Foxtons set for more takeovers and new tech investment in data

Foxtons says it's set for radical new investment and further takeovers following the acquisition of rival London agency Douglas and Gordon.

In a trading statement to shareholders this morning, chief executive Nic Budden says raising new capital last year has given the firm confidence to make progress with an ambitious growth strategy.

"We continue to consider investments in data, technology and PropTech where they promote further differentiation for Foxtons. Our performance under the lockdown measures is a reminder of how important it is to stay at the forefront of technology in this industry and we will continue to invest in this area to ensure we retain a leadership position" he says.

"Our best-in-class technology continues to provide a compelling differentiator, and our disciplined approach to cost remains strong" he adds.

In terms of future acquisitions, lettings books are the main target.

"Lettings is a particular focus for the business because it provides greater protection against the sales cycle and our cash position allowed us to invest in high quality lettings businesses which we have successfully integrated into our operationally geared business model. In addition to the lettings acquisitions we completed in 2020, we recently announced the acquisition of Douglas & Gordon, a well-respected brand with a strong lettings business." 

Over the course of the past 15 months Foxtons has acquired four lettings books - three in 2020 for a total investment of £4.6m and adding a combined 1,600 tenancies, and then Douglas & Gordon earlier this month for £14.25m adding a further 2,900 tenancies.

Budden tells shareholders that following the recovery of profitability in the second half of 2020, Foxtons' financial performance has continued to improve into 2021.

"Group revenue for the first two months of 2021 is well ahead of 2020 (and 2019) and continued tight cost control has resulted in significant growth in group operating profit over that period. The sales commission pipeline started 2021 more than 30 per cent higher than prior year and has led to much improved revenue growth in the first two months of the year. Despite the significant increase in units sold to date, the value of the pipeline has remained stable over this period at levels last seen in early 2017."

He continues: "Stock levels in lettings are also well ahead of 2020 and, although a relative excess supply of rental properties in London has driven down average rents by 12 per cent versus prior year, we have so far been able to fully mitigate the impact on average commissions through greater volumes as tenants look to take advantage of more attractive prices. Mortgage broking has also started the year well with higher new purchase activity, driven by the stronger sales market."

Foxtons' performance in 2020 - the official subject of today's trading statement - reflected the challenges of operating in London during the depth of the pandemic. 

The overall group revenue declined by 12 per cent  to £93.5m, with letting revenue dropping 13 per cent to £57.2m and a similar drop for sales revenue to £28.2m. 

However, the company says it staged a "strong operational recovery once first lockdown was eased".

In December it announced a £3m share buyback, with £1.8m returned to date.