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Foxtons dives into the red as London housing market remains subdued

Demand for rental properties remains high but had little impact on average rental prices as the supply of rental properties has returned to more normal levels.
Foxton's mini
Where's reverse gear?

It’s hard to believe that it is possible to make a loss selling houses in London but Foxtons Group PLC (LON:FOXT) has managed it.

The little-loved estate agency posted a loss before tax of £2.5mln in the first half of 2018 compared to a profit in the same period of 2017 of £3.8mln.

READ: Foxtons still facing tough conditions in London despite recent pick-up in the sales pipeline

The group’s adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was positive – just – at £100,000, compared to EBITDA of £7.1mln the year before.

Nevertheless, the company opted not to recommend an interim dividend, having paid out 0.43p per share at the halfway stage last year.

The debt-free group had net cash of £11.8mln at the end of June, up from £10.6mln at the end of 2017.

Revenue in the period declined to £53.0mln from £58.5mln as a resilient lettings performance was offset by ongoing weakness in the London sales market.

Revenue from the lettings business eased 1% to £31.7mln, with the group seeing an improved performance in the second quarter.

Revenue from facilitating property sales slumped 23% to £17.2mln. The first quarter saw a year-on-year decline of 27% and the second quarter a decline of 19% so things are getting worse more slowly.

The under-offer pipeline has improved substantially compared to the beginning of the year, resulting in a closing level broadly in line with the prior year, Foxtons revealed.

"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.

“The property sales market in London is undergoing a sustained period of very low activity levels with longer and less visible transaction outcomes, which clearly impacts our business. We continue, however, to achieve market-leading share of listings giving us confidence that our service led, the 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,” said Nic Budden.

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

Neil Wilson at markets.com said lettings were “OK but revenues still fell by 1%”.

“Sales are the real problem as the exodus of buyers in the wake of the Brexit vote continues, while higher stamp duty is biting,” Wilson noted.

“Chief executive Nic Budden finds comfort in London’s ‘strong fundamentals as a global hub’. So he won’t be pleased to see Deutsche Bank moving half of its euro clearing out of the capital to Germany,” Wilson observed.

Shares in Foxton’s were unchanged in early trading.

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