Shares in estate agency group Countrywide have fallen hard, wiping its market capitalisation down to less than one-fifth that of Purplebricks.
Yesterday they tumbled for a second day running – at one point touching just 84p – with speculation that the cause was negative news about the housing market from the likes of Hometrack and mortgage lenders.
Countrywide’s market capitalisation fell to £225.8m, about 18% of Purplebricks.
Yesterday evening Purplebricks had a value of over £1.2bn or £1,258.31m – some five times that of Countrywide, the UK’s largest agent.
London-focused Foxtons, far smaller than Countrywide, had a market capitalisation of £190.1m.
Countrywide appears to be alone in the publicly quoted estate agency firms affected by the flow of negative news about the housing market.
These include stories in The Times which yesterday sparked a fall in shares in several house builders, with the suggestion that the Government could revoke planning permissions and developers could have paid far too much for land.
The paper yesterday began what it says is a series examining the housing market.
In one story, it is alleged that the prime minister is a Nimby who “just doesn’t understand the scale of the housing crisis”.
The story claims that “radical proposals” from housing secretary Sajid Javid and Chancellor Philip Hammond have been blocked.
The story centres on Tory fears that housing did more damage to them during the last election than tuition fees, because it is primarily younger voters who have been squeezed out of home ownership.
A second story – covered in EYE today – is about the increase in Stamp Duty receipts because the 3% surcharge now payable by buyers of second homes and buy-to-let properties has more than offset a fall in overall transactions.
The Times story quotes the RICS as saying that sellers are holding off because of economic uncertainty, and new buyers last year reached the peak of what they could afford.
A third story said that developers would lose planning permissions if they failed to hit construction targets. There would also be greater powers of compulsory purchase, with the possibility of land in future being acquired by councils for development at agricultural prices, with councils granting themselves planning permission. The implication of this is that developers would have over-paid for land that they have not yet build on.
The Times quotes housing analyst Anthony Codling of Jefferies, who warned of a dramatic drop in developers’ share prices.
Codling said: “If the Government were to implement a use or lose it rule or windfall tax retrospectively on all land that has got planning permission, you are talking Armageddon.
“Share prices are linked to the value of land that house-builders hold, so if you reduce the value of land, that has a direct effect.”
Sentiment on the stock market appeared to reflect this warning – although only partially. While drops in share prices seemed uniform, they were not major.
Builder Persimmon’s share price slipped 61p, while Barratts and Bovis each fell by around 2%, and Redrow was down by about 1.6%.
Meanwhile, Countrywide’s share price continued yesterday, slipping to 84.9p, according to the London Stock Exchange.
Countrywide has already issued a profits warning and parted company with its chief executive as the shares dived below 100p.
With further falls since then, the new executive team may have a tough job ahead in convincing the market about its recovery strategy – due to be revealed early next month.
* This morning Nationwide reported that house prices picked up in January, rising from £211,156 in December to £211,756. Economist Robert Gardner described the growth as “a little surprising” after mortgage approvals declined to their weakest level in three years at the end of last month.
But he added: “The flow of properties coming on to estate agents’ books has been more of a trickle than a torrent for some time now and the lack of supply is likely to be the key factor providing support to house prices.”
LSL market cap £293m, is it time for a well run estate agent business, run in the main by estate agents and property professionals to take over a flagging business?
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CWD & LSL
Yes ,indeed but do they want to take on a £193m debt when they can just cherry pick the individuals / teams where clients and revenue will follow
You can guarantee that some of the lions are now completely fed up being led by donkeys and will be looking to further their professional careers elsewhere They won’t be hanging around waiting to see who their next boss is.Mindful of the fact also that clients might be voting with their feet as well
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Please stop posting about the debt. It makes no sense.
Many businesses have a perceived large debt the question is can they service it, as previously pointed out Apple have incredible debt.
If you have a mortgage of 300k on your home are you about to go bust? – No you make the monthly payments and service it.
There are many advantages to debt, tax being one.
As posted above CW are still posting profits which means they are servicing the debt and still making profit.
A lot is wrong with CW but it is not the debt they carry.
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I agree 100% and the reality is PB are still to make a profit, i don’t see how there business model can continue to thrive when the vast majority of their listers are just that, they are not selling the stock they take on they are just listing it and charging a fee for no end product.
I will openly admit that this is not always the case, the PB rep in my area is actually selling 79% of the stock they list but he did recently value a property here at £560,000 and i sold it for £610,000 so if he is managing to get them on below market value then its info wonder he is selling them but the truth is my vendor was still £42,000 better off even after paying my standard fee of 1.25% plus vat.
however if we all roll over and let them get the upper hand then they and the way they do things will become the norm
As high street agents, i don’t know why we have not got together with someone like onthemarket.com to do some adverts to counter PB’s commisery ads something along the lines of no sale no fee, pay on results not upfront.
High street agents are losing the war because they are not fighting back Pb are using the A Bomb of tv advertising and the high street are the ones caught unsuspected like hiroshima in 1945.
I remember a senior member of the firm i was working for in 1998 who said that “this internet malarki is a flash in the pan and it will be gone as quick as it has arrived” he was proved wrong and the same is the case with the internet agents.
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We’re not losing a war against a flawed business model.
Call centre agent growth v high street agent growth is poor. Call centre advertising spend is MASSIVE and always will be. I watched Spurs v Man Utd on BT Sport last night. In one set of adverts there was a PB ad, in a subsequent ad break there was an emoov ad undercutting them on price. What was the differentiator? None. They have to spend heavily on advertising ad infinitum. There is always undercutting in a low cost, low service environment, so call centre fees are always under pressure. They are not going to make any money. Their share price looks at its peak again.
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Smile Please
CWD
Sure they are profitable and that’s thanks to the excellent staff
The debt is the issue because the banks are applying pressure on the group to pay it back Its not a domestic mortgage they aren’t happy with just the monthly payments that’s not how it works CWD were forced by the banks to undertake a placing last year where they raised money not to raise money for the business but purely to reduce the debt pile
They are operating on the back foot Its like the value of the house has reduced by 90%!!
They were also put under pressure to see what they could raise by the sale of LSH
You don’t borrow money to spend money buying revenue just so you are able to service the debt !The idea was to add value and increase revenue It hasn’t happened and not only that it has reduced which means the debt will be hanging a round for many years to come taking longer to pay off
All the good work at the coalface ruined by strategic corporate mistakes Why do you think the SP today is 83p and itwas 600p
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You make valid points re the staff, you are either still there or like me a previous employee.
However you are still wrong with your view regarding the debt.
There was not pressure on them to sell LSH, like the dumping of Zoopla stock it was a strategic play they looked at as a company.
I am not saying the selling of Z stock or the potential selling of LSH was right or wrong.
What you are missing is when you are floated its about the SP even short term gains help, ask Harry Hill, he dested being listed as it was just about maintaining and growing SP to the detriment of agency which is probably why he is today more interested in start ups or being on a board as opposed to the burden of being the CEO.
The banks will be fine with CW although disappointed in the SP – They will only make sounds of recalling debt if payments are missed.
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There hasn’t been any agent in history that charges up front that has lasted the course.
Now it seems that the loss making onliners are more valuable to the city boys – if it lasts long term I for one will be surprised.
What is happening though is that the corporates and regionals don’t know their place anymore and they cannot make money from selling houses.
When referral fees and tenant fees vanish there will be a lot of consolidation, which really should be at the top of everyone’s agenda now.
Raise your fees boys and girls.
Be better, not cheaper. Be the agent that the clients really want and in most cases need.
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History is exactly that, history. Times are changing. The internet has changed the house sale business for ever.
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I still cannot get over Countrywide. With the right leadership from experienced ‘coal face’ Agents there is still huge potential.
If I was in charge I would be looking at it as ‘what can’t we do’ with tens of millions of profit still coming in.
Unfortunately, having never previously taken a large company to the brink of collapse, and then having been paid a huge amount of money to ‘shove off’, I will not be thought of as having the relevant experience and qualifications to be considered!!! 😉
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I have never heard so much nonsense as purple bricks being worth over 1bn. Still haven’t release any of there proper figures have they? And with a turnover of £50m how do you get to a value of 1bn. So if my agency turns over £50,000 its worth 1 million? Surely people have to stop investing in this business, which is held up completely on other peoples money and not by its own money making ability.
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Like my old father said to me,
You can fool some of the people all of the time, you can fool all of the people some of the time, but you can’t fool all of the people all of the time…
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Potential its all about potential. 135million houses in the use plus Australia and the UK. Thats a lot of potential. I have money in sirius minerals and it hasn’t even produced anything yet but it will and it has a unique dish product and easily mineable so i have made money. I wish i had invested in apple
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Mid 2018 news headline “Purplebricks acquires Countrywide, Mrs Alison Platt named as new CEO of Purplebricks”
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What a load of **** !
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Countrywide , the once super tanker of the property world , is now rusting in dry dock waiting to be sold for scrap , thanks to AP , BS , and the incompetent board members , who have all fiddled around the fire . All earning six figure salaries , whilst the staff have their commisssion reduced to 3% and forced to work 6 day weeks . The London property market is a complex and varied global market , of which AP and BS had no understanding of , what works in Milton Keynes and Bedford does not apply to London . The rot started pre AP, but without doubt she sure did accelerate the disaster , sitting in the plush Oxford St head office (TWO FLOORS , BTW ) completely detached from the real world . ” Oh that fresh fruit looks yummy , someone please pass me the violin ” .
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I think all of the doubters will be surprised. CWD still has many great people. The new Lettings and Agency boss is well respected and has many years of agency experience. The chance they now have is to reinvest but with a leaner fitter structure. Lots of the branches that lost money have gone. No one know how much they have made but it ill be 50 to 100 million. I think the worse has passed and many people who I know still work there say they can feel so many positive changes in the last few weeks. All the bankers and retail teams have gone. Proper agents now in charge.
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