Foxtons Group — New CEO targets recurring income streams

Foxtons Group (LSE: FOXT)

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Research: Real Estate

Foxtons Group — New CEO targets recurring income streams

Foxtons’ new CEO has identified historical failings that are expected to be addressed by upgrades to data infrastructure, investment in staff and a reinvigoration of the Foxtons brand. If successful, over the medium term Foxtons expects margins to expand 500bp and hopes that operating profit will more than double. Importantly, it aims to increase the proportion of recurring income from c 65% currently, thereby reducing cyclical income and increasing the quality of income. We have raised our FY23 EPS estimates by c 8%, reflecting the latest M&A. Our ‘base’ case valuation rises to 59p and our preferred ‘bull’ case valuation rises from 118p to 124p.

Andy Murphy

Written by

Andy Murphy

Director, Financials & Industrials

Male hand showing, offering a new dream house at the empty field with copy space

Real Estate

Foxtons Group

New CEO targets recurring income streams

Operational review

Real estate

15 March 2023

Price

40p

Market cap

£128m

Forecast net cash (£m) at 31 December 2023

8.1

Shares in issue

330.1m

Free float

100%

Code

FOXT

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

7.1

30.7

24.6

Rel (local)

11.6

28.6

20.0

52-week high/low

47p

27p

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

AGM

May 2023

Interim results

August 2023

Analyst

Andy Murphy

+44 (0)20 3077 5700

Foxtons Group is a research client of Edison Investment Research Limited

Foxtons’ new CEO has identified historical failings that are expected to be addressed by upgrades to data infrastructure, investment in staff and a reinvigoration of the Foxtons brand. If successful, over the medium term Foxtons expects margins to expand 500bp and hopes that operating profit will more than double. Importantly, it aims to increase the proportion of recurring income from c 65% currently, thereby reducing cyclical income and increasing the quality of income. We have raised our FY23 EPS estimates by c 8%, reflecting the latest M&A. Our ‘base’ case valuation rises to 59p and our preferred ‘bull’ case valuation rises from 118p to 124p.

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/21

126.5

10.0

2.0

0.5

20.1

1.2

12/22

140.3

13.7

3.0

0.9

13.4

2.2

12/23e

137.8

13.5

2.4

0.8

16.8

2.0

12/24e

146.5

17.8

3.3

1.2

12.2

3.0

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.

New CEO, new plan to double medium-term profits

Foxtons’ new CEO has conducted an operational review that has identified past failings and focused his mind on the upgrades and changes that are needed to rebuild the business by investing in data capability, recruitment, training and incentivising staff, and re-energising the Foxtons brand. If successful, the non-cyclical Lettings business should expand rapidly, Sales will take market share, particularly at the higher price points, and Financial Services will grow strongly. The target is to expand the margin by c 50% and to double operating profit.

FY22 results highlight steady progress

Despite a volatile market, Foxtons grew FY22 revenue by 10.9% to £140.3m, driven by growth in all three divisions. Adjusted operating profit grew 55.6%, driven largely by a c 65% drop-through rate in Lettings, offset by losses in Sales due to investment in future capacity. Overall, the operating margin expanded by 280bp to 9.9%, still some way short of its new 15% medium-term target. EPS increased c 50% to 3.0p and the total dividend was doubled to 0.9p/share. Despite investing £8.4m in acquisitions, £1.5m in dividends and £4.9m in share buybacks, Foxtons ended the year with net cash of £12m, comfortably ahead of its £8–10m target.

Valuation: ‘Bull’ valuation raised from 118p to 124p

Our underlying estimates are unchanged post the prelims, bar for the inclusion of the March 2023 acquisition of Atkinson McLeod, which is earnings enhancing in FY23 but also sees net cash reduce, reflecting the £7.4m consideration. Our ‘base’ case valuation rises from 53p/share to 59p, and our preferred ‘bull’ case valuation, which attempts to reflect market share gains across all three divisions in line with the revised strategy, rises from 118p/share to 124p. It also attempts to reflect some value for yet-to-be-announced M&A and Build to Rent activity. M&A has been a strong feature of the group for the last three years and is likely to remain so given its strategy, its financial strength and the opportunities that exist.

Foxtons to finally ‘get it done’

Foxtons’ new CEO has returned to the business, via a successful period at a competitor, with a clear plan to reinvigorate a declining brand and turn it back into the estate agency powerhouse that it once was. An operational review has identified past failings and focused his mind on the upgrades and changes that are needed to rebuild the business by investing in data capability, recruitment, training and incentivising staff, and re-energising the Foxtons brand. If successful, the non-cyclical Lettings business should expand rapidly, the Sales business will take market share, particularly at the higher price points, and Financial Services will grow strongly. The target is to expand the margin by c 50%, double operating profit ‘over the medium term’ and to materially increase the proportion of non-cyclical revenue from the current level of c 65%.

Operational review identifies past failings and future growth path

Guy Gittins, the new CEO, has carried out a thorough operational review of Foxtons since his arrival in September 2022 and has not only identified what he sees as the company’s medium-term growth ambitions, but has also, refreshingly, outlined what he sees as the company’s core operational failings over the last six to seven years, which have resulted in loss of market share in Sales, a missed opportunity to aggressively grow the Lettings business and a lack of investment in Financial Services. In a nutshell, the Foxton brand name has been diminished and competitors have performed better.

The key operational failings identified are:

Poor data accessibility and usage. Foxtons’ data architecture is not fit for purpose, despite the company having the largest property and customer database in London, which has not been used to drive new revenue opportunities. Decision-making has therefore not been informed by data, leading to sub-optimal outcomes.

Outdated estate agency processes and diluted Foxtons culture. In Lettings, poor efficiency has slowed the speed of new properties to market and the speed of deals. In Sales, the basic fundamentals of estate agency need rebuilding and a culture of self-generating lead opportunities is lacking. Furthermore, there is a total lack of cross-selling across the group.

Insufficient headcount capacity and experience. There are too few fee-earners in the group, estate agent retention and a lack of experience is constraining productivity, and its once industry-leading training programme has been scaled back and is no longer fit for purpose.

No clear customer proposition and reduced brand visibility. Foxtons has lost its way and no longer has a clear customer proposition, leading to brand invisibility and a loss of market share, particularly in the high-value markets.

The core operational upgrades largely reflect the four sets of failings listed above and include:

1.

Data accessibility and usage

a.

Overhaul of data architecture, including implementing a modern data platform.

b.

Increase database mining to identify revenue opportunities.

c.

Implement a management information system to support decision-making.

2.

Estate agency processes and culture

a.

Identify and overhaul inefficient front-end processes.

b.

Rebuild Foxtons’ culture of delivering results.

c.

Encourage and incentivise estate agents to self-generate opportunities and engage in cross-selling.

3.

Headcount capacity and experience

a.

Resource the business with sufficient headcount, in line with market conditions.

b.

Drive salesforce tenure, experience and productivity.

c.

Deliver a comprehensive in-person training programme.

4.

Brand visibility and customer proposition

a.

New purpose reflecting the business’s core focus.

b.

Introduce a new brand messaging campaign: ‘We get it done’.

c.

Increase brand visibility and focus on higher-value properties.

Foxtons expects the costs of the operational upgrades will be largely paid for by the cost savings generated by the removal of a layer of management and from an anticipated improved financial performance from the underlying divisions. Management hopes that the upgrades will have a material and long-term impact across the whole business. For example, in Lettings, it expects to improve organic revenue growth by 3–5% pa and to continue to execute M&A, which should target a return on capital of at least 20%. In Sales, Foxtons anticipates increasing its market share from 3.4%, back to where it was as recently as 2016, at c 4.5%, and in Financial Services, it anticipates leveraging on the Sales business to achieve compound revenue growth of c 7–10%.

Exhibit 1: Summary of medium-term growth ambitions

Source: Foxtons Group

Collectively, over the medium term Foxtons expects to achieve an operating margin of at least 15%, versus a reported 9.9% in FY22, and a total adjusted operating profit of £25–30m, compared to £13.9m in FY22. Although these targets may seem ambitious, they should be seen in the context of previous profits and margins. For example, in 2013, 2014 and 2015, Foxtons averaged an operating margin of c 30%, and generated an operating profit in excess of £40m in each year, so we believe these new targets are credible.

The chart below highlights the increasing operating profit generated from the non-cyclical Lettings division over the last four years. The number of tenancies and revenue have both grown at a 7.2% CAGR over the period, but operating profit has grown from £5.3m to £18.0m and, broadly speaking, has accounted for all of the growth in the group’s operating profit. Financial Services, which is c 50% non-cyclical, has also grown progressively over the period, while the highly cyclical Sales business has roughly halved its operating losses which may continue to decline if it retakes market share, as planned under the operational review.

Exhibit 2: Lettings and group operating profit and margin, last four years

Source: Foxtons Group and Edison Investment Research

M&A continues to be a clear growth driver

On 6 March 2023 Foxtons announced its latest acquisition of an estate agency, which follows six other deals in the previous three years. In this move, Foxtons agreed to buy Atkinson McLeod for a total consideration of £7.4m in cash. Atkinson McLeod is described as a ‘high-quality’ estate agency operating out of a four-branch network in Central East London. In the year to March 2022, the business generated revenue of £3.1m and an operating profit of £0.9m, implying a historical sales multiple of 2.4x. The multiple is modestly higher than the 2x multiple paid for Gordon & Co in 2022, reflecting the relatively low proportion of cyclical sales revenue and the high proportion of non-cyclical letting revenue in the mix. Atkinson McLeod generated c 90% of revenue from lettings, versus c 65% for Foxtons Group.

The 1,100 tenancies in the portfolio bring the acquired number of tenancies since 2020 to c 8,100, and Foxtons’ total tenancy portfolio to c 27,500. We expect Foxtons to be able to generate both revenue and cost synergies from the deal as it is integrated into existing business, suggesting like-for-like revenue of perhaps £3.5m and an operating profit in excess of £1.5m. It is worth noting that the pure lettings book of Douglas & Gordon (D&G), purchased in 2021, generated a revenue of £11.2m in FY22, an operating profit of £5.3m and an implied operating margin of 47%, supporting the expectation that Atkinson McLeod’s operating profit will improve under Foxtons’ ownership.

We believe that Foxtons will continue to comb the market for other suitable lettings books, though further deals in 2023 may be limited given the spend in 2023 to date. That said, we believe that Foxtons will end the current year with net cash of c £8.1m, which offers the potential to execute another deal of this size if the opportunity arose. The three 2020 deals and the 2021 purchase of D&G collectively generated a return of c 34% in 2022, after synergies. Foxtons anticipates similar returns from the latest three deals, as shown below.

Exhibit 3: M&A activity since January 2020

Target

Date

Consideration(£m)

Revenue
(£m)

PBT
(£m)

EBITDA (£m)

EBIT
(£m)

Location

Sales multiple (x)

Tenancies acquired

London Stone

1 Mar '20

2.0

1.5

0.7

-

-

Woolwich

1.3

687

Pillars Estates

Oct '20

0.2

-

-

-

-

-

-

224

Aston Rowe

23 Nov '20

2.0

1.1

0.5

-

-

Acton and Brook Green

1.8

689

2020 total

4.2

2.6

-

-

-

-

-

1,600

Douglas & Gordon

1 Mar '21

15.3

16.5

-

0.6

-

Central, South and West

0.9

2,900

2021 total

15.3

16.5

-

-

-

-

-

2,900

Gordon & Co

May '22

8.4

4.0

-

-

0.1

South London

2.1

2,000

Stones Residential

May '22

2.2

1.3

-

-

-

Stanmore

1.7

500

2022 total

10.6

5.3

-

-

-

-

-

2,500

Atkinson McLeod

Mar '23

7.4

3.1

0.9

East London

2.4

1,100

Total since 1 January 2020

37.4

27.5

-

-

-

-

1.4

8,100

Source: Foxtons Group data, Edison Investment Research

FY22 results: Good revenue growth, very strong profit growth

Despite a volatile market, Foxtons grew FY22 revenue by 10.9% to £140.3m, driven by growth in all three divisions, modestly exceeding our revised expectations. Adjusted operating profit grew 55.6%, driven largely by a c 65% drop-through rate in Lettings, offset by losses in Sales due to investment in future capacity. Overall, the total adjusted operating margin expanded 280bp to 9.9%, still some way short of its 15% medium-term target. EPS increased c 50% to 3.0p and the total dividend was doubled to 0.9p/share. Despite investing £8.4m in acquisitions, £1.5m in dividends and £4.9m in share buybacks, Foxtons ended the year with net cash of £12m, comfortably ahead of it £8–10m net cash target.

Exhibit 4: Full year 2022 results summary

FY19

FY20

FY21

FY22

FY22 vs FY19

FY22 vs FY21

Revenue

Lettings

65.7

57.3

74.3

86.9

32.2%

16.9%

Sales

32.6

28.2

42.7

43.2

32.4%

1.2%

Financial Services

8.5

8.1

9.5

10.2

19.8%

8.0%

Total revenue (£m)

106.9

93.6

126.5

140.3

31.3%

10.9%

Adjusted operating profit

Lettings

4.2

6.3

9.8

18.0

327.0%

83.6%

Sales

(6.3)

(5.8)

0.5

(3.2)

(48.4%)

-

Financial Services

1.4

1.4

1.5

1.8

29.4%

14.8%

Total adjusted operating profit (£m)

(0.7)

1.9

8.9

13.9

-

55.6%

PBT (ex exceptionals) (£m)

(3.2)

(0.3)

6.9

12.0

-

-

EPS – continuing, diluted and adjusted (p)

(1.1)

(0.2)

2.0

3.0

-

-

DPS (p)

0.0

0.0

0.5

0.9

-

-

Net cash (£m)

15.5

37.0

23.1

12.0

(22.3%)

(47.9%)

Source: Foxtons Group data, Edison Investment Research

Lettings growth accelerated by M&A

Total Lettings revenue increased 17% to £86.9m (2021: £74.3m) on the back of a 5% increase in the overall lettings book to c 26,500 tenancies. Revenue was boosted by a 25% increase in the average revenue per transaction to £4,211, offset by a 7% reduction in transactions to 20,640, reflecting tightness in availability.

Of the £12.6m increase in Lettings revenue, £7.6m was organic growth driven by a c 20% increase in average rental prices offset by longer agreed tenancies, £2m was the annualisation of the D&G lettings book, which was included for an additional two months in the year, and £3m was driven by the two lettings books purchased in May 2022. The latter will be included for an additional five months in 2023.

The Lettings operating margin expanded by 750bp, from 13.2% to 20.7%, benefiting from the operating leverage of growth, notably from the additional £11.2m of revenue and £5.3m of operating profit from the acquired D&G Lettings business. In the period, Foxtons disposed of the loss-making D&G Sales business and successfully integrated the D&G lettings book and the two businesses purchased in May 2022.

The chart below clearly shows that although the number of lettings in H122 and H222 was broadly similar to 2019, the average revenue per rental has risen by roughly a third as overall rates are now higher, and the quality of the portfolio has improved, driven in particular by the D&G portfolio.

Exhibit 5: Foxtons lettings activity, last eight half years

Source: Foxtons Group data, Edison Investment Research

Sales revenue increased 1%

Sales revenue rose by 1% to £43.2m, benefiting from a 3% increase in transaction volumes to 3,215, offset by a 2% decline in the average revenue per transaction to £13,431 despite an increase in the average price of properties, from £577k to £590k. The decline in revenue per transaction reflects an increase in the proportion of properties sold under the government’s Help to Buy scheme, which has now been closed. Trading in Q4 was particularly hit by the mini-budget but is now showing some signs of recovery.

Although revenue was up slightly, operating profit fell from £0.5m to a loss of £3.2m, reflecting investment in the business, including increased staff numbers, rebuilding costs and one-off property restructuring costs, plus inflation. The operating margin reversed from +1.3% to -7.5%.

The chart below shows the volume of sales, revenue and revenue per unit over the last eight half years. It shows half-yearly volumes in 2022 of c 1,500–1,700, up c a third versus c 1,200 in H119 and H219. Revenue per unit is broadly unchanged, implying that total revenue was also about a third higher in FY22 versus FY19.

Exhibit 6: Foxtons sales activity, last eight half years

Source: Foxtons Group data, Edison Investment Research

Financial Services showing steady growth

Foxtons’ Financial Services division handled 5,003 units in the year, which was marginally up on FY21. Revenue and revenue per transaction were both up 8%, to £10.2m and £2,043 respectively, due to a 6% increase in mortgage activity from higher average fees and an increase in loan size, and a 2% increase in protection volumes. Of the £10.2m total revenue, £4.5m was from non-cyclical refinance activity and £5.7m was from more cyclical purchase activity.

Operating profit in the segment increased c 20% to £1.8m and the margin expanded by 100bp to 17.3%. Over the last eight half years, volumes and revenue per transaction have both trended modestly higher, which has steadily pushed total revenue up. Financial Services remains the smallest division of the group by a long way, but it is a profitable and complementary component of Foxtons.

Exhibit 7: Foxtons Financial Services activity, last eight half years

Source: Foxtons Group data, Edison Investment Research

Estimates and valuation raised to reflect the latest M&A

Our underlying estimates are unchanged post the prelims, bar for the 10-month inclusion of the Atkinson McLeod acquisition in FY23, and a full 12-month inclusion in FY24. We assume revenue in both years increases by £2.1m and £3.0m respectively, and that operating profit benefits from a £0.5m contribution this year, including some integration costs, and by £1.2m in FY24, benefiting from a full year contribution and some synergies. Net cash declines in both years, reflecting the £7.4m total estimated cost of acquisition.

Exhibit 8: Revised forecasts

FY22

FY23e (Old)

FY23e (New)

Chg (%)

FY24e (Old)

FY24e (New)

Chg (%)

Revenue (£m)

140.3

135.7

137.8

1.6%

143.5

146.5

2.1%

Y-o-y growth (%)

10.9%

-

(1.8%)

-

-

6.3%

-

Adjusted operating profit (£m)

13.9

11.4

11.9

4.1%

14.9

16.1

8.2%

Y-o-y growth (%)

55.6%

-

(14.7%)

-

-

35.9%

-

Reported PBT (£m)

11.9

9.1

9.7

6.3%

12.8

13.9

9.0%

Y-o-y growth (%)

115.1%

-

(19.0%)

-

-

44.2%

-

EPS (company definition) (p)

3.0

2.2

2.4

7.7%

3.1

3.3

8.0%

Y-o-y growth (%)

51.5%

-

(12.0%)

-

-

31.2%

-

DPS (p)

0.9

0.8

0.8

3.7%

1.1

1.2

6.5%

Y-o-y growth (%)

100.0%

-

(7.9%)

-

-

41.3%

-

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

12.0

15.2

8.1

(46.9%)

23.4

15.8

(32.6%)

Y-o-y growth (%)

(47.9%)

-

(32.8%)

-

-

95.2%

-

Source: Foxtons Group data, Edison Investment Research

Our ‘base’ case valuation rises from 53p/share to 59p/share with the inclusion of the latest acquisition. However, our preferred valuation methodology in our ‘bull’ case attempts to reflect market share gains across all three divisions in line with the revised strategy, which we believe is likely to result in an increased headcount. It also attempts to reflect some value for yet-to-be-announced M&A and an increase in the recurring, non-cyclical lettings and remortgage activity. M&A has been a strong feature of the group for the last three years and is likely to remain so given its strategy, its financial strength and the opportunities that exist. The additional c £24m of revenue assumed over and above the FY24 estimate of £146.5m is driven by market share gains, assumed M&A and growth from the Build to Rent sector. We have then assumed a c 65% drop-through rate to which we apply a 17.5x price to earnings ratio. The implied earnings lead us to our revised 124p/share ‘bull’ case valuation, up from 118p.

Exhibit 9: Financial summary

£m

2019

2020

2021

2022

2023e

2024e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

INCOME STATEMENT

Revenue

 

 

106.9

93.6

126.5

140.3

137.8

146.5

Normalised operating profit

 

 

0.6

3.8

12.1

15.6

15.7

20.0

Amortisation of acquired intangibles

(0.6)

(0.8)

(1.7)

(1.6)

(1.8)

(1.9)

Share-based payments

(0.7)

(1.0)

(1.5)

(0.2)

(2.0)

(2.0)

Total adjusted operating profit

(0.7)

1.9

8.9

13.9

11.9

16.1

Exceptionals

(5.7)

(1.1)

(1.4)

(0.1)

0.0

0.0

Reported operating profit

(6.3)

0.8

7.6

13.8

11.9

16.1

Net Interest

(2.4)

(2.2)

(2.0)

(1.9)

(2.2)

(2.2)

Exceptionals

(0.1)

(0.0)

(0.0)

(0.0)

0.0

0.0

Profit Before Tax (norm)

 

 

(1.9)

1.6

10.0

13.7

13.5

17.8

Profit Before Tax (reported)

 

 

(8.8)

(1.4)

5.6

11.9

9.7

13.9

Reported tax

1.0

(1.8)

(6.9)

(2.4)

(2.3)

(3.5)

Discontinued operations

0.0

0.0

(4.8)

0.0

0.0

0.0

Net income (normalised)

(0.9)

(0.2)

(1.7)

11.4

11.2

14.4

Net income (reported)

(7.8)

(3.2)

(6.2)

9.6

7.4

10.5

Basic average number of shares outstanding (m)

275

314

324

308

308

308

EPS - basic normalised (p)

 

 

(0.32)

(0.08)

(0.52)

3.69

3.64

4.67

EPS - basic reported (p)

 

 

(2.83)

(1.02)

(1.90)

3.11

2.41

3.40

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

 

 

(1.06)

(0.16)

1.98

3.00

2.37

3.35

Dividend (p)

0.00

0.00

0.45

0.90

0.83

1.17

Revenue growth (%)

-4.1

-12.5

35.2

10.9

-1.8

0.0

Normalised Operating Margin

0.5

4.1

9.5

11.1

11.4

13.7

BALANCE SHEET

Fixed Assets

 

 

178.7

173.4

184.4

191.7

188.9

181.0

Intangible Assets

101.0

103.5

107.3

109.3

110.4

111.5

Goodwill

9.3

11.4

17.7

26.1

26.1

26.1

Tangible Assets

13.0

10.5

9.7

10.7

17.8

18.9

Right of use assets

51.4

44.4

43.8

42.6

31.6

21.6

Contract assets

0.6

0.4

0.9

1.7

1.7

1.7

Investments & other

3.3

3.1

5.1

1.4

1.3

1.3

Current Assets

 

 

30.2

52.6

39.3

34.5

32.4

41.2

Contract assets

1.0

1.7

3.7

5.7

5.7

5.7

Debtors

13.4

13.9

16.0

16.0

17.9

19.0

Cash & cash equivalents

15.5

37.0

19.4

12.0

8.1

15.8

Other

0.3

0.1

0.3

0.7

0.7

0.7

Current Liabilities

 

 

(27.9)

(29.2)

(31.9)

(38.7)

(37.1)

(38.0)

Creditors

(10.5)

(10.3)

(14.5)

(16.7)

(15.2)

(16.1)

Lease liabilities

(9.7)

(10.8)

(8.8)

(10.7)

(10.7)

(10.7)

Contract liabilities

(6.3)

(7.7)

(8.2)

(9.7)

(9.7)

(9.7)

Other

(1.4)

(0.4)

(0.3)

(1.5)

(1.5)

(1.4)

Long Term Liabilities

 

 

(65.2)

(62.4)

(68.4)

(64.9)

(54.1)

(43.3)

Lease liabilities

(46.2)

(40.7)

(39.3)

(35.8)

(25.0)

(14.2)

Contract liabilities

(1.3)

(1.1)

(1.1)

(0.3)

(0.3)

(0.3)

Other long term liabilities

(17.8)

(20.6)

(28.0)

(28.8)

(26.5)

(23.1)

Shareholders' equity

 

 

115.8

134.5

123.5

122.7

130.1

140.9

CASH FLOW

Op Cash Flow before WC and tax

(2.6)

4.3

6.6

15.0

13.7

18.0

Depreciation - Right of use assets

9.8

9.4

10.6

12.2

11.0

10.0

Impairment of goodwill

0.0

0.0

3.2

0.0

0.0

0.0

Branch asset impairment

4.3

1.7

1.1

(0.3)

0.0

0.0

Gain on disposal of PPE etc

(0.4)

(0.5)

(1.4)

(0.3)

(0.5)

(0.5)

Working capital

(2.6)

(0.6)

1.7

(1.2)

(3.4)

(0.2)

Decrease in provisions

0.8

(0.8)

0.2

1.1

(1.0)

(1.0)

Share based payment charges

0.7

1.0

1.5

0.2

2.0

2.0

Cash settlement of share incentive plan

(0.4)

0.0

0.0

(0.0)

(0.5)

(0.5)

Tax

0.2

0.2

(0.2)

(2.7)

(2.3)

(3.5)

Net operating cash flow

 

 

9.8

14.7

23.5

23.9

19.0

24.4

Capex

(0.3)

(0.4)

(1.7)

(2.9)

(0.4)

(0.4)

Acquisitions/disposals

(0.2)

(3.9)

(14.5)

(9.6)

(6.8)

(0.8)

Dividends

0.0

0.0

(0.6)

(1.5)

(2.8)

(2.6)

Repayment of lease liabilities

(12.0)

(10.0)

(15.2)

(12.7)

(13.0)

(13.0)

Purchase of own shares

(0.1)

(0.3)

(5.7)

(4.9)

(0.3)

(0.3)

Net proceeds from issue of ord. 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)

(11.1)

(3.9)

7.7

Opening net debt/(cash)

 

 

(17.9)

(15.5)

(37.0)

(23.1)

(12.0)

(8.1)

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

 

(15.5)

(37.0)

(23.1)

(12.0)

(8.1)

(15.8)

Source: company data, Edison Investment Research

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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.

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Copyright: Copyright 2023 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

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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

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 2023 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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