Profits nosedived at Connells after Truss Mini-Budget, latest results reveal
Company accounts for Connells, part of the Skipton Group, showed a pre-tax profit of £12 million last year down from £21.4 million the year before.
Profits fell nearly 50% at Connells as buyer demand cooled in the last quarter of 2022 and sales rates dropped dramatically after last year’s ‘ill-feted mini-budget’, paperwork filed by the agency revealed last week.
Company accounts for Connells, which is part of the Skipton Group, showed a pre-tax profit of £12 million in 2022 down from £21.4 million the year before.
STRATEGIC REVIEW
In a strategic review laid out in the accounts the agency says that the first nine months of the year enjoyed the benefits of the Covid bounce driven by the ‘race for space’ with a shortage of stock creating ‘urgency amongst buyers’ that ‘led to strong house price inflation.’
But the agency says: “The growing concerns over cost of living and then the ill-feted mini-budget in September led to a significant change in sentiment within the housing market.
“The significant rises in mortgage rates that followed created affordability issues and concerns over the prospects of a fall in house prices.
Consequently buyer demand cooled significantly and sales rates dropped dramatically.”
“Consequently buyer demand cooled significantly in Q4 of 2022 and sales rates dropped dramatically.”
Despite the gloom Connells says that mini-budget had ‘no adverse effect’ on the lettings market with ‘very strong levels of demand from tenants and a significant shortage of available properties for rent’.
POSITIVE FOR LETTINGS
The accounts, made available last week but officially signed off on April 25 and filed on August 26, paint ‘a positive outlook for the lettings market as we move into 2023’.
But it says that results from the company’s mortgage services operation reflected that of the house selling operation.
Even so, Connells says it’s continuing to focus on growing the headcount of branch-based mortgage consultants as well as increasing productivity per consultant.
The report says: “Top-line results within sales and mortgage services in 2022 didn’t keep pace with those achieved in 2021 when record levels of transactions were experienced within the UK housing market.
The lettings business helped to insulate against the reduction in house sales and mortgage completions.”
“The Company’s lettings business produced a robust performance, helping to insulate the Company against the reduction in house sales and mortgage completions.”
It adds management are focused on growing the Company’s market share in both the second-hand sales market and the lettings market as well as increasing fees to counteract lower transaction levels and falling house prices.
“Further growth in market share is targeted in 2023, with branch staff incentivised to achieve such,” it says.
The Neg reported last month how Connells has launched yet another internal investigation into ‘pressurised selling’ after the agency was called out on X, formerly Twitter, for taking part in conditional selling – when buyers are told their offers will only be forwarded to a vendor if they use one of the estate agency’s services.
When it comes to Connells cutting off ones nose to spite ones face comes to mind.
Skipton need to realize the biggest risk to their business is Connells because a class action would go after the top dog. 70% of all business over 200k comes from independent mortgage brokers and conditional selling has destroyed Connells reputation.
Sellers that work with independent mortgage brokers, which is the majority of them, have been blatantly told to use an estate agent with common sense and integrity like Foxtons, Hamptons, Dexters or Acorn. And avoid Connells.
Connells is blackmailing customers into buying Connells other services or they will accept someone elses offer (plenty of documented evidence available online from Connells staff). This provides more money for Connells but breaks the chain between mortgage brokers and Connells. This is illegal according to FCA (Financial conduct authority) consumer duty and rating customers fairly, NAEA and ARLA codes of practice.
It would be interesting to see how much lending goes through Skipton. Hopefully not too much because this would be seen as breaking a whole load of other FCA rules.