Countrywide this morning warned that its EBITDA is expected to be £20m lower in the first half of this year, compared with the same period last year. It does not expect the shortfall to be recovered in the second half.
The profits warning – its second this year – was issued this morning as part of a ‘back to basics’ recovery plan and trading update.
The City reacted quickly, with shares plunging 24% in early trading to around the 60p mark.
EBITDA is earnings before interest, taxes, depreciation and amortisation.
This morning, Countrywide said that trading, in terms of listings is back to 2017 levels, and that it has reduced head office costs by cutting functions by a third.
It also said that money is to be pumped into the business to reduce debts by a half.
However, the statement was almost more remarkable for what it didn’t say, with not a word about any new CEO.
The full statement is:
“Back to basics recovery plan
The Group is encouraged by early operational improvements since it set out its immediate priorities for a return to profitable growth at its preliminary results in March 2018. At that time, the Group announced a strategic re-set which, alongside management changes, established the foundations for the Group to return to profitable growth focused on:
· Back to basics approach in Sales and Lettings to regain market share;
· Cost efficiency; and
· Financial discipline and better cash flow conversion.
The Group has made substantial progress in re-establishing industry expertise and the right level of staffing and capability in its Sales and Lettings businesses. The register of properties available for sale is now broadly back to 2017 levels having increased by 9% since 31 December 2017.
Cross-referral income within the Group has increased by 8%, with every £1 of income earned by estate agency in the first five months to May 2018 matched by a further 41 pence of income generated from estate agency referrals (FY 2017: 38 pence in every £1).
On cost efficiency, we have reduced head office functions by a third. Our B2B and Financial Services businesses performed in line with the Board’s expectations.
Long term capital structure
The Company is now looking to put in place a long term capital structure to reduce its indebtedness and to support its turnaround plan and growth. It is our intention to reduce the levels of debt by at least 50% through additional equity finance. Our major shareholder, Oaktree, and the Company’s lender group are supportive of this approach. This process remains at an early stage and the Group will update the market on these initiatives at its interim results on 26 July 2018.
2018 trading and outlook
The market in the first half has continued to be subdued and we have experienced longer transaction cycles. As previously announced, the Group entered 2018 with our Sales pipeline significantly below that of 2017. Following a recently completed review, adjusted EBITDA is now expected to be around £20 million lower in the first half compared with the same period last year and we do not expect this shortfall to be recovered in the second half.
Our focus remains on building back the Sales pipeline and we expect to substantially close the pipeline gap by the end of the year. We will provide full year guidance and a detailed recovery plan at the interim results on 26 July 2018.”
Comments (19)
One of our neighbours works at the local CWD lettings office and no longer has a company car. Things must be bad.
Wow 30% drop in value today.
Only way out must be taking this private again?
Looks like i may lose my bet on share price 😉
Interesting to read J1’s comments.
Countrywide had a perfectly good franchising proposition utilising the Bairstow Eves brand but chose not to support it and gave it away to Hunters.
Maybe now’s the time to take those radical steps and re-think the franchising proposition but this time fully funded.
I hear that several of the original CAFL management team are still in the property and franchising business………………….
I agree with what one of the posters stated. Get the right Mangers in and give them the scope to make decisions at a local level. I worked for a large corporate and was allowed to “get on with it” and from a 50k loss over the next two years it was 100k profit followed by a 200k profit – nothing special about it, just the right people being guided in the right way – employ the right managers and it will turn around…..eventually!
Danny
Too late the banks want their money back NOW hence the announcement . Their covenant testing for the £192m is up in July it doesn’t look good with further shrinking revenue . The problem is the debt ,useless BODS ,bad decisions not the talented staff .Oaktree who own 30% of the shares who specialise in distressed debts will be sitting there like vultures
https://www.oaktreecapital.com/strategies/credit/distressed-debt/distressed-opportunities
You then have to beg the question why would any talented staff who hold no equity wish to sit and and wait and see their careers tossed into the winds with an uncertain outcome. It must be a recruiter’s field day.
The right managers all left a long time ago when their comission was getting cut at the drop of a hat and year end bonuses werent getting paid. They have a heck of a lot of recruitment to do.
The banks now firmly calling the tune and now CWD forced to seek a placing in the market to keep the shop open. The market factoring in today that this is likely to be around 60p with a £100m raise .This will require regime change in the BODS -not too soon . Incredulous that the BODS seem to avoid any censure preserving their reputations having overseeing this wipeout of shareholder value for some very bad decisions The talented staff pedalling like mad paying for their mistakes.
This time around they aren’t looking for finance for expansion but to get the banks off their back .A debt unncessarily incurred in buying buinesses with disappearing turnover .There must be many former senior partners raising a glass to the BODS enjoying the sunshine for their golden goodbye fat cheques at the end of their careers.That will do nicely,thanks.
You have to have some sympathy for the FD who arrived on the scene last summer. Fair play to him he showed willing bought some shares in loyally and now nursing a 6 figure loss wiping out the majority of his salary. Little did he know on arrival in his first set of accounts he would be writing off hundreds of millions in goodwill for monies borrowed paid out where the ink wasn’t fully dry on the contracts.
Furthermore he must have scratched his head that the woodentops on the BODS sanctioned buying shares back despite the SP falling further causing further losses . Like a punter a the races trying to get out of trouble in the last race only to see the horse fall at the the first hurdle .Platt an easy scapegoat, sure she contributed but the BODS failed to act quickly, sanctioned the busineeses being bought and despite the whole market and staff screaming at them failed to stop Platt in her tracks soon enough .Absolute disgrace
It will be hard for a company like Countrywide to re-invest from such a low level.
It may not have enough cash to catch up with new technologies, training and re-branding never mind the enormous advertising spend it will need to re-establish it’s proposition.
It would be perhaps best to franchise out its entire sales operation and concentrate on driving income through Property Management, FS & Surveys for example.
Bold decisions need to be taken to create something sustainable for the future.
If countrywide want to see a change in fortune then perhaps they need to to widen there marketing exposure on to the 3 major property portals just as most agents are now doing.
Ha! That gave me a chuckle on a Monday morning.
It was tongue in cheek Surrey1 although clearly missed by the 5 people who gave my comment a dislike !!
Looks like the markets like it 60.40 down 18% . The employees will not be happy they were given 20% off the share price ,doesn’t look so good now
Think like an independent, be genuine, be trusted and most of all be genuinely #local.
Countrywide is a storming good firm made up of strong local independent firms that came into the fold and benefited from economies of scale savings on cost and administration. Outwardly unless you knew the firm was part of Countrywide the strong local presence of the strong local firm was retained and you didn’t know they were part of Countrywide.
Most people know how I keep an eye on things in quiet some detail. When a firm was last brought into the fold there was a very obvious change management issue. A firm that was obviously doing good business suddenly wasn’t doing what it used to. That is nothing more than the disturbance brought about by a change of loyalties. The firm suddenly had KPI’s notably lower than others who had got used to being part of Countrywide and although things were a bit different their local team kept fairly much in tact.
It’s hard for management to say what is sometimes needed but some things have to be said. Your fate is in, your hands. Independent agencies don’t have the luxury of a salary each month they have to earn it. Think like an independent because unless you do… go figure out your fate and your future.
Much good sense written by a perhaps more considered commentator than some regular contributors. Countrywide, I suspect (as I know no more than anyone else outside the business) must be now under enormous bank covenant pressure with unsustainable and on current business levels, unserviceable debt levels. In that scenario, the shareholders must, I suspect, either support yet another equity sale (goodness knows at what price!) or see the business partially or totally broken up and sold into a market where buyers for many parts of the business will be few and far between even at fire-clearance prices. How the Board has allowed this situation to develop over the last 3/4 years whilst the entire property industry has sat and watched one gross failing after the next with total incredulity is astonishing-as is the willingness of some major savvy investors to allow it to continue without major dissent at AGM’s. One fears that there is no way back for Cwd now without major and radical surgery.
Cue the sale of LSH!
I do see the possibility of going private again!
Thank you Mr Hill.
With a memory of the Pru and Halifax era of agency, the thought that a branch might be returned to its original partners or owners has to be scotched. “Sorry, the trading numbers are on the floor but the goodwill value is still enormous”
From reliable accounts the new FD knows what has to be done, it’s just a case of getting that message to the front-line troops. Only you lot can save this branch, don’t worry about the branch next door, this is yours and this is your future. There are very few opportunities in agency as good as the one that’s here. The name is known in the area and you have a track record of sales that is recognised on the patch.
The staff have two choices; an unthinkable periwinkle stain on their CV or they do what other have done start their own agency. Even established, exceptional staff struggle as a new agency on their own #local patch. With no history to fall back on, with un-recognised branding and no economies of scale discounts on marketing a new independent agency will struggle to establish itself.
For all those lucky enough to be drawing a salary now is a very good time to understand how valuable that is and how with a little effort that can be protected
It’s a joke looking at the LinkedIn updates from countrywide members of staff from negs up to head office.
Back slapping and handing out cheap bottles of wine to each other in an attempt to show they are “winning”
Local office to me I know did close to 600k just 4 years ago last year did 180k and this year YTD banked just 50k
Still the same poor members of staff in the wrong roles. Still starved of enough people. Still no identity.
It’s encouraging saying they are going Back to basics but they have a monumental job to do and as we all know it’s a thankless place and a cheap bottle of red does not make everything better.
Point well made Smile Please. The real bombshell for them is that nearly 30% of their income is from the related referrals!! If the public/government wise up to that further, they will find income decimated in a climate of dropping transactions. They have milked the London market and that has been flattering them, rentals are now being squeezed and of course new homes will be the next one …
From the guys I speak to morale is still rock bottom, doesn’t seem to have been any recruitment at branch level either