Foxtons currently has 67 branches across London and Surrey, and covers around 85% of Greater London.
The exposure to the capital – once its source of growth – is now the group’s vulnerability.
Analysts at the higher end of the market had previously predicted a £9m profit before tax, but the results showed that pre-tax profits fell 65.4% to £6.5m from £18.8m in 2016.
This marks another year of marked declines for the group, as it continues to battle a cooling London market. Foxtons’ pre-tax profits more than halved in 2016, falling to £18.8m from £41m in 2015 – which had dropped from £42.1m in 2014.
Group revenues for 2017 fell to £117.6m from £132.7m in 2016.
Adjusted Earnings Before Interest, Taxes, depreciation, and Amortisation (EBITA) profits dropped to £15.1m from £24.6m.
Foxtons’ strongest arm, the lettings division, drew revenues of £66.3m against £68.3m in 2016, with the adjusted EBITDA profits falling to £12.1m from £16.2m.
Foxtons chief executive officer Nic Budden said he expected trading conditions to remain challenging in 2018, and noted that current sales pipelines is below where it was this time last year.
The statement warned that continuous property price inflation could impact affordability and reduce transaction levels, and Brexit may harm the capital’s “standing as a major financial city”.
Furthermore, the challenge of a highly competitive marketplace was emphasised, as “new or existing competitors could develop new services or methods of working include online and hybrid agents which could give them a competitive advantage over Foxtons”.
After years of expanding branch presence to capture market share, the group will now focus more on the less cyclical lettings side of the business, adding that there are “several initiatives underway to promote growth in the lettings business”.
More so, it will make investments in tech to cut down costs, increase branch reach, and facilitate targeted digital marketing using new analytical tools and a “vast customer database”.
Budden commented: “2017 was a challenging year for the property market in which Foxtons operates.
“Whilst the lettings business continues to deliver a steady income stream for the group, the London sales market continues to be weighed down by the impact of stamp duty tax changes introduced during 2016 and declining consumer confidence, as a result of the general macro-political uncertainty
“Notwithstanding the challenging environment, Foxtons retains a strong balance sheet, high cash generation and no debt which allows us selectively to invest in areas that will drive long-term growth of the business.
“We will continue to review and optimise our business structure and leverage our proprietary technology and data in order to make our agents as productive and competitive as possible.”