Although we don’t believe in timing the market or panicking over every stock fluctuation, understanding how a business is performing, competing and changing is vital to sensible investment.
What: Shares in Foxtons (LSE: FOXT) tumbled by more than 19% in early trade this morning, following trading results for the quarter to 30 September 2014 that reflected a “sharp and recent slowing of volumes in London property sales markets”.
So what: This follows an “exceptionally strong nine-month period to 30 June 2014 in which volumes reached their highest levels since 2007”, but factors such as political and economic uncertainty within the UK and Europe, tighter mortgage lending markets and mismatches between the price expectations of buyers and sellers all contributed to the slowdown in sales.
Despite noting these headwinds in its half-time interim results, management now expects full-year 2014 adjusted EBITDA to be below the prior-year figure of £49.6m following Q3 group turnover of £39.9m (2013: £41.1m). Q3 property sales commissions came in 7.8% lower at £16.4m, compared to £17.8m in Q3 last year, as a reduction in sales volumes more than offset price increases.
Now what: Foxtons remains positive on the long-term outlook for London property markets, with CEO Nic Budden commenting:
“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. Our seven new branches opened this year bring our network to fifty one, with all our sites secured for 2015. Foxtons remains highly profitable, cash generative and debt free, and therefore well positioned to deliver further cash returns to shareholders, building on the £28.1m of ordinary and special dividends paid since our IPO.”
Since coming to market in September 2013, shares in Foxtons initially drove up — hitting a high of 399p earlier this year — but after a slump now find themselves at an all-time low.
