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Countrywide announces turnaround plan after profit slump

Countrywide announces turnaround plan after profit slump

Countrywide has outlined a refinancing plan to address its "unsustainable" current capital position.

In a note to the stock exchange today (2 August) the estate agent and mortgage broker said it intends to reduce accumulated debts of £211.7m by 60 per cent using proceeds from share sales.

The listed firm had issued its fourth profit warning in eight months in June, when shares plunged more than 25 per cent as a result.  

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The refinancing plan comprises the proposed sale of 1.1 billion shares at 10 pence each and 286 million open offer shares at 10 pence each - raising approximately £111.4m and £28.6m respectively.

The fundraise must still be approved company shareholders at a meeting on 28 August, but company directors who are shareholders have already committed to vote in favour of the proposal.

Countrywide also announced the appointment of Paul Creffield to the board as managing director and confirmed that Peter Long, the current executive chairman, will remain in his position for now to oversee Countrywide's implementation of the turnaround plan.

Mr Long said the capital refinancing announced today was a significant milestone for the group.

He said: "It will enable us to build upon the progress we have made to date on our three-year recovery plan as we deliver our return to growth strategy.  

"Although it is still very early in the turnaround, we are encouraged by the operational improvements that we are making and the tangible results that are being achieved."

Mr Long added he was confident Countrywide would return to profitable growth and long-term success.

The company also released its half year results for the first six months of 2018, which reported a total income of £303.6m and a loss of £205.8m.

The group’s exceptional costs had increased from £2.7m in the first half of 2017 to £226.2m in the first half of this year - an increase attributed primarily to further impairment charges of £210.7m and to the "continued subdued external environment" and a "deterioration in trading".  

Ray Boulger, senior mortgage technical manager at John Charcol, said a squeeze on margins and competitors taking business away, coupled with a shrinking market, had presented a challenging situation for Countrywide.

He said: "Clearly Countrywide, along with other high street estate agents, have been badly affected by online agents joining the market, which has put a lot of pressure on charges - this is combined with a slowdown in the market with each month's transaction figures lower than the same time last year.

"These challenges have been apparent for some time and some could argue that Countrywide has been slow to address them - however, raising equity capital to reduce debts seems a sensible approach even if it could be argued it should have been done sooner."

Countrywide reported "encouraging" early signs from its turnaround plan in the half year results, with its sales pipeline climbing up to a 9 per cent deficit year-on-year in June compared with a 15 per cent deficit year-on-year in December 2017.