Countrywide plc Annual Report 2019 Building resilience Annual Report 2019 Contents Operational results Strategic report At a glance 2 (continuing operations) Our business model 6 Properties exchanged Market overview 8 Executive chairman’s statement 12 Group managing director’s statement 16 45,371 (2018: 46,828) Our strategy in action 20 1 Segmental review 26 Properties under management Corporate responsibility 30 Risk management and principal risks 40 85,093 Chief financial officer’s review 49 (2018: 87,033) Income from complementary services2 Corporate governance Board of directors 56 Executive chairman’s introduction to 48p (2018: 44p) corporate governance 60 Corporate governance statement 62 Mortgages completed Board engagement with stakeholders 64 Report of the Nomination Committee 66 £20.9bn Report of the Audit and (2018: £20.3bn) Risk Committee 68 Directors’ remuneration report 76 Surveys and valuations Directors’ report 96 Statement of directors’ responsibilities in 392,632 respect of the financial statements 100 (2018: 381,893) Financial statements Financial results Independent auditors’ report 101 (continuing operations)1 Consolidated income statement 110 Consolidated statement of Group income comprehensive income 111 Consolidated statement of changes in equity 112 £498.1m Consolidated balance sheet 113 (2018: £515.1m) Consolidated cash flow statement 114 Adjusted EBITDA (pre-IFRS 16)3 Notes to the consolidated financial statements 115 Company balance sheet 177 £24.4m (2018: £21.1m) Company statement of changes in equity 178 Loss for the year Notes to the Company financial statements 179 Appendix 188 £37.5m (2018: £224.4m) Company information 195 4 Forward-looking statements 196 Basic loss per share 1. Restated from prior year following the reclassification of Lambert Smith Hampton as discontinued operations. 114.4p 2. Complementary services is the income earned for each £1 of estate (2018: 1,585.7p) agency income from other Group services such as conveyancing and financial services. Adjusted earnings per share4,5 3. Earnings before interest, tax, depreciation, amortisation, exceptional items, contingent consideration, share-based payments and share of profits from joint venture before the adoption of IFRS 16, referred to hereafter as 'adjusted EBITDA (pre-IFRS 16)' (for comparability with prior 62.0p period). Please see page 52 for detail of impact of IFRS 16 adoption on (2018: loss 31.9p) adjusted EBITDA, note 4 for reconciliation and note 2 for justification of adjusted EBITDA as an alternative performance measure. 4. Restated from last year following share consolidation. Net debt to adjusted EBITDA 5. Adjusted earnings per share is calculated on earnings before interest, (pre-IFRS 16) ratio6 tax, depreciation, amortisation, exceptional items, contingent consideration, share-based payments and share of profits from joint venture, before the adoption of IFRS 16 (for comparability with prior period) (see note 13). 3.4x 6. Net debt to adjusted EBITDA ratio before the adoption of IFRS 16 (for (2018: 2.2x) comparability with prior period) (see note 32). Building resilience Our continuing business returned to growth in profitability in 2019, before the effects of the COVID-19 pandemic. During 2020, we have taken swift and decisive action to protect the safety of our people and customers, and to take steps to protect and preserve our business for the future. At a glance Overview of our business We are the UK’s largest integrated property services group, including the largest estate agency and lettings network. Countrywide’s network of expertise combined with national scale and local reach helps more people move than any other business in the UK. Key performance indicators Brands Properties exchanged Like-for-like1 60+ 19 45,371 19 44,308 18 46,828 18 43,217 Branches Properties under management 700+ 19 85,093 18 87,033 Income from complementary services 19 48p 18 44p Mortgages completed 19 £20.9bn 18 £20.3bn Surveys and valuations 19 392,632 18 381,893 1. Properties exchanged (and comparatives) have been restated on a like-for-like basis to exclude branches closed during the year. Building resilience We focus on having the right brands in the right The actions we took to right-size the branch network location to serve customers across all property- resulted in like-for-like growth in exchanges by 3%. We have also focused on our complementary services and related services. We have a portfolio of income has increased. The number of surveys over 60 brands, ranging from local or national and valuations, and mortgages completed has also presence to internationally recognised brands. increased. The Group entered 2020 leaner and more agile and was able to respond to the COVID-19 pandemic swiftly. 2 Countrywide plc Annual report 2019 Strategic report Breadth of our offering B2C products B2B relationships Estate agency Mortgage lending and distribution Residential lettings Land and new homes developers Corporate governance Mortgages Asset management Insurance Surveying Conveyancing Surveying Our segments Selection of brands Sales and Lettings Financial statements Our Sales and Lettings business consists of over 700 physical locations across 61 brands. We have unparalleled coverage of the UK property market and are uniquely placed to support our customers across all aspects of their property journey. Total income Adjusted EBITDA Adjusted EBITDA (£m)1 (pre-IFRS 16) (£m)1,2 (£m)4 326.6 3.8 30.4 -5% (2018: 343.0) 257% (2018: -2.4 loss) (2018: -2.4 loss) Financial Services Surveying Services We have a dedicated network of over 520 mortgage and protection consultants operating under the Countrywide brand, and in Mortgage Intelligence, we own one of the most successful networks of advisors in the UK. The Buy to Let Business and Mortgage Bureau provide specialist lending to those market segments. Total income Adjusted EBITDA Adjusted EBITDA (£m) (pre-IFRS 16) (£m)2 (£m)4 82.1 16.5 17.3 -2% (2018: 83.9) 0% (2018: 16.6) (2018: 16.6) B2B As one of the largest property businesses serving corporate clients in the UK, we provide services to most major lenders and other financial institutions. Total income Adjusted EBITDA Adjusted EBITDA (£m)1,3 (pre-IFRS 16) (£m)1,2,3 (£m)4 89.3 17.7 19.4 2% (2018: 87.4) -11% (2018: 19.9) (2018: 19.9) 1. Restated from prior year following the reallocation of Countrywide Residential Development Solutions (CRDS) and Auctions business units from B2B into Sales and Lettings (see note 4). 2. Earnings before interest, tax, depreciation, amortisation, exceptional items, contingent consideration, share-based payments and share of profits from joint venture before the adoption of IFRS 16, referred to hereafter as ‘adjusted EBITDA (pre-IFRS 16)’ (for comparability with prior period). Please see page 52 for detail of impact of IFRS 16 adoption on adjusted EBITDA. 3. Restated from the prior year following the reclassification of Lambert Smith Hampton as discontinued operations. 4. Earnings before interest, tax, depreciation, amortisation, exceptional items, contingent consideration, share-based payments and share of profits from joint venture, referred to hereafter as ‘adjusted EBITDA’. Please see note 4 for reconciliation and note 2 for justification of adjusted EBITDA as an alternative performance measure. Countrywide plc Annual report 2019 3 At a glance Our strategic framework Our Purpose Our Vision Our People Our Values and Culture 4 Countrywide plc Annual report 2019 Strategic report Corporate governance Building resilience Financial statements Bringing people Our turnaround strategy and property together 2019-2021 1. ‘Back to basics’ in We believe that every customer should find Sales and Lettings their perfect home. We offer a complete range of residential property services to enable us to support • Invest in building expertise in our customers from the beginning to the end of branch, growing the register of their property journey. properties and market share and restoring the business to profitable growth. To be the provider of choice for See more on page 20 residential property services in the UK 2. Income from complementary services We aim to become the UK’s most trusted provider of residential property services for customers who are engaged in buying, • Grow complementary services. selling or renting residential property. See more on page 21 3. Cost efficiency • We aim to have a lean cost base with We own more than 60 high street brands specific focus on IT transformation and customer contact centre optimisation. and employ over 7,000 people nationwide See more on page 22 We invest in our people to give them the right knowledge and skills to deliver the best outcome for our customers. We recognise that the 4. B2B and Financial Services only way we can realise our purpose is through our people. • Continued growth in B2B and Financial Services. See more on page 23 Personal, responsible, 5. Financial discipline straightforward, passionate and cash flow • Reduce leverage to 1.0x in the We live and breathe our values and constantly drive to medium term. enforce a culture where our people and customers feel See more on page 24 appreciated and listened to. Read more about our values Read more about our and culture on pages 32-33 strategy on pages 20-24 Countrywide plc Annual report 2019 5 Our business model How we create value Our business model is at the heart of everything that we do. It supports our focus on building a sustainable and growing business, and defines the activities we engage in, the relationships we depend on and the outputs and outcomes we aim to achieve in order to create value for all of our stakeholders in the short, medium and long term. Resources What we do Brands We operate a multi-brand B2C products strategy. This enables us to segment the market Estate agency and relate to our Residential lettings customers’ needs. Mortgages People Insurance We invest in recruiting, Conveyancing training and developing Surveying industry experts who understand their local markets to ensure we maintain our high levels of customer service.