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Aghast investors were struck by how much Foxtons had lost its way, as they watched a presentation by the London estate agency’s executives last summer.
While chief executive Nic Budden and chairman Ian Barlow were happy to wax lyrical about compliance, the internal “culture of fun” and ESG (environmental, social and governance issues), they seemed less interested in talking about hard numbers - or responding to ever-louder complaints.
Shares have cratered since 2014, while annual profits of £42m completely disappeared at the company once famed for its hard-driving, hungry approach.
“It was all just a bit snow-flakey,” one investor recalls. “To look at it, you would think everything's fantastic and everyone deserves their bonuses.”
The malaise had already sparked a campaign by frustrated activist investors seeking to shake the company out of its stupor. Last week Budden left Foxtons with immediate effect after eight years at the helm, following Barlow’s resignation last July.
In their place is new chairman Nigel Rich, while Guy Gittins, the former boss of rival London agent Chestertons, will be parachuted in as chief executive in September.
They are tasked with a major renovation job: freeing the estate agent from what critics have branded “the blob” of corporate excess and returning it to feistier glory days.
Despite the past decade’s property boom, shares in Foxtons have shed 80pc of their value. Meanwhile, the company’s 2014’s peak annual profits of £42m shrunk to just £5.6m last year - following a loss of £1.4m in 2020. Foxtons’ market value has plunged from a high of £1.1bn a year after its float to just £130m today.
Such decay is foreign territory for Foxtons, which has always been seen as an entrepreneurial, aggressive agitator. No other property firm is so loved and loathed in equal measure.
Founded by billionaire Jon Hunt, the company upended the capital’s stuffy property market in the 1980s and 1990s.
Despite its Marmite reputation, sellers and landlords have continually turned to the agency - recognisable by its green fleet of Mini Coopers - because they know it will get a good price.
According to those who have met him, Hunt likes to illustrate this paradox with an anecdote: “I used to go to dinner parties in Notting Hill where people would say to me ‘I hate Foxtons. They are too pushy. I would never buy from them - but I would let them sell my house’.
“This was gold dust. All I wanted were listings, as that’s what you ultimately get paid for. And the people that give you listings are the people selling their house!”.
Its early philosophy was simple: agents worked longer and sold harder than any rivals.
“Our clients want us to go to war for them,” Hunt would tell staff.
At times, the bravado went too far. Foxtons was investigated by police in 2003 over claims it had destroyed rivals’ signs, while a 2006 BBC programme alleged staff regularly forged signatures, bragged about misleading clients and inflated property values.
Hunt went on to sell Foxtons in 2007, making £370m just before the property market went into meltdown.
It was bought by BC Partners, a private equity firm, which eventually floated the company on the stock market in 2013 after several ups and downs. BC employees are said to at one stage have referred to the agency as “the F word”.
But in more recent years, critics have complained that the Foxtons X-factor has been overshadowed by complacency and lacklustre returns.
Some investors say that under Budden, the agency became too concerned with ESG issues such as staff wellbeing and lost sight of making money.
Even as the average London home price rocketed 80pc to £523,666 in the decade to March 2022, revenues at Foxtons only increased by 5pc to £126.5m. During that time, sales reached a peak of £150m in 2015 before tumbling to a low of £93.5m in 2020.
Top-performing members of staff have also been poached, leaving for other agencies such as Savills.
Some of this turmoil is down to tectonic shifts out of Foxtons’ control, says Sam Cullen, an analyst at Peel Hunt.
While house prices have surged higher, they have become less affordable as banks have tightened up their mortgage lending requirements, meaning fewer people can scrape together a deposit. The price of a typical property in London is now 13 times average earnings.
Against this backdrop, the number of property transactions in London has fallen from around 110,000 in 2014, to 74,000 in 2019 and 65,000 in 2020. The figure rose to 85,000 last year.
It means even though prices are booming, there are fewer deals that would generate commission for any estate agent.
Pricier, more central boroughs that Foxtons has traditionally focused on have also been hit harder by the slowdown.
But last year investors lost their patience, including Hosking Partners, Catalist Partners, 3G Capital Partners and Platinum Asset Management.
They had already been angered by Foxtons’ decision to raise £22m by issuing new shares in April 2020, just as the coronavirus outbreak sent stocks plunging.
What particularly incensed them, however, was the pay handed to Budden, which had continued to rise even as profits fell - and during the pandemic, when Foxtons took furlough cash from the Government.
Budden, who had been chief executive since 2014, was seen by critics as overly bureaucratic. He could not be reached for comment.
According to the company’s annual report, his pay packages in 2019, 2020 and 2021 totalled £1.3m, £1.6m and £1.7m, respectively. They each included a base salary of £579,600 and bonuses worth nearly £1m in the latter two years.
It prompted a shareholder rebellion at 2021’s annual general meeting, with almost 40pc of votes cast against the remuneration report.
Behind the scenes, Hosking Partners, Catalist and others began calling for Budden’s resignation.
Catalist was also publicly calling for Foxtons to scrap its fixed commission fees, which it believed rivals were undercutting, and expand into other cities as remote working became widespread.
Both Hosking and Catalist also argued that staff pay - including for the chief executive - should be more closely aligned with value creation.
When Barlow privately refused to remove Budden, investors went public with demands for “radical change” at board level - a thinly disguised call for the chairman to quit too.
Converium Capital, a Montreal-based fund that had built a 2pc stake, even suggested Foxtons should consider selling itself.
The interventions prompted Barlow to quit in July. He was replaced as chairman in October by Rich, a former boss of Hong Kong Land and chairman of luxury estate agency Hamptons International.
Peter Rollings, an industry veteran who had worked under Hunt at Foxtons until 2005 and then rival London agent Marsh & Parsons, was also appointed as a non-executive director two months later in a bid to steady the ship.
Then, just last week, Rich announced that Budden would be stepping down with immediate effect, to be replaced by Gittins - a hot shot salesman who insiders believe will restore the company’s swagger.
While Foxtons gave no reason for Budden’s departure, it is understood Rich decided he was not the right man to take Foxtons forward. One major investor is scathing about the company’s performance under Budden.
“They allowed their competitors to eat their lunch, take their market share, take their best people - and did nothing about it,” they say. “They were asleep at the wheel.”
Investors now hope that things will quickly turn around under the two new leaders. Rollings has taken over temporarily as chief executive and is said to be prioritising expanding the sales teams and recruiting top talent.
The company has also axed the role of chief operating officer and cut the chief executive’s pay, while investors are pushing for staff to be incentivised with share awards that could eventually make them a fortune - if the stock recovers.
Rich and Rollings have both shown their confidence in the business by snapping up thousands of shares.
On Wednesday, Rich said: “I joined Foxtons in October 2021 having engaged with a broad range of shareholders, including a number who were dissatisfied with our performance.
“Since then we have made significant progress including changing the board, cutting costs, restructuring remuneration, investing in our sales teams and growing the lettings business to drive market share.
“As a board we remain focused on improving profitability and realising the potential of the business.”
One key investor says they are now waiting to see what happens next - and have not ruled out pushing for a sale if things do not improve.
Asked if Foxtons will “go to war” for clients again, and regain the mojo under Hunt, one insider suggests the company is sticking with a slightly softer image.
“I think ‘going the extra mile’ is now a nicer way of putting it.”