23rd Oct 2014 09:07
LONDON (Alliance News) - Shares in Foxtons Group PLC plunged on Thursday after the company said its third-quarter performance had been hit by a sharp slowdown in London property sales volumes over the period, adding its expectation that market volumes will remain constrained for the second half has forced it to downgrade its earnings forecast for the year.
The company's shares collapsed in morning trade, down 15% to 174.00 pence to make it easily the worst performer in the FTSE 350.
The FTSE 250-listed estate agency said its performance in the third quarter to September 30 was hit by a slowdown in London property sales, coming after an "exceptionally strong" period in the nine months to June 30, when it said volumes hit the highest levels since 2007. It said market volumes in the third quarter were more in line with the first half of 2013 and said it now expects the second half of 2014 to see a significant fall in volumes year-on-year.
Group revenue for the third quarter was down to GBP39.9 million from GBP41.1 million a year earlier. Revenue for the nine months to September 30 remains above the year before, at GBP112.7 million against GBP103.7 million in 2013.
But the group said its adjusted earnings before income, taxation, depreciation and amortisation for the third quarter fell to GBP14.2 million from GBP18 million last year. While EBITDA for the nine months to the end of September is up, to GBP39.2 million from GBP37.3 million a year earlier, the group said it expects the weakness in the London market to remain in the short term and so expects its full year EBITDA to be below its previous forecast of GBP49.6 million.
Its adjusted EBITDA margin for the third quarter was 35.6%, compared to 43.7% in the same period last year. The margin for the nine months to the end of September was 34.8%, down from 36% last year.
Foxtons said property sales commissions in the third quarter were down to GBP16.4 million, from GBP17.8 million a year earlier, as a fall in sales volumes more than offset a rise in prices. For the nine months to the end of September, property sales commissions were up 16.9% to GBP54.1 million.
Lettings revenue was flat in the third quarter at GBP21.9 million and flat for nine months too, at GBP53.7 million. Mortgage revenue was up 13.8% in the quarter to GBP1.6 million and up to GBP4.6 million, from GBP3.4 million, for the nine month period.
Foxtons said that while the long-term outlook for the London property market remains positive, the market is expected to remain constrained in the short term owing to political and economic uncertainty in the UK and Europe, tighter mortgage lending and a mismatch between the price expectations for buyers and sellers. It said the slowdown caused by these external factors, noted in its first half results, had driven the downgrade to its earnings forecast.
"Despite the impact that market uncertainty is having on transaction volumes, we are continuing with our clear strategy, centralised business model and steady roll out programme which is delivering higher market share," said Foxtons Chief Executive Officer Nic Budden.
Despite the sell-off Foxtons suffered in early trade, Numis said it still has a Buy recommendation on the stock, with a price target of 290 pence, and said it still believes in the fundamentals of the business.
Accordingly, it said it is still forecasting EBITDA growth of 10% for Foxtons, assuming market conditions remain flat.
By Sam Unsted; [email protected]; @SamUAtAlliance
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