Foxtons continues to struggle

Foxtons Mini
Foxtons: not so flash and brash these days

Foxtons, the estate agent, is having a terrible time of it – investors should steer clear.

Foxtons estate agents (LSE: FOXT) has acquired a reputation for being flashy and a bit brash. Unfortunately, while this may have paid off in the days of the property boom, the approach hasn’t translated into as many sales over the past few years.

Having reported in February its first full-year losses since going public in 2013, Foxtons’ first-quarter results for 2019 made for similarly gloomy reading when the company reported this month. The number of houses sold was at “record-low levels”, which was put down to Brexit uncertainty dampening consumer confidence (though we tend to think the slowing of the UK housing market is more down to the government’s crackdown on the buy-to-let sector, which has made it a far less appealing investment prospect).

Total revenue for the first three months of the year was £23.8m, from £24.5m in the first quarter of last year. While sales revenue was down 13% (from £8.2m in 2018 to £7.1m), lettings revenue was up 2%, from £14.3m to £14.6m.

The market was not impressed – the share price fell by 5%, and is now down a staggering 84% from its March 2014 high of 363p, although still off the lows of summer 2018.

As well as reporting uninspiring results, Foxtons has also recently come in for criticism for awarding chief executive Nick Budden and finance chief Mark Berry bonuses totalling £389,000 for 2018, up from £371,000 the year before. This came despite the fact that 22% of Foxton shareholders voted against the remuneration package. It was then announced last week that Berry was set to leave the business at the end of July, “by mutual agreement”.

At the moment, Foxtons doesn’t look like an appealing investment. The estate-agent sector as a whole has struggled over the past few years, due to the prolonged slowdown in the housing market. However, Foxtons may have been affected particularly badly because of its specialisation in high-value London property. It’s not just about Brexit uncertainty and the ailing buy-to-let market; luxury property from New York to Sydney has been struggling as governments become less welcoming to ultra-wealthy overseas investors.

Don’t rush to buy

Analysts have taken a slightly more optimistic, if somewhat resigned, view on Foxtons. “The London market is still as difficult as it has ever been, but those numbers suggest it’s not getting a whole heap worse,” says Numis. And “while near-term earnings momentum remains weak, Foxtons remains well placed to benefit from a market recovery”, said Berenberg. That is all very well – but it assumes that a recovery is on the horizon. Given its disappointing recent performance, its decision at the beginning of the year to axe its dividend completely, and the fact that we wouldn’t bet the house on an imminent revival in the property market, we would suggest investors continue to steer clear of Foxtons for now.