Foxtons Warns Of Tough Trading Conditions After Profit Plunge

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Foxtons on Wednesday warned of difficult trading conditions in 2017 after reporting a 54 per cent fall in profit for last year because of London’s slowing housing market.

The UK estate agency group recorded pre-tax profit of £18.8m for the year to December, compared with £41m in 2015, as Foxtons was hit by a drop in the number of homes in the capital changing hands.

Foxtons’ tough 2016 marked a change in fortunes for the company, which floated in 2013 and proved adept at spotting London districts set for gentrification during the housing boom.

Nic Budden, chief executive, said: “Last year’s London property market was severely impacted by an unprecedented sequence of events, with changes to stamp duty and the EU referendum vote leading to a substantial reduction in property sales transactions, especially in central London . . . We expect trading conditions to remain challenging throughout 2017.”

In contrast to 2015, Foxtons proposed no special dividend for 2016. This means total payouts to shareholders for last year, based on an ordinary dividend, are due to be 2p, down from 5.01p in 2015.

Foxtons’ shares were down 1 per cent at 97.25p in Wednesday trading, less than half the level at which they floated in 2013.

The slowdown in London’s housing market followed five strong years that sent prices to 56 per cent above their previous peak in 2007, according to Hometrack, which monitors valuations.

The market in central London began to falter in 2015, and the slowdown spread beyond the capital’s most expensive districts last year.

Analysts said it was hard to see prospects improving in the short term for Foxtons, given that unlike other listed estate agencies it operates almost entirely within London’s borders, although it does have two branches in Surrey.

Foxtons expects sharp drop in profits on London slowdown

Shares fall more than 4% as estate agent warns of challenging year ahead


“Unfortunately, Foxtons is bearing the brunt of the troubles facing the London property market,” said George Salmon, analyst at Hargreaves Lansdown.

“Considering the group’s gloomy outlook, it appears the uncertainty around the capital’s property market won’t be shifting in the short term . . . A return to the days of more generous [dividends] feels some way off.”

Revenue at Foxtons fell 11 per cent to £132m last year. The decline was driven by a 23 per cent drop, to £56m, in revenue from housing sales. Foxtons’ lettings business was more resilient, with revenue declining 1 per cent to £68m.

Mortgage revenue rose 7 per cent to £8.9m. Foxtons attributed the performance to a spike in new mortgage business as landlords and second homeowners rushed to beat a new stamp duty surcharge on additional properties introduced in April.

The company may suffer, however, from plans by the government for a clampdown on lettings fees charged to tenants.

Foxtons said it was “too early to tell” what the impact would be from a proposed ban on such charges.

Mr Budden said the company was focused on increasing its lettings business and adding to market share at its newer branches.

Foxtons opened seven new branches during 2016, bringing the total to 65, but average revenue per office fell to £2.2m last year, from £2.7m in 2015.

“We have a clear strategy through these challenging market conditions, but one which also seeks to capitalise on the long-term growth opportunity across London,” Mr Budden said.

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