REG - Foxtons Group PLC - Q3 Trading Update

FoxtonsAnnouncement

26/10/2023 07:00

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RNS Number : 3213R  Foxtons Group PLC  26 October 2023

Foxtons Group plc

Q3 2023 Trading update

Third consecutive quarter of market outperformance as operational upgrades
take effect

26 October 2023 - Foxtons Group plc (LSE:FOXT), London's leading estate
agency, has continued to deliver against its operational turnaround plan and
outperform the market(1). For the nine months ended 30 September 2023, revenue
was up 5% to £114.8m (Q3 YTD 2022: £108.9m) despite sales market volumes
being down 23%(2). For the three months ended 30 September 2023, revenue was
broadly flat at £43.9m against a robust prior year comparative (Q3 2022:
£43.8m).

Commenting on Q3, Guy Gittins, Chief Executive Officer, said:

"We have delivered a third consecutive quarter of market outperformance as
operational upgrades take effect. Our investment in fee earners, training,
data and brand is yielding results sooner than I expected, and is now
delivering material benefits to our competitiveness and market positioning.

"Market share gains across Lettings, Sales and Financial Services have enabled
us to grow revenue year-to-date despite reduced sales market transaction
volumes, a result of the higher interest rate environment. Earlier this month
we launched our new "Foxtons - London's No. 1" marketing campaign, having
regained the title as London's largest estate agency brand off the back of
significant market share gains in the first half of the year.

"The operational progress made to date, and our continued focus on growing
non-cyclical and recurring revenues to decouple earnings from sales market
volatility, gives me confidence that we will continue to deliver against our
strategic priorities and medium-term profit ambitions."

Group revenue: 30 September (Q3 and 9 months YTD)

 3 months                   Q3 2023     Q3 2022  £m change   % change
 Lettings            £31.6m       £29.2m         £2.4m       8%
 Sales               £9.9m        £11.9m         (£2.0m)     (17%)
 Financial Services  £2.4m        £2.8m          (£0.4m)     (13%)
 Total               £43.9m       £43.8m         £0.1m       -

 

 9 months                   Q3 2023       Q3 2022  £m change   % change

                            YTD           YTD
 Lettings            £81.3m        £68.6m          £12.7m      18%
 Sales               £26.9m        £32.7m          (£5.9m)     (18%)
 Financial Services  £6.6m         £7.6m           (£0.9m)     (12%)
 Total               £114.8m       £108.9m         £5.9m       5%

 

Lettings

Q3 Lettings revenue was up 8% to £31.6m (Q3 2022: £29.2m) and up 18% on a
year-to-date basis to £81.3m (Q3 2022 YTD: £68.6m). Q3 revenue growth of
£2.4m, included £0.5m (+2%) of organic growth, £0.6m of incremental revenue
from the March 2023 acquisition and £1.3m growth in interest on rental
deposits. As guided in the interim results, the rate of rental price growth
moderated compared to the previous two quarters, reflecting more normalised
supply and demand dynamics.

 

Sales

Sales volumes have continued to outperform the market with significant market
share gains(3) delivered in the quarter. Q3 Sales revenue was down 17% to
£9.9m (Q3 2022: £11.9m), compared to a 23% reduction in market exchange
volumes(4). On a year-to-date basis, Sales revenue was down 18% to £26.9m (Q3
2022 YTD: £32.7m).

Market share gains and other operational improvements enabled a 6% increase in
Q3 viewings, compared to the prior year, and drove good Q3 under offer rates,
which were only 4% lower than the prior year against a significantly weaker
market backdrop. Furthermore, despite a 5% decline in property values across
the market(5), the Foxtons average exchange price remains flat as a result of
gaining market share in higher value properties.

Financial Services

Financial Services revenue was down 13% in Q3 to £2.4m (Q3 2022: £2.8m) and
down 12% to £6.6m (Q3 2022 YTD: £7.6m) on a year-to-date basis. This
reflected lower new purchase mortgage volumes, in line with the sales market,
and an increased proportion of lower value product transfer mortgages in the
refinance portfolio. Despite these headwinds, Financial Services has
outperformed the wider market in the year, as the investment in additional fee
earner capacity has supported growth in the market share of mortgage
underwriting(6).

FY23 full year outlook

In Lettings, Q4 performance is expected to be robust, although year-on-year
rental increases are expected to moderate against the comparative quarter,
during which rental prices were already at elevated levels. The supply of
available rental properties is expected to continue to improve, providing an
additional opportunity to increase market share.

 

In Sales, although Q4 2023 revenue is expected to be lower than the prior year
comparative, market share gains mean the adverse variance versus Q4 2022
should reduce compared to previous quarters. Furthermore, with mortgage rates
beginning to stabilise, Q4 2023 buyer demand will outpace Q4 2022 levels,
which was heavily impacted by the September 2022 mini-budget. As a result, we
expect the 31 December 2023 under-offer pipeline to be significantly higher
than the prior year, which will drive year-on-year revenue growth in the first
quarter of 2024.

 

At 31 December 2023 we are forecasting a small net cash position assuming no
further acquisitions ahead of the year end. As noted within the interim
results, the cash position reflects the acquisition completed in March 2023,
dividends paid, share buybacks and the introduction of shorter billing periods
for landlords opting to agree to longer tenancy terms, in order to drive
organic Lettings revenue growth and portfolio retention.

 

Overall, full year earnings are expected to be in-line with consensus(7). The
Group's strategy of acquiring lettings businesses, coupled with Lettings
organic growth, has protected profitability in a lower volume sales market to
a far greater extent than in previous years.

 

 

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

 

(1) Outperformance on a market share basis. Calculated as Foxtons share of
Lettings instruction volumes, Sales exchange volumes and Financial Services
mortgage underwriting volumes.

(2) Exchange volumes in Foxtons core addressable markets for the 9 months
ended September 2022 and 2023. Source: TwentyCi.

(3) Share of exchange volumes in Foxtons core addressable markets. Source:
TwentyCi.

(4) Exchange volumes in Foxtons core addressable markets for the 3 months
ended September 2022 and 2023. Source: TwentyCi.

(5) Source: Halifax House Price Index.

(6) Share of UK mortgage underwriting volumes. Source: UK Finance.

(7) Consensus expectations for Foxtons Group plc, being the average of
forecasts for the year ending 31 December 2023 provided by analysts covering
the Group, is revenue of £141.5m and adjusted operating profit of £11.8m
(adjusted operating profit includes the amortisation of acquired intangibles).

 

 

About

Founded in 1981, Foxtons is London's leading estate agency and largest
lettings agent, with a portfolio of over 27,000 tenancies. The Group operates
from a network of over 60 interconnected branches, offering a range of
residential property services across three business segments: Lettings, Sales
and Financial Services.

 

The Group's strategy to accelerate growth is focused on non-cyclical and
recurring revenues from Lettings and Financial Services refinance activities,
supplemented by market share growth in Sales. In order to drive organic
growth, the Group is rebuilding its competitive advantages, with a strong
focus on leveraging data and technology; investing in people and culture; and
reinvigorating the Foxtons brand.

 

By rebuilding Foxtons' estate agency DNA and returning the business to its
position as London's go-to estate agent, the Group aims deliver significant
profit growth and deliver value for shareholders.

 

·      Lettings organic growth: Focus on winning new property
instructions, 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 and
increasing sales headcount to grow addressable market share.

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

 

To find out more, please visit www.foxtonsgroup.co.uk
(http://www.foxtonsgroup.co.uk)

 

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