An analyst for business data consultancy Bloomberg has some news for Foxtons - he says its swashbuckling days are over and it will have to cut costs...and quickly.
Chris Bryant, a former Financial Times analyst who is now a columnist for Bloomberg, suggests this week’s trading statement by Foxtons reveals that the company is in longer-term trouble than even its figures reveal.
The figures show the London-focussed agency plunging into the red for the first time in a decade following a massive 23 per cent slump in sales.
But looking in more detail at the figures, Bryant warns that in the first half of 2018 “Foxtons burned through £6m of cash, as operating expenses exceeded revenues.”
Foxtons’ cost-cutting “will need to step up a gear” says Bryant.
Despite a moratorium on expanding the 80 branch network and reducing headcount by around 10 per cent in a year, “management needs to try a bit harder” says the Bloomberg contributor.
The key problems, Bryant believes, lie with the £120m of intangible assets held by Foxtons, with the fact that its annual cash flow is only around a third of what it was at the time it launched on the London Stock Exchange five years ago, and because of new accounting rules which from next year “will force it to include roughly 87 million pounds of operating lease obligations in its net cash/debt calculation.”
He concludes by warning that the agency “will have to learn the value of modesty” and possible curtail “branches that resemble wine bars and the branded Mini cars that its sales staff whiz about in.”
A key phrase in the piece by Bryant, which you can see in full here, is that “Foxtons’ swashbuckling days are over.”