TIDMFOXT
RNS Number : 3304H
Foxtons Group PLC
27 July 2023
Foxtons Group plc
INTERIM RESULTS FOR THE HALF YEARED 30 JUNE 2023
27 July 2023
Operational turnaround on track; significant market share gains
delivered, together with revenue and profit growth in a challenging
market.
Commenting on today's announcement, Guy Gittins, Group Chief
Executive said:
"Our continued focus on growing non-cyclical and recurring
revenues is working and has enabled us to deliver strong revenue
and profit growth despite a challenging sales market and investing
in recruiting more fee earners.
"In the first half of the year we cemented our position as
London's largest Lettings and Sales estate agency brand. We not
only had the largest market share of instruction volumes in London,
but we also grew instruction market share quicker than any of our
competitors as recently implemented operational upgrades yielded
significant gains.
"Our Lettings business continued its growth trajectory, with
double digit organic growth delivered in a competitive market. In
Sales, although revenues were down due to the September 2022
mini-budget, which impacted the under-offer pipeline at the start
of the year, we significantly grew market share, rebuilt the
pipeline at the fastest rate in the last 5 years and agreed a
similar level of new sales as last year, despite challenging market
conditions.
"Looking ahead, despite the uncertainty in the sales market, our
resilient and growing Lettings business combined with continuing
Sales market share gains and a strengthened sales culture, means we
are well positioned for the rest of the year."
H1 2023 H1 2022 Change
------------------------------- ----------- --------- -------
Continuing operations (1)
:
Revenue GBP70.9m GBP65.1m +9%
Adjusted operating profit(2) GBP6.8m GBP6.2m +10%
Profit before tax GBP6.1m GBP4.3m +42%
Adjusted earnings per share
(basic)(3) 1.4p 1.1p +27%
Earnings per share (basic) 1.4p 0.9p +56%
------------------------------- ----------- --------- -------
Total Group (4) :
Net free cash flow(5) (GBP4.3m) GBP2.8m n/a
Interim dividend per share 0.20p 0.20p -
------------------------------- ----------- --------- -------
Operational highlights:
-- Largest Lettings and Sales estate agency brand in London (6) .
-- Delivered significant instruction market share growth vs H1 2022 (7) .
-- 14% growth in organic Lettings revenue vs H1 2022, supported
by an increase in the cross-sell of property management services
(+21%) and securing longer tenancies.
-- 33% increase in new Sales agreed market share; 15% increase
in Sales exchange market share vs H1 2022 (8) .
-- 29% growth in Financial Services refinance volumes vs H1 2022.
Financial highlights:
-- Revenue up 9% to GBP70.9m; adjusted operating profit up 10%
to GBP6.8m. 73% of revenue from non-cyclical, recurring activities.
Strong Lettings growth more than offset the expected reduction in
H1 Sales volumes.
-- Lettings revenue up 26% to GBP49.8m, including GBP5.6m (+14%)
of organic growth and GBP2.7m of incremental contribution from
acquisitions. Operational upgrades delivered market share gains and
higher average revenue per transaction.
-- Atkinson McLeod (acquired March 2023) fully integrated and
synergies being realised. Prior acquisitions trading well and
delivering returns in line with expectations.
-- Sales revenue down 19% to GBP16.9m due to expected lower
exchange volumes, reflecting a lower under-offer pipeline at the
start of the year, partly mitigated by market share growth.
-- Financial Services revenue down 12% to GBP4.2m as higher
refinance volumes were offset by lower new purchase transaction
volumes and smaller loan sizes.
-- Adjusted operating profit up 10% to GBP6.8m with Lettings
operating profit growth more than offsetting a Sales operating
loss, including the cost of increasing fee earner headcount.
-- Net free cash outflow of GBP4.3m (2022: GBP2.8m inflow). Net
debt of GBP2.1m at 30 June 2023 (31 December 2022: net cash
GBP12.0m). This reflects GBP6.3m of acquisition spend, GBP9.0m
working capital outflow due to the introduction of shorter landlord
billing periods to improve competitiveness and portfolio retention
, and GBP3.2m of shareholder returns. Working capital flows are
expected to normalise across 2024.
-- RCF refinanced with existing lender. Committed facility
increased to GBP20m (from GBP5m) and extended to June 2026.
Provides increased strategic flexibility including working capital
support for organic Lettings growth and the Lettings portfolio
acquisition strategy.
-- Unchanged interim dividend of 0.20p per share in line with dividend policy.
-- Making good progress towards medium-term ambition to deliver
GBP25m-GBP30m of operating profit.
Implementing operational upgrades and progressing against
strategic priorities:
-- Data accessibility and usage: KPI reporting suite upgraded to
improve data visibility and new algorithms implemented across the
Group to better identify new lead opportunities. New data platform
implementation well progressed and expected to be operational in
H2.
-- Estate agency processes and culture: Overhauling our internal
culture has significantly improved cross-sell of Lettings property
management services and Financial Services ancillary products.
Process improvements delivered a 40% reduction in the time to
complete a lettings transaction and a 20% shorter time to complete
a sales transaction than the industry average. New end-to-end
digital lettings platform developed in the half and delivery in H2
is expected to drive further Lettings growth.
-- Headcount capacity and experience: 13% increase in fee
earning headcount drove record levels of sales viewings. 16%
improvement in retention rates boosts salesforce tenure, experience
and productivity.
-- Brand visibility and customer proposition: Appointed an
experienced marketing director to upgrade our marketing, increase
brand visibility and articulate the value of the Foxtons
proposition to customers.
Current trading and outlook:
Trading since the end of the first half is in line with our
expectations:
-- Lettings revenue in July 2023 performing in line with H1 2023 trends and delivering growth.
-- Sales volumes in July were ahead of the H1 2023 run-rate as
deals in our under-offer pipeline exchanged. However, new buyer
enquiries softened in July in reaction to mortgage rate rises.
Looking ahead to the remainder of the year:
-- In Lettings, operational improvements will continue to drive
revenue and market share growth. Little change expected to the
ongoing supply and demand imbalance, which will continue to
underpin rents. Rent increases are expected to moderate through
H2.
-- In Sales, we are exchanging deals in our under-offer
pipeline, and consequently expect our Q3 exchanges to outpace the
levels seen in H1 2023. The wider sales market continues to remain
challenging, primarily driven by higher inflation levels and
associated interest rates, which will continue to impact market
exchange volumes through H2 2023. However, should inflation
moderate, buyer demand may rebound strongly, underpinned by ongoing
demand for London residential property.
-- In Financial Services, refinancing is expected to remain
resilient while purchase mortgage volumes will track the sales
market.
-- Our large portfolio of non-cyclical and recurring revenues,
combined with revenue and market share growth driven by the
operational improvements we continue to deliver at pace, will limit
the impact of a weaker sales market and protect Group profitability
to a far larger extent than in previous years.
For further information, please contact:
Foxtons Group plc investor@foxtonsgroup.co.uk
Chris Hough, Chief Financial +44 20 7893 6261
Officer
Muhammad Patel, Investor Relations
TB Cardew Foxtons@tbcardew.com
Tom Allison / William Baldwin-Charles +44 7789 998 020 / + 44 7834
/ 524 833 /
Olivia Rosser + 44 7552 864 250
The Company will present a live webcast at 9:00am (GMT) for
analysts and investors. To access you will be required to
pre--register using the following link:
https://secure.emincote.com/client/foxtons/foxtons005 .
The presentation will also be broadcast via conference call. To
access you will be required to pre--register using the following li
nk:
https://secure.emincote.com/client/foxtons/foxtons005/vip_connect
(1) Both 2022 and 2023 results are presented on a continuing
operations basis and exclude the results of the D&G Sales
business (disposed of on 11 February 2022).
(2) Adjusted operating profit is defined as profit before tax
for the period before finance income, finance cost, other
gains/(losses) and adjusted items. Refer to Note 2 for a
reconciliation of the measure to statutory measures.
(3) Adjusted earnings per share is defined as earnings per share
excluding the impact of adjusted items and any significant
remeasurements of deferred tax balances as a result of UK corporate
tax rate changes. Refer to Note 7 for a reconciliation between
earnings/(loss) per share and adjusted earnings per share.
(4) Total Group includes results from both continuing operations
and discontinued operations. Refer to Note 5 for details of the
results from discontinued operations.
(5) Net free cash flow is defined as net cash from operating
activities less repayment of IFRS 16 lease liabilities and net cash
generated/used in investing activities, excluding the acquisition
of subsidiaries (net of any cash acquired), divestments and
purchases of investments.
(6) By instruction volumes. Source: TwentyCi
(7) New property instruction market share growth in Foxtons core
addressable markets. Source: TwentyCi
(8) Share of exchanges (H1 2023: 3.8%; H1 2022: 3.3%) and new
sales agreed in Foxtons core addressable markets. Source:
TwentyCi
About Foxtons
Founded in 1981, Foxtons is London's leading estate agency and
largest lettings agent, with a portfolio of over 27,000 tenancies.
The Group operates from a network of over 60 interconnected
branches, offering a range of residential property services across
three business segments: Lettings, Sales and Financial
Services.
The Group's strategy to accelerate growth is focused on
non-cyclical and recurring revenues from Lettings and Financial
Services refinance activities, supplemented by market share growth
in Sales. In order to drive organic growth, the Group is rebuilding
its competitive advantages, with a strong focus on leveraging data
and technology; investing in people and culture; and reinvigorating
the Foxtons brand.
By rebuilding Foxtons' estate agency DNA and returning the
business to its position as London's go-to estate agent, the Group
aims deliver significant profit growth and deliver value for
shareholders.
-- Lettings organic growth : Focus on winning new property
instructions, speed to market and high quality landlord service to
drive revenue growth.
-- Lettings acquisitive growth : Acquire, integrate and service
high quality lettings portfolios.
-- Sales market share growth: Reinvigorating the Foxtons brand
and increasing sales headcount to grow addressable market
share.
-- Financial Services revenue growth : Increasing adviser
headcount, improving productivity and cross-sell to drive revenue
growth.
PERFORMANCE AT A GLANCE
Half year ended 30 June 2023 2022 Change
---------------------------------------- ---------- ---------- --------
Income statement (from continuing operations (1) )
--------------------------------------------------------------------------
Revenue GBP70.9m GBP65.1m +9%
Operating profit GBP6.8m GBP5.3m +28%
Adjusted operating profit(2) GBP6.8m GBP6.2m +10%
Adjusted operating profit
margin(2) 9.6% 9.5% +11 bps
Profit before tax GBP6.1m GBP4.3m +42%
Earnings per share (from continuing operations (1) )
--------------------------------------------------------------------------
Basic earnings per share 1.4p 0.9p +56%
Adjusted basic earnings per
share(2) 1.4p 1.1p +27%
Dividends
---------------------------------------- ---------- ---------- --------
Interim dividend per share 0.20p 0.20p -
Net cash and net free cash
flow
---------------------------------------- ---------- ---------- --------
Net (debt)/cash(2) (GBP2.1m) GBP11.6m n/a
N et cash from operating activities(3) GBP3.2m GBP9.6m (67%)
Net free cash flow(2,3) (GBP4.3m) GBP2.8m n/a
Segmental metrics (from continuing operations (1) )
--------------------------------------------------------------------------
Lettings revenue GBP49.8m GBP39.4m +26%
Lettings volumes 9,361 9,110 +3%
Average revenue per Lettings
transaction GBP5,316 GBP4,330 +23%
Sales revenue GBP16.9m GBP20.8m (19%)
Sales volumes 1,293 1,528 (15%)
Average revenue per Sales
transaction GBP13,084 GBP13,627 (4%)
Financial Services revenue GBP4.2m GBP4.8m (12%)
Financial Services volumes 2,411 2,334 +3%
Average revenue per Financial
Services transaction GBP1,755 GBP2,056 (15%)
(1) Both 2022 and 2023 results are presented on a continuing
operations basis and exclude the results of the D&G Sales
business (disposed of on 11 February 2022).
(2) These measures are APMs used by the Group and are defined,
and purpose explained within Note 15.
(3) Net cash from operating activities and net free cash flow
includes continuing and discontinued operations.
CHAIRMAN'S STATEMENT
We have experienced a positive start to the year, following the
significant changes Foxtons underwent in 2022. Our Chief Executive,
Guy Gittins, started in September last year and launched a review
of the business which resulted in him identifying a number of
operational improvements that needed to be made to rebuild Foxtons'
competitive advantage. These operational improvements are a major
focus for the business and are being delivered at speed. While
there remains significant work to do to fulfil the business'
potential, I am extremely encouraged by the progress the new
management team has made in such a short period.
At the same time as implementing the operational improvements we
have refocused our strategic priorities, with an emphasis on
non-cyclical and recurring revenue streams. In March, Guy set out a
number of ambitions for the business to achieve in the medium-term.
At a Group level, we aim to deliver GBP25m-GBP30m of operating
profit, underpinned by: 3%-5% average organic growth in the
Lettings business as well as attractive returns from acquisitions;
by increasing market share to 4.5% in Sales; and achieving revenue
growth of 7%-10% in Financial Services.
Our Lettings business delivered another six months of strong
performance, which highlights the strength of non-cyclical revenue
streams and the resilience they provide the business. While both
the Sales and Financial Services businesses recorded lower
revenues, this was due to external factors and masks the fact that
we have outperformed the market. Despite the challenging sales
market and the additional costs incurred through investing in fee
earner headcount, we grew both our revenues and profits in the
half.
Financials
Revenue increased by 9% to GBP70.9m, driven largely by Lettings
which contributed GBP49.8m, an increase of 26%. Adjusted operating
profit increased by 10% to GBP6.8m and profit before tax increased
by 42% to GBP6.1m.
Within Lettings, we introduced shorter landlord billing periods
to improve the competitiveness of our Lettings proposition and
support the retention and organic growth of the portfolio over the
medium-term. As Lettings revenue outpaced cash collections, a
working capital outflow resulted in a net debt position of GBP2.1m
at the period end. Working capital flows are expected to normalise
across 2024.
In June we refinanced our revolving credit facility, which now
provides GBP20m of committed borrowing capacity, up from GBP5m. The
facility will provide increased strategic flexibility, including
further working capital support to drive organic Lettings growth
and delivery against the Lettings portfolio acquisition
strategy.
The Board has declared an interim dividend of 0.2p per share,
under our policy of returning 35% to 40% of profit after tax in
ordinary dividends. The Board will continue to keep share buybacks
under review in the context of other potential uses of capital.
Outlook
The business has made good progress in a short period of time.
The operational turnaround is already starting to show results and
Group earnings are underpinned by high levels of recurring
revenues. Whilst the near term outlook for the sales market remains
challenging, we are making good progress towards our medium-term
growth ambitions.
Nigel Rich CBE
Chairman
26 July 2023
CHIEF EXECUTIVE'S REVIEW
The business performed well in challenging markets, primarily
due to our resilient Lettings business delivering good growth, and
we took significant steps to implement the critical operational
improvements required for Foxtons to be London's go-to estate
agent.
In the half we cemented our position as London's largest
Lettings and Sales agency brand. We not only have the largest
market share of instruction volumes in London, but we also grew
instruction market share quicker than any of our competitors as
operational upgrades yielded significant gains. Property
instructions are the lifeblood of estate agency and growth here
supported the delivery of higher organic revenues in Lettings. In
Sales, higher instruction levels drove record buyer demand and
supported a significant increase in our market share of sales
exchanges and new sales agreed. However, due to a lower under-offer
pipeline at the start of the year, and significant increases in
mortgage rates, these improvements will take time to be reflected
in revenue.
We still have work to do to turn Foxtons into the force it can
be, but we are making good progress towards our ambition to deliver
GBP25m-GBP30m of operating profit in the medium-term.
Financial highlights
Revenue for the half was up 9% to GBP70.9m, adjusted operating
profit was up 10% at GBP6.8m and profit before tax was up 42% at
GBP6.1m.
In Lettings, revenue was up 26% to GBP49.8m, with 14% organic
growth underpinned by operational improvements supporting the
delivery of both market share gains and higher average revenue per
transaction as the business focused on improving deal conversion
rates, securing longer tenancy terms, and improving property
management cross-sell, alongside higher rents. The Atkinson McLeod
acquisition, announced on 6 March 2023, is fully integrated and we
are seeing the benefits of operational and financial synergies.
As we have previously noted, the mini-budget in September last
year severely disrupted the sales market, and when combined with
rising mortgage rates in the half, revenues were down 19% to
GBP16.9m. The decrease in revenue was partly mitigated as the
business outperformed the wider market and delivered growth in the
share of exchanged deals in H1. Significant growth in our share of
new sales agreed in H1 meant we were able to rebuild our
under-offer pipeline at the fastest rate in the last 5 years as we
agreed a similar level of sales in the period versus the prior
year.
Financial Services revenue was down marginally at GBP4.2m, as
the decline in the sales market and rising interest rates affected
the number of purchase volumes, partly mitigated by growth in
refinancing volumes supported by additional adviser headcount.
Net debt at the period end was GBP2.1m, with the net debt
position reflecting a working capital outflow as we introduce
shorter landlord billing periods to improve the competitiveness of
our Lettings proposition and support the retention and organic
growth of the portfolio over the medium-term.
Lettings market update
Demand in Lettings remains strong and rents continued to rise in
the first half, as supply remains constrained, although the rate of
rent increases moderated as the half progressed.
The continued growth in the imbalance between supply and demand
is at the highest levels we have ever seen. This continues to drive
rents and is making it more difficult for renters to find
affordable accommodation in London. We have written to the
Secretary of State for the Department of Levelling Up, Housing
& Communities highlighting the challenges private landlords
face and how this will negatively impact renters, alongside
suggesting ways of addressing the supply side issue. This is an
increasingly serious issue and we will continue to seek ways to
engage with the Government to help ensure London has a sustainable
rental market.
Sales market update
We have highlighted the impact of the mini-budget on a number of
occasions, and so the H1 slow-down in Sales exchange volumes was
not a surprise. The combination of higher mortgage costs, the
inflation driven cost of living issue, and the withdrawal of Help
to Buy on new homes all combined to cause a drag on the sales
market. Looking at new sales agreed in the first six months, the
market remained challenging with new sales agreed volumes down
c.19% versus the prior year. More positively, demand for London
property remains robust and there is still a tail of Covid pent-up
demand from changing lifestyles affecting property
requirements.
The operational upgrades we have implemented meant Foxtons was
able to capitalise on these conditions and outperform the
market.
Operational turnaround on track
In March 2022, we identified key operational upgrades needed to
rebuild our competitive advantages in four core areas: data
accessibility and usage; estate agency processes and culture;
headcount capacity and experience; and brand visibility and
customer proposition.
Data accessibility and usage
We have the largest data set on London properties, in both sales
and lettings, but we have not been making it work to our advantage.
We have made significant progress in overhauling our data
architecture so that we can become a data-led company. As part of
the overhaul, we have introduced a new KPI reporting suite to
significantly improve data visibility and embed a high-performance
culture through managing our employees against new KPI measures. In
addition, we have introduced new algorithms to better identify and
convert new leads from our unrivalled database.
Estate agency processes and culture
We are also rebuilding the estate agency culture and investing
in our talented workforce. We have made good progress here, through
re-empowering our agents and reinstating and significantly
enhancing our industry leading training programme. In the half our
Learning and Development team delivered over 1,100 hours of
in-person training to our workforce, a tenfold increase in the
training time invested in H1 2022. This training enables our new
recruits to be productive more quickly and supports the enhanced
culture we are embedding across the Group.
And these changes to culture are already driving behavioural
changes. The salesforce significantly enhanced its self-generation
of property instruction opportunities, supporting an 8% Lettings
and 43% Sales instruction market share growth in H1 versus the
prior year. Moreover, better employee management and
incentivisation delivered a 21% increase in cross-selling of our
higher value Lettings property management service and good growth
in the cross-sell of ancillary products in Financial Services.
Finally, we have made significant progress on overhauling our
estate agency processes, aided by our in-house operating system and
development teams. In the half we delivered a 40% reduction in the
time to complete a lettings transaction and a 20% shorter time to
complete a sales transaction than the industry average.
Innovation is a key element in Foxtons' DNA, and we have spent
much time identifying and developing new functionalities to
modernise the lettings process for landlords and tenants. We are
well progressed with the delivery of a new digital end-to-end
rental solution, which is an industry first, and I look forward to
providing an update later in the year. While we remain one of the
most technologically advanced agents in the market, we are yet to
fully exploit our rich data sets and technology capability; we
believe this represents untapped value and will allow us to be a
leader in embracing new technologies, such as AI.
Headcount capacity and experience
Following my operational review, it was clear that the Company
was under-resourced in fee earning headcount, and so was unable to
take advantage of all available market opportunities. Addressing
this was a key priority. We have increased headcount by 16% across
Lettings and Sales fee earners and increased Financial Services
adviser headcount by 21%. Typically, there is a 12-month lag
between hiring a new fee earner or financial adviser and seeing the
benefits come through. Encouragingly, the additional resource is
already delivering growth with a record number of Sales viewings
completed in H1 2023 and growth in refinancing volumes within
Financial Services.
Another area of focus was reducing the unacceptably high levels
of staff attrition. Overall staff retention rates increased by 16%
in H1, which boosts staff tenure, experience and productivity, with
consequential benefit to profit.
Brand visibility and customer proposition
Finally, we are reinvigorating our brand - at the end of last
year we reintroduced the iconic Foxtons-branded Minis, and we have
now appointed a new marketing director, to focus on growing our
market share by overhauling our approach to marketing.
I have been very encouraged by the reaction of my colleagues to
these changes we are implementing. They have embraced them and that
is beginning to feed through into our operational and financial
results. We have good quality people across the organisation with
deep experience of our industry which is critical for our future
growth.
Delivering our strategic priorities
We have a focused set of strategic priorities to deliver revenue
and profit growth and meet our medium-term operating profit
ambition. Emphasis is on growing non-cyclical and recurring revenue
streams in Lettings and Financial Services to enhance the Group's
earnings resilience, alongside returning Sales to profitability in
the longer term.
In March, we set medium-term targets that will demonstrate our
success in delivering these strategic priorities. Although we are
only six months into a multi-year programme, we are making good
progress:
-- Organic Lettings growth : achieved 14% organic revenue growth
in the half, against our ambition of 3%-5%.
-- Lettings acquisitions growth : completed the acquisition of
Atkinson McLeod in March 2023, rapidly integrating it into the
Foxtons infrastructure to deliver synergies. Prior acquisitions are
trading well and delivering in line with our expectations of 20%+
returns on capital.
-- Sales market share growth : delivered 15% growth in H1 to
grow market share to 3.8% (H1 2022: 3.3%) as we progress delivery
against our medium-term ambition of 4.5% market share in our core
markets. In addition, delivered 33% growth in market share of new
sales agreed over the period to support the significant rebuild in
the under-offer pipeline in the half.
-- Financial Services growth : increased headcount and
operational upgrades delivered a 29% increase in refinance volumes
and higher levels of ancillary product cross-sell to mostly
mitigate the challenging market. We are building well to deliver on
our ambition of 7%-10% revenue growth.
Current trading and outlook
Trading since the end of the first half is in line with our
expectations. July 2023 Lettings revenue is performing in line with
the trends seen H1 2023, and we continue to deliver strong organic
growth. Sales volumes in July were ahead of the H1 2023 run-rate as
we exchanged deals in our under-offer pipeline. However, new buyer
enquiries softened in July reflecting challenges in the mortgage
market.
Looking ahead to the remainder of the year, in Lettings, the
operational improvements implemented will continue to drive revenue
and market share growth. We see little change to the supply and
demand imbalance which will continue to underpin rents, but we do
expect rent increases to moderate through H2.
In Sales, we are exchanging deals in our under-offer pipeline,
and consequently expect our Q3 exchanges to outpace the levels seen
in H1 2023. The wider sales market continues to remain challenging,
primarily driven by higher inflation levels and associated interest
rates, which will continue to impact market exchange volumes
through H2 2023. Continuing to win market share should mitigate
some of these market headwinds. However, should inflation moderate,
buyer demand may rebound strongly, underpinned by ongoing demand
for London residential property.
And finally in Financial Services, we expect mortgage
refinancing to remain resilient while new mortgage volumes will
track the sales market.
In summary, our large portfolio of non-cyclical and recurring
revenues, combined with revenue and market share growth driven by
the operational improvements we continue to implement at pace, will
limit the impact of a weaker sales market and protect Group
profitability to a far larger extent than in previous years.
Guy Gittins
Chief Executive Officer
26 July 2023
Financial review
H1 2023 H1 2022 Change
GBPm GBPm
---------------------------------------- ------- ------- ---------
Revenue 70.9 65.1 +9%
Contribution (1) 44.5 41.9 +6%
Contribution margin (1) 62.7% 64.3% (160 bps)
Operating profit 6.8 5.3 +28%
Adjusted operating profit (1) 6.8 6.2 +10%
Adjusted operating profit margin (1) 9.6% 9.5% +11 bps
Profit before tax 6.1 4.3 +42%
Profit after tax 4.1 2.9 +41%
Adjusted earnings per share (basic) 1.4p 1.1p +27%
Earnings per share (basic) 1.4p 0.9p +56%
---------------------------------------- ------- ------- ---------
Net free cash flow and net cash
Net free cash flow (1,2) (4.3) 2.8 n/a
(Net debt)/Net cash as at 30 June (1) (2.1) 11.6 n/a
---------------------------------------- ------- ------- ---------
Dividends
Interim dividend per share 0.20p 0.20p -
---------------------------------------- ------- ------- ---------
Financial overview - highlights
1 APMs are defined, purpose explained and reconciled to
statutory measures within Note 2 of the financial statements.
2 Net free cash flow is from continuing and discontinued
operations.
Notes:
- All results and measures within the financial review are
presented on a continuing operations basis unless otherwise
stated.
- Values in tables may have been rounded and totals may
therefore not be the sum of presented values in all instances.
Revenue increased by 9% to GBP 70.9 m (2022: GBP65.1m), with
Lettings revenue up 26% , Sales revenue down 19% and Financial
Services revenue down 12% . Adjusted operating profit increased by
GBP 0.6 m to GBP 6.8 m (2022: GBP6.2m), underpinned by good growth
in Lettings profitability. Profit before tax was GBP 6.1 m (2022:
GBP4.3m) and profit after tax was GBP 4.1 m (2022: GBP2.9m).
Net free cash outflow of GBP4.3m (2022: GBP2.8m inflow). At 30
June 2023, the net debt position of GBP2.1m (31 December 2022:
GBP12.0m net cash) reflected GBP6.3m of acquisition spend, a
GBP9.0m working capital outflow and GBP3.2m of shareholder
returns.
The working capital outflow was driven by the introduction of
shorter billing periods for landlords opting to agree to longer
tenancy terms . This initiative has been successful in driving an
increase in average tenancy lengths , which under the Lettings
revenue recognition policy, also resulted in a greater proportion
of revenue being recognised at the start of the affected tenancies.
With Lettings revenue recognition outpacing cash collections, the
H1 working capital outflow increased to GBP9.0m (2022: GBP2.1m
outflow). This billing initiative improves the competitiveness of
our Lettings proposition for landlords and supports the retention
and organic growth of the Lettings portfolio over the
medium-term.
In June, the Group's revolving credit facility (RCF) was
refinanced, increasing the size of the committed facility from
GBP5m to GBP20m and extending the facility to June 2026. At 30 June
2023, GBP5m of the RCF was drawn. The new facility provides
increased strategic flexibility, including working capital support
to drive organic Lettings growth and delivery against the Lettings
portfolio acquisition strategy.
Revenue
H1 2023 H1 2022 Change
GBPm GBPm
------------------- ------- ------- ------
Lettings 49.8 39.4 +26%
Sales 16.9 20.8 (19%)
Financial Services 4.2 4.8 (13%)
------------------- ------- ------- ------
Total 70.9 65.1 +9%
------------------- ------- ------- ------
The Group consists of three operating segments: Lettings, Sales
and Financial Services. In the period, Lettings represented 70% of
total revenue (2022: 61%), Sales 24% of total revenue (2022: 32%)
and Financial Services 6% of total revenue (2022: 7%).
Lettings revenue
Lettings revenue increased by 26% to GBP 49.8 m (2022:
GBP39.4m), reflecting a 23% increase in average revenue per
transaction and a 3% increase in transactional volumes. Revenue
growth included organic growth of GBP5.6m (year-on-year growth of
14%), GBP2.7m incremental revenue contribution from acquisitions
and GBP2.0m growth in interest earned on client monies.
Organic revenue growth of 14% was driven by a number of key
drivers, including:
-- An operational focus to secure longer tenancy terms, which
under the Lettings revenue recognition policy, resulted in a
greater proportion of revenue being recognised at the start of the
affected tenancies.
-- Continued focus on increasing the cross-sell of our higher
value property management service, increasing the penetration of
new deals under management by 21% year-on-year.
-- 12% year-on-year increase in average rents, reflecting a
rental market where demand continues to outstrip supply driving
competition for rental properties.
The GBP2.7m of incremental inorganic revenue growth reflects the
incremental revenue from the two acquisitions completed in May 2022
and the March 2023 acquisition of Atkinson McLeod. In June 2023,
the Atkinson McLeod lettings portfolio was fully integrated into
the Foxtons operating platform and branch network. GBP0.1m of
closure costs relating to the acquired branches have been
recognised as an adjusted item in the period (as noted further
below).
Sales revenue
Sales revenue decreased by 19 % to GBP 16.9 m (2022: GBP20.8m),
with the decrease mainly driven by a 15% decrease in Sales exchange
volumes compared to H1 2022. Average revenue per transaction was 4%
lower reflecting a 2% decrease in the average price of properties
sold as sellers adjusted prices to match prevailing market
conditions, whilst commission rates remained robust at 2.2%.
The reduction in exchange volumes reflects a lower under-offer
pipeline at the start of the year, a consequence of reduced buyer
activity following the September 2022 mini-budget. Over the period,
despite challenging market conditions, significant progress has
been made in rebuilding the under-offer pipeline, with sales
exchanges expected to accelerate in Q3.
Financial Services revenue
Financial Services revenue decreased by 12% to GBP4.2m (2022:
GBP4.8m), reflecting a 3% increase in volumes and a 15% decrease in
average revenue per transaction. Lower average revenue per
transactions was driven by lower average loan sizes, reduced new
purchase volumes and an increase in lower value product transfers
within the refinance business.
Contribution and contribution margin
H1 2023 H1 2022
------------------- ------------ ------------
GBPm margin GBPm margin
------------------- ---- ------ ---- ------
Lettings 37.4 75.1% 28.9 73.4%
Sales 5.5 32.7% 10.9 52.2%
Financial Services 1.6 37.2% 2.1 42.8%
------------------- ---- ------ ---- ------
Total 44.5 62.7% 41.9 64.3%
------------------- ---- ------ ---- ------
Group contribution, defined as revenue less direct salary costs
of front office staff and bad debt charges, increased to GBP44.5m
(2022: GBP41.9m). Contribution margin for the period was 62.7%
(2022: 64.3%). Lettings contribution increased by 29%, reflecting
26% of revenue growth and the inherent operating leverage in the
business model. Contribution across both Sales and Financial
Services reduced due to a reduction in new purchase volumes and
additional costs through the investment in fee earner headcount.
Fee earner productivity was robust, with the respective pipelines
of business being rebuilt effectively over H1.
Adjusted operating profit/(LOSS) and adjusted operating
profit/(LOSS) margin
H1 2023 H1 2022
------------------- -------------- -------------
GBPm margin GBPm Margin
------------------- ----- ------- ----- ------
Lettings 14.1 28.4% 7.3 18.4%
Sales (6.4) (37.6%) (0.7) (3.2%)
Financial Services 0.2 4.7% 0.8 17.1%
Corporate costs (1.2) n/a (1.2) n/a
------------------- ----- ------- ----- ------
Total 6.8 9.6% 6.2 9.5%
------------------- ----- ------- ----- ------
Adjusted operating profit for the period was GBP 6.8 m (2022:
GBP6.2m) and adjusted operating margin was 9.6% (2022: 9.5%).
Consistent with prior periods, for the purposes of segmental
reporting, shared costs relating to the estate agency businesses
are allocated between Lettings and Sales with reference to relevant
cost drivers, such as front office headcount in the respective
businesses. Corporate costs are not allocated to the operating
segments and are presented separately.
Lettings adjusted operating profit increased by GBP6.8m to
GBP14.1m and underpinned Group profitability. In contrast, Sales
adjusted operating loss increased by GBP5.7m to a loss of GBP6.4m,
with the reduction due to the fall in exchange volumes and
investment in headcount as previously mentioned.
Adjusted operating profit of GBP 6.8 m (2022: GBP6.2m) is after
charging GBP 64.1 m (2022: GBP58.9m) of costs, including the
following:
-- Direct operating costs of GBP 26.5 m (2022: GBP23.2m)
relating to direct salary costs of front office staff and bad debt
charges.
-- Other operating costs, excluding GBPnil (2022: GBP0.9m) of
adjusted items, of GBP 37.6 m (2022: GBP35.7m), which includes the
following charges:
- Depreciation of GBP6.4m (2022: GBP6.0m).
- Amortisation of GBP 0.8 m (2022: GBP0.7m), including GBP0.6m
(2022: GBP0.4m) relating to acquired intangibles.
- Share-based payment charges of GBP 0.5m (2022: GBP0.6m).
-- Adjusted items of net GBPnil (2022: GBP0.9m) comprise of:
GBP0.1m property related credits (2022: GBP0.1m), GBP0.1 m
transaction related costs (2022: GBP0.2m) and GBPnil reorganisation
costs (2022: GBP0.7m).
Profit before tax
H1 2023 H1 2022
GBPm GBPm
----------------------------------------- ------- -------
Adjusted operating profit 6.8 6.2
Less: adjusted items - (0.9)
----------------------------------------- ------- -------
Operating profit 6.8 5.3
Less: Net finance costs and other losses (0.8) (1.0)
Profit before tax 6.1 4.3
----------------------------------------- ------- -------
Profit before tax has increased by 42% to GBP 6.1 m (2022:
GBP4.3m) after charging GBP 0.8m (2022: GBP1.0m) net of finance
costs, primarily relating to IFRS 16 lease interest, and other
losses.
profit after tax
H1 2023 H1 2022
GBPm GBPm
-------------------------------------------- ------- -------
Profit before tax 6.1 4.3
Less: current tax charge (1.9) (0.7)
Less: deferred tax charge (other movements) - (0.7)
-------------------------------------------- ------- -------
Profit after tax 4.1 2.9
-------------------------------------------- ------- -------
The profit after tax of GBP 4.1 m (2022: GBP2.9m) is after a
total tax charge of GBP 1.9 m (2022: GBP1.4m), of which GBP nil
(2022: GBP0.7m) relates to non-cash deferred tax accounting charges
and GBP 1.9 m (2022: GBP0.7m) relates to current tax.
The effective tax rate for the period was 32.0% (2022: 32.4%),
which compares to the statutory corporation tax rate of 25% (2022:
19.0%). The 2023 effective tax rate is higher than the statutory
corporation tax rate due to non-deductible expenses.
The Group's net deferred tax liability at 30 June 2023 totalled
GBP 26.1 m (2022: GBP26.1m), which includes GBP 27.6 m (2022:
GBP27.2m) of deferred tax liabilities relating to the Group's
intangible assets, offset by deferred tax assets of GBP 1.6 m
(2022: GBP1.0m). The deferred tax assets relate to tax losses
brought forward which are expected to be recovered through future
taxable profits.
The Group has a low-risk approach to its tax affairs and all
business activities are 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. The Group always sets out to be transparent,
open and honest in its dealings with tax authorities. The Group
received GBP0.3m of tax refunds during the year (2022: GBPnil).
Earnings per share
H1 2023 H1 2022
GBPm GBPm
----------------------------------------------------------------------------------------- ----------- -----------
Profit after tax 4.1 2.9
Add back: adjusted items (net of tax) 0.1 0.7
Adjusted earnings for the purposes of adjusted earnings per share 4.2 3.6
------------------------------------------------------------------------------------------ ----------- -----------
Weighted average number of ordinary shares for the purposes of basic earnings per share 302,815,955 317,888,904
------------------------------------------------------------------------------------------ ----------- -----------
Weighted average number of ordinary shares for the purpose of diluted earnings per share 11,723,508 2,633,344
------------------------------------------------------------------------------------------ ----------- -----------
Earnings per share (basic) 1.4p 0.9p
Earnings per share (diluted) 1.3p 0.9p
Adjusted earnings per share (basic) 1.4p 1.1p
Adjusted earnings per share (diluted) 1.3p 1.1p
------------------------------------------------------------------------------------------ ----------- -----------
Earnings per share (basic) was 1.4p (2022: 0.9p) and earnings
per share (diluted) was 1.3p (2022: 0.9p). On an adjusted basis,
earnings per share (basic) was 1.4p (2022: 1.1p) and earnings per
share (diluted) was 1.3p (2022: 1.1p).
Net FREE cash flow and net cash
H1 2023 H1 2022
From continuing and discontinued operations GBPm GBPm
-------------------------------------------------------- ------- -------
Operating cash flow before movements in working capital 13.3 11.8
Working capital outflow (9.0) (2.1)
Income taxes paid (1.1) (0.1)
-------------------------------------------------------- ------- -------
Net cash from operating activities 3.2 9.6
-------------------------------------------------------- ------- -------
Repayment of IFRS 16 lease liabilities (6.3) (5.9)
Net cash used in investing activities(1) (1.3) (0.9)
-------------------------------------------------------- ------- -------
Net free cash flow (4.3) 2.8
-------------------------------------------------------- ------- -------
(1) Excludes GBP6.3m (2022: GBP8.5m) of cash outflows relating
to the acquisition of subsidiaries (net of any cash acquired),
GBPnil (2022: GBP3.7m) relating to the disposal of discontinued
operations (net of cash disposed) and GBPnil related to the
purchase of investments (2022: GBP0.4 m).
The GBP 9.0m working capital outflow (2022: GBP2.1m) is
reflective of Lettings revenue recognition outpacing cash
collections as a result of the previously mentioned introduction of
shorter billing periods for landlords opting to agree to longer
tenancy terms. Working capital flows are expected to normalise
across 2024 as the portfolio continues to transition to shorter
billing periods.
Net free cash flow, from continuing and discontinued operations,
was a GBP 4.3 m outflow (2022: GBP2.8m inflow), with the reduction
due to the Lettings working capital outflow previously noted.
Net debt at 30 June 2023 was GBP 2.1 m (30 June 2022: GBP11.6m
net cash) with GBP5.1 m of external borrowings (30 June 2022:
GBP0.1m).
Acquisitions
Atkinson McLeod - acquired 3 March 2023
On 3 March 2023, the Group acquired the entire issued capital of
Atkinson McLeod. The acquisition has a strong lettings business
that generates 90% of revenue across c.1,100 tenancies. Gross
purchase consideration was GBP8.2m, with GBP7.5m paid to date and
GBP0.7m deferred for a period of 12 months post completion.
Acquired net assets were provisionally fair valued at the date
of acquisition and include GBP2.6m of customer contracts and
relationships and GBP5.6m of acquired goodwill. The acquisition
contributed GBP0.9m of revenue and GBP0.3m of adjusted operating
profit in the first four months of ownership, and prior to
integration synergies being realised. Refer to Note 11 for further
details.
Gordon & Co and Stones Residential - acquired 25 May
2022
On 25 May 2022, the Group acquired the entire issued share
capital of two estate agents, Gordon & Co, and Stones
Residential. Gross purchase consideration for both businesses,
after adjustments for deferred consideration, is estimated to be
GBP9.7m. GBP8.4m of the gross purchase consideration was paid at 30
June 2023, with an estimated GBP1.3m deferred consideration payable
in H2 2023.
Discontinued operations
H1 2023 H1 2022
GBPm GBPm
------------------------ -------- -------
Revenue - 0.6
Adjusted operating loss - (0.6)
Less: adjusted items - 0.2
------------------------ -------- -------
Operating loss - (0.4)
Loss after tax - (0.3)
------------------------ -------- -------
In H1 2022, discontinued operations related to D&G Sales,
which was acquired alongside D&G Lettings and disposed of on 11
February 2022. In 2022, on a total Group basis, which includes both
continuing and discontinued operations, revenue was GBP65.6m and
adjusted operating profit was GBP5.6m.
In H1 2023, there were no discontinued operations.
Other balance sheet positions
At 30 June 2023 the significant balance sheet positions
were:
-- Goodwill of GBP31.7m (2022: GBP26.0m) and other intangible
assets of GBP111.8m (2022: GBP109.5m), with the increase in
goodwill and other intangible assets due to the acquisition of
Atkinson McLeod which contributed GBP5.6m of goodwill and GBP2.6m
of customer contracts and relationships.
-- Trade and other receivables of GBP18.6m (2022: GBP18.9m) and
trade and other payables of GBP18.3m (2022: GBP18.2m).
-- Total contract assets of GBP13.3m (2022: GBP5.5m) and total
contract liabilities of GBP10m (2022: GBP8.4 m), with the increase
in contract assets being driven by a focus on securing longer
tenancy terms, and the introduction of shorter billing periods for
landlords opting to agree to longer tenancy terms. Increase in
contract liabilities was mainly driven by the acquired Atkinson
McLeod's contract liabilities of GBP0.9m.
-- Lease liabilities of GBP45.8m (2022: GBP46.9m) and
right-of-use assets of GBP42.7m (2022: GBP42.2m).
-- Intangible assets under construction of GBP1.4m (2022: GBP0.2m).
Capital allocation and Dividends
The Board has declared an interim dividend of 0.2p per share
(2022: interim dividend of 0.2p per share). Payment will be made on
12 September 2023 to shareholders on the register at close of
business on 4 August 2023. The shares will be quoted ex-dividend on
3 August 2023. The Company operates a Dividend Reinvestment Plan
("DRIP"), which is managed by its registrar, Link Group. For
shareholders who wish to receive their dividend in the form of
shares, the deadline to elect for the DRIP is 18 August 2023.
Capital returns
The GBP3m share buyback programme announced in November 2022 was
completed in May 2023. In the period, GBP1.1m (2022: GBP0.9m) of
shares, or 2,847,821 shares (2022: 14,829,261 shares), were bought
back to return excess capital to shareholders. The Board will keep
the continuation of the share buyback under review bearing in mind
our other capital needs and potential returns available on lettings
acquisitions. Since 2020, a total of GBP12.0m of shares (28,513,694
shares) have been bought back.
Post balance sheet events
There are no post balance sheet events to report.
Related partY transactions
Related party transactions are disclosed in Note 13 of the
condensed financial statements. There have been no material changes
to the related party transactions described in the 2022 Annual
Report and Accounts.
Treasury policies, objectives & revolving credit
Facility
The Group's treasury policy is designed to reduce financial
risk. Financial risk for the Group is low as the Group is in a net
cash position, is entirely UK based with no foreign currency risks
and surplus cash balances are held with major UK based banks. As a
consequence, the Group has not had to enter into any financial
instruments to protect against risk.
In the period, the RCF was successfully refinanced, with an
increase in the committed facility size from GBP5m to GBP20m, and
the term extended to June 2026. The terms of the facility have
remained materially the same as the previous facility and remains
unsecured. Drawdowns on the facility accrue interest at SONIA
+1.65%.
Pensions
The Group does not have any defined benefit schemes in place but
is subject to the provisions of auto-enrolment which require the
Group to make certain defined contribution payments for our
employees.
Risk management
The Group has identified its principal risks and uncertainties
and they are regularly reviewed by the Board and Senior Management.
Refer to pages 17 and 18 for details of the Group's risk management
framework and principal risks and uncertainties.
Going concern
The financial statements of the Group have been prepared on a
going concern basis as the Directors have satisfied themselves
that, at the time of approving the financial statements, the Group
will have adequate resources to continue in operation for a period
of at least 12 months from the date of approval of the financial
statements. Refer to Note 1 of the financial statements for details
of the Group's going concern assessment and the going concern stat
ement.
Chris Hough
Chief Financial Officer
26 July 2023
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 Group and its shareholders in the constantly
changing environment in which it operates. The Board, through the
Audit Committee, regularly reviews the principal risks facing the
Group, together with the relevant mitigating controls, and
undertakes a robust risk assessment. In reviewing the principal
risks, the Board considers emerging risks, including
climate-related risks, and changes to existing risks. 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 risks is undertaken by specific executive
risk committees that analyse the risk universe by risk type across
four key risk types: strategic risks, financial risks, operational
risks and compliance risks. A common risk register is used across
the Group to monitor gross and residual risk, with the results
assessed by the Audit Committee and Board. The Audit Committee
monitors the effectiveness of the risk management system through
management updates, output from the various executive risk
committees and reports from internal audit.
The principal 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. Risk
descriptions have been updated to reflect prevailing and expected
conditions where necessary.
Risk Impact on the Group
Market risk The key factors driving market risk are:
* Affordability, including the current cost of living
increases, which in turn may reduce transaction
levels;
* The market being reliant on the availability of
affordable mortgage finance, a deterioration in
availability or an increase in borrowing rates may
adversely impact the performance of the Sales
business. Borrowing rates in the UK have continued to
climb in 2023 reflecting increases in the Bank of
England base rate as steps are taken to control
inflation;
* The market being impacted by changes in government
policy such as future changes in stamp duty taxes or
increased regulation in the lettings market,
including the impact of future rental market reforms;
* Arguably a reduction in London's standing as a major
financial city caused by the macro-economic and
political environment; and
* Ongoing geopolitical risk which may increase market
uncertainty and customer confidence.
------------------------------------------------------------------------
Competitor The Group operates in a highly competitive marketplace.
challenge New or existing competitors could develop new technology,
service models or methods of working which could give
them a competitive advantage.
------------------------------------------------------------------------
Compliance Breaches of laws or regulations could lead to financial
with the penalties and reputational damage.
legal and Our estate agency business operates under a range
regulatory of legal and regulatory requirements, such as complying
environment with certain money laundering regulations and protecting
tenant deposits in line with the relevant regulations.
Our Financial Services business is authorised and
regulated by the Financial Conduct Authority (FCA)
and could be subject to sanctions for non-compliance.
------------------------------------------------------------------------
Risk Impact on the Group
IT systems Our proprietary operating system continues to provide
and cyber us with a competitive advantage by connecting our
risk entire network of agents and enables efficient processes
and the ability to deliver higher levels of customer
service.
Our business operations are dependent on sophisticated
and bespoke IT systems which could fail or be deliberately
targeted by cyber attacks leading to interruption
of service, corruption of data or theft of personal
data.
Such a failure or loss could also result in reputational
damage, fines or other adverse consequences.
------------------------------------------------------------
People There is a risk the Group may not be able to recruit
or retain quality staff to achieve its operational
objectives or mitigate succession risk. As experienced
in the current labour market, increased competition
for talent leads to a reduction in the available talent
pool and an increased cost of labour. Additional risk
could arise in the event there are changes in our
industry or markets that result in less attractive
career opportunities.
------------------------------------------------------------
Reputation Foxtons is an iconic estate agency brand with high
and brand levels of brand recognition. Maintaining a positive
reputation and the prominence of the brand is critical
to protecting the future prospects of the business.
There is a risk our reputation and brand could be
damaged through negative press coverage and social
media due to customer service falling below expectations
or because our actions are considered to be inappropriate.
We recognise the need to maintain our reputation and
protect our brand by delivering consistently high
levels of service and maintaining a culture which
encourages our employees to act with the highest ethical
standards.
------------------------------------------------------------
FORWARD LOOKING STATEMENTS
This interim results 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 2023. 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
Guy Gittins Chris Hough
Chief Executive Officer Chief Financial Officer
26 July 2023 26 July 2023
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months ended 30 June 2023
Continuing operations Notes H1 2023 H1 2022
(unaudited) (unaudited)
GBP'000 GBP'000
---------------------------------------------- ------ ------------- -------------
Revenue 2 70,933 65,066
---------------------------------------------- ------ ------------- -------------
Direct operating costs (26,456) (23,210)
Other operating costs (37,629) (36,605)
---------------------------------------------- ------ ------------- -------------
Operating profit 6,848 5,251
Finance income 221 46
Finance costs (1,008) (998)
---------------------------------------------- ------ ------------- -------------
Profit before tax from continuing operations 6,061 4,299
Tax charge 4 (1,939) (1,394)
---------------------------------------------- ------ ------------- -------------
Profit for the period from continuing
operations 4,122 2,905
---------------------------------------------- ------ ------------- -------------
Discontinued operations
---------------------------------------------- ------ ------------- -------------
Loss after tax for the period from
discontinued operations 5 - (318)
---------------------------------------------- ------ ------------- -------------
Profit for the period attributable
to shareholders of the Company 4,122 2,587
---------------------------------------------- ------ ------------- -------------
Earnings per share
---------------------------------------------- ------ ------------- -------------
From continuing operations
Basic earnings per share 7 1.4p 0.9p
Diluted earnings per share 7 1.3p 0.9p
---------------------------------------------- ------ ------------- -------------
From continuing and discontinued operations
Basis earnings per share 7 1.4p 0.8p
Diluted earnings per share 7 1.3p 0.8p
---------------------------------------------- ------ ------------- -------------
Adjusted results
---------------------------------------------- ------ ------------- -------------
From continuing operations
Adjusted operating profit (1,4) 2 6,824 6,159
Adjusted earnings for the purposes
of the adjusted earnings per share(2,4) 7 4,182 3,618
Adjusted basic earnings per share(3,4) 1.4p 1.1p
Adjusted diluted earnings per share(3,4) 7 1.3p 1.1p
---------------------------------------------- ------ ------------- -------------
(1) Adjusted operating profit is an APM and is reconciled to
statutory profit before tax in Note 2. Adjusted operating profit
from continuing operations is presented before charging GBPnil of
adjusted items (2022: GBP0.9m) as set out in Note 3.
(2) Adjusted earnings for the purposes of adjusted earnings per
share from continuing operations is presented before charging
GBP0.1m of adjusted items (2022: GBP0.7m) including the associated
tax charge totalling GBP0.1 m (2022: GBP0.2m credit), as set out in
Note 7.
(3) Adjusted basic and diluted earnings per share is an APM and
is reconciled to statutory earnings per share in Note 7.
(4) Further details of the APMs are provided in Note 15.
The notes on pages 25 to 37 form part of this condensed
consolidated financial information.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended 30 June 2023
H1 2023 H2 2022
(unaudited) (unaudited)
GBP'000 GBP'000
------------------------------------------------------------- ------- -------------- -------------
Profit for the period attributable
to shareholders of the Company 4,122 2,587
Other comprehensive loss
Items that will not be reclassified
to profit or loss (net of tax):
Changes in fair value of equity
instruments at FVOCI - (46)
Other comprehensive loss for
the period - (46)
Total comprehensive income for
the period 4,122 2,541
------------------------------------------------------------- ------- -------------- -------------
Total comprehensive income attributable to shareholders of the
Company arising from:
Continuing operations 4,122 2,905
Discontinued operations - (364)
--------------------------- -------------------------------- ------- -------------------------------
4,122 2,541
--------------------------- -------------------------------- ------- -------------------------------
The notes on pages 25 to 37 form part of this condensed
consolidated financial information.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2023
Notes 30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
------------------------------- ------ ---------------- ------------- ------------
Non-current assets
Goodwill 8 31,663 26,031 26,050
Other intangible assets 8 111,820 109,496 109,309
Property, plant and equipment 10,885 9,722 10,692
Right-of-use assets 9 42,728 42,178 42,570
Contract assets 3,004 897 1,688
Investments 31 3,717 6
Deferred tax assets 1,563 1,048 1,386
------------------------------- ------ ---------------- ------------- ------------
201,694 193,089 191,701
------------------------------- ------ ---------------- ------------- ------------
Current assets
Trade and other receivables 18,639 18,860 16,016
Contract assets 10,291 4,622 5,688
Current tax assets - - 745
Cash and cash equivalents 3,006 11,667 12,027
31,936 35,149 34,476
------------------------------- ------ ---------------- ------------- ------------
Total assets 233,630 228,238 226,177
------------------------------- ------ ---------------- ------------- ------------
Current liabilities
Trade and other payables (18,261) (18,224) (16,694)
Borrowings (4,846) (50) -
Current tax liabilities (225) (374) -
Lease liabilities 9 (10,147) (11,577) (10,708)
Contract liabilities (9,611) (7,376) (9,745)
Provisions (541) (1,396) (1,506)
(43,631) (38,997) (38,653)
------------------------------- ------ ---------------- ------------- ------------
Net current liabilities (11,695) (3,848) (4,177)
------------------------------- ------ ---------------- ------------- ------------
Non-current liabilities
Borrowings (115) - -
Lease liabilities 9 (35,657) (35,323) (35,753)
Contract liabilities (410) (997) (289)
Provisions (2,012) (1,619) (1,765)
Deferred tax liabilities (27,627) (27,196) (27,049)
------------------------------- ------ ---------------- ------------- ------------
(65,821) (65,135) (64,856)
------------------------------- ------ ---------------- ------------- ------------
Total liabilities (109,452) (104,132) (103,509)
------------------------------- ------ ---------------- ------------- ------------
Net assets 124,178 124,106 122,668
------------------------------- ------ ---------------- ------------- ------------
Equity
Share capital 3,301 3,301 3,301
Merger reserve 20,568 20,568 20,568
Other reserves 2,653 2,653 2,653
Own shares reserve 12 (12,092) (7,014) (10,993)
Retained earnings 109,748 104,598 107,139
------------------------------- ------ ---------------- ------------- ------------
Total equity 124,178 124,106 122,668
------------------------------- ------ ---------------- ------------- ------------
The notes on pages 25 to 37 form part of this condensed
consolidated financial information.
These unaudited condensed consolidated interim financial
statements for the 6 months ended 30 June 2023 were approved by the
Board on 26 July 2023.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 June 2023
Own
Share Merger Other shares Retained Total
capital reserve reserves reserve earnings equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Balance at 1 January
2023 3,301 20,568 2,653 (10,993) 107,139 122,668
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Profit for the period
attributable to shareholders
of the Company - - - - 4,122 4,122
Changes in fair value - - - - - -
of equity instruments
at FVOCI
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Total comprehensive
income for the period - - - - 4,122 4,122
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Dividends 6 - - - - (2,122) (2,122)
Own shares acquired
in the period 12 - - - (1,112) - (1,112)
Credit to equity for
share-based payments - - - - 622 622
Settlement of share
incentive plan - - - 13 (13) -
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Balance at 30 June
2023 (unaudited) 3,301 20,568 2,653 (12,092) 109,748 124,178
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Own
Share Merger Other shares Retained Total
capital reserve reserves reserve earnings equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Balance at 1 January
2022 3,301 20,568 2,653 (6,059) 103,039 123,502
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Profit for the period
attributable to shareholders
of the Company - - - - 2,587 2,587
Changes in fair value
of equity instruments
at FVOCI - - - - (46) (46)
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Total comprehensive
income for the period - - - - 2,541 2,541
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Dividends 6 - - - - (856) (856)
Own shares acquired
in the period 12 - - - (963) - (963)
Debit to equity for
share-based payments - - - - (20) (20)
Settlement of share
incentive plan - - - 8 (106) (98)
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Balance at 30 June
2022 (unaudited) 3,301 20,568 2,653 (7,014) 104,598 124,106
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Notes Share Merger Other Own Retained Total
capital reserve reserves shares earnings equity
GBP'000 GBP'000 GBP'000 reserve GBP'000 GBP'000
GBP'000
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Balance at 1 January
2022 3,301 20,568 2,653 (6,059) 103,039 123,502
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Profit for the period
attributable to shareholders
of the Company - - - - 9,127 9,127
Changes in fair value
of equity instruments
at FVOCI - - - - (3,711) (3,711)
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Total comprehensive
income for the year - - - - 5,416 5,416
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Dividends - - - - (1,487) (1,487)
Own shares acquired
in the period 12 - - - (4,941) - (4,941)
Credit to equity for
share-based payments - - - - 178 178
Settlement of share
incentive plan - - - 7 (7) -
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
Balance at 31 December
2022 3,301 20,568 2,653 (10,993) 107,139 122,668
------------------------------- ------ --------- --------- ---------- --------- ---------- ---------
The notes on pages 25 to 37 form part of this condensed
consolidated financial information.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Six months ended 30 June 2023
Notes H1 2023 H1 2022
(unaudited) (unaudited)
GBP'000 GBP'000
------------------------------------------------------------- ------------- -------------
Operating activities
Operating profit from continuing operations 2 6,848 5,251
Operating loss from discontinued operations - (414)
-------------------------------------------------------- --- ------------- -------------
Operating profit from continuing and discontinued
operations 6,848 4,837
Adjustments for:
Depreciation of property, plant and equipment
and right-of-use assets 6,385 6,044
Amortisation of intangible assets 834 695
Gain on disposal of discontinued operations - (180)
Gain on disposal of lease liability (617) -
Sub-lease asset impairment 190 152
Loss/(gain) on disposal of property, plant
and equipment and right-of-use assets 26 (424)
(Decrease)/increase in provisions (896) 806
Cash settlement of share incentive plan - (98)
Share-based payment charges/(credit) 522 (49)
-------------------------------------------------------- --- ------------- -------------
Operating cash flows before movements in working
capital 13,292 11,783
Increase in receivables and contract assets (8,723) (2,905)
(Decrease)/increase in payables and contract
liabilities (234) 829
------------------------------------------------------------- ------------- -------------
Cash generated by operations 4,335 9,707
Income taxes paid (1,102) (60)
------------------------------------------------------------- ------------- -------------
Net cash from operating activities 3,233 9,647
-------------------------------------------------------- --- ------------- -------------
Investing activities
Interest received 221 37
Proceeds on disposal of property, plant and
equipment - 46
Proceeds on disposal of associate and investments - 40
Purchases of property, plant and equipment (792) (989)
Purchases of intangibles (698) -
Purchases of investments 10 (25) (400)
Acquisition of subsidiaries (net of cash
acquired) 11 (6,328) (8,490)
Disposal of discontinued operations 5 - (3,715)
-------------------------------------------------------- --- ------------- -------------
Net cash used in investing activities (7,622) (13,471)
-------------------------------------------------------- --- ------------- -------------
Financing activities
Net proceeds from borrowings 4,800 -
Dividends paid 6 (2,122) (856)
Interest paid (38) (15)
Repayment of lease liabilities 9 (6,288) (5,926)
Sub-lease receipts 128 56
Purchase of own shares 12 (1,112) (857)
-------------------------------------------------------- --- ------------- -------------
Net cash used in financing activities (4,632) (7,598)
-------------------------------------------------------- --- ------------- -------------
Net decrease in cash and cash equivalents (9,021) (11,422)
-------------------------------------------------------- --- ------------- -------------
Cash and cash equivalents at beginning of
period(1) , comprised: 12,027 23,089
Cash and cash equivalents (continuing operations) 12,027 19,374
Cash included in assets held for sale (discontinued
operations) - 3,715
-------------------------------------------------------- --- ------------- -------------
Cash and cash equivalents at end of period 3,006 11,667
-------------------------------------------------------- --- ------------- -------------
(1) Total Group balances, which include continuing and
discontinued operations.
The notes on pages 25 to 37 form part of this condensed
consolidated financial information.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORT
1. accounting policies, judgements and estimates
1.1 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 financial statements are presented in pounds sterling
which is the currency of the primary economic environment in which
the Group operates.
1 .2 Basis of preparation
These condensed interim financial statements do not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006. Statutory accounts for the year ended 31
December 2022 were approved by the Directors on 6 March 2023 and
delivered to the Registrar of Companies. The report of the auditors
on those accounts was unqualified, did not contain an emphasis of
matter paragraph and did not contain any statement under section
498 of the Companies Act 2006. The financial statements have been
reviewed, not audited.
This condensed consolidated interim financial report for the
half-year reporting period ended 30 June 2023 has been prepared in
accordance with the UK-adopted International Accounting Standard
34, 'Interim Financial Reporting' and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
1.3 Going concern
Going concern assessment
The financial statements of the Group have been prepared on a
going concern basis as the Directors have satisfied themselves
that, at the time of approving the financial statements, the Group
will have adequate resources to continue in operation for a period
of at least 12 months from the date of approval of the financial
statements. Furthermore, the Group expects to be in compliance with
the RCF's covenants throughout the going concern review period.
The going concern assessment has taken into consideration the
Group's financial position, liquidity requirements, recent trading
performance and the outcome of reverse stress testing which
determines the point at which the Group could be considered to fail
without taking further mitigating actions or raising additional
funds.
At 30 June 2023 the Group was in a net debt position of GBP2.1m
(31 December 2022: GBP12.0m net cash) and a net current liability
position of GBP11.7m (31 December 2022: GBP4.2m). The net debt
position reflects a cash and cash equivalent balance of GBP3.0m (31
December 2022: GBP12.0m) and GBP5.1m of external borrowing, which
includes GBP5m drawn down on the Company's GBP20m RCF. The RCF was
refinanced in June 2023, increasing the facility size from GBP5m to
GBP20m, as well as extending the facility to June 2026. The terms
of the facility have remained materially the same as the previous
facility and remains unsecured. Drawdowns on the facility accrue
interest at SONIA +1.65%.
Reverse stress scenario
In assessing the Group's ability to continue as a going concern,
the Directors have reviewed the Group's cash flow forecasts which
have been stress tested using a reverse stress scenario which
incorporates a severe and unlikely deterioration in market
conditions.
The reverse stress scenario incorporates a reduction in trading
from October 2023 to December 2024 against plan, reflecting a 65%
reduction in sales market transactions and a 10-20% reduction in
Lettings units compared to base case. For context, a 65% reduction
in sales market transactions would see transactions levels in the
market at 6% above 2009 levels (after the Global Financial Crisis)
in 2023 and 17% below 2009 levels in 2024 .
In the unlikely event of the reverse stress scenario, the
Group's ability to draw down sufficient borrowings on the RCF would
be constrained by the facility's covenants which would be breached
in July 2024. Under such a scenario, additional mitigating action
could be taken to protect liquidity.
1.4 Accounting policies, interpretations and amendments adopted by the Group
The accounting policies applied in these interim statements are
the same as those applied in the Group's 2022 Annual Report and
Accounts, with the exception of certain new interpretations and
amendments adopted in the current period which had no significant
effect on the Group's results.
1.5 Discontinued operations
Discontinued operations are excluded from the results of
continuing operations and are presented as a single amount as
profit or loss after tax from discontinued operations in the
consolidated income statement. Additional disclosures are provided
in Note 5. All other notes to the interim financial statements
include amounts for continuing operations only, unless indicated
otherwise.
1.6 Alternative performance measures
In reporting financial information the Group presents APMs which
are not defined or specified under the requirements of IFRS. The
Group believes that the presentation of APMs provides stakeholders
with additional helpful information on the performance of the
business, but does not consider them to be a substitute for or
superior to IFRS measures. APMs are also used to enhance the
comparability of information between reporting periods, by
adjusting for uncontrollable factors which affect IFRS measures, to
aid users in understanding the Group's performance. The Group's
APMs are defined and purpose explained within Note 15.
Adjusted items include costs or revenues which due to their size
and incidence require separate disclosure in the financial
statements to reflect management's view of the underlying
performance of the Group and allow comparability of performance
from one period to another. Items include restructuring and
impairment charges, significant acquisition costs and any other
significant exceptional items.
1.7 Critical accounting judgements and key sources of estimation uncertainty
The Group's critical accounting judgements and key sources of
estimation uncertainty are consistent with those described in the
Group's 2022 Annual Report and Accounts.
2. Business and geographical segments
Products and services from which reportable segments derive
their revenues
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 Group. Management has identified that the
Board is the Chief Operating Decision Maker ('CODM') in accordance
with the requirements of IFRS 8 'Operating Segments'.
The operating and reportable segments of the Group are (i)
Lettings, (ii) Sales and (iii) Financial services.
(i) Lettings generates commission from the letting and
management of residential properties and income from interest
earned on client monies.
(ii) Sales generates commission on sales of residential property.
(iii) Financial services generates commission from the
arrangement of mortgages and related products under contracts with
financial service providers and receives administration fees from
clients.
All revenue for the Group is generated from within the UK and
there is no intra-group revenue.
Segment assets and liabilities, including depreciation,
amortisation and additions to non-current assets, are not reported
to the Board on a segmental basis and are therefore not disclosed.
Goodwill and intangible assets have been allocated to reportable
segments as described in Note 8.
The segmental disclosures include two APMs as defined below.
Further details of the APMs is provided in Note 15.
Contribution and contribution margin
Contribution is defined as revenue less direct operating costs
(being salary costs of front office staff and costs of bad debt).
Contribution margin is defined as contribution divided by revenue.
These measures indicate the profitability and efficiency of the
segments before the allocation of shared costs.
Adjusted operating profit and adjusted operating profit
margin
Adjusted operating profit represents the profit before tax for
the period before adjusted items (defined below), finance income
and finance cost. Adjusted operating profit margin is defined as
adjusted operating profit divided by revenue. As explained in Note
15, these measures are used by the Board to measure delivery
against the Group's strategic priorities, to allocate resource and
to assess segmental performance.
Adjusted items
Adjusted operating profit, adjusted operating profit margin and
adjusted earnings per share, exclude adjusted items. Adjusted items
include costs or revenues which due to their size and incidence
require separate disclosure in the financial statements to reflect
management's view of the underlying performance of the Group and
allow comparability of performance from one period to another.
Items include restructuring and impairment charges, significant
acquisition costs and any other significant exceptional items.
Refer to Note 3 for further information of the adjusted items
recognised in the period.
Segment revenues and results
The following is an analysis of the Group's continuing
operations results by reportable segment for the half year ended 30
June 2023:
Financial Corporate
Lettings Sales services costs Consolidated
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------ --------- --------- ---------- ---------- -------------
Revenue 49,768 16,933 4,232 n/a 70,933
Contribution 15 37,362 5,540 1,575 n/a 44,477
Contribution margin 15 75.1% 32.7% 37.2% n/a 62.7%
--------------------- ------ --------- --------- ---------- ---------- -------------
Adjusted operating
profit/(loss) 15 14,145 (6,364) 199 (1,156) 6,824
Adjusted operating
profit margin 15 28.4% (37.6%) 4.7% n/a 9.6%
Adjusted items 3 24
Operating profit 6,848
Finance income 221
Finance costs (1,008)
Profit before tax 6,061
--------------------- ------ --------- --------- ---------- ---------- -------------
Financial Corporate
Lettings Sales services costs Consolidated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- --------- ---------- ---------- -------------
Depreciation and amortisation
(excluding acquired
intangibles) 4,031 2,529 51 - 6,611
Amortisation from
acquired intangibles 608 - - - 608
-------------------------------- --------- --------- ---------- ---------- -------------
Total 4,639 2,529 51 - 7,219
The following is an analysis of the Group's continuing
operations results by reportable segment for the half year ended 30
June 2022:
Financial Corporate
Lettings Sales services costs Consolidated
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------ --------- --------- ---------- ---------------- -------------
Revenue 39,443 20,823 4,800 n/a 65,066
Contribution 15 28,942 10,860 2,054 n/a 41,856
Contribution margin 15 73.4% 52.2% 42.8% n/a 64.3%
--------------------- ------ --------- --------- ---------- ---------------- -------------
Adjusted operating
profit/(loss) 15 7,260 (671) 819 (1,249) 6,159
Adjusted operating
profit margin 15 18.4% (3.2%) 17.1% n/a 9.5%
Adjusted items 3 (908)
Operating profit 5,251
Other losses -
Finance income 46
Finance costs (998)
Profit before tax 4,299
--------------------- ------ --------- --------- ---------- ---------------- -------------
D&G Sales (disposed 11 February 2022) is presented as a
discontinued operation. Refer to Note 5 for further details.
Financial Corporate
Lettings Sales services costs Consolidated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- --------- ---------- ---------- -------------
Depreciation and amortisation
(excluding acquired
intangibles) 3,827 2,433 51 - 6,311
Amortisation from
acquired intangibles 407 21 - - 428
-------------------------------- --------- --------- ---------- ---------- -------------
Total 4,234 2,454 51 - 6,739
3. ADJUSTED ITEMS
Adjusted operating profit, adjusted operating profit margin and
adjusted earnings per share, exclude adjusted items. These APMs are
defined, purpose explained and reconciled to statutory measures in
Note 2 and Note 15. The following items have been classified as
adjusted items attributable to continuing operations in the
period.
H1 2023 H1 2022
GBP'000 GBP'000
------------------------------ --------- ---------
Property related credit(1) (148) (59)
Transaction related costs(2) 124 246
Reorganisation costs(3) - 721
------------------------------ --------- ---------
(24) 908
------------------------------ --------- ---------
(1) Property related credit relates to the net of a charge for
re-estimation of the provision for adjusted items, a net gain on
the disposal of IFRS 16 balances and other charges relating to
vacant property (including, in H1 2023, GBP0.2m of costs relating
to the closure of three Atkinson McLeod branches with business now
being served out of the existing Foxtons branch network).
(2) Transaction related costs relate to the acquisition of
Atkinson McLeod Limited (2022: for the acquisition of IMM
Properties Limited).
(3) Net costs of Executive reorganisation.
4. Taxation
The components of the income tax charge recognised in the Group
income statement are :
H1 2023 H1 2022
GBP'000 GBP'000
---------------------------------------------- --------- ---------
Current tax charge 1,915 694
Deferred tax charge 24 583
---------------------------------------------- --------- ---------
Tax charge on profit on ordinary activities
from continuing and discontinued operations 1,939 1,277
Less: discontinued operations tax credit - 117
---------------------------------------------- --------- ---------
Tax charge on profit on ordinary activities
from continuing operations 1,939 1,394
---------------------------------------------- --------- ---------
The tax charged within the 6 months ended 30 June 2023 has been
calculated by applying the effective rate of tax which is expected
to apply to the Group for the year ending 31 December 2023 using
rates substantively enacted as at 30 June 2023 as required by IAS
34 'Interim Financial Reporting'.
Deferred tax assets/liabilities have been recognised at 25%
reflecting the prevailing UK corporate tax rate.
5. DISCONTINUED OPERATIONS
On 11 February 2022, the D&G Sales business, including
branch and head office leases, was disposed of through the sale of
the entire share capital of Douglas & Gordon Limited and
Douglas & Gordon (2) Limited, to Lochlan for nominal
consideration of GBP2. In 2022, the results of D&G Sales for
the period 1 January to 11 February 2022, which showed a loss of
GBP0.3m are presented as a discontinued operation. In 2023 there
are no discontinued operations.
Discontinued operations: Cash flows
The net cash flows incurred by discontinued operations are as
follows:
2023 2022
GBP'000 GBP'000
------------------------------------------- --------- --------
Net cash outflow from operating activities - (458)
Net cash outflow from investing activities - (3,715)
Net cash outflow from financing activities - (18)
-------------------------------------------- -------- --------
Net cash outflow - (4,191)
-------------------------------------------- -------- --------
6. Dividends
H1 2023 H1 2022
GBP'000 GBP'000
---------------------------------------------- -------- --------
Amounts recognised as distributions to
equity holders in the period:
Final dividend for the year ended 31 December
2022: 0.7p (31 December 2021: 0.27p) per
ordinary share 2,122 856
----------------------------------------------- -------- --------
2,122 856
---------------------------------------------- -------- --------
For 2023, the Board has declared an interim dividend of 0.2p
(2022: 0.2p) per ordinary share to be paid in September 2023. The
financial statements do not reflect the dividend payable.
7. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the period attributable to ordinary equity holders of the
Company by the weighted average number of ordinary shares in issue
during the financial period, excluding own shares held.
Diluted earnings per share is calculated by dividing the
earnings attributable to ordinary equity holders of the Company by
the weighted average number of ordinary shares in issue during the
financial period, excluding own shares held, plus the weighted
average number of ordinary shares that would be issued on
conversion of all the dilutive potential ordinary shares into
ordinary shares. The Company's potentially dilutive ordinary shares
are in respect of share options granted to employees.
Continuing operations Total Group
(continuing and discontinued
operations)
------------------------------------ -------------------------- --------------------------------
H1 2023 H1 2022 H1 2023 H1 2022
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------------ ------------ --------------- ---------------
Profit for the purposes of
basic and diluted earnings/(loss)
per share 4,122 2,905 4,122 2,587
Adjusted items (including
associated taxation)(1) 60 713 60 533
Adjusted earnings for the
purposes of adjusted earnings
per share 4,182 3,618 4,182 3,120
------------------------------------ ------------ ------------ --------------- ---------------
(1) Net adjusted items credit relating to continuing operations
of GBP24k (2022: GBP908k), plus associated tax charge of GBP84k
(2022: GBP194k credit), resulting in an after tax adjusted items
charge of GBP60k (2022: GBP713k). Refer to Note 3 for details on
adjusted items.
Number of shares 2023 2022 2023 2022
------------------------------------ ------------ ------------ --------------- ---------------
Weighted average number of
ordinary shares for the purposes
of basic earnings per share 302,815,955 317,888,904 302,815,955 317,888,904
Effect of potentially dilutive
ordinary shares(1) 11,723,508 2,633,344 11,723,508 2,633,344
------------------------------------ ------------ ------------ --------------- ---------------
Weighted average number of
ordinary shares for the purpose
of diluted earnings per share 314,539,463 320,522,248 314,539,463 320,522,248
------------------------------------ ------------ ------------ --------------- ---------------
Earnings per share (basic) 1.4p 0.9p 1.4p 0.8p
------------------------------------ ------------ ------------ --------------- ---------------
Earnings per share (diluted) 1.3p 0.9p 1.3p 0.8p
------------------------------------ ------------ ------------ --------------- ---------------
Adjusted earnings per share
(basic) 1.4p 1.1p 1.4p 1.0p
------------------------------------ ------------ ------------ --------------- ---------------
Adjusted earnings per share
(diluted) 1.3p 1.1p 1.3p 1.0p
------------------------------------ ------------ ------------ --------------- ---------------
(1) The main drivers of an increase in the effect of potentially
dilutive ordinary shares from H1 2022 are the LTIP buyout awarded
to the CEO upon joining the business in September 2022 and new
share awards issued in April 2023.
In the prior period, the basic and diluted loss per share for
discontinued operations was 0.1p.
8. Goodwill and other intangible assets
At 30 June 2023, goodwill and other intangible assets total
GBP143.5m (30 June 2022: GBP135.5m) as detailed below, with GBP5.6m
of goodwill and GBP2.6m of intangible assets additions in the
period attributable to the acquisition of Atkinson McLeod (refer to
Note 11 for further details).
30 June 30 June 2022 31 December
2023 GBP'000 2022
GBP'000 GBP'000
-------------------------------------- --------- ------------- ------------
Goodwill 31,663 26,031 26,050
-------------------------------------- --------- ------------- ------------
Brand 99,000 99,000 99,000
Software 228 555 446
Customer contracts and relationships 11,147 9,726 9,108
Assets under construction 1,445 215 755
-------------------------------------- --------- ------------- ------------
Other intangible assets 111,820 109,496 109,309
-------------------------------------- --------- ------------- ------------
Goodwill and other intangible
assets 143,483 135,527 135,359
-------------------------------------- --------- ------------- ------------
a) Review for indicators of impairment at 30 June 2023
Under IAS 36 'Impairment of Assets', the Group is required
to:
-- review its intangible assets in the event of a significant
change in circumstances that would indicate potential impairment;
and
-- review and test its goodwill and indefinite-life intangible
assets annually or in the event of a significant change in
circumstances.
At 30 June 2023, the Group has assessed for indicators of
impairment of the Group's goodwill and brand asset. Following
consideration of both internal and external impairment indicators,
including 2023 year-to-date trading performance, no indicators of
impairment have been identified.
b) Sensitivity analysis
Sensitivity analysis was performed as part of the impairment
review for the year ended 31 December 2022 to assess whether the
carrying value of the Foxtons brand asset is sensitive to
reasonable possible changes in key assumptions and whether any
changes in key assumptions would materially change the carrying
value. Lettings goodwill showed significant headroom against all
sensitivity scenarios, whilst the brand asset was sensitive to
reasonable possible changes in key assumptions.
The key assumption used in the 2022 brand asset impairment
assessment was the forecast revenues for the sales and lettings
businesses. The carrying value of the brand asset was not highly
sensitive to changes in discount rates or long-term growth
rates.
As disclosed in Note 10 of the 2022 Annual Report and Accounts,
the impairment model indicated brand asset headroom of GBP71.1m or
38% of the carrying value under test. Cash flows are from the
Group's Board approved plan while also complying with the
requirements of the relevant accounting standard. Sales revenue was
assumed to decline in 2023 before fully recovering by 2026,
resulting in a compound average growth rate (CAGR) of 3.2% over the
forecast period. Lettings revenue was assumed to grow at a CAGR of
4.3% over the forecast period, excluding future Lettings portfolio
acquisitions that must be excluded from forecast cash flows under
the relevant accounting standard.
It was disclosed that assuming no changes in other elements of
the plan, the brand asset headroom would reduce to zero if the
combined revenue CAGR over the forecast period reduces from 3.9% to
2.1%. Under a reasonable possible downside scenario, in which Sales
revenue only fully recovers by 2027, Lettings revenue growth is
limited to 2.2% and the Group takes appropriate mitigating actions,
such as reducing discretionary spend and direct costs, the brand
asset would be impaired by GBP1.2 million. At 30 June 2023,
consideration of the latest economic and geo-political conditions
have been made, and there have been no significant changes to this
reasonable possible downside scenario.
The Group will complete a full annual impairment review, as
required under IAS 36, for the goodwill and brand assets in the
second half of the year.
9. leases
Right-of-use assets
The carrying amounts of the right-of-use assets recognised and
the movements during the period are outlined below:
30 June 2023 30 June 2022 31 December 2022
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------ ------------ ----------------
Opening balance 42,570 43,832 43,832
--------------------------------------- ------------ ------------ ----------------
Additions 6,633 2,957 8,564
Acquired through business combinations - 599 599
Lease modifications 67 - 138
Disposals (1,330) (149) (558)
Depreciation (5,212) (5,027) (10,134)
Impairment charge - (34) 129
Closing balance 42,728 42,178 42,570
--------------------------------------- ------------ ------------ ----------------
Lease liabilities
The carrying amounts of lease liabilities recognised and the
movements during the period are outlined below:
30 June 2023 30 June 2022 31 December 2022
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------ ------------ ----------------
Opening balance 46,461 48,083 48,083
--------------------------------------- ------------ ------------ ----------------
Additions 6,590 2,933 8,497
Acquired through business combinations - 880 880
Lease modifications 67 - 138
Disposals (1,996) (75) (416)
Interest charge 970 984 1,965
Payments(1) (6,288) (5,905) (12,686)
Closing balance 45,804 46,900 46,461
--------------------------------------- ------------ ------------ ----------------
Current 10,147 11,577 10,708
Non-current 35,657 35,323 35,753
--------------------------------------- ------------ ------------ ----------------
(1) IFRS 16 lease payments relating to discontinued operations
totalling GBP21k were made in the period ended 30 June 2022.
At the balance sheet date, continuing operations had outstanding
commitments for future minimum lease payments which fall due as
follows:
30 June 2023 30 June 2022 31 December 2022
GBP'000 GBP'000 GBP'000
------------------------------------------------------------------------ ------------ ------------ ----------------
Maturity analysis - contractual undiscounted cash flows from continuing
operations
Within one year 11,874 11,620 11,671
In the second to fifth years inclusive 30,917 30,990 30,147
After five years 9,145 10,477 10,598
51,936 53,087 52,416
------------------------------------------------------------------------ ------------ ------------ ----------------
10. Financial instruments
Categories of financial instruments
The categories of financial instruments, including contact
assets and liabilities, held by the Group are as follows:
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
-------------------------------- --------- --------- ------------
Financial assets
FVOCI financial assets 31 3,717 6
Cash and cash equivalents 3,006 11,667 12,027
Financial assets recorded at
amortised cost 28,935 21,254 18,650
Financial liabilities
Financial liabilities recorded
at amortised cost (21,461) (20,371) (21,967)
Borrowings (4,961) (50) -
Lease liabilities (45,804) (46,900) (46,461)
-------------------------------- --------- --------- ------------
Management considers that the book value of financial assets and
liabilities recorded at amortised cost and their fair value are
approximately equal.
Fair value hierarchy
The Group uses the following hierarchy for determining the fair
value of the financial instruments held:
-- Level 1 - Quoted market prices
-- Level 2 - Valuation techniques (market observable)
-- Level 3 - Valuation techniques (non-market observable)
At 30 June 2023, the Group does not hold any financial
instruments categorised as Level 1 or 2 by IFRS 13 (31 December
2022: GBPnil, 30 June 2022: GBPnil). The Level 3 financial
instruments held by the Group relate solely to unlisted equity
shares.
The following table shows the changes in Level 3 financial
assets for the six months ended 30 June:
2023 2022
GBP'000 GBP'000
-------------------------- ------- -------
Opening balance 1 January 6 3,317
Additions 25 400
Closing balance 30 June 31 3,717
--------------------------- ------- -------
There were no transfers between Level 1 and Level 3 during the
period.
Financial risk factors
The Group's activities expose it to a variety of financial risks
including, interest rate risk, credit risk and liquidity risk. The
condensed interim financial statements do not include all financial
risk management information and disclosures as required in the
annual financial statements; they should be read in conjunction
with the information included in Note 23 of the 2022 Annual Report
and Accounts. There have been no changes in any risk management
policies since the year end.
11. business combinations
During the period, the Group acquired 100% of the share capital
of Atkinson McLeod Limited ('Atkinson McLeod'), a London estate
agent focused on providing lettings and property management
services. The acquisition is in line with the Group's strategy of
acquiring high quality businesses with strong lettings
portfolios.
A provisional purchase price allocation exercise, which will be
finalised in the second half of the year, has been completed which
provisionally identified GBP2.6m of acquired intangible assets
relating to customer contracts and relationships, which are
identifiable and separable, and will be amortised over 10 years.
The discount rate applied to the cash flows is based on the
Atkinson McLeod's weighted average cost of capital (WACC) and is
calculated using a capital asset pricing model. The WACC has been
adjusted to reflect risks specific to Atkinson McLeod not already
reflected in the future cash flows.
GBP 5.6m of goodwill has arisen on the acquisitions and is
primarily attributable to synergies, new customers, the acquired
workforce and business expertise. The acquired goodwill has been
allocated for impairment testing purposes to the Group's lettings
cash-generating units which are expected to benefit from the
synergies of the combination. None of the goodwill is expected to
be deductible for tax purposes.
From the date of acquisition, the business combinations
contributed GBP 0.7m of revenue and GBP 0.1m profit before tax to
the Group's performance from 3 March 2023 to 30 June 2023. If the
combination had taken place at the beginning of the year, revenue
for the period would have been GBP 1.3m higher and profit before
tax would have increased by GBP 0.3m .
Assets acquired and liabilities assumed
The provisional fair values of the identifiable assets and
liabilities of Atkinson McLeod as at the date of acquisition are
disclosed below. The fair value of the identifiable assets and
liabilities are estimated by taking into consideration all
available information at the reporting date and are on a
provisional basis due to the timing of the acquisitions.
Atkinson McLeod
GBP'000
----------------------------------------------------- ---------------
Assets
Acquired intangible assets recognised on acquisition 2,647
Property, plant and equipment 600
Cash and cash equivalents 1,301
Trade and other receivables 68
Contract assets 156
4,772
Liabilities
Trade and other payables 304
Contract liabilities 918
Current tax liability 154
Deferred tax liability 473
Borrowings 161
Provisions 178
------------------------------------------------------- ---------------
2,188
----------------------------------------------------- ---------------
Total identifiable net assets at fair value 2,584
------------------------------------------------------- ---------------
Goodwill arising on acquisition 5,613
Fair value of consideration transferred 8,197
------------------------------------------------------- ---------------
The fair value of the combined trade receivables amounts to less
than GBP0.1m. The gross amount of trade receivables is less than
GBP0.1m and it is expected that the full contractual amounts can be
collected.
The deferred tax liability mainly comprises the tax effect of
the accelerated amortisation for tax purposes of the acquired
intangible assets recognised on acquisition offset by the tax
effect of the accelerated revenue recognition.
Purchase consideration
Atkinson McLeod
GBP'000
---------------------------------------- ---------------
Amount settled in cash 7,457
Deferred cash consideration 740
Fair value of consideration transferred 8,197
---------------------------------------- ---------------
Gross purchase consideration was GBP 8.2m , with GBP 7.5m paid
in March 2023. Consideration paid in the period, net of cash
acquired, was GBP 6.2m and is included in cash flows used in
investing activities. GBP0.7m of deferred cash consideration is
payable 12 months from the transaction completion date, with the
liability included within trade and other payables.
2022 acquisitions
As disclosed in Note 13 of the 2022 Annual Report and Accounts,
the Group completed the acquisition of IMM Properties Limited and
its subsidiary IMM Properties Investment Limited, trading under the
name Gordon & Co, (collectively 'Gordon & Co') and Stones
Residential Holdings Limited and its subsidiary Stones Residential
(Stanmore) Limited (collectively 'Stones Residential'). Deferred
consideration of GBP0.2m was paid during the period representing
the partial settlement of deferred consideration, with an estimated
GBP1.3m of deferred consideration payable in the second half of the
year.
Analysis of cash flows on acquisition
Total
GBP'000
------------------------------------------------------- ---------
Cash consideration (7,457)
Deferred and contingent consideration paid in relation
to 2022 acquisitions (172)
Cash acquired in subsidiaries 1,301
Acquisitions of subsidiaries, net of cash acquired
(included in cash flows used in investing activities) (6,328)
------------------------------------------------------- ---------
Transaction costs of the acquisition (included
in cash flows from operating activities) (124)
------------------------------------------------------- ---------
Net cash flow on acquisitions (6,452)
------------------------------------------------------- ---------
Transaction costs amounting to GBP0.1m are not included as part
of consideration transferred and have been recognised as an
adjusted item expense in the Group's consolidated income statement
(refer to Note 3).
12. OWN SHARES RESERVE
30 June 2023 30 June 2022 31 December
GBP'000 GBP'000 2022
GBP'000
---------------------------- ------------- ------------- ------------
Opening balance 10,993 6,059 6,059
Acquired during the period 1,112 963 4,941
Utilised during the period (13) (8) (7)
---------------------------- ------------- ------------- ------------
Closing balance 12,092 7,014 10,993
---------------------------- ------------- ------------- ------------
The own shares reserve represents the cost of shares in the
Company purchased in the market and held by either the Company or
the Foxtons Group Employee Benefit Trust to satisfy awards under
the Group's long-term incentive schemes. The number of ordinary
shares held by the Company and the Employee Benefit Trust at 30
June 2023 was 28,860,245 (2022: 13,887,108).
During the first six months of the year 2,847,821 (2022:
2,772,985) shares with a total value of GBP1,112,042 (2022:
GBP962,859) have been repurchased by the Company through a share
buyback programme and are held in treasury at 30 June 2023. From
the total value spent in the period ended 30 June 2022, GBP0.1m of
the balance is included within trade and other payables.
13. 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.
As set out in Note 5, in the prior year, the D&G Sales
business was disposed of on 11 February 2022 through the sale of
the entire share capital of Douglas & Gordon Limited and
Douglas & Gordon (2) Limited, to Lochlan, a company owned by
the CEO of Douglas & Gordon Limited, for nominal consideration
of GBP2. This transaction was a related party transaction due to
both the CEO, a previous director of Douglas & Gordon Limited,
and Lochlan constituting related parties.
14. Client monies
At 30 June 2023, client monies held within the Group in approved
bank accounts amounted to GBP125m (31 December 2022: GBP112.4m, 30
June 2022: GBP113.4m). Neither this amount nor the matching
liabilities to the clients concerned, are included in the
consolidated balance sheet. The Group's terms and conditions
provide that interest income on these deposits accrues to the
Company.
Client funds are protected by the FSCS under which the
government guarantees amounts up to GBP85,000 each. This guarantee
applies to each individual client deposit, not the sum total on
deposit.
15. Alternative performance measures
In reporting financial information the Group presents APMs which
are not defined or specified under the requirements of IFRS. The
Group believes that the presentation of APMs provides stakeholders
with additional helpful information on the performance of the
business, but does not consider them to be a substitute for or
superior to IFRS measures.
The Group's APMs are aligned to our strategy and together are
used to measure the performance of the business and form the basis
of the performance measures for remuneration. Adjusted results
exclude certain items because if included, these items could
distort the understanding of our performance for the period and the
comparability between periods.
The definition, purpose and how the measures are reconciled to
statutory measures are set out below.
a) Adjusted operating profit and adjusted operating profit margin
Adjusted operating profit represents the profit before tax for
the period before finance income, finance costs, other gains and
adjusted items (defined within Note 2) . This is the measure
reported to the Board for the purpose of resource allocation and
assessment of segment performance. The closest equivalent IFRS
measure to adjusted operating profit is profit before tax.
Adjusted operating profit margin is defined as adjusted
operating profit divided by revenue. This APM is a key performance
indicator of the Group and is used to measure the delivery of the
Group's strategic priorities.
Refer to Note 2 for a reconciliation between profit before tax
and adjusted operating profit and for the inputs used to derive
adjusted operating profit margin.
b) Contribution and contribution margin
Contribution is defined as revenue less direct salary costs of
front office staff and costs of bad debt. Contribution margin is
defined as contribution divided by revenue. Contribution and
contribution margin are key metrics for management since both are
measures of the profitability and efficiency before the allocation
of shared costs. A reconciliation between continuing operations
revenue and contribution is presented below.
H1 2023 Lettings Sales Financial Consolidated
GBP'000 GBP'000 services GBP'000
GBP'000
------------------------ --------- --------- ---------- -------------
Revenue 49,768 16,933 4,232 70,933
Less: Direct operating
costs (12,406) (11,393) (2,657) (26,456)
Contribution 37,362 5,540 1,575 44,477
------------------------ --------- --------- ---------- -------------
Contribution margin 75.1% 32.7% 37.2% 62.7%
------------------------ --------- --------- ---------- -------------
H1 2022 Lettings Sales Financial Consolidated
GBP'000 GBP'000 services GBP'000
GBP'000
------------------------ --------- --------- ---------- -------------
Revenue 39,443 20,823 4,800 65,066
Less: Direct operating
costs (10,501) (9,963) (2,746) (23,210)
Contribution 28,942 10,860 2,054 41,856
------------------------ --------- --------- ---------- -------------
Contribution margin 73.4% 52.2% 42.8% 64.3%
------------------------ --------- --------- ---------- -------------
c) Adjusted earnings per share
Adjusted earnings per share is defined as earnings per share
excluding the impact of adjusted items.
The measure is derived by dividing profit after tax, adjusted
for adjusted items after tax, by the weighted average number of
ordinary shares in issue during the financial period, excluding own
shares held.
This APM is a measure of management's view of the Group's
underlying earnings per share. The closest equivalent IFRS measure
is basic earnings per share. Refer to Note 7 for a reconciliation
between statutory earnings per share and adjusted earnings per
share.
d) Net free cash flow
Net free cash flow is defined as net cash from operating
activities less repayment of IFRS 16 lease liabilities and net cash
generated/used in investing activities, excluding the a cquisition
of subsidiaries (net of any cash acquired), divestments and
purchases of investments . This measure is used to monitor cash
generation. A reconciliation between net cash from operating
activities and net free cash flow is presented below.
H1 2023 H1 2022
GBP'000 GBP'000
---------------------------------------------- --------- ---------
Net cash from operating activities 3,233 9,647
----------------------------------------------- --------- ---------
Less: Repayment of IFRS 16 lease liabilities (6,288) (5,926)
----------------------------------------------- --------- ---------
Net cash (outflow)/inflow from operating
activities, after repayment of IFRS
16 lease liabilities (3,055) 3,721
----------------------------------------------- --------- ---------
Investing activities
Interest received 221 37
Proceeds on disposal of property,
plant and equipment - 46
Purchases of property, plant and equipment (792) (989)
Purchase of intangibles (698) -
Net cash used in investing activities (1,269) (906)
----------------------------------------------- --------- ---------
Net free cash (outflow)/inflow (4,324) 2,815
----------------------------------------------- --------- ---------
e) Net (debt)/cash
Net cash/(debt) is defined as cash and cash equivalents less
external borrowings and excludes IFRS 16 lease liabilities. The
definition of the measure is consistent with the definition of the
leverage ratio covenant attached to the Group's RCF and therefore
monitored internally for the purposes of covenant compliance. A
reconciliation of the measure is presented below.
30 June 30 June 31 December
2023 2022 2022
GBP'000 GBP'000 GBP'000
------------------------------- --------- --------- ------------
Cash and cash equivalents 3,006 11,66 7 12,027
Less: External borrowings (1) (5,114) (50) -
------------------------------- --------- --------- ------------
Net (debt)/cash (2,108) 11,61 7 12,027
------------------------------- --------- --------- ------------
(1) Excludes GBP0.2m of RCF arrangement and legal fees (30 June
2022: GBPnil, 31 December 2022: nil) that are offset against
borrowings within the balance sheet caption.
INDEPENDENT REVIEW REPORT TO FOXTONS GROUP PLC
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 2023 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
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 2023 which comprises the condensed
consolidated income statement, 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 the
related explanatory notes that have been reviewed.
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410, "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, 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 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.
As disclosed in note 1.2, the annual financial statements of the
Group are prepared in accordance with UK adopted International
Accounting Standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
conclusion section of this report, nothing has come to our
attention to suggest that the Directors have inappropriately
adopted the going concern basis of accounting or that the Directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410, however future events or conditions
may cause the Group to cease to continue as a going concern.
Responsibilities of Directors
The Directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the Directors are
responsible for assessing the Company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority and for no other purpose. No person is
entitled to rely on this report unless such a person is a person
entitled to rely upon this report by virtue of and for the purpose
of our terms of engagement or has been expressly authorised to do
so by our prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
Tim Neathercoat
BDO LLP
Chartered Accountants
London, UK
26 July 2023
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
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END
IR NKABPCBKDFOB
(END) Dow Jones Newswires
July 27, 2023 02:00 ET (06:00 GMT)
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