Foxtons Profit Slumps as London Housing Market Cools--Update

By Art Patnaude and Tapan Panchal 

LONDON--A weaker London housing market has pushed down profits at Foxtons Group PLC, one of the U.K. capital's biggest property brokers.

The London-focused real-estate broker on Friday reported pretax profit in the first half of 2016 of GBP10.5 million ($13.8 million), 42% lower than the same period last year. The firm blamed uncertainty created by Britain's referendum over its European Union membership in June.

Foxtons shares fell 8.5% Friday to 113.5 pence, down 53% from 12 months ago. The company dropped out of the FTSE 250 index in December because of deep share-price declines.

The decision to leave the EU will continue to hit profits through the rest of the year, the firm said. U.K. property brokers Countrywide PLC and LSL Property Services have also said their 2016 profits would be lower than last year due to Britain's vote to leave the EU.

The U.K. housing market had cooled this year ahead of the referendum, with buyers and sellers pausing amid uncertainty over the outcome. The weakness was most acute in central London.

The leave vote has created fresh uncertainty, with the U.K. now needing to negotiate the terms of its exit, a process that could take years.

Amid a lack of clarity, "we do not expect London residential property sales markets to show signs of recovery before the end of the year," said Nic Budden, chief executive at Foxtons.

The high-end housing market in central London, where Foxtons has historically focused its business, has been cooling since prices peaked in the summer of 2014. Government tax hikes and years of strong price gains turned off foreign investors that were also contending with market volatility and low oil prices.

To combat the slowdown, last autumn Foxtons announced plans to ramp up its business in the suburbs, where it would open new offices.

The company is now reviewing those growth plans, "and may slow the pace of expansion in response to market conditions," Mr. Budden said.

"Expanding in a contracting market is proving even too difficult for Foxtons," said Anthony Codling, equity analyst at Jefferies International, in a note to investors.

The company maintained its interim dividend at 1.67 pence per share and decided not to pay a special dividend. In the first half of 2015, Foxtons declared a special dividend of 3.10 pence per share.

The weak results were largely expected, but the "lower dividend and some greater than expected lettings weakness is an incremental negative," said Heidi Richardson, analyst at Swiss lender UBS AG in a note.

Write to Art Patnaude at [e-mail] and Tapan Panchal at [e-mail]

(END) Dow Jones Newswires

July 29, 2016 07:35 ET (11:35 GMT)

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