TIDMWINK
RNS Number : 1548J
M Winkworth Plc
28 March 2018
M Winkworth Plc
Audited final results for the year to 31 December 2017
M Winkworth plc ("Winkworth" or the "Company") is pleased to
announce its
results for the year ended 31 December 2017
Highlights for the year
-- Revenues of GBP5.42 million broadly flat against prior year
despite challenging market conditions (2016: GBP5.57 million)
-- Profit before taxation GBP1.38 million (2016: GBP1.42 million)
-- Cash generated from operations GBP1.70 million (2016: GBP1.12 million)
-- Year end cash balance increased to GBP3.58 million (2016: GBP2.97 million)
-- Rental income increased to 46% of total revenues
-- Seven new offices opened and three resold to new management
-- Dividends of 7.25p declared and paid (2016: 7.2p)
Dominic Agace, CEO of the Company, commented:
"These good results were achieved against a testing background
and we believe that a broadly flat market will continue to suit our
franchise model. Our combination of local expertise, history and
knowledge, combined with an evolving platform which drives leads to
our office network under the umbrella of an established national
brand, is a formula for success. We remain debt free, with a strong
cash position and an increasing number of opportunities to grow in
2018."
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: 020 3540 6458
Tim Draper
Stockdale Securities Ltd (NOMAD and Tel: 020 7601 6100
Broker)
Robert Finlay
Ed Thomas
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
Chairman's Statement
2017 was a challenging year for estate agents given evolving
market conditions and a reduction in sales volumes. The strength of
the Winkworth franchise model, however, has demonstrated the
benefit of having individually-owned businesses, which are more
resilient to market change, and this is reflected in our results.
Our franchisees have been able to achieve average turnover of
almost GBP500,000 per office, well above the average turnover of
our franchise competitors.
While always seeking ways to enhance our offering, we have
adhered to our proven formula of concentrating on excellent levels
of service and long-term relationships through our network of some
100 medium-sized offices. This business model makes us attractive
to incoming franchisees as they are able to achieve more than they
could were they employed at a top level elsewhere, especially at a
time when many are scaling back their operations. Winkworth's
efficient and economic logistics systems allow our franchisees to
focus their efforts on servicing their clients and carrying out
viewings.
On flotation, Winkworth targeted expansion out of London in
order to grow. This process has gathered pace and we welcome the
new businesses that joined us in 2017 and the pipeline of offices
for 2018. These have generally flowed from experienced estate
agents making new starts, but we have also seen growth from the
regeneration of some of the older Winkworth franchises where
previous owners have retired and sold. We expect this trend to
continue as many of the Winkworth franchisees commenced trading in
the 1980s. Both routes provide us with a suitable base for
growth.
It has been the Winkworth principle to make sure that our
offices have sufficient economic turnover. This is a natural
business plan for a proprietor franchisee and it has proved to be a
successful policy. We continue to develop systems and services
which enable our franchisees to deliver the best local and national
service. In particular, we have continued to work on projects to
enhance our relationships with both landlords and tenants, and I am
pleased to note the ongoing growth of our rental business.
We do not believe in developing competing brands, nor do we see
any value in acquisitions at present. We expect to see some market
consolidation as like-minded, non-competing companies consider
merging as a way of achieving cost savings and growth. We will
ourselves be alert to such opportunities but without burdening our
shareholders with debt, which we consider as inappropriate at this
point of the cycle.
I congratulate the management and our franchisees on their
performance in 2017 and a strong start to 2018.
Simon Agace
Non-Executive Chairman
27 March 2018
CEO's Statement
2017 was a year that was once again affected by political
developments, with an unexpected snap election and the ensuing
uncertainty surrounding the government's mandate to drive a Brexit
deal through, weighing on buyer sentiment in the latter half. This
led to a depressed level of transactions despite the positive
underlying factors of high employment and low interest rates.
Despite this, and as predicted, Winkworth reverted to a more
normalised year. The mini boom caused by buyers looking to beat the
additional stamp duty tax of 3% on second properties in the first
half of 2016 was not repeated and, once again, we achieved more of
our income in the second half.
Against this background we saw a sustained rise in sales
activity in central London, where demand has increased following
price falls of some 15% since the stamp duty changes of Autumn
2014. Sales revenue in central London rose by 16% on 2016, with an
increase in transactions of 8%. This supported the overall London
performance, which came in at broadly flat at -1%. We are also
particularly pleased to note that the average price of a property
sold by Winkworth's London offices rose from GBP692,000 to
GBP718,000, an increase of 4% despite property prices declining
across the city over the course of the year. In addition, we
recorded a rise in average percentage commissions, reflecting the
value that customers put on trusted advisers in an uncertain
market. We see this as endorsement of the strengthening Winkworth
proposition.
Gross rentals revenue grew by 6% in 2017, reflecting the
initiatives we have put in place to drive this sector of the
business. Our corporate rentals department (CRD) continued to
support above-trend performance, with 139 deals across the network
with 61 different companies adding GBP283,000 in gross revenue to
those franchisees with markets which are the most attractive for
corporate relocation. This department has started well in 2018,
with a significant increase in deals closed compared to the same
period in 2017.
Property management revenue grew by 15%, a similar level to the
16% achieved in 2016, while country rental income was 9% higher. As
a result of the increase in rental revenue we have moved closer to
our goal of a 50/50 split between lettings and sales - at the end
of 2017 our revenue split was 46% lettings and management and 54%
sales, up from a 44/56 split in 2016.
Total gross revenues of the franchised office network in 2017
were flat at GBP46.2m (2016: GBP46.1m) with sales 5% lower at
GBP24.8m (2016: GBP25.9m) and rentals up 6% to GBP21.3m (2016:
GBP20.1m). London offices accounted for 80% of gross revenues
(79%). Winkworth's revenues fell by 2.7% to GBP5.42m (2016:
GBP5.57m) and profit before taxation was 2.8% lower at GBP1.38m
(2016: GBP1.42m). Cashflow rose by 51.8% to GBP1.70m
(2016:GBP1.12m), as a result of which the year end cash balance
increased to GBP3.58m (2016: GBP2.97m). Dividends of 7.25p were
declared for the year (2016: 7.2p).
We see the current market as an opportunity to attract
experienced and talented operators to the Winkworth network, as
successful agents look to move into business ownership to gain
greater control over their earnings potential. This has always been
a key motivation and is providing us with the opportunity to
re-invigorate the network in areas where some older franchisees are
looking to exit. Three franchises were resold last year and four in
2016. The offices which were resold in 2016 increased their
combined turnover on average by 15% in 2017, despite a more
difficult market, and we would expect the offices resold in 2017 to
add to this growth as the new operators drive their businesses to
outperform the market.
We have put significant effort into developing our centralised
departments to help us to gain market share. The client services
department (CSD), which refers leads between offices, continued to
grow, delivering GBP780,000 of revenue to the network in 2017. CSD
is currently on track to exceed this figure in 2018 with 73
instructions to the end of February versus 53 in the same period of
2017. As this department grows, it also improves in efficiency,
with the cost of a lead to franchisees falling from GBP170 in 2016
to GBP140 in 2017 and GBP80 so far in 2018, as the size of the
network lowers the marketing costs to franchisees.
Following its launch in June 2017, centralised recruitment is
progressing ahead of target, placing five candidates a month so far
in 2018 and helping new offices to accelerate their launches with
high quality employees. This activity also supports our new
franchising efforts by increasing our connections with talented
estate agents looking for new opportunities within the
industry.
Finally, we are pleased that our updated website, launched in
March 2017, has delivered more leads to our franchisees despite a
weak second half of the year in terms of overall applicants. It has
provided a robust platform for our digital evolution, enabling the
launch of our vendor portal in November to which 40 offices have
already signed up. We are pleased that it was recognised as website
of the year at the Negotiator awards in November 2017.
We aim to continue to build on this success in 2018 with
continued investment in the vendor portal for clients and the
development of the landlord portal, ensuring we have a best in
class website to offer existing and new franchisees. We will also
be conducting nationwide digital campaigns to continue to drive
leads. We are currently two months into our digital campaign and
this is on track to deliver an additional 200,000 visits per month
to our website and, in turn, to our franchisees.
Outlook
The underlying fundamentals of the market remain positive.
Following the stamp duty changes introduced in 2014, asking prices
have adjusted significantly downwards in central London and this is
now increasingly the case in London zones 2 and 3. Sellers are
accepting these reductions and this, in turn, is in some areas
leading to improved levels of transactions despite applicant
numbers remaining at low levels. We expect this trend to continue
throughout the year and for the reduction in stamp duty for first
time buyers to stimulate the lower end of the property market,
feeding through to the upper levels in due course.
On the lettings side of the business, our applicants are
tracking at some 12% ahead of the same period of last year, which
should support further growth in 2018. Landlords are consolidating
their portfolios following the tax changes on mortgage interest and
increasing their equity in buy-to-let properties, and this
tightening of supply is expected to lead to further increases in
rental prices.
New franchising applicant numbers are more than 25% above this
point in 2017, and with two offices already opened in Banstead and
Poringland we look forward to maintaining the momentum gained in
2017 by targeting to open eight new offices in 2018 in areas
affiliated to our extensive London network.
We believe that a broadly flat market will continue to suit our
franchise model. Our combination of local expertise, history and
knowledge, combined with an evolving platform which drives leads to
our office network under the umbrella of an established national
brand, is a formula for success. We remain debt free, with a strong
cash position and an increasing number of opportunities to grow in
2018.
Dominic Agace
Chief Executive Officer
27 March 2018
M WINKWORTH PLC
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
FOR THE YEARED 31 DECEMBER 2017
2017 2016
Notes GBP'000 GBP'000
CONTINUING OPERATIONS
Revenue 5,423 5,568
Cost of sales (1,292) (1,477)
-------- --------
GROSS PROFIT 4,131 4,091
Administrative expenses (2,829) (2,746)
OPERATING PROFIT 1,302 1,345
Finance income 74 71
-------- --------
PROFIT BEFORE TAXATION 1,376 1,416
Tax 1 (273) (290)
-------- --------
PROFIT AND TOTAL COMPREHENSIVE INCOME
FOR THE YEAR 1,103 1,126
======== ========
Earnings per share expressed
in pence per share: 3
Basic 8.66 8.84
Diluted 8.66 8.84
======== ========
M WINKWORTH PLC
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
31 DECEMBER 2017
2017 2016
Notes GBP'000 GBP'000
ASSETS
NON-CURRENT ASSETS
Intangible assets 796 777
Property, plant and equipment 98 116
Investments 7 7
Trade and other receivables 516 716
1,417 1,616
-------- --------
CURRENT ASSETS
Trade and other receivables 1,102 1,348
Corporation tax receivable 208 69
Cash and cash equivalents 3,579 2,971
-------- --------
4,889 4,388
-------- --------
TOTAL ASSETS 6,306 6,004
======== ========
EQUITY
SHAREHOLDERS' EQUITY
Share capital 5 64 64
Share premium 1,793 1,793
Other reserves 51 51
Retained earnings 3,742 3,556
-------- --------
TOTAL EQUITY 5,650 5,464
-------- --------
LIABILITIES
NON-CURRENT LIABILITIES
Deferred tax 11 16
-------- --------
CURRENT LIABILITIES
Trade and other payables 645 524
TOTAL LIABILITIES 656 540
-------- --------
TOTAL EQUITY AND LIABILITIES 6,306 6,004
======== ========
M WINKWORTH PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2017
Called
up
share Retained Share Other Total
Notes capital earnings premium reserves equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 January 2016 64 3,334 1,793 51 5,242
Changes in equity
Transactions with owners
Dividends 2 - (904) - - (904)
Total comprehensive income - 1,126 - - 1,126
-------- --------- -------- --------- --------
Balance at 31 December 2016 64 3,556 1,793 51 5,464
-------- --------- -------- --------- --------
Changes in equity
Transactions with owners
Dividends 2 - (917) - - (917)
Total comprehensive income - 1,103 - - 1,103
-------- --------- -------- --------- --------
Balance at 31 December 2017 64 3,742 1,793 51 5,650
======== ========= ======== ========= ========
M WINKWORTH PLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2017
2017 2016
Notes GBP'000 GBP'000
Cash flows from operating activities
Cash generated from operations 4 2,115 1,568
Tax paid (417) (452)
-------- --------
Net cash from operating activities 1,698 1,116
-------- --------
Cash flows from investing activities
Purchase of intangible fixed assets (224) (122)
Purchase of tangible fixed assets (23) (128)
Interest received 74 71
-------- --------
Net cash from investing activities (173) (179)
-------- --------
Cash flows from financing activities
Equity dividends paid (917) (1,132)
-------- --------
Net cash from financing activities (917) (1,132)
-------- --------
Increase/(decrease) in cash and cash
equivalents 608 (195)
Cash and cash equivalents at beginning
of year 2,971 3,166
-------- --------
Cash and cash equivalents at end of
year 3,579 2,971
======== ========
M WINKWORTH PLC
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 DECEMBER 2017
1. TAXATION
Analysis of tax expense
2017 2016
GBP'000 GBP'000
Current tax:
Taxation 274 274
Adjustment re previous years 4 (2)
-------- --------
Total current tax 278 272
Deferred tax (5) 18
-------- --------
Total tax expense in consolidated
statement of profit or loss and
other comprehensive income 273 290
======== ========
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:
2017 2016
GBP'000 GBP'000
Profit before tax 1,376 1,416
======== ========
Profit multiplied by the standard
rate of corporation
tax in the UK of 19.250% (2016 -
20%) 265 283
Effects of:
Expenses not deductible for tax
purposes 7 8
Adjustment in respect of prior periods
taxable 4 (2)
Depreciation in excess of capital
allowances (3) 1
-------- --------
Tax expense 273 290
======== ========
2. DIVIDENDS
2017 2016
GBP'000 GBP'000
Ordinary shares of 0.5p each
Interim 917 904
======== ========
There are no proposed dividends at the reporting date.
3. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the earnings
attributable to ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
2017
Weighted
average
number Per-share
Earnings of shares amount
GBP'000 '000 pence
Basic EPS
Earnings attributable to ordinary
shareholders 1,103 12,733 8.66
Effect of dilutive securities
Options - - -
--------- ---------- ----------
Diluted EPS
Adjusted earnings 1,103 12,733 8.66
========= ========== ==========
Given that the market price of the shares has fallen lower than
the strike price, this has made the shares anti-dilutive.
2016
Weighted
average
number Per-share
Earnings of shares amount
GBP'000 '000 pence
Basic EPS
Earnings attributable to ordinary
shareholders 1,126 12,733 8.84
Effect of dilutive securities - - -
Diluted EPS
Adjusted earnings 1,126 12,733 8.84
========= ========== ==========
4. RECONCILIATION OF PROFIT BEFORE TAX TO CASH GENERATED FROM OPERATIONS
Group
2017 2016
GBP'000 GBP'000
Profit before tax 1,376 1,416
Depreciation charges 246 368
Finance income (74) (71)
-------- --------
1,548 1,713
Decrease/ (increase) in trade and
other receivables 446 (98)
Increase/ (decrease) in trade and
other payables 121 (47)
-------- --------
Cash generated from operations 2,115 1,568
======== ========
Company
2017 2016
GBP'000 GBP'000
Profit before tax 917 906
Finance income (917) (906)
-------- --------
Increase in trade and other payables - 230
-------- --------
Cash generated from operations - 230
======== ========
The movements in liabilities from financing cashflows are
nil.
5. CALLED UP SHARE CAPITAL
2017 2016
GBP'000 GBP'000
Authorised:
Ordinary shares
20,000,000 of 0.5p 100 100
======== ========
2017 2016
GBP'000 GBP'000
Issued and fully paid:
Ordinary shares
12,733,238 of 0.5p 64 64
======== ========
6. FINANCIAL INFORMATION
The financial information contained within this preliminary
announcement for the year ended 31 December 2017 is derived from
but does not comprise statutory financial statements within the
meaning of section 434 of the Companies Act 2006. Statutory
accounts for the year ended 31 December 2016 have been filed with
the Registrar of Companies and those for the year ended 31 December
2017 will be filed following the Company's annual general meeting.
The auditors' reports on the statutory accounts for the years ended
31 December 2017 and 31 December 2016 are unqualified, do not draw
attention to any matters by way of emphasis, and do not contain any
statements under section 498 of the Companies Act 2006.
7. ANNUAL REPORT AND ACCOUNTS
Copies of the annual report and accounts for the year ended 31
December 2017 together with the notice of the Annual General
Meeting to be held at the offices of M Winkworth Plc on 1 May 2018,
will be posted to shareholders shortly and will be available to
view and download from the Company's website at
www.winkworthplc.com
The annual report and accounts will be filed at Companies House
in due course.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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