Struggling national estate agent gets £140m rescue package

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Countrywide to get rescue package

Countrywide shareholders have voted through its £140m Capital Refinancing Plan at the company’s AGM this morning.

Approximately £115m of the proceeds of this share issue will be used to pay down debt, with a further £14m used for “general corporate purposes” and to support working capital. Around £11m will be swallowed up by fees and expenses of the equity issue.

Proposals for a new remuneration scheme for directors, providing them up to 10% of any market cap gains above 15% a year by the end of 2021, was previously withdrawn as an item for shareholders to vote on at the AGM.

Laith Khalaf, Senior Analyst, Hargreaves Lansdown, said: “Countrywide is back from the brink thanks to a shareholder bailout, though the estate agent is still fighting an uphill battle on a rather slippery slope. The injection of £129m of cash will keep the wheels turning for now, but that money is being used to pay down debt rather than to fund growth. In other words, this cash is a lifeline rather than a springboard.

“The company’s share price has fallen by around 90% over the last year, so it’s no surprise plans to reward executives in the event of a big bounce back have been given short shrift by shareholders, and withdrawn from the AGM agenda. Indeed some of the wounds Countrywide is nursing were self-inflicted, though political and fiscal decisions have played a part too. In particular stamp duty reforms and Brexit concerns prompted a 22% decline in London housing transactions last year, which compounded the operational mistakes made by Countrywide itself.

He continued: “Meanwhile digital disruptors like Purple Bricks have started to tuck into the lunch of traditional high street estate agents with gusto. Little wonder then that Countrywide is looking to boost sales of complementary products like conveyancing, mortgages and insurance to make the most out of each customer who walks through the door.

“Looking forward, it’s a long road to recovery for Countrywide. The sales pipeline is not disappearing quite as quickly as it was, but the latest published decline of 9% is still pretty steep. In the immediate future the company also faces a prospective £21m revenue headwind from legislation banning letting fees being charged to tenants, expected to come into force next year.

“Countrywide now has to retrace some of its steps and rebuild its business. Shareholders will be hoping the housing market doesn’t throw the estate agent a curveball while it’s climbing back off its knees.”

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