Last close As at 05/08/2026
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GBP110m
Research: Real Estate
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.
Foxtons Group |
Deals’ benefits matched by tax rise |
M&A update |
Real estate |
28 November 2024 |
Share price performance
Business description
Next events
Analyst
Foxtons Group is a research client of Edison Investment Research Limited |
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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.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/22 |
140.3 |
13.7 |
3.0 |
0.9 |
19.3 |
1.6 |
12/23 |
147.1 |
15.2 |
2.9 |
0.9 |
20.0 |
1.6 |
12/24e |
160.2 |
19.5 |
3.7 |
1.3 |
15.7 |
2.2 |
12/25e |
178.5 |
23.6 |
4.5 |
1.6 |
12.9 |
2.8 |
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).
Acquisitions in London commuter towns
At the end of October, Foxtons announced its latest acquisitions, in line with its strategy and followed a well-trodden path of enhancing deals over the last five years. Firstly, the purchase of Haslams Estate Agents for a total initial consideration of £7.6m, and secondly, the purchase of Imagine Property for £5.0m. Both deals reflect further progress against the group’s strategy to acquire high-quality, lettings-focused businesses that offer growth and synergy benefits. The company expects both revenue and cost synergies to boost the top and bottom lines of the acquired businesses, as well as further consolidation opportunities.
Strategic progress continues to be made
Foxtons’ strategy strives to return the company to its former position as London’s go-to estate agent. This includes growing non-cyclical and recurring revenues, which currently stand at approximately two-thirds of group revenue, targeting operating profit of £25–30m and achieving an operating margin of more than 15%. The company has made significant progress, with unprecedented investment in staff training and retention, as well as developing proprietary IT and data systems which aim to put Foxtons ahead of its competition. Market share is growing and, in sales in particular, is already ahead of target.
Valuation: Unchanged despite enhancing deals
Despite the addition of the two value-enhancing acquisitions, our adjusted operating profit forecast is unchanged because the deals coincided with the UK budget, which saw a significant increase in employers’ National Insurance contributions. This £2.0m tax rise neatly and completely offsets the benefits of the deals, hence we retain our operating profit forecasts as well as our 134p/share valuation. Earlier this year, Foxtons revised its dividend policy, which points to progression potential, with payments at least in line with FY23.
Latest M&A augments management action
Foxtons’ most recent acquisitions follow a comfortable pattern set by the business over the last five years of one to two deals each year and investing c £12m pa, largely in businesses that are heavily focused on recurring lettings revenue. This time, the acquired operations are in London commuter towns, and open up new, low-risk geographies as springboards for future expansion. These deals are unlikely to be the last that Foxtons undertakes as it continues to expand and improve the quality of earnings in line with its strategy. Unfortunately, the increase in employers’ National Insurance contributions wipes out the financial benefit of the acquisitions and so we retain our 134p valuation.
M&A continues like clockwork
At the end of October, Foxtons announced its latest acquisitions, which were in line with its strategy and followed a well-trodden path of enhancing deals over the last five years. It completed the purchase of Haslams Estate Agents for a total consideration of £7.6m, plus £2.4m in contingent deferred consideration, and purchased Imagine Property for £5.0m in initial consideration, plus £1.0m in a deferred payment.
Exhibit 1: Foxtons M&A history, last five years
Target |
Date |
Initial consideration (£m) |
12-month |
Location |
Sales multiple (x) |
Tenancies acquired |
Comment |
London Stone |
1/3/20 |
2.0 |
1.5 |
Woolwich |
1.3 |
687 |
Lettings and property management |
Pillars Estates |
Oct 2020 |
0.2 |
- |
- |
- |
224 |
Companies House micro company accounts |
Aston Rowe |
23/11/20 |
2.0 |
1.1 |
Acton and Brook Green |
1.8 |
689 |
Branches and sales activities retained by Aston Rowe |
2020 total |
4.2 |
2.6 |
- |
1,600 |
|||
Douglas & Gordon |
1/3/21 |
15.3 |
16.5 |
Central, South and West |
0.9 |
2,900 |
Branches and sales activities retained by vendor |
2021 total |
15.3 |
16.5 |
- |
2,900 |
|||
Gordon & Co |
May 2022 |
8.4 |
4.0 |
South London |
2.1 |
2,000 |
70% of revenue from lettings and financial services |
Stones Residential |
May 2022 |
2.2 |
1.3 |
Stanmore |
1.7 |
500 |
70% of revenue from lettings and financial services |
2022 total |
10.6 |
5.3 |
- |
- |
2,500 |
||
Atkinson McLeod |
Mar 2023 |
7.4 |
3.1 |
East London |
2.4 |
1,100 |
90% of revenue from lettings |
Ludlow Thompson |
Nov 2023 |
10.0 |
7.3 |
City, Docklands, South London |
1.4 |
1,700 |
70% of revenue from lettings. Seven branches |
2023 total |
17.4 |
10.4 |
2,800 |
||||
Haslams |
29/10/24 |
7.6 |
6.5 |
Reading |
1.2 |
1,700 |
Plus £2.4m deferred. Lettings is c 60% of revenue |
Imagine Property Group |
29/10/24 |
5.0 |
3.3 |
Watford |
1.5 |
1,200 |
Plus £1.0m deferred. Lettings is c 60% of revenue |
2024 total |
12.6 |
9.8 |
- |
2,900 |
|||
Total since 1 Jan 2020 |
60.0 |
44.6 |
1.3 |
9,800 |
Source: Foxtons Group, Edison Investment Research
Both deals reflect further progress against the group’s strategy to acquire high-quality, lettings-focused businesses that offer growth and synergy benefits. Both acquired operations (Haslams in Reading and Imagine Property in Watford) open new markets for Foxtons and each generates approximately 60% of total revenues from recurring lettings activity. The deals build on Foxtons’ previous success in the London commuter towns of Guildford and Woking.
In addition, the two acquisitions are the largest lettings and sales agents in their core markets and each brings three branches to the portfolio, increasing the total number of Foxtons branches in London and the South East to 64. They also bring a total of c 2,900 tenancies (Haslams: c 1,700 and Imagine: 1,200) to Foxtons, increasing the total portfolio to more than 31,000 tenancies, up from approximately 19,800 at the start of 2020.
In the 12 months to December 2023, Haslams generated revenue of £6.5m with an operating profit of £0.8m, and was bought on a cash- and debt-free basis with the deferred consideration contingent on the delivery of performance targets. Imagine generated revenue of £3.3m with an operating profit of £0.5m and was bought on similar terms to Haslams. The deals represent trailing multiples of 1.2x and 1.5x revenue, respectively, which we believe is consistent with Foxtons’ previous deals.
The company expects revenue and cost synergies that will boost both the top and bottom lines of the acquired businesses, as well as further opportunities to consolidate the surrounding markets.
M&A benefits wiped out by UK budget tax increase
The deals will be financed from Foxtons’ existing facilities, which will see net debt increase from c £5.0m at the end of December 2024 to c £14.3m, well within existing facilities and covenant constraints. We estimate that net debt will decline to c £4.7m by the end of FY25, compared to our previous forecast of a net cash position.
The deals will only have a limited impact on FY24 revenue and adjusted operating profit, given the seasonality of estate agency and the fact that it is towards the end of the year. However, we estimate that the deals will add c 5.7% to revenue in FY25. Unfortunately, the well-publicised increase in employers’ National Insurance contributions wipes out all of the anticipated benefit of the acquisitions to our FY25 adjusted operating profit estimate, which remains at £20.8m. This implies that Foxtons remains on track to achieve its medium-term target of £25–30m in adjusted operating profit, but unfortunately it is not as close as it would have hoped when the deals were struck.
Exhibit 2: Revised forecasts
FY23 |
FY24e |
FY25e |
|||||
£m |
Old |
New |
Change (%) |
Old |
New |
Change (%) |
|
Revenue |
147.1 |
159.7 |
160.2 |
0.3% |
168.9 |
178.5 |
5.7% |
y-o-y growth (%) |
4.9% |
- |
8.9% |
- |
11.4% |
- |
|
Adjusted operating profit |
14.3 |
17.9 |
17.9 |
-0.1% |
20.8 |
20.8 |
0.0% |
y-o-y growth (%) |
1.1% |
- |
25.4% |
- |
16.1% |
- |
|
Reported PBT |
7.9 |
15.2 |
15.2 |
-0.7% |
18.5 |
18.3 |
-1.2% |
y-o-y growth (%) |
-37.9% |
- |
92.0% |
- |
20.8% |
- |
|
EPS (p) – company definition |
2.9 |
3.7 |
3.7 |
-0.7% |
4.5 |
4.5 |
-1.2% |
y-o-y growth (%) |
-0.9% |
- |
28.6% |
- |
20.8% |
- |
|
DPS (p) |
0.9 |
1.3 |
1.3 |
-0.7% |
1.6 |
1.6 |
-1.2% |
y-o-y growth (%) |
0.0% |
- |
44.1% |
- |
20.8% |
- |
|
Net (debt)/cash (pre-IFRS 16, ie ex-lease liabilities) |
(6.8) |
(5.0) |
(14.3) |
-185.1% |
7.5 |
(4.7) |
-162.5% |
y-o-y growth (%) |
-155.9% |
- |
110.8% |
- |
-67.2% |
- |
|
Source: Foxtons Group, Edison Investment Research
Exhibit 3: 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 |
160.2 |
178.5 |
185.7 |
EBITDA |
|
|
13.5 |
15.7 |
25.1 |
27.8 |
30.0 |
35.2 |
39.0 |
43.7 |
Normalised operating profit |
|
|
0.6 |
3.8 |
12.1 |
15.6 |
17.1 |
22.2 |
26.0 |
30.7 |
Amortisation of acquired intangibles |
(0.6) |
(0.8) |
(1.7) |
(1.6) |
(1.8) |
(2.4) |
(3.3) |
(3.0) |
||
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 |
(2.4) |
(2.2) |
(2.0) |
(1.9) |
(1.9) |
(2.7) |
(2.4) |
(2.2) |
||
Exceptionals |
(0.1) |
(0.0) |
(0.0) |
(0.0) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
(1.9) |
1.6 |
10.0 |
13.7 |
15.2 |
19.5 |
23.6 |
28.6 |
Profit Before Tax (reported) |
|
|
(8.8) |
(1.4) |
5.6 |
11.9 |
7.9 |
15.2 |
18.3 |
23.6 |
Reported tax |
1.0 |
(1.8) |
(6.9) |
(2.4) |
(2.4) |
(3.8) |
(4.6) |
(5.9) |
||
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 |
15.7 |
19.0 |
22.7 |
||
Net income (reported) |
(7.8) |
(3.2) |
(6.2) |
9.6 |
5.5 |
11.4 |
13.7 |
17.7 |
||
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 |
5.20 |
6.29 |
7.50 |
EPS - basic reported (p) |
|
|
(2.83) |
(1.02) |
(1.90) |
3.11 |
1.82 |
3.76 |
4.55 |
5.86 |
EPS - continuing, diluted, and adjusted. Company def. (p) |
|
|
(1.06) |
(0.16) |
1.98 |
3.00 |
2.88 |
3.71 |
4.48 |
5.77 |
Dividend (p) |
0.00 |
0.00 |
0.45 |
0.90 |
0.90 |
1.30 |
1.57 |
2.02 |
||
Revenue growth (%) |
(4.1) |
(12.5) |
35.2 |
10.9 |
4.9 |
8.9 |
11.4 |
4.0 |
||
EBITDA Margin (%) |
12.6 |
16.8 |
19.9 |
19.8 |
20.4 |
22.0 |
21.8 |
23.6 |
||
Normalised Operating Margin (%) |
0.5 |
4.1 |
9.5 |
11.1 |
11.6 |
13.9 |
14.6 |
16.6 |
||
BALANCE SHEET |
||||||||||
Fixed Assets |
|
|
178.7 |
173.4 |
184.4 |
191.7 |
214.2 |
215.6 |
209.7 |
200.6 |
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 |
22.8 |
28.9 |
31.7 |
||
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 |
33.0 |
45.0 |
63.0 |
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 |
23.2 |
24.1 |
||
Cash & cash equivalents |
15.5 |
37.0 |
19.4 |
12.0 |
5.0 |
(2.5) |
7.1 |
24.2 |
||
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) |
(53.2) |
(53.7) |
Creditors |
(10.5) |
(10.3) |
(14.5) |
(16.7) |
(21.3) |
(16.0) |
(17.9) |
(18.6) |
||
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 |
137.6 |
151.7 |
169.6 |
CASH FLOW |
||||||||||
Op Cash Flow before WC and tax |
(2.6) |
4.3 |
6.6 |
15.0 |
11.6 |
20.2 |
24.0 |
28.7 |
||
Depreciation - Right of use assets |
9.8 |
9.4 |
10.6 |
12.2 |
12.9 |
13.0 |
13.0 |
13.0 |
||
Branch asset impairment and goodwill |
4.3 |
1.7 |
4.3 |
(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) |
(0.5) |
(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) |
(5.9) |
||
Net operating cash flow |
|
|
9.8 |
14.7 |
23.5 |
23.9 |
15.7 |
20.8 |
31.9 |
36.6 |
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) |
(11.5) |
(4.2) |
(0.8) |
||
Net interest |
0.0 |
0.0 |
(0.0) |
0.1 |
0.1 |
(0.2) |
(0.2) |
0.1 |
||
Dividends |
0.0 |
0.0 |
(0.6) |
(1.5) |
(2.7) |
(2.7) |
(3.9) |
(4.7) |
||
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) |
(7.5) |
9.6 |
17.1 |
||
Opening net debt/(cash) (ex-lease liabilities) |
|
|
(17.9) |
(15.5) |
(37.0) |
(23.1) |
(12.0) |
6.8 |
14.3 |
4.7 |
Closing net debt/(cash) (ex-lease liabilities) |
|
(15.5) |
(37.0) |
(23.1) |
(12.0) |
6.8 |
14.3 |
4.7 |
(12.4) |
|
Source: Foxtons Group, Edison Investment Research
|
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Research: Investment Companies
Partners Group Private Equity’s (PGPE’s) recent portfolio realisation efforts (supported by the gradual pick-up in M&A activity and an opening IPO window) included, most notably, the sale of SRS Distribution earlier this year (see our September 2024 note for details) and more recently Techem (3.8% of end-Q324 NAV, sold to a trade buyer in October 2024), as well as the successful IPO pricing of Galderma in March and KinderCare in October. The positive valuation effects from these activities (21% weighted average uplift to latest published NAV) were coupled with a 5.1pp contribution to portfolio performance in 9M24 from earnings growth (average 11% increase in last 12-month EBITDA across top 20 holdings) and a slight 1.2pp tailwind from peer multiples. This was partly offset by an increase in portfolio net debt amid several debt package refinancings at a lower spread to strengthen capital structures and in turn support growth. Moreover, the Q324 return was affected by a weakening US dollar, which makes up c 40% of the portfolio’s exposure by currency (although these FX headwinds have more than reversed so far in Q424). As a result, the company posted a moderate 3.1% NAV total return (TR) in 9M24.