On the surface, Foxtons appears to have had a decent year. Revenues for 2014 were up 3.4% to £143.9m, while profits rose 8.2% to £42.1m. As Foxtons boss Nic Budden pointed out, however, 2014 was a year of ‘contrasting halves’.
The first was categorised by a dramatic boom in London, where Foxtons conducts much of its business. Profits for its first half were well up on 2013, at £23.1m. The second half was characterised by tighter mortgage lending rules, a mansion -tax-esque stamp duty reform and the deflation of the bubble. Indeed, the latest Nationwide figures indicate London prices in fact fell 0.2% in January.
A little tap on the MT calculator shows that Foxtons’ pre-tax profits fell 21.5% in the second half compared to the same period in 2013, to £19m. Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) was even worse, falling 29.5% to £21.3m.
Budden doesn’t appear to see things improving this year, blaming the election for creating doubts about the economy. ‘We expect property sales activity to remain subdued at levels comparable to those seen in 2012 and early 2013 until greater political and economic certainty returns,’ he said, adding that ‘the long term fundamentals of the London market remain sound and attractive’.
He has a point there. London may be suffering the hangover from its earlier boom, but the underlying cause of high demand and therefore price growth remains strong – the capital pulls people from across the country and the world and will continue to do so, eventually boosting prices.
Unless UKIP somehow win the election and close the borders, of course, but somehow it seems doubtful that’s the political uncertainty to which Budden was referring. A Tory win and EU referendum, on the other hand...