EYE INFORMATION: Countrywide returned to profitable growth in 2019

| EYE Correspondent

Countrywide Group 2019 results were released this morning.

The statement said:

The Group’s continuing business made significant financial and operational progress in 2019, benefitting from its ‘Back to basics’ turnaround plan.

This saw the Group return to profitable growth, with adjusted EBITDA pre-IFRS 16 up 16% year-on-year and, most importantly, our Sales and Lettings business returned to profit.

·    Group income for the full year was £498.1 million, down 3% after absorbing £12.2 million impact of the tenant fee ban

·    Adjusted EBITDA pre-IFRS 16 of £24.4 million was up 16% year-on-year and ahead of the Board’s expectations

·    Adjusted EBITDA of £54.5 million

·    Operating profit of £35.8 million (2018: £3.6 million) before £57.7 million of exceptional costs (principally non-cash exceptional charges for goodwill and other non-current asset impairments (2018: £237.2 million) with a net loss for the period of £37.5 million (2018: £224.4 million)

·    Net debt pre-IFRS 16 £82.9 million (2018: £70.7 million) with net debt/adjusted EBITDA pre-IFRS 16) 3.4x (2018: 2.2x)

 

COVID-19 update

As noted in the update provided on 30 April 2020, the Group saw a positive start through the end of February in agreed sales which continued during March, with the pipeline of agreed sales 9% ahead year-on-year through the first 12 weeks of the year. The pipeline remained resilient and stood at approximately £50 million, ahead year-on-year. Equally, we continued to see the benefits of the recurring income from approximately 86,000 properties we manage across the UK on behalf of private and investor landlords and our book of general insurance policies.

Following the Government’s announcement on 12 May 2020 of the re-opening of the housing market in England, the Group has undertaken a comprehensive risk assessment of our business operations to ensure the health and safety of colleagues and customers, and begun phased re-opening for business across all of our operating channels, including physical branches and valuation visits in addition to the continuation of web-chat and telephony contact.

We have accelerated the expansion of our virtual viewing offerings, adapting to social distancing measures, and we are offering our customers online mortgage advice. This way of working is resonating well with our colleagues and customers who are appreciative of this multi-channel choice of engagement, providing support and advice whilst allowing everyone to stay safe.

For the four months to 30 April 2020, the Group benefited from positive trading in the first quarter, and the strong pipeline build before lockdown. Adjusted EBITDA to 30 April 2020 was significantly ahead of prior year for continuing operations, and the Group’s cash position remains strong, with liquidity at 20 May 2020 of £60 million. In order to provide additional liquidity, the Group continues to explore the availability of funding available to large businesses under the Coronavirus Large Business Interruption Loan Scheme.

Outlook

We continue to actively monitor the effect of the COVID-19 situation. The Board’s priority remains the safety of our colleagues and customers; to provide essential services to our customers; to preserve and protect the future of the business for our people; and to conserve cash and to manage the Group through the coronavirus pandemic.

Whilst the housing market in England was re-opened on 13 May, it is too early to assess the impact on housing transactions, and the Group is therefore unable to provide guidance on future profitability.

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14 Comments

  1. JohnJames
    May 21, 2020 at 07:45

    So – Op profit of £35.8M before £57.7M of exceptional costs, and a ‘Net loss for the period of £37.5M’ so Countrywide lost about a million pounds every 10 days *before* this COVID-19 situation…

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  2. AgencyInsider
    May 21, 2020 at 08:11

    The last line is the killer. 2019 is ancient history now. In fact it is B.C. – Before Covid.

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  3. BrianP293
    May 21, 2020 at 08:36

    I wonder how much they paid for that headline?! Whilst it’s great that they’ve got £60m in the bank that’s not even going to cover their net debt.  Looks like it’s running on empty as we enter a massive recession…

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  4. whatdoiknow58
    May 21, 2020 at 08:41

    Can someone explain to me the difference between profitable growth and profit? Looks like £37.5 million to me. I must try that with my Bank.

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  5. GeorgeHammond78
    May 21, 2020 at 08:44

    How on earth do they manage to retain 86,000 managed properties? Must be a shed load of client apathy out there.

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  6. Hillofwad71
    May 21, 2020 at 08:57

    The abortive merger costs with LSL and sale of LSH will be arriving in this years accounts .Should imagine total debts they are currently well over £90m

    Lets hope they don’t incur anymore abortive costs chasing the Dane for the costs

    Market likely  to be more appreciative  Central  London still looks moribund

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  7. Andrew Stanton Proptech Real Estate Strategist
    May 21, 2020 at 09:31

    A 37.5M loss how can that be changed to a headline of Countrywide returns to profit?

    If we add that 37.5M loss to the 473M operating losses of the previous two years that is a combined 3 year loss of 510M in 36 months.

    And if you look at the accounts and the blunders and the millions spent and lost – I can not fathom how the group managing director of the chief financial officer keeps their jobs, over 2m of spend on aborted attempts to re-finance since 2018, so someone has had fees of over 2m to sort out better cash flow and it came to nothing so just write that down.

    There are millions and millions or exceptional costs stuffed into the accounts – I think they should be renamed costs incurred by Countrywide due to exemplary incompetence by the most senior management, and what I find a real shocker is – swimming in all this debt who has literally millions of shares … the very people who think a 37.5M loss is a victory – you could not make it up. If you want to cheer yourself up have a good look at the full accounts.

    I do not see  Countrywide the ‘bastion of traditional we do it this way’ – legacy agency model built on paper and ‘man/woman power, and is the largest agent by size in the UK over 690 physical offices lumbering on much further.As stated this grey dinosaur managed to have an operating loss of 212M in 2017, and an operating loss of 251M in 2018, and the full horror show figures for 2019 are not in the general domain – but in the notes of the General meeting of 23rd of December when the aborted sale of Lambert Smith Hampton was discussed Countrywide stated …’ Even if the Countrywide Group is able to fully realise its strategic goals and turnaround plan, there is no guarantee that the Countrywide Group will return to profitability promptly, or indeed at all.’Maybe the executives need to read their own words … and take ownership.

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    1. whatdoiknow58
      May 21, 2020 at 10:26

      Andrew. For what it maybe worth you have my respect for setting out the plain facts. This once fine business which has helped launch the careers of many outstanding Estate Agents over the years has been utterly trashed by some of the worst mis-management ever seen within the industry having turfed out seemingly anyone who raised any objection to their crazy ‘ retail ‘ strategy and then continuing to scoop up over priced Lettings businesses with borrowed money even after the tenants fees ban had been proposed and then announced. The amount of money wasted is just appalling and the irony is that if they had simply done next to nothing and sat on their hands over the last four years or so and put a fraction of that money into updating their dinosaur technology and marketing strategy they would now have one hell of a business. 

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      1. Bertie
        May 21, 2020 at 19:12

        The rot had set in before the Alison Platt era. Things have gone from bad to worse, but Countrywide was heading in the wrong direction even before she arrived.

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        1. Mythoughts
          May 21, 2020 at 19:35

          I think Alison Platt must be looking back with a little rye smile..

          We have accelerated the expansion of our virtual viewing offerings, adapting to social distancing measures, and we are offering our customers online mortgage advice. This way of working is resonating well with our colleagues and customers who are appreciative of this multi-channel choice of engagement, 

           

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        2. ARC
          May 22, 2020 at 10:12

          What when the share price was north of £6 and the group had just announced record profits, mmmmmmmmmmmmm, not sure you on solid ground there Bertie, my boy.

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    2. Mythoughts
      May 21, 2020 at 17:34

      I agree Andrew.
      You can fool some of the people some of the time…. I
      n some areas an improving picture but..
      Looking over the past 3 years (2017), group income has fallen from £673m to £498m; since the start of the “Back to Basics “plan, the group income has fallen by £129m.
      Sales and lettings Income continued to fall 5% in 2019 and managed property continued to fall by a further 2.3% (well down from the 125,700 managed residential  units  reported in 2017).
      Sales exchanges modestly increased to 44303 once restated, but is well down from the 54,205 completed in 2017.
      Seemingly good news is that mortgages written have increased from £17.7bn to £20.9bn but this naturally increase as house value have risen.
      One of the key areas of lost income is B2B which has seen a fall from £220m to £89 in the past two years.
      The main area for Countrywide however is the level of debt resulting in share placements and share consolidation over the past couple of years. The company market capitalisation today is around 19.2m with a short term liability of £82m but debts totalling £317m.
      Not too much security for the lenders as perhaps admitted in Annual Report The Board’s assessment in relation to going concern is included in note 2(b) of the financial information.
      Given the timing and risks associated with achieving forecast liquidity, and therefore remaining within the liquidity covenant as stipulated by the banking facility agreements, the directors have drawn attention to material uncertainties which may cast significant doubt about the Group’s and Company’s ability to continue as a going concern. However, the directors have confirmed that, after due consideration, they have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
      Not the most confident of statements. Looking over the past two years there have been some areas of decline that have been slowed or arrested but these have been celebrated as major successes.
      Although £60m of cash reserves as of the 20 May 2020 may seem healthy, perhaps think of two months no salaries, deferred VAT etc. With total operating costs of around £38m per month, how long will £60m last once the £10m reserve has been used and business costs return to normal.
      Why are Countrywide pursuing the Government for further financial assistance. …
      because you can’t fool the people all of time.    

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  8. Joseph60
    May 21, 2020 at 14:44

    Many will just be thinking, ‘How long can it continue?’  Very sad.

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  9. Outofideas
    May 22, 2020 at 17:03

    Purely speculation here, but rumour has it that Countrywide are not only stalling on getting their branches back to work due to health and safety but are also looking at further consolidation of their ‘estate’. No more 2/3 branch towns in the Core EA / Lettings business (there may still be some overlap with Hamptons / John D Wood and the mass market brands) and any branches under a certain level of profit are being shut unless available pipelines / registers are enough to pull them through 2020.

    The Lettings book is being used as a short term cash generator whilst property managers are being slowly returned to work in line with customer expectations on service. At which point they are required to be fully staffed they will pull the plug on the closure program.

    The well has run dry, the ship is sinking. May she rest in peace.

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