A financial website has said that Countrywide’s level of liabilities is “disappointing” – but that while it considers it risky, profitability might not be far away.
According to the article on Yahoo, Countrywide had debts of £100.4m as at June this year. This was down from £244.9m a year earlier (Countrywide had an emergency cash call in August 2018 to help pay down debt). However, because Countrywide had a cash reserve of £10.9m in June, its net debt is actually about £89.5m.
The article says that according to the last reported balance sheet, Countrywide had liabilities of £110.5m due within 12 months, and liabilities of £211.1m due beyond 12 months.
Offsetting this, it had that £10.9m in cash plus £71.4m in receivables due within 12 months.
“So it has liabilities totalling £239.4m more than its cash and near-term receivables, combined,” says the article.
Countrywide itself has a market capitalisation of £65.5m – “So we’d watch its balance sheet closely, without a doubt.
“At the end of the day, Countrywide would probably need a major re-capitalisation if its creditors were to demand repayment.”
However, while Countrywide’s debt is 3.4 times its EBITDA (profits once costs and depreciation are stripped out) its EBIT (earnings before interest and tax) covers its interest expense 2.7 times over.
The article goes on: “This suggests that while the debt levels are significant, we’d stop short of calling them problematic. Looking on the bright side, Countrywide boosted its EBIT by a silky 88% in the last year. . .
“[But] a company can only pay off debt with cold hard cash, not accounting profits. So we clearly need to look at whether that EBIT is leading to corresponding free cash flow. Over the last three years, Countrywide reported free cash flow worth 3.5% of its EBIT, which is really quite low. That limp level of cash conversion undermines its ability to manage and pay down debt.
“We’d go so far as to say Countrywide’s level of total liabilities was disappointing. But at least it’s pretty decent at growing its EBIT; that’s encouraging.”
It concludes: “While Countrywide didn’t make a statutory profit in the last year, its positive EBIT suggests that profitability might not be far away.”
Yesterday Countrywide shares closed at about 4p. The shares hit a low of 3.2p in June.
The full article is here:
https://uk.finance.yahoo.com/news/countrywide-lon-cwd-risky-investment-082410627.html
Comments (8)
They have about as much chance of coming back in to profit as a slug surviving a salt convention. I left two years ago, and in that time their stock levels, staffing exodus, IT systems and training needs have only gotten worse and worse. The average neg in the business has been there two minutes, before resigning after realising the OTE is not achievable and not accepting the minimum wage top up as any basis for the 48 hour week and unsocial hours, all the while being shouted at by management and attending endless naughty corner conference calls and filling in more and more spreadsheets for the BODS.
The work force has been beaten with a stick for so long now, they accept it as reality, and I am sure many of the old war horses that remain are only there waiting to pick up some sort of redundancy money.
These analysts also don’t see the problems at granular branch level – The dilapidations costs off the balance sheets on some of these offices 5 years ago were MASSIVE, and with so little investment back in to them, they will only have gotten worse. A branch I used to run in my region had over £200k of Dilaps in 2016, and hasn’t had anything spent on it since! This was one of the more profitable offices in the subsidiary, so God knows what some of the smaller branches need spending on them.
I can see a time coming where mass investment is needed back in to many of them with little or no capital to do it. They may end up closing profitable branches as a short term cash solution, which then sets the wheels in motion of the same cash investment/profitability problem 18 months later. Vicious circle!!!
#Doomed
There is no mention of the tenant fee ban which surely will have given their figures a kicking since 1st June. Looks like the Thomas Cook of our industry to me.
Throw in the guaranteed 81p they told staff they would get in March 2018 when trying to secure investment from them. Now 4p do you reckon the staff read the small print or are CW going to back the staff and give them their 77p per share 🙁 You’ve just been Countrywided #Roasted
Well said Pinky. I have been surprised this hasn’t been raised before by anyone. I was paying into the previous share save scheme before I saw what was happening to the share price and stopped my payments but I still lost over £1000 as I now have a useless piece of paper telling me I am the proud owner of shares worth almost nothing after I left CWD a while back. When I raised the matter of me and others being conned I was told ‘ tough ‘ basically. Any remaining support I had for CWD disappeared after that while the fat BODS continued to fiddle whilst the Company burnt.
This article on Yahoo isn’t worth its salt. The same “Analyst” was advocating investing in shares at the end of last year. No comment required there!
Not sure what figures he has been “Analysing” but earnings have been consistently falling over the past three years and were down YOY at the end of Q2.
Cash in the bank of £10.9m wouldn’t even cover the operating costs for one month. previous accounts show cash reserves were around £22.5m
Since that debacle of the alleged buyout last month, the share price has continued to slide downwards , so I guessing REAL ANALYSTS don’t quite share the same optimism as “Simply Wall Street”.
It will be interesting to see if Countrywide publish Q3 figures or do as they have done the past 3 years and published full year results in the following March.
Countrywide used to do very well when its brands were all separate subsidiaries with their own management teams. They could move quickly and focus on the demands and quirks of their local markets – in other words, exactly what a successful agent needs to do in order to be successful.
Their current “one size ought to fit all” approach doesn’t work. They’ve a complete lack of tech, virtually no marketing funnel, dated brands, too many offices, and are basically irrelevant.
Countrywide CAN be turned around, but until they focus on their local markets they’ve very little chance of doing so.
Well surveying and financial services have been oiling the wheels .
However what has been noticeable this year is that revenue has fallen at Lambert Smith Hampton which has been their cash cow The high fees come in from property investment acquistions and disposals .
A few lumpy city office investment deals makes alt the difference to the figures
Yesterday’s news that London real estate investment volumes have been cut almost in half in 2019 compared to last year. Q3 transactions down almost 45% too, doesn’t augur well .
No chance! I worked for this mob and what I experienced with the set up in my short spell is…… well, lets just say, in my humble opinion, they don’t have a hope in hell.