Foxtons’ shares fell almost 11% yesterday after the estate agency said the introduction of the Renters’ Rights Act had reduced first-half earnings by up to £3m.
The London-listed firm said the legislation, which abolished fixed-term tenancies and gave tenants greater flexibility to end agreements, had led to a marked increase in tenancy terminations, weighing on short-term earnings.
In a trading update Foxtons said it expects adjusted operating profit for the first half of the year to be around £8.5m, down from £12.3m in the same period last year. The company also said residential sales remained subdued amid political uncertainty, conflict in the Middle East and higher borrowing costs.
In response, Foxtons introduced cost-saving measures expected to deliver annualised savings of £4.5m, including a targeted efficiency programme and the relocation of its headquarters.
Despite the short-term impact, the company said it expects demand for professional lettings and property management services to increase over time under the new rental legislation.
Foxtons has narrowed its full-year adjusted operating profit guidance to between £17m and £19m, with performance expected to improve in the second half as seasonal lettings activity strengthens and tenancy termination rates begin to normalise.
The company’s shares closed at 39p, down almost 11% on the day and close to half their value at the start of the year.
Comments (2)
“What was presented as growth often looked more like financial engineering. Acquiring independents allowed corporates to report rising revenues while the underlying market deteriorated. Eventually, however, gravity reasserts itself and the difference between organic growth and acquired growth becomes painfully obvious.”
Oh dear!
How sad!
Never mind!