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Countrywide shares sink as it swings to 2017 loss and issues another profit warning

Countrywide scrapped its dividend as it issued its second profit warning since Christmas
A poor performance in the sales and letting business dragged earnings lower

Countrywide PLC (LON:CWD) shares plunged after the UK estate agency swung to a large loss in 2017 and warned on earnings for this year.

The company posted a pre-tax loss of £212.1mln for 2017, compared to a profit of £19.5mln the previous year, reflecting one-off costs. Excluding items, pre-tax profit still slumped to £25.2mln from £52.7mln.

Shares fell 12% to 77.3p in morning trade. 

Income declined 8.8% to £657.9mln and adjusted underlying earnings (EBITDA) dropped 23% to £64.7mln, driven by a poor performance in its sales and letting divisions

The number of homes sold dropped 20% to 8,778 amid a slowdown in the property market.

London housing market the hardest hit

Countrywide said the housing market in London has seen demand fall more than the rest of the UK since the Brexit vote and after the government increased stamp duty on high value properties and on second home purchases.

The company said it expects trading to remain challenging in 2018 and has started the year with a pipeline “significantly below” last year.

 “We have begun to take steps to build back the pipeline to the 2017 level but this will take time,” said executive chairman Peter Long.

“We therefore anticipate that in the first half of the year this will result in a reduction in adjusted EBITDA of around £10mln.

“At this time, it is unlikely that the shortfall in the first half will be recovered.” 

Long has stepped in to replace Alison Platt as executive chairman following her departure in January, which came less than a week after the group issued a profit warning.

READ: Countrywide's CEO, Alison Platt resigns less than a week after estate agent's profit warning

Countrywide scraps dividend 

Countryside has scrapped its dividend due to the challenge of turning around the sales and letting business in an uncertain environment and its plans to invest in cost and growth initiatives.

The company is cutting head office jobs to 300 from 450 in a bid to reduce costs as part of its restructuring.

The overhaul will also involve investing in IT and revamping the contact centre operation.

Long said he would bring the sales and letting arm “back to basics” in an effort to return to profit growth after losing experienced staff through an ill-fated restructure in 2015.

UK sales and lettings saw adjusted EBTIDA fall 47% to £14.8bn and total income drop 17% to £205mln.

Brexit uncertainty continues to weigh

"The company is paying dearly for the acquisitive growth that helped its shares climb 80% to peak at 700p just 12-months after its March 2013 IPO," said Mike van Dulken, head of research at Accendo Markets.

"The problem is that the seemingly unbreakable UK housing market finds itself under increasing pressure with buyers deterred by economic uncertainty related to Brexit and the prospect of higher interest rates, letting investors hampered by both tax changes and rate hikes, clear slowing in house price growth and of course fierce competition from cheaper on-line selling alternatives."

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