Shares in Countrywide (CWD) fell by a quarter after the property services group warned that a decline in transactional volume in the existing housing market will cut cash profits in the six months to June 2018 by £20m from a year earlier.
This shortfall is unlikely to be recovered in the second half as house sales are expected to remain subdued. And with net debt of around two-thirds of total equity, there are also plans to pay back at least half of this through a share placing. At the end of 2017, net debt stood at £192m, nearly three times adjusted cash profits. Analysts estimate that fresh equity of around £125m is needed; that’s significant when considering that the market capitalisation is around £184m. The proposed fundraise has the backing of its major stakeholder, Oaktree Capital, which owns around 30 per cent of the company.
Countrywide has managed to recover the number of properties registered for sale since the start of the year, while head office costs have been reduced by a third. An update on the fundraising is expected on 26 July when it releases half-year results.
