An analyst said yesterday that yesterday’s warning on profits from Countrywide said “more about the management than the market”.
The warning dragged down its own and other estate agents’ share prices.
The comments, from stockbroking and investment banking business Whitman Howard, are unlikely to come as music to the ears of Alison Platt.
She is the CEO who took over at Countrywide in September last year, coming from a non-estate agency background.
This year, a number of senior people at Countrywide have departed abruptly, including former boss of the estate agency division Robert Scarff, Nick Dunning, who had largely been in charge of lettings, and its chief digital officer Alex Bailes.
A highly complex restructure has recently been completed, with sales and lettings incorporated under the same “retail” label.
In a ‘capital markets’ day last month, Platt spoke to the City about the restructure, which comes under the Building our Future label.
However, Whitman Howard’s comments appear to suggest that not everyone found the presentation convincing.
Notably, in the presentation, Countrywide said it expected transactions of 1-1.1m per year.
Yesterday, however, Countrywide predicted that transactions this year would finish up at around 950,000 – 5% fewer than in 2014.
Countrywide itself sold 48,541 homes in the first nine months of this year – 10% down on the same period last year.
Its lettings business was up, by 7%, in terms of properties under management, to 70,352, while it had arranged 4% more mortgages at 53,730.
Countrywide’s trading update, however, underlines the importance of its estate agency business.
It said in its trading update that its operating profits dropped 11% in the first nine months of this year, and that it expects full-year profits to be less than those of last year when it reported £121m operating profits (EBITDA).
In its capital markets presentation, it said it planned to double EBITDA to £142m in 2020.
The UK’s largest estate agency chain blamed a fall in housing transactions, saying that it sold 10% fewer homes in the year to the end of September compared with the same period last year.
Whitman Howard said of yesterday’s trading update: “The need to issue this statement so soon after the less convincing capital markets day says more about the management than the market.
“The shares have been weak and should go weaker but this is a management story and we suspect that this is not the last we will hear from Countrywide.”
Another analyst, Jefferies, said that as Countrywide had made clear its ambitions to double EBITDA over the next five years “a fall in profits in year one adds to the challenge”.
However, while it downgraded its estimates for Countrywide, it added: “There has been no rebasing or dumbing down of the aspirations or strategic intent to double the profits of the business by 2020.”
Online agent Russell Quirk – whose business is believed to have been evaluated as a possible purchase by Countrywide – said Countrywide’s strategy was at fault as it was continuing to ignore the online sector.
He said: “The share calamity at Countrywide is not just about short-term trading issues. It’s a message to the Countrywide management and board to wake up to the inevitability of the impending consumer-led change in our industry.”
Videos of the Countrywide strategy presentations to investors may be found here:
http://www.countrywide.co.uk/investor-relations/results-and-presentations/
Comments (11)
I have said it before; In my view Alison Platt is trying to do too much, too soon and this must have an affect on staff morale.
They have put little investment into their offices in recent years leaving some looking very tatty and dated, again affecting staff morale.
It would have been wiser to sure up and keep a focus on their existing business model whilst considering any re-structure/re-brand at a more sensible pace.
Alison Platt ,in my opinion, didn’t look enough at what she had before deciding to steam on with tunnel vision to achieve her aims……..the outcome of her re structuret will have to be good if Countrywide want to reverse their current slide.
Agreed.
Still privy to a far bit of the goings on at CW and i think you have hit it spot on.
No doubt agency needs to move with the times but the speed at which things are moving has created a lot of unrest. It is notable in the key personnel that have left and remained tight lipped.
There has been a sizemic shift (imo) in regards to fees and financial services. It is all about market share. Give it some thought why that maybe ……
As for the branches i think the last 18 months they have smartened up and modernised their big hitters (some of the offices are actually jaw dropping) but they are also looking to leave premises on rolling 1 year leases now. Again might be worth giving that some thought ……
Tight lipped as a result of compromise arrangements.
Just look at the new restructure, all new names with zero track record in Countrywide, so they have sold themselves at interview but can they walk the walk….
Interestingly one has to question why they kept on being nominated at the Negotiator Awards categories!
they sponsored a table
Be under no illusion C/wide has been broken for years. Grenville sold himself well but those on the inside saw a restructure where all the old halifax /lloyds guys came in and sucked up to Bob who couldn’t tie his shoelaces . Diverse income yes, but just like the guy who sells the big issue and begs a little and plays guitar….both in the gutter just with diverse income
I wonder how their valuation levels are stacking up year on year? Are they getting called out on as many vals?
Less properties are coming to the market for all Agents but it would be interesting to know if the CW %age share of new instructions is the same or lower compared to the same period last year.
Just prior to the Election CW made a significant change in their marketing ie; by cutting a lot of it back. Has it had an impact? Only CW will know the answer to that.
Less marketing, means less awareness, means you won’t be asked out on as many valuations.
Perhaps it’s another hidden factor? Much more likely than Mr Quirk’s assertion that it’s due to the ‘inevitability of the impending consumer-led change in our industry’.
Who much wrong is it possible to cram into one story?
Countrywide under Grenville Turner was a good solid sensible corporate agency that was only limited by the natural constraints of corporate agency.
Given the chance I would employ all of those guys they have done a good job and achieved a lot.
I am not sure why there is a comment by Russell Quirk at the end, vexatious trolling of the EAT audience 2013 didn’t end well.
Interesting comments in a Telegraph piece here yesterday:
Gavin Jago, of Peel Hunt, said: “Countrywide has been trying to hold its commission rates and its market share has suffered as a result.
The growing presence of online and hybrid estate agents will only increase this pressure.” Mr Jago thinks the sector is only at “the early stages of structural change”, which could see consumers shift their business to lower-cost online estate agents.
Remind me again, how many crowdfunding begs have you done so far?