Foxtons (FOXT ) announced final results for the full year ended 31 December 2022 (FY22), with revenue up 11% to £140.3m with growth across all divisions: +17% in Lettings, +1% in Sales and +8% in Financial Services. 65% of revenue was generated from non-cyclical, recurring activities.
Adjusted operating profit was up 56% to £13.9m, and pre-tax profit was up 115% to £11.9m. D&G Lettings, which Foxtons acquired in March 2021, delivered £5.3m of operating profit in FY22 and a 35% return on capital. £10.6m was invested in Lettings acquisitions in FY22.
The business generated net free cash flow of £7.7m, compared to £6.6m in FY21. Year-end net cash was £12m, compared to £19.4m in FY21, helping Foxtons declare a final dividend of 0.7p/share, with a total 2022 dividend of 0.9p/share, up 100%. £4.9m was returned through share buybacks in FY22.
After some difficult years the London-focused estate agent Foxtons announced a refocusing of its strategic priorities to support its medium-term growth goal of £25-30m operating profit. The company's new strategy will focus on non-cyclical and recurring revenue streams.
For Lettings, the goal is to deliver 3-5% average annual growth and "attractive returns" from portfolio acquisitions. For Sales, Foxtons is aiming for 4.5%+ market share. For Financial Services, the company wants to see 7-10% annual average revenue growth by maximising cross-sell opportunities.
View from Vox
A strong showing from Foxtons in FY22 with revenue up across its Lettings, Sales, and Financial Services divisions, and pre-tax profit up 115% year-on-year. Adjusted operating profit increased 56%, as high levels of operating leverage converted revenue to profit.
The strong trading performance in FY22 was underpinned by significant growth in non-cyclical, recurring revenue. Trading in January and February was in line with expectations. Foxton shares were up 4.3% in early afternoon trading.
It was not all good news for Foxtons, however. The company identified several operational setbacks in FY22 that prevented "significant unfulfilled potential" from being realised. Foxtons named poor data accessibility and utilisation; outdated estate agency processes and diluted culture; insufficient headcount capacity; and no clear customer proposition and brand visibility. Foxtons said it has been implementing an operational improvements programme to address these issues, and already seeing results in front-end operations.
Foxton said Sales faced a challenging market as new buyer activity reduced following the September mini-budget, reducing the value of its under-offer sales pipeline into FY23. Similarly, Lettings saw low volumes and high rental prices.
However, Foxton expects refinance activity to remain resilient, and demand for mortgages to track the performance of the wider market. Foxtons expressed optimism for 2H23 as mortgage rates have begun to reduce in recent weeks, with buyer activity picking up.
Overall, Foxtons' operational improvements made over the last half-year, combined with high levels of non-cyclical and recurring revenues, should continue to drive market share and keep the company profitable and on track to meet its medium-term goal of £25-30m operating profit. Foxton's recent £7.4m acquisition of Atkinson McLeod should also enhance earnings in FY23.
Follow News & Updates from Foxtons: