Estate agency Foxtons has been urged by some of its biggest shareholders to face up to the UK’s struggling property market by pursuing consolidation and halting its dividend.

The London-listed firm has faced opposition from its investors on several fronts in recent months, including share buybacks, political donations and takeovers of rival estate agencies. 

Foxtons told shareholders on Tuesday that it has been engaging with a number of its top investors, who voted against motions on its dividend and political donations policy at its annual general meeting earlier this year. 

Michael Rapps, managing partner of Converium Capital, which owns about seven per cent of Foxtons, told the estate agency should halt dividends and instead commit to share buyback schemes of up to £20m each year. 

He said: “The dividend is just not a good use of capital when your stock trades at half the multiple of all the other peers in the industry.”

Rapps has also been pushing for Foxtons to pursue more takeovers of rival estate agencies, in a bid to insulate itself against the slowdown facing the UK’s property market. 

He said: “They’re in a very out of favour sector right now. Property, specifically in London, has been a punching bag for the government for years, and the government is not going to stop punching that bag.

“They need to deploy more money into acquiring other brokerages, other estate agencies at good prices, while this backdrop persists.”

House prices in London, where Foxtons conducts most of its business, have been in steady decline in recent months, as high mortgage rates deter home movers and high stamp duty charges cause sellers to lower their asking prices. 

Foxtons has also hit out at Labour’s renters’ rights act in recent months, which it said caused it to lose out on £3m in expected rental income. 

Foxtons profit halves

Rhys Summerton, who owns 18 per cent of Foxtons through his funds Milkwood and AIMIA, making him the group’s biggest shareholder, said the firm should do more to keep up with the UK’s struggling housing market. 

He said: “They should focus on turning the sales business profitable, making further acquisitions of smaller agencies and look for sizable consolidation opportunities.”

The group last expanded its footprint in September, with a £4.8m deal to acquire a handful of agencies in Birmingham, Watford and Reading but its shareholders are urging it to pursue more aggressive expansion.

Foxtons, which operates about 60 branches in the UK, posted a three per cent dip in revenue to £83.7m in the six months to the end of July. Its pre-tax profit more than halved, from £10.2m to £4.4m.

Shares in Foxtons have shed more than a third of their value in the year to date, and were trading at about 37p on Tuesday.

A spokesperson for the company said: “We welcome engagement from all our shareholders and share their view that consolidation is a significant opportunity – that is why M&A sits at the heart of our strategy. Over the past five years we have completed 13 acquisitions, all delivering returns in line with our targets, strengthening our position in existing markets and taking us into complementary, high-growth areas.

“Our capital allocation policy is designed to balance the needs of a diverse shareholder base and the long-term interests of the business as a whole. Despite one of the toughest sales markets on record for the whole sector, our focus on growing recurring lettings revenue and reshaping the business for current market conditions has enabled Foxtons to drive profitability throughout the cycle.”