Foxtons May Slow Expansion as Brexit Hurts Earnings

Foxtons Group Plc, the London-focused real estate broker, may slow the pace of branch openings after first-half profit fell on tax increases and uncertainty over Britain’s vote to leave the European Union. The shares fell.

Net income dropped to 8.4 million pounds ($11.1 million) from 14.4 million pounds, the company said in a statement on Friday. The result of the Brexit vote makes a recovery in the second half unlikely, Chief Executive Officer Nic Budden said. The interim dividend is being maintained and no special divided will be paid.

“We believe that the overall level of property sales transactions made in London during the first half of the year is substantially down on last year,” the CEO said. “We are reviewing the pace of our branch openings over the short-term and may slow the pace of expansion in response to market conditions.”

The U.K.’s vote to leave the EU could cause a 30 percent fall in residential property values in London, Societe Generale SA analysts including Marc Mozzi wrote in a note to clients last week. Sales taxes for landlords and second-home purchasers increased by three percentage points in April on top of an increase for all luxury homes which was introduced in December 2014.

The number of prime properties sold in London in the 12 working days after the referendum fell 43 percent from the same period a year earlier, according to data compiled by researcher Lonres. Average prices across the city’s best districts dropped 0.6 percent in the year through June, Knight Frank LLP data show.

Foxton’s fell as much as 6.6 percent in London trading, and was down 5.6 percent at 117 pence as of 9:17 a.m. That extends the decline this year to 38 percent.

Revenue at Foxtons fell 3.1 percent in the six-month period to 68.8 million pounds, despite a record first quarter in which landlords and second-home purchasers rushed to beat the tax hike. Values face a “major shock” as investors offload properties after increases in levies and new lending rules reduced returns to near zero, analysts at Deutsche Bank AG said a week before the referendum.

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