Foxtons Group plc (FOXT) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Foxtons' Investor Event presentation. My name is Sabrina, and I will be the operator for your call this afternoon. [Operator Instructions] We are now going live to the presentation room where you will hear brief silence or music from a video being shown in the presentation room before the conference begins.

Hello, I'm Ian Barlow, Chairman of Foxtons. Thank you for your time and interest in our company and for attending today. Unfortunately, circumstances dictated that today's event is a virtual one, which is a great shame as we would have enjoyed seeing you all in person, but I hope, restrictions permitting, that we'll be able to meet together in the coming months. As many of you know, I assumed the Chairman's role at Foxtons last year following several years on the Board. In that time, I've seen at firsthand the strength of this business. Over 40 years, the Foxtons brand has established itself as a prominent feature on the streets of London, helping people with our most critical transactions, putting a roof over their heads. Selling, letting, buying and renting is something most of us will do only a handful of times over our lives. And as the business that enables these important events, I speak for the entire company when I say we feel a deep responsibility to do a good job for our customers and stakeholders. During its 4 decades, Foxtons has enjoyed booms, endured recessions and handled severe market dislocations like the credit crisis, Brexit and, of course, the COVID-19 pandemic. We have seen interest rates of size 15% and inflation over 10% as well as the record low rates we see today. Through all of this, Foxtons has been at the vanguard of the industry with highly professional and knowledgeable agents, the best technology -- we were the first agent to have a website -- and crucially, a go-the-extra-mile culture. As you will hear, these characteristics are essential to their business today and are what I believe will drive our success into the future. There's no question, but the last few years have been a real challenge, not just for us but for the whole industry, particularly in London, where we have effectively seen our addressable marketing sales halve. But as Nic will set out, we have adapted and evolved like we have always done and entered 2020 with real confidence that it was going to be a year of inflection for us. Then the pandemic struck. And of course, 2020 will be forever associated with COVID-19 and the terrible impact it has had on our communities, particularly on great cities like London. Last year, thanks to the most uncertain outlook in the business' history, we took decisive steps to secure the business' future and the executive team did an outstanding job financially and operationally, allowing us not only to weather the storm, but emerge from it in a really strong position to drive growth. It's that future growth strategy that we are focusing on today. Today, Nic and his team will be sharing with you our ambitious strategy for growth and details of the key programs currently underway, which we believe leverage our strengths and support our overriding objective to create substantial shareholder value over the next 3 years and beyond. As Nic will set out, over the past few years Foxtons has undergone significant change to ensure the business is the right shape and proposition to thrive in the coming years. Under Nic's leadership, the senior management team has been strengthened, and you'll hear from many of them shortly. I and my Board believe they are very well equipped to execute the strategy we are presenting today. Estate agency is not a difficult business in theory, but it's plenty challenging in practice. Above all, it's a people business. And wherever I visit, in the branches or HQ, I meet highly motivated people operating to the highest standards of integrity in the business. It's why I joined the Board. But Foxtons is also a business with purpose, and perhaps we've been too shy in recent years about the role we play in providing a leg up to people from all walks of life. Foxtons doesn't just help people move, we help people move up in the world. Throughout its history, Foxtons has hired people from the broader spectrum of backgrounds and experience. We recognize the skills we look for under was captured in traditional qualifications. It's the reason our workforce almost exactly reflects the diversity of London, the city we still predominantly serve. This isn't just a nice to have; we think this is an essential element of our success and gives us an advantage. Our industry is not known for its diversity, but we are. And we want to do more, and that's why we just signed up to a long-term partnership with the charity Career Ready to continue to make a meaningful positive difference to social mobility in our capital. We couldn't bring all of our employees and customers here today, but they are the best people to tell our story. We wanted to include them somehow. So here are some clips to give you a quick insight into today's Foxtons. [Presentation]

I'll hand over now to Nic to introduce his team. I'll be back to take your questions after the presentation. Thank you.

Thank you, Ian. And let me add my warm welcome to all of you that have taken the time to join us today to learn more about our iconic company and our strategy for the future. Although it would have been nice to be presenting to you in person, this virtual event does at least give us the opportunity to involve a wider group of our senior managers in the session. And today, I'm delighted to be joined by Ed Phillips and Sarah Tonkinson from Lettings; Steve Rodgers, who runs our Marketing and Data Science team; and Sarah Mason, our Chief People Officer. Richard Harris, our CFO; and Patrick Franco, our COO, who some of you have met before, are also here with us. Today, our overall objective is to demonstrate the huge potential for the business and to give you a comprehensive understanding of the focused strategic initiatives we have underway to ensure we maintain our leadership position and achieve our ambitious top and bottom line growth aspirations. We have a very exciting future ahead of us and tremendous conviction within the team here about our ability to deliver growth. But before reviewing our strategic programs with you in more detail, I'd like to spend just a few minutes reminding you of the journey to this point and the steps we've taken over the last 5 years to respond to the challenges of the marketplace and to ensure that Foxtons is now well placed to capitalize on the opportunities ahead of us. As Ian mentioned, 2021 will be Foxtons' 40th year in business. Over that period, we've been at the forefront of innovation in the industry, and we've led much of the change in the sector. In the early days, our priority was to build the strongest possible brand and our intense work ethic focus on results, our cafe-style branches, MINI Coopers and enthusiastic people all meant that we quickly became a brand icon, known for shaking up the sector with a strong personality and deep roots in the London property market. With our distinctive brand and centralized business model in place and the backing of private equity in 2007, we began our expansion program to build out our network across the entire London property market. And during the 5 years between 2010 and 2015, we've doubled our branch numbers, giving us the ability to reach the vast majority of property markets within Greater London. But more than that, because our branches form an interconnected network of sales channels, the network as a whole is more valued than some of its parts, effectively enabling us to deploy the efforts of all of our salespeople across the network into each local market and deliver market-leading levels of productivity and service. The Brexit vote in 2016 and the economic and political disruption it brought with us did lead to extremely difficult market conditions. And although the resulting contraction in the sales market impacted the profitability of the entire sector, Foxtons remained cash-generative over the period as a whole. And as a management team, we were determined to shut in shore during this period that we optimized every aspect of the business. We strengthened our competitive advantage and created the launch pad that you've received for growth today. Over the last 20 years, we've invested heavily in technology to transform the property experience, and we continue to see that as being key to our future growth and profitability. The development of our customer portal and virtual sales capability has enabled us to optimize our branch network, extending its reach so that we can now address a similar geographical market with 15% fewer branches than we have in 2017. This improvement in branch efficiency, together with other actions taken on costs, helped us remove GBP 15 million from the cost base between 2016 and 2019, and facilitated significant investment in people, tech and marketing over the same period. This has left us more capable today than ever, but means that we can expect our cost base this year to be GBP 4 million to GBP 5 million lower than it was in 2019 on a like-for-like basis. The investment we made over the last 5 years has involved literally hundreds of IT programs developed and delivered by our in-house team of IT specialists who are obsessed with perfecting the customer experience, making our people as productive as they can be and empowering our business with data. We've recently completed the implementation of a leading-edge customer data platform, and we believe this could be a real game changer for us, helping us to drive up funnel conversion, increase market share and creating new opportunities for cross sell. We also expect it to reduce the overall cost of customer acquisition. Patrick and Steve will demonstrate later on how some of these projects are reshaping the way we run our business and the potential they have to drive increased value. And so as we stand here today, Foxtons is lean, has a highly scalable technology capability, a powerful culture and retains its premium fee position. All of this gives us a significant petting advantage and the ability to deliver superior outcomes for customers and the business. Our business is designed to be different. In fact, we really do believe it is unique in our sector. And as I'll set out shortly, the fact that we can sustain the premiums that we do and combine the market share that we have proves this. The brand built over decades is well-known throughout London and further afield for premium service and results. Our integrated approach to tech and science underpins all areas of the business, whether it's enabling the customer to transact digitally, giving sales managers real-time data on the performance of their teams or determining the best way to market to a customer through machine learning, ultimately, we believe we're the most technologically advanced agent in the U.K. We believe these capabilities will be very difficult for competitors to replicate. Having said that, estate agency is fundamentally a people business. We know that our customers want to deal with knowledgeable, experienced and committed people who deliver results and our culture of sales and service intensity creates strong customer loyalty and advocacy. Together, these advantages lead to better overall outcomes for customers and the business. And let me add some color to that by showing you what our business is currently capable of delivering. We've been the leading brand in London Estate Agency for many years with the highest brand awareness in the sector, delivering a strong customer proposition that typically results in an 8% rental yield premium for our landlords and a 4% sales premium for our sellers. These results substantiate our premium fees and lead to exceptional customer service demonstrated by our excellent rating on Trustpilot, where we have 4x the number of 5 Star reviews than the next best London agent. We have a loyal customer base with significant levels of repeat business, 86% among our landlords and by delivering great results for new and returning customers over many years, we've built up a large, rich database that gives us valuable insights into our customer behavior and creates significant opportunity for further cross-sell. The combination of high levels of repeat business, premium fees and a focus on high value markets mean that our sales productivity is 48% higher than peers in terms of revenue per branch and the operational leverage inherent in our business model means that a higher proportion of incremental revenue flows through to the bottom line, in excess of 70%, in fact. Finally, our prudent approach to balance sheet management gives us a strong balance sheet with no external borrowings. Taken together, these attributes give us a highly differentiated position in the marketplace, which is unusual, not only within agency but across any industry. In any market, premium prices are usually associated with lower volumes, but the strength of our sales proposition enables us to maintain a significant price premium whilst being one of the market's largest players by volume also. This leads to the high levels of revenue productivity I mentioned a moment ago, and it's not just in sales; we've consistently enjoyed a price premium in lettings too. We're the only agent at this market intersection. And because our fees are significantly higher, we can extract a greater share of the commission pool than other agents, some of whom have a larger business on a volume basis. And this is a crucial point and one that I'll return to in a moment. So it's fair to say we're very excited about the shape and capability of our business now, and we think it gives us a powerful platform from which to grow. But that's just part of the story. There are big changes going on in the sector, driving huge opportunity for growth. So before I set out our strategy in more depth, I want to spend a few moments looking at the broader market. We deal with literally hundreds of thousands of customers every year, and we've collected and created detailed and rich data on many millions that we've worked with over the longer term. And whether they are buyers, sellers, landlords or tenants buying a first home, an investment flat or GBP 5 million [ free ] property, they tell us they will have similar expectations from their state agent. Beyond anything else, they want an agent to provide a high quality of service. They want us to be responsive to their needs at a time and a place convenient to them, whether that's in a branch, over the phone, by text, e-mail or online. And they want their agents to know the local market personally and to have easy access to clear and accurate facts, figures and data to back up their personal expertise. They value technology? Yes, but primarily as a way to reduce bureaucracy and save time, not to replace a personal relationship or justify lower fees. In fact, in 2020, despite online and hybrid agents being around for over a decade, these agents together accounted for fewer than 1 in 10 property transactions, a market share position that actually worsened compared with the previous year. In fact, 80% of customers still value the branch, and that is no surprise to us. Our customers are dealing with one of the largest and most emotional financial transactions of their life, and many of them have very little experience of the process, having done it maybe once or twice before. So they need to get it right, and they want to work with a quality brand with a physical presence and expert people that they can trust to advise them properly. The reason our customers pay more, come back and recommend us to their friends and families is because we give them what we feel they want. And we help unlock the true value of their property, potentially leading to significant wealth creation for them. On the institutional side, our customers want access to sophisticated market data to inform their large-scale, long-term investment decisions. Making a mistake in that sector can be extremely costly. And Sarah will explain later in more detail how we're working to help large institutional investors mitigate their risk. Against these relatively simple customer needs, the reality is that the majority of agents in our sector are poorly place to deliver. The sector itself is highly fragmented with over 10,000 estate agency businesses across the U.K. and over 2,500 in London alone. And although the top 10 agency brands do account for 25% share of the market, the largest share is currently served by a long tail of literally thousands of independent agents, often sole traders or small family businesses who lack the financial strength to improve their businesses through investment in brand, training or technology. The majority of these agents are destined to remain small, localized and to compete largely on price alone. And we believe these conditions create a sector that is ripe for consolidation. And that's not just in lettings, as I'll set out in a moment. Regulation is only going to increase and technology is becoming an ever more important aspect of the customer journey. And when I think about our capabilities and plans in this context, I'm really excited about Foxtons' potential. I think we're really well placed to create our own winning territory for ourselves and to gain market share, should we see further consolidation within the sector. Let me now change tack for a moment and talk about our geographical focus and the demographics behind the U.K. property market. There's good reason why we've focused primarily our business on London, where we're the market leader. It's the U.K.'s most concentrated property market due to its status as a true global city and the demographics of this population means that it has great prospects for growth. Despite being at the bottom of the sales cycle for some time and particularly badly exposed to Brexit and COVID-19 more recently, London's property market still generates disproportionate value, with 1/3 of all U.K. property sales transactions by value and almost 40% of all lettings transactions by value taking place in the capital. And we believe the fundamentals that supported that extremely valuable property market in London in the past remains solid for the future too. London already faces a shortage of housing stock, having built just 30,000 new homes on average per year since 2011. And with London's population expected to grow by 60,000 people annually over the next 5 years, we expect demand within sales and lettings to remain strong and for prices and rents, therefore, to remain resilient. As I mentioned earlier, by combining our physical branch network with a virtual presence, we've been able to increase our footprint in London with fewer branches. Today, we address 85% of the market by volume with just 57 branches. In the summer of last year, we moved further afield, opening a virtual presence in Berkshire. In fact, even further out, our brand awareness is still good. And together with the technology platforms we now have in place, this offers us an interesting and different opportunity for expansion outside London. Whilst I think it's unlikely that Foxtons will ever have a branch in hundreds of towns around the U.K., like some of our competitors, we don't see that as an optimal use of capital. We do believe there's a significant opportunity to create a valuable regional business in the southeast and within larger urban areas around the U.K., where our brand recognition is already high and where there could be significant synergies to be had from leveraging our existing business model and the technology platforms that we've been developing. This could be through direct ownership of regional branches, partnerships, franchising or licensing, and we are currently investigating rollout opportunities and building a team to take this forward. In terms of scale, the Southeast and the next 50 largest cities outside London currently account for over 30% of the sales and lettings markets. So cumulatively, there's almost as much value to go for in these markets as there are -- is in London. And they share similar dynamics, too. They're all economic hubs, experiencing population growth and inward investment. They represent an increasing proportion of the U.K. total population, and there's significant excess demand for property in each of these markets, which we expect will lead to high and increasing property prices and rents. We have a good plan for growth in this area, and I look forward to reporting back on progress towards the end of the year. Today's session is very much focused on the strategic levers we're pulling to achieve our own objectives through our own action. However, we shouldn't ignore the fact that our business performance is sensitive to property sales markets. The whole sector has certainly felt the pressure of that over the last 5 years. But I think there's now a real chance that the cycle may be more forgiving to us over the next 5. The data on this slide provides a comprehensive long-term analysis of transaction volumes and prices in property sales markets over the last 25 years and considers the potential impact of future growth on the value of our addressable markets. It's also helpful in putting into context our performance over the last 5 years. It's worth breaking down the last 25 years or so into 3 periods. For a decade before the global financial crisis, U.K. and London property sales markets remained relatively stable and typically moved in tandem. Between 1997 and 2007, for example, there were typically 160,000 annual sales transactions in London with a further 1.2 million each year across the rest of the U.K. The financial crisis in 2009 saw volumes plummet, but the recovery that followed was rapid and significant. Between 2009 and 2014, London property volumes and prices grew by 62% and 50%, respectively, essentially more than doubling the value of the property market over a 5-year period. Naturally, this meant that most estate agents did particularly well during this period. In 2014 and '15, for example, we delivered record operating profits of around GBP 40 million per year. And because growth in the U.K. market during this period was more muted, we outperformed U.K. peers significantly. Since 2015, London volumes have been particularly severely impacted, both in absolute and relative terms. The last 5 years have been some of the most turbulent in the U.K.'s modern history with 3 general elections between 2015 and 2019, a disorderly and lengthy Brexit and, of course, COVID last year. As a result, London volumes fell over 40% between 2014 and 2020, and the decline in Central London, where we have our most mature branches, was closer to 60%. And because prices were subdued too, the addressable market at London fell very sharply over that period. Despite these extremely difficult market conditions, you will have seen from our recent trading update that the actions that we've taken over the last 5 years to optimize the business have helped us make a really positive start to the year. Although we sold around 50% more properties in the first quarter of the year compared to 2019, we've continued to grow our sales pipeline, which today remains well ahead of where it was at the beginning of the year. We've also taken on a significant amount of new style stock this year, and I feel encouraged about our market share position. Whilst it's very difficult to forecast property markets with real accuracy within London sales transactions, currently at their lowest levels for decades, absent further lockdowns, it does seem likely that the sales market is set for a period now of significant growth. And on that basis, it's worth reflecting on what the possible shape and scale of a market recovery could be over the next couple of years. Given what we see from publicly available forward looking indicators, it does seem reasonably possible to us that property sales markets transactions could be expected to return to levels between those we saw in 2019 at the lower end of expectations, right up to those that we saw in 2014 at the higher end. At constant prices, these 2 scenarios would increase the value of estate agency commission pools in London by between 23% and 75% compared with 2020. There is significant potential upside for the U.K., too, with commissions rising between 27% and 31% in similar market recovery scenarios. The impact of this level of growth can involve some big numbers for us, and Richard will set out in his session what that could mean for our revenue base later on in the presentation. Sales isn't the only sector seeing change in opportunity. Motivated by affordability and flexibility, private renting is increasingly popular, and it's perfectly possible that it will become the dominant form of residential living in London within the next 10 years. At the same time, many small agents are under real pressure. They're struggling to cope with a raft of new regulation, and they've lost significant value from tenant fees, which were banned in 2019. As a result, we've seen many lettings agents lead the industry, and we expect that trend to continue. Now I won't steal Ed's thunder as he'll go into much more detail on this topic in a moment. But the key message really here is that we have the strategic capabilities necessary to deal with the challenges in lettings and to grow our proposition -- position, both organically and by continuing to integrate high-quality lettings books into our scalable lettings platform. We have grown share over the last 4 years in lettings, and our early success in the institutional build-to-rent sector also means that we're ambitious about growth in that area, too. So now let's turn to our strategy. So far, I've set out our capabilities and the opportunities as we see them. So what do we want to achieve and how do we plan to take advantage? Our high-level strategic objectives really are quite simple. We want to sustain market leadership where we already have it and build it rapidly in the new markets where we enter. The economic cycle is always going to be an important feature of property sales, but the more we can diversify revenues towards recurring sources and new market opportunities, the more resilient we'll be and the more we'll be able to maintain profitability throughout the cycle. And fundamentally, we want to grow profits. Historically, this business has been very profitable, and we are confident that 2021 could be a significant first step towards delivering significant future shareholder value. During the rest of the presentation, we'll take you through our detailed plans for achieving these objectives in each area of our business. But before getting into that detail on sales, let's take a brief look at the makeup of the London property sales market. As I mentioned a little earlier, we are uniquely positioned in the sector, serving the most attractive, high-value, high-volume sales markets with a premium fee position. Now the bar charts on this slide represent the value of sales commission pools in each of our 4 target value segments. As you can see, the London property sales market is largely dominated by property transactions of below GBP 1.5 million. In fact, in 2019, sales of properties below this level represented 95% of all transactions by volume and 76% by value. At Foxtons, we're focused on these 4 segments, which we call value, core, rare and prime. And we have a disciplined approach to pricing and market share management in each. For transactions below GBP 1.5 million, the strength of the Foxtons customer proposition and the value we deliver enables us to maintain our standard nonnegotiable fee position at 2.5%, whilst achieving high levels of market share of available commissions of between 5.6% and 7.2%. We are uncompromising about our fee in these segments because we can be. We and our customers know we deliver better results. We have well trained, knowledgeable people supported by excellent technology, which provides exceptional user experience, and we deliver better sales outcomes, including average sales prices that are 4% above those achieved by our competitors, which obviously more than offsets our premium fee. But we also recognize the opportunities beyond these segments, and our wide market coverage does enable us to move up the property ladder with customers over time, creating what we hope becomes a lifelong property partnership. In 2019, more than 1/3 of our sellers have used us before, and many of these were moving up into higher-value segments. We split our prime segment into 2 price ranges, properties between GBP 1.5 million and GBP 3 million and GBP 3.3 million to GBP 5 million. We understand high-value property sales requires a slightly differentiated proposition and specialist salespeople reflecting the nature of that marketplace, which often requires more collaboration with other agents and buyer agents. Only our most experienced salespeople qualify to work with clients in these higher-value segments and has the flexibility to adjust our fee to win business. We also utilize a sub brand, Prime by Foxtons, in these markets to reflect our slightly differentiated service offering. In the GBP 1.5 million to GBP 3 million segment, for example, we'll price match some competitors where required. And in these instances, we'll often structure our commissions to share in any value upside we achieve above competitive valuations. At the higher end of the market, we're willing to negotiate bespoke pricing. At this level, we'll also agree to fee sharing with other agents and new sharing platforms such as long res. Our share of the prime market commissions is around 4.5%. And whilst we're always keen to deepen our position in this market, it is important to remember that although it gets a disproportionate amount of coverage in the media, it is a relatively small market, both in volume and value terms. In 2019, for example, there were fewer than 400 property sales in London above GBP 5 million. And with even high-quality brands often discounting their fees to well below 1% and then sharing proceeds with others, the market represents a relatively small commission opportunity. Up until now, we focus very much on the sales of existing properties between consumers. However, there is also a valuable new homes market in London, which is important to us, too, particularly as international buyers return to London. Developers require a specialist capability, and we have a dedicated new homes team, one of the largest in London, in fact, which works with developers of all sizes, including 18 of the top 20 in London. We do negotiate fees in this business, but have managed to retain an average fee of 2% as our proposition and performance enables us to charge more than our competitors in this sector, too. Let me now touch on how we are planning to build on this leading position in sales through data science, technology, new sales channels and productivity growth. One of the fundamental challenges with estate agency is that people don't move often, once in every 18 years in the U.K. on average. This makes it difficult accurately to target those most likely to transact and leads to the low productivity levels and a high acquisition costs, which are commonplace among many agents in our sector. We recognized this very early on in our development, and it was the main reason why we set up the business to focus on high volume, high-value markets with a centralized platform and CRM system that enabled us to manage and mature very large numbers of customer leads, each with a relatively low probability of transacting in a short run. Initially, our customer contact strategy involved using sales centers, telephone calls and e-mail. And although this worked very well with our centralized business model, the state-of-the-art customer data platform that we've implemented last year with high levels of automation and powered by machine learning means that we can predict customer behavior much more precisely now and deliver highly customized marketing content throughout individual customer journeys to increase engagement and conversion. We believe this could be a game-changing capability for us, akin to what tech firms are doing with big data. And we expect it to have a positive impact across the business and to present a significant challenge to competitors trying to emulate a similar approach. And to put the potential value of this development into context, a 1% increase in the sales funnel conversion for us would lead to about GBP 13 million worth of extra sales revenues. Obviously, it's still early in our journey in relation to the customer data platform, but you can see why we think this could be a game changer. The CDP will also support better cross-selling by integrating marketing throughout customers' journeys online and within the Foxtons' app. We currently have a healthy 33% cross rate into our integrated mortgage broker and conveyancing panel, but there are further opportunities for significant growth outside these areas. And Patrick and Steve will explore that in more detail later on. As I indicated earlier, we have an ambitious plan to grow and diversify sales revenues through new sales channels, both in the U.K. and internationally. At the time of the IPO, we saw potential for up to 100 physical branches in London with a further 100 to provide exposure to the southeast of England. But the optimization process that we've been through recently with our London network has helped us evolve our thinking around our strategy for expansion outside of London. Essentially, we'll become more ambitious and more focused. And we're now currently working up options for targeting in the Southeast and the next 15 top urban areas in the U.K. with a range of different possible deployments. We took the first step towards that expansion last year when despite the impact of COVID-19, we began our home counties expansion with the launch of a virtual business in the Berkshire area. Whilst it's still early days, I'm pleased with progress, and it's been encouraging to see our brand, our premium fee working well in this area. And we've got some great customer feedback, too. We're also about to expand our new homes capability into the regions, creating sales channels in a number of areas in the U.K. to support London investors looking to add U.K. exposure to their property portfolios. Looking more globally as the leading estate agent in a city like London, Foxtons naturally has a strong track record of working with international buyers and sellers with existing links to the capital. But we also knew there was a big opportunity on the ground in China itself. We knew that, that would require a specialist tailored approach to ensure that we could create profitable revenue streams for buyers, many of whom won't have ever been to London or even the U.K. We launched our China desk last year. And today, we work with the largest agents and portals in China and have developed a targeted digital marketing strategy to deliver prospective buyers at relatively low cost. This channel has started really well, and it's already hitting 7-figure levels of sales on an annualized basis. And given our early success in China, we see potential for developing similar presence in other high-value destinations around the world. That's all I intended to say now by way of background, on high-level strategy and on our sales business. And I would now like to hand over to the rest of the team to take you through the detailed plans that we have in the other key areas of our business. We'll start with lettings, and I'd love to introduce now Ed Phillips, our Chief Sales Officer for lettings. Ed recently celebrated his 20th anniversary with Foxtons, and is without question one of the most experienced agents in London.

Thank you very much, Nic, and good afternoon, everybody. By way of background, I've worked at Foxtons for more than 20 years and headed up the letting side of the business for the past 15 of them. It's fair to say that over that time, there's been considerable change to both the sector and our business. As with sales, we've navigated different market conditions, but crucially, and especially in the last few years, have extended our market leadership position. When I look at the platform we have got and the speed of change coming, I'm extremely confident in our ability to accelerate growth. I'll talk you through this today. To echo Ian's opening remarks, as the agent that facilitates 1 in 10 resident transactions in the capital, we are passionate about the role we play in helping people with such a critical transaction. Unlike the majority of estate agents, lettings have always been a key component of our strategy and business model, and it's becoming increasingly important over the last few years. It benefits from having attractive growth prospects, high levels of repeatability and being less cyclical than sales. The marketplace is complicated with a number of different segments. But as in sales, we have deliberately broad market coverage. Single property landlords dominate, but the market stretches into small multi-property landlords, nearly 1/5 of our portfolio, and up to premier annals between 10 and 100 properties and then the institutional portfolio holders. Each segment has different service requirements, but fundamentally, the desired outcome is consistent: good quality tenants, premium rental prices and the lowest void periods to maximize returns. Pressure across the whole sector in sales has driven more into letting in the last 5 years, but we expect this dynamic to reverse in the coming years as a more onerous regulatory regime designed to protect tenants has increased the cost of doing business, especially for smaller agents. These agents are exiting and helping to fill our M&A pipeline. More on this in a minute. I'm fazed by the competitive backdrop we chose to double down on investment, ensuring we have the best proposition in the marketplace. Over the last 5 years, we've invested heavily in our technology, data and compliance systems, which underpin our differentiated customer proposition. Lettings is a long-term and relationship-driven business, and we have -- the capability we have will, I believe, pay off handsomely over the next 5 to 10 years. This proposition is already driving high levels of landlord repeat business and share gains over the last few years, and continues to do so, enabling us to extend our leadership position. As I mentioned on the previous slide, the hard work we've done carving out our market leadership position means I'm extremely optimistic that we can capitalize on the growth opportunities we see. Our lettings growth strategy is threefold: Firstly, we will continue to organically grow our share of the B2C lettings market from growth in both new customers and our existing ones. Through the My Foxtons platform, we have our powerful and highly customer-centric interface and the rich data we have collected on tenants and landlords over the years also means we are well placed to drive other revenue streams and cross-sell opportunities. Secondly, the build-to-rent sector presents us with a strong growth opportunity. We're already the leading build to run agent in London, and the sector shows strong growth characteristics. It's expected to more than double in size by 2025, with further growth through to 2030 and beyond. And there is more growth to come from M&A. We have a track record of delivering value from our acquisitions and quickly, and there's also an attractive pipeline of opportunities. Our centralized platform is highly scalable and allows us to embed acquisitions very quickly and use them to increase profits. To give you a sense of how scalable this platform is, it could easily manage every tenancy in London. You've already heard the reference to our market-leading lettings proposition, uniquely powerful for both landlords and tenants, and something we've continually improved and refined over the last 15 years. While we're obviously in a results-driven industry, it is my fundamental belief that it is our customer service and unflinching compliance standards that set us apart from the rest. Our service delivery is based on a simple overarching principle. We provide an end-to-end service for landlords and tenants, ensuring the experience during the life cycle of a tenancy is the best that it can possibly be. This is underpinned by our expert and dedicated teams who provide deep domain knowledge and support and guidance through the entire letting process. Our technology and customer platform means landlords and tenants are able to interact with us on a medium that suits them, and we're able to provide a 21st century experience, whilst many of our competitors are still far more analog. And our asset management approach to letting is unique in the mass market. We're not just a lettings agent. Our data and on the ground expertise mean we partner with landlords to both protect their investment and maximize returns. We're unflinching on our compliance standards. We've taken the decision to lose the occasional transaction in the short term. We are doing the right thing and protecting all interested parties, landlords, tenants, our staff and our investors. As a large proportion of the population choose to privately rent, we think these requirements will continue to grow. Doing the right thing here and doing it better than the rest gives us a real competitive edge with new customers and a defensive moat around our existing ones. And lastly, our scale is a key driver for our outperformance. For landlords, you get exposure to London's largest database of better tenants and tenants get access to the largest database of vetted properties in London. Our sales agents, supported by our integrated operating system, will support your search across our network. We match more property with more people with more than 30% of tenants actually renting outside their initial search area. To my knowledge, this is unheard of in the sector. But as I said at the beginning, we are a results-driven industry, and we get the best results for our customers. By matching more people with more properties across London means tenants are actually willing to pay a premium for their perfect property. Our incentivized negotiators and data science helps us minimize void periods, and our asset management approach means we can present the best properties to the best tenants, generating an 8% rental yield premium for landlords and high levels of loyalty. 86% of landlords last year were repeat customers. And it's not just our landlords who appreciate our service. Tenants are a key customer base for us. And in the more normalized markets pre-COVID, we regularly saw tenant renewal rates in excess of 80%. The challenge then is to translate this leading customer experience into meaningful growth in our business. The strategy for organic growth in lettings is to target marketing with introductory pricing offices that are cost-effective weapon to organically grow our portfolio and landlord base. Once embedded into the Foxtons' ecosystem and with our repeat business rates, we find we have high levels of retention and can deliver payback within a year. Retaining and winning more tenancies from our existing landlords is another key driver for organic growth. Alongside ensuring we have the best-in-class service and results, we've introduced specific programs targeting the largest private landlords, including dedicated account managers and the prime lettings team. I'm pleased to report this has borne fruit at an early stage with our account management department delivering an 18% increase in the number of new tenancies in the first 5 months of this year alone as against 2019. The Prime team also works seamlessly across sales and lettings and provides a single point of contact for property owners in a segment of the market where the decision to sell or rent out the house can be less binary. Whilst the sales market in Prime Central London over the last few years has been at some of its lowest ever levels, we've been able to convert many sellers towards renting their property and now claim a 10% market share of property let for over GBP 2,000 per week according to the prime property portal alone. As mentioned earlier, we marry big data with on the ground experience to provide a unique asset management service in the mass market. This drives our landlord retention and experience and has become a key conduit to selling ancillary services. For landlords, we've been able to leverage our data to develop a proactive building work service and offer a rent guarantee program. And in the future, we look to roll out further products. And we're developing a full suite of products for tenants too, to drive cross seller products, which are mutually beneficial. We already provide 0 deposit service to tenants who do not want to lock away a 5-week cash deposit, and we also provide utility switching services, where unlike many of our competitors, we find the best deal in the market for tenants rather than partnering with the company paying the largest commissions. Landlords are notoriously sticky, and so M&A is a key and increasingly important part of our growth plans. We have invested to create a highly scalable platform into which we can easily plug new acquisitions. And as I mentioned, we've got sufficient capacity such that we could manage all of London's tenancies from it. The combination of our technology and back office capability means lettings books can quickly be integrated by us with minimal incremental cost. And as I set out, our overall proposition is attractive to landlords who find themselves receiving a better service in Foxtons. Our platform and centralized business enables us to deliver significant rate of return from lettings book acquisitions, and we're building up a good track record of successfully sourcing, completing and adding value from acquisitions. There's also another important aspect to this. And you've heard us talk at length about how we are a people business and now how our people go the extra mile motivated for our customers. The reasons for that are many and varied, but acquisitions like this are part of it. Besides it being a great way of getting experienced staff into Foxtons, it's also a reason people stay with us. Acquisitions create momentum, more opportunities for our people to do well and act as a further proof point as to why you should stay and keep growing with us. On this slide, you can see the criteria we measure all acquisitions against. Whilst I won't talk through every point here, it is a scientific process, and we reject those that aren't suitable to ensure we purchase only the best quality portfolios and avoid any negative impact, reputational or financial to Foxtons. To give you an indication of scale, in 2020, we purchased 3 portfolios but rejected more than 30 others. For us, it is quality, not quantity that matters. Speaking of our 2020 acquisitions, I'd like to share our experience with the first portfolio we bought, London Stone properties in Southeast London, now rebranded to Foxtons Woolwich. London Stone was a strong business that ticked all the boxes in our sweet spot in terms of fitting profile, the right fee structure, the right price and untapped opportunity. Despite purchasing in March just before COVID-19 swept through London, we've had great success by growing the size of the portfolio during our ownership. I've previously mentioned how our single-tech platform, integrated branch network across London and high service levels are our USP. This is a clear example of that. And quite a number of landlords in Woolwich had properties outside of that area that couldn't be serviced by London Stone because it lacks a wider presence. Once they experience the Foxtons service and the industry-leading My Foxtons customer platform, they were very keen to move their full portfolios across to us. As Richard will demonstrate, the economics of M&A are very compelling in that we can add revenue without proportionate costs, meaning profit grows effectively and quickly. As an aside, I'd like to give you a sense of just how old fashioned some business practices are in the sector. London Stone, which was a well organized, high-quality agent, was still almost entirely filing everything in paper with a cash box in the corner for emergencies. It took a little time, but we've digitalized everything and moved it onto our platform, so we're immediately operating the same business more efficiently. There are many more London Stones out there, and we have the real confidence in our ability to continue to make successful acquisitions, which will grow our tenancy base and profitability in the short to medium term. And before I hand over to Sarah, who will run you through the exciting opportunity we have in the build-to-rent sector, I'd like to summarize by highlighting what a fantastic opportunity we have in lettings overall, with its attractive countercyclical and structural growth characteristics. The hard work we've put in over the last 5 years has created a leading business perfectly positioned to win. Not only are we the largest agent in London today, but we have a clear program to grow over the medium term, and we can clearly see a path to creating a meaningful larger business through acquisition, organic growth and retention. And with that, I'd like to pass over to Sarah Tonkinson.

Thank you, Ed, and hello, everybody. I'm also a Foxtons veteran with more than 21 years experience in lettings, most recently, setting up and running our dedicated build-to-rent department, and I'll share some details on the sector and how we do it better than anyone else. Build-to-rent is an exciting opportunity for us and the lettings market in general. Over time, we've seen the market evolve to a position where renting has become a lifestyle choice rather than just a necessity. And this emerging sector is helping us drive this change. Its institutional investors have recognized the opportunity and are deploying significant amounts of capital to build new, high-quality, perfect built rental accommodation with a tenant experience at the center of the proposition. Over the last 5 years, we've developed good working relationships with the majority of build-to-rent operators, delivering results for them and giving us a market leadership position as we head into an exciting new chapter. This sector is set to more than double over the next 5 years with high levels of meaningful growth anticipated beyond that. This is especially exciting as many of these developments are in regeneration hotspots across London, all of which we currently operate in. Many of our competitors simply don't know these barriers. As with our other businesses, our unique proposition is why we win market share. Operators are focused on 3 main outcomes: achieving a good yield, letting a property quickly and providing a tenant experience that supports their brand proposition. In addition to the build-to-rent sector, like the rest of the rental market, is increasingly subject to swathes of regulations, which represents a significant compliance risk for landlords and particularly institutional landlords due to their scale, reputation and exposure. Our unique proposition is built on our treasure trove of data, our London reach and local expertise, high levels of service and the delivery of tangible results. We find tenants quickly achieve market-leading rents and manage regulatory risks. Our leading lettings market position and sophisticated data capture and analytics means we are the only provider of comprehensive London-wide lettings data, which, as you can imagine, is invaluable for developers, investors and asset managers. Put simply, nobody else can provide the level of information we do, and it allows us to jump the queue and get involved in the Build to Rent conversations earlier than the competition. We advise from planning stage through to completion, becoming an invaluable partner, able to provide real-time market data and information through the life cycle of the building. Key to delivering this sector is recognizing the unique nature of the developments. These provide high-quality accommodation and amenities at scale, often in areas where comparative rents can be 20% to 25% lower. Our ability to move tenants across our London-wide network allows us to let up large developments quickly, which is not possible if relying only on local markets. This capability sets us apart and is why we've built working relationships quickly with the biggest Build to Rent operators in London. These companies were collectively responsible for the majority of the Build to Rent units that completed last year and all have planned for further significant expansion. Crucially, many of these are landing in Outer London areas, where we have a presence and many of our competitors don't. As an example, I'd like to share our experience from a scheme in East London. Initially, a prestigious Central London agent was mandated for the lettings but only managed to let 3 units in 4 months. The mandate switched to us earlier this year, and we've already let more than 20 units. As you can tell, I'm very passionate about this space and what it can offer the letting sector. Through my membership of the U.K. Apartment Association and relationships with the major players in the industry, I sense the opportunity is significant, and I'm delighted by the way the business has responded quickly and expertly to become the leading player in this high-grade sector. And with that, I'd like to pass it over to Patrick Franco, Group COO, who will run through the technology and data science programs in more detail.

Thanks, Sarah, and good afternoon, everyone. I am COO of Foxtons with responsibility for all the group's operations as well as our back office and customer proposition, and I co-chair Foxtons' LGBTQ+ network. We are the most tech and data advanced estate agent in the U.K. and want our business to have both the best tech-enabled plumbing to support its operations and customer proposition to attract them and best serve their needs. All aspects of our strategy and operations are enhanced with technology and data. And our aim is to transform the property experience through technology, data and artificial intelligence. Foxtons has been developing its proprietary technology for the last 2 decades, with more than GBP 30 million invested since inception in our proprietary enterprise system, BOS, our website and customer portal. This has been mentioned already, but it bears repeating. We were the first agent to launch a property website in the late '90s, well before Rightmove launched in 2000, and our website still attracts more than 5 million unique visitors each year. We estimate that half of all adults in London visited our website last year. The push hasn't stopped. Today, we have an in-house tech team of more than 40 people who partner with the business, refining our technology platform to help make our agents as productive as possible and to make it easier for our customers to transact. Our tech stack is a key competitive advantage for Foxtons. It allows our agents to deliver exceptional service by freeing up their time to advise rather than administer, as we have automated most workflows through our proprietary CRM system, BOS. It also allows our managers to monitor agents' performance in real-time and for us to reward customer service through gamification. This is very different from other agents that still rely on heavily manual processes and switching screens across different off-the-shelf technology providers with limited real-time management information. As Nic alluded to, this year, we have applied data science and artificial intelligence to the 4.4 million property records we hold in BOS by creating a new customer data platform that includes proprietary and third-party data about our customers and their properties. Over time, this will help us predict their behavior and tailor our offering accordingly. Another differentiator in our tech stack is our customer-facing MyFoxtons portal with over 700,000 users. Our ambition is to put our customers at the center of their property universe to make the process of transacting in property a pleasure. Unlike our competitors, our platform is truly end-to-end, which means you can entirely transact from your personal device, although we find the overwhelming majority of our customers choose to engage with their agents at many points in their housing transaction. So the technology is more of an enabler. I will demo some of this technology in a moment. Finally, our tech stack has real-time integration with aggregators, including Rightmove, Zoopla and Boomin, and powers our digital marketing campaigns. Combined with everything I've mentioned, the technology brain at the core of our business results in better service for our customers and more productive agents. Foxtons also invests in technology that complements our core business. This year, we were a founding member and investor in Boomin, a next-generation property search website that also facilitates cross-selling products and services related to the home. In addition, we were also a founding member and investor in Zero Deposit, which offers tenants an alternative to traditional cash deposits, making it more affordable to rent. We regularly analyze the proptech ecosystem for investments and partnerships that complement our own platform. Before handing you off to Steve Rodgers, our Marketing Director, who will cover our data science programs, I wanted to show you a short demo video of our tech stack, also featuring Raj Patel, who is responsible for product development in our IT team. [Presentation]

As Nic and Patrick have said, we're using data science and our customer data platform to better predict customer behavior. This will improve productivity, increase conversion and facilitate cross-sell. One key application of our data science program is lead scoring. We're scoring our entire pipeline of potential customers. This is based on our internal first-party data and complementary third-party data sets. Lead scores allow us to predict which of the contacts in our data base are most likely to transact. This is an extremely powerful approach. It means that we can begin to automate the process of assigning these to employees and just as importantly, when. Those customers most likely to transact or hot leads can be matched with the agents that can serve them best and ensure that we speak to the right customers at the right time. It means we don't solely rely on the judgment and expertise of our salespeople. This foundation of data science allows our sales staff to focus on what they're good at, selling, rather than searching our database for the right customer to speak to. Our data model that powers our lead scoring has a constant stream of new data so we can update lead scores constantly in real time, re-prioritizing our contacts to ensure that no opportunity is missed. And for those customers who are less likely to transact in the short term, we're nurturing these warmer and colder leads with personalized content across relevant channels. Depending on how customers engage with us across those channels, we've mapped out numerous automated digital marketing journeys in our customer data platform. This allows us to present bespoke Foxtons' content to them and increase the chances of engagement. It means that instead of a phone call, these contacts could receive an e-mail, SMS, see one of our digital marketing adverts or even receive a letter in the post. And with the data we're collecting, we're also able to identify existing customers most likely to churn and trigger various interventions to avoid and minimize attrition, specifically within our landlord portfolio. We're redesigning our property recommendation engine akin to what customers would see on Spotify, Amazon or Netflix to serve up more relevant properties for our customers to view either virtually or in person. And finally, we're integrating MyFoxtons with our customer data platform and launching a new mobile app to cross-sell products and services related to moving home at the most optimal time in the customer journey and designing bespoke offers based on lifetime customer value. The ability to deliver real value from data science depends on the amount and quality of data available. We're extremely lucky as a business to have the benefit of a centralized database of property and contact records something that no other agent has. We started collecting this data over 15 years ago, and it gives us a huge competitive advantage over any other agent attempting to replicate the same approach. Our data science team use this rich transactional data from BOS, combine with behavioral data we see through digital channels, then enrich it with third-party data sets. This predicts what customer is likely to transact next. We have more than 250 data points in our model, including a profile of every household in London. Over time, machine learning will refine the accuracy of our models and allow us to find look-alike customers from millions of records in Foxtons' database and proactively contact them about moving home. We're already seeing significant success through the application of data science within our acquisition and marketing campaigns. We see this in both traditional and digital channels. We've begun evolving our approach to lead management using the same principles, but there are so many more opportunities for us, including driving operational efficiencies and productivity, higher conversion rates through our sales and marketing funnels, and delivering a better customer experience. We now have a strong foundation in place, and it's extremely exciting to think that our journey down this path is only just getting started.

Thank you, Steve. You've heard about the data science and the tech we are using, which is an essential component of our approach, but our people deserve some airtime, too. The robots aren't taking over just yet. The tech is brilliant, but its role is to both guide and free up our people to do a better job than the competition in serving our customers. This will enable our teams in continuing to be the best in the business. This model looks very simple on paper, but is actually hard to pull off. One of the main reasons we are alone in occupying the space where premium fee levels intersect with high volumes is because our people are the best in the industry. We think they are the best because they demonstrate the highest levels of sales intensity in the sector, and they do this consistently. Customers can feel that, and they appreciate it. It's why we have a 4% price premium. But it takes work. It takes work on our culture and how we engage with our people, especially those spread across London and now beyond. And it takes work in terms of the right approach to learning and development and making sure we're the most professional, efficient and effective. Our sales intensity comes primarily from 2 places: our incentives and our transparency. Incentives and reward are key drivers in the way the estate agencies are run. We all know the sector is built on a higher-than-average degree of variable pay, and that drives effort and performance. Our people know exactly what's available to them and how to achieve it. We make sure this is structured in the right way to drive the right behaviors. This clear and transparent link between performance, pay and progression is reflected both in our results and in our culture. But there's more to our people strategy than simply competition and compensation. It takes more than that to create a sustainable high-performance culture. We focus on a number of factors linked to engagement, including communication, ongoing development and diversity and inclusion. We have a highly engaged workforce. Like many businesses, we survey them every year in some detail. Unlike many businesses, we have engagement scores in the 80s. We think part of that is down to the diversity in our business and how we have built a culture of high performance that allows for individuality. You can really be yourself here. That might not sound like a lot, but you have to think about that from your own perspective and how important that property is to you. Ian mentioned this at the beginning, our diversity genuinely matches the diversity of London, with just under half of our staff identifying as female and 1/3 as BAME. You can do well at Foxtons, whoever you are, wherever you come from. I can assure you this isn't necessarily the approach right across the property sector, as this industry is not known for its diversity. We're focused on performance, we're happy and engaged, and we're also highly professional. Property is generally the largest financial asset and transaction a normal person will make in their life, and they rely on expertise and passion of our people. Due to their long average tenure, our directors and office managers have a wealth of experience, having seen the whole property cycle and every scenario imaginable. So they are well placed to support our more junior staff in serving our customers. These are complemented by our enthusiastic and energetic sales and sales support staff who are focused on delivering the best outcome for every customer. We support our teams with a comprehensive program of continuing professional development. This includes both professional qualifications, such as ARLA, alongside bespoke training programs for different roles and levels and the digital coaching platform for all employees. Our intensive onboarding programs are particularly important in ensuring we embed a consistent, professional and effective approach across our business. Recruitment matters, too. We do still proudly recruit people from a broad spectrum of backgrounds, including those without degrees. We know that the skills that make truly exceptional property professionals are not always captured by exam papers. So we use a range of evidence-based methods of selection and assessment to ensure we hire the right people rather than focusing purely on academic qualifications. We do this because it's good for the business and our customers who will more readily see themselves among the Foxtons' workforce than any other estate agent in the capital. We also feel that it can make a genuine difference to social mobility in London. We plan to make even more of a difference as part of our recent partnership with social mobility experts, Career Ready. I should also mention that we've increased our efforts in recent years to hire in experienced, too. This gives us a great mix of people and rounded expertise who can also plug straight in and add value to the business immediately. We focus on the right balance of succession planning but retaining a core of homegrown employees so that we don't dilute our culture. And we should talk about value when it comes to our people. We can track our ever-improving approach to incentives, to recruitment, to professionalism, to measurable improvements in business outcomes. This stuff matters as much as our tech. We've seen how our 5-star reviews have marched upwards over the years. This outstrips the competition and is a huge driver of customer acquisition. This is effectively our customers publicly grading our people, and we score well. And repeat business is on the up, tracking a people journey we're very proud of, and it's only going to continue. And with that, I will pass you across to Richard Harris.

Thanks, Sarah, and good afternoon, everybody. I'm going to give you a run-through of how we plan to deliver strong financial performance across Foxtons. I'll touch on the significant revenue opportunity we see over the medium term, building on the strategy the team has taken you through today. We'll run through the cost actions we've taken over the last 5 years and how we've made Foxtons a more efficient, a more resilient business. I'll then bring that together to walk you through the substantial operating leverage that exists and explain the attractive financial returns we can achieve through lettings book acquisitions. Finally, we'll go through the cash characteristics of the business, the potential we have to deliver strong cash generation in the coming years under approach to capital allocation. You've heard a lot this afternoon about what we're going to do in the lead, diversify and growth strategy. But what I wanted to set out is how to think about the opportunity that, that represents. So what you see on this slide is a framework that illustrates the potential for revenue growth for Foxtons over the medium term. I'm using 2019 revenues as the base, given 2020 was such an abnormal trading period. You can see the impact on each of lettings and sales from various internal and external factors that will affect our performance. Obviously, I'm not making predictions about future market volumes nor am I making forecast of what our performance will be like. But I did want to provide some illustrative data points to give you a sense of the revenue opportunity we have for a given change in volume and price factors. You can then make your own assessment about what will be delivered in the coming years. So starting with lettings. As Ed set out, market share growth comes from selling our unique proposition of great service and high compliance standards in a rapidly professionalizing sector. In turn, we delivered great results for our landlords [ for ] our sales intensity, technology platform and London-wide reach. Were we able to deliver 50 basis points improvement in lettings market share, this equates to approximately GBP 4 million of additional revenue from the 2019 base. Moving to the wider market. Given the limited market growth we've seen in the recent past, I've used a modest growth rate for the lettings market over the medium term. A 5% increase in market volumes, which might happen over a number of years, delivers an additional GBP 3 million of revenue growth, assuming a fixed level of market share. Ed has presented the strategy for lettings book acquisitions to you today. And as you've heard, our track record of retaining landlords so far is good. And I'll run through the profit contribution and return on investment, we expect from acquisitions in a moment. But so far, we have spent around GBP 19 million acquiring 3 lettings in 2020 and a much larger Douglas & Gordon business in March of this year. Total lettings revenue from these acquisitions is expected to be around GBP 13 million. Were we to spend a further GBP 10 million on lettings book acquisitions in the coming years, we would add GBP 5 million to GBP 6 million of revenue. We believe a number of agents are looking to exit the market, so there should be plenty of opportunities over the coming years. The Build to Rent sector of lettings, where Sarah and the team have established a leading position, is forecast to grow substantially in the coming years. This presents an attractive revenue opportunity for Foxtons of around GBP 750,000 per annum based on our expectation of future developments and consistent market share. Finally, in lettings. Once the current market conditions have waned, it would be reasonable to assume there will be some rental inflation in the market over the medium term. At 2% per annum, that drives additional revenue of GBP 1 million per year. So overall, whilst the lettings market has been relatively static in volume terms over the last few years and revenue has been impacted by the tenant fee ban that came into force in 2019, we see plenty of opportunity for growth in this part of the business in the coming years. Turning now to sales. A number of our strategic programs are focused on improving our already leading market share, including the use of data science and technology, and the introduction of our new international sales channels. It's fair to say that the market share growth in sales is likely to come from continuous incremental improvements. Marginal gains has become the commonly used term in other industries. We have started to see signs of improvement here since the second half of 2020. In sales, every 100 basis points improvement in market share is worth GBP 5 million of revenue on static market volumes. As you have seen, at the start of 2021, the sales market is potentially at an inflection point, with 2019 and 2020 volumes at the lower end of levels seen in the last 25 years. At 20% growth in market volumes contributes an additional GBP 6 million of revenue to our sales business on static market share. It's important to realize that with 20% growth from 2019, the market will still remain well below the levels seen in 2014. Given the constraints on housing supply in London and the appeal of London as a global city, it also seems reasonable to assume there might be some further house price inflation over the medium term. If house prices were to increase at 3% per annum, as they have done in the recent past, that would contribute GBP 1 million per year to sales revenue. Finally, Nic talked to you about our plans to target the Southeast and 15 key urban locations outside of London. The intention is to access these markets in a capital-light way via our virtual branches, franchising or licensing, capitalizing on strong brand recognition we already have in these markets. There's also potential to further exploit the cross-sell opportunity within Foxtons. We will share more on what we see the potential being in these areas at a later date. So that gives you a sense of the revenue opportunity that is in front of us. Now let's move on to cost management. You've heard the addressable sales market in London has declined by over 40% since the Brexit vote in 2016. During this period, we have looked for productivity gains and efficiencies across all aspects of the business in order to mitigate the impact on short-term profitability. Let me give you a few examples. As has been previously mentioned, we have reduced the cost of customer acquisition across the business by 23% over the last few years. We implemented a number of projects to improve the efficiencies of our back-office processes, removed some significant senior headcount and reduced number of branches in our London network to 57 from a peak of 68. We have coverage of 85% of the London market from the current network. We feel this is an appropriate level that takes into account the importance of the branch but also the role technology can play in supporting us with a wider reach into areas that wouldn't normally support branch presence. As a result of the tight cost management, the cost base is expected to be GBP 10 million lower in 2021 than it was in 2016. This is despite inflationary pressure, increasing cost of compliance and our decision to make selected investments in key areas during this period. A few examples of our investments are noted here and are worth calling out. We continue to nurture and develop the successful MyFoxtons platform, which is such a key part of the lettings proposition. We've made further investments in the group's data and technology capability and ensured our brand remains relevant and visible through targeted digital marketing. Finally, we've continued to invest in our great people who are, after all, our most important asset. All of these investments have either reinforced our existing market leadership positions or provided us with the foundation on which to grow in the coming years. Estate agency is a notoriously cyclical business. And whilst this can't be eliminated entirely, one of our key areas of focus has been on building income from resilient revenue streams. 41% of the lettings business represents recurring revenue in the form of renewals and property management fees. Including relapse, a total of 75% of lettings revenue comes from repeat landlords. This repeat business, combined with our market-leading position in new deals, drives overall lettings revenue and provides a significant level of resilience. Mortgage broking also has a recurring element in the form of remortgages and product transfers. As these homeowners move on to new properties in the future, we expect they will continue to use our broker, Alexander Hall for their ongoing mortgage requirements. As has been mentioned a number of times today, Foxtons has a powerful, centralized model and a single technology platform created over a number of years. This centralized capability is designed to allow our customer-facing teams to deliver the highest level of service. Our sales teams are focused on delivering what is important for our customers, leaving the administration and compliance to skilled member of our support team. From a financial perspective, really important point is that our centralized operating model and single technology platform are both highly scalable. They can accommodate significant additional volume in both sales and lettings. Building on this, we understand how to use our variable pay mechanisms to motivate our teams who have a broad physical presence across London and are incentivized to do the best job for our customers and not compete amongst themselves, as is the case of some of our competitors. What all of this means in practice is that the sales business can handle significant short-term volume without adding significantly more cost. In practice, it means 85p in every pound of additional revenue drops through to profits in the short term, and this falls to 75p over the medium term, reflecting the additional need to add headcount as additional transactions go through. In lettings, there isn't quite the same short-term capacity opportunity, but the drop-through to operating profit is still a very healthy 70% from each additional tenancy we take on organically. It's also worth expanding here on the financial impact of the lettings book acquisitions we made in 2020. The 3 acquisitions are expected to generate GBP 2.6 million of revenue on an annualized basis from 1,600 tenancies. By plugging these tenancies into the Foxtons' infrastructure, we can significantly improve the level of profitability under our ownership. The cash profit from our bolt-on acquisitions is expected to be 65% of revenue on a portfolio basis, and this helps to drive a strong expected return on investment of at least 25%. It's early days with Douglas & Gordon, our largest acquisition, which we acquired in March and are running as a separate brand, but the business is performing well so far, and we'll keep you posted on progress over the coming months. Moving on to cash. It's fair to say that the cash fundamentals of this business are particularly strong. Foxtons has no external borrowings, allowing us to make long-term decisions that look through the short-term phase of the sales market cycle. Our capital expenditure requirements are limited, given the branch rollout has been completed. And whist it's important to maintain our existing branches to a high standard, any further expansion outside of London is expected to be capital light. Our investment needs in people and technology can be met primarily through operating expenditure. Finally, Foxtons has the best cash collection cycle in the industry with lettings commissions collected in the early months of the tenancy and sales commissions collected at completion. As a result, we have very low levels of bad debt in both sales and lettings. This combination of strong cash fundamentals ensures that over the medium term, we expect to convert 90% of our operating profit into free cash flow. So what does all of this mean for our shareholders? The first point to note is that there is no change to our capital allocation framework. This has been in place for some time now and we believe remains set for purpose. Our priority use of cash is as follows. We must first have sufficient liquidity available to manage day-to-day operational requirements. We don't have particularly high working capital needs, but there is a seasonal element to lettings. It's important for us to retain enough cash to manage through short-term market shocks. We believe around GBP 12 million to GBP 15 million of cash is appropriate at this stage. Hopefully, you will have seen through this presentation the importance we place on investment in the business, especially in people and technology, in order to maintain our market leadership position and drive long-term profitability. I hope you've also understood why we think lettings books are attractive opportunity for us. The dynamics in the industry, our strong track record, a scalable model and the returns on investment we can generate make this a priority area for us. Assuming the above market conditions have been met and we retain a strong balance sheet, we will look to return cash to shareholders as we did with the buyback announced last year that recently completed. First, this will come in the form of dividends and we're paying 35% to 40% of profit after tax as an ordinary dividend. The additional resilience that comes from growing our revenues, particularly in lettings, should help to underpin a more consistent dividend in the future. In the event that we have further excess cash, we will make additional shareholder returns through special dividends or share buybacks. So to summarize from me, the strategy presented today offers this business a significant revenue opportunity in the medium term. We have managed our cost base tightly over the last 5 years, and this allowed us to protect profitability to a certain extent. Crucially, as we manage through the inflection point in the sales market, our market-leading position and core capabilities mean the business is now positioned to rapidly grow. This will ultimately drive improved profitability because we can convert the majority of incremental revenues into profit. We have a resilient backbone to our revenue streams, particularly within lettings and mortgage broking, and this combines well with a significant operating leverage. Finally, our strong cash fundamentals mean the profit growth translates through into cash. We believe there is significant opportunity to return cash to shareholders over the coming years. That's it for me, and I'll now hand back to Nic.

Thank you, Richard. I want to spend just a few moments now summing up before we take any questions you might have. Above all, I hope today has given you a sense of how excited we are about the prospects for Foxtons in the short to medium term. This is a business with a lot of potential. Foxtons has operated through market cycles for 40 years, and recent market conditions have been extremely challenging with a shrinking sales market in London, followed by a pandemic, which had an unprecedented impact on communities and the economy. But we've reacted to these challenges. And today, we're a more efficient, more capable business. Our customer proposition is unique, and the investments we've made in technology and data science capabilities give us a huge advantage and a solid platform for growth. 2021 has started extremely well, with strong trading and the biggest acquisition in our history. And here we are, looking out on a significant opportunity, and we have a clear plan to take advantage of it. Fundamentally, we want to grow. Foxtons has a history of being a highly profitable business. And when I reflect on the actions we've taken together with the opportunity in improving market conditions, I'm confident that we can deliver significant shareholder value in the coming years. So with that, can I thank you all for your interest and attention and hand over to Ian, who will chair the Q&A session.

[Operator Instructions] Now I would like to hand back to Ian Barlow.

Hello. We're back live now. I hope you [ find that as a ] useful look at our strategy. We wanted to go into quite a lot of detail. It's a strategy we've been following for some time now that the Board regularly reviews and last signed off on it in September last year. It was also an opportunity to show you the strength and depth of the team we have here under Nic's leadership which he has built over the last few years since becoming CEO. We have 1 or 2 questions. And if I could kick off with one for Nic and then a follow-up for Patrick, the question for Nic is about regional growth plans. Can you tell us a bit more about that? And there's a specific on the Berkshire pilot we've got, setting up a virtual model there, which perhaps Patrick could comment on. Nic?

Yes. So to bring you up to date with that, we launched in Q3 last year our Berkshire program. And more recently, we've also started working with some of our Build to Rent clients and our new home developers throughout the U.K. as well to give our London customers exposure more widely to the U.K. market for their portfolios. The brand landed very well in Berkshire, and we've got some excellent feedback from customers already. And we've been taking on a good amount of listings, which, Patrick, I'll pass over to deal with in a moment. Beyond that, as I said in the presentation, we've identified 15 areas beyond London, where we think we can leverage successfully our brand, our tech and our London customer base. And we've also hired an industry expert who will be joining us in August to take that forward on the ground. So we'll be in a much better position to give you detailed update towards the end of the year. But as you can see from the presentation, the opportunity is significant for us. And we'll probably involve a mix of directly owned branches, partnerships, franchises or licensing. We haven't decided on each of those for each area yet, but they're really dependent on the scale and attractiveness of each local destination. Patrick, if I can hand over to you to talk a little bit more about Berkshire maybe.

Sure. Thanks, Nic. We launched in Berkshire last August. So it's still been less than a year, but the results have been really encouraging. We are top 10 in terms of instruction levels and available stock. And the proposition that we're offering is still very much the core proposition that we offer to our customers in London. Our customers in Berkshire have a dedicated agent. They're supported by a team of specialists, negotiators who are based in our head office in Chiswick Park. And then we have dedicated viewers out in the field who act a bit like Uber drivers who still take applicants out to do viewings and so on. So the proposition is still very much a high service, high touch one. It just happens to be that we don't have a branch opening there. What's been interesting is the enthusiasm of our customer base there for the Foxtons proposition largely because the brand awareness is very high. That brand awareness has come from our branch network in London and also our ability to bring London buyers who we've initially worked with in our branches within London M25, now we're taking them slightly further afield, and that's been very relevant in the last 12 months during the course of the pandemic as more and more customers started rethinking where they wanted to live, looking for more space, more green space and looking to outer areas of London. So we'll continue to progress on this. I think this has been a really important test case for us to get the data and insights that we need to craft our expansion outside of London, and it's certainly given us the comfort that the Foxtons proposition will work in other areas of the Southeast and major urban centers across the U.K., where our brand awareness is very high.

Thanks, Patrick. Another question is on our data science program. Is it really a game changer? Can't other agents do the same? And I wonder if Steve is on the line, could he respond to that, Steve Rodgers, who is our Marketing Director. Steve?

Yes. Thanks, Ian. So there are huge benefits to our approach, both within our marketing and internal operations. It's definitely unique to Foxtons because there are so many parts to it, which other agents just don't have or extremely difficult to replicate. And all of these things we do have in place today. So first is data. You need a lot of data in order to derive trends, create customer segments, build models and then optimize, and Foxtons has that scale. We've been collecting data for over 15 years. And the volumes of leads and transactions that we manage allow us to apply these improvements forward and keep optimizing as well. So first is data. Second, you need your data in a structured format and in one place. We're lucky to have a centralized system in BOS, but we also went through a huge project to build the customer data platform last year, which isn't something that many other agents have the manpower to do. It's connected to our website. It's connected to MyFoxtons, BOS and our marketing channels and also third-party data sets. So the scale of our data as well. Next, you need your own tech. So the value comes from deploying improvements within the business. For example, new lead management screens or new insights to help our staff convert more business. And we own our own tech. We dictate our own road map of improvements. And finally, you need centralized operations. So at Chiswick Park here, our HQ, we've got a floor of move consultants that process and convert our lead pipeline. And if we need to update the way they manage leads, we can affect that change in one place across the whole department of staff. We don't need to go on a branch-to-branch roadshow to educate or train or evaluate. It's all under one roof and extremely manageable. So it's the combination of those 4 things that make the approach unique to Foxtons and extremely difficult to replicate.

Thanks, Steve. Impressive. Impressive. On a different tack, another question is about the new homes business. Perhaps this is one for Nic. How many new homes are you now selling versus 2019? And are these on a referral basis or do you get paid on every plot?

Yes. So we're not sharing detailed trading information today, but I can say our sales in new homes are up on 2019 levels. Yes, we do get paid on each plot, each sale. And probably as an indication, I can give you, if you refer to more your data, we sell about 1 in every 5 new homes in London that are not sold directly through the developers. So of those properties sold through agents, we have about 20% market share.

Thanks. Another question is on the prime market. And I think, again, this is for you, Nic. How does your approach to the prime market differ to the rest of your business? You talked a bit about this in your presentation. Perhaps if you could amplify on that.

Yes. Let me just reinforce what I said. Our approach in prime really reflects the different needs and expectations of the clients in that high-value property market. First and foremost, only our most experienced people work with our prime clients, both on sales and lettings. They do have flexibility to negotiate these. So as I said, between GBP 1.5 million and GBP 3 million, we typically price match with other agency if the property is already listed, and we can share upside with the client, depending on our performance on the price we achieve. And then above GBP 3 million, the pricing is bespoke, and we do also use LonRes sharing platforms, and we collaborate much more readily with other agents, either through joint sole or through LonRes or with buyers' agents who often bring us applicants for the highest value properties. And our approach there has been successful. We have about 4.5% of the commission pool above GBP 3 million to GBP 5 million and about 10% market share in lettings above GBP 2,000 a week. And there's a very symbiotic relationship at this end of the market between sales and lettings. We often find property owners with a property that they're not using, will let it through us and then when sales markets improve, they'll look to us to sell. So it is a market that's important to us. It is relatively small, as I showed you in terms of volume and value compared to our more core markets, but it's something that we take very seriously, and we're investing continually in.

Great. I think we've got a question on the phone. Is that right?

Yes. The first question from the phone is from Mr. Sam Cullen with Peel Hunt.

I've got 3 if possible. I'll do them one at a time. That would be easier. First one really is on market share. Nic, if I look at the sales market, and I kind of have a broad estimation of your transactions versus the total market, it looks to me like you've probably lost 4% of your share since 2014? Could you talk a little bit about the drivers of that decline? And then how you go about reversing that? And what the levers are you going to pull to add 100 bps of market share if that is one of the targets [indiscernible] presentation?

I think that's one for you, Nic.

Yes. Let me take that one first, Sam. If you remember back to the slide where I talked about the market, what we saw was a significant decline in volumes since 2016, in particular. We think that market volumes in 2020 were somewhere between 40% and 60% down. And obviously, when the market contracts in that way, especially when other agents don't leave the market is what we saw. The key way in which they compete is through price. So we decided intentionally to keep our premium fee at 2.5% for our sales business, and we saw, therefore, the premium increased. Rather than sort of getting involved with the race to the bottom in fee, we reinforced our focus on to lettings, and we have grown share in that business considerably over that time. I went through in my section of the presentation how we expect to drive that market share, and that really is through the use of the customer data platform and our technology to improve conversions through the funnel. It's opening the new sales channels, both U.K. wide and internationally and through driving our productivity in our salespeople. So they are the 3 key elements of our strategic growth programs for sales.

Okay. So you'd be confident, I guess, that if the current market trajectory continues, let's say, 12 months, then you should expect to see your share begin to increase?