Countrywide rebounds despite interim profit squeeze post-Brexit

Countrywide said the slowdown in the housing market has worsened since June’s Brexit vote, sending half-year profits in the estate agent shooting down but lifting its shares as investors had feared it would be even worse.

Directors warned that full year earnings before interest, tax, depreciation and amortisation (EBITDA) will be lower than the level last year.

In the six month to 30 June, revenue rose 9% to £370.1m but EBITDA fell 8% to £38m and pre-tax profits dropped 25% to £21.8m.

This reflected investment in staff and technology to underpin future growth, said chief executive Alison Platt, though this helped grow the top line and market share.

A flat interim dividend of 5p was declared, following the £17m spent on a share buy-back during the period.

By the period end net debt, including finance lease liabilities, stood at £258.3m, up from £184.9m at the end of December, with a net debt/equity ratio of 51% up from 34%.

The board took a cautious view in the months leading up to the EU referendum and in the event, Platt said the company had seen “a slowdown in our retail and London residential businesses and, since the EU referendum result this has become more marked in London, the South East and expensive prime markets”.

Oh the upside, the rest of the country has fared rather better and the lettings business and mortgage trends have been largely unaffected.

“This period of uncertainty will inevitably impact the level of transactional activity in the second half of the year and, although it is too early to quantify accurately, we will not meet last year's result at the EBITDA level,” Platt said.

“Notwithstanding this, and following the significant investment we made in the business in the second half of 2015, we continue to make real progress in executing our strategy."

Broker Numis said the increased level of debt is also likely to be in focus and was also prompted to downgrade its 2016 by around 30% to £59.9m PBT and adjusted EPS of 25.6p, with a similar cut for 2017.

“Whilst today’s downgrade does not come as a surprise, it has led us to downgrade our target price from 416p to 286p,” analysts said.

Shares in Countrywide were up 13% to 279.67p just before 1100 BST on Thursday.