Foxtons beats expectations for revenue, operating profit

(Sharecast News) - Foxtons Group announced in a trading update on Thursday that it surpassed market expectations in 2023, with total revenue rising 5% year-on-year to £147m. The London-listed firm said adjusted operating profit also topped market forecasts at £14m, rising marginally from the prior year's £13.9m.

It attributed its performance to strategic improvements in data management, core processes, corporate culture and brand enhancement.

The lettings segment, representing about 70% of the group's revenue, achieved growth of 16%, surpassing the £100m revenue milestone for the first time in Foxtons' history.

Its board said that success reflected the company's strategic focus on non-cyclical and recurring revenues.

During the year, the company also completed two lettings acquisitions, totalling £15.2m, which added more than 2,800 tenancies to its portfolio.

Sales operations outperformed the market, demonstrating substantial market share growth compared to the prior year.

Foxtons entered 2024 with a robust under-offer pipeline, and the company's brand became the UK's fastest-growing large lettings and sales agency, increasing its share of new lettings and sales instructions by 36% and 26%, respectively.

Despite a challenging market environment with a volume decrease of around 22% and a 2.4% decline in average sales prices, Foxtons said it still managed to deliver market share gains in sales.

However, sales revenue decreased by 14% compared to 2022, primarily due to higher interest rates and weaker macroeconomic conditions.

Foxtons reported net debt of £7m as of 31 December, including acquisition-related expenses, working capital investment in lettings growth initiatives, dividends paid, and share buybacks.

Looking ahead, Foxtons anticipated resilience in its lettings business in 2024, supported by strong recurring and non-cyclical characteristics.

Stable rents and improved availability of rental properties were expected to facilitate further market share growth.

In sales, the company said it expected continued revenue growth in the first quarter, driven by a robust under-offer pipeline and growing buyer demand as mortgage rates normalise.

Foxtons said it was committed to operational enhancements to sustain growth and reduce its dependence on sales market cycles, aiming to achieve £25m to £30m in adjusted operating profit in the medium term.

"2023 has been a transformational year for Foxtons, following the implementation of a refreshed strategy and operational turnaround plan," said chief executive officer Guy Gittins.

"We have delivered a year of market share growth and have ended the year with revenue and adjusted operating profit ahead of market expectations; our operational upgrades and investment in fee earners, training, data and brand, coupled with a return to driving innovation in the industry, are now consistently delivering material benefits to our competitiveness and market positioning, helping us to end 2023 as the UK's fastest growing large lettings and sales agency brand."

Gittins said the firm's strategy to prioritise non-cyclical and recurring revenues had driven revenue and profit growth, despite a weaker sales market, and in contrast to prior years.

"This, combined with the operational progress and significant market share gains made to date, gives me confidence that our strategy is working, and we enter 2024 focused on delivering our strategic priorities and medium-term profit ambitions."

At 1021 GMT, shares in Foxtons Group were down 0.95% at 52.1p.

Reporting by Josh White for Sharecast.com.