London-focused estate agency Foxtons (FOXT) had been betting on a second-half pick-up in sales volumes but those hopes have been dashed by the UK’s decision to leave the European Union (EU) on Thursday.
The end result is a hefty profit warning from the company that has sparked a huge stock sell-off, the share price diving nearly 23% to 104p.
Sales had already declined thanks to uncertainty surrounding the referendum. Those anxieties now appear likely to drag on through the rest of 2016, and perhaps beyond.
The National Association of Estate Agents has been unable to provide additional confidence. The organisation is reported to have threatened that a vote for Brexit could wipe £7,500 off the value of an average home in London over the next three years, to £599,200.
An expected fall in transactions leads Foxtons’ board to believe that earnings before interest, tax, depreciation and amortisation (EBITDA) in 2016 will be ‘significantly’ below the £46 million reported in 2015.
Consensus before June 23’s referendum put the figure for 2016 at £47 million. Analysts will be scrapping these forecasts following Monday’s announcement.
Margins will also fall to 20% from the 30.7% recorded in 2015, the board estimates. Lower sales along with an investment in opening new outlets have been blamed for this decline.
This is more bad news for an industry that has already been hit by higher stamp duty charges from 1 April, putting some people off buying second homes as an investment.
More details of Foxtons’ trading will be in the interims on 29 July.