Foxtons has revealed that its six branch closures announced towards the end of last year will save the company £3m in 2019.
The company has reiterated its previously-published view that no further branch closures are considered necessary but in the agency’s annual report, published in the past 24 hours, chief financial officer Mark Berry says: “Our front office headcount remains under constant review.”
The annual report also sets out gloomy news about the general London sales market, expressed through the company’s substantial write-down in its sales business.
A write-down is an accountancy term for the recognition that assets or activities are now worth less than before.
Part of the annual report says: “£9.8m of the charge comprised the write down of goodwill in the sales segment, which we consider an appropriate course of action given the prolonged nature of the current downturn in the sales market. The £3.2m of the non-recurring charge which is cash related, all of which relates to branch closures, is expected to be spent over a three year period. The branch closures and other cost saving initiatives undertaken in the second half [of 2018] are expected to deliver circa £3m of cost savings during 2019.”
The branches closed last year were at Loughton, Enfield, Beckenham, Ruislip and Park Lane; the firm says it can cover 85 per cent of London postcodes from its existing network of 61 branches.
However, the annual report also reveals a subtle change in emphasis for Foxtons, away from the glitzy high value central London sales sector which has suffered particularly since the EU Referendum back in June 2016.
“Foxtons now has over 50 per cent of branches outside Transport for London’s zones 1 and 2, and is well placed to capture the growth and activities in these areas in both lettings and sales” says the report.
It adds: “The political uncertainty, weakened UK economy and fall in consumer confidence since the 2016 Brexit referendum have resulted in homebuyers exercising greater caution. This is translating to lower transaction volumes in the London property market. We do not expect market conditions to improve significantly until the political and economic landscape becomes clearer.
“In the prime central London area, transaction levels have been lower than that of 2009/10 for the last three years whilst volumes in outer London areas have been relatively strong. In the medium-term, the attraction of lower prices in outer London will continue to drive migration and housebuilding to these locations.”
Meanwhile the report also shows that the bonus of chief executive Nic Budden rose from £218,000 in 2017 to £248,000 last year despite the worsening position of the company. However, his total pay fell slightly from £920,000 to £914,000.
The annual report also sets out in detail a five-pronged strategy by Foxtons for the future. These are:
1. Focus on developing strong positions in markets with attractive market fundamentals: “The size of Foxtons branch network across London means it is well positioned to benefit from any future growth in sales volume” it says.
2. Deliver exceptional customer service: “The Group continues to deliver high quality service levels, maximising value for customers by selling and letting their properties at the best price through innovative application of technology, utilisation of data and a dedicated sales force to support the process.”
3. Balanced business through the cycle: “The Group’s current focus is to grow recurring lettings revenue by both winning new landlords and retaining existing ones, by leveraging our lettings portfolio which is the largest under a single brand in London … Our investment in technology means the lettings business platform offers both great customer experience and is very efficient and scalable with fully automated online functions. The Group will continue to expand into the high growth institutional Build To Rent segment.”
4. Improve Profitability of newer branches: “The Group has a successful track record of pro table organic expansion and now covers over 85 per cent of the Greater London area. Leveraging our existing platform of 61 branches, we are aiming to cover the rest of the remaining parts of London by optimising existing territories, ‘up-skilling’ our people and investing in technology.”
5. Best in class technology: The Group’s substantial long term investment in IT infrastructure, automated centralised systems and business processes have created a highly scalable and efficient business model … The Group will continue to make enhancements to improve conversion and customer experience, including enhancements to our tenant portal in 2019.”
You can see the entire annual report here.