OPINION: Savills, LSL, Belvoir, TPFG, Purplebricks and Foxtons. Shareholders take note

Russell Quirk
Russell Quirk

As willy-waving goes, the estate agency industry knows how to brag. Door-drops, window displays and newspaper ads festooned with pie-charts resplendent in the revelation that… ‘We, Bloggs & Co, have listed more homes for sale in a nine-and-a-half-day period than agent A, agent B and agent C’. Whoopee! This is bound to have potential home sellers salivating at the prospect of enlisting the super-powers of Bloggs & Co as their selling agent. Size matters after all, it seems.

In the corporate estate agency world the same applies but more in pure financial terms especially for those companies listed on the stock exchange – the ultimate distributor of shareholder wealth but with the sting that being public, more leg has to be shown in their numbers in order to satisfy the scrutiny of institutional investors. And so those pie-charts make their way into expensive yearly and half-yearly results presentations that are spun to within an inch of the truth to show off the CEO’s prowess on the important metrics of revenue growth, profit and cost control.

There are a number of listed estate agency businesses and these include Savills, LSL, Belvoir, The Property Franchise Group (Martin & Co, CJ Hole, Hunters, Ewe Move), Purplebricks and Foxtons. All these entities have hustled investment funds from institutions, pension funds, asset managers and high net worth individuals that invest on the basis of a return. This return takes the form of share price growth and dividend, the yield that each company distributes as a portion of profits each year as a return on investment.

Let’s look at how some of these PLCs have fared in the last five years and whether there’s anything compelling to take from the outcome (you know there’s going to be, right?). And incidentally, for share price also read ‘company value’ because, simply, the higher the share price the higher the market capitalisation (value) of the companies.

It turns out, as you’ll see, that the six can easily be split into just two groups. Let’s call them the ‘Haves’ and the ‘Have Nots’ in that one group has performed, the other has not.

First, the ‘Haves’:

  • Savills has a share price of £13.34. This values them at £1.91bn
  • LSL Property Services, owners of Reeds Rains, Marsh & Parsons and Your Move has a share price of £4.17 and a value of £438m.
  • Belvoir has a share price of £2.42 and a value of £90m.
  • TPFG has a share price of £2.63 and a value of £85m.

What’s interesting about this clique but perhaps not that surprising is that their company values have risen sharply in the last five years.

  • Savills is worth 98.5% more now than in 2016.
  • LSL 108% more.
  • Belvoir 124% more.
  • TPFG 114% more.

Some, Savills for instance, are riding at pretty close to their peak all time value and LSL and TPFG are not that far off.

Then we come to the second batch of businesses, the ‘Have Nots’ – Purplebricks and Foxtons.

Now, I’ve been pretty hard on both of them in my writing over the last year or two and that’s because, in my opinion, they are not the companies that they should be and, well, the numbers themselves rather validate my opinion….

Purplebricks has been hammered of late and the reasons are well-documented and increasingly apparent as more and more soiled washing is aired around their performance. Purplebricks’ share price is now just 26 pence, down 75% from it’s 2016 level but down 95% from its peak in July 2017. From a market cap of over £1bn it is now worth £81m and in my view vastly overvalued at that.

Then there’s Foxtons, the once respected and revered ‘London Agent’ that went from one branch in Notting Hill under Jon Hunt to a £1bn business in 2014 but a few years later is consigned to a fraction of that former weight given a catastrophic share price slide from a peak of £4.00 to just 40 pence last week. In five years alone it has lost 59% of its worth.

Against a backdrop of their peers’ performance Purplebricks and Foxtons have fared poorly – very poorly and whilst the backroom financial PR wizards concoct mitigation and explanation for such, the fact remains that both are a shadow of the benchmark set by Savills, LSL, Belvoir and TPFG.

For those interested in facts (not everyone is, some prefer pointless anecdotes and rhetoric), my good friend Christopher Watkin crunched the following data recently and which explains the plight of Foxtons…

In 2013 Foxtons’ market share of London sales was 5.47%. By 2020 that had almost halved to 2.3%. This, bear in mind, is totally relative to all London agents and there can be no excuses for the London market being ‘affected by x, y or z’ where comparative market share is concerned. FACT: Foxtons have lost 50% of their presence in the London market.

Commercially, some sliver of mitigation might be found in the fee income being achieved. In other words, if performance has halved this could be partly countered if fees had doubled – albeit it wouldn’t in itself justify the loss of overall sales that have disappeared into a Chiswick sink-hole.

Alas, Foxtons’ fee has also dropped relative to its 2013 performance. Whilst its sales fee in pounds is slightly higher now by 9.8% at £13,400 compared to £12,200 seven years ago, London house prices over the same period have risen by 29%. Therefore Foxtons’ fee performance has weakened considerably – outpaced by about 20% to market.

What can we take from all this? Well, there’s obviously a clear problem with two of these companies in performance terms – they’re going backwards.

But the common denominator? The ‘haves’ are run by experienced estate agents. The ‘have nots’ are…. not.

You can join the dots from there. Their shareholders should certainly now do so.

Russell Quirk is Co-founder of ProperPR and a regular commentator on the property market and industry.

 

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7 Comments

  1. JonnyBanana43

      Interesting piece Quirky, and I must say, this piece is probably the most interesting one you’ve ever written.   I invested heavily in Savills after Rishi’s stamp duty bonanza – it certainly has performed well – I also put a bit of money into Winkworth – after a bit of a story/tipoff here on PIE… I have made 20% on those shares. I don’t know the London market well enough… But certainly I think now might be a good time to invest in Foxtons – surely they can’t get much lower?!!

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  2. Whaley

    You had me at ‘willy waving’

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    1. aSalesAgent

      It’s Monday morning, and I’ve not finished my first coffee — far too early to be reading “willy-waving.”

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  3. Mrlondon52

    Yes, this is old news or at least old copy Russell.

    I own shares in Foxtons, Savills and Winkworth, hence am long on all of them.

    Foxtons has a cracking business but the dependence on sales income has kippered them over the past 5 years as lower sales led to zero profits. Which doesn’t look good. Over the next 5+ years it will become more and more lettings dominated and valued more by the stockmarket. My guess is that the chairman / ceo are not articulating the story well enough to city institutions. Plus, lots of city funds got their fingers burned with CWD so other than savills which property-related firms do they want to invest in? Yes, the answer is…. Rightmove 🙂

    Savills is a global commercial property adviser with a small resi bit on the side which acts as a halo and gets people on this site all excited.

    Winkworth is a small business (the listed co only gets a sliver of the franchisees income) but slow can be steady and I like firms built on rock not sand.

     

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  4. henrymarr80

    I think the issue with Foxtons is deep set in their loss of culture within the business. Dexters and to a degree Chestertons have taken a large chunk of their market share that they’ll struggle to get back

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  5. UKisgreat

    How very misogynistic. Dreadful piece of journalism. I would have thought there is not place for ‘willy waving’ 2021!

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  6. Diogenes

    If ever there was an expert in hustling for investment…..

    the companies listed provide dividends at least.

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