Foxtons Group’s recent acquisition of estate agents in two London commuter towns highlights the outer-London potential for low-risk, value-added expansion. Furthermore, it adds to the developing success of the company’s strategic vision and implies that medium-term targets are now coming into focus. We have updated our forecasts for the deals, but additional profit from the acquisitions is broadly matched by the increase in employer’s National Insurance costs, hence we retain our valuation of 134p/share and believe that falling interest rates and property market stability are contributing to a buoyant sales market.

The latest quarterly trading update reconfirms the developing success of the Foxtons strategic vision and implies that medium-term targets, particularly the adjusted annualised operating profit target of £25–30m, are now coming further into focus. We believe that market share is being gained in all divisions, which is likely to be boosted further as the Sales pipeline is growing comfortably ahead of the market. We have modestly raised forecasts and our valuation to 134p/share and believe that if interest rates ease further, there is upside potential to our forecasts.

Foxtons Group’s H1 results clearly highlight the success of the strategy the company embarked on at the start of last year. Although there is still work to be done, significant progress has been made and it now appears likely that the medium-term target of reaching operating profit in the range of £25–30m can be achieved. Although we have maintained our existing forecasts and valuation, we believe the risks appear to be to the upside, considering that the underlying macroeconomic data appear to be supportive; something that has been lacking for some time.