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M&A contribution and potential overlooked

Foxtons Group 11 August 2022 Update
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Foxtons Group

M&A contribution and potential overlooked

M&A update and
interims comment

Real estate

11 August 2022

Price

42p

Market cap

£139m

Net cash (£m) at 30 June 2022

11.6

Shares in issue

330.1m

Free float

100%

Code

FXT

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

6.7

6.3

(28.4)

Rel (local)

1.8

2.5

(29.1)

52-week high/low

57.4p

31.1p

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 break down into three separate revenue streams: sales, lettings and mortgage broking.

Next events

Q3 trading update

27 October 2022

2022 prelims

March 2023

Analyst

Andy Murphy

+44 (0)20 3077 5700

Foxtons Group is a research client of Edison Investment Research Limited

H1 revenue grew 3% against tough comparators and operating profit increased by 13% y-o-y, reflecting good underlying markets and M&A in lettings. The announcement also highlighted the strong contribution from M&A, where we expect Douglas & Gordon (D&G) alone to contribute c 45% of FY22 profit, an aspect we believe is overlooked by the market. We retain our underlying assumptions and our 128p per share valuation.

Year end

Revenue
(£m)

PBT*
(£m)

EPS**
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/20

93.6

1.6

(0.2)

0.0

N/A

N/A

12/21

126.5

10.0

2.0

0.5

21.2

1.1

12/22e

132.6

12.8

2.2

0.8

18.0

1.9

12/23e

137.6

15.0

2.7

1.0

15.3

2.3

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 company definition.

Pipeline of M&A demonstrably adding value

In the last three years, Foxtons has executed six acquisitions, which collectively expanded the tenancy book by more than a third. We believe the market is missing the potential value created here. When analysing the largest deal, D&G, in March 2021, it can be demonstrated that the retained lettings business was bought on an EBIT multiple of just 2.9x. Subsequently, Foxtons bought Gordon & Co and Stones Residential, which we believe could offer similar synergies. With a fragmented lettings market and a strong balance sheet, we believe Foxtons will continue to make value enhancing acquisitions.

Interims results highlight good progress

H1 revenue increased 2.7% to £65.1m and adjusted operating profit rose 13% to £6.2m as the business benefited from operational gearing. PBT (pre-exceptionals) rose 18.7% to £5.2m and the basic, diluted and adjusted EPS came in at 1.1p, from which the company declared an interim dividend of 0.2p. Foxtons ended the period with net cash of £11.6m, having spent £8.5m on M&A, £0.9m on share buybacks and a similar figure on dividends in the period. Revenue growth was a blend of an improvement in Lettings, and year-on-year declines in both Sales and Financial Services due to very tough, Stamp Duty Land Tax affected comparables in 2021. Underlying volumes in both divisions demonstrate a positive long-term trend.

Valuation of 128p/share retained

Following the acquisitions in May and the robust interim results we have made no material changes to our underlying trading assumptions. However, we have adjusted our estimates to reflect the acquisitions of Gordon & Co and Stones Residential, completed in May, and we have now reflected the full impact of the ongoing £3m share buyback, which the company expects to be completed this year. In total this raises EPS by c 10% in FY23, and with our dividend payout estimate remaining at 35% of EPS, the dividend rises by a similar proportion. We retain our 128p/share valuation as higher earnings are offset by slightly lower growth assumptions.

M&A impact missed by the market

In the last three years, Foxtons has executed six acquisitions, which collectively brought c 7,000 tenancies into the group, expanding the tenancy book by more than a third. We believe the market is missing the potential value created here. When analysing the largest deal, the £15.0m purchase of D&G in March 2021, it can be demonstrated that the retained lettings business was bought on an EBIT multiple of just 2.9x. Subsequently, Foxtons bought Gordon & Co and Stones Residential, which we believe could offer similar synergies. With a fragmented lettings market and a strong balance sheet, we believe it is likely that Foxtons will continue to make value-enhancing acquisitions.

D&G deal implies purchase ratio of just 2.9x

At its capital markets day in June 2021, Foxtons highlighted its willingness to expand the business via acquisition. It had, in fact, already executed four deals in the preceding 18 months, adding 4,500 tenancies to its book at that point, and has subsequently added a further 2,500 tenancies this year with the purchases of Gordon & Co and Stones Residential. These 7,000 new tenancies added via acquisition imply that the lettings book has grown by more than a third to 27,500 tenancies in just over two years.

Exhibit 1: Summary of M&A activity since 2020

Target

Date

Consideration

£m

Revenue

£m

Location

Sales multiple (x)

Tenancies acquired

London Stone

Mar-20

2.2

1.5

Woolwich

1.5

687

Pillars Estates

Oct-20

0.2

-

-

-

224

Aston Rowe

Nov-20

2.2

1.1

Acton and Brook Green

2.0

689

2020 total

4.6

2.6

-

-

1,600

Douglas & Gordon

Mar-21

15.0

16.5

Central, South and West

0.9

2,900

2021 total

15.0

16.5

-

-

2,900

Gordon & Co

May-22

8.4

4.0

2.1

2,000

Stones Residential

May-22

2.2

1.3

1.7

500

10.6

5.3

-

-

2,500

Total since 1 Jan 2020

30.1

24.4

-

1.2

7,000

Source: Foxtons Group, Edison Investment Research

The six deals completed to date had a total consideration of £30.1m and a total revenue of £24.4m, implying that on average Foxtons paid c 1.2x revenue for the portfolio. However, this multiple hides the real value that can be created by these acquisitions. It we look more closely at the D&G purchase, Foxtons paid £15.0m for a business with total sales of £16.5m and an EBITDA of £0.6m, which at first glance looks very expensive.

However, this completely ignores the rationale for the deal. Foxtons has a lettings management system that is scalable, almost into infinity, which means that it could take on the D&G lettings book with only limited additional costs. It also allowed Foxtons to sell the D&G Sales business, with its branch network, back to the original owners for a nominal price of £2. This in effect took c £4m of costs out of the business, which Foxtons was then able to capture. We also believe in the period since the deal that D&G Lettings has grown. We base this assumption on the comment from Foxtons that D&G Lettings generated revenue in H1 of c £5.7m, and an operating profit of £2.6m.

Plugging all of these numbers into the table below, and annualising the D&G H1 profit, we estimate that Foxtons bought D&G on a forward EBIT multiple of just 2.9x. We forecast that Foxtons will generate a revised operating profit of £11.3m in FY22, which implies that this one deal alone accounts for c 45% of group profits. We also know that the two deals executed this year also contain a modest number of branches, so a similar uplift may be possible either here, and/or on future deals. We believe these facts may have been missed by the market.

Exhibit 2: D&G implied EBIT multiple

£m

Total consideration, including D&G Sales

15.0

Proceeds from disposal of D&G Sales

0.0

Net consideration

15.0

EBITDA

0.6

Minus depreciation and amortisation

0.0

Add back costs in D&G Sales

4.0

Add growth estimate

0.6

EBIT

5.2

Implied forward EBIT multiple (x)

2.9

Total consideration, including D&G Sales

Proceeds from disposal of D&G Sales

Net consideration

EBITDA

Minus depreciation and amortisation

Add back costs in D&G Sales

Add growth estimate

EBIT

Implied forward EBIT multiple (x)

£m

15.0

0.0

15.0

0.6

0.0

4.0

0.6

5.2

2.9

Source: Foxtons Group, Edison Investment Research

We have previously discussed that Foxtons targets c 40% operating profit margins post synergies and the last three deals appear to achieve this hurdle. We think there will be more deals to come.

The lettings market is highly fragmented, with Foxtons being the largest player in Greater London with a market share of c 8%. The chart below gives some indication of the opportunity available to Foxtons. The fragmentation, the increasing complexity of the market and succession issues with owners are some of the reasons that there appears to be a steady flow of lettings books becoming available on the market.

Exhibit 3: Market share of London lettings agencies

Source: Foxtons Group

On 2 March, Foxtons announced that it expected to invest £8m in 2022. It subsequently announced the purchase of Gordon & Co for £8.4m and added Stones Residential, which had a consideration of £2.2m. Given Foxtons’ track record on acquisitions (detailed in Exhibit 1) and its strong balance sheet (which ended the first half, after paying for the deals achieved to date, with net cash of £11.7m), it seems likely that other value-enhancing deals could be forthcoming in H2 and/or 2023 and beyond.

Interim results highlight progress in FY21 versus FY19

H122 revenue increased 2.7% to £65.1m and adjusted operating profit rose 13% to £6.2m as the business benefited from operational gearing. PBT (pre exceptionals) rose 18.7% to £5.2m and the basic, diluted and adjusted EPS came in at 1.1p, from which the company declared an interim dividend of 0.2p. Foxtons ended the period with net cash of £11.6m, having spent £8.5m on M&A, £0.9m on share buybacks and a similar figure on dividends in the period. Revenue growth was a blend of an improvement in Lettings, and year-on-year declines in both Sales and Financial Services due to very tough, Stamp Duty Land Tax affected comparables in 2021.

Exhibit 4: Interim results summary

£m

H119

H120

H121

H122

H122 vs H119

H122 vs H121

Revenue

Lettings

32.4

25.7

32.9

39.4

21.7%

19.8%

Sales

15.4

11.1

25.2

20.8

34.8%

-17.5%

Mortgage Broking

4.0

3.6

5.2

4.8

21.1%

-7.6%

Total revenue

51.8

40.4

63.4

65.1

25.5%

2.7%

Adjusted operating profit

Lettings

2.0

2.0

1.5

7.3

-

397.9%

Sales

(3.5)

(4.8)

4.4

(0.7)

-

-

Mortgage Broking

0.6

0.5

1.1

0.8

-

-22.4%

Corporate costs

-

-

(1.5)

(1.2)

-

-18.4%

Total adjusted operating profit

(0.9)

(2.4)

5.4

6.2

-

13.5%

PBT (ex exceptionals)

(2.1)

(3.5)

4.4

5.2

-

18.7%

EPS - basic, diluted and adjusted (p)

(0.7)

(1.6)

1.1

1.1

-

6.3%

DPS (p)

-

-

0.18

0.20

-

11.1%

Net cash

14.5

40.5

24.4

11.6

67.8%

-39.9%

Source: Foxtons Group, Edison Investment Research

Costs in H122 increased £0.9m driven by an increase in employers’ National Insurance contributions, utility costs and business rates. These cost increases were totally offset by other costs taken out of the business, including the simplification of the management structure and the removal of the COO from the board. In total, the company expects these measures to reduce costs by c £3m in FY23. Overall, the company has made good strategic progress and continues to return cash to shareholders via dividends and the £3m share buyback, which should be completed by the end of the year.

Lettings volumes down, but higher fees more than compensate

In Lettings, revenue grew 19.8%, or £6.5m, to £39.4m which was driven by a 32% increase in overall revenue per transaction, to £4,330, due to a better rental environment as well as the inclusion of D&G volumes that attract a higher fee. Volumes dipped 9.1% to 9,110, reflecting a tight market. £4.0m of the growth was organic, reflecting the increase in prices offset by the lower volumes. £2m was growth and annualisation of the D&G acquisition in May 2021, and £0.5m was generated from the two deals completed in May 2022. In total, D&G Lettings contributed £5.7m in revenue and £2.6m of operating profit. The drop-through was impressive as the Lettings contribution rose £6.8m to £28.9m, and operating profit increased from £1.5m to £7.3m, implying a contribution drop-through rate of c 85%. Following the acquisition of Gordon & Co and Stones Residential in May, the letting portfolio has grown to c 27,500 tenancies.

Exhibit 5: Foxtons letting activity, last seven half years

Source: Foxtons Group

Sales activity strong despite year-on-year declines

In Sales, revenue fell 17% to £20.8m reflecting a strong comparable in 2021 rather than a weak market in itself. This can be seen clearly in Exhibit 6 where the volume of sales fell from an artificially inflated number of 1,895 in H121, to a more ‘normalised’ level of 1,525 in H122. To put this into context, the H122 volumes were c 28% ahead of H119. The average revenue per transaction increased 1% to £13,627 as Foxtons took some market share, especially in the mid-price level properties where the average price of property sold increased c 5% to £586k. The trends in both volumes and revenue per unit are positive, which has had a strong influence on the divisional revenue, which has risen from £15.4m in H119 to £20.8m in H122.

Exhibit 6: Foxtons sales activity, last seven half years

Source: Foxtons Group

The under-offer commission pipeline stood at £19m at the end of June, which was significantly better than the position both last year and at the same point in 2019. Industry-wide capacity constraints in conveyancing and surveying are adding to the time scale to progress sales from the offer stage to exchange.

Financial services activity reflects reduced sales volumes

In Financial Services, volumes fell from 2,795 in H121, to 2,334 in H122, reflecting the lower levels of sales activity year-on-year. That said, volumes were c 11% higher than H119 boosted by efforts to take market share in financial services. Again, revenue fell, to £4.8m, reflecting the pull forward of purchase mortgages into H121 rather than underlying market weakness, and revenue per transaction rose 11% to £2,057. The drive to bring in more negotiators and advisers into Sales and Financial Services respectively is going well, with some contribution expected in H2.

Exhibit 7: Foxtons financial services activity, last seven half years

Source: Foxtons Group

M&A and share buyback boost EPS estimates by c 10%

Following the acquisitions in May and the robust interim results, we have made no material changes to our underlying trading assumptions. However, we have adjusted our estimates to reflect the acquisitions of Gordon & Co and Stones Residential completed in May, and have now reflected the full impact of the ongoing £3m share buyback, which the company expects to be completed this year. In total, this raises EPS in both years by c 10% and, because the dividend payout is set in our model at 35% of EPS, the dividend rises by a similar proportion.

The other material change here is in the forecast net cash, which falls by c £10m in both periods reflecting the £8.5m cost of the acquisitions and the share buyback, previously left out of the model, of c £2m.

Exhibit 8: Summary of estimate changes

£m

FY21

FY22e (old)

FY22e (new)

Change (%)

FY23e (old)

FY23e (new)

Change (%)

Revenue

126.5

132.3

132.6

0.2%

137.1

137.6

0.3%

Y-o-y growth (%)

-

4.6%

4.9%

-

3.6%

3.7%

-

Adjusted operating profit

8.9

10.9

11.3

3.5%

13.1

13.5

3.6%

Y-o-y growth (%)

-

22.4%

26.7%

-

19.5%

19.5%

-

PBT

5.6

8.8

8.9

1.2%

11.0

11.4

3.8%

Y-o-y growth (%)

-

58.5%

60.3%

-

24.4%

27.7%

-

EPS (company definition) (p)

2.0

2.1

2.2

1.0%

2.5

2.7

9.6%

Y-o-y growth (%)

-

7.5%

8.6%

-

17.5%

27.4%

-

DPS (p)

0.5

0.7

0.8

1.1%

0.9

1.0

9.5%

Y-o-y growth (%)

-

65.6%

67.3%

-

17.6%

27.4%

-

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

23.09

23.8

13.9

-41.6%

31.7

22.2

-29.9%

Y-o-y growth (%)

-

3.1%

-39.8%

-

33.2%

59.7%

-

Source: Foxtons Group, Edison Investment Research

We retain our 128p per share valuation despite the increase in estimates, at least in part reflecting the more questionable economic situation.

Exhibit 9: Financial summary

Year end 31 December

£m

2019

2020

2021

2022e

2023e

2024e

INCOME STATEMENT

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

Revenue

 

 

106.9

93.6

126.5

132.6

137.6

142.7

Normalised operating profit

 

 

0.6

3.8

12.1

14.9

17.1

19.1

Amortisation of acquired intangibles

(0.6)

(0.8)

(1.7)

(1.6)

(1.6)

(1.6)

Share-based payments

(0.7)

(1.0)

(1.5)

(2.0)

(2.0)

(2.0)

Total adjusted operating profit

(0.7)

1.9

8.9

11.3

13.5

15.5

Exceptionals

(5.7)

(1.1)

(1.4)

(0.3)

0.0

0.0

Reported operating profit

(6.3)

0.8

7.6

11.1

13.5

15.5

Net Interest

(2.4)

(2.2)

(2.0)

(2.2)

(2.2)

(2.1)

Profit Before Tax (norm)

 

 

(1.9)

1.6

10.0

12.8

15.0

16.9

Profit Before Tax (reported)

 

 

(8.8)

(1.4)

5.6

8.9

11.4

13.3

Reported tax

1.0

(1.8)

(6.9)

(2.3)

(2.7)

(3.3)

Profit After Tax (norm)

(0.9)

(0.2)

3.1

10.5

12.3

13.6

Profit After Tax (reported)

(7.8)

(3.2)

(1.3)

6.6

8.7

10.0

Discontinued operations

0.0

0.0

(4.8)

0.0

0.0

0.0

Net income (normalised)

(0.9)

(0.2)

(1.7)

10.5

12.3

13.6

Net income (reported)

(7.8)

(3.2)

(6.2)

6.6

8.7

10.0

Basic average number of shares outstanding (m)

275

314

324

313

313

313

EPS - basic normalised (p)

 

 

(0.32)

(0.08)

(0.52)

3.35

3.93

4.35

EPS - basic reported (p)

 

 

(2.83)

(1.02)

(1.90)

2.12

2.788

3.20

EPS - continuing, diluted and adjusted (company definition)

 

 

(1.06)

(0.16)

1.98

2.15

2.74

3.15

Dividend (p)

0.00

0.00

0.45

0.82

0.96

1.10

Revenue growth (%)

(-4.1)

(-12.5)

35.2

4.9

3.7

0.0

Normalised Operating Margin

0.5

4.1

9.5

11.2

12.5

13.4

BALANCE SHEET

Fixed Assets

 

 

178.7

173.4

184.4

184.5

174.9

166.4

Intangible Assets

101.0

103.5

107.3

108.2

109.3

110.4

Goodwill

9.3

11.4

17.7

17.7

17.7

17.7

Tangible Assets

13.0

10.5

9.7

21.0

21.4

21.8

Right of use assets

51.4

44.4

43.8

31.8

20.8

10.8

Contract assets

0.6

0.4

0.9

0.9

0.9

0.9

Investments & other

3.3

3.1

5.1

4.9

4.8

4.8

Current Assets

 

 

30.2

52.6

39.3

29.7

36.0

40.6

Contract assets

1.0

1.7

3.7

3.7

3.7

3.7

Debtors

13.4

13.9

16.0

17.2

17.9

18.5

Cash & cash equivalents

15.5

37.0

19.4

10.2

18.3

25.6

Other

0.3

0.1

0.3

(1.4)

(4.1)

(7.4)

Current Liabilities

 

 

(27.9)

(29.2)

(31.9)

(32.0)

(33.2)

(33.7)

Creditors

(10.5)

(10.3)

(14.5)

(14.6)

(15.8)

(16.4)

Lease liabilities

(9.7)

(10.8)

(8.8)

(8.8)

(8.8)

(8.8)

Contract liabilities

(6.3)

(7.7)

(8.2)

(8.2)

(8.2)

(8.2)

Other

(1.4)

(0.4)

(0.3)

(0.3)

(0.3)

(0.3)

Long Term Liabilities

 

 

(65.2)

(62.4)

(68.4)

(55.9)

(42.5)

(28.4)

Lease liabilities

(46.2)

(40.7)

(39.3)

(28.5)

(17.7)

(7.0)

Contract liabilities

(1.3)

(1.1)

(1.1)

(1.1)

(1.1)

(1.1)

Other long-term liabilities

(17.8)

(20.6)

(28.0)

(26.3)

(23.6)

(20.3)

Shareholders' equity

 

 

115.8

134.5

123.5

126.3

135.2

144.8

CASH FLOW

Op Cash Flow before WC and tax

(2.6)

4.3

6.6

12.3

15.1

17.1

Depreciation - Right of use assets

9.8

9.4

10.6

12.0

11.0

10.0

Impairment of goodwill

0.0

0.0

3.2

0.2

0.0

0.0

Branch asset impairment

4.3

1.7

1.1

0.0

0.0

0.0

Gain on disposal of PPE etc

(0.4)

(0.5)

(1.4)

(0.7)

(0.5)

(0.5)

Working capital

(2.6)

(0.6)

1.7

(1.1)

0.6

(0.1)

Decrease in provisions

0.8

(0.8)

0.2

1.0

(1.0)

(1.0)

Share based payment charges

0.7

1.0

1.5

2.0

2.0

2.0

Cash settlement of share incentive plan

(0.4)

0.0

0.0

(0.5)

(0.5)

(0.5)

Tax

0.2

0.2

(0.2)

(1.7)

(2.7)

(3.3)

Net operating cash flow

 

 

9.8

14.7

23.5

23.4

24.1

23.6

Capex

(0.3)

(0.4)

(1.7)

(2.3)

(0.4)

(0.4)

Acquisitions/disposals

(0.2)

(3.9)

(14.5)

(9.5)

(0.1)

(0.1)

Net interest

0.0

0.0

(0.0)

0.1

0.1

0.1

Dividends

0.0

0.0

(0.6)

(1.5)

(2.4)

(3.0)

Repayment of lease liabilities

(12.0)

(10.0)

(15.2)

(13.0)

(13.0)

(13.0)

Purchase of own shares

(0.1)

(0.3)

(5.7)

(3.0)

(0.3)

(0.3)

Net proceeds from issue of ordinary shares

0.0

21.1

0.0

0.0

0.0

0.0

Other

0.3

0.3

0.3

(3.4)

0.3

0.3

Net Cash Flow

(2.4)

21.5

(13.9)

(9.2)

8.3

7.3

Opening net debt/(cash)

 

 

(17.9)

(15.5)

(37.0)

(23.1)

(13.9)

(22.2)

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

 

(15.5)

(37.0)

(23.1)

(13.9)

(22.2)

(29.5)

Source: Foxtons Group, 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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