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Emoov could be interested in taking over Countrywide

Tuesday, June 26, 2018

Yesterday Countrywide announced the reaffirmation of their ‘Back to Basics’ plan which, in a nutshell, sets out that they will seek to grow their fee pipeline ‘back to 2017 levels’ by re-hiring some of their former experienced colleagues. Plus they are cutting one third of their head office costs.

There was also a further profit warning, one of several in the past two years, whereby EBITDA is expected to be some £20m lower than forecast.

But nothing about a proper future proof strategy. Or any acknowledgement of the way that the consumer is driving the industry. Or any mention of installing a CEO which, one would imagine, is rather key to providing reassurance to investors that the ship is now steering away from the rocks.

Consequently Countrywide’s share price has plummeted.

The explanation as to why Countrywide has suffered so much is apparently because estate agency is cyclical and because ‘the London market is slow’. But as far as explanations go, I’m afraid this is really window dressing.

Countrywide must face reality. The reality is that the industry is changing and the consumer no longer wants (or will tolerate):

  • Unjustifiably high fees
  • Inaccessibility
  • No customer empowerment
  • No transparency over their transaction
  • Poor service

The answer is to work with the consumer rather than against the grain and by providing them with what they are used to where their other buying experiences are concerned. The solution is not to ‘carry on doing the same as we did up until 2015’ and to ignore the direction of travel that the industry is being taken in.

Because if that attitude prevails as it seems to have done, then Countrywide’s value will continue to be decimated.

The solution to the demise of this once fantastic business is obvious to me, albeit to the incumbency it is probably unpalatable at first glance.

The traditional high street estate agency model does not work that well. It’s predicated around high (and rising) fixed costs and the consumer being on the hook for those costs, whereas in all other verticals now, that premise has changed (Amazon, Ocado, Expedia, Monzo etc).

But not everything about the incumbent model is bad.

Countrywide for instance has a great basket of brands. A good name in estate agency. Some awesome people. And once their debt mountain of circa £200m is mitigated, a decent balance sheet.

They’ll have to sell off some of their portfolio first, although the likes of Gascoigne Pees, Greene and Co, Lambert Smith and Taylors do have value if run properly.

In refusing to understand, acknowledge and adopt the ‘newness’ now prevailing in estate agency (and proven by the growing market share of PurpleBricks which is now a £1bn business, more than five times Countrywide’s value) renders the high street giant unable ever to prosper.

That ‘newness’ is characterised by the following:

  • A technology platform that delights and empowers the customer 24/7 and substantially reduces the cost of servicing each customer but with no compromise on service.
  • In fact, service becomes enhanced as it is perfectly possible to use a blend of great people and brilliant technology (if done correctly and with experience in such things) to improve customer experience to a 90%+ satisfaction (Emoov have a 9.3/10 Trustpilot score and is also rated the UK’s number 1 hybrid estate agent on allAgents.co.uk).
  • Marketing is a complex animal these days. But no longer is estate agency marketing about window displays, press ads and door drops. It’s about performance marketing, PPC, SEO, affiliates, Paid Social and a balance between clever brand building ATL creative and its effect on digital (if you don’t know what ATL is, that’s exactly my point). The consumer searches and procures services differently now and this needs to be understood. My belief is that within Countrywide and the like, this maze of non-understanding is very much an ‘unknown unknown’ still.
  • A modern team – across property, technology, marketing and finance.

Our sector is undoubtedly seeing change. And I believe my own business, Emoov, in particular understands this and has executed on what the future looks like.

We’re no stranger to a merger deal now, having just aligned with Tepilo and Urban to become the UK’s seventh biggest estate agency group, combining the best bits of all of these brands and consolidating the sector to put distance between the leading pack and the others.

So the natural progression to that deal is for Countrywide to merge with someone that can provide these vital new ingredients, forming a combination of the best of the traditional and the best of the new. A ‘paper’ deal that existing and new shareholders would surely savour and benefit from. Indeed, under the right direction and with ‘future proofing’ I can see its burned-out share price reigniting so that it has the decimal in the right place once again.

This deal does not mean ‘no branches’, but it does mean fewer than now.

It does not necessarily mean fixed fees at £800. But it does require an acknowledgement that home-sellers will not pay 2% any longer.

It does not mean that Countrywide becomes an ‘online agent’. Hell, I don’t even regard Emoov as an online agent. Just a great estate agent that’s better than most and which charges a fair fee. The label does not matter, at least not to the public.

Amazon are buying grocery stores. Ocado is facilitating traditional retailers’ supply chains. The tobacco manufacturers have purchased all of the E-Cig companies. Oil companies are now ‘energy companies’ and invest heavily in sustainable solar, wind and wave technology rather than seeing them simply as a threat. And the once staid car manufacturer now understands that developing electric powered, driverless vehicles is no longer the realm of 1970s science fiction or mad billionaires, but a consumer led environmental necessity that also has huge economic benefits.

Countrywide could be great again and I want it to be. But it’s an experienced horse in an automobile world and now it needs a car. And a driver.

I’ll be waiting by the ‘phone…

Russell Quirk is founder of Emoov, which has recently acquired Tepilo and Urban

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