February 28, 2020 / 8:03 AM / 3 months ago

UPDATE 2-UK's Foxtons plans lettings acquisitions after profit plunge

* CEO says first deal to be announced next week

* Ban on tenant fees hit 2019 revenue

* Full-year core profit down 30%

* CEO says well-prepared for Brexit challenges (Recasts, adds CEO comment)

By Yadarisa Shabong

Feb 28 (Reuters) - British real estate agent Foxtons will make a lettings acquisition next week, its chief executive said, embarking on a buying spree to boost growth in its higher-margin division.

A recent ban on tenant fees that go towards cost of conducting viewings, verifying references and drawing up contracts has shaved off revenue at Foxtons’ lettings business, making it harder to achieve organic growth.

The lettings business accounts for more than 60% of Foxtons’ total revenue and boasts its highest margins.

The new regulations on top of higher stamp duty for landlords has prompted some to reduce investment in the sector or quit the market.

Foxtons CEO Nic Budden’s announcement, made in a conference call with analysts after the company reported a hefty full-year profit fall on Friday, comes only days after rivals Countrywide and LSL Property Services said they were in talks about a potential tie-up.

“We’ve begun to look more seriously this year at lettings book acquisitions,” Budden said.

“We’ve looked at a number of businesses over the past six months and (next week) we’ll be making the first of what I hope to be several acquisitions this year.”

Budden gave no further detail on the deal expected next week.

London’s property market has been sluggish in many areas over the past year, hit by uncertainty surrounding Britain’s decision to leave the European Union.

However, signs of improvement have emerged since the decisive December election victory for Brexiteer Boris Johnson’s Conservative party.

Foxtons, which sells and lets properties, said its sales pipeline is stronger than last year’s, adding that it was well-prepared for further challenges in the UK market during the Brexit transition period.

“Despite some much-needed clarity around the political direction of the UK, it is still too early to predict how the market will behave during the year,” Budden said.

Shares in the company were down 4.7% by 1107 GMT, against a decline of about 4% for the small-cap index, having posted a 30% plunge in 2019 adjusted core profit as Britons bought and sold fewer homes and as its letting business was hurt by the tighter regulation. ($1 = 0.7696 pounds) (Reporting by Yadarisa Shabong in Bengaluru; Editing by Vinay Dwivedi and David Goodman)

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