Shares in London and south east-focused estate agency Foxtons Group PLC (LON: FOXT) (LSE: FOXT.L) have declined by 23% today after the company released a profit warning. The update comes ahead of Foxtons interim results which are due for release on 29 July and the company now expects first-half sales to be slightly below the prior year. It also anticipates that its adjusted EBITDA margin will be lower than last year at 20% as a result of subdued sales volumes and the costs associated with investment in its branch network.
Beyond the current half-year, Foxtons now expects the upturn in transactions following the EU referendum (which it had previously anticipated) to fail to materialise. It now anticipates that the uncertainty which caused a lacklustre performance in the run-up to the referendum to continue in light of the added uncertainty which Brexit brings. Although Foxtons states that it is difficult to accurately predict how the London property market will perform, it now expects full-year sales and adjusted EBITDA to be significantly lower than in the prior year.
Regarding its longer term outlook, Foxtons states that it remains confident on the attractiveness of the London property sales markets and on its strategy to focus on the outer London mid-market segment. Further, it believes that its lettings business should provide it with downside protection moving forward.
The market is obviously feeling downbeat about Foxtons judging by today’s share price fall. Although Foxtons now trades on a P/E of 8.3, its outlook is highly uncertain and further profit warnings simply cannot be ruled out. It may have a great strategy but if the UK housing market plunges and transaction volumes fall then those factors are likely to send Foxtons’ share price lower. Therefore, in my view it is a stock to sell at the moment.
The author does not own shares in Foxtons at the time of writing.