Foxtons Group
plc
("Foxtons" or the
"Group")
UNAUDITED 2023 YEAR END Trading update
2023 earnings ahead of
expectations following a year of market outperformance as
operational turnaround continues to drive growth
25
January 2024 - Foxtons Group plc
(LSE:FOXT), London's leading estate agency, has continued to
deliver against its operational turnaround plan and outperform the
market1. For the year ended December 2023, both revenue
and adjusted operating profit2 are expected to be ahead
of consensus market expectations3.
2023 highlights:
· 2023
revenue of c.£147m (2022: £140.3m) and adjusted operating profit of
c.£14m (2022: £13.9m), both ahead of consensus market
expectations.
· Improvements across data, core processes, culture, and brand
successfully unlocked the value of the scalable Foxtons Operating
Platform. These improvements, alongside investment in fee earners,
delivered significant market share growth across Lettings, Sales
and Financial Services in the year.
· Lettings, which represents c.70% of Group revenue, grew c.16%
delivering over £100m revenue for the first time in Foxtons'
history, reflecting the Group's focus on non-cyclical and recurring
revenues.
· Completed two Lettings acquisitions for £15.2m4,
adding over 2,800 tenancies to the Group's portfolio.
· Sales outperformed the market, delivering significant levels
of market share growth versus 20225. Entered 2024 with
an under-offer pipeline significantly ahead of the prior
year.
· In 2023, Foxtons was the UK's fastest growing large lettings
and sales agency brand growing its share of new lettings and sales
instructions by 36% and 26% respectively6.
2023 trading review (unaudited)
Total revenue for the full year was
ahead of consensus market expectations at c.£147m, up c.5% versus
the prior year (2022: £140.3m). Adjusted operating profit of c.£14m
was also ahead of consensus market expectations (c.£11.8m) and
broadly flat against the prior year (2022: £13.9m) as the Group
delivers on its growth strategy by decoupling earnings from sales
market cycles.
Total revenue growth was driven by
Lettings, which grew c.16% and passed the £100m revenue milestone,
more than offsetting expected reductions in Sales and Financial
Services revenue caused by a significantly weaker sales market.
Lettings growth was underpinned by both organic growth and
portfolio acquisitions.
The Group continued its successful
acquisition strategy in 2023, adding over 2,800 tenancies to its
Lettings portfolio following the acquisitions of Atkinson McLeod
and Ludlow Thompson in the year. Operational synergies are being
delivered in line with expectations, with Atkinson McLeod fully
integrated onto the Foxtons Operating Platform and the integration
of Ludlow Thompson due to complete in Q1 2024.
Significant market share gains were
delivered in Sales, outperforming a challenging market which was
down c.22% on volume7 and down c.2.4% on average sales
price8. Against this backdrop, Sales revenue was down
c.14% versus 2022. The challenging market conditions were primarily
driven by higher interest rates and the weaker macroeconomic
backdrop.
Net debt at 31 December 2023 was
c.£7m, and reflects £13.9m of acquisition related spend, c.£11m of
working capital investment in Lettings growth initiatives (expected
to normalise across 2024), £2.7m of dividends paid and £1.1m of
share buybacks.
Annualised cost savings of c.£3m
will be realised in 2024 as the Group delivers synergies related to
the November 2023 acquisition of Ludlow Thompson and consolidates
certain branches within the Foxtons network by leveraging lease
exit events. These savings have resulted in a one-off restructuring
charge of c.£4.3m in 2023, of which c.£3.3m is cash related and
c.£1.0m is non-cash. The cash charge
relates to branch closure and vacancy costs, the majority of which
will be incurred over a 3 year period.
Outlook
Lettings is expected to remain
resilient in 2024 with the business continuing to display strong
recurring and non-cyclical characteristics. As lettings supply and
demand dynamics have largely normalised, rents are expected to
stabilise and remain at historically elevated levels, whilst
improvement in the supply of available rental properties provides a
good opportunity to deliver further market share growth.
In Sales, the Group entered 2024
with an under-offer pipeline significantly ahead of the prior year
despite weaker market conditions, which should support a good level
of year-on-year revenue growth in Q1. Furthermore, continuing to
deliver the Sales market share levels achieved in H2 2023 is
expected to drive further Sales revenue growth through
2024.
In addition, buyer demand has grown
as mortgage rates have begun to normalise, with good levels of
growth seen in recent weeks as the first mortgage products are
released with rates below 4% since the September 2022 mini-budget.
Any sustained reduction in interest rates is expected to spur
significant further growth in buyer demand.
Through 2024, the Group will
continue its focus on delivering operational enhancements to drive
further growth and continue to decouple earnings from sales market
cycles. By doing so, the Group is well positioned for its
medium-term growth ambition to deliver £25m to £30m of adjusted
operating profit.
Guy
Gittins, Chief Executive Officer, said:
"2023 has been a transformational year for Foxtons, following
the implementation of a refreshed strategy and operational
turnaround plan.
"We have delivered a year of market share growth and have
ended the year with revenue and adjusted operating profit ahead of
market expectations; our operational upgrades and investment in fee
earners, training, data and brand, coupled with a return to driving
innovation in the industry, are now consistently delivering
material benefits to our competitiveness and market positioning,
helping us to end 2023 as the UK's fastest growing large lettings
and sales agency brand.
"Our strategy to prioritise non-cyclical and recurring
revenues has driven revenue and profit growth, despite a weaker
sales market, and in contrast to prior years. This, combined with
the operational progress and significant market share gains made to
date, gives me confidence that our strategy is working, and we
enter 2024 focused on delivering our strategic priorities and
medium-term profit ambitions."
Foxtons
Group plc intends to report 2023 full year results on 5 March
2024.
1 Outperformance on a market share basis calculated as Foxtons'
share of Lettings instruction volumes in 2022 vs 2023, Sales
exchange volumes in 2022 vs 2023, and Financial Services share of
total mortgage underwriting for January to August 2022 vs January
to August 2023. Source: TwentyCi, UK Finance.
2 Adjusted operating profit is defined as profit before tax for
the period before finance income, finance cost, other
gains/(losses) and adjusted items. 2023 adjusted operating profit
includes c.£1.4m of amortisation of acquired intangibles and
excludes c.£4.4m of adjusted items.
3 2023 consensus market expectations being the average of
forecasts provided by analysts covering the Group for the year
ending 31 December 2023 (revenue: c.£144.5m; adjusted operating
profit: c.£11.8m).
4 Consideration measured on a cash and debt free
basis.
5 Share of exchange volumes in Foxtons' core addressable
markets. Source: TwentyCi.
6 Market share growth of new lettings and sales instructions
amongst the UK's 10 largest estate agency brands (with reference to
instruction market share) in 2023 versus 2022. Source:
TwentyCi.
7 Annual change in London sales exchange volumes (2023 vs 2022).
Source: TwentyCi.
8 Annual change in average London house prices (2023 vs 2022).
Source: Nationwide House Price Index.
-ENDS-
For further information,
please contact:
Foxtons Group plc
|
investor@foxtonsgroup.co.uk
|
Chris Hough, Chief Financial
Officer
Muhammad Patel, Investor
Relations
|
+44 20 7893 6261
|
|
|
TB
Cardew
|
Foxtons@tbcardew.com
|
Will Baldwin-Charles / Olivia
Rosser
|
+44 7834 524 833 / +44 7552 864
250
|
About
Founded in 1981, Foxtons is London's
leading estate agency and largest lettings agency brand, with a
portfolio of over 28,000 tenancies. The Group operates from a
network of over 60 interconnected branches, offering a range of
residential property services across three business segments:
Lettings, Sales and Financial Services.
The Group's strategy to accelerate
growth is focused on non-cyclical and recurring revenues from
Lettings and Financial Services refinance activities, supplemented
by market share growth in Sales. In order to drive organic growth,
the Group has rebuilt its competitive advantages, with a strong
focus on leveraging data and technology; investing in people and
culture; and reinvigorating the Foxtons brand.
By rebuilding Foxtons' estate agency
DNA and returning the business to its position as London's go-to
estate agent, the Group aims to deliver significant profit growth
and value for shareholders.
· Lettings organic
growth: Focus on winning new
property instructions, with speed to market and high quality
landlord service to drive revenue growth.
· Lettings acquisitive
growth: Acquire, integrate and
service high quality lettings portfolios.
· Sales market share
growth: Leveraging Foxtons'
competitive advantages to grow market share through all market
conditions.
· Financial Services revenue
growth: Increasing adviser headcount
and improving productivity and cross sell to drive revenue
growth.
To find out more, please visit
www.foxtonsgroup.co.uk