London estate agent Foxtons has invested £3 million in the property portal set up by the founder of Purplebricks despite still refusing to return millions of pounds it received in taxpayer-funded Covid support.
The deal comes just weeks after Foxtons spent £14 million buying rival agent Douglas & Gordon.
Its investment in Boomin, set up by Purplebricks founder Michael Bruce, came as the company was already being criticised for paying bonuses to its chief executive despite having received nearly £7 million in government furlough money and business rates relief.
Rivals including Winkworths repaid their furlough money after seeing a leap in property sales thanks to the government’s stamp duty holiday.
Foxtons is joining Channel 4 and Mortgage Advice Bureau to invest in Boomin as part of its £25 million fundraising for the new portal.
Channel 4 is believed to be taking a stake in return for free or discounted ad space but Foxtons today said it was paying cash of £3 million for a share in the business set up to compete with rivals such as Rightmove.
The funding round is expected to value Boomin at £100 million.
Foxtons also today reported a 24% jump in its first quarter revenues as sales boomed but rents in the capital fell 12%.
The company has come under fire for awarding its chief executive Nic Budden a short-term bonus of £389,300 for a year in which its shares have fallen and it received £4.5 million furlough money and around £2.5 million in business rates relief.
Most of its staff were on furlough last year but business has bounced back since, with group revenue for the quarter to 31 March jumping 24% to £28.5 million from £23 million before.
Foxtons bought Douglas & Gordon, the London agent, at the start of March.
The newly-acquired business brought in £1 million of new lettings revenue in the quarter, helping take lettings up 6% to £14.8 million at a time rents in London remained under pressure.
Rents have fallen sharply, particularly in central locations, as Londoners left the city. Many international residents returned to their home countries, while many Brits headed for bigger properties in the suburbs and green belt or returned to their parents homes.
In sales, Foxtons said revenues jumped 60% to £11.4 million. Douglas & Gordon contributed £800,000 of that.
Mortgage broking revenues also gained from £1.9 million in the first quarter last year to £2.3 million thanks to the increase in buying activity.
The Group’s net cash position, excluding lease liabilities, at 31 March 2021 was £22.3m after the £14.25m acquisition of Douglas & Gordon.
Budden said: "I am delighted with the start we have made to the year, which is the best first quarter’s trading in some time.
“The acquisition of Douglas & Gordon, the largest acquisition in our history, represents an acceleration of the Group’s strategy and is a business with significant potential.
“Our recent investment in Boomin demonstrates our commitment to remain at the forefront of technology. As we look forward, the strong trading momentum is expected to continue through the second quarter and together with tight cost control gives us confidence that operating profit for the first half will be significantly higher than last year".
Company sources said it would not be repaying the furlough cash because it had passed it all onto staff.
The government help had been outweighed by the £15 million in cost savings and £22 million it had raised from shareholders to tide itself through, the sources said.
Shareholder representatives Glass Lewis and ISS are concerned Foxtons is paying out bonuses to executives despite a sharp fall in the share price, tapping investors for emergency cash, and government support.
ISS said there was a “material disconnect between bonus outcomes and company performance”.
Glass Lewis and ISS recommend investors vote against the pay plan at Foxtons’ April 22 AGM. Pirc suggested they abstain and the Investment Association’s Ivis service issued its highest level of warning, the FT reported.