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Countrywide's earnings could be lower than expected, warns Jefferies

City broker Jefferies is warning that Countrywide’s earnings as calculated through the EBITDA measure could drop to as little as £50m - down from an estimate of almost £65m made only last month. 

Jefferies acts as a broker for Countrywide, as well as LSL Property Services and ZPG. It was the consultancy that wrote the analysis of Purplebricks’ sales figures which caused uproar in the industry and consumer press earlier this month.

In this latest analysis of Countrywide, equity analysts Anthony Codling and Sam Cullen use as a key measure the agency group’s EBITDA - this is net earnings with interest, taxes, depreciation and other costs added back to it. This is a common way of assessing profitability of companies.


The analysts say Countrywide - which now has a share value of around 80p, some 20 per cent below even the level when former chief executive Alison Platt was ousted - is facing both “internal and external challenges.”

A statement to staff from the interim chairman Peter Long shortly after Platt’s departure revealed a change of management structure and a general pledge on returning resources to branch level, along with the suggestion that a more substantial strategy statement would be revealed when Countrywide formally reports its 2017 figures to shareholders on March 8.

In its prediction of a £50m EBITDA floor, Jefferies’ analysts hint that Countrywide could be in a yet more difficult position had the ban on tenants‘ fees not been delayed by government until at least spring 2019. As a result, the analysts say the full year 2017 figures, when confirmed, are likely to be “the low point of EBITDA for the group.”

Jefferies’ analysis, sent as a note to its investor clients, says it maintains its Hold rating for Countrywide, following the group’s amendment to its credit facility with existing lenders. The analysts say this “provides [it] with the financial flexibility to invest in the business as it takes action to restore the sales and lettings businesses back to profitable growth.”

However, the broker says all eyes are now on the March 8 announcement by Countrywide. 

“The group hinted in its trading update in January that it had started to take a range of actions to improve sales and lettings performance. We look forward to learning more about the actions to improve performance” it says. 

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    From last year

    “One of the industry’s leading analysts says Countrywide’s figures for the first half of 2017 are likely to be tough - but he forecasts the group’s performance is likely to improve significantly in the final six months of the year.

    Countrywide’s long-term share price fall has been well documented; it is now languishing around 165.0, up from its lowest early this year but a far fry from three years ago when it hit 686.5. Its high volume of senior staffing changes - some walk-outs, some redundancies, some orderly departures - have also been heavily publicised. Its latest senior management reshuffle, reported here last month, took effect earlier this week.

    But now Anthony Codling, a leading analyst at Jefferies, has told investors in a guidance note that ‘headwinds turn into tailwinds’ for Countrywide as the year goes on.

    He says the group’s trading report on the first half of 2017, released in three weeks’ time, may prove discouraging. Countrywide’s EBITDA - City jargon for its earnings, a crucial measure of corporate performance - will be around £25m to £30m, he predicts, thanks to the General Election hiatus, reduced buy to let purchasing, and the London market’s continuing problems triggered by high stamp duty on many more expensive properties.”



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