Foxtons: lavish praise from investment chiefs despite profits fall

Foxtons has received lavish praise from investment consultancy Jefferies despite long-term share price worries reflecting its mixed performance in the troubled London housing market.

Earlier this month Foxtons reported to shareholders that in the year to the end of December its pre-tax profits fell from £41m in 2015 to £18.8m in 2016, with group revenue down from £149.8m to £132.7m and - worst of all - sales down 23 per cent to £55m thanks to what it called “a marked step down in activity in the second half [of 2016] following the EU referendum and stamp duty changes”.

“Should current sales activity continue through the remainder of this year, it is likely that 2017 sales volumes will be well below last year” chief executive Nic Budden warned the City at the time.

But now Jefferies has given a glowing new assessment of Foxtons’ chances, with a series of specific areas in which it has confidence.

“We admire the one firm, many branch mentality. Branch does not compete against branch, nor brand against brand and value of 'data' was recognised by the founder Jon Hunt back in 1981 before most of today's data scientists were even born” say Jefferies analysts Antony Codling and Sam Cullen in a note to the firm’s clients.

“Foxtons was also planning its digital strategy before most estate agents even had websites. It has a habit of being ahead of the curve. Oh - and did we mention it still charges fees of 2.5 per cent and has net cash on the balance sheet” they continue.

“Their current crop of digital initiatives are so leading edge, it isn't a case of Foxtons keeping up with the Jones's, rather the Jones's keeping up with them” the analysts conclude.

In a routine ‘health and safety’ warning, Jefferies’ note adds that the weakness is of course that the agency’s fortunes are explicitly linked to the strength or weakness of the London housing market, and therefore significant reductions in house prices and/or rents and housing transactions would negatively impact the agency’s performance.