2007-03-13 08:08:54 -
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 Change
Turnover £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 be
paid if the Offer from Apollo is
unsuccessful) 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 Change
Turnover £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 Change
Turnover £43.9m £39.1m 12%
Operating profit £8.0m £5.6m 43%
Properties under management at year end
Retail 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 Change
Turnover £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 Change
Turnover £136.8m £118.1m 16%
Operating profit - before non-recurring
income £26.7m £18.7m 43%
- profit on disposal of Commercial Surveying
business £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 Change
Turnover £22.7m £19.1m 19%
Operating loss - before non-recurring losses £(0.2)m £(7.7)m 97%
- write off of computer software and
associated 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 Change
Turnover £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 Sporborg
12 March 2007
Group Income Statement
for the year ended 31 December 2006
Note 2006 2005
£'000 £'000 £'000 £'000
Revenue 3 654,204 528,164
Other income 17,399 14,264
Exceptional income
- Profit on disposal of freehold - 4,982
properties ----- -----
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 31,941
exceptional items
- Exceptional items (net) (3,270) (558)
Group operating profit 3 92,244 31,383
Finance expense (1,595) (5,603)
Finance income 2,346 2,252
Share of profit post tax from joint
ventures and associates 1,411 1,014
Profit on part disposal of joint venture
and associated undertakings 19,357 2,621
----- -----
Profit before taxation 113,763 31,667
Taxation 5 (31,907) (4,468)
----- -----
Profit attributable to equity 81,856 27,199
shareholders
----- -----
Earnings per share Basic 6 47.22p 15.45p
Diluted 6 46.53p 15.37p
Group Statement of Recognised Income and Expense
for the year ended 31 December 2006
2006 2005
£'000 £'000
Foreign 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 437 786
Deferred 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 £'000
Assets
Non-current assets
Intangible assets:
Goodwill 30,685 37,737
Other intangible assets 6,143 6,164
Property, plant and equipment 22,780 22,397
Investments accounted for using the equity method:
Investments in joint ventures and associated
undertakings 6,462 3,738
Other investments 1,233 1,225
Other receivables 123 1,401
Deferred tax asset 10,192 11,479
----- -----
Total non-current assets 77,618 84,141
----- -----
Current assets
Trade and other receivables 86,440 78,006
Cash 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 shareholders
of the company
Share capital 8,543 8,872
Share premium 30,452 30,213
Capital redemption reserve 50 50
Capital reserve (433,829) (433,829)
Treasury share reserve (35,766) (6,216)
ESOP share reserve (3,588) (571)
Other reserves 1,109 1,109
Translation reserve 186 211
Retained earnings 493,400 423,584
------ -----
Total shareholders' equity 60,557 23,423
----- -----
Non-current liabilities
Financial liabilities - loans and borrowings - 5,000
Defined benefit scheme liabilities 15,867 15,514
Provisions 10,674 9,654
Deferred income 18,223 18,060
----- -----
Total non-current liabilities 44,764 48,228
----- -----
Current liabilities
Trade and other payables 95,354 82,399
Provisions 11,231 10,130
Current 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 £'000
Cash flows from operating activities
Cash generated from operations 8 111,638 45,021
Interest paid (10) (5,800)
Tax paid (18,512) (5,069)
----- -----
Net cash from operating activities 93,116 34,152
Cash flows from investing activities
Acquisition of subsidiaries, net of
cash acquired (178) (1,008)
Purchase of investments - (10)
Purchase of property, plant and
equipment (8,259) (5,510)
Purchase of intangible assets (2,245) (1,407)
Proceeds from sale of property,
plant and equipment 794 11,021
Proceeds from part disposal of joint
ventures and associated undertaking 20,246 3,412
Purchase of additional holding in
joint venture (1,086) -
Proceeds from disposal of business 4,340 -
Dividend received from associated
undertaking 428 1,537
Interest received 1,995 2,193
----- -----
Net cash generated from investing
activities 16,035 10,228
Cash flows from financing activities
Proceeds from issue of share capital 400 28,943
Proceeds from disposal of own shares - 268
Repayment 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 financing
activities (51,768) (56,494)
----- -----
Net increase/(decrease) in cash and
cash equivalents 57,383 (12,114)
Cash and cash equivalents at 1
January 6,987 19,101
----- -----
Cash and cash equivalents at 31
December 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 1,414 278,817
Lettings 43,913 - 43,913 39,086 - 39,086
Financial Services 91,299 278 91,577 74,473 - 74,473
Surveying and
Valuation 136,844 - 136,844 118,075 - 118,075
Conveyancing 22,731 - 22,731 19,127 - 19,127
Eliminations - (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 recurring
Segment 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 - 8,500
Lettings 7,963 - 7,963 5,589 - 5,589
Financial Services 20,973 - 20,973 11,713 - 11,713
Surveying and
Valuation 26,733 1,999 28,732 18,722 - 18,722
Conveyancing (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 4,982
of properties
Abortive 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 £'000
Wages and salaries 317,416 280,276
Defined contribution pension cost 6,349 5,442
Other long-term employee benefits 825 225
Share-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 2005
Analysis of tax charge in the year £'000 £'000
Current tax 30,078 7,649
Deferred 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 9,500
Effects 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 1,139 193
Utilisation 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 offsetting
of balances within the same jurisdiction as permitted by IAS 12) during the
year are shown below. Deferred tax assets and liabilities are only offset
where there is a legally enforceable right of offset and there is an intention
to 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) 437
Share options 1,647 321 105
Other 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 6,337 382 786
Share 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 £'000
Numerator
Earnings used in basic EPS and diluted EPS
Profit for the year 81,856 27,199
----- -----
Denominator 000's 000's
----- -----
Weighted average number of shares
used in basic EPS 173,356 176,082
Effects of:
Employee share options 2,553 862
----- -----
Weighted average number of shares used
in diluted EPS 175,909 176,944
----- -----
Pence Pence
Basic EPS 47.22 15.45
Diluted EPS 46.53 15.37
Underlying 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 2005
All items stated net of taxation £'000 £'000
Basic earnings for the year 81,856 27,199
Abortive transaction costs 3,270 -
Profit on disposal of freehold properties - (4,982)
Write off of computer software and associated
contracts - 3,878
Dividend from insurance cell - (985)
Business closure costs 1,724 -
Profit on disposal of business (1,399) -
Profit on part disposal of associated undertakings and
joint ventures (19,357) -
Legal claim 3,700 910
Goodwill impairment 2,360 -
----- -----
72,154 26,020
7. Dividend
2006 2005
£'000 £'000
Final dividend at 3.0p (2005: 4.5p) per 5p share
proposed and paid during the year relating to the
previous year's results 5,273 7,625
Interim dividend of 5.0p (2005: 1.0p) per 5p share
paid 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 activities
Reconciliation of profit before taxation to cash generated from operations:
2006 2005
Cash generated from operations £'000 £'000
Profit before taxation 113,763 31,667
Adjustments for:
Depreciation 7,235 8,102
Amortisation of intangible assets 1,736 2,770
Impairment charge 3,118 -
Share-based payments 1,442 566
Profit 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 2,738
Profit on sales of fixed assets and intangibles (428) (232)
Exceptional write off of computer software and
associated contracts - 5,540
Finance expense 1,595 5,603
Finance 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.
END
Source: COUNTRYWIDE PLC
