Foxtons Group plc

Good morning everyone and thank you for joining the Foxton's 2024 full year results presentation. I'm joined by Chris Hough, Group CFO and we look forward to answering any questions at the end of the call. I will take you through some of the key financial and operational highlights and Chris will talk you through the numbers. Since I took over as Foxton CEO just over two years ago, we have achieved a huge amount. We've forensically reviewed every part of the business and identified and fixed the areas that contributed to underperformance prior to my arrival. Significant investment has gone into creating the upgraded Foxton's operating platform, strengthening some areas and building entirely new capabilities in others. And this investment was delivered by our highly dedicated staff across every part of our business. I set out medium term targets for each of our businesses, as well as at group level. We've progressed at pace beyond my expectations and are now well on track to deliver on these targets and in doing so create significant value. With the turnaround now complete, the business is totally focused on delivering growth and accelerating performance to meet our profitability targets. And pleasingly, we can now look forward to the next stage of growth, which will be presented at a capital markets event in the second quarter of this year. Moving now to the key highlights for 2024. We delivered 11% revenue growth and a 38% profit growth, primarily driven by market share gains. This included a substantial 20% increase in sales market share and 12% growth in lettings new business volumes. This level of annual growth is highly unusual in a state agency and really highlights the sophistication and capabilities of the new Foxsons operating platform alongside our leadership position in our markets. And it is my view that this has only been possible due to the size of our customer database with well over two and a half million contacts built up over more than 20 years. The database is the largest in London and almost impossible to be recreated by our competition. And we also grew productivity. improving revenue per fee earner by 8% and revenue per branch by 13%. Productivity growth has been achieved through improving staff retention, best in class training, upskilling, and generally a laser focus on achieving the best outcomes for our customers. And we continued to improve the resilience of our businesses with non-cyclical and reoccurring activities generating over two thirds of revenue in the year. And finally, although the rebuild stage of our plan is complete, we haven't stood still. We are embracing a culture of continuous improvement, always identifying the upgrades and process improvements that will keep us ahead of the competition. In 2024, we focused on upgrades to improve lead generation and drive service and productivity levels, all of which support further revenue and profit growth. Turning now to slide seven and an update on the London lettings market. On the chart on the left-hand side, we've indexed tenant demand and property instruction levels to 2019, considered the last normal period before COVID. As you can see on the graph, supply and demand dynamics are starting to normalize in 24, but the imbalance still remains at elevated levels versus the 2019 comparator. Our focus on evolving and developing our industry leading platform has enabled us to maximize the opportunity from slightly higher levels of stock in the market. We visited, viewed, listed, and closed a higher number of deals than our competitors. And in 2024, this drove a 12% increase in new business volumes. Rental prices remain at the elevated levels we saw in 2023. and we expect this dynamic will continue to be underpinned by the long-term trend of high levels of demand and limited new supply of rental properties. On the regulatory front, the government is advancing the Renters' Rights Bill, largely continuing the framework proposed by the last administration. Whilst this change brings some uncertainty to the industry, we are working hard to ensure that as London's largest lettings agents, we can provide the best advice, deliver the best results and ensure the best protection for our landlords. As the lettings industry becomes more complex, I expect landlords will increasingly rely on large professional agents reinforcing our competitive advantage. Turning now to slide eight and an update on the London sales market. Exchange volumes in London were 9% higher than in 2023, with volumes reflecting a year of two halves. H1 volumes were broadly flat year on year, close to the historically low levels, with H2 volumes being 16% higher than the prior year. Pricing was broadly flat throughout the year. New buyer and seller activity grew throughout the year and in turn drove new sales agreed. The two charts on the bottom left-hand side clearly demonstrate this dynamic. In my view, the key drivers for this growth are interest rates beginning to come down and also the pent-up demand in the market. After a period of lower levels of activity, buyers are now accepting interest rates won't be at the 1% or 2% levels again and are now transacting to meet their lifestyle requirements. It's also worth remembering the process for a property transaction. the property is first listed on the market. And after completing a number of viewings, a sale is agreed between a buyer and a seller. Following a roughly three to four month due diligence process, the property ultimately exchanges and the transaction completes. And this process can take anywhere from six months up. Therefore, the good growth in offers agreed in Q4 24 will underpin revenue in Q1 2025. Some of this growth has undoubtedly been driven by first time buyers transacting before the stamp duty reliefs are withdrawn in April. However, through the first two months of this year, we've continued to see good levels of property instructions, viewings and offers suggesting that the market can deliver more growth in 2025. Turning now to slide 10 and an update on progress against our strategic priorities. my return to foxton's i laid out medium-term targets to deliver 28 to 33 million pounds of operating profit with this target now excluding the amortization of intangibles this was set against circa 10 million pounds of operating profit in the year before my arrival a year which saw sales volumes at their highest level in recent years this was ambitious but i felt it was achievable reflecting the high levels of potential I saw locked within the business. I also set strategic priorities and targets for each business within Foxton's, and I'm pleased to report that we are well on track with this delivery. In lettings, since 2022, we've achieved over 3% annual organic growth. And in 2024, we delivered 12% growth in new business volumes. This is a strong performance as landlords are typically highly sticky with their agents, which is why we focus on this non-cyclical and reoccurring revenue stream. Growth has been delivered through leveraging our data-driven lead generation capabilities to win new property instructions, and most importantly, letting them to tenants through a highly motivated sales force aided by the best in class technology and processes. A key feature is our digital lettings platform introduced last year. It has created a highly efficient digital journey, which allows us to lead score and prioritise inquiries to drive the productivity of our fee earners. This new business growth alongside stronger landlord retention through overhaul processes and a new real-time customer satisfaction feedback system has supported 4% growth in organic tenancy portfolio. And in doing so, we now have higher levels of reoccurring monthly revenues and have created increased deal opportunities in the future. On the acquisition side, our prior acquisitions continue to perform well. An average return of 26% is comfortably ahead of our 20% target. In October, 2024, we completed the simultaneous acquisitions of Haslam's and Imagine, expanding our footprint into the fast growing commuter belt towns of Reading and Watford. These acquisitions aligned with our strategy of adding high quality earnings enhancing lettings businesses to the group. But more exciting for me is that by adding hubs into these markets, we can unlock further growth, both organically and through further bolt on acquisitions. And on that note, I'm very pleased to announce that last week we completed the acquisition of a second lettings business in Watford. This was enabled by the rapid integration of the October acquisition into the Foxton's operating platform and demonstrates the scalability and roll-up capabilities of our platform. Acquisitions are a fantastic way to grow our portfolio of non-cyclical and reoccurring earnings. And with the high levels of return that we can deliver are value enhancing for our shareholders. The sector is highly fragmented. with the top 10 agents in London only accounting for around 23% of the London market. And with over 3,600 agents in London, there remains a significant opportunity for further consolidation. In sales, we delivered an impressive 20% growth in our market share of exchanged deals, allowing us to significantly outperform the market. Market share in 2024 was 4.9% and continuing to build on this supported by continued market recovery leaves us well positioned to return sales back to profitability. Putting our sales performance into context since taking over in 2022, we have grown our market share by nearly 50%, which frankly is well ahead of even my most ambitious internal targets. This underlines the incredible opportunity locked within our database, which we are unlocking by our data-led prospecting systems. And with rebuilt fee earner headcount and improved caliber, tenure, and experience, we're now selling these properties at a rate well ahead of the market. The operational upgrades we've made have boosted cross-selling rates within the sales business. And in 2024, we delivered a 41% increase in revenues from ancillary services. And in 2024, we agreed the most sales of any agent in London. We've entered 2025 with a record pipeline, which continued to grow even in recent months, leaving us well positioned to deliver further growth in this year. And finally, to financial services. We delivered 6% revenue growth in 2024, but this doesn't capture the amount of work that has been put into the business in the year. The business has been overhauled and key processes rebuilt through 2024 under a new managing director who joined at the beginning of the year. A full operational review of the business was completed and following this significant changes were made, including process upgrades, enhanced cross-selling from the estate agency business, an overhaul of the branding and the implementation of a new data suite to support a KPI driven performance culture. Together, these drove improved productivity with an 11% increase in revenue per advisor and an 8% rise in deals per advisor. With strengthened operational capabilities, I'm expecting this business to begin to deliver a meaningful contribution to the group's revenue and profits growth. And finally, to slide 11, where the benefits of our strategy can clearly be seen. We have grown our portfolio of non-cyclical and reoccurring revenues, which has totally transformed the group's financial profile and resilience. In 2024, this supported both revenue and operating profit growth and operating profit at its highest level in nearly a decade. And the level of transformation and robustness of the group today is illustrated by a comparison with 2021. We delivered over 21 million pounds of operating profit in 2024, 120% higher than the near circa 10 million pounds we delivered in 2021. This was despite London sales market volumes being 26% lower and a significant inflationary cost pressures over the past few years. This uplift in profitability, despite challenging microeconomic conditions, is a remarkable achievement and testament to the hard work of our teams across the business. These results also show solid progress against our plan to deliver further profit growth and reduce the impact of sales market cyclicality. And I hope demonstrates why I'm incredibly excited for the next chapter of growth that we can deliver. I'll now pass over to Chris who will run you through the financial review. Thank you Guy and good morning everyone.

I'm pleased to report that following a period of rebuilding a business, we are now firmly into the growth phase of our plan, as demonstrated by the financial highlights I have set out on slide 13. Backed by the Foxton's operating platform, we have delivered a year of significant growth with group revenue up 11% to 163.9 million. The main drivers being a big step forward in sales market share, and strong returns from our lettings acquisitions programme as we consolidate in a highly fragmented market. We delivered 21.6 million of adjusted operating profits, which is 38% higher than the prior year. Our adjusted operating profit margin grew by 260 basis points to 13.2%. The improved revenue to profit conversion reflects the inherent operating leverage in the business and a continued focus on margin growth, which is underpinned by fee-owner productivity and proactively managing the cost base. So, aligned to general market practice, we have updated the definition of adjusted operating profit. It now excludes the non-cash amortization of acquired intangibles. Throughout this presentation and in the financials, the prior year comparatives have been restated to ensure comparability. We have also restated the medium term adjusted operating profit targets that we first announced in March 2023 to align to this revised definition. The target range is now 28 million to 33 million of adjusted operating profits, an increase of 3 million. Statutory profit before tax was 17.5 million, up 121% on the prior year. On an adjusted basis, which strips out adjusted items and the amortisation of acquired intangibles, adjusted profit before tax was up 40% to 19.2 million. Adjusted EPS increased by 47% to five pence per share. This definition has also been updated to exclude the non-cash amortisation of acquired intangibles. We saw strengthened net free cash flow at 9.8 million, which compared to 0.1 million outflow in 2023, reflecting a return to strong cash generation and more normalised working capital movements. Finally, the board has declared a dividend of 0.95 pence per share, bringing total dividends declared for 2024 to 1.17 pence per share, an increase of 30% on the prior year. Turning now to slide 14 and an overview of the income statements and an explanation of the key movements that drove the 38% increase in adjusted operating profit. The group delivered 16.8 million of revenue growth, primarily driven by improved sales volumes and incremental year-on-year revenues from lettings acquisitions. I will talk to the key revenue dynamics in each business over the next three slides. Group revenue continues to be underpinned by our portfolio of non cyclical and recurring lettings revenues, with 65% of group revenue being generated by lettings. Direct costs were 5.1 million higher, reflecting increased revenue linked staff commissions and a 4% year on year increase in fee earner headcount. Headcount has been rebuilt over the last two years and is now broadly at the right levels to drive further growth. Overheads, including the depreciation of right of use assets, were £5.3 million higher, reflecting a number of key items. Incremental acquisition related operating costs, some of which will reduce as Realised Energies analyse in 2025. Secondly, we have made selective cost investments to support continued growth, mainly enhancing our performance marketing and lead generation capabilities. And thirdly, continuing inflationary pressures, which we continue to mitigate through cost management programmes and driving fee earner productivity. Depreciation, amortisation of non-acquired intangibles and share-based payments were 0.4 million higher. Together, these movements delivered a just operating profit of 21.6, a 38% increase on the prior year. Profit before tax was 9.6 million higher than the prior year, an increase of 121%, reflecting underlying improvements in group profitability and the minimal levels of adjusted items in the year. Now turning to slide 15 and performance in lettings. Lettings revenue grew by 4.8 million to 106 million, a record level for the group. Growth was driven by 4.3 million of incremental revenues from lettings acquisitions, reflecting two incremental months of trading from Atkinson Macleod, 10 months of incremental trading from Ludlow Thompson, and two months of incremental trading from Haslam's and Imagine. Like-for-like revenue growth was resilient in the period, underpinned by 12% growth in new business volumes as we focus on delivering organic growth. This growth offset an expected temporary reduction in the volume of existing tenancies of re-transacting as a result of longer tenancy terms being signed across 2022 and 2023. Like-for-like revenue growth also benefited from £1 million of additional interest earned on client monies, which supports the operating costs of managing client accounting. Average revenue per deal was 5% higher reflecting improved property management cross-sell and a change in mix towards higher fee new business volumes. This new business growth coupled with improved landlord retention supported 4% growth in the size of the organic portfolio across 2024. Portfolio growth allows us to generate a higher level of monthly recurring revenues alongside providing increased levels of future deal opportunities. As expected, rental prices for new deals were flat as supply and demand dynamics continued to normalise, but with prices remaining at elevated levels. Contribution grew 4% to 78.1 million, reflecting revenue growth, whilst the contribution margin fell slightly to 73.7%, reflecting a temporary reduction in higher margin re-transaction volumes. Adjusted operating profit was broadly flat at 27.2 million at a margin of 25.6%. Moving to slide 16, where I have presented more detail on the returns from our lettings acquisition strategy, under which we continue to consolidate in a highly fragmented market, targeting earnings accretive opportunities. Since 2020, we've acquired 10 portfolios, of which eight have been trading for a full year under Foxton's ownership. Post-acquisition organic revenue growth, high levels acquired landlord retention and cost synergies mean that we are able to drive an eight times improvement in EBITDA from pre-acquisition levels. This really demonstrates the significant value accretion that Foxton's operating platform can unlock. Since limited incremental cost is incurred in our well-resourced centralised functions, the acquisitions are margin accretive with an EBITDA margin of over 50% achieved to date. On a valuation basis, on average, we acquire portfolios as an EBITDA multiple of just under three times on a post synergies basis. This is a level we consider to be highly competitive and reflective of our ability to quickly realise synergies in acquired businesses. We have delivered an average return on investment of 26%, which is comfortably above our target of 20%. These returns highlight why we view the acquisition strategy as an effective use of capital and a proven route to delivering growth and value per share returns. Acquisitions are our preferred route for expansion into new geographies. as we can create new organic lettings and sales growth opportunities, whilst profitability is underpinned by acquired lettings revenues. As you know, we completed the acquisition of Haslands and Imagine in the commuter towns of Reading and Watford in October, 2024. These acquisitions delivered a further 2,900 tenancies and provide access to new growth markets. As Guy mentioned earlier, These commuter town acquisitions also unlock new organic growth opportunities and will act as hubs for further synergistic bolt-on acquisitions. We are moving at pace with us acquiring Marshall Vizard last week, a Watford lettings agent for 2.3 million on a cash-free and debt-free basis of which 0.5 million has been deferred for 12 months, subject to performance conditions. This acquisition firmly puts Foxton's as number one agent in the Watford area. We continue to target a minimum return on invested capital of 20% for Bolton acquisitions. Where acquisitions are more strategic in nature, such as Haslam's and Imagine, a return on capital above the group's weighted average cost of the capital is targeted, reflecting the high levels of organic and inorganic growth these acquisitions create. Moving to slide 17 and an update on the sales business. Sales revenue was 31% higher and we outperformed the market and delivered 20% market share growth, taking our exchange market share for the period to 4.9% compared to 4.1% in 2023. Key drivers were a 30% increase in deal volumes, outperforming the wider London market, which grew by 9%. Average sale prices for foxes were flat versus a 1% decline in the wider London market. And finally, sales commission rates were held at 2.25% on average. Our commission rates continue to represent a significant premium against our competitors. As we build our market share without compromising our premium fee position. The adjusted operating loss in sales narrowed to 4.1 million, an improvement of 58%, reflecting the inherent operating leverage in the business. By continuing to deliver market share growth supported by a continued normalization of market volumes, the business is set up to progress towards profitability. Finally, the under-offer pipeline at the end of February was 21% higher than the prior year as buyer and seller activity has remained strong in the first two months of the year. The higher under offer pipeline will support continued year-on-year revenue growth through the first half. Moving on to slide 18 on financial services. The business delivered 6% revenue growth driven by a 2% increase in volumes as sales market volumes improved. Internal productivity upgrades achieved through process and technology improvements helped offset an increase in the number of mortgages requiring rebroking in the year due to changes in borrowing rates over the course of 2024. Average revenue per transaction was at 5% driven by growth in new purchase activity, which commands a higher average fee than product transfers within the refinance business. In 2024, 40% of revenue was generated from non-cynical refinance activity and 60% was generated on purchase activity and other ancillary revenue sources. As Guy mentioned earlier, the business has undergone an operation overhaul over the past 12 months and is now well-placed to make a greater contribution to the group's overall earnings. Moving now to slide 19 and cash flow. Net free cash flow was positive at 9.8 million, reflecting stronger underlying cash generation and normalized working capital movements. The operating cash to net free cash bridge on the left hand side shows the items contributing to 9.8 million net free cash inflow. The key items to call out are a 24.7 million inflow from operating cash before working capital movements, which was 57% higher than the previous year. A 4.9 million working capital outflow, which represents more normalised levels versus 2023, as the impact of shorter landlord billing terms eases. As a reminder, shortening landlord billing terms is a strategic initiative to enhance our competitiveness and improve portfolio retention. The group paid 5.6 million of corporation tax and made 13.2 million of IFRS 16 lease liability repayments in the year. And 1.7 million of cash was used in investing activities, primarily relating to the new foxton.co.uk website due to launch in March. We also spent on value enhancing software developments and branch refurbishments. Looking at the opening to closing net cash bridged on the right hand side, we started the year with 6.8 million of net debt and ended the year with 12.7 million of net debt. This primarily reflects the 9.8 million net free cash inflow, 12.7 million of acquisitions consideration paid, and 2.8 million of dividends paid. In the year, we successfully increased the size of the RCF facility with our existing lender, increasing the committed facility from 20 million to 30 million and extended the term by 12 months to June 2027 with an option to renew for a further year. The interest cover and leverage covenants have remained unchanged and at the period end, the leverage covenant ratio was 0.5 times, come to be below our covenant limit of 1.75 times. Finally, we have declared a final dividend of 0.95 pence per share, bringing the total 2024 dividends to 1.17 pence per share. This is a 30% increase on the prior year under the group's new progressive dividend policy announced March last year. Finally, to slide 20 and an overview of the group's capital allocation framework. The capital allocation framework has been refined in the year. to fully reflect the group's ongoing strategic priorities and capital structure. The framework aims to support long-term growth and deliver sustainable shareholder returns. The framework has several elements. Firstly, organic growth by investing in strategically important areas, such as people, technology, data, and brand. Secondly, pursuing accretive acquisition opportunities, which involve acquiring high-quality lettings portfolios which contribute to non-cyclical and recurring revenue and deliver strong returns on investment and synergy potential. And thirdly, a progressive dividend, which provides a reliable and growing income stream to investors whilst maintaining strong dividend cover. We also continuously assess other shareholder return opportunities, such as share buybacks, considering factors such as the earnings per share accretion or incapacity and leverage. We seek to utilise our balance sheet and revolving credit facility to the best effect and to maintain a leverage ratio of net debt to adjust the EBITDA of less than 1.25 times. By doing so, we are well placed to deliver enhanced EPS and ultimately deliver shareholder value. Thank you for your time today and I'll now hand back to Guy who will provide an operational update.

Thank you, Chris. At the last full year results call, I explained the advantages that our totally re-engineered operating platform brings to the business. And I hope throughout this presentation, I've been able to demonstrate just how much it has supported our growth to date and can continue to unlock further opportunities. To that end, I'm embedding a culture of continuous improvement in the company. It is imperative we don't rest on our laurels and allow the competition to catch up as has happened in the past. We need to always be three steps ahead. Everyone in the business is challenged to identify upgrades and improvements. Being innovative is one of Foxton's core values, which we expect every member of staff to embody and a suggestion box on our intranet is open to everyone's suggestions. This drive for improvement is led at the highest levels of the business. as my senior leaders are challenged to identify and deliver upgrades on a regular basis, as we instill the continuous improvement ethos throughout the business. On this slide, I have summarized some of the key upgrades we've made over the past year. Starting with technology, we've overhauled our website, completely rewriting 2.9 million lines of underlying code to modernize it. ensure it is future fit and create a more streamlined and user-friendly customer journey. Our website is the most visited estate agent website in the UK by a significant margin. And it is one of our largest sources of high quality customer leads. The new website is due to be launched this month and will enable us to evolve and make changes far more quickly than our previous one. Early progress is promising and we expect the new website to significantly improve our instruction generation capabilities and help deliver the next level of growth. We've also developed a new app to streamline the tenant move-in process. In addition, we have updated the fee on a remuneration to incentivize deal excellence. Together, these changes have significantly improved the tenant experience alongside ensuring that we maximize landlords investments by reducing tenant churn and associated void periods. Our BOSS technology platform is widely regarded as the best in the industry. Developed with significant input from estate agents over more than 20 years, and it means our agents are able to operate in the most streamlined and efficient manner. We have a best in class system, and have a roadmap to continue to deliver market leading products to further cement our position as number one in the industry. Moving now to data. Over the last two years, we have built a whole new state of the art Microsoft Azure Data Platform. The platform brings together rich but previously inaccessible databases with the ability to ingest external data sources and perform advanced data science and analytics and make us AI ready for the future. Through 2024, our data teams have been focusing on maximizing the value of our data by embedding advanced data science to drive instruction levels. Property instructions are the lifeblood of a state agency. And by driving high levels of lead opportunities and improving the conversion of these leads, we can deliver further growth in instructions and market share. a new AI-driven lead scoring platform has been developed and deployed across the Foxton's branch network to drive lead generation levels from our estate agency staff. By expanding the ability to generate instructions more widely across the business, we are creating a powerful foundation to continue to deliver rapid market share growth without the need to hire significantly more staff. To give you an idea of the benefits of embedding data science, It's worth highlighting the lead scoring system we implemented in our lead prospecting center just over a year ago. The uplift it's delivered has been remarkable. Where we previously took on average 33 calls to create a property valuation opportunity for the front offices, today, this has been reduced to as little as 15 calls, a 55% improvement. By building on these levels of efficiency gains and embedding data-led initiatives, more widely across the business, we can really start to drive staff productivity levels over the medium term. We also developed a comprehensive new marketing data and reporting suite to drive forensic insight into our activities and reinforce our data-driven marketing approach. The new system significantly improves customer targeting and drives improved returns on marketing spend. Finally, a new real-time productivity reporting system has been deployed across the entire business. This has significantly improved the visibility of fee-earner output and is already driving productivity growth as we improve workforce transparency and motivation. Moving now to brand. As I presented in July, we have overhauled our customer-facing marketing including introducing new campaigns to drive customer engagement and reinforce the brand's value proposition. These campaigns are themed and refreshed regularly, making a total departure from our previous marketing strategy and setting our brand apart in a highly competitive sector. We continue to deliver upgrades to our leading hub and spoke model with a focus on driving productivity and customer service levels. At the heart of our lettings business is property management. We've implemented a globally recognized customer satisfaction software, which allows us to better understand our service delivery and most importantly, align remuneration with that service delivery. We're also overhauling processes in light of customer feedback in line with our continuous improvement ethos. And we continue to develop our out of London property management center of excellence. This is a structured transition process at a measured speed to ensure no impact on customer experience and service levels. We've made great progress so far, including opening a new facility in Q4 of last year and growing the size of the team by nearly 50%. Delivering better customer service is a huge task and there is no one silver bullet. but we've made significant progress to date and ultimately improved service levels will continue to drive improved landlord retention. Finally, as I mentioned earlier, our recent acquisitions have expanded our footprint into new London commuter town locations. We are leveraging these businesses as local hubs to create further localised networks and bring our unique customer and results focused operating model into these areas. Finally, onto our people, culture and training, a highly important area of focus. Estate agency is a people-first business and maintaining a respectful and inclusive culture is my highest priority. Creating an environment which attracts, motivates and retains outstanding talent is critical to our success. In light of recent coverage regarding the culture at Foxton's, I'd like to point out that this is something very close to my heart. Culture is an area that we've worked very hard on over the last two and a half years to constantly improve. Countless changes to improve the culture of this business have been implemented, including new career development and diversity programs, improving ED and I policies and enhancing our whistleblowing and speak up processes. And these changes are having a very real positive impact. In 2024, Year-on-year employee engagement levels have increased considerably, and since 2022, staff turnover rates have dropped by 13%. Career development and diversity programmes introduced since my arrival are working, and we are proud to have delivered an increase in the number of female managers by 25% during that period. Today, 87% of employees believe Foxton's values diversity and builds diverse teams. And 81% of employees would recommend Foxton's as a great place to work, which is 8% higher than equivalent businesses in the UK. We do not tolerate harassment and misconduct at Foxton's. We take any allegations extremely seriously. When misconduct of any kind is reported through the internal channels, we can be proud of the decisive action that we've taken. And like all businesses, we are constantly striving and evolving to always improve our culture as well as our performance. And finally, a look at the year-to-date trading and the outlook for the rest of the year. Lettings is trading in line with expectations. Rents have remained stable as supply levels have grown and this high level of supply will support our organic growth ambitions over the year. The three commuter town acquisitions we've now completed will provide further incremental lettings revenues and organic growth opportunities across both lettings and sales. And we remain in the market for further acquisition opportunities. In sales, Q1 revenues are well underpinned by the record under-offer pipeline entering the year, the highest level since the Brexit vote in 2016. Whilst the ending of the stamp duty relief will result in some exchanges being pulled forward into Q1, the level of buyer and seller activity in early 2025 suggests that this impact will be limited and the sales market should see a continued year-on-year growth in H1. At the end of February, the under-offer pipeline stood 21% higher than at the prior year. The speed and extent of future interest rate reductions will likely determine the number of buyers entering the market with faster interest rate cuts providing an opportunity for accelerated growth. Financial services revenue will remain resilient with a large portfolio of refinance activity creating a solid repeat business. And with rebuilt operational capabilities, the business is expected to begin making contribution to the group's growth. Through continued market outperformance, we are on track to deliver against the 28 to 30 million pounds medium term adjusted operating target I set out two years ago, despite the £2 million annual impact of the increased national insurance costs. That concludes the formal presentation. Thank you all for joining us today. Chris and I look forward to meeting with many of you in the coming weeks. I'll now pass back to the operator for any questions you may have.

First telephone question comes from the line of Chris Millington from Deutsche Bank. Please go ahead.

Morning, Guy, Chris. Mohamed, congratulations on a good year. Hopefully you can hear me OK. I've got a few questions, if I may, please. First one's really just about the headwinds you face and longer tenancy lengths in FY24 and whether or not you can provide any numbers just to give us a feel of how those headwinds ease in 25. Do you want me to do them one at a time? And I'll just come back once you've answered each one.

Morning, Chris. Great to hear from you. Yeah, that's absolutely fine. Let's do them one by one to make sure we cover them for you. These longer tendencies that we knew we were delivering into the market in 23 meant that the reporting and the forecasting of the returning portfolios became very, very complicated for 24. We've spent considerable time last year and invested a lot of man hours in making sure that the models now have been improved over the last year to make sure that we've now today have much more visibility on the returning numbers of properties due to the end of their tenancies. It might sound like a simple process, but it's actually hugely complicated because we've got such a huge volume of different contracts that have been agreed in the overall portfolio. So the team has done a really good job in modeling all of that out. And ultimately now today, we've seen better performance and much, much more in line with our modeling. Certainly at the start of this year, to give us confidence that we now know exactly where the rest of the year will pan out. So I think we feel confident in the returning numbers and it won't this year be a headwind for us, which is the most important thing.

Very clear. Thanks. Next one, guys. I just want to talk about the sales business. And, you know, ultimately, what would it take to move it back into profit? I mean, is it possible we could see that in 2025 if momentum is kind of maintained, built upon?

We're really pleased with the direction of travel that, you know, we're rebuilding this sales business from a position of loss of 10 million pounds a few years ago. And we've taken some really big steps forward. We know we can't save ourselves to profitability in sales. We've got to dominate market share. We have to grow the top line revenue because of the fixed costs within the business. And that's what we're constantly striving to do. And I think a 50% growth in our market share in the last two years since I came back to the business is something that everybody in sales can be rightfully very proud of. The question, when will we get back to that break even point? It really will depend upon how quickly interest rates trickle down. I think we've got amazing momentum at the start of this year. We've started with a pipeline that is 21% higher than this time last year coming in February. And that gives us very good visibility for certainly H1, And we're also quite pleased with the number of new sales that we've agreed in February because the new sales that are being agreed last month, no full clear, don't have any aspiration that they would be making the stamp duty saving. So those numbers were elevated against previous years. And ultimately now we've got to get that, convert that pipeline as quickly as we can. And we know that each time we see even a modest decrease in the interest rate, let's say a quarter of a percent, but even we're going to keep our fingers crossed for a half percent. Each time we see those movements, we see more buyers returning back to the market to be able to transact. So, yeah, it will be probably macroeconomic driven. But as we sit here, certainly the outlook looks good for the first half. And, you know, end quarter of last year, the business was actually close to breakeven.

Yes, certainly if you look at H2 versus H1 2024 on sales, Chris, it was really promising. Q3 2024, profitable position in sales and Q4 held its position. So last year was very much a story of two halves with a strong Q1 forecast for 2025. That will really help our journey to break even. But as Guy says, There's some market factors there, but we're self-help through the market. Market share growth is so, so important.

Thank you. Last one. There's kind of two parts to it here. So it's just a question about considering other locations. Obviously, it sounds like you've been fairly successful so far in Watford and Reading. Is there anything else in terms of acquisitions or organic expansion? out there for geographic expansion and perhaps just if you could tie in for that, just what the competitive environments like for acquisitions at the moment.

Great question. Thank you. Our acquisition strategy is always on. That's absolutely paramount to growing quickly our lettings portfolio. All of the acquisition, just as a reminder, are focused on lettings books. That's what we're really, that's the value of what we're buying. Our decisions on where to invest are data led. We have an incredible data set across the whole of the UK that allows us to look at high volume, high value locations. We can then look at the competitive markets environment within those specific locations and identify areas that for us, when we look at the likes of Reading, it takes me 20 minutes on a train now from central London to get to Reading. That's quicker than it is to get to some of our inner London offices. So really, it's an expansion of what I view London to be. And when we've gone into a market like Reading and Watford, we've been able to buy you know, somebody who's very, very is either first, second or third in terms of market share. But then that allows us to also bolt on further acquisitions as we've done very pleasingly to announce, uh, Marshall Vizard, um, uh, last week as well, this week as well. And that's a great example of, uh, finding these new market locations where it fits with our profile of, of volume and value. We buy a, a, a great operating, you know, successful business. And then we're able to turbocharge that growth by a hub and spoke model of rolling in further acquisition. So that's always on the M&A. We have a great internal team who are out there talking to lots of owners of these businesses. We're reaching out to them proactively. Many of the businesses that we've bought, we've bought completely off market direct with the sellers. And we will continue to drive that as fast as we possibly can do. The outlook, competitive outlook, obviously there's other people who have been doing this acquisition as well, who were on the acquisition trail. But when you look at how fragmented the market is, we are now today the clear leader in terms of the number one brand for lettings agents by volume in London, but we only have five or 6% market share. So there's an awful lot more for us to go after. And we will continue to look at those 3,600 lettings agents within London. and then the many tens of thousands of agents outside of London where we think there is a sensible story for a commuter belt location where you can gain access quickly into London and we can manage those businesses as we start to grow them.

Very good. Thanks for all your answers, James.

Thanks, Chris. And the next question comes from Greg Poulton from Singer Carpet and Markets. Please go ahead.

Yeah, morning guys. Hope you can hear me. Just on, you've obviously made some good progress on market share, getting it up to now close to 5%. Can you just give a bit more detail around how it progresses from here? And if you want to leverage it up even more, do you need to invest again in order to achieve that?

Great. No problem at all. A lot of that market share has come from the shift in focus that I brought to the business two years ago in how we internally value, reward and focus on generating our own market appraisal opportunities. Prior to my arrival, the business was very, very siloed with all market, all lead generation really being just the sole responsibility of one department. But now We've taken a much broader stroke approach. We've also invested enormously, as we've mentioned in the release, in our state of the art Azure Microsoft data stack. And that allows us now to interrogate one of our biggest assets, which is this huge customer database that we've been building over the last 20 years of buyers and owners of properties and liaising with those owners of properties to use some advanced data analytics and some machine learning to be able to improve the communication with those potential clients, but also helping us lead score who we should be contacting and when. And that really has turbocharged the growth. We've got several further iterations of this that we are evolving over the next year as we continue to improve the model, which is always learning. And each time we release a newer version of the algorithm, we see an improvement in the number of, a reduction in the number of calls per valuation, which is our main metric. And of course, the other great part of making acquisitions are that when we make these acquisitions, we're also ingesting more data from their own, from their own business. And we can feed that into the machine and that delivers further organic growth as well. So all of that is the internal self-help that we've focused on and delivered, but there's of course then at least another 50%, which comes from things like marketing. The data stack that we've, that we've created and the data, the forensic data analytics, is particularly insightful when it comes to things like canvassing. You know, we A and B test everything we send out. We've got huge data on the market. And that's really helping us drive a better ROI on the marketing spend each year as well. So there's much further growth, but it will come from, you know, from the internal self-help as well as improving our marketing, the pointy marketing end.

Okay, great. And just following on that, obviously, you've got a capital market share coming up later this year. Do you think the market share target will be upgraded at that point?

It's part of the build that we're looking at at the moment. And ultimately, you know, the 50% market share that we've delivered in just two years in sales is quite extraordinary. We have to bear in mind, Rightmove confirmed last year that they'd never seen a large agency or even a medium sized agency move the dial on market share as quickly as we had. by simply starting to generate the value out of this database. Can we deliver another 50% growth on that? I think it's going to be really difficult to see that type of growth as we're going up. It's just, you know, that's probably not realistic. But absolutely, further market share growth targets internally are firm in our mind. Whether we'll communicate those out to the market, we'll have to wait and see on the Capital Markets Day. Okay. Thanks, guys. Thank you.

Ladies and gentlemen, we will now move on to the questions from the webcast.

Great. A couple of questions from Andy Murphy at Edison. First one is capital allocation. Given the robust increase in the final dividend above the interim one, does this signal increased confidence in the outlook and what impact does this have on our overall capital allocation policies?

Thanks, Andy, for that question. I'll take that one. Yes, you're right. Interim dividend was up 10%. Final dividend was up 36%, 30% in total across the year, year over year. So, yes, it does signal increasing confidence. It's that progressive dividend policy we've discussed early in the year. So we have made some refinements to the policy. capital allocation policy and I went through that early on in the call. But absolutely that 30% increase in the dividend shows confidence. It really shows the underpin coming from the lettings business and that recurring revenue and earnings that it generates.

Two more questions from Andy. M&A and commuter towns, what are the characteristics in the target town that we look for?

Ultimately, this is always data led. We look at the volumes that are within the marketplace. We look at the number of listings. We look at what that listing to let ratio might look like. We look at the leaders within that marketplace and we work out if we're able to acquire the leading position to make sure that we are number one or number two within that marketplace. It's ultimately very, very data led today. and having this data set across the UK will allow us, we know where our next target areas are. Of course, all of this is also opportunity led and I think we've built a very good reputation within the industry for being very fair with the acquired businesses. We look after not just the sellers, but very much look after the employees that we bring across and integrate within Foxton's. And I think that reputation has meant that more and more sellers are naturally coming to us as their first choice, which obviously we want to continue to encourage and ultimately when we start to look at where our own offices are, we want to be able to, in the short to medium term, be able to get to those locations within a relatively short commute time. Now, that could be up to an hour on a fast train, you know, but ultimately we're trying to get quick visibility, quick connectivity with these high volume, high value lettings market locations.

And last question, fee earner growth, revenue per earner in sales was up 8%. But what was the increase in fee earners last year? And what is the outlook for fee earner growth numbers? Good question.

Thank you. I'll hand that one over to Chris. I'll take the detail in terms of the fee earner growth. So year over year, we had 4% increase in fee earner growth. That's across letting sales and financial services to 859. I think when I look forward, we're in a good place in terms of headcount. We will grow that headcount. as we do acquisitions and we retain those members of staff, really key part of the acquisition journey. But what we do have is good levels of capacity in the business. So therefore the focus very much is growing the productivity, using the staff base we have today, focusing on that training, focusing on that culture, focusing on that continuous improvement. So that will help drive productivity in the business.

And actually one final question from Andy, cost savings, what can you say from subletting the part of Chiswick Park?

Yeah, I think I can touch on that. We touched on it briefly in the release, probably keep it relatively brief in so far as that we're continuing to have conversations with our landlord of our Chiswick Park headquarters to explore options to surrender a portion of our office space ahead of the lease end date in September 2027. If we were successful in that, that would generate meaningful cost savings ahead of that lease end date.

Moving on to Adrian Kiersey at Panama with Librem. A couple of questions on the sales pipeline. First, you mentioned the sales pipeline is currently up 21%. What proportion of this uplift is likely to fall after the change in stamp duty? And also, Are you able to provide colour on the types of properties that are moving into the pipeline?

Great question. Thank you, Adrian. The pipeline today obviously does contain people who are rapidly trying to get those properties exchanged so that they can complete by the end of this month. However, the new agreed sales going into the pipeline are very encouraging because as I've mentioned earlier, anybody agreeing a sale in February, maybe even in January, we were being very clear with buyers that it would be, you know, it's a very tall order in January to agree a sale and be completed by the end of March. So the strong addition into the pipeline, we don't see slowing down in the short term, but we will naturally see a little bit of a pull forward in March's exchange numbers as people are pulling that exchange or that completion to make sure that they can make that stamp duty saving. But it won't be as huge as we've seen with other stamp duty deadlines because the numbers are not as big. Let's remind ourselves that this is only for first-time buyers and the maximum saving is up to £11,250. Now that is of course a very important amount of money for first-time buyers to save, but from our communication with the thousands of people that we have under offer at the moment, we don't feel that that saving is enough to stop somebody wanting to get on the sales ladder. So we're carefully managing that process As we move forward, we are likely to see that 21% reduce for sure, but we don't think that the lead that we've got or the head start over last year will diminish completely for sure. We still think that there's an awful lot more value to come and we're quite happy with that.

And then the second part was, will we see higher value properties moving into the pipeline after the stamp duty change?

It won't be impacted by the stamp duty change. But what I do expect is that as we see further rate reductions, that we will see that mid to prime market, let's call it anywhere between 800,000 up to 2 million pounds. In my view, that's the area and that's the sector of the market that's been most heavily impacted by the increase in interest rates and particularly mortgage rates. that people are actually paying because we've seen that they are the sector of the market that's probably stretched the most, particularly with inflation, and also therefore impacted the most by a larger level of borrowing. So hopefully if we see another half a percent or quarter percent rate drop, we'll see more of that market starting to free up than we're seeing at the moment. The majority of the activity is sub. a million pounds at the moment. But we are working on an internal project to make sure that we are listing a higher quality, higher value proportion of properties that we're bringing to market. We're certainly not turning our back on the market area that we dominate, which is that mid-market. But we are successfully focused on listing a slightly higher price bracket of properties. And as that As these rate drops start to translate, then we'll be ready to be able to make the most of that increased market share in that price category.

Final question is the financial services division has quietly moved up through the gears. Do you expect future growth will be delivered through headcount expansion or productivity gains? Great question.

Thank you. I think it's ultimately it's through both, right? We've got to, we have to, we know we have to invest in growing headcount for financial services because we know that we have an opportunity with the lead generation that we're creating and the market share gains and the volume increase of transactions that we're creating in London. We want the need more headcount, but we need to invest in that headcount Because there's quite a long lead time from onboarding, training new brokers to when they start to become productive. But the other side of that is, of course, an increase in productivity. And we've already pointed to some quite good gains for productivity for financial services, as well as other parts of the business as well, which we're pleased with.

Then Robin Savage at Seuss. On slide 22, we've provided colour on Foxton's approach to improving landlord retention. and gathering new business from existing and new landlords. Can you explain how management quantifies the embedded value of Foxen's portfolio of 30,000 properties?

Great, I'll take the first part of that, which is about how we're focused on the improvement of quality. We've spent the last year and a half embedding a global leading customer satisfaction platform into our software. And now for the first time, I think in the industry, we will be able to test the temperature at every touch point across the customer journey for both our landlords and for our tenants so that we can really focus on improving the customer experience and the quality of service that we're delivering. I believe passionately that that quality of service in the industry needs improving. And actually, I think by having this really, really clear feedback, we're going to be able to, for the first time, to be able to deliver and align remuneration of our property management service with the service levels that we're providing. And I think that's going to really, over time, make sure that the level of service that we're providing is just heads and shoulders above our competition. And ultimately, that will absolutely feed into the retention of our landlord portfolio. And that is of absolute utmost priority. And I think we've done as you've seen within the numbers, organic lettings portfolio growth of 4%. All of these aspects are going to be the outcome of delivering better service across what we've been doing. The second part of that question was?

It was around the lifetime value, which I can perhaps comment on briefly. I think, Robin, we'll all unpack this this exact topic at the capital markets events, and it's really getting under the skin, under the bonnet of the portfolio. But I think headlines around how we quantify it very much is a relationship with lots of landlords, the length of that relationship. We look at the loyalty rates, which ultimately comes down to the relet rates. So we monitor that. And then how much value per property do we generate? So the property management penetration, is a key area of focus from us. And those areas that Guy has just discussed around customer service, customer satisfaction is a very important area. Ultimately, that 4% portfolio growth we've delivered across 2024, which is looking at the organic portfolio start of the year to the end of the year, that's a really important metric because that really shows the inherent value of the assets we've got here at Foxen's within our lettings book.

Very good. Okay. I think we'll probably close the presentation. Thank you all very much for joining. Just a quick closing remark for myself. We're really pleased with the momentum that's in the business. The turnaround is now complete. We're now, Chris and I and the rest of the business are totally focused on the next stage of growth, which we really look forward to communicating further at our Capital Markets Day. And ultimately, this is all about making sure that we have an inclusive and very progressive culture within the business. And we're committed to making sure that over the next period of growth that we continue to evolve and improve every aspect of the business, including culture. So thank you all for your interest. And thanks for the great questions as well. Hopefully we've answered what you needed to. And we look forward to meeting with many of you in person over the next few weeks.