Grenville Turner, chief executive, said: “I am immensely pleased to report that Countrywide has delivered its strongest first half results since 2007.”
And David Watson, interim chairman at Countrywide, added: “The UK housing market continues to grow at a measured pace, with recovery in both transaction volumes and house prices underpinning the strong momentum we are experiencing across all our divisions. As a result, we are confident that Countrywide will deliver its best ever Group performance this year.
“I am also pleased that, as anticipated at the time of the IPO, the Group has significantly increased the immediate level of cash returns to our shareholders who recognise and support our consistent strategy. In addition, we have plans for further increased returns in coming years.”
Chairman’s statement in full
The first half of 2014 has continued to reflect a strong trading performance with increased business activity across all divisions within the group. We successfully renegotiated increased debt facilities in February 2014 and invested £36 million in strategic acquisitions strengthening our services and geographical footprint. I am therefore delighted to report a positive set of results for the first half of 2014. Total income increased by 29% to £334.5 million and EBITDA increased by 70% to £45.0 million, our highest level in seven years, which is reflected in basic earnings per share of 15.0 pence.
On the basis of these results, the Board has recommended an interim dividend of 5.0 pence (net) per share to be paid on 15 September 2014 to shareholders on the register at 15 August 2014.
We announced on 26 June 2014 that following the recent sale of Zoopla Property Group PLC ("Zoopla") ordinary shares by Countrywide on the Zoopla IPO, Countrywide would pay a special dividend of £20 million to return the cash proceeds to shareholders. The special dividend of 9.0 pence (net) per share will be paid along with the interim dividend for 2014.
Return of capital and dividend policy
The Board also noted in its 26 June 2014 statement that a further announcement regarding a long term dividend policy would be released in conjunction with the Group's interim results on 31 July 2014, and this follows below.
At IPO in March 2013 our stated dividend policy was to target a dividend between 25% and 35% of the annual reported Group profits for the financial year after tax but before any amortisation. Given the improvement in the housing market since that time; the increased confidence the Board has in the outlook for the Group; and the cash
generative nature of the Group’s businesses, the Board believes that it is appropriate to revise the dividend policy and supplement the ordinary dividend with further additional returns to shareholders.
Recognising the potential volatility of the market in which the Group operates our objective is to provide a sustainable ordinary dividend through the cycle. Given the strong position the Group is in, the Board intends to target an ordinary dividend between 35% and 45% of the annual reported Group profits for the financial year after tax but before any amortisation.
In the absence of a major acquisition and assuming the continuation of the recent recovery in the residential housing market, the Board anticipates that starting in 2015 the combined value of the ordinary dividend and any supplemental return of cash will be between 60% and 70% of reported Group profits for the financial year after tax but before any amortisation. This will be further augmented by the realisation of value from the remaining Zoopla shareholding. Our present intention is that supplemental return of cash will be by way of a special dividend or a share repurchase programme depending on the prevailing market conditions and the views of our shareholders.
Capital structure
In February 2014 we increased our banking facilities by £50 million and at the same time reduced the margin we pay.
The additional funds have been used to invest in further strategic opportunities when appropriate. Net debt at the period end was £74.1 million (31 December 2013: £48.4 million) and the Group had a further £40 million in undrawn facilities.
Board update
This period has seen a significant change in the Board structure. As announced in our annual report, Grenville Turner indicated his desire to step down as CEO and willingness to accept appointment as non-executive Chairman once a successor as chief executive was in place. In May 2014, the Board were delighted to announce the appointment of
Alison Platt as Group chief executive effective from 1 September 2014. Accordingly, from 1 September 2014, Grenville Turner will become non-executive Chairman of the Board and of the Nomination Committee and I will continue to act as Deputy Chairman and Senior independent director, at the same time remaining a member of the Group's Audit &
Risk, Nomination and Remuneration Committees
I commented within the annual report for 2013 that we intended to make further non-executive appointments.
Accordingly, I was pleased to announce on 9 June 2014 the appointment of: Richard Adam who will be the Chairman of the Group's Audit & Risk Committee from 1 August 2014 and will also be a member of the Group's Nomination and
Remuneration Committees; and Jane Lighting who will be a member of the Group's Audit & Risk, Nomination and
Remuneration Committees. Rupert Gavin was appointed on 25 June 2014 and will be a member of the Group's
Nomination and Remuneration Committees. Finally, Sandra Turner left the Board in June 2014 and I would like to record my thanks to her for her valuable contribution since the IPO last year.
Outlook
Our very encouraging first half performance provides a robust foundation on which to deliver our 2014 plan. The housing market continues to grow at a measured pace, with recovery in both transaction volumes and house prices underpinning the strong momentum we are experiencing across all our divisions. We are confident that Countrywide will deliver its best ever Group performance this year, with strong cash generation enabling us to explore strategic acquisitions and investment in our current business whilst maintaining modest levels of leverage in the business. Our revised underlying dividend policy and commitment to special dividends or share repurchases will deliver increased shareholder returns.
