- Some recovery seen in house sales
- Rental growth is still the main priority
The first quarter update for ubiquitous London-based estate agent Foxtons (FOXT) showed a certain amount of operational improvement against what looks like a slightly better, but still uncertain, housing market. There was also the sense that market share gains were the main driver of growth.
In some respects, Foxtons is not a representative example for the market as the company is foremost a lettings specialist. Indeed, management forecasts that £25mn to £30mn of adjusted operating profit will be underpinned by the non-cyclical lettings market in the medium term. Total rental sales were 5 per cent higher at £24mn, year on year. Still, house sales revenue, which was 17 per cent higher at £9.5mn, showed some signs of an improved macroeconomic picture compared with time last year, as well as market share gains for Foxtons.
The “sales agreed” measure was up by 31 per cent compared with 2023, with the value of the pipeline also up by a similar number, driven in part by better levels of stock. Management said: “This under-offer pipeline is expected to support further revenue growth in the second quarter, supported by an improving sales market backdrop as mortgage availability and rates have both stabilised.”
Broker Peel Hunt said, the shares are down slightly and trade at 11.2 times 2025’s expected earnings and 5.5 times EV/Ebitda, with a 12 per cent free cash flow yield. “The shares currently look fairly valued to us, though that could change if the strong sales backdrop continues through the middle of the year.” It is hard to disagree with that assessment, and investors should wait to see if Foxtons can deliver an improved level of growth in line with its operational plan.
Last IC view: Hold, 39.70p, 27 Jul 2023
