TIDMFOXT
RNS Number : 7857G
Foxtons Group PLC
26 July 2019
Foxtons Group plc
INTERIM RESULTS FOR THE HALF YEARED 30 JUNE 2019
26 JULY 2019
Foxtons Group plc, London's leading estate agent, today
announces its financial results for the half year ended 30 June
2019.
Financial summary
Half year ended 30 June 2019 2018
---------------------------------------- ---------- ----------
Group revenue GBP51.1m GBP53.0m
Group Adjusted EBITDA(1) GBP5.4m GBP0.1m
Group Adjusted EBITDA (pre-IFRS 16)(2) GBP0.1m GBP0.1m
Statutory loss before tax(3) (GBP3.2m) (GBP2.5m)
Net free cash (outflow)(4) (GBP3.5m) (GBP6.0m)
Basic loss per share (1.1p) (1.1p)
Interim dividend per share - ordinary Nil Nil
---------------------------------------- ---------- ----------
Financial highlights:
-- Group revenue declined by 3.5% to GBP51.1m (2018: GBP53.0m)
as a consistent lettings performance was offset by lower revenue in
the sales business reflecting the ongoing weakness of the London
market.
-- Adjusted EBITDA of GBP5.4m reflects transition to IFRS 16.
Adjusted EBITDA (pre-IFRS 16) of GBP0.1m was flat versus last year
as cost actions implemented in 2018 helped protect profitability.
The statutory loss before tax was GBP3.2m(3) (2018: GBP2.5m).
-- Continued resilience in the lettings business with revenue of
GBP31.7m (2018: GBP31.7m). The period included one month without
tenant fees following the tenant fee ban.
-- Sales revenue was down 10% to GBP15.4m (2018: GBP17.2m). Flat
volumes were offset by lower average revenue per unit which was
impacted by the mix of properties sold and a reduction in the
average property selling price.
-- Alexander Hall mortgage revenue of GBP4.0m, down 3% on the
prior year reflecting a decline in new mortgages, partially offset
by growth in re-mortgages.
-- Strong balance sheet maintained with no external borrowings
and cash balance of GBP14.5m at 30 June 2019 (31 December 2018:
GBP17.9m, 30 June 2018: GBP11.8m).
-- There will be no interim dividend in this financial period in line with our policy.
Operational highlights:
-- Differentiated proposition and exceptional service continue
to drive listings during challenging conditions, with Foxtons
maintaining No 1 property listings position in London.
-- Cost actions in prior years have protected profitability.
-- Maintained strong sales and lettings infrastructure to
capitalise on future growth opportunities.
-- Decision taken not to increase lettings fees following the tenant fee ban.
-- Build to Rent and Institutional PRS pipeline continues to strengthen.
Commenting on the results, Nic Budden, CEO, said:
"The prolonged downturn in the London sales market and continued
political uncertainty continues to impact our results.
The lettings business remains our priority and continues to
deliver stable results underpinned by strong structural drivers of
demand. We believe our excellent service offering and compliance
culture, combined with our decision not to increase fees for
landlords following the implementation of the tenant fee ban, will
continue to differentiate us from the competition.
Low consumer confidence combined with challenging market
conditions means selling or finding a property is more challenging
than ever before, and we believe this creates even more relevance
for our high service sales model. In lettings, our professional
approach mitigates legal risk for landlords and provides them with
reliable tenants who trust us to provide the biggest range of
high-quality rental accommodation.
Looking ahead, we expect conditions to remain challenging and
have effectively positioned the business to reflect this. In
lettings, we expect our ongoing commitment to landlords in light of
the tenant fee ban to improve further our proposition and we are
confident this will continue to drive market share.
In the longer term, our strong balance sheet and leading market
position in London will allow us to capitalise on any recovery, in
what remains one of the world's most desirable cities and dynamic
property markets."
For further information, please contact:
Foxtons Group plc
Richard Harris, Chief Financial
Officer
Muhammad Patel, Investor Relations
Manager +44 20 7893 6484
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Teneo
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Robert Morgan / Anthony Di Natale +44 20 7367 6045
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The Company will host a conference call today at 9:30am for
analysts and investors - dial in details: UK: +44 (0) 330 336 9125,
US: +1 323-794-2093, Confirmation code: 6599559. There will also be
a replay of the call: UK: +44 (0) 207 660 0134. US: +1
719-457-0820.
The presentation will be webcast live. To access you will be
required to pre-register using the following link:
https://globalmeet.webcasts.com/starthere.jsp?ei=1253957&tp_key=8d380f53cd
(1) Adjusted EBITDA is defined by the Group as profit before
tax, finance costs, finance income, other gains/losses,
depreciation, amortisation, profit on disposal of fixed assets,
share-based payments and Adjusted items. The Group transitioned to
IFRS 16 'Leases' on 1 January 2019 using the modified retrospective
approach with no restatement of prior year comparatives. Refer to
Note 13 for details of the impact of IFRS 16 on the Group's 30 June
2019 financial position and performance. The Group has defined and
outlined the purpose of its Alternative Performance Measures within
Note 14 of the financial statements.
(2) Adjusted EBITDA (pre-IFRS 16) is defined by the Group as
profit, determined using pre-IFRS 16 lease accounting principles,
before tax, finance costs, finance income, other gains/losses,
depreciation, amortisation, profit on disposal of fixed assets,
share-based payments and Adjusted items. Refer to Note 13 of the
financial statements for further details of the impact of IFRS
16.
(3) The application of IFRS 16 has increased the Group's 2019
statutory loss before tax by GBP0.6m, with no restatement of the
prior year comparative. Refer to Note 13 of the financial
statements for further details of the impact of IFRS 16.
(4) Net free cash outflow is defined as Adjusted net cash from
operating activities, less cash used in investing activities.
Adjusted net cash from operating activities is defined as net cash
from operating activities, less the repayment of IFRS 16 lease
liabilities. Refer to Note 14 of the financial statements for a
reconciliation of the measure.
PERFORMANCE AT A GLANCE
Six months ended 30 June 2019 2018 % change
------------------------------------ ----------------------- ---------- --------------------
Income statement
------------------------------------ ----------------------- ---------- --------------------
Revenue GBP51.1m GBP53.0m (3.5%)
------------------------------------ ----------------------- ---------- --------------------
Adjusted EBITDA(1) GBP5.4m GBP0.1m
------------------------------------ ----------------------- ---------- --------------------
Adjusted EBITDA margin(1) 10.7% 0.1%
------------------------------------ ----------------------- ---------- --------------------
Adjusted EBITDA (pre-IFRS 16)(1) GBP0.1m GBP0.1m -
------------------------------------ ----------------------- ---------- --------------------
Adjusted EBITDA margin (pre-IFRS
16)(1) 0.2% 0.1% 100%
------------------------------------ ----------------------- ---------- --------------------
Statutory loss before tax (GBP3.2m) (GBP2.5m) (29%)
------------------------------------ ----------------------- ---------- --------------------
Loss per share
------------------------------------ ----------------------- ---------- --------------------
Basic and fully diluted loss per
share (1.1p) (1.1p) -
------------------------------------ ----------------------- ---------- --------------------
Dividends
------------------------------------ ----------------------- ---------- --------------------
Interim proposed - - -
Cash flow
------------------------------------ ----------------------- ---------- --------------------
Net free cash (outflow)(2) (GBP3.5m) (GBP6.0m) 42%
------------------------------------ ----------------------- ---------- --------------------
Period end cash balance GBP14.5m GBP11.8m
------------------------------------ ----------------------- ---------- --------------------
KPIs(3)
------------------------------------ ----------------------- ---------- --------------------
Sales revenue GBP15.4m GBP17.2m (10%)
------------------------------------ ----------------------- ---------- --------------------
Sales units 1,194 1,188 1%
------------------------------------ ----------------------- ---------- --------------------
Revenue per sales unit GBP12,934 GBP14,450 (10%)
------------------------------------ ----------------------- ---------- --------------------
Lettings revenue GBP31.7m GBP31.7m -
------------------------------------ ----------------------- ---------- --------------------
Lettings units 9,265 9,430 (2%)
------------------------------------ ----------------------- ---------- --------------------
Average revenue per lettings unit GBP3,423 GBP3,365 2%
------------------------------------ ----------------------- ---------- --------------------
Mortgage broking revenue GBP4.0m GBP4.1m (3%)
------------------------------------ ----------------------- ---------- --------------------
Units 2,099 2,120 (1%)
------------------------------------ ----------------------- ---------- --------------------
Average revenue per broking unit GBP1,889 GBP1,929 (2%)
------------------------------------ ----------------------- ---------- --------------------
(1) These measures are the Alternative Performance Measures used
by the Group. Refer to Note 14 of the financial statements for
definitions, purpose and reconciliations to IFRS measures.
(2) Net free cash outflow is defined as Adjusted net cash from
operating activities, less cash used in investing activities.
Adjusted net cash from operating activities is defined as net cash
from operating activities, less the repayment of IFRS 16 lease
liabilities. Refer to Note 14 for a reconciliation of the measure.
As explained in Note 14, the Group's Operating cash conversion
measure is not considered to be relevant for H1 2019 due to an
Adjusted operating cash outflow in the current and prior
period.
(3) Average revenue per branch and Average revenue per employee
were presented as KPIs in the Group's 2018 Annual Report and
Accounts. These metrics are not considered to be relevant at the
half-year reporting date and therefore have not been presented.
CHIEF EXECUTIVE'S REVIEW
Summary
The Group's results in the first half of 2019 continued to be
impacted by the prolonged downturn in the London sales market, with
volumes remaining at very low levels. First half Group revenue was
GBP51.1m (2018: GBP53.0m) of which revenue from sales was GBP15.4m
(2018: GBP17.2m), revenue from lettings was GBP31.7m (2018:
GBP31.7m) and revenue from mortgage broking was GBP4.0m (2018:
GBP4.1m).
Whilst the Group's sales volumes remained stable, lower house
prices and the sale of a higher proportion of lower-value
properties compared to the same period last year led to a decrease
in average revenue per unit to GBP12,934 (2018: GBP14,450). Overall
revenue from the sales business fell by 10%, and on a quarterly
basis sales revenue fell by 13% in Q1 versus prior year, and by 7%
in Q2 versus prior year.
The lettings business remains our priority, representing 62% of
the Group's revenues, and it continues to deliver stable results in
what is an attractive and competitive marketplace. Lettings revenue
was flat in the first half of the year, with Q1 revenue 2% higher
and Q2 revenue 2% lower compared to prior year. Revenues included
one month without tenant fees, following the implementation of the
ban from 1 June 2019. The impact of the ban on Group revenue is
expected to be GBP3m on 2019, and GBP4.5m on a full year basis. As
a sign of our commitment to current and prospective landlords we
have left our landlord fees unchanged.
Revenues at Alexander Hall, our mortgage broker, were down 3%,
reflecting a decline in new mortgages, partially offset by growth
in re-mortgages. In total, mortgage volumes were relatively flat,
but the lower average fee attached to re-mortgages resulted in the
overall revenue decline.
Group Adjusted EBITDA was GBP5.4m. Excluding the impact of IFRS
16, Group Adjusted EBITDA was flat at GBP0.1m (2018: GBP0.1m) as
the lower revenue was offset by the cost actions we took last year
which have helped protect profitability. Statutory loss before tax
was GBP3.2m (2018: GBP2.5m loss before tax).
The Group maintains a strong balance sheet, with no external
borrowings, and a cash balance of GBP14.5m at the period end (31
December 2018: GBP17.9m, 30 June 2018: GBP11.8m).
Property sales market
We are currently operating in a sustained downturn, with
political uncertainty exacerbating a London sales market
characterised by very low transaction levels. Selling or finding a
house in this market can be challenging, making us the ideal
partner for buyers and sellers. Our high service model is based on
knowledgeable and committed professionals who benefit from our
London-wide footprint and are committed to delivering the best
results. Our consistent listings share and number one position
demonstrate the continuing trust homeowners have in Foxtons to sell
their home.
Whilst there has been some softening of prices we do not see any
change to overall market conditions in the short term. In the
longer term, we maintain confidence that transaction levels will
improve based on the inherent desirability of owning property in
London and we will continue to position the business such that we
are ready to benefit from any change in market conditions.
Lettings market
Lettings in London is a dynamic and attractive market with
strong, structural drivers of demand and increasing levels of
regulatory complexity. This is partially offset by heightened
levels of competition as agents prioritise lettings in the weak
sales market. The trend to rent in London continues to grow, with
approximately 30% of households (one million) now in private rented
accommodation. The growing numbers of renters and desire to
increase standards of accommodation has increased regulatory
scrutiny on landlords. Foxtons is well placed to benefit from this
dynamic with a strong compliance culture and London-wide footprint
enabling us to both help landlords navigate the risks and find the
right tenants whilst offering tenants the biggest choice of high
quality rental property in the capital.
The tenant fee ban has only recently come into place and it is
too early to assess its impact on the marketplace. The scale and
the efficiency initiatives we have undertaken in recent years have
enabled us to invest in our lettings offer and maintain landlord
fees at current levels. We are committed to providing an
outstanding proposition to our landlords and this decision builds
on our already excellent offer.
During the period the portfolio remained broadly flat and the
proportion of actively managed properties in the portfolio remained
stable at 34% (2018: 34%).
Outlook
Looking ahead we see market conditions unchanged in the short
term. The sales market remains very challenging with political
uncertainty further impacting a weak market. In lettings our
decision not to increase fees has improved our already strong
proposition and we are confident this will drive market share over
the medium term.
In the longer term we remain well placed to benefit from
increases in activity levels with a leading market position in
London, one of the world's most desirable cities and dynamic
property markets, and a strong balance sheet.
Nic Budden
Chief Executive Officer
FINANCIAL REVIEW
Overview
Group revenue fell by 3.5% to GBP51.1m (2018: GBP53.0m), with
revenue from sales down 10%, revenue from lettings flat
year-on-year and revenue from mortgage broking down 3%.
Group Adjusted EBITDA was GBP5.4m. Excluding the impact of IFRS
16, Group Adjusted EBITDA was flat at GBP0.1m (2018: GBP0.1m). The
cost saving initiatives undertaken in the second half of 2018 have
delivered savings of GBP1.7m during the period, in line with our
expectations.
The Group's statutory loss before tax was GBP3.2m (2018: GBP2.5m
loss before tax), with GBP0.6m of the year-on-year decrease due to
the implementation of IFRS 16 from 1 January 2019.
The Group has no external borrowings with GBP14.5m of cash as at
30 June 2019 (31 December 2018: GBP17.9m, 30 June 2018: GBP11.8m).
The Group has a GBP5m revolving credit facility which expires in
July 2022 and remains undrawn.
Summary income statement and cash flow
Half year ended 30 June 2019 2018 % change
--------------------------------- ---------- ---------- ---------
Group revenue GBP51.1m GBP53.0m (3.5%)
Group Adjusted EBITDA GBP5.4m GBP0.1m
Group Adjusted EBITDA (pre-IFRS GBP0.1m GBP0.1m -
16)
Statutory loss before tax (GBP3.2m) (GBP2.5m) (29%)
Net free cash (outflow) (GBP3.5m) (GBP6.0m) 42%
Basic and fully diluted loss
per share (1.1p) (1.1p) -
Interim dividend per share Nil Nil -
--------------------------------- ---------- ---------- ---------
Revenue
The Group comprises three reporting segments: Sales, Lettings
and Mortgage Broking. The majority of operations are in the London
area with two branches in the adjacent area of Surrey.
GBPm H1 2019 H1 2018 % variance
------------------ -------- -------- -----------
Sales 15.4 17.2 (10%)
Lettings 31.7 31.7 -
Mortgage Broking 4.0 4.1 (3%)
Total revenue 51.1 53.0 (3.5%)
------------------ -------- -------- -----------
Sales
There continues to be very low levels of activity in the London
property sales market. Revenues fell by 10% versus the prior year,
with volumes flat year-on-year and the average revenue per
transaction decreasing to GBP12.9k (2018: GBP14.5k). The reduction
in average revenue per transaction was due to a change in the mix
of properties sold. The average price of properties sold was lower
than last year at GBP544k (2018: GBP582k).
Lettings
Lettings continues to provide a consistent recurring revenue
stream which comprises 62% of the Group's revenues. Lettings
revenue was in line with prior year, despite the tenant fee ban
impacting revenues by GBP0.5m in June 2019. The lettings business
is seasonal and the Group has a number of initiatives in place to
capitalise on the peak period which occurs in the third quarter of
the year.
Mortgage Broking
Revenue at our mortgage business, Alexander Hall, fell by 3%.
This reflected a decline in new mortgages, partially offset by
growth in re-mortgages. Volumes were relatively flat but the lower
average fee attached to re-mortgages resulted in the overall
revenue decline.
Balanced business
A key strategic priority for the Group is to maintain a balanced
business since this enables the Group to withstand fluctuations in
the property market and provides protection from the potentially
volatile sales market. The Group has maintained a consistent
balance in its business year-on-year.
% of total revenue H1 2019 H1 2018
--------------------- ------- -------
Sales 30% 32%
Lettings 62% 60%
Mortgage Broking 8% 8%
Total revenue 100% 100%
--------------------- ------- -------
Contribution and Adjusted EBITDA
A key metric for management is the contribution generated by the
three reporting segments. Contribution is defined as revenue less
direct salary costs of front office staff and costs of bad debt.
The Group's contribution margin was marginally higher than prior
year at 63.6% (2018: 63.3%) as lettings become a greater proportion
of total revenue. Refer to Note 14 of the financial statements for
a reconciliation of contribution from revenue.
Contribution 2019 2018
--------------------
GBPm Margin GBPm Margin
-------------------- ----- ------- ----- -------
Sales 7.9 51.0% 8.8 51.2%
Lettings 22.8 71.9% 22.9 72.0%
Mortgage Broking 1.9 46.9% 1.9 47.1%
Group contribution 32.5 63.6% 33.6 63.3%
-------------------- ----- ------- ----- -------
Following the application of IFRS 16 from 1 January 2019 the
Group's reported Adjusted EBITDA is GBP5.3m higher than if previous
lease accounting principles had been applied. Under previous
accounting principles, a lease rental expense of GBP5.5m and other
income of GBP0.2m would have been recognised within Adjusted
EBITDA. Under IFRS 16, these elements have been replaced by
right-of-use asset depreciation of GBP4.7m and net finance costs of
GBP1.2m which are excluded from Adjusted EBITDA.
The table below presents the Group's 2019 Adjusted EBITDA
measures on an "as reported" and "pre-IFRS 16" basis, with no
restatement of the 2018 measures. Refer to Note 3 of the financial
statements for a definition of Adjusted EBITDA and reconciliation
to loss before tax. Following the application of IFRS 16, and as
market practice evolves, the Group's Alternative Performance
Measures will be reviewed for continuing relevance.
Adjusted EBITDA 2019 (as reported) 2019 (pre-IFRS 2018
16)
-----------------------
GBPm Margin GBPm Margin GBPm Margin
----------------------- --------- ---------- ------- -------- ------ --------
Sales (0.8) (5.3%) (2.8) (18.0%) (3.6) (21.0%)
Lettings 5.6 17.7% 2.3 7.3% 3.0 9.5%
Mortgage Broking 0.6 16.4% 0.6 14.1% 0.7 16.4%
Group Adjusted EBITDA 5.4 10.7% 0.1 0.2% 0.1 0.1%
----------------------- --------- ---------- ------- -------- ------ --------
The integrated nature of the business model means that a
relatively large proportion of the cost base is shared between the
Sales and Lettings segments. Adjusted EBITDA (pre-IFRS 16) and
margin for the sales business improved, whilst Adjusted EBITDA
(pre-IFRS 16) and margin for the lettings business declined. For
the purposes of segmental reporting shared costs are allocated
between the sales business and the lettings business according to
headcount. 2019 headcount was higher in the lettings business than
in the sales business, and therefore a higher proportion of shared
cost has been allocated to lettings in the current year.
Statutory loss before tax
The statutory loss before tax in the period was GBP3.2m (2018:
GBP2.5m loss before tax) and was after charging:
-- Direct salary costs of front office staff of GBP18.4m (2018: GBP19.1m)
-- Shared costs of GBP27.1m (2018: GBP33.5m), which under IFRS
16 no-longer includes operating lease expenses of GBP5.5m
-- Depreciation (excluding IFRS 16 depreciation charges of
GBP4.7m) and amortisation GBP2.0m (2018: GBP2.2m)
-- Share-based payment charge of GBP0.4m (2018: GBP0.7m)
-- Other losses GBP0.1m (2018: Other gains of GBP0.3m)
-- Net finance costs (excluding IFRS 16 finance costs of GBP1.3m) of nil (2018: nil)
-- IFRS 16 charges of GBP6.0m (2018: nil) relating to
right-of-use depreciation of GBP4.7m (2018: nil) and lease
liability finance costs of GBP1.3m (2018: nil)
-- Adjusted items charges GBP0.4m (2018: nil); refer to the
section below for additional details
Adjusted items
The Group incurred a GBP0.4m charge (H1 2018: nil, FY 2018:
GBP15.7m charge) in respect of Adjusted items, all of which is
non-cash. The charge is driven by the impairment of the fixed
assets of a relatively new branch which has not matured at the rate
originally anticipated.
IFRS 16 'Leases'
The implementation of IFRS 16 does not impact how we run the
business, nor does it impact the cash position or cash flows of the
Group. However, there is a material impact on the presentation of
the financial statements. On transition to IFRS 16 on 1 January
2019, the Group recognised additional right-of-use assets and
additional lease liabilities with respect to its offices and motor
vehicles. The financial reporting impact is summarised as:
-- Recognition of right-of-use assets of GBP61.0m presented
within property, plant and equipment
-- Recognition of lease liabilities of GBP62.4m presented
separately within current and non-current liabilities
-- Net GBP0.6m increase in the Group's loss before tax compared
to if pre-IFRS 16 accounting principles had been applied. This is
due to a reduction in revenue of GBP0.2m, and a rental expense of
GBP5.5m being replaced by right-of-use asset depreciation of
GBP4.7m and lease liability finance costs of GBP1.3m.
Taxation
The Group has a low risk approach to its tax affairs. All
business activities of Foxtons operate within the UK and are UK tax
registered and fully compliant. The Group does not have any complex
tax structures in place and does not engage in any aggressive tax
planning or tax avoidance schemes. The Group always sets out to be
transparent, open and honest in its dealings with tax authorities.
The Group received a tax refund of GBP0.1m in the period (2018:
GBP1.4m tax paid).
Loss per share (EPS)
Basic and fully diluted loss per share is 1.1p (2018: 1.1p)
driven by reduced profitability. Adjusted loss per share is 1.0p
(2018: 1.1p).
Cash flow
Net free cash outflow for the period is GBP3.5m (2018: GBP6.0m
outflow) which includes:
-- Working capital outflow of GBP2.0m (2018: GBP2.5m)
-- GBP0.7m (2018: GBP0.7m) payments in respect of prior year Adjusted items
-- GBP0.2m (2018: GBP0.5m) of net capital expenditure, which has been tightly controlled
-- Nil (2018: GBP1.0m) purchase of investments
-- GBP0.1m tax refund (2018: GBP1.4m tax paid)
The Group held net cash of GBP14.5m as at the period end (31
December 2018: GBP17.9m, 30 June 2018: GBP11.8m).
Dividends
The Board's priorities for free cash flow are to fund investment
in the future development of the business, maintain a strong
balance sheet and to return excess cash to shareholders. We have a
policy of returning 35% to 40% of profit after tax as an ordinary
dividend. As the Group did not make a profit in the period, the
Board has taken the decision not to pay an interim dividend.
Post balance sheet events
There are no post balance sheet events to report.
Treasury policies and objectives
The Group's treasury policy is designed to reduce financial
risk.
Financial risk for the Group is low as:
-- the Group has no external borrowings;
-- the Group is entirely UK-based with no foreign currency risks; and
-- surplus cash balances are held with major UK based banks.
As a consequence of the above, the Group has not had to enter
into any financial instruments to protect against risk.
Pensions
The Group does not have any defined benefit schemes in place but
is subject to the provisions of auto-enrolment which require the
Group to make certain defined contribution payments for our
employees.
Richard Harris
Chief Financial Officer
PRINCIPAL RISKS
Risk management
The Board is responsible for establishing and maintaining the
Group's system of risk management and internal control, with the
aim of protecting its employees and customers and safeguarding the
interests of the Company and its Shareholders in the constantly
changing environment in which it operates. The Board regularly
reviews the principal risks facing the Company together with the
relevant mitigating controls and undertakes a robust assessment. In
reviewing the principal risks the Board considers emerging risks
and significant changes to existing risk ratings. In addition the
Board has set guidelines for risk appetite as part of the risk
management process against which risks are monitored.
The identification of risk in the Group is undertaken by
specific executive risk committees which analyse overall corporate
risk, information technology risk and mortgage broking risk. Other
committees exist below this level to focus on specific areas such
as anti-money laundering. A common risk register is used across the
Group to monitor gross and residual risk with the results being
assessed by the Board. The compliance department constantly reviews
operations to ensure that any non-standard transactions have been
properly authorised and that procedures are being properly adhered
to across the branch network. The Audit Committee monitors the
effectiveness of the risk management system through regular updates
originating from the various executive risk committees.
The principal risks table below sets out the risks facing the
business at the date of this report analysed between external and
internal factors. These risks do not comprise all of the risks that
the Group may face and are not listed in any order of priority.
Additional risks and uncertainties not presently known to
management or deemed to be less material at the date of this report
may also have an adverse effect on the Group.
The Group's principal risks are considered to be consistent with
those set out on pages 26 to 28 of the 2018 Annual Report and
Accounts. A summary of the principal risks is provided below.
External risk factors
Risk Impact on Group
Market risk As set out in the Chief Executive's review on pages
4 and 5, the Group continues to be impacted by the
prolonged downturn in the London sales market, with
transactions continuing to be at very low levels during
2019. There is a risk that the Group will be further
impacted by factors such as:
* affordability, which in turn may reduce transaction
levels in the market;
* a reduction in London's standing as a major financial
city caused by the macro-economic and political
environment, including the UK's decision to leave the
EU;
* the market being reliant on the availability of
mortgage finance, a deterioration in which may
adversely affect the Group; and
* the market being impacted by any changes in
government policy such as increases in stamp duty
taxes or increased regulation in the lettings market.
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Competitor challenge Foxtons operates in a highly competitive marketplace.
New or existing competitors could develop new services
or methods of working including online and hybrid
agents which could give them a competitive advantage
over Foxtons.
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Compliance with Breaches of laws or regulations could lead to financial
the legal and regulatory penalties and reputational damage.
environment
The Mortgage broking division is authorised and regulated
by the FCA and could be subject to sanction for non-compliance.
-----------------------------------------------------------------
Internal risk factors
Risk Impact on Group
IT systems and Foxtons business operations are dependent on sophisticated
cyber risk IT systems which could fail or be deliberately targeted
by cyber-attacks leading to interruption of service
or corruption of data, or the loss or theft of customer
data.
-----------------------------------------------------------
People There is a risk that Foxtons may not be able to
recruit and retain sufficient people to satisfy
its organic expansion plans. In addition, senior
staff may be recruited by competitors.
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FORWARD LOOKING STATEMENTS
This interim results announcement contains certain
forward-looking statements with respect to the financial condition
and results of operations of Foxtons Group plc. These statements
and forecasts involve risk and uncertainty because they relate to
events and depend upon circumstances that will occur in the future.
There are a number of factors that could cause actual results or
developments to differ materially from those expressed or implied
by these forward-looking statements and forecasts. The
forward-looking statements are based on the directors' current
views and information known to them at 25 July 2019. The directors
do not make any undertakings to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. Nothing in this statement should be
construed as a profit forecast.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
We confirm that to the best of our knowledge:
(a) The condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting';
(b) The interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
(c) The interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related parties'
transactions and changes therein).
By order of the Board
Chief Executive Officer Chief Financial Officer
Nic Budden Richard Harris
25 July 2019 25 July 2019
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended 30 June 2019
Six months
Six months to 30 June
to 30 June 2018(1)
2019 (Unaudited) (Unaudited)
Continuing operations Notes GBP'000 GBP'000
------------------------------------ ----- --------------------- ----------------------
Revenue 3 51,125 52,993
Administrative expenses (53,073) (55,769)
------------------------------------ ----- --------------------- ----------------------
Operating loss (1,948) (2,776)
Other (losses)/gains (55) 257
Finance income 67 31
Finance costs (1,300) (29)
------------------------------------ ----- --------------------- ----------------------
Loss before tax (3,236) (2,517)
Tax credit/(charge) 4 250 (430)
------------------------------------ ----- --------------------- ----------------------
Loss and total comprehensive loss
for the year (2,986) (2,947)
------------------------------------ ----- --------------------- ----------------------
Loss per share
Basic and diluted (pence per share) 6 (1.1) (1.1)
Adjusted (pence per share)(2) 6 (1.0) (1.1)
------------------------------------ ----- --------------------- ----------------------
(1) The Group has applied IFRS 16 using the modified
retrospective transition approach, under which the cumulative
effect of initial application is recognised in retained earnings at
1 January 2019. Therefore comparative information has not been
restated. Refer to Note 13 for details of the impact of IFRS
16.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2019
30 June 31 December
2018(1) 2018(1)
30 June
2019 (unaudited) (unaudited) (audited)
Notes GBP'000 GBP'000 GBP'000
------------------------------------- ----- ----------------- ------------ -----------
Non-current assets
Goodwill 9 9,349 19,168 9,349
Other intangible assets 9 101,248 101,250 101,455
Property, plant and equipment 10 72,936 22,131 17,171
Interest in associate 1,265 1,039 1,289
Deferred tax assets 1,407 763 1,158
------------------------------------- ----- ----------------- ------------ -----------
186,205 144,351 130,422
------------------------------------- ----- ----------------- ------------ -----------
Current assets
Trade and other receivables 10,950 12,040 7,532
Current tax assets 82 61 212
Prepayments 5,070 5,865 6,195
Cash and cash equivalents 8 14,516 11,818 17,927
------------------------------------- ----- ----------------- ------------ -----------
30,618 29,784 31,866
------------------------------------- ----- ----------------- ------------ -----------
Total assets 216,823 174,135 162,288
------------------------------------- ----- ----------------- ------------ -----------
Current liabilities
Trade and other payables (13,042) (13,419) (13,747)
Lease liabilities 13 (11,788) - -
Provisions (1,419) (1,109) (2,532)
Deferred revenue and lettings refund
liability (5,397) (4,937) (4,988)
------------------------------------- ----- ----------------- ------------ -----------
(31,646) (19,465) (21,267)
------------------------------------- ----- ----------------- ------------ -----------
Net current (liabilities)/assets (1,028) 10,319 10,599
Non-current liabilities
Lease liabilities 13 (47,235) - -
Deferred tax liabilities (16,830) (16,830) (16,830)
------------------------------------- ----- ----------------- ------------ -----------
(64,065) (16,830) (16,830)
------------------------------------- ----- ----------------- ------------ -----------
Total liabilities (95,711) (36,295) (38,097)
------------------------------------- ----- ----------------- ------------ -----------
Net assets 121,112 137,840 124,191
------------------------------------- ----- ----------------- ------------ -----------
Equity
Share capital 2,751 2,751 2,751
Own shares held (774) (720) (720)
Other capital reserve 2,582 2,582 2,582
Capital redemption reserve 71 71 71
Retained earnings 116,482 133,156 119,507
------------------------------------- ----- ----------------- ------------ -----------
Total equity 121,112 137,840 124,191
------------------------------------- ----- ----------------- ------------ -----------
(1) The Group has applied IFRS 16 using the modified
retrospective transition approach, under which the cumulative
effect of initial application is recognised in retained earnings at
1 January 2019. Therefore comparative information has not been
restated. Refer to Note 13 for details of the impact of IFRS
16.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 June 2019
Own Other Capital
Share shares capital redemption Retained Total
capital held reserve reserve earnings equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ----- -------- -------- -------- ----------- --------- ---------
Balance at 31 December
2018 2,751 (720) 2,582 71 119,507 124,191
--------------------------------- ----- -------- -------- -------- ----------- --------- ---------
IFRS 16 adjustment (net
of tax)(1) 13 - - - - 28 28
Balance at 1 January 2019 2,751 (720) 2,582 71 119,535 124,219
--------------------------------- ----- -------- -------- -------- ----------- --------- ---------
Loss and total comprehensive
loss for the period - - - - (2,986) (2,986)
Dividends 5 - - - - - -
Own shares acquired in
the period - (54) - - - (54)
Credit to equity for share-based
payments - - - - 381 381
Cash settlement of share
incentive plan - - - - (448) (448)
--------------------------------- ----- -------- -------- -------- ----------- --------- ---------
Balance at 30 June 2019
(unaudited) 2,751 (774) 2,582 71 116,482 121,112
--------------------------------- ----- -------- -------- -------- ----------- --------- ---------
Own Other Capital
Share shares capital redemption Retained Total
capital held reserve reserve earnings equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ----- -------- -------- -------- ----------- --------- ---------------
Balance at 1 January 2018 2,751 (720) 2,582 71 136,238 140,922
--------------------------------- ----- -------- -------- -------- ----------- --------- ---------------
Loss and total comprehensive
loss for the period - - - - (2,947) (2,947)
Dividends 5 - - - - (742) (742)
Credit to equity for share-based
payments - - - - 607 607
--------------------------------- ----- -------- -------- -------- ----------- --------- ---------------
Balance at 30 June 2018
(unaudited) 2,751 (720) 2,582 71 133,156 137,840
--------------------------------- ----- -------- -------- -------- ----------- --------- ---------------
Own Other Capital
Share shares capital redemption Retained Total
capital held reserve reserve earnings equity
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ----- ------------ ------- ------- ----------------------------------------------------------- -------- -----------
Balance at 1
January 2018 2,751 (720) 2,582 71 136,238 140,922
--------------- ----- ------------ ------- ------- ----------------------------------------------------------- -------- -----------
Loss and total
comprehensive
loss for the
period - - - - (17,190) (17,190)
Dividends 5 - - - - (742) (742)
Credit to
equity for
share
based-payments - - - - 1,201 1,201
----- ------------ ------- ------- ----------------------------------------------------------- -------- -----------
Balance at 31
December
2018 2,751 (720) 2,582 71 119,507 124,191
--------------- ----- ------------ ------- ------- ----------------------------------------------------------- -------- -----------
(1) The Group has applied IFRS 16 using the modified
retrospective transition approach, under which the cumulative
effect of initial application is recognised in retained earnings at
1 January 2019. Therefore comparative information has not been
restated. Refer to Note 13 for details of the impact of IFRS
16.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Six months ended 30 June 2019
Six months
to 30 June
2019
Six months
to 30 June
2018(1)
(unaudited) (unaudited)
Notes GBP'000 GBP'000
---------------------------------------------- ------------------------------------------------- ------------
Operating activities
Operating loss (1,948) (2,776)
Adjustments for:
Depreciation of property, plant and equipment 6,383 2,172
Adjusted items charge 385 -
Other (losses)/gains (55) 257
(Profit) on disposal of property, plant
and equipment (42) (125)
Amortisation of intangible assets 278 75
(Decrease) in provisions (130) (198)
Share-based payment charges 392 715
Cash settlement of share incentive plan (448) -
---------------------------------------------- ------------------------------------------------- ------------
Operating cash flows before movements in
working capital 4,815 120
(Increase) in receivables (4,958) (4,482)
Increase in payables 2,664 1,229
---------------------------------------------- ------------------------------------------------- ------------
Cash generated by operations 2,521 (3,133)
Income taxes received/(paid) 130 (1,380)
---------------------------------------------- ------------------------------------------------- ------------
Net cash from/(absorbed by) operating
activities 2,651 (4,513)
---------------------------------------------- -------------------------------------- --------- ------------
Investing activities
Interest received 33 31
Proceeds on disposal of property,
plant and equipment 63 314
Purchases of property, plant and
equipment (153) (484)
Purchases of intangibles (116) (350)
Purchases of investments (31) (1,039)
Net cash used in investing activities (204) (1,528)
---------------------------------------------- -------------------------------------- --------- ------------
Financing activities
Dividends paid 5 - (742)
Interest paid (30) (29)
Repayment of lease liabilities (5,934) -
Finance sub-lease income received 160 -
Purchase of own shares (54) -
---------------------------------------------- -------------------------------------- --------- ------------
Net cash used in financing activities (5,858) (771)
---------------------------------------------- -------------------------------------- --------- ------------
Net (decrease)/increase in cash
and cash equivalents (3,411) (6,812)
Cash and cash equivalents at beginning
of period 17,927 18,630
---------------------------------------------- -------------------------------------- -------- -------------
Cash and cash equivalents at end
of period 14,516 11,818
---------------------------------------------- -------------------------------------- -------- -------------
(1) The Group has applied IFRS 16 at 1 January 2019, using the
modified retrospective approach. Under this approach, comparative
information is not restated and the cumulative effect of initially
applying IFRS 16 is recognised in retained earnings at the date of
initial application. Refer to Note 13.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL REPORT
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.
2. Basis of preparation
These unaudited condensed consolidated interim financial
statements have been prepared in accordance with the Disclosure
Guidance and Transparency Rules of the UK Financial Conduct
Authority, and with IAS 34 'Interim Financial Reporting', as
adopted by the European Union. Unless otherwise stated, the
accounting policies applied, and the judgements, estimates and
assumptions made in applying these policies, are consistent with
those described in the Group's Annual Report and Accounts 2018.
These unaudited condensed consolidated interim financial
statements for the six months ended 30 June 2019 do not constitute
statutory accounts as defined in sections 435 (1) and (2) of the
Companies Act 2006. Statutory accounts for the year ended 31
December 2018 have been reported upon by the Group's auditor and
have been delivered to the Registrar of Companies. The report of
the auditor was unqualified, did not include a reference to any
matters to which the auditor drew attention by way of emphasis of
matter and did not contain a statement under section 498 (2) or (3)
of the Companies Act 2006.
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Financial Review. The Financial Review also
includes a summary of the Group's financial position and its cash
flows.
Going concern
After making enquiries, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future, having considered
the Group forecasts and projections, taking account of reasonably
possible changes in trading performance, the current economic
uncertainty and the uncertainty relating to Brexit. Accordingly,
they have adopted the going concern basis in preparing the
financial statements.
New standards, interpretations and amendments adopted by the
Group
Except as described below, the accounting policies applied in
these interim statements are the same as those applied in the
Group's 2018 Annual Report and Accounts. The changes in accounting
policies are also expected to be reflected in the Group's
consolidated financial statements as at and for the year ending 31
December 2019.
IFRS 16 'Leases' has been applied from 1 January 2019. IFRS 16
has had a material impact on the Group's financial reporting,
increasing both the assets and liabilities of the Group and the
timing of recognition of operating costs, including Adjusted
EBITDA. IFRS 16 has not had a material impact for leases where the
Group is the intermediate sub-lessor.
The Group has applied IFRS 16 using the modified retrospective
approach, under which the cumulative effect of initial application
is recognised in retained earnings at 1 January 2019. Accordingly,
the comparative information has not been restated.
Further details on the Group's IFRS 16 accounting policy and the
transitional impact are provided in Note 13.
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 2018 Annual Report and Accounts. No critical accounting
judgements or key sources of estimation uncertainty have been
identified in relation to the Group's application of IFRS 16.
Alternative Performance Measures
In reporting financial information the Group presents
Alternative Performance Measures (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 have been defined, explained and reconciled to the
nearest IFRS measure within Note 14.
To assist with the comparison of the Group's 2019 APMs with the
2018 APMs, certain 2019 APMs are presented on both a pre-IFRS 16
basis and on an IFRS 16 basis since the 2018 comparatives have not
been restated under the modified retrospective transition
option.
3. Business and geographical segments
Products and services from which reportable segments derive
their revenues
Management has determined the operating segments based on the
monthly management pack reviewed by the directors, which is used to
assess both the performance of the business and to allocate
resources within the entity. Management has identified that the
directors are the chief operating decision-makers in accordance
with the requirements of IFRS 8 'Operating segments'.
The operating and reportable segments of the Group are (i)
Sales, (ii) Lettings and (iii) Mortgage Broking.
The Sales segment generates commission on sales of residential
property. The Lettings segment earns fees from the letting and
management of residential properties and income from interest
earned on tenants' deposits. As these two segments operate out of
the same premises and share support services, a significant
proportion of costs have to be apportioned between the segments.
The basis of apportionment used is headcount in each segment.
The Mortgage Broking segment receives commission from the
arrangement of mortgages and related products under contracts with
financial service providers and receives administration fees from
clients.
The accounting policies of the operating segments are the same
as the Group's accounting policies described in Note 2.
All revenue for the Group is generated from within the UK and
there is no intra-group revenue.
Adjusted EBITDA
Adjusted EBITDA represents the profit before tax for the period
earned by each segment before allocation of finance costs, finance
income, other gains/losses, depreciation, amortisation, profit on
disposal of fixed assets, share-based payments and Adjusted items.
This is the measure reported to the directors for the purpose of
resource allocation and assessment of segment performance. Refer to
Note 14 for additional details.
Adjusted items include costs or revenues which due to their
size, incidence and departure from the Group's strategy require
disclosure in the financial statements to provide alternative
information to the user, representing underlying performance of the
Group and allow comparability of performance from one period to
another.
As set out in Note 13, IFRS 16 has been applied using the
modified retrospective approach on 1 January 2019 and therefore the
2018 comparators do not require to be restated. To assist with the
comparison of the Group's 2019 Adjusted EBITDA with 2018 Adjusted
EBITDA , the Group's 2019 Adjusted EBITDA is presented on both a
pre-IFRS 16 basis and on an IFRS 16 basis.
Segment assets and liabilities, including depreciation,
amortisation and additions to non-current assets, are not reported
to the directors on a segmental basis and are therefore not
disclosed.
Segment revenues and results
The following is an analysis of the Group's revenue and results
by reportable segment for the half year ended 30 June 2019:
Notes Sales Lettings Mortgage Consolidated
GBP'000 GBP'000 Broking GBP'000
GBP'000
------------------------------------------ ------ --------- --------- --------- -------------
Revenue 15,443 31,717 3,965 51,125
------------------------------------------ ------ --------- --------- --------- -------------
Contribution 14 7,868 22,813 1,859 32,540
Contribution margin 14 51.0% 71.9% 46.9% 63.6%
------------------------------------------ ------ --------- --------- --------- -------------
Adjusted EBITDA (815) 5,614 650 5,449
Adjusted EBITDA margin (5.3%) 17.7% 16.4% 10.7%
------------------------------------------ ------ --------- --------- --------- -------------
Depreciation (excl. IFRS 16 right-of-use
depreciation) (1,702)
Amortisation (278)
Profit on disposal of property,
plant and equipment 42
Other losses (55)
Adjusted items(1) (385)
Finance income 67
Finance cost (excl. IFRS 16 finance
cost) (30)
Share-based payment charge (392)
IFRS 16 right-of-use depreciation 13 (4,682)
IFRS 16 lease liability finance
cost 13 (1,270)
Loss before tax (3,236)
------------------------------------------ ------ --------- --------- --------- -------------
(1) The Group incurred a GBP0.4m charge (H1 2018: nil, FY 2018:
GBP15.7m charge) in respect of Adjusted items, all of which is
non-cash. The charge is driven by the impairment of the fixed
assets of a relatively new branch which has not matured at the rate
originally anticipated.
Under IFRS 16, the Group's Adjusted H1 2019 EBITDA is GBP5.3m
higher than if previous lease accounting principles had been
applied. Under previous lease accounting principles, a lease rental
expense of GBP5.5m and other income of GBP0.2m would have been
recognised within Adjusted EBITDA. Under IFRS 16, these elements
have been replaced by right-of-use asset depreciation of GBP4.7m
and net finance costs of GBP1.2m which are excluded from Adjusted
EBITDA. On a pre-IFRS 16 basis, the Group's H1 2019 Adjusted EBITDA
would have been GBP0.1m.
The table below summarises the Group's 2019 Adjusted EBITDA and
2019 Adjusted EBITDA margin on a pre-IFRS 16 basis to enable
comparability to 2018's results.
Sales Lettings Mortgage Consolidated
GBP'000 GBP'000 Broking GBP'000
GBP'000
Adjusted EBITDA (pre-IFRS 16) (2,789) 2,334 560 105
Adjusted EBITDA margin (pre-IFRS
16) (18.0%) 7.3% 14.1% 0.2%
---------------------------------- --------- --------- --------- -------------
The following is an analysis of the Group's revenue and results
by reportable segment for the half year ended 30 June 2018:
Notes Mortgage
Sales Lettings Broking Consolidated
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- ------ --------- --------- --------- -------------
Revenue 17,167 31,736 4,090 52,993
--------------------------------- ------ --------- --------- --------- -------------
Contribution 14 8,787 22,853 1,927 33,567
Contribution margin 14 51.2% 72.0% 47.1% 63.3%
--------------------------------- ------ --------- --------- --------- -------------
Adjusted EBITDA (3,612) 3,002 671 61
Adjusted EBITDA margin (21.0%) 9.5% 16.4% 0.1%
Depreciation (2,172)
Amortisation (75)
Profit on disposal of property,
plant and equipment 125
Other gains 257
Finance income 31
Finance cost (29)
Share-based payment charge (715)
--------------------------------- ------ --------- --------- --------- -------------
Loss before tax (2,517)
--------------------------------- ------ --------- --------- --------- -------------
4. Tax
Six months
to 30 June
2019
Six months
to 30 June
(unaudited) 2018 (unaudited)
GBP'000 GBP'000
------------------------------------------
Current tax
Current tax charge - 316
Deferred tax (credit)/charge (250) 114
------------------------------------------ ------------ -----------------
Tax (credit)/charge on profit on ordinary
activities (250) 430
------------------------------------------ ------------ -----------------
Changes to the UK corporation tax rates were substantively
enacted as part of the Finance Act 2019 (February 2019). These
include reductions to the main rate to reduce the rate to 17% from
1 April 2020. Deferred taxes at the balance sheet date have been
measured using these enacted tax rates and reflected in these
financial statements.
5. Dividends
Six months
to 30 June
2019
Six months
to 30 June
(unaudited) 2018 (unaudited)
GBP'000 GBP'000
---------------------------------------------- ------------
Amounts recognised as distributions to equity
holders in the period:
Final and special dividends year ended 31
Dec 2017: 0.27p per ordinary share - 742
---------------------------------------------- ------------ -----------------
- 742
---------------------------------------------- ------------ -----------------
As the Group did not make a profit after tax, in line with the
policy, the Board has taken the decision to not pay an interim
dividend.
6. LOSS per share
Six months Six months
to 30 June to 30 June
2019 2018 (unaudited)
(unaudited) GBP'000
GBP'000
------------------------------------------------
Loss for the purposes of basic and diluted
earnings per share being loss for the
period (2,986) (2,947)
Adjust for:
Adjusted items 385 -
Taxation on Adjusted items (95) -
Adjusted loss (2,696) (2,947)
------------------------------------------------ ----------------------------- -----------------
Adjust for the impact of IFRS 16:
Deduct: IAS 17 lease rental expense for
H1 2019 (5,344) -
Add back: IFRS 16 right-of-use depreciation
for H1 2019 4,682 -
Add back: IFRS 16 lease liability finance
cost for H1 2019: 1,270 -
------------------------------------------------ ----------------------------- -----------------
Adjusted loss (pre-IFRS 16) (2,088) (2,947)
------------------------------------------------ ----------------------------- -----------------
Number of shares
Weighted average number of ordinary shares
for the purposes of basic earnings per
share 274,859,980 274,870,477
Effect of dilutive potential ordinary
shares - 899,373
------------------------------------------------ ----------------------------- -----------------
Weighted average number of ordinary shares
for the purpose of diluted earnings per
share 274,859,980 275,769,850
------------------------------------------------ ----------------------------- -----------------
Basic and diluted loss per share (in pence
per share) (1.1) (1.1)
------------------------------------------------ ----------------------------- -----------------
Adjusted loss per share (in pence per
share) (1.0) (1.1)
------------------------------------------------ ----------------------------- -----------------
Adjusted loss per share pre-IFRS 16 (in
pence per share) (0.8) (1.1)
------------------------------------------------ ----------------------------- -----------------
7. Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term bank
deposits with an original maturity of three months or less, net of
outstanding bank overdrafts. The carrying amount of these assets is
approximately equal to their fair value. Cash and cash equivalents
excludes client monies (refer to Note 12).
8. Financial instruments
The Group does not hold any financial instruments categorised as
level 1, 2 or 3 as detailed by IFRS 13. Management considers that
the book value of financial assets and liabilities recorded at
amortised cost and their fair value are approximately equal.
The book value and fair value of the Group's financial assets
and liabilities are as follows:
Six months
to 30 June
2019
Six months Year ended
to 30 June 31 December
(unaudited) 2018 (unaudited) 2018 (audited)
GBP'000 GBP'000 GBP'000
---------------------------- ------------ ----------------- ---------------
Cash and cash equivalents 14,516 11,818 17,927
---------------------------- ------------ ----------------- ---------------
Trade and other receivables 10,950 12,040 7,532
---------------------------- ------------ ----------------- ---------------
Trade and other payables (13,042) (13,419) (13,747)
---------------------------- ------------ ----------------- ---------------
Cash and cash equivalents comprise cash and short-term bank
deposits with an original maturity of three months or less, net of
outstanding bank overdrafts. Cash and cash equivalents exclude
client monies (refer to Note 12).
9. Goodwill and other intangible assets
Goodwill and other intangible assets of GBP110.6m (31 December
2018: GBP110.8m, 30 June 2018: GBP120.4m) comprise:
-- GBP9.3m of goodwill (31 December 2018: GBP9.3m, 30 June 2018: GBP19.2m);
-- GBP99m brand asset relating to the Sales and Lettings
businesses (31 December 2018: GBP99m, 30 June 2018: GBP99m);
-- GBP2.2m of software (31 December 2018: GBP2.3m, 30 June 2018: GBP2.0m); and
-- GBP0.1m of purchased contracts (31 December 2018: GBP0.2m, 30 June 2018: GBP0.2m).
The goodwill of GBP9.3m as at 30 June 2019 is allocated to the
Lettings segment (31 December 2018: GBP9.3m Lettings); 30 June
2018: GBP9.8m Sales and GBP9.3m Lettings).
Review for indicators of significant impairment at 30 June
2019
At 30 June 2019, the Group has assessed for indicators of
significant impairment of the Group's goodwill and brand asset.
Following consideration of both internal and external impairment
indicators, including 2019 year-to date trading performance, no
indicators of significant impairment have been identified.
Impairment sensitivity
As described in the Group's 2018 Annual Report and Accounts:
-- the brand asset is sensitive to changes in growth assumptions;
-- the goodwill showed significant headroom against all
scenarios in the 2018 sensitivity analysis;
-- due to the prolonged nature of the current downturn in the
sales market the headroom, the brand asset is more sensitive to the
lettings growth plan and therefore the key judgement in the
impairment assessment is the expected growth of the lettings
business; and
-- the carrying value of the brand asset is not highly sensitive
to changes in the discount rate or long-term growth rate.
The impairment review completed for the year ended 31 December
2018 showed headroom on the brand asset of GBP55m. The plan
underpinning the impairment review assumed that lettings revenue
growth throughout the plan period will be driven by a number of
significant investments in the Group's service offering made over
2017 and 2018.
Within the 2018 Annual Report and Accounts, it was noted that if
there was no change in other elements of the plan, the headroom
would reduce to zero if the CAGR for lettings over the five year
plan period was 1%. If there was no growth in lettings revenue over
the five year plan period, this would impair the brand asset by
GBP24m. Both these downside scenarios to the plan include
controllable cost mitigation in negotiator headcount and reduction
in back office costs. Further mitigating actions would be available
should these two scenarios arise.
As set out in the Financial Review, in the six months to 30 June
2019, lettings revenue is flat compared to the prior year despite
the tenant fee ban impacting revenue by GBP0.5m. It continues to be
management's view that lettings continues to deliver a consistent
and stable revenue stream for the Group with good long-term
fundamentals.
The Group will complete an annual impairment review for the
goodwill and the brand asset in the second half of the year.
10. PropertY, PLANT & EQUIPMENT
Right-of-use assets of GBP61.0m were recognised upon the initial
application of IFRS 16 on 1 January 2019 and are presented within
property, plant and equipment. Refer to Note 13 for further
information regarding the initial application of IFRS 16.
11. 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.
During the period, no group companies entered into transactions
with related parties who are not members of the Group.
12. Client monies
At 30 June 2019, client monies (all held by Foxtons Limited) in
approved bank and building society accounts amounted to GBP91.0m
(31 December 2018: GBP90.2m, 30 June 2018: GBP92.5m). Neither this
amount nor the matching liabilities to the clients concerned are
included in the consolidated balance sheet. Foxtons Limited's terms
and conditions provide that interest income on these deposits
accrues to the Company.
Client funds are protected by the Financial Services
Compensation Scheme (FSCS) under which the government guarantees
amounts up to GBP85,000 each. This guarantee applies to each
individual client's deposit monies, not the sum total on
deposit.
13. IFRS 16 'Leases' accounting policy, initial application AND
2019 IMPACT
This note sets out the Group's IFRS 16 accounting policy, IFRS
16 transitional disclosures and the impact of IFRS 16 'Leases' on
the Group's 30 June 2019 financial position and financial
performance.
IFRS 16 Accounting policy
The Group as lessee
The Group assesses whether a contract is or contains a lease, at
inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease
arrangements in which it is the lessee, except for short-term
leases (defined as leases with a lease term of 12 months or less)
and leases of low value assets. For these leases, the Group
recognises the lease payments as an operating expense on a
straight-line basis over the term of the lease unless another
systematic basis is more representative of the time pattern in
which economic benefits from the leased assets are consumed.
-- Lease liability: The lease liability is initially measured at
the present value of the lease payments that are not paid at the
commencement date, discounted by using the rate implicit in the
lease. If this rate cannot be readily determined, the Group uses an
incremental borrowing rate which is the rate of interest that the
lessee would have to pay to borrow over a similar term, and with a
similar security, the funds necessary to obtain an asset of a
similar value to the right-of-use asset in a similar economic
environment.
Lease payments included in the measurement of the lease
liability primarily comprise of fixed lease payments, less any
lease incentives and variable lease payments that depend on an
index or rate, initially measured using the index or rate at the
commencement date.
The lease liability is presented across separate lines (current
and non-current) in the consolidated statement of financial
position. The lease liability is subsequently measured by
increasing the carrying amount to reflect interest on the lease
liability (using the effective interest method) and by reducing the
carrying amount to reflect the lease payments made.
The carrying amount of lease liabilities is re-measured if there
is a modification, a change in the lease term, a change in the
in-substance fixed lease payments or a change in the assessment to
purchase the underlying assets. No re-measurements have been made
in the period.
-- Right-of-use assets: The right-of-use assets comprise the
initial measurement of the corresponding lease liability, lease
payments made at or before the commencement day and any initial
direct costs. They are subsequently measured at cost less
accumulated depreciation and impairment losses. Right-of-use assets
are depreciated over the shorter period of lease term and useful
life of the underlying asset and are now presented within property,
plant and equipment.
The Group applies IAS 36 to determine whether a right-of-use
asset is impaired and accounts for any identified impairment loss
in line with the Group's existing impairment accounting policy.
Variable rents that do not depend on an index or rate are not
included in the measurement of the lease liability and the
right-of-use asset. The related payments are recognised as an
expense in the period in which the event or condition that triggers
those payments occurs and are included in administrative expenses
in the statement of comprehensive income.
Under IFRS 16, the straight-line operating lease expense,
previously charged under IAS 17 has been replaced with a
depreciation charge for the right-of-use assets and interest
expense on lease liabilities.
The Group as lessor
The Group acts as an intermediate sub-lessor for certain
properties. The Group accounts for the head lease and the sublease
as two separate contracts. The sublease is classified as a finance
or operating lease by reference to the right-of-use asset arising
from the head lease (and not by reference to the underlying asset
as was the case under IAS 17). Because of this change, the Group
has reclassified certain of its sublease arrangements as finance
leases.
Rental income from operating leases is recognised on a
straight-line basis over the term of the relevant lease. Amounts
due from lessees under finance leases are recognised as receivables
at the amount of the Group's net investment in the leases. Finance
lease income is allocated to accounting periods so as to reflect a
constant periodic rate of return on the Group's net investment
outstanding in respect of the leases.
IFRS 16 initial application
Lease identification
For contracts entered into before 1 January 2019, the Group
determined whether the arrangement was or contained a lease by
assessing whether the fulfilment of the arrangement was dependent
on the use of a specific asset or assets; and the arrangement had
conveyed a right to use the asset. The key points of consideration
were:
-- the Group's ability or right to operate the asset while obtaining or controlling more than an insignificant amount of the output;
-- the Group's ability or right to control physical access to
the asset while obtaining or controlling more than an insignificant
amount of the output; or
-- whether it was remote that other parties would take more than
an insignificant amount of the output, and the price per unit was
neither fixed per unit of output nor equal to the current market
price per unit of output.
Practical expedients applied
At transition, the Group has applied the following practical
expedients:
-- using a single discount rate for portfolios of leases with
reasonably similar characteristics. The Group applied a range of
discount rates from 2.6% to 4.62%;
-- relied on its assessment of whether leases are onerous
immediately before the date of initial application as an
alternative to performing an impairment review; and
-- applied the short-term leases exemptions to leases with lease
term that ends within 12 months and do not contain a purchase
option at the date of initial application.
Impact of transition
On transition to IFRS 16, the Group recognised additional
right-of-use assets and additional lease liabilities, recognising
the difference in retained earnings. The effect of adoption IFRS 16
as at 1 January 2019 to the Statement of Financial Position is as
follows:
* Right-of-use assets of GBP61.0m were recognised and
presented within property, plant and equipment in the
statement of financial position. This relates only to
the lease assets treated previously as operating
leases.
* Lease liabilities of GBP62.4m were recognised and
presented separately in the statement of financial
position, allocated between current and non-current
liabilities.
* Prepayments of GBP2.5m and rent premiums of GBP0.7m
(both included in trade and other receivables)
related to previous operating leases were
derecognised.
* Rent free period accruals of GBP2.7m (included in
trade and other payables) related to previous
operating leases were derecognised.
-- A GBP0.9m finance lease adjustment was recognised in relation
to Group's sub-lease arrangements.
The lease liabilities as at 1 January 2019 can be reconciled to
the operating lease commitments as of 31 December 2018 as
follows:
GBP'000
Operating lease commitments as at 31 December 2018 76,053
Less:
Commitments relating to short-term leases (157)
Adjusted operating lease commitments as at 31 December
2018 75,896
Discounted by: weighted average incremental borrowing
rate as at 1 January 2019 4.5%
Lease liabilities as at 1 January 2019 62,436
-------
Of which are:
Current lease liabilities 11,768
Non-current lease liabilities 50,668
Impact for the period ended 30 June 2019
Below, the impact of IFRS 16 on the 30 June 2019 reporting
period is presented since it is relevant to understanding the
Group's 30 June 2019 financial statements.
Impact on the consolidated statement of comprehensive income: 30
June 2019
The application of IFRS 16 has resulted in a decrease in lease
rental income, a decrease in other operating expenses and an
increase in depreciation and finance costs compared to IAS 17.
30 June 2019 30 June 2019 30 June 2019
results as reported IFRS 16 impact results on a
GBP'000 GBP'000 pre-IFRS 16
basis
GBP'000
--------------------------- --------------------- ---------------- --------------
Revenue 51,125 (160) 51,285
Administrative expenses (53,073) 825 (53,898)
--------------------------- --------------------- ---------------- --------------
Operating (Loss)/Profit (1,948) 665 (2,613)
--------------------------- --------------------- ---------------- --------------
Other gains (55) - (55)
Finance income 67 34 33
Finance costs (1,300) (1,270) (30)
--------------------------- --------------------- ---------------- --------------
(Loss)/Profit before tax (3,236) (571) (2,665)
Tax credit 250 - 250
--------------------------- --------------------- ---------------- --------------
(Loss)/Profit and total
comprehensive income for
the year (2,986) (571) (2,415)
--------------------------- --------------------- ---------------- --------------
Impact on the consolidated statement of financial position: 30
June 2019
30 June 2019 30 June 2019 30 June 2019
results as reported IFRS 16 impact results on a
GBP'000 GBP'000 pre-IFRS 16
basis
GBP'000
--------------------------- -------------------- -------------------------------- ---------------------------------
Non-current assets
Goodwill 9,349 - 9,349
Other intangible assets 101,248 - 101,248
Property, plant and
equipment 72,936 57,853 15,083
Interest in associate 1,265 - 1,265
Deferred tax assets 1,407 - 1,407
--------------------------- -------------------- -------------------------------- ---------------------------------
186,205 57,853 128,352
--------------------------- -------------------- -------------------------------- ---------------------------------
Current assets
Trade and other receivables 10,950 564 10,386
Current tax assets 82 - 82
Prepayments 5,070 (3,244) 8,314
Cash and cash equivalents 14,516 - 14,516
--------------------------- -------------------- -------------------------------- ---------------------------------
30,618 (2,680) 33,298
--------------------------- -------------------- -------------------------------- ---------------------------------
Total assets 216,823 55,173 161,650
--------------------------- -------------------- -------------------------------- ---------------------------------
Current liabilities
Trade and other payables (13,042) 2,867 (15,909)
Lease liabilities (11,788) (11,788) -
Provisions (1,419) 439 (1,858)
Deferred revenue and
lettings refund
liability (5,397) - (5,397)
---------------------------------
(31,646) (8,482) (23,164)
--------------------------- -------------------- -------------------------------- ---------------------------------
Net current assets (1,028) (11,162) 10,134
Non-current liabilities
Lease liabilities (47,235) (47,235) -
Deferred tax liabilities (16,830) - (16,830)
--------------------------- -------------------- -------------------------------- ---------------------------------
(64,065) (47,235) (16,830)
--------------------------- -------------------- -------------------------------- ---------------------------------
Total liabilities (95,711) (55,717) (39,994)
--------------------------- -------------------- -------------------------------- ---------------------------------
Net assets 121,112 (544) 121,656
--------------------------- -------------------- -------------------------------- ---------------------------------
Total equity 121,112 (544) 121,656
--------------------------- -------------------- -------------------------------- ---------------------------------
Impact on the consolidated cash flow statement: 30 June 2019
30 June 2019 30 June 2019 30 June 2019
results as IFRS 16 impact results on a
reported GBP'000 GBP'000 pre-IFRS 16
basis GBP'000
------------------------------------ ------------------ ---------------- ---------------
Operating activities
Operating (loss) (1,948) 665 (2,613)
Adjustments for:
Depreciation of property,
plant and equipment 6,383 4,682 1,701
Adjusted items charge 385 - 385
Other (losses) (55) - (55)
(Profit) on disposal of property,
plant and equipment (42) (3) (39)
Amortisation of intangible
assets 278 - 278
(Decrease) in provisions (130) 807 (937)
Share-based payment charges 392 - 392
Cash settlement of share incentive
plan (448) - (448)
------------------------------------ ------------------ ---------------- ---------------
Operating cash flows before
movements in working capital 4,815 6,151 (1,336)
------------------------------------ ------------------ ---------------- ---------------
(Increase) in receivables (4,958) (3,244) (1,714)
Increase in payables 2,664 2,867 (203)
------------------------------------ ------------------ ---------------- ---------------
Cash generated by operations 2,521 5,774 (3,253)
------------------------------------ ------------------ ---------------- ---------------
Income taxes received 130 - 130
------------------------------------ ------------------ ---------------- ---------------
Net cash from operating activities 2,651 5,774 (3,123)
------------------------------------ ------------------ ---------------- ---------------
Net cash used in investing
activities (204) - (204)
------------------------------------ ------------------ ---------------- ---------------
Interest paid (30) - (30)
Repayment of lease liabilities (5,934) (5,934) -
Finance sub-lease income received 160 160 -
Purchase of own shares (54) - (54)
Net cash used in financing
activities (5,858) (5,774) (84)
------------------------------------ ------------------ ---------------- ---------------
Net (decrease)/increase in
cash and cash equivalents (3,411) - (3,411)
------------------------------------ ------------------ ---------------- ---------------
14. Alternative performance measures
In reporting financial information the Group presents
Alternative Performance Measures (APMs) such as Adjusted EBITDA,
Contribution and Net Free Cash Flow 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.
Our 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.
As set out in Note 13, IFRS 16 has been applied using the
modified retrospective approach on 1 January 2019 and therefore the
2018 comparators do not require to be restated. To assist with the
comparison of the Group's 2019 APMs with the 2018 APMs, certain
2019 APMs are presented on both a pre-IFRS 16 basis and on an IFRS
16 basis. Following the application of IFRS 16, and as market
practice evolves, the Group's APMs will be reviewed for continuing
relevance.
Adjusted EBITDA
Adjusted EBITDA is defined as profit before tax, finance costs,
finance income, other gains/losses, depreciation, amortisation,
profit on disposal of assets, share-based payments and Adjusted
items (defined below). This measure is reported to the directors
for the purpose of resource allocation and assessing segmental and
Group performance.
Adjusted items include costs or revenues which due to their
size, incidence and departure from the Group's strategy require
disclosure in the financial statements to give a true
representation of the underlying performance of the Group and allow
comparability of performance from one period to another. Items
include restructuring and impairment charges together with any
particularly significant one-off items.
Share-based payments are excluded from Adjusted EBITDA since
they are a non-cash item and vary depending on the share price at
the date of grants under the Group's share option schemes, and
depending on the assumptions used in valuing these awards as they
are granted. Excluding share-based payment charges removes
volatility and improves comparability of the Group's results with
prior periods. Additionally, excluding the charges improves
comparability of the Group's results with peer companies which
exclude the charges where applicable.
The closest equivalent IFRS measure to Adjusted EBITDA is
profit/loss before tax. Refer to Note 3 for a reconciliation
between profit/loss before tax and Adjusted EBITDA.
Adjusted EBITDA margin
Adjusted EBITDA margin is defined as Adjusted EBITDA 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.
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 of the Group and operating segments before the
allocation of shared costs. The closest IFRS measure is revenue. A
reconciliation between revenue and contribution is presented
below.
30 June 2019 Sales Lettings Mortgage Consolidated
GBP'000 GBP'000 Broking GBP'000 GBP'000
----------------------------- --------- --------- ----------------- -------------
Revenue 15,443 31,717 3,965 51,125
Less: Directly attributable
salary costs (7,458) (8,815) (2,106) (18,379)
Less: Bad debt charges (117) (89) - (206)
----------------------------- --------- --------- ----------------- -------------
Contribution 7,868 22,813 1,859 32,540
----------------------------- --------- --------- ----------------- -------------
Contribution margin 51.0% 71.9% 46.9% 63.6%
----------------------------- --------- --------- ----------------- -------------
30 June 2018 Sales Lettings Mortgage Consolidated
GBP'000 GBP'000 Broking GBP'000 GBP'000
----------------------------- --------- --------- ----------------- -------------
Revenue 17,167 31,736 4,090 52,993
Less: Directly attributable
salary costs (8,313) (8,645) (2,162) (19,120)
Less: Bad debt charges (67) (238) (1) (306)
----------------------------- --------- --------- ----------------- -------------
Contribution 8,787 22,853 1,927 33,567
----------------------------- --------- --------- ----------------- -------------
Contribution margin 51.2% 72.0% 47.1% 63.3%
----------------------------- --------- --------- ----------------- -------------
Adjusted earning/loss per share
Adjusted earnings/loss per share is defined as earnings/loss per
share excluding Adjusted items. The measure is derived by dividing
profit/loss after tax adjusted for Adjusted items by the weighted
average number of ordinary shares in issue during the financial
period. This APM is a measure of the Group's underlying earnings
per share.
The closest equivalent IFRS measure is basic earnings/loss per
share. Refer to Note 6 for a reconciliation between basic
earnings/loss per share and Adjusted earnings/loss per share.
Operating cash conversion
Operating cash conversion is defined as the ratio of Adjusted
operating cash to Adjusted EBITDA less the repayment of IFRS 16
lease liabilities. Adjusted operating cash is defined as Adjusted
EBITDA less the repayment of IFRS 16 lease liabilities, adjusted
for movements in working capital and net capital spend.
The APM definition has been revised in the period as a result of
the application of IFRS 16 from 1 January 2019, under which, lease
payments are excluded from Adjusted EBITDA. In order for the
operating cash conversion measure to include lease payments, under
the revised definition, the repayment of IFRS 16 lease liabilities
is deducted from Adjusted EBITDA. The measure acts as a proxy for
cash generation.
At the H1 2019 and H1 2018, the Group's adjusted operating cash
is negative and therefore the Operating cash conversion measure is
not considered to be relevant and therefore has not been calculated
in the current year or prior period. The Group will continue to
utilise the measure for the full year.
Net free cash flow
Net free cash flow is defined as Adjusted net cash from
operating activities less net cash used in investing activities.
Adjusted net cash from operating activities is defined as net cash
from operating activities, less repayment of IFRS 16 lease
liabilities.
The APM definition has been revised in the period as a result of
the application of IFRS 16 from 1 January 2019, under which, lease
payments are excluded from net cash from operating activities. In
order for the net free cash flow to include lease payments, under
the revised definition, the repayment of IFRS 16 lease liabilities
is deducted from net cash from operating activities.
The measure is used as a measure of financial performance. The
closest equivalent IFRS measure is cash from operating activities.
A reconciliation between net cash from operating activities and net
free cash flow is presented below.
Six months
to 30 June
2019
Six months
to 30 June
2018(1)
(unaudited) (unaudited)
GBP'000 GBP'000
------------------------------------------------- --- -------------------- ------------
Net cash from/(absorbed by) operating activities 2,651 (4,513)
------------------------------------------------------ -------------------- ------------
Less: Repayment of IFRS 16 lease liabilities(2) (5,934) -
------------------------------------------------------ -------------------- ------------
Adjusted net cash (absorbed by) operating
activities (3,283) (4,513)
------------------------------------------------------ -------------------- ------------
Investing activities
Interest received 33 31
Proceeds on disposal of property, plant
and equipment 63 314
Purchases of property, plant and equipment (153) (484)
Purchases of intangibles (116) (350)
Purchases of investments (31) (1,039)
Net cash used in investing activities (204) (1,528)
------------------------------------------------------ -------------------- ------------
Net free cash (outflow) (3,487) (6,041)
------------------------------------------------------ -------------------- ------------
(1) The Group has applied IFRS 16 using the modified
retrospective transition approach, under which the cumulative
effect of initial application is recognised in retained earnings at
1 January 2019. Therefore comparative information has not been
restated.
(2) Under IFRS 16 repayment of lease liabilities are excluded
from Adjusted EBITDA. In order for operating cash conversion to be
a proxy for cash generation repayment of lease liabilities are
deducted from 2019 Adjusted EBITDA.
INDEPENDENT REVIEW REPORT TO FOXTONS GROUP PLC
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 2019 which comprises 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 related notes 1 to 14. We have
read the other information contained in the half-yearly financial
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the Company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company, for our review
work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in Note 2, the annual financial statements of the
Group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting," as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, 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.
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 2019 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
London, United Kingdom
25 July 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR SEDFWIFUSESW
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