REG - Foxtons Group PLC - Acquisitions of Haslams and Imagine Property Group

FoxtonsAnnouncement

29/10/2024 07:00

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RNS Number : 9464J  Foxtons Group PLC  29 October 2024

Foxtons Group plc

Acquisitions of Haslams Estate Agents and Imagine Property Group

 

Two acquisitions completed in London commuter towns to profitably expand the
Group's network into new complementary growth markets.

 

29 October 2024 - Foxtons Group plc (LSE:FOXT) ("the Group" or "Foxtons"),
today announces the acquisitions of two estate agents, Haslams Estate Agents
(Thames Valley) Limited ("Haslams") and Imagine Property Group Limited
("Imagine") (together "the Acquisitions").

Total initial consideration is £12.6m, with £3.4m of total deferred
consideration contingent on the delivery of performance targets. Haslams'
initial consideration is £7.6m, with £2.4m deferred, and Imagine's initial
consideration is £5.0m, with £1.0m deferred.

Strategic rationale

·     The Acquisitions reflect further progress against the Group's
strategy to acquire high quality, earnings accretive, lettings focused
businesses, with synergistic growth opportunities which increase the Group's
exposure to recurring lettings revenues (lettings revenue accounts for c.60%
of total revenue for each acquisition).

·       The Acquisitions expand Foxtons' network into the new
complementary markets of Reading and Watford:

-    Both markets are commuter towns with excellent transport links to
London, with Central London accessible in under 30 minutes.

-     Both markets are forecast to deliver leading levels of economic growth
versus the rest of the UK, with Reading forecast to become the UK's fastest
growing location by 2027(1).

-        The Acquisitions build on Foxtons' success in the London
commuter towns of Guildford and Woking.

·      Both acquisitions are the largest lettings and sales agents in
their core markets(2) and increase the Group's branch footprint to 64
branches. The Acquisitions will deliver a further c.2,900 tenancies (Haslams:
c.1,700, Imagine: c.1,200), increasing the size of Foxtons' portfolio of
tenancies by c.10% to over 31,000 tenancies.

·      Experienced management teams, with the added support of the Foxtons
Operating Platform, are well placed to deliver attractive returns on invested
capital by leveraging Foxtons' technology and data capabilities, realising
synergies and combining B2B expertise and relationships across the New Homes
and Build to Rent sectors.

·      The Acquisitions will act as strategic hubs to unlock growth
opportunities in the areas surrounding Reading and Watford, both organically
and through further synergistic bolt-on acquisitions.

·       The Acquisitions build on Foxtons' successful track record of
identifying, acquiring and integrating high quality lettings focused
businesses.

Haslams

Haslams operates from 3 branches and is primarily focussed on the commuter
town of Reading, with additional coverage of the nearby towns of Wokingham and
Crowthorne through its Michael Hardy brand.

Haslams' unaudited total revenue and operating profit for the 12 months ended
31 December 2023 was £6.5m and £0.8m respectively. Initial
consideration for the acquisition, on a cash and debt free basis, is £7.6m,
with £2.4m deferred and contingent on the delivery of performance targets.

Imagine

Imagine operates from 3 branches and is focussed on the commuter town of
Watford and its surrounding areas.

Imagine's unaudited total revenue and operating profit for the 12 months ended
31 March 2024 was £3.3m and £0.5m respectively. Initial consideration
for the acquisition, on a cash and debt free basis, is £5.0m, with £1.0m
deferred and contingent on the delivery of performance targets.

Both businesses are being bought from private individual shareholders.

 

Financial Impact

Following the delivery of growth initiatives and operating synergies, the
businesses are expected to deliver significantly higher levels of
profitability from the levels historically reported by the Acquisitions. The
Acquisitions will be accretive to the Group's 2025 adjusted earnings per
share(3), with further accretion in 2026 and beyond as the impact of synergies
annualise. The Acquisitions are expected to deliver attractive long term
returns on capital, and at a level above the Group's weighted average cost of
capital.

 

The Acquisitions will be funded using the Group's £30m revolving credit
facility which has the option to be extended to £40m subject to bank
approval. The Group's proforma net debt to adjusted EBITDA(4) ratio is
expected to be marginally below 1x at 31 December 2024.

Guy Gittins, Foxtons CEO, commented:

"Our latest acquisitions add to our strong track record of identifying,
acquiring, and integrating high quality lettings businesses to deliver
attractive returns and are a key part of our strategy to deliver £25-30m
adjusted operating profit in the medium term.

"We are delighted to have completed the acquisitions of Haslams and Imagine as
we continue to pursue acquisitive lettings growth, to supplement our organic
growth strategies. We have been impressed with the quality of both businesses
which hold established leadership positions in their local markets and have
built long-standing client relationships over many years, making them a great
fit with Foxtons.

"Reading and Watford are new markets for Foxtons and reflects our confidence
that the Foxtons Operating Platform, and in particular our technology, data
and reach can unlock new growth opportunities in these new markets."

 

Steve Woodford, Haslams Executive Chairman, commented:

"Having led The Haslams Group for over three decades, it was important to me
for our buyer to be a custodian of our business, building on our existing
successes and nurturing the exceptional expertise across the Group. Foxtons
was the perfect fit and I'm looking forward to seeing how both businesses will
excel after combining forces. With the ability to leverage the power of
Foxtons' platform, I'm extremely confident the business will go from
strength-to-strength."

 

Mike Cole, Imagine Group Managing Director, commented:

"After leading the business for nearly 20 years, the time was right for new
energy and investment. The property landscape is changing, and it is essential
agents have the best technology, marketing and brand awareness to stay ahead,
which is why we chose Foxtons to take the business forward. Foxtons' expansion
into Hertfordshire is one of the most exciting developments the local market
has seen for two decades, and I have no doubt our exceptional staff and
long-standing clients will be excited about our offering being supercharged by
Foxtons."

 

 

For further information, please contact:

 

 Foxtons Group plc

 Chris Hough, Chief Financial Officer   investor@foxtonsgroup.co.uk (mailto:investor@foxtonsgroup.co.uk)

 Muhammad Patel, Investor Relations     +44 20 7893 6261

                                        Foxtons@cardewgroup.com (mailto:Foxtons@cardewgroup.com)

 Cardew Group
 Olivia Rosser                          07552 864 250
 Will Baldwin-Charles                   07834 524 833

 

 

(1) Source: EY UK Regional Economic Forecast.

(2) Volume of lettings instructions and sales exchanges in the core markets of
Reading (Haslams) and Watford (Imagine). Source: TwentyCi.

(3) Adjusted earnings per share is defined as earnings per share excluding
adjusted items and amortisation of acquired intangibles. The measure is
derived by dividing profit after tax, adjusted for post-tax adjusted items and
amortisation of acquired intangibles, by the weighted average number of
ordinary shares in issue during the financial period, excluding own shares
held.

(4) Adjusted EBITDA is used to calculate the leverage and interest cover
ratios for the purposes of the Group's RCF covenants. The measure is defined
as profit before tax before finance income, non-IFRS 16 finance costs, other
gains/(losses), depreciation of property, plant and equipment (but after IFRS
16 depreciation), amortisation, share-based payment charges and adjusted
items.

 

 

About

Founded in 1981, Foxtons is London's leading estate agency and largest
lettings agency brand, with a portfolio of over 31,000 tenancies. The Group
operates from a network of interconnected, single-brand branches and offers a
range of residential property services across three business segments:
Lettings, Sales and Financial Services.

 

The Group's strategy is to accelerate growth, and deliver against its
medium-term target of £25m to £30m adjusted operating profit, by focusing on
non-cyclical and recurring revenues from Lettings and Financial Services
refinance activities, supplemented by market share growth in Sales.

 

Growth is underpinned by the Foxtons Operating Platform, the most
comprehensive and advanced platform in UK estate agency. The platform was
strengthened through 2023 and leverages the Group's competitive advantages in
data and technology; the Foxtons brand, its hub and spoke operating model and,
its people, culture and training.

 

By fully leveraging the platform, the Group will drive significant growth;
both organically through market share gains and by strengthening Foxtons'
position as an effective sector consolidator, to deliver significant profit
growth and value for shareholders. The Group's strategic priorities are:

 

·    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: Reinvigorating the Foxtons brand to grow
addressable market share.

·    Financial Services revenue growth: Increasing adviser headcount, with
improving productivity and cross sell to drive revenue growth.

 

To find out more, please visit www.foxtonsgroup.co.uk

 

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