Stock exchange: Countrywide shares crash
One of the ‘big five’ conveyancing law firms is aiming for more market share and remortgage work as part of efforts to steady its struggling parent company.
Shares in Countrywide PLC, the owner of alternative business structure Countrywide Conveyancing Services (CCS), crashed from 50p last Wednesday to 16p by close of trading on Friday after the company announced an emergency £140m capital refinancing plan.
It came with half-year results showing a £206m loss made by the company that owns dozens of leading high street estate agency brands, such as Hamptons International, Bairstow Eves, Taylors and Bridgfords. Its net debt has hit £212m.
Countrywide’s shares were nearly 600p in the summer of 2015 – closing 2017 at 120p – and the share issue prospectus blamed the previous management’s strategy from 2015 to 2017 for the problems, exacerbated by a slowing London property market.
The strategic issues included integrating sales and lettings into a single retail business, closing branches based on footfall rather than profitability, and “loss of focus on the provision of complementary services” such as conveyancing, surveying and financial services.
In 2012, Countrywide made 50p from complementary services for every pound made from sales, but by last year this was down to 38p.
The lower level of referrals meant that the number of conveyances handled by CCS fell 19% last year, from 33,053 to 26,870. This downward trend continued in the first half of 2018.
However, referral income rose to 41p for every pound in sales in the first half of 2018, and the prospectus said it aimed to increase the number of mortgage customers who signed up with CCS from 26% to 29% next year.
It said the board believed that CCS had the capacity to handle “many more” transactions.
“The market for conveyancing services is fragmented with the largest players estimated to have a market share of completions of less than 3% in 2017, with many small high street firms undertaking this work.
“The industry is changing, however, with lenders now setting standards higher for businesses allowed to act for them in connection with obtaining a mortgage. With the law and regulation in this area getting ever more stringent, we expect the market to consolidate.
“Today in the remortgage market, our instructions levels are limited and we only focus on applicant paid work. However, we believe that through targeted marketing we can win significantly more volume.
“We also see a growing sustainable remortgage market and demand for remortgage conveyancing growing.”
It also said that CCS’s customer service was improving, with 2017 being a “record year as measured by the customer through the group’s net promoter scores of 38+ and FEEFO rating of 4.2/5”.
New customer portal technology for the conveyancing business will also be rolled out across the agency network by the end of the year, the prospectus said.
“The portal provides an improved digital instruction platform for customers and employees, while allowing for electronic and secure communication between customers and the group’s property lawyers during the conveyancing process.”
A spokesman for the Council for Licensed Conveyancers, which regulates CCS, said: “‘We monitor CLC practices on a regular basis and have a regular dialogue with CCS, amongst other practices, on a range of issues.
“The results that Countrywide have posted are something we are taking up with CCS.”
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