Foxtons’ earnings suffer as London property market slows
The revenue squeeze was driven by falling sales volumes in the first quarter of 2017.
Estate agency Foxtons is facing a hefty drop in annual revenues and earnings after grappling with a London property market slowdown and the fallout of a stamp duty hike in 2016.
The group said full-year revenues were set to tumble 12% to around £117 million for the year ending in December, with earnings also sinking 39% to £15 million over the period.
The revenue squeeze was driven by a sharp drop in sales volumes during the first quarter of 2017 compared to the year before when buyers rushed to finalise transactions ahead of a stamp duty rise on buy-to-let properties and second homes.
Efforts to tackle its costs base also saw the firm book a £2 million non-recurring charge.
Despite the financial pressure, investors struck an optimistic tone, with shares rising close to 4% in morning trading on the London Stock Exchange.
Chief executive Nick Budden said the performance was “solid” given the firm was tackling “ongoing challenging conditions” in the London property market.
He said: “Looking ahead, we expect trading conditions to remain challenging throughout 2018.
“We are well placed to withstand these conditions due to our strong balance sheet with no debt, and we will provide an update on a number of strategic initiatives which we have been working on at our preliminary results presentation on February 28.”
Foxtons, which was founded in Notting Hill Gate in 1981, said annual sales revenues were down 23% to £42 million, with lettings revenue also coming in 3% lower at £66 million in response to the “downward pressure on rents”.
It said the group’s cash performance was strong at around £18 million for 2017, up from £9.5 million the year before.
Focusing on the fourth quarter, revenues edged down by £2 million to £24 million for three months ending in December, compared to 2016.
Peel Hunt analyst Gavin Jago said: “The outlook remains challenging with little or no uplift in transactions expected in 2018.
“Headwinds remain for the lettings business, albeit the timing of the implementation of the Government’s lettings fee ban has been pushed back to 2019.
“When it comes into force, we are forecasting around £3 million profit impact from the fee ban, largely offsetting ongoing cost-cutting measures.”