Get 40% Off
🚨 Volatile Markets? Find Hidden Gems for Serious Outperformance
Find Stocks Now

Foxtons Group: Strong Results, Dividend And Share Buy Back In H2

Published 02/08/2021, 11:26
Updated 09/07/2023, 11:31

Foxtons (LON:FOXT) core London market has been improving all year and the interim results highlight both the recovery and the contribution from recent acquisitions. Furthermore, the company announced a return to paying dividends in respect of the half year and given the strength of both trading and the balance sheet, revealed a £3m share buyback programme that should augment earnings. We retain our underlying assumptions but raise our valuation by 1p to 130p to reflect the share buyback.

EPS Forecasts

H121 Results And Outlook

Share Price Performance

Share Price Performance

Strong markets and M&A imply good growth

Foxtons reported H1 revenue of £66.9m, up 29% versus H119, comfortably ahead of our expectations. Operating profit was £5.2m having been in loss in both 2019 and 2020 and PBT was £3.3m, again having been in loss for the previous two years. Adjusted EPS was 1.1p/share which has allowed Foxtons to declare a dividend of 0.18p/share. The company ended the period with net cash of £24.4m which along with the positive cash inflow has encouraged the board to announce a £3m share buyback.

Underlying forecasts unchanged

The outlook is encouraging despite the tapering of the stamp duty holiday as the market appears to be maintaining momentum. Our underlying full year forecasts are essentially unchanged, bar the inclusion of £1.5m of branch business rates, taken voluntarily in H1 and paid in July. Foxtons continues to roll out its growth strategy which was highlighted in its June capital markets day. This includes investing in the underlying business, pursuing M&A of lettings books, regional expansion and focusing on the Build to Rent (BTR) market which is expanding rapidly.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Valuation: Bull case value edges up to 130p/share

Our base case shows 2022e EPS of 2.4p, which gives a valuation below the current share price when we apply the average 2014/15 P/E of 17.5x. If we roll over our forecasts to 2023e, our basic, adjusted and diluted EPS of 2.9p implies a valuation of 50.8p, much closer to the current price. However, we would argue that future growth may not be fully reflected in the share price or our estimates as we do not forecast acquisitions. Our bull case highlights the potential upside in forecasts, where Foxtons is particularly geared to further acquisitions of lettings books as well as growth from BTR, regional expansion and underlying markets. Our bull case scenario suggests a potential 2022e EPS of 7.4p, which implies a valuation of 130p/share when the 17.5x P/E is applied, a 1p uplift due to the £3m share buyback announced.

Click on the PDF below to read the full report:

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.