Countrywide craters as it warns over full-year income

Property services group Countrywide warned on Thursday that 2017 income will be down on the previous year following a disappointing performance from its sales and lettings business.

In a trading update for the year to 31 December, the company said total group income is expected to decline to £672m from £737m in 2016, with fourth-quarter income falling to £164m from £179m. Meanwhile, earnings before interest, tax, depreciation and amortisation are expected come in at around £65m, down from £83.5m the year before.

Total income in the sales and lettings business is expected to drop 14% from 2016 to around £360m, reflecting a disappointing fourth quarter performance. Income in the UK business is seen down 17% to around £205m, while in London, it's expected to decline 10% on the year to circa £155m. Countrywide reckons lettings income will be down 4% to approximately £169m, driven by an 8% decline in the UK, with London lettings revenue flat year on year.

EBITDA is forecast to come in at around £26m, down 45%, mostly as a result of the changes in the sales and lettings structure made over the last 12-24 months.

Although Countrywide's financial services division delivered a resilient performance overall, lower transactional volumes from estate agency mean EBITDA for the segment is set to drop to around £20m from £22.6m in 2016.

On the bright side, the B2B business, including Lambert Smith Hampton, is expected to deliver EBITDA growth of 14% to £36m.

"We have begun to take a range of actions over the last quarter that we believe can restore the business back to profitable growth," the company said.

Atif Latif, director of trading at Guardian Stockbrokers, said: "Nothing short of a disappointing profit warning from Countrywide this morning. The drop in profit of 9% shows that the property sector continues to be slow to adapt to digital, where costs are lower and where the focus must be with potential cross selling easier. We remain concerned on debt levels, lack of growth outlook and slow sales - a bad combination for real estate names. Management must be able to address these issues quickly and deliver on the turnaround that has been promised so that other income options and diversification can allow things to improve."

At 0905 GMT, the shares were down 15% to 114.58p.