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UK's biggest estate agent Countrywide sees shares plunge 12% as shortage of properties for sale hits profits

A shortage of properties coming up for sale is set to hamper full-year profits at Britain's biggest estate agent Countrywide, the firm warned today.

In the nine months to September, Countrywide's operating profits fell 11 per cent on the same period last year, with full year profits set to drop below its 2014 total of £121.1million.

Countrywide is one of the FTSE 250's biggest fallers today, with shares down 52.01p or 11.18 per cent to 412.99p. Other listed high end, estate agent firms also suffered, with Foxtons dropping 12.68p to 187.32p and Savills down 16.50p to 895.50p.

According to Countrywide, the anticipated post-election recovery in residential transactions failed to materialise.
Recent Land Registry data revealed property transactions to the end of July running 8 per cent below 2014 levels.

Countrywide said: 'A key constraining factor in the current market is the availability of stock, with the number of properties coming to the market running significantly below the same period last year.'

Analyst Chris Millington, of Numis, said: 'Countrywide report that due to slow transaction volumes post-election, which have been exacerbated by the lack of stock for sale, it now expects full year EBITDA to be below 2014 levels. 

'Consequently, we have reduced 2015 and 2016 EBITDA by 12% and 17% respectively and also reduced our target price, which is now based on 12x 2016 PE. In our view, the continuing lack of second hand stock is putting increasing onus on acquisitions in order for Countrywide to achieve its 2020 target of £250m.' 

The Countrywide estate agent network consists of approximately 50 household high street brands, including Dixons, Hamptons and Gascoigne Pees.

Analysts at broker Peel Hunt downgraded their rating for Countrywide shares to reduce from hold and cut their price target to 400p from 560p after the profit warning.

‘Countrywide has confirmed that conditions in the second-hand housing market remain very tricky, with low transaction levels and continued pressure on commission rates,’ they said in a note.

Alison Platt CEO of country wide PLC speaking last month 

‘Full-year profits are expected to be 6-9 per cent below the prior year, and weak momentum will drive larger downgrades for 2016,’ they added.

Last month, the Royal Institution of Chartered Surveyors said that a lack of homes on the market is expected to push values higher in the coming months.

Though many within the industry have also commented , It's not just shortage of properties, there are now better and cheaper alternatives to 'high street' based estate agents.More people are going for internet fixed price selling, which is much cheaper.

Mean while ,as  the self congratulating award ceremonies, wind down for the year,Lettings and national expansion by online estate agents, has been steadily continuing. CW plc  is mulling over it's £40M worth of Zpla stock, [the second largest property portal in the UK , though has higher stock ownership of rightmove shares [the largest uk property portal ]  ,both list online estate agents. What differentiates , is zoopla recent acquisition of comparison site U switch, allowing its members to earn additional benefit with the U switch.

Its Q3 traading statement released yesterday goes on to say :
“For the financial year ending 31 December 2015, the Board intends to maintain the total ordinary dividend at the previous year’s level of 15p per share.

“It is envisaged that the payment of special dividends will be reintroduced in 2017 and in the meantime we will continue to monitor our options with regard to our current holding in the Zoopla Property Group.” which contradicts what the CEO says in CNBC interviews [see below video].
more here

lost in translation ? on the record > declaring green shoots in July 2015 ,contradiction ,confusion trouble at the top brewing ? 

Alison Platt, chief executive of Countrywide, said: 'While we are undoubtedly experiencing a period of short-term pressure on market volumes, we continue to invest in our underlying business to ensure we have the foundation for future growth.'

Anthony Codling, analyst at Jefferies, said that Countrywide was struggling because the market for existing homes has not had the boost the government’s Help to Buy scheme has given to new builds.

“Without the help of Help to Buy equity loans, the existing homes transaction market has not been as sheltered as the new-build sector from the impact of May’s general election. Transaction levels were muted ahead of the election and have not picked up afterwards as we anticipated,” he said.

The chief executive coming from a previous transportation background, has yet to show performance to her PLC share holders, after 14 months within the role, 
though talk of digital transformation after 1 year at the helm, rumbles on. Platt joined British Airways as a management trainee straight from school, turning down the offer of a university place and worked there for 13 year.

Most recently the Bank of England  at its meeting ending on 4 November 2015, the MPC voted by a majority of 8-1 to maintain Bank Rate at 0.5%.On the committees consensus interests rates, could will remain this low for at least 2017. A far cry from Platt , hark at their mortgage business at 1 % growth.

So is Bricks and Mortar business of CW Plc, worried or do they envisage Zoopla acquisition of  consumer switching  site uswitch  [financial products mortgages , banking ,insurance selling , as a conflict of interest ,to their own business model ?] with interest rates forecast to remain low for some time , mortgage selling /online business just got alot more exciting ! even more worryingly is CW plc insistent future focus on London [see videos] , when most online agents are expanding nationally, and rumours of a bursting bubble in the capital within a couple of years , only fuel the woes ahead for CountryWide PLC .

Platt has also stated in the above interview that portals are just big shop windows , with CW plc  making the business transactions happen, so is that why CW are leaning more towards [rightmove where there is no conflict of interest] and mulling over the sale of zoopla stock? 

Further Reading 

Countrywide PLC UKs largest Real Estate Agency - Alison Platt CEO Let The Battle Commence Online
The number of High Street real estate agency uk jobs slowing at a dramatic rate 5000 decline factors

Former Cricket Team Aces Join the Online EstateAgent business model

Online Agency teams up with Property Detective to offer local API Data