With the latest announcement that income is continuing to slide at Countrywide, a new revelation has emerged from the company’s recently-published annual accounts that appears to have been completely overlooked by commentators.
The company appears to have a £275m ‘revolving credit facility’ along with a £60m ‘accordion facility’.
It looks like any borrowings from these credit facilities (or at least a large part of it) need to be paid back to its six lending banks … by March 2020.
That’s less than two years away!
According to the 2016 accounts, some of that money was spent on expanding the company, including the acquisition of ten businesses for £38.5m. But there’s always a day of reckoning and, in my view, that day is looming.
Although it states in the 2017 report that the company plans to renegotiate the term of its borrowing facility later this year or early next year, the accounts also state: “Failure of the Group to comply with its existing debt covenants may lead to a default on the Group’s borrowings and a requirement for the Group to repay any amounts outstanding or to renegotiate the terms of its facility.”
The accounts go on to say that the Group has in fact already had to agree covenant changes in February of this year, due to the worsening of its leverage ratio.
But how can it repay what it owes unless it reduces costs by making swingeing cuts to staffing levels and overheads, or sells off some of its assets?
How I’d like to have been a fly on the wall at the company’s AGM! Despite all the changes they’ve been making, they’ve revealed that income is down in the first quarter of this year by £17m, from £162m to £145m.
I admire Countrywide’s efforts for taking control of the rudderless ship, bringing back good staff who had left the business – even bringing people out of retirement. Yet I can’t help but feel it’s the hard-working foot soldiers who are going to bear the brunt of some tough decision-making in the months to come.
So, is Countrywide the ‘Carillion’ of our Industry?
Which brings me on to another piece of information relating to Countrywide which appears to have escaped most people’s attention – the results of the Government’s new Gender Pay Gap survey, which compels businesses with 250 staff or more to disclose average pay for men and women, including bonuses – or in the case of our industry, we believe this to mean commission.
In the case of Countrywide Estate Agents, only 19.3% of women and 14.9% of men are listed as having received a bonus. Our own at Spicerhaart by comparison sits at 92.3% for men and 86.3% for women (reflecting also that we have a number of female admin staff who don’t receive commission).
It appears Countrywide’s figures suggest they offer little or no commission – so where’s the incentive to make a sale? People on commission are hungry to sell and know they can earn far more money that way.
Perhaps it’s one more thing they need to look at when refreshing and revising the company’s strategy going forward. But it’s on a very long list – and time may be running out.
Purplebricks survey reveals interesting fact
According to an ‘independent’ survey produced by Purplebricks’ own corporate brokers Investec, around one in 12 properties on the hybrid’s books are actually sold by other estate agents.
The survey of 513 Purplebricks’ vendors stated that of the 24% unsold, 34% were then sold by another agent. By my maths, that’s around 8% sold by other agents – i.e. 1 in 12.
This is data that has come from sellers themselves, not from Purplebricks – so I’d be very keen to see their own statistics on this interesting fact.
Not least because we recently completed a sale on a property – which Purplebricks claimed as their own! Imagine our surprise to see on Rightmove that they had marked it as sold and, when challenged via their call centre, Purplebricks told us ‘they needed to make sure that the public understood the property was now sold’.
True enough. But it was sold by haart, who had been brought in on a multi-agency basis after nothing happened with Purplebricks and we had it under offer within two weeks with a buyer we had introduced.
We have numerous cases on our books where we’ve been called in to resolve issues caused by Purplebricks – sometimes because of their inactivity when there are problems or chains, and other times where we’ve picked up the pieces because they’ve failed to sell. I wonder, too, how many other agents are in the same boat, perhaps we can compare notes?
It will also be interesting to see how much of a chunk will be taken out of Purplebricks’ income stream by HouseSimple’s move to a No Sale No Fee model. What a dangerous move that could be for both hybrids. There must be mergers and closures afoot!
There must come a time when both investors and customers realise they are being short-changed.
My feeling is that time is coming.