London-based estate agency Foxtons reported a sharp drop in first-half profits as a slowdown in property sales and new rental laws affected its business.
Profits fall 57% despite lettings resilience
The agency posted pre-tax profit of £4.4 million for the six months to June 30, down from £10.2 million in the same period last year. Revenue slipped 3% to £83.7 million, with sales revenue alone falling 13%.
Lower transaction volumes, weak consumer confidence, and higher interest rates caused the decline. The agency also noted that last year’s stamp duty-driven activity created an unusually strong comparison period.
Lettings revenue remained broadly flat, but a £3 million reversal of previously recognised income—linked to an increase in tenant-led tenancy terminations after the Renters’ Rights Act took effect—reduced profitability. Adjusted operating profit fell 29% to £8.9 million.
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Financial services provided a rare positive, with revenue up 20% as refinancing activity increased. Recurring and non-cyclical income streams now account for 69% of total revenue, up from 65% a year earlier.
Cost-cutting measures saved £1.3 million during the first half. Annualised benefits are expected to reach £4.5 million. Net debt rose to £28.4 million due to lower cash generation, £8.8 million in acquisition spending, and shareholder returns. The agency also increased its revolving credit facility from £40 million to £50 million to support future growth.
It maintained its interim dividend at 0.24p per share.
Rental reforms create short-term pain, long-term opportunity
The Renters’ Rights Act has disrupted the lettings market, though Foxtons expects it to drive consolidation and demand for professional services over time. Tenant terminations spiked after the law’s introduction but have since moderated. Levels are expected to stabilise in the second half.
Build to Rent revenues grew 29% as the agency expanded partnerships with institutional clients. Ancillary services, including property management and auctions, also saw strong growth, with cross-sell revenues up 33%. These higher-margin streams helped offset some of the sales market weakness.
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The company has entered new markets through acquisitions in Milton Keynes and Birmingham. This expansion is part of a strategy to gain market share through bolt-on deals. Performance so far matches expectations, and further consolidation opportunities are anticipated.
The London sales market remains challenging, with buyer activity limited by weak confidence and high borrowing costs. Foxtons adjusted its operating model to perform in a lower-volume environment.
Demand for rental properties continues to exceed supply. Foxtons does not expect significant changes in tenant behaviour or occupancy levels over the medium term, even as the rental market adjusts to the new rules.
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