Foxtons Group — Robust Q4 and strength into 2022

Foxtons Group (LSE: FOXT)

Last close As at 21/12/2024

GBP0.66

1.00 (1.54%)

Market capitalisation

GBP201m

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Research: Real Estate

Foxtons Group — Robust Q4 and strength into 2022

Foxtons traded well in all divisions in Q4 and generated revenue for the year of c £133m. The company benefited not only from the implementation of its strategy, but also from a robust sales market, which saw a 22% increase in the number of properties under offer in Q4 compared to the long-run average. The letting market also improved, with rental rates recovering sharply and now c 3% ahead of pre-pandemic levels. Foxtons entered 2022 with a sales pipeline similar in size year-on-year.

Andy Murphy

Written by

Andy Murphy

Director, Financials & Industrials

Real Estate

Foxtons Group

Robust Q4 and strength into 2022

FY21 trading update

Real estate

28 January 2022

Price

40p

Market cap

£130m

Net cash (£m) at 30 September 2021, excluding lease liabilities

24.5

Shares in issue

324.9m

Free float

100%

Code

FOXT

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.4)

(16.6)

(22.5)

Rel (local)

(2.2)

(17.5)

(31.4)

52-week high/low

74p

38p

Business description

Foxtons Group is London’s leading and most widely recognised estate agency. It operates from a network of 57 interconnected branches offering a range of residential-related services, which are split into three separate revenue streams: sales, lettings and mortgage broking.

Next events

Prelims

2 March 2022

Analyst

Andy Murphy

+44 (0)20 3077 5700

Foxtons GroupFoxtons Group is a research client of Edison Investment Research Limited

Foxtons traded well in all divisions in Q4 and generated revenue for the year of c £133m. The company benefited not only from the implementation of its strategy, but also from a robust sales market, which saw a 22% increase in the number of properties under offer in Q4 compared to the long-run average. The letting market also improved, with rental rates recovering sharply and now c 3% ahead of pre-pandemic levels. Foxtons entered 2022 with a sales pipeline similar in size year-on-year.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/19

106.9

(1.9)

(0.3)

0.0

N/A

N/A

12/20

93.6

1.6

(0.1)

0.0

N/A

N/A

12/21e

131.8

7.5

(0.0)

0.5

N/A

1.3

12/22e

132.1

12.0

3.2

0.8

12.5

2.0

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Better than expected Q4, £16.8m D&G contribution

Trading in Q4 was better than expected across all divisions and resulted in FY21 revenue of c £133m and adjusted reported operating profit hitting c £7m, ahead of consensus and in line with the top end of the expected range. Revenue included a £16.8m contribution from Douglas & Gordon (D&G) in the 10 months from March 2021, modestly ahead of our expectations.

Good start to 2022 and disposal of D&G sales

Foxtons entered this year with a pipeline similar in size to the same time last year and benefited from some sales that were slow to complete at the end of 2021 falling into the early weeks of 2022. At this early stage we are maintaining our profit forecasts for 2022, where we anticipate revenue of £132.1m and adjusted reported operating profit of £10.9m versus the c £7m that Foxtons expects to report for FY21. In mid-January, Foxtons announced the simultaneous disposal of the D&G sales business, including the high street premises, and the integration of the D&G lettings book into the Foxtons network. The D&G lettings business alone is expected to contribute c £4m to operating profit in FY22, around twice the contribution of the whole business in 2021.

Valuation: Profit forecasts and valuation retained

Our base case shows FY22e reported diluted EPS of 2.2p that, when we apply the average 2014–15 P/E of 17.5x, gives a valuation in line with the current share price. Based on FY23 estimates, our basic EPS of 2.7p implies a valuation of 45.5p, c 14% ahead of the current price. However, we believe future growth is not fully reflected in the share price or in our estimates as we do not include M&A activity. Our unchanged bull case highlights potential upside in forecasts, where Foxtons is particularly geared to further acquisitions of lettings books, growth from Build to Rent, regional expansion and underlying market growth. Our bull case scenario suggests a potential FY22e EPS of 7.3p, which implies a valuation of 128p/share when the 17.5x P/E is applied.

Exhibit 1: Financial summary

£m

2018

2019

2020

2021e

2022e

2023e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

111.5

106.9

93.6

131.8

132.1

136.7

Normalised operating profit

 

 

(0.3)

0.6

3.8

9.5

13.9

15.9

Amortisation of acquired intangibles

(0.2)

(0.6)

(0.8)

(1.2)

(1.0)

(1.0)

Exceptionals

(15.7)

(5.7)

(1.1)

(0.8)

0.0

0.0

Share-based payments

(1.3)

(0.7)

(1.0)

(1.8)

(2.0)

(1.9)

Reported operating profit

(17.6)

(6.3)

0.8

5.7

10.9

13.0

Net Interest

0.0

(2.4)

(2.2)

(1.9)

(1.9)

(1.9)

Exceptionals

0.3

(0.1)

(0.0)

(0.1)

0.0

0.0

Profit Before Tax (norm)

 

 

0.0

(1.9)

1.6

7.5

12.0

14.0

Profit Before Tax (reported)

 

 

(17.2)

(8.8)

(1.4)

3.7

9.0

11.1

Reported tax

0.0

1.0

(1.8)

(7.7)

(1.7)

(2.6)

Net income (normalised)

0.0

(0.9)

(0.2)

(0.1)

10.3

11.4

Net income (reported)

(17.2)

(7.8)

(3.2)

(4.0)

7.3

8.5

Basic average number of shares outstanding (m)

275

275

314

325

320

320

EPS - basic normalised (p)

 

 

0.01

(0.32)

(0.08)

(0.04)

3.22

3.57

EPS - diluted normalised (p)

 

 

0.01

(0.32)

(0.08)

(0.04)

3.17

3.52

EPS - basic reported (p)

 

 

(6.25)

(2.83)

(1.02)

(1.22)

2.28

2.67

Dividend (p)

0.00

0.00

0.00

0.54

0.79

0.92

Revenue growth (%)

(5.2)

(4.1)

(12.5)

40.9

5.9

3.4

Normalised Operating Margin

(0.3)

0.5

4.1

7.2

10.0

11.0

BALANCE SHEET

Fixed Assets

 

 

130.9

178.7

173.4

172.6

163.1

154.5

Intangible Assets

101.5

101.0

103.5

103.9

105.0

106.1

Goodwill

9.3

9.3

11.4

11.4

11.4

11.4

Tangible Assets

17.2

13.0

10.5

22.4

19.8

17.2

Right of use assets

0.0

51.4

44.4

35.4

27.4

20.4

Contract assets

0.3

0.6

0.4

0.4

0.4

0.4

Investments & other

2.6

3.3

3.1

(0.9)

(0.9)

(1.0)

Current Assets

 

 

32.4

30.2

52.6

38.4

45.6

51.1

Contract assets

0.5

1.0

1.7

1.7

1.7

1.7

Debtors

13.7

13.4

13.9

19.0

20.1

20.8

Cash & cash equivalents

17.9

15.5

37.0

18.6

26.4

33.8

Other

0.2

0.3

0.1

(0.6)

(2.3)

(5.0)

Current Liabilities

 

 

(22.0)

(27.9)

(29.2)

(33.4)

(34.2)

(34.8)

Creditors

(13.7)

(10.5)

(10.3)

(14.5)

(15.4)

(15.9)

Lease liabilities

0.0

(9.7)

(10.8)

(10.8)

(10.8)

(10.8)

Contract liabilities

(2.5)

(6.3)

(7.7)

(7.7)

(7.7)

(7.7)

Other

(5.7)

(1.4)

(0.4)

(0.4)

(0.4)

(0.4)

Long Term Liabilities

 

 

(17.9)

(65.2)

(62.4)

(49.7)

(38.1)

(25.5)

Lease liabilities

0.0

(46.2)

(40.7)

(28.8)

(18.8)

(8.9)

Contract liabilities

(1.1)

(1.3)

(1.1)

(1.1)

(1.1)

(1.1)

Other long-term liabilities

(16.8)

(17.8)

(20.6)

(19.9)

(18.2)

(15.6)

Net Assets

 

 

123.3

115.8

134.5

128.1

136.6

145.5

Shareholders' equity

 

 

123.3

115.8

134.5

128.1

136.6

145.5

CASH FLOW

Op Cash Flow before WC and tax

(13.2)

(2.6)

4.3

9.9

14.9

17.0

Depreciation - Right of use assets

0.0

9.8

9.4

9.0

8.0

7.0

Impairment of goodwill

9.8

0.0

0.0

0.0

0.0

0.0

Branch asset impairment

2.7

4.3

1.7

0.7

0.0

0.0

Gain on disposal of PPE etc

0.1

(0.4)

(0.5)

(0.5)

(0.5)

(0.5)

Working capital

1.3

(2.6)

(0.6)

(0.9)

(0.3)

(0.2)

Exceptional & other

0.0

0.0

0.0

0.0

0.0

0.0

Decrease in provisions

1.2

0.8

(0.8)

(1.0)

(1.0)

(1.0)

Share based payment charges

1.3

0.7

1.0

1.8

2.0

1.9

Cash settlement of share incentive plan

0.0

(0.4)

0.0

0.5

0.5

0.5

Tax

(1.5)

0.2

0.2

(0.7)

(1.7)

(2.6)

Net operating cash flow

 

 

1.8

9.8

14.7

18.7

22.0

22.2

Capex

0.2

(0.3)

(0.4)

(0.4)

(0.4)

(0.4)

Acquisitions/disposals

(2.0)

(0.2)

(3.9)

(17.6)

(0.1)

(0.1)

Net interest

0.0

0.0

0.0

0.1

0.1

0.2

Dividends

(0.7)

0.0

0.0

0.0

(1.8)

(2.5)

Repayment of lease liabilities

0.0

(12.0)

(10.0)

(14.0)

(12.0)

(12.0)

Purchase of own shares

0.0

(0.1)

(0.3)

(5.7)

(0.3)

(0.3)

Net proceeds from issue of ord. Shares

0.0

0.0

21.1

0.0

0.0

0.0

Other

0.0

0.3

0.3

0.3

0.3

0.3

Net Cash Flow

(0.7)

(2.4)

21.5

(18.4)

7.9

7.3

Opening net debt/(cash)

 

 

(18.6)

(17.9)

(15.5)

(37.0)

(18.6)

(26.4)

Closing net debt/(cash) (ex lease liabilities)

 

(17.9)

(15.5)

(37.0)

(18.6)

(26.4)

(33.8)

Source: Company accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by Foxtons Group and prepared and issued by Edison, in consideration of a fee payable by Foxtons Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Foxtons Group and prepared and issued by Edison, in consideration of a fee payable by Foxtons Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 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.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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