Foxtons: We need to rediscover our DNA

Foxtons has lost its DNA, its chief executive has warned.

It comes as the company published its first annual results under new boss Guy Gittins this morning.

The update said the brand’s business foundations are strong but claimed poor data accessibility and utilisation has impeded business decision making and the ability to unlock revenue growth opportunities.

It said outdated estate agency processes and diluted culture restricted organic growth, while no clear customer proposition and brand invisible in core markets limited ability to successfully compete.

Gittins said: “The key to rediscovering that DNA is through rebuilding areas of historic competitive advantage - namely our brand, people and culture, and data and technology - which have been eroded over time as a result of some investments made in the wrong areas, leading to an underinvested core business and limiting the ability to deliver any significant organic growth.

“In addition, the company's purpose was confused and our employee values misaligned with the business' focus and ambitions. I have refocused the whole business on what we need to deliver and launched a new purpose and values to reflect our strategic priorities and estate agency DNA.

“Our purpose, to get the right deal done for London's property owners, was unveiled to the entire workforce in December 2022 and will act as a cornerstone to everything we do, including delivering the best result for all our stakeholders. It will inspire and focus our teams as we renew the culture and remind customers of why they should appoint Foxtons.”

Its refocused strategies in lettings include  growingrevenue and profits through organic growth, accelerated further by acquisitive growth. 

In sales, the focus is to drive market share growth by “ensuring the business captures the upside from any sales market recovery and delivering good levels of cross-sell into lettings and financial services.”

Gittins said Foxtons now has around a 3.4% share of the addressable sales market compared with 4.5% in 2016. 

It aims to get back to the 2016 levels by re-establishing Foxtons' premium brand positioning, maintaining staffing at its branches to ensure sales get from exchange to instruction and by cross selling with financial services and in-house conveyancing.

Financial highlights:

• Revenue up 11% to £140.3m with growth across all businesses: +17% in Lettings, +1% in Sales and +8% in Financial Services. 65% of revenue generated from non-cyclical, recurring activities.
• D&G Lettings, acquired in March 2021, delivered £5.3m of operating profit in 2022 and a 35% return on capital. £10.6m invested in Lettings acquisitions in 2022.
• Adjusted operating profit up 56% to £13.9m and profit before tax up 115% to £11.9m reflecting high levels of operating leverage driving strong revenue to profit conversion.
• Net free cash flow of £7.7m (2021: £6.6m) and year end net cash of £12.0m (2021: £19.4m).
• Final dividend of 0.7p per share declared, total 2022 dividend of 0.9p per share, an increase of 100%. £4.9m returned through share buybacks in 2022.

Current trading and outlook

• Trading in January and February in line with our expectations.
• Lettings market dynamic of low volumes and high rental prices has continued into 2023. Little change to the dynamic expected over the year but year-on-year rental price growth rates likely to normalise.
• Sales market more challenging as new buyer activity reduced following the September mini-budget, reducing the value of the under-offer sales pipeline entering this year. Due to the time to complete a sales transaction, these effects will be felt through the majority of 2023.
• Financial Services refinance activity is expected to remain resilient, whilst demand for new purchase mortgages will track performance of the wider sales market. 
• Mortgage rates have started to reduce in recent weeks and buyer activity is picking up, which may result in a more favourable sales market in the latter part of the year.
• Operational improvements made in the last 6 months are starting to improve front-end operations including driving property instruction market share growth in both Lettings and Sales.
• High levels of non-cyclical and recurring revenues, alongside operational improvements to drive growth, will protect Group profitability and limit the impact of a weaker sales market.
• £7.4m acquisition of Atkinson McLeod announced yesterday, expected to be earnings enhancing in 2023.

https://www.investegate.co.uk/foxtons-group-plc/rns/final-results/202303070700040732S/