Countrywide’s executive chairman and group managing director have spoken to Estate Agent Today about the impact of Brexit on the company, but with reassuring claims over how they will manage the Tenants Fees ban and possible referral fees restrictions.
Peter Long and Paul Creffield this morning released their company’s 2018 figures - profits halved to £32.6m but with the Back To Basics recovery programme producing improving performance in terms of market share and recruitment.
However, in a follow-up interview with EAT editor Graham Norwood, the company's senior figures warn that Brexit remains an outstanding problem which threatens the stability of the housing market for the first half of this year at least. “It’s a major headwind for the company and the housing market. People have a reluctance to put their home on the market and a reluctance to trade up. It’s a case of wait and see, they say, and this is particularly the case in London and the south east of England” according to Peter Long.
“What we need is clarity on Brexit, when it happens and what it means. It’s undoubtedly the case that there will be a reduction in income in the first half of 2019 because of this uncertainty - we’ve put it at £3m to £5m - and to be honest we don’t know if we’ll make that up in the second half or beyond” he cautions.
Long told EAT that he had seen the actions of LSL, Foxtons and others in terms of cutting branch networks as a way of preparing for such headwinds - but he says that no decisions on branch changes have yet been made by Countrywide.
“Of course we’re looking at estates but we’re not going to be thrown off course. The Back To Basics recovery programme is three years or so and we’re only one year through that” he adds.
Long says that Countrywide’s commercial arm, Lambert Smith Hampton, is also suffering from Brexit uncertainty, in line with the wider commercial property sector.
But while political and economic volatility is hurting Countrywide and the rest of the industry at the moment, the company says it is much better prepared to counter other headwinds facing it in 2019 - specifically the Letting Fees ban and, possibly, restrictions on referral fees as part of the government’s reforms of the house buying processes.
Countrywide warns the Tenants Fees ban may cost it as much as £9m in revenue this year but it expects this to be mitigated by year end. "We have eight to 10 initiatives in place to mitigate the Tenant Fees ban” explains Paul Creffield.
He says one of these is to ensure that a uniform approach takes place on fees across the lettings operations of the Countrywide empire. “Some companies had special deals for friends and family, for example, so we’re changing that and making fees uniform” he says. In addition Countrywide has developed tools for its landlord clients to cope with the plethora of varying selective and other rental licensing regimes that exist in different localities.
“Developing a product like that helps our clients and produces additional income - this is the sort of thing we’ve been developing for some years in anticipation of the ban” according to Creffield.
On referral fees - currently the subject of a 12-month review by government and the subject of new guidelines from the National Trading Standard Estate Agency Team - Creffield says Countrywide is in a “virtually unique advantageous position.”
It has its own regulated in-house legal firm, he says, so while Countrywide does currently pay referral fees in some areas, it is well placed if there is a sharp clampdown or even a ban on fees in the future.
“If the government bans them altogether, which is possible, then I can overnight stop them at Countrywide and we’re in a position to benefit because of our in-house firm. We don’t think any of our competitors can do that” he adds.
You can see the full report on Countrywide’s 2018 figures and the progress it’s making on its Back To Basics recovery programme here.
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Newsflash worthy?
It's so easy to blame bad management on Brexit these days.
With the sales pipeline down by 20%, Countrywide's first quarter revenue will also be down by a fifth, add the loss of revenue due to the lettings ban which will start soon, and then transparency on referrals, I think that unless 30% of branches close, by this time next year there may be no Countrywide.
Also, this nonsense about a 3 year plan and back to basics, this sounds very confusing. A three-year plan sounds like a communism and back to basics sounds like the conservatives. I turn clients businesses around in 6 to 8 weeks, if I said I have a 3 year plan to cut your debt and increase your profit, most of my clients would rightly tell me where to go.
I like Countrywide, because in 1986 one of their brands made me a manager after only 14 months in the business, but back then they had a structure, and a strategy and an identity, that made them unique. Also, most importantly, they sold huge amounts of property and their fees were sometimes twice that of the competition and they loved the fact that they were the agent of choice.
Last month I personally called over 150 agents as an exercise for a client, in those calls I spoke with a number of Countrywide offices, and they seemed to have two voices, either condescending and in your face or disinterested and beaten, there were plenty of other agents who had the same voice also.
In contrast, the agents who were market leaders in their areas, either corporate agents or independents, had the same voice on the end of the telephone, professional polite, non-pushy, and interested in what I had to say. Many of those were mature agents who clearly were loving their job, or young men and women who reveled in customer care.
Maybe, the COO's of this corporate should ring their branches, not to spy on their front-line team, but to understand that if prospective clients call and are greeted by negativity or a sales team who do not listen, then the business will not make profit.
Sure, Proptech means only 7% of business comes directly from a telephone call, but if a branch has never made profit in the last 5 years, and by profit I am saying 28% gross profit on turnover in all disciplines, then maybe the front line troops are confused, badly trained and possibly in the wrong profession and the buck for that stops right at the top.
Worringly, when top management say we are not going to sell off part of the company, that is very similar to the PM saying I have every faith in a certain MP, which often as not is followed by the said MP resigning.
My diary is a little busy at present and I am away in sunny Barcelona on holiday until next week, but if Countrywide would like some sound advice, I can certainly impart it, and they would not need to wait another 24 months to start turning around those loss making offices. And those vulnerable offices about to go the same way with sales revenue and other revenue streams about to be cut.
As a point of balance though I was an independent agent for half of my 30 year sales career, I also did time for another corporate who recently posted profits, more than twice those of Countrywide.
It comes as no surprise that all the managers and teams I was privileged to work with, were always on it, and the management teams through to the COO's had a strong, strategy based on customer service.
Also, though it was a corporate, each branch felt like a premier league independent agent, and had enough autonomy at branch level to make the customer feel the same way. And that is a very hard thing to accomplish.
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