London-based Super Agency Foxtons announced that revenues declined by a staggering 34% last quarter (Q3 ’16).
The business, founded by Jon Hunt in 1981, said the results reflected “a continuation of reduced activity in the London property sales market”. Their shares have also taken a bashing, down nearly 50% year to date and a monstrous two-thirds since they floated in 2013.
These painful results come hot off the heels of CEO Nic Budden issuing a profit warning in July, blaming the groups dwindling profits on Brexit fears and the restrictive changes in stamp duty. The lettings business didn’t fare too badly, there was lower demand for homes to rent but renewals meant revenues were flat at £22.6 million.
In April this year the Foxtons board upped Budden’s salary to a healthy £550,000. His total pay packet including bonuses could hit a juicy £2.3 million, which would amount to a 700% increase on the £327,00 he received in 2014.
Budden hit back to the market with a clear message, “we have built Foxtons to withstand sales market cycles with our lettings revenue comprising over half the business.”
City analysts don’t seem entirely convinced.
Gavin Jago at brokerage house Peel Hunt looked beyond Brexit and stamp duty, saying that the high commission fees “remain a concern” when compared with emerging online competitors Purplebricks and eMoov.
Foxtons have developed a fantastic business model, but their most recent flop is too easy to blame on market conditions and regulation – the two ever-present constraints on growth. Instead of claiming to be diversified by having a lettings and sales business, DMZ suggests they look to incorporate more PropTech to their services.
Time-saving solutions, like Splittable, which allows flatmates to split and track all their bills could prove extremely popular with Generation Rent. Ex-Foxtons agent Richard White raised £2 million in funding this year for his rental management platform Goodlord, which smoothes the moving in process for renters by allowing them to transfer deposits and sign tenancy agreement using only their mobile phone.
The real PropTech holy grail is a blockchain conveyancing solution for buyers, supposedly not far away the technology will be a game changer for the sales market. In an increasingly fragmented market, any of these solutions could give the Foxtons an edge over other agents if offered as part of the fee.
Foxtons has been at the cutting edge of London Real Estate for years with their branded minis, lively sales culture and record-breaking deals. However, if they don’t fully embrace the ongoing changes in Real Estate we fear for their long-term future.