**UPDATE: Countrywide Shares Fall On 2014 Deterioration, Tough 2015**
LONDON (Alliance News) – Countrywide PLC shares fell on Thursday after the company reported a deterioration in activity across 2014, even as it said it would deliver record financial results for the year, and as it said it expects a tough start to 2015.
Countrywide shares were down 3.3% to 416.80 pence on Thursday, one of the worst performers in the FTSE 250.
Countrywide said it expects its revenue for the year to the end of December to be up 20% year-on-year to GBP702.2 million, with revenue rising 5% to GBP179.3 million in the fourth quarter year-on-year. Its revenue in the fourth quarter, however, slowed against the third quarter, down 4.8% from the GBP188.4 million reported in the three months to the end of October.
But the impact of the deteriorating market towards the end of 2014, against strong comparables for 2013 when the housing market was given a boost by the launch of the UK government’s Help to Buy scheme, was illustrated by a 2% fall in house exchanges in its estate agency business in the fourth quarter to 16,534.
That fall was exacerbated by a 14% year-on-year decline in house exchanges in its London & Premier business, down to 1,569, which came on the back of a 9% decline in exchange for the London arm in the third quarter. The drop was in line with the warning Countrywide gave in its third-quarter trading update, when it said the slowdown in the London market was dragging on its performance.
For the full-year, total house exchanges rose 11% to 66,022, with London & Premier exchanges up 1% to 6,383.
Countrywide said buyers remain generally cautious at present, particularly in the London market. It says the reform to stamp duty announced by Chancellor George Osborne in his Autumn Statement should prove beneficial to the market in the long term, but initially resulted in a rise in uncertainty in the London market.
The fall in exchanges was offset for the company by a jump in residential properties under management, up 20% in the fourth quarter and up 25% for the full year. The group said its lettings business produced record profit, revenue and margins for the year.
But the group also said it will take an exceptional charge of GBP15 million in its full-year results as due to a professional indemnity provision. The company said the second half of 2014 had always been forecast to be a key period for assessing claims arising from its Surveying & Valuation Division between 2004 and 2008, as the six-year primary statutory limitation period came to an end.
The group said claims are an issue across the industry at present and said the reasons behind the charge it will take related to an unexpected volume of claims brought about under common law outside of the statutory limitation period rather than under contract law. It also saw a deterioration of claims previously notified, along with an increase in the average loss per claim it made.
Countrywide said it expects to meet market expectations for 2014 but said the recent negative trend in mortgage approvals is set to impact transaction volumes in the first half of 2015, a period already beset by uncertainty owing to the upcoming General Election. Combined, Countrywide expects these trends to result in some sluggishness for the housing market in the first half.
“These results once again underline the resilience we derive from our broadly based business and our ability to deliver strong growth in a challenging market. We are well placed to both take advantage of the sustainable growth in our Lettings and Commercial business whilst being positioned to lead as the housing sales market recovers,” said Countrywide Chief Executive Alison Platt.
Numis reiterated its Buy rating and 522 pence price target on Countrywide, saying its results were in line with its estimates.
It said the only surprise in the statement was the increase in the provision for professional indemnity costs, but the broker said it did not consider this to be “material in the context of the group” and added its net debt remains “low and very manageable”, though it did say the provision means “uncertainty persists in this area”.
But Numis left its 2015 forecasts for Countrywide unchanged, saying it expects a tough first half to be followed, hopefully, by a recovery in the second.
By Sam Unsted; [email protected]; @SamUAtAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.