View from City Road: Hambro's policy pays off

Hambro Countrywide seems to have got it right where Abbey National got it wrong as far as running a big estate agency is concerned. Indeed, after Abbey abandoned its own ambitions in this market recently at a cost approaching pounds 250m, many industry observers and participants claimed it proved that large estate agency chains cannot work per se.

Granted, much of Hambro's return to profitability was due to its life assurance activities. Its pre-tax profits for the six months to 30 June were pounds 13m against a loss of pounds 3.9m last time and the interim dividend was restored with a modest 0.5p payment. The estate agency side was still in the red but losses were cut by roughly pounds 5m to pounds 1.7m.

Hambro did slightly better than expected from selling its remaining stake in Hambro Legal Protection for a pounds 11m profit.

So wringing profits from Hambro's 452 branches is still proving difficult, despite an 80 per cent rise in the value of house proceedings since the beginning of the year.

A key difference separating Hambro from its hapless rival Cornerstone is that the former decided to maintain local management, local brand names and local structures: Bairstow Eaves remained Bairstow Eaves, Mann & Co stayed as Mann & Co and so on. This probably resulted from the way the group developed as a series of mergers between equals, rather than a building society or life company leviathan deciding to swallow a load of minnows.

Hambro insists it wants to grow through organic expansion only, despite the many estate agency chains now being put on the block at knockdown prices, which sounds sensible. Its estate agency side breaks even at about 50,000 house purchases, compared with the 46,000 it is expected to sell this year. So any improvement on yesterday's closing share price, up 7.5p at 76p, would be assuming a really substantial UK housing receovery next year.

Time for a little caution yet.