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.