Foxtons warns London’s housing market is in the midst of a ‘prolonged downturn’ after slumping to £17m loss
- Foxtons slumped to pre-tax loss of £17.2m last year, down from £6.5m profit
- Sale numbers fell to ‘record lows’, with revenue down 5% to £111.5m
Foxtons slumped to a pre-tax loss of £17.2million last year, down from a profit of £6.5million the year before.
The London-based estate agent’s shareholders will not be receiving a dividend for 2018, after pocketing 0.7p a share for the year before.
With sales plunging to ‘record lows’ amid ‘weakness’ in the London property market, the estate agent’s total annual revenues fell from £117.6million to £111.5million.
Losses: Foxtons slumped to a pre-tax loss of £17.2million last year
Gary Watts, the group’s chairman, said: ‘The London sales market is in a prolonged downturn and the current uncertainty surrounding Brexit is clearly impacting consumer confidence.
‘We are managing the business to reflect this and ensure we are well prepared for any change in market conditions.’
The group added: ‘We continue to have excellent coverage in London which, in the long-term, is a highly attractive property market.’
Foxtons said annual sales fell 5 per cent to £111.5million, with the weakness in property sales being offset slightly by a ‘resilient lettings performance.’
The estate agent was pushed into the red by one-off charges of £15.7million, which included the costs of closing six sites in Beckenham, Enfield, Loughton, Ruislip, Park Lane and Barnes.
Foxtons said it was able to cover 85 per cent of London’s housing market from 61 branches and had no current plans for further closures.
Reach: Foxtons said it was able to cover 85 per cent of London’s housing market from 61 branches
Tom Stevenson, investment director at Fidelity Personal Investing, said: ‘The estate agency business is all about volumes. Once you have covered your basic fixed costs, every extra sale is basically profit. This is great in a rising market with lots of transactions. In a falling market, when sellers are in short supply it is a disaster.
‘Foxtons’ full year results reflect the awful arithmetic of its business model. A 5% fall in annual revenues – all of it from the sales part of the business as lettings and mortgages held up – was enough to wipe out profits. The dividend has been scrapped.
‘With Brexit uncertainty set to continue for even longer, the company has fallen back on bromides about how attractive the London property market is. Shareholders will ignore that and wait for people to start buying and selling again.’
Sales in the group’s lettings arm rose by 1 per cent to £67million, with the firm viewing the sector as having ‘good long-term fundamentals.’
Looking ahead in the lettings market, Foxtons said: ‘We anticipate the implementation of the Tenant Fees Bill in June 2019. Internally management has been focusing on how best to mitigate the impact of the ban in various scenarios and we will update the market in due course of the actions we propose to take.’
Nic Budden, Foxton’s chief executive, said the group plans to focus on ‘cost control and appropriate investment to improve efficiency.’
Foxton’s share price is down 0.9 per cent or 0.55p to 60.65p.
Speaking to This is Money, buying agent Henry Pryor, said: ‘Many competitors will be smirking at the apparent car crash results this morning but these are not untypical of the industry and it’s only because they are a listed company that they are forced to wash their dirty linen in public.
‘The truth is that most London agents are feeling the pinch, fee laid down enough fat during the good times to survive the inevitable downturn when it came and there are agents in far worse shape than Foxtons.
‘They remain a powerful brand in the Capital with very capable people and I’m still much happier to recommend a client uses them to sell their property than hoping to buy from them. Those writing Foxtons off are doing so prematurely.’
Figures published by Nationwide today reveal that the average cost of a home fell by 0.1 per cent month-on-month, with prices over the course of the year rising by just 0.4 per cent.
Housebuilder Telford Homes issues profit warning
AIM-listed London-focused housebuilder group Telford Homes has issued a warning over its annual profit.
The group has cut its annual profit forecast by at least £10million to around £40million amid slower-than-expected sales and margins pressured by incentives.
Telford also forecast continued impact on sales rates and margins in 2020.
To offset the hit, the London-focused homebuilder said it plans ‘even greater focus’ on build-to-rent, with an ever-increasing proportion of Londoners renting.
‘We continue to view build to rent as being the future of increasing housing delivery in London’, the company said.