Foxtons sells back D&G sales arm for nominal sum

Foxtons has sold the sales business of Douglas & Gordon, as well as the name and all of its branches, back to its original owner for a token sum. The disposal will result in a £3m impairment loss for Foxtons. Under the terms of the deal, D&G chief executive James Evans will pay a nominal consideration for the sales business, as well as £3.7m in cash, which will be left in the business to cover working capital and retained liabilities. Evans said he was “thrilled to have the opportunity to lead D&G as an independent brand”. The London-based agent bought D&G in March last year for a total consideration of £15.5m. At the time, D&G had cash in the bank of £3.9m and the sales business was deemed to have no value, as it was considered to be a loss-making drain on the firm. Foxtons said it had fully integrated D&G’s lettings business into its network, in line with its strategy to expand its lettings business through acquisitions. Over the past 10 months the lettings arm has grown by 4%, generating £10m in revenue, and is expected to contribute £4m profit by 2023. The sales business has also grown, Foxtons said, but still contributed an operating loss of £1.9m to the group from £6.8m of sales revenue. Foxtons said it had reviewed a number of options for addressing the profitability of the sales business, including shutting it down or running D&G as a separate brand. “After consideration, the board concluded that disposing of the sales business to D&G management and integrating the lettings business into the Foxtons network was the most attractive option.” It added that this was primarily because Foxtons’ own branch network overlaps significantly with D&G’s branches. Under the terms of the disposal, D&G will operate under restrictive covenants to protect the lettings book assets retained by Foxtons, including existing customer contracts and relationships, and the employees that are transferring to Foxtons. Foxtons CEO Nic Budden said: “D&G has performed extremely well over the last 10 months under Foxtons  ownership and this next step is a real win-win for both parties to the transaction. We have an excellent track record of acquiring and integrating lettings businesses and expect to deliver significant growth in operating profit through the integration of the D&G lettings business into Foxtons highly scalable infrastructure. The D&G sales business will remain as an independent brand under its current leadership and we wish them well for the future.” To send feedback, e-mail piers.wehner@eg.co.uk or tweet @PiersWehner or @EGPropertyNews