ZPLA, Outperforms Rival..........23 Oct 2015 08:20
Foxtons outdone by canny Zoopla
By Harriet Mann | Thu, 22nd October 2015 - 15:04
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Foxtons outdone by canny Zoopla
With buyers put off by high house prices and stamp duty charges, the number of property transactions in central London is at historical lows. With a massive footprint in London and Surrey, that's shaken the foundations at estate agent Foxtons (FOXT) during the third quarter. Online estate agent Zoopla (ZPLA), meanwhile, is thriving, thanks in part to its canny acquisition of comparison website uSwitch, which is doing even better than expected.
Triggering polar market reactions, Foxtons shares crashed 7% to 207p on Thursday, a six-month low, as investors uncomfortable with the London exposure shifted their cash elsewhere. Over at Zoopla, traders chased the shares up 6% to 247p, a seven-week high, driven by a pledge that it will meet 2016 expectations. Both sets of shares have traded a similar trend this year, but have been inversely correlated since the start of September (see chart).
Foxtons had expected activity to increase after the general election, and it has. But it still hasn't been good enough in the challenging London residential market. Weak comparatives made it easier to beat last year's performance, too. Property sales commissions rose 12.8% to £18.5 million in the three months ended 30 September, lifting revenue by 8.8% to £43.5 million. Sales from mortgage broking were up nearly half to £2.3 million. New let volumes were lower than expected, as the shift in the lettings market continues to favour renewals. Up 3.3%, residential lettings rose to £22.6 million in the period.
Zoopla hasn't been without its challenges, either, and the property portal will admit it dropped the ball momentarily with the arrival of OnTheMarket.com. But its total agency customers are continuing to return, with 12,701 on the books. The number of new homes customers has reached 2,706, with 737 overseas members. These figures were a touch light, but definitely in the right direction.
"Pleased" with its performance over the last 12 months, Zoopla reckons full-year revenue will rise by a third to £107 million, with adjusted cash profit up by a fifth to £48 million. These upbeat forecasts are underpinned by the firm's decision to diversify its offering with its uSwitch acquisition, which has outperformed expectations, while its portal division was in line.
Foxtons has been broadening its focus, too, expanding into outer London. The ribbon was cut on seven new branches in the period, with the new Croydon site up and running. Although subdued activity has held back the third-quarter, broker Numis reckons Foxtons is poised to benefit from any recovery.
"The London market has continued to operate at c.60% of long run transaction volumes, which has constrained the growth in the business. However, this does mean that significant reversionary potential exists and in our view Foxto
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