Foxtons relying on lettings for revenue as brand is reshaped

Foxtons’ latest trading statement suggests that it’s heavily reliant on lettings revenue as the sales market stutters and the whole company is reshaped by its new top management. 

New chief executive Guy Gittins, formerly of Chestertons, says: “Whilst the macroeconomic backdrop remains uncertain, our resilient Lettings and Financial Services businesses, coupled with the operational improvements we are delivering at pace, should mitigate most of the impact of a potentially lower volume sales market.” 

The statement covers the calendar year of 2022 and it shows revenue for the whole group was up 11 per cent to £140.3m but most particularly benefiting from a 17 per cent growth in lettings revenue and eight per cent in financial services - even last year, with the strong sales market for much of the time, sales growth was just one per cent. 

However, in a candid section of the trading statement, the company gives a forthright assessment of failings that prevented it doing better last year, and for some time in the recent past.

“Four core operational failings have negatively impacted historical performance and prevented significant unfulfilled potential being realised” the firm says, with Gittins identifying the four as poor data accessibility and utilisation; outdated estate agency processes and diluted culture; too few staff and too little experienced staff; and no clear customer proposition. 

Gittins tells shareholders in the statrement: “My operational review is complete, whilst Foxtons has strong foundations, core operational failings have throttled historical performance and prevented significant unfilled potential from being realised.

“Operational improvements are being made at pace to rebuild our competitive advantages, including embedding a more confident articulation of our brand, investing in revenue generating headcount and improving our data platform to fully harness the power of our industry leading database. 

“With the support of our talented workforce, I am certain we have the collective determination to put Foxtons on top where it belongs, and with a refocused set of strategic priorities, have a medium-term growth ambition to deliver £25m to £30m of operating profit.”

In a detailed breakdown of Foxtons’ lettings success, the company says that D&G Lettings, acquired in March 2021, delivered £5.3m of operating profit in 2022 and a 35 per cent return on capital. 

Just this week Foxtons revealed it had snapped up small London lettings agency Atkinson McLeod for £7.4m: Foxtons says the acquisition represents further progress against Foxtons’ strategy of acquiring lettings businesses that deliver an attractive return on invested capital, enhance earnings and improve the resilience of the company. 

Since 2019 Foxtons has significantly increased the size of its lettings portfolio through acquisition. In January it told shareholders it had invested £10.6m in lettings acquisitions in the past year. It integrated the Douglas & Gordon lettings portfolio in early 2022 and later in the year it acquired two further lettings portfolios, adding 2,500 tenancies.