Countrywide plc (lon:cwd)
Countrywide - Market CapitalisationDown To About £67 Million

Countrywide plc Financials

ItemCurrent PeriodPrevious Period
Year20182017
Period
Revenue£627m£672m
Earnings
Adjusted Earnings
EBITDA
Adjusted EBITDA£33m£66m
Statutory Profit(£218m)(£207m)
Adjusted Profit
Total Debt
Net Debt£71m£196m

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 - Market CapitalisationDown To About £67 Million
Company: CWD - Countrywide plc
Share Price Then: 4.2p
Author: Ian Smith
Date: Sat 01 Jun 2019
Comments: Currently the share price is down at around 4.2p valuing the company at around £68 million and the share price has been steadily and consistently falling since the share issue in August 2018

So the question is why, surely those who provided the funds knew what they were letting themselves in for?

Countrywide reports over three sectors.

SectorIncomeAdjusted EBIDTA
£million
Sales and lettings £329 £1.2
Financial Services £83.9 £16.5
B2B £213 £27.9

The bad news starts with an expectation a loss of around £9million from the banning of tenant fees. Exactly how this will play out is unclear but they do seem to have been a bit of a cash cow. A tenant can be easily bullied into paying these fees as they have little choice, landlords have more choices so will be more concerned about value for money.

Countrywide has around £106 million of operating leases, these are due to appear on the balance sheet soon as the Group will adopt IFRS 16 for the year ending 31 December 2019, this is expected to have a significant impact on the reported numbers but will it make a difference to real world operations?

Looking at the last annual report we see yet another company in "Transition" and so far I can’t see a successful transition as the latest trading updates talked about a reduction of income for the business.
Which is worrying when the 2018 annual report says that 2018 was a bad year and 2017 was worse than 2016 which was worse than 2015.

There are also reports of branch closures, but this is not necessarily anything other than we don’t need 850 branches something they have been encouraged to do for a while and now that they are doing it, it is a bad thing!

I am also not sure that there has been time for the improvements in the company’s structures and processes, if they are going to work, to have yielded much in the way of results.

One of the non executive directors has received some criticism for attending 10 out of the 14 board meetings he was eligible for. However some of these were unscheduled during the refinancing process, although a non exec he is also a senior member of Oaktree Capital who own about 18% of Countrywide, so I am not sure that this is a real issue.

I always have a problem with the exceptional costs and in 2017 and 2018 the company reported exceptional items in the £220-£240 million range although a big proportion was Impairment of non-current assets, writing off hundreds of millions spent on expansion? Is Countrywide at the end of this process and even if it is not as long as they non cash exceptionals then they are just part of the bad news from the past.

£70 million of debt is not good, but it is not crippling the business although I would worry if it starts to grow again.

I can’t help seeing the B2B business and wonder if the retail side is over emphasised and the closure of branches just getting rid over bad decisions from the past.

I keep seeing a share price that could easily double or triple and having a feeling that those who know the industry better than me are right.

It may be the huge headline losses are scaring investors away and the company is much healthier than it is perceived to be or it may be that it is just too big and being big offers nothing over being small, local and motivated except a layer of management to pay for and possibly a board that is over comfortable.

Or are we about to see some board changes brought about by Oakwood and other large share holders.
Read Count/ID: 154/7064

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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