Countrywide has this morning announced the proposed sale of its commercial wing, Lambert Smith Hampton, for £38m cash.
It has also announced an amended credit facility with its lenders to continue with its turnaround plan in a “challenging and uncertain market environment”.
Shares rose in early trading in response, up almost 14% by 9.30am.
Making the announcement to the stock exchange, Countrywide said that the sale of Lambert Smith Hampton deal will allow it to concentrate on its residential business.
The purchaser is a private buyer, John Bengt Moeller. He is the founder of Great Global Holdings, a holding company for a number of UK and international companies in the business of commercial property.
Countrywide said that the sum being paid represents a fair valuation for the Lambert Smith Hampton business, representing six times its adjusted EBITDA.
The group said that the sale will “significantly improve Countrywide’s capital structure” and allow it to reduce its debt.
Countrywide also told the stock exchange that it is simplifying its share capital. The shares will be consolidated 50 for one, reducing the number of ordinary shares in issue. In simple terms, it could boost the share price from around 5p to 250p. Last year, in a cash call to investors, new shares were issued to raise money; a consolidation will reduce the number of shares.
Both moves are recommended by the Countrywide board and are subject to shareholder approval, likely to be given at a general meeting on December 23, with the sale likely to complete by December 31.
Today’s statement to the stock exchange said: “In addition to the sale agreement of Lambert Smith Hampton and the proposed share consolidation, on 28 November 2019 the Group agreed an amended credit facility with its lenders.
“The new facility provides the Group with the financial flexibility to execute the turnaround plan while operating in what continues to be a challenging and uncertain market environment.”
Countrywide told the City that it is continuing to make “operational progress” its turnaround and is on course to deliver a full year result in line with the board’s expectations.
Executive chairman Peter Long said: “The sale of the Lambert Smith Hampton commercial business strengthens the group.
“Once completed we believe that the group will be in a more advantageous position in our core residential market.”
Lambert Smith Hampton had been put up for sale earlier, in 2016, but at the time led to no transaction, and some ten months later Countrywide announced that it was no longer for sale.
Countrywide bought the business in 2013, paying £34.1m in cash.
Managing director Paul Creffield said that the sale of Countrywide’s commercial arm is likely to be well received by staff, as the business’s turnaround continues, “giving a future for our people”.
He told EYE this morning that Countrywide will now concentrate on its three traditional businesses – sales and lettings, financial services, and business-to-business. He also revealed that Countrywide had not put Lambert Smith Hampton up for sale, but had been approached.
- Countrywide has also announced that Polly Ogden Duffy will take up the post of managing director for John D Wood & Co. from January 1. For much of 2019 she and Jonny Dyson have taken joint responsibility for leading the business since the sad death of previous MD Nick Taylor earlier this year. Commenting, Paul Chapman, Countrywide managing director sales & lettings, said: “I am delighted that Polly will lead John D Wood & Co with continued support of Jonny Dyson and the leadership team. We wish Polly and the team every success in her new role.
Comments (7)
For how much longer is this lame duck going to limp along?
So after closing upwards of 50 Branches so far this year without actually having the guts to name them the BODS now resort to a fire sale of arguably their biggest hard cash asset ( you can only sell it once ). Then they have the cheek to announce earnings this financial year will be in line with the BODS expectations! So that would have included dumping LSH for 38 million and draining their cash reserves? At least the BODS who bought in at the princely sum of 10p a while back should be looking at a nice profit now. Drinks all round chaps and Merry Christmas to all who lost their jobs after the Branch cull.
The LSH acquisition came at a time when Deloittes and Alison’s plan was to consolidate the commercial agency space – LSH was the cornerstone deal and as the wheels came off CWD this plan was thrown out of the window.
So LSH is a good, regional mid market commercial agent and it has very little synergy with the rest of CWD – so perfect to sell. The price? Seems low, particularly when you add in the other businesses bought. Ultimately CWD needs the £34m of cash big time, hence they take a low-ball offer.
Clearly it is utter bollox to say ‘this strengthens the core resi offer” – LSH or no LSH doesn’t make any difference to the resi ops or staff or customers.
As for JDW – it used to be such a strong brand in PCL, perhaps it still is. Was a licence to print money in SW1, SW3, W11. It needs some love and better marketing investment.
Market likes it – for now. Share price up 14%.
They say a creaking gate never falls off its hinges… seems that way with Countrywide. The markets are reacting in the short-term because they see a profit to be made by buying shares at 5p and by the end of the the year, those shares being worth £2.50.
It would hard to accept the reason for purchase is because investors see a long and sustained period of profitable growth. Share consolidation is aimed at attracting investors into a company that looks well valued.
The underlying metrics after the resolution has been passed by the Board may tell a different story.
The story above starts with the fact Countrywide needed to increase its credit facility with a pending cash sale of £38m which tends to suggest that cash reserves held have been used. Much in the same way as we’ve used our overdraft for Christmas shopping and its only mid January !
Must be questioned if this share consolidation was a condition of the increased borrowing as the current debt ratio may have been unpalatable to lenders.
By consolidating the number of shares the debt ratio will be reduced in terms of value of the company but the earnings per share increase, giving the appearance that £ 4 £, the company is offering a good return.
The downside is that profit (ROE) will be reduced and that current investors will find it harder to sell shares at 50p then 5p if the company performs below expectations.
The one key factor that the company can not change to any significance is the level of revenues generated and no matter how you amend accounting, like individuals , you can’t spend what do you have.
Countrywide are continuing to live on borrowed money and the funds of liquidated assets. One day, Countrywide will have to start to pay its way and operate without the need to borrow and using investment tools such as share placements and consolidations to survive
Selling the family silver is not the solution.
Desperate measures for desperate time .Yet more destruction of shareholder value by an inept set of BODS as their “tunaround” strategy has hit the buffers
£38m doesn’t even punch halfway through the debt
The revenue producing cash cow sold for a sum considerably less than they spent buying in additional businesses for LSH in recent years where they added 6 businesses, including Tushingham Moore, BTWShiells, ES Group and Douglas Newman.
LSH have been hawked around the market since 2016 where should think they would have expected £70m +
Every single step of the way this set of BODS have demonstrated that they are not fit for purpose