Countrywide - CWD .....the short ?!

Worth reading these two recent trading statements end to end (bold highlighting is mine)

15 September 2005

Trading Update

In anticipation of a series of meetings, which the Company has arranged with
certain US institutional investors, scheduled for the week commencing 19
September, the Board of Countrywide has decided to update the market as to the
Company's current trading and prospects. As a consequence, the Board has
approved the following release.

Although trading conditions experienced in July and August are often much
quieter, we are pleased to report that the gradual improvement in trading
conditions, referred to in the Chairman's statement at the time of the
announcement of our Interim Results, on 11 August 2005, has continued. Our
recent experience supports the following statement which has been extracted
from the August Halifax House Price Index report dated 7 September 2005: '
….Market activity is improving somewhat. The number of mortgage approvals to
fund house purchase continued its upward trend in July, according to the latest
Bank of England figures….'

In addition, whilst residential property prices have remained broadly stable,
commission rates obtained across the enlarged agency network have continued to
improve. In normal years, trading in September and October would be expected to be reasonably strong. We have therefore authorised our senior agency management team to marginally increase local press advertising in the next two months. We will be seeking to further grow our pipeline of sales arranged - which at the end of August was £74.2million.

The level of estate agency activity witnessed in August was similarly matched
by retail financial product sales, and also by the level of new client
referrals to our conveyancing division. However, as previously discussed, this
division continues to be affected by capacity issues associated with an ongoing
I.T. systems upgrade. Management continue to focus on resolving these problems
which are a cause of immense frustration.

Volumes of remortgage conveyancing cases continue to grow and be successfully
serviced by the new IT systems installed last year.

Activity and productivity at Countrywide Surveyors and Securemove similarly
continue to improve but neither business is yet operating at full capacity
levels.

Page impressions received by Rightmove in August represented a record month. We
believe this is further evidence that there is currently more interest in the
housing market than has been the case for fifteen months.

Director/Company Secretary

Countrywide plc


*******************************************************8

15th Dec '05


Countrywide is due to release its preliminary results on the 14th March 2006,
and is providing this update in advance of the close period.

Estate Agency

The volume of completed home sales in 2005 is likely to be at the lowest level
for 30 years. However, we are pleased to report that the gradual improvement in
trading conditions that we have experienced since the very low points in the
winter/early spring of 2004/2005 has continued. Although, in our experience,
house prices have remained reasonably stable throughout the year, the volumes
of newly arranged sales have improved and, most unusually, the fee value of
sales arranged in November exceeds that experienced in October. As a
consequence, the pipeline of fees attached to sales in the hands of
conveyancers awaiting exchange of contract, now exceeds £76.8m (on the
30.11.05) a figure some £16.7m higher than 12 months ago when, immediately
following our acquisition of an agency/surveyors business from the Bradford &
Bingley plc, we had 54 more sales offices.

In the same period, commission rates across the enlarged business have
increased from 1.58% to 1.69% despite intense ongoing downward pressure on fees
across the whole Country - a performance about which our management team is
justifiably proud.

Financial Services

Although adversely affected by a variety of factors in the early part of the
year, most particularly, substantially fewer selling opportunities, high staff
turnover and price resistance to our life protection products - we have seen a
marked improvement during the second half of the year and during the fourth
quarter were able to integrate into our selling compliance framework the
majority of the consultants working in the former B&B agency offices.

Whilst productivity shortfalls between the respective sales forces continues to
exist, we are confident of being able to close the gap in 2006. Lower pricing
of the life products introduced in the third quarter of 2005 has also seen a
substantial uplift in sales and retention in the intervening period.

Surveyors

Trading conditions have been challenging throughout the year for a number of
reasons. The B&B agency/surveying acquisition has lead to over capacity in our
surveying division this year, depressing the near term profitability of the
business, but it positions us well for the introduction of HIPS in 2007.
Reduction in the overall volume of re-mortgage business - and the market share
contraction at our most valuable supplier of survey work have impacted trading.

Conveyancing

The problems to this division caused by the failure of a new computer system
have been fully reported earlier. The initial stages of the replacement system
have been successfully completed and tested.

HIPS & SIPPS

Following the formal confirmation of the introduction of HIPS on the 1st July
2007, we are now able to further develop our implementation and investment
plans to meet the needs of this changing market.

Along with others, we were disappointed to note the Chancellor's recent
decision to remove residential property from Self Administered Pension Plans in
2006. However, whilst our lettings business will not be able to benefit from
this opportunity, the effects on the Group's result is not material.

Conclusion

2005 has been, for the most part, a very challenging year for Countrywide. For
much of the year we have suffered from below long run average transaction
volumes. At the same time, we have been integrating the largely underperforming
agency/financial services and surveyors business acquired in 2004 into our core
business. However, we believe that we have made enormously successful steps to
merge the two businesses and are gratified to have seen a tick up in market
activity as the year has progressed.

With two months' results outstanding, we are currently comfortable that the
Group's year-end performance will be in line with current consensus.

Since August 2005, £6.3m has been used to buy back shares in the market and £
1.7m to pay a 1p interim dividend. In the future, the Board intends to use both
methods as appropriate to provide returns to shareholders.

Given a reasonably benign interest rate environment, and no major adverse
external factors, we seem certain to enter the New Year with a strong pipeline
of ongoing business, very little debt and guarded optimism for the future.


I seem to remember a quote from somewhere saying that the normal surge of business that should take place in September/October had been delayed, i.e. into the two months yet to be reported that would somehow lead to results meeting 'consensus', whatever that means. I didn't realise it at the time but this "delay" comment was reported from a conversation with CWD but not actually stated in the Trading Update. So there is nothing in the Update to suggest results will pick up other than the ambiguous phrase about them being "comfortable" with reference to some unspecified "consensus" which we know to have been quite varied amongst brokers and analysts.
Otherwise we have to rely on the dubious claim that "unusually" the amount expected in fees in November is higher than that in October, but a lot of these fees seem to be "in the pipeline" rather than banked.

Also what they appear to be saying is, despite the extra advertising they did in anticipation of a peak of activity in Sept/Oct, mentioned in the first Update, they in fact obtained a pretty pedestrian result. By inference then the result in Sept/Oct may well have been pretty dire if they had NOT increased their advertising.


It's also noteworthy that in the first statement they were planning on speaking to various US institutional investors commencing 19th Sept. At this point in time Fidelity had only a few days before made it's first disposal since April and about a month later SEAM started consistently dumping. Clearly the PR tour was not reassuring enough to convince the yanks to sit tight.

To cap it all they have now ditched their auditors of many years prior to their close period at the end of which they report their full year results which will now include the two months on which they are pinning their hopes and which will be assessed and reported on by their new auditors.

I may well be over-analysing and/or looking for something that isn't there, but there do seem to be some odd coincidences of timing and missing detail.