The London Stock Exchange is a strange beast. By its reckoning the UK’s largest estate agency corporate by number of sales and branches, Countrywide, is only worth £63 million, based on the number of publicly traded shares in the company.
But by any other measure of business worth, this is of course questionable. Countrywide owns dozens of the UK’s leading and best-known regional and national estate agency brands and also operates several stand-alone specialist businesses, including one of the UK’s largest home surveying companies.
So why the dramatic share price slumps over the past four years, which have taken its stock today to sub-4p?
Revenue has dipped alarmingly by £104m to £621m since 2016, its latest 2018 results show, during which pre-tax losses have escalated to £251 million.
“Talking to people who’ve been in senior positions at the company and have come out the other side, it’s clear that the demise started in 2008/9 and wasn’t all down to Alison Platt,” says industry commentator and former Belvoir executive Chris Watkins. “She was just the final nail in the coffin.”
But what next? Some City analysts have mooted an imminent take-over of Countrywide by an asset-stripping entity that would then sell off its constituent and most successful parts and bag a profit.
“These problems for Countrywide were sort of inevitable – how do you look after so many brands in a market which is changing?” says Graham Lock, Chairman of the Federation of Independent Agents.
“I think Countrywide will have to be broken up eventually. It’s got some big, strong brands but I can’t see how they’re going to glue it all back together.
“This is going to be particularly difficult to achieve in a market where we’re now at sub-one million sales transactions every year for the foreseeable future.”
Anthony Codling, CEO of soon-to-launch portal competitor Rummage4 and previously an analyst at City firm Jefferies, disagrees that Countrywide should be broken up.
“Investment is often about momentum and if Countrywide can demonstrate at its half year results that momentum is building I believe that investors should sit tight,” he says.
“The lure of a small jar of sweet-tasting jam today from an asset stripper may be appealing, but if the medicine is working why sell out at the bottom when the jam tomorrow has the potential to be much sweeter and served in a much larger jar.”
Like its struggling London counterpart, Foxtons, the senior management team and board at Countrywide know this and have been underlining the difficult trading conditions in the housing market and asking investors for time to let their rejuvenation plans work.
“The stock market is currently valuing Countrywide at around £75,000 per branch compared to London based Foxtons at £2.2m per branch,” says Codling.
“Whilst Foxtons is and will in my opinion remain a marmite brand, whether or not you like the taste of it the company is operationally very well organised.
“If Countrywide could fire on all cylinders and have every division and every brand running at its full potential, I see no reason why it couldn’t be valued in-line with Foxtons current valuation.”
Jeremy Leaf, Principal of London estate agency Leaf & Co and between 1990 and 2013 RICS’ housing spokesperson, says he has enormous sympathy for the people running Countrywide at the moment because they are experiencing difficult times.
“There are some very good bits and there are others that are not responding to market trends and the world we currently find ourselves in.Jeremy Leaf
“I think the best bet going forward for them is to think about enhancing and preserving those parts of the business which are meeting modern requirements, and not keep those ones which aren’t at the same level as they were.”
Leaf says this kind of surgery is going to be necessary because the current levels of transactions in the market aren’t going to improve in the short to medium term.
Countrywide’s figures speak for themselves; in 2018 it sold 46,828 homes, down from 54,205 the year before.
Christopher Watkin says that in the short term Countrywide’s biggest challenge is that it has too many of its estate agency brands competing in the same town or area, and that Countrywide should keep the strongest and the others closed and the stock transferred over to it.
Jeremy Leaf says he regularly comes across two key parts of the Countrywide empire, Hamptons International and its New Homes division, both of which he says are strong at the moment, but says he suspects its 90-branch network Bairstow Eves must ‘sadly’ soon make decisions about what to do with under-performing branches on on an individual basis.
“I think some of its brands are more likely to survive compared to others irrespective of the name above the branch door,” says Leaf.
Despite several of its more mainstream, mid-market estate agencies struggling, there are at least half a dozen strong businesses within Countrywide that would both make good assets to sell and also on which market watchers believe the company should be concentrating on.
“There have been recent press reports suggesting that some are seeking to purchase parts of Countrywide and that doesn’t surprise me because there are some very attractive parts to the company,” says Codling.
“However, I think Countrywide shareholder returns would be higher if the management were given time to re-tune and restore the company rather than to prematurely seek to sell parts of it at a salvage valuation.”
High-flying candidates for sell-off include Countrywide’s little-known but profitable internal, tech-driven and stand-alone lettings business, but also its clutch of student lettings operations, upmarket London agencies John D Wood and Hamptons International and its 12-branch Home Counties agency Gascoigne Pees.
And while most of its estate agency customers will have no idea who Countrywide is, its stock of B2B businesses are big brands within the industry.
This is particularly true for Countrywide Surveyors which last year completed 381,900 valuations, mostly on behalf of lenders.
But the biggest jewel in the Countrywide crown is its mortgage business, which last year grew fast, completing 109,379 mortgages in 2018, up from 96,031 the year before, making Countrywide the largest employed mortgage distributor in the UK and the third largest overall.
It is also one of the few parts of the business undergoing sustained growth and has been launching new products and employs 520 mortgage salespeople working both in branches and also its Mortgage Intelligence network.
It alone is probably worth the £63 million that the company’s market capitalisation currently indicates it is worth as a whole, and can hopefully help the company when its half-year results come out on 31st July.