House prices are rising, spring is in the air and the property market is blooming. Estate agency and lettings chain Martin & Co floated on the stock market in December and is ideally positioned to benefit from the new mood. At 129p, the shares offer robust, long-term value.
Martin & Co was founded by entrepreneur Richard Martin in the 1980s. Starting out in Yeovil, Somerset, the business did well and in 1996, the company adopted a franchise model so it could grow at a faster pace without recourse to the banks.
Under this structure, agents run their own businesses but have access to Martin & Co’s support and experience in areas such as IT, marketing, shopfitting and training. They also benefit from collective purchasing and in exchange, they give the company 9 per cent of their annual revenues.
The system works in part because many Martin agents come from other professions, ranging from policemen to vicars to tennis coaches. They are looking for change, they want to run their own businesses but they need training and advice to be able to set up and Martin & Co gives provides them with this help.
Even seasoned agents like the idea of support from a larger parent and many are given financial help too, particularly in the early years.
The company now has 160 franchisees operating 190 branches from Scotland to Devon.
Until recently, the business focused exclusively on letting, working with landlords, finding them tenants and managing their properties. In 2012, however, the company added sales to its roster and most franchisees now cover both selling and letting.
The move was smart, as the housing market has picked up dramatically in the past two years and sales have increased considerably. A number of landlords have begun to sell their properties, too, and Martin can now pick up this business. Conversely, when people buy property to let, they frequently use the estate agent involved in the sale. Martin’s is winning business here, too.
Investors can become suspicious when founders decide to float their business on the stock market. In Richard Martin’s case, however, he has stayed on as chairman and only sold half his shares, keeping the rest in the business. In his mid-60s, he is keen to have a little more free time so he is a non-executive chairman and the day-to-day running of the business is handled by chief executive Ian Wilson.
Wilson has been at the company for ten years, initially as managing director, now chief executive. He is keen to double the size of the business and has already identified 204 locations where he believes Martin & Co would work.
The group also hopes to recruit more franchisees and buy up rival letting and estate agencies, particularly within the M25, where it is under-represented. Martin’s maiden results as a public company, released at the end of March, showed a 16 per cent increase in revenues to £5 million and a 15 per cent rise in underlying profits to £1.6 million.
The group intends to pay an interim dividend in September and the first final dividend in spring 2015. Wilson has guaranteed investors that 50 per cent of post-tax profits will be paid out as dividends. Analysts expect a 44 per cent increase in pre-tax profits to £2.3 million for 2014 with a dividend of 4.1p. Profits of £3.2 million are forecast for 2015.
Midas verdict: The property market has made a real comeback and both sales and lettings are flourishing.
Martin & Co’s agents benefit from the company’s experience and financial strength but they are also semi-autonomous, so they are incentivised to do well. The company is poised for growth and the shares should respond.
Republished from Thisismoney.co.uk