Foxtons Group — Further strategic progress towards targets

Foxtons Group (LSE: FOXT)

Last close As at 09/01/2025

GBP0.65

−1.00 (−1.52%)

Market capitalisation

GBP198m

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Research: Real Estate

Foxtons Group — Further strategic progress towards targets

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.

Andy Murphy

Written by

Andy Murphy

Director, Financials & Industrials

Real Estate

Q3 trading update

Real estate

25 October 2024

Price

61p

Market cap

£185m

Net debt at 30 June 2024

£11.3m

Shares in issue

303.5m

Free float

100%

Code

FOXT

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(0.3)

(6.4)

63.2

Rel (local)

(0.2)

(7.4)

43.9

52-week high/low

71p

35p

Business description

Foxtons Group is London’s leading and most widely recognised estate agency. It operates from a network of 60 interconnected branches offering a range of residential-related services, which break down into three separate revenue streams: lettings, sales and financial services.

Next events

FY24 trading update

End January 2025

Preliminary results

March 2025

Analyst

Andy Murphy

+44 (0)20 3077 5700

Foxtons Group is a research client of Edison Investment Research Limited

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/22

140.3

13.7

3.0

0.9

20.4

1.5

12/23

147.1

15.2

2.9

0.9

21.2

1.5

12/24e

159.7

19.6

3.7

1.3

16.3

2.1

12/25e

168.9

22.9

4.5

1.6

13.5

2.6

Note: *PBT is normalised, excluding amortisation of acquired intangibles, exceptional items discontinued business and share-based payments. EPS is similar but after charging for share-based payments and excluding deferred tax re-measurement attributable to the corporate tax charge (ie diluted company definition).

Profit target forecast to be achieved in FY26e

At the start of 2023, Foxtons’ CEO set out a strategic vision to return the company to its former position as London’s go-to estate agent. This included growing the non-cyclical and recurring revenues, which currently stand at circa two-thirds of group revenue, to target operating profit of between £25m and £30m and to achieve an operating margin of over 15%. Significant progress has been made, with unprecedented investment in staff training and retention, and also the development of proprietary IT and data systems that strive to put Foxtons ahead of its competition. Market share is growing and in Sales in particular, share is already ahead of target.

Sales division drives strong Q3 revenue performance

Foxtons’ Q324 trading update was robust, with Q3 revenue increasing 8.0% to £47.4m, benefiting from continued market outperformance and market share gains, which have become a regular feature of Foxtons’ performance over the last 18 months. Year-to-date (to 30 September) revenue increased 9.7% to £125.9m, with growth in all divisions, although the most marked outperformance was in Sales as internal initiatives have begun to feed through and the market has picked up a little. Group revenue in the first nine months of 2024 (9M24) is up more than 50% on the 9M19 pre-COVID comparative period, implying a step-change in trading performance.

Valuation: Raised modestly to 134p/share

The outlook is finally improving after a prolonged period of uncertainty, and as a result of this and very good Sales activity throughout this year, we have modestly raised our FY24 and FY25 adjusted operating profit estimates. We have also raised our valuation, from 132p/share to 134p/share, in line with the profit upgrade. Earlier this year, Foxtons revised its dividend policy, which points to progression potential, with payments at least in line with FY23.

Q324 trading confirms improving markets

Without doubt, the underlying driver of Foxtons’ revenue growth in the year-to-date and Q3 periods has been the Sales division, which has benefited from a range of reinvigorating internal initiatives, and as a result has taken market share comfortably above the 4.5% target. Elsewhere, Lettings, the less volatile and more predictable revenue driver, has performed robustly in markets that are beginning to witness a greater supply of properties entering the market, thus providing added opportunity. With the end-September sales pipeline up 23%, the outlook for the remainder of the year and into 2025 appears encouraging.

Year-to-date and Q3 revenue growth driven by Sales

Foxtons’ Q324 trading update was robust, with Q3 revenue increasing 8.0% to £47.4m. We believe this is a continuation of the market outperformance and market share gains that have become a regular feature of Foxtons’ performance over the last 18 months. Year-to-date revenue increased 9.7% to £125.9m, with growth in all divisions, although the most marked outperformance was in Sales, as internal initiatives have begun to feed through and the market has picked up a little. Looking at the table below, year-to-date (9M24) group revenue is up more than 50% on the 9M19 pre-COVID comparative period.

In the core Lettings business, Q3 revenue was flat year-on-year at £31.6m, with the comparative period benefiting from a record level of renewal revenues due to high numbers of tenancies coming up for renewal in the period. This year, Foxtons has seen double-digit growth in new business, driven by operational improvements, and in Q324 this helped to offset the lower expected renewal volumes. Last year, Foxtons acquired Ludlow Thompson in November, which added c £1m of revenue in the quarter.

On a year-to-date basis, Lettings revenue increased 3% to £84.0m, (9M23: £81.3m), which included c £3.1m from the acquisition. The underlying Lettings market has been consistent with the H124 period, with rental prices flat year-on-year and strong tenant demand facing improved levels of available stock, which in turn is focusing the group on new business volumes.

Exhibit 1: 9M24 and Q324 revenue growth rates by division and group

£m

9M19

9M20

9M21

9M22

9M23

9M24

9M24 vs 9M19

9M24 vs 9M20

9M24 vs 9M21

9M24 vs 9M22

9M24 vs 9M23

Revenue

 

 

 

Lettings

53.7

45.2

57.7

68.6

81.3

84.0

56.3%

85.8%

45.5%

22.3%

3.3%

Sales

23.8

18.0

33.5

32.7

26.9

35.1

47.5%

95.3%

4.8%

7.3%

30.4%

Financial Services

6.0

5.8

7.2

7.6

6.6

6.8

13.2%

18.0%

-4.9%

-9.3%

3.3%

Total revenue

83.5

69.0

98.4

108.9

114.8

125.9

50.7%

82.6%

28.0%

15.6%

9.7%

 

£

Q319

Q320

Q321

Q322

Q323

Q324

Q324 vs Q319

Q324 vs Q320

Q324 vs Q321

Q324 vs Q322

Q324 vs Q323

Revenue

 

 

Lettings

21.3

19.5

24.8

29.2

31.6

31.6

48.5%

62.1%

27.6%

8.2%

0.0%

Sales

8.4

6.9

8.3

11.9

9.9

13.5

61.5%

95.7%

63.4%

13.4%

36.4%

Financial Services

2.1

2.2

2.0

2.8

2.4

2.3

10.4%

4.5%

14.8%

-16.4%

-4.2%

Total revenue

31.7

28.6

35.0

43.8

43.9

47.4

49.4%

65.7%

35.3%

8.3%

8.0%

Source: Foxtons Group, Edison Investment Research

In Sales, Q3 revenue increased 36% y-o-y to £13.5m, which is the highest figure in nearly 10 years, as Foxtons continues to take market share and as the market showed some early signs of recovery. Q3 volumes were up 34% compared to a market that increased c 13%, implying continued market share gain. In the year-to-date (9M24), revenue was up 30% to £35.1m, reflecting market share growth of 25% to leave Foxtons on a 9M24 market share of 5.0%, versus 4.0% last year. Foxtons is now regularly ahead of its 4.5% market share target, suggesting that the target may be reviewed in due course.

The outlook for sales in Q4 is encouraging given the under-offer pipeline at the end of September was up 23% against the prior year.

In Financial Services, Q3 revenue was down marginally at £2.3m (Q323: £2.4m), while being up 3% at £6.8m for 9M24. In Q3, Foxtons experienced higher levels of lower-value transfer mortgages, which had a negative impact on commission levels. There was, however, an almost equal and opposite impact of increased adviser productivity as operational upgrades took effect. Refinance activity remains a key feature and the division is expected to benefit from the uplift in new purchase volumes mentioned above.

Continued strategic development

Exhibit 2 below highlights the divisional revenue trends. Clearly, Lettings has grown steadily in each of the last four years in contrast to Sales and Financial Services, as the underlying markets have been quite volatile, driven by outside influences. Revenue in both Sales and Financial Services has grown in the year to date compared with 9M23, and despite the evident volatility, the revenues of both divisions are comfortably higher than they were in 9M19, which, in our opinion reflects the active investment in fee earners, staff training, data suites and the Foxtons brand, especially in the more recent periods.

Exhibit 2: 9M revenue by division, last six years

Source: Foxtons Group, Edison Investment Research

Exhibit 3 below shows the growth rates of the three divisions in Q324 versus the same period in 2019 and in 9M24 versus 9M19. While Lettings has shown consistently strong growth in both periods, at least partly driven by M&A, it is interesting to note that revenue grew faster in Sales in Q3 versus the nine-month period, suggesting some acceleration in performance as a result of the management initiatives mentioned above.

Exhibit 3: Divisional growth rates – Q324 and 9M24 versus Q319 and 9M19

Revenue growth

Q324 vs Q319

9M24 vs 9M19

Lettings

48.5%

56.2%

Sales

61.5%

47.9%

Financial Services

10.4%

13.2%

Total revenue

49.4%

50.7%

Source: Foxtons Group, Edison Investment Research

Modest profit upgrade driven by Sales outperformance

Given the strong performance in Sales in particular, and the positive outlook for the Sales pipeline, we have modestly increased our FY24 and FY25 revenue and adjusted operating profit estimates. Although the company pointed to its expectations of achieving FY consensus, given the market backdrop, we believe that the balance of risks is to the upside although we understand that the forthcoming UK government budget may have some impact on market sentiment.

Exhibit 4: Revised forecasts

£m

FY23

FY24e (old)

FY24e (new)

Change (%)

FY25e (old)

FY25e (new)

Change (%)

Revenue

147.1

157.6

159.7

1.3%

166.6

168.9

1.6%

Y-o-y growth (%)

4.9%

-

8.5%

-

5.7%

-

Adjusted operating profit

14.3

17.6

17.9

1.6%

20.4

20.8

1.8%

Y-o-y growth (%)

1.1%

-

25.4%

-

16.1%

-

Reported PBT

7.9

15.0

15.3

1.7%

18.2

18.5

1.8%

Y-o-y growth (%)

-37.9%

-

93.3%

-

21.4%

-

EPS (company definition) (p)

2.9

3.7

3.7

0.9%

4.4

4.5

3.0%

Y-o-y growth (%)

-0.9%

-

29.5%

-

21.4%

-

DPS (p)

0.9

1.3

1.3

0.5%

1.6

1.6

2.3%

Y-o-y growth (%)

0.0%

-

45.1%

-

21.4%

-

Net cash/(debt) (pre-IFRS 16, ie ex-lease liabilities)

(6.8)

(5.1)

(5.0)

1.5%

7.2

7.5

4.3%

Y-o-y growth (%)

-155.9%

-

-26.1%

-

-249.6%

-

Source: Foxtons Group, Edison Investment Research


Exhibit 5: Financial summary

£m

2019

2020

2021

2022

2023

2024e

2025e

2026e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

106.9

93.6

126.5

140.3

147.1

159.7

168.9

175.6

EBITDA

 

 

13.5

15.7

25.1

27.8

30.0

35.2

38.1

43.1

Normalised operating profit

 

 

0.6

3.8

12.1

15.6

17.1

22.2

25.1

30.1

Amortisation of acquired intangibles

(0.6)

(0.8)

(1.7)

(1.6)

(1.8)

(2.4)

(2.4)

(2.4)

Share-based payments

(0.7)

(1.0)

(1.5)

(0.2)

(1.0)

(2.0)

(2.0)

(2.0)

Total adjusted operating profit

(0.7)

1.9

8.9

13.9

14.3

17.9

20.8

25.8

Exceptionals

(5.7)

(1.1)

(1.4)

(0.1)

(4.5)

0.0

0.0

0.0

Reported operating profit

(6.3)

0.8

7.6

13.8

9.8

17.9

20.8

25.8

Net Interest and exceptionals

(2.5)

(2.2)

(2.0)

(1.9)

(1.9)

(2.6)

(2.2)

(1.9)

Profit Before Tax (norm)

 

 

(1.9)

1.6

10.0

13.7

15.2

19.6

22.9

28.2

Profit Before Tax (reported)

 

 

(8.8)

(1.4)

5.6

11.9

7.9

15.3

18.5

23.9

Reported tax

1.0

(1.8)

(6.9)

(2.4)

(2.4)

(3.8)

(4.6)

(6.0)

Discontinued operations

0.0

0.0

(4.8)

0.0

0.0

0.0

0.0

0.0

Net income (normalised)

(0.9)

(0.2)

(1.7)

11.4

12.8

15.8

18.2

22.2

Net income (reported)

(7.8)

(3.2)

(6.2)

9.6

5.5

11.4

13.9

17.9

Basic average number of shares outstanding (m)

275

314

324

308

302

302

302

302

EPS - basic normalised (p)

 

 

(0.32)

(0.08)

(0.52)

3.69

4.23

5.23

6.04

7.36

EPS - basic reported (p)

 

 

(2.83)

(1.02)

(1.90)

3.11

1.82

3.79

4.60

5.92

EPS - continuing, diluted, and adjusted. company def. (p)

 

 

(1.06)

(0.16)

1.98

3.00

2.88

3.73

4.53

5.83

Dividend (p)

0.00

0.00

0.45

0.90

0.90

1.31

1.59

2.04

Revenue growth (%)

(-4.1)

(-12.5)

35.2

10.9

4.9

8.5

5.7

4.0

Normalised Operating Margin (%)

0.5

4.1

9.5

11.1

11.6

13.9

14.9

17.2

BALANCE SHEET

Fixed Assets

 

 

178.7

173.4

184.4

191.7

214.2

206.4

197.1

188.0

Intangible Assets

101.0

103.5

107.3

109.3

114.9

116.0

117.1

118.2

Goodwill

9.3

11.4

17.7

26.1

40.7

40.7

40.7

40.7

Tangible Assets

13.0

10.5

9.7

10.7

9.5

13.6

16.3

19.1

Right of use assets

51.4

44.4

43.8

42.6

42.5

29.5

16.5

3.5

Contract assets

0.6

0.4

0.9

1.7

4.7

4.7

4.7

4.7

Investments & other

3.3

3.1

5.1

1.4

1.9

1.9

1.8

1.8

Current Assets

 

 

30.2

52.6

39.3

34.5

37.1

42.2

56.0

73.5

Contract assets

1.0

1.7

3.7

5.7

14.3

14.3

14.3

14.3

Debtors

13.4

13.9

16.0

16.0

17.4

20.8

22.0

22.8

Cash & cash equivalents

15.5

37.0

19.4

12.0

5.0

6.8

19.3

35.9

Other

0.3

0.1

0.3

0.7

0.5

0.5

0.5

0.5

Current Liabilities

 

 

(27.9)

(29.2)

(31.9)

(38.7)

(57.1)

(51.6)

(52.2)

(52.7)

Creditors, tax and social security

(10.5)

(10.3)

(14.5)

(16.7)

(21.4)

(16.1)

(17.0)

(17.7)

Lease liabilities

(9.7)

(10.8)

(8.8)

(10.7)

(10.7)

(10.7)

(10.7)

(10.7)

Short term borrowings

0.0

0.0

0.0

0.0

(11.7)

(11.7)

(11.7)

(11.7)

Contract liabilities

(6.3)

(7.7)

(8.2)

(9.7)

(11.8)

(11.8)

(11.8)

(11.8)

Other

(1.4)

(0.4)

(0.3)

(1.5)

(1.6)

(1.4)

(1.1)

(0.9)

Long Term Liabilities

 

 

(65.2)

(62.4)

(68.4)

(64.9)

(68.6)

(59.4)

(49.8)

(40.3)

Lease liabilities

(46.2)

(40.7)

(39.3)

(35.8)

(36.9)

(27.7)

(18.1)

(8.6)

Contract liabilities

(1.3)

(1.1)

(1.1)

(0.3)

(0.4)

(0.4)

(0.4)

(0.4)

Other long term liabilities

(17.8)

(20.6)

(28.0)

(28.8)

(31.3)

(31.3)

(31.3)

(31.3)

Shareholders' equity

 

 

115.8

134.5

123.5

122.7

125.6

137.7

151.0

168.4

CASH FLOW

Op Cash Flow before WC and tax

(2.6)

4.3

6.6

15.0

11.6

20.2

23.1

28.1

Depreciation - Right of use assets

9.8

9.4

10.6

12.2

12.9

13.0

13.0

13.0

Impairment of goodwill

0.0

0.0

3.2

0.0

0.0

0.0

0.0

0.0

Branch asset impairment

4.3

1.7

1.1

(0.3)

3.4

0.0

0.0

0.0

Gain on disposal of PPE etc

(0.4)

(0.5)

(1.4)

(0.3)

0.2

(0.5)

(0.5)

0.5

Working capital

(2.6)

(0.6)

1.7

(1.2)

(10.8)

(8.7)

(0.3)

(0.2)

Decrease in provisions

0.8

(0.8)

0.2

1.1

(0.5)

(1.0)

(1.0)

(1.0)

Share based payment charges

0.7

1.0

1.5

0.2

1.0

2.0

2.0

2.0

Cash settlement of share incentive plan

(0.4)

0.0

0.0

(0.0)

0.0

(0.5)

(0.5)

(0.5)

Tax

0.2

0.2

(0.2)

(2.7)

(2.2)

(3.8)

(4.6)

(6.0)

Net operating cash flow

 

 

9.8

14.7

23.5

23.9

15.7

20.8

31.2

36.0

Capex

(0.3)

(0.4)

(1.7)

(2.9)

(2.1)

(1.9)

(2.0)

(2.1)

Acquisitions/disposals

(0.2)

(3.9)

(14.5)

(9.6)

(15.5)

(2.3)

(0.8)

(0.8)

Net interest

0.0

0.0

(0.0)

0.1

0.1

(0.1)

0.0

0.3

Dividends

0.0

0.0

(0.6)

(1.5)

(2.7)

(2.7)

(3.9)

(4.8)

Repayment of lease liabilities

(12.0)

(10.0)

(15.2)

(12.7)

(12.5)

(12.0)

(12.0)

(12.0)

Purchase of own shares

(0.1)

(0.3)

(5.7)

(4.9)

(1.1)

(0.3)

(0.3)

(0.3)

Net proceeds from issue of ord. Shares

0.0

21.1

0.0

0.0

0.0

0.0

0.0

0.0

Other

0.3

0.3

0.3

(3.4)

0.2

0.3

0.3

0.3

Net Cash Flow

(2.4)

21.5

(13.9)

(11.1)

(17.9)

1.8

12.5

16.7

Opening net debt/(cash)

 

 

(17.9)

(15.5)

(37.0)

(23.1)

(12.0)

6.8

5.0

(7.5)

Closing net debt/(cash) (ex lease liabilities

 

(15.5)

(37.0)

(23.1)

(12.0)

6.8

5.0

(7.5)

(24.2)

Source: Foxtons Group, Edison Investment Research

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

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United Kingdom

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United States

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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