July 2007

Chesterton’s eyes on growth

Acquisitions in London and beyond could be just the start

THIS month I am turning my attention to Chesterton Global, the re-branded residential businesses of Chestertons, in the light of three recent deals which are expanding the business, and my past coverage of the problems at the old Chesterton group, which once enjoyed a share quote but went into receivership.

Chesterton Global is now owned by Vincent Tchenguiz’s Consensus Business Group and Salah Mussa’s Mercantile Group. It was formerly the residential business of Chestertons which was sold off by the receivers in March 2005.

In some ways, the sale was a forerunner of more recent, bigger private equity deals.

It was a well-timed buy for the current owners and the reputed price of £900,000 was reasonable enough to allow for investment into a business which might have closed with up to 200 job losses. An example , perhaps of private equity to the rescue.

In May and June this year, Chesterton Global bought the central north London firms of Stickley & Kent and Copping Joyce, then Millest of Sevenoaks, its first office outside of London, followed by Moss Kaye Pembertons, a long-established firm of chartered surveyors and property consultants based in Swiss Cottage, London.

The recent deals boost the London area office tally from 15 to 22. Add to that an office in Singapore and a small office in the South of France and Chestertons is beginning to ‘get global’. It’s not in the same league as Savills, but it’s a start.

The chief executive of Chesterton Global is Robert Bartlett who joined in August 2006 from Cluttons. He seems to be taking things slowly and steadily, with a good eye on the bottom line.

He said Chesterton still made losses in 2005 but in 2006 moved to a profit of more than £2 million despite costs of refurbishing offices and improving systems.

He adds: “Compared with May 2006, we are 140 per cent ahead in terms of profit and 50 per cent up in turnover. By 2008, I expect our turnover will be close to triple the 2004 figure.”

Staff numbers were about 220 when he joined, but is currently about 310, with 60 per cent of the increase accounted for by acquisitions.

The initial strategy was to “consolidate core London business, refurbish our existing office network and improve staff training,” he adds.

“But we are 24 months ahead of our planned programme which is why we have looked to acquisitions.”

Mr Bartlett admits that in the current climate it is not easy to find firms which fit in with the business plan and at a reasonable price.

“In the case of Stickley & Kent and Copping Joyce, the senior partners Clive Evans and Conrad Mazen wanted to become part of a larger firm, and have joined our management team.”

Copping Joyce and Stickley & Kent have offices in Covent Garden, Islington, Camden and Kentish Town, and also have a land and new homes division.

Millest, a long-established firm in Sevenoaks, marked expansion into the “stockbroker belt”

According to Mr Bartlett, acquiring Moss Kaye Pembertons “will provide us with our first opportunity to re-enter the commercial market and will significantly increase the size of the property management team we acquired with Copping Joyce and Stickley & Kent. This all forms a part of our plan to eventually provide a full service property firm.” Mr Bartlett believes there is a continuing “consolidation process” among middle to upper market firms. He also believes this sector of the market is going to become “a lot tougher”.

He adds: “We won’t see a downturn in prices in the London area. But buyers are becoming much more savvy about what they want. ”

He also identifies a split between London areas which attract the international mega rich and those which cater for the middle classes.

“Knightsbridge and Chelsea are still healthy but Battersea has become tougher,” he added.

Food for thought at Countrywide

I THINK I underestimated the shareholdings of Countrywide directors when I discussed how much they made out of the Apollo takeover.

The 2006 annual report shows that at the end of that year Harry Hill held 500,253 shares, Mike Nower 268,475, and then chairman Chris Sporborg 50,000.

In addition, long-time chief executive Mr Hill was entitled to 179,000 share options, Mr Nower 277,765, and Grenville Turner 489,256.

Incidentally, in the event of a takeover, the directors can give three months notice if they want to leave, within one month of the takeover becoming effective, as outlined on page 18 of the annual report.

Otherwise, each side must give 12 months’ notice, six months in the case of Harry Hill.

It’s food for thought...

Rightmove in £10.5m ‘buyback’

I REMARKED in my last column that Rightmove had obtained the powers to buy back its shares, but this was not on the immediate agenda.

In fact Rightmove announced early in June that it was buying back £10.5 million worth of its shares over the next few months. The announcement has kept the share price above 600p.

As I explained earlier, the key advantage of a share buy back is that it concentrates earnings among fewer shares.

It’s been done with some top FTSE 100 companies to boost shareholder returns and it’s a sign that a company is making more profits than it can use to invest in the business. In other words, it’s a sign of success.

There were two other pieces of good news for Rightmove. The first is that it is to supply property data through mobile phones, under a joint venture with Vodafone and the second is that it now lists over 1 million properties for sale or rent.

This landmark means it lists 34 per cent more properties than at the time of flotation in March 2006.

I expect more good news when the next set of profit figures are announced later this summer.