Belvoir Group also specialises in rental properties, with a focus on the Midlands and the North. Founded in the 1990s and listed on AIM in 2012, the company runs hundreds of estate and letting agencies, managing homes on behalf of landlords and tenants.
Group profits have increased consistently for 26 years and chief executive Dorian Gonsalves is determined to maintain and exceed that performance.
In the beginning, Belvoir focused exclusively on rental properties. In latter years, sales and mortgage advice have been added to the roster.
This spread of businesses helps to make Belvoir more resilient to economic ebbs and flows. When sales are subdued, rentals pick up the flak. When new mortgage applications reduce, demand for remortgage advice tends to increase.
The company also benefits from operating a franchise model, with 240 franchisees running 335 offices across the country. Each agent acts like a mini business owner, passing a proportion of their turnover to Belvoir, in return for support in areas such as marketing, regulation, compliance, training and IT.
The approach works. Franchisees can focus on developing their businesses while Belvoir provides the administrative backbone that helps them to succeed. Franchisees tend to be entrepreneurial too, as their rewards are directly linked to the amount of business they generate.
Belvoir adopts a similar strategy on the finance side, with more than 300 self-employed advisers operating through the Mortgage Advice Bureau, a network offering independent guidance on mortgages and home-related insurance.
A blend of different divisions and a judicious acquisition strategy have helped Belvoir to withstand some of the toughest economic conditions in decades. Gonsalves even upgraded the group’s dividend policy at the interim figures in September, with a 25 per cent hike in the half-year payout to 5p a share.
Brokers are looking for a full-year dividend of 11p, rising to 11.5p next year and 12p in 2025. Profits of £10.1 million are forecast for 2023, increasing 13 per cent to £11.4 million over the next two years.
Growth should come not just from an improving economic environment but also from greater collaboration between estate agents, letting agents and mortgage advisers. Most of the group’s financial services experts source customers independently of their colleagues but Gonsalves is working on an IT tool that should encourage cross-sales across divisions.
Midas verdict: Midas recommended Belvoir in 2016 when the stock was £1.21. Today, the shares are £2.40. The increase is notable compared with peers, but the price has still come down from highs two years ago. That should change, with brokers targeting £3.75 within 12 months.
Demand for rental properties is at a record high, while sales are holding up better than many expected. Gonsalves is a steady hand on the tiller too, having spent his entire career in the market, including a five-year stint as a director of the Property Ombudsman. Hold on to these shares.