Foxtons has announced it has furloughed around 750 staff members as well as asking all employees earning over £40,000 to take a 20% pay cut, amid the Covid-19 crisis.
Foxtons revealed 80% of its staff accepted the pay cut with all executive directors having volunteered to take a 20% reduction in base pay and all non-executive directors a 20% reduction in fees for at least the two months of April and May.
The measures introduced are in a bid to decrease its cash outflow from £9m to £3m by the end of the month, which includes its remaining 250 members of staff working remotely as the company has closed all of its branches.
The company also announced it is notifying HMRC that it will be deferring the February PAYE and NIC payments (due in March) for “at least one month”.
Other measures include temporary flexibility and payment deferral, which is being “negotiated with some of the company’s landlords and its vehicle leasing company”, which Foxtons said the majority of whom have accepted the need for flexibility.
Foxtons said: “As far as possible, all other discretionary spend has been reduced to the minimum levels required to maintain reasonable levels of service and operational effectiveness. Where the company is contractually committed to a certain level of expenditure, discussions with the majority of those suppliers have taken place to identify opportunities for deferral or discounts.”
Nic Budden, chief executive, said: “The London property market has been severely disrupted by the necessary measures the country has taken to contain the Covid-19 pandemic. Prior to the lock-down, Foxtons’ trading in 2020 had been in line with the board’s expectations and we started the year in a strong financial position, with a cash balance of over £15m and no external borrowings and a growing sales commission pipeline.
“We have since prioritised the safety of our people and customers with a range of actions, including closing all our branches. We also worked quickly to minimise cash outflow ahead of a period of significantly reduced revenues for an uncertain duration.”
He added: “Notwithstanding our current strong financial position, the board considers it prudent to raise additional capital at this time to enable the company to maintain liquidity in a reasonable worst-case scenario and preserve vital business capability to support customers when the Covid-19 pandemic subsides.
“This is an extremely challenging period for everyone but our people have been amazing in responding and I am confident we have taken the right measures both for our stakeholders and the business so that we can emerge from this crisis with the capability and financial position to thrive.“
In addition to the above actions taken by Foxtons management, the government has confirmed that estate agents are eligible for full rates relief in the financial year 2020/21 and VAT payments due between March and June 2020 can be deferred to March 2021.
The news comes as Foxtons announced a 3% decrease to £23m in group revenues for the first 11 weeks of the year to 20 March 2020.