In a trading statement this morning, Countrywide says it has “a new covenant package with lenders provides the financial flexibility to continue to execute the turnaround plan.”
Few details are being made public but the statement says: "The Group’s lenders remain supportive of the business and the amended covenant package provides the Group with the financial flexibility to continue to execute the turnaround plan ... the Board has agreed, as part of the new covenant package, to share its plans with the Group's lenders through the turnaround period as they continue to be developed and executed."
The programme of branch closures which took place from March until June has effectively finished, according to Countrywide's group managing director Paul Creffield in an interview with Estate Agent Today this morning. He says the closures were not demanded by the lenders and took place separately to the negotiations over a new covenant deal.
On the upside, Countrywide's figures today show that it has cut pre-tax losses with a declared statutory loss of £37.7m (down from £206.4m a year ago) and - the most optimistic piece of news in the statement - there is an operating profit of £10m for the six months to the end of June. Countrywide also says its pipeline was £13.5m higher at the end of June than at the start of the year.
However, many other figures for the first half of 2019 make difficult reading once again.
Warning of a weak market overall, Countrywide’s group income declined 4.0 per cent to £290.6m (2018: £302.9m), with sales and lettings also bringing in 4.0 per cent less income - some £157.85m. The agency’s total of residential exchanges were down slightly to 21,624 (2018: 22,026).
On sales the statement says: “Total income for H1 2019 declined £4.5 million, down six per cent year on year. Adjusting for the effect of closed branches, estate agency was three per cent down year on year. There was a good performance in our UK estate agency business which was down two per cent year on year compared with the 23 per cent decline in H1 2018.”
Countrywide’s senior management says the lettings performance was “resilient” - but here too there has been a small drop. The statement admits: “Lettings income decreased by £1.4m, two per cent year on year with the number of properties under management down two per cent at 86,064 (30 June 2018: 87,837). Our landlord retention rates continue to improve despite a number of landlords exiting the market. The first half of the year also saw the introduction of new regulation for Tenant Fees from 1 June and our plans are broadly on track to mitigate some of the effects of this. Overall the lettings business has performed well against the backdrop of four per cent fewer properties overall in this sector and the impact of tenant fee ban.”
The statement goes on to say that Countrywide has “built back industry expertise and staffing levels in sales and lettings at regional and branch management level against the backdrop of an uncertain market” but admits for the first time that it embarked on a branch closure programme early in 2019.
“The Group took a series of actions to close a number of loss making branches that the Group considered non-viable in this market, reduced staffing levels in each of our local markets based on activity levels, reduced the levels of marketing spend where there was not the appropriate level of return in each local market, and took further actions to accelerate and reset our cost structure across the business and to reduce discretionary costs and overheads” says the statement.
Countrywide claims that “this has underpinned the delivery of the first half performance, with significant adjusted EBITDA benefit flowing through into the second half and gives the Board confidence in the outlook for the full year.”
The company also says it is the “clear leader” in listings by market share, claiming it has an 8.4 per cent share of the UK market and remains the number one lettings agent with seven per cent share of rental listings on Rightmove.