REG - Foxtons Group PLC - Interim Results
30/07/2024 07:00
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RNS Number : 2897Y Foxtons Group PLC 30 July 2024
Foxtons Group plc
("Foxtons" or the "Group")
INTERIM RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2024
30 July 2024
Double-digit revenue and earnings growth as the Group continues to deliver on
its turnaround plan.
Foxtons Group plc (LSE:FOXT), London's leading estate agency, delivered both
revenue and earnings growth in H1 2024, with significant sales market share
gains(1), alongside driving Lettings new business volumes and delivering
returns from acquisitions. The Group's expectation for the full year remains
unchanged and the Group is on-track to deliver its medium-term target of £25m
to £30m adjusted operating profit.
H1 2024 H1 2023 Change
Revenue £78.5m £70.9m +11%
Adjusted EBITDA(2) £10.5m £8.4m +25%
Adjusted operating profit(3) £8.5m £6.8m +24%
Profit before tax £7.5m £6.1m +24%
Adjusted earnings per share (basic)(4) 1.9p 1.4p +36%
Earnings per share (basic) 1.9p 1.4p +36%
Net free cash flow(5) (£0.9m) (£4.3m) +80%
Interim dividend per share 0.22p 0.20p +10%
Strategic highlights:
· 24% growth in adjusted operating profit underpinned by continued
strategic progress:
· 6% Lettings organic revenue CAGR since H1 2022, ahead of the
Group's target of 3% to 5%(6).
· 25% average return on Lettings acquisitions, ahead of the Group's
target of 20%(7).
· 5.1% of sales exchange market share (2023: 3.9%), ahead of the
Group's target of at least 4.5%.
· c.70% of revenue from non-cyclical and recurring revenue
streams(8).
Financial highlights:
· Revenue up 11% to £78.5m as all three businesses delivered growth in
the half:
· Lettings revenue up 5% to £52.4m.
· Sales revenue up 28% to £21.6m.
· Financial Services revenue up 7% to £4.5m.
· Adjusted EBITDA up 25% to £10.5m, adjusted operating profit up 24%
to £8.5m and profit before tax up 24% to £7.5m.
· Net free cash outflow of £0.9m in-line with expected seasonality.
Improved cash generation versus H1 2023 and more normalised working capital
movements as the impact of shorter landlord billing eases.
· RCF increased from £20m to £30m and maturity extended to June 2027
to support the Group's organic and inorganic growth strategy.
· Interim dividend increased 10% to 0.22p per share (2023: 0.20p per
share), as a result of strategic progress, improved earnings and in-line with
the Group's progressive dividend policy.
Operational highlights:
· Reinforced number 1 estate agency position in London(9). Largest
lettings estate agency brand in the UK(10).
· Double-digit growth in Lettings new business volumes offset an
expected temporary reduction in the volume of existing tenancies
re-transacting in H1 2024, following longer tenancy terms signed across 2022
and 2023. Average tenancy lengths have increased by c.20% since 2022 as part
of the Group's strategy to improve client retention and grow its portfolio of
recurring revenues.
· Ludlow Thompson acquisition integrated into Foxtons, with synergies
delivered ahead of schedule. Improved landlord retention rates across the more
recently acquired portfolios versus pre-2022 acquisitions.
· Sales revenue growth driven by significant market outperformance,
with 30% increase in the market share of exchanges with H1 market share of
5.1% (2023: 3.9%), exceeding the Group's medium-term target of 4.5%. Revenue
growth delivered despite a backdrop of flat year-on-year London exchange
volumes.
· Year-on-year growth in sales instruction market share through
increased lead generation. Growing instruction levels underpins future
delivery of exchange market share growth.
· Fee earner headcount has been rebuilt and broadly at the right levels
to drive further profit growth.
· Productivity growth driven by improved rates of staff retention and
average tenure, a comprehensive programme of ongoing training and a return to
Foxtons unique high-performance culture. Average revenue per fee earner up 6%
and average revenue per branch up 15% versus the prior year.
· Additional operational upgrades delivered in H1 to further strengthen
the Foxtons Operating Platform. Focus on continuing to drive lead
opportunities, alongside service and productivity levels. Highlights include:
· AI-driven lead-scoring platform to drive lead generation across
the branch network.
· New marketing analytics and reporting data suite to forensically
review marketing effectiveness.
· New customer service system implemented to gather real-time
feedback. Process upgrades being delivered, alongside linking staff
remuneration to service delivery, to improve customer retention.
· Introduced new thematic marketing campaigns to drive customer
engagement and reinforce the brand's value proposition.
July trading and outlook
· July trading in-line with expectations, with little change in
customer behaviour or market dynamics since the General Election at the
beginning of the month.
· In Lettings, market dynamics are expected to remain consistent with
the first half, with rental levels expected to remain broadly flat. Healthy
stock levels support the Group's focus on driving new business volumes which
help mitigate the temporary reduction in existing tenancies re-transacting due
to longer tenancy lengths. The November 2023 Ludlow Thompson acquisition will
also provide further incremental revenues in the second half.
· At 30 June, the Sales under-offer pipeline was 21% higher than the
prior year and at its highest value since the Brexit vote in 2016. This
pipeline, and continued growth in our market share of instructions, is
expected to deliver further year-on-year Sales revenue growth in H2. Further
growth in buyer activity is likely if we begin to see a reduction in inflation
feeding through into lower interest rates.
· Financial Services refinance activity is expected to remain
resilient, whilst demand for new purchase mortgages should track the
performance of the wider sales market.
· Through continued market outperformance, the Group's expectations for
the full year remain unchanged and the Group is on-track to deliver its
medium-term target of £25m to £30m adjusted operating profit.
Guy Gittins, Chief Executive Officer, said:
"The strong momentum we started the year with has continued, with double-digit
revenue and earnings growth and our position as London's largest Lettings and
Sales agency reinforced.
"Despite macro headwinds and the election interruption, we continued to
outperform the market, delivering strong Sales revenue growth of 28% and
market share growth of 30%. Growth was also delivered in Lettings, with a
double-digit increase in new business volumes, further bolstered by the
acquisitions we made in 2023.
"This growth is the result of the significant gains we have delivered in our
market share of sales instructions, alongside the strengthening of our Foxtons
Operating Platform and improvements to our market-leading data capabilities
following considerable reengineering of the business over the last 18 months.
"When I joined the business in 2022, I knew there was a significant amount of
work to unlock the vast amount of value within the business. Two years on, and
we are making great progress thanks to the collective effort of the Foxtons
team. The work we did to rebuild the business' foundations continues to
deliver progress; we are growing the non-cyclical and recurring Lettings
business, our Sales under-offer pipeline is at a record level since the Brexit
vote in 2016, and we are on track to deliver against our medium-term target of
£25m to £30m adjusted operating profit.
"Momentum can be felt across every aspect of the business and I am very
excited about the second half and beyond as we work hard to deliver excellent
results for the property owners of London and our shareholders."
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 524833 / +44 7552 864 250
TB Cardew
Foxtons@tbcardew.com (mailto:Foxtons@tbcardew.com)
Will Baldwin-Charles / Olivia Rosser
+44 7834 524833 / +44 7552 864 250
( )
The Company will present a live webcast at 9:00am (BST) for analysts and
investors. To access you will be required to pre‐register using the
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The presentation will also be broadcast via conference call. To access you
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(
1) Share of sales exchanges in Foxtons' core addressable markets. Source:
TwentyCi.
(2) Adjusted EBITDA represents the profit before tax before finance income,
non-IFRS 16 finance costs, other gains, depreciation of property, plant and
equipment (but after IFRS 16 depreciation), amortisation, share-based payment
charges and adjusted items
(3) Adjusted operating profit is defined as profit before tax for the period
before finance income, finance cost, other gains and adjusted items.
(4) Adjusted earnings per share is defined as earnings per share excluding the
impact of adjusted items. Refer to Note 7 of the condensed financial
statements for a reconciliation between earnings per share and adjusted
earnings per share.
(5) Net free cash flow is defined as net cash from operating activities less
repayment of IFRS 16 lease liabilities and net cash generated/used in
investing activities, excluding the acquisition of subsidiaries (net of any
cash acquired), divestments and purchases of investments.
(6) 2022 is considered the base period for growth calculations, being the last
year before the introduction of the operational turnaround plan.
(7) Defined as return on invested capital.
(8) Defined as revenue from Lettings and refinance activities within Financial
Services.
(9) Share of estate agent lettings and sales instructions. Source: TwentyCi.
(10) Share of estate agent lettings instructions. Source: TwentyCi.
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 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
(http://www.foxtonsgroup.co.uk)
PERFORMANCE AT A GLANCE
Half year ended 30 June 2024 2023 Change
Income statement
Revenue £78.5m £70.9m +11%
Adjusted EBITDA(1) £10.5m £8.4m +25%
Adjusted operating profit(1) £8.5m £6.8m +24%
Adjusted operating profit margin(1) 10.8% 9.6% +120bps
Profit before tax £7.5m £6.1m +24%
Earnings per share
Basic earnings per share 1.9p 1.4p +36%
Adjusted basic earnings per share(1) 1.9p 1.4p +36%
Dividends
Interim dividend per share 0.22p 0.20p +10%
Cash flow and net debt
Net cash from operating activities £6.7m £3.2m +108%
Net free cash flow(1) (£0.9m) (£4.3m) +80%
Net debt(1,2) (£11.3m) (£2.1m) n/a
Segmental metrics
Lettings revenue £52.4m £49.8m +5%
Lettings volumes(3) 9,495 9,361 +1%
Average revenue per Lettings transaction(3) £5,515 £5,316 +4%
Sales revenue £21.6m £16.9m +28%
Sales volumes(3) 1,655 1,293 +28%
Average revenue per Sales transaction(3) £13,060 £13,084 -
Financial Services revenue £4.5m £4.2m +7%
Financial Services volumes(3) 2,599 2,411 +8%
Average revenue per Financial Services transaction(3) £1,750 £1,755 -
( )
(1) These measures are APMs used by the Group and are defined, and purpose
explained, within Note 15.
(2) For comparison purposes, net debt at 31 December 2023 was £6.8m.
(3) These segmental metrics are defined within Note 15.
CHIEF EXECUTIVE'S REVIEW
The Group has continued its recent positive momentum into the first half of
2024, with double-digit revenue and earnings growth as the Group continues to
deliver on its turnaround plan, against a backdrop of flat year-on-year London
sales exchange volumes. This growth has been enabled through the
transformational operational changes made over the last 18 months, resulting
in significant sales market share gains, including the milestone of breaking
through the 5% exchange market share threshold in the first half.
As reported in the full year 2023 results, we rebuilt and strengthened the
Foxtons Operating Platform over the course of last year. I also outlined the
industry-leading nature of the platform and my belief that it will underpin
market share and profit growth as demonstrated in the first half of this year.
At the start of 2023, I set out my vision to once again make Foxtons London's
go-to agent and deliver against our medium-term target of £25m to £30m
adjusted operating profit. We are making excellent progress and are on-track
as we execute against our organic and acquisitive growth strategies.
H1 2024 market conditions
The Lettings market in London remains attractive, as high levels of demand
underpin rents and create a valuable non-cyclical and recurring source of
revenue. Following a period of supply and demand imbalance over the past few
years, and subsequent rental price growth, lettings market dynamics are
continuing to normalise in London. Supply levels have grown, allowing us to
win new business to deliver organic growth, whilst rental prices were flat
compared to the prior year.
Sales market dynamics were more mixed with exchange volumes across London
remaining subdued and flat compared to the prior year. Encouragingly, buyer
activity picked up significantly in the half, with sales agreed in our markets
up 18% compared to the prior year. As property transactions typically take an
average of 3 to 4 months to exchange following a successful offer, this growth
in market sales agreed is expected to drive year-on-year growth in market
exchange volumes in the second half.
It is worth noting the growth in buyer activity was sustained due to pent-up
demand in the market despite little change in mortgage rates over the period
and the political uncertainty following the announcement of the General
Election in May.
Financial results
Revenue for the half was up 11% to £78.5m, adjusted operating profit up 24%
to £8.5m and profit before tax up 24% to £7.5m.
Lettings revenue was up 5% to £52.4m, including £2.2m of incremental
revenues from 2023 acquisitions and £1.1m of additional interest on client
monies.
Sales revenue grew 28% to £21.6m as the business significantly outperformed
the market, growing exchange market share by 30% to 5.1% (2023: 3.9%) against
a backdrop of flat year-on-year London exchange volumes.
Financial Services revenue grew 7% to £4.5m as improved productivity meant
the business was able to deliver revenue growth despite continued weakness in
the mortgage market.
Operational highlights
The significant investments made into rebuilding the Foxtons Operating
Platform through 2023 have supported good levels of operational performance in
the half.
In Lettings, we delivered double-digit new business volume growth which
demonstrates the attractiveness of the Foxtons brand and our market-leading
data and technology capabilities which drive lead opportunities and convert
these opportunities to deals. Build to Rent volumes contributed to this
organic growth with deal volumes doubling year-on-year as we successfully won
new mandates from institutional clients. This growth offset an expected
temporary reduction in the volume of existing tenancies re-transacting in the
half, following longer tenancy terms signed across 2022 and 2023. Average
tenancy lengths have increased by c.20% since 2022 as part of the Group's
strategy to improve client retention and grow its portfolio of recurring
revenues.
Sales growth is being propelled by market share growth, and with now over 5%
market share of exchanges, the business is enjoying good momentum. Another
half of growth in our market share of instructions was delivered and leaves
the business well positioned to deliver further exchange market share growth
in the future. Sales operating losses are expected to continue to narrow with
further benefit from any improvement in market conditions.
We have continued to deliver upgrades to the Foxtons Operating Platform in the
half, with a focus on driving levels of lead generation, customer service and
staff productivity.
Fee earner headcount has been rebuilt, 5% higher than the prior year, and are
now at broadly appropriate levels to continue to deliver growth. In addition,
fee earner retention levels have also continued to improve, with improved
tenure and experience of our staff, a comprehensive programme of ongoing
training and a return to Foxtons' unique high-performance culture which is key
to driving productivity growth across the business.
Property instructions are the life-blood of estate agency and many of the
upgrades we made in the half are focussed on driving higher levels of lead
opportunities and improving the conversion of these leads to instructions.
A new AI-driven lead-scoring platform has been developed and deployed across
the branch network to drive lead generation levels from front office teams.
The platform complements and builds on the lead-scoring software deployed in
2023 within our dedicated customer prospecting centre. By expanding the
ability to generate quality leads more widely across the business we are able
to further grow instruction levels.
Marketing upgrades have been implemented in the half to further support lead
generation. A comprehensive new data and reporting suite has been created
driving forensic insight into our marketing activities and reinforcing our
data-driven approach to marketing. The new systems allow improved customer
targeting and will also drive improved returns on future marketing spend.
Our website, www.foxtons.co.uk (http://www.foxtons.co.uk) , is the most
visited estate agent website in the UK by a significant margin, even against
national operators, and is a key source of new customer leads. We have
modernised the underlying website architecture to ensure the site remains
best-in-class and future-fit. And, through leveraging our new data
capabilities, we have reworked and optimised customer journeys, to improve the
customer experience. Early progress is promising, including a 34% increase in
website visibility and 30% increase in user engagement on the website in June,
versus the prior year.
Finally, we overhauled our approach to customer-facing marketing by
implementing a new programme of marketing campaigns to drive customer
engagement and reinforce the brand's value proposition. The campaigns are
thematic in nature and are refreshed regularly. This refreshed marketing
strategy further sets the Foxtons' brand apart in the highly competitive
estate agency sector and is already driving increased brand consideration.
To date in 2024, we have launched three campaigns including "Grab January by
the Foxtons" to drive engagement in the new year, "Spring into Action" during
the spring months and "Ready, Set, Foxtons" to coincide with summer sporting
events including: Wimbledon; the British Grand Prix; Euro 2024; and the
Olympics. These campaigns have supported our organic volume growth in the half
and contributed to a 27% increase in customer brand preference in Q2 2024
versus the prior year.
In addition to improving lead generation levels, we have enhanced our customer
service and staff productivity over the past 6 months. At the beginning of the
year we embedded a new real-time customer experience feedback system to better
understand our customers' requirements and challenges. Feedback is being
regularly collated across our various customer segments and we are actively
overhauling our processes to better reflect our customers' preferences.
Improving service levels in property management is key to driving improved
landlord retention and we continue to develop our new out-of-London lettings
property management hub to create a centre of excellence.
Finally, a new real-time productivity reporting system has been created and
deployed across the business. The new system increases the transparency of
productivity at all levels of the business, highlights best practices and
allows the business to further align incentivisation to desired behaviours.
Delivering our strategic priorities
Our strategy is to deliver long-term growth by decoupling earnings from sales
market cycles, through a focus on non-cyclical and recurring revenues, and
deliver against our medium-term adjusted operating profit target of £25m to
£30m.
In H1 2024, the Group continued to make good progress against its strategic
priorities:
1. Lettings organic growth: 6% organic revenue CAGR since H1 2022(1).
(Medium-term target: 3% - 5% revenue CAGR)
2. Lettings acquisitions: Integrated the November 2023 acquisition of Ludlow
Thompson into Foxtons, with delivery of synergies ahead of schedule. Prior
acquisitions continue to perform well, delivering 25% average annual return
since acquisition.
(Medium-term target: 20%+ return on capital)
3. Sales: Grew sales exchange market share by 30% to 5.1% (2023: 3.9%) against
a backdrop of flat and historically depressed London exchange volumes.
(Medium-term target: At least 4.5% exchange market share in more normalised
market conditions)
4. Financial Services: 7% revenue increase in H1 2024. (3%) revenue CAGR since
H1 2022, reflecting a turbulent mortgage market over the last 18 months.
(Medium-term target: 7% - 10% revenue CAGR)
General Election 2024
Labour's victory in the General Election on 4 July 2024 should prove positive
for the property market over the long run. Labour's manifesto demonstrated a
strong focus on business and economic growth, and we especially welcome the
new government's commitment to building 1.5 million new homes across the
country. In addition, we welcome any initiatives that support both first time
buyers and home-movers to create a more liquid market and support home
ownership levels. Finally, the government must ensure there is a healthy and
robust lettings market, with appropriate levels of supply to meet tenant
demand levels. A strong and well-functioning property market is vital to
underpinning the country's economic ambitions over the coming years.
July trading and outlook
July trading is in-line with our expectations, with little change in customer
behaviour or market dynamics observed during the period of campaigning before
the General Election or in the weeks following.
Lettings market dynamics are expected to remain consistent with the first
half, with rental levels expected to remain broadly flat. Healthy stock levels
support the Group's focus on driving new business volumes which help mitigate
the temporary reduction in existing tenancies re-transacting due to longer
tenancy lengths. The November 2023 Ludlow Thompson acquisition will also
provide further incremental revenues in the second half.
At 30 June, the Sales under-offer pipeline was 21% higher than the prior year
and at its highest value since the Brexit vote in 2016. This pipeline, and
continued growth in our market share of instructions, is expected to deliver
further year-on-year Sales revenue growth in the second half. Furthermore,
additional growth in buyer activity is likely if we begin to see a reduction
in inflation feeding through into lower interest rates.
And finally in Financial Services, we expect mortgage refinancing to remain
resilient while new mortgage volumes should track the performance of the wider
sales market.
In summary, we will continue to drive growth through leveraging the Foxtons
Operating Platform and driving new business volumes across the business.
Improving market conditions will aid performance and support the delivery of
our medium-term £25m to £30m adjusted operating profit target.
Guy Gittins
Chief Executive Officer
29 July 2024
(1) 2022 is considered the base period for growth calculations, being the last
year before the introduction of the operational turnaround plan.
Financial review
H1 2024 H1 2023 Change
£m £m
Revenue and profit measures
Revenue 78.5 70.9 +11%
Contribution(1) 51.0 44.5 +15%
Contribution margin(1) 65.0% 62.7% +230bps
Adjusted EBITDA(1) 10.5 8.4 +25%
Adjusted EBITDA margin(1) 13.4% 11.8% +160bps
Adjusted operating profit(1) 8.5 6.8 +24%
Adjusted operating profit margin(1) 10.8% 9.6% +120bps
Profit before tax 7.5 6.1 +24%
Profit after tax 5.9 4.1 +43%
Earnings per share
Adjusted earnings per share (basic)(1) 1.9p 1.4p +36%
Earnings per share (basic) 1.9p 1.4p +36%
Cash flow and net debt
Net free cash flow(1) (0.9) (4.3) +80%
Net debt as at 30 June(1) (11.3) (2.1) n/a
Dividends
Interim dividend per share 0.22p 0.20p +10%
(1)APMs are defined, purpose explained and reconciled to statutory measures
within Note 15 of the condensed financial statements.
Note: Values in tables may have been rounded and totals may therefore not be
the sum of presented values in all instances.
Financial overview
As presented in the table above, key financial performance measures include:
• Revenue increased by 11% to £78.5m (2023: £70.9m), with
Lettings revenue up 5%, Sales revenue up 28% and Financial Services revenue up
7%.
• Adjusted EBITDA increased by 25% to £10.5m (2023: £8.4m) and
adjusted operating profit increased by 24% to £8.5m (2023: £6.8m).
• Profit before tax increased by 24% to £7.5m (2023: £6.1m) and
profit after tax increased by 43% to £5.9m (2023: £4.1m).
• Basic adjusted earnings per share was 1.9p (2023: 1.4p) and
basic earnings per share was 1.9p (2023: 1.4p).
• Net free cash flow was a £0.9m outflow (2023: £4.3m outflow)
and net debt at 30 June was £11.3m (31 December 2023: £6.8m; 30 June 2023:
£2.1m).
• The Board has declared an interim dividend of 0.22p per share
(2023: interim dividend of 0.20p per share).
In May 2024, the Board increased and extended the Group's revolving credit
facility (RCF). The size of the committed facility increased from £20m to
£30m and the facility was extended by a year to June 2027, with an option to
extend for a further year. The facility also includes a £10m accordion option
which can be requested at any time subject to bank approval. The RCF supports
the Group's inorganic and organic growth strategy.
Revenue
Revenue Volumes(1) Revenue per transaction(1)
H1 2024 H1 2023 Change H1 2024 H1 2023 Change H1 2024 H1 2023 Change
£m £m £ £
Lettings 52.4 49.8 +5% 9,495 9,361 +1% 5,515 5,316 +4%
Sales 21.6 16.9 +28% 1,655 1,293 +28% 13,060 13,084 -
Financial Services 4.5 4.2 +7% 2,599 2,411 +8% 1,750 1,755 -
Total 78.5 70.9 +11%
(1')Volumes' and 'Revenue per transaction' are defined in Note 15 of the
condensed financial statements.
The Group consists of three operating segments: Lettings, Sales and Financial
Services. Lettings represents 67% (2023: 70%), Sales 28% (2023: 24%) and
Financial Services 6% (2023: 6%) of Group revenue. Non-cyclical and recurring
revenue streams, generated by Lettings and refinance activity within Financial
Services, represents 69% (2023: 73%) of Group revenue.
Lettings revenue
Lettings revenue increased by 5% to £52.4m (2023: £49.8m), including £2.2m
of incremental acquisition revenues (2 additional months of trading from
Atkinson McLeod, acquired March 2023, and 6 additional months of trading from
Ludlow Thompson, acquired November 2023). Transaction volumes increased by 1%
and average revenue per transaction increased by 4%.
Double-digit growth in new business volumes offset an expected temporary
reduction in the volume of existing tenancies re-transacting in H1 2024,
following longer tenancy terms signed across 2022 and 2023. Average tenancy
lengths have increased by c.20% since 2022 as part of the Group's strategy to
improve client retention and grow its portfolio of recurring revenues.
As expected, rental prices for new deals completed in the period were flat as
year-on-year rental growth moderated as supply and demand dynamics continue to
normalise, but with rental prices remaining at elevated levels.
Lettings revenue includes £3.4m (2023: £2.3m) of interest earned on client
monies which supports the operating costs of managing client money, such as
staff costs, bank and card fees, and compliance costs.
Sales revenue
Sales revenue increased by 28% to £21.6m (2023: £16.9m), with the increase
driven by a 28% increase in Sales exchange volumes compared to H1 2023 against
a backdrop of flat year-on-year London exchange volumes. Market share of
exchange volumes increased by 30% to 5.1% (2023: 3.9%).
Average revenue per transaction was flat against 2023. The average price of
properties sold (H1 2024: £581,000; 2023: £584,000) was flat in-line with
the wider market, whilst commission rates remained robust at 2.16% (2023:
2.17%).
Financial Services revenue
Financial Services revenue increased by 7% to £4.5m (2023: £4.2m) driven by
an 8% increase in volumes. Average revenue per transaction was flat as a 2%
increase in average loan size was partially offset by adverse product mix with
the number of product transfers continuing to grow. In H1 2024, £2.0m (44% of
revenue) was generated from non-cyclical and recurring refinance activity and
£2.5m (56% of revenue) from purchase activity and other revenue sources.
Contribution and contribution margin
H1 2024 H1 2023
£m margin £m margin
Lettings 39.3 75.0% 37.4 75.1%
Sales 9.8 45.3% 5.5 32.7%
Financial Services 2.0 43.1% 1.6 37.2%
Total 51.0 65.0% 44.5 62.7%
Contribution, defined as revenue less direct salary costs of front office
staff and bad debt charges, increased to £51.0m (2023: £44.5m) with growth
across all segments. Contribution margin for the period increased to 65.0%
(2023: 62.7%) reflecting the following segmental margin changes:
· Lettings contribution margin remained flat at 75.0% (2023: 75.1%)
with growth in higher margin revenues, such as property management services,
cross-sell of ancillary services and interest on client monies, offset by 6%
year-on-year growth in Lettings fee earner headcount.
· Sales contribution margin increased to 45.3% (2023: 32.7%) due to
growth in transaction volumes and the inherent operating leverage in the
business.
· Financial Services contribution margin increased to 43.1% (2023:
37.2%) due to higher revenues and improved productivity.
Total average fee earner headcount across Lettings, Sales and Financial
Services was up 5% at 851 (2023: 812) due to acquired staff and additional
hires in specific markets to drive organic growth. The average tenure of fee
earners continued to improve which will drive further productivity growth.
Adjusted operating profit and adjusted operating profit margin
H1 2024 H1 2023
£m margin £m Margin
Lettings 12.9 24.7% 14.1 28.4%
Sales (3.7) (17.3%) (6.4) (37.6%)
Financial Services 0.6 13.0% 0.2 4.7%
Corporate costs (1.3) n/a (1.2) n/a
Total 8.5 10.8% 6.8 9.6%
Adjusted operating profit for the period was £8.5m (2022: £6.8m) and
adjusted operating margin increased to 10.8% (2023: 9.6%). Refer to Note 2 of
the condensed financial statements for a reconciliation of adjusted operating
profit to the closest equivalent IFRS measure.
Consistent with prior periods, for the purposes of segmental reporting, shared
costs relating to the estate agency businesses are allocated between Lettings
and Sales with reference to relevant cost drivers, such as front office
headcount in the respective business. Corporate costs are not allocated to the
operating segments and are presented separately.
Lettings adjusted operating profit reduced by £1.2 to £12.9m, Sales adjusted
operating loss improved by £2.6m to £3.7m and Financial Services adjusted
operating profit increased by £0.4m to £0.6m.
Within adjusted operating profit, £3.2m (2023: £2.6m) of non-cash charges
were incurred relating to depreciation, amortisation and share-based payments:
H1 2024 H1 2023
£m £m
Depreciation - property, plant and equipment 1.2 1.2
Amortisation - non-acquired intangibles 0.1 0.2
Amortisation - acquired intangibles 1.0 0.6
Share-based payments(1) 0.9 0.6
Total non-cash charges 3.2 2.6
(1) Including National Insurance contributions payable in connection with the
schemes.
ADJUSTED EBITDA and adjusted EBITDA MARGIN
H1 2024 H1 2023
£m margin £m margin
Adjusted EBITDA 10.5 13.4% 8.4 11.8%
Adjusted EBITDA increased by 25% to £10.5m (2023: £8.4m) and Adjusted EBITDA
margin increased to 13.4% (2023: 11.8%). Adjusted EBITDA, which excludes
non-cash depreciation, amortisation and share-based payment charges, is
defined on a basis consistent with that of the Group's RCF covenants. Since
the metric includes IFRS 16 lease depreciation and IFRS 16 lease finance costs
the measure fully reflects the Group's lease cost base. Refer to Note 15 of
the condensed financial statements for a reconciliation of adjusted EBITDA to
the closest equivalent IFRS measure.
Adjusted items
A net adjusted items credit of £0.1m (2023: nil) was incurred in the period.
Adjusted items, due to their size and incidence require separate disclosure in
the financial statements to reflect management's view of the underlying
performance of the Group and allow comparability of performance from one
period to another. The table below provides detail of the adjusted items in
the period.
H1 2024 H1 2023
£m £m
Net property related reversal(1) (0.1) (0.1)
Transaction related costs(2) - 0.1
Total net adjusted items credit (0.1) -
(1) Net property related reversal relates to the net of a charge for
re-estimation of the provision for adjusted items, a net gain on the disposal
of IFRS 16 balances and other charges relating to vacant property (including,
in H1 2023, £0.2m of costs relating to the closure of three Atkinson McLeod
branches with business now being served out of the existing Foxtons branch
network).
(2) Transaction related costs relate to the acquisition of Atkinson McLeod
Limited in H1 2023.
Profit before tax AND ADJUSTED PROFIT BEFORE TAX
H1 2024 H1 2023
£m £m
Adjusted operating profit 8.5 6.8
Add: adjusted items 0.1 -
Operating profit 8.6 6.8
Less: Net finance costs and other income (1.0) (0.8)
Profit before tax 7.5 6.1
Deduct: adjusted items credit (0.1) -
Adjusted profit before tax 7.4 6.1
Profit before tax has increased by 24% to £7.5m (2023: £6.1m) after charging
£1.0m (2023: £0.8m) of net finance costs and other income, primarily
relating to IFRS 16 lease finance costs. Adjusted profit before tax, which
excludes adjusted items, is £7.4m (2023: £6.1m).
profit after tax
H1 2024 H1 2023
£m £m
Profit before tax 7.5 6.1
Less: current tax charge (2.0) (1.9)
Less: deferred tax credit 0.4 -
Profit after tax 5.9 4.1
The Group has a low-risk approach to its tax affairs and all business
activities are within the UK and are UK tax registered and fully tax
compliant. The Group does not have any complex tax structures in place and
does not engage in any aggressive tax planning or tax avoidance schemes. The
Group is transparent, open and honest in its dealings with tax authorities.
Profit after tax of £5.9m (2023: £4.1m) is after a total tax charge of
£1.7m (2023: £1.9m), of which £0.4m (2023: £nil) relates to a non-cash
deferred tax accounting credit and £2.0m (2023: £1.9m) relates to a current
tax charge. The effective tax rate for the period was 22.0% (2023: 32.0%),
which compares to the statutory corporation tax rate of 25% (2023: 25%). The
2024 effective tax rate is lower than the statutory corporation tax rate due
to adjustments in respect of prior periods.
Net deferred tax liabilities totalled £25.4m (2023: £26.1m), which comprise
£28.0m (2023: £27.6m) of deferred tax liabilities relating to the Group's
intangible assets, offset by deferred tax assets of £2.6m (2023: £1.6m). The
deferred tax assets mainly relate to share based payments, property, plant and
equipment and tax losses brought forward which are expected to be recovered
through future taxable profits.
The Group received no tax refunds during the year (2023: £0.3m).
ADJUSTED operating cost base
The Group defines its adjusted operating cost base as the difference between
revenue and adjusted operating profit, excluding depreciation of property,
plant and equipment and amortisation of intangible assets. The reconciliation
of the adjusted operating cost base measure is presented below:
H1 2024 H1 2023
£m £m
Revenue 78.5 70.9
Less: Adjusted operating profit (8.5) (6.8)
Difference between revenue and adjusted operating profit 70.0 64.1
Less: Property, plant and equipment depreciation (1.2) (1.2)
Less: Amortisation (1.1) (0.8)
Adjusted operating cost base 67.7 62.1
The table below analyses the adjusted operating cost base into five
categories. The adjusted operating cost base increased by £5.6m to £67.7m
(2023: £62.1m), with £2.0m attributable to incremental acquisition related
operating costs.
H1 2024 H1 2023
£m £m
Direct costs(1) 27.5 26.5
Branch operating costs(2) 17.0 15.7
Centralised revenue generating operating costs(3) 8.3 7.0
Revenue generating operating costs 52.9 49.2
Central overheads(4) 13.5 11.7
Corporate costs(5) 1.3 1.2
Adjusted operating cost base 67.7 62.1
(1) Direct salary costs of branch fee earners and bad debt charges.
(2) Branch related operating costs shared between Lettings and Sales.
(3) Centralised fee earners, lead generation staff and Lettings property
management staff.
(4) Central overhead costs supporting branch operations.
(5) Corporate costs not attributed directly to the operating activities of the
operating segments.
Key movements in the adjusted operating cost base in 2024 versus 2023 are as
follows:
· Direct costs increased by £1.0m due to a 5% investment in fee
earner headcount and increased variable pay reflecting revenue growth, net of
lower bad debt charges.
· Branch operating costs increased by £1.3m primarily due to
additional marketing spend to drive organic growth.
· Centralised revenue generating operating costs increased by
£1.3m due to investment in centralised Lettings and lead generation
functions.
· Central overheads increased by £1.8m, which includes incremental
acquisition overheads, increased IT spend to drive competitive advantage and
centralised salary inflation.
Earnings per share
H1 2024 H1 2023
£m £m
Profit after tax 5.9 4.1
(Deduct)/Add back: adjusted items (net of tax) (0.1) 0.1
Adjusted earnings for the purposes of adjusted earnings per share 5.8 4.2
Earnings per share (basic) 1.9p 1.4p
Earnings per share (diluted) 1.9p 1.3p
Adjusted earnings per share (basic) 1.9p 1.4p
Adjusted earnings per share (diluted) 1.8p 1.3p
Cash flow from operating activities and net free cash flow
H1 2024 H1 2023
£m £m
Operating cash flow before movements in working capital 16.6 13.3
Working capital outflow (7.1) (9.0)
Income taxes paid (2.8) (1.1)
Net cash from operating activities 6.7 3.2
Repayment of IFRS 16 lease liabilities (6.5) (6.3)
Net cash used in investing activities(1) (1.0) (1.3)
Net free cash flow (0.9) (4.3)
(1) Excludes £1.3m (2023: £6.3m) of cash outflows relating to the
acquisition of subsidiaries (net of any cash acquired).
Operating cash flow before movements in working capital increased by £3.3m to
£16.6m (2023: £13.3m). Net cash from operating activities increased by
£3.5m to £6.7m (2023: £3.2m) due to the increased operating cashflows and
more normalised working capital movements as the impact of shorter landlord
billing terms, highlighted in the prior year, eases. Net free cash flow was a
£0.9m outflow (2022: £4.3m outflow).
Net debt
Net debt at 30 June 2024 was £11.3m (30 June 2023: £2.1m; 31 December 2023:
£6.8m). The net debt position reflects £1.3m of acquisition related spend
(2023: £6.3m), £7.1m of working capital outflows (2023: £9.0m), £1.8m of
capital expenditure (2023: £1.5m) and £2.1m of dividends paid (2023:
£2.1m).
Revolving credit facility
In May 2024, the Board increased and extended the Group's RCF. The size of the
RCF was increased from £20m to £30m and the facility was extended by a year
to June 2027, with an option to extend for a further year. The facility also
includes a £10m accordion option which can be requested at any time subject
to bank approval. The RCF supports the Group's Lettings portfolio acquisition
strategy and working capital management. Drawdowns on the facility accrue
interest at SONIA +1.65%.
The RCF is subject to a leverage covenant (net debt to EBITDA not to exceed
1.75) and an interest cover covenant (EBITDA to interest not to be less than
4) as defined in the facility agreement. Both covenants are calculated using
pre-IFRS 16 accounting principles. At 30 June 2024 the leverage ratio was 0.6x
and the interest cover ratio was 28x.
Other balance sheet positions
At 30 June 2024 the significant balance sheet positions were:
· Goodwill of £40.7 m (2023: £31.7m) and other intangible assets
of £114.7 m (2023: £111.8m), with the increase in goodwill and other
intangible assets due to the acquisition of Ludlow Thompson which contributed
£9.0m of goodwill and £3.2m of customer contracts and relationships.
· Trade and other receivables of £20.3m (2023: £18.6m) and trade
and other payables of £20.0m (2023: £18.3m).
· Total contract assets of £22.0m (2023: £13.3m) and total
contract liabilities of £10.9m (2023: £10.0m). The increase in contract
assets was driven by a focus on securing longer tenancy terms and shortening
billing periods for landlords opting to agree to longer tenancy terms.
· Lease liabilities of £45.5m (2023: £45.8m) and right-of-use
assets of £40.4m (2023: £42.7m).
· Intangible assets under construction of £2.4m (2023: £1.4m)
with the increase reflecting additional capital technology development.
Dividend policy and capital allocation
As reported in the full year 2023 results, for 2024, the Board has adopted a
progressive dividend policy. The policy aims to provide a more reliable and
growing income stream to investors, as well as enabling the Group to pursue
its strategic growth objectives, whilst maintaining strong dividend cover.
The Group's approach to capital allocation, which includes the progressive
dividend policy, aims to support long-term growth and shareholder returns. The
Group's capital allocation priorities are set out below:
· Maintain balance sheet strength to enable the Group to meet its
operational cash requirements and manage through cyclical sales markets.
· Invest in areas that drive organic growth and rebuild our
competitive advantages.
· Pay a progressive ordinary dividend.
· Deploy capital to acquire high quality lettings portfolios to
drive inorganic lettings growth.
· Return excess capital, not used for profitable growth, to
shareholders.
The Board has declared an interim dividend of 0.22p per share (2023: interim
dividend of 0.20p per share). Payment will be made on 16 September 2024 to
shareholders on the register at close of business on 9 August 2024. The shares
will be quoted ex-dividend on 8 August 2024. The Company operates a Dividend
Reinvestment Plan ("DRIP"), which is managed by its registrar, Link Group. For
shareholders who wish to receive their dividend in the form of shares, the
deadline to elect for the DRIP is 23 August 2024.
Share buy back
No shares were bought back in the period (2023: £1.1m). The Board will
continue to keep share buybacks under review in the context of other potential
uses of capital.
Related partY transactions
Related party transactions are disclosed in Note 13 of the condensed financial
statements. There have been no material changes to the related party
transactions described in the 2023 Annual Report and Accounts.
Treasury ManAgement
The Group seeks to ensure it has sufficient funds for day-to-day operations
and to enable strategic priorities to be pursued. Financial risk is managed by
ensuring the Group has access to sufficient borrowing facilities to support
working capital demands and growth strategies, with cash balances held with
major UK based banks. The Group has no foreign currency risk and as a
consequence has not entered into any financial instruments to protect against
currency risk.
Pensions
The Group does not have any defined benefit schemes in place but is subject to
the provisions of auto-enrolment which require the Group to make certain
defined contribution payments for our employees.
Risk management
The Group has identified its principal risks and uncertainties and they are
regularly reviewed by the Board and Senior Management. Refer to pages 16 and
17 for details of the Group's risk management framework and principal risks
and uncertainties.
Going concern
The financial statements of the Group have been prepared on a going concern
basis as the Directors have satisfied themselves that, at the time of
approving the financial statements, the Group will have adequate resources to
continue in operation for a period of at least 12 months from the date of
approval of the financial statements. Refer to Note 1 of the financial
statements for details of the Group's going concern assessment and the going
concern statement.
Chris Hough
Chief Financial Officer
29 July 2024
PRINCIPAL RISKS
Risk management
The Board is responsible for establishing and maintaining the Group's system
of risk management and internal control, with the aim of protecting its
employees and customers and safeguarding the interests of the Group and its
shareholders in the constantly changing environment in which it operates. The
Board, through the Audit Committee, regularly reviews the principal risks
facing the Group, together with the relevant mitigating controls, and
undertakes a robust risk assessment. In reviewing the principal risks, the
Board considers emerging risks, including climate-related risks, and changes
to existing risks. In addition, the Board has set guidelines for risk appetite
as part of the risk management process against which risks are monitored.
The identification of risks is undertaken by specific executive risk
committees that analyse the risk universe by risk type across four key risk
types: strategic risks, financial risks, operational risks and compliance
risks. A common risk register is used across the Group to monitor gross and
residual risk, with the results assessed by the Audit Committee and Board. The
Audit Committee monitors the effectiveness of the risk management system
through management updates, output from the various executive risk committees
and reports from internal audit.
The principal risks do not comprise all of the risks that the Group may face
and are not listed in any order of priority. Additional risks and
uncertainties not presently known to management, or deemed to be less material
at the date of this report, may also have an adverse effect on the Group.
Risk Impact on the Group
Market risk The key factors driving market risk are:
· Affordability, including ongoing cost of living increases, which
in turn may reduce transaction levels;
· The market being reliant on the availability of affordable
mortgage finance, a deterioration in availability or an increase in borrowing
rates may adversely impact the performance of the Sales business. In 2023,
borrowing rates increased reflecting increases in the Bank of England base
rate. Since the start of 2024, there is improved stability of borrowing rates,
with rates beginning to fall which may support additional market activity;
· The market being impacted by changes in government policy such as
renters reform or changes in stamp duty legislation;
· A reduction in London's standing as a major financial city caused
by the macro-economic and political environment; and
· Heightened geopolitical risk which may increase market
uncertainty and customer confidence.
Competitor challenge The Group operates in a highly competitive marketplace and there is a risk the
Group could lose market share.
Market share loss could be the result of competitors scaling up (organically
or through acquisition), developing new customer service propositions,
changing pricing structures or launching alternative business models to drive
a competitive advantage.
Compliance with the legal and regulatory environment Breaches of laws or regulations could lead to financial penalties and
reputational damage.
Our estate agency business operates under a range of legal and regulatory
requirements, such as complying with certain money laundering regulations and
protecting client money in-line with the relevant regulations.
Our Financial Services business is authorised and regulated by the Financial
Conduct Authority (FCA) and could be subject to sanctions for non-compliance.
During periods of interest rate volatility there is an increased risk of
compliance issues arising which require specific management.
Risk Impact on the Group
IT systems and cyber risk Our business operations are dependent on sophisticated and bespoke IT systems
which could fail or be deliberately targeted by cyber attacks leading to
interruption of service, corruption of data or theft of personal data.
Such a failure or loss could also result in reputational damage, fines or
other adverse consequences.
People There is a risk the Group may not be able to recruit or retain quality staff
to achieve its operational objectives or mitigate succession risk. As
experienced in the current labour market, increased competition for talent
leads to a reduction in the available talent pool and an increased cost of
labour. Additional risk could arise in the event there are changes in our
industry or markets that result in less attractive career opportunities.
Reputation and brand Foxtons is an iconic estate agency brand with high levels of brand
recognition. Maintaining a positive reputation and the prominence of the brand
is critical to protecting the future prospects of the business.
There is a risk our reputation and brand could be damaged through negative
press coverage and social media due to customer service falling below
expectations or because our actions are considered to be inappropriate.
We recognise the need to maintain our reputation and protect our brand by
delivering consistently high levels of service and maintaining a culture which
encourages our employees to act with the highest ethical standards.
FORWARD LOOKING STATEMENTS
This interim results announcement contains certain forward-looking statements
with respect to the financial condition and results of operations of Foxtons
Group plc. These statements and forecasts involve risk and uncertainty because
they relate to events and depend upon circumstances that will occur in the
future. There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied by these
forward-looking statements and forecasts. The forward-looking statements are
based on the Directors' current views and information known to them at 29 July
2024. The Directors do not make any undertakings to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Nothing in this statement should be construed as a profit
forecast.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
We confirm that to the best of our knowledge:
(a) The condensed set of financial statements has been prepared in
accordance with IAS 34 'Interim Financial Reporting';
(b) The interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events during the
first six months and description of principal risks and uncertainties for the
remaining six months of the year); and
(c) The interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board
Guy Gittins Chris Hough
Chief Executive Officer Chief Financial Officer
29 July 2024 29 July 2024
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended 30 June 2024
Continuing operations Notes H1 2024 H1 2023
(unaudited) (unaudited)
£'000
£'000
Revenue 2 78,515 70,933
Direct operating costs (27,510) (26,456)
Other operating costs (42,416) (37,629)
Operating profit 8,589 6,848
Other gains 260 -
Finance income 166 221
Finance costs (1,474) (1,008)
Profit before tax 7,541 6,061
Tax charge 4 (1,656) (1,939)
Profit and total comprehensive income for the period 5,885 4,122
Earnings per share
Basic earnings per share 6 1.9p 1.4p
Diluted earnings per share 6 1.9p 1.3p
Adjusted measures
Adjusted EBITDA(1,4) 15 10,517 8,383
Adjusted operating profit(2,4) 2 8,458 6,824
Adjusted profit before tax(1,4) 15 7,410 6,037
Adjusted basic earnings per share(3,4) 6 1.9 1.4p
( )
(1) Adjusted EBITDA and Adjusted profit before tax are APMs and are reconciled
to the nearest statutory measure in Note 15. Both measures exclude £0.1m of
adjusted item charges (2023: £nil) which are detailed in Note 3.
(2) Adjusted operating profit is an APM and is reconciled to statutory profit
before tax in Note 2. The measure excludes £0.1m of adjusted items (2023:
£nil) which are detailed in Note 3.
(3) Adjusted basic earnings per share is an APM and is reconciled to statutory
earnings per share in Note 6.
(4) Further details of the APMs are provided in Note 15.
The notes on pages 23 to 35 form part of this condensed consolidated financial
information.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2024
Notes 30 June 30 June 31 December
2024 2023 2023
(unaudited) (unaudited) (audited)
£'000
£'000 £'000
Non-current assets
Goodwill 7 40,709 31,663 40,709
Other intangible assets 7 114,714 111,820 114,897
Property, plant and equipment 9,130 10,885 9,459
Right-of-use assets 8 40,412 42,728 42,471
Contract assets 5,666 3,004 4,748
Investments 31 31 31
Deferred tax assets 2,563 1,563 1,905
213,225 201,694 214,220
Current assets
Trade and other receivables 20,305 18,639 17,432
Contract assets 16,311 10,291 14,256
Current tax assets 804 - -
Cash and cash equivalents 1,813 3,006 4,989
Assets classified as held for sale - - 450
39,233 31,936 37,127
Total assets 252,458 233,630 251,347
Current liabilities
Trade and other payables (19,998) (18,261) (21,303)
Current tax liabilities - (225) (79)
Borrowings 11 (13,132) (4,846) (11,682)
Lease liabilities 8 (11,029) (10,147) (10,686)
Contract liabilities (10,466) (9,611) (11,770)
Provisions (1,167) (541) (1,609)
(55,792) (43,631) (57,129)
Net current liabilities (16,559) (11,695) (20,002)
Non-current liabilities
Lease liabilities 8 (34,423) (35,657) (36,915)
Borrowings 11 - (115) (98)
Contract liabilities (480) (410) (439)
Provisions (3,111) (2,012) (3,008)
Deferred tax liabilities (27,963) (27,627) (28,153)
(65,977) (65,821) (68,613)
Total liabilities (121,769) (109,452) (125,742)
Net assets 130,689 124,178 125,605
Equity
Share capital 3,301 3,301 3,301
Merger reserve 20,568 20,568 20,568
Other reserves 2,653 2,653 2,653
Own shares reserve 12 (11,180) (12,092) (12,092)
Retained earnings 115,347 109,748 111,175
Total equity 130,689 124,178 125,605
The notes on pages 23 to 35 form part of this condensed consolidated financial
information.
These unaudited condensed consolidated interim financial statements for the 6
months ended 30 June 2024 were approved by the Board on 29 July 2024.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 June 2024
Notes Share Merger reserve Other reserves Own Retained earnings Total
capital
£'000
£'000
shares reserve
£'000
equity
£'000
£'000
£'000
Balance at 1 January 2024 3,301 20,568 2,653 (12,092) 111,175 125,605
Total comprehensive income for the period - - - - 5,885 5,885
Dividends 5 - - - - (2,119) (2,119)
Credit to equity for share-based payments - - - - 1,388 1,388
Own shares acquired in the period 12 - - - - - -
Settlement of share incentive plan 12 - - - 912 (982) (70)
Balance at 30 June 2024 (unaudited) 3,301 20,568 2,653 (11,180) 115,347 130,689
Notes Share Merger reserve Other reserves Own Retained earnings Total
capital
£'000
£'000
shares reserve
£'000
equity
£'000
£'000
£'000
Balance at 1 January 2023 3,301 20,568 2,653 (10,993) 107,139 122,668
Total comprehensive income for the period - - - - 4,122 4,122
Dividends 5 - - - - (2,122) (2,122)
Own shares acquired in the period 12 - - - (1,112) - (1,112)
Credit to equity for share-based payments - - - - 622 622
Settlement of share incentive plan - - - 13 (13) -
Balance at 30 June 2023 (unaudited) 3,301 20,568 2,653 (12,092) 109,748 124,178
Notes Share Merger reserve Other reserves Own Retained earnings Total
capital
£'000
£'000
shares reserve
£'000
equity
£'000
£'000
£'000
(audited)
Balance at 1 January 2023 3,301 20,568 2,653 (10,993) 107,139 122,668
Total comprehensive income for the year - - - - 5,490 5,490
Dividends 5 - - - - (2,725) (2,725)
Own shares acquired in the period 12 - - - (1,112) - (1,112)
Credit to equity for share-based payments - - - - 1,284 1,284
Settlement of share incentive plan - - - 13 (13) -
Balance at 31 December 2023 3,301 20,568 2,653 (12,092) 111,175 125,605
The notes on pages 23 to 35 form part of this condensed consolidated financial
information.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Six months ended 30 June 2024
Notes H1 2024 H1 2023
(unaudited) (unaudited)
£'000
£'000
Operating activities 2 8,589 6,848
Operating profit
Operating profit 8,589 6,848
Adjustments for:
Depreciation of property, plant and equipment and right-of-use assets 6,633 6,385
Amortisation of intangible assets 1,087 834
Gain on disposal of lease liability (72) (617)
Sub-lease asset impairment - 190
Loss on disposal of property, plant and equipment and right-of-use assets 15 26
Decrease in provisions (339) (896)
Settlement of share incentive plan (70) -
Share-based payment charges 766 522
Operating cash flows before movements in working capital 16,609 13,292
Increase in receivables and contract assets (5,896) (8,723)
Decrease in payables and contract liabilities (1,221) (234)
Cash generated by operations 9,492 4,335
Income taxes paid (2,766) (1,102)
Net cash from operating activities 6,726 3,233
Investing activities
Interest received 166 221
Proceeds on disposal of property, plant and equipment 570 -
Purchases of property, plant and equipment (930) (792)
Purchases of intangibles (917) (698)
Purchases of investments 9 - (25)
Proceeds from sale of shares 91 -
Acquisition of subsidiaries (net of cash acquired) 10 (1,301) (6,328)
Net cash used in investing activities (2,321) (7,622)
Financing activities
Proceeds from borrowings 8,800 4,800
Repayment of borrowings (7,428) -
Dividends paid 5 (2,119) (2,122)
Interest on borrowings (458) (38)
Interest on lease liabilities (1,038) (970)
Repayment of lease liabilities (5,432) (5,318)
Sub-lease receipts 94 128
Purchase of own shares 12 - (1,112)
Net cash used in financing activities (7,581) (4,632)
Net decrease in cash and cash equivalents (3,176) (9,021)
Cash and cash equivalents at beginning of period: 4,989 12,027
Cash and cash equivalents at end of period 1,813 3,006
The notes on pages 23 to 35 form part of this condensed consolidated financial
information.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORT
1. accounting policies, judgements and estimates
1.1 General Information
Foxtons Group plc ("the Company") is a company incorporated in the United
Kingdom under the Companies Act 2006. The address of the Company's registered
office is Building One, Chiswick Park, 566 Chiswick High Road, London W4 5BE.
The principal activity of the Company and its subsidiaries (collectively, "the
Group") is the provision of services to the residential property market in the
UK.
These condensed interim financial statements are presented in pounds sterling
which is the currency of the primary economic environment in which the Group
operates.
1.2 Basis of preparation
These condensed interim financial statements do not comprise statutory
accounts within the meaning of section 434 of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2023 were approved by the
Directors on 4 March 2024 and delivered to the Registrar of Companies. The
report of the auditors on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement under section
498 of the Companies Act 2006. The condensed interim financial statements have
been reviewed, not audited.
This condensed consolidated interim financial report for the half-year
reporting period ended 30 June 2024 has been prepared in accordance with the
UK-adopted International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
1.3 Going concern
Going concern assessment
The condensed interim financial statements of the Group have been prepared on
a going concern basis as the Directors have satisfied themselves that, at the
time of approving the condensed interim financial statements, the Group will
have adequate resources to continue in operation for a period of at least 12
months from the date of approval of the condensed consolidated interim
financial statements. The assessment has taken into consideration the Group's
financial position, liquidity requirements, recent trading performance and the
outcome of reverse stress testing. At 30 June 2024, the Group was in a net
debt position of £11.3m (31 December 2023: £6.8m net debt) and a net current
liability position of £16.6m (31 December 2023: £20.0m), both of which
include the £13.3m drawdown on the Group's £30.0m revolving credit facility
('RCF') used to fund the Group's acquisition strategy and working capital
requirements. The facility is available for use until June 2027 and has an
option to extend for a further year to June 2028. For RCF terms refer to Note
11.
Reverse stress scenario
In assessing the Group's ability to continue as a going concern, the Directors
have stress tested the Group's cash flow forecasts using a reverse stress
scenario which incorporates a severe deterioration in market conditions.
Reverse stress testing seeks to determine the point at which the Group could
be considered to fail without taking further mitigating actions or raising
additional funds. For the purposes of the reverse stress test, the point of
failure has been defined as the point at which the Group breaches its RCF
covenants.
The reverse stress scenario has taken into consideration the revenue
characteristics of the Group, specifically the transactional nature of Sales
revenue, which contrasts to the recurring and non-cyclical nature of Lettings
revenue. The scenario assumes a severe macro-economic downturn from July 2024
to December 2025 which heavily impacts Sales and Financial Services revenues
since these streams are most sensitive to the macro-economic environment.
Additionally, Lettings revenues have been assumed to be impacted despite their
resilient nature. The key assumptions are summarised below:
· A 30% reduction in sales market transactions and a 19% reduction
in Lettings units compared in 2022. For context, a 30% reduction in sales
market transactions would see transaction volumes fall c.10% compared to those
levels seen in 2009 following the Global Financial Crisis.
· Additionally, the scenario incorporates a 10% reduction in house
prices and a 15% reduction in Lettings average revenue per transaction from
current levels, further reducing revenues.
· Under the reverse stress scenario, Sales revenue would be 20%
lower than 2023 and Lettings revenue would be 13% lower than 2023. Noting that
2023 Sales revenues were already at a depressed level, a further fall of 20%
in improving market conditions is considered to be unlikely.
· Under the scenario, it is assumed management would take
mitigating action to reduce discretionary spending and right size fee earner
headcount to reflect market conditions. The modelled actions include: reducing
front office headcount in line with the revenue reductions; reducing
discretionary spend such as marketing; and deferring management bonuses.
In the unlikely event of the reverse stress scenario, the Group forecasts it
would breach the RCF's leverage covenant (refer to Note 11 for details of the
covenants) in December 2025. Under such a scenario, further mitigating actions
that could be taken, but not included in the reverse stress scenario, include
further reducing discretionary spend, further rationalising headcount, pausing
capital expenditure, seeking agreement to defer lease payments or raising
additional funds.
1.4 Accounting policies, interpretations and amendments
adopted by the Group
The accounting policies applied in these interim statements are the same as
those applied in the Group's 2023 Annual Report and Accounts, with the
exception of certain new interpretations and amendments adopted in the current
period which had no significant effect on the Group's results.
1.5 Alternative performance measures
In reporting financial information the Group presents APMs which are not
defined or specified under the requirements of IFRS. The Group believes that
the presentation of APMs provides stakeholders with additional helpful
information on the performance of the business, but does not consider them to
be a substitute for or superior to IFRS measures. APMs are also used to
enhance the comparability of information between reporting periods, by
adjusting for uncontrollable factors which affect IFRS measures, to aid users
in understanding the Group's performance. The Group's APMs are defined, and
purpose explained, within Note 15.
1.6 Critical accounting judgements and key sources of
estimation uncertainty
The Group's critical accounting judgements and key sources of estimation
uncertainty are consistent with those described in the Group's 2023 Annual
Report and Accounts.
2. Business and geographical segments
Products and services from which reportable segments derive their revenues
Management has determined the operating segments based on the monthly
management pack reviewed by the Directors, which is used to assess both the
performance of the business and to allocate resources within the Group.
Management has identified that the Board is the Chief Operating Decision Maker
('CODM') in accordance with the requirements of IFRS 8 'Operating Segments'.
The operating and reportable segments of the Group are (i) Lettings, (ii)
Sales and (iii) Financial Services.
(i) Lettings generates commission from the letting and
management of residential properties and income from interest earned on client
monies.
(ii) Sales generates commission on sales of residential
property.
(iii) Financial Services generates commission from the
arrangement of mortgages and related products under contracts with financial
service providers and receives administration fees from clients.
All revenue for the Group is generated from within the UK and there is no
intra-group revenue.
Segment assets and liabilities, including depreciation, amortisation and
additions to non-current assets, are not reported to the Board on a segmental
basis and are therefore not disclosed. Goodwill and intangible assets have
been allocated to reportable segments as described in Note 7.
The segmental disclosures include two APMs as defined below. Further details
of the APMs is provided in Note 15.
Contribution and contribution margin
Contribution is defined as revenue less direct operating costs (being salary
costs of front office staff and costs of bad debt). Contribution margin is
defined as contribution divided by revenue. These measures indicate the
profitability and efficiency of the segments before the allocation of shared
costs.
Adjusted operating profit and adjusted operating profit margin
Adjusted operating profit represents the profit before tax for the period
before adjusted items (defined below), finance income and finance cost and
other gains/losses. Adjusted operating profit margin is defined as adjusted
operating profit divided by revenue. As explained in Note 15, these measures
are used by the Board to measure delivery against the Group's strategic
priorities, to allocate resource and to assess segmental performance.
Adjusted items
Adjusted operating profit, adjusted operating profit margin, adjusted EBITDA,
adjusted EBITDA margin and adjusted earnings per share, exclude adjusted
items. Adjusted items include costs or revenues which due to their size and
incidence require separate disclosure in the condensed interim financial
statements to reflect management's view of the underlying performance of the
Group and allow comparability of performance from one period to another. Items
include restructuring and impairment charges, significant acquisition costs
and any other significant exceptional items. Refer to Note 3 for further
information of the adjusted items recognised in the period.
Segment revenues and results
The following is an analysis of the Group's continuing operations results by
reportable segment for the half year ended 30 June 2024:
Notes Lettings Sales Financial Services Corporate costs Consolidated
( ) £'000 £'000 £'000 £'000 £'000
Revenue 52,356 21,610 4,549 n/a 78,515
Contribution 15 39,265 9,779 1,961 n/a 51,005
Contribution margin 15 75.0% 45.3% 43.1% n/a 65.0%
Adjusted operating profit/(loss) 15 12,941 (3,742) 592 (1,333) 8,458
Adjusted operating profit margin 15 24.7% (17.3%) 13.0% n/a 10.8%
Adjusted items 3 131
Operating profit 8,589
Other income 260
Finance income 166
Finance costs (1,474)
Profit before tax 7,541
Lettings Sales Financial Services Corporate costs Consolidated
( ) £'000 £'000 £'000 £'000 £'000
Depreciation(1) 4,124 2,501 8 - 6,633
Amortisation from non-acquired 47 30 29 - 106
intangibles
Amortisation from acquired intangibles 820 161 - - 981
Total 4,991 2,692 37 - 7,720
(1) Total depreciation of £6.6m consists of £1.2m of property, plant and
equipment depreciation and £5.4m of IFRS 16 lease depreciation (refer to Note
8)
The following is an analysis of the Group's continuing operations results by
reportable segment for the half year ended 30 June 2023:
Notes Lettings Sales Financial Services Corporate costs Consolidated
( ) £'000 £'000 £'000 £'000 £'000
Revenue 49,768 16,933 4,232 n/a 70,933
Contribution 15 37,362 5,540 1,575 n/a 44,477
Contribution margin 15 75.1% 32.7% 37.2% n/a 62.7%
Adjusted operating profit/(loss) 15 14,145 (6,364) 199 (1,156) 6,824
Adjusted operating profit margin 15 28.4% (37.6%) 4.7% n/a 9.6%
Adjusted items 3 24
Operating profit 6,848
Finance income 221
Finance costs (1,008)
Profit before tax 6,061
Lettings Sales Financial Services Corporate costs Consolidated
( ) £'000 £'000 £'000 £'000 £'000
Depreciation(1) 3,918 2,459 8 - 6,385
Amortisation from non-acquired 113 70 43 - 226
intangibles
Amortisation from acquired intangibles 608 - - - 608
Total 4,639 2,529 51 - 7,219
(1) Total depreciation of £6.4m consists of £1.2m of property, plant and
equipment depreciation and £5.2m of IFRS 16 lease depreciation (refer to Note
8)
3. ADJUSTED ITEMS
Adjusted operating profit, adjusted operating profit margin, adjusted EBITDA,
adjusted EBITDA margin, adjusted profit before tax, adjusted earnings per
share, exclude adjusted items. These APMs are defined, purpose explained and
reconciled to statutory measures in Note 2, Note 6 and Note 15.
H1 2024 H1 2023
£'000
£'000
Net property related reversal(1) (131) (148)
Transaction related costs(2) - 124
(131) (24)
(1) Net property related reversal relates to the net of a charge for
re-estimation of the provision for adjusted items, a net gain on the disposal
of IFRS 16 balances and other charges relating to vacant property (including,
in H1 2023, £0.2m of costs relating to the closure of three Atkinson McLeod
branches with business now being served out of the existing Foxtons branch
network).
(2)Transaction related costs relate to the acquisition of Atkinson McLeod
Limited in H1 2023.
4. Taxation
The components of the income tax charge recognised in the Group income
statement are:
H1 2024 H1 2023
£'000
£'000
Current tax charge 2,022 1,915
Deferred tax (credit)/charge (366) 24
Tax charge on profit on ordinary activities 1,656 1,939
The tax charged within the 6 months ended 30 June 2024 has been calculated by
applying the effective rate of tax which is expected to apply to the Group for
the year ending 31 December 2024 using rates substantively enacted as at
30 June 2024 as required by IAS 34 'Interim Financial Reporting'.
Deferred tax assets/liabilities have been recognised at 25% reflecting the
prevailing UK corporate tax rate.
5. Dividends
H1 2024 H1 2023
£'000 £'000
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2023: 0.7p (31 December 2022: 2,119 2,122
0.7p) per ordinary share
2,119 2,122
For 2024, the Board has declared an interim dividend of 0.22p (2023: 0.20p)
per ordinary share to be paid in September 2024. The condensed interim
financial statements do not reflect the dividend payable.
6. Earnings per share
Basic earnings per share is calculated by dividing the profit for the period
attributable to ordinary equity holders of the Company by the weighted average
number of ordinary shares in issue during the financial period, excluding own
shares held.
Diluted earnings per share is calculated by dividing the earnings attributable
to ordinary equity holders of the Company by the weighted average number of
ordinary shares in issue during the financial period, excluding own shares
held, plus the weighted average number of ordinary shares that would be issued
on conversion of all the dilutive potential ordinary shares into ordinary
shares. The Company's potentially dilutive ordinary shares are in respect of
share options granted to employees.
H1 2024 H1 2023
£'000 £'000
Profit for the purposes of basic and diluted earnings per share 5,885 4,122
Adjusted items (including associated taxation)(1) (95) 60
Adjusted earnings for the purposes of adjusted earnings per share 5,790 4,182
Number of shares H1 2024 H1 2023
Weighted average number of ordinary shares for the purposes of basic earnings 302,097,591 302,815,955
per share
Effect of potentially dilutive ordinary shares 12,613,971 11,723,508
Weighted average number of ordinary shares for the purpose of diluted earnings 314,711,562 314,539,463
per share
Earnings per share (basic) 1.9p 1.4p
Earnings per share (diluted) 1.9p 1.3p
Adjusted earnings per share (basic) 1.9p 1.4p
Adjusted earnings per share (diluted) 1.8p 1.3p
(1)Net adjusted items credit of £131k (2023: £24k), plus associated tax
charge of £36k (2023: £84k), resulting in an after tax adjusted items credit
of £95k (2023: £60k charge). Refer to Note 3 for details on adjusted items.
7. Goodwill and other intangible assets
At 30 June 2024, goodwill and other intangible assets total £155.4m (30 June
2023: £143.5m) as detailed below:
30 June 2024 30 June 2023 31 December 2023
£'000
£'000
£'000
Goodwill 40,709 31,663 40,709
Brand 99,000 99,000 99,000
Software 724 228 814
Customer contracts and relationships 12,615 11,147 13,596
Assets under construction 2,375 1,445 1,487
Other intangible assets 114,714 111,820 114,897
Goodwill and other intangible assets 155,423 143,483 155,606
Assets under construction represent the amount of expenditure recognised in
the course of an asset's construction. Development costs that are directly
attributable to the design and testing of identifiable software products
controlled by the Group are recognised as intangible assets when the project
or process is technically and commercially feasible. Directly attributable
costs that are capitalised as part of the software product include the
software development employee costs and an appropriate portion of relevant
overheads.
a) Review for indicators of impairment at 30 June 2024
Under IAS 36 'Impairment of Assets', the Group is required to:
· review its intangible assets in the event of a significant change
in circumstances that would indicate potential impairment; and
· review and test its goodwill and indefinite-life intangible
assets annually or in the event of a significant change in circumstances.
At 30 June 2024, the Group has assessed for indicators of impairment of the
Group's goodwill and brand asset. Following consideration of both internal and
external impairment indicators, including 2024 year-to-date trading
performance, no indicators of impairment have been identified.
b) Sensitivity analysis
Sensitivity analysis was performed as part of the impairment review for the
year ended 31 December 2023 to assess whether the carrying value of the
Foxtons brand asset is sensitive to reasonable possible changes in key
assumptions and whether any changes in key assumptions would materially change
the carrying value. Lettings goodwill showed significant headroom against all
sensitivity scenarios, whilst the brand asset was sensitive to reasonable
possible changes in key assumptions.
The key assumption used in the 2023 brand asset impairment assessment was the
forecast revenues for the sales and lettings businesses. The carrying value of
the brand asset was not highly sensitive to changes in discount rates or
long-term growth rates.
As disclosed in Note 10 of the 2023 Annual Report and Accounts, the impairment
model indicated brand asset headroom of £60.4m or 38% of the carrying value
under test. Cash flows are from the Group's Board approved plan while also
complying with the requirements of the relevant accounting standard. The key
assumptions were as follows:
· Sales revenue increases by a CAGR (compound average growth rate)
of 10.7% as the market recovers 5% in 2024 and 2.5% annually from there and
market share growth continues.
· Within the Sales revenue assumption, house prices are assumed to
fall 2% in 2024 before increasing 2.5% annually from 2026.
· Lettings revenue is assumed to grow at a CAGR of 3.4% over the
forecast period, excluding future Lettings portfolio acquisitions that must be
excluded from forecast cash flows under the relevant accounting standard.
It was disclosed that assuming no changes in other elements of the plan, the
brand asset headroom would reduce to zero if the combined revenue CAGR over
the forecast period reduces from 5.5% to 3.4%. Under a reasonably possible
downside scenario, in which Sales revenue only fully recovers to 2022 levels
by 2028, Lettings revenue growth is limited to 2.2% and the Group takes
appropriate mitigating actions, such as reducing discretionary spend and
direct costs, the brand asset headroom would be reduced to £1.1m. At 30 June
2024, consideration of the latest economic and geo-political conditions have
been made, and there have been no significant changes to this reasonable
possible downside scenario.
The Group will complete a full annual impairment review, as required under IAS
36, for the goodwill and brand assets in the second half of the year.
8. leases
Right-of-use assets
The carrying amounts of the right-of-use assets recognised and the movements
during the period are outlined below:
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Opening balance 42,471 42,570 42,570
Additions 2,979 6,633 13,532
Acquired through business combinations - - 1,891
Lease modifications 579 67 (298)
Disposals (228) (1,330) (2,340)
Depreciation (5,389) (5,212) (10,511)
Impairment charge - - (2,373)
Closing balance 40,412 42,728 42,471
Lease liabilities
The carrying amounts of lease liabilities recognised and the movements during
the period are outlined below:
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Opening balance 47,601 46,461 46,461
Additions 2,985 6,590 13,440
Acquired through business combinations - - 1,891
Lease modifications 579 67 (574)
Disposals (281) (1,996) (3,063)
Interest charge 1,038 970 1,971
Payments (6,470) (6,288) (12,525)
Closing balance 45,452 45,804 47,601
Current 11,029 10,147 10,686
Non-current 34,423 35,657 36,915
At the balance sheet date, continuing operations had outstanding commitments
for future minimum lease payments which fall due as follows:
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Maturity analysis - contractual undiscounted cash flows from continuing
operations
Within one year 12,837 11,874 12,488
In the second to fifth years inclusive 29,555 30,917 31,007
After five years 8,970 9,145 10,357
51,362 51,936 53,852
9. Financial instruments
Categories of financial instruments
The categories of financial instruments, including contact assets and
liabilities, held by the Group are as follows:
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Financial assets
FVOCI financial assets 31 31 31
Cash and cash equivalents 1,813 3,006 4,989
Financial assets recorded at amortised cost 39,189 28,935 31,304
Financial liabilities
Financial liabilities recorded at amortised cost (22,997) (21,461) (27,112)
Borrowings (13,132) (4,961) (11,780)
Lease liabilities (45,542) (45,804) (47,601)
Management considers that the book value of financial assets and liabilities
recorded at amortised cost and their fair value are approximately equal.
Fair value hierarchy
The Group uses the following hierarchy for determining the fair value of the
financial instruments held:
· Level 1 - Quoted market prices
· Level 2 - Valuation techniques (market observable)
· Level 3 - Valuation techniques (non-market observable)
At 30 June 2024, the Group does not hold any financial instruments categorised
as Level 1 or 2 by IFRS 13 (31 December 2023: £nil, 30 June 2023: £nil).
The Level 3 financial instruments held by the Group relate solely to unlisted
equity shares.
The following table shows the changes in Level 3 financial assets for the six
months ended 30 June:
2024 2023
£'000 £'000
Opening balance 1 January 31 6
Additions - 25
Closing balance 30 June 31 31
There were no transfers between the levels during the period.
Financial risk factors
The Group's activities expose it to a variety of financial risks including,
interest rate risk, credit risk and liquidity risk. The condensed interim
financial statements do not include all financial risk management information
and disclosures as required in the annual financial statements; they should be
read in conjunction with the information included in Note 24 of the 2023
Annual Report and Accounts. There have been no changes in any risk management
policies since the year end.
10. business combinations
2023 acquisitions
As disclosed in Note 13 of the 2023 Annual Report and Accounts, on 3 March and
6 November 2023 respectively the Group acquired 100% of the share capital of
the following independent London estate agents which are primarily focused on
providing Lettings and Property Management services:
• Atkinson McLeod Limited ('Atkinson McLeod');
• Ludlow Thompson Holdings Limited and its subsidiaries
Ludlowthompson SLM Ltd and Ludlowthompson.com Limited (collectively 'Ludlow
Thompson').
A total deferred consideration of £1.3m was paid in H1 2023 relating to:
• £0.7m paid in relation to Atkinson McLeod, with no further
payments due.
• £0.6m paid in relation to Ludlow Thompson representing the
partial settlement of deferred consideration, with an estimated £1.4m of
deferred consideration payable in the second half of the year.
Analysis of cash flows on acquisition
H1 2024 H1 2023
£'000
£'000
Cash consideration - (7,457)
Deferred and contingent consideration paid in relation to prior year (1,301) (172)
acquisitions
Cash acquired in subsidiaries - 1,301
Acquisitions of subsidiaries, net of cash acquired (included in cash flows (1,301) (6,328)
used in investing activities)
Transaction costs of the acquisition (included in cash flows from operating - (124)
activities)
Net cash flow on acquisitions (1,301) (6,452)
H1 2023 transaction costs of £0.1m were recognised as an adjusted item
expense in the Group's consolidated income statement (refer to Note 3).
11. bORROWINGS
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Current:
Revolving credit facility 13,329 4,964 11,769
Freehold mortgage - 35 40
Transaction costs (197) (153) (127)
Total borrowings due within one year 13,132 4,846 11,682
Non-current:
Freehold mortgage - 115 98
Total borrowings due in more than one year - 115 98
Total borrowings 13,132 4,961 11,780
During the period, the Company increased the revolving credit facility (RCF)
from £20m to £30m and extended it by one year from June 2026 to June
2027.The RCF attracts a margin of 1.65% above SONIA and is unsecured. The
facility is available for use until June 2027 and has an option to extend for
a further year to June 2028, as well as an accordion facility to increase the
facility size to £40m subject to bank approval.
Interest of £0.5m was paid in the period (2023: nil).
The RCF is subject to a leverage covenant (net debt to EBITDA not to exceed
1.75) and an interest cover covenant (EBITDA to interest not to be less than
4) as defined in the facility agreement. Both covenants are calculated using
pre-IFRS 16 accounting principles. The Group has been in compliance with
covenants throughout the period and at 30 June 2024 the leverage covenant was
0.6x and the interest cover was 28x.
12. OWN SHARES RESERVE
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Opening balance 12,092 10,993 10,993
Acquired during the period - 1,112 1,112
Settlement of share incentive plan (912) (13) (13)
Closing balance 11,180 12,092 12,092
The settlement of share incentive plans relates to the exercise of the
following share awards in H1 2024:
Number of awards
Restricted Share Plans (RSP) 479,117
Salary Substitute Restricted Share Awards 302,298
Bonus Banking Plan (BBP) (1) 1,489,952
LTIP 9,130
(1) 524,309 share awards were exercised by the Executive Directors.
The own shares reserve represents the cost of shares in the Company purchased
in the market and held by either the Company or the Foxtons Group Employee
Benefit Trust to satisfy awards under the Group's long-term incentive schemes.
The number of ordinary shares held by the Employee Benefit Trust at 30 June
2024 was 57,467 (31 December 2023: 57,467; 30 June 2023: 57,467).
The number of ordinary shares held by the Company at 30 June 2024 was
26,589,303 (31 December 2023: 28,758,900; 30 June 2023: 28,758,900).
13. RelaTed party transactions
Balances and transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not disclosed
in this note.
14. Client monies
At 30 June 2024, client monies held within the Group in approved bank accounts
amounted to £129.5m (31 December 2023: £122.4m, 30 June 2023: £125.0m).
Neither this amount nor the matching liabilities to the clients concerned, are
included in the consolidated balance sheet since these funds belong to
clients. Foxtons Limited's terms and conditions provide that any interest
income received on these client monies accrues to the Company.
Client monies are protected by the FSCS under which the government guarantees
amounts up to £85,000 each. This guarantee applies to each individual client
deposit, not the sum total on deposit.
15. Alternative performance measures
In reporting financial information the Group presents APMs which are not
defined or specified under the requirements of IFRS. The Group believes that
the presentation of APMs provides stakeholders with additional helpful
information on the performance of the business, but does not consider them to
be a substitute for or superior to IFRS measures.
The Group's APMs are aligned to the Group's strategy and together are used to
measure the performance of the business with certain APMs forming the basis of
remuneration performance measures. Adjusted results exclude certain items,
because if included, these could distort the understanding of our performance
for the period and the comparability between periods. The definition, purpose
and how the measures are reconciled to statutory measures are set out below.
a) Contribution and contribution margin
Contribution is defined as revenue less direct salary costs of front office
staff and costs of bad debt. Contribution margin is defined as contribution
divided by revenue. Contribution and contribution margin are key metrics for
management since both are measures of the profitability and efficiency before
the allocation of shared costs. A reconciliation between continuing operations
revenue and contribution is presented below.
H1 2024 Lettings Sales Financial Services Consolidated £'000
£'000 £'000 £'000
Revenue 52,356 21,610 4,549 78,515
Less: Direct operating costs (13,091) (11,831) (2,588) (27,510)
Contribution 39,265 9,779 1,961 51,005
Contribution margin 75.0% 45.3% 43.1% 65.0%
H1 2023 Lettings Sales Financial Services Consolidated £'000
£'000 £'000 £'000
Revenue 49,768 16,933 4,232 70,933
Less: Direct operating costs (12,406) (11,393) (2,657) (26,456)
Contribution 37,362 5,540 1,575 44,477
Contribution margin 75.1% 32.7% 37.2% 62.7%
b) Adjusted EBITDA and adjusted EBITDA margin
Adjusted EBITDA represents the 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. Since the measure includes
IFRS 16 lease depreciation and IFRS 16 lease finance cost, adjusted EBITDA
includes all elements of the Group's leasing costs and therefore fully
reflects the Group's lease cost base. Adjusted EBITDA margin is defined as
adjusted EBITDA divided by revenue. These measures are frequently used by
investors, securities analysts and other interested parties to evaluate
financial performance and compare performance of sector peers. Furthermore,
adjusted EBITDA is used to calculate the leverage and interest cover ratios
for the purposes of the Group's RCF covenants. A reconciliation between
operating profit and adjusted EBITDA is presented below.
Notes H1 2024 H1 2023
£'000
£'000
Operating profit 8,589 6,848
Add back: adjusted items 3 (131) (24)
Adjusted operating profit 8,458 6,824
Add back: Amortisation of non-acquired intangibles 106 226
Add back: Amortisation of acquired intangibles 981 608
Add back: Depreciation of property, plant and equipment(1) 1,244 1,173
Add back: Share-based payment charges 766 522
Deduct: Interest on IFRS 16 leases(2) 8 (1,038) (970)
Adjusted EBITDA 10,517 8,383
Adjusted EBITDA margin 13.4% 11.8%
(1) Depreciation of IFRS 16 right-of-use assets is not added back so that
adjusted EBITDA includes the non-financing element of property and vehicle
leases.
(2) Interest on IFRS 16 leases is deducted so that adjusted EBITDA includes
the financing cost of property and vehicle leases.
c) Adjusted operating profit and adjusted operating profit margin
Adjusted operating profit represents the profit before tax for the period
before finance income, finance cost, other gains/(losses) and adjusted items
(defined within Note 2). This measure is reported to the Board for the purpose
of resource allocation and assessment of segment performance. The closest
equivalent IFRS measure to adjusted operating profit is profit before tax.
Adjusted operating profit margin is defined as adjusted operating profit
divided by revenue. This APM is a key performance indicator of the Group and
is used to measure the delivery of the Group's strategic priorities.
Refer to Note 2 for a reconciliation between profit before tax and adjusted
operating profit and for the inputs used to derive adjusted operating profit
margin.
d) Adjusted profit before tax
Adjusted profit before tax represents profit before tax before adjusted items
and provides a view of the underlying profit before tax and aids comparability
of performance from one period to another. A reconciliation between profit
before tax and adjusted profit before tax is presented below.
Notes H1 2024 H1 2023
£'000
£'000
Profit before tax 7,541 6,061
Deduct: adjusted items credit 3 (131) (24)
Adjusted profit before tax 7,410 6,037
e) Adjusted earnings per share
Adjusted earnings per share is defined as earnings per share excluding the
impact of adjusted items.
The measure is derived by dividing profit after tax, adjusted for adjusted
items after tax, by the weighted average number of ordinary shares in issue
during the financial period, excluding own shares held. This APM is a measure
of management's view of the Group's underlying earnings per share.
The closest equivalent IFRS measure is basic earnings per share. Refer to Note
6 for a reconciliation between statutory earnings per share and adjusted
earnings per share.
f) Net free cash flow
Net free cash flow is defined as net cash from operating activities less
repayment of IFRS 16 lease liabilities and net cash used in investing
activities, excluding the acquisition of subsidiaries (net of any cash
acquired), divestments and purchases of investments. This measure is used to
monitor cash generation. A reconciliation between net cash from operating
activities and net free cash flow is presented below.
H1 2024 H1 2023
£'000 £'000
Net cash from operating activities 6,726 3,233
Less: Repayment of IFRS 16 lease liabilities (6,470) (6,288)
Net cash inflow/(outflow) from operating activities, after repayment of IFRS 256 (3,055)
16 lease liabilities
Investing activities
Interest received 166 221
Proceeds on disposal of property, plant and equipment 570 -
Purchases of property, plant and equipment (930) (792)
Purchase of intangibles (917) (698)
Net cash used in investing activities (1,111) (1,269)
Net free cash flow (855) (4,324)
g) Net (debt)/cash
Net (debt)/cash is defined as cash and cash equivalents less external
borrowings and excludes IFRS 16 lease liabilities. The measure is monitored
internally for the purposes of assessing the availability of capital and
balance sheet strength. A reconciliation of the measure is presented below.
30 June 2024 30 June 2023 31 December 2023
£'000 £'000 £'000
Cash and cash equivalents 1,813 3,006 4,989
Less: External borrowings (13,132) (5,114) (11,780)
Net debt (11,319) (2,108) (6,791)
Other performance measure definitions
Definitions of other performance measures presented in the Group's interim
statement are summarised below.
Volumes
· Sales volumes: Total number of property sales transactions which have
exchanged during the period.
· Lettings volumes: Total of the number of long and short lets entered
into by tenants and the number of renewals agreed between tenants and
landlords during the period.
Financial Services volumes: Total number of mortgages arranged during the
period (purchase and refinance units).
Revenue per transaction
· Revenue per Sales transaction: Sales revenue during the period
divided by Sales volumes during the period.
· Revenue per Lettings transaction: Lettings revenue during the period
divided Lettings volumes during the period.
· Revenue per Financial Services transaction: Financial Services
revenue during the period divided by Financial Services volumes during the
period.
INDEPENDENT REVIEW REPORT TO FOXTONS GROUP PLC
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2024 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2024 which comprises the condensed consolidated statement of
comprehensive income, the condensed consolidated statement of financial
position, the condensed consolidated statement of changes in equity, the
condensed consolidated cash flow statement and the related explanatory notes
that have been reviewed.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A review of interim
financial information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
As disclosed in note 1.2, the annual financial statements of the Group are
prepared in accordance with UK adopted International Accounting Standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for conclusion section of this report,
nothing has come to our attention to suggest that the Directors have
inappropriately adopted the going concern basis of accounting or that the
Directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410, however future events or conditions may cause the Group to
cease to continue as a going concern.
Responsibilities of Directors
The Directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the Directors are responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to
liquidate the Company or to cease operations, or have no realistic alternative
but to do so.
Auditor's responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statement in the
half-yearly financial report. Our conclusion, including our conclusions
relating to going concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our engagement to
assist the Company in meeting the requirements of the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority and for
no other purpose. No person is entitled to rely on this report unless such a
person is a person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised to do so
by our prior written consent. Save as above, we do not accept responsibility
for this report to any other person or for any other purpose and we hereby
expressly disclaim any and all such liability.
BDO LLP
Chartered Accountants
London, UK
29 July 2024
BDO LLP is a limited liability partnership registered in England and Wales
(with registered number OC305127).
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