Property recovery boosts Countrywide

The number of houses Countrywide’s network of estate agencies sold rose 8 per cent to 59,471, pushing divisional revenue up 5 per cent to £193m. Because the cost base remained largely unchanged, cash profits soared 56 per cent to £16.1m. The lettings segment, a focus of huge investment for Countrywide, gained market share, with revenue up 15 per cent to £113m as properties under management swelled 23 per cent to 52,181. Some of the growth was bought in. Countrywide acquired 28 lettings businesses as well as a commercial-property specialist, Lambert Smith Hampton, which together contributed £5.3m to income and boosted profit by £1.8m.

Intriguingly, the company also shelled out £7m on its first rental property investment - a new project to which it has committed £20m of capital. Management says it is "exploring options" to partner with institutional investors to establish a £1bn private-rented fund over the next five years.

Financial-services revenue was flat, but mortgage volumes grew 12 per cent to 60,460 and costs fell 4 per cent, leaving profit up by a quarter at £12.2m. Surveying revenue also rose 9 per cent, thanks to both higher fees and an increase in instructions.

Countrywide's stellar results were clearly driven by a booming property market. But they were also helped by a high proportion of fixed costs, which meant operational gearing kicked in and profits soared as sales started to tick up. According to finance director Jim Clarke, the momentum that started to gather pace in the second half has continued into the first seven weeks of 2014. With no sign of a change in market conditions, broker Jefferies expects EPS to nearly double over the next two years from 24.4p in 2013 to 48.6p in 2015.