Foxtons Regulatory News (FOXT)

Foxtons Group plc

INTERIM RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2022

28 JULY 2022

Foxtons Group plc (the "Company" or "Foxtons"), London's leading estate agent, today announces its financial results for the half year ended 30 June 2022.

Commenting on the results, Nigel Rich, Chairman of Foxtons, said: "In the first six months of the year we have made significant progress against our plans to reset the business and get back on the front foot. To this end I am very much looking forward to welcoming Guy Gittins, the former CEO of Chestertons, as CEO in September this year.

In the period, we successfully completed the integration of D&G lettings, as well as making a further two acquisitions in our lettings business to enhance earnings and market share. We enter the second half with a tightening grip on costs, a focus on sales intensity, and an improved ability to generate revenue from prudent investment in negotiators and financial services advisers.

There remains much to do, but the heart of Foxtons is strong, and we are well placed to accelerate profit growth and realise the potential of the business."

Financial summary

Financial highlights - half year ended 30 June

· From continuing operations1:

- Revenue growth of 3%, reflects 20% growth in lettings revenue, a 17% decline in sales revenue and an 8% decline in financial services revenue.

- Sales and financial services revenues benefited in 2021 from sales transactions being pulled forward ahead of the 30 June 2021 stamp duty deadline.

- Adjusted operating profit of £6.2m, up 13%, with strong profit conversion from incremental lettings revenues and £0.9m of H1 cost savings (annualised savings of £3.0m), mitigating inflationary cost pressures.

- Profit before tax of £4.3m up 21%.

· Net free cash inflow of £2.8m (2021: £3.0m).

· Net cash of £11.6m at 30 June 2022 (31 December 2021: £19.4m), after £8.5m of net cash outflow relating to lettings acquisitions, £0.9m of share buybacks and dividends paid of £0.9m.

· Interim dividend of 0.20p per share (2021: 0.18p).

Continued strategic progress in the half

· Organic revenue growth

- Streamlined executive and senior management, introducing more estate agency expertise, to drive a return to a robust culture of sales intensity and productivity.

- Invested in sales negotiators and financial advisers to better maximise the existing opportunity and deliver profit growth.

- New revenue channels delivered good organic growth with the Asia Pacific channel revenue doubling to £1.9m and Build to Rent revenue exceeding £1m.

· Lettings portfolio acquisitions

- Successful integration of D&G lettings with synergies delivered in line with expectations, £5.7m of revenue and £2.6m of operating profit in the period.

- Lettings portfolio stands at c.27,500 tenancies, with 2,500 new tenancies added in the period through the acquisition of Gordon & Co and Stones Residential, both expected to be earnings enhancing towards the end of 2022.

- Building a pipeline of lettings portfolio targets, with a view to delivering further acquisitions in the next 12 months.

·  Profit growth

- Increased adjusted operating profit margin by 90bps to 9.5%.

- Cost action taken to streamline the Executive Board and de-layer senior management with £0.7m of reorganisation costs recognised in the first half as adjusted items.

- Expect to realise £3.0m of annualised savings from cost action, with £0.9m delivered in H1 2022. Cost savings mitigate ongoing external cost pressures and enable reinvestment in revenue growth areas.

Outlook

Notwithstanding the global and domestic headwinds impacting the UK economy, we expect adjusted earnings growth in the second half compared to H2 2021, including some additional benefit from the recent lettings portfolio acquisitions. We anticipate adjusted earnings for the full year to be at least in line with market expectations.

1 Both 2021 and 2022 results are presented on a continuing operations basis and excludes the results of the D&G sales business (disposed of on 11 February 2022).

 2 Adjusted operating profit is defined as profit before tax for the period before finance income, finance cost, other gains/(losses) and adjusted items.

3 Adjusted earnings per share is defined as earnings 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 7 for a reconciliation between earnings/(loss) per share and adjusted earnings per share.

4 Total Group includes results from both continuing operations and discontinued operations. On a total Group basis, revenue was £65.6m and adjusted operating profit was £5.6m. Refer to Note 5 for details of the results from discontinued operations.

5 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), divestments and purchases of investments.

The Company will present a live webcast at 9:00am (BST) for analysts and investors. To access you will be required to pre‐register using the following link: https://secure.emincote.com/client/foxtons/interim-results-2022. A replay of the presentation will be available shortly afterwards on the webcast link. The presentation will also be broadcast via conference call. To access you will be required to pre‐register using the following link: https://secure.emincote.com/client/foxtons/interim-results-2022/vip_connect

For further information, please contact:

About

Foxtons is London's leading estate agent with the most recognised brand. Founded in 1981, Foxtons operates from a network of interconnected branches, offering a range of residential related services across three revenue streams: lettings, sales and financial services.

Foxtons is confident it can deliver significant shareholder value by delivering against core strategic objectives:

· Driving organic revenue growth through market share growth, further developing our revenue channels and enhancing cross-sell capabilities;

· Identifying, acquiring, and integrating high quality lettings portfolios; and

· Achieving profit growth by increasing staff productivity and continuing to streamline infrastructure and management.

To find out more, please visit www.foxtonsgroup.co.uk

CHAIRMAN'S STATEMENT

The last six months have seen a marked change in the political and economic outlook both globally and nationally. The continuing war in Ukraine and the sad consequences for its people has further exacerbated inflationary pressures. Interest rates and mortgage rates have risen, and although they still remain relatively low, further increases may impact the London sales market. Despite these headwinds, I am pleased to report that Foxtons has made good progress.

Significant changes have occurred in the senior management team with the departures, for a variety of reasons, of the CEO, COO, CFO and other senior managers. As announced on 30 May, Guy Gittins, the former CEO of Chestertons, will join the Company as CEO on 5 September. Guy began his estate agency career at Foxtons and has proven himself to be a highly effective leader and business builder within the industry. We look forward to Guy bringing his skills as an estate agent and as a successful CEO to Foxtons in September with a particular emphasis on driving revenue and gross margin, as well as reviewing the cost structure of the business.

Pending Guy's arrival, Peter Rollings, a non-Executive Director, agreed to take over as acting CEO following Nic Budden's departure. Peter was for a number of years a Managing Director of Foxtons and subsequently successfully bought and grew Marsh & Parsons before conducting a sale to LSL. I am very grateful to Peter for taking on the interim CEO role. He will revert to being a non-Executive Director again once Guy is in position.

Both Nic Budden and Patrick Franco retired from the Board during the period. We will be looking at the Board composition in the coming months to ensure it is best placed to meet the needs of the business and governance requirements.

Amidst the political and economic turmoil, it is pleasing to report that the Company has increased adjusted operating profits by 13% from £5.4m to £6.2m, and profit before tax has increased by 21% from £3.6m to £4.3m. The lettings business performed particularly strongly, with 20% revenue growth year-on-year, enhanced by the contribution from the acquired D&G portfolio and growth in rental prices. As expected, sales revenue was down in the half year due to the prior period benefiting from stamp duty relief which pulled forward significant transaction volumes into the first half of 2021. There is still much to do to improve our performance in sales of which the strategic recruitment and retention of negotiators is crucial.

We ended the half year with net cash of £11.6m compared with £19.4m at the previous year end. In May we acquired two lettings portfolios for £8.2m cash, with a further £1.5m of consideration deferred over the next 12 months. Over the period we also spent £0.9m on share buybacks and paid a final dividend of £0.9m. We expect to make further lettings portfolio acquisitions during the next 12 months and will review the continuation of share buybacks once the current commitment to buy up to £3m of shares is fulfilled.

The Board has declared an interim dividend of 0.20p per share (2021: 0.18p per share) which will be paid on 27 September 2022 to shareholders on the register at 26 August 2022.

Notwithstanding the global and domestic headwinds impacting the UK economy, we expect adjusted earnings growth in the second half compared to H2 2021, including some additional benefit from the recent lettings portfolio acquisitions. We anticipate adjusted earnings for the full year to be at least in line with market expectations. Above all we look forward to the arrival of Guy Gittins and the impact and enthusiasm he will bring to the business.

Nigel Rich CBE

Chairman

INTERIM CHIEF EXECUTIVE'S REVIEW

The Group made good progress in the first half of 2022, and I'm delighted to be leading the business on an interim basis before Guy Gittins, the former CEO of Chestertons, joins us in September. Over the last two months, I have reviewed the fundamentals of the business, which I'm pleased to say are strong, but importantly note there is significant opportunity to be realised by investing in the right areas.

First half Group revenue from continuing operations grew 3% to £65.1m (2021: £63.4m) comprising: lettings £39.4m (2021: £32.9m); sales £20.8m (2021: £25.2m) and financial services £4.8m (2021: £5.2m). Adjusted operating profit from continuing operations grew 13% to £6.2m (2021: £5.4m) and profit before tax from continuing operations grew 21% to £4.3m (2021: £3.6m).

Delivering against the strategy

The executive team has been focused on delivering against our core objectives to grow organic revenues; deliver our lettings portfolio acquisition strategy; and drive profits, primarily through increasing market share and cost management, whilst prioritising high return investments. 

Organic revenue growth

We accelerated our organic growth strategy in the first half by increasing the number of negotiators in our sales business and expanding our financial services advisers, to maximise the revenue and profit opportunity. Despite the tough talent market, we have made progress in scaling up the business to drive higher volumes through our fixed cost base, enabling us to further benefit from our inherent operational leverage.

Lettings portfolio acquisitions

As part of our strategy to deliver attractive total returns on invested capital and improve the resilience of our revenues, we acquired two lettings portfolios, Gordon & Co and Stones Residential. The acquisitions add 2,500 additional tenancies to our lettings portfolio, which now stands at c.27,500 tenancies. We expect the acquisitions to be earnings enhancing towards the end of the year once acquisition synergies start to be realised. Following a successful integration, that delivered the planned cost synergies, the D&G lettings portfolio is trading well contributing £2.6m in operating profits in the first half.

Profit growth and cost management

While there remains limited flexibility on core costs, we have made significant progress on simplifying our management structures and expect to deliver £3m of cost savings on an annualised basis. These savings help mitigate external cost pressures, such as national insurance increases, business rates increases, wage inflation and utilities inflation, and enable us to invest in the business to sustainably grow market share and profits.

Operating Review - continuing operations

Lettings

The lettings business performed well in the first half as we capitalised on a strong market. Revenue grew £6.5m, or by 20%, reflecting organic growth of £4.0m, £2.0m incremental revenue from D&G and £0.5m of revenue from the May 2022 acquisitions. Organic growth was driven by a 23% increase in average rental prices compared to the prior year, longer tenancies, and growth in Build to Rent and short lets. In the second half, supply of lettings properties is expected to remain restricted but strong tenant demand will likely underpin rents over the remainder of 2022.

Sales

Sales traded in line with expectations, with revenue down £4.4m, or by 17%, as the first half of 2021 benefited from transaction volumes pulled forward to take advantage of stamp duty relief ahead of the 30 June 2021 deadline, creating a tougher comparative period. We expect a stronger third quarter in sales compared to the prior year with an under offer commission pipeline of £19m at 30 June 2022, significantly higher than both the prior year and 2019.

Under offer to exchange conversion continues to be slower than normal due to continuing industry-wide capacity issues in conveyancing and surveying; This means, while we saw good levels of buyer demand and agreed sales, the time for these transactions to exchange contracts has extended which can increase the risk of transaction fall through. The time for a property to convert from 'under offer' to 'exchange' was approximately 96 days, 23% higher than pre-pandemic norms, a trend we expect to continue through the second half.

Financial services

Alexander Hall, our financial services business, performed in line with expectations with revenues down £0.4m, or by 8%, due to lower new purchase mortgage activity compared to the prior period which also benefited from stamp duty relief. We saw good levels of repeat remortgage business partly offsetting the reduction in new business and a 11% increase in average revenue per transaction reflecting higher mortgage loan values.

We have made good progress over the first half and I look forward to this continuing under Guy when he joins in September.

Peter Rollings

Interim Chief Executive Officer

PERFORMANCE AT A GLANCE

1 Both 2021 and 2022 results are presented on a continuing operations basis and exclude the results of the D&G sales business, a discontinued operation disposed of on 11 February 2022.

2 These measures are APMs used by the Group and are defined, and purpose explained within Note 15.

3 Net cash from operating activities and net free cash inflow includes continuing and discontinued operations.

FINANCIAL REVIEW

Financial highlights

1 These measures are APMs. APMs are defined, purpose explained and reconciled to statutory measures within Note 15 of the financial statements. Note: Throughout this review, amounts in tables may have been rounded and accordingly may not precisely sum to the total amounts expressed in such tables.

Revenue from continuing operations increased by 3% to £65.1m (2021: £63.4m), with lettings revenue up 20%, sales revenue down 17% and financial services revenue down 8%. The decrease in sales and financial services revenue is reflective of a significant number of sales transactions being pulled forward into Q2 2021 ahead of the 30 June 2021 stamp duty relief deadline.

Adjusted operating profit from continuing operations increased by 13% to £6.2m (2021: £5.4m). Profit before tax from continuing operations was £4.3m (2021: £3.6m) and profit after tax was £2.9m (2021: £3.7m loss).

On a total Group basis, which includes both continuing and discontinued operations, £2.8m of net free cash flow was generated (2021: £3.0m). Net cash at the end of the period was £11.6m (31 December 2021: £19.4m, excluding cash classified as held for sale). The Group continues to have access to a £5.0m revolving credit facility (RCF) which expires in June 2024 and remained undrawn throughout the period.

Revenue (from continuing operations)

The Group consists of three operating segments: Lettings, sales and financial services. Narrative on segmental revenue performance against 2021 follows:

Lettings revenue

Lettings revenues increased by 20% to £39.4m (2021: £32.9m) and average revenue per lettings transaction was up 32% to £4,330 (2021: £3,284). Revenue growth includes £4.0m of organic revenue growth, driven by rental price increases more than offsetting a reduction in transaction volumes, £2.0m of growth from D&G, including £1.7m from two additional months of trading, and £0.5m of revenue from the acquisitions completed in May 2022. D&G lettings, which was fully integrated into the Foxtons infrastructure in February 2022, contributed total revenue of £5.7m.

Sales revenue

Sales revenue declined by 17% to £20.8m (2021: £25.2m) reflecting a reduction in market volumes compared to the first half of 2021 which benefited from a significant number of sales transactions being pulled forward ahead of the 30 June 2021 stamp duty deadline. The average revenue per transaction was £13,627 or 1% higher (2021: £13,532). The average price of properties sold increased to £586k (2021: £560k) which reflects our increased focus on driving instructions on higher value property.

Financial services revenue

Financial services revenue decreased by 8% to £4.8m (2021: £5.2m), with new purchase mortgage revenues down due to H1 2021 benefiting from a significant number of sales transactions being pulled forward ahead of the 30 June 2021 stamp duty deadline.

Contribution and contribution margin (from continuing operations)

1Certain changes have been made to the segmental disclosures in the period. The relevant changes are summarised in Note 2.

Group contribution, defined as revenue less direct salary costs of front office staff and bad debt charges, increased to £41.9m (2021: £39.4m). The increase is attributable to incremental revenue converting to contribution resulting in a contribution margin of 64.3% (2021: 62.2%).

Adjusted operating profit and adjusted operating profit margin (from continuing operations)

1Certain changes have been made to the segmental disclosures in the period. The relevant changes are summarised in Note 2.

Adjusted operating profit for the period increased by 13% to £6.2m (2021: £5.4m). The increase is driven by higher revenue in the half, realisation of synergies in D&G lettings and ongoing cost action which has offset external cost pressures. D&G lettings contributed £2.6m of adjusted operating profit (2021: £1.1m) on £5.7m of revenue (2021: £3.7m).

For the purposes of segmental reporting, shared costs relating to the estate agency businesses are allocated between the lettings business and the sales business with reference to relevant cost drivers, such as front office headcount in the respective businesses. Corporate costs, which relate to non-executive director and other listed entity costs, are not allocated to the operating segments and are presented separately.

Adjusted operating profit of £6.2m (2021: £5.4m) is after charging £58.9m (2021: £57.9m) of costs, which includes the following:

· Direct operating costs of £23.2m (2021: £23.9m) relating to direct salary costs of front office staff and bad debt charges; and

· Other operating costs, excluding adjusted items, of £35.7m (2021: £34.0m), which includes the following non-cash charges:

- Depreciation charges of £6.0m (2021: £6.0m);

- Amortisation charges of £0.7m (2021: £0.7m), including £0.4m (2021: £0.4m) relating to acquired intangibles; and

- Share-based payment charges of £0.6m (2021: £0.9m charge).

Profit before tax (from continuing operations)

Adjusted operating profit excludes net adjusted item charges of £0.9m (2021: £0.8m) classified in line with the Group's accounting policy. The net adjusted item charges comprise: £0.2m of acquisition related costs; £0.7m of reorganisation costs; and £0.1m of net property related credits. Net finance costs and other losses of £1.0m (2021: £1.0m) relate to interest charges on lease liabilities.

PROFIT/(Loss) after tax (from continuing operations)

The profit after tax of £2.9m (2021: loss of £3.7m) is after a total tax charge of £1.4m, of which £0.7m relates to current tax and £0.7m relates to non-cash deferred tax accounting charges.

The effective tax rate for the period was 32.4% (2021: (203.1%)) which compares to the statutory corporation tax rate of 19.0% (2021: 19.0%). The variance in the effective tax rate compared to the prior year is driven by the one-off remeasurement in H1 2021 of the Group's deferred tax liabilities to the corporation tax rate of 25% that was substantially enacted in May 2021. 

The Group's net deferred tax liability at 30 June 2022 totalled £26.1m (2021: £25.4m), which includes £27.2m (2021: £26.7m) of deferred tax liabilities relating to the Group's intangible assets, offset by deferred tax assets of £1.0m (2021: £1.3m). The deferred tax assets relate to tax losses brought forward which are expected to be recovered through future taxable profits.

The Group has a low-risk approach to its tax affairs and all business activities are 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 Group received no tax refunds during the year (2021: £nil).

Earnings per share (from continuing operations)

On a continuing operations basis, earnings per share (basic and diluted) was 0.9p. On an adjusted basis, which excludes adjusted item charges of £0.7m (net of tax) and no deferred tax re-measurement charge, earnings per share (basic and diluted) was 1.1p.

net free cash flow and Net cash (from continuing AND DISCONTINUED operations)

1 Excludes £8.5m (2021: £10.0m) of cash outflows relating to the acquisition of subsidiaries (net of any cash acquired), £3.7m (2021: £nil) relating to the disposal of discontinued operations (net of cash disposed) and £0.4m related to the purchase of investments (2021: £3.0m).

Net free cash flow, from continuing and discontinued operations, of £2.8m (2021: £3.0m), was driven by increased profitability, partly offset by £5.9m of lease liability payments and £0.9m of net capital expenditure.

The Group held net cash, excluding lease liabilities, of £11.6m (31 December 2021: £19.4m), with £0.1m external borrowing (31 December 2021: £nil).

Acquisitions

Gordon & Co and Stones Residential

On 25 May 2022, the Group acquired the entire issued share capital of two estate agents, Gordon & Co, and Stones Residential. The acquisitions have strong lettings businesses that together generate over 80% of their total combined revenues from lettings services across 2,500 tenancies.

Total consideration was £9.8m with £8.2m paid in May 2022 and £1.5m of contingent cash consideration remaining, deferred for up to a period of 12 months subject to the business achieving certain performance targets. Consideration paid in the period, net of cash acquired, was £8.0m.

Acquired net assets have been provisionally fair valued at the date of acquisition and include £2.9m of customer contracts and relationships and £8.3m of acquired goodwill. The acquisitions contributed £0.5m of revenue and £nil of adjusted operating profit in the first 5 weeks of ownership, and prior to any synergies being realised. Refer to Note 11 for further details.

D&G lettings business

£0.5m of deferred consideration, relating to the acquisition of the D&G lettings business which was acquired on 1 March 2021, was paid in the period.

Discontinued operations

In both the current and prior period, discontinued operations relates to the D&G sales business, which was acquired alongside the D&G lettings business and disposed of on 11 February 2022 to its CEO, James Evans, having been approved by shareholders at the General Meeting held on 10 February 2022. H1 2021 results includes 4 months of trading from the date of acquisition (1 March 2021) and H1 2022 results includes trading up to the date of disposal (11 February 2022).

On a total Group basis, which includes both continuing and discontinued operations, revenue was £65.6m (2021: £66.9m) and adjusted operating profit was £5.6m (2021: £5.2m).

Other balance sheet positions

At 30 June the significant balance sheet positions were:

· Goodwill of £26.0m (2021: £17.7m) and other intangible assets of £109.5m (2021: £108.1m), with the increase due to the May 2022 acquisitions which contributed £8.3m of goodwill and £2.9m of intangible assets.

· Trade and other receivables of £18.9m (2021: £19.5m) and trade and other payables of £18.2m (2021: £20.3m).

· Total contract assets of £5.5m (2021: £4.1m) and total contract liabilities of £8.4m (2021: £8.0m).

· Lease liabilities of £46.9m (2021: £53.3m) and right-of-use assets of £42.2m (2021: £49.1m).

Interim Dividend

The Board has declared an interim dividend of 0.20p per share for the half year period (2021: interim dividend of 0.18p per share). Payment will be made on 27 September 2022 to shareholders on the register at close of business on 26 August 2022. The shares will be quoted ex-dividend on 25 August 2022.

Capital returns

A total of £0.9m (2021: £2.7m) of shares have been bought back to return excess capital to shareholders. The shares were bought back through the share buyback programme of up to £3.0m announced on 8 March 2022. Since December 2020 a total of £6.9m of shares have been bought back.

Post balance sheet events

There are no post balance sheet events to report.

Related partY transactions

Related party transactions are disclosed in Note 13 of the condensed financial statements. On 11 February 2022, the D&G sales business was disposed of through the sale of the entire share capital of Douglas & Gordon Limited and Douglas & Gordon (2) Limited, to Lochlan, a company owned by the CEO of Douglas & Gordon Limited, for nominal consideration of £2. This transaction was a related party transaction due to both the CEO, a previous director of Douglas & Gordon Limited, and Lochlan constituting related parties.

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 £5.0m RCF which expires in 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.

Chris Hough

Chief Financial Officer

27 July 2022

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 management updates, output from the various executive risk committees and reports from internal audit.

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 2022, the principal risks are considered to be consistent with those set out on pages 33 to 35 of the 2021 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

Internal risk factors

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 27 July 2022. 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

CONDENSED CONSOLIDATED INCOME STATEMENT

Six months ended 30 June 2022

1 The Group has presented D&G sales (disposed of on 11 February 2022) as a discontinued operation, and accordingly the prior period has been restated as required by IFRS, refer to Note 5.

2Adjusted operating profit is an APM and is reconciled to statutory profit before tax in Note 2. Adjusted operating profit from continuing operations is presented before charging £0.9m of adjusted items (2021: £0.8m) as set out in Note 2.

3 Adjusted earnings for the purposes of adjusted earnings per share from continuing operations is presented before charging £0.9m of adjusted items (2021: £0.8m) including associated tax credit totalling £0.2m (2021: £0.1m charge) and £nil non-cash deferred tax accounting re-measurement charges (2021: £6.3m), as set out in Note 7.

4Adjusted basic and diluted earnings per share is an APM and is reconciled to statutory earnings per share in Note 7.

The notes on pages 22 to 37 form part of this condensed consolidated financial information.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Six months ended 30 June 2022

1 The Group has presented D&G sales (disposed of on 11 February 2022) as a discontinued operation, and accordingly the prior period has been restated as required by IFRS, refer to Note 5.

The notes on pages 22 to 37 form part of this condensed consolidated financial information.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2022

The notes on pages 22 to 37 form part of this condensed consolidated financial information.

These unaudited condensed consolidated interim financial statements for the 6 months ended 30 June 2022 were approved by the Board on 27 July 2022.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Six months ended 30 June 2022

The notes on pages 22 to 37 form part of this condensed consolidated financial information.

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

Six months ended 30 June 2022

1 Total Group balances, which include cash related to continuing and discontinued operations

The notes on pages 22 to 37 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 interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2021 were approved by the Directors on 1 March 2022 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The financial statements have been reviewed, not audited.

This condensed consolidated interim financial report for the half-year reporting period ended 30 June 2022 has been prepared in accordance with the UK-adopted International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

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 2022, the Group held a net cash balance of £11.6m (31 December 2021: £19.4m, excluding cash held for sale) and an undrawn £5.0m rolling credit facility ('RCF') which 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 market conditions and the geopolitical environment.

The reverse stress scenario incorporates a severe reduction in trading from August 2022 to March 2023 against plan, approximately 1.1 times more severe as that experienced from March 2020 to October 2020 during the spring 2020 Covid-19 related lockdown and recovery period.

In the unlikely event of the reverse stress scenario, the Group would have a negative cash position in March 2023, 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 2021 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 Discontinued operations

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the consolidated income statement. Additional disclosures are provided in Note 5. All other notes to the interim financial statements include amounts for continuing operations, unless indicated otherwise.

1.6 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 15. 

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.

1.7 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 2021 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 Board is the Chief Operating Decision Maker ('CODM') 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) Financial services.

(i) Lettings generates commission from the letting and management of residential properties and income from interest earned on tenants' deposits.

(ii) Sales generates commission on sales of residential property.

(iii) Financial services generates commission from the arrangement of mortgages and related products under contracts with financial service providers and receives administration fees from clients.

Certain changes have been made to the segmental disclosures in the period. The relevant changes are summarised below:

- Corporate costs that are managed on a Group basis, and cannot be reasonably attributed directly to the operating activities of the Group's operating segments, are no longer allocated to the operating segments. Corporate costs are now presented within a separate column of the segmental disclosure as 'Corporate costs'.

- Since the lettings and sales segments operate out of the same premises and share support services, a significant proportion of costs are apportioned between the segments. The cost allocation methodology used to allocate shared costs between the lettings and sales segments has been updated to better reflect the cost consumed by each of the segments.

- The prior period comparatives have been restated to enable fair comparability against the current year segmental results.

- The financial services segment, previously referred to as the 'mortgage broking' segment, has been renamed in the period. The renaming of the segment is reflective of the segment providing a range of financial services.

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 Board on a segmental basis and are therefore not disclosed.

The segmental disclosures include two APMs as defined below. Further details of the APMs is provided in Note 15:

- 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. These measures indicate the profitability and efficiency of the segments before the allocation of shared costs.

- Adjusted operating profit and adjusted operating profit margin

Adjusted operating profit represents the profit before tax for the period before adjusted items (defined in Note 1), finance income, finance cost and other gains/losses. Adjusted operating profit margin is defined as adjusted operating profit divided by revenue. These measures are used by the Board for the purpose of resource allocation and assessment of segment performance. Adjusted operating profit 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 continuing operations results by reportable segment for the half year ended 30 June 2022:

The Group has presented D&G sales (disposed of on 11 February 2022) as a discontinued operation. The following is an analysis of the Group's results split by continuing and discontinued operations for the half year ended 30 June 2022:

The following is an analysis of the Group's continuing operations results by reportable segment for the half year ended 30 June 2021:

1The Group has presented D&G sales (disposed of on 11 February 2022) as a discontinued operation, and accordingly the prior period has been restated as required by IFRS, refer to Note 5. In addition, prior year comparative segmental contribution and adjusted operating profit has been restated to reflect the cost allocation changes described above and to enable fair comparability against the current year segmental results.

The following is an analysis of the Group's results split by continuing and discontinued operations for the half year ended 30 June 2021:

3. ADJUSTED ITEMS

Adjusted operating profit, adjusted operating profit margin and adjusted earnings per share, exclude adjusted items. These APMs are defined, purpose explained and reconciled to statutory measures in Note 2 and Note 15. The following items have been classified as adjusted items attributable to continuing operations in the period.

1Property related credit relates to the net of a charge relating to re-estimation of the provision for adjusted items, a net gain on the disposal of IFRS 16 balances and other charges relating to vacant property.

2Transaction related costs relate to costs involved with the acquisition of IMM Properties Limited (2021: for the acquisition of Douglas & Gordon Estate Agents Limited).

3Net cost of head office reorganisation activity.

4. Taxation

The components of the income tax charge recognised in the Group income statement are:

The tax charged within the 6 months ended 30 June 2022 has been calculated by applying the effective rate of tax which is expected to apply to the Group for the year ending 31 December 2022 using rates substantively enacted as at 30 June 2022 as required by IAS 34 'Interim Financial Reporting'.

Changes to the UK corporation tax rates, from 1 April 2023, were substantively enacted as part of the Finance Bill 2021 from 19% to 25%. 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 measured using these enacted rates.

5. DISCONTINUED OPERATIONS

On 1 March 2021, the Group acquired 100% of the share capital of Douglas & Gordon Estate Agents Limited and its subsidiary companies (collectively, 'D&G Group'), thereby obtaining control.

On 10 November 2021, the Board approved the integration of the Douglas & Gordon ('D&G') lettings business into the Foxtons network and the simultaneous disposal of the D&G sales business to Lochlan Holdings Limited ('Lochlan'), a company owned by the CEO of Douglas & Gordon Limited.

On 10 February 2022, the shareholders of the Company approved the disposal of the D&G sales business, which was a related party transaction under the Listing Rules, via an ordinary resolution at a General Meeting.

On 11 February 2022, the D&G lettings customer contracts and relationships were transferred from Douglas & Gordon Limited to Foxtons Limited by way of a distribution in specie at net book value. Immediately after the transfer, the D&G sales business, including branch and head office leases, was disposed of through the sale of the entire share capital of Douglas & Gordon Limited and Douglas & Gordon (2) Limited, to Lochlan for nominal consideration of £2.

The sale of D&G sales business resulted in a pre-tax gain on disposal of £0.2m, following a held-for-sale impairment charge of £3.2m recognised in the year ending 31 December 2021.

In accordance with IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations', the D&G sales business, a disposal group, has been presented as a discontinued operation in both the current period and the prior year comparative period.

Discontinued operations: Income statement

The following results of the operations classified as a discontinued operation have been eliminated from the Group's continuing operations results, and are shown as a single line item in the consolidated income statement.

1 The results for the six months to 30 June 2022 reflect trading for the period from 1 January 2022 to 11 February 2022. 

2 The results for the six months to 30 June 2021 reflect trading for the period from 1 March 2021 to 30 June 2021.

Discontinued operations: Cash flows

The net cash flows incurred from the sale of the discontinued operations are as follows:

6. Dividends

For 2022, the Board has declared an interim dividend of 0.20p (2021: 0.18p) per ordinary share to be paid in September 2022. The financial statements do not reflect the dividend payable.

7. Earnings per share

Basic earnings per share is calculated by dividing the profit for the period attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the financial period, excluding own shares held.

Diluted earnings per share is calculated by dividing the earnings attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares in issue during the financial period, excluding own shares held, 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.