Property slowdown causes slump at Countrywide

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Countrywide, Britain's biggest real-estate agency chain, reported yesterday that first-half profits were down by almost nine-tenths in the wake of the slowdown in the housing market.

But the company was more optimistic about the second half, saying an improved pipeline of house sales should soon return its estate agency and financial services divisions to profit.

Pre-tax profits slumped to £3.5m in the first six months of the year, from £30.7m a year ago. The company had already warned investors in April that results would be materially below last year's.

Countrywide cited figures from the Land Registry for completed house sales across Britain which were down by a third in the six months to June. Christopher Sporborg, the company's chairman, said: "This accords with our experience."

Countrywide's problems have been exacerbated by difficulties in integrating the under-performing property services businesses acquired from Bradford & Bingley last October. Countrywide has been cutting costs and increasing commissions at the businesses, but even so they dragged down profits by £2.7m in the first half.

The company has also had problems with the installation of a new IT system designed to handle a greater number of transactions, and is now carrying out a review of whether the system can actually deliver this. Harry Hill, the managing director, said yesterday: "We're now getting to a stage where we're not sure whether it will work in the way intended because of fundamental design faults."

Depending on the outcome of the review, Countrywide could pursue legal action against Logica, which provided the software. It has spent about £6m installing the IT system.

Amid tricky trading conditions, Countrywide closed 34 branches at the beginning of the year and reduced the headcount by about 500 people. It also raised overall commission rates from 1.58 per cent last year - rates fell when it integrated the Bradford & Bingley businesses which charged much less than Countrywide - to 1.67 per cent in July and hopes to get back above 1.75 per cent soon.

Mr Hill sounded upbeat about the housing outlook, saying the "conditions are very much in place for the housing market to recover", after last week's interest rate cut from the Bank of England - barring external shocks such as terrorist attacks or a continued surge in oil prices.

The shares closed down half a penny at 337.5p.