13th Mar 2007 07:00
PRESS RELEASE Embargoed until 7.00 am Tuesday 13 March 2007
PRELIMINARY RESULTS TO 31 DECEMBER 2006
Countrywide plc, the UK's largest estate agency and residential property services Group, today reports preliminary results for the twelve months ended 31 December 2006
- Turnover ‚£654.2m (2005: ‚£528.2m)
- Underlying operating profit ‚£102.0m (2005: ‚£32.3m)
- Operating profit ‚£92.2m (2005: ‚£31.4m)
- Profit before tax ‚£113.8m (2005: ‚£31.7m)
- EPS 47.22p (2005: 15.45p)
- Underlying EPS 41.62p (2005: 14.78p)
- Second interim 10.0p (2005: 3.0p) to be paid if the Offer from Apollo is unsuccessful.
- House exchanges 103,252 (2005: 85,106)
- Average house price ‚£193,500 (2005: ‚£179,300)
- Strong pipeline of sales at year end awaiting exchange of ‚£71.5m (2005: ‚£63.1m)
- Strong operating cash flow results in ‚£64m net cash at year-end (2005: ‚£7m)
Christopher Sporborg, Chairman, commented:
"The record pipelines brought forward have ensured a healthy start to 2007. January and February new business across all divisions has broadly met our expectations .........Whilst we anticipate the rate of increase in house price growth slowing, we currently see no sign of the volume of transactions falling below the normal levels we have experienced in the recent past. In the absence of further significant interest rates rises and any broader negative economic events, we believe the market is sustainable at this level. This being the case, we expect another very satisfactory year."
For further information please contact:
Grenville Turner, Group Managing Tel: 01376 533 700 Director Mike Nower, Group Finance Director Tel: 01376 533 700
COUNTRYWIDE PLC
CHAIRMAN'S STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006
HIGHLIGHTS 2006 2005 ChangeTurnover ‚£654.2m ‚£528.2m 24%Underlying operating profits ‚£102.0m ‚£32.3m 216%Operating profits ‚£92.2m ‚£31.4m 194%Profit before tax ‚£113.8m ‚£31.7m 259%Earnings per share 47.22p 15.45p 206%Underlying earnings per share 41.62p 14.78p 182%Interim dividend per share 5.00p 1.00p 400%Second interim dividend per share (to bepaid if the Offer from Apollo isunsuccessful) 10.0p 3.00p 233%House sales exchanged 103,252 85,106 21%Life policies arranged 49,811 33,814 47%Mortgages arranged 61,354 48,432 27%Valuations and survey instructions 697,305 639,028 9%Total conveyances completed 66,751 53,367 25%
RESULTS
Earlier this year I announced my intention to step down as Chairman of Countrywide plc following this preliminary announcement of the results for 2006. Although I will remain as Chairman until the outcome of the recent offer from Apollo is known, this will be my final opportunity to report to shareholders, and I am delighted to confirm the achievement of record profits in 2006.
The 2006 operating profit was 194% up on 2005 and was achieved after making provision for business closure costs and despite abortive transaction costs associated with the bid from 3i. The profit before tax, which includes the profit on the sale of part of our holding in Rightmove, was ‚£113.8 million (2005: ‚£31.7 million).
The improvement in the housing market noted in my Interim Statement continued into the second half of 2006. All our divisions took advantage of these improved conditions and, although accurate statistics in relation to the housing market are notoriously difficult to obtain, we believe we outperformed the market on all fronts.
The excellent operating performance created an exceptionally strong trading cash flow. Following the Interim Statement, we paid an interim dividend of ‚£8.7 million, and bought ‚£20 million of Countrywide shares into Treasury. Despite these outgoings, the net cash inflow in the second half of the year was ‚£29.2 million. This brought the total cash generated for the year, including the proceeds of sale of part of our Rightmove holding, to ‚£57.4 million, 33.1 pence per share, and the year end cash balance to ‚£64.4 million.
The profit after tax for the year was ‚£81.9 million (2005: ‚£27.2 million) after providing for corporation tax of ‚£31.9 million - an effective tax rate of 28%. This reduced rate reflects the use of reliefs available on the disposal profits, offset by unrelievable losses arising in our Spanish business and certain costs arising from the abortive bid from 3i.
The underlying earnings per share were 41.62p (2005: 14.82p) whilst the basic earnings per share were an impressive 47.22p which represents an increase of 206% over the somewhat depressed figure in 2005.
If the offer from Apollo is unsuccessful, we intend to pay a second interim dividend of 10.0 pence per share (2005: 3.0 pence) in lieu of a final dividend. Total dividends for the year would be 15.0 pence (2005: 4.0 pence). In the autumn we expended ‚£20.0 million, approximately equal to the proceeds of sale of part of our holding in Rightmove, in buying shares into Treasury. These distributions are in line with our stated policy. We would anticipate maintaining a progressive dividend policy based on the dividend being covered between 2 and 2.5 times by earnings on average through the business cycle. We also expect that periodically we may have capital in excess of that required to develop the business and to maintain the dividend and we would propose to return such excess capital to shareholders by the most appropriate means at the time. If the bid from Apollo is unsuccessful, by the time of the Annual General Meeting we would anticipate being in a position to update shareholders with our proposals for further returns of capital.
As mentioned, the Company was strongly cash generative in 2006 and 2007 has started well. Accordingly, the board believes that it would be appropriate to utilise some of the cash in the balance sheet to grow the business organically and, where possible at a reasonable cost, by acquisition.
DEVELOPMENTS
I am pleased to report that, in addition to achieving record profits, we have remained focussed on progressing the projects previously advised, whilst developing plans for profitable future growth.
Our estate agency business is, by some margin, the largest of its kind in the UK. Now that we have successfully integrated the offices we bought from Bradford & Bingley Group (BBG), the size, level of profitability and cash flow generated by the business justify focussed organic expansion. There are few, if any, large scale estate agency businesses likely to come to market in the near future. Therefore despite the initial impact on both profits and cash of an organic growth strategy, we believe the success of our business model justifies a significant further investment. We plan to open up to 100 additional offices over 3 years creating a further 500 jobs, while continuing to invest ‚£8.5 million in our refurbishment programme, in addition to which we will be investing ‚£2.0 million refreshing our Bairstow Eves brand and offices.
In 2005 we conducted a comprehensive review of the life assurance products we offer our house-buying clients. Following this review, these products were repriced and some benefits enhanced. As previously reported we were delighted with the resultant increase in take up rates. This year we have conducted a similar review of our general insurance products, which has resulted in the repricing and improvement of the product features. The revised products have been enthusiastically received by clients and our consultants . We are already seeing the benefit of this in improved persistency of the policy book.
Following the Government's decision to abandon compulsory Home Condition Reports from the Home Information Pack (HIP) in July 2006, and Rightmove's decision to withdraw from that market, Rightmove had no rationale for a continued holding in TMG Holdings Limited (TMG), the property search business. As a result, their stake was purchased by the other three shareholders in equal proportion at the same price per share as paid by Rightmove in January 2006. As a consequence of this, our holding increased to 33.3%, from the previous 25%, at a cost of ‚£1.1 million.
In December, we instigated a review of the future prospects of our remortgage conveyancing operation. Since we first announced our plans to enter this market in 2002, the selling price of this service has fallen by two thirds. Despite the economic advantage enjoyed by outsourcing part of the process, we no longer consider this business can be sufficiently profitable at these price levels. We have therefore consulted with the affected employees and regrettably concluded that the business will close once the existing pipeline has been serviced. We have provided ‚£2.1 million for closure costs and onerous contracts.
We have conducted a similar evaluation of our Spanish business H2O Homes Overseas Countrywide, and concluded that this business is better carried out by a specialist able to offer a wider range of property opportunities for clients. We are therefore currently undertaking a closed sale process and are confident of a successful outcome.
The rollout of our "Enterprise" system across Countrywide Surveyors' offices, excluding the Securemove Property Services offices acquired from BBG in 2004, has been successfully completed. As a result, in December we significantly scaled down our support operations and anticipate a resultant cost saving of ‚£800,000 per annum. We are hopeful of a quick resolution to the remaining connectivity issues which currently prevent the Securemove offices linking with some of their clients. We have already carried out a number of enhancements to the system and expect to benefit from improved surveyor productivity.
Countrywide Property Lawyers has made a number of key enhancements to the computer system installed towards the end of 2005. This has enabled the business to progress its plans to outsource parts of the conveyancing process and the results to date have been encouraging. This will create much needed capacity to enable the business to fully capitalise on the client leads generated by our own estate agency offices and thus materially improve its market share.
Earlier this year, the Government announced its latest plans for the implementation of the reduced content Home Information Pack (HIPs). Despite the lateness of this update, and the continued uncertainties surrounding the proposed implementation date, we have to ensure we are ready to manage the operational implications for our businesses. We have therefore entered into an agreement with a UK subsidiary of MacDonald, Dettweiler and Associates Ltd, a company quoted on the Toronto Stock Exchange, who plan to become the leading HIPs consolidator in the UK, for the packaging and delivery of the HIPs which we will be required to provide for our estate agency clients.
Following the acquisition of 69 offices from BBG in late 2004, our lettings business makes a material contribution to group profits. Although these operations have always been separately managed, the results have previously been reported within our estate agency division. We have decided that its scale and the nature of its activities merits separate reporting as a stand alone division. With the continued growth in the buy-to-let market, and the relatively unconsolidated nature of the lettings market in the UK, we anticipate devoting considerable effort to growing this business, which is already the largest of its kind in the UK, both organically and through acquisition.
The point of sale system used by our financial consultants has served us well over the past few years. Our panel of mortgage lending partners are all seeking to improve offer speed through the medium of electronic application forms. We therefore are planning a number of enhancements to facilitate this process, which will deliver benefits to our clients.
PEOPLE
In the twenty-one years I have been Chairman of Countrywide and its predecessors, I have been privileged to lead a company with the most talented and hard-working people in this industry. The sheer commitment to doing the best for their clients is what underpins the success of the group. I would like to express my sincere appreciation to them all. My place as Chairman will be taken by Harry Hill, who has been an inspirational leader over the 19 years he has occupied the Group Managing Director's chair. I wish him and his worthy successor, Grenville Turner, further success in the future. We will also be bidding farewell to Peter Mason who has sat on the board since 1992, initially as a representative of Guardian Assurance, at the time a major shareholder, and since 1999, as an independent Non-Executive Director. His contribution has been most valuable. On your behalf I would like to thank him and wish him all success.
We are keen to ensure that we have a talented layer of management when the present generation of senior colleagues retire. To this end we have conducted a review of our management development and succession strategies. The result is a comprehensive new programme of training and talent management which will be rolled out through 2007.
OUTLOOK
The record pipelines brought forward have ensured a healthy start to 2007. January and February new business across all divisions has broadly met our expectations. It is perhaps too early for the recent interest rate increase to have affected the market, which thus far has taken it and the previous increases in its stride. Whilst we anticipate the rate of increase in house price growth slowing, we currently see no sign of the volume of transactions falling below the normal levels we have experienced in the recent past. In the absence of further significant interest rates rises and any broader negative economic events, we believe the market is sustainable at this level. This being the case, we expect another very satisfactory year.
ESTATE AGENCY DIVISION
The results of the Estate Agency Division for 2005 have been restated to exclude the Lettings Division which is now reported separately.
Estate agency 2006 2005 ChangeTurnover ‚£361.8m ‚£278.9m 30%Operating profit ‚£53.5m ‚£8.5m 529% House exchanges 103,252 85,106 21%Average commission 1.66% 1.66% -Average house price ‚£193,500 ‚£179,300 8%Average employees per branch 5.4 5.1 6%Closing pipeline - value ‚£71.5m ‚£63.1m 13%- number of offers 21,596 19,600 10%Branches at year end 1,059 1,064 -Headcount (average FTE) 6,454 6,163 5%Residential Estate Agency
Recent figures published by the Land Registry appear to have confirmed that volumes of house sales in 2006 returned to more normal levels, close to the long-run average. Our own experience bears this out and furthermore, the seasonal pattern of sales arranged, exchanges and pipeline were as expected. Our offices completed 21% more house exchanges than in 2005, compared to the growth in transactions recorded by The Land Registry of 16.7% - an excellent performance.
As the year wore on, a market-wide shortage of sales instructions led to pressure on commission rates and our estate agency management did well to hold these at 1.66% in the second half of 2006. Although the rate of increase in the average price of the houses we sold appears to have been slightly below the national average, we nevertheless achieved a healthy 8.4% uplift in the average fee per sale.
In order to capitalise on the improved market conditions, additional employees have been recruited. Despite this, and other cost increases associated with a more active market, there was a significant increase in margin in the second half of the year and over the previous year as a whole.
Franchising
Our franchising division recorded its best ever results. As our franchisees gained in experience and skills, the like-for-like growth in volume easily outstripped the housing market performance. Since we started our estate agency franchise business, a number of competitors have entered this market. Nevertheless, the combination of our well known Bairstow Eves brand, and our well established support and development package, continues to attract new franchisees. We believe we can continue to add further to the network, which makes a valuable contribution to our overall market presence.
H2O Homes Overseas Countrywide
We have continued to find it difficult to achieve a satisfactory return from operating our own outlets in Spain. Whilst we maintain our belief that there is a good level of demand amongst our estate agency clients for overseas property, we have concluded that this is best satisfied by a specialist operator able to offer a broader range of destinations. As mentioned in the Chairman's Statement, we have decided to exit this market as a direct operator and are conducting a closed sale of our existing operation.
LETTINGS DIVISION 2006 2005 ChangeTurnover ‚£43.9m ‚£39.1m 12%Operating profit ‚£8.0m ‚£5.6m 43% Properties under management at year endRetail 18,943 18,026 5%Corporate 36,381 34,975 4%
Number of retail branches at year end 134 129 4% Headcount (average FTE)
930 867 7%
Countrywide Residential Lettings
All parts of Countrywide Residential Lettings business achieved good growth in both income and, through strict cost control, profits. Income increased by slightly under ‚£4.0 million, whilst profits moved from ‚£5.2 million to ‚£6.6 million - a 27% gain.
The number of managed properties, across all divisions, rose to a record 54,300. At the year end the corporate division had a pipeline of new business in excess of 16,000 units. The Retail Division completed well over 17,000 new lettings during the year.
Historically the majority of the retail lettings offices have been located in estate agency offices. Experience has proved that moving into stand alone offices can be more profitable, and during the year four existing offices were converted to stand alone. In addition four additional offices were added to the portfolio.
After a slow start to the year market conditions became quite buoyant. We saw an increase in demand during 2006 with the number of applicants looking to rent from us rising by 11.3% to 101,000; the majority of whom are under 35 years old and looking for property up to ‚£800 per calendar month (pcm). Supplies of stock reduced by 7.8% during the year whilst the average rent of our portfolio increased from ‚£599 pcm at the start of the year to ‚£624 pcm in December, a 4.2% increase.
Our own branded landlord's insurance, "Lets-Cover", saw a 56% growth as a direct result of the addition of 2 sales support staff and improved desk top technology within the branches.
The Corporate Division saw profits rise to ‚£2.2 million, as a result of its growth in the leasehold management market and through the addition of specialist commercial property management for pension fund providers.
We regard the lettings market as an important growth area for the group. This growth will be achieved through a selective acquisition programme, together with organic growth. The first of a number of targeted acquisitions was completed in February 2007 and brings with it a professional practice with 1,100 managed properties in Nottingham. In addition we plan to move another 40 offices to their own stand alone premises during the next 3 years.
PKL
PKL operates our Central London lettings business, trading under the John D Wood, Faron Sutaria and Gascoigne Pees brands. It enjoyed a much more successful year in 2006. Income improved by 20%, aided by an 8% increase in average rentals, whilst costs were well-controlled, assisted by the outsourcing of part of the back-office process. As a result, the contribution from this business increased to ‚£1.4 million.
FINANCIAL SERVICES DIVISION 2006 2005 ChangeTurnover ‚£91.6m ‚£74.5m 23%Operating profit ‚£21.0m ‚£11.7m 79%Life protection policies 49,811 33,814 47%Total mortgages arranged 61,354 48,432 27%Value ‚£7.1bn ‚£5.1bn 39%Panel mortgages arranged 56,097 41,151 36%Value ‚£6.5bn ‚£4.3bn 51%General insurance polices arranged 56,711 42,027 35%Conversion rate (% of house exchanges)Mortgages 59.4% 54.9%Life polices 48.2% 39.7%General insurance 54.7% 49.4%Headcount (average FTE) 1,454 1,374 6%
The financial services division, comprising the estate agency based mortgage consultants and our mortgage and insurance processing centres, had a very good year.
In addition to the benefit accruing from a more active housing market and higher house prices, a number of other factors contributed to this success. We further increased the number of mortgage consultants servicing clients in the ex-BBG estate agency offices and, as the consultants based in these offices gained experience, their productivity and conversion rates improved.
The number of life assurance policies arranged increased significantly over the previous year. This was largely due to the more competitive pricing introduced last year.
As mentioned earlier, in conjunction with Axa, our general insurance product provider, we conducted a comprehensive review of our product features and benefits and pricing, with the aim of improving our competitive position. This review was completed mid-year and, following the re-launch in October, we immediately experienced an increase in the uptake of these products by our mortgage clients. We believe that retention of these clients will also improve, to the benefit of profitability in future years.
High staff turnover amongst consultants is the bane of the financial services industry. The excellent training and development our consultants receive is now complemented by the new national remuneration structure aimed at ensuring that we retain staff. Whilst this has resulted in an increase in fixed costs, we have already seen a beneficial reduction in staff turnover.
SURVEYING AND VALUATION
2006 2005 ChangeTurnover ‚£136.8m ‚£118.1m 16%Operating profit - before non-recurringincome ‚£26.7m ‚£18.7m 43%- profit on disposal of Commercial Surveyingbusiness ‚£2.0m -Operating profit ‚£28.7m ‚£18.7m 53%
Valuations and survey instructions completed 697,305 639,028 9% Headcount (average FTE)
1,468 1,678 -13%
This division experienced a good recovery in 2006 growing its market share. Bank of England statistics reveal that whilst the number of mortgage approvals for house purchase increased broadly in line with property sales, those for remortgages fell year-on-year. The growth in mortgage surveys and valuations achieved by the business just surpassed the growth in the combined number of mortgage approvals.
Despite this growth in market share, a number of factors meant that for much of the year, average surveyor productivity was below the optimum. In the first six months, there was a disruptive effect arising from the preparation for the introduction of Home Condition Reports. Similarly, during the year the "Enterprise" system was rolled out and time was spent in training and familiarisation on the new system. Towards the end of the year, as confidence and expertise in the new system increased, productivity improved and there are further gains to be made. One consequence of this reduced productivity was an increase in the proportion of instructions panelled to external surveyors lowering our margins. However, this materially reduced in the final quarter of the year.
The proposed introduction of HIPs also had a destabilising effect on the market for surveyors, as the industry came to terms with the potential shortage of home inspectors. As a result, we enhanced the remuneration packages offered to our surveyors, particularly the commission element that can be earned by the achievement of higher productivity.
CONVEYANCING DIVISION
2006 2005 ChangeTurnover ‚£22.7m ‚£19.1m 19%Operating loss - before non-recurring losses ‚£(0.2)m ‚£(7.7)m 97%- write off of computer software andassociated contracts - ‚£(5.5)m- goodwill impairment ‚£(2.4)m -- business closure costs ‚£(2.1)m -Operating loss ‚£(4.7)m ‚£(13.2)m 64%Completions 66,751 53,367 25%In-house 27,676 24,089 15%Panelled 30,251 22,231 36%Remortgages 8,824 7,047 25%Headcount (average FTE) 591 591 - Residential conveyancing
This business achieved a pleasing improvement in its results in 2006, increasing its contribution to operating profits by some ‚£7.5 million.
Following the successful installation of the replacement computer system, capacity has improved over 2005, resulting in an encouraging uplift in completions. This increase in capacity has reduced the number of cases panelled to external lawyers, although further capacity growth is necessary to reduce this to a desired level.
The replacement system carries lower depreciation and other IT costs. In addition, the implementation of the system has enabled the central call centre to be disbanded whilst new employees have been recruited in the three Property Law Centres. This has not only reduced overheads, but will also lead to better service in the centres.
As our manufacturing capacity increases, our panel management operation will receive less internal instructions resulting in reduced throughput. In addition, at the end of last year, it unsuccessfully tendered for the renewal of a contract (which was in force when we acquired the business) with one of its major clients. IFRS rules require us to conduct annual impairment reviews of all goodwill. Such reviews can only take account of approved business plans and the contracts in force, or expected to be achieved, at the date of the review. As a result we have reduced the value of the goodwill by ‚£2.4 million.
Remortgage conveyancing
Due to cut-throat competition in pricing, this business failed to win either of the two major contracts on offer in the second half of 2006. As a result, we have concluded that in the foreseeable future it will be unable to achieve the volume levels anticipated and required to trade at a satisfactory level of profitability. No further instructions are being accepted, and the pipeline is being run down, with a view to closure of the unit at the end of April. A provision of ‚£2.1 million has been made for closure.
JOINT VENTURES AND ASSOCIATES
2006 2005 ChangeTurnover ‚£16.9m ‚£17.2m -2%Profit after tax ‚£1.4m ‚£1.0m 40%Profit on disposal ‚£19.4m ‚£2.6m 646%Rightmove plc (21.5% owned)
We have consolidated our share of the profits and net assets announced by Rightmove in its preliminary announcement on 2 March. As can be seen more fully in that announcement, Rightmove had an excellent year following its successful flotation in March 2006. At close of business on 12 March 2007, our 21.5% holding in Rightmove was worth ‚£140 million.
T M G Holdings Limited (33.3% owned)
Our new joint venture partners are now directing search requirements to this operation. This, together with the benefit of additional clients gained by the business and an extension of the product range into the commercial sector, has resulted in an increase in turnover of ‚£7.6 million over 2005. Profit before tax, 33% of which is accounted for in our results, has increased by over 1000%.
CENTRAL COSTS
Central costs in 2006 totalled ‚£10.9 million (2005: ‚£4.9 million). However, underlying central costs for 2006 were ‚£6.9 million compared to ‚£4.6 million in 2005. The increase is principally due to bonuses being earned at maximum level in 2006, a special bonus earned by H D Hill and the cost of the group-wide deferred bonus scheme which has been accrued centrally; ‚£825,000. In addition ,we have provided a further ‚£4.0 million in respect of liabilities arising from our unsuccessful appeal against the judgment in the case brought by the owners of a former subsidiary, and other similar claims.
Christopher Sporborg12 March 2007Group Income Statementfor the year ended 31 December 2006 Note 2006 2005 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Revenue 3 654,204 528,164Other income 17,399 14,264Exceptional income - Profit on disposal of freehold - 4,982properties ----- ----- 671,603 547,410 Employee benefit costs 4 (361,172) (317,007)Depreciation, amortisation and (12,089) (10,872)
impairment
Other expenses:Regular expenses (202,828) (182,608)Exceptional items:- Abortive transaction costs (3,270) -- Write of computer software and - (5,540)
associated contracts
----- ----- (206,098) (188,148)Group operating profit before 95,514 31,941exceptional items- Exceptional items (net) (3,270) (558)Group operating profit 3 92,244 31,383Finance expense (1,595) (5,603)Finance income 2,346 2,252Share of profit post tax from jointventures and associates 1,411 1,014Profit on part disposal of joint ventureand associated undertakings 19,357 2,621 ----- -----Profit before taxation 113,763 31,667Taxation 5 (31,907) (4,468) ----- -----Profit attributable to equity 81,856 27,199shareholders ----- ----- Earnings per share Basic 6 47.22p 15.45p Diluted 6 46.53p 15.37p Group Statement of Recognised Income and Expensefor the year ended 31 December 2006 2006 2005 ‚£'000 ‚£'000Foreign exchange translation differences (25) (6)Actuarial losses arising in the pension scheme (1,455) (2,619)
Deferred tax adjustment arising on the pension scheme assets and liabilities
437 786Deferred tax movement in relation to share-based payments 105 -
Share of movements recorded directly in equity by joint ventures 1,076 500 and associated undertakings
----- -----Income and expense recognised directly in equity 138 (1,339)Profit for the year 81,856 27,199 ----- -----
Total income and expense recognised for the year attributable to equity shareholders
81,994 25,860
Group Balance Sheet as at 31 December 2006
2006 2005 ‚£'000 ‚£'000AssetsNon-current assetsIntangible assets:Goodwill 30,685 37,737Other intangible assets 6,143 6,164Property, plant and equipment 22,780 22,397Investments accounted for using the equity method:Investments in joint ventures and associatedundertakings 6,462 3,738Other investments 1,233 1,225Other receivables 123 1,401Deferred tax asset 10,192 11,479 ----- -----Total non-current assets 77,618 84,141 ----- ----- Current assetsTrade and other receivables 86,440 78,006Cash and cash equivalents 64,370 6,987 ----- -----Total current assets 150,810 84,993 ----- ----- Total assets 228,428 169,134 ----- -----Capital and reserves attributable to the shareholdersof the companyShare capital 8,543 8,872Share premium 30,452 30,213Capital redemption reserve 50 50Capital reserve (433,829) (433,829)Treasury share reserve (35,766) (6,216)ESOP share reserve (3,588) (571)Other reserves 1,109 1,109Translation reserve 186 211Retained earnings 493,400 423,584 ------ -----Total shareholders' equity 60,557 23,423 ----- ----- Non-current liabilitiesFinancial liabilities - loans and borrowings - 5,000Defined benefit scheme liabilities 15,867 15,514Provisions 10,674 9,654Deferred income 18,223 18,060 ----- -----Total non-current liabilities 44,764 48,228 ----- ----- Current liabilitiesTrade and other payables 95,354 82,399Provisions 11,231 10,130Current tax liabilities 16,522 4,954 ----- -----Total current liabilities 123,107 97,483 ----- ----- Total liabilities 167,871 145,711 ----- ----- Total equity and liabilities 228,428 169,134 ----- -----
Group Cash Flow for the year ended 31 December 2006
2006 2005 Note ‚£'000 ‚£'000 ‚£'000 ‚£'000Cash flows from operating activitiesCash generated from operations 8 111,638 45,021Interest paid (10) (5,800)Tax paid (18,512) (5,069) ----- -----Net cash from operating activities 93,116 34,152 Cash flows from investing activitiesAcquisition of subsidiaries, net ofcash acquired (178) (1,008)Purchase of investments - (10)Purchase of property, plant andequipment (8,259) (5,510)Purchase of intangible assets (2,245) (1,407)Proceeds from sale of property,plant and equipment 794 11,021Proceeds from part disposal of jointventures and associated undertaking 20,246 3,412Purchase of additional holding injoint venture (1,086) -Proceeds from disposal of business 4,340 -Dividend received from associatedundertaking 428 1,537Interest received 1,995 2,193 ----- -----Net cash generated from investingactivities 16,035 10,228 Cash flows from financing activitiesProceeds from issue of share capital 400 28,943Proceeds from disposal of own shares - 268Repayment of term loan (5,000) (70,000)Buyback of shares (30,211) (6,300)Purchase of own shares in ESOP (3,017) -Dividend paid (13,940) (9,405) ----- -----Net cash used in financingactivities (51,768) (56,494) ----- ----- Net increase/(decrease) in cash andcash equivalents 57,383 (12,114) Cash and cash equivalents at 1January 6,987 19,101 ----- ----- Cash and cash equivalents at 31December 64,370 6,987 ----- -----1. Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards including International Accounting Standards and Interpretations (collectively 'IFRS') issued by the International Accounting Standards Board ('IASB') and endorsed for use by companies in the EU, and with those parts of the UK Companies Act 1985 applicable to companies reporting under IFRS.
2. Status of financial information
The financial information contained in this preliminary announcement does not constitute the Company's consolidated statutory financial statements for the years ended 31 December 2006 or 2005, but is derived from those financial statements. The financial statements for the year ended 31 December 2005 have been delivered to the Registrar of Companies. The financial statements for the year ended 31 December 2006 will be delivered following the Company's Annual General Meeting. The auditors have reported on those financial statements; their reports were unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1985.
The annual report and financial statements will be posted to shareholders on 19 March 2007. Copies of which will also be available from the Company Secretary, Countrywide plc, Countrywide House, Perry Way, Witham, Essex CM8 3SX.
3. Segment results Revenue Inter Inter- External -segment External segment sales sales 2006 sales sales 2005 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 Estate Agency 359,417 2,405 361,822 277,403 1,414 278,817Lettings 43,913 - 43,913 39,086 - 39,086Financial Services 91,299 278 91,577 74,473 - 74,473Surveying andValuation 136,844 - 136,844 118,075 - 118,075Conveyancing 22,731 - 22,731 19,127 - 19,127Eliminations - (2,683) (2,683) - (1,414) (1,414) ----- ----- ----- ----- ----- ----- Total 654,204 - 654,204 528,164 - 528,164 ----- ----- ----- ----- ----- ----- Under- Under- Non- lying Non- lying recurring results recurringSegment Result results items for items for 2006 2006 2006 2005 2005 2005 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 ‚£000 Estate Agency 53,470 - 53,470 8,500 - 8,500Lettings 7,963 - 7,963 5,589 - 5,589Financial Services 20,973 - 20,973 11,713 - 11,713Surveying andValuation 26,733 1,999 28,732 18,722 - 18,722Conveyancing (250) (4,443) (4,693) (7,657) (5,540) (13,197) ----- ----- ----- ----- ----- ----- 108,889 (2,444) 106,445 36,867 (5,540) 31,327 Unallocated Expenses (6,931) (4,000) (10,931) (4,611) (315) (4,926)Profit on disposal - - - - 4,982 4,982of propertiesAbortive transaction - (3,270) (3,270) - - -costs ----- ----- ----- ----- ----- -----Operating profit 101,958 (9,714) 92,244 32,256 (873) 31,383 ----- ----- ----- ----- ----- -----4. Staff costs 2006 2005 ‚£'000 ‚£'000Wages and salaries 317,416 280,276Defined contribution pension cost 6,349 5,442Other long-term employee benefits 825 225Share-based payment expense 1,442 566
Employer's national insurance contributions and similar taxes 35,140 30,498
----- ----- 361,172 317,007 ----- -----5. Taxation 2006 2005Analysis of tax charge in the year ‚£'000 ‚£'000 Current tax 30,078 7,649Deferred tax 1,829 (3,181) ----- -----Taxation 31,907 4,468 ----- -----
The tax charge for the year differs from the standard rate of corporation tax in the UK (30%). The differences are explained below:
2006 2005 ‚£'000 ‚£'000 Profit on ordinary activities before tax 113,763 31,667 ----- -----
Profit on ordinary activities multiplied by the rate of corporation tax in the UK of 30% (2005 - 30%)
34,129 9,500Effects of:Utilisation of unprovided trading losses - (86)Profits from joint venture and associates (479) (1,091)Share options (304) (394)Abortive transaction costs disallowed 981 -Other expenses not deductible 1,139 193Utilisation of unprovided capital losses (631) (2,056)Goodwill impairment 708 -Overseas trading losses 2,115 (1,598)
Capital gains eligible for Substantial Shareholder Exemptions (5,751) -
----- -----Total taxation charge 31,907 4,468 ----- -----
Deferred tax assets have been recognised in respect of all tax losses and other temporary differences giving rise to deferred tax assets because it is probable that these assets will be recovered.
The movements in deferred tax assets and liabilities (prior to the offsettingof balances within the same jurisdiction as permitted by IAS 12) during theyear are shown below. Deferred tax assets and liabilities are only offsetwhere there is a legally enforceable right of offset and there is an intentionto settle the balances net. 2006 (Charged)/ (Charged)/ Asset/ credited to credited (liability) income to equity ‚£'000 ‚£'000 ‚£'000 Capital allowances 2,212 60 -Employee pension liabilities 5,275 (1,499) 437Share options 1,647 321 105Other temporary and deductible differences 1,058 1,204 -Overseas losses - (1,915) ----- ----- ----- 10,192 (1,829) 542 --- ---- ----- 2005 (Charged)/ (Charged)/ Asset/ credited to credited (liability) income to equity ‚£'000 ‚£'000 ‚£'000 Capital allowances 2,152 987 -Employee pension liabilities 6,337 382 786Share options 1,221 285 -
Other temporary and deductible differences (146) (388) - Overseas losses
1,915 1,915 ----- ----- ----- 11,479 3,181 786 ----- ----- -----
A deferred tax asset has not been recognised in respect of unused capital losses ‚£32,939,000 (2005: ‚£32,097,000).
6. Earnings per share 2006 2005 ‚£'000 ‚£'000NumeratorEarnings used in basic EPS and diluted EPSProfit for the year 81,856 27,199 ----- -----Denominator 000's 000's ----- ----- Weighted average number of sharesused in basic EPS 173,356 176,082Effects of:Employee share options 2,553 862 ----- -----Weighted average number of shares usedin diluted EPS 175,909 176,944 ----- ----- Pence Pence Basic EPS 47.22 15.45Diluted EPS 46.53 15.37Underlying EPS 41.62 14.78
Underlying earnings per ordinary share is calculated before the exceptional and non-recurring items and the profit on the part disposals of the associated undertakings and joint ventures. A reconciliation of the basic earnings for the year to the underlying earnings is presented below:
2006 2005All items stated net of taxation ‚£'000 ‚£'000 Basic earnings for the year 81,856 27,199Abortive transaction costs 3,270 -Profit on disposal of freehold properties - (4,982)Write off of computer software and associatedcontracts - 3,878Dividend from insurance cell - (985)Business closure costs 1,724 -Profit on disposal of business (1,399) -Profit on part disposal of associated undertakings andjoint ventures (19,357) -Legal claim 3,700 910Goodwill impairment 2,360 - ----- ----- 72,154 26,020 7. Dividend 2006 2005 ‚£'000 ‚£'000Final dividend at 3.0p (2005: 4.5p) per 5p shareproposed and paid during the year relating to theprevious year's results 5,273 7,625Interim dividend of 5.0p (2005: 1.0p) per 5p sharepaid during the year 8,667 1,780 ----- ----- 13,940 9,405 ----- -----
In addition, the Directors intend to pay a second dividend in lieu of a final dividend in respect of the financial year ending 31 December 2006 of 10.0p per share which will absorb an estimated ‚£16,968,000 of Shareholders' Funds if the offer from Apollo is unsuccessful.
8. Cash flow from operating activitiesReconciliation of profit before taxation to cash generated from operations: 2006 2005Cash generated from operations ‚£'000 ‚£'000Profit before taxation 113,763 31,667Adjustments for:Depreciation 7,235 8,102Amortisation of intangible assets 1,736 2,770Impairment charge 3,118 -Share-based payments 1,442 566Profit on sale of investments (19,357) (7,603)Profit on sale of business (1,999) -Income from joint ventures and associates (1,411) (1,014)Movement on provisions 2,072 2,738Profit on sales of fixed assets and intangibles (428) (232)Exceptional write off of computer software andassociated contracts - 5,540Finance expense 1,595 5,603Finance income (2,346) (2,252)
Changes in working capital (excluding affects of acquisitions and disposals of Group undertakings): Increase in trade and other receivables
(5,187) (4,596)Increase in trade and other payables 11,405 3,732 ----- ----- Cash generated from operations 111,638 45,021 ----- -----
9. Forward-looking statements This document may contain forward-looking statements with respect to certain of the plans and current goals and expectations relating to the future financial condition, business performance and results of Countrywide plc. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that are beyond the control of Countrywide plc including, amongst other things, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates, inflation, deflation, the impact of competition, changes in customer preferences, delays in implementing proposals, the timing, impact and other uncertainties of future acquisitions or other combinations within relevant industries, the policies and actions of regulatory authorities, the impact of tax or other legislation and other regulations in the jurisdictions in which Countrywide plc and its affiliates operate. As a result, Countrywide plc's actual future condition, business performance and results may differ materially from the plans, goals and expectations expressed or implied in these forward-looking statements.
COUNTRYWIDE PLCRelated Shares:
CWD.L