Foxtons warning on slowdown overshadows special dividend

August 27, 2014
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LONDON (Reuters) – British property agent Foxtons said it expected to see a slowdown in the rate of transactions in the second half of the year, knocking its shares and overshadowing the payment of a special dividend.

The company, which returned to the London stock market in September last year, said it would pay out a total of 12.8 million pounds to shareholders in dividends after reporting a 29 percent rise in first-half core earnings.

But the strong trading, helped by higher sales and mortgage volumes, could slow in the second half.

The group, whose business is focussed on London, said Bank of England measures designed to control mortgage lending and expectations of an interest rate hike had already had an impact on short-term demand among buyers.

Shares in the firm, which have risen 18 percent in the last two weeks on anticipation of the results, were down 5.7 percent at 1200 GMT (1 p.m. BST), at 277.4 pence, valuing the company at about 782 million pounds.

Shares in Countrywide Plc, Britain’s largest estate agency with brands including Bairstow Eves and Hamptons International, were down 3 percent.

BoE has announced measures to prevent a build-up of risky home loans and a survey earlier this month showed that asking prices for houses in Britain have fallen at the sharpest pace on record for the month of August, led by a drop in London.

Asking prices in London fell for a third month, dropping nearly 6 percent between July and August, much more than the typical fall in what is usually the quietest month of the summer for the housing market.

Policymakers at the central bank broke ranks over interest rates for the first time in three years this month, when two unexpectedly voted to tighten policy and revived speculation about a 2014 rate hike – which would make mortgages more expensive for borrowers.

FLEET

Analysts at Numis said despite the signs of a slowdown, they retained a Buy rating on Foxtons.

“With the group continuing its successful branch roll-out strategy (with all new branches performing in line with expectations) we would expect Foxtons to show double-digit (core earnings) growth in the medium term even against a flat market backdrop,” Numis said.

Foxtons, a familiar fixture of the London property market with its fleet of staff-driven Mini Cooper cars, posted first-half earnings before interest, tax, depreciation and amortisation (EBITDA) of 24.9 million pounds, with an earnings margin up 330 basis points to 34.3 percent.

The strong results enabled the group to pay a maiden interim dividend of 1.77 pence and a special interim dividend of 2.77 pence, totalling 12.8 million pounds.

“I am pleased to report continued strong trading during the first half of 2014,” Chief Executive Nic Budden said. “The combination of higher sales and mortgage volumes, together with the efficiency of our operating model has led to a significant increase in revenue and profits.”

(Reporting by Kate Holton; Editing by Sarah Young and Pravin Char)

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