Foxtons confirms potential sale of mortgage broker

Foxtons confirms potential sale of mortgage broker

Foxtons has confirmed “it is reviewing strategic options” for its mortgage broker arm Alexander Hall, “which could include the potential sale of the business”.

According to reports, the sale has already generated some interest from potential buyers. 

One broker consolidator believed to be interested is Pivotal Growth, which was set up in April by LSL and investor Pollen Street Capital.

In a stock exchange announcement this morning (July 21), Foxtons said: "Further to recent press speculation, Foxtons confirms that it is reviewing strategic options for Alexander Hall Associates Limited, its mortgage broking business, which could include the potential sale of the business."

LSL and Pollen Street Capital committed up to £33.5m and £62.4m respectively to support acquisitions made by Pivotal Growth. 

But Foxtons’ broker would come with a struggling balance sheet. Alexander Hall’s revenues experienced a 9 per cent drop to £3.6m in the first six months of 2020. 

It maintained a £450,000 operating profit, but this was down compared to its £614,000 profit in the same period over 2019.

The broker relied on its remortgage business to survive the intermittent lockdowns, having reported a 10 per cent uptick in refinancing between January and June 2020.

Chief executive of Foxtons, Nic Budden, said the revenue dip - which evened out to 5 per cent over the entirety of 2020 - was “due to reduced market volumes, which were partially offset by market share increases”.

As a group, Foxtons has worked hard to lift up its revenues. After making its first ever loss in 2019 of £700,000, Foxtons managed to swing back into the green in 2020 with a profit before tax of £1.9m. 

But this was mainly down to its paring back of operating costs by £15.9m, which offset a £13.4m reduction in revenue.

As a regulated subsidiary of the group, its broker Alexander Hall is subject to externally imposed capital requirements. 

In 2020, this threshold sat at £195,000, which Foxtons said was met in its latest financial results.