Countrywide: Trading statement

8:38 a.m. Thu 15 Dec 2005

Estate agent Countrywide reported that the volume of completed house sales in 2005 is likely to be at the lowest level for 30 years. However, Countrywide's results for the year to December 2005 are in line with current consensus forecasts.

The company said trading conditions have improved since the very low points in the winter/early spring of 2004/2005 but the market still appears to be very sluggish.

Following the acquisition of the agency/surveyors business of Bradford & Bingley (B&B), the number of sales offices has grown by 54. Despite downward pressure on commission rates the company has succeeded in increasing commission rates across the enlarged business from 1.58% to 1.69%.

Financial services (which mainly involve selling life protection policies to house buyers) have enjoyed a better second half, although overall results will be depressed due to poor market conditions. The integration of consultants working in the former B&B agency offices is ongoing but there is still a gap in productivity between the two sales forces, which the company is hoping to reduce next year.

The surveying business has performed poorly with the acquisition of the B&B agency/surveying business leading to over capacity in the surveying division. Slower market conditions as well as market share contraction at a key supplier of survey work have impacted trading.

The company is reasonably well run but is an early victim of the slowdown in the housing market, contractors and building suppliers are likely to be hit more heavily later on once the current pipeline of work unravels. The short term outlook for the sector is poor, growth will return once the housing market recovers.

The share trades at 393p, on a prospective PE (2006 earnings) of 16.9x, at the upper end of the sector range with a yield of 1.2%.