Slide 1: Final results for the year ended 31 December 2022
Foxtons Group plc Final results for the year ended 31 December 2022 7 March 2023
Slide 2: Important information
Important information This presentation includes statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements can be identified by the use of forward- looking terminology, including the terms “believe”, “estimates”, “plans”, “projects”, “anticipates”, “
Slide 3: Agenda
Agenda 1. Introduction, highlights and market update 2. Financial review 3. Operational review and strategic priorities 4. Investment case, outlook and summary 3
Slide 4: Introduction, highlights and market update
Introduction, highlights and market update Guy Gittins, Chief Executive Officer 4
Slide 5: Highlights
Highlights Financial progress in the year, but significant unfulfilled potential Financial Operational • £140.3m revenue (+11%) • Refreshed Senior Management • 65% of revenue from non-cyclical and • Operational review completed, key issues recurring activities identified and rebuild process underway
Slide 6: Lettings market update
Lettings market update Dynamic of lower supply and high demand underpinning rents 2022 rental prices 20% above 2021 reflecting Market dynamic of lower supply and continued high levels of lower property supply (1) demand £650 Weekly rental price YoY property supply change 100% (LHS) (RHS) • Total mar
Slide 7: Sales market update
Sales market update 2022 in line with prior year but new buyer activity weaker following mini-budget 2022 volumes in line with prior year. Price growth in 2022 but New buyer activity significantly reduced following September weakened in Q4 following mini-budget 2022 mini-budget. Some early pick up i
Slide 8: Financial review
Financial review Chris Hough, Chief Financial Officer 8
Slide 9: Financial highlights
Financial highlights Good drop-through of revenue growth to profit . FY22 FY21 Change (1) Revenue £140.3m £126.5m +11% (2) Adj. operating profit £13.9m £8.9m +56% (3) Adj. operating profit margin 9.9% 7.1% +286 bps (4) Profit before tax £11.9m £5.6m +115% (5) Adj. EPS (basic) 3.1p 1.9p +63% (6) Net
Slide 10: Adj. operating profit walk
Adj. operating profit walk Revenue growth and cost savings supporting investment required to rebuild business 2021 Adj. Revenue Variable cost Acquired Lettings Cost savings Inflation Rebuilding Property 2022 Adj. operating profit increase increase portfolio costs costs restructuring costs operating
Slide 11: Segmental performance
Segmental performance Driven by significant growth in Lettings revenue and profitability Revenue Adj. operating profit Adj. operating profit margin FY22 Change FY22 Change FY22 Change Lettings £86.9m £12.6m £18.0m £8.2m 20.8% 754 bps Sales £43.2m £0.5m (£3.2m) (£3.7m) (7.5%) (873 bps) Financial Serv
Slide 12: Focus on Lettings: delivering YoY growth
Focus on Lettings: delivering YoY growth Operating leverage driving revenue drop-through to operating profit Tenancy portfolio size (at year end) Revenue (£m) Adj. operating profit (£m) (1) Adj. operating profit margin CAGR CAGR CAGR 7.2% 7.2% 35.8% 26.6k 86.9 25.2k 21% 18.0 74.3 21.7k Adj. op. prof
Slide 13: Focus on Lettings: acquisitions
Focus on Lettings: acquisitions Delivering good returns Annual (1) 2022 operating (2) Year Acquisition price pre-acquisition 2022 return profit operating profit 3 x portfolios 2020 £4.2m £0.6m £1.3m 30% Douglas & Gordon 2021 £15.3m £0.3m £5.3m 35% (3) 2 x portfolios 2022 £10.6m £0.1m £0.4m n/a (4) T
Slide 14: Cost base in FY22 and FY23 expectations
Cost base in FY22 and FY23 expectations Maximising operating leverage key to delivering profit growth £126.4m (5) Fee earners and FY23 LFL expectations: c.£124m-£125m £49.0m other direct costs • LFL cost base expected to be broadly flat • Investment in fee earner headcount will take 12-18 (1) months
Slide 15: Cash flow
Cash flow Business model delivers high levels of cash generation Operating cash to net free cash inflow conversion Uses of net free cash inflow Net cash from operating activities: £23.9m Opening cash £23.1m Net free cash flow £7.7m Acquisition consideration paid (£8.5m) Disposal of D&G sales (£3.7m)
Slide 16: Capital allocation
Capital allocation Supporting growth ambitions and shareholder returns 1. Balance sheet strength Operational requirements and manage through cyclical sales markets 2. Organic growth Rebuilding competitive advantages 3. Dividend Return 35%-40% of profit after tax as a regular dividend 4. Lettings acq
Slide 17: Operational review and strategic priorities
Operational review and strategic priorities Guy Gittins, Chief Executive Officer 17
Slide 18: Operational review
Operational review Business has underperformed since 2016 Capital allocation and operational decisions Organic portfolio growth not prioritised or • Insufficient investment in growth drivers, delivered. Acquisitions should have started costs cut in the wrong areas earlier Group • Tech investments fo
Slide 19: Operational review: core operational failings identified
Operational review Core operational failings identified 1. 2. 3. 4. Poor data accessibility Outdated estate Insufficient headcount No clear customer and usage agency processes and capacity and proposition and diluted Foxtons culture experience reduced brand visibility 1. Data architecture not fit 1.
Slide 20: Operational review: core operational upgrades required
Operational review Core operational upgrades required to deliver growth 1. 2. 3. 4. Data accessibility and Estate agency Headcount capacity Brand visibility and usage processes and culture and experience customer proposition Overhaul architecture, Identify and overhaul Sufficient headcount, in line
Slide 21: Refocused strategic priorities
Refocused strategic priorities Emphasis on non-cyclical and recurring revenue streams Strategic priorities How they deliver growth Lettings Organic Acquisitive Non-cyclical and recurring revenues growth growth Sales Capture sales market upside Market share growth Cross-sell into non-cyclical busines
Slide 22: Refocused strategic priorities: medium term growth ambitions
Refocused strategic priorities Tangible objectives drive medium term growth ambitions Organic growth 3%-5% (1) CAGR Lettings Acquisitive Return: growth 20%+ (2) Medium term growth ambitions: 1. £25m - £30m operating profit Sales Market 4.5%+ share share growth medium term (3) (1 2. 15%+ operating pr
Slide 23: Investment case, outlook and summary
Investment case, outlook and summary Guy Gittins, Chief Executive Officer 23
Slide 24: Investment case
Investment case Resilient business with significant upside potential from operational improvement London is the most valuable residential property market in the UK Highly valuable markets Largest private rental sector in the UK with high levels of non-cyclical demand Resilient business model Non-cyc
Slide 25: Outlook and summary
Outlook and summary Outlook • Non-cyclical Lettings and Financial Services refinance business will continue to deliver high levels of earnings resilience • Sales market will be more challenging but early indicators in January and February suggest buyer activity returning Summary • Business reset und
Slide 26: Appendix
Appendix 26
Slide 27: Balance sheet
Balance sheet Strong balance sheet with no external borrowing FY22 FY21 Goodwill and intangibles 135.4 125.0 Property, plant & equipment 53.4 53.5 Cash 12.0 19.4 Investments - 3.3 Net working capital 0.1 1.8 Deferred tax (25.7) (24.8) Provisions and net contract liabilities (5.9) (6.6) Lease liabili
Slide 28: How we deliver our growth ambitions
How we deliver our growth ambitions Strategically we are focussing on rebuilding areas of historic competitive advantage Leading brand • Brand positioning • Customer proposition • Brand visibility Brand High functioning sales teams • Revenue generation headcount • Tenure and productivity • Empowerin
Slide 29: New purpose and values
New purpose and values Reflecting our new ambitions and expectations Our purpose Our values “To get the right deal done for Providing the most efficient, reliable and dedicated London’s property owners” Professional customer journey, whilst maintaining the highest standards of business ethics Ambiti
Slide 30: New brand messaging: We Get It Done
New brand messaging “We Get It Done” 30
Slide 31: Contact
Contact: www.foxtonsgroup.co.uk investor@foxtonsgroup.co.uk +44 (0) 207 893 6261 31