CWD.L Share News (CWD)

LONDON (Alliance News) - Shares in Countrywide PLC fell sharply Thursday after the company swung to a pretax loss, axed its dividend payout, and issued its second profit warning in six weeks.

Shares in Countrywide were down 8.3% at 81.557 pence each at Thursday midday, having hit as low as 67.70p earlier in the session. Countrywide shares have fallen nearly 90% since hitting its all-time high of 701.00p in March 2014.

In 2017, the estate agent and property services firm sunk to a pretax loss of GBP212.1 million from a GBP19.5 million profit the year prior. Revenue also fell to GBP671.9 million from GBP737.0 million the year before.

Profit performance was chiefly hurt by GBP237.2 million in exceptional charges in 2017, compared to GBP33.2 million in 2016.

This was following a massive GBP216.1 million impairment charge to goodwill. This was primarily due to a GBP151.3 million impairment of goodwill on its UK business and GBP41.0 million goodwill impairment on its London business.

Nonetheless, even after excluding exceptionals, pretax profit more than halved to GBP25.2 million from GBP52.7 million the year before.

This was after top and bottom line results from its UK and London Sales & Lettings units fell sharply. UK Sales & Lettings saw total income fall 17% to GBP205.2 million and adjusted earnings before interest, tax, depreciation and amortisation fall 47% to GBP14.9 million. For London, total income fell 10% to GBP155.3 million and adjusted Ebitda down 44% to GBP11.6 million.

The UK business saw the number of properties managed fall 4% to 62,646 with lettings income 8% lower. On the sales front, homes exchanged fell 17% to 41,722.

In London, lettings performance was healthier with properties managed up 3% to 26,644 and lettings income flat. This was helped by its premium brands: Hampton International and John D Wood. Sales again fell 20%, however, to 8,778 homes.

Following the overall fall in profit for 2017, Countrywide, therefore, axed its dividend payment for 2017. In 2016, it paid 5.0 pence per share dividend.

Nor could investors take much solace in future prospects as Countrywide delivered its second profit warning - this time for 2018 - since late January.

Countrywide explained 2018's pipeline was "significantly" below 2017 levels. Although the company has "begun to take steps" to return pipeline levels to those seen at the start of 2017 it emphasised this would "take time."

The company therefore expects profit from the first half of 2018 to be lower than in 2017, and does not expect the remainder of the year to make up this reduction.

The company forecast interim 2018 adjusted Ebitda to fall GBP10 million below the year before. In 2017, interim adjusted Ebitda stood at GBP28.1 million - itself down from GBP37.9 million the year prior.

Full year adjusted Ebitda in 2017 was GBP64.7 million, 23% lower than the GBP83.6 million the year before.

"The under-performance of our business over the last three years has resulted in us making significant management change in the group," Countrywide Executive Chairman Peter Long said.

In late January, the company's former Chief Executive Alison Platt resigned shortly after reporting a profit warning. She had been in the post since 2014.

"Industry expertise in all areas of our business is key," Long added. "Within Sales and Lettings, the previous strategy resulted in us losing a lot of that expertise. In the group, we are fortunate in that we have an industry veteran, Paul Creffield, who has been promoted to the role of group operations director. His deep understanding of the market and operations means that we have quickly been able to identify what we need to do to begin addressing our under-performance."

"I am greatly encouraged by the number of high calibre industry business leaders that we already have within our Sales and Lettings business and a number of similarly experienced and high calibre industry people who previously left us and want to rejoin now that Paul is in this role", Long said.

"Fundamentally," Long continued, "Countrywide has a unique market position given its breadth within the property services industry. We have established and trusted brands that resonate with customers, together with dedicated and committed colleagues who are the cornerstone of our business."

"The strong areas in the group, Financial Services and B2B [Business to Business], have unfortunately been overshadowed by the poor performance in our core Sales and Lettings business units," Long explained. "We believe these business units are fixable, know what we have to do to restore them and the steps to take that should result in a return to profitable growth. This will take time but ultimately there will be much upside for our group and our shareholders, whose patience has been sorely tested recently."

In 2017, its financial services unit saw adjusted Ebitda fall 13% to GBP19.7 million on total income of GBP87.3 million. The total value of its mortgages completed in the year, however, grew to GBP17.70 billion from GBP15.70 billion the year prior.

B2B - which provides services including surveying and conveyancing - saw total income fall 2% to GBP220.8 million but adjusted Ebitda rise 13% to GBP35.6 million. In particular, Countrywide singled out a "strong" year for contract retention and new lender relationships in its surveying business.