Shares in Countryside Partnerships (LSE:CSP) slumped by 17% in early trading on Thursday morning. The stock was already trading at a discount having fallen from a year high of 579p to 245p at the time of writing.
Formerly known as Countryside Properties, the UK housebuilder and urban regeneration firm has endured a tough year. In January, CEO Iain McPherson stepped down from his role after the company’s operating profits fell from £36.6m to £16.5m in Q1.
Why did shares fall today?
the shares fell on Thursday after Countryside Partnerships said annual profit would fall. The housebuilder also published a damning review of its own operations.
The company admitted that it expanded too quickly and botched the acquisition of Westleigh in 2018. The review highlighted a number of “execution-related” failures and stated that operations continued to be impacted. Project delays, poor workmanship, as well as rising costs were all cited as issues that affected the group’s operations.
Countryside said it would respond to the findings of the review. Costs would be cut and an unspecified number of jobs would be shed.
The Brentwood-based firm stated that annual adjusted operating profit was expected to fall from £167m to £150m. The current year’s estimate excludes £10.1m of one-off costs as well as £10m of operating losses at the manufacturing division. £15m of expected cost savings were also not included.
Acting CEO John Martin said that the firm would quickly act upon the recommendations of the review. “There remains significant market demand for our homes and we did not identify any competitive issues during our review,” Martin added, striking a more positive tone.
The company’s shares had plunged 17% to a five-year low of 231p by 8:37am.
Should I buy?
Nothing quite puts me off a housebuilder like reports of poor workmanship and mismanagement. This is particularly the case following the cladding fiasco that has trapped thousands in dangerous and unsellable homes. Now homebuilders are having to pay for their role in the crisis.
Overall, the trend doesn’t exactly look great for Countryside, especially considering the performance of other housebuilders in the booming property market. The firm said that adjusted revenue fell 13% to £658.6m in the six months to March 31, down from £755m a year before. This is reflected in operating profit for the period, which fell 42% to £45.6m from £78.6 million a year before.
Countryside said the unfavourable results were exacerbated by comparatively strong performance in the first half of the 2021 financial year. It noted that completions at the end of 2020 were delayed until the first half of financial 2021 due to lockdowns.
However, the six months to March 31 were still down on the same period in 2020/2021.
One positive is that Countryside appears to be less impacted by the cladding crisis than other housebuilders. Signing the government’s fire-safety pledge will cost it around £24m. Another positive is its clear focus on taking action.
I’m quite bullish on housebuilders, but not on this one. I’m concerned about the long-term impacts of its botched growth strategy. And its inability to capitalise on the super-strong property market over the last six months is also an issue. I won’t be buying.