CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Six months ended 30 June 2023

 

						H1 2023 (unaudited) £'000	H2 2022 (unaudited) £'000
Profit for the period attributable to shareholders of the Company						4,122	2,587
Other comprehensive loss
Items that will not be reclassified to profit or loss (net of tax):
Changes in fair value of equity instruments at FVOCI						-	(46)
Other comprehensive loss for the period						-	(46)
Total comprehensive income for the period						4,122	2,541
	Total comprehensive income attributable to shareholders of the Company arising from:
Continuing operations				4,122		2,905
Discontinued operations				-		(364)
				4,122		2,541

 

The notes on pages 25 to 37 form part of this condensed consolidated financial information.

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2023

	Notes	30 June 2023 (unaudited) £'000	30 June 2022 (unaudited) £'000	31 December 2022 (audited) £'000
Non-current assets
Goodwill	8	31,663	26,031	26,050
Other intangible assets	8	111,820	109,496	109,309
Property, plant and equipment		10,885	9,722	10,692
Right-of-use assets	9	42,728	42,178	42,570
Contract assets		3,004	897	1,688
Investments		31	3,717	6
Deferred tax assets		1,563	1,048	1,386
		201,694	193,089	191,701
Current assets
Trade and other receivables		18,639	18,860	16,016
Contract assets		10,291	4,622	5,688
Current tax assets		-	-	745
Cash and cash equivalents		3,006	11,667	12,027
		31,936	35,149	34,476
Total assets		233,630	228,238	226,177
Current liabilities
Trade and other payables		(18,261)	(18,224)	(16,694)
Borrowings		(4,846)	(50)	-
Current tax liabilities		(225)	(374)	-
Lease liabilities	9	(10,147)	(11,577)	(10,708)
Contract liabilities		(9,611)	(7,376)	(9,745)
Provisions		(541)	(1,396)	(1,506)
		(43,631)	(38,997)	(38,653)
Net current liabilities		(11,695)	(3,848)	(4,177)
Non-current liabilities
Borrowings		(115)	-	-
Lease liabilities	9	(35,657)	(35,323)	(35,753)
Contract liabilities		(410)	(997)	(289)
Provisions		(2,012)	(1,619)	(1,765)
Deferred tax liabilities		(27,627)	(27,196)	(27,049)
		(65,821)	(65,135)	(64,856)
Total liabilities		(109,452)	(104,132)	(103,509)
Net assets		124,178	124,106	122,668
Equity
Share capital		3,301	3,301	3,301
Merger reserve		20,568	20,568	20,568
Other reserves		2,653	2,653	2,653
Own shares reserve	12	(12,092)	(7,014)	(10,993)
Retained earnings		109,748	104,598	107,139
Total equity		124,178	124,106	122,668

The notes on pages 25 to 37 form part of this condensed consolidated financial information.

These unaudited condensed consolidated interim financial statements for the 6 months ended 30 June 2023 were approved by the Board on 26 July 2023.           

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Six months ended 30 June 2023

	Notes	Share capital £'000	Merger reserve £'000	Other reserves £'000	Own shares reserve £'000	Retained earnings £'000	Total equity £'000
Balance at 1 January 2023		3,301	20,568	2,653	(10,993)	107,139	122,668
Profit for the period attributable to shareholders of the Company		-	-	-	-	4,122	4,122
Changes in fair value of equity instruments at FVOCI		-	-	-	-	-	-
Total comprehensive income for the period		-	-	-	-	4,122	4,122
Dividends	6	-	-	-	-	(2,122)	(2,122)
Own shares acquired in the period	12	-	-	-	(1,112)	-	(1,112)
Credit to equity for share-based payments		-	-	-	-	622	622
Settlement of share incentive plan		-	-	-	13	(13)	-
Balance at 30 June 2023 (unaudited)		3,301	20,568	2,653	(12,092)	109,748	124,178

 

	Notes	Share capital £'000	Merger reserve £'000	Other reserves £'000	Own shares reserve £'000	Retained earnings £'000	Total equity £'000
Balance at 1 January 2022		3,301	20,568	2,653	(6,059)	103,039	123,502
Profit for the period attributable to shareholders of the Company		-	-	-	-	2,587	2,587
Changes in fair value of equity instruments at FVOCI		-	-	-	-	(46)	(46)
Total comprehensive income for the period		-	-	-	-	2,541	2,541
Dividends	6	-	-	-	-	(856)	(856)
Own shares acquired in the period	12	-	-	-	(963)	-	(963)
Debit to equity for share-based payments		-	-	-	-	(20)	(20)
Settlement of share incentive plan		-	-	-	8	(106)	(98)
Balance at 30 June 2022 (unaudited)		3,301	20,568	2,653	(7,014)	104,598	124,106

 

	Notes	Share capital £'000	Merger reserve £'000	Other reserves £'000	Own shares reserve £'000	Retained earnings £'000	Total equity £'000
Balance at 1 January 2022		3,301	20,568	2,653	(6,059)	103,039	123,502
Profit for the period attributable to shareholders of the Company		-	-	-	-	9,127	9,127
Changes in fair value of equity instruments at FVOCI		-	-	-	-	(3,711)	(3,711)
Total comprehensive income for the year		-	-	-	-	5,416	5,416
Dividends		-	-	-	-	(1,487)	(1,487)
Own shares acquired in the period	12	-	-	-	(4,941)	-	(4,941)
Credit to equity for share-based payments		-	-	-	-	178	178
Settlement of share incentive plan		-	-	-	7	(7)	-
Balance at 31 December 2022		3,301	20,568	2,653	(10,993)	107,139	122,668

The notes on pages 25 to 37 form part of this condensed consolidated financial information.

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

Six months ended 30 June 2023

Notes		H1 2023 (unaudited) £'000	H1 2022 (unaudited) £'000
Operating activities Operating profit from continuing operations	2	6,848	5,251
Operating loss from discontinued operations		-	(414)
Operating profit from continuing and discontinued operations		6,848	4,837
Adjustments for:
Depreciation of property, plant and equipment and right-of-use assets		6,385	6,044
Amortisation of intangible assets		834	695
Gain on disposal of discontinued operations		-	(180)
Gain on disposal of lease liability		(617)	-
Sub-lease asset impairment		190	152
Loss/(gain) on disposal of property, plant and equipment and right-of-use assets		26	(424)
(Decrease)/increase in provisions		(896)	806
Cash settlement of share incentive plan		-	(98)
Share-based payment charges/(credit)		522	(49)
Operating cash flows before movements in working capital		13,292	11,783
Increase in receivables and contract assets		(8,723)	(2,905)
(Decrease)/increase in payables and contract liabilities		(234)	829
Cash generated by operations		4,335	9,707
Income taxes paid		(1,102)	(60)
Net cash from operating activities		3,233	9,647
Investing activities
Interest received		221	37
Proceeds on disposal of property, plant and equipment		-	46
Proceeds on disposal of associate and investments		-	40
Purchases of property, plant and equipment		(792)	(989)
Purchases of intangibles		(698)	-
Purchases of investments	10	(25)	(400)
Acquisition of subsidiaries (net of cash acquired)	11	(6,328)	(8,490)
Disposal of discontinued operations	5	-	(3,715)
Net cash used in investing activities		(7,622)	(13,471)
Financing activities
Net proceeds from borrowings		4,800	-
Dividends paid	6	(2,122)	(856)
Interest paid		(38)	(15)
Repayment of lease liabilities	9	(6,288)	(5,926)
Sub-lease receipts		128	56
Purchase of own shares	12	(1,112)	(857)
Net cash used in financing activities		(4,632)	(7,598)
Net decrease in cash and cash equivalents		(9,021)		(11,422)
Cash and cash equivalents at beginning of period1, comprised:		12,027		23,089
Cash and cash equivalents (continuing operations)		12,027		19,374
Cash included in assets held for sale (discontinued operations)		-		3,715
Cash and cash equivalents at end of period		3,006	11,667

¹ Total Group balances, which include continuing and discontinued operations.

The notes on pages 25 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 2022 were approved by the Directors on 6 March 2023 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 2023 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.

1.3          Going concern

Going concern assessment

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 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 financial statements. Furthermore, the Group expects to be in compliance with the RCF's covenants throughout the going concern review period.

The going concern 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 2023 the Group was in a net debt position of £2.1m (31 December 2022: £12.0m net cash) and a  net current liability position of £11.7m (31 December 2022: £4.2m). The net debt position reflects a cash and cash equivalent balance of £3.0m (31 December 2022: £12.0m) and £5.1m of external borrowing, which includes £5m drawn down on the Company's £20m RCF. The RCF was refinanced in June 2023, increasing the facility size from £5m to £20m, as well as extending the facility to June 2026. The terms of the facility have remained materially the same as the previous facility and remains unsecured. Drawdowns on the facility accrue interest at SONIA +1.65%.

Reverse stress scenario

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 severe and unlikely deterioration in market conditions.

The reverse stress scenario incorporates a reduction in trading from October 2023 to December 2024 against plan, reflecting a 65% reduction in sales market transactions and a 10-20% reduction in Lettings units compared to base case. For context, a 65% reduction in sales market transactions would see transactions levels in the market at 6% above 2009 levels (after the Global Financial Crisis) in 2023 and 17% below 2009 levels in 2024.

In the unlikely event of the reverse stress scenario, the Group's ability to draw down sufficient borrowings on the RCF would be constrained by the facility's covenants which would be breached in July 2024. Under such a scenario, additional mitigating action could be taken to protect liquidity.

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 2022 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 only, 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 2022 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 Group. 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 client monies.

(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.

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. Goodwill and intangible assets have been allocated to reportable segments as described in Note 8.

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 operating costs (being 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 below), finance income and finance cost. Adjusted operating profit margin is defined as adjusted operating profit divided by revenue. As explained in Note 15, these measures are used by the Board to measure delivery against the Group's strategic priorities, to allocate resource and to assess segmental performance.

 

Adjusted items

 

Adjusted operating profit, adjusted operating profit margin and adjusted earnings per share, exclude adjusted items. 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. Refer to Note 3 for further information of the adjusted items recognised in the period.

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 2023:

	Notes	Lettings £'000	Sales £'000	Financial services £'000	Corporate costs £'000	Consolidated £'000
Revenue		49,768	16,933	4,232	n/a	70,933
Contribution	15	37,362	5,540	1,575	n/a	44,477
Contribution margin	15	75.1%	32.7%	37.2%	n/a	62.7%
Adjusted operating profit/(loss)	15	14,145	(6,364)	199	(1,156)	6,824
Adjusted operating profit margin	15	28.4%	(37.6%)	4.7%	n/a	9.6%
Adjusted items	3					24
Operating profit						6,848
Finance income						221
Finance costs						(1,008)
Profit before tax						6,061

 

		Lettings £'000	Sales £'000	Financial services £'000	Corporate costs £'000	Consolidated £'000
Depreciation and amortisation (excluding acquired intangibles)		4,031	2,529	51	-	6,611
Amortisation from acquired intangibles		608	-	-	-	608
Total		4,639	2,529	51	-	7,219

 

 

 

 

 

 

 

 

The following is an analysis of the Group's continuing operations results by reportable segment for the half year ended 30 June 2022:

	Notes	Lettings £'000	Sales £'000	Financial services £'000	Corporate costs £'000	Consolidated £'000
Revenue		39,443	20,823	4,800	n/a	65,066
Contribution	15	28,942	10,860	2,054	n/a	41,856
Contribution margin	15	73.4%	52.2%	42.8%	n/a	64.3%
Adjusted operating profit/(loss)	15	7,260	(671)	819	(1,249)	6,159
Adjusted operating profit margin	15	18.4%	(3.2%)	17.1%	n/a	9.5%
Adjusted items	3					(908)
Operating profit						5,251
Other losses						-
Finance income						46
Finance costs						(998)
Profit before tax						4,299

 

D&G Sales (disposed 11 February 2022) is presented as a discontinued operation. Refer to Note 5 for further details.

 

		Lettings £'000	Sales £'000	Financial services £'000	Corporate costs £'000	Consolidated £'000
Depreciation and amortisation (excluding acquired intangibles)		3,827	2,433	51	-	6,311
Amortisation from acquired intangibles		407	21	-	-	428
Total		4,234	2,454	51	-	6,739

 

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.

 

	H1 2023 £'000	H1 2022 £'000
Property related credit1	(148)	(59)
Transaction related costs2	124	246
Reorganisation costs3	-	721
	(24)	908

¹Property related credit relates to the net of a charge for 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 (including, in H1 2023, £0.2m of costs relating to the closure of three Atkinson McLeod branches with business now being served out of the existing Foxtons branch network).

²Transaction related costs relate to the acquisition of Atkinson McLeod Limited (2022: for the acquisition of IMM Properties Limited).

³Net costs of Executive reorganisation.

 

 

4.    Taxation

 

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

	H1 2023 £'000	H1 2022 £'000
Current tax charge	1,915	694
Deferred tax charge	24	583
Tax charge on profit on ordinary activities from continuing and discontinued operations	1,939	1,277
Less: discontinued operations tax credit	-	117
Tax charge on profit on ordinary activities from continuing operations	1,939	1,394

 

The tax charged within the 6 months ended 30 June 2023 has been calculated by applying the effective rate of tax which is expected to apply to the Group for the year ending 31 December 2023 using rates substantively enacted as at 30 June 2023 as required by IAS 34 'Interim Financial Reporting'.

Deferred tax assets/liabilities have been recognised at 25% reflecting the prevailing UK corporate tax rate.

5.    DISCONTINUED OPERATIONS

 

On 11 February 2022, 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. In 2022, the results of D&G Sales for the period 1 January to 11 February 2022, which showed a loss of £0.3m are presented as a discontinued operation. In 2023 there are no discontinued operations.

 

Discontinued operations: Cash flows

The net cash flows incurred by discontinued operations are as follows:

		2023 £'000	2022 £'000
Net cash outflow from operating activities		-	(458)
Net cash outflow from investing activities		-	(3,715)
Net cash outflow from financing activities		-	(18)
Net cash outflow		-	(4,191)

 

6.    Dividends

		H1 2023 £'000	H1 2022 £'000
Amounts recognised as distributions to equity holders in the period:
Final dividend for the year ended 31 December 2022: 0.7p (31 December 2021: 0.27p) per ordinary share		2,122	856
		2,122	856

 

For 2023, the Board has declared an interim dividend of 0.2p (2022: 0.2p) per ordinary share to be paid in September 2023. 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.

	Continuing operations		Total Group (continuing and discontinued operations)
	H1 2023 £'000	H1 2022 £'000	H1 2023 £'000	H1 2022 £'000
Profit for the purposes of basic and diluted earnings/(loss) per share	4,122	2,905	4,122	2,587
Adjusted items (including associated taxation)1	60	713	60	533
Adjusted earnings for the purposes of adjusted earnings per share	4,182	3,618	4,182	3,120
1Net adjusted items credit relating to continuing operations of £24k (2022: £908k), plus associated tax charge of £84k (2022: £194k credit), resulting in an after tax adjusted items charge of £60k (2022: £713k). Refer to Note 3 for details on adjusted items.
Number of shares	2023	2022	2023	2022
Weighted average number of ordinary shares for the purposes of basic earnings per share	302,815,955	317,888,904	302,815,955	317,888,904
Effect of potentially dilutive ordinary shares1	11,723,508	2,633,344	11,723,508	2,633,344
Weighted average number of ordinary shares for the purpose of diluted earnings per share	314,539,463	320,522,248	314,539,463	320,522,248
Earnings per share (basic)	1.4p	0.9p	1.4p	0.8p
Earnings per share (diluted)	1.3p	0.9p	1.3p	0.8p
Adjusted earnings per share (basic)	1.4p	1.1p	1.4p	1.0p
Adjusted earnings per share (diluted)	1.3p	1.1p	1.3p	1.0p

¹ The main drivers of an increase in the effect of potentially dilutive ordinary shares from H1 2022 are the LTIP buyout awarded to the CEO upon joining the business in September 2022 and new share awards issued in April 2023.

 

 

In the prior period, the basic and diluted loss per share for discontinued operations was 0.1p.

 

 

 

 

 

 

 

 

 

 

 

 

8.    Goodwill and other intangible assets

 

At 30 June 2023, goodwill and other intangible assets total £143.5m (30 June 2022: £135.5m) as detailed below, with £5.6m of goodwill and £2.6m of intangible assets additions in the period attributable to the acquisition of Atkinson McLeod (refer to Note 11 for further details).

	30 June 2023 £'000	30 June 2022 £'000	31 December 2022 £'000
Goodwill	31,663	26,031	26,050
Brand	99,000	99,000	99,000
Software	228	555	446
Customer contracts and relationships	11,147	9,726	9,108
Assets under construction	1,445	215	755
Other intangible assets	111,820	109,496	109,309
Goodwill and other intangible assets	143,483	135,527	135,359

 

a)     Review for indicators of impairment at 30 June 2023

Under IAS 36 'Impairment of Assets', the Group is required to:

·    review its intangible assets in the event of a significant change in circumstances that would indicate potential impairment; and

·     review and test its goodwill and indefinite-life intangible assets annually or in the event of a significant change in circumstances.

At 30 June 2023, the Group has assessed for indicators of impairment of the Group's goodwill and brand asset. Following consideration of both internal and external impairment indicators, including 2023 year-to-date trading performance, no indicators of impairment have been identified.

b)    Sensitivity analysis

Sensitivity analysis was performed as part of the impairment review for the year ended 31 December 2022 to assess whether the carrying value of the Foxtons brand asset is sensitive to reasonable possible changes in key assumptions and whether any changes in key assumptions would materially change the carrying value. Lettings goodwill showed significant headroom against all sensitivity scenarios, whilst the brand asset was sensitive to reasonable possible changes in key assumptions.

The key assumption used in the 2022 brand asset impairment assessment was the forecast revenues for the sales and lettings businesses. The carrying value of the brand asset was not highly sensitive to changes in discount rates or long-term growth rates.

As disclosed in Note 10 of the 2022 Annual Report and Accounts, the impairment model indicated brand asset headroom of £71.1m or 38% of the carrying value under test. Cash flows are from the Group's Board approved plan while also complying with the requirements of the relevant accounting standard. Sales revenue was assumed to decline in 2023 before fully recovering by 2026, resulting in a compound average growth rate (CAGR) of 3.2% over the forecast period. Lettings revenue was assumed to grow at a CAGR of 4.3% over the forecast period, excluding future Lettings portfolio acquisitions that must be excluded from forecast cash flows under the relevant accounting standard.

It was disclosed that assuming no changes in other elements of the plan, the brand asset headroom would reduce to zero if the combined revenue CAGR over the forecast period reduces from 3.9% to 2.1%. Under a reasonable possible downside scenario, in which Sales revenue only fully recovers by 2027, Lettings revenue growth is limited to 2.2% and the Group takes appropriate mitigating actions, such as reducing discretionary spend and direct costs, the brand asset would be impaired by £1.2 million. At 30 June 2023, consideration of the latest economic and geo-political conditions have been made, and there have been no significant changes to this reasonable possible downside scenario.

The Group will complete a full annual impairment review, as required under IAS 36, for the goodwill and brand assets in the second half of the year.

 

 

 

 

9.    leases

 

Right-of-use assets

The carrying amounts of the right-of-use assets recognised and the movements during the period are outlined below:

	30 June 2023 £'000	30 June 2022 £'000	31 December 2022 £'000
Opening balance	42,570	43,832	43,832
Additions	6,633	2,957	8,564
Acquired through business combinations	-	599	599
Lease modifications	67	-	138
Disposals	(1,330)	(149)	(558)
Depreciation	(5,212)	(5,027)	(10,134)
Impairment charge	-	(34)	129
Closing balance	42,728	42,178	42,570

 

Lease liabilities

The carrying amounts of lease liabilities recognised and the movements during the period are outlined below:

 

	30 June 2023 £'000	30 June 2022 £'000	31 December 2022 £'000
Opening balance	46,461	48,083	48,083
Additions	6,590	2,933	8,497
Acquired through business combinations	-	880	880
Lease modifications	67	-	138
Disposals	(1,996)	(75)	(416)
Interest charge	970	984	1,965
Payments1	(6,288)	(5,905)	(12,686)
Closing balance	45,804	46,900	46,461
Current	10,147	11,577	10,708
Non-current	35,657	35,323	35,753

¹IFRS 16 lease payments relating to discontinued operations totalling £21k were made in the period ended 30 June 2022.

 

At the balance sheet date, continuing operations had outstanding commitments for future minimum lease payments which fall due as follows:

	30 June 2023 £'000	30 June 2022 £'000	31 December 2022 £'000
Maturity analysis - contractual undiscounted cash flows from continuing operations
Within one year	11,874	11,620	11,671
In the second to fifth years inclusive	30,917	30,990	30,147
After five years	9,145	10,477	10,598
	51,936	53,087	52,416

 

 

 

 

 

 

 

 

10.  Financial instruments

Categories of financial instruments

The categories of financial instruments, including contact assets and liabilities, held by the Group are as follows:

	30 June 2023 £'000	30 June 2022 £'000	31 December 2022 £'000
Financial assets
FVOCI financial assets	31	3,717	6
Cash and cash equivalents	3,006	11,667	12,027
Financial assets recorded at amortised cost	28,935	21,254	18,650
Financial liabilities
Financial liabilities recorded at amortised cost	(21,461)	(20,371)	(21,967)
Borrowings	(4,961)	(50)	-
Lease liabilities	(45,804)	(46,900)	(46,461)

Management considers that the book value of financial assets and liabilities recorded at amortised cost and their fair value are approximately equal.

Fair value hierarchy

The Group uses the following hierarchy for determining the fair value of the financial instruments held:

·      Level 1 - Quoted market prices

·      Level 2 - Valuation techniques (market observable)

·      Level 3 - Valuation techniques (non-market observable)

At 30 June 2023, the Group does not hold any financial instruments categorised as Level 1 or 2 by IFRS 13 (31 December 2022: £nil, 30 June 2022: £nil). The Level 3 financial instruments held by the Group relate solely to unlisted equity shares.

 

The following table shows the changes in Level 3 financial assets for the six months ended 30 June:

 

		2023	2022
		£'000	£'000
Opening balance 1 January		6	3,317
Additions		25	400
Closing balance 30 June		31	3,717

There were no transfers between Level 1 and Level 3 during the period.

Financial risk factors

The Group's activities expose it to a variety of financial risks including, interest rate risk, credit risk and liquidity risk. The condensed interim financial statements do not include all financial risk management information and disclosures as required in the annual financial statements; they should be read in conjunction with the information included in Note 23 of the 2022 Annual Report and Accounts. There have been no changes in any risk management policies since the year end.

 

 

 

 

 

 

11.  business combinations

During the period, the Group acquired 100% of the share capital of Atkinson McLeod Limited ('Atkinson McLeod'), a London estate agent focused on providing lettings and property management services. The acquisition is in line with the Group's strategy of acquiring high quality businesses with strong lettings portfolios.

A provisional purchase price allocation exercise, which will be finalised in the second half of the year, has been completed which provisionally identified £2.6m of acquired intangible assets relating to customer contracts and relationships, which are identifiable and separable, and will be amortised over 10 years.  The discount rate applied to the cash flows is based on the Atkinson McLeod's weighted average cost of capital (WACC) and is calculated using a capital asset pricing model. The WACC has been adjusted to reflect risks specific to Atkinson McLeod not already reflected in the future cash flows.

£5.6m of goodwill has arisen on the acquisitions and is primarily attributable to synergies, new customers, the acquired workforce and business expertise. The acquired goodwill has been allocated for impairment testing purposes to the Group's lettings cash-generating units which are expected to benefit from the synergies of the combination. None of the goodwill is expected to be deductible for tax purposes.

From the date of acquisition, the business combinations contributed £0.7m of revenue and £0.1m profit before tax to the Group's performance from 3 March 2023 to 30 June 2023. If the combination had taken place at the beginning of the year, revenue for the period would have been £1.3m higher and profit before tax would have increased by £0.3m.

Assets acquired and liabilities assumed

The provisional fair values of the identifiable assets and liabilities of Atkinson McLeod as at the date of acquisition are disclosed below. The fair value of the identifiable assets and liabilities are estimated by taking into consideration all available information at the reporting date and are on a provisional basis due to the timing of the acquisitions.

 

			Atkinson McLeod £'000
Assets
Acquired intangible assets recognised on acquisition			2,647
Property, plant and equipment			600
Cash and cash equivalents			1,301
Trade and other receivables			68
Contract assets			156
			4,772
Liabilities
Trade and other payables			304
Contract liabilities			918
Current tax liability			154
Deferred tax liability			473
Borrowings			161
Provisions			178
			2,188
Total identifiable net assets at fair value			2,584
Goodwill arising on acquisition			5,613
Fair value of consideration transferred			8,197

 

The fair value of the combined trade receivables amounts to less than £0.1m. The gross amount of trade receivables is less than £0.1m and it is expected that the full contractual amounts can be collected.

 

The deferred tax liability mainly comprises the tax effect of the accelerated amortisation for tax purposes of the acquired intangible assets recognised on acquisition offset by the tax effect of the accelerated revenue recognition.

 

 

Purchase consideration

 

	Atkinson McLeod £'000
Amount settled in cash	7,457
Deferred cash consideration	740
Fair value of consideration transferred	8,197

 

Gross purchase consideration was £8.2m, with £7.5m paid in March 2023. Consideration paid in the period, net of cash acquired, was £6.2m and is included in cash flows used in investing activities. £0.7m of deferred cash consideration is payable 12 months from the transaction completion date, with the liability included within trade and other payables.

 

2022 acquisitions

As disclosed in Note 13 of the 2022 Annual Report and Accounts, the Group completed the acquisition of IMM Properties Limited and its subsidiary IMM Properties Investment Limited, trading under the name Gordon & Co, (collectively 'Gordon & Co') and Stones Residential Holdings Limited and its subsidiary Stones Residential (Stanmore) Limited (collectively 'Stones Residential'). Deferred consideration of £0.2m was paid during the period representing the partial settlement of deferred consideration, with an estimated £1.3m of deferred consideration payable in the second half of the year.

 

Analysis of cash flows on acquisition

	Total £'000
Cash consideration	(7,457)
Deferred and contingent consideration paid in relation to 2022 acquisitions	(172)
Cash acquired in subsidiaries	1,301
Acquisitions of subsidiaries, net of cash acquired (included in cash flows used in investing activities)	(6,328)
Transaction costs of the acquisition (included in cash flows from operating activities)	(124)
Net cash flow on acquisitions	(6,452)

 

Transaction costs amounting to £0.1m are not included as part of consideration transferred and have been recognised as an adjusted item expense in the Group's consolidated income statement (refer to Note 3).

 

12.  OWN SHARES RESERVE

	30 June 2023 £'000	30 June 2022 £'000	31 December 2022 £'000
Opening balance	10,993	6,059	6,059
Acquired during the period	1,112	963	4,941
Utilised during the period	(13)	(8)	(7)
Closing balance	12,092	7,014	10,993

 

The own shares reserve represents the cost of shares in the Company purchased in the market and held by either the Company or the Foxtons Group Employee Benefit Trust to satisfy awards under the Group's long-term incentive schemes. The number of ordinary shares held by the Company and the Employee Benefit Trust at 30 June 2023 was 28,860,245 (2022: 13,887,108).

During the first six months of the year 2,847,821 (2022: 2,772,985) shares with a total value of £1,112,042 (2022: £962,859) have been repurchased by the Company through a share buyback programme and are held in treasury at 30 June 2023. From the total value spent in the period ended 30 June 2022, £0.1m of the balance is included within trade and other payables.

 

 

 

 

13.  RelaTed party transactions

 

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

As set out in Note 5, in the prior year, the D&G Sales business was disposed of on 11 February 2022 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.

 

14.  Client monies

 

At 30 June 2023, client monies held within the Group in approved bank accounts amounted to £125m (31 December 2022: £112.4m, 30 June 2022: £113.4m). Neither this amount nor the matching liabilities to the clients concerned, are included in the consolidated balance sheet. The Group's terms and conditions provide that interest income on these deposits accrues to the Company.

Client funds are protected by the FSCS under which the government guarantees amounts up to £85,000 each. This guarantee applies to each individual client deposit, not the sum total on deposit.

 

15.  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.

The Group's APMs are aligned to our strategy and together are used to measure the performance of the business and form the basis of the performance measures for remuneration. Adjusted results exclude certain items because if included, these items could distort the understanding of our performance for the period and the comparability between periods.

The definition, purpose and how the measures are reconciled to statutory measures are set out below.

 

a)     Adjusted operating profit and adjusted operating profit margin

Adjusted operating profit represents the profit before tax for the period before finance income, finance costs, other gains and adjusted items (defined within Note 2). This is the measure reported to the Board for the purpose of resource allocation and assessment of segment performance. The closest equivalent IFRS measure to adjusted operating profit is profit before tax.

Adjusted operating profit margin is defined as adjusted operating profit divided by revenue. This APM is a key performance indicator of the Group and is used to measure the delivery of the Group's strategic priorities.

 

Refer to Note 2 for a reconciliation between profit before tax and adjusted operating profit and for the inputs used to derive adjusted operating profit margin.

 

b)    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. Contribution and contribution margin are key metrics for management since both are measures of the profitability and efficiency before the allocation of shared costs. A reconciliation between continuing operations revenue and contribution is presented below.

H1 2023	Lettings £'000	Sales £'000	Financial services £'000	Consolidated £'000
Revenue	49,768	16,933	4,232	70,933
Less: Direct operating costs	(12,406)	(11,393)	(2,657)	(26,456)
Contribution	37,362	5,540	1,575	44,477
Contribution margin	75.1%	32.7%	37.2%	62.7%
H1 2022	Lettings £'000	Sales £'000	Financial services £'000	Consolidated £'000
Revenue	39,443	20,823	4,800	65,066
Less: Direct operating costs	(10,501)	(9,963)	(2,746)	(23,210)
Contribution	28,942	10,860	2,054	41,856
Contribution margin	73.4%	52.2%	42.8%	64.3%

 

c)     Adjusted earnings per share

Adjusted earnings per share is defined as earnings per share excluding the impact of adjusted items.

The measure is derived by dividing profit after tax, adjusted for adjusted items after tax, by the weighted average number of ordinary shares in issue during the financial period, excluding own shares held. 

This APM is a measure of management's view of the Group's underlying earnings per share. The closest equivalent IFRS measure is basic earnings per share. Refer to Note 7 for a reconciliation between statutory earnings per share and adjusted earnings per share.

d)    Net free cash flow

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. This measure is used to monitor cash generation. A reconciliation between net cash from operating activities and net free cash flow is presented below.

		H1 2023 £'000	H1 2022 £'000
Net cash from operating activities		3,233	9,647
Less: Repayment of IFRS 16 lease liabilities		(6,288)	(5,926)
Net cash (outflow)/inflow from operating activities, after repayment of IFRS 16 lease liabilities		(3,055)	3,721
Investing activities
Interest received		221	37
Proceeds on disposal of property, plant and equipment		-	46
Purchases of property, plant and equipment		(792)	(989)
Purchase of intangibles		(698)	-
Net cash used in investing activities		(1,269)	(906)
Net free cash (outflow)/inflow		(4,324)	2,815

 

e)    Net (debt)/cash

Net cash/(debt) is defined as cash and cash equivalents less external borrowings and excludes IFRS 16 lease liabilities. The definition of the measure is consistent with the definition of the leverage ratio covenant attached to the Group's RCF and therefore monitored internally for the purposes of covenant compliance. A reconciliation of the measure is presented below.

	30 June 2023 £'000	30 June 2022 £'000	31 December 2022 £'000
Cash and cash equivalents	3,006	11,667	12,027
Less: External borrowings 1	(5,114)	(50)	-
Net (debt)/cash	(2,108)	11,617	12,027

 

¹ Excludes £0.2m of RCF arrangement and legal fees (30 June 2022: £nil, 31 December 2022: nil) that are offset against borrowings within the balance sheet caption.

 

INDEPENDENT REVIEW REPORT TO FOXTONS GROUP PLC

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2023 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2023 which comprises the condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated cash flow statement and the related explanatory notes that have been reviewed.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410"). A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 1.2, the annual financial statements of the Group are prepared in accordance with UK adopted International Accounting Standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the Directors have inappropriately adopted the going concern basis of accounting or that the Directors have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410, however future events or conditions may cause the Group to cease to continue as a going concern.

Responsibilities of Directors

The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

In preparing the half-yearly financial report, the Directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statement in the half-yearly financial report. Our conclusion, including our conclusions relating to going concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

 

 

 

 

 

 

 

 

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose.  No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent.  Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

 

 

Tim Neathercoat

BDO LLP

Chartered Accountants

London, UK

26 July 2023

 

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).