Foxtons confident after rise in full-year profits

London-based estate agency Foxtons Group reported an 11% increase in revenue in its final results on Tuesday, to £140.3m, with growth across all of its businesses.

The company said that included a 17% increase in lettings, a 1% increase in sales, and an 8% increase in financial services.

Notably, 65% of the revenue generated was from non-cyclical, recurring activities.

Foxtons said D&G Lettings, acquired in March 2021, delivered £5.3m of operating profit in 2022 and a 35% return on capital.

Additionally, the firm said it invested £10.6m in lettings acquisitions in 2022.

Adjusted operating profit for the 12 months ended 31 December was up 56% at £13.9m, and profit before tax was ahead 115% at £11.9m, reflecting high levels of operating leverage driving strong revenue to profit conversion.

The company reported a net free cash flow of £7.7m and a year-end net cash of £12.0m.

Foxtons declared a final dividend of 0.7p per share, making for a total 2022 dividend of 0.9p per share, for an increase of 100%.

At the same time, the company said it returned £4.9m through share buybacks in 2022.

Looking ahead, Foxtons said trading in January and February was in line with expectations.

The lettings market dynamic of low volumes and high rental prices continued into 2023, with little change expected over the year, but year-on-year rental price growth rates were said to be likely to normalise.

It said the sales market is more challenging, as new buyer activity reduced following the September mini-budget, reducing the value of the under-offer sales pipeline entering the year.

Foxtons said it was expecting to feel the effects of that throughout the majority of 2023, due to the time to complete a sales transaction.

However, the firm said it expected financial services refinance activity to remain resilient, while demand for new purchase mortgages would track the performance of the wider sales market.

Additionally, mortgage rates had started to reduce in recent weeks, and buyer activity was picking up, which the board said could result in a more favourable sales market in the latter part of the year.

Foxtons said it had made operational improvements in the last six months which were now starting to improve front-end operations, including driving property instruction market share growth in both lettings and sales.

The firm said it expected high levels of non-cyclical and recurring revenues, alongside operational improvements, to drive growth and protect group profitability, limiting the impact of a weaker sales market.

“Operational improvements are being made at pace to rebuild our competitive advantages, including embedding a more confident articulation of our brand, investing in revenue generating headcount and improving our data platform to fully harness the power of our industry leading database,” said chief executive officer Guy Gittins.

“With the support of our talented workforce, I am certain we have the collective determination to put Foxtons on top where it belongs, and with a refocused set of strategic priorities, have a medium-term growth ambition to deliver £25m to £30m of operating profit.

“Whilst the macroeconomic backdrop remains uncertain, our resilient lettings and financial services businesses, coupled with the operational improvements we are delivering at pace, should mitigate most of the impact of a potentially lower volume sales market.”

At 0855 GMT, shares in Foxtons Group were up 1% at 41.61p.

Reporting by Josh White for Sharecast.com.