carried at cost less any accumulated depreciation and any accumulated impairment losses.

Depreciation is provided at rates calculated to write down the cost of assets, less estimated residual value, over their expected useful lives on the following basis:

Leasehold land and buildings Straight line over the life of the lease

Plant and machinery 25% Reducing balance

Fixtures, fittings and equipment 25% Reducing balance or 10%-33% straight line

Motor vehicles 25% Straight line

The residual value and the useful life of an asset are reviewed at least at each financial year-end and if expectations differ from previous estimates, the changes are accounted for as a change in an accounting estimate in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying value of the asset and are recognised in profit or loss.

1.8 Non-current investments

A subsidiary is an entity controlled by the Group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

Other investments in equity instruments that have a quoted market price in an active market and other equity instruments whose fair value can be reliably measured are measured at fair value.

1.9 Impairment of non-current assets

For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash flows. As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors goodwill.

Cash-generating units to which goodwill has been allocated are tested for impairment at least annually. All other individual assets or cash‑generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An asset or cash-generating unit is impaired when its carrying amount exceeds its recoverable amount. The recoverable amount is measured as the higher of fair value less cost of disposal and value in use. The value in use is calculated as being net projected cash flows based on financial forecasts discounted back to present value.

The impairment loss is allocated to reduce the carrying amount of the asset, first against the carrying amount of any goodwill allocated to the cash-generating unit, and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment loss is reversed if the asset's or cash-generating unit's recoverable amount exceeds its carrying amount.

1.10 Financial instruments

Financial assets

Financial assets are recognised in the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the instrument.

Financial assets are initially recognised at fair value plus directly attributable transaction costs.

After initial recognition, financial assets are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial.

Impairment losses on trade receivables are measured based on estimated expected credit losses.

A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred.

Financial assets held for trading

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by IFRS 9. The Company has not designated any financial assets upon initial recognition as at fair value through profit or loss.

Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments.

Financial assets at fair value through profit and loss are carried in the Statement of Financial Position at fair value with changes in fair value recognised in finance revenue or finance expense in the Statement of Comprehensive Income.

Impairment of financial assets

Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.

Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset's original effective interest rate. The impairment loss is recognised in profit or loss.

If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.

Derecognition of financial assets

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the Group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Classification of financial liabilities

Financial liabilities include borrowings and trade and other payables.

Financial liabilities are obligations to pay cash or other financial assets and are recognised in the statement of financial position when, and only when, the Group becomes a party to the contractual provisions of the instrument.

Financial liabilities are initially recognised at fair value adjusted for any directly attributable transaction costs.

After initial recognition, financial liabilities are measured at amortised cost using the effective interest method, with the effective interest recognised as an expense in finance costs.

Derecognition of financial liabilities

Financial liabilities are derecognised when the Group's contractual obligations expire or are discharged or cancelled.

1.11 Equity instruments

Share capital represents the nominal value of shares that have been issued.

Share premium represents the excess consideration received over share capital upon the sale of shares, less any incidental costs of issue.

Retained earnings include all current and prior period retained profits.

Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the Group.

Within the Company, the share option reserve is recognised in respect of the cumulative fair value of share options recognised, net of issues made, where the benefit of the services received under the share option are recognised within subsidiaries of the Company. Once the share option is exercised, the element included within this reserve for fair values expensed is transferred to the share premium account. Full details on share options existing as at the year end is given in note 25.

The Group applied the principles of merger accounting in consolidating the results, as control was only acquired by Hunters Property Plc via a share-for-share exchange on 27 March 2015. Merger accounting requires that the results of the Group are presented as if the Group has always been in its present form, and does not require a re-evaluation of fair values as at the point of acquisition. Accordingly, as a result of this merger accounting a merger reserve is recognised within equity which represents the difference between the net assets of the Group and the retained profits recognised by the Group as at 27 March 2015.

1.12 Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.

Deferred tax

Deferred taxes are calculated using the liability method on temporary differences between the carrying amounts of assets and liabilities and their tax bases.

A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss). However, for deductible temporary differences associated with investments in subsidiaries a deferred tax asset is recognised when the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.

1.13 Provisions

Provisions are recognised when the Group has a legal or constructive present obligation as a result of a past event, it is probable that the Group will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting end date, taking into account the risks and uncertainties surrounding the obligation.

Where the effect of the time value of money is material, the amount expected to be required to settle the obligation is recognised at present value. When a provision in measured at present value the unwinding of the discount is recognised as a finance cost in profit or loss in the period it arises.

1.14 Employee benefits

The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or non-current assets.

The cost of any unused holiday entitlement is recognised in the period in which the employee's services are received.

Termination benefits are recognised immediately as an expense when the Company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.

1.15 Retirement benefits

Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.

1.16 Share-based payments

The fair value of equity-settled share based payments to employees is determined at the date of grant and is expensed on a straight-line basis over the vesting period based on the Group's estimate of shares or options that will eventually vest. Full disclosure of the calculation models is given in note 25.

1.17 Leases

The economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards of ownership of the leased asset. Where the Group is a lessee in this type of arrangement, the related asset is recognised at the inception of the lease at the fair value of the leased asset or, if lower, the present value of the lease payments plus incidental payments, if any. A corresponding amount is recognised as a finance lease liability.

This liability is reduced by lease payments net of finance charges. The interest element of lease payments represents a constant proportion of the outstanding capital balance and is charged to profit or loss, as finance costs over the period of the lease.

Rentals payable under operating leases, including any lease incentives received, are charged to income on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the lease asset are consumed.

1.18 Standards, amendments and interpretations adopted in the year

The current standards, amendments and interpretations have been adopted in the year and have not had a material impact on the reported results in the Group's financial statements:

· Amendments to IAS 40 'Investment Property' for transfers of investment property

· IFRS 15 'Revenue from Contracts with Customers', including clarifications made to the standard since initial release

· IFRS 9 'Financial Instruments'

· IFRIC 22 'Foreign Currency Transactions and Advance Consideration'

· Amendments to IFRS 2 'Share-based Payment' for classification and measurement of share-based payment transactions

· Amendments to IFRS 4 'Insurance Contracts' around interaction with IFRS 9

The disclosure requirements of the Group have been revised to comply with the updated requirements of IFRS 9 'Financial Instruments' but the Group has not otherwise adjusted the carrying value of its assets or liabilities at any reporting date.

1.19 Standards, amendments and interpretations in issue but not yet effective

The adoption of the following mentioned standards, amendments and interpretations in future years:

The directors have reviewed the impact of IFRS 16 'Leases' and expect this to have a material impact on the financial statements. As at the current period end, it is expected that the implementation of IFRS 16 will create right of use assets with carrying value £2,506,248 and associated lease liabilities of £2,823,798, with current period reported profits being increased by £2,597 for adjustments in respect of derecognising operating lease rentals, and recognising depreciation on right of use assets and finance costs on the lease.

The directors have also reviewed Apollo House in relation to IFRS 16 and are to recognise the elements under sublet as an investment property. The directors anticipate that this will be recognised at historical cost based on the present value of the lease commitment, although are yet to finalise this accounting policy choice.

The amendments to IFRS 3 have altered the definition of a business combination, which the directors already consider to be a key judgement as disclosed more fully in note 2. The directors are of the opinion that the updated definition remains broadly consistent when reviewing from the perspective of business combinations enacted during the current and comparative year; further, on more marginal business combinations there has been no goodwill recognised which would make the treatment substantially equivalent if such a business combination was judged to be simply an acquisition of assets. As such, the directors do not expect that the future adoption of this standard would have a material impact on the financial statements.

2 Judgements and key sources of estimation uncertainty

The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.

Critical judgements

The following judgements (apart from those involving estimates) have had the most significant effect on amounts recognised in the financial statements:

Basis of consolidation

The Group was formed on 27 March 2015 when Hunters Property Plc acquired shares in its subsidiaries through a share-for-share exchange. This type of common control transaction falls outside the scope of IFRS 3 and therefore UK GAAP has been referred to for best practice guidance. The result is that the Group adopted merger accounting as a basis for the Group consolidation.

Franchisee revenue & intangible assets

Franchisee sign up fees are recognised upfront at the inception of a franchisee contract, which in the Directors' opinion matches to the estimated cost of time and knowledge to create the franchiser-franchisee contractual arrangement.

Franchisee Development Grants ("FDG's") are recognised at the inception of certain contracts with franchisees, and are provided in order to assist with the transition of franchisees to the Hunters brand name. These intangibles are amortised over the life of the franchise contract, typically 10-15 years.

Accounting for acquired lettings books

The Group has acquired lettings books in the current and comparative year. Although each of these books are subsumed within the overall trade of the Group, the originally acquired book is separable and tradable in its own right, although following acquisition is managed by existing Company staff and systems. The directors consider that recognition under IFRS 3 'Business Combinations' is the most suitable accounting treatment.

Key sources of estimation uncertainty

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows:

Provisions

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date. Each period the Directors assess the risks and uncertainties surrounding the obligation and review the discount rates applied when calculating the present value. When reviewing the discount rates the Directors refer to the Group weighted average cost of capital. Further details on the assumptions made for specific provisions are disclosed in note 22.

Business combinations and goodwill

The Group has made acquisitions during the year and comparative year. Judgements and estimations are made in respect of the recognition of the acquisition as a separable business, and of measurement of the provisional fair values of assets and liabilities acquired and the consideration transferred. Furthermore, estimation techniques have been used to value the intangibles acquired.

The Directors test annually for impairment of the Group's intangible assets and goodwill, details of which are given in note 12.

3 Revenue

IFRS 8, Operating Segments, requires operating segments to be identified on the basis of internal reports of the Group that are regularly reviewed by the Group's chief operating decision maker. The chief operating decision maker of the Group is considered to be the Boardof Directors.

The Group has three principal operating segments: Residential Sales, Lettings, and Franchising. The operating segments are monitored by the Group's chief operating decision maker and strategic decisions are made on the basis of adjusted segment operating results. All assets, liabilities and revenues are located in, or derived in, the United Kingdom.

The Group does not have any major customers which account for 10% or more of revenues.

Segmental analysis of revenue

Revenue analysed by geographical market

Further disclosure of the segmental analysis of goodwill is made in note 12. Due to the nature of operations, the Directors, as the chief operating decision-making body, review financial information for the Group's overall business and have identified a single operating segment at cost and asset/liability levels. Accordingly, further disclosure has not been made of these elements.

All of the above revenue has arisen from contracts with customers. The revenue presented above has been disaggregated to provide revenue amounts for material categories of services provided by the Group in accordance with the disclosure requirements of IFRS 15 'Revenue from Contracts with Customers'.

* A small element of Lettings sales is recognised at a point in time, which relates to upfront fees.

† A small element of Other sales is recognised over time, which relates to rental income.

4 Operating profit

The Group's subsidiary Realcube Limited has undertaken Research & Development activities on which tax credits were received totalling £48,000 (2017 - £22,000). Expenses in relation to this are included within employment costs.

5 Auditor's remuneration

In addition to the above, there were £1,000 of non-audit fees paid to the Group's auditors for a review of compliance with financing covenants in each of the current and comparative years.

6 Employees

The average monthly number of persons (including Directors) employed by the Group during the year was:

Their aggregate remuneration comprised:

Details of Directors' remuneration is provided in note 30.

7 Finance income

8 Finance costs

9 Taxation

The charge for the year can be reconciled to the profit per the Consolidated Statement of Comprehensive Income as follows:

In addition to the amount charged to the Consolidated Statement of Comprehensive Income, the following amounts relating to tax have been recognised directly in equity:

The UK corporation tax rate was 19% throughout the year.

A reduction in the UK corporation tax rate from 19% to 17% (effective from 1 April 2020) was enacted in March 2017. These rates have therefore been considered when calculating deferred tax at the reporting date. Deferred tax balances at the reporting date are measured at 17% (2017: 17%) except when the timing difference is expected to be substantially unwound before 1 April 2020, in which case a rate of 19% has been used to measure the balance.

10 Dividends

The proposed final dividend for the year ended 31 December 2018 is:

The proposed final dividend is subject to approval by shareholders and has not been included as a liability in these financial statements.

The full year dividend for 2018 is 2.40 pence per share, made up of the interim dividend of 0.80 pence per share and a final proposed dividend of 1.60 pence per share.

11 Earnings per share

The calculation of the basic and diluted earnings per share is based on the following data:

In each period there were share options outstanding. As at 31 December 2018, 89% of these options were in the money, and are due to expire at various stages over the next 8 years.

The Directors use adjusted earnings before time-value interest, interest income, amortisation, impairments and loss on disposal of intangible assets, costs of acquisition, and share-based payment expenses ("Adjusted Earnings") as a measure of ongoing profitability and performance. The calculation of these Adjusted Earnings now takes into account the impact of profits and losses on the disposal of intangible assets; this is to better reflect the non-cash impact of the consumption of intangible assets, which the Directors feel provides more useful and relevant financial information to shareholders. The previously reported Adjusted Earnings for the year ended 31 December 2017 were £1.811 million, and reported Basic Adjusted Earnings per Share was 5.84p.

The calculated Adjusted Earnings for the current period is as follows:

12 Goodwill and other intangible assets

The Company had no intangible assets as at 31 December 2018 or 31 December 2017.

Franchise Development Grants ("FDG's") and rebrand costs are expenses incurred at the inception of certain contracts with franchisees in order to assist with the transition to using the Hunters brand name. The amounts invested are amortised over the minimum life of the underlying franchise contract, typically 10 to 15 years. The Group recognises an impairment as provision against impairment losses arising from the risk of early terminations of franchise agreements.

The Group tests goodwill annually for impairment, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill is assessed for impairment by comparing the carrying values with the value-in-use calculation, which is determined by calculating the net present value (NPV) of future cash flows arising from the original acquired business.

The NPV of future cash flows is based on budgets and forecasts for the next 5 years to 2023, using growth rates of 0% - 3% based on past experience and outlook. Thereafter growth is assumed to be 0-3% in to perpetuity based on long term housing sector growth rates and current housing transaction volumes. A discount rate of between 10% and 11% has been used based on the Group's estimated cost of capital, and varied based on the risk profile of the underlying asset.

The key sensitivities in assessing the value in use of goodwill are forecast cashflows and the discount rate applied as follows:

· A 1% reduction in long term growth rates would have no impact on carrying values; and

· A 2% increase in the discount applied would have no impact on carrying values.

Given the political uncertainties around Brexit, the Group has applied further sensitivities in assessing the value in use in the short to medium term. 5% reduction compared to the base case revenues over each year of the 5 year forecast horizon period, have no impact on the assessment of impairment.

The carrying amounts of goodwill have been assigned to the following cash-generating units:

13 Property, plant and equipment

The Company had no property, plant and equipment assets at 31 December 2018 or 31 December 2017.

The net carrying value of property, plant and equipment includes the following in respect of assets held under finance leases or hire purchase contracts, which are secured by the lessors' title to the assets. The depreciation charge in respect of such assets amounted to £28,672 (2017 - £40,901) for the year.

Bank borrowings are secured by a fixed and floating charge over the current and future assets of the Group that include the property plant and equipment, as disclosed further in note 17.

14 Investments

The movement in Group investments represents a non-cash acquisition via a gift of shares in return for continued service with a property portal. As at the year end, the investment is held at fair value as determined using market price.

An impairment review has been carried out however not considered necessary in the current year.

Movements in non-current investments

Movements in non-current investments

15 Business combinations

Acquisition of a lettings book

During 2018 the Group acquired a lettings book providing landlords with residential letting agency services. The consideration paid totalled £350,000, being settled in cash. In addition there were directly attributable costs of £11,255.

As part of the acquisition, the Directors have identified an intangible asset, being the lettings book. This was determined to be equal to the amount paid for the book, after adjustment for deferred tax. Historical data and forecasts have been used, together with a 10% discount rate (reduced to reflect the relatively low risk profile of a lettings book acquisition) and an assumption of a useful life of 12 years for the lettings book to estimate the fair value of this intangible.

The analysis of the cash flows on acquisition is:

The lettings book was acquired for a consideration of £350,000 on 31 December 2018 and its operations began from 1 January 2019; accordingly, it contributed £nil revenue and profit in the current financial year. Had the acquisition taken place at the start of the year, the directors estimate that the acquisition would have contributed £215,000 of revenue and £101,000 of profit before tax.

In addition to the above, the business combination and acquisition expenses disclosed on the face of the Consolidated Statement of Comprehensive Income includes £2,000 of costs, relating to an aborted acquisition.

16 Trade and other receivables

Trade receivables at the reporting date are shown above net of provisions. Expected credit losses for the following 12 months have been estimated in accordance with IFRS 9, taking into account that there has been no significant increase in credit risk. Given the straightforward nature of the Group's receivables, the directors consider that the Group qualifies for Stage 1 impairment models which permits the simplified recognition of credit losses arising from default events that are possible within the next 12 months only.

Trade receivables are stated net of impairment for estimated irrecoverable amounts of £143,805 (2017: £76,361). This impairment has been determined by reference to past default experience and known issues. Write offs are made when the irrecoverable amount becomes certain. The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

Included within prepayments and accrued income is an amount of £35,904 (2017 - £nil) relating to accrued revenues, calculated in accordance with IFRS 15.

Movement on the allowance for irrecoverable amounts on trade receivables are as follows:

An analysis of the trade receivables:

The Directors consider the credit quality of trade and other receivables that are neither past due nor impaired to be good.

17 Borrowings

The Group holds two flexible loan facilities.

The first loan has a maximum facility amounting to £5,550,000; at the year end £3,895,336 had been drawn down and is disclosed as payable after one year. The loan has 5 year repayment terms and bears interest at 2.80% above Libor.

The second loan had an amount of £248,084 outstanding at the year end. The loan is repayable at £90,000 per annum and bears interest at 2.80% above Libor.

Included within the above are establishment fees of £61,575 (2017 - £85,000) which are netted off the total liability presented. The fees are expensed to the Income Statement on a straight line basis over the term of the loan.

Both the above bank loans are secured by a fixed and floating charge over the current and future assets of the Group. All of the Group's borrowings are due for repayment within five years.

18 Obligations under finance leases

Future minimum lease payments due under finance leases:

The finance leases relate to office equipment included within non-current assets. There are no lease incentives or contingent elements attaching to the leases.

19 Current trade and other payables

Included within accruals and deferred income is an amount of £73,255 (2017 - £35,000) relating to deferred revenues, calculated in accordance with IFRS 15. The amount of deferred income relating to the prior year has been fully released in the current financial year.

20 Non-current trade and other payables

21 Financial instruments

Market and liquidity risks

The Group trades entirely within the UK property market, and accordingly there is a risk relating to the underlying performance of that market; this creates an exposure to the risk of large-scale failure in the property trading market which would have a corresponding impact on the results of the Group. The Directors monitor this risk closely with the intention to foresee downturns in trade.

Within the Group there exists a sizeable lettings division which generates a fixed percentage income based on the letting and management of properties owned by third parties, and the Directors consider this to be a more secure income stream and a suitable diversification of the trade and corresponding risk, based on historic performance where typically a downturn in the property trading market creates more buoyancy within the lettings market, and vice versa. As such, the Directors believe that the Group maintains sufficient liquidity and flexibility to continue trading through a potential downturn in the UK property market.

The Group has a bank loan and loan facility upon which interest is charged at 2.8% over the Bank of England base rate. The outstanding value of these bank loans at the year end are £4.172 million (2017 - £3.945 million). The directors do not consider that the Group is exposed to a material risk from fluctuations in these interest rates; had the base rate been 2.0% higher throughout the increased interest costs would have been approximately £108,000 (2017 - £88,000).

The Group makes use of structured loans to finance its acquisitions and ongoing trading activities as an alternative to overdraft financing, due to the certainty of repayment timings and predictable lower interest rates which attract to this. Accordingly, the Directors consider that the market risks arising from these interest-bearing loans are acceptable and minimal on a risk-reward profile compared to overdraft finance.

Similarly, fixed rate finance lease agreements are used to acquire property, plant and equipment; this ensures that the Group maintains its existing working capital and ensures certainty of costs at the point of acquisition of those assets.

The Group does not trade in overseas markets and has no financial instruments denominated in non-Sterling currencies, and accordingly it has no exposure to currency risks.

Credit risk

The Group does not make sales under the traditional credit term agreement model, with cash typically being recognised at the completion date of property or upon receipt of regular rent from tenants; credit is, however, granted to franchisees, financial services partners and survey & valuation partners.

The highest risk exposure is in relation to loans and franchisees. The Group closely monitors the performance of its franchisees, on a frequent and ongoing basis. Operationally the Group are actively involved in the running of the franchising businesses, including frequent exchange of financial and key performance data, and are able to manage their own credit risk by using this knowledge to minimise exposure to potential bad debt. Additionally, franchisees are encouraged to remit via Direct Debit arrangements, which helps to maintain the Group's working capital whilst mitigating against long-term credit risk exposure.

Only reputable and accredited partners are used, and ledger balances are carefully monitored to minimise exposure to material credit risk. The Group's maximum exposure is represented by the carrying amounts in the financial statements, which are shown in the table below.

Capital management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and other stakeholders. The Group manages the capital structure, being cash and cash equivalents, availability of longer term bank funding, and reinvestment of a proportion of profits generated, and makes changes in light of movements in economic conditions. In order to maintain or adjust the capital structure, the Group may adjust its borrowings and investment decisions, as evidenced when bank borrowing arrangements were replaced during the comparative year.

The undiscounted contractual maturity analysis for Group financial instruments is shown below. The maturity analysis reflects the contractual undiscounted cashflows, including future interest charges, which may differ from the carrying value of the liabilities as at the reporting date.

22 Provisions for liabilities

Movements on provisions apart from deferred tax liabilities: