27th Apr 2005 09:43
27 April 2005Trading StatementAt the time of our preliminary announcement we pointed out that very weaktrading conditions during the final quarter of 2004 had substantially depletedwork in progress pipelines in our house agency, financial services andconveyancing businesses. As a consequence of that situation, which wasexacerbated by our simultaneous efforts to incorporate the previouslysubstantially underperforming businesses acquired from the Bradford & BingleyGroup plc in October 2004, the Group will register a loss during the firstquarter of 2005.During the first quarter of 2005, we are pleased to have seen a gentle seasonalrecovery in house sales activity. Although it is difficult to make comparisonwith prior years because of the effect of the acquired offices on thecomparatives, we believe that transaction levels are between 25 and 30% belowthose experienced in the buoyant first quarter of 2004 and considerably lessthan one would normally expect. The market remains fragile, and volatile, andslowed in the second half of March, which included the Easter week-end. Sincethe beginning of the year, pipelines of work in progress have all improved butare still substantially below previous years and this has materially reducedour expectations for the second quarter.Sales of financial products have suffered a decline in the face of reducednumbers of house sales. However, conversion rates have stabilised at similarlevels to the second half of 2004.The reduced activity in the housing market, together with the level ofre-mortgages across the market being much lower than expected, has alsonegatively impacted our enlarged surveying business where we currently findourselves with considerable over capacity. Whilst we would normally seek toreduce costs by adjusting capacity to match demand, we remain convinced that inthe run up to the introduction of Home Information Packs, expected in 2007, itis vital that we retain our market leading position in the residentialsurveying market. Although this may result in lower productivity in themeantime, if we are to be in a position to capitalise on this opportunity, itis essential that we have in place, in good time, a team of well trained,accredited, Home Inspectors. We therefore plan to take up slack currentlycreated by lower levels of activity by the introduction of dedicated trainingfor the Home Inspector qualification to our team of surveyors.Our transaction conveyancing business has received strong support from ourenlarged house agency network and registered a record number of new clientreferrals (almost 10,000) in March. However, the new computer system, designedto allow us to handle a substantially increased number of completions, hasfound it difficult to cope with the increased throughput, and we have nowauthorised further systems enhancements to correct this situation.Consequently, we anticipate that full implementation will now be delayed by sixmonths. In the meantime, excess business is being panelled to a number of otherconveyancing practices with whom we enjoy excellent relationships.Remortgage conveyancing commenced operations in December 2004. Whilst volumesduring the first quarter of 2005 have been little more than test levels, majorcontracts with several mortgage banks continue to be negotiated. However,current signs are that both the systems and our Indian outsourcing arrangementsare working well.Encouraging further profitable progress has been experienced at both Rightmoveand TM Property Services where we hold 30% and 46.77% shareholdingsrespectively and both are confidently expected to make positive contributionsthis year.Whilst still early days, we are also much encouraged by the very positiveattitude of the staff and management of the newly acquired businesses. We havenearly completed the re-branding of the estate agency offices and this has hada beneficial effect on morale. Our desire to see severe cost constraints andenhanced commission rates introduced throughout the agency offices has beenvery well received and progress is being made nationwide on both counts.Consequently, we remain confident that the acquisitions strongly reinforce ourUK market leading position in the sale, survey and legal transfer ofresidential property, and are, despite current dull markets, in the best mediumand long term interests of our shareholders.The uncertainty that pervades the housing market around a General Electionmeans markets will remain subdued, and, with continued talk of further interestrate rises, we believe this is unlikely to change in the short term. Whilstever this remains the case, we will continue to exercise the greatest possibleconstraints on costs across all our business areas whilst striving to increasefees in our agency division and grow market share across all our businesses.DirectorCountrywide plcENDCOUNTRYWIDE PLCRelated Shares:
CWD.L