Foxtons is being urged to voluntarily return £4.4m to the government in furlough payments after reporting a ‘strong operational and financial performance’ this week.
The London estate agent on Wednesday said revenue had increased significantly at the start of this year as the market continued to be supported by pent-up demand and the stamp duty holiday.
Foxtons said revenue for the first two months of 2021 is “well ahead” of both last year and 2019, with the sales commission pipeline more than 30% higher than the corresponding period last year.
Foxtons, which acquired Douglas & Gordon for £14.25m last week, said it had made adjusted operating profit of £1.9m, up from a loss of £700,000 in 2019, through a £15.9m reduction in operating costs which offset a £13.4m reduction in revenue, thanks in part to government support.
The trading update prompted a call from Darren Jones MP, chair of the Business Energy and Industrial Strategy Committee, for Foxtons and other businesses performing well to repay government cash before making payouts to investors.
Foxtons announced a £3m share buyback in December and has so far handed £1.8m to investors.
Jones told Yahoo Finance UK: “As the business committee has said time and time again, business leaders need to act in good faith when using taxpayers’ money during the pandemic.
“We have called out businesses who have passed on taxpayers’ money to shareholders, instead of using it to keep workers in their jobs or returning it to the Treasury if it’s no longer required.”
A Foxtons spokesperson told EYE that government support helped it avoid “lots of short-term redundancies” during the pandemic.
“Like many customer-facing businesses, 2020 was an extremely challenging year for Foxtons. We were required to close for months during the first lockdown which cut our annual revenue by £15m, equivalent to a fifth of the annual total. We made a statutory loss for the year and will not pay a dividend.
“We very gratefully received Government support via the furlough scheme and business rates relief. We used it as it was intended and for as shorter time as possible. Were it not for furlough we would have had to make lots of short-term redundancies because we were facing a revenue cliff edge. We ended up making no Covid-related redundancies in 2020. Our furloughed staff received money directly from Government during this period and as such there is no surplus to repay.
“We didn’t just rely on government help to keep the business viable. We made our own cost savings of some £9m, including pay reductions for the highest paid in the business.
“We also raised more than £20m from shareholders to help us through lockdown and provide a cushion against further closures which fortunately did not materialise.
“We therefore had excess capital, so much later in the year, with the business trading again and with more confidence about the future, began returning some of this to our shareholders in the form of a £3m share buyback.”
Comments (27)
Bragging about profits when clearly there has been some gain for the schemes I find very distasteful
All’s fair in love and war.
We’ve recently ( January ) paid our corporation tax bill, equating to just shy of the equivalent of two months turnover, complimenting the PAYE, VAT harvesting, Business Rates that we haemorrhage throughout any given year into the system.
Society needs paying for, we get that, which is why we play be the rules, but I don’t get the holier than thou sentiment here if grants or furlough were executed in times of unprecedented uncertainty.
What I do know is that when ( if ) everything is back to normal our business will put into the system orders of magnitude more over the years to come than it will of received during the covid event.
That’s exactly my point H. You have either got a moral compass or you haven’t.
So are you saying that agents (or any business for that matter) who took the money that was legitimately on offer and now find themselves (unexpectedly) in a better financial position than they imagined, should return it?
Good luck with that one.
I’m unsure too AAA, is my post moral or immoral?
You hit the nail on the head when you said “all’s fair in love and war”. It’s an old phrase that refers to cheating.
I’m not saying you’re cheating, don’t get me wrong, I’m saying that monies should be returned if businesses didn’t need it. Some companies have already returned Gov monies and many others will do the same over the next year. If you didn’t need the money, and you’re keeping it, it’s immoral and it’s depriving businesses, people and children, who are genuinely in need of financial support. That’s immoral.
Ok, we’re not going to fall out about it 🙂
All’s Fair in Love and War… this does not suggest cheating to me, it suggests that during times of exceptional turmoil things happen which would not take place during normal times as everything is on the line.
We have furloughed staff, brought them back ( after topping up their salary for the period that they were furloughed ) and have the final member of furloughed staff returning on April fools day which I like to think I’m deliberately doing to wind her up going forward.
We have a BBL as yet untouched which we will sit on as protection / hedge against a covid variant emerging and splatting all the forecasts.
To me, this is a moral approach which also takes account of realpolitik ( politics based on practical and material factors rather than on theoretical or ethical objectives ) .
There will be many a Senior Director looking at their cash balances and thinking it is a good time to retire, not off the back of their good planning, but off the back of the taxpayer.
Leave now as this sort of windfall only comes along once.
One year on, nobody could have predicted the financial position that many agents find themselves in.
Many were crying into their tea last year, leaving Rightmove (which never happened), and closing departments (using government money to do it).
This is an industry that lurches around like a ship in a storm. It’s no wonder it makes many a person unwell.
It’s all relative. Small businesses like ours did ok out of government help and it has and will be re invested. There have been plenty of sole traders working and collecting furlough, people getting grants for owning empty lock up garages etc and not too mention the fraudulent access to bounce back loans. But it’s not fashionable to talk about Joe Bloggs working the system to their benefit.
In total Connells benefitted from £25.7m of Government support from the CJRS, business rates relief and the Retail Cash Grant Scheme during the year. No other parts of the Skipton Group received direct government support in relation to the pandemic
However, Connells topped up the salaries of its 7000+ staff to 100% (including commissions), throughout March-June so that nobody went without; so their own cash was used.
It is great that any agent had a good year, I am not knocking that but furlough was a safety net that many people took advantage of but in hindsight they did not need. There will be many companies who did need it and could still do with help and there are lots of employees who are much worse of as a result. I just think some redistribution to those who have or are still suffering rather than awarding shareholders and directors a bonus is the moral thing to do. It does not help when you get companies reporting decent profits and banging on what a great job the management have done when a vast proportion of the people who actually made the money got screwed.
Sanctimonious nonsense. If Foxtons and many others followed the rules then it is down to them how they run their business.
the pandemic is not over by a long shot. Those businesses virtue signalling and handing back furlough support may well come to regret it this winter.
Well said.
We applied for the bounce back loan and received it. Coming up to a year now and we have not touched it. Do we pay it back to save on the interest or keep it?
My thoughts are keep it, we dont know when we will be fully free from this pandemic. Another three month lockdown this Christmas with a far more depressed market …… Some maybe grateful of the ‘fighting fund’ As for the agents that have taken the money to open new office or purchase others …. You might end up regretting that choice.
Absolutely keep it. Its cheap money not free money. If you intend to pay it back over time then it is very prudent to hold on to it.
As for furlough support, people forget that many businesses would have made many staff redundant in order to preserve their businesses. Jobs have been preserved, many businesses are in good shape and this bodes well going forward into a higher corporate tax regime which is designed to recoup much of the support funding.
I think I am missing something here as the furlough money would have been paid out to the employees? OK so Foxtons didn’t have to pay commission on houses that were completing in lockdown (they may have chosen to, I don’t know?) but for us it was a particularly quiet spell for completions anyway. As soon as the employees return to work then no more furlough pay. With 50 offices Foxtons could have benefitted from the £25k grant and business rate holiday to the tune of perhaps £2m or so which leaves £2.4m for the furloughed employees. Agents know how their business runs and I imagine people did whatever it took to keep their head above water and personally we were very grateful for the furlough money, the local authority grant and zero business rates for the year. As it happens, the intervention of Mr Sunak has turned our financial year around and we will have had pretty much our best year ever but I refuse to feel guilty about it as this is what the stamp duty holiday was designed to do. Criticise me if you want but we give jobs to a dozen or so people, pay all the VAT and tax that we need to and there may well be rough years ahead when government assistance is nowhere to be seen. I am no fan of Foxtons but I think sniping at them for taking what was open to every other firm is wrong. Far better to concentrate your anger on the way that government contracts were handed out to friends of ministers with no competitive tendering at all.
Complete nonsense. Government money was available to support employment and for survival. It wasn’t to support share buy backs or dividends. You have either got a moral compass or you haven’t.
Furlough was not designed to pay shareholders a dividend or pay the board of directors a bonus but this is where it is heading with some of these large companies. It was designed to keep staff employed but perversely they are the ones who will be paying for these dividends and director bonus’s. many staff on furlough were only paid 80% of salary, often no commission and those higher earners lost more. Many of them would have taken mortgage holidays and now have the additional debt to pay back.
If companies have still made a reasonable profit they should first pay the staff what they have lost then return the surplus before any dividends or bonus’s are paid otherwise directors and shareholders are benefiting at the expense of the loyal staff who make it all happen. It is immoral.
March / April 2020 I wouldnt begrudge anyone taking public money …who knew what was around the corner. However at this point in time many businesses including estate agents will have done surprisingly well.
Covid is not finished yet so maybe not now …but at some point not far away Govt needs to provide a mechanism for all businesses to pay back furlough and grant monies where they cant be justified.
Sounds obvious but furlough and grants monies are revenues that have been taxed at year end …so youve already paid corporation tax on it…so will need unravelling.
ps in this case I believe Foxtons raised £20m odd from a rights issue last year so that needs to be taken into account
Ouch – how much!?
And while us conveyancers were seeing deals through with no break or holiday all these last 12 months!!!
Agreed! I’ve got my first holiday in literally 14 months coming up from 1st April. I’m shattered
Are all the smaller independent offices going to pay back furlough after their bumper year?
We are a small one……..3 offices and 26 staff, only furloughed one person (she asked to be furloughed) WFH contacting potential clients and keeping current ones in the loop……. arranging free accommodation for NHS staff who had vulnerable family members raising funds for tablets to enable families to have contact with members in resi care. Our brand profile grew massively whilst the corporates “slept” and we had 15% growth in turn-over (FYE July) last year and so far this year is concerned on target for 12%. Net up 3.5% too. I think that any agency who used the Furlough scheme didn’t need to and should repay it.
I agree. If agents have legitimately claimed furlough they should not repay.
Just because Foxtons have had a good year, why should they repay?
We did not furlough a single member of staff. I dont begrudge agents that did claim if they needed it. BUT the agents i have reported i know have claimed the furlough payments whilst still making the employees work.
Isn’t it incredible that the directors of this huge company made an excuse for the amount of furlough money they received…. disgusting.
I placed one member of staff on furlough for a a very short period of time when we weren’t allowed to operate last year, apart from that all members of staff have been employed full time throughout. Little us, we still didn’t money grab, we did our bit and took the lows and highs.
This is how mucked up it can really be – Huge company, with cash reserves = take more money during a Pandemic to pay share holders and ensure they remain huge (even when people are dying – may as well say it how it is!)
Smaller (moral) companies = take as little as possible, go through more pain and have much lower cash reserves but still sacrifice everything, during a Pandemic.
Time we started saying it how it is … it’s f*cked up, isn’t it?
Outrageous. Clients will view this as unforgivable unless it’s paid back in full.
The use of taxpayers’ money to fund an acquisition and a share buy back to benefit shareholders.
This money could be used in the NHS, schools, foodbanks etc, and instead it’s been taken and used for the benefit of Directors and shareholders. They need to sort this out.
Yes, they should pay it back. They’ve pretty much used furlough money to buy Douglas & Gordon. The same with Connells and Countrywide.
Very poor form and lowers the reputation of the industry further. Furlough money should be for those that really need it, not opportunistic companies looking to seize a commercial edge from it.