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Foxtons – Q1 2017 trading update, still a short?

By Steve Moore | Wednesday 17 May 2017

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

London estate agency Foxtons (FOXT) has updated on the first quarter of 2017, seeing a significant decline in revenue on the corresponding 2016 period though arguing “performance has been in line with the board's expectations”.

This is with it noting the first quarter revenue decline, of £9.7 million to £28.7 million, in the context of “record sales volumes in the first quarter last year when a number of transactions were brought forward ahead of the stamp duty surcharge on buy-to-let investments and second homes”. It details first quarter property sales commissions of £11.1 million (2016: £20.0m), lettings revenues of £15.5 million (2016: £15.8m), and mortgage broking fees of £2.1 million (2016: £2.6m).

I previously wrote in January – noting a dire sales trend at the end of last year though, that amidst admitted continued “challenging” market conditions. I’d suggest that remains the case – and, having recently recovered back comfortably above 100p, the shares are currently in retreat towards that level again.

That though still capitalises this company – the end 2016 balance sheet of which showed net current assets of £5.7 million (including cash of £9.5 million) and net tangible assets of £17.4 million (including £28.1 million of “property, plant and equipment”) – at more than £275 million.

As such, I retain my previous scepticism and understand the grown short interest here (as of yesterday, from the FCA's spreadsheet of short positions required to be disclosed to it); BlackRock 2.10%, Ennismore 1.32%, Rye Bay Capital 0.95%, Pelham 0.74% and Polar Capital 0.74%.

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