Foxtons Group plc (FOXT) Earnings Call Transcript & Summary

Good day, and welcome to the Foxtons Group's plc preliminary results for 2020. Today's conference is being recorded. At this time, I would like to turn the conference over to Nic Budden, Chief Executive Officer. Please go ahead.

Thank you very much, and good morning, everyone, and welcome to our full year 2020 results call. I think everyone is well and looking forward to the opportunity to get out and about again over the summer. And let's hope by mid-year, we'll be able to meet again in person. Today, I'm joined on the call by the executive here, Richard Harris, our CFO; Patrick Franco, our COO. And we'll all be on hand following the presentation as usual to take any questions you might have. Looking back, 2020 was clearly a year full of challenges for most businesses around the world. But I hope you'll see from today's presentation our team collaborated brilliantly to deliver resilient financial and operational results and to keep our strategic agenda moving forward. In terms of today's agenda, I'll begin in a moment with an overview of performance before handing over to Richard to review the financials in detail. I'll then return to cover strategy, our recent acquisition of Douglas & Gordon and share my thoughts on current trading and outlook. But before turning to the performance summary, I would like to just pause for a moment to recognize our amazing team of employees. In what was an unprecedented year, I'm really proud of the way they pulled together to look after each other and our customers. They did a great job keeping the business running safely, and I'm very grateful to them for all of their efforts. And through 2020, although it was a year of considerable uncertainty and volatility, and that stressed our business in the most extreme way, our people, systems and positive culture allowed us to weather the storm well and emerge even stronger. So turning to Slide 5 now. Let me run you through our financial highlights. And in the context of the disruption from COVID, I think the group delivered a resilient performance. The group revenues were 12% lower at GBP 93.5 million and reflected a year of 2 halves, really. In the first half, new business was clearly heavily constrained by the first lockdown when we had to close our branches and head office from the 23rd of March through to the end of May. But during that period, group revenue was helpfully underpinned by our recurring revenue streams in renewals, property management and the remortgage business from Alexander Hall. Our branches reopened in June under strict COVID-secure conditions. And through the enthusiasm and hard work of our teams, we were able to capitalize on pent-up demand in our markets to deliver a solid financial performance in the second half, which saw us grow market share in each segment of the business. We took decisive action on cost during the first lockdown to mitigate the financial impact of branch closures, and we maintain that discipline throughout the year to guard against further possible closures of property markets, which, at the time, was a real possibility. We did furlough 750 employees for a period of time over the summer, but we quickly bought back the vast majority of them by the end of July. And since September last year, we've made no further use of the government's CJRS scheme. These actions together with a strong second half on revenues enabled us to deliver improved profitability with full year adjusted operating profit of GBP 1.9 million, up GBP 2.6 million on 2019. Notwithstanding the focus on cost control through the year, it was important for us, obviously, to continue to invest in our key strategic differentiators, and I'm pleased to say that we made some significant progress with our tech and data road map. And as I mentioned earlier, our team and our culture and brand are strong as ever. In April 2020, you'll remember we successfully raised GBP 22 million from investors by replacing to support the business during its closure and to navigate the potential wider uncertain macroeconomic backdrop that exists at the time. And although these proceeds were not ultimately required for defensive purposes of which feared they might be, I'm extremely grateful for the support that we've had from our shareholders. In fact, our tight cost control and strong second half performance actually resulted in a net cash inflow for the year, which, among other things, enabled us to self-fund the acquisition of 3 high-quality lettings books of GBP 4.6 million in total. We finished the year with a net cash balance of GBP 37 million that gave us the confidence to return excess cash to shareholders through a GBP 3 million share buyback program launched in December and to complete the acquisition of Douglas & Gordon last week. I won't pick up on every bullet point on Slide 6, but the overall message is that our business showed itself to be extremely agile and resilient in the face of the unprecedented challenges presented by the pandemic. In particular, our centralized business model, cutting-edge tech and highly motivated people meant that we were able to maintain essential services to priority customers when the property market was closed in March. Our teams reacted quickly to government guidelines, ensuring our operations were COVID secure when we reopened in June, and these protocols also prepared us to operate safely during subsequent lockdowns, and many of them, in fact, remain in place today. The nature of the property market means that activity just can't stop instantaneously without causing profound problems for many in our communities, and we took our responsibility to support essential activity very seriously. And within 24 hours of the lockdown in March, we had established a core team of 350 people working from home, but connected to our systems by VPN so that they could provide essential support to vulnerable customers. Our property management team completed over 4,000 urgent maintenance jobs. And throughout the pandemic, we negotiated 3,000 rental discounts for financially distressed tenants with Foxtons expecting to forego over GBP 1 million in commission as a result. Once we're allowed to do so, our sales teams completed 300,000 virtual viewings and 1,000 home moves safely under tightly controlled conditions to keep everyone safe. We also waived some GBP 40,000 of mortgage broker fees for NHS workers. And the efforts of our service teams didn't govern noticed externally either, Foxtons was recognized by the University of Bath and the Chartered Institute of Personnel and Development as a responsible business during the crisis, and that's something we're proud of. As I mentioned earlier, we took the decision to build that capacity early and well ahead of the initial expiration of the CJRS scheme. And in turn, this enabled us to capitalize on opportunities as they emerged during the relaxation of the first lockdown for the rest of the year. The CJRS was a very valuable tool for our people effectively, enabling us to temporarily put capacity on ice in the face of a sharp decline in revenues in the spring that would otherwise have forced us to make significant redundancies. In the final analysis, we were able to avoid making any redundancies due to COVID. And today, our team remains intact, motivated and very positive. Our approach on service was very much to refuse to let the pandemic being excuse to let them slip, and this paid off, enabling us to exceed customer expectations throughout an incredibly disruptive period and to maintain our excellent Trustpilot rating of 4.8 out of 5. We made excellent progress with Build to Rent, consolidating our #1 position in this high-growth market. We also grew market share in Alexander Hall, our lettings and sales businesses, too. And we delivered growth in ancillary revenue streams, such as conveyancing and property services. Technology leadership has always been crucial for us, and we haven't rested on our laurels here either, creating a new fully automated customer lettings platform, which has been extremely well received and meets the needs of our landlords and tenants that prefer to interact with us entirely online. We also launched our new customer data platform with impressive AI machine learning capabilities to ensure that we can bring the full benefits of data science to our marketing programs. To supplement our organic growth initiatives, we acquired and successfully integrated 3 lettings books during the year, totaling 1,600 tenancies. And the acquisition of Douglas & Gordon, which will be run as a separate brand, means that our total portfolio of tenancies is now 25% higher than it was at the start of 2020. That's ahead of where we expected to be at this time last year and is a solid outcome in a challenging year. Before I hand over to Richard to review the financials in more detail, let me just bring you up to speed briefly with what we're seeing in the market. And I don't expect it to be a surprise to anyone to hear that last year's property market saw their fair share of turmoil. And frankly, we expect that to take a little while to settle. Turning to lettings on Page 7 then. The market for new lets was obviously heavily constrained during the lockdown in the first half with only essential new tenancies allowed to progress. The market then rebounded strongly with significant growth in both supply and demand in the second half. The supply of new rental properties grew particularly strongly in part because the pandemic temporarily halted the short-let market, meaning those landlords turned to the long-let market to fill their properties. Institutional Build to Rent also grew with some 5,000 new properties coming on stream in London over the course of the year. Despite there being very little activity in international relocation in the student market due to travel restrictions and university closures, tenant demand was still up 14% across 2020 with key drivers for that being the need to work from home and falling rents, which created opportunities for tenants to switch properties to upgrade or save money. So the natural upshot really of these market dynamics was that rents came under pressure last year. They fell by 6%. Nothing in the first half, probably 12% in the second half. And that pressure has continued this year with rents currently down about 12%. Turning to sales on Slide 8. As you know, we entered 2020 with really positive momentum following the election and greater certainty around Brexit. And there were some really encouraging signs of a more buoyant market ahead of us. During the first 2 months of 2020, for example, we've already seen higher activity levels start to flow through to exchanges. And by February, London transactions were up about 7% and the value of our sales commission pipeline is up over 20% on prior year. But as you can see from the chart, the spring lockdown essentially snuffed out any chance that, that bubbling recovery would take hold longer term. In Q2, London property sales volumes fell 40% to 60%, recovering only partially once property markets were reopened at the end of May, and the gradual easing of lockdown during the summer did release pent-up activity, as you can see from the graph on the right. And this was further supported by the stamp duty holiday, which resulted in a more buoyant market going into Q3. Uncertainty about whether or not the stamp duty holiday was going to be extended beyond March did lead to some hesitancy among new buyers late in 2020 and early this year, but we're hopeful that the recent priority from the government on stamp duty and mortgage support will see activity pick up again from now on through to the summer. I'll pause there and hand over to Richard to take you through the financial detail. Richard?

Thanks, Nic, and good morning, everyone. I'm going to start on Slide 10 with a summary of our income statement. So total revenue in the year declined by 12%, GBP 13.4 million across the group, and we'll talk more about component parts in a moment. GBP 11.4 million of the revenue reduction occurred in the first half of the year, and that was all driven by the spring lockdown. Business performance recovered quickly with revenue in the second half of the year down by only GBP 2 million, and the business is able to achieve revenue growth in the fourth quarter. We were able to more than offset the revenue decline with cost reductions. In total, operating costs were down GBP 16 million. The lion's share of this reduction to around GBP 9 million came from actions we took on the business from March onwards to minimize expenditure, including 20% pay reductions and the vast majority of employees, supply contract negotiations and reduced marketing spend. GBP 6.9 million of the cost reduction came from the government support packages, and GBP 4.4 million of wages were claimed under the CJRS and these were passes right on to our employees. We're also eligible for rights to relief and other support amounting to GBP 2.5 million. Taking the above into account, I'm pleased to say that the full year adjusted operating profit was GBP 1.9 million, an improvement of GBP 2.6 million on the prior year. Operating profit in the second half of the year improved by GBP 4.2 million on the prior year. Adjusted items in 2020 totaled GBP 1.1 million, and they primarily relate to head office reorganization costs and some branch impairments. Net finance costs of GBP 2.2 million were charged in relation to the IFRS 16 lease liabilities, resulted in a loss before tax of GBP 1.4 million during the year. Finally, on taxes, noncash charge of GBP 1.8 million on the remeasurement of deferred tax balances. Moving on to lettings on Slide 11, which accounted for 61% of group revenue in the year. Revenue declined by 13% during 2020, driven by a combination of lower units, lower rents and the residual impact of the tenant fee ban. Overall, units were down 6% across the full year, but with the impact being driven by a unit decline of 18% in the second quarter, which included the spring lockdown, obviously. The impact of the tenant fee ban was GBP 1.4 million, and that affected Q1 and Q2. Business activity recovered quickly in lettings once the property market reopened, and volumes were back at close to pre-pandemic levels in Q3, and we then saw volume growth in Q4. Across the second half of the year, in aggregate, units were 1% higher than in 2019. The increase in units was offset by lower average rental prices on long-let deals, which declined by 12% in the second half of the year. The proportion of the lettings portfolio that is actively managed remained at 34%, which is no mean feat when rents are coming down quite significantly. We were able to maintain our contribution margin at around 70%, and that was driven by the cost action we took and the benefit of support from the CJRS. As Nic mentioned, the tenancy portfolio grew by 10% during the year from 19,800 to 21,800. In part, this is driven by our lettings book acquisition strategy, which I'll go through in a moment. However, it was pleasing to see growth of 400 tenancies on an organic basis, reflecting good growth in market share. On Slide 12, covering our lettings book acquisitions. So we made 3 acquisitions in 2020, delivering an incremental 1,600 tenancies. Total spend on the 3 acquisitions was a combined GBP 4.6 million on a cash and debt-free basis. In the year, the 3 acquisitions combined delivered GBP 1.3 million worth of revenue and GBP 700,000 worth of profit, which is in line with our plans. Going forward, on an annualized basis, they're expected to generate GBP 2.6 million of revenue and GBP 1.7 million of profit, excluding the amortization of acquired intangible assets. This is a strong drop-through to profit as we fully integrated the acquisitions into the Foxtons' operating model. The lettings acquisitions delivered an attractive return on invested capital and are expected to pay back around 4 years. In March, we announced the acquisition of Douglas & Gordon for GBP 14.25 million, adding a further 2,900 tenancies. And as a result, the March portfolio is now 25% higher than it was at the start of 2020. Douglas & Gordon is a significantly larger acquisition than those that have gone before it, and we'll continue to run it as a separate brand. However, again, we expect the acquisition to provide an attractive return on invested capital. Moving on to sales. So 2020 started strongly for Foxtons, as Nic mentioned, off the back of the conservative election victory at the end. In Q1, the sales commission pipeline has increased to be around 20% higher than it was in the same period in 2019, and this was starting to flow through to exchanges at the time the pandemic struck. Q2 revenues were significantly impacted by the closure of the property market, being down 53%. Again, business activity recovered quickly once the property market reopened in June as pent-up demand and a boost on the stamp duty release led to strong applicant demand. However, the hangover from the lockdown period and new ways of working in our industry meant that the time completed -- time taken to complete the transaction increased significantly. The revenue in Q3 suffered from the fallout -- from the breakdown in the pipeline in Q2 and the longer transaction times being down 18%. Sales revenues in Q4 were then up 16%, reflecting the increased business activity that we saw post-lockdown. We've seen improved growth in the first months -- first 2 months of 2021, ahead of that feel in Q4. In a similar way to lettings, the sales contribution margin remained flat in the period as we offset lower revenue by reducing the cost base and utilizing the government support package. [indiscernible] on mortgage brokerage, we saw a resilient performance during the year with revenues down only 5%. Total units were down 2%, driven by the decline in new purchase activity off the back of lower volumes in the sales market. This was partially mitigated by growth in remortgage volumes, particularly in the second and third quarters of the year. Whilst there was limited new purchase activity in this period, many borrowers took the opportunity to remortgage and benefit from historically low mortgage rates. Alexander Hall continues to deliver high levels of customer service and has regularly recognized rewards for the quality of [indiscernible] and the service that it offers. On Slide 15, just 2 points really to point out on the balance sheet. So the cash position at year-end was GBP 37 million. That obviously benefited from placing proceeds of a net GBP 21.1 million in April, and it also benefited from GBP 2.3 million of lease deferrals. Goodwill and intangibles increased by GBP 3.8 million off the back of the 3 acquisitions completed in the year and partially offset by some amortization. Deferred tax also increased for the same reason and the change in tax rate. Moving on to Slide 16, covering cash flow. Business generated net cash inflow of GBP 4.3 million over the full year and a few points to within that. The lease repayments were GBP 10 million, but that doesn't include the lease deferrals that we negotiated during the pandemic, and they amounted to GBP 2.3 million. This will be fully repaid in 2021. Adjusted items of GBP 0.8 million relates to historical branch closures and also the small head office reorganization that we did in the second half of the year. We invested GBP 4.6 million in 3 lettings books, which is a GBP 3.8 million on allowing for normalized working capital. It was pleasing to see that the business didn't need to utilize any of the placing proceeds for defensive purposes. On Slide 17, we've reiterated our capital allocation policy following the placing in April. The first priority of the business is to ensure we have sufficient liquidity available to manage our operational requirements and protect against any short-term shocks in what is a cyclical market. Our second priority is to then fund investment in the future development of the business. One of the key learnings in the last 12 months is that the success of Foxtons depends on continued investment in our 2 key assets, our people and our technology. We've also seen the attractive financial returns that can be made from the acquisition of high-quality lettings businesses. There's likely to be a short digestion period where we incorporated the Douglas & Gordon business over the next 6 months. However, we see that -- see further opportunity in the future to grow the business through acquisition. In terms of the cash return policy, we intend to continue with the core dividend policy to return to 35% to 40% of profit after tax as an ordinary dividend. If there is an excess cash over and above what is required from an operational perspective, we will return this to shareholders, either through special dividends or share buybacks. In summary, we're aiming for a strong but efficient balance sheet that allows us to invest appropriately to ensure the business maintains its competitive advantage. Once we've done that, we will distribute any excess cash to shareholders. Most of you will be aware, we've started to demonstrate that already in December 2020 by commencing a GBP 3 million share buyback program. In 2020, only GBP 300,000 was spent buying back shares, and that subsequently reason to GBP 1.8 million as of today. Finally, there's no ordinary view in respect to 2020. Finally, summarized on Slide 18, I won't go through the whole slide, but the key points are the business has adapted really well for the closure of the property market and the challenges we faced in 2020. The resilient lettings revenue, combined with cost action and government support, minimized the impact on our profitability. Business activity recovered quickly once the property market reopened, and we're able to deliver good growth in profitability in the second half of the year. We made good progress in our lettings acquisition strategy, and we believe there will be further opportunities to invest and these will provide an attractive financial return for us. The high level of operating leverage that exists within our business means we are well positioned to benefit from the additional benefit of incremental letting tenancies and the potential upswing in sales market volumes. I'll hand back to Nic for the strategy update and trading outlook.

Thanks, Richard. So let me pick up on Slide 20 then that maps out our strategic priorities. So the pandemic did mean that we needed to temporarily adjust to adopt a broader set of priorities for last year, but we've now fully refocused our efforts back around 3 core areas. First, customer acquisition, and our objective here is to grow core business by retaining an attractive new landlords through best-in-class service and tech, leveraging relationships with developers to drive growth in Build to Rent, acquiring high-quality lettings books and growing market share organically in our premium sales business through greater differentiation and more scientific approach to marketing. We'll also continue to expand our reach through new products, services and sales channels. The key achievements in 2020, of course, includes our GBP 4.6 million investment in lettings books, growing our Build to Rent being ranked #1 by market share in London and broadening our reach in Southeast England and internationally for establishing a virtual presence in market share and our Foxtons China desk, both of which have been successful. Second, we'll continue to build on our technology and data capabilities. We believe the state agency is primarily a people business requiring expertise, energy and commitment. But we do believe the winners in this industry will be those that can bring together the best people with cutting-edge tech and data. And as you've heard, this is where a lot of our focus has recently been, investing in these areas to enhance our market-leading position and drive value for customers. We took some significant steps along our technology road map in 2020, including the launch of our new customer data platform, which uses machine learning to, among other things, score and prioritize the many thousands of different leads that we deal with on a monthly basis and to improve cross-sell opportunities throughout the touch points that customers have with their journey with Foxtons. We also completed the build-out of automated customer lettings platform last year, another first for our sector. And lastly, I'm pleased to announce we're a founding member of the property portal Boomin, which we believe will offer exciting new opportunities not just for greater exposure, but for better cross-sell. Thirdly, brand and service. First-class customer service, which delivers results for our customers, is in part of our DNA, and our leading brand awareness has been built up over decades. In a year where we made significant operational changes to become COVID secure, which inevitably led to significant disruption in anxiety for our people and customers, we were delighted to maintain high levels of customer satisfaction and employee engagement, which reached a record high of 84% in 2020 according to a survey conducted by Willis Towers Watson. Motivated employees and satisfied customers is a powerful combination, which strengthens our brand, underpins our position as the #1 agent in London and drives market share growth. Turning to our acquisition then of Douglas & Gordon. The acquisitions we made during 2020 have already successfully been integrated into the Foxtons' ecosystem. And as I said earlier, we're pleased with progress to date. Last week, we were delighted to announce the acquisition of Douglas & Gordon for GBP 14.25 million, funded entirely from cash reserves. This transaction is a continuation of our strategy and reflects our confidence in the London property market, the strength of the combined management teams and our respects generally for D&G. D&G is a business who have longer [indiscernible] like Foxtons. This is a high-quality London estate agent with great people, a well-respected brand and a strong lettings focus. Both businesses have a successful track record of exceptional service, strong premium fee integrity and robust regulatory compliance. And their similar cultures based on delivering results creates an excellent fit. Unlike previous smaller acquisitions, as Richard said, D&G will continue to operate as a stand-alone brand with the existing management team in place. And as we work together to build value, we expect there to be opportunities to share best practice and create synergies. Finally, from a shareholder value perspective, we expect the acquisition to be materially earnings enhancing from 2022 with further upside possible from any sustained upturn in the sales market in London. Before looking a little further ahead then on outlook, let me just touch on trading for the first 2 months of the year on Slide 22. We made a strong start to the year across all 3 areas of the business, with revenue ahead of 2020 and efficiency gains made last year supporting significant growth in early operating profits. In lettings units, we're well above last year as tenants look to take advantage of lower rents. And for us, this increase in volume has more than compensated the impact of lower rents on average deal values, meaning that we've grown lettings. I'm also pleased to report the sales markets at a strong start, too, outpacing even the strong pre-COVID market in 2020 with good growth in completions and an under-offer pipeline that has remained consistently high since the beginning of this year, despite having completed a number of exchanges. This increased activity in sales is also driving greater referral volume through to our mortgage broker, Alexander Hall, which is seeing good revenue growth in the first 8 weeks, too. We believe these improvements are sustainable and potentially provide a solid foundation for further growth this year, particularly following the successful rollout of the vaccine program and the helpful actions announced in the budget, which recognize the vital role that our market plays in living standards and economic growth. Extending the stamp duty holiday will give buyers and sellers more time to complete their transactions and will allow supply chain within lenders, surveyors and conveyances to clear naturally. The mortgage guarantee scheme will also help by demand, especially for first-time buyers, and the extension of CJRS will be crucial in helping distressed tenants through this difficult period. Finally then on Slide 23, I'll recap and look a little further ahead. 2020 presented an unforeseen and unprecedented challenge for us, but we took action to protect our people as well as the business and continue to do an excellent job for customers. The actions we took as a team, the support we received from shareholders and the deeper relationships we've built with customers through these difficult times have seen us emerge from the crisis stronger and well prepared to take advantage of future opportunities. We're really pleased to have made the acquisitions we did in 2020, and we're delighted with our most recent acquisition of Douglas & Gordon, which further strengthens our brand as London's leading agent. Furthermore, we're confident we can successfully drive good returns from these transactions. Looking forward, we're more optimistic now than we have been for a while. Trading in the first 2 months has been strong, and we were encouraged to see the chance to recognize the role that the market plays in reflating the economy in last week's budget. As international travel returns to London, we expect tenant demand to pick back up to more normal levels and begin to mop up excess supply and rentals. Our efforts to prioritize efficiency over the past few years have resulted in a very lean business now, which will endeavor to maintain to drive margin improvements whilst ensuring ongoing investment in technology to maintain competitive advantage and exceptional service. So that's all I wanted to say in summary. Thanks very much for listening. That concludes the formal part of the presentation. And Richard, Patrick and I will now be happy to take any questions you have. So feel free to speak up or enter them into the system.

[Operator Instructions] We will take the first question from our participant, Chris Millington from Foxtons (sic) [ Numis ].

I've got a few, if I could, please. Just to start on the balance sheet, first of all, Richard. You talked about [indiscernible] liquidity makes perfect sense in these uncertain times. I wonder if you could just kind of elaborate on what you see as that sufficient liquidity? And perhaps with the answer, you could also tie into what capacity you have to do kind of further lettings deals and whether they're likely just to be paused for a while as you integrate D&G. So that's kind of the first with 2 parts. I'll come on to the others in a moment.

Yes. Okay. So GBP 37 million cash at the year-end, I would say, having spent some money on Douglas & Gordon, we've got the share buyback that is in process up to GBP 3 million, and we've got the lease deferrals of GBP 2 million that will be paid back this year. So when you allow for that, you've got a cash balance of kind of in the GBP 15 million to GBP 17 million raise on a kind of pro forma basis. And I think in normal circumstances, we would want GBP 10 million to GBP 15 million worth of cash on the balance sheet to run the business. We see -- so it will take a little bit of time to integrate Douglas & Gordon into the business. But as for that, we would expect to back on the trial of the acquisitions, I suppose. And probably I would see that in the second part of this year and expect to fund it through existing cash balances and already cash generated during the year.

It's very clear. Next one, and this is probably for Nic. And it's really -- obviously, it's very difficult to be sure as to where the market is going to go this year. But if it does continue the same trajectory, it does look like sales volumes are going to be somewhat higher. I'm just wondering what capacity you see within the sales business now you've taken on D&G. And perhaps you could also just kind of tie a comment in there on lettings about how much more activity you could take on with your current personnel.

Yes. It's a good question, Chris. Thanks very much. Yes, I would say 2 things to that. In terms of capacity, there's 2 elements to it. One is obviously, the raw number of negotiators that we have to process transactions. But the second, just as important part of it, is the sentiment in the market. And what you find is in a positive market with good momentum, good positive sentiment. Average productivity is much higher because there's less of a battle with the buyers and sellers to take transactions forward. And so what we're seeing at the moment is very positive outlook from both sellers and buyers. We've seen lots more activity in the last 2 months and even more recently in the last couple of weeks, good levels of activity. So long-winded way of saying, I think there's significant capacity in our existing negotiator base on sales. We will be growing that group slightly over the next 3 months, but not significantly. And I think that there will be, therefore, a strong drop-through of increasing revenues from sales transactions through to operating profit over the next part of the year. We're a lean business, but we haven't kept things so tight that we've got no excess capacity.

Got you. And just a similar question on lettings, Nic?

Yes. Lettings is a little bit tighter, frankly, just because our volumes are up so much. I mean we haven't given away the numbers entirely. But average rents down 12%, and we're sort of ahead on revenues. And so there's obviously quite a bit of volume going through our lettings business at the moment. So that's one where we are building up our negotiator base a little bit more on that. And of course, our biggest focus there, Chris, is for Q3, because that's where we typically see our busiest period in the year for lettings. So as long as we get into Q3 with 20 or 30, maybe more next in our team, net, that will be in good shape.

Got you. The final one, I just wanted to ask about was market share. It does look like you've obviously taken a little bit in sales through both organic and acquisitive means -- sorry, in lettings, pardon me. Sales is a bit more difficult to get underneath because the data is a bit lagged. But what's your feel of market share in sales through the course of this year or 2020, pardon me?

Yes. I think the way I would characterize it is that remembering, first, that we are a premium fee company. Maintaining market share is difficult by itself, and so I think we've probably moved our market share by 0.25%, 0.5% up maybe in the last year. That's acceptable. We're trying to accelerate that, obviously, going through to this year and next. But the problem we're having at the moment more than anything really is access to reliable land registry data. It's lagged, as you said, but the pandemic has meant that it's extremely lagged this year. And we're not entirely comfortable with this reliability at the moment.

[Operator Instructions] It appears there are no questions at this time. I will hand over the call back to Nic for any additional closing remarks.

Well, thanks very much, everyone, for attending again. And I know we've got one-to-one meetings in [indiscernible] the over the next couple of days with a lot of you. So look forward to seeing you then. Thanks again.

This concludes today's call. Thank you for your participation. You may now disconnect.