Wednesday, 6 November 2013

Foxtons pulls its punches on London outlook

London is supposedly the hottest housing market in Britain and supposedly no one knows it better than Foxtons, the capital’s estate agent über alles. So stock market observers may have been perplexed at seven this morning with the remarkably circumspect market comments of the newly-IPO’d group’s maiden IMS.

The group remains confident about prospects for the rest of the year, to December (it would be astonishing if it didn’t, having floated only several weeks ago): total turnover was up 18%, with revenues from property sales 29% higher.
But the group, which is focused overwhelmingly on the capital and its environs, did “not expect to see a significant upturn in London property sales transactions”.
A bit strange given the view expressed by many observers ahead of the float (myself included) that its focus on the (supposedly) flourishing London market was Foxtons’ Unique Selling Point.
Transactions, the statement explained, have “remained relatively flat due to a shortage in the supply of property for sale and low mortgage availability”. Furthermore, “it remains to be seen whether the Help to Buy initiatives and early signs of a pick-up in mortgage activity ultimately lead to a significant increase in market volumes but these dynamics are expected to materialise slowly".
There was also a hint of reticence about margins. EBITDA margins for the nine months to September were up to 36.0% from 33.2% a year ago, reflecting the operational leverage associated with the higher revenue so far. But margins for the final quarter would be lower, reflecting two new branch openings, at Crystal Palace and Twickenham (along with the attendant Minis) and the “higher on-going costs of operating as a listed company”.  There was no “granularity” on how the margins had progress during the three quarters so far this year.
Shares dipped by over 5% following the statement but recovered ground by midday, suggesting management had soothed any concerns. But with shares up 37% since the IPO in September, investors will be keeping their fingers crossed that the tone of the next statement more faithfully reflects the ebullience of the group’s flashy sales offices and racy Minis.

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