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Currency in GBP
Last close As at 09/06/2023
GBP0.40
▲ 0.20 (0.51%)
Market capitalisation
GBP119m
Research: Real Estate
Q1 revenue growth of 8% reflects good underlying growth and M&A in lettings, as well as robust sales and mortgage markets. In sales, Foxtons has taken market share despite the y-o-y decline in revenue and Q2 has started well, with an 8% increase in the under-offer pipeline. Furthermore, additional income streams are developing well and Foxtons has identified c £8m of M&A investment so far this year, highlighting strategic progress. We retain our underlying assumptions and our 128p per share valuation.
Foxtons Group |
Strong performance and market share gains |
Q1 trading update |
Real estate |
25 April 2022 |
Share price performance
Business description
Next events
Analyst
Foxtons GroupFoxtons Group is a research client of Edison Investment Research Limited |
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Q1 revenue growth of 8% reflects good underlying growth and M&A in lettings, as well as robust sales and mortgage markets. In sales, Foxtons has taken market share despite the y-o-y decline in revenue and Q2 has started well, with an 8% increase in the under-offer pipeline. Furthermore, additional income streams are developing well and Foxtons has identified c £8m of M&A investment so far this year, highlighting strategic progress. We retain our underlying assumptions and our 128p per share valuation.
Year end |
Revenue (£m) |
PBT* |
EPS** |
DPS |
P/E |
Yield |
12/20 |
93.6 |
1.6 |
(0.2) |
0.0 |
N/A |
N/A |
12/21 |
126.5 |
10.0 |
1.9 |
0.5 |
23.0 |
1.1% |
12/22e |
132.3 |
12.4 |
2.1 |
0.7 |
20.8 |
1.6% |
12/23e |
137.1 |
14.6 |
2.5 |
0.9 |
17.5 |
2.1% |
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 change, ie company definition.
Q1 revenue up 8% to £30m driven by lettings
Q1 was a robust period for Foxtons, with group revenue increasing 8% to £30m. Lettings accounted for £17.9m of revenue and was the main driver, up 21% in total, with organic growth of 10% and M&A (D&G) accounting for 11% growth (incremental revenue of £1.7m). The London market is currently characterised by an excess of demand over supply, which has pushed rents up, particularly since February, to levels in excess of pre-pandemic rates. Renewal revenues have also been increasing as tenants are signing for higher rents over extended periods, which collectively is offsetting a reduction in new transaction volumes.
Sales takes market share as headcount increases
In sales, although revenue was down by 9% y-o-y to £9.6m, underlying buyer demand was strong and Foxtons took market share. The lower level of revenue reflects distortion in the market in 2021, when the original stamp duty relief deadline was set at 31 March. The current pipeline is encouraging, with the under-offer pipeline up 8% versus 2021. There is likely to be similar distortion in Q2 as stamp duty relief was extended to 30 June last year, which pulled transactions from Q3 into Q2. In mortgage broking, revenue increased by 5% to £2.4m, benefiting from growth in remortgage activity offset by lower new purchase mortgage volumes. As previously announced, the number of sales negotiators and financial advisers has been increased to maximise revenue opportunities.
Valuation: Unchanged 128p/share valuation
We believe that Foxtons’ growth strategy is bearing fruit and that our ‘bull’ case scenario better highlights the potential upside in forecasts, where Foxtons is particularly geared to further acquisitions of lettings books, as well as growth from Build to Rent, regional expansion and its underlying markets. Our bull case scenario suggests a potential 2022 EPS of 7.4p, which implies a valuation of 128p/share when the average 2014/15 forward P/E of 17.5x is applied.
Exhibit 1: Financial summary
£m |
2019 |
2020 |
2021 |
2022e |
2023e |
2024e |
||
31-December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||||
Revenue |
|
|
106.9 |
93.6 |
126.5 |
132.3 |
137.1 |
142.0 |
EBITDA |
|
|
13.5 |
15.7 |
25.1 |
26.5 |
27.7 |
28.5 |
Normalised operating profit |
|
|
0.6 |
3.8 |
12.1 |
14.5 |
16.7 |
18.5 |
Amortisation of acquired intangibles |
(0.6) |
(0.8) |
(1.7) |
(1.6) |
(1.6) |
(1.6) |
||
Exceptionals |
(5.7) |
(1.1) |
(1.4) |
0.0 |
0.0 |
0.0 |
||
Share-based payments |
(0.7) |
(1.0) |
(1.5) |
(2.0) |
(2.0) |
(2.0) |
||
Reported operating profit |
(6.3) |
0.8 |
7.6 |
10.9 |
13.1 |
14.9 |
||
Net Interest |
(2.4) |
(2.2) |
(2.0) |
(2.1) |
(2.1) |
(2.1) |
||
Exceptionals |
(0.1) |
(0.0) |
(0.0) |
0.0 |
0.0 |
0.0 |
||
Profit Before Tax (norm) |
|
|
(1.9) |
1.6 |
10.0 |
12.4 |
14.6 |
16.4 |
Profit Before Tax (reported) |
|
|
(8.8) |
(1.4) |
5.6 |
8.8 |
11.0 |
12.8 |
Reported tax |
1.0 |
(1.8) |
(6.9) |
(1.7) |
(2.6) |
(3.2) |
||
Profit After Tax (norm) |
(0.9) |
(0.2) |
3.1 |
10.7 |
12.0 |
13.2 |
||
Profit After Tax (reported) |
(7.8) |
(3.2) |
(1.3) |
7.1 |
8.4 |
9.6 |
||
Discontinued operations |
0.0 |
0.0 |
(4.8) |
0.0 |
0.0 |
0.0 |
||
Net income (normalised) |
(0.9) |
(0.2) |
(1.7) |
10.7 |
12.0 |
13.2 |
||
Net income (reported) |
(7.8) |
(3.2) |
(6.2) |
7.1 |
8.4 |
9.6 |
||
Basic average number of shares outstanding (m) |
275 |
314 |
324 |
330 |
330 |
330 |
||
EPS - basic normalised (p) |
|
|
(0.32) |
(0.08) |
(0.52) |
3.25 |
3.63 |
4.00 |
EPS - diluted normalised (p) |
|
|
(0.32) |
(0.08) |
(0.52) |
3.20 |
3.58 |
3.94 |
EPS - basic reported (p) |
|
|
(2.83) |
(1.02) |
(1.90) |
2.16 |
2.54 |
2.91 |
EPS – continuing, diluted and adjusted* |
(1.06) |
(0.16) |
1.88 |
2.13 |
2.50 |
2.87 |
||
Dividend (p) |
0.00 |
0.00 |
0.45 |
0.75 |
0.88 |
1.00 |
||
Revenue growth (%) |
(4.1) |
(12.5) |
35.2 |
4.6 |
3.6 |
0.0 |
||
EBITDA Margin (%) |
12.6 |
16.8 |
19.9 |
20.1 |
20.2 |
20.1 |
||
Normalised Operating Margin |
0.5 |
4.1 |
9.5 |
11.0 |
12.2 |
13.0 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
178.7 |
173.4 |
184.4 |
181.0 |
171.5 |
162.9 |
Intangible Assets |
101.0 |
103.5 |
107.3 |
109.4 |
110.5 |
111.6 |
||
Goodwill |
9.3 |
11.4 |
17.7 |
17.7 |
17.7 |
17.7 |
||
Tangible Assets |
13.0 |
10.5 |
9.7 |
12.5 |
12.9 |
13.3 |
||
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 |
8.8 |
8.7 |
8.7 |
||
Current Assets |
|
|
30.2 |
52.6 |
39.3 |
39.6 |
45.5 |
50.0 |
Contract assets |
1.0 |
1.7 |
3.7 |
3.7 |
3.7 |
3.7 |
||
Debtors |
13.4 |
13.9 |
16.0 |
17.2 |
17.8 |
18.5 |
||
Cash & cash equivalents |
15.5 |
37.0 |
19.4 |
20.1 |
28.0 |
35.0 |
||
Other |
0.3 |
0.1 |
0.3 |
(1.4) |
(3.9) |
(7.1) |
||
Current Liabilities |
|
|
(27.9) |
(29.2) |
(31.9) |
(31.9) |
(33.1) |
(33.7) |
Creditors |
(10.5) |
(10.3) |
(14.5) |
(14.6) |
(15.8) |
(16.3) |
||
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) |
(56.0) |
(42.6) |
(28.7) |
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) |
(23.7) |
(20.5) |
||
Net Assets |
|
|
115.8 |
134.5 |
123.5 |
132.8 |
141.3 |
150.6 |
Shareholders' equity |
|
|
115.8 |
134.5 |
123.5 |
132.8 |
141.3 |
150.6 |
CASH FLOW |
||||||||
Op Cash Flow before WC and tax |
(2.6) |
4.3 |
4.2 |
12.5 |
14.7 |
16.5 |
||
Depreciation - Right of use assets |
9.8 |
9.4 |
13.0 |
12.0 |
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 |
0.0 |
0.0 |
0.0 |
||
Gain on disposal of PPE etc |
(0.4) |
(0.5) |
(1.4) |
(0.5) |
(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) |
(2.6) |
(3.2) |
||
Net operating cash flow |
|
|
9.8 |
14.7 |
23.5 |
21.8 |
23.7 |
23.2 |
Capex |
(0.3) |
(0.4) |
(1.7) |
(6.0) |
(0.4) |
(0.4) |
||
Acquisitions/disposals |
(0.2) |
(3.9) |
(14.5) |
(0.6) |
(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) |
(2.5) |
(2.9) |
||
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) |
(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 |
||
Other |
0.3 |
0.3 |
0.3 |
0.3 |
0.3 |
0.3 |
||
Net Cash Flow |
(2.4) |
21.5 |
(13.9) |
0.8 |
7.9 |
7.0 |
||
Opening net debt/(cash) |
|
|
(17.9) |
(15.5) |
(37.0) |
(23.1) |
(23.8) |
(31.7) |
Closing net debt/(cash) (excluding lease liabilities) |
|
(15.5) |
(37.0) |
(23.1) |
(23.8) |
(31.7) |
(38.7) |
|
Closing net debt/(cash) (including lease liabilities) |
40.4 |
14.6 |
28.7 |
17.2 |
(1.4) |
(19.2) |
||
Source: Company data, Edison Investment Research. Note: *Company definition.
|
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