Foxtons fortunes soar two years after rescue

Tuesday 30th August 2011

Foxtons has chalked up record profits – less than two years after it had to be rescued from collapse.

The firm posted £35.4m pre-tax profits in the year ending December 31, 2010 – topping the profits it made at the peak of the market in 2007. Even more extraordinary was the size of the margin – revenue last year was £98.3m.

The firm also pocketed £3m from an ‘adviser’ after settling a claim for inadequate advice. The settlement also benefited founder Jon Hunt to the tune of £1.2m.

The firm also released a ‘significant proportion’ of the £2.8m it had set aside to compensate landlords over renewal fees after a tussle with the Office of Fair Trading.  

Management, led by chief executive Michael Brown, last year shared a £1.5m pay pot. Brown said that last year’s results were a result of cost-cutting and a boom in the London housing market.  

The turnaround is the latest twist in a remarkable story.

Founder Jon Hunt sold Foxtons in May 2007, just before the housing market collapsed, for £375m to private equity firm BC Partners.

The following year, the recession saw Foxtons’ revenues plunge 33%, whilst BC Partners struggled to service its huge debts and laid off nearly a quarter of its staff.

BC’s managing partner, Andrew Newington, famously admitted in an interview that buying the business was a mistake: “We made the wrong call. The market decline was way too steep and we didn’t anticipate it.”

BC Partners subsequently had to restructure £260m of debt provided by Bank of America and Japan’s Mizuho, which was costing the private equity group annual debt interest payments of £26m.

Foxtons’ backers agreed to a cut in debt in return for BC Partners accepting a smaller equity stake.

Hunt, estimated to be worth £660m, wrote off a £50m shareholder loan that the company owed to him.

However, there are signs that Foxtons may not repeat last year’s astonishing success.

Foxtons said it expects 2011 to be a “difficult” year.

In a yet more extraordinary twist, Marsh & Parsons – headed by the man who helped steer Foxtons to such success – is about to clinch its own sale. See next story.