Sector Report

Estate Agents Industry

Paul Whitney

Corporate Finance Director

Overview of the Market

The UK Estate Agent industry is estimated to be worth approximately £11.1bn with a growth rate of 1.0% per annum between 2014 and 2019. During this period, although the industry has grown slightly, revenue has been relatively volatile. The EU referendum caused a reasonable amount of uncertainty in the last couple of years and has resulted in a fall in demand, especially in the commercial sector as businesses and people hold out on purchasing property. Part of this fall has also been due to the overall increase in house prices. This trend is predicted to continue with an expected decline in revenue of 0.2% during 2018-19.

The growth of online property services has placed downward pressure on industry margins. These companies charge estate agents a fee in order to advertise properties on their site. This has resulted in margins being squeezed and has resulted in large industry players into creating their own site as a rival.

The number of residential property transactions in the United Kingdom is a key driver of estate agents' performance. Residential property transactions are estimated to account for 43.2% industry revenue. A rise in the number of transactions increases demand for the industry's services from this segment. In 2018-19, the number of residential property transactions is expected to decline.

Market Share

The two major players in the market are as follows (Estimated):

  • Countrywide Plc: 5.1%
  • Connells Ltd: 3.6%
  • Savills Plc: 3.1%

Estate Agents Companies

A profitability analysis on the sector from a pool of 1,500 leading UK-based Estate Agent companies revealed the following points:

  • The most profitable 656 companies benefitted from an average profit margin of 8.6%
  • The least profitable 844 companies made an average profit margin of 0.0%; the industry average is 1.7%
  • 454 of the companies increased in value over the year with 243 companies increasing by more than 25%
  • 601 companies decreased in value, 341 fell by more than 25%
  • 180 companies have made a loss for two consecutive years

Based on analysis, companies were rated on their ‘takeover attractiveness’. A total of 642 companies were given a ‘Strong’ rating whereas 405 companies were given the lowest rating, ‘Danger’. 526 companies in the industry were highlighted to be highly attractive takeover prospects. London was the most attractive region for takeover prospects.

M&A Activity in the Sector

Market IQ data indicates a total of 179 significant deals in the industry from January 2013 to October 2018, with UK targets. Deals are only reported over a certain value threshold (c.£500k), therefore, it is likely that not all deals have been captured.

Upon breaking down the deal type, M&A activity within the sector is mainly categorised by acquisitions, with 152 since January 2013. There were also 20 mergers and 7 management buy-outs. A geographical breakdown of the deals shows that the South East dominates M&A activity, benefitting from 29 deals in the time frame. London was the closest behind with 24 deals being completed. The rest of the deals are spread throughout other regions whilst slowly declining to Northern Ireland, with only two deals. The North West completed 22.

Deal flow has been significant in each year with a gradual upwards trend through 2013-2015, until growth slowed in 2016. Deal levels then continued to fall into 2017. This dip is characteristic of the uncertainty effect of the UK’s exit from the EU. Without the clarity that a deal will bring, UK businesses are highly likely to be risk adverse. This is justified further by the YTD 2018 figures, with 24 deals through September 2018, forecasting the same rate to the end of the year gives 28 deals. This would be the one of the lowest yearly rates in the data set.

Industry Benchmarking Information - September 2018

Hallidays' client base consists of small to lower mid-market enterprises. Our benchmarking analysis reflects businesses with turnover below £20m, in line with the majority of our clients in this sector.

Care Home Benchmarking Data Mean Median Lower Quartile Upper Quartile
Turnover Growth/Decline (%) 0.45 0.00 (11.45) 10.48
EBIT Margin (%) 12.84 12.72 1.07 34.09
EBIT Growth/Decline (%) 3.22 (1.94) (50.64) 72.06
EBITDA Margin (%) 14.91 14.34 2.85 38.11
EBITDA Growth/Decline (%) 3.27 (1.29) (47.53) 61.82
Total Net Assets Growth/Decline (%) 4.97 3.57 (15.17) 25.81
Current Ratio 3.65 1.46 0.85 3.26
Acid Test 3.57 1.44 0.80 3.11
Estate Agents Benchmarking

Using full company accounts filed in the last two years under the SIC-Code “6831 – Real estate agencies”, Excluding companies with nil turnover in either period, we have summarised key benchmarking information for businesses under £20m turnover in the table above. September 2018.

M&A Activity Source

Experian Market IQ (September 2018)
Search Criteria: SIC-Code “6831 – Real estate agencies”

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