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Categorized | Property

Countrywide shares fall after profit downgrade

Posted on November 24, 2016

Shares in Countrywide fell more than 13 per cent on Thursday morning after the UK estate agency group warned that its full-year profits would be at the lower end of expectations.

Countrywide, which runs Britain’s biggest chain of residential estate agents, said changes in stamp duty and uncertainty following the EU referendum in June meant that transaction levels are “currently running significantly below” last year.

The company said that it expected transaction volumes for the current financial year to be down 6 per cent compared to last year, adding that the level of market transactions was likely to be even lower next year.

Analysts were downbeat, with Michael Goltsman at Citi saying the trading update “highlighted continued challenging conditions within the UK residential property market”. Gavin Jago at Peel Hunt was even more pessimistic, saying: “There’s no light at the end of the tunnel here.”

Countrywide first warned in July that its full-year profits would be lower than last year after the UK vote to leave the EU hit the markets for homes and commercial property. The company reported a 25 per cent year-on-year drop in pre-tax profit in the first half.

Countrywide issued Thursday’s warning alongside its results for the third quarter, in which total group revenues slipped to £188.5m, compared to £197.1m in the same period last year. House exchanges fell 1 per cent across the company’s retail business, but plummeted 29 per cent in London.

Alison Platt, chief executive, looked to reassure investors, saying the company had made “good progress this year despite tough market conditions since the EU referendum”.

But shares in the FTSE 250 group plunged more than 13 per cent, to 167.30p, in the first hour of trading on Thursday.

The company’s shares have lost more than 55 per cent of their value since the start of the year, and hit a record low last month after Jefferies, its house broker, forecast earnings would slump to below pre-flotation levels.

Thursday’s disappointing results came just one day after UK chancellor Philip Hammond announced a ban on letting agents charging fees to tenants, sending Countrywide shares down more than 5 per cent on Wednesday.

Mr Hammond said the ban would be brought in “as soon as possible” following a consultation period, and Ms Platt said on Thursday that Countrywide “look[ed] forward to working with the government through this consultation process”.

The government believes that the ban will help millions of households in private rented housing save hundreds of pounds in fees. But some analysts have warned that landlords and estate agencies may pass the cost on to consumers by increasing rents instead.

Mr Jago said letting fees were a “high margin business for the estate agents” and the chancellor’s announcement was “another setback in a difficult year for Countrywide”.

Countrywide, whose businesses also include property auctions and mortgage lending, has also come under pressure in recent months amid increased competition from online focused rivals such as Purplebricks.

In September, the estate agency group said it would close 59 branches, or about 7 per cent of its high street network, after launching a fixed-fee, pared-back digital service similar to those offered by start-up online agencies earlier this year.

The company said on Thursday that it was “delighted” with the early results of its online offering, which showed the digital agency outperforming bricks-and-mortar across multiple measures, including the number of leads, instructions and registered buyers, since it was launched.