Countrywide’s in-house broker has slashed its forecast for the amount of earnings the group is expected to make in the coming two years, while another analyst has placed its forecast under review.
The news came after Countrywide yesterday revealed thumping losses for last year, which sent the firm’s share price sinking 16% in early trading before it recovered to close just 1.57% down at 87.5p.
Countrywide announced that it made a loss after tax of £208m in 2017, compared with a profit of £17.5m the year before.
Its earnings fell 23% last year, while profit in its sales and lettings division plummeted 45%.
But analysts expect more pain to come.
Anthony Codling and Sam Cullen, of Countrywide’s own in-house broker Jefferies, said they were cutting estimates for earnings by 24% and 22% this year and next year respectively.
Jefferies now expects earnings before interest, taxation, depreciation and amortisation (EBITDA) in 2018 to be £55m on revenue of £670.1m, down from its previous estimate of £72.1m.
In 2019, it estimates EBITDA of £61.8m on revenue of £687.3m, down from £79.7m.
In their note, the analysts predicted a “messy” few months as Countrywide put new plans into place, having recognised the need to go “back to basics” and dispense with Alison Platt’s much-denigrated retail strategy.
Nonetheless, Jefferies highlighted the fact that the same syndicate of six banks that had been there since Countrywide’s IPO in 2013 were still backing the business, having amended their lending terms only last month.
Jefferies said: “For the overwhelming majority of customers, buying or selling a home is a huge financial and emotional investment, each transaction is unique and Countrywide has found that service is highly valued.
“Centralisation robs entrepreneurial branch managers of the ability to maximise revenues and tailor service to individuals’ needs.
“High frequency lettings and low frequency sales are best catered by specialist teams rather than generalists.
“Trying to nail the hybrid offering is like trying to hit a moving target.
“The hybrid model needs to be proven before one should try to emulate it.”
The broker continued with a “hold” rating for Countrywide, with a target price of 85p (from 125p).
Meanwhile, analysts Peel Hunt also predicted a “long road to recovery” for Countrywide.
Examining the results yesterday, it said: “The significantly weaker sales pipeline for 2018 implies a downgrade of up to 25% on our FY18 EBITDA forecast of £74m.
“While a recovery plan is being put into place, the impending 2019 lettings fee ban leaves the group facing problems for at least the next two years.”
Peel Hunt added that its target price and forecasts were now under review.
The banks have no choice but to sit there and be supportive. Fully aware if greater autonomy is being offered to the regional brands the exemplar brands are more than capable of hiving themselves off and doing what they do best-running a successful business all on their ownio.
.Putting clear water between an expensive ,head office , a £195m debt and a set of BODS they have lost confidence in.The supposed synergy and adding value applying the CWD wrapper to individual brands hasn’t worked in fact the polar opposite has happened -a complete failure
The banks will be very twitchy knowing this could unravel overnight and they are left holding the £195m baby
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Jefferies March 2018:
“Trying to nail the hybrid offering is like trying to hit a moving target.
“The hybrid model needs to be proven before one should try to emulate it.”
Jefferies in July 2017 http://www.propertyindustryeye.com/newsflash-revenues-and-profits-plunge-at-both-countrywide-and-foxtons/
“City analyst Anthony Codling, of Jefferies, said of Countrywide that it “is doing the right things” in “taking out costs, offering complementary digital services and growing the financial services division. However the costs of this strategy are being felt before the benefits and whilst it is difficult to see Countrywide receiving any help from the underlying housing market, we do see silver linings amid the clouds”
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Take a look at the copy below which confirms it wasn’t only the Countrywide Board members who had lost the plot. Talk about misleading or is it obfuscation or trying to save face with today’s about turn.
Click on the link to see the slide presentation on the facts.….
http://www.mikedp.com/articles/2018/3/6/2018-emerging-models-in-real-estate
36. Meanwhile, its investment bank, Jefferies, continued to boost the stock as it fell last year… Buy Hold Buy Buy Buy Hold Hold Purplebricks launches Purplebricks floats on stock exchange Buy Buy Buy Buy Countrywide’s Stock Price
37. …while at the same time maintaining a negative view of Purplebricks during its rise. Underperform Underperform Underperform Underperform Purplebricks’ Stock Price
38. Which highlights the risk of institutional bias when disruptive models threaten the status quo. 0 200 400 600 800 1000 Countrywide LSL ZPG Rightmove Foxtons Purplebricks DaysRecommended Jefferies Stock Recommendations August 2013 – March 2017 Buy Hold Sell Corporate Clients of Jefferies Direct Competitors of Corporate Clients
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Somebody should have had a grip of this a long time ago
There are obviously people near the top of CW who were either too scared to front up to AP when she made these hair brained decisions; or just simply content to sit back and watch her fail in the hope they survived long enough to gain a promotion for themselves
Is it inevitable that it will be broken up????
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Mr Codling and Jefferies seem to make many mistakes, you must wonder on the accuracy of anything they publish.
Just look at what happened with Beaufort securities last week (although not directly associated)
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Conflict of interest…they are house brokers, so will hype their paymasters like crazy….or those that they have a personal interest in. Therefore, beware brokers, they are selling either way, shorting a stock if they aren’t the house broker and promoting to their investors….you get the picture! They always have a vested interest, they don’t do the coverage for altruistic reasons
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Food for thought from today’s Times?
Property with many character features
https://www.thetimes.co.uk/article/95afe254-231c-11e8-a25c-0a92182647c9
Patrick Hosking
business commentary
March 9 2018, 12:01am, The Times
Investors seduced by the silver-tongued investment bankers working on the flotation of Countrywide five years ago have now lost four fifths of their money. Congratulations to Goldman Sachs and Jefferies. Britain’s biggest estate agency chain, which was offloaded by a trio of private equity groups, naturally, has proved to be an absolute investment stinker.
Peter Long, the executive chairman, pins the blame squarely on previous management, led by Alison Platt, who was fired in January days after a profit warning. Commendably, he refuses to use the excuse of a universal slowdown in housing transactions or the rise of a new generation of digital rivals such as Purplebricks.
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Agency is personal service. The bigger you are, the harder it is to deliver consistently. The more layers of National Managers, Regional Managers, Area Managers and Branch Managers you have between the Directors at the top and the customers at the coal face, the more diluted that personal service becomes.
All the mainstream corporates are suffering, not necessarily through any fault of their own, but simply by virtue of the truth in the previous paragraph.
If independent agents can ride out the perfect storm of online and corporate competition in a market of falling volumes and sit tight while the corporates continue to struggle, the future will improve.
Adopting the Hybrid model was a predictably terrible move which only served to undermine the entire value proposition of their core business.
Today’s hybrid model is simply a replacement for yesterday’s private sales. There have always been 5% of sellers who want to sell privately, and there always will be. Best to ignore that tiny minority of sellers who have yet to learn their lesson, and focus on the other 95% of sellers who still freely choose to use conventional, professional agents.
There are some great people at Countrywide who have been badly let down by some poor decisions at the top.
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