TIDMFOXT
RNS Number : 8211G
Foxtons Group PLC
29 July 2021
LEI: 5493001HCMG6R1MYKC59
Foxtons Group plc
INTERIM RESULTS FOR THE HALF YEARED 30 JUNE 2021
29 JULY 2021
Foxtons Group plc, London's leading estate agent, today
announces its financial results for the half year ended 30 June
2021.
Overview
The Group delivered its best first half results since 2016 by
capitalising on improved trading conditions, particularly in sales,
with our investment in people, brand and technology enabling rapid
growth in profitability. The acquisition of Douglas & Gordon
("D&G"), the largest in the Group's history, was a significant
strategic development. At our recent Capital Markets Day held in
June, the management team set out the Group's potential and clear
plans for growth. With growing organic market share and an
attractive proposition, Foxtons is well placed in both sales and
lettings and our first half performance demonstrates how
efficiently the business can deliver profits, cash and returns to
shareholders. We are pleased to be re-instating the dividend and
are announcing a GBP3m share buyback programme today.
Financial summary and highlights
Half year ended 30 June 2021 2020 2019
--------------------------------------------- --------- ---------- ----------
Group revenue GBP66.9m GBP40.4m GBP51.8m
Group adjusted operating profit/(loss)(1) GBP5.2m (GBP2.4m) (GBP0.9m)
Group statutory profit/(loss) before GBP3.3m (GBP4.3m) (GBP2.5m)
tax
Net free cash inflow/(outflow)(2) GBP3.0m GBP5.7m (GBP3.5m)
Adjusted basic earnings/(loss) per share(3) 1.0p (1.0p) (0.8p)
Basic loss per share (1.2p) (1.8p) (0.9p)
Interim dividend per share - ordinary 0.18p - -
Net cash(2) GBP24.4m GBP40.5m GBP14.5m
--------------------------------------------- --------- ---------- ----------
-- Growth across all business areas, Group revenue of GBP66.9m,
66% up against 2020 and 29% up against 2019:
- Lettings: GBP33.1m (2020: GBP25.7m, 2019: GBP32.4m); 2% up
against 2019 including GBP1.4m tenant fee impact
- Sales: GBP28.6m (2020: GBP11.1m, 2019: GBP15.4m); 86% up against 2019
- Mortgage broking: GBP5.2m (2020: GBP3.6m, 2019: GBP4.0m); 31% up against 2019
-- Group adjusted operating profit of GBP5.2m (2020: GBP2.4m
loss, 2019: GBP0.9m loss); inherent operating leverage drove strong
growth in profitability combined with D&G's contribution since
acquisition on 1 March.
-- Net cash of GBP24.4m at 30 June 2021 (31 December 2020:
GBP37.0m) after a GBP2.7m share buyback programme and GBP10.0m net
cash consideration for D&G in March 2021.
-- Interim dividend of 0.18p declared and GBP3m share buyback
programme being announced today to return excess capital to
shareholders following the strong trading performance during the
period.
-- No use of government support in the period with GBP1.5m of
branch business rates voluntarily paid in July relating to the
first 6 months of 2021.
Operational highlights and strategic developments
-- Growth in market share, further strengthened by the
acquisition of D&G, enabled the Group to capitalise on high
levels of market activity to deliver a strong first half
performance.
-- Acquisition of D&G for GBP14.25m (cash and debt free
basis), including a portfolio of 2,900 tenancies, contributed
GBP7.2m of revenue and GBP1.0m of operating profit in the period
supported by a strong sales market. Integration proceeding in line
with plan.
-- GBP3m investment in Boomin, the next generation property
site, demonstrating Foxtons' commitment to remaining at the
forefront of technological transformation in the property
sector.
-- Implementation of sophisticated customer data platform
enabling us to engage with customers far more effectively through
the delivery of highly customised marketing content.
-- At our recent Capital Markets Day we set out our growth
strategy with a focus on how technology and data science is
supporting our strategy focussed on market leadership, revenue
diversification and profit growth.
-- Progression of our revenue diversification strategy with a
newly appointed Business Development Director to drive UK
expansion; strong revenue growth and momentum across both the China
Desk and Build to Rent.
-- Launched new social mobility partnership with charity Career
Ready to help young people fulfil their potential.
Commenting on the results, Nic Budden, CEO, said:
"I am delighted to be reporting a strong first half performance
which has seen growth across all our business areas and allows us
to re-instate the dividend and further our share buyback
programme.
The combination of political stability and easing restrictions
has seen positive momentum return in the market and we are
delighted that thousands of customers chose Foxtons to sell or let
their property. This enabled us to grow revenues and market share
in both sales and lettings, further strengthened by the acquisition
of D&G, demonstrating the attractiveness of our customer
proposition.
Over the past few years our focus on both efficiency and
investment in brand, people and technology has put us in a strong
position to capitalise on improving market conditions. We have the
most sophisticated, technology-enabled proposition in the market
and a highly efficient business allowing us, as these results
demonstrate, to maximise profitability, cash flow and returns to
shareholders as revenues increase.
We were pleased to make two significant transactions over the
period. D&G is a renowned London agent and gives us a high
quality lettings book and our investment in the exciting new market
entrant Boomin ensures we remain closely associated with next
generation property businesses.
The management team and I were delighted last month, to present
our strategy focussed on market leadership, revenue diversification
and profit growth at the recent Capital Markets Day. Foxtons has
huge potential and today's results demonstrate we are building a
highly profitable business.
I would also like to pay tribute to our outgoing Chairman Ian
Barlow who has recently announced his retirement from the Board.
His expert advice and stewardship over eight years on the Foxtons
board has been invaluable and on behalf of the Board and the
Company we wish him all the very best for the future."
For further information, please contact:
Foxtons Group plc
Richard Harris, Chief Financial +44 20 7893 6261
Officer investor@foxtonsgroup.co.uk
Muhammad Patel, Investor Relations
Manager
-----------------------------
Sanctuary Counsel
------------------------------------- -----------------------------
+44 7557 413 275 / +44 7918
Robert Morgan / Rachel Miller 606 667
-----------------------------
The Group will host a conference call today at 9.00am (BST) for
analysts and investors on the following numbers:
UK: +44 (0)330 336 9127, US: +1 323-794-2588, Confirmation code:
1312367. The presentation will be webcast live. To access you will
be required to pre-register using the following link:
https://globalmeet.webcasts.com/starthere.jsp?ei=1482893&tp_key=7d5d5332e9
A replay of the call will be available for 3 days after the
event on the following numbers: UK: +44 (0) 207 660 0134, US: +1
719-457-0820, Confirmation code: 1312367
(1) Adjusted operating profit/(loss) is defined as profit/(loss)
before tax for the period before finance income, finance cost,
other gains/(losses) and adjusted items. The Group's alternative
performance measures (APMs) are defined and purpose explained
within Note 13.
(2) 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) and purchases of
investments. Net cash is defined as cash and cash equivalents less
external borrowings.
(3) Adjusted basic earnings/(loss) per share is defined as
earnings/(loss) 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 5 for a
reconciliation of the measure.
PERFORMANCE AT A GLANCE
Half year ended 30 June 2021 2020 2021 vs 2019 2021 vs
2020 2019
----------------------------------- ---------- ------------------------ ----------- ---------- ---------
Income statement
----------------------------------- ---------- ------------------------ ----------- ---------- ---------
Group revenue GBP66.9m GBP40.4m +66% GBP51.8m +29%
Group adjusted operating GBP5.2m (GBP2.4m) +GBP7.6m (GBP0.9m) +GBP6.1m
profit/(loss)(1)
Group adjusted operating +1,360 + 950
profit/(loss) margin(1) 7.8% (5.8%) bps (1.7%) bps
Group statutory profit/(loss) GBP3.3m (GBP4.3m) +GBP7.6m (GBP2.5m) +GBP5.8m
before tax
Loss per share
----------------------------------- ---------- ------------------------ ----------- ---------- ---------
Basic and diluted loss
per share (1.2p) (1.8p) 0.6p (0.9p) (0.3p)
Adjusted basic and diluted
earnings/(loss) per share(1) 1.0p (1.0p) 2.0p (0.8p) 1.8p
Dividends
----------------------------------- ---------- ------------------------ ----------- ---------- ---------
Interim dividend per 0.18p - n/a - n/a
share
Cash and cash flow
----------------------------------- ---------- ------------------------ ----------- ---------- ---------
Period end cash balance GBP24.4m GBP45.5m (GBP21.2m) GBP14.5m GBP9.8m
Net cash(1) GBP24.4m GBP40.5m (GBP21.2m) GBP14.5m GBP9.8m
N et cash from operating GBP13.2m GBP8.5m GBP4.7m GBP2.6m GBP10.6m
activities
Net free cash inflow/(outflow)(1) GBP3.0m GBP5.7m (GBP2.7m) (GBP3.5m) GBP6.5m
Segmental metrics
----------------------------------- ---------- ------------------------ ----------- ---------- ---------
Lettings revenue GBP33.1m GBP25.7m +29% GBP32.4m +2%
Lettings volumes 10,026 7,952 +26% 9,265 +8%
Average revenue per lettings
transaction GBP3,300 GBP3,229 +2% GBP3,499 (6%)
Sales revenue GBP28.6m GBP11.1m +159% GBP15.4m +86%
Sales volumes 2,071 858 +141% 1,194 +73%
Average revenue per sales
transaction GBP13,833 GBP12,906 +7% GBP12,934 +7%
Mortgage broking revenue GBP5.2m GBP3.6m +44% GBP4.0m +31%
Mortgage volumes 2,795 2,066 +35% 2,099 +33%
Average revenue per mortgage
transaction GBP1,859 GBP1,744 +7% GBP1,889 (2%)
(1) These measures are APMs used by the Group and are defined
and purpose explained within Note 13.
CHIEF EXECUTIVE'S REVIEW
Summary
Foxtons delivered its best first half performance since 2016 as
the cumulative action taken in previous years both through
efficiency actions and investment in proposition enabled us to
capitalise on a resurgent sales market in London. Thousands of
customers chose Foxtons to sell their home and falling rents
encouraged an uplift in activity in the rental market where we
rented out over 10,000 homes. Our results-based technology-enabled
proposition saw us continue to gain market share in all parts of
the business.
First half Group revenue was GBP66.9m (2020: GBP40.4m, 2019:
GBP51.8m) of which revenue from lettings was GBP33.1m (2020:
GBP25.7m, 2019: GBP32.4m), revenue from sales was GBP28.6m (2020:
GBP11.1m, 2019: GBP15.4m) and revenue from mortgage broking was
GBP5.2m (2020: GBP3.6m, 2019: GBP4.0m). Our highly operationally
geared model delivered an adjusted operating profit of GBP5.2m
(2020: GBP2.4m loss, 2019: GBP0.9m loss). Statutory profit before
tax was GBP3.3m (2020: GBP4.3m loss, 2019: GBP2.5m loss).
This is a positive performance after several years of weakness
in the London market. Following the election result at the end of
2019 there were promising signs in the sales market but this
recovery proved to be nascent and was halted by the Covid-19
pandemic, which caused a severe market dislocation. However, there
will always be a need for people to move house and as 2021
progressed and restrictions eased we saw confidence return across
sales and lettings. This confidence combined with the extension to
the stamp duty relief resulted in an 86% increase in sales revenue
in the first half compared to H1 2019.
Within lettings, we have grown volumes by 8% compared to 2019,
driven by D&G's contribution since acquisition and growth in
our existing lettings portfolio. The lettings book acquisitions we
made in 2020 are performing well and in line with plan. Our Build
to Rent business delivered a record performance with revenues more
than doubling against 2019, despite the impact of lower rents,
which disproportionately impacted Build to Rent due to its premium
pricing position.
At the Capital Markets Day in June we set out Foxtons' potential
by providing a comprehensive update on the Group's growth strategy
with a focus on how technology and data science is supporting our
objectives to reinforce market leadership, diversify revenue
streams and grow profits. In line with our strategy, we have made
two significant transactions and implemented our unique customer
data platform.
In March we acquired D&G, a well-established, high quality
London estate agent with 2,900 tenancies. Since the acquisition
completed the business has performed well and we remain very
excited by its potential. In April we made a GBP3m investment in
Boomin, the next generation property site, which furthers our
ambition to remain at the forefront of technological transformation
in the property sector. The business has had a successful launch
and we are delighted to have invested at its inception.
Our state-of-the-art customer data platform, with high levels of
automation and powered by machine learning, means we can predict
customer behaviour much more precisely and deliver highly
customised marketing content throughout individual customer
journeys to increase engagement and conversion. We believe this is
a game-changing capability, akin to what tech firms are doing with
Big Data, and has the potential to improve the conversion of our
sales funnel which represents very attractive incremental
revenues.
Additionally, we were delighted to partner with leading national
charity Career Ready whose focus on social mobility is closely
aligned with our purpose and track record of promoting talent
regardless of background. The partnership will give our people the
opportunity to get personally involved in the delivery of a range
of social mobility programmes.
Finally, I would like to pay tribute to our Chairman Ian Barlow
who has recently announced his retirement from the Board. Over
eight years on the Board, and more recently as Chairman, Ian has
provided invaluable challenge and advice as well as strong
stewardship through some difficult conditions. Everyone here at
Foxtons would like to thank him for his service and wish Ian all
the very best for the future.
Lettings
Activity in our lettings business was elevated throughout the
period as we leveraged our unique proposition for landlords and
tenants to deliver both volume and organic market share growth.
Volumes in the period were 8% higher than 2019 reflecting D&G's
four month contribution as well as growth in our existing lettings
portfolio. However, rents in London remained under pressure,
declining by 9% compared to 2019 levels, and tenancy lengths are
shorter on average with a higher incidence of break clauses as
tenants and landlords seek to retain flexibility.
Sales
We have continued to invest in our sales proposition and I am
delighted, in more favourable market conditions, that so many
sellers trusted Foxtons to handle their house sale. It has been a
very strong half with the commission pipeline initially building
strongly and then converting into exchanges in the period resulting
in 86% revenue growth compared to 2019 and the best first half
sales performance since 2016. A combination of returning confidence
in the sales market, first witnessed in early 2020, pent up demand
from last year's lockdown and stamp duty relief encouraged more
house moves and the best market conditions for some time.
Productivity gains have ensured incremental sales revenue has been
delivered without substantially increasing headcount leading to a
strong rebound in profitability. 49% of sales transactions included
conveyancing cross-sell, and within our international sales
channels, the China desk contributed GBP1m of revenue across sales
and lettings in the period.
Mortgage broking
The more favourable market conditions also benefitted Alexander
Hall, our mortgage broking business. The business continued to grow
market share and saw increases in new mortgages supporting new home
moves driven by referrals from our sales business. We are in the
process of reviewing strategic options for Alexander Hall.
Government support
2020 was a challenging, loss-making year for Foxtons in which
forced closures resulted in GBP15m of lost revenue over the course
of the second and third quarters of 2020 compared to 2019, and on
this basis we were grateful for the Government support we received.
Given our branches have traded without closure this year and are
performing well we have not taken business rates relief. In July we
paid GBP1.5m of branch business rates relating to the first 6
months of 2021 and reflected this expense in our first half
performance. We have not made use of the Government's furlough
scheme during the period.
Capital returns
As we explained at the Capital Markets Day, once we have met our
liquidity and investment needs we will seek to return cash to
investors if the business is profitable. We returned to profit in
the first half and there is momentum in the business. We are
therefore re-instating the ordinary dividend with a payment of
0.18p per share with respect to the half year period and are
announcing a GBP3m share buyback programme to return excess capital
to shareholders.
Outlook
After several years of declines, the London sales market is
enjoying a resurgence although sales transactions in 2021 are
nevertheless likely to be low on a historical basis. The second
half of the year is likely to be quieter than the first as the
stamp duty relief tapers, but we believe there are signs of
sufficient underlying confidence in the market to support a more
sustained recovery.
Lettings has yet to fully recover from the pandemic and the
associated market dislocation. A return to normality relies upon a
return to previous levels of activity and rents, which is dependent
on more normal working patterns and increased international travel.
However, there are some early signs of growth in tenant demand and
of rents firming up.
With improving market share and an attractive proposition,
Foxtons is well placed in both sales and lettings. Our first half
performance demonstrates how efficiently the business can deliver
profits, cash and returns to shareholders.
Nic Budden
Chief Executive Officer
FINANCIAL REVIEW
Overview
Group revenue increased by 29% to GBP66.9m compared to 2019
(2020: GBP40.4m, 2019: GBP51.8m), with revenue from lettings up 2%,
revenue from sales up 86% and revenue from mortgage broking up 31%.
Group adjusted operating profit was GBP5.2m (2020: GBP2.4m loss,
2019: GBP0.9m loss) with the growth in profitability driven by
revenue growth across all three segments. In particular, the sales
business delivered significant profitability from incremental
revenues delivered in the period. In the four months since
acquisition, D&G contributed GBP7.2m of revenue and GBP1.0m of
operating profit. The Group's statutory profit before tax was
GBP3.3m (2020: GBP4.3m loss, 2019: GBP2.5m loss).
At 30 June, the Group held a net cash balance of GBP24.4m (31
December 2020: GBP37.0m), with no external borrowings (30 June
2020: GBP5m). In July, the Group paid GBP1.1m of deferred D&G
consideration and GBP1.5m of branch business rates relating to the
first half of 2021. Period end cash also excludes GBP0.2m of
deferred lease payments that will be paid in the second half of
2021. The Group has a GBP5m revolving credit facility which has
been extended in the period and will expire in July 2024 and
remains undrawn.
Summary income statement
GBPm H1 2021 H1 2020 H1 2019 Change vs 2020 Change vs 2019
----------------------------------------------------- ------- ------- ------- -------------- --------------
Group revenue 66.9 40.4 51.8 65.9% 29.1%
Group contribution (1) 41.7 24.9 33.2 67.8% 25.5%
Group adjusted operating profit/(loss) (1) 5.2 (2.4) (0.9) 321.5% 710.1%
Adjusted items (0.8) (0.8) (0.4) 5.0% 115.2%
Net finance costs (1.1) (1.1) (1.2) -3.5% -12.8%
Group statutory profit/(loss) before tax 3.3 (4.3) (2.5) 176.1% 229.2%
Basic and diluted loss per share (1.2p) (1.8p) (0.9p) 0.6p (0.3p)
Adjusted basic and diluted earnings/(loss) per share 1.0p (1.0p) (0.8p) 2.0p 1.8p
Dividend per share 0.18p - - n/a n/a
----------------------------------------------------- ------- ------- ------- -------------- --------------
(1) These measures are APMs. Measures are defined and purpose
explained within Note 13.
Revenue
The Group consists of three operating segments: Lettings, sales
and mortgage broking. Narrative explaining segmental revenue
performance against 2019 follows.
GBPm H1 2021 H1 2020 H1 2019 Change vs 2020 Change vs 2019
----------------- ------- ------- ------- -------------- --------------
Lettings 33.1 25.7 32.4 28.8% 2.0%
Sales 28.6 11.1 15.4 158.7% 85.5%
Mortgage broking 5.2 3.6 4.0 44.3% 31.1%
----------------- ------- ------- ------- -------------- --------------
Group revenue 66.9 40.4 51.8 65.9% 29.1%
----------------- ------- ------- ------- -------------- --------------
Lettings
Lettings revenues increased by 2% to GBP33.1m (2020: GBP25.7m,
2019: GBP32.4m) and average revenue per lettings transaction was
GBP3,300 or 6% down (2020: GBP3,229, 2019: GBP3,499), with D&G
contributing GBP3.8m of revenue since acquisition in March 2021.
Excluding D&G, and adjusting for the GBP1.4m impact of the
tenant fee ban, lettings revenue was 5% down which is reflective of
a 9% decrease in average rentals only being partially offset by
increased volumes, driven by market share gains.
Sales
Sales revenue increased by 86% to GBP28.6m (2020: GBP11.1m,
2019: GBP15.4m), with D&G contributing GBP3.4m of revenue since
acquisition in March 2021. The average revenue per transaction was
GBP13,833 or 7% higher (2020: GBP12,906, 2019: GBP12,934) and the
average price of properties sold increased marginally to GBP579k
(2020: GBP556k, 2019: GBP544k) which is reflective of D&G's
sales contribution being more concentrated on inner parts of
London.
Mortgage broking
Mortgage broking revenue increased by 31% to GBP5.2m (2020:
GBP3.6m, 2019: GBP4.0m), the increase primarily reflecting growth
in new mortgages driven by the pick-up in sales volumes noted
above.
Balance of business
Our balance of business enables the Group to withstand
fluctuations in the property market thereby providing protection
from the potentially volatile sales market. The table below shows
an increase in sales market activity in the period.
% of total revenue H1 2021 H1 2020 H1 2019
------------------- ------- ------- -------
Lettings 49% 64% 62%
Sales 43% 27% 30%
Mortgage broking 8% 9% 8%
-------------------- ------- ------- -------
100% 100% 100%
------------------- ------- ------- -------
Profitability
Contribution, contribution margin, adjusted operating
profit/(loss) and adjusted operating profit/(loss) margin are APMs
management uses to monitor the profitability of the Group and
operating segments. The Group's APMs are defined and purpose
explained in Note 13.
Contribution and contribution margin
Contribution is revenue less direct salary costs and cost of bad
debt. Group contribution increased to GBP41.7m (2020: GBP24.9m,
2019: GBP33.2m) compared to both 2020 and 2019 as a result of
increased revenue. Group contribution margin was 62.4% (2020:
61.6%, 2019: 64.1%), with margin being marginally down compared to
2019.
H1 2021 H1 2021 H1 2020 H1 2020 H1 2019 H1 2019
GBPm margin GBPm margin GBPm margin
------------------- ------- ------- ------- ------- ------- -------
Lettings 22.5 67.9% 18.4 71.6% 23.5 72.5%
Sales 16.9 59.1% 4.9 43.9% 7.9 50.9%
Mortgage broking 2.3 45.1% 1.6 44.9% 1.8 46.9%
------------------- ------- ------- ------- ------- ------- -------
Group contribution 41.7 62.4% 24.9 61.6% 33.2 64.1%
------------------- ------- ------- ------- ------- ------- -------
Adjusted operating profit/(loss) and adjusted operating
profit/(loss) margin
Adjusted operating profit for the period was GBP5.2m (2020:
GBP2.4m loss, 2019: GBP0.9m loss). For the purposes of segmental
reporting, shared costs are allocated between the lettings business
and the sales business with reference to their relative
headcount.
H1 2021 H1 2021 H1 2020 H1 2020 H1 2019 H1 2019
GBPm margin GBPm margin GBPm margin
--------------------------------------- ------- ------- ------- ------- ------- -------
Lettings 1.5 4.4% 2.0 7.8% 2.0 6.2%
Sales 2.7 9.5% (4.8) (43.4%) (3.5) (22.5%)
Mortgage broking 1.1 20.3% 0.4 12.5% 0.6 15.5%
--------------------------------------- ------- ------- ------- ------- ------- -------
Group adjusted operating profit/(loss) 5.2 7.8% (2.4) (5.8%) (0.9) (1.7%)
--------------------------------------- ------- ------- ------- ------- ------- -------
Adjusted items
A net GBP0.8m adjusted items charge (2020: GBP0.8m, 2019:
GBP0.4m) comprises GBP0.5m of acquisition costs, GBP0.7m impairment
of an interest in an associate to fair value to reflect the manner
in which the carrying amount will be principally recovered and a
GBP0.4m credit relating to property restructuring.
Statutory profit/(loss) before tax
The statutory profit before tax in the period was GBP3.3m (2020:
GBP4.3m loss, 2019: GBP2.5m loss) after charging direct operating
costs of GBP25.2m (2020: GBP15.5m, 2019: GBP18.6m) and other
operating costs of GBP37.3m (2020: GBP28.0m, 2019: GBP34.5m).
Within other operating costs, the following charges have been
incurred:
-- Depreciation of GBP6.4m (2020: GBP6.3m, 2019: GBP6.4m)
-- Amortisation of GBP0.8m (2020: GBP0.4m, 2019: GBP0.3m),
including GBP0.6m (2020: GBP0.3m, 2019: nil) relating to acquired
intangibles
-- Share-based payment charge of GBP0.8m (2020: GBP0.5m, 2019: GBP0.4m)
-- Adjusted items charges of GBP0.8m (2020: GBP0.8m, 2019: GBP0.4m)
The Group incurred net finance costs of GBP1.1m (2020: GBP1.1m,
2019: GBP1.2m).
Taxation
The Group has a low risk approach to its tax affairs. All
business activities of Foxtons operate within the UK and are UK tax
registered and fully compliant. The Group does not have any complex
tax structures in place and does not engage in any aggressive tax
planning or tax avoidance schemes. The Group always sets out to be
transparent, open and honest in its dealings with tax
authorities.
The effective tax rate for the period was 219.6% (2020: 26.8%)
which compares to the statutory corporation tax rate of 19.0%
(2020: 19.0%). The main driver affecting the effective tax rate is
the substantively enacted UK corporation tax rate change from 19%
to 25% with effect from 1 April 2023, resulting in the net deferred
tax liability being remeasured accordingly to GBP25.4m (2020:
GBP19.1m). The Group received no tax refunds during the year (2020:
GBP0.3m, 2019: GBP0.1m).
Earnings/loss per share
Basic and diluted loss per share was 1.2p (2020: 1.8p, 2019:
0.9p) and adjusted basic and diluted earnings/(loss) per share was
1.0p (2020: 1.0p loss, 2019: 0.8p loss). The basic and diluted loss
per share is the result of the remeasurement of the Group's
deferred tax liabilities following the change in the UK corporation
tax rate noted above resulting in an additional GBP6.3m tax charge
(2020: GBP1.7m) in the period.
Cash flow and net cash
The Group held net cash, excluding lease liabilities, of
GBP24.4m at 30 June 2021 (31 December 2020: GBP37.0m). Net free
cash inflow of GBP3.0m (2020: GBP5.7m), was driven by increased
profitability in the period, partly offset by GBP9.1m of lease
liability payments, including GBP2.1m of previously deferred lease
payments, and GBP1.1m of net capital expenditure driven by IT and
branch investments.
H1 2021 H1 2020 H1 2019
GBPm GBPm GBPm
---------------------------------------------------------- ------- ------- -------
Operating cash inflow before movements in working capital 12.5 4.6 5.5
Working capital inflow/(outflow) 0.7 3.6 (3.0)
Income taxes refund - 0.3 0.1
---------------------------------------------------------- ------- ------- -------
Net cash from operating activities 13.2 8.5 2.6
---------------------------------------------------------- ------- ------- -------
Repayment of IFRS 16 lease liabilities (9.1) (2.7) (5.9)
Net cash used in investing activities(1) (1.1) (0.1) (0.2)
---------------------------------------------------------- ------- ------- -------
Net free cash inflow/(outflow) 3.0 5.7 (3.5)
---------------------------------------------------------- ------- ------- -------
(1) Excluding the acquisition of subsidiaries (net of any cash
acquired) and purchases of investments.
Acquisitions
On 1 March 2021, the Group acquired the entire issued share
capital of Douglas & Gordon Estate Agents Limited and its
subsidiary companies for GBP14.25m, measured on a cash and debt
free basis. D&G is a high quality London estate agent with a
large lettings business typically delivering around 65% of total
revenues from 2,900 tenancies. The acquisition is in line with the
Group's strategy of acquiring high quality businesses with strong
lettings books.
Gross purchase consideration was GBP15.5m with GBP13.9m paid in
March, GBP1.1m paid in July and GBP0.5m of contingent cash
consideration remaining. Consideration paid in the period, net of
cash acquired, was GBP10.0m.
Acquired net assets have been provisionally fair valued at the
date of acquisition and include GBP5.4m of customer contracts and
relationships and GBP6.3m of acquired goodwill. The acquisition
contributed GBP7.2m of revenue and GBP1.0m of operating profit
during the Group's four months of ownership.
Other balance sheet positions
At 30 June the significant balance sheet positions were:
-- Goodwill of GBP17.7m (2020: GBP10.1m) and other intangible
assets of GBP108.1m (2020: GBP102.1m). Increases due to the D&G
acquisition contributing GBP6.3m of goodwill and GBP5.4m of
intangibles.
-- Total contract assets of GBP4.1m (2020: GBP1.8m) and total
contract liabilities of GBP8.0m (2020: GBP7.5m), with the increase
in the contract asset driven by the acquisition of D&G.
-- Interest in associate and investments of GBP3.7m (2020:
GBP1.2m) reflecting a GBP3m investment in PD Innovations Limited,
trading as Boomin, and a GBP0.7m impairment of an interest in an
associate to fair value.
-- Lease liabilities of GBP53.3m (2020: GBP56.5m) and
right-of-use assets of GBP49.1m (2020: GBP47.8m).
-- Trade and other receivables of GBP19.5m (2020: GBP11.6m) and
trade and other payables of GBP20.3m (2020: GBP12.6m). Both
balances increased due to the acquisition of D&G and increased
June activity.
Dividend
The Group's ordinary dividend policy is to return 35-40% of
profit after tax to shareholders as an ordinary dividend. In the
first half of the year the Group made a profit after tax of GBP3.1m
after excluding one-off non-cash charges of GBP7.0m relating to
deferred tax remeasurement charge (GBP6.3m) and non-cash adjusted
items (GBP0.7m) recognised during the period. Based upon the first
half performance and the momentum in the business, the Board has
made the decision to re-instate the dividend with a payment of
0.18p per share for the half year period. Payment will be made on
28 September 2021 to shareholders on the register at close of
business on 27 August 2021. The shares will be quoted ex-dividend
on 26 August 2021.
Post balance sheet events
There are no post balance sheet events to report.
Treasury policies and objectives
The Group's treasury policy is designed to reduce financial
risk. Financial risk for the Group is low as the Group is 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. The Group has access to a
GBP5m revolving credit facility (RCF) which has been extended to
June 2024 and remains undrawn.
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.
Details of the Group's risk management framework and principal
risks are set out below.
Going concern
The condensed financial statements have been prepared on a going
concern basis as the Directors have satisfied themselves that 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 for details of the Group's
going concern assessment.
Related parties
Related party transactions are disclosed in Note 11 of the
condensed financial statements. There have been no material changes
in the related party transactions described in the last Annual
Report and Accounts.
Richard Harris
Chief Financial Officer
PRINCIPAL RISKS
Risk management
The Board is responsible for establishing and maintaining the
Group's system of risk management and internal control, with the
aim of protecting its employees and customers and safeguarding the
interests of the Group and its shareholders in the constantly
changing environment in which it operates. The Board regularly
reviews the principal risks facing the Group together with the
relevant mitigating controls and undertakes a robust assessment. In
reviewing the principal risks the Board considers emerging risks
and significant changes to existing risk ratings. In addition the
Board has set guidelines for risk appetite as part of the risk
management process against which risks are monitored.
The identification of risk in the Group is undertaken by
specific executive risk committees which analyse overall corporate
risk, information technology risk and mortgage broking risk. Other
committees exist below this level to focus on specific areas such
as anti-money laundering. A common risk register is used across the
Group to monitor gross and residual risk with the results being
assessed by the Board. The compliance department regularly reviews
operations to ensure that any non-standard transactions have been
properly authorised and that procedures are being properly adhered
to across the branch network. The Audit Committee monitors the
effectiveness of the risk management system through regular updates
originating from the various executive risk committees.
The principal risks table below sets out the risks facing the
business at the date of this report analysed between external and
internal factors. These risks do not comprise all of the risks that
the Group may face and 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.
At half year 2021, the principal risks are considered to be
consistent with those set out on pages 32 to 35 of the 2020 Annual
Report and Accounts. The impact of the Group's existing principal
risks have been reviewed and updated where required. A summary of
the principal risks is provided below.
External risk factors
Risk Impact on Group
Market risk During the first half of the year there was evidence
of the sales market recovering driven by a combination
of political stability and easing Covid-19 restrictions.
Notwithstanding the improvements in the market, there
continues to be market risk, with the following key factors
driving the level of risk:
* affordability, which in turn may reduce transaction
levels;
* arguably a reduction in London's standing as a major
financial city caused by the macro-economic and
political environment, including the UK's decision to
leave the EU;
* the market being reliant on the availability of
mortgage finance, a deterioration in which may
adversely affect the Group; and
* the market being impacted by changes in government
policy such as changes in stamp duty taxes or
increased regulation in the lettings market.
------------------------------------------------------------------
Covid-19 During 2020 the Group's performance was significantly
impacted by Covid-19 in the form of forced branch closures
and other business restrictions. Over the course of 2021
restrictions have eased and associated level of risk
continues to reduce. Notwithstanding the improving conditions,
there continues to be Covid-19 related risks including:
* ongoing negative impact on the UK economy and
consumer confidence which may adversely impact
residential property transaction levels in the medium
term. The speed and extent of recovery is difficult
to predict and therefore there continues to be
uncertainty in the market outlook;
* there remains a risk the Group's offices and branches
may have to temporarily close, property viewings
could be required to switch to virtual viewings and
customer-facing activities could be restricted due to
the self-isolation requirements; and
* there is an ongoing Covid-19 health and safety risk
which has to be carefully and responsibly managed to
ensure the ongoing safety of our employees and
customers.
------------------------------------------------------------------
Competitor The Group operates in a highly competitive marketplace.
challenge New or existing competitors could develop new technology,
services, methods of working including online and hybrid
agents 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 The mortgage broking division is authorised and regulated
regulatory by the FCA and could be subject to sanctions for non-compliance.
environment
------------------------------------------------------------------
Internal risk factors
Risk Impact on Group
IT systems Our proprietary operating system continues to provide
and cyber us with a competitive advantage by connecting our entire
risk network of agents together 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 that the Group may not be able to recruit
or retain quality staff to achieve its operational objectives
or mitigate succession risk. This risk may occur in the
event competition for talent increases or there are changes
in our industry or markets that result in less attractive
career opportunities.
---------------------------------------------------------------
Reputation Foxtons is a strong, single network brand with a reputation
and brand for delivering exceptional service and the highest brand
awareness in London estate agency. Our reputation and
brand provides competitive advantage and is critical
to maintaining and 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 our
actions considered to be inappropriate.
---------------------------------------------------------------
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 28 July 2021. 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
Nic Budden Richard Harris
Chief Executive Officer Chief Financial Officer
28 July 2021 28 July 2021
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months ended 30 June 2021
Six months Six months
to to
30 June 30 June
2021 2020
(unaudited) (unaudited)
Continuing operations Notes GBP'000 GBP'000
------------------------------------------- ----- ------------ ------------
Revenue 2 66,926 40,350
Direct operating costs (25,188) (15,478)
Other operating costs (37,342) (28,021)
------------------------------------------- ----- ------------ ------------
Operating profit/(loss) 4,396 (3,149)
Other losses (29) (32)
Finance income 16 78
Finance costs (1,091) (1,192)
------------------------------------------- ----- ------------ ------------
Profit/(loss) before tax 3,292 (4,295)
Tax charge 3 (7,173) (1,152)
------------------------------------------- ----- ------------ ------------
Loss for the period (3,881) (5,447)
------------------------------------------- ----- ------------ ------------
Earnings/(loss) per share
Basic and diluted (pence per share) 5 (1.2) (1.8)
------------------------------------------- ----- ------------ ------------
Adjusted results from continuing
operations
------------------------------------------- ----- ------------ ------------
Adjusted operating profit/(loss)
(1) 2 5,225 (2,360)
Adjusted basic and diluted earnings/(loss)
per share (pence per share) (2) 5 1.0 (1.0)
------------------------------------------- ----- ------------ ------------
(1) Adjusted operating profit/(loss) is an APM and is reconciled
to statutory profit/(loss) before tax in Note 2. The adjusted
operating profit/(loss) measure is presented before charging
GBP0.8m of adjusted items (2020: GBP0.8m) as set out in Note 2.
(2) Adjusted basic and diluted earnings/(loss) per share is an
APM and is reconciled to statutory earnings/(loss) per share in
Note 5.
The notes below form part of this condensed consolidated
financial information.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended 30 June 2021
Six months
Six months to to
30 June 30 June
2021 2020
(unaudited) (unaudited)
GBP'000 GBP'000
-------------------------------------------- ------------- ------------
Loss for the period (3,881) (5,447)
Other comprehensive income
Items that will not be reclassified
to profit or loss (net of tax):
Changes in fair value of equity instruments
at FVOCI (19) -
-------------------------------------------- ------------- ------------
Other comprehensive loss for the period (19) -
-------------------------------------------- ------------- ------------
Total comprehensive loss for the period (3,900) (5,447)
-------------------------------------------- ------------- ------------
The notes below form part of this condensed consolidated
financial information.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2021
30 June 30 June 31 December
2021 2020 2020
(unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
------------------------------ ----- ------------ ------------ -----------
Non-current assets
Goodwill 6 17,716 10,100 11,420
Other intangible assets 6 108,110 102,074 103,542
Property, plant and equipment 11,468 11,428 10,548
Right-of-use assets 7 49,081 47,854 44,444
Contract assets 582 759 350
Interest in associate
and investments 3,684 1,239 1,237
Deferred tax assets 1,272 2,859 1,904
------------------------------ ----- ------------ ------------ -----------
191,913 176,313 173,445
------------------------------ ----- ------------ ------------ -----------
Current assets
Trade and other receivables 19,471 11,589 13,866
Contract assets 3,550 1,061 1,653
Current tax assets - - 76
Cash and cash equivalents 24,365 45,545 36,984
------------------------------ ----- ------------ ------------ -----------
47,386 58,195 52,579
------------------------------ ----- ------------ ------------ -----------
Total assets 239,299 234,508 226,024
------------------------------ ----- ------------ ------------ -----------
Current liabilities
Trade and other payables (20,317) (12,581) (10,309)
Borrowings - (5,000) -
Current tax liabilities (112) (154) -
Lease liabilities 7 (11,536) (12,780) (10,849)
Contract liabilities (6,917) (6,272) (7,659)
Provisions (338) (611) (367)
------------------------------ ----- ------------ ------------ -----------
(39,220) (37,398) (29,184)
------------------------------ ----- ------------ ------------ -----------
Net current assets 8,166 20,797 23,395
------------------------------ ----- ------------ ------------ -----------
Non-current liabilities
Lease liabilities 7 (41,761) (43,755) (40,709)
Contract liabilities (1,042) (1,211) (1,080)
Provisions (1,906) (1,174) (1,216)
Deferred tax liabilities (26,700) (19,066) (19,379)
------------------------------ ----- ------------ ------------ -----------
(71,409) (65,206) (62,384)
------------------------------ ----- ------------ ------------ -----------
Total liabilities (110,629) (102,604) (91,568)
------------------------------ ----- ------------ ------------ -----------
Net assets 128,670 131,904 134,456
------------------------------ ----- ------------ ------------ -----------
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 10 (3,063) (56) (374)
Retained earnings 105,211 105,438 108,308
------------------------------ ----- ------------ ------------ -----------
Total equity 128,670 131,904 134,456
------------------------------ ----- ------------ ------------ -----------
The notes below form part of this condensed consolidated
financial information.
These unaudited condensed consolidated interim financial
statements for the 6 months ended 30 June 2021 were approved by the
Board on 28 July 2021.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 June 2021
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 2021 3,301 20,568 2,653 (374) 108,308 134,456
--------------------------------- ----- -------- -------- --------- -------- --------- --------
Loss for the period - - - - (3,881) (3,881)
Other comprehensive loss
for the period (19) (19)
Dividends 4 - - - - - -
Own shares acquired in
the period 10 - - - (2,689) - (2,689)
Credit to equity for share-based
payments - - - - 803 803
Balance at 30 June 2021
(unaudited) 3,301 20,568 2,653 (3,063) 105,211 128,670
--------------------------------- ----- -------- -------- --------- -------- --------- --------
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 2020 2,751 - 2,653 (56) 110,433 115,781
--------------------------------- ----- -------- -------- --------- -------- --------- ---------
Loss and total comprehensive
loss for the period - - - - (5,447) (5,447)
Dividends 4 - - - - - -
Share issuance 550 20,568 - - - 21,118
Credit to equity for share-based
payments - - - - 452 452
Balance at 30 June 2020
(unaudited) 3,301 20,568 2,653 (56) 105,438 131,904
--------------------------------- ----- -------- -------- --------- -------- --------- ---------
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 2020 2,751 - 2,653 (56) 110,433 115,781
--------------------------------- ----- -------- -------- --------- -------- --------- --------
Loss and total comprehensive
loss for the period - - - - (3,191) (3,191)
Dividends 4 - - - - - -
Share issuance 550 20,568 - - - 21,118
Own shares acquired in
the period 10 - - - (318) - (318)
Credit to equity for share-based
payments - - - - 1,066 1,066
Balance at 31 December
2020 3,301 20,568 2,653 (374) 108,308 134,456
--------------------------------- ----- -------- -------- --------- -------- --------- --------
The notes below form part of this condensed consolidated
financial information.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Six months ended 30 June 2021
Six months
30 June Six months
2021 30 June
(unaudited) 2020(1) (unaudited)
Notes GBP'000 GBP'000
------------------------------------------------- ------------------------------------------------------------- --------------------
Operating activities
Operating profit/(loss) 4,396 (3,149)
Adjustments for:
Depreciation of property, plant and
equipment and right-of-use assets 6,387 6,262
Branch asset impairment - 1,420
Investment impairment 694 -
Gain on disposal of property, plant
and equipment and right-of-use assets (540) (173)
Amortisation of intangible assets 837 389
Decrease in provisions (109) (590)
Share-based payment charges 803 473
Operating cash flows before movements in working
capital 12,468 4,632
(Increase)/decrease in receivables (4,095) 1,662
Increase in payables 4,813 1,848
------------------------------------------------- ------------------------------------------------------------- --------------------
Cash generated by operations 13,186 8,142
Income taxes (paid)/received (18) 339
------------------------------------------------- ------------------------------------------------------------- --------------------
Net cash from operating activities 13,168 8,481
------------------------------------------------- -------------------------------------- --------------------- --------------------
Investing activities
Interest received 3 54
Proceeds on disposal of property,
plant and equipment 124 94
Proceeds on disposal of investments - 57
Purchases of property, plant and equipment (1,199) (208)
Purchases of intangibles - (29)
Purchases of investments (3,000) -
Acquisition of subsidiaries (net of
cash acquired) 9 (10,031) (1,913)
Net cash used in investing activities (14,103) (1,945)
------------------------------------------------- -------------------------------------- --------------------- --------------------
Financing activities(1)
Dividends paid 4 - -
Interest paid (10) (56)
Repayment of lease liabilities 7 (9,143) (2,707)
Sub-lease receipts 158 173
Purchase of own shares 10 (2,689) -
Net proceeds from issue of ordinary
share capital - 21,117
Proceeds from external borrowings - 5,000
------------------------------------------------- -------------------------------------- --------------------- --------------------
Net cash (used in)/from financing
activities (11,684) 23,527
------------------------------------------------- -------------------------------------- --------------------- --------------------
Net (decrease)/increase in cash and
cash equivalents (12,619) 30,063
Cash and cash equivalents at beginning
of period 36,984 15,482
------------------------------------------------- -------------------------------------- --------------------- --------------------
Cash and cash equivalents at end of
period 24,365 45,545
------------------------------------------------- -------------------------------------- --------------------- --------------------
(1) All liabilities associated with financing activities are in
relation to IFRS 16 lease liabilities except for the proceeds from
external borrowings in 2020. Refer to Note 7 for a reconciliation
of lease liabilities.
The notes below 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 consolidated interim financial statements for
the 6 months to 30 June 2021 have been prepared in accordance with
IAS 34 'Interim Financial Reporting' and also in accordance with
the measurement and recognition principles of UK adopted
international accounting standards. They do not include all of the
information required for full annual financial statements and
should be read in conjunction with the 2020 Annual Report and
Accounts, which were prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 and in accordance with international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
The comparative figures for the financial period ended 31
December 2020 are not the Group's statutory accounts for that
financial period. Those accounts have been reported on by the
Group's auditors and delivered to the registrar of companies. The
report of the auditor was (i) unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Financial Review. The Financial Review also
includes a summary of the Group's financial position and its cash
flows.
1.3 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 interim 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
interim financial statements. The 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 2021, the Group held a cash
balance of GBP24.4m (31 December 2020: GBP37.0m), no external
borrowings and an undrawn GBP5m RCF which has been extended and
expires in July 2024.
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 possible deterioration in market conditions, with
specific consideration given to the ongoing impact of Covid-19.
The reverse stress scenario incorporates a severe reduction in
trading from August 2021 to October 2021, approximately 1.3 times
more severe as that experienced from March 2020 to May 2020 during
the spring 2020 lockdown, followed by a protracted recovery from
November 2021 to May 2022 that is slower than that from June 2020
to September 2020 following the spring 2020 lockdown.
In the unlikely event of the reverse stress scenario, the Group
would have a negative cash position in June 2022, assuming the RCF
facility is not available due to covenants being breached. Under
such a scenario, additional mitigating action could be taken to
protect liquidity such as raising additional funds, seeking
agreement to defer lease payments and further reducing
discretionary spend.
The Group expects the RCF to be available throughout the going
concern review period with ongoing compliance with the RCF's
covenants. The going concern assumption is not dependent on the
availability of the RCF.
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 2020 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 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 13.
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.
1.6 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 2020 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 entity. Management has identified that the
Directors are the chief operating decision-makers 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) mortgage broking.
(i) Lettings earns commission from the letting and management of
residential properties and income from interest earned on tenants'
deposits.
(ii) Sales segment generates commission on sales of residential property.
(iii) Mortgage broking receives commission from the arrangement
of mortgages and related products under contracts with financial
service providers and receives administration fees from
clients.
Since the sales and lettings segments operate out of the same
premises and share support services, a significant proportion of
costs have to be apportioned between the segments. The basis of
apportionment used is headcount in each segment.
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 Directors on a segmental basis and are therefore not
disclosed. Goodwill and intangible assets have been allocated to
reportable segments as described in Note 6.
Adjusted operating profit/(loss) and adjusted operating
profit/(loss) margin
Adjusted operating profit/(loss) represents the profit/(loss)
before tax for the period before finance income, finance costs,
other gains/losses and adjusted items. This measure is used by the
Directors for the purpose of resource allocation and assessment of
segment performance. Adjusted operating profit/(loss) margin is
used to measure the delivery of the Group's strategic
priorities.
Segment revenues and results
The following is an analysis of the Group's revenue and results
by reportable segment for the half year ended 30 June 2021:
Mortgage
Lettings Sales broking Consolidated
2021 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- --------- --------- -------------
Revenue 33,082 28,648 5,196 66,926
--------------------------- --------- --------- --------- -------------
Contribution(1) 22,475 16,923 2,341 41,739
Contribution margin(1) 67.9% 59.1% 45.1% 62.4%
--------------------------- --------- --------- --------- -------------
Adjusted operating profit 1,452 2,718 1,055 5,225
Adjusted operating profit
margin 4.4% 9.5% 20.3% 7.8%
Adjusted items(2) (829)
Operating profit 4,396
Other losses (29)
Finance income 16
Finance costs (1,091)
Profit before tax 3,292
--------------------------- --------- --------- --------- -------------
(1) Contribution and contribution margin are defined in Note
13.
(2) 2021 adjusted items charge of GBP0.8m relating to GBP0.5m of
acquisition costs, GBP0.7m impairment of an interest in an
associate to fair value to reflect the manner in which the carrying
amount will be principally recovered and a GBP0.4m credit relating
to property restructuring.
Other information
------------------------------- -------- -------- ----- --------
Depreciation and amortisation (4,105) (3,058) (61) (7,224)
------------------------------- -------- -------- ----- --------
The following is an analysis of the Group's revenue and results
by reportable segment for the half year ended 30 June 2020:
Mortgage
Lettings Sales broking Consolidated
2020 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- --------- --------- -------------
Revenue 25,675 11,073 3,602 40,350
---------------------------------- --------- --------- --------- -------------
Contribution(1) 18,394 4,859 1,619 24,872
Contribution margin(1) 71.6% 43.9% 44.9% 61.6%
---------------------------------- --------- --------- --------- -------------
Adjusted operating profit/(loss) 1,996 (4,806) 450 (2,360)
Adjusted operating profit/(loss)
margin 7.8% (43.4%) 12.5% (5.8%)
---------------------------------- --------- --------- --------- -------------
Adjusted items(2) (789)
---------------------------------- --------- --------- --------- -------------
Operating loss (3,149)
Other losses (32)
Finance income 78
Finance costs (1,192)
Loss before tax (4,295)
---------------------------------- --------- --------- --------- -------------
(1) Contribution and contribution margin are defined in Note
13.
(2) 2020 adjusted items charge of GBP0.8m relating to branch
impairments and property restructure costs.
Other information
------------------------------- -------- -------- ----- --------
Depreciation and amortisation (3,959) (2,631) (61) (6,651)
------------------------------- -------- -------- ----- --------
3. Taxation
The components of the income tax charge recognised in the Group
income statement are :
Six months Six months
to to
30 June 30 June
2021 2020
GBP'000 GBP'000
-------------------- ---------- ----------
Current tax charge 189 -
Deferred tax charge 6,984 1,152
-------------------- ---------- ----------
Income tax charge 7,173 1,152
-------------------- ---------- ----------
The tax charged within the 6 months ended 30 June 2021 has been
calculated by applying the effective rate of tax which is expected
to apply to the Group for the year ended 31 December 2021 using
rates substantively enacted by 30 June 2021 as required by IAS 34
'Interim Financial Reporting'.
Following the announcement made in the Chancellor's Spring
Budget regarding an increase to the UK corporate tax rate from 19%
to 25% from 1 April 2023, the Finance Bill 2021 was substantively
enacted on 24 May 2021. As IFRS requires that deferred tax be
measured at tax rates that have been substantively enacted at the
reporting date, the Group's deferred tax balances have been
remeasured accordingly and the impact has been reflected within the
interim financial statements.
4. Dividends
For 2021, the Board has declared an interim dividend of 0.18p
per ordinary share (GBP0.6m) to be paid in September 2021. The
financial statements do not reflect the dividend payable.
5. Earnings/(loss) per share
Basic earnings/(loss) per share is calculated by dividing the
loss for the year attributable to ordinary equity holders of the
Company by the weighted average number of ordinary shares
outstanding during the year.
Diluted earnings/(loss) per share is calculated by dividing the
earnings/(loss) attributable to ordinary equity holders of the
Company by the weighted average number of ordinary shares
outstanding during the year 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.
Six months Six months
to to
30 June 30 June
2021 2020
GBP'000 GBP'000
----------------------------------------------------
Loss for the purposes of basic and diluted loss
per share (3,881) (5,447)
Adjust for:
Adjusted items (including associated taxation)(1) 897 730
Deferred tax remeasurement (due to UK corporate
tax rate change) 6,316 1,739
Adjusted earnings/(loss) for the purposes of
adjusted earnings/(loss) per share 3,332 (2,978)
---------------------------------------------------- ----------- -----------
(1) Net adjusted items charge of GBP829k (2020: GBP789k), plus associated
tax charge of GBP68k (2020: GBP59k credit), resulting in an after
tax charge of GBP897k (2020: GBP730k).
Number of shares
Weighted average number of ordinary shares for
the purposes of basic earnings/(loss) per share 326,253,710 300,734,042
Effect of potentially dilutive ordinary shares 4,694,741 -
---------------------------------------------------- ----------- -----------
Weighted average number of ordinary shares for
the purpose of diluted earnings per share 330,948,451 300,734,042
---------------------------------------------------- ----------- -----------
Basic and diluted loss per share (in pence per
share)(1) (1.2) (1.8)
---------------------------------------------------- ----------- -----------
Basic and diluted adjusted earnings/(loss) per
share (in pence per share)(2) 1.0 (1.0)
---------------------------------------------------- ----------- -----------
(1) As the Group made a loss after tax in the first six months
of 2020 and 2021, the diluted loss per share for this period is
equal to the basic loss per share, due to the potentially dilutive
share options resulting in a reduction in the loss per share and
are therefore anti-dilutive.
(2) The 30 June 2020 comparator has been restated to reflect the
impact of the 2020 deferred tax remeasurement on the adjusted loss
for the period to enable year-on-year comparability.
6. Goodwill and other intangible assets
At 30 June 2021, goodwill and other intangible assets comprises
GBP125.8m of the balances set out below, with GBP6.3m of goodwill
and GBP5.4m of intangible assets additions in the period being
attributable to the acquisition of Douglas & Gordon (refer to
Note 9 for further details).
30 June 2021 31 December
GBP'000 30 June 2020 2020
GBP'000 GBP'000
------------------------------------- ------------ ------------ -----------
Goodwill 17,716 10,100 11,420
------------------------------------- ------------ ------------ -----------
Brand 99,000 99,000 99,000
Software 1,302 1,706 1,540
Customer contracts and relationships 7,808 1,368 3,002
------------------------------------- ------------ ------------ -----------
Other intangible assets 108,110 102,074 103,542
------------------------------------- ------------ ------------ -----------
Goodwill and other intangible
assets 125,826 112,174 114,962
------------------------------------- ------------ ------------ -----------
a) Review for indicators of significant impairment at 30 June
2021
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 2021, the Group has assessed for indicators of
significant impairment of the Group's goodwill and brand asset.
Following consideration of both internal and external impairment
indicators, including 2021 year-to-date trading performance, no
indicators of significant impairment have been identified.
b) Sensitivity analysis
Sensitivity analysis was performed as part of the impairment
review for the year ended 31 December 2020 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 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 9 of the 2020 Annual Report and Accounts,
the impairment model indicated brand asset headroom of GBP57.5m or
35% of the carrying value under test. Cash flows were sourced from
the Group's Board approved plan whilst also complying with the
requirements of the relevant accounting standard. Sales revenue was
assumed to recover to between the levels experienced in 2016 and
2017, which equates to an average increase of 11.1% over the
forecast period. Lettings revenue was assumed to grow at an average
rate of 4.6% over the forecast period, excluding future lettings
book 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 compound annual growth rate (CAGR) over the
forecast period reduces from 6.9% to 5.5%. Under a reasonable
possible downside scenario, in which sales revenue fails to recover
to 2017 levels by 2025 with an average 7% increase over the
forecast period, lettings revenue growth is limited to 3% and the
Group takes appropriate mitigating actions, such as reducing
discretionary spend and direct costs, the brand asset would be
impaired by GBP20.5m. At 30 June 2021 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.
7. 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 2021 30 June 2020 31 December 2020
GBP'000 GBP'000 GBP'000
--------------------------------------------------------- ------------ ------------ ----------------
Opening balance 44,444 51,404 51,404
Additions 4,779 2,005 3,379
Acquired through business combinations (refer to Note 9) 5,365 424 581
Disposals (337) (96) (396)
Depreciation (5,170) (4,857) (9,363)
Impairment charge - (1,026) (1,161)
--------------------------------------------------------- ------------ ------------ ----------------
Closing balance 49,081 47,854 44,444
--------------------------------------------------------- ------------ ------------ ----------------
Lease liabilities
The carrying amounts of lease liabilities recognised and the
movements during the period are outlined below:
30 June 2021 30 June 2020 31 December 2020
GBP'000 GBP'000 GBP'000
--------------------------------------------------------- ------------ ------------ ----------------
Opening balance 51,558 55,864 55,864
Additions 4,779 2,005 3,379
Acquired through business combinations (refer to Note 9) 5,497 424 581
Disposals (475) (187) (467)
Interest charge 1,081 1,136 2,216
Payments (9,143) (2,707) (10,015)
Closing balance 53,297 56,535 51,558
--------------------------------------------------------- ------------ ------------ ----------------
Current 11,536 12,780 10,849
Non-current 41,761 43,755 40,709
--------------------------------------------------------- ------------ ------------ ----------------
At the balance sheet date, the Group had outstanding commitments
for future minimum lease payments which fall due as follows:
30 June 2021 30 June 2020 31 December 2020
GBP'000 GBP'000 GBP'000
-------------------------------------------------------- ------------ ------------ ----------------
Maturity analysis - contractual undiscounted cash flows
Within one year 12,916 14,322 12,735
In the second to fifth years inclusive 34,730 32,647 30,771
After five years 13,917 18,329 15,240
61,563 65,298 58,746
-------------------------------------------------------- ------------ ------------ ----------------
8. Financial instruments
Categories of financial instruments
The book value and fair value of the Group's financial assets
and liabilities are as follows:
30 June 2021 30 June 2020 31 December
GBP'000 GBP'000 2020
GBP'000
--------------------------------------- ------------ ------------ -----------
Financial assets
FVOCI financial assets 3,487 317 317
Cash and cash equivalents 24,365 45,545 36,984
Financial assets recorded at amortised
cost 19,850 10,529 14,147
Financial liabilities
Financial liabilities recorded at
amortised cost (22,066) (12,581) (14,105)
Borrowings - (5,000) -
Lease liabilities (53,297) (56,535) (51,558)
--------------------------------------- ------------ ------------ -----------
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)
The Group does not hold any financial instruments categorised as
Level 2 by IFRS 13. The Level 1 and Level 3 financial instruments
held by the Group relate solely to listed equity shares and
unlisted equity shares respectively. The Group determines that
using cost is an appropriate estimate of fair value of the unlisted
equity securities.
The following table shows the changes in Level 1 and Level 3
financial assets for the six months ended 30 June 2021:
Level 1 Level 3
GBP'000 GBP'000
--------------------------------------- ------- -------
Opening balance 1 January 2021 - 317
Additions - 3,000
Acquired through business combinations 194 -
Fair value movement (24)
--------------------------------------- ------- -------
Closing balance 30 June 2021 170 3,317
--------------------------------------- ------- -------
In the period the Group invested GBP3m in PD Innovations
Limited, trading as Boomin, which has been classified as a Level 3
FVOCI financial asset. Boomin is the next generation property
website, which furthers the Group's ambition to remain at the
forefront of technological transformation in the property sector.
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 Group's annual financial statements as at 31 December
2020. There have been no changes in any risk management policies
since the year end.
9. business combinations
On 1 March 2021, the Group acquired 100% of the share capital of
Douglas & Gordon Estate Agents Limited ('Douglas & Gordon')
and its subsidiary companies, thereby obtaining control. Douglas
& Gordon is a high quality London estate agent with a large
lettings business delivering around 65% of total revenues from
2,900 tenancies. The acquisition is in line with the Group's
strategy of acquiring high quality businesses with strong lettings
books.
A provisional purchase price allocation exercise has been
completed which identified GBP5.4m of acquired intangible assets
relating to customer contracts and relationships, which are
identifiable and separable, and will be amortised over 15 years.
GBP6.3m of goodwill has arisen on acquisition 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, Douglas and Gordon contributed
GBP7.2m of revenue and GBP0.9m of profit before tax to the Group's
performance from 1 March 2021 to 30 June 2021. If the combination
had taken place at the beginning of the year, revenue for the
period would have been GBP2.8m higher and profit before tax would
have increased by GBP0.1m, excluding future synergies and
amortisation of acquired intangible assets.
Assets acquired and liabilities assumed
The provisional fair values of the identifiable assets and
liabilities of the combined acquired entities as at the date of
acquisition were:
Fair value recognised on acquisition
GBP'000
----------------------------------------------------- ------------------------------------
Assets
Acquired intangible assets recognised on acquisition 5,373
Property, plant and equipment 947
Intangible assets 23
Right-of use assets 5,365
Investments 194
Cash and cash equivalents 3,872
Trade and other receivables 1,534
Contract assets 1,955
Deferred tax asset 50
----------------------------------------------------- ------------------------------------
19,313
Liabilities
Trade and other payables (2,808)
Contract liabilities (56)
Lease liabilities (5,497)
Current tax liability -
Deferred tax liability (1,025)
Provisions (770)
----------------------------------------------------- ------------------------------------
(10,156)
----------------------------------------------------- ------------------------------------
Total identifiable net assets at fair value 9,157
----------------------------------------------------- ------------------------------------
Goodwill arising on acquisition 6,296
Fair value of consideration transferred 15,453
----------------------------------------------------- ------------------------------------
The fair value of the trade receivables amounts to GBP0.9m. The
gross amount of trade receivables is GBP1.1m and it is expected
that the full contractual amounts can be collected except for
GBP0.2m, which is provided for.
The Group measured the acquired lease liabilities using the
present value of the remaining lease payments at the date of
acquisition. The right-of-use assets were measured at an amount
equal to the lease liabilities, less any acquisition related
adjustments.
The deferred tax liability mainly comprises the tax effect of
the accelerated amortisation for tax purposes of the acquired
intangible assets recognised on acquisition.
Purchase consideration
GBP'000
---------------------------------------- -------
Amount settled in cash 13,903
Deferred cash consideration 1,050
Contingent cash consideration 500
Fair value of consideration transferred 15,453
---------------------------------------- -------
As part of the purchase agreement with the previous owners of
Douglas & Gordon, GBP0.5m of contingent cash consideration will
be due from the Group on the 12 month anniversary of the
acquisition based on the outcome of a number of agreed
contingencies. This contingent consideration is included within
trade and other payables.
Analysis of cash flows on acquisition
GBP'000
---------------------------------------------------------------------------------------------------
Consideration settled in cash (included in cash flows from investing activities) (13,903)
Net cash acquired with the subsidiary (included in cash flows from investing activities) 3,872
Transaction costs of the acquisition (included in cash flows from operating activities) (464)
Net cash flow on acquisition (10,495)
------------------------------------------------------------------------------------------ --------
Transaction costs amounting to GBP0.5m are not included as part
of consideration transferred and have been recognised as an expense
in the Group's consolidated income statement, as an adjusted
item.
10. OWN SHARES RESERVE
31 December
30 June 2021 30 June 2020 2020
GBP'000 GBP'000 GBP'000
--------------------------- ------------ ------------ -----------
Opening balance 374 56 56
Acquired during the period 2,689 - 318
Utilised during the period - - -
Closing balance 3,063 56 374
--------------------------- ------------ ------------ -----------
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 2021 was 5,200,379 (2020: 24,314).
During the first six months of the year 4,512,267 (2020: nil)
shares with a total value of GBP2,689,047 have been repurchased by
the Company through a share buyback programme and are held in
treasury at 30 June 2021.
11. 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. During the
period, no Group companies entered into transactions with related
parties who are not members of the Group.
12. Client monies
At 30 June 2021, client monies in approved bank and building
society accounts amounted to GBP101.2m (31 December 2020: GBP87.0m,
30 June 2020: GBP91.0m). 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
Group.
Client funds are protected by the Financial Services
Compensation Scheme (FSCS) under which the Government guarantees
amounts up to GBP85,000 each. This guarantee applies to each
individual client's deposit monies, not the sum total on
deposit.
13. 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.
Our 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/(loss)
Adjusted operating profit/(loss) represents the profit/(loss)
before tax for the period before finance income, finance costs,
other gains/(losses) and adjusted items (defined within Note 1) .
This is the measure reported to the Directors for the purpose of
resource allocation and assessment of segment performance. The
closest equivalent IFRS measure to adjusted operating profit
/(loss) is profit/(loss) before tax. A reconciliation between
profit/(loss) before tax and adjusted operating profit /(loss) is
included within the segmental analysis table included in Note
2.
b) Adjusted operating profit/(loss) margin
Adjusted operating profit/(loss) margin is defined as adjusted
operating profit/(loss) 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
the inputs used to derive adjusted operating profit/(loss)
margin.
c) 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 revenue and contribution
is presented below.
Six months to 30 June Lettings Sales Mortgage broking Consolidated
2021 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- --------- ----------------- -------------
Revenue 33,082 28,648 5,196 66,926
Less: Directly attributable
salary costs (10,580) (11,681) (2,855) (25,116)
Less: Bad debt charges (27) (44) - (71)
----------------------------- --------- --------- ----------------- -------------
Contribution 22,475 16,923 2,341 41,739
----------------------------- --------- --------- ----------------- -------------
Contribution margin 67.9% 59.1% 45.1% 62.4%
----------------------------- --------- --------- ----------------- -------------
Six months to 30 June Lettings Sales Mortgage broking Consolidated
2020 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- --------- --------- ----------------- -------------
Revenue 25,675 11,073 3,602 40,350
Less: Directly attributable
salary costs(1) (7,077) (6,048) (1,983) (15,108)
Less: Bad debt charges (204) (166) - (370)
----------------------------- --------- --------- ----------------- -------------
Contribution 18,394 4,859 1,619 24,872
----------------------------- --------- --------- ----------------- -------------
Contribution margin 71.6% 43.9% 44.9% 61.6%
----------------------------- --------- --------- ----------------- -------------
(1) Includes GBP2.2m of Government support relating to
Coronavirus Job Retention Scheme (CJRS) passed through to
furloughed employees recognised against direct operating costs. In
the first half of 2021, the Group made no use of CJRS.
d) Adjusted earnings/(loss) per share
Adjusted earnings/(loss) per share is defined as earnings/(loss)
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.
The measure is derived by dividing profit/(loss) after tax,
adjusted for adjusted items and the impact of remeasuring deferred
tax balances as a result of UK corporate tax rate changes, by the
weighted average number of ordinary shares in issue during the
financial period. This APM is a measure of management's view of the
Group's underlying earnings/(loss) per share.
The closest equivalent IFRS measure is basic earnings/(loss) per
share. Refer to Note 5 for a reconciliation between statutory
earnings/(loss) per share and adjusted earnings/(loss) per
share.
e) 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) 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.
Six months Six months
to 30 June to 30 June
2021 2020
GBP'000 GBP'000
--------------------------------------------- ----------- -----------
Net cash from operating activities 13,168 8,481
---------------------------------------------- ----------- -----------
Less: Repayment of IFRS 16 lease liabilities (9,143) (2,707)
Investing activities
Interest received 3 54
Proceeds on disposal of property, plant
and equipment 124 94
Proceeds on disposal of investments - 57
Purchases of property, plant and equipment (1,199) (208)
Purchases of intangibles - (29)
Net cash used in investing activities (1,072) (32)
---------------------------------------------- ----------- -----------
Net free cash inflow 2,953 5,742
---------------------------------------------- ----------- -----------
f) Net cash/debt
Net cash/(debt) is defined as cash and cash equivalents less
external borrowings. The APM defines how the Group measures net
cash/(debt) after applying IFRS 16 accounting principles. 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.
31 December
30 June 2021 30 June 2020 2020
GBP'000 GBP'000 GBP'000
-------------------------- ------------ ------------ -----------
Cash and cash equivalents 24,365 45,545 36,984
Borrowings - (5,000) -
Net cash 24,365 40,545 36,984
-------------------------- ------------ ------------ -----------
INDEPENT REVIEW REPORT TO FoxtonS group plc
Introduction
We have been engaged by Foxtons Group plc ('the Group') to
review the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2021 which
comprises the condensed consolidated income statement, condensed
consolidated statement of comprehensive income, condensed
consolidated statement of financial position, condensed
consolidated statement of changes in equity, condensed consolidated
cash flow statement and notes to the condensed consolidated interim
financial report.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
As disclosed in note 1.2, the annual financial statements of the
Group are prepared in accordance with international accounting
standards in conformity with the Companies Act 2006 and
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union.
The condensed set of financial statements included in this
half-yearly financial report has been prepared in accordance with
International Accounting Standard 34, "Interim Financial
Reporting", and also in accordance with the measurement and
recognition principles of UK adopted international accounting
standards.
Our responsibility
Our responsibility is to express to the Group a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Financial Reporting Council for use
in the United Kingdom. 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.
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 2021 is not prepared, in all material respects, in accordance
with International Accounting Standard 34, and also in accordance
with the measurement and recognition principles of UK adopted
international accounting standards, and the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Use of our report
Our report has been prepared in accordance with the terms of our
engagement to assist the Group in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with 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.
BDO LLP
Chartered Accountants
London, United Kingdom
28 July 2021
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
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END
IR SEMFWAEFSESW
(END) Dow Jones Newswires
July 29, 2021 02:00 ET (06:00 GMT)
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