A disappointing end to 2017 for estate agent Countrywide (CWD) prompts a damaging profit warning with the shares down 15.6% to 114.1p.

The UK’s leading estate agent play expects full year income of £672m, down 9% on 2016. London-focused rival Foxtons (FOXT) is also lower in sympathy, down at 4.4% at 78.4p.

TWIN THREATS

Countrywide arguably faces two issues. The first is that the wider market is under pressure amid Brexit-driven economic uncertainty. The latest RICS (Royal Institute of Chartered Surveyors) housing market survey, out today, shows the number of people enquiring about house purchases is falling.

There is also little sign the cuts to stamp duty announced in the 2017 Budget are stimulating demand among first time buyers.

Shore Capital analyst Robin Hardy says: ‘The market net balance has fallen again with demand (new buyer enquiries) slipping faster than supply (new vendor instructions) once again pushing us more towards a deflationary buyers' market.

‘Another key factor highlighted by estate agents is the lack of immediate impact of the stamp duty cut for first time buyers in the Budget. Some 86% of respondents say that there has been no immediate increase in either activity (too soon to expect that in reality) or enquiry levels (where the impact could be immediate).’

The other problem for Countrywide is the disruption to its business model caused by online-based rivals like Purplebricks (PURP:AIM).

ONLINE ON HOLD?

Writing in November Berenberg analysts were concerned that the company was pausing its digital rollout. ‘Tracking the performance of the first three brands that trialled Countrywide’s “flexi-service” digital offering, we find it has not driven an increase in sale listings.

‘We see issues with the structure, framing, marketing and execution of its digital strategy which highlights the services customers do not receive.

‘We suspect therefore that it competes more with Countrywide’s existing businesses than with Purplebricks as it is supposed to. We take the pause of the rollout as confirmation of these fears.’

Countrywide is due to announce its full year results on 8 March.


Issue Date: 18 Jan 2018