Foxtons blames property market as it swings to loss

The London-listed company said adjusted EBITDA fell to £0.1m from £7.1m, while it swung to a loss before tax of £2.5m from a profit of £3.8m a year ago.

It said the decline in profitability was driven by lower revenue in the sales business, and additional planned investments in people, brand and technology.

The lettings business reportedly continued to demonstrate resilience, with revenue of £31.7m down 1% compared to the same period last year, and with apparently improving second quarter performance.

Sales revenue was £17.2m, down 23%, which the board said reflected continued market weakness due to lower sales transactions.

Revenue at its Alexander Hall mortgage business was £4.1m - down 3% - which the company called a “solid performance” driven by re-mortgages.

Foxtons said it maintained a “strong” balance sheet, with no debt and cash balance of £11.8m as at 30 June.

The board said there would be no interim dividend for the period, in line with its policy.

On the operational front, Foxtons talked up its “strong” single brand, “clear” proposition and “exceptional” service as continuing to drive listings.

It maintained its market listings position as number one in both sales and lettings, the board claimed.

It said it made ongoing improvements to its My Foxtons proposition, including a tenant issues tracker and an app, which were both apparently well-received.

The board said its focus was on efficiency, with its marketing spend refocused towards digital channels, reducing the cost of acquisition.

“As expected the weak sales market impacted our performance in the first half of 2018,” said chief executive officer Nic Budden.

“After a slow start to the year, performance in our lettings business improved throughout the period delivering another consistent result for the first six months.”

Budden said the property sales market in London was undergoing a sustained period of “very low” activity levels, with longer and less visible transaction outcomes, which impacted the Foxtons business.

“We continue, however, to achieve market leading share of listings giving us confidence that our service led, results based model remains highly relevant to consumers.

“Going forward we will continue to invest in our proposition to enable us to maintain our differentiation in the minds of buyers, sellers, landlords and tenants.”

Looking ahead, Budden said the availability of mortgage finance, absorption of stamp duty costs, and the return of confidence to the market would, among other factors, determine the timing and rate of increased activity levels.

“London though remains an important global city,” he said, adding that the Foxtons franchise was well-known and remained debt-free.

“Our ability continuously to improve quality, adapt our business models to underlying shifts - such as the expansion of digital capability and institutional investment in the private rented sector - and keep a tight focus on operating costs puts us in a strong position to benefit both from the momentum in our lettings business and to capitalise on increased sales activity as it returns.

“We remain confident of our long term prospects.”