REG - Foxtons Group PLC - UNAUDITED 2023 YEAR END TRADING UPDATE

FoxtonsAnnouncement

25/01/2024 07:00

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RNS Number : 8322A  Foxtons Group PLC  25 January 2024

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 market(1). For the year ended December 2023, both revenue and
adjusted operating profit(2) are expected to be ahead of consensus market
expectations(3).

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 £15.2m(4), adding over 2,800
tenancies to the Group's portfolio.

·  Sales outperformed the market, delivering significant levels of market
share growth versus 2022(5). 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% respectively(6).

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 volume(7) and down c.2.4% on
average sales price(8). 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 (mailto:investor@foxtonsgroup.co.uk)
 Chris Hough, Chief Financial Officer  +44 20 7893 6261

 Muhammad Patel, Investor Relations

 TB Cardew                             Foxtons@tbcardew.com (mailto:Foxtons@tbcardew.com)
 Will Baldwin-Charles / Olivia Rosser  +44 7834 524 833 / +44 7552 864 250

 

TB Cardew

 

Foxtons@tbcardew.com (mailto: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
(http://www.foxtonsgroup.co.uk)

 

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