REG - M Winkworth Plc - Half-year Report
07/09/2022 07:00
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RNS Number : 4951Y M Winkworth Plc 07 September 2022
M Winkworth Plc
Interim Results for the six months ended 30 June 2022
M Winkworth Plc ("Winkworth" or the "Company") is pleased to announce its
unaudited interim results for the six months ended 30 June 2022.
Highlights for the period¹
· Results in line with expectations and show good progress against 2019
but reflect extraordinary H1 2021 comparative
· Network revenues down by 24% to £27.7 million (H1 2021: £36.4
million; H1 2019: £21.4 million)
- Network sales revenues down by 39% to £15.0 million (H1 2021:
£24.6 million; H1 2019: £10.0 million)
- Network lettings revenues up by 8% to £12.7 million (H1 2021:
£11.8 million; H1 2019: £11.4 million)
· Network sales revenues accounted for 54% of total network revenues
(H1 2021: 68%)
· Winkworth revenues down by 18% to £4.28 million (H1 2021:
£5.25 million; H1 2019: £2.55 million)
· Majority-owned offices generated revenues of £1.19 million (H1 2021:
£1.04 million)
· Profit before taxation down by 46% to £1.07 million (H1 2021: £1.98
million; H1 2019: £0.58 million)
· Cash balance at 30 June 2022 of £4.11 million (30 June 2021: £4.57
million; H1 2019: £2.51 million)
· Two new franchised offices opened
· Ordinary dividends of 5.4p declared during the period (H1 2021: 4.4p)
Note¹: H1 2019 comparatives have been included as a reference point to the
last H1 of normalised trading
Dominic Agace, Chief Executive Officer of the Company, commented:
"Our first half results, which are in line with management's expectations, are
not flattered by the comparison with the extraordinarily strong first half of
2021, but show that our business has developed well since the last year of
normalised trading in 2019. As such, we are pleased with the good progress
that we have made since then. We enter the second half with an overhang of
unfulfilled business, the confidence that our franchisees are adept at
adjusting rapidly to changing markets, and a business model that is designed
to perform throughout the property cycle."
M Winkworth
Plc
Tel : 020 7355 0206
Dominic Agace (Chief Executive Officer)
Andrew Nicol (Chief Financial Officer)
Milbourne (Public
Relations)
Tel : 07903 802545
Tim Draper
Shore Capital (NOMAD and Broker)
Tel : 020 7408 4090
Robert Finlay
David Coaten
Henry Willcocks
Chairman's Statement
After the exceptionally strong first half in 2021, this year's results are
encouraging and Winkworth has continued to trade well. As things stand, sales
transactions remain brisk, although there are now signs that buyers in some
areas are becoming more cautious of excessive valuations, taking note of
rising inflation and interest rates and either making the most of available
mortgage offers or re-assessing their timings.
This shift in market sentiment may affect sales volumes going into 2023 and
lead to a more careful pricing environment, where the most important
consideration becomes choosing a buyer at a price that will ensure completion
of the transaction. Winkworth's tailor-made approach to handling transactions
becomes of even greater importance in more mature markets such as these.
The lettings and management business has continued to grow. We are, however,
following closely developments which may have a bearing on the long-term
prospects for growth in the sector, in particular the political debate on the
future of the private rental sector.
Over the course of my career, I have experienced the Rent Acts pre-1986 and I
am, therefore, personally wary of the outcome of the current debate on the
relationship between landlords and tenants. It is interesting to note that
the Irish government has recently suggested introducing incentives to
encourage landlords to grant longer leases to tenants in return for tax
incentives, whereas in the UK, July 2022's White Paper considers scrapping
fixed-term tenancy agreements altogether. This uncertainty may cause some
landlords in the UK to reduce their portfolios or exit the business.
While the build to rent sector may replace some of the demand at the mid to
lower end of the market, it will not replace the higher demand for the
individual and varied supply of rental properties generated by the private
rental sector. At this point of the cycle, we suspect that Winkworth's sales
business will grow faster than rentals.
The core Winkworth franchise business continues to show organic growth through
steady and consistent expansion of the network, while the businesses where we
have taken an equity stake are producing slightly more dynamic growth, giving
us a good mix of earnings. Our strategy remains to maintain a positive cash
balance through the cycle, and to make loans selectively to franchisees
looking to expand, thus broadening the Company's footprint. Estate agency is a
cyclical business, tied to the UK economy and a fluctuating market, and one
where the ability to retain cash brings both stability and opportunities.
Simon Agace
Non-Executive Chairman
7 September 2022
CEO's Statement
Activity in the sales market remained strong in the first half of the year.
Comparisons for the first half of the last three years are difficult to make,
with trading in 2020 having been severely disrupted by lock downs, while as a
result of the government's stamp duty holiday in 2021, with a deadline set for
the end of June (exemption was tapered from £500,000 to £250,000 until
September 2021), sales in the first half of that year were boosted by
completions which would ordinarily have taken place in July and August 2021.
While H1 2022 activity was below the level of H1 2021, it was significantly
ahead of the last normalised year of trading in 2019. Sales agreed in H1 2022
were 16% down on H1 2021 but 40% ahead of H1 2019.
Demand picked up in London, as buyers returned to city centres post-pandemic
and proximity to work regained importance. As a result, we saw prices for
houses starting to rise in London, while interest in flats also picked up
significantly as Covid trends abated. With some buy-to-let landlords selling
down their portfolios, however, the supply of flats increased and held back
prices.
We also saw an upturn in activity in prime central London, resulting in these
offices accounting for a higher proportion of revenues. This was led by
lettings, with gross revenues rising by 14% in H1 versus 8% at Group
level. While the lettings side of the business has been leading the way,
prime central London offers good value relative to other international cities
and we would expect international interest in the sales market to return.
In the country markets we have seen demand easing as rapid recent price
increases and a partial reversion to city living have cooled demand. With
supply remaining extremely limited, however, prices continued to rise in H1 as
pent-up demand fed through.
Overall, in H1 2022 we sold more properties than any other online or
traditional agent in the postcodes that we cover².
Lettings and management continued to be extremely busy, with activity
picking up where 2021 left off and London leading the way in terms of price
rises, making up lost ground on the country markets and now some 15% ahead of
pre-pandemic levels. Demand has been boosted by a return to cities from the
country and, in prime central London, by international interest including
students. The supply of rental properties has been squeezed by landlords
selling off properties on the back of increased taxation and regulation, with
the prospect of further proposals, which are currently being debated further
affecting their profitability. As a result, many landlords have taken the
opportunity of a strong sales market to exit, creating a perfect storm for
rent increases.
In H1 2022, gross revenues of the franchised network of £27.7m were 24% lower
year-on-year (2021: £36.4m) but 29% higher than the £21.4m achieved in the
last normalised period of 2019. Sales income was down by 39% at £15.0m (2021:
£24.6m; 2019: £10.0m) while Lettings and Management increased by 8% to
£12.7m (2021: £11.8m; 2019: £11.4m), producing a 54:46 revenue split
between these two activities compared to a 68:32 ratio in 2021.
Winkworth's revenues fell by 18% to £4.28m (H1 2021: £5.25m) and profit
before taxation by 46% to £1.07m (H1 2021: £1.98m). The Group's cash stood
at £4.11m at 30 June 2022 (H1 2021: £4.57m) and ordinary dividends of 5.4p
were declared for the first half of the year (H1 2021: 4.4p).
The investments that we have made in selected offices through taking equity
stakes in partnership with proven operators have continued to bear fruit,
generating increased franchise fees on the back of the success of these
businesses as well as profit contributions to the Company. Winkworth Tooting
is now well-established and has retained its leading position by market share
for sales agreed in the area. Winkworth Crystal Palace has continued to grow,
both its market share and revenues and is expected to make an increasingly
significant contribution going into next year.
Elsewhere, our new Developments and Commercial Investments business, which is
still at an early stage of development, is expected to be profitable in 2022
and to grow significantly in 2023. These new ventures have made a considerable
difference to our business since we first invested in 2018 and, alongside new
franchising opportunities and the franchisee-led acquisitions that we back,
we expect these to help drive our growth over and above market trends in the
years ahead.
After opening six new offices in 2021, we carried a healthy pipeline of
opportunities into 2022, supporting our talented franchisees in Bath and
Exeter to acquire and convert long-established businesses in Bristol and
Crediton respectively, the latter adding to the recently launched office in
Tiverton last year. We now have five offices in Devon, building on a
localised hub, which will continue to provide Winkworth with a regional point
of growth, in the same way as has our highly successful Norfolk local
network.
With further opportunities in the pipeline, we expect to open 6-8 new
offices this year. In addition, we have resold our Shepherds Bush office to a
new operator, as we did with our Ealing and Fulham offices last year, bringing
a new generation of talented franchisees into well established and successful
offices. We expect their energy and commitment to take these offices to new
heights.
Outlook
Despite a backdrop of increasing interest rates leading to higher funding
costs, our sales applicants remain high. Sales applicants in July 2022 were 4%
ahead of July 2021 and 26% ahead of July 2019. Lettings demand continues to be
strong, with applicants up 7% versus July 2021 and 44% ahead of 2019. We
do expect the increased cost of borrowing to have an impact on property,
softening demand and slowing the price increases seen of late. With strong
levels of employment, however, as well as the significant pent-up demand to
relocate post-Covid, and as the cost of renting increases, we expect sales
demand to remain strong for the remainder of the year, with prices in
positive territory.
Beyond that, much will depend on the trajectory of interest rates and
macro-economic factors. With a limited fixed cost base, a healthy cash balance
and no debt, we remain confident. Our considered growth strategy is to
support talented and proven franchisees in acquiring businesses and to expand
our equity ownership of businesses in partnership with established operators.
In this way, we believe we can outperform market trends and continue to pay a
progressive dividend.
Note²: based on postcodes where Winkworth has listed a property - Source:
TwentyEA
Dominic Agace
Chief Executive Officer
7 September 2022
About Winkworth
Established in Mayfair in 1835, Winkworth is a leading franchisor of
residential real estate agencies with a pre-eminent position in the mid to
upper segments of the sales and lettings markets. The franchise model allows
entrepreneurial real estate professionals to provide the highest standards of
service under the banner of a well-respected brand name and to benefit from
the support and promotion that Winkworth offers.
Winkworth is admitted to trading on the AIM Market of the London Stock
Exchange.
For further information please visit: www.winkworthplc.com
(http://www.winkworthplc.com)
M WINKWORTH PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period 1 January 2022 to 30 June 2022
(Unaudited) (Unaudited)
Period Period
1.1.22 1.1.21 (Audited)
To To Year ended
30.6.22 30.6.21 31.12.21
£000's £000's £000's
CONTINUING OPERATIONS
Revenue 2 4,281 5,247 9,451
Cost of sales (769) (696) (1,294)
GROSS PROFIT 3,512 4,551 8,157
Other operating income 1 - 18
Administrative expenses (2,433) (2,560) (4,941)
Negative goodwill - - -
OPERATING PROFIT 1,080 1,991 3,234
Finance costs (19) (19) (52)
Finance income 11 7 32
PROFIT BEFORE TAXATION 1,072 1,979 3,214
Taxation (265) (408) (606)
PROFIT AND TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 807 1,571 2,608
797 1,491 2,519
Profit and total comprehensive income attributable to:
Owners of the parent
Non-controlling interests 10 80 89
TOTAL COMPREHENSIVE INCOME SINCE LAST ANNUAL REPORT
807 1,571 2,608
Earnings per share expressed
in pence per share: 3
Basic 6.26 11.71 19.78
Diluted 6.22 11.57 19.48
M WINKWORTH PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2022
(Unaudited) (Unaudited) (Audited)
30.06.2022 30.06.2021 31.12.2021
Notes £000's £000's £000's
ASSETS
NON-CURRENT ASSETS
Intangible assets 4 963 799 925
Property, plant and equipment 807 1,076 944
Prepaid assisted acquisitions support 402 313 279
Investments 51 56 71
Trade and other receivables 484 393 334
2,707 2,637 2,553
CURRENT ASSETS
Trade and other receivables 1,449 1,952 1,301
Cash and cash equivalents 4,108 4,568 5,019
5,557 6,520 6,320
TOTAL ASSETS 8,264 9,157 8,873
EQUITY
SHAREHOLDERS' EQUITY
Share capital 64 64 64
Share option reserve 51 51 51
Retained earnings 5,745 5,909 6,145
6,260
5,860 6,024
Non-controlling interests 82 163 72
TOTAL EQUITY 5,942 6,187 6,332
LIABILITIES
NON-CURRENT LIABILITIES
Trade and other payables 508 762 632
Deferred tax 87 92 97
595 854 729
CURRENT LIABILITIES
Trade and other payables 1,354 1,648 1,412
Tax payable 373 468 400
1,727 2,116 1,812
TOTAL LIABILITIES 2,322 2,970 2,541
TOTAL EQUITY AND LIABILITIES 8,264 9,157 8,873
M WINKWORTH PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period 1 January 2022 to 30 June 2022
Non controlling
Share Retained Share option Shareholders'
capital earnings reserve interest equity
£000's £000's £000's £000's £000's
Balance at 1 January 2021 64 5,147 51 165 5,427
Total comprehensive income - 1,491 - 80 1,571
NCI on acquisition of shares - (55) - (82) (137)
Dividends paid - (674) - - (674)
Balance at 30 June 2021 64 5,909 51 163 6,187
Total comprehensive income - 1,028 - 9 1,037
NCI on acquisition of shares - 100 - (100) -
Dividends paid - (892) - - (892)
Balance at 31 December 2021 64 6,145 51 72 6,332
Total comprehensive income - 797 - 10 807
Dividends paid - (1,197) - - (1,197)
Balance at 30 June 2022 64 5,745 51 82 5,942
M WINKWORTH PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
for the period 1 January 2022 to 30 June 2022
(Unaudited) (Unaudited)
Period Period
1.1.22 1.1.21 (Audited)
To To Year ended
30.6.22 30.6.21 31.12.21
Notes £000's £000's £000's
Cash flows from operating activities
Cash generated from operations i 995 1,010 2,958
Interest paid (1) - (1)
Tax paid (300) (120) (382)
Net cash from operating activities 694 890 2,575
Cash flows from investing activities
Purchase of intangible fixed assets (108) - (180)
Purchase of tangible fixed assets (10) (28) (46)
Assisted acquisition support (165) (35) (50)
Interest received 11 7 32
Net cash used in investing activities (272) (56) (244)
Cash flows from financing activities
Payment of lease liabilities (117) (97) (219)
Interest paid on lease liabilities (19) (19) (51)
Equity dividends paid (1,197) (674) (1,566)
Non controlling interest - (137) (137)
Net cash used in financing activities (1,333) (927) (1,973)
(911) (93) 358
Increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period 5,019 4,661 4,661
Cash and cash equivalents at end of period ii 4,108 4,568 5,019
M WINKWORTH PLC
NOTES TO THE CONSOLIDATED STATEMENT OF CASH FLOWS
for the period 1 January 2022 to 30 June 2022
i. RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS
(Unaudited) (Unaudited)
Period Period
1.1.22 1.1.21 (Audited)
To To Year ended
30.6.22 30.6.21 31.12.21
£000's £000's £000's
Profit before taxation 1,072 1,979 3,214
Depreciation and amortisation 259 509
255
(Reversal of) Impairment of fixed asset investments 20 15 -
Finance costs 19 19 (32)
Finance income (11) (7) 52
Loss on disposal of fixed asset - 1 1
1,359 2,262 3,744
265 (1,125) (411)
(Increase) in trade and other receivables
Increase/(decrease) in trade and other payables (629) (127) (375)
Cash generated from operations 995 1,010 2,958
ii. CASH AND CASH EQUIVALENTS
The amounts disclosed in the cash flow statement in respect of cash and cash
equivalents are in respect of these balance sheet amounts:
30.6.22 30.6.21 31.12.21
£000's £000's £000's
Cash and cash equivalents 4,108 4,568 5,019
M WINKWORTH PLC
NOTES TO THE CONSOLIDATED INTERIM RESULTS
for the period 1 January 2022 to 30 June 2022
1. ACCOUNTING POLICIES
Basis of preparation
The interim report for the six months ended 30 June 2022 and the comparative
information for the periods ended 30 June 2021 and 31 December 2021 do not
constitute statutory accounts as defined in section 434 of the Companies Act
2006. A copy of the most recent statutory accounts for the year ended 31
December 2021 has been delivered to the Registrar of Companies. The
auditor's report on these accounts was unqualified and did not contain a
statement under section 498 of the Companies Act 2006.
The financial information for the six months ended 30 June 2022 and 30 June
2021 is unaudited. The financial information for the year ended 31 December
2021 is derived from the group's audited annual report and accounts.
The annual financial statements are prepared in accordance with UK adopted
International Accounting Standards (UK IFRS). The condensed set of financial
statements included in this interim financial report has been prepared in
accordance with International Accounting Standard 34 'Interim Financial
Reporting'.
The accounting policies and methods of computation used in this financial
information is consistent with those applied in the group's latest annual
audited financial statements, except as noted below.
Taxation
Income tax expense has been recognised based on the best estimate of the
weighted average annual effective income tax rate expected for the full
financial year.
Deferred tax is recognised in respect of all material temporary differences
that have originated but not reversed at the balance sheet date.
M WINKWORTH PLC
NOTES TO THE CONSOLIDATED INTERIM RESULTS
for the period 1 January 2022 to 30 June 2022
2. SEGMENTAL REPORTING
The board of directors, as the chief operating decision making body, review
financial information and make decisions about the group's business and have
identified a single operating segment, that of estate agency and related
services and the franchising thereof.
The directors believe that there are two material revenue streams relevant to
estate agency franchising.
6 months 2022 6 months 2021 12 months 2021
£000 £000 £000
Revenue
Estate agency and lettings business 1,185 1,038 2,231
Commissions and subscriptions due to the group under franchisee agreements
3,096 4,209 7,220
4,281 5,247 9,451
All revenue is earned in the UK and no customer represents more than 10% of
total revenue in either of the years reported.
M WINKWORTH PLC
NOTES TO THE CONSOLIDATED INTERIM RESULTS
for the period 1 January 2022 to 30 June 2022
3. EARNINGS PER SHARE
Basic and diluted earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the period.
Weighted
average
number Per-share
Earnings of shares amount
£000's 000's pence
Period ended 30.06.22
Basic EPS
Earnings/number of shares 797 12,733 6.26
Effect of dilutive securities - 87 (0.04)
Diluted EPS
Adjusted earnings/number of shares 797 12,820 6.22
Period ended 30.06.21
Basic EPS
Earnings/number of shares 1,491 12,733 11.71
Effect of dilutive securities - 149 (0.14)
Diluted EPS
Adjusted earnings/number of shares 1,491 12,882 11.57
Year ended 31.12.21
Basic EPS
Earnings/number of shares 2,519 12,733 19.78
Effect of dilutive securities - 195 (0.3)
Diluted EPS
Adjusted earnings/number of shares 2,519 12,928 19.48
M WINKWORTH PLC
NOTES TO THE CONSOLIDATED INTERIM RESULTS
for the period 1 January 2022 to 30 June 2022
4. INTANGIBLE ASSETS
Customer lists Website development
Total
£000's £000's £000's
Net book value at 1 January 2021 585 265 850
Additions - - -
Amortisation (23) (28) (51)
Net book value at 30 June 2021 562 237 799
Additions - 179 179
Amortisation (22) (31) (53)
Net book value at 31 December 2021 540 385 925
Additions - 108 108
Amortisation (23) (47) (70)
Net book value at 30 June 2022 517 446 963
M WINKWORTH PLC
NOTES TO THE CONSOLIDATED INTERIM RESULTS
for the period 1 January 2022 to 30 June 2022
5. FINANCIAL INSTRUMENTS
Categories of financial instruments
The group has the following financial instruments:
30.06.2022 30.06.2021 31.12.2021
£000's £000's £000's
Financial assets that are debt instruments measured at amortised cost
Trade receivables 985 1,491 667
Loans to franchisees 646 632 530
Other receivables 46 222 37
Financial liabilities measured at amortised cost
Trade payables 271 86 411
Lease liability 752 992 871
Other payables 10 44 8
Financial assets measured at fair value
Listed investments 44 49 64
Listed investments are valued by reference to publicly available share prices
and are considered at level 1 under the IFRS 13 fair value hierarchy.
6. RELATED PARTY
DISCLOSURES
During the 6 months to 30 June 2022, total dividends of £595,019 (30 June
2021: £341,097) were paid to the directors.
During the 6 months to 30 June 2022, the Company received a dividend of
£1,171,458 (30 June 2021: £674,862) from its subsidiary undertaking
Winkworth Franchising Limited. The balance owed by Winkworth Franchising
Limited to the Company at 30 June 2021 was £1,267,587 (30 June 2021:
£1,267,587).
The balance owed by the Fulham franchise, which is owned by Dominic Agace's
wife and her business partner, to Winkworth Franchising Limited at 30 June
2022 was £15,130 (30 June 2021: £Nil).
7. POST BALANCE SHEET EVENTS
On 13 July 2022, M Winkworth Plc declared dividends of 2.7p for the second
quarter of 2022.
8. INTERIM RESULTS
Copies of this notice are available to the public from the registered office
at 1 Lumley Street, London, W1K 6TT, and on the Company's website at
www.winkworthplc.com (http://www.winkworthplc.com)
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