Financial analysts at City consultancy Jefferies - which helped Countrywide float on the stock market - say 2016 is a key litmus test for the agency group after its disappointing annual figures released yesterday.
As we reported on Estate Agent Today, Countrywide reported a four per cent increase in income for 2015 but a thumping 37 per cent drop in operating profits after what it calls a “decline in estate agency and lettings profitability.” Its income boost was provided by particularly strong figures from financial services, commercial property and surveying.
In a statement to its subscribers, Jefferies says since its radical restructuring during 2015 the company has drawn a “tough first match” with a general election and wider economic uncertainties dampening the housing market.
“2016 is another election year, which may lead to a pause for transactions ahead of the EU referendum. We suspect all of the new divisions will need to have their wits about them in the months ahead and the new divisional structure is unlikely, in our view, to receive help from the underlying UK housing market” Jefferies warns.
“If nothing else, this year will be the litmus test on the appropriateness of the new operating structure and if successful all credit will be due to the group's efforts rather than shared between corporate action and government stimulus as for the UK housebuilders” it says.
It warns that while Countrywide has deliberately diversified “it is exposed in many forms to the underlying UK housing market, weakness in house prices, transactions or the private rented sector may lead to a reduction in our estimates.” For the moment, however, Jefferies is not changing its expectation for the group to grow in 2016.