Countrywide’s own broker slashes earnings forecast for UK’s biggest estate agent with ‘messy’ times ahead
9 Mar 2018
Countrywide’s in-house broker has slashed its forecast for the amount of earnings the group is expected to make in the coming two years, while another analyst has placed its forecast under review.
The news came after Countrywide yesterday revealed thumping losses for last year, which sent the firm’s share price sinking 16% in early trading before it recovered to close just 1.57% down at 87.5p.
Countrywide announced that it made a loss after tax of £208m in 2017, compared with a profit of £17.5m the year before.
Its earnings fell 23% last year, while profit in its sales and lettings division plummeted 45%.
But analysts expect more pain to come.
Anthony Codling and Sam Cullen, of Countrywide’s own in-house broker Jefferies, said they were cutting estimates for earnings by 24% and 22% this year and next year respectively.
Jefferies now expects earnings before interest, taxation, depreciation and amortisation (EBITDA) in 2018 to be £55m on revenue of £670.1m, down from its previous estimate of £72.1m.
In 2019, it estimates EBITDA of £61.8m on revenue of £687.3m, down from £79.7m.
In their note, the analysts predicted a “messy” few months as Countrywide put new plans into place, having recognised the need to go “back to basics” and dispense with Alison Platt’s much-denigrated retail strategy.
Nonetheless, Jefferies highlighted the fact that the same syndicate of six banks that had been there since Countrywide’s IPO in 2013 were still backing the business, having amended their lending terms only last month.
Jefferies said: “For the overwhelming majority of customers, buying or selling a home is a huge financial and emotional investment, each transaction is unique and Countrywide has found that service is highly valued.
“Centralisation robs entrepreneurial branch managers of the ability to maximise revenues and tailor service to individuals’ needs.
“High frequency lettings and low frequency sales are best catered by specialist teams rather than generalists.
“Trying to nail the hybrid offering is like trying to hit a moving target.
“The hybrid model needs to be proven before one should try to emulate it.”
The broker continued with a “hold” rating for Countrywide, with a target price of 85p (from 125p).
Meanwhile, analysts Peel Hunt also predicted a “long road to recovery” for Countrywide.
Examining the results yesterday, it said: “The significantly weaker sales pipeline for 2018 implies a downgrade of up to 25% on our FY18 EBITDA forecast of £74m.
“While a recovery plan is being put into place, the impending 2019 lettings fee ban leaves the group facing problems for at least the next two years.”
Peel Hunt added that its target price and forecasts were now under review.
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