TIDMFOXT
RNS Number : 0040K
Foxtons Group PLC
17 April 2020
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES
OF ARTICLE 7 OF THE MARKET ABUSE REGULATION (EU 596/2016). UPON THE
PUBLICATION OF THIS ANNOUNCEMENT THE INSIDE INFORMATION IS NOW
CONSIDERED TO BE IN THE PUBLIC DOMAIN.
FOXTONS GROUP PLC (the "Company" or "Foxtons")
Q1 Trading statement, update on management actions in response
to Covid-19 impact and proposed placing
17 April 2020
Foxtons Group plc (LSE: FOXT) today issues a Q1 trading
statement and an update on management actions during this period of
unprecedented disruption and uncertainty.
Q1 trading
As noted in the update provided on 20 March 2020, financial
performance in the first 11 weeks of the year had been in line with
the Board's expectations. Although strong and steady growth in the
Company's sales commission pipeline during the first two months of
the year had started to flow through to revenues in March, the
necessary defensive measures taken by the Government to suppress
the Covid-19 pandemic inevitably impacted trading in the final two
weeks of the first quarter and our outlook for the remainder of the
year.
-- Group revenue for the first quarter was down 3% to GBP23.0m (Q1 2019: GBP23.8m).
-- Lettings revenue fell 5% to GBP13.9m (Q1 2019: GBP14.6m). The
impact of the tenant fee ban in the period was GBP0.8m.
-- Sales revenue was flat at GBP7.1m (Q1 2019: GBP7.1m).
-- The value of the sales commission pipeline was up 20% on the prior year as at 19 March 2020.
-- Mortgage broking revenue fell 5% to GBP1.9m (Q1 2019: GBP2.0m).
Whilst demand and supply side indicators of performance in both
sales and lettings have been negatively affected since the lockdown
was announced, it is too early to forecast the exact impact the
lockdown will have on business performance. Commissions earned in
the first three weeks of the 'lockdown' period were down 47% on the
prior year.
Management actions in response to Covid-19 impact
The measures announced by the Government to restrict all
non-essential movement, have had a material impact on the Group's
revenues. In response, management rapidly undertook a number of
actions in order to minimise the impact on cash flow. Overall, the
actions taken during the three week period following the "lockdown"
are expected to reduce the average monthly cash outflow of the
business from c. GBP9m to c. GBP3m by the end of April. Actions
taken to date include the following:
-- all branches were closed on 23 March 2020 but the Company's
technology systems and web applications have enabled it to continue
to support customers online and over the telephone and to conduct
virtual viewings and valuations;
-- approximately 750 employees were furloughed on 25 March 2020
under the Government's Coronavirus Job Retention Scheme ("CJRS").
The vast majority of these employees will receive 80% of their base
salary while furloughed. Approximately 350 employees are now
working from home, serving customers and maintaining key
operational aspects of the business;
-- all employees earning a basic salary of over GBP40,000 whom
have not been furloughed were asked to take a 20% pay cut for April
and May, and approximately 80% accepted. In line with the wider
workforce, all Executive Directors have volunteered to take a 20%
reduction in base pay and all Non-Executive Directors a 20%
reduction in fees for at least the two months of April and May.
Given recent volatility in the Company's share price the
Remuneration Committee intends to consider carefully the
appropriateness of the share price used to calculate the quantum of
the awards arising from the Restricted Share Plan in 2020, and to
closely monitor the impact of Covid-19 on the Company's
remuneration policy (such plan and policy to be proposed to
shareholders at the forthcoming AGM) and use its discretion to
adjust vesting outcomes if it considers that "windfall" gains have
occurred;
-- the Company has notified HMRC that it will be deferring the
February PAYE and NIC payments (due in March) for at least one
month;
-- temporary flexibility and payment deferral is being
negotiated with some of the Company's landlords and its vehicle
leasing company, the majority of whom have accepted the need for
flexibility;
-- as far as possible, all other discretionary spend has been
reduced to the minimum levels required to maintain reasonable
levels of service and operational effectiveness. Where the Company
is contractually committed to a certain level of expenditure,
discussions with the majority of those suppliers have taken place
to identify opportunities for deferral or discounts.
In addition to the above actions taken by management, the
Government has confirmed that estate agents are eligible for full
rates relief in the financial year 2020/21 and VAT payments due
between March and June 2020 can be deferred to March 2021.
Scenario analysis for Covid-19, liquidity and proposed
placing
As at 31 March 2020, Foxtons had a cash balance of GBP21.9m,
including the fully drawn revolving credit facility ("RCF") of
GBP5.0m. At that date, approximately GBP7.0m of this cash related
to creditor payments that were subject to the above noted
negotiations regarding payment terms and discounts.
Uncertainty around the scale, duration and impact of the
Covid-19 pandemic on London property markets means it is impossible
at this time, with a reasonable degree of precision, to determine
the impact on our performance, particularly for the remainder of
the financial year to 31 December 2020. Instead, we have analysed a
broad range of potential scenarios, primarily based on assumptions
of the period of lockdown restrictions in London and the time
period that it might subsequently take for the residential sales
and lettings markets in London to recover to more normal levels of
activity. We have included in the scenarios estimates of the
financial impact of the mitigating actions detailed above.
Although the Company's relatively strong net cash position is
sufficient to support its current operations in a number of
scenarios, it could potentially face a liquidity gap in the event
of a reasonable worst case scenario emerging involving a protracted
period of lockdown until the end of August, followed by a slow
recovery in London property markets.
Rather than implement further cost reduction measures that could
damage the Company's long term operational capacity or seek further
borrowings, we have today announced a proposed placing to secure
further equity capital, of up to 19.9% of our issued share capital
(the "Placing"). The net proceeds from the Placing will be used to
repay in full the RCF and to provide sufficient liquidity and
flexibility to support the business through our reasonable worst
case scenario and to help it exit the anticipated period of
disruption in a strong financial position in the event of less
pessimistic outcomes.
In addition, the Placing, if completed would:
-- avoid necessitating decisions being made for short-term
liquidity or cash management reasons that may cause detriment to
Foxtons' long term prospects, and give the Company the flexibility
to restructure its business in the case of a prolonged
downturn;
-- along with the management actions described above, enable
Foxtons to retain a net cash position whilst weathering a
reasonable worst case scenario period of lockdown restrictions in
London until the end of August 2020 where the Company has modelled
a reduction in revenues for Q2 and Q3 2020 of 78% lower than the
same period last year, with a slow recovery in the sales and
lettings markets in London by April 2021. For context, commissions
earned by the Company during the first three weeks following
lockdown were only 47% lower year on year.
-- in the circumstances where the London sales and lettings
markets recover sooner than the reasonable worst case scenario
described above, Foxtons will be well placed to strengthen further
its competitive advantage in the London residential sales market
and potentially take advantage of opportunities to acquire lettings
book portfolios. The Company would also consider returning any
excess cash to shareholders.
All Foxtons directors, both Executive and Non-executive, intend
to participate in the Placing.
Publication of 2019 Annual Report & Accounts
The Company has today published its Annual Report and Accounts
for the year ended 31 December 2019 which is available on the
Company's website at www.foxtonsgroup.co.uk . The Annual Report and
Accounts and notice of AGM will be posted to shareholders on Monday
20 April 2020.
Commenting on the impact of Covid-19, Nic Budden, Chief
Executive, said:
"The London property market has been severely disrupted by the
necessary measures the country has taken to contain the Covid-19
pandemic. Prior to the lock-down, Foxtons' trading in 2020 had been
in line with the Board's expectations and we started the year in a
strong financial position, with a cash balance of over GBP15m and
no external borrowings and a growing sales commission pipeline. We
have since prioritised the safety of our people and customers with
a range of actions, including closing all our branches. We also
worked quickly to minimise cash outflow ahead of a period of
significantly reduced revenues for an uncertain duration.
Notwithstanding our current strong financial position, the Board
considers it prudent to raise additional capital at this time to
enable the company to maintain liquidity in a reasonable worst-case
scenario and preserve vital business capability to support
customers when the Covid-19 pandemic subsides. This is an extremely
challenging period for everyone but our people have been amazing in
responding and I am confident we have taken the right measures both
for our stakeholders and the business so that we can emerge from
this crisis with the capability and financial position to
thrive."
Contact details
Foxtons Group plc
Nic Budden, Chief Executive Officer
Richard Harris, Chief Financial
Officer
Teneo
Robert Morgan/Anthony Di Natale +44 7557 413 275
The securities referred to in this announcement have not been
and will not be registered under the U.S. Securities Act of 1933,
as amended (the "Securities Act"), and may not be offered or sold
in the United States, except pursuant to an applicable exemption
from, or in a transaction not subject to, the registration
requirements of the United States and in compliance with any
applicable securities laws of any state or other jurisdiction of
the United States.
LEI: 5493001HCMG6R1MYKC59
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END
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