Foxtons interim update: ‘Our turnaround is working’

Foxtons has seen its sales revenues decline during the first half of the year but insists its turnaround is working.

The London agency giant revealed in an interim update this morning that its sales revenue fell 19% annually during the first six months of the year to £16.9m.

This was attributed to expected lower exchange volumes, reflecting a lower under-offer pipeline at the start of the year, partly mitigated by market share growth.  

It said has seen a 33% in new sales agreed market share and 15% rise in exchange market share, making it the largest agent in London.
 

Guy Gittins, group chief executive of Foxtons, said: "Our continued focus on growing non-cyclical and recurring revenues is working and has enabled us to deliver strong revenue and profit growth despite a challenging sales market and investing in recruiting more fee earners.

"In the first half of the year we cemented our position as London's largest lettings and sales estate agency brand. We not only had the largest market share of instruction volumes in London, but we also grew instruction market share quicker than any of our competitors as recently implemented operational upgrades yielded significant gains.  

"Our lettings business continued its growth trajectory, with double digit organic growth delivered in a competitive market. In sales, although revenues were down due to the September 2022 mini-budget, which impacted the under-offer pipeline at the start of the year, we significantly grew market share, rebuilt the pipeline at the fastest rate in the last 5 years and agreed a similar level of new sales as last year, despite challenging market conditions.

"Looking ahead, despite the uncertainty in the sales market, our resilient and growing lettings business combined with continuing sales market share gains and a strengthened sales culture, means we are well positioned for the rest of the year."

Operational highlights:

· Largest Lettings and Sales estate agency brand in London.

· Delivered significant instruction market share growth vs H1 2022.

· 14% growth in organic Lettings revenue vs H1 2022, supported by an increase in the cross-sell of property management services (+21%) and securing longer tenancies.

· 33% increase in new Sales agreed market share; 15% increase in Sales exchange market share vs H1 2022.

· 29% growth in Financial Services refinance volumes vs H1 2022.

Financial highlights:

· Revenue up 9% to £70.9m; adjusted operating profit up 10% to £6.8m. 73% of revenue from non-cyclical, recurring activities. Strong Lettings growth more than offset the expected reduction in H1 Sales volumes.

· Lettings revenue up 26% to £49.8m, including £5.6m (+14%) of organic growth and £2.7m of incremental contribution from acquisitions. Operational upgrades delivered market share gains and higher average revenue per transaction.

· Atkinson McLeod (acquired March 2023) fully integrated and synergies being realised. Prior acquisitions trading well and delivering returns in line with expectations.

· Sales revenue down 19% to £16.9m due to expected lower exchange volumes, reflecting a lower under-offer pipeline at the start of the year, partly mitigated by market share growth.  · Financial Services revenue down 12% to £4.2m as higher refinance volumes were offset by lower new purchase transaction volumes and smaller loan sizes.

· Adjusted operating profit up 10% to £6.8m with Lettings operating profit growth more than offsetting a Sales operating loss, including the cost of increasing fee earner headcount.

· Net free cash outflow of £4.3m (2022: £2.8m inflow). Net debt of £2.1m at 30 June 2023 (31 December 2022: net cash £12.0m). This reflects £6.3m of acquisition spend, £9.0m working capital outflow due to the introduction of shorter landlord billing periods to improve competitiveness and portfolio retention, and £3.2m of shareholder returns. Working capital flows are expected to normalise across 2024.

· RCF refinanced with existing lender. Committed facility increased to £20m (from £5m) and extended to June 2026. Provides increased strategic flexibility including working capital support for organic Lettings growth and the Lettings portfolio acquisition strategy.

· Unchanged interim dividend of 0.20p per share in line with dividend policy.

· Making good progress towards medium-term ambition to deliver £25m-£30m of operating profit.

https://www.londonstockexchange.com/news-article/FOXT/interim-results/16057955