The Paul Smith column: Will Countrywide’s problems be over any time soon? It really doesn’t look like it

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.

 

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11 Comments

  1. dompritch134

    Welcome to Paul Smiths weekly rant at his competitors, let’s not mention his last piece on staff retention, which whiffed of pure hypocrisy.

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  2. AgencyInsider

    That’s it dom. Well done. Now pop off down the other pub. Btw – Whilst we all take issue from time to time with Mr Smith’s pontifications we also know that he has probably forgotten more about Agency than you will ever know.

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  3. J1

    Not sure this is anything new.

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  4. smile please

    Do you think somebody at CW stole his GF when he was younger? – He seems to have an unhealthy obsession with other agents.

    I think he would be better spending his time looking at his own offices and staff.

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  5. Hillofwad71

    The debt  has been the pressing issue for sometime  which has reflected  in the  SP  descent .It’s been much talked about and the  heavy  hand of the banks has been sitting on their shoulders .The banks will be keen  for CWD to go back  to the market for another capital raise say £75m might do the trick and  decrease the debt.This of course will be difficult  as they only did this 12 months ago and the SP  has plumetted  further with some very unhappy institutions

     

    What the banks will be most concerned about is the possibility of some of the exemplar brands under the CWD umbrella breaking off independentally taking the business,cherry picking the best staff   and leaving the debt  behind

     

    What is certain the poor shareholder is likely  to  get further shafted

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  6. MrLister

    Always leave a slightly bad taste in the mouth when the CEO of a company thinks they’re superior enough to take to forums to knock the competition within their industry. One of my best mates works for Spicer Haart in a neighbouring town and from what he says they’re far from perfect.

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    1. Robert May

      In a competitive industry that is exactly what Mr Smith’s job is. Flying the flag for his troops, standing out the front shouting we’re better than you lot, nah nah na nah nah! He has to accept being loved by some, loathed by others.

      Of course they’re not perfect, none of us are. I got in trouble last week for speaking the truth which some people didn’t like. One person got in a right snot because I didn’t answer their question before I’d  finished answering someone else’s. Displaying good manners to one person was considered arrogant, bad manners to the one who couldn’t wait

      Mr Smith is making a point as he sees it and because his opinion differs from yours it doesn’t make him wrong but if you want to prove him wrong you have to put a bit more effort into saying why.

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  7. Typhoon

    REF PURPLEBRICKS AND OTHER ON LINE PROPOSITIONS

    Shareholders are usually clever people with vision and it staggers me that they have not yet cottoned on to the train crash coming with on line. The concept is great “cheap” because there are no staff to serve the public, but the reality is “cheap” in regards to results and customer care and service. You vacant do estate agency properly without expert people and enough of them

     

    For us, a chain  where an on liner is involved (which in truth  isn’t that many) is always a bigger stress to get across the line and many don’t.  There is just NEVER anyone there that is interested or ever responds. So our recommendation to clients when we are putting a sale together is that if there are two buyers of equal standing and ability and one is not linked into a chain where there is an on line agent involved, choose the other.

     

    Last week a stat was released suggesting that the national fall through rate last year nationally, climbed  from 33%to 38% No wonder. Our company fall through rate across the board is 12% because we have expert STAFF to support and guide our customers.

     

     

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  8. cyberduck46

    >a new revelation has emerged from the company’s recently-published annual accounts that appears to have been completely overlooked by commentators.

     

    Hardly. It’s been discussed widely, even on PIE.

     

    >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.

     

    A company which nobody has really heard of because they don’t spend a lot on advertising.

     

    Doesn’t really sound much like this author has much knowledge or offers very much insight into his own industry.

     

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  9. agent9371

    I had a short spell at Countrywide recently as company i was at was bought out by them, have to say they are awful and really ripped the soul out of what was once a very credible company.

     

    I do however believe Haart are not in a position to discredit any competitor as i think their brand is very weak and the staff quality i have seen in the offices around my part of town are very poor indeed, mainly rude boys in BMW and still put their tie on like they are in year 10.

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    1. Woodentop

      They also used to wear white socks!

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