Preliminary Announcement for year ended 31.12.16

PRESS RELEASE

9 March 2017

Countrywide plc

('Group'/the 'Company')

Preliminary statement of annual results

for the year ended 31 December 2016

Rapid response to challenging markets drives business transformation

Countrywide plc, the UK's largest integrated property services group, announces its results for the year ended 31 December 2016.

FINANCIAL HIGHLIGHTS

· Maintained income through market share gains, benefit of 2015 acquisitions

· Challenging residential market, investment to support future growth impacts profitability and cashflow

· Positive progress in Lettings, Financial Services and Surveying

· Key cost initiatives underway to underpin future profits

· 9.99% placing of share capital announced to reinforce balance sheet

· New dividend policy to pay out between 30 and 35% of earnings; no final dividend for 2016

* Earnings before interest, tax, depreciation, amortisation, exceptional items, contingent consideration, share-based payments and share of losses from joint venture, referred to hereafter as 'EBITDA' (see note 4 for reconciliation)

** Before exceptional items, amortisation of acquired intangibles, contingent consideration and share based payments (net of taxation impact)

OPERATIONAL HIGHLIGHTS

2016: a year of unprecedented change

· Volatile residential property market

· Focus on key organic strategic initiatives

· Investment in foundations for future success

· Reassessing capital allocation

· Cost transformation

2017 outlook:

· Sales market volatility likely to continue

· Expected headwinds from tenants' fees regulation and pressured landlord environment

· Focus on share gain through digital rollout, planned to be in 50% of branches by June 2017

· Delivery of next phases of cost transformation

· Accelerate organic growth in Financial Services

· Expect a resilient performance in 2017

Peter Long, Chairman at Countrywide plc, commented:

"In 2016, political uncertainty and stamp duty changes had a significant impact on the UK property market, making it a challenging year for Countrywide. We faced into these challenges - making difficult decisions quickly and acting decisively, streamlining the cost base and transforming our customer offer. In addition we have, today, announced plans to reinforce our balance sheet giving us a strong platform, going into 2017, to accelerate our transformation agenda."

Alison Platt, Chief Executive, added:

"Countrywide is evolving at pace, with a clear strategy to create a business with a cost base that better reflects market conditions and a differentiated, customer centric offer available to customers across the UK. Looking forward we expect difficult market conditions for the foreseeable future ensuring that the emphasis for 2017 will remain on our strong plans for change. Over the medium term our diverse revenues, nationwide footprint and portfolio of high quality brands gives us confidence that Countrywide can build on its leadership position and deliver sustainable, profitable growth."

*Restated from prior year

For further information please contact:

· Investors

· Alison Platt Chief Executive Officer

· Jim Clarke Chief Financial Officer +44(0)7970 477299

· Media Press office +44(0)7721 439043

· Nadia Mahmud Head of Communications +44(0)7950 312124 [email protected]

· Alicia Edmonds-Smith Teneo Blue Rubicon +44 (0)20 7420 3148 [email protected]

· Rob Morgan Teneo Blue Rubicon +44 (0)20 7420 3148 [email protected]

CHAIRMAN'S STATEMENT

Building for the Future

My first year as chairman coincided with a particularly challenging market backdrop. Overall the property market was destabilised by fiscal change and heightened economic uncertainty, which inevitably had an impact on transactions.

Changes to the stamp duty regime, the UK's decision to leave the European Union and proposed changes to tenants' fees all had an effect on the sector and the Group. Property will always be a part of the national conversation and how the industry reacts to these conditions will remain a key focus for a wide variety of stakeholders going forward.

Tough market conditions can act as a catalyst for necessary change and true leaders show their strength by responding, transforming their business to build and ultimately to thrive. I have been impressed at how quickly Countrywide has faced into these challenges and how the executive team has responded, by accelerating our transformation agenda.

2016 results delivered a modest growth in income to £737.0 million (2015: £733.7 million), despite the unpredictable residential sales market. EBITDA decreased by 26% to £83.5 million (2015: £113.0 million), and statutory operating profit by 46%, as a result of a reduced sales transaction market and investment in key areas of our business impacting underlying profitability.

The company is at a critical point in its evolution, and is determined to reinforce its leadership by developing a business that better reflects the needs of our customers. We accept that the market will continue to be constrained and that we need to transform our business, but we do so from a position of strength. We have genuine national reach, a broad service offering and a portfolio of high quality, well known brands.

As we transform, the executive team is committed to building a customer focused company, driving and delivering efficiency and maintaining a sustainable and profitable business. Some of the decisions taken this year have put us ahead on this journey, not least:

- defining a new operating model which will include resizing the retail estate, updating the technology platform and driving down our cost base

- implementing a multichannel offering through a comprehensive digital, phone and high street presence

- seizing the growth opportunity represented in the financial services sector

- pausing all M&A activity after the first quarter of 2016 and focusing primarily on organic growth, delivering what we do already, but better.

As previously stated, we commenced a strategic review of our commercial business, Lambert Smith Hampton, during 2016 to consider how best to maximise value in that sector over the coming years. That review continues and we anticipate it will conclude later this year.

Despite the uncertain market environment, we remain committed to reducing our leverage and at the same time enable the management team to future proof the business and exploit growth opportunities. To that end, and following consultations with our major shareholders, the Board has decided to make a small placing of up to 9.99% of our share capital available via a cash box structure today. In addition, we have reviewed our dividend policy and have rebased that to between 30 and 35% of earnings going forward. No final dividend will be paid for 2016.

I am confident that we are building a business for the long term, working towards a more resilient and efficient operating model that promotes organic growth through customer retention and by building on our unique strengths to be the best in the market at what we do.

Peter Long

Chairman

9 March 2017

CHIEF EXECUTIVE'S REVIEW

Geographic and service diversification underpins performance in uncertain markets

2016 - A year of unprecedented change

2016 was a year of two halves for the property market in the UK. The first half of the year saw Countrywide benefit from a strong residential sales market and the actions we took to strengthen the core business in both Sales and Lettings. The changes to stamp duty land tax on second homes provided a lift to first quarter volumes as our Sales team capitalised on those buying second homes - most notably investor landlords who pulled forward transactions to beat the April deadline for the additional 3% levy. However, the introduction of higher rate stamp duty land tax rates for second home purchasers combined with previous stamp duty land tax rate rises on £1 million homes suppressed the market. This was most evident at the upper end of the sector where the stamp duty burden is greatest, inevitably meaning that this - effectively geographic - tax hurts aspiring working households in London and the South East more than anywhere else in the UK.

The outcome of June's referendum on the UK's membership of the European Union predictably had an impact on confidence in the housing market in the second half of the year. Transactions fell in the third quarter, and in the fourth quarter were also down (9% year on year); consumers showed an appetite for mitigating risks and the number of customers seeking to remortgage was up, with approvals up by 14% compared to 2015, with the number of loans at its highest levels since 2009.

Thanks to the diversity of our geographic footprint and service offer, despite these headwinds we maintained Group revenue at the same level as 2015. We increased our market share in Mortgages and Surveying, maintained our leading market share position in both Sales and Lettings, and took a significant step forward in our ability to grow the number of properties under management in our Lettings business. Our focus on delivering improved levels of service to our landlords and their tenants has been a core focus for Countrywide over the last year and the turnaround in performance is really pleasing.

Challenges in the property market are likely to be with us for some time whilst uncertainty around the UK economy weighs heavily on consumer confidence. The Chancellor's intent to remove tenants' fees brings further challenges to the rental sector, where increasing regulatory burdens risk some agents putting quality a poor second to rates of return.

In our view, these market conditions create an impetus to change our business faster. Our focus on building a business which is genuinely multichannel in nature, delivers more choice and flexibility to customers and lowers our cost of doing business is imperative for us now. The launch of our digital sales pilot in summer 2016 has surpassed our ambitions and we have now accelerated the rollout to more than 25% of our network. Whilst that rollout will continue at pace development is now focused on building both telephone and digital channels in our mortgage and protection business and our across our Lettings proposition.

Our focus on reducing the cost base came immediately post the EU referendum and has continued at pace. We initiated significant cost cutting, with estimated run rate reductions of £10 million already embedded and a further £9 million expected in 2017. The strategic review of our Commercial business is underway as we seek a route to enable our growth agenda without increasing our debt. These exceptional costs of restructuring our business of £27.7 million (including £1.4 million impairment of brands we rationalised) were incurred in parallel with goodwill impairment charges of £19.6 million arising from market conditions.

The current market provides an opportunity to accelerate towards our vision of being recognised as the most recommended company in the property sector. The work we started in 2015 to improve our customers' experience, while increasing the efficiency and productivity of our business, continues at pace. In 2016 that marked a shift away from growth delivered though acquiring independent businesses to organic growth. In building a multichannel network we have taken the opportunity to review our footprint across the UK and in pursuit of fewer, bigger, better brands and branches, we closed 200 branches across the UK. That, coupled with a reduction in the layers of management, has enhanced our ability to move at pace, and focus on growing our business through achieving more for our customers. Seeing colleagues leave our business is never easy and, although tough, the decisions we took in 2016 will stand us in good stead as we navigate the market challenges ahead.

As we enter 2017 we do so with confidence - both in the capabilities our business and our people have to serve our customers, and in our clear plans for transformation. The progress made, and momentum gained from responding rapidly to the changing market conditions in 2016, put us firmly on the front foot and mean we are well placed to deliver on our strategy: delivering a better, more personalised customer experience; creating an internal environment for great people to flourish; and aligning our portfolio to where the growth is.

Alison Platt

Chief executive officer

9 March 2017

SEGMENTAL RESULTS

Retail

Highlights

· Revenue up 3%; EBITDA down 28%

· 50,891 properties exchanged - up 1%

· 10% improvement in landlord retention

· Multichannel sales proposition launched

Operating review 

The market was unique in 2016 with the second home stamp duty charge and the EU referendum accelerating activity in the first quarter and subduing the second half. We sought to maximise the opportunities that were available and managed to actually exchange more homes in 2016 than 2015 whilst introducing our multichannel proposition to the market. Although acquisition activity was limited we did bring Finders Keepers, the market leading Lettings business in and around Oxford, into the group in the first quarter.

Investment in the foundations to support future growth, combined with challenging market conditions impacted our profitability and EBITDA reduced by 28% to £31.0 million. Exceptional costs of £19.9 million further depressed our profit before tax and arose as a result of our focus on reducing branches and layers of management, and include a £5.0 million impairment charge arising as a result of the market changes and a £1.4 million impairment charge arising from rationalisation of four brands.

SalesWe started the year very strongly with a significant increase in activity aided in part by the impending 3% additional stamp duty charge for second home owners that came into effect in April 2016. This led to a record conversion of our sales pipeline in March: property exchanges across the Group were 29% ahead compared to the same period in 2015, as buyers - primarily landlords - brought forward transactions to meet the deadline. Leading up to the EU referendum in June, the second quarter saw a slowing of activity as uncertainty increased in the run up to the vote.

In the second half of the year the June EU referendum had a sustained impact on sentiment, with fewer buyers and sellers coming to the market. In the immediate wake of the vote, we also saw higher levels of sale cancellations and a reduction in front end activity.

As a result of these exceptional circumstances, the number of potential homebuyers registered was down 3% year on year at 886,000 and the number of homes exchanged only increased by 1% year on year. Positively, we continued to improve productivity with better conversion of valuations to instructions in the second half of 2016, up by 4%. Overall our delivery for customers improved and we agreed sales on a higher proportion of our new instructions in the year, improving performance by 7%. 

LettingsOverall, demand continued to outstrip supply, with more than 430,000 potential applicants in Retail registering an interest in property, which is up 11% on last year. Demand slowed in the second half of the year and the quality of stock and competitiveness of rents came to the fore.

Our ongoing focus on delivering greater service to our landlords delivered 10% better client retention than in 2015, and we also grew properties under management by over 8,500 or 14%. As such our lettings revenue grew by 13%.

Digital innovation

The major development in our customer offering has been the pilot and subsequent rollout of our multichannel proposition which offers sellers the ability to not only list, monitor and complete the full property sale transaction online at a very competitive fixed fee, but uniquely to upgrade to a fully supported service without putting at risk the fees they have already paid. Customers have told us that they value the choice, transparency and peace of mind that our proposition - which is unique to Countrywide - offers them. With six of our brands offering this at the end of 2016, we will roll this out to the majority of our branch network in 2017.

Continuing with the theme of leveraging digital technology to enhance the customer experience, we introduced the Fixflo reporting system into our lettings business in summer 2016. This provides tenants with an online tool to help them report repairs quickly and more accurately. As a result, our property managers are able to deal with repair issues much more efficiently for our tenants. This service has been well received by landlords and tenants alike and reflects our desire to provide the highest levels of service to both.

Brand and branch efficiency

In 2016 we focused our business on organic growth and driving improved results from our national branch network. This has led to increased focus on meeting all of our customer's needs in a property transaction as well as maintaining our leading market share position in Sales and Lettings.

A detailed review of our branch network has been completed, ensuring we have the right presence in the right locations to deliver sustainable growth. We saw some branches close as a result of this review as we looked to retain the strongest brands and branches with the greatest customer bases and potential for growth. Strong control on our external recruitment meant we retained almost all colleagues affected by the branch closures, redeploying them within the business and retaining their expertise. Our management structure has also been aligned to the branch network and drives a focused and more effective performance culture.

We acquired Finders Keepers, the number one lettings business in the Oxford area with excellent customer service and reviews. Finders Keepers now forms a key component of our premier offering, working in partnership with our Hamptons International brand.

Outlook

2016 was a challenging year for the property sector and we expect the market to remain uncertain throughout 2017. We anticipate sales transactions will be slightly down on 2016. Our forecast for house price growth in 2017 is for a small fall in prices across the country.

Many of the risks facing the sales market in 2017 should support the private rental sector. Labour market uncertainty and weaker house price expectations are likely to delay first time purchase decisions, adding to the demand for rented accommodation.

In last year's Autumn Statement it was announced that tenants' fees will be banned. The timing of any ban being introduced is uncertain at present, but it is anticipated that this will have some effect on our revenue. However, work is already underway as part of our existing plans to improve the resilience of our business operating model to mitigate this. Furthermore, our continued focus on customer service for both landlords and tenants will help with both retention and growth in this sector.

With our customers at the heart of what we do, we believe we are well placed to support them in navigating these uncertain times as they seek out experienced, informed, trusted and reputable agents. Our focus on customer service and our multichannel sales proposition offers them choice and transparency coupled with a strong high street presence that is unique in the UK market. This provides us with a strong foundation for growth in 2017.

Plans for 2017

The Retail business will have a more streamlined and focused footprint delivering our multichannel offering across an increased proportion of our network. We will continue to invest in our customer journey, specifically around the initial valuation, and we will continue to leverage our technology to enhance the overall customer experience and ensure a successful sale or let.

We remain committed to ensuring organic growth and retaining customers, both new and those from our existing portfolio. 

London

Highlights

· Revenue down 10%; EBITDA down 47%

· 10,423 properties exchanged - down 14%

· Improved performance of listers, increasing conversion 6%

· Improvement in Landlord retention with a 4% increase in managed properties.

· Progress on creating leaner, more customer focused network and brand proposition

Operating Review

The London market, more than any other part of the UK, was most impacted by the external factors referenced earlier: the 3% additional stamp duty charge for second home owners, a weaker housing market sentiment in the run up to and after the EU referendum and the adverse impact of increases in stamp duty land tax on homes valued over £1 million.

Overall revenues in London benefitted from the continued diversification of its income stream, with Lettings now representing a greater proportion of total London income at 42% vs 36% in 2015. During the first quarter of 2016, we also completed the acquisition of Patterson Bowe, adding a portfolio of managed lettings properties to the Hamptons International network.

Uncertainty weighing on housing sentiment in the run up to after the EU referendum, combined with the hangover from stamp duty changes, had a more pronounced impact on the London sales market. Our EBITDA reduced by 47% to £18.0 million, but key cost initiatives were implemented to restructure our cost base. Exceptional costs of £20.6 million were principally driven by a £13.5 million impairment charge arising as a result of the market changes and costs arising from our transformation agenda and restructuring the business.

Sales 

With the challenging sales environment, the average fee in the year was 4% lower even though the average sale price increased by 7%, and overall we exchanged on 10,423 properties, 14% lower than in 2015.

Demand was a key factor in the London market with the number of potential buyers coming to the market down 18% on 2015 at 242,000. As a result of negative market sentiment, the likelihood of a sale falling through increased by 15% in 2016.

Lettings 

Our London Lettings business continued to perform well in the market, with 13,700 properties let in 2016, in line with the prior year. Revenue grew by 7.2% and the number of properties under our management increased 4% to over 22,000. As part of our targeted strategy to capitalise on the strength and breadth of our branches, London continued to diversify its revenue streams, with Lettings now representing almost half (42%) of revenue in 2016 compared with just over a third (36%) in 2015. This demonstrates the strength of our branch network, supporting our differentiated brands and associated price-point propositions for tenants and landlords across the capital.

We improved our referrals from Sales to Lettings and between brands and branches, contributing to the growth in our London Lettings market share which increased from 4.5% in 2015 to 4.8% in 2016. With particular focus on the opportunity in the London mid-market, we increased our market share of instructed properties (in this segment) from 4.1% in 2015 to 4.3% in 2016.

Digital innovation

In line with our strategy of putting customers at the heart of what we do, we continued to invest in and adopt our use of technology to improve the customer experience through developments such as web-chat, the rollout of net promoter scores across all London brands and the re-launch of our new innovative proposition, Urban Spaces. Focused on a 'property as a service' ethos, Urban Spaces follows a branchless estate agency model that leverages technology to enhance the customer's experience. This makes it simpler for customers to interact with the brand through the use of client portals for property management and virtual reality viewing.

Brand and branch efficiency

London also consolidated its branch network during the year, closing a number of smaller branches and creating impactful hub-style branches with more colleagues and extended opening hours. The hubs were deployed in brands including Gascoigne Pees, Hamptons International and Greene & Co. Early signs are encouraging as these branches show good levels of activity, driven by greater collaboration across Sales and Lettings and a wider geographic reach from a single base, enabling us to meet customer needs more effectively.

International

Hamptons International benefited from the launch of a new property website, built over the course of 2016. The leading international site represents circa 150,000 listings across the world from over 7,000 partner international offices. In addition, the enhanced international volumes help drive traffic to the main UK site.

Building on firm foundations established in 2015, our international department continued to grow throughout 2016 with new partners in the Canary Islands, Switzerland, Ibiza and mainland Spain. Countrywide brands Hamptons International, John D Wood & Co. and Bridgfords now represent one of the largest international property portfolios in the UK.

Outlook

In London, we expect that weaker house prices are likely to drag on activity and lead to more negotiation on price. While we expect a small decrease in house prices nationally, we anticipate there will be a larger adjustment in London and the South East.

The undersupply of housing is more acute in London, meaning a greater reliance on the private rented sector. However, stamp duty on homes in excess of £1m has an effect on mobility throughout the housing chain, as does the stamp duty on second homes, which has had an impact on people looking to move home as well as buy to let landlords.

Plans for 2017

We remain committed to growing organically by focusing on enhancing the services we offer to our customers - and by using our strong portfolio of London brands to play across the different segments of the market.

Financial services

Highlights

· 10% EBITDA growth

· In our field sales force, remortgage conversion for existing customers increased from 13% to 25% year on year

· 12% increase in protection revenues

· Market share now stands at 7%, up from 6% at the end of 2015

Operating review

Mortgage market conditions in the first half of 2016 were stronger than the same period in 2015, with gross lending 40% ahead in Q1 and 9% ahead in Q2. Activity in Q1 was driven principally by buying demand ahead of the 3% stamp duty surcharge on second homes and buy to let properties, and we observed the purchase end of the market cool after April. This was then followed by a wider slowdown in the residential estate agency markets as uncertainty grew around the outcome, and subsequently, the future of the country post the EU referendum. As a result, the property market was more challenging in the second half of the year, with only 3% year on year lending growth in Q3 and a 1% contraction in lending in Q4. Overall gross lending finished at £245bn (2015: £222bn), representing 11% year on year growth.

Despite these market conditions, we were very encouraged by the performance of our businesses, with Mortgage Intelligence achieving 26% growth by value, The Buy to Let Business 35%, Mortgage Bureau 11% and Slater Hogg 22%. Our main employed sales force, with close links to our estate agency operations, experienced more challenging trading, though still increased exchanged mortgages 8% year on year.

The decisions of the Bank of England's Monetary Policy Committee were closely followed during the year and the move to decrease interest rates to a record low of 0.25% in August ensured that the mortgage landscape continued to be as competitive as ever. Despite the remortgage market growing in 2016, many customers are still choosing to wait and see rather than remortgage due to the record low interest rates and without the spectre of imminent interest rate rises. Nonetheless, we have continued to focus on building long-lasting relationships with our existing customers and it was encouraging to see our remortgage conversion for existing customers increasing to 25% (2015: 13%).

This year we have also achieved encouraging results from both our core protection and general insurance sales, with 4% growth in protection income and 3% overall growth in our general insurance book. We continue to work with our protection and general insurance partners to improve both the available benefits and the value of the products offered and this will continue in 2017 with further product launches.

Outlook

2016 was a year of volatility in the mortgage and real estate markets and we expect that uncertainty around the future of the country is set to continue into 2017. Whilst we forecast the mortgage markets to remain broadly flat in 2017, we see excellent opportunities to help our existing customers navigate these uncertain times and widen our reach to new customers needing expert advice.

Plans for 2017

As part of the Group's strategy we have worked tirelessly during the year to progress our transformation agenda, both with a series of strategic acquisitions to strengthen our specialist capability in specific markets (The Buy to Let Business, Mortgage Bureau and Capital Private Finance) and also through organic changes to our core proposition. Our most notable achievement in the core business was the deployment of our new point of sales technology, enabling us to provide high quality advice in a flexible, efficient and user-friendly way, whilst giving access to the full suite of premium protection and general insurance products from our partners.

We have continued our focus on building the best team, through investing resources in the training and development of our existing sales force. We have also supported our consultants through the recruitment of additional field-based business assurance managers in order to boost on the job training and maintain our high standards of quality advice.

As we look to 2017, our growth agenda concentrates on transforming the mortgage buying experience for our customers - through making the process more efficient and transparent and providing consumer flexibility and choice in how they can access our services.

B2B

*Restated to include the commission from asset management paid to our estate agency branches

Highlights

· Strong performance from surveying business delivering 4% revenue growth and 14% increase in EBITDA contribution

· Conveyancing revenues declined in line with housing market transactions, EBITDA margin improved by 3%

· Other professional services revenue fell by 4% principally due to declining repossessions market;

· Land and new homes performance grew with the addition Lanes Property Agents and Lanes Land

· Lambert Smith Hampton, like other commercial property businesses, was affected mid-year as the transactional and capital markets paused around the EU referendum, but finished the year strongly

Operating review

2016 was our first full year for this portfolio of businesses working together and we are pleased to report a solid performance in the face of a difficult market. Working together to deliver coherent professional services for Countrywide's corporate client base we have increased revenues from our lender clients by 8% year on year, retained all our asset management client contracts and secured surveying panel management contracts for 2017. Further, 10% of the Group's house exchanges were on behalf of B2B clients.

Our Surveying business has performed extremely well during 2016. While survey instructions broadly tracked increased mortgage and remortgage approvals the business delivered EBITDA growth of 14% owing to an increase in the average fee of 5% and moderate marginal expenses arising from this additional revenue. Following the result of the EU referendum we experienced a clear North/South divide in demand for valuations. The South and South East in particular slowed down compared to our northern regions and it was several months before productivity began to recover.

Professional indemnity claims have been a significant focus for the business over the past eight years and we are pleased to report that we received very few valuation claims in 2016 and our operating costs reduced by £500,000 as a result. In addition, we have been successful in defending a number of claims and this has led to a revision of the balance sheet provision and the release of £2.9 million.

Managing risk on behalf of our clients is a key service we provide. In order to build on our experience we are upgrading our operational systems and successfully rolled out new hardware with minimal disruption to service. During 2017 we will deliver additional functionality to support the evaluation of risk and develop a broader range of services provided directly to home buyers.

Our Conveyancing business suffered lower volumes reflecting the reduced house exchanges across the Group and a decline in penetration rate from 51.5% to 48.6%. Nevertheless, the business delivered £30.6 million (2015: £32.2 million) of Group revenue and a gross margin of 43% (2015: 37%) (before internal payaway) and it provides a key service to our home mover customers.

At the beginning of 2016 we set out to improve our service and throughout 2016 we have steadily seen this change. Our complaints have reduced and our net promoter score has increased significantly.

The inhouse Conveyancing business delivered 69% (2015: 68%) of the completions through its three property law centres; the remainder are outsourced to panel firms. In view of the reduced volumes and excess capacity in our centres, the decision was taken to close the smallest centre in Bridgend removing £1.2 million from the cost base and reducing our spare capacity in the remaining centres. This process will be completed in Q1 2017. At the same time we will complete our investment in our customer portal technology in the first half of 2017 and this will deliver improved service to customers and efficiencies for our employees.

Other professional services comprise a portfolio of small businesses which have been brought together under a single leadership team, offering asset management primarily around the repossessions market, block management, emergency relocation and auctions. During 2016 these businesses delivered 30.6% (2015: 29.2%) EBITDA margin before internal payaway.

Land and New Homes held its own during 2016 and delivered EBITDA growth of 15% despite lower new homes exchanges across the country, due to the acquisition of Lanes, a specialist land and new homes business in Hertfordshire. Performance in this sector was severely impacted by the EU referendum particularly in and around London. It took several weeks for developers to assess the longer term impact on price and during the third quarter we experienced a material number of cancellations as buyers pulled out nervous about the future. Whilst we have seen sales recovering this was late into the fourth quarter. Our pipeline is some £700,000 lower as we move into 2017 and reflecting this we have removed some management heads to reduce costs.

Finally, our commercial business, Lambert Smith Hampton, experienced a difficult year as a result of the EU referendum. While income was flat year on year, EBITDA reduced by 18% to £11.3 million (2015: £13.8 million). The decline in transactional business was offset by an increase in consultancy revenues but not to the extent that the costs had increased owing to the full year impact from acquired businesses.

Outlook

2016 was the first year the portfolio of B2B businesses came together as a division and moving into 2017 we will build on the foundations we have established. Our plans are focused on four key issues: development of the risk hub in Surveying; driving increased referrals from the branches and delivering further efficiencies though Conveyancing; growth in new homes sales; and streamlining our estate and asset management services.

Plans for 2017

We do not anticipate that the mortgage and housing markets will grow in 2017. However, our contracts with lender and corporate clients, together with a healthy number of instructions from developers supports our expectation of modest growth in the coming year. The outlook for commercial for London is expected to recover but not to the levels experienced in 2015. However, regional markets show signs of more activity.

GROUP FINANCIAL REVIEW

Introduction

Despite the considerable external challenges in 2016, the Group demonstrated its resilience by marginally growing total income. As expected, the investment in key areas of our business, together with the impact of a reduced sales transaction market, impacted our underlying profit performance.

There are a number of immediate challenges in our sector which, together with the current uncertainty around the UK economy, will impact our areas of focus in coming months. This will include a plan to reduce our current levels of debt, putting M&A activity on hold and increased focus on organic growth opportunities.

We have also commenced work to reduce and restructure our costs to reflect our current strategic plan for the Group. This involves significant branch rationalisation as well as streamlining our back-office functions. Exceptional costs of restructuring our business amounting to £27.8 million (including £1.4 million impairment of brands we rationalised) were incurred in parallel with goodwill impairment charges of £19.6 million arising from market conditions. Further details are provided in note 10.

The reduction in appetite for M&A activity increases the focus on delivering our organic growth plan. This includes rolling out our multichannel proposition across our branch network and other key areas for organic growth including our Financial Services business.

Results

Our business units reported improvements in income, with the exception of London which experienced challenging market conditions. 2016 has been a period of investment in our Financial Services business unit to provide foundations for the next stage of our growth. Our central costs remained comparable to 2015 and will remain a focus.

Income statement, cash flow and balance sheet items

Depreciation and amortisation

Our depreciation and amortisation charge continues to be separated on the face of the income statement to indicate the depreciation and amortisation that relates to assets purchased for use in the business and amortisation arising on those intangible assets that have been recognised as a result of business combinations. The underlying depreciation and amortisation charge increased by £1.3 million, the principal driver of which was £1.6 million in respect of leasehold improvements as a result of branch refurbishments. Amortisation of intangible assets recognised through business combinations has increased by £0.2 million as a result of the incremental rate of growth in acquisitions during the year. It should be noted that £6.6 million of the annual charge relates to intangible assets recognised in 2007, when the Group was taken private, and this will end in 2017.

Share-based payments

Share-based payment charges are also reported separately on the face of the profit and loss account. The most significant proportion of this charge relates to a specific scheme granted at the point of the IPO in 2013 when we granted 7.2 million options to employees who were former equity holders of Countrywide Holdings, Ltd under the IPO Plan. The majority of these nil-cost options vested based on adjusted Group EBITDA for 2014 in March 2015 (80%) and the residual balance due to directors vested in March 2016. The charge to the income statement in 2016 was £0.3 million (2015: £3.3 million; 2014: £10.6 million).

In addition, we also operate annual grants under a three year Long Term Incentive Plan (LTIP) to senior managers which commenced in September 2013. These are nil-cost options which will vest subject to certain performance criteria disclosed within the remuneration report and the charge for the year was £1.3 million (2015: £0.5 million credit).

Contingent consideration

Contingent consideration charges amounting to £6.8 million (2015: £8.9 million) have been incurred. Each of these contingent consideration arrangements require the vendors to remain in employment and as such have been treated as a post-combination employment expense and excluded from consideration. Values are being accrued over the relevant periods of one to five years (2015: one to three years) specific to each of the agreements.

Exceptional items

We have reported net exceptional costs of £12.5 million, which have been disclosed in further detail within note 10, comprising:

· non-recurring costs of £26.4 million related to the branch restructuring undertaken during the year, accelerating our transformation agenda and resizing the Retail estate, principally comprising £8.1 million of redundancy costs and £15.8 million of property closure costs;

· £19.6 million of goodwill impairment charges arising from write downs to recoverable value in Retail (£5.0 million) and London (£13.5 million) as a result of changing market conditions, and £1.1 million from closure of conveyancing operations;

· £1.4 million of brand impairment charges in Retail from abandoning the use of four smaller brands in pursuit of our fewer, better brands strategy; and

· £0.9 million of acquisition expenses;

offset by

· £32.8 million of income in respect of the sale of our remaining shareholding in Zoopla Property Group plc; and

· £2.9 million in respect of an exceptional credit arising from the release of professional indemnity provisions (originally booked as exceptional costs). Despite the judgemental nature of the provision, the progress made during the year on individually significant claims, aligned with the low level of claims made, has resulted in the assessment of a £2.9 million release in provision.

Finance charges

Our draw down on bank borrowing facilities increased from £200 million at the prior year end to £290 million at 31 December 2016. Consequently, our finance costs have increased by £3.3 million and are now incurred at a margin of 2.75% over LIBOR.

To mitigate exposure and volatility arising from interest rate changes, the Group entered into an interest rate swap to convert floating levels of interest on the revolving credit facility into a fixed rate of 0.766% on specified levels of revolving credit facility draw down from 20 June 2016. The interest cashflows on the first proportion of the revolving credit facility have been hedged, and therefore this value moves over the period to March 2020 in line with the forecast drawdowns.

Taxation

Our total tax charge for 2016 of £2.0 million (2015: £5.9 million) represents an effective tax rate of 10.0% (2015: 12.5%). The principal reasons for the lower effective rate are the £32.8 million gain on the disposal of Zoopla shares being sheltered by unrecognised capital losses and the impact of a further 1% reduction in the tax rate on deferred tax liabilities generated a £2.3 million tax credit.

Countrywide's business activities operate predominantly in the UK. All businesses are UK tax registered apart from small operations in Hong Kong (which are in the process of closure), and Ireland. We act to ensure that we have a collaborative and professional relationship with HMRC and continue to enjoy a low risk rating. We conduct our tax compliance with a generally low risk approach whilst endeavouring to maintain shareholder value and optimise tax liabilities. Tax planning is done with full disclosure to HMRC when necessary and being mindful of reputational risk to the Group. Transactions will not be undertaken unless they have a business purpose or commercial rationale. 

In addition to our corporation tax contribution, our businesses generate considerable tax revenue for the Government in the UK. For the year ended 31 December 2016, we will pay corporation tax of £5.2 million (2015: £8.5 million) on profits for the year, we collected employment taxes of £158 million (2015: £172 million) and VAT of £94 million (2015: £99 million), of which the Group has incurred £44.3 million and £3.3 million (2015: £61 million and £2.5 million) respectively. Additionally, we have paid £12.8 million (2015: £12 million) in business rates and collected £41.7 million (2015: £35.5 million) of stamp duty land tax though our Conveyancing business.

Cash flow

Net cash generated from operating activities decreased by £37.5 million to £29.6 million for the year (2015: £67.1 million). Both years have been impacted by payments to settle professional indemnity claims. Payments in 2015 were lower than expected at £10.8 million, principally due to the timing of settlements, and as a result payment levels increased, as anticipated, to £13.8 million during 2016.

Capital expenditure

Cash expenditure on capital items in the year amounted to £29.0 million (2015: £22.0 million), principally relating to an ongoing programme of planned branch refurbishments, and an additional £11.1 million (2015: £5.4 million) has been incurred on software, including new technology platforms to deliver online offerings to our customers, which has been treated as an intangible asset.

Net assets

At 31 December 2016, our net assets per issued share were £2.18, a total of £479.5 million (2015: £544.6 million) a decrease of £65.1 million, or 12%, driven by a post-tax profit for the year of £17.5 million offset by £29.9 million of reserve movements from realisation of gains on the sale of Zoopla shares, dividend returns to shareholders of £33.0 million and the purchase of treasury shares of £18.1 million.

Net bank debt

At 31 December 2016 we had cash balances of £45.3 million (2015: £24.3 million) and £290 million drawn down within our revolving credit facility (RCF) (2015: £200 million RCF). The £69.0 million increase in net bank debt arose principally as a result of net outflow on acquisitions amounting to £35.4 million and £29.0 million capital expenditure during the year.

Shareholders' funds amounted to £479.5 million (2015: £544.6 million) giving balance sheet gearing of 34% (2015: 25%). Net bank debt represented 63% of the Group's market capitalisation at 31 December 2016, and 293% of the Group's adjusted EBITDA for the year.

Committed bank facilities

The Group's available bank facilities (excluding overdraft arrangements available) at 31 December 2016 comprised of a £340 million revolving credit facility repayable in March 2020.In February 2016, the Group increased its borrowing capacity to facilitate the strategic plans announced during 2015 and renegotiated our existing £250 million RCF, which was repayable in March 2018, to a £340 million RCF with the existing lenders and an accompanying £60 million accordion facility repayable in March 2020.

Dividend policy

Following consultations with major shareholders we have reviewed our dividend policy and there has been a change to the Group's previously stated policy in respect to normal dividends which was previously stated as 35-45% of underlying profit after tax. As noted in the Chairman's Statement, in light of the uncertainty surrounding the outlook for the residential property market and our desire to invest in key organic strategic initiatives, our policy has been slightly revised to 30-35% of underlying profit after tax. Underlying profits are measured as profit after tax but before exceptional items, amortisation of acquired intangibles, contingent consideration and share-based payments.

The Board do not recommend the payment of a final dividend (2015: 10.0 pence), giving a total 2016 dividend of 5.0 pence (net) per share (2015: 15.0 pence).

Events after the balance sheet date

Despite the uncertain market environment, we remain committed to reducing our leverage and at the same time facilitate the acceleration of our ability to future proof the business and exploit growth opportunities. To that end, and following consultations with our major shareholders, the Board has decided to make a small placing of up to 9.99% of our share capital available via a cash box structure today.

Jim Clarke

Chief financial officer

9 March 2017

APPROVAL

This report was approved by the board of directors on 9 March 2017 and signed on its behalf by:

Alison Platt

Chief executive officer

9 March 2017

PRINCIPAL RISKS AND UNCERTAINTIES

There are a number of risks and uncertainties facing the business in the forthcoming financial year. The Board has reconsidered the risks and uncertainties listed below:

· Market risk

· Loss of a major business partner or outsourcing partner

· IT infrastructure and information security

· Professional indemnity exposure

· Financial misstatement and fraud risk

· Competitive landscape

· Regulatory compliance

These risks and uncertainties and mitigating factors are described in more detail on pages 21 to 23 of the Countrywide plc financial statements for the year ended 31 December 2015 (a copy of which is available on the Group's website).

Having reconsidered these, particularly in light of the proposed exit of the UK from the European Union following a referendum, the Board considers that they remain the principal risk areas facing the Group. The result of the EU referendum has increased the overall level of macroeconomic uncertainty, which could have an effect on property prices, mortgage approvals and volume of transactions as outlined under 'market risk' Additionally, our continued focus on providing customers with the best property related advice has resulted in the identification of 'Attracting, developing and retaining excellent people' as a new principal risk for the forthcoming year.

FORWARD-LOOKING STATEMENTS

This Report may contain certain "forward-looking statements" with respect to some of the Group's plans and its current goals and expectations relating to its future financial condition, performance, results, strategy and objectives. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. These statements are based on current plans, estimates and projections, and therefore you should not place undue reliance on them. By their nature, all forward-looking statements involve risk and uncertainty. A number of important factors could cause the Group's actual future financial condition or performance or other indicated results to differ materially from those indicated in any forward-looking statement. We refer you to the Group's financial statements as well as the Group's most recent Prospectus which can be downloaded from the Group's website: www.countrywide.co.uk/investor-relations. These documents contain and identify important factors that could cause the actual results to differ materially from those indicated in any forward-looking statement.

Consolidated income statement

For the year ended 31 December 2016

Consolidated statement of comprehensive income

For the year ended 31 December 2016

Consolidated statement of changes in equity

For the year ended 31 December 2016

Consolidated balance sheet

As at 31 December 2016

¹ See note 20

Consolidated cash flow statement

For the year ended 31 December 2016

Notes to the financial statements

1. General information

Countrywide plc ('the Company'), and its subsidiaries (together, 'the Group'), is the leading integrated, full service residential estate agency and property services group in the UK, measured by both revenue and transaction volumes in 2016. It offers estate agency and lettings services, together with a range of complementary services, and has a significant presence in key areas and property types which are promoted through locally respected brands.

The Company is a public limited company, which is listed on the London Stock Exchange and incorporated and domiciled in the UK (registered number: 08340090). The address of its registered office is County House, Ground Floor, 100 New London Road, Chelmsford, Essex CM2 0RG.

2. Basis of preparation

The preliminary announcement does not constitute full financial statements.

The results for the year ended 31 December 2016 included in this preliminary announcement are extracted from the audited financial statements for the year ended 31 December 2016 which were approved by the Directors on 9 March 2017. The auditor's report on those financial statements was unqualified and did not include a statement under Section 498(2) or 498(3) of the Companies Act 2006.

The 2016 annual report is expected to be posted to shareholders and included within the investor relations section of our website on 23 March 2017 and will be considered at the Annual General Meeting to be held on 27 April 2017. The financial statements for the year ended 31 December 2016 have not yet been delivered to the Registrar of Companies.

The auditor's report on the consolidated financial statements of Countrywide plc for the year ended 31 December 2015 was unqualified and did not include a statement under Section 498(2) or 498(3) of the Companies Act 2006. The financial statements for the year ended 31 December 2015 have been delivered to the Registrar of Companies.

 (a) Going concern

These financial results have been prepared on a going concern basis, which assumes that the Group will be able to meet its liabilities when they fall due. The board of directors has reviewed cash flow forecasts which have been stress tested with various assumptions regarding the future housing market volumes. The directors have concluded that it is appropriate to prepare the condensed consolidated preliminary announcement of annual results on a going concern basis.

(b) Accounting policies

In preparing this preliminary announcement the same accounting policies, methods of computation and presentation have been applied as those set out in the Countrywide plc annual financial statements for the year ended 31 December 2015. The accounting policies are drawn up in accordance with International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) as endorsed by the European Union.

The accounting policies adopted in the preparation of this preliminary announcement are consistent with those of the previous financial year, except as stated below:

Derivative financial instruments and hedging activities:

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The Group has designated certain derivatives as a cash flow hedge and documented at inception of the transaction the relationship between the hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items.

The fair values of derivative instruments used for hedging purposes are disclosed on the face of the balance sheet. The fair value of derivatives has been calculated by discounting all future cash flows by the market yield curve at the balance sheet date. Movements in the hedging reserve in other comprehensive income are shown in note 28. The full fair value of a hedging derivative is classified as a non-current liability when the remaining hedged item is more than 12 months from maturity. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the income statement. Amounts accumulated in equity are reclassified to profit or loss in the period when the hedged item affects profit or loss. The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognised in the income statement within 'Finance cost'.

The preparation of the consolidated financial information in conformity with IFRS requires the use of certain critical accounting estimates and requires management to exercise judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 3.

 (c) New standards, amendments and interpretations

Standards, amendments and interpretations effective and adopted by the Group

The new interpretation and annual improvements to existing standards which are mandatory for the Group for the first time for the financial year beginning on or after 1 January 2016 have had no material impact on the Group.

3. Critical accounting judgements and estimates

The preparation of the Group's consolidated financial statements under IFRS requires the directors to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities. Estimates and judgements are continually evaluated and are based on historical experience and other factors including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates, given the uncertainty surrounding the assumptions and conditions upon which the estimates are based.

The directors consider that the following estimates and judgements are likely to have the most significant effect on the amounts recognised in the Group's consolidated financial statements.

Impairment of goodwill and indefinite-lived intangible assets

Determining whether goodwill and indefinite-lived intangible assets are impaired requires an estimation of the value in use of the cash generating units to which the assets have been allocated. Calculating the cash flows requires the use of judgements and estimates that have been included in our strategic plans and long range forecasts. In addition, judgement is required to estimate the appropriate interest rate to be used to discount the future cash flows. The data necessary for the execution of the impairment tests is based on management estimates of future cash flows, which require estimating revenue growth rates and profit margins.

Accounting for acquisitions

The Group accounts for all business combinations under the purchase method. Under the purchase method, the identifiable assets acquired and liabilities and contingent liabilities assumed are measured at their fair value at the acquisition date. Judgements and estimates are made in respect of the measurement of the fair values of assets and liabilities acquired and consideration transferred. Where necessary, the Group engages external valuation experts to advise on fair value estimates, or otherwise performs estimates internally. Further details of contingent consideration are set out in note 29.

Exceptional items

Certain items are presented separately in the income statement as exceptional where, in the judgement of the directors, they need to be disclosed separately by virtue of their nature, size or incidence in order to obtain a clear and consistent presentation of the Group's underlying business performance. Further details of material, non-recurring items the directors have disclosed as exceptional items, including the costs of restructuring the business, are provided in note 10.

Professional indemnity provisions

When evaluating the impact of potential liabilities arising from claims against the Group, the Group takes legal and professional advice to assist it in arriving at its estimation of the liability taking into account the probability of the success of any claims and also the likely development of claims based on recent trends.

The Group has made provision for claims received under its professional indemnity insurance arrangements. The provision can be broken down to three categories:

• Reserves for known claims: These losses are recommended by our professional claims handlers and approved panel law firms who take into account all the information available on the claims and recorded on our insurance bordereaux. Where there is insufficient information on which to assess the potential losses, initial reserves may be set at an initial level to cover investigative costs or nil. Further provisions are also made for specific large claims which may be subject to litigation and the directors assess the level of these provisions based on legal advice and the likelihood of success.

• Provision for the losses on known claims to increase: It can take one to two years for claims to develop after they are initially notified to the Group. For this reason, the Group creates a provision based on historical loss rates for closed claims and average losses for closed claims.

• Provision for incurred but not reported (IBNR): The Group also provides for future liabilities arising from claims IBNR for mortgage valuation reports and home buyer reports performed by Surveying Services. This provision is estimated on a future projection of historical data for all claims received based on the number of surveys undertaken to date. This projection takes into account the historic claim rate, the claim liability rate and the average loss per claim. In view of the significant events in the financial markets and the UK property market in recent years, the directors have identified a separate sub-population of claims received which is tracked separately from the normal level of claims. This sub-population has been defined as claims received since 2009 for surveys carried out between 2004 and 2008.

The estimate of these provisions by their nature is judgemental. The three key inputs, claim rate, claim liability rate and average loss, are very sensitive to any change in trends.

Claim rate - the number of claims received compared to the number of surveys performed.

Following our experience in 2015, the number of valuation claims continued to decline significantly throughout 2016 to historically low levels. In common with 2015, the majority of valuation claims related to surveys completed over six years old. While there is very little experience relating to old claims on which to base any future model, given our experience and the low volumes received, we do not foresee any reason to increase our rates. There is a possible risk that a significant rise in mortgage interest rates could lead to an increase in repossessions and potential losses being incurred by the lenders. While there is uncertainty around the future of the UK economy as the Government deals with Brexit, there are no macroeconomic indicators that this is a reasonable likelihood in the short term and the directors do not consider it appropriate to provide for additional claims due to macroeconomic changes. It should be noted that a 5% increase in the claim rate (which is applied to all surveys performed between 2004 and 2008) could lead to a £3.5 million increase in the provision for future claims.

Claim liability rate - the number of claims closed with a loss compared to the number of closed claims.

Our claim handlers and panel lawyers robustly defend all our claims and as a result they have achieved a number of successes in 2016 where clients have withdrawn their claim. Consequently, we have not experienced any increase to the claim liability rate.

The liability rate is sensitive to changes in experience and therefore we have used the average liability rate for claims closed over two years as the most appropriate claim liability rate to estimate the provision for those claims already received. As the number of open claims at the end of the year and unreported claims anticipated is much lower than in previous years, a 10% increase in the average liability rate would impact the provision for claims already received by £0.6 million.

Average loss - the average of total incurred losses for closed claims.

Overall, the average losses experienced over all claims have decreased 23%. This is primarily driven by the decrease of 12% in average loss on exceptional claims, being those with surveys carried out between 2004 and 2008, which account for the majority of losses experienced. This is the value used to estimate the further provision required for claims already received. Applying a further 10% increase in the average loss would increase the total provision required by £0.1 million, lower than in previous years owing to the reduced number of claims.

4. Segmental reporting

Management has determined the operating segments based on the operating reports reviewed by the Executive Committee that are used to assess both performance and strategic decisions. Management has identified that the Executive Committee is the chief operating decision maker in accordance with the requirements of IFRS 8 'Operating segments'.

The Executive Committee considers the business to be split into four main types of business generating revenue: Retail, London, Financial Services and Business to Business (B2B), and 'all other segments' comprising central head office functions. Whilst the executive teams for Retail and London have been brought together during 2016, these remain separate operating segments based on operating reports reviewed by the Executive Committee.

The Retail network combines estate agency and lettings operations. Estate agency generates commission earned on sales of residential and commercial property and Lettings earns fees from the letting and management of residential properties and fees for the management of leasehold properties. The London division revenue is earned from both estate agency commissions and lettings and management fees. The Financial Services division receives commission from the sale of insurance policies, mortgages and related products under contracts with financial service providers. Business to Business services comprise all lines of business which are delivered to corporate clients, including Surveying Services, Conveyancing Services and revenue from Lambert Smith Hampton. Surveying Services generates surveying and valuation fees which are received primarily under contracts with financial institutions with some survey fees being earned from home buyers. Conveyancing Services generates revenue from conveyancing work undertaken from customers buying or selling houses through our network. Lambert Smith Hampton's revenue is earned from commercial property consultancy and advisory services, property management and valuation services. Other income generated by head office functions relates primarily to sub-let rental income or other sundry fees.

The Executive Committee assesses the performance of the operating segments based on a measure of adjusted EBITDA. This measurement basis excludes the effects of exceptional items, share-based payment charges and related National Insurance contributions, contingent consideration and income from joint ventures. Finance income and costs are not allocated to the segments, as this type of activity is driven by the central treasury activities as part of managing the cash position of the Group.

The revenue from external parties reported to the Executive Committee is measured in a manner consistent with that in the income statement.

Revenue and other income from external customers arising from activities in the UK was £734,561,000 (2015: £732,099,000) and that arising from activities overseas was £2,394,000 (2015: £1,637,000).

The assets and liabilities for each operating segment represent those assets and liabilities arising directly from the operating activities of each division. Pension assets and liabilities, liabilities arising from the revolving credit facility and related derivative financial instrument are not allocated to operating segments, but allocated in full to 'All other segments' within the segmental analysis as they are managed by central Group functions. Non-current assets attributable to the UK of £798,266,000 (2015: £830,828,000) are included in the total assets in the tables on the following pages. Non-current assets of £838,000 (2015: £939,000) are attributable to the overseas operations. The equity investment in joint venture is disclosed within 'All other segments' and is £2,292,000 (2015: £2,305,000).

The available-for-sale financial assets are disclosed within 'All other segments' £16,058,000 (2015: £52,072,000) and Retail £Nil (2015: £5,688,000).

Adjusted items

Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so in order to provide further understanding of the financial performance of the Group. They are material items of income or expense that, in the judgement of the directors, need to be disclosed separately by virtue of their nature, size or incidence in order to obtain a clear and consistent presentation of the Group's underlying business performance. Examples of material and non-recurring items which may give rise to disclosure as exceptional items include costs of restructuring existing businesses, integration of newly acquired businesses, asset impairments, costs associated with acquiring new businesses and profit on sale of available-for-sale financial assets. The columnar presentation of our income statement separates exceptional items, amortisation of intangibles arising on business acquisitions, contingent consideration and share-based payments to illustrate consistently the Group's underlying business performance.

5. Other income

6. Employment costs

7. Other operating costs

8. Finance costs

9. Finance income

10. Exceptional items

The following items have been included in arriving at profit before taxation:

2016

Exceptional income

The £32,804,000 profit on disposal of available-for-sale financial assets relates entirely to the sale of the Group's residual interest in Zoopla Property Group plc.

During 2016 the Group received reduced numbers of professional indemnity valuation claims, in line with expectations, and achieved closure of a number of challenging cases. Estimating the liability for PI claims remains highly judgemental and we have updated our financial models to reflect the latest inputs and trends and taken advice from our panel of lawyers in respect of open claims. Despite the judgemental nature of the provision, the progress made during the year on individually significant claims, aligned with the low level of claims made, has resulted in the assessment of a £2,910,000 release in the provision.

Exceptional costs

Restructuring costs

During 2016 the Group undertook a significant branch restructuring, accelerating our transformation agenda and resizing the Retail estate, resulting in a number of exceptional, non-recurring costs in relation to the project and related restructuring costs. The principal elements are:

• £8,109,000 in respect of associated redundancy costs to achieve the appropriate organisational structure;

• £15,813,000 of property provisions, comprising: £4,162,000 dilapidation costs; £7,430,000 onerous contract costs in respect of closed premises; £3,084,000 associated asset write downs arising from rationalisation of our branch footprint; and £1,137,000 of other property closure costs;

• £19,564,000 of impairment charges from writing down goodwill associated with conveyancing operations (£1,083,000), and £5,016,000 and £13,465,000 respectively in relation to the Retail and London cash generating units following an assessment of the recoverable value against the carrying value of the goodwill (see note 14);

• £1,358,000 of impairment charges from writing down four brands which have been abandoned as part of our review of the Retail marketplace (see note 14); and

• £2,032,000 in respect of costs expensed during the year as part of the organisational redesign of our marketing function and revisions to our channels to market aligned with the launch of our digital offering.

Acquisition expenses

The Group incurred acquisition expenses of £927,000 across a number of transactions undertaken during the year (note 29).

2015

Exceptional income

This income arose from the continued amortisation of the deferred income in relation to Zoopla Property Group plc warrants which ceased unwind at 31 December 2015.

Exceptional costs

Strategic and restructuring costs

During 2015, the Group undertook the 'Building our Future' strategic review and incurred a number of exceptional, non-recurring costs in relation to the project and related restructuring costs. The principal elements are:

• Following an initial period of organisational design work, a number of redundancies were made throughout the year as the leadership structure evolved to meet the future needs of the Group. All redundancy costs directly related to this strategic review amounted to £3,289,000. This included the costs of redundancies which were communicated to the individuals prior to 31 December 2015, and settlements agreed, but whose employment ceased during 2016.

• The organisational redesign also resulted in the creation of a number of posts created to meet the revised needs of the Group. As a result, recruitment costs of £478,000 were incurred during 2015.

• As part of the strategic review, external agencies were involved where specialists skills were required. Consultancy costs of £3,288,000 were incurred in relation to a number of projects that included: strategic support and change management; IT transformation; organisational redesign; talent development and leadership skills training; and internal communication in support of specific strategic objectives identified.

• The Group decided to rationalise its property footprint in London to integrate the London and B2B teams into our existing commercial and corporate rented property in Oxford Street. As a result, the Group sold its existing leasehold premises in Grosvenor Square generating a profit on sale of £836,000 (net of legal costs). Offsetting this profit were costs in relation to exiting additional space in London that was surplus to requirements. As a result, costs of £1,211,000 were incurred in relation to dilapidation costs, onerous lease provisions and the rental costs of the additional Oxford Street space during the three-month period of refurbishment and relocation when costs were also being incurred in the original sites.

• Following the reorganisation of business units, an initial review of London brands was undertaken and as a result of this rationalisation of intended future brand use an impairment of £6,126,000 was identified (note 14).

Other costs directly related to the strategic review were collated and, whilst individually immaterial, these aggregated to a total cost of £669,000 and principally related to the costs of strategic sessions and leadership training.

Regulatory settlement costs

On 19 March 2015, the Competition and Markets Authority (CMA) concluded its investigation into an association of estate and lettings agents in Hampshire. Hamptons Estates Limited was one of three parties forming part of an association that admitted arrangements which had the object of reducing competitive pressure on estate agents and lettings agents' fees in the local area in and around Fleet in Hampshire in a period prior to the Group's ownership. The exceptional cost above reflects the penalty payable to the CMA and associated legal costs.

Acquisition expenses

The Group incurred acquisition expenses of £1,082,000 across a number of transactions.

11. Taxation

Analysis of charge in year

The tax charge for the year differs (2015: differs) from the standard rate of corporation tax in the UK of 20.0% (2015: 20.25%). The differences are explained below:

12. Dividends

The directors do not recommend the payment of a final dividend in respect of the year ended 31 December 2016.

13. Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares of Countrywide plc.

For diluted earnings per share, the weighted average number of ordinary shares in existence is adjusted to include all dilutive potential ordinary shares arising from share options.

14. Intangible assets

(a) Goodwill

(b) Other intangible assets