Shares in estate agency Countrywide tumbled on Thursday as it said it swung to a loss in 2017, scrapped its dividend and sounded a cautious note on its outlook.
In the 12 months to the end of December 2017, which the company itself headed up "a disappointing year", Countrywide swung to a statutory loss of £208.1m from a profit of £17.5m in 2016, reflecting £225.9m of principally non-cash exceptional charges for goodwill, intangible and other asset impairments.
Meanwhile, adjusted earnings before interest, taxes, depreciation and amortisation fell 23% to £65m, as adjusted EBITDA in sales and lettings slumped 45% to £26.4m, marking the third consecutive year of underperformance in this core area.
Countrywide said 2017 was another disappointing year for UK sales and lettings, adding that the new strategy launched in 2015 - whereby it made a series of structural changes to the business, closing 200 branches and bringing together its sales and lettings business - was flawed.
The impact of these structural changes continued well into the first half of 2017, as the company saw a high level of attrition of some of its most experienced sales and lettings people, which impacted performance for the whole year. Countrywide said it is working on arresting the decline and reckons it can recover this division to profitable growth and improve market share.
Internal issues were further exacerbated by the tough 2016 comparatives on the back of changes in the stamp duty regime and the uncertainty in consumer confidence as a result of the Brexit vote.
Countrywide also admitted on Thursday that its foray into digital in the form of a hybrid fixed-fee offering, which has now been withdrawn, served only to dilute its full service proposition.
Executive chairman Peter Long said: "We have entered 2018 with our pipeline significantly below that of 2017. We have begun to take steps to build back the pipeline to the 2017 level but this will take time. We therefore anticipate that in the first half of the year this will result in a reduction in adjusted EBITDA of around £10m.
"At this time, it is unlikely that the shortfall in the first half will be recovered. We will provide full year guidance and a detailed recovery plan at the interim results."
The company said it plans to go "back to basics" as this offers the greatest opportunity for value creation for shareholders, colleagues and customers.
"Our aim is to restore our sales and lettings business back to profitable growth. Key to this will be the drive to increase our pipeline which has decreased significantly."
At 1055 GMT, the shares
were down 14% to 76.40p.
Barclays, which rates the stock at 'equalweight', cut its 2018 EBITDA forecast to around £55m from £79m to reflect "the very weak" current pipeline. The bank said it forecasts a further fall in EBITDA in 2019 to capture the part-year impact of the tenancy fee ban, which it had previously assumed would start in January 2019. To reflect its new forecasts, it slashed its price target to 84p from 133p.
Jefferies, which rates the stock at 'hold', chopped its price target to 85p from 125p following the results.
"Like many, Countrywide is using Lent as a period of sober reflection and diligent preparation. The group has seen the error of its ways and is now seeking to restore investors faith in the team. As with any 'fixer upper' the next few months will be messy as new plans are put into place. However, banks are lending their support to the new plan and we believe those equity investors who choose to do the same will have their patience rewarded."