Foxtons cancels its special divi as profits plummet on Brexit worries
Foxtons was bearing the brunt of its decision to focus on the London market today, after profits fell 42 per cent.
In a statement this morning, the estate agent said pre-tax profits had fallen 42 per cent to £10.5m in the six months to the end of June.
Revenues fell 3.1 per cent to £68.8m, net free cash flow almost halved, from £12.9m last year to £6.8m this year.
If ever there was evidence for pre-referendum jitters hitting the property market, this is it: sales revenue fell seven per cent to £31.3m, while transactions fell 10.2 per cent, to 2,314.
Meanwhile, lettings revenue fell 2.7 per cent to £32.6m, and the number of units it let fell 11.5 per cent to 9,127.
That led the company to scrap its special dividend for the year. Foxtons shares were down six per cent at 116.5p in early trading.
Why it's interesting
Foxtons' minis may be a familiar sight on the streets of the capital – but not so much in the rest of the UK. Now the company's decision to focus in the capital's high-end areas is coming back to bite: figures published by LonRes earlier this month showed transaction volumes in prime central London are now lower than they were in 2008.
Part of that is undoubtedly thanks to the previous chancellor's attempts to cool the market. At the beginning of April, new rules came into effect which hiked stamp duty on buy-to-let homes, causing a rush just before the deadline – and things have been rather quieter since.
But by far the biggest factor was pre-referendum jitters. Although it had a record first quarter (thanks to aforementioned stamp duty changes), it said it expects Brexit to lead to a "prolonged period of further uncertainty".
"Expanding in a contracting market is proving even too difficult for Foxtons and growth plans are being reviewed," said Anthony Codling, equity analyst at Jefferies International.
"The dividend cut, while not welcome, is a reflection of the negative impacts of operational gearing during a downturn.
"The stock market value of Foxtons is less than that of the challenger low cost estate agent Purplebricks, which has yet to turn a profit, recently delivering a full year loss of £11.9m."
What Foxtons said
Chief executive Nic Budden said:
The result of the referendum to leave Europe is likely to lead to a prolonged period of further uncertainty and we do not expect London residential property sales markets to show signs of recovery before the end of the year.
Putting all its eggs in London's basket has not paid off for Foxtons.