Sales growth in the estate agents industry

Property Management

ISSN: 0263-7472

Article publication date: 1 March 2000




(2000), "Sales growth in the estate agents industry", Property Management, Vol. 18 No. 1.



Emerald Group Publishing Limited

Copyright © 2000, MCB UP Limited

Sales growth in the estate agents industry

Sales growth in the estate agents industry

Keywords: Estate agents, Property profession

Sales growth in 1999 is going to be hard to find. In the best of times, the market average has only grown by a maximum of 14.1 per cent in 1997 and if the worst sales growth was 0.6 per cent in 1995, at what rate can the estate agents industry grow when the forecasts are decidedly pessimistic for this year? If you hope to get growth this year, it is going to be at the expense of your competition.

Most disturbing was that over a quarter of companies in 1997 in the estate agents industry did not grow at all. This compares to 44 per cent of companies with no growth in 1993.

Every year for the past six years, there has been, and still is, a band of companies who are beating this trend in terms of sales growth. Within the estate agents industry, 235 companies achieved 20 per cent or higher annual sales growth in 1997.

The fact remains that if sales come under pressure then profit margins start to be vital as companies seek to maximise resources. As the latest Plimsoll Portfolio Analysis - Estate Agents, 1st edition, 1999 can demonstrate, the growing trend in the industry has been surprising as pre-tax profit margins were at an all time low of - 0.1 per cent in1995 and yet have risen to 6.8 per cent in 1997.

Interestingly, 31 per cent of the industry failed to make a profit at all in 1997. This compares to 46 per cent of the industry in 1993.

Overall, average pre-tax profit margins have gone up by 5.8 per cent since 1993 with an average of 6.8 per cent in 1997. Yet in the upper band of companies in the estate agents industry, the average pre-tax profit margin in 1997 was 39.5 per cent. This is almost six times the industry average!

Gross profit margins for the majority of companies in the industry have remained relatively constant but costs seem to be going up year on year. Directors' fees and average remuneration per employee, for example, have both increased consistently over the last five years.

It is not the shareholders that are chipping away at pre-tax profit margins. Dividends as a percentage of sales have remained fairly constant year on year since 1993.

Because Plimsoll reports are based on individual companies, we can pick the average beaters; those companies moving the industry. As with any industry, there are those companies who manage to beat the averages. Plimsoll's report has found some terrific companies that year on year over the last four years have beat the averages in the estate agents industry:

  • 32 companies have grown at 5 per cent or more in terms of sales.

  • 56 companies have made over twice the average pre-tax profit margin.

  • 24 companies have increased salaries every year.

Conversely, Plimsoll has detected several companies who are pulling the averages down. Over the last four years in the estate agents industry:

  • eight companies have shown no growth at all.

  • 126 companies have shown a loss in pre-tax profit margins.

  • four companies are showing a fall in average salary.

Either set of these companies could be your key competitors. What is vital here is a means of finding amongst all these mixed messages what your key competitors are doing. Every company is unique, and therefore having a way to assess them individually is key in determining not only an industry overview, but an individual company overview as well. The Plimsoll Portfolio Analysis - Estate Agents, 1st edition 1999, gives the non-accountant a simple means of assessing a company's last four years of audited accounts as well as key ratios in determining a company's overall financial standing. The report analyses 1,602 individual companies in the estate agents industry. For more information on this report, contact Jennifer Ovington on (01642) 257800. Main report @ £305 or Supplement report @ £205. Readers of this publication can obtain a 5 per cent discount if mentioning this article upon ordering.

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