The crisis at Countrywide deepened yesterday as its shares plunged to close almost 30% down at 55p – a new low – while the firm revealed plans for a £100m emergency fund-raise to cut its debts by “at least 50%”.
Its share price continued to fall in trading this morning, down to another record low of 51p following negative press coverage after yesterday’s profits warning.
It said its EBITDA earnings for the first half of this year would be down by £20m on the same time last year, and that it will not be able to recoup this in the remaining six months of 2018.
Countrywide is owned 30% by US equity firm Oaktree, which was said yesterday to support the plans.
However, the City is already querying how successful Countrywide will be in raising sufficient money to cut a debt which stood at £192m at the end of last year.
Brokers Peel Hunt believe Countrywide will be looking to raise £125m gross, because of the costs involved in seeking new investment.
Countrywide is due to give full details of its new fundraising on July 26.
There is also speculation that Countrywide, which does not appear to be looking for a new chief executive following the departure of Alison Platt in January, may be broken up.
An obvious candidate for a sell-off could be its flagship business Hamptons, but there is also speculation over its mortgage and surveying arms.
Countrywide returned to the stock market five years ago, after being taken private at the height of the market – although only just before the start of the downturn – in 2007 for £1.1bn.
On its return to the stock market, in March 2013, its shares were offered at 350p, valuing the business – then headed by Grenville Turner – at £750m. Its shares rocketed to 704p in 2014.
Yesterday, Countrywide’s market cap was £131m, according to Bloomberg.
For analysis of what is wrong – and a hinted takeover offer – see the following opinion piece by Russell Quirk.
Could he be the man to step in at the helm of Countrywide?
countrywide set up rightmove …which has eventually killed them with allowing pay any way agents to slaughter an industry with lies.
No coming back from this… profit is a thing of urban myth under this tech loving duped govt.
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Online agents aren’t destroying Countrywide.. bad management and even worse decisions are destroying Countrywide.
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Marketing costs – turnover = no profit + hedgefund money = loss for everyone accept founders and speculative share dealers .
Welcome to UK business.
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I can’t see them turning this around under current market conditions.
Its a shame to see such a business being destroyed by mismanagement.
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Anyone surprised Mr. C at Jefferies hasn’t issued another “buy” recommendation yet?
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I am not trying to be rude or disrespectful but Russell Quirk does not have the intangible qualities or credibility to lead the company out of place they’re in.
Plonk Russell in front of 10 branch managers to motivate them to dig deep and give their all even though every single gram of their body is feeling resentful and betrayed? I can’t see it.
Bounce a ‘one of them’ back in there and then you’re talking. It has to be a returnee, a Steve Jobs returning to rescue Apple.
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A bit like the Titanic after it struck the berg.
”But Mr Andrews, the Titanic is unsinkable”
”Dear Rose, this ship is made of iron, I assure you it can and it will”
Someone needs to get a grip quickly. It must be awful for those that work there right now.
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I’d sell off Hamptons, Gascoigne Pees, John D wood and possibly Taylors before those brands get dragged down any further with the rest of the sinking ship.
Countrywide can then do a complete re structure (under new management) of the remaining brands (and the financial services, surveying etc) and literally start from scratch.
But what’s for certain is continuing as is ain’t an option.
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Yesterday the market capitalisation of CWD dipped below the total debt .Next month the loan covenants are going to be stress tested by the banks so forewarned is forearmed .
Oaktree who hold 30% find themselves with an opportunity to utilise their skill sets and take advantage of the situation .This is where they come into their own
Their Mission Statement
“The market inefficiencies we seek as a firm are exemplified in the market for financially distressed debt in which we have extensive experience. Our approach seeks to combine protection against loss, which generally comes from buying claims on assets at bargain prices, with the substantial gains achieved by returning companies to financial viability through restructuring. ”
They are in a relatively strong position to negotiate with the banks on the debt .Both parties mindful that some of the brands could easily peel off taking good business away leaving the debt behind .What is for certain is that the individual private investor will see the value of their shares brutally reduced again.
Turn the clock back to 2011 and look at the similar situation which DTZ faced having spent millions buying up Donaldsons and others only to see revenue evaporate and left with the bill.
https://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/8936953/DTZ-becomes-a-victim-of-the-financial-crisis.html
Over one weekend they went into administration ,flatpacked and emerged Monday morning being bought by UGL with the poor shareholder with nothing
The irony is 3 years later UGL hit the jackpot cashing in the chips
https://www.theaustralian.com.au/business/news/ugl-sells-property-arm-dtz-for-1215-billion/news-story/db2e06cd7fba56ec8a68df0ea
Oaktree with their eye on the prize ?Disgrace that the BODS at CWD by their reckless buying has put jobs and livelihoods of the staff at the mercy of financiers.
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It is one of the skill sets at Oaktree investing in distressed debts…but of course they are nursing some big losses on their direct investment. Lots of work needed and there will be asset stripping. The challenge is what these businesses can be sold for and of course if they are sold, the value of the core business is affected bearing in mind the plan for a share placement to raise extra cash. The premiums for the sales of businesses was fuelled by Countrywide in the first place to build their rental business…starting to look very very ugly…which is something bearing in mind it was ugly in the first place 🙂
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interesting.
Some of the historic figures quoted in the article above are similar to PB’s position now although CW was making 10s of millions of profit at their zenith?
History continually repeats itself.
Does this expose PB as the latest dot.com bubble ready to burst as they do not charge enough even with those not too obvious charges for viewings, fee deferment, failure to sell/complete and outrageously high under pressure conveyancing referral fees?
Why isn’t the market asking why PB had to triple their fees in Australia and quadrupled their fees in USA if their UK model is really viable long term?
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The sad news is that the best hope of finding the money will be to sell their most marketable assets / brands which ironically would be the most likely to create the business required to drag them out of the mire.
No one wants to see companies like this failing to this extent and will no doubt throw more fuel on the online agent fire.
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The day of the large leviathan estate agent are over.
Countrywide should be split up into 2 businesses, Premium including Hamptons, LSH and parts of other divisions that are in posher areas such as financial services and surveying. This division could even be spun out either through a demerger or Private Equity sale as it leads into the general shift of the middle market slowly disappearing, and could attract a decent price.
A standard division headed up by John D Wood, the original part of Countrywide, should contain the standard/retail brands with further rationalisation of names to create a more cohesive identity. It would be a mistake to spin off the surveying/conveyancing and finance arms as there value is tied into the captive businesses that they work with.
Further cash cold be raised by selling off specialist businesses such as Finders Keepers in Oxfordshire, where they are in direct competition with the two other countrywide businesses in town.
It is internal competition that is Countrywide’s real problem now that cash is scarce. All those different brands often operating in the same area drawing out marketing cash spent on outdoing each other is a big problem for multi-brand businesses. A lot has been done to solve this in the last 5 years but it is still a problem.
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Chippy
Finders Keepers have been a very successful agency which CWD paid a handsome price
They wouldn’t get anywhere near what hey paid for in April 2016 All those associated with the success of the firm have upped sticks and gone clutching their golden goodbye cheques This highlights the danger of paying out the big bucks when those that created it leave Mary Channer retired immediately
http://www.propertyindustryeye.com/hes-gone-sailing-that-is-agency-boss-announces-departure-on-social-media/
http://www.propertyindustryeye.com/leading-industry-figure-frank-webster-to-leave-finders-keepers-two-years-after-sale-to-countrywide/
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