Countrywide plc (lon:cwd)
Countrywide – Recovering Share Price Or Recovering Business

Countrywide plc Financials

ItemCurrent PeriodPrevious Period
Year20192018
Period12 Months12 Months
Revenue£498m£515m
Earnings
Adjusted Earnings
EBITDA
Adjusted EBITDA£24m£21m
Statutory Profit(£42m)(£231m)
Adjusted Profit
Total Debt
Net Debt£83m£71m

Commentary History
Countrywide plc Share Price
Grade:The Black Grade - Shares That I Think Could Collapse To Nothing Or Suffer A Massive Share Issue.
Title: Countrywide – Recovering Share Price Or Recovering Business
Company: CWD - Countrywide plc
Share Price Then: 115p
Author: Ian Smith
Date: Mon 13 Jul 2020
Comments: I stopped looking t Countrywide a while ago as I was pretty sure that it was in terminal decline but they are still around.

In Jan 2020 a 50 for 1 swap bringing the price up from around 7p to 350p peaking at nearly 400p, so is the business recovering or did the share swap help to make the share price respectable and reality has taken hold again at 115p?

Pre swap this would be around 2.3p or pretty close to the all time low and with a current market cap of around £36m it is almost petty cash if someone wanted the business.

In June there was a trading update for Jan – May revenue was down by 25% to around £150m from £200m in 2019 due to branch closures.

The tenant fee ban has seen around £8m lost in fees.

The 2019 accounts showed another £58m of exceptional costs, and a net loss of £48m possibly suggesting that the core business was close to being back in profit pre debt repayment.

Worrying about reductions in income seems pointless as we all know that COVID has significantly affected property sales but we can still look at debt.

Net bank debt is £55m and with £64m available as part of a £125m RCF along with two £10m facilities which sounds healthy. But there is benefitting from the deferral of VAT, PAYE and NI. so it seems that they are “borrowing” these amounts and it is not clear how much they are but when they become due there will be limited flexibility in how long they can be put off.

Added to this we have The 2019 accounts showed another £58m of exceptional costs, and a net loss of £48m possibly suggesting that the core business was close to being back in profit pre debt repayment.

So overall my option hasn’t changed much, the £130 million raised in August 2018 is all gone, debt is high and possibly going to grow and there appears to a significant risk that money due but to HMRC but deferred is being used as working capital.

In the early part of the year there a timescale to sell Lambert Smith Hampton for £38m but this sale fell though and LSH are still part of the group. If another buyer can be found then at first glance this could be a big chunk of the debt paid off, but what seems more likely now is that the proceeds will cover an increase in debt over the next few months.

There was also some talk of a takeover by LSL which came to nothing.

Whether these two events indicate something not clear to outsiders or just normal business is a question that troubles me when considering the company’s financial position.

To me another share issue seems to be the only way out of the debt trap which would probably need to be £100m so a five-ten fold dilution seems about right.

Of course PurpleBricks have been pulling back from overseas markets where the no branch and up front fees model didn’t work so do they want a ready made branch network?
Read Count/ID: 146/13157

Buy/No Buy In A Nutshell
NegativesToo much debt and they have already done a share issue to fix that, did a 50 for 1 share consolidation to bring the shares out the penny arena
PositivesMaybe Purple Bricks or another on line only business might see the business as a quick way to establish an office presence in many towns under another name.
Initial Review Price109p
Last Review Price109p
Last Review Date15-Jul-2020
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