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Foxtons to pay another special dividend

Foxtons has been hit by the slowdown in the London housing market, but remains very cash-generative
March 11, 2015

It was a tale of two halves for estate agent Foxtons (FOXT) last year. A buoyant first half was followed by a more subdued second half as uncertainty ahead of the general election started to bite.

IC TIP: Hold at 207p

Focused on the top end of the London housing market, Foxtons is more exposed to worries about a mansion tax than its rivals. Last October it warned that profits would be down from the previous year. In the end, adjusted cash profits ended 7 per cent lower, at £46.2m, as margins slipped from 35.7 per cent to 32.1 per cent. Headline profits were higher, but that's because the previous year's numbers were depressed by £3.2m of exceptional costs from the group's initial public offering in September 2013.

Sales volumes slipped by 3.7 per cent, but commission revenue was ahead by 3.6 per cent thanks to a 7.5 per cent increase in revenue per deal - essentially the result of the average sales prices rising by more than 10 per cent to £544,000.

However, sales commission is only half the story, because nearly half of Foxtons' revenue is generated by the counter-cyclical lettings business. Revenue here grew by 1.5 per cent to £67.4m, while income from mortgage broking rose by more than a quarter to £6.3m. Foxtons also continues to expand its network, with seven new branches opened last year, taking the total to 51. This is important because, historically, new branches have achieved positive cash flow in around six or seven months, and broken even in cash terms within 19 months.

Both sides of the business remain highly cash-generative. With no debt and a sizeable cash pile, Foxtons once again rewarded shareholders with a special dividend.

Analysts at Numis trimmed their estimates for the current year in light of the "depressed" sales market. They now expect pre-tax profits of £43.2m and EPS of 12.2p.

FOXTONS (FOXT)
ORD PRICE:207pMARKET VALUE:£582m
TOUCH:205.75-207p12-MONTH HIGH:383pLOW: 143p
DIVIDEND YIELD:2.4%PE RATIO:17
NET ASSET VALUE:52p*NET CASH:£22.5m

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2010***10313.2nanil
2011***11625.6nanil
2012***12024.98.0nil
201313938.912.21.7**
201414442.111.94.94**
% change+4+8-2+191

Ex-div: 30 Apr

Payment: 29 May

*Includes intangible assets of £118m, or 42p a share

**Excludes special dividend of 3.74p a share in 2013 and 4.76p in 2014 ***Prior to flotation