M Winkworth Plc

Audited final results for the year to 31 December 2023

M Winkworth plc ("Winkworth" or the "Company"), the leading London franchisor of real estate agencies, is pleased to announce its audited final results for the year ended 31 December 2023 (''Final Results'').

 Highlights for the year:

The financial performance in 2023 was in line with management expectations, with higher revenues from lettings helping to balance a subdued sales market.

The quality of our platform and of our franchisees meant that we agreed more sales and lettings than any other agent within our operating area¹.

•             Revenues of £9.27 million in line with 2022 (2022: £9.31 million).

•             Franchised office network revenue down 8% at £57.8 million (2022: £63.1 million).

•             Sales revenues 48% of total revenues (2022: 54%).

•             Profit before taxation down 15% to £2.15 million (2022: £2.47 million).

•             Clean Balance Sheet: Year-end cash balance of £4.55 million (2022: £5.25 million) with no debt.

•             Four new offices opened in the year (2022: two offices opened).

•             Ordinary dividends of 11.7p per ordinary share declared (2022: 11.0p per ordinary share).

Dominic Agace, CEO of the Company, commented: "Winkworth's business remained strong, and we continue to execute our plan of recruiting new talent in order to create significant uplifts in revenue. We have already opened three new offices in 2024 and have the potential to open or relaunch eight new franchisees in London over the next 18 months. Our portfolio management initiatives include revitalising ambition and growth right across the business, and with sales agreed to the end of March 23% ahead of the same period in 2023, we are excited by the outlook for the current year."

Investor presentation

Dominic Agace, CEO of the Company, and Andrew Nicol, CFO of the Company, will present the Final Results via the Investor Meet Company platform on 18 April 2024 at 13.00 BST.

The presentation is open to all existing and potential shareholders who can sign up and register to participate for free at:

https://www.investormeetcompany.com/m-winkworth-plc/register-investor

Investors who already follow Winkworth on the Investor Meet Company platform will automatically be invited.

Note¹: based on postcodes where Winkworth has listed a property - Source: TwentyEA

For further information please contact:

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

 David Coaten

 Rachel Goldstein

 Henry Willcocks

About Winkworth

Winkworth is the leading London 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 long-established 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

Chair's Statement

Last year saw an industry-wide downturn in the sales market, due largely to a rise in interest rates which meant that sellers were affected by price uncertainty and buyers held back. As a proprietor-led business with a balanced portfolio between sales and lettings, however, Winkworth turned in another steady performance.

There will always be blips in the sales market due to external conditions, hence Winkworth adheres to a personalised business model, which benefits from market upturns whilst minimising the risks of downturns. We operate as teams based locally with high visibility, enabling us to maximise the number of viewings for our clients to achieve the best price in all markets.

With my 60 years' experience in the business, I believe the creation of long-term goodwill generated by quality franchisees builds the strength of the brand and enables us to benefit from that goodwill as our network expands. Over the years, we have nurtured the relationship with our customers and people who began by purchasing their first property through us in the 1970's or renting through us as of the 1990's, are now still dealing with Winkworth as they approach retirement. 

Our teams look after their clients and often provide free long-term advice when sought, and I believe that this is the ethos behind the successful development of our 101 offices today. Retaining goodwill means that where sales fail due to economic conditions, such as experienced in 2023, we retain those clients for their future move, plus we often pick-up sales where others over-promised on price. We have always been primarily a sales-oriented estate agency and we judge our success by our instructions to sales ratio, where we rank as one of the leaders in the industry.

Since the ending of rent controls in the late 1980's, we have built up a very professional lettings and management business, which has made a strong contribution to the revenues of our franchisees, albeit that its profitability is lower than that of the sales market. At present, London rentals are performing differently to those in the country market. The London market has become increasingly price sensitive as affordability kicks in, therefore careful pricing in London will now be important for landlords. The country market, meanwhile, is short of stock, as it seems that some Londoners have been prepared to move out to seek lower rentals. We have also seen changes in some areas such as central London where, post Covid, stock has moved back to short term rentals providers, such as Airbnb. This situation may change with increased regulation, with the presumption that eventually much of that stock will either be sold or come back to the longer-term market once rules are tightened up.

Our franchisor organisation and accounting systems have grown substantially since we started franchising in 1981 and we now consider it is time to integrate AI into the group accounting process to eliminate some of our semi-manual processes. This will free up more time for financial compliance and speed up cash flow.

Finally, as alluded to at the time of our interim results, we have taken the first steps towards reviewing the composition of our board and broadening its expertise.  This initiative is aimed at ensuring the future leadership structure supports the continued success of the Company and its stakeholders.

This process began in February 2024 with the appointment of Tara Tan as an executive director. Tara provides strategic and transactional guidance to the business development team and to the day-to-day commercial operations team, as well as overseeing brand protection, network compliance and training. As our efforts progress, we anticipate making further announcements in due course.

At our AGM in May 2024, I look forward to celebrating both my half century at the helm of Winkworth and next year's 190th anniversary of the Company's foundation - milestones which I believe are a testament to our enduring legacy.

Simon Agace
Non-Executive Chair
16 April 2024

CEO's Statement

Successive interest rate rises in 2023 brought considerable uncertainty to the sales market, with expectations as to when the tightening cycle might end fluctuating over the course of year. This led to a significant reduction in transactions.  Against this background, Winkworth's business remained strong, and we continued to execute our plan of recruiting new talent to acquire certain existing franchises, creating significant uplifts in revenue.

We further invested in our digital platform to ensure that our franchisees are equipped to compete as a leading estate agency in their local markets and reviewed franchises where we do not feel we have the right operators in place.  We believe that by doing this we can grow the market share of our network to the benefit of all franchisees and underpin growing and profitable businesses which are fit for purpose throughout the property cycle. The quality of our platform and of our franchisees meant that we agreed more sales and lettings than any other agent within our operating area¹. In sales, we ranked second against our peers in the London area for converting listings to exchange, a measure of which we are proud as we believe it is the one that best reflects goodwill for the Winkworth brand and the achievements of our franchisees.

Our lettings business grew by a further 5% compared to financial year 2022, despite a tempering of activity in H2 as affordability levels were reached. Within this we were particularly pleased to see the ongoing growth of the property management segment of our business, with revenues growing by 12% compared to financial year 2022 and now accounting for 26% of our total network revenues.

With the temporary closure of some of our London offices, further details below, we saw the country market offices outperform our London network. The overall revenue share of our country offices increased from 23% to 25%, with a particularly strong performance in lettings and management where year-on-year revenues grew by 10% compared to 4% in London.

In 2023, gross revenues of the franchised network of £57.8m were down by 8% year-on-year (2022: £63.1m). Sales income was down by 20% at £27.6m (2022: £34.3m) while Lettings and Management increased by 5% to £30.2m (2022: £28.7), producing a 48:52 revenue split between these two activities, respectively, compared to a 54:46 ratio in 2022.

Winkworth's revenues were in line with 2022 at £9.27m (2022: £9.31m) and profit before taxation fell by 15% to £2.15m (2022: £2.47m). The Group's cash position at year end reduced to £4.55m (2022: £5.25m) with no debt. Dividends of 11.7p per share were declared for the year (2022: 11.0p per share).

We added four new offices in 2023 with new openings in Wokingham and West Hampstead, a re-opening in Salisbury, and the supported merger of a market leading business in Wimborne, building on the success of our local network in Dorset. Whilst this is below our long-term target for annual openings, we are happy with the quality of these additions and welcome their early success in their respective markets.

In line with our ambition to be a top three contender in local markets, in 2023 we decided not to renew certain franchises where our standards were not being met and results were below expectations.  This led to the closure of the Battersea, and Clapham offices, and the sale of the Kennington Lettings business to our Kennington sales franchisee, who is now also empowered to open a further office in his territory. While our Pimlico office was taken back, we used our assisted acquisition support strategy to relaunch it alongside an entrepreneurial partner who has the opportunity to receive equity in this franchise as its potential is realised. We are in active discussion with new, proven agents to relaunch in Battersea and Clapham and to not only fulfil the revenue potential of these areas, but also help grow the market share, profile and, ultimately, revenue potential of our other successful South London franchises.

Through these initiatives and others focussed on providing exits for franchisees seeking to retire, as well as by supporting existing franchisees financially to open new offices, we have the potential to open or relaunch eight new franchises in London alone over the next 18 months, encouraging talented operators with new ideas to boost the revenue that we generate in London, where we believe there is still significant headroom for us to grow.

OUTLOOK

2024 has had a stronger start than expected, with our sales agreed to the end of March 23% ahead of the same period in 2023, bolstered by mortgage providers reducing rates in anticipation of a rate cutting programme by the Bank of England. There is a sense that the worst of the cost-of-living crisis may now be past, and we are seeing a gradual return to more normal economic conditions. There is still a large amount of refinancing to be done in the market, with some realising far higher rates than initially locked in, and sellers and potential buyers are coming to the market in equal numbers. We expect housing prices to remain broadly flat this year, with new interest instead feeding through into an increase in transactions which have been held back over the past 18 months.

We have witnessed some price weakening in the rental market with supply increasing (29% ahead of 2023 to end of March 2024) and demand declining (5% behind 2023 to end of March 2024). We believe that affordability ceilings have now been reached and, as financing costs fall from peak levels, some landlords may be tempted back into the market.

We have already opened three new offices in 2024 in St Leonard's, adding to our existing Exeter network through a supported acquisition, Leamington Spa and Stoke Newington. With the planned new franchisees in London, and our portfolio management initiatives revitalising ambition and growth right across the business, we are excited by the outlook for the current year.

Note¹: based on postcodes where Winkworth has listed a property - Source: TwentyEA

Dominic Agace

Chief Executive Officer

16 April 2024

M WINKWORTH PLC

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2023

M WINKWORTH PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 DECEMBER 2023

M WINKWORTH PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2023

WINKWORTH PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2023 

1.    STATUTORY INFORMATION

M Winkworth Plc is a public company, registered in England and Wales and quoted on AIM. The Company's registered number and registered office address can be found on the Company Information page of the Annual Report.

2.    ACCOUNTING POLICIES

Basis of preparation

The financial statements have been prepared under the historical cost convention, with the exception of financial instruments as set out below, and in accordance with UK adopted International Accounting Standards. The financial statements are presented in pound sterling, which is also the company's functional currency. The following principal accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements.

Going concern

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the accounts.

Revenue

Revenue represents the value of commissions and subscriptions due to the Group under franchise agreements, together with the value of fees earned by its subsidiary lettings business. Revenue in respect of commissions due on house sales is recognised at the point of the relevant property sale having been completed by the franchisee. Revenue in respect of commissions due on lettings, property management and administration services is recognised in the period to which the services relate. The Group earns a straight 8% by value on all sales and lettings income generated by the franchisees.

In Tooting Estates Limited, Crystal Palace Estates Limited and Lumley 1 Limited, revenue in respect of commissions due on house sales is recognised on completion. Revenue in respect of commissions due on lettings and property management is recognised over the life of the rental agreement.

3.    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.

4.    TAXATION

      Analysis of tax expense

              Factors affecting the tax expense

The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is explained below: