Foxtons Group plc (FOXT) Earnings Call Transcript & Summary

Great. Well, good morning, everyone, and welcome to our Foxtons Capital Markets event. I'm Guy Gittins, CEO at Foxtons, and we are delighted to have you here, whether in person or virtually to engage with the next chapter of Foxtons' growth story. I joined Foxtons as CEO in September '22. Having started my career at Foxtons 2 decades earlier, I knew firsthand what this company was capable of. From the outside, I saw huge untapped potential and from the inside, I see a team that I genuinely believe to be the best in the industry. Founded in Notting Hill in 1981, Foxtons has grown into an iconic brand with over 60 interconnected branches offering best-in-class residential property services. Foxtons has always been built on innovation, ambition and an unwavering commitment to deliver results. At the start of '23, we set out our vision to reestablish Foxtons as London's go-to agent backed by a clear strategy and growth targets to ensure accountability. Over the last 3 years, we've completely reshaped our business, building resilience, accelerating growth and reclaiming our position as London's #1 estate agency brand. [Presentation]

Well, today, we operate from a position of strength with a clear strategy for sustainable and scalable expansion. We've grown our noncyclical recurring and resilient income streams for Lettings and Financial Services from 50% historically to nearly 70% today across 31,000 tenancies, all supported by strong and growing share in sales. At the heart of this success are 1,400 dedicated individuals driven by a singular purpose, to get the right deal done for the property owners of London. With strong financial and operational foundations in place, we are now well positioned to capitalize on further opportunities in '25 and beyond. And today, my team and I will outline exactly how we plan to build on this momentum, delivering great results for our clients while creating long-term value for our shareholders. We are confident, we are ambitious, and we are ready to drive the next phase of Foxtons' growth. I'm delighted to be joined by some of the Foxtons senior leadership team today, Chris, our CFO; Fran, our MD of Property Management and Customer Experience; Gareth, our MD of Lettings; Imran, our Chief of Information & Technology; Richard, our MD of Financial Services; and Natalie, our HR Director. Between us, we have a combined total of nearly 100 years of Foxtons' experience. And this is what we'll each be covering today. In March '23, we presented part-1 of our rebuild story, setting firm financial targets and a road map to deliver GBP 28 million to GBP 33 million of adjusted operating profit. Today, I'm pleased to confirm that those initial targets are now well within reach despite a very challenging market backdrop for sales. The Foxtons you see today is fundamentally a different business to the one I rejoined almost 3 years ago. We have pivoted aggressively to grow our resilient reoccurring Lettings revenue, fundamentally transforming our profit profile. That shift has positioned us for part-2, the next stage of Foxtons' growth. And I'm delighted to reveal our new medium-term target to deliver GBP 50 million of AOP. Since 2021, we have more than doubled our profit, and our ambition is now to double it again in the next chapter of our growth. On this slide, it's possible to see the progress that we've made over the last 3 years, a 120% increase in AOP since the last full year before my return to Foxtons. This has been driven by significant gains in our market share as we became the fastest-growing estate agent in the U.K. Increases such as 38% for Lettings and 40% for sales are completely unheard of for large agencies across the U.K. The 38% growth in Lettings market share is particularly impressive given how rental contracts lock properties into contracts for anywhere between 1 to 5 years. We'll be able to give more color on how we build on this through our technology, data and training later in the presentation. Our investment proposition can be distilled into 3 parts. We have the leading platform in our sector as evidenced by our growth and trajectory over the last 3 years, powered by our people, our tech and our data. We've grown our noncyclical reoccurring Lettings earnings, primarily in lettings, which now means that we have a highly resilient business, having decoupled our profitability from the sales market cycles. And we've established a highly efficient, highly effective acquisitions engine that consistently delivers strong returns, demonstrating a strong track record of fully deploying our allocated acquisition funds year after year. Ultimately, we have a strategy and operating model built for scalability. And this is what makes our platform so unique. Number one, a tech advantage like no other. Foxtons has the most advanced, fully integrated CRM in the sector, built over the last 20 years by our dedicated in-house technology team. Unlike fragmented off-the-shelf systems used by almost all of our competitors, our platform connects every single department in our business into a completely seamless ecosystem. We have the unique ability to design and deliver innovative products straight into the industry, and we can also scale and integrate acquisitions at a speed that our competitors simply can't match. Foxtons has built a data powerhouse, capturing insights at every customer touch point over the last 20 years with 1.6 billion data points and 4.5 million contacts. Foxtons has the largest estate agency database in London, giving us an unmatched advantage when prospecting for pricing and for performance. To unlock its full potential, we have invested in building a state-of-the-art Microsoft Azure stack alongside a bespoke real-time data dashboard, which enhances transparency, optimizes performance and drives efficiencies across every department in the business. And our AI-driven lead scoring system has boosted market share while cutting calls per valuations booked from 35 historically down to just 10.5 today. Looking ahead, our ability to leverage 20 years of viewing history, buyer and tenant journey and granular feedback will create unparalleled insights with our customers, cementing our leadership far ahead of the market in the future. Foxtons is an iconic name, boasting the highest brand awareness in the U.K. estate agency arena. We also have the most visited agency website by a significant margin despite only operating really in and around London. And we have a fee premium position that is sometimes double of our competitors. Supported by high-impact marketing campaigns like We Get It Done and Ready, Set, Foxtons, we've strengthened engagement, reinforced our market position, and we've elevated our brand perception. Our highly scalable operating model allows us to grow revenue with minimal incremental costs, driving strong operating leverage from our central hub at Chiswick Park. And finally, our people, the most important asset for a business like ours. Our people are the driving force behind Foxtons. And over the last 3 years, we've rebuilt our employee value proposition, strengthening headcount while raising the caliber of talent across the business. We've increased face-to-face training 10x, ensuring that new negotiators ramp up productivity faster than ever before. And as a result, Foxtons is widely recognized for offering the best training in the industry and providing opportunities for fresh talent to join the profession. Rebuilding our culture has been a crucial focus. And while great progress has been made, we know that there is more to do. When challenges arise, we tackle them head on, driving accountability and embedding a values-led mindset across the organization. Change takes time, and we're committed to doing this properly. You'll hear more from Natalie, our HR Director, on how this journey continues. Some stats. We are proud to have reclaimed our position as London's #1 sales and lettings brand for market share. And also, we are actually the #1 lettings agent in the U.K. by listing volumes despite only really operating in and around London. 2.5 years ago, we completely changed our strategy to aggressively grow Lettings revenue, both organically and through acquisition. On these 3 charts, you can see how we've accelerated Lettings growth while also rebuilding the Sales business despite declining sales volumes in the market. Crucially, these reoccurring revenues are underpinning our profit growth despite the cyclicality of the sales market. The outcome of this is a transformed resilience in our profitability. Foxtons continues to accelerate its acquisition strategy across the South of England, leveraging its industry-leading platform to unlock substantial synergies. With GBP 64 million invested in 11 acquisitions since 2020, we have paid an average of 2.9x EBITDA multiples while delivering 54% margins. All of this has enabled us to be able to achieve an impressive 26% return on invested capital. As with every decision in the business today, every acquisition is data-driven, ensuring strategic expansion in London and key commuter belt locations. Chris will cover this more later in the presentation. And here we are, our new medium-term targets for Foxtons next phase of growth. Our strategy remains focused and proven, building on our strengths to drive the next level of expansion. For Lettings, we aim to continue delivering organic growth ahead of the market and expand our highly successful acquisition strategy into key commuter locations and continuing to bolt-on opportunities within London while maintaining Lettings at around about 2/3 of total revenue. For sales, with our initial market share targets now achieved, we're focused on returning the business to profit within the next 18 months as we push to ensure sales contributes positively to group profitability. And for Financial Services, where we must maximize all opportunities created by our estate agency operations and scale into a materially larger operation. And so our new medium-term targets are GBP 240 million in revenue, GBP 50 million of AOP, a profit margin rising from 14% to 20% and a stronger cash generation will fuel the acquisitions engine and shareholder returns. With clear financial goals, a proven execution and an accelerating momentum, Foxtons is on track to more than double our profitability of the business over the medium term. Now I want to talk through all of our tailwinds, but I think it's really worth highlighting that we feel the property market value is well underpinned as the fundamentals are not changing. Demand will be driven by population growth and supply constraints. This will also stimulate lettings demand and underpin pricing. We expect lettings market to remain resilient and grow at least by inflation, while we are a little more bullish on the sales market recovery as interest rates reduce. It's important to note that Foxtons is most dominant in the volume and mid-markets, a section where we see 85% of all transactions in the London market, meaning that we are not exposed to the considerable headwinds seen by some of the prime and super prime markets. With this in mind, we do see a market upside beyond our conservative financial modeling that could provide a significant profit upside. This left-hand side chart shows just why we love London properties so much and why we've specifically shifted our focus from sales to lettings. London's total commission value has grown at 4.6% CAGR since 2005. Despite economic and political volatility, London's market has proven highly resilient and as you can see, almost entirely driven by lettings, where the value has increased by 400% over that period. On the right side, you can see the massive consolidation opportunity. There are 3,600 agents operating within the M25 today, yet the top 50 agents only control half of the market with a very long tail of independent agencies. London remains Foxtons' core market, where acquisitions within the M25 integrate rapidly and deliver fast shareholder returns. But we're equally as excited about expansion into high-value commuter belt locations where demand and lettings volume creates significant opportunities. A prime example of this is the Imagine Property Group that we acquired in Watford, a leader in their share in lettings. Since joining Foxtons last year, their market share is now growing at its fastest rate ever. Thanks to our CRM-driven efficiencies, some bolt-on acquisitions that we've been able to complete and our brand strength, which has significantly increased average fees for their new business. Our data-led strategy pinpoints high-growth locations, leveraging sector fragmentation where we see that M&A activity is booming, fueled by retiring business owners and increasing regulation. Looking ahead, we need minimal additional investment to be able to scale our platform further. 50% of our acquisitions are actually secured off-market directly with business owners. And we're targeting 20% return on invested capital through our buy, bolt and build strategy. The industry consolidation, combined with Foxtons' platform means that we are well positioned for growth. And on this slide, you can see just how much more opportunity there is when we open up new markets, taking the total addressable Lettings, sales and Financial Services commission from GBP 2 billion to a potential GBP 3.5 billion. I'll now hand over to Imran to talk more about our tech advantage.

Thank you, Guy. Good morning, everyone. I'm Imran Soomro, Chief Information and Technology Officer at Foxtons. I joined Foxtons 21 years ago, leading transformation in IT operations. I later was promoted to Chief Information and Technology Officer in 2018. Today, I'll show you how our technology and data strategy isn't just supporting our business, it's powering our growth. Estate agency at its core is a complex B2C process. The pace is relentless and the expectations are high. Success requires operational agility, data-driven insights and continuous innovation, where most see complexity and friction, we see opportunities. At Foxtons, technology isn't seen as an add-on. It's an engine of growth, resilience and a genuine competitive advantage. We've invested in a bespoke in-house tech stack that's AI-enabled and uniquely tailored to solve these industry challenges and unlock new growth levers for the business. At the heart of our business is our platform. We've built from the ground up over 23 years to address the unique flows of estate agency. Our platform is the gatekeeper to the entire process from initial lead generation all the way through to completion, after care and retention. Underpinning all of this is BOS, our business operating system software, which is continuously developed by our talented in-house team and integrated into our data platform, delivering data-driven insights hosted securely on Microsoft Azure cloud infrastructure. Collectively, our core team brings over 200 years of Foxtons experience. We have deep industry knowledge and a proven track record that's central to our ability to innovate and execute. We've designed a system that bends to our business model, not the other way around. It's built for today's needs, but also ready for tomorrow's innovation. Let me bring that to life. Think of BOS not as a tool, but as the brain of Foxtons, a fully integrated real-time engine that powers every corner of our business, from marketing and lead generation to sales, lettings, finance and compliance, everything flows seamlessly. There's no manual handoffs, no gaps, no leaking of data, just one connected system driving performance. This means our staff spend less time wrestling with admin and more time doing what they do best, winning business, serving customers and building relationships. Crucially, the whole thing is built to scale, supporting both organic growth and M&A, whether it's branch or hundreds. Because our architecture is modular and open, when we acquired a new business or open new branches, integration isn't a headache. We have a track record of integrating acquisitions faster than anyone else in the industry, bringing new businesses onto our platform, realizing value within days, not months. At Foxtons, it's a proven playbook, plug in, onboard and realize synergies in costs and revenue. In today's market, that speed is a real competitive advantage. We're embracing the data revolution. Here's how we're building a truly data-led business. We operate a scalable cloud platform that unifies more than 20 years of rich transactional data. At Foxtons, we are building a data culture. Real-time KPIs and dashboards are embedded across every part of the business, empowering every team to act with real-time insights. Our road map includes developing advanced models to boost productivity and return on investment. Predictive analytics are going to be designed directly into daily workflows, equipping our agents to make smarter decisions. All of our technology is underpinned by a strong security-first mindset. We employ advanced cybersecurity controls and maintain a defense in-depth approach throughout. We're not chasing hype. We're focused on piloting and scaling AI solutions where they deliver real measurable ROI. This isn't about technology for its own sake. It's about making the business stronger and smarter at every turn. Here's what that looks like in action. Our propensity modeling predicts which properties are likely to come to market before they've listed, cutting valuation costs by 50%. Our real-time touting engine targets prospects instantly, driving up conversion rates and contributing to 25% of sales and Lettings revenue in 2024. Machine learning optimizes canvassing, delivering a fourfold improvement in conversion rates over traditional randomized letter drops. By digitalizing the lettings process, we've streamlined the funnel, freed up our agents and boosted productivity by 5%. And with embedding leading AI solutions into property management, we've raised customer service standards, achieving 22% improvement in tenant satisfaction. Our tech isn't just clever. It's delivering measurable, high-impact ROI at every stage of the journey, turning innovation into real business value. In short, we're not just keeping up, we're setting the pace. Thank you. Now I'll hand over to Fran, our MD of Property Management and Customer Experience.

Thanks, Imran. Hi, everybody. My name is Fran Giltinan. I joined Foxtons in 2002. And originally, I set up our Talent Acquisition and L&D Department. Since 2021, I have led the Property Management teams and Customer Experience teams, driving a major shift towards a more customer-focused approach and restructuring property management to really boost service delivery and efficiency. So over the past 18 months, our CX strategy has evolved significantly so that we focus on developing landlord and tenant loyalty to ensure we maximize customer lifetime value whilst also continuing to reinforce our reputation for innovation, market leadership and consistent execution. At the core of this strategy is our commitment to building a customer-centric culture, one that delivers a premium service across multiple digital interactions and is augmented by a high-performing team of skilled agents and property managers. Our approach will continue to evolve and is driven by real-time customer analytics, robust performance management and best-in-class digital experiences continuously optimized to meet customer needs. We aim to support individuals throughout their entire property journey, acting as a trusted partner across all life stages. Our typical customer may begin as a tenant in their 20s, purchase their first home in their 30s and become landlords by the time they're 40. And what this does is present a multi-decade opportunity to drive recurring value across renting, buying, selling and investing. And it also allows us to cross-sell services such as mortgages, insurance and property management, so we can really maximize revenue per customer and create a robust, diversified earning model. Let's look at James. He's a real like Foxtons customer who started his journey with us in 2010. [Presentation]

So there we go. Firstly, that's why we're investing significant time and energy into perfecting the very start of the journey because we know when we get it right, we don't just gain a tenant, we build a lifelong relationship. Secondly, our integrated estate agency model, spanning sales, Lettings and Financial Services, creates a seamless end-to-end experience that both -- benefits both the client and our teams. And finally, our rich data and network of interconnected branches gives us a unique advantage. We can anticipate when someone is about to move from South Ken to Camden, so they can move from a flat to a house. And this allows us to step in and guide their journey while maintaining continuity and care throughout. Now in a market where property decisions are deeply emotional and complex, Foxtons is leading the way with a model based on data, innovation and relationships. As you've heard from Imran, we have a uniquely powerful tech stack that sets us apart in the industry, but we also have an advanced Voice of the Customer program. That gives us feedback at every critical stage of the journey and has driven a culture of continuous service improvement and allowed us to really deliver tailored coaching and training to our people. Now we're leveraging AI to generate for a more proactive and real-time insights, so we no longer need to wait for our customers to reach out to us. AI has transformed our approach by listening to every interaction, analyzing tone, sentiment and emotion. In property management alone, we received over 150,000 calls last year. Using AI, we can now identify friction points that previously went unnoticed. This has had a direct impact on retaining landlords, improving tenant satisfaction and a reduction in our headcount as we gain operational efficiency by reducing unnecessary inbound contact. We're also placing a really strong emphasis on our Net Promoter Score, NPS, as a key indicator of customer satisfaction and loyalty. This metric not only helps us understand how our clients feel about their experience, but also allows us to benchmark our performance against other leading service providers. We recognize that for landlords and tenants, loyalty is built on a foundation of trust and service excellence. Our commitment to excellence is reshaping expectations and setting a new standard for our industry. Finally, the portal. In an era of increased regulation and rising compliance standards, the ability to deliver a professional experience at scale is essential. Our portal boosts operational efficiency and also centralizes key financial and compliance documentation. We resolve over 40,000 maintenance issues every single year. We know how many are triaged within 24 hours. We know our speed to resolve and we can measure tenant and landlord satisfaction throughout the journey. With the imminent Renters Rights' Bill, a decent home standards moving into the PRS, these metrics aren't just nice to have, they're now essential. We can also use our platform for behavioral nudges, i.e., nudging a landlord to buy rent protection or for a tenant to purchase contents insurance. So in summary, for landlords and tenants transitioning from smaller agencies, all of this represents a significant upgrade. It brings previously hidden property management functions to the forefront, supported by real-time data and proactive service. We're a tech-enabled property partner delivering measurable outcomes, regulatory resilience and enhance customer retention at scale. That's it, back to Guy, who's going to discuss our people initiatives.

Great. Thank you very much, Fran. Well, the people at Foxtons are the driving force behind our success. When I joined the business 2.5 years ago, it was clear that we needed to transform the culture. Since then, we've implemented sweeping changes to attract, support and develop top talent, embedding recruitment, training and retention as core priorities, with retention KPIs being now integrated into leadership objectives. Culture is at the heart of our strategy, fueling ambition and driving performance and also securing long-term success. Like all businesses, we face challenges and remain committed to continuous improvements to refine our people strategy over time. With the right team in place, we can deliver our GBP 50 million of AOP target with only limited levels of additional headcount investment. And Foxtons is proud to be the employer of choice for those entering the industry. Many of the most successful leaders in our industry started their career with Foxtons. We have a young, diverse workforce with team members from a variety of socioeconomic backgrounds. I'm proud of some of the results that we've already seen with a 25% increase of female managers over the last 3 years. As a competitive, performance-driven sales organization, we recognize the need to provide an environment that fosters success, helping people thrive, earn well and of course, advance their careers. However, it doesn't come without its challenges, and we recognize that culture transformation is a continuous journey. We are fully committed to raising the bar, ensuring that Foxtons remains a place where talent grows, ambition is realized and success is built. Now let's hear directly from some of our people recorded as part of our renewed employee value proposition project last year. [Presentation]

Okay. Good morning, everyone. Just by means of introduction, my name is Natalie Booth, and I'm the HR Director at Foxtons. I've been in post for just over 6 months now, but this is not actually my first role within the business. Originally, I started as a graduate in 2009 in a sales role before transferring into a learning and development role. But after 7 years at Foxtons, I actually left, and I spent the following 9 years at Berkeley Group plc, the FTSE 100 Housebuilder in a variety of HR roles. Anyway, I'm thrilled to be back and to talk to you about my plans for our people and our culture. So as we've heard in the EVP, our employees take immense pride in working here. Initially, this project aimed to refine recruitment, but it became much more, and it ended up clarifying our unique position in both the estate agency and the graduate job markets, making our message really clear. Despite receiving up to about 80,000 job applications per year, we've sharpened efficiency and transparency, and this is through interviews and listening exercises, we found 4 key themes that have emerged. So people love working for us because we've got a unified mission, strategy and values. That's a real golden thread that connects the whole company. We also have a high-performing goal-driven sales culture, and this is a real energy that fuels success for everyone. As we know and we've talked about already, we have industry-leading learning and development from day-1 throughout people's careers. And then finally, we work in a true meritocracy with rapid progression and transparent rewards for our top performers. So next, I'm going to dive into our people and cultural journey in a bit more detail, looking at what we've done in the last few years and what we are focusing on in the near term. So since 2022, we've seen a major cultural shift and implemented a range of initiatives along the way. Some of these include increasing our fee earner headcount capacity and quality by rolling out a brand-new rewards and recognition framework to better recognize and celebrate excellence within our people. As we've mentioned, we've overhauled our learning and development strategy, and this has resulted in a 10x increase in face-to-face training. We've also created a suite of people-related KPIs that senior leadership will hold accountability for to ensure their delivery. And we've also introduced a refreshed purpose, mission and values to unify and energize the organization. And then finally, this year, we have put a new focus on our culture by introducing and evolving a range of initiatives. The results we're now seeing in areas like retention, engagement, revenue per head and customer satisfaction are all downstream of this people and cultural journey. As we continue to review and grow, we will rely predominantly on the following areas to guide and shape our future initiatives. We'll be looking at constant alignment with our people and strategic objectives to make sure success is achieved mutually. This year, in addition to our annual staff survey, we've invested more time with employees, listening to the experience of our people and capturing views across locations, roles and grades. We'll also look at a suite of KPIs and metrics that indicate success across the people and cultural journey. And to support listening, we have continued to work with a number of external experts, which allow us to foster an environment where we're adopting best practice. And finally, let's talk about our near-term areas of focus. Well, we're going to further embed our company values through ongoing training and improved infrastructure to support them. We're going to continue to progress with our EDI initiatives such as programs like Women at Foxtons. And then finally, we're going to broaden our performance management metrics across the board. Each of these pillars is absolutely vital to supporting our employees and the wider business through this next stage of growth. So we've talked about employee voice and how important that feedback loop is to ensure that we're understanding the employee experience. Employee voice is critical to understanding workplace experience and culture. And using Culture Amp, an external benchmarking tool, we've measured engagement with our 2024 survey, showing a growth from 65% to 69% in the last year, outperforming the U.K. averages. But we're not complacent about the growth in engagement, and we know there is a lot more we can do. And then finally, this last slide tells the story of the output of all the work that has come together in the delivery of our people and culture initiatives. Our shift from volume hiring to value creation means that fewer people are in and out of the door, and more focus is given on hiring the best talent and giving them the tools and environment to succeed, and it has had a profound impact. Retention is up 9% since 2022, a testament to better onboarding, clearer career paths, stronger leadership and all the work we've done to enhance our culture. Female retention is also improving with a 30% decline in labor rates since 2022, and this is set to improve further as our targeted programs gain traction. And then finally, revenue has grown 12% since 2021 in our fee earners despite a 20% decline in London sales transaction, proof that increased skill and productivity is within our workforce. Now boosting retention and performance isn't just good for Foxtons. It also cultivates an engaged and successful workforce. Long-term tenure leads to industry-leading leadership. It shapes careers, and it fosters the next generation of property professionals. I'm now going to hand you over to Gareth, who's going to discuss Lettings.

Good morning, everyone. I'm Gareth Atkins, the Managing Director of our Lettings business, and I have been at Foxtons for 22 years, working in every job from negotiator to running regions for both sales and lettings across our network before taking up my current role in 2022. Our Lettings business is a highly valuable recurring revenue stream with strong growth potential. The market is robust with inflation-linked revenues and regulation that supports both consolidation and increased agent penetration. Our growth strategy is built on a proven playbook, increasing customer retention, winning new customers and cross-selling what we call our growth formula. We have a well-developed acquisition strategy that complements our organic growth initiatives, enabling us to enter new markets and further accelerate growth. So some headlines. Since 2021, we've grown our portfolio from 25,000 to 31,000 tenancies. Revenue has grown over 40% from GBP 74 million to GBP 106 million. Adjusted operating profit has more than doubled to GBP 27.2 million, and our margin has improved from 14% to 26%. This growth has been driven by both organic initiatives and strategic acquisitions. The Lettings market is underpinned by inflation-linked recurring revenue because of the structurally sound dynamic between supply and demand. Demand is driven by population growth, affordability pressures and wage increases. We've only seen this go one way. We get over 0.5 million applicants registered with us each year and by contrast, have just 2,000 available properties at any one time. Supply remains stable with instruction levels being broadly flat year-on-year. A market that recently may have seen a portion of landlords considering exiting as high borrowing costs have resulted in low yields has turned on its head. Borrowing costs have dropped, and we've seen turbulence in the equities market. So landlord sentiment is that the PRS once again offers a safe and resilient investment. The build-to-rent sector is a major growth opportunity, especially for scale agents like us who can cover London's vast geography. As the #1 agent by volume across the capital, we're uniquely positioned to lead in this space. Regulation is another driver, which I'll talk to on the next slide. So to summarize, the lettings market in London has historically delivered above inflationary returns and the data we see suggests no significant change in that going forward. Regulatory changes, such as the Renters Rights' Bill are increasing the use of agents. It's an evolution, not a revolution, and it catches England up with other parts of the U.K. DIY landlords who assume all of the risk of not using an estate agent are declining and agent penetration is rising. With a huge increase in legislation, licensing and the imminent Renters Rights' Bill, if a landlord gets it wrong, the risk and the associated penalties are substantial. Just imagine having to repay 2 years' worth of rent to your tenant because you've missed something. Smaller agents are struggling with this compliance cost, while larger agents like us benefit from scale and tech investment. We're already prepped and ready ahead of time for such legislation. Our most recent acquisition pointed to this increasing legislation as the reason for their exit. The market remains fragmented, creating significant consolidation opportunities for us. Our growth formula focuses on 3 pillars: improving retention, acquiring new customers and our value-add services. We increased retention in 2 ways: delivering the best results with the best service and industry-leading technology through a customer-centric digital-first approach. The landlord landscape is evolving as a new wave of younger landlords step in often as older generations pass their assets on. So the way the next generation interact with their agents plays further into our strengths. Our lettings platform supports transaction efficiency and new customer acquisition. We can complete a lettings deal end-to-end in under 2 hours. And our average lettings deal, including referencing, is just over 2 days, which is light years ahead of the competition. Our ability to funnel that demand and our geography and technology makes us the #1 listing agent in London's growing build-to-rent sector. Margin growth is driven by property management and ancillary services. Our cross-selling of property management is driving revenue, and we believe there is huge opportunity for us here. A stat we are particularly proud of is driving our organic management penetration from a historic level of 28% in 2021 to 38% in 2025, a large piece of this through educating our landlords on the legislation and the relatively small cost of protecting such a big asset. In summary, we've got a track record of delivering organic growth, delivering 3.3% CAGR between 2022 and 2024. Our Lettings platform gives us leading-edge technology in acquiring new customers and retaining our portfolio, and it handles massive volumes, 480,000 inquiries, 140,000 viewings, 31,000 offers and 19,000 deals every year. For customers, it offers a digital-first experience with personalized journeys and 24/7 self-service. Operationally, it also boosts efficiency through lead scoring, optimized workflows and always-on machine learning. This has improved viewing efficiency by 8% and deals per head by 5% in the last 12 months. So there is still room for growth. Combine all of this with our acquisition strategy, and we are in a great position to deliver a significant proportion of the group's targets. I'll now hand over to Chris to talk through the acquisition strategy.

Well, good morning, everyone, and to move on to Lettings acquisitions. Since 2020, the group has used Lettings acquisitions to transform its financial profile. Group earnings used to be significantly influenced by fluctuations in the sales market, but now they are underpinned by resilient Lettings revenues. Since 2020, the group has invested GBP 64 million in acquisitions, acquiring over 13,000 tenancies. On a post-synergy basis, the acquisitions to date have achieved an average ROIC of 26%, an average EBITDA margin of 54%, and we've paid an average EBITDA multiple of 2.9x. These strong post-synergy margins are achieved through a mixture of cost synergies and revenue synergies. So now to look at our strategy. Over the last 5 years, we've refined our acquisition strategy playbook and evolved our approach to doing acquisitions. We've got a dual-track approach. The first track is a bolt-on acquisition approach and the second track is a buy, build and bolt-on strategy. So starting with the bolt-on acquisition strategy. This accelerates market share in our existing London markets and delivers high levels of cost synergies quickly. Due to the overlapping nature of bolt-on acquisitions with the existing Foxtons network, the organic growth opportunity is naturally lower. However, by leveraging the Foxtons operating platform and in particular, our lead generation systems, we can extract acquired customer databases and generate new business using our technology and data capabilities. Bolt-on acquisitions also provide us with an acquired pool of experienced and knowledgeable staff who are excellent at nurturing those acquired client relationships. Moving to the right-hand side of the slide and our buy, build and bolt-on strategy. This is our route to new geographies within high-value commuter markets. This strategy firstly focused on acquiring a lettings-focused hub business, typically the #1 player in the market. We then retain the existing business footprint, power the business through the Foxtons operating platform and either rebrand the business as Foxtons or dual brand business. And that branding decision is informed by the strength and legacy of the acquired brand. And if we do take the decision to dual brand, the Foxtons brand provides an additional boost to the acquired business and enables dual marketing of lettings and sales stock. That hub then acts as an anchor for future bolt-on acquisitions, which allows us to scale up more quickly and deliver cost synergies. Once powered by the Foxtons operating platform, we actively target organic growth strategies, and I'll touch on those briefly. Key enablers are enhanced staff productivity through our CRM system, marketing stock to a much wider pool of applicants across the entire Foxtons network. And also, we build on our existing B2B relationships in areas such as build-to-rent and new homes. We target a total ROIC of 20% once we've built out the hub, realized synergies and delivered some organic growth. So this strategy is our entry route into new markets, and it's much more effective than opening cold start offices, which do not benefit from day-1 reoccurring lettings revenue. The October 2024 acquisitions in Reading and Watford are examples of this strategy. And just to briefly touch on Watford as an example, we've already transitioned that business onto the operating platform, rebranded fully to Foxtons and have already bolted in a Lettings business earlier this year. And although it's still early days, we've seen really encouraging results in terms of customer reaction, including doubling our market share of new sales instructions over the last 3 months compared to the prior year. So let's take a look now at our acquisition playbook and how we identify acquisition targets and in particular, the need for ongoing financial discipline. So our acquisition playbook emphasizes the importance of a number of areas. Firstly, strategic fit, so market position, fee levels and quality businesses are key areas of key factors we look at. Secondly, quality of earnings, so in particular, seeking out those businesses that are highly focused on lettings. Where an acquired business has a sales operation, which supports and feeds the lettings operation, we'll look to grow the sales market share there through using our platform. And thirdly, geography. We look at areas which have high value opportunity available, but also have growth opportunities available. Naturally, valuation discipline, earnings accretion and synergy delivery are all important elements which we look at when we're making that decision. As Gareth covered earlier, the agented segment of the market is highly fragmented and provides an opportunity to consolidate. For this reason, we believe the consolidation runway is strong. The chart on the left summarizes the lettings market across London and Southeast England commuter markets, splitting independent agents versus corporates. In London, we estimate 66% of the market remains an acquisition opportunity and in commuter markets, 64%. We also believe increased levels of lettings regulation will act as a driver of consolidation as smaller agents exit the market in the face of increasing complexity. From a funding perspective, we'll fund these acquisitions through a mix of net free cash flow and debt, and we'll maintain appropriate levels of gearing, which will reduce over the medium term as net free cash flow grows. I'll talk to leverage again later in the presentation in the financials. The plan assumes we acquire and spend at least GBP 15 million a year, which is in line with the levels we've acquired in previous years. But for the purpose of the base plan, we also assume in outer years that spend increases as cash generation grows. Should larger acquisition opportunities come to market and meet our criteria, our capital allocation framework does allow us with that strategic flexibility to scale up, which I'll cover later on in the presentation. I'm now going to hand back to Guy to talk through the sales plan.

Great. Thank you very much, Chris. Now to sales. Restoring profitability in sales is a challenge. However, we've made massive progress. Between 2016 and 2022, Foxtons lost considerable market share, particularly in the prime markets. Today, we've rebuilt and in many areas, exceeded those past peaks. We know that we can't save our way to profitability in sales. It requires higher transaction volumes and a focus over the long term of increasing our average sales price. It's important to recognize that sales and lettings are codependent with a strong sales offering essential to be able to deliver organic growth. Here, you can see just what's happened to the enormous swings in transaction volumes in London since 2010 despite a population growth of over 1 million people. In 2023, the market experienced almost record low levels of transactions, thanks to the September '22 mini budget. We believe that there's a backlog of around about 60,000 transactions due to that prior downturn. And we forecast further market recovery due to interest rates declining over the medium term ahead. We are now at the start of the next sales cycle, and we've rebuilt Foxtons' sales machine to be able to return to profitability, even at normal sales volumes levels within the next 18 months, with a considerable upside opportunity in more buoyant years. With 8,600 properties currently for sale, which is our largest in 40 years, we lead the market, surpassing the next competitor brand who only have 5,500 properties available. Our market share has surged from 3.5% to 5% between '21 and '24, the fastest growing of any U.K. agency as measured by 20CI, all while maintaining a premium fee average of 2.25%, which is double that of many of our competitors. We have leading market share in all high-volume markets, with a 6.4% share in the volume market and 4% share in the mid-market, dominating where a staggering 86% of all transactions occur in London. We also dominate in the new homes market, having sold 18% of all new homes in London, which is, again, considerably more than our closest competitor. Here, you can see our sales formula growth. Market share plus improved margin equals revenue and profit growth. And of course, Paris is our AI-prospecting platform which has helped to rapidly grow instruction levels. We now have more tiers as well with better training to help convert those listings into sales in a shorter space of time, and our CRM and our fee create productivity and improved margin. We are already the established leader in the volume, mid and new homes markets, and we are positioned today to return sales back to that profitability even at today's market levels. Further profitability will come from rebuilding our strength in these higher-value markets, but we must earn our way back into the prime markets and everything has got to be right from our marketing, our branding, the talent, the training and ultimately, delivery of those sales. Given the large volumes that we deal with, even a modest increase of GBP 50,000 to our average sales price will unlock millions of additional profitability, strengthening our position for future growth. Rather than a one-size-fits-all approach, we now have a segmented offering to ensure that the offering is relevant to each client. We will do this with revamped branding and personalized services initiatives. We've introduced a bespoke fee menu for the higher-value markets to help grow market share. And this fee flex will always grow the average fee value in pounds for each individual office. And we also have an enhanced premium marketing focus, and all of this together, we're starting to see promising progress already. And now to talk more about our Financial Services strategy is Richard Merrett.

Good morning. I'm Richard Merrett, MD of Alexander Hall. I rejoined the business in January last year, having first started in 2003 as a mortgage adviser. I know the culture and values deeply. Time away gave me a fresh perspective in order to make the adjustments that are needed to drive our growth. Alexander Hall is an extremely high-quality business with very strong fundamentals. We have the highest levels of training, compliance and customer service, excellent customer retention and strong lead flow from our Foxtons partnership. Recurring revenue from remortgages underpins the business and improving affordability in the purchase market supports growth. Since returning, we've completed a full operational review, fixing the foundations, boosting efficiency and enhancing lead conversion from Foxtons. Our Foxtons partnership is a unique underutilized opportunity, and we've identified complementary models to optimize this relationship and accelerate our growth. The mortgage market is fundamentally strong. 87% of mortgages now go through brokers, up from 58% a decade ago. Bank branches are in decline. Market complexity and demand for advice drive broker growth. We're also seeing stability post mini budget. Rates are falling, lending rules are easing, borrowing and buying power are improving. This creates a strong growth environment. We operate in a resilient expanding market. In my opinion, we have the best people in the industry, delivering top-rated service. We're growing headcount through industry-leading training and one of the few firms bringing in new talent. We've enhanced pay structures to boost retention and accelerate adviser growth. And we have been laser-focused on process efficiency gains, increasing adviser capacity and productivity. And for the first time in 30 years, we're supporting this with a marketing strategy. More customer engagement means more opportunities. Mirroring the Foxtons' success, we're now able to use our data more strategically. We have built an embedded and new data platform, which acts as a single source of truth. This means that we can manage to clear KPIs and gain data-driven insights into our operations. We know that faster customer contact improves conversion. And we've, therefore, overhauled the 20-year-old Foxtons referral process to focus on active buyers, those who have the highest propensity to transact, ensuring that they are seen as quickly as possible, resulting in an 8% efficiency gain. This has also seen purchase business introduced by Foxtons increased by 105% year-on-year. We've enhanced our internal messaging, utilizing the narrative that finance is the enabler. The more Foxtons customers hear and understand this, the more homes the business will sell. Our challenge now is to scale faster without compromising service or compliance. As I've said, there's untapped potential in the Foxtons ecosystem. Currently, referrals focus too narrowly on new buyers. We must expand beyond the negotiator adviser link. Opportunities lie with vendors, high-value movers and landlord financing. Better tech and marketing will help us reach both these and a huge untapped tenant base, nurturing future homebuyers. Alexander Hall is a strong business, but the model hasn't evolved in 2 generations. Scaling the employed model alone carries risk. Our solution is a complementary self-employed broker network. This model offers fast, scalable growth, greater leverage of Foxtons brand and leads, a flexible low-cost structure and geographical diversification of both cost base and talent pool. We're pursuing a strategic partnership and the process is underway. Launch is anticipated within the next 12 months, laying the foundations for Alexander Hall to make a more meaningful contribution to the growth of Foxtons Group. Thank you. I'll now hand over to Chris for the financials.

Okay. Well, this morning, you've heard about all our medium-term ambitions from the management team. And in this section, I'll look to pull all that together in the context of the financials. But before we do that, a quick reminder of our track record. So over the last 3 years, we've really been in a turnaround mode and delivered the first phase of growth. We've been very focused on improving our operations and selectively investing in value-accretive acquisitions. We're now a lettings-focused business and in 2024, delivered GBP 21.6 million of adjusted operating profit. And that's despite sales market transactions being depressed compared to the long-run average. Importantly, we are on track to deliver the medium-term targets we set in March 2023 to deliver GBP 28 million to GBP 33 million of adjusted operating profit. And hence, why today, we're setting out new financial targets for the next phase of the growth plan. This slide summarizes value creation from a financial perspective, which draws on many of the points you've heard this morning. I'll briefly talk to the key ones. So we expect to benefit from the structural market tailwinds that Guy touched on at the start of this presentation. We have purposely repositioned the revenue profile with 2/3 of revenue now coming from lettings. This brings resilience to our earnings profile across market cycles. Organic growth is a major focus for us, and the Foxtons operating platform provides us with that competitive edge against other agents. Acquisitions continue to be an important part of our growth story, and we are confident we can continue to consolidate in highly fragmented markets through value-accretive lettings-focused acquisitions. Margin expansion opportunities exist, mainly achieved by increasing our scale, increasing customer lifetime value that you heard about earlier and ongoing cost action. We are a capital-light business. And although we will continue to invest in our technology stack, we don't envisage significant levels of CapEx in order to evolve this over the medium term. The balance sheet remains strong and appropriate levels of leverage are used to support our growth. Overall, this drives shareholder value with the 4 points on the right-hand side of the slide being the key takeaways. We expect to double earnings in the medium term. We expect to deliver earnings which are reliable, stable and predictable. We have a progressive dividend along with other shareholder returns such as share buybacks, which remain under constant review. And finally, the sales market recovery presents further upside against our base plan, and I'll talk to that in a second. So now to look at our new medium-term targets, which replace those targets we set out in March 2023. In the medium term, we plan to deliver over 40% revenue growth, taking us from GBP 164 million to GBP 240 million, deliver GBP 50 million of adjusted operating profit, which surpasses the target range we set in March 2023. Margin accretion will naturally follow with an adjusted operating profit margin of 20% being targeted. And finally, net free cash flow conversion of 60% to 70% is expected, which basically returns us to 2021 levels. You'll recall across '22, '23 and '24, net free cash flow conversion was impacted as we transitioned to shorter and more competitive customer billing profiles in Lettings. So this slide really builds out the growth plan in more detail, and it shows the key drivers that will take us from the GBP 21.6 million of adjusted operating profit in '24 to the medium-term target of GBP 50 million. Firstly, Lettings organic growth, it's a key focus. Revenue growth will be underpinned by inflation-linked revenue with further upside being delivered from the Letting growth formula, which Gareth presented earlier. Specifically, that was customer retention, new customer growth and increasing the penetration of higher-value services. Interest on Lettings client money provides a natural hedge in higher rate environments when sales volumes are typically lower. But as interest rates fall, we will see a headwind here. But on the upside, expect to see increased sales market transactions and more landlords entering the lettings market as financing costs fall. Lettings acquisitions remain a real key part of our story. Our base plan modeling assumes that over the medium term, we will spend at least GBP 15 million a year, which is in line with our track record with spend increasing in the outer years of the plan as cash generation grows. A post-synergy return on invested capital of 20% is assumed once synergies have been delivered and hubs grown out. In Sales, we assume some improvement in market volumes in the medium term. Specifically, we assume 95,000 transactions in London, which compares to 88,000 transactions we saw in 2024, and that number sits below the long-run average of 100,000 transactions per year. Market share is expected to progress beyond 5% through organic growth initiatives, noting that we've already exceeded the target of 4.5% that we set in March 2023. We also assume some increase in our average revenue per deal as we take more share in higher-value property markets, which Guy touched on in his presentation. In Financial Services, we plan to scale up the business organically and better capitalize on the revenue opportunity available from the estate agency business. Reoccurring mortgage volumes will continue to underpin earnings. So beyond the GBP 50 million target, there is further upside available should we see further sales market recovery beyond the assumed 95,000 transactions I mentioned earlier. Margin expansion. It's a key focus over the medium term, and this will be delivered through a combination of operating model fundamentals, cost control and productivity growth. There are 3 key operating model points that provide margin protection and growth to touch on those briefly. So we have our inflationary-linked revenues. This provides protection against general inflationary headwinds. As we scale revenues, we'll benefit from the inherent operating leverage in the business model. And we're targeting improved unit economics by moving up the value chain and increasing penetration of higher-value products. Proactive cost control will continue to be a key area of focus, in particular, looking to reduce costs across our head office and branch leases. In relation to our head office, we are engaging with our landlord to explore options to surrender a portion of that office space with a view of generating meaningful cost savings ahead of the 2027 lease end date. Technology enhancements and new data and AI products will also support margin progression. You heard from that earlier through Imran's area, and we look to improve levels of productivity. Over the medium term, we plan to drive down our operating expense ratio and target that 20% adjusted operating profit margin. So this slide provides a reminder of our capital allocation framework, which I presented in March at the full year results. The framework aims to support long-term growth and to deliver sustainable shareholder returns. The framework supports that organic growth we talked about earlier and the initiatives you've heard about, accretive acquisition opportunities, a progressive dividend and additional shareholder returns after considering factors such as earnings per share accretion, borrowing capacity and leverage. We will use leverage to support growth and the framework targets an EBITDA to net debt ratio of less than 1.25x, which compares to an RCF covenant of 1.75x. Finally, let me run you through the key cash and leverage points, which are set out on this slide. Strong cash conversion and profitability underpin the group's disciplined capital allocation policy. The acquisition program will continue to be funded by a mix of net free cash flow and debt made available through our GBP 30 million RCF, which is expandable to GBP 40 million and provides flexibility as we grow. The base plan assumes leverage remains below 1x and incorporates at least GBP 15 million of spend each year with spend increasing in those outer years of the plan. And with a capital allocation policy that supports EBITDA to net debt ratio of up to 1.25x, we have that strategic flexibility to increase spend and enhance shareholder returns. I'll now hand back to Guy for the wrap-up.

Leading, innovating and delivering. We've never been simply content with keeping pace. We've refined our market leadership, doubling our profitability since 2021 and positioning ourselves now to be able to double it again in the medium term ahead. We dominate London's lettings and sales markets and are now focused on expanding our network further. Our ability to outperform competitors, unlock hidden value and drive premium fees proves that we're not just participating in the market, we're shaping it. With our new headline target set out today of GBP 50 million of AOP, Foxtons is building for the future backed by a clear strategy, precise execution and an unwavering ambition. We have the tech, the data and the people to deliver this, working closely with our 1,400 colleagues to drive value for our clients and our shareholders. We've taken huge strides forward in the business over the last 2.5 years, and we couldn't be more excited about the next phase of growth. We're confident we're ambitious, and we are ready. An enormous thank you for all joining us today, both in the room and online. And ultimately, we look forward to answering your questions as my fantastic team can come and join me up on stage. Thank you.

[Operator Instructions] I think we may also already have a question?

It's Robin Savage, and I'll limit myself to one.

That's very kind of you. Thank you.

I think Martin and I remember 12 years ago when we saw Foxtons before it got floated and we went around the offices and went down to your basement and saw the very impressive tech team that was around then. So I may have met you back then in early 2013. But -- and a very impressive presentation. But can you talk about the importance of the work that was done over that sort of first 15 years perhaps from 2020 through to 2015, the period of coating the data, curating the data. I suppose the question is, when did AI start for you? And how important is it that the data that you're using for AI has been properly prepared and that the people that use it are properly engaged for that use?

Great question. Thank you. I think it's really important to go back to the early 2000s. I'd come straight out of university and joined this business just as it is accelerating and growing this market share very quickly. And I arrived at a business that had just launched this new version of the CRM, and I thought that, that's how all of the industry operated. Absolutely, they didn't. They were still operating on Rolodex probably for the next 5 to 10 years ahead. But Foxtons has had this machine and this insight and this vision to be able to start gathering data. And those insights early on is what really started to accelerate. And Imran, you might just want to talk about the importance that we've placed over the last 2 years of building the correct structures around AI to make sure that we're AI ready.

Yes. So what we have been doing in the last 4 years, we've been very conscious about that new technology will come out. So we've built a data platform, a combination of a data warehouse, data lake, and we just call it a modern data platform. So we've been -- we've got some -- we work very closely with Microsoft and their preferred data partners in this space, who have helped us and we've come up with this road map where we want to take our data from our CRM system into their cloud-native Synapse kind of platform. So we're working very hard in getting data extracted from our systems in the raw format and making it more readable for any kind of technology that also available today and later on can just go in, plug in and unlock. I think we're quite ahead in that space.

I think it's really important that we position ourselves to be future fits. We've made the vast majority of the main investment to build the platform. And the hardest part, as you might appreciate, is actually making sure that the data has been filed correctly, volumized correctly. So that when we're then using instant plug-in AI platforms and AI functionality, it's ready to go and that we know that we've got the system ready.

And when it comes to how our staff is ready, since last year, we've been doing a lot of training across the teams. We're piloting different AI solutions. We don't go and adopt every single new tool that comes out because we don't believe in chasing the hype kind of things. So we're always looking at tools that will make a real difference, provide measurable return of investments, such as we've been using machine learning for our propensity modeling, which has delivered a reduction of the number of calls we make to create that valuation. That's 50% reduction that that's brought in. Another example I can give you is in Fran's team, we use natural language processing and ML to -- for speech analytics and text analytics, which is such a valuable tool for customer services. I remember I used to see a couple of team members spending 4 to 5 hours going through call recordings and everything. We can now deliver within 15 minutes what they were looking at before for 4 hours. So that increase in efficiency and productivity is something that we're chasing right now in the AI space.

I think from a usage point of view as well, because everything we do at Foxtons is on a single homogenous system, a complete ecosystem from end-to-end, every department has to use that system. Every department enjoys using that system because of the visibility. So therefore, we don't have any usage issues across the business. And it's actually remarkable when we do implement either a new functionality or new training, just how quickly the business adapts. It is really, really, really impressive. Thank you.

Andrew Murphy at Edison. You made no secret since you came back to Foxtons that you're trying to grow the business and successfully so far, and you've obviously trying to accelerate it here. I was just wondering what market reaction you've noticed, if any, from your competitors on the ground, particularly in London. That's the first question. And then the second question will be, given what you're trying to do and the expansion outside of London, are you now finding that lettings books or letting agencies are increasingly coming to you and saying, come and get me?

Great. Thank you very much for that. Firstly, if we think about how the markets reacted in general, because of the hugely fragmented nature, we're not just taking market share off one individual business. It's across sometimes thousands of different agencies, particularly in London. So actually, we haven't really noticed any competitive change to what they're doing. It's always been and always will be a competitive market, particularly where you've got these high transaction volumes and high-value areas like London. And actually, that really, I think, leans into the productivity gains that we get because of the platform that we have. And then if we think about outside of London, the first thing that I said when I -- when we were looking at the acquisitions engine is I really wanted Foxtons to make sure that we had the best reputation as a buying partner when we're going and looking at acquisitions. I don't want to be -- have a reputation for chipping people on the last day or for being brutal through that process. The way that we've approached this is making sure that the sellers of these businesses, when they're coming to us directly, we act as a partner through that process, holding their hand, helping them through to make sure that we can get the deal over the line, both for them and for us. And that is a small world of smaller independent agents, and they know each other and they talk regularly. And actually, what we do find is when we've closed a deal, in fact, this happened in Watford just a year ago, the day we announced the deal being closed, 2 or 3 of their instant competitors nearby came straight to us saying, look, I don't mind being a competitor against the previous firm, but I don't want to be a competitor against Foxtons, would you like to have a look at my business as well? And we bought one of those and already brought them in. So I think it's the reputation of us as buyers, but also then making sure that, that new market opportunity is maximized as much as possible. Thank you. Question over here?

Adrian Kearsey. I'll keep it to 1.5 questions, if I may. You talked about the post-synergy multiple within Lettings M&A of 2.9. Would you be able to remind us what the pre-synergy multiple was? And then this is the half bit. Can you split that synergy between revenue synergies and cost?

Great. Well, we certainly enjoyed answering that for you. It's a nice one for Chris, actually. It's something we look at very closely.

The pre-synergy multiple generally is quite large, Adrian. And I don't put a number on it. And the reason for that is a lot of these businesses are privately owned and therefore, not set up for profits. So actually, when we look at multiples, often it's on a revenue basis. But in terms of the post-synergy multiple, that is obviously a very key focus for us, as I set out earlier. The lion's share of the improvement, it comes from cost synergy, particularly on that bolt-on strategy. And when I'm talking about that buy, build and bolt-on strategy, there's more revenue growth in there. So typically, on that bolt-on strategy, I would say around 2/3 comes from cost synergies.

Thanks, Adrian. 1.5. Greg?

Greg Poulton from Singers. Two from me, please. Firstly, on the Lettings side of the business, could you talk about the strength of the M&A pipeline and whether you're confident of deploying that GBP 15 million in the current year? And then on the sales side, could you talk about targeting the higher-value markets and how your people strategy is evolving against that? Because I guess Foxtons of old is known for having a very young workforce. But in the higher-value markets, you might need more of an experienced hand?

Great. Well, I'll take the first part of that question for sales, and I'll hand over to Chris for the Lettings question about M&A pipeline. Yes, absolutely. We don't need to change the game of what we're doing. We know where we are dominant. You can see where we're dominant, where the vast majority of those sales actually occur. But what we do want to do is try to just edge it up slightly. And that might be in one market, a much higher growth opportunity than we see in some other markets. So what we do is we look at it intrinsically per office. We look at what's going on in the market activity. We look at where we are as an average sales price within that office. We look at the average listing price. We look at the average price of the property that we're actually valuing to see where that trend looks down on that KPI chain. And we try to work out where the opportunity to grow in each office is and give a different strategy dependent upon that. Now some of that might be, as we've said, branding, it might be bringing a more mature audience to go on those valuations and to help make those sales occur. But it's only a GBP 50,000 increase that actually can change the game from a profitability point of view. But absolutely, all of those avenues are being looked at very, very closely. And I think there are opportunities really for us to try to list more freehold houses. And we know freehold houses simply by nature, are much quicker to be able to go from under offer to exchange. That's also bringing in time frames that we can squeeze a little bit as well as aiming a slightly higher price bracket. So yes, there's no one silver bullet in that. It has to be everything right in order to earn our way back into that next value position. And Chris, you might want to talk about the M&A pipeline?

Yes. In terms of M&A pipeline, it's where it needs to be. We've done one deal this year. The activity this year will be second half weighted. And that's probably because first quarter was a particularly busy quarter for agents as they work through their own sales pipelines in many cases, ahead of that stamp duty deadline. So it's where it needs to be. It's probably quite even weighted towards that in London and those commuter markets. So look forward to updating you in due course.

Thanks, Greg. Michael?

Michael Brown, Lombard Odier. Just a question on the assumptions on the Sales business. It lost broadly GBP 4 million in '24, and you've got 95,000 transactions kind of in your model. What should we assume, therefore, sales can get to? Is that just to get it back to breakeven? And then the second part of that question is, given your focus on higher-value properties, which does take time to build, what kind of ASP assumptions do you have as a result of that?

So our absolute focus has got to be returning sales back to profitability even in those harder, lower volume years. And as you've seen, the huge swing in the transaction volumes that we've been at historically. And I can remember not that long ago where we've seen 145,000 sales transactions. In 2023, that was 80,000, a record low number. So that's why we are restructuring the business and really weighting that growth towards lettings to decouple ourselves from these up and down swings. So that's our focus. And this year, we know we'll probably see somewhere between 90,000 to 95,000 transactions, and we know that we can get the Sales business back to breakeven and just into profitability over the next 18 months. So that's where the baseline plan comes in. And then all of the other bits on top, which might be a little bit of market recovery, it might be a little bit of improving that average sales price is just going to start to add on to the profitability in terms of where we might sit. Thank you.

Sam Cullen from Peel Hunt. I've just got another really on the M&A pipeline. I mean you said it where it needs to be for this year. How do you think about the funnel that you've got going out over the medium term? And I guess the obvious question is, what is the medium term? That's the first one.

Great. Well, I'll let Chris answer the medium-term question.

So medium term, I'd probably answer that. We have a 5-year planning horizon. So the way we've built this plan, built the plan, which we presented earlier is very much within that 5-year planning horizon. Some parts of that are market dependent, and we'll see how those go and some of those are very much within our grasp. But what we can say, we're absolutely moving as quickly as we possibly can to make that plan delivered as soon as possible.

Great. And in terms of the M&A pipeline, we have an internal team that focuses only on growing the pipeline. They've got great experience in the South of England. They know lots and lots of these independent business owners. And you know what, some of the conversations that we've closed over the last 2 years have happened literally in 2 or 3 months from an initial conversation to getting it under offer and to closing it. Other conversations, we're still speaking to people that we were talking to 5 years ago, and we're trying to work with them to get their businesses ready to a point when they're ready themselves as well as having the business ready to be able to be incorporated into the business.

The second one is, if you looked at the slide, we had your core London and then Southeast opportunities at the end of the medium term, end of the 5-year period. If all goes to plan, how should we think about the split of revenue and profit between London markets and then your commuter belt or Southeast satellites?

Great question. We've talked about this actually literally just yesterday. So probably a good one for you again, Chris.

The focus will always be in that core London pocket. And then we see the satellite towns contributing to that. So we've not got a hard figure on that, Sam, but the balance is always going to be in that core London area, and there's opportunities to continue to build that. But these complementary markets will mean we've got a good, diversified business.

Thanks, Sam. At the front here.

[ Ben Keith ]. I've got 2 questions. The first question has kind of been raised, I think, a little bit by others as well. But I think more than 50% of the increase in operating profit in the new target comes from acquisitions, at least look like it on the chart. So the rate of those acquisitions is going to be critical in terms of achieving that GBP 15 million per year, I think the last question I sort of just touched upon this as well. I guess what scope is there for that to increase? And I guess that's a function of 2 things, the deals that are available, but also how those deals are being funded, be it free cash or debt? So if you wouldn't mind just touching upon that. The second question was around the expansion into the higher-end prime and super prime markets. And I'm wondering whether there is as much sort of benefits in your operating platform in terms of those markets because historically, that's not where your main volumes have been or your main client base. So these are new clients. And it could be potentially quite a capital-intensive exercise to build out a new prime offering if that's not really where the business has been historically? So just those 2 questions.

Great. Thank you for those. Ben, I'll ask Chris to take the first question around AOP from acquisitions.

No, you're right, Ben. Lettings acquisitions is a key driver, a large block in that profit build. It's around 40% to 45%. So not far off that. The deals are certainly available in the market. We often source these direct with seller. So that's a plus point and a real focus for us. When we are in a competitive tender with other buyers, we often come out on top. So it's always going to be an area of focus for us to make sure we can deliver. You could see from that fragmentation that absolutely exists. And this market, even though we started to see consolidation, there's plenty more to do. So we think the opportunity is absolutely there. From a funding perspective, all those -- all the numbers we gave earlier are funded through our debt facilities up to GBP 40 million expandable, sensible levels of leverage. And in those early years, yes, this year, I talked to GBP 15 million as a baseline, you can see that building up into GBP 20 million, GBP 20-plus million. And as I said earlier, if something came and it really had met our criteria that we can flex up. And as Guy said earlier, we can plan. We've got the pipeline, and we've got this phased out into future years. But sometimes deals drop and we have to move, and we've had a good example of that in the past. So when you look at all that in the round, I feel like we've got a good level of confidence to deliver that block of growth.

We certainly could have spent more last year if we'd had the opportunity given some of the opportunities that were coming at us. But of course, it's always about making sure we do the right deal, not just any deal, and we'll always be very disciplined in that fact. Again, looking at those super prime markets, the super prime market, even the prime market that if you can define it 1,000 different ways, but even if you just look at the market above GBP 2 million today because of the interest rate environment, because of the taxation, because of some of the changes in London, it's really tough going. We know that from conversations and from looking at the data that we see in the marketplace. We don't need or want to be dominant in that market. What we need to do is raise the average sales price by a small amount. And if we can do that through continuing to be dominant in that volume market and taking just a little bit more in that volume mid-market, say, up to GBP 1.5 million, we're gold. And that's exactly where we should be aiming for. And that will have a very quick drop-through down to profitability once we achieve breakeven. Thank you. Front here.

It's Michael Rapps from Converium Capital. I have 2 questions. The first is in terms of the acquisition strategy, do you have a preference for -- or what is your preference for the size of the acquisition? We've seen some of your competitors with their machine, they do an acquisition a week and one is a 60 lettings book individual and some are multi-branch deals. So how do you sort of think about the size and both in dollars or in branches or in contracts?

When we're initially looking to buy the hub, so let's assume we're looking outside of London now. That hub for us is really critical, where it is, what the market share looks like and then ultimately, what we're able to bolt on around the outside to drive those synergies. So that's critical. We don't mind doing smaller deals, but obviously, there's a point where it becomes too small for us to look at deals below GBP 1.5 million enterprise value, really, it starts to get a little bit marginal at those types of levels. Unless it's a really simple, really easy drop in book that we can see why it makes sense. And we may well do those perhaps within London where we've got the main opportunity. And we all know that last year, there was a lot of consolidation in London. There were some really big deals. Some businesses selling for over GBP 50 million. They would be deals that would really be a seismic change to our business, but we're ready when those opportunities come around if we've got the capital allocation to be able to go for it.

I want to build on Ben's question from a minute ago. So at the end of 2024, you had about GBP 12 million of net debt. And you had about GBP 20 million of adjusted operating profit. So your leverage was, call it, 0.6x. And you generate about GBP 10 million a year of free cash flow. So the first GBP 10 million of acquisitions you do is not adding to the leverage profile of the business. So if you did the GBP 15 million of acquisitions that you're talking about in the base case, so now your debt goes to GBP 17 million, call it, and your adjusted operating profit goes up a little bit above GBP 20 million. So the leverage build is very minimal as you add these acquisitions on. So my question is, isn't GBP 15 million of acquisitions not ambitious enough? Couldn't you easily be doing GBP 20 million to GBP 25 million a year without getting anywhere close to your leverage -- your max leverage target?

Again, it's something that's under constant review. And I think perhaps, Chris, you might want to talk about how we view capital allocation and what we think of it.

I think you summarized it well, Michael. And GBP 15 million is very much the base. And absolutely in this plan, to deliver this plan, we're talking GBP 20 million, GBP 25 million in year 3, year 4, year 5 of the plan. So it's a building plan. We are -- we take a sensible view on leverage. We don't want to overleverage the business, but equally now we are underpinned by resilient lettings revenue. So there's a balancing piece there. But it is an ambitious plan. It's suitably ambitious, and it will build.

At the back.

On the Lettings side, I'm just wondering how does retention of landlords compare once they've become part of the Foxtons Group versus how they were trending before?

Chris, another acquisition.

Yes. I may pass it to Gareth actually only because you're really on the cold face of dealing with acquired landlords. You know what it's like under Foxtons, how they respond to the brand and how we look after that relationship.

Gareth gets paid on this. He knows it quite well.

Trust me, I pay quite a lot of attention to this. So the honest answer is that we spend a huge amount of time on acquisition retention. We spend a lot of time on retention generally. And over the last 5 years, we put plans in place, both in terms of our senior leadership in lettings. All of them are rewarded on organic growth, and that only happens by retaining your clients. Now when it comes to acquisitions, we've learned some lessons over the last 5 years. 5 years ago, in early acquisitions, we had a bit of a marketing model of sort of welcome to the big green machine, which [indiscernible], lots of landlords didn't love. And we've sort of evolved it into much more of a sort of, excuse the cheese, but sort of same team now green. And over the sort of period of time leading up to it now, we've got a really dedicated communication strategy with those landlords. We go out of our way to effectively talk to every landlord that's in tenancy already. So the first point that we sort of deal with them is not at the point when they can walk away from us, and that's a big learning curve from previously. So we've probably learned both ways. We've learned from what we did with our organic book, people that are used to dealing with us. And then we've learned from what we've done with our acquisition book. And probably the final thing I'd mention is we're also very sensible about how we deal with those landlords. We honor their fee in perpetuity. So whilst we're a premium agent with a premium fee and we don't really budge on our fee, when we take an acquisition book, we honor their existing fees. So right from the start, both with the staff and with the clients, we deliver a message of you're going to deal with the same people, but you're going to get everything that Foxtons can offer with the same people you were dealing with before at the price you were paying before. So you're getting a deal that no one else can get because you were already in early, and that works very well for us in terms of our attention. Now we do allow for a little bit of attrition, as you'd expect, in both our organic and inorganic book. But if you allow for the fact that looking at our acquisitions as an example, we've also made GBP 3.5 million worth of sales fees from them. Where there is some attrition, we get the maximum sort of return out of it anyway to try and make sure that we're not losing anywhere really.

And what we often find is when we buy that new business, and we have all of this fantastic data that previously has really not been -- hasn't been prospected, we're able to drop that into our machine, into the prospecting team up at Chiswick Park, and get real value out of it from landlords who sometimes haven't been spoken to for 5 or 6 years by the original business that we bought. So there's definite upside beyond just that loss, it's about then trying to make sure that the net position is higher. And we've got lots of different ways of doing that.

So can you put a number on that? How does attrition in acquired businesses compare to before they were acquired and also to the rest of your organic group?

Well, in terms of attrition versus organic, it's fairly similar. Obviously, it differs slightly depending on the exact acquisition. In terms of how it compares before, I'll be completely honest, that is trickier, not because we don't monitor it, but because often these acquisitions don't monitor it. It's amazing how little some of these acquisitions, their data is sort of probably advanced for Joe Bloggs' estate agent of they record the key KPIs, but the attrition rate and things like that is just something that they don't look at. So we very quickly start monitoring it. And therefore, it aligns very similarly. And certainly, in my tenure and Guy's tenure, it's been a sole focus for us. But broadly, where they've been recording it, broadly flat.

Thank you. Perhaps over here, on the side.

It's Rupert from Zeus. Could -- just one for Imran. It seems that every week, there's a cyber attack of one sort or another. And you mentioned defense in depth. Could you just give the audience a bit of comfort or a bit more detail on what exactly it is you do to prevent that happening to you guys? And then sort of a half a question. Do you take 100% of interest on client monies? And if you do, do you think that's right in an environment where it's looking after the consumer?

Thank you. We protect against cyber attacks with a mature multilayered security approach. This includes robust access controls, continuous monitoring, regular pen testing and a lot of employee training. We adhere to industry best practices and compliance standards. We aim to align ourselves with ISO 27001 standard to ensure we stay ahead of these evolving threats.

Second question around client monies. I mean you might not recognize this or it might not be seen. There is actually a huge amount of work that goes on in the background and administering those funds, particularly when it comes time to hand them back. But you might want to talk a little bit more to that, Chris?

Yes. Yes, we do, to answer your question. And that's obviously with agreement with our clients. So that's well understood and very transparent. But as Guy said, there's an enormous amount of responsibility and compliance goes in that function. So it helps fund that and cover those costs.

Yes?

I thought all these sections are very good, but particularly interested in the customer lifetime value. I thought that was excellent. But the question isn't really for Fran, it's for Chris and you, which is, to what extent do you use customer lifetime value when you look at the value of a business like Ludlow Thompson that you bought? And even yourselves, if you were looking at, say, an acquirer that was looking at you, to what extent do you actually have an understanding of what the latent value within your business is?

Great question. I think for us, customer lifetime value really is a concept that is overarching for everything that we do. And actually, the first conversation that I had with Fran 2.5 years ago when we met was how can we drive a massive improvement in the customer service with the clients that Fran looks after within the remit of property management who are our most valuable clients. We know by the time we get to being able to look after and manage those properties for those clients, they are our most valuable clients. And we have got to make sure that in an industry that I think it is fair to say that the service levels in certain aspects of that property management across the industry might be a 5 out of 10, how do we get and build to a 10 out of 10. And that really was the initial conversation about bringing in tech and data to be able to really help test the pulse across every single journey point of that and how then we can start to measure it because before, it was a great concept. We didn't really have any proper way of measuring it, but also measuring the customer outcome and being able to test temperature at each of those different touch points. So even in areas where we thought we were great, we might not have been delivering a 10 out of 10 service. And in areas where we perhaps thought we were poor, we might have been outperforming the customers' expectation. And I think also a bigger mindset change, which is perhaps the industry and certainly at Foxtons, going back many, many years ago, had an absolute laser focus on the client. The only person that we wanted to constantly talk about building the value for was our clients, understandable, and that's absolutely how it should be. But we've also got to provide great service to people like our buyers and our tenants because as we've seen over a longer period of time, the value of those people that want renting from us, they become buyers, they become landlords and they become great clients of the business over a much longer period of time. We can measure it internally, and we've got value on as you've seen. I think when we're making acquired businesses, when we're looking at acquired businesses, it's much more difficult because we are literally picking up the live data that they're operating with that we're asking for and they're very basic KPIs. They don't have this forensic insight going really, really deep and certainly not looking back that we're able to do at Foxtons, thanks to the tech build that we have.

Sorry, just one more on the cost base, you mentioned the upcoming lease at Chiswick Park and possibly taking a bit less space. In a perfect world, would you take 0 space at Chiswick?

I was a little bit disappointed to find the length of the contract term when I took my position for Foxtons head office. I mean we get amazing value. As you've seen, when you come and see the energy, the output, that really intense version of what we do at Chiswick Park, there is amazing value to having our teams close together working. We do have vacant space in some of our offices. And in some offices, we have quite large vacant space, and we're looking as a project plan over the next 2 or 3 years as we get closer to the end of the term to really try to utilize more of that space and also having a rightsized mindset at the end of every lease opportunity. So when leases come up for renewal, we're always saying, right, is this still the required space? Is there a better location on the high street? Is it possible to amalgamate? And of course, when we're making bolt-on acquisitions as well, a number of times, we've actually closed huge offices and moved into the acquired smaller office to make sure that we're constantly looking at that bottom line. You might want to just talk a bit more about Chiswick Park.

Yes. I think Chiswick Park or version of Chiswick Park will always have a role to play the amount of value we get from it, those who have visited the head office. If you haven't, please do, and we can get that arranged. But there's enormous amount of value there, but it's just a way of evolving things. And Fran as an example, you may want to talk to it briefly, Fran, but you've got a number of property management hubs, which just shows that the property strategy is not just a single point place in London, it's more diversified and actually that helps you with the operations as well.

Definitely, it's quite an old-fashioned concept to think that certain functions, lettings operations, property management need to be based in branch or in London, even they could be based anywhere. So I will extend Chris' invite to Chiswick Park and ask you all if anyone would like to come up to Worcester, where we have 10,000 square foot of beautiful office space, and we're growing out a team of property managers and lettings operations individuals, it's fantastic. We're tapping into a new talent pool of people that are hugely grateful to have the opportunity. And clearly, the way that tech works these days and the shared objectives that we have between our estate agency branches and our back-office functions mean that really the teams pulled together and work incredibly well despite being a couple of hundred miles away from each other.

Yes, at the back.

So when you make an acquisition, do you have a template to reengineer the branch P&L, if you like, to sort out incentivization given outsourced functions, better productivity to make sure that those staff are kind of paid as they should be and everyone shares the benefits of coming into the group?

Definitely, it's always an individual review because obviously, every business that requires a different way of doing things. You're probably closest to that, Chris.

Yes. It's really, really critical to get these teams who are actually very excited to join Foxtons. You have a fantastic -- I might ask you, Gareth, just to finish off this answer because you deal with this on day-to-day. But that opportunity to come under Foxtons earn a different level of earnings that they had previously, have a different level of benefits they've had previously and ought to be really incentivized to grow their business. And actually, just responding to one of the questions earlier where why is Foxtons the favored buyer? Well, some of these sellers are retiring and therefore, stepping away from their business, but some of these sellers are actually still wanting to be involved in the business. So for those ex-business owners, they also see it as a way, well, how can I, myself, grow my earnings and my value going forward of this business I've grown with the help of Foxtons in partnership with Foxtons. So it's a really important piece. And we do that, probably Gareth, you set it out probably within week-1. And then within month 2 or 3, you've put that together, you brought them on to our incentivization schemes and perhaps just give a flavor for probably Watford is a good one of how the team responds.

Yes. I mean Fran and I in fairness go in, as Chris said, within the first week, normally within a couple of days of the acquisition being announced and the team being told, we tend to give them a data sort of taken into account, and we tend to go in very quickly after that. Again, a lesson learned from previous acquisition of sort of leaving it a little bit too long of a week or 2 is too much time for people to worry about things. Fran and I will then go in, in that first couple of days and basically eyeball everyone and speak to everyone individually because we've got a massive responsibility from a lettings-based business to retain the clients. You mentioned that earlier. So Fran will get under the bonnet immediately with the property managers to make sure that we have got the property managers on site. We know that if a property manager walks out the door with 20 years' experience, we're going to lose some of that book. So we take that hugely important to make sure that property managers are rewarded and in some cases, given retention schemes to make sure that they're still there 2, 3 years down the line. From a front office point of view and negotiator point of view, we're fortunate in the respect that whilst we honor their existing fees in perpetuity, there's growth in all of these businesses. So everything that we take on that's brand new and new to the business comes on at Foxtons fees, which on average is far higher. If you take Watford as an example, their average fee in lettings at the moment is less than GBP 2,000. Our average fee is more than GBP 5,000. So it doesn't take a rocket scientist when you're talking to the negotiator about the opportunity ahead. A lot of these businesses that we take, especially as you get slightly further out towards and beyond the M25 are very much used to a model of paying their negotiators GBP 50 a deal. And so it's very easy for us to incentivize negotiators. And you can sort of see almost immediately when you chat to them, not sort of their eyes light up. But they suddenly think, wow, look at the opportunity. Because we talk to them about the geography, about the ability that you currently have 7 properties to rent, but you will soon be neighbored by offices that mean that you have 35 properties to rent and you can rent anything anywhere in London. So the short version is, yes, absolutely, but that's a little bit of color behind what we do within the first week, and we reiterate that message again and again to hold on to the staff.

Great. Okay. If there's no more questions, I think we can conclude the day. Thank you very much for joining us. It's really been enjoyable to present the plan, and we look forward to sharing more of that with you as we progress over the coming years. Thank you.