Foxtons Backs Midterm Views After Pretax Profit Rise

Foxtons Group PLC, the London-focused estate agency, has reported a significant rise in pretax profit for the full year 2022, doubling to £11.9 million from £5.6 million in the previous year. This positive news comes as the company's revenue climbed 11% to £140.3 million from £126.5 million in the same period. The company also declared a final dividend of 0.7 pence per share for 2022, soaring from 0.27 pence for 2021, and a total dividend of 0.90 pence per share, which is double the amount from the previous year.

The company's strong performance can be attributed to its strategic vision, which focuses on growing non-cyclical and recurring revenues. This approach has already expanded these revenue streams to 72% of the group's total revenue. The strategic vision also targets an operating profit of between £25 million and £30 million and an operating margin of over 15%. The company's CEO, Guy Gittins, has driven this progress through unprecedented investment in staff training and retention, as well as developing proprietary IT and data systems that put Foxtons head and shoulders above its competition.



Foxtons' FY23 results came in modestly ahead of expectations, with revenue up 4.9% to £147.1 million, largely driven by the strength of the Lettings division, offset by weakness in Sales and Financial Services. Total adjusted operating profit increased 2.5% to £14.3 million, implying modest margin erosion, from 9.9% to 9.7%, at least in part due to the deliberate retention of skilled staff to ensure the business has the right calibre of personnel and capacity to grow when sales markets recover. Net cash reduced from £12 million to net debt of £6.8 million, at least partly due to working capital investment and M&A.

The new strategic vision set out by the CEO is gaining significant momentum, driven by investment in staff and in best-in-class bespoke IT and data platforms, and implies that medium-term targets are now coming into focus. Market share is being gained in all divisions, which is likely to be boosted if the sales market stabilises in 2024. We have modestly raised forecasts and our valuation to 132p/share and believe that if interest rates stabilise or ease further, there are upside risks to our forecasts.

In conclusion, Foxtons Group PLC's strong performance and strategic focus on non-cyclical revenue streams have contributed to its resilience in challenging market conditions. The company's investment in staff training, retention, and proprietary IT systems has driven market share gains across its divisions. The acquisition of Lettings businesses aligns with Foxtons' medium-term targets and contributes to its valuation. As the company continues to execute its strategic vision, investors can expect further progress towards its medium-term targets.