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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Foxtons Group Plc | LSE:FOXT | London | Ordinary Share | GB00BCKFY513 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -1.00 | -1.90% | 51.60 | 51.80 | 52.00 | 52.60 | 51.40 | 51.60 | 1,185,984 | 16:35:25 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Agents & Mgrs | 147.13M | 5.49M | 0.0182 | 28.57 | 156.67M |
From Apr 2019 to Apr 2024
TIDMFOXT
RNS Number : 2108M
Foxtons Group PLC
27 July 2017
Foxtons Group plc
INTERIM RESULTS FOR THE HALF YEARED 30 JUNE 2017
27 JULY 2017
Foxtons Group plc, London's leading estate agent, today announces its financial results for the half year ended 30 June 2017.
Financial summary
Half year ended 30 June H1 2017 H1 2016 --------------------------------------- --------- --------- Group revenue GBP58.5m GBP68.8m Group Adjusted EBITDA(1) GBP7.1m GBP13.1m Profit before tax GBP3.8m GBP10.5m Net cash from operating activities GBP3.8m GBP10.2m Net free cash flow(2) GBP2.1m GBP6.8m Basic Earnings per share 1.2p 3.0p Interim dividend per share - ordinary 0.43p 1.67p --------------------------------------- --------- ---------
Financial highlights:
-- Lettings revenue GBP32.1m down 2% versus prior year; Volumes up 1% with several growth initiatives underway, offset by fall in rental rates. Remains a resilient, recurring revenue stream.
-- Sales revenue GBP22.2m down 29% in the half; mainly driven by the Q1 surge in the prior year. Q2 sales revenue down 3% overall versus prior year and impacted by increased political uncertainty towards the end of the period.
-- Alexander Hall mortgage revenue GBP4.2m, down 9% reflecting tough prior year comparatives. -- Focus on tight cost control with costs down GBP3.7m versus prior year. -- Robust balance sheet with no debt. GBP10.6m cash as at 30 June 2017. -- 0.43p interim dividend in line with policy.
Operational highlights:
-- Maintained No 1 position in both sales and lettings delivering market leading service for customers:
o Customer service scores of 9.5/10 (TrustPilot) and 4.6/5 (Google reviews).
o 96% success rate in achieving asking prices in sales and lettings .
o Further focus on deepening staff expertise.
-- New technology platforms built to enhance customer experience including the MyFoxtons portal for buyers and tenants.
-- Several new initiatives launched or launching in H2 designed to accelerate the growth in lettings portfolio.
-- Two branches opened in February as planned. Network now covers 80% of the London market. -- Strategic focus on maximising upside potential from newer branches.
Commenting on today's statement, Nic Budden, Chief Executive Officer said:
"Our performance has been resilient in the context of a London property market that has been further impacted by unprecedented economic and political uncertainty. Whilst sales commissions in the second quarter as a whole were down 3% versus prior year, sales exchanges and our under offer pipeline weakened through June and the early part of July. The growth in our lettings portfolio was encouraging, up 2% to c.19,800 tenancies and now accounts for 55% of group revenues, delivering a steady and recurring income stream.
"During the last six months we have maintained our relentless focus on delivering a market leading service for our customers and that remains our priority. We recently launched MyFoxtons for tenants and buyers, a sophisticated online portal to complement the equivalent for landlords and vendors launched last year, and early feedback has been encouraging. We have several new and exciting initiatives underway designed to build our lettings portfolio and strengthen our customer offer further. While conditions remain challenging, we are confident that these initiatives, together with the strength of our network, our balance sheet and our brand will support long term growth for our shareholders."
For further information, please contact:
Foxtons Group plc Jenny Matthews, Investor Relations Manager +44 20 7893 6484 Tulchan Communications LLP Peter Hewer/Jessica Reid +44 20 7353 4200
A live webcast of the management team's presentation at 9:00 a.m. today can be accessed via the Group's website at www.foxtonsgroup.co.uk. An audio dial in will also be available - dial in details: U.K. +44(0)330 336 9105, U.S.: +1 719 457 2086 Confirmation Code: 3639821. There will also be a replay for 14 days after the presentation, replay dial in: London/UK: +44 (0)207 984 7568, and US: +1 719 457 0820. Conference code: 3639821
1. Adjusted EBITDA is defined by the Group as profit before tax, depreciation, amortisation, finance costs, finance income, exceptional items, profit on disposal of assets and share based payments. Refer to note 3. This is used as a key performance indicator of underlying trading performance on the basis that it excludes one-off exceptional charges and management incentive schemes.
2. Net free cash flow is defined by the Group as net cash from operating activities less net cash used in investing activities exclusive of exceptional items. This is considered to represent the most appropriate measure of net cash flow generated from the business, excluding amounts distributed to shareholders.
Performance at a glance
Hot Features
Premium
Six months ended
30 June
----------------------------------- ------------------ -----
H1 2017 H1 2016
----------------------------------- -------- -------- -----
Income statement
----------------------------------- -------- -------- -----
Revenue GBP58.5m GBP68.8m (15%)
----------------------------------- -------- -------- -----
Adjusted EBITDA GBP7.1m GBP13.1m (46%)
----------------------------------- -------- -------- -----
Profit before tax GBP3.8m GBP10.5m (64%)
----------------------------------- -------- -------- -----
Adjusted EBITDA margin 12.2% 19.1%
----------------------------------- -------- -------- -----
Earnings per share
----------------------------------- -------- -------- -----
Basic EPS 1.2p 3.0p (60%)
----------------------------------- -------- -------- -----
Returns to shareholders:
----------------------------------- -------- -------- -----
Cash paid during the period
Total paid GBP0.9m GBP17.1m
Share buy-backs - GBP11.2m
----------------------------------- -------- -------- -----
Total cash returns in the GBP0.9m GBP28.3m
period
----------------------------------- -------- -------- -----
Dividends payable
----------------------------------- -------- -------- -----
Interim 0.43pps 1.67pps
----------------------------------- -------- -------- -----
Special - -
----------------------------------- -------- -------- -----
Total 0.43pps 1.67pps
----------------------------------- -------- -------- -----
Cash flow
----------------------------------- -------- -------- -----
Operating cash conversion(1) 45.1% 83.1%
----------------------------------- -------- -------- -----
Net free cash flow GBP2.1m GBP6.8m
----------------------------------- -------- -------- -----
Net free cash flow as a percentage
of Adjusted EBITDA 29.5% 51.5%
----------------------------------- -------- -------- -----
Period end cash balance GBP10.6m GBP4.1m
----------------------------------- -------- -------- -----
KPIs
------------------------------ --------- --------- -----
Sales revenue GBP22.2m GBP31.4m (29%)
------------------------------ --------- --------- -----
Sales units 1,544 2,314 (33%)
------------------------------ --------- --------- -----
Revenue per sales unit GBP14,412 GBP13,615 +6%
------------------------------ --------- --------- -----
Lettings revenue GBP32.1m GBP32.7m (2%)
------------------------------ --------- --------- -----
Lettings units 9,435 9,322 1%
------------------------------ --------- --------- -----
Revenue per lettings unit GBP3,399 GBP3,507 (3%)
------------------------------ --------- --------- -----
Mortgage broking revenue GBP4.2m GBP4.7m (9%)
------------------------------ --------- --------- -----
Units 1,992 2,152 (7%)
------------------------------ --------- --------- -----
Average revenue per broking
unit GBP2,119 GBP2,162 (2%)
------------------------------ --------- --------- -----
Definitions:
1. Operating cash conversion is computed as Adjusted operating cash flow/Adjusted EBITDA. Adjusted operating cash flow is defined as the summation of Adjusted EBITDA, change in working capital and net capital spend. This is considered to represent the key performance indicator for operating cash flow, excluding income tax payments.
Chief Executive's review
First half Group revenue was GBP58.5 million (2016: GBP68.8 million) and comprised sales revenue of GBP22.2 million (2016: GBP31.4 million), lettings revenue of GBP32.1 million (2016: GBP32.7 million) and mortgage broking revenue of GBP4.2 million (2016: GBP4.7 million).
Sales revenue fell 29%, mainly reflecting the surge in transactions in Q1 2016 prior to the increase in stamp duty on buy-to-let and second homes. Sales revenue was down 44% in Q1 versus prior year, and down by 3% in Q2 versus prior year. Lettings continued to provide a resilient, less-cyclical revenue stream and now represents 55% of the Group's revenues. Lettings revenue was down 2% on the prior year, with downward pressures on rents partly offset by increased volumes. Alexander Hall, our mortgage broker, was down 9% driven by prior year volumes in Q1 ahead of the changes to stamp duty.
Group Adjusted EBITDA reduced to GBP7.1 million (2016: GBP13.1 million) driven principally by lower revenue in the sales business. We delivered against our cost reduction targets, delivering GBP3.7m of savings, despite business rates increases, one-off costs and inflationary pressures.
The Group continues to be cash generative, delivering GBP2.1m of free cash flow, and remains debt free.
Property sales market
The sales market continues to be weighed down by the impact of stamp duty tax changes introduced during 2016. The unexpected general election led to a further slowing of transaction levels in Q2 2017.
However, despite these short-term issues, London remains an economic and financial powerhouse, with an enviable level of global reach and influence. With its solid infrastructure and skilled workforce supporting both financial and commercial sectors, its long-term attractiveness is unlikely to diminish. London continues to be a highly attractive property market driven by high population density and limited housing stock. Significant pent-up demand for housing is driven by the fact that population has increased by c1.2m from 2005 to 2016 with only c.200,000 new homes built. These fundamental demand and supply dynamics mean that transactions will increase once a greater level of economic certainty returns to the market.
Lettings market
London has experienced a significant shift in tenure with nearly 30% of private households now living in rented accommodation, double that seen a decade ago. This increase in demand for private rentals in London underpins our lettings business, which continues to be a key element of our future growth strategy.
Our lettings business is the largest single brand portfolio in London and has benefitted from an increased operational focus alongside well-received new customer initiatives in the period. We are starting to see encouraging growth in our portfolio, which increased to c.19,800 from c.19,400 in the prior year. The proportion of actively managed properties in the portfolio also increased in the period, to 32% (2016: 31%). We also achieved growth in our short lets business despite the corporate relocation market remaining constrained.
Whilst demand for rental properties remains high, the first half of the year saw a 5% decrease in average rental prices driven by both supply and demand factors; supply of rental property increased following the surge in buy-to-let activity in Q1 2016, whilst demand weakened following the European Union referendum and inflationary pressures on household incomes.
The growth of high-quality, professionally managed Institutional PRS has increased choice and quality in the rental sector. Foxtons is well placed to benefit from this emerging rental product; our market-leading lettings experience, IT infrastructure and operational processes have been well received by Institutional PRS operators. Our pipeline remains strong, however many schemes remain at build stage.
As the lettings market grows, it is becoming more complex too, with significant new regulation, legislation and tax changes introduced in recent years. Against this background our high quality lettings business is the sensible choice for landlords and tenants looking for a long term partner who can safeguard their interests.
Outlook
Looking ahead, we expect trading conditions to remain challenging for the remainder of 2017 given the effects of ongoing economic and political uncertainty.
Our balanced business model, underpinned by less cyclical lettings income, provides resilience against sales market cycles and we continue to target growth in this area. Enhanced operational focus, customer initiatives and utilisation of technology and data have already shown some progress in H1 and we aim to build on this in H2.
Foxtons remains in an attractive position with a robust balance sheet, good cash generation and with no debt. We have made good progress aligning our cost base with market conditions. We will continue to review and optimise our business structure and leverage our proprietary technology and data (including 4 million property records) to make our agents as productive and competitive as possible.
Longer term, whilst recent political events have produced uncertainty for buyers and sellers, we expect London to remain a highly attractive property market for sales and lettings. We have several initiatives underway to promote growth in our lettings business and our less mature branches remain focused on growing market share. Our high-touch approach to customer service continues to be a key differentiator, and as the most recognised residential brand in London, we are uniquely positioned to manage through the market uncertainties and take advantage of any change in conditions.
Nic Budden
Chief Executive Officer
Financial review
Summary income statement
Half year ended 30 June H1 2017 H1 2016 % change ------------------------- --------- ---------- --------- Group revenue GBP58.5m GBP68.8m (15%) Group Adjusted EBITDA GBP7.1m GBP13.1m (46%) Profit before tax GBP3.8m GBP10.5m (64%) Net cash from operating activities GBP3.8m GBP10.2m (63%) Basic Earnings per share 1.2p 3.0p (60%) Dividend per share 0.43p 1.67p (74%) ------------------------- --------- ---------- ---------
Note: Alternative performance measures such as "Adjusted EBITDA" are presented as alternatives to IFRS equivalent measures as they provide a clearer understanding of the Group's underlying performance.
Revenue
The Foxtons Group comprises three business segments: Sales, Lettings and Mortgage broking. The majority of operations are in the London area with two branches in the adjacent area of Surrey.
GBPm H1 H1 % variance
2017 2016
------------------ ------ ------ -----------
Sales 22.2 31.4 (29%)
Lettings 32.1 32.7 (2%)
Mortgage broking 4.2 4.7 (9%)
Total revenue 58.5 68.8 (15%)
------------------ ------ ------ -----------
Sales
The London property sales market was significantly impacted by a marked step down in activity due to political uncertainty and taxation changes affecting buy-to-let properties. Revenues fell by 29% versus the prior year, primarily driven by a 33% fall in volumes. "Average revenue per transaction" increased by 6% versus prior year. This increase was due to underlying London price inflation with the average price of Foxtons property sales increasing to GBP589k (H1-2016: GBP573k) together with an increasing number of deals at multi-agency rates.
Lettings
The Lettings segment continues to provide a consistent recurring revenue stream which comprises over half of group revenues. Lettings revenue remained resilient, down 2% versus prior year driven by lower rental rates in the market, partly offset by increased deal volumes.
Mortgage broking
Mortgage broking revenue fell by 9%, principally driven by reduced volumes due to reduced activity in the property sales market.
Balanced business
A key strategic priority for the Company is to maintain a balanced business. This balance across the Sales and Lettings segments provides financial strength in the Group to withstand fluctuations in the property market.
% of total revenue H1 2017 H1 2016 ------------------- ------- ------- Sales 38% 46% Lettings 55% 47% Mortgage broking 7% 7% Total revenue 100% 100% ------------------- ------- -------
Organic expansion
The Group opened two new branches during the period in Wembley and Wood Green. The network now totals 67 branches. Further openings will be dependent on conditions in the property sales market and we will focus on the maturing of our newer branches.
Segmental Group Adjusted EBITDA
Adjusted EBITDA H1 H1 H1 H1
2017 2017
2016 2016
-------------------------
GBPm margin GBPm margin
------------------------- ------ ------- ------ -------
Sales 1.4 6.5% 5.2 16.7%
Lettings 4.9 15.4% 7.1 21.7%
Mortgage broking 0.8 18.1% 0.8 17.1%
Group Adjusted EBITDA 7.1 12.2% 13.1 19.1%
------------------------- ------ ------- ------ -------
Lettings EBITDA and margin reduced versus prior year driven primarily by lower revenue, and an increased apportionment of shared central costs, which for the purposes of segmental reporting are allocated between the sales and lettings segments according to headcount. As H1 2017 headcount was higher in the lettings business than that of the sales business, a higher proportion of shared cost has been allocated to Lettings than was the case in the prior year. The contribution margin in Lettings prior to the allocation of shared central costs was in line with the prior year.
Sales EBITDA and margin reduced versus prior year driven primarily by lower revenue, partially offset by lower costs arising from lower headcount.
Seasonality
EBITDA generation is not phased equally during the year. Seasonality is seen in both Sales and Lettings with Q3 being the peak period for Lettings revenues. Historically, Adjusted EBITDA has been weighted towards the second half of the year with a ratio of circa 47:53 (H1:H2).
Profit before tax (PBT)
Profit before tax (PBT) was GBP3.8 million (H1 2016: GBP10.5 million) and was after charging administrative expenses of GBP54.7 million (H1 2016: GBP58.4 million), a reduction of GBP3.7 million (6%) driven mainly by headcount reductions, all through natural attrition, as we controlled costs as market conditions worsened. There were no exceptional items in either the current or prior year.
Taxation
The Group has a low risk approach to its tax affairs. All business activities of Foxtons operate within the UK and are UK tax registered and fully compliant. The Group does not have any complex tax structures in place and does not engage in any aggressive tax planning or tax avoidance schemes. Foxtons always sets out to be transparent, open and honest in its dealings with tax authorities. Foxtons' effective tax rate is 11.4% (2016: 19.7%).This may be compared to the statutory blended corporation tax rate of 19.25% (2016: 20.0%). The effective tax rate fell due to the recognition of a deferred tax asset relating to a non-trading inter-company loan relationship from prior years. Tax payments during the first half of the year totalled GBP1.1 million (H1 2016: GBP4.2million).
Earnings per share (EPS)
Basic EPS was 1.2p (H1 2016: 3.0p) driven by reduced profitability, partially offset by a deferred tax credit in the period.
Cash flow
Net free cash flow for the period was GBP2.1 million (H1 2016: GBP6.8 million). The reduction was primarily due to reduced EBITDA (GBP6.0m), and an adverse movement in working capital (GBP3.5m), partially offset by lower tax payments +GBP3.1m and lower net capital spend +GBP1.7m. The adverse working capital movement was caused by debtors returning to more normal levels in June 2017 after a relatively weak end to the 2016 year which in turn led to relatively low debtors at the start of 2017. This adverse working capital movement was the main reason for the reduction in operating cash conversion, which was 45.1% (H1 2016: 83.1%)
The Group held net cash of GBP10.6m as at period end, and has a GBP10m Revolving Credit Facility which remains entirely undrawn.
Dividends
The Board's priorities for free cash flow are to fund investment in the future development of the business, maintain a strong balance sheet and to return excess cash to shareholders.
A final dividend in respect of 2016 of 0.33p per share was paid in May 2017. In line with our policy of returning 35% to 40% of profit after tax as an ordinary dividend, a 2017 interim dividend of 0.43p per share will be paid in September 2017 (2016 interim: 1.67p per share). Payment will be made on 26 September 2017 to shareholders on the register at close of business on 1 September 2017. The shares will be quoted ex-dividend on 31 August 2017.
Share buy-backs
No share buy-backs were undertaken during the period (H1-2016: GBP11.2 million).
Post balance sheet events
There are no post balance sheet events to report.
Treasury policies and objectives
The Group's treasury policy is designed to reduce financial risk.
Financial risk for the Group is low as:
-- The Group is debt-free; -- The Group is entirely UK-based with no foreign currency risks; and -- Surplus cash balances are held with major UK based banks.
As a consequence of the above, the Group has not had to enter into any financial instruments to protect against risk.
Pensions
The Group does not have any defined benefit schemes in place but is subject to the provisions of auto-enrolment which require the Company to make certain defined contribution payments for our employees.
Mark Berry
Chief Financial Officer
Principal risks
Risk management
The Board is responsible for establishing and maintaining the Group's system of risk management and internal control, with the aim of protecting its employees and customers and safeguarding the interests of the Company and its Shareholders in the constantly changing environment in which it operates. The Board regularly reviews the principal risks facing the Company together with the relevant mitigating controls and undertakes a robust assessment. In reviewing the principal risks the Board considers emerging risks and significant changes to existing risk ratings. In addition the Board has set guidelines for risk appetite as part of the risk management process against which risks are monitored.
The identification of risk in the Group is undertaken by specific executive risk committees which analyse overall corporate risk, information technology risk and mortgage broking risk. Other committees exist below this level to focus on specific areas such as anti-money laundering etc. A common risk register is used across the Group to monitor gross and residual risk with the results being assessed by the Board. The Compliance department constantly reviews operations to ensure that any non-standard transactions have been properly authorised and that procedures are being properly adhered to across the branch network. The Audit Committee monitors the effectiveness of the risk management system through regular updates originating from the various executive risk committees.
The principal risks table below sets out the risks facing the business at the date of this Report analysed between external and internal factors. These risks do not comprise all of the risks that the Group may face and are not listed in any order of priority. Additional risks and uncertainties not presently known to management or deemed to be less material at the date of this Report may also have an adverse effect on the Group.
The following principal risks and uncertainties are consistent with those disclosed in the 2016 Annual Report and Accounts.
External factors
Risk Impact on company
----------------------- -----------------------------------------------
Market Risk Continuous high property price inflation
may impact affordability which in turn
may reduce transaction levels in the
market. The market may also be affected
by a reduction in London's standing as
a major financial city caused by the
UK's decision to leave the EU.
The market is also reliant on the availability
of mortgage finance, a deterioration
in which may adversely affect Foxtons.
The market may also be impacted by any
changes in government policy such as
increases in stamp duty taxes or increased
regulation in the lettings market such
as banning tenants' fees.
----------------------- -----------------------------------------------
Competitor challenge Foxtons operates in a highly competitive
marketplace. New or existing competitors
could develop new services or methods
of working including online and hybrid
agents which could give them a competitive
advantage over Foxtons.
----------------------- -----------------------------------------------
Compliance with Breaches of laws or regulations could
the legal and lead to financial penalties and reputational
regulatory environment damage.
The Mortgage broking division is authorised
and regulated by the FCA and could be
subject to sanction for non-compliance.
----------------------- -----------------------------------------------
Internal factors
Risk Impact on company
-------------- --------------------------------------------------
IT systems and Foxtons business operations are dependent
cyber risk on sophisticated IT systems which could
fail or be deliberately targeted by cyber-attacks
leading to interruption of service or
corruption of data.
-------------- --------------------------------------------------
People There is a risk that Foxtons may not
be able to recruit and retain sufficient
people to satisfy its organic expansion
plans. In addition, senior staff may
be recruited by competitors.
-------------- --------------------------------------------------
Forward looking statements:
This interim announcement contains certain forward-looking statements with respect to the financial condition and results of operations of Foxtons Group plc. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that will occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. The forward-looking statements are based on the directors' current views and information known to them at 26 July 2017. The directors do not make any undertakings to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Nothing in this statement should be construed as a profit forecast.
Statement of Directors' responsibilities
We confirm that to the best of our knowledge:
(a) The condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting'
(b) The interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
(c) The interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).
By order of the Board
Chief Executive Officer Chief Financial Officer Nic Budden Mark Berry 26 July 2017 26 July 2017
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended 30 June 2017
Six
months
to 30
June
2016
Year
ended
Six months 31 December
to 30 June 2016
2017 (Unaudited) (unaudited) (audited)
Continuing operations Notes GBP'000 GBP'000 GBP'000
------------------------------- ----- ----------------- ------------ ------------
Revenue 58,541 68,846 132,688
Administrative expenses (54,727) (58,412) (113,877)
------------------------------- ----- ----------------- ------------ ------------
Operating profit 3,814 10,434 18,811
Finance income (3) 33 34
Finance costs (40) - (80)
------------------------------- ----- ----------------- ------------ ------------
Profit before tax 3,771 10,467 18,765
Tax 4 (431) (2,062) (3,043)
------------------------------- ----- ----------------- ------------ ------------
Profit and total comprehensive
income for the year 3,340 8,405 15,722
------------------------------- ----- ----------------- ------------ ------------
Earnings per share
Basic and diluted (pence
per share) 6 1.2 3.0 5.7
------------------------------- ----- ----------------- ------------ ------------
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2017
30 June 31 December
2016 2016
30 June 2017
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
----------------------------------------------- ------ ------------ ------------ -----------
Non-current assets
Goodwill 19,168 19,168 19,168
Other intangible assets 100,625 99,727 100,104
Property, plant and equipment 26,450 27,832 28,077
Deferred tax assets 909 332 468
------------------------------------------------------- ------------ ------------ -----------
147,152 147,059 147,817
------------------------------------------------------ ------------ ------------ -----------
Current assets
Trade and other receivables 11,700 12,282 7,753
Prepayments 5,729 5,558 5,681
Cash and cash equivalents 10,634 4,093 9,476
------------------------------------------------------- ------------ ------------ -----------
28,063 21,933 22,910
------------------------------------------------------ ------------ ------------ -----------
Total assets 175,215 168,992 170,727
------------------------------------------------------- ------------ ------------ -----------
Current liabilities
Trade and other payables (13,204) (11,723) (11,313)
Current tax liabilities (943) (1,585) (1,184)
Provisions (305) (206) (286)
Deferred revenue and lettings refund liability (4,353) (4,709) (4,473)
------------------------------------------------------- ------------ ------------ -----------
(18,805) (18,223) (17,256)
------------------------------------------------------ ------------ ------------ -----------
Net current assets 9,258 3,710 5,654
Non-current liabilities
Deferred tax liabilities (16,830) (17,820) (16,830)
------------------------------------------------------- ------------ ------------ -----------
(16,830) (17,820) (16,830)
------------------------------------------------------ ------------ ------------ -----------
Total liabilities (35,635) (36,043) (34,086)
------------------------------------------------------- ------------ ------------ -----------
Net assets 139,580 132,949 136,641
------------------------------------------------------- ------------ ------------ -----------
Equity
Share capital 2,751 2,751 2,751
Own shares held (720) (1,540) (1,540)
Other capital reserve 2,582 2,582 2,582
Capital redemption reserve 71 71 71
Share premium - - -
Retained earnings 134,896 129,085 132,777
------------------------------------------------------- ------------ ------------ -----------
Total equity 139,580 132,949 136,641
------------------------------------------------------- ------------ ------------ -----------
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 June 2017
Own Other Capital
Share shares capital redemption Retained Total
capital held reserve reserve Share premium earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- -------- -------- -------- ----------- ------------- --------- --------
Balance at 1 January
2017 2,751 (1,540) 2,582 71 - 132,777 136,641
--------------------- -------- -------- -------- ----------- ------------- --------- --------
Total comprehensive
income for the year - - - - - 3,340 3,340
Dividends - - - - - (908) (908)
Exercise of shares
from EBT - 820 - - - (820) -
Credit to equity
for share based
payments - - - - - 507 507
--------------------- -------- -------- -------- ----------- ------------- --------- --------
Balance at 30 June
2017 (unaudited) 2,751 (720) 2,582 71 - 134,896 139,580
--------------------- -------- -------- -------- ----------- ------------- --------- --------
Own Other Capital
Share shares capital redemption Retained Total
capital held reserve reserve Share premium earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- ----------- ------------- --------- --------
Balance at 1 January
2016 2,817 (1,540) 2,582 5 52,727 95,994 152,585
=========================== ======== ======== ======== =========== ============= ========= ========
Total comprehensive
income for the period - - - - - 8,405 8,405
Dividends - - - - - (17,108) (17,108)
Share buyback (66) - - 66 - (11,163) (11,163)
Share premium cancellation
net of transaction
costs - - - - (52,727) 52,703 (24)
Credit to equity
for share based
payments - - - - - 254 254
Balance at 30 June
2016 (unaudited) 2,751 (1,540) 2,582 71 - 129,085 132,949
--------------------------- -------- -------- -------- ----------- ------------- --------- --------
Own Other
Share shares capital Capital redemption Retained Total
capital held reserve reserve Share premium earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- -------- -------- -------- ------------------ ------------- --------- --------
Balance at 1 January
2016 2,817 (1,540) 2,582 5 52,727 95,994 152,585
--------------------------- -------- -------- -------- ------------------ ------------- --------- --------
Total comprehensive
income for the
year - - - - - 15,722 15,722
Dividends - - - - - (21,694) (21,694)
Share buyback (66) - - 66 - (11,163) (11,163)
Share premium cancellation
net of transaction
costs - - - - (52,727) 52,703 (24)
Credit to equity
for share based
payments - - - - - 1,215 1,215
--------------------------- -------- -------- -------- ------------------ ------------- --------- --------
Balance at 31 December
2016 2,751 (1,540) 2,582 71 - 132,777 136,641
--------------------------- -------- -------- -------- ------------------ ------------- --------- --------
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Six months ended 30 June 2017
Six months
to 30 June
2017
Six
months Year
to 30 ended
June 31 December
2016 2016
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
------------------------------- ---- ------------ ------------ ------------
Net cash from operating
activities 7 3,795 10,197 23,385
------------------------------- ---- ------------ ------------ ------------
Investing activities
Interest received (3) 33 34
Proceeds on disposal of
property, plant and equipment 20 166 399
Purchases of property, plant
and equipment (1,134) (3,351) (6,296)
Purchases of intangibles (572) (276) (704)
------------------------------- ---- ------------ ------------ ------------
Net cash used in investing
activities (1,689) (3,428) (6,567)
------------------------------- ---- ------------ ------------ ------------
Financing activities
Dividends paid (908) (17,108) (21,694)
Cancellation of share premium
expenses - (24) (24)
Interest paid (40) - (80)
Share buy-back - (11,163) (11,163)
Net cash used in financing
activities (948) (28,295) (32,961)
------------------------------- ---- ------------ ------------ ------------
Net increase/(decrease)
in cash and cash equivalents 1,158 (21,526) (16,143)
Cash and cash equivalents
at beginning of year 9,476 25,619 25,619
------------------------------- ---- ------------ ------------ ------------
Cash and cash equivalents
at end of year 10,634 4,093 9,476
------------------------------- ---- ------------ ------------ ------------
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORT
1. General information
Foxtons Group plc (the "Company") is a company incorporated in the United Kingdom under the Companies Act 2006. The address of the Company's registered office is Building One, Chiswick Park, 566 Chiswick High Road, London W4 5BE. The principal activity of the Company and its subsidiaries (collectively, the "Group") is the provision of services to the residential property market in the UK.
These condensed financial statements are presented in pounds sterling which is the currency of the primary economic environment in which the Group operates.
The information for the year ended 31 December 2016 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
2. Significant accounting policies
Compliance with International Financial Reporting Standards
The annual financial statements of Foxtons Group plc are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as adopted by the European Union.
Basis of preparation
These condensed financial statements have been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for the assets.
Going concern
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, having considered the Company forecasts and projections, taking account of reasonably possible changes in trading performance and the current economic uncertainty. Accordingly, they have adopted the going concern basis in preparing the financial statements.
Accounting policies
The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2016, as described in those financial statements. These policies have been applied in preparing the condensed financial statements for the 6 months ended 30 June 2017 and 30 June 2016.
Seasonality
Seasonality of the business is discussed in the financial review section.
3. Business and geographical segments
Products and services from which reportable segments derive their revenue
Management has determined the operating segments based on the monthly management pack reviewed by the Directors, which is used to assess both the performance of the business and to allocate resources within the entity. Management has identified that the Directors are the chief operating decision maker in accordance with the requirements of IFRS 8 'Operating segments'.
The operating and reportable segments of the Group are (i) Sales, (ii) Lettings and (iii) Mortgage broking.
The Sales segment generates commission on sales of residential property. The Lettings segment earns fees from the letting and management of residential properties and income from interest earned on tenants' deposits. As these two segments operate out of the same premises and share support services, a significant proportion of costs have to be apportioned between the segments. The basis of apportionment used is headcount in each segment.
The Mortgage broking segment receives commission from the arrangement of mortgages and related products under contracts with financial service providers and receives administration fees from clients.
Adjusted EBITDA represents the profit before tax for the period earned by each segment before allocation of depreciation, amortisation, finance income, finance costs, exceptional items and share based payments. This is the measure reported to the Directors for the purpose of resource allocation and assessment of segment performance.
All revenue for the Group is generated from within the UK and there is no intra-group revenue.
Segment revenues and results
The following is an analysis of the Group's revenue and results by reportable segment for the half year ended 30 June 2017:
Mortgage
Sales Lettings Broking Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- -------- -------- ------------
Revenue 22,252 32,069 4,220 58,541
-------------------------------- -------- -------- -------- ------------
Adjusted EBITDA 1,452 4,926 763 7,141
Adjusted EBITDA margin 6.5% 15.4% 18.1% 12.2%
Depreciation (2,512)
Amortisation (51)
Profit on disposal of property,
plant
and equipment (230)
Finance income (3)
Finance cost (40)
Share based payment charge (534)
-------------------------------- -------- -------- -------- ------------
Profit before tax 3,771
-------------------------------- -------- -------- -------- ------------
The following is an analysis of the Group's revenue and results by reportable segment for the half year ended 30 June 2016
Mortgage
Sales Lettings Broking Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- -------- -------- ------------
Revenue 31,506 32,688 4,652 68,846
-------------------------------- -------- -------- -------- ------------
Adjusted EBITDA 5,263 7,084 795 13,142
Adjusted EBITDA margin 16.7% 21.7% 17.1% 19.1%
Depreciation (2,425)
Amortisation (51)
Profit on disposal of property,
plant
and equipment 57
Finance income 33
Finance costs -
Share based payment charge (289)
-------------------------------- -------- -------- -------- ------------
Profit before tax 10,467
-------------------------------- -------- -------- -------- ------------
Segment assets and liabilities, including depreciation, amortisation and additions to non-current assets, are not reported to the Directors on a segmental basis and are therefore not disclosed.
The following is an analysis of the Group's revenue and results by reportable segment for the year ended 31 December 2016:
Mortgage
Sales Lettings Broking Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------------- -------- -------- -------- ------------
Revenue 55,489 68,349 8,850 132,688
-------------------------------------- -------- -------- -------- ------------
Adjusted EBITDA 7,021 16,155 1,425 24,601
Adjusted EBITDA margin 12.7% 23.6% 16.1% 18.5%
Depreciation (4,949)
Amortisation (101)
Profit on disposal of property, plant
and equipment 113
Finance income 34
Finance cost (80)
Share based payment charge (854)
-------------------------------------- -------- -------- -------- ------------
Profit before tax 18,765
-------------------------------------- -------- -------- -------- ------------
4. Tax
Six months
to 30 June
2017
Six
months Year
to 30 ended
June 31 December
2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------------
Current tax
Current tax charge 872 2,100 3,834
Deferred tax (credit)/charge (441) (38) (791)
------------------------------------- ------------ ------------ ------------
Tax on profit on ordinary activities 431 2,062 3,043
------------------------------------- ------------ ------------ ------------
From 1 April 2017, the UK corporate tax rate fell to 19% and there will be a further reduction in the UK corporation tax rate to 17% from April 2020. The effective corporation tax rate for the year ended 31 December 2017 is likely to be circa 17% (year ended 31 December 2016: 19.7%) of the estimated taxable profit for the period.
5. Dividends
Six months
to 30 June
2017
Six
months Year
to 30 ended
June 31 December
2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------------
Amounts recognised as distributions
to equity holders in the period:
Final and special dividends year
ended 31 Dec 2015: 6.23p (2014:
5.16p) per ordinary share - 17,108 17,108
Interim and special dividends year
ended 31 Dec 2016: 1.67p (2015:
4.77p) per ordinary share - - 4,586
Final and special dividends year
ended 31 Dec 2016: 0.33p (2015:
6.23p) per ordinary share 908 - -
------------------------------------ ------------ ------------ ------------
908 17,108 21,694
------------------------------------ ------------ ------------ ------------
For 2017, the Board has declared an interim dividend of 0.43p per ordinary share (GBP1.2 million) to be paid in September 2017. An interim special dividend will not be paid. These financial statements do not reflect the dividend payable.
6. Earnings per share
Six months
to 30 June
2017
Six months Year ended
to 30 June 31 December
(unaudited) 2016 (unaudited) 2016 (audited)
GBP'000 GBP'000 GBP'000
------------------------------------
Earnings for the purposes of
basic and diluted earnings per
share being profit for the year 3,340 8,405 15,722
Number of shares
Weighted average number of ordinary
shares for the purposes of basic
earnings per share 274,710,237 275,724,200 275,161,239
Effect of dilutive potential
ordinary shares 525,366 653,008 786,455
------------------------------------ ------------ ----------------- ---------------
Weighted average number of ordinary
shares for the purpose of diluted
earnings per share 275,235,603 276,377,208 275,947,694
------------------------------------ ------------ ----------------- ---------------
Basic and diluted earnings per
share (in pence per share) 1.2 3.0 5.7
------------------------------------ ------------ ----------------- ---------------
7. Notes to the cash flow statement
Six months
to 30 June
2017
Six
months Year
to 30 ended
June 31 December
2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------------------- ------------ ------------ ------------
Operating profit 3,814 10,434 18,811
Adjustments for:
Depreciation of property, plant
and equipment 2,512 2,425 4,949
(Gain)/loss on disposal of property,
plant and equipment 230 (57) (113)
Amortisation of intangibles 51 51 101
Increase in provisions 18 11 91
Share based payment cost 535 289 854
Operating cash flows before movements
in working capital 7,159 13,153 24,693
Decrease/(Increase) in receivables (3,994) 412 4,819
Increase in payables 1,770 852 195
Less NI on share based payments (28) (35) -
Cash generated by operations 4,907 14,382 29,707
Income taxes paid (1,112) (4,185) (6,322)
-------------------------------------- ------------ ------------ ------------
Net cash from operating activities 3,795 10,197 23,385
-------------------------------------- ------------ ------------ ------------
Cash and cash equivalents
Six months
to 30 June
2017
Six
months Year
to 30 ended
June 31 December
2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
-------------------------- ------------ ------------ ------------
Cash and cash equivalents 10,634 4,093 9,476
-------------------------- ------------ ------------ ------------
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less, net of outstanding bank overdrafts. The carrying amount of these assets is approximately equal to their fair value. Cash and cash equivalents excludes client monies. See note 9.
8. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
Trading transactions
During the period, no Group companies entered into transactions with related parties who are not members of the Group.
9. Client monies
At 30 June 2017, client monies (all held by Foxtons Limited) in approved bank and building society accounts amounted to GBP90.5 million (30 June 2016: GBP87.5 million, 31 December 2016: GBP87.4 million). Neither this amount nor the matching liabilities to the clients concerned is included in the consolidated balance sheet. Foxtons Limited's terms and conditions provide that interest income on these deposits accrues to the Company.
Client funds are protected by the Financial Services Compensation Scheme ("FSCS") under which the government guarantees amounts up to GBP85,000 each. This guarantee applies to each individual client's deposit monies, not the sum total on deposit.
10. Operating cash conversion and net free cash flow
The Group utilises two key performance indicators for cash, namely:
-- Operating cash conversion; and -- Net free cash flow
Operating cash conversion is defined as the ratio of Adjusted operating cash to Adjusted EBITDA. Adjusted operating cash is defined as Adjusted EBITDA less the movement in working capital and net capital spend.
Six months
to 30 June
2017
Six
months Year
to 30 ended
June 31 December
2016 2016
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
------------------------------------------- ----- ------------ ------------ ------------
Adjusted EBITDA 3 7,141 13,142 24,601
------------------------------------------- ----- ------------ ------------ ------------
Decrease/(Increase) in receivables 7 (3,994) 412 4,819
Increase in payables 7 1,770 852 195
Increase in provisions 7 18 11 91
Purchases of property, plant and equipment (1,134) (3,351) (6,296)
Less NI on share based payment (28) (35) -
Purchases of intangibles (572) (276) (704)
Proceeds on disposal of property, plant
and equipment 20 166 399
------------------------------------------- ----- ------------ ------------ ------------
Adjusted operating cash 3,221 10,921 23,105
------------------------------------------- ----- ------------ ------------ ------------
Operating cash conversion 45.1% 83.1% 93.9%
------------------------------------------- ----- ------------ ------------ ------------
Net free cash flow is used as a measure of financial performance. It is defined as net cash from operating activities less net cash used in investing activities exclusive of exceptional items.
Six months
to 30
June 2017
Six
months Year
to 30 ended
June 31 December
2016 2016
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
----------------------------------- ----- ------------ ------------ ------------
Net cash from operating activities 7 3,795 10,197 23,385
----------------------------------- ----- ------------ ------------ ------------
Investing activities
Interest received (3) 33 34
Proceeds on disposal of property,
plant and equipment 20 166 399
Purchases of property, plant
and equipment(1) (1,134) (3,351) (6,296)
Purchases of intangibles (572) (276) (704)
----------------------------------- ----- ------------ ------------ ------------
Net cash used in investing
activities (1,689) (3,428) (6,567)
----------------------------------- ----- ------------ ------------ ------------
Net free cash flow 2,106 6,769 16,818
----------------------------------- ----- ------------ ------------ ------------
Adjusted EBITDA 3 7,141 13,142 24,601
----------------------------------- ----- ------------ ------------ ------------
Net free cash as a percentage
of Adjusted EBITDA 29.5% 51.5% 68.4%
----------------------------------- ----- ------------ ------------ ------------
(1) Capital spend primarily relates to fit out costs of new branch openings.
11. Financial instruments
The Group does not hold any financial instruments categorised as level 1, 2 or 3 as detailed by IFRS 13.
Management considers that the book value of financial assets and liabilities recorded at amortised cost and their fair value are approximately equal.
The book value and fair value of the Group's financial assets, liabilities and derivative financial instruments are as follows:
Six months
to 30
June 2017
Six
months Year
to 30 ended
June 31 December
2016 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
---------------------------- ------------ ------------ ------------
Cash and cash equivalents 10,634 4,093 9,476
---------------------------- ------------ ------------ ------------
Trade and other receivables 11,700 12,282 7,753
---------------------------- ------------ ------------ ------------
Trade and other payables (13,204) (11,723) (11,313)
---------------------------- ------------ ------------ ------------
INDEPENDENT REVIEW REPORT TO FOXTONS GROUP PLC
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and related notes 1 to 11. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
26 July 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR SEEFMMFWSEDW
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