Foxtons shares decline as Numis cuts 2016 earnings forecast

Foxtons shares were under pressure on Friday as Numis cut is full year earnings forecast after the real estate giant reported 42% drop in first half profit.

Pre-tax profit fell to £10.5m in the six months to the end of June from £18.1m the same period a year earlier. Revenue dropped to £68.8m from £71.1m. Adjusted earnings before interest, tax, depreciation and amortisation was £13.1m, down from last year’s £20.5m.

Foxtons blamed the uncertainty leading up to the European Union referendum on 23 June and the slowdown in sales following higher stamp duty charges on second homes and buy-to-let properties from 1 April.

"Uncertainty surrounding the EU referendum led to slow residential property markets in London during the first half of the year,” said chief executive Nic Budden.

“Although we achieved a Q1 revenue record due to a surge in property sales transactions in March ahead of the introduction of the stamp duty premium for buy to let properties and second homes, Q2 experienced a sharp contraction and we believe that the overall level of property sales transactions made in London during the first half of the year is substantially down on last year.”

Numis said Foxtons first half results are in line with the update given at the end of June. The broker now expects full year EBITDA of £27.4m, compared to a previous forecast of £30m.

However, Numis issued an ‘add’ rating from a previous ‘suspended’ and reiterated a target price of 145p, saying Foxtons is in a good position to weather a slowdown in the London property market.

“Whilst it is difficult to predict the future trends in the London housing market, Foxtons remains highly cash generative and we believe it will benefit when London sales volumes do recover from the current low levels,” Numis said.

It added: “We have set our target price based on a 6% yield for 2016, which should benefit from cost cutting and lower cap-ex and we believe the shares can move meaningfully higher once uncertainty lifts and volumes recover.”

Shares fell 6.77% to 115.60p at 0948 BST.