M Winkworth Plc Audited final results for year to 31 December 2016 (9544A)

TIDMWINK

RNS Number : 9544A

M Winkworth Plc

30 March 2017

M Winkworth Plc

Audited final results for the year to 31 December 2016

M Winkworth Plc ("Winkworth" or the "Company") is pleased to announce its

results for the year ended 31 December 2016

Highlights for the period

   --     Revenues down 5.1% to GBP5.57 million (2015: GBP5.87 million) 
   --     Profit before taxation 25.7% lower at GBP1.42 million (2015: GBP1.91 million) 
   --     Net cashflow GBP(195,632) (2015: GBP662,217) 
   --     Cash balance at 31st December remained strong at GBP2.97 million (2015: GBP3.17 million) 
   --     Rental income increased to 44% of total revenues 
   --     Six new franchisees with two new offices opened and four resold to new management 
   --     Dividends of 7.1p declared and paid (2015: 6.5p plus a special dividend of 1.8p) 

Dominic Agace, Chief Executive Officer of the Company, commented:

"The resilience of Winkworth's franchising model has been demonstrated in a difficult market, while the increasingly balanced exposure between sales and rentals has proved to be a considerable benefit. We are delighted by the progress that we have made outside of London, with these offices now making an important contribution. Our strong cash position provides us with opportunities to deliver growth both by supporting the expansion plans of existing franchisees and by helping the conversion of established businesses to the Winkworth brand."

Chairman's Statement

Last year was a testing one for the UK residential property market. In such a market, marked by uncertainty, a reduced number of transactions and shifting dynamics in rentals, motivating buyers and tenants to view properties becomes more than ever the prime differentiator for a successful agency.

To achieve a satisfactory sale or rental price, clients require maximum exposure for every property - without the power to generate and execute viewings, an agency is unable to service their needs adequately. The numerous investments that we have made since our admission to AIM in 2009 have contributed to strengthening both our business and our brand and, consequently, our ability to achieve the exposure that our clients require.

In terms of growing the franchise network, the board is confident that the market has to a large extent settled following the unease caused by political upheaval in the UK over the last couple of years and there are signs of reinvigorated interest in joining the Winkworth franchise. As we remain highly diligent throughout our selection process, however, always seeking winners and well-funded applicants, it does take time to sign up new franchisees. We remain of the belief that in most cases we can create greater long term value through organic growth than through acquisition.

We will continue to build services centrally to administer the Winkworth network, thus helping to reduce overheads at the same time as benefitting our franchisees. I welcome our new website which is aimed at offering buyers, sellers, tenants and landlords a digital solution backed by a full service experience.

I remain confident that Winkworth will not only grow but also increase its market share as it evolves its offering to meet the highest standards of today's marketplace.

Simon Agace

Non-Executive Chairman

30 March 2017

CEO's Statement

The theme of macro events influencing market sentiment continued into 2016, a year which turned out to be an irregular one for sales. The early part of the year saw a boom in activity in the run up to stamp duty changes on second home properties, but this was followed by a lull surrounding uncertainty over Brexit and its likely implications. As a result, we experienced an unusually strong first half and a weaker second one.

Underlying these events, the sales market was driven by strong fundamentals, with interest rates remaining at record lows, employment high, and wage inflation showing an uptick. These fundamentals underpinned demand with the exception of the higher end of the market, where stamp duty changes announced in the November 2015 autumn statement continue to weigh on properties valued in excess of GBP1 million. Here, buyers are still adjusting to this increased cost, resulting in lower levels of activity. In prime markets, however, with sterling having devalued and prices fallen by some 15%, we are starting to see signs of the tax changes being absorbed and central London market activity picked up significantly in the last quarter of 2016, albeit from a low base.

Our rentals business continued to grow on the back of new initiatives such as the corporate relocation department and, in 2016, represented 44% of our income versus 38% in 2015. With an improved proposition for landlords, property management commissions grew by 16% to represent 15% of rental revenue compared to 12% in 2015.

Post Brexit, we saw a reduction in searches through our corporate relocation department. While we still received over 4,000 searches for companies looking to move staff to London over the course of the year, a 6% increase on 2015, we witnessed a change in the make-up of these companies, with an increasing bias towards the technology and creative sectors partly offsetting a reduction in financial services. The latter were not only less active but also reduced their relocation budgets, while the former were typically seeking less expensive space in areas outside of the traditional central London zones. This contributed to downward pressure on rents in central London, whereas outer London rental markets remained strong. As rents in central London soften and greater value becomes apparent in 2017, we expect to see demand pick up in this market.

In geographic terms, the best performing markets over the course of the year were in suburban areas and provincial towns, where higher stamp duty was less of an impediment. Winkworth's sales income grew by 3% in the country markets, despite a pause in activity around the Brexit vote, and represented 27% of our total sales revenues, up from 22% in 2015. Rental income growth in the country was stronger still, rising by 21%, so that the total contribution to group turnover from offices outside of London increased from 19% in 2015 to 21%. This vindicates our strategy of expansion outside of London since 2008.

In 2016, gross revenues of the franchised office network fell by 6% to GBP46.12m (GBP49.01m) with sales 14% lower at GBP25.98m (GBP30.14m) and rentals up 7% to GBP20.05m (GBP18.78m). Winkworth's revenues fell by 5.1% to GBP5.57m (GBP5.86m) and profit before taxation was 26% lower at GBP1.42m (GBP1.91m). Partly as a result of the GBP229,000 special dividend declared in December 2015 and paid in 2016, there was a cash outflow in the year of GBP(195,632) (2015 inflow of GBP662,217). Year end cash balances remained strong at GBP2.97 million (GBP3.17 million) and the group remained debt free. Dividends of 7.1p were declared for the year (2015: 8.3p including a special dividend of 1.8p), representing a 9% increase in regular dividends.

In 2016, two new offices were opened in Colindale and Marlborough, while four existing offices were resold to new management, giving us a total number of offices at year end of 94. With a new office in Cheltenham and the conversion of an existing estate agency in Kingsbury, we have a further seven new offices in the pipeline and so anticipate 6-8 openings in 2017 as well as a further 1-2 resales. We anticipate seeing further opportunities to add or resell offices to talented individuals looking to take the step of owning their own business and so being able to share in the equity rewards that this can bring.

We continue to build central services to support our franchisees and help them to grow market share. The client services department, which refers searches across offices, met with further success, generating gross franchise office fees of GBP0.61 million, up from GBP0.36 million in 2015. The corporate relocation department continued to help franchisees let more properties to high quality tenants, generating GBP0.35 million in franchised offices fees against GBP0.25 million in 2015.

To add to these central facilities, we are launching a recruitment service in Q3 2017 to help franchisees lower costs while improving their ability to attract high quality employees. We are also excited about the new website that was launched in March 2017, providing a platform that will enable clients to deal with their properties and interact with us both on and offline. Our experienced local franchisees will be in a position to maintain the high standards of personal service that they provide while offering clients new digital options for communicating, transacting or managing their properties.

Outlook

We believe that low unemployment, wage inflation and record low interest rates will continue to underpin the domestic property market. While the increased cost of transactions above GBP1 million and the knock-on effect lower down the chain will continue to act as a brake on transactions in 2017, we are starting to see higher stamp duty absorbed in prime central London where prices are stabilising. We also anticipate that without the macro events of a referendum or an election and a positive outlook for UK growth there will be a gradual improvement in sentiment and so buyer interest this year. We expect the country markets to be at the forefront of this improvement, with good affordability ratios and cheap mortgages leading to price growth.

In the rentals market we expect that the over-supply from the buy-to-let boom will increasingly be absorbed and that demand from corporate tenants will stabilise. As interest in central London, the area most affected, recovers there may be some lowering of rents in greater London as a result. We anticipate that rental prices in the country markets will remain broadly flat while the increased supply from Q1 2016 is absorbed.

We expect a broadly flat market to continue to be favourable to the franchising model and provide new opportunities to grow the business. We are in regular conversation with existing agencies to explore how we can help them grow market share in a slow market, and with entrepreneurs looking to start-up businesses with the support of a strong brand. In particular, we see an opportunity to convert lettings and management businesses in provincial markets to Winkworth. By joining us we can not only support their existing business but also offer them a sales operation, more than offsetting the loss of tenancy administration fees in 2018, which in the case of some independent specialist lettings agencies we estimate could account for up to 30% of their revenue. With an average Winkworth franchised office posting a 56/44 balance between sales and rental income, we can help talented operators to more than replace this revenue loss.

We remain debt-free, and the strength of our cash position provides us with opportunities in the current market to deliver growth both by supporting the expansion plans of existing franchisees and by helping the conversion of established businesses to the Winkworth brand.

Dominic Agace

Chief Executive Officer

30 March 2017

For further information please contact:

M Winkworth Plc Tel : [phone]

Dominic Agace (Chief Executive Officer)

Andrew Nicol (Chief Financial Officer)

   Milbourne (Public Relations)                                                     Tel : [phone] 

Tim Draper

   Stockdale Securities Ltd (NOMAD and Broker)                      Tel : [phone] 

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

M WINKWORTH PLC

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

for the Year Ended 31 December 2016

 
                                                         2016          2015 
                                              Notes       GBP           GBP 
 CONTINUING OPERATIONS 
 Revenue                                                5,566,389     5,865,182 
 
 Cost of sales                                        (1,477,542)   (1,551,281) 
 
 GROSS PROFIT                                           4,088,847     4,313,901 
 
 Administrative expenses                              (2,743,291)   (2,496,711) 
 
 OPERATING PROFIT                                       1,345,556     1,817,190 
 
 Finance income                                            71,383        89,839 
 
 PROFIT BEFORE TAXATION                                 1,416,939     1,907,029 
 
 Taxation                                      1        (290,919)     (391,578) 
 
 TOTAL COMPREHENSIVE INCOME FOR 
  THE YEAR                                              1,126,020     1,515,451 
 
 Total comprehensive income attributable 
  to: 
  Owners of the parent                                  1,126,020     1,515,451 
 
 Earnings per share expressed 
  in pence per share:                           3 
 Basic                                                       8.84         11.95 
 Diluted                                                     8.84         11.91 
 
 
 

M WINKWORTH PLC (REGISTERED NUMBER: 01189557)

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 December 2016

 
                                               2016             2015 
                                    Notes       GBP              GBP 
 ASSETS 
 NON-CURRENT ASSETS 
 Intangible assets                              776,819             976,001 
 Property, plant and equipment                  115,357              34,650 
 Investments                                      7,200               7,200 
 Trade and other receivables                    715,654             800,189 
 Deferred tax                                         -               2,222 
                                              1,615,030           1,820,262 
 
 CURRENT ASSETS 
 Trade and other receivables                  1,347,693           1,166,173 
 Tax receivable                                  69,167                   - 
 Cash and cash equivalents                    2,972,072           3,167,704 
                                              4,388,932           4,333,877 
 TOTAL ASSETS                                 6,003,962           6,154,139 
 
 EQUITY 
 SHAREHOLDERS' EQUITY 
 Called up share capital             5           63,666              63,666 
 Share premium                                1,792,906           1,792,906 
 Other reserves                                  51,295              51,295 
 Retained earnings                            3,556,228           3,334,268 
 TOTAL EQUITY                                 5,464,095           5,242,135 
 
 LIABILITIES 
 NON-CURRENT LIABILITIES 
 Deferred tax                                    16,164         - 
 
 CURRENT LIABILITIES 
 Trade and other payables                       523,703             800,536 
 Tax payable                                      -                 111,468 
                                                523,703             912,004 
 TOTAL LIABILITIES                              539,867             912,004 
 
 TOTAL EQUITY AND LIABILITIES                 6,003,962           6,154,139 
 

M WINKWORTH PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the Year Ended 31 December 2016

 
                               Notes      Share         Share        Share option       Retained        Total 
                                         capital       premium          reserve          earnings       equity 
                                           GBP           GBP              GBP              GBP 
 Balance at 1 January 
  2015                                      63,381     1,718,469              47,488     2,871,971     4,701,309 
 
 Changes in equity 
 Total comprehensive income                      -             -                   -     1,515,451     1,515,451 
 
 Transactions with owners 
  in their capacity as 
  owners 
 Issue of share capital                        285        62,415                   -             -        62,700 
 Share options exercised                         -        12,022            (12,022)             -             - 
 Dividends                       2               -             -                   -   (1,053,154)   (1,053,154) 
 Share-based payment                             -             -              15,829             -        15,829 
 Balance at 31 December 
  2015                                      63,666     1,792,906              51,295     3,334,268     5,242,135 
 
 Changes in equity 
 Total comprehensive income                      -             -                   -     1,126,020     1,126,020 
 Transactions with owners 
  in their capacity as 
  owners 
 Dividends                       2               -             -                   -     (904,060)     (904,060) 
 Balance at 31 December 
  2016                                      63,666     1,792,906              51,295     3,556,228     5,464,095 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

M WINKWORTH PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

for the Year Ended 31 December 2016

 
                                                      2016         2015 
                                           Notes       GBP          GBP 
 Cash flows from operating activities 
 Cash generated from operations             4        1,569,185   1,913,669 
 Tax paid                                            (453,167)   (471,919) 
 Net cash from operating activities                  1,116,018   1,441,750 
 
 Cash flows from investing activities 
 Purchase of intangible fixed 
  assets                                             (121,758)   (107,477) 
 Purchase of tangible fixed assets                   (128,017)       (639) 
 Interest received                                      71,383      89,839 
 Net cash from investing activities                  (178,392)    (18,277) 
 
 Cash flows from financing activities 
 Share issue                                                 -      62,700 
 Equity dividends paid                             (1,133,258)   (823,956) 
 Net cash from financing activities                (1,133,258)   (761,256) 
 
 (Decrease)/increase in cash and 
  cash equivalents                                   (195,632)     662,217 
 Cash and cash equivalents at 
  beginning of year                                  3,167,704   2,505,487 
 Cash and cash equivalents at 
  end of year                                        2,972,072   3,167,704 
 
 
 
 
 
 

M WINKWORTH PLC

NOTES TO THE STATEMENTS OF CASH FLOWS

for the Year Ended 31 December 2016

   1.        TAXATION 

Analysis of tax expense

 
                                        2016      2015 
                                         GBP       GBP 
 Current tax: 
 Taxation                              274,450   405,389 
 Adjustment re previous years          (1,918)   (4,740) 
 Total current tax                     272,532   400,649 
 Deferred tax                           18,387   (9,071) 
 Total tax expense in consolidated 
  statement of profit or loss and 
  other comprehensive income           290,919   391,578 
 

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:

 
                                         2016        2015 
                                          GBP         GBP 
 
 Profit before tax                     1,416,939   1,907,029 
 Profit on ordinary activities 
  multiplied by the standard rate 
  of corporation tax in the UK 
  of 20% (2015 - 20.250%)                283,388     386,173 
 Effects of: 
 Expenses not deductible for tax 
  purposes                                 8,781      11,176 
 Adjustment in respect of prior 
  periods taxable                        (1,918)     (4,740) 
 Different tax rates                         149       (340) 
 Depreciation in excess of capital 
  allowances                                 519       (691) 
 Tax expense                             290,919     391,578 
 
   2.        DIVIDENDS 
 
                                                    2016         2015 
                                                     GBP          GBP 
 
 Ordinary shares of 0.5p each 
  Final 2015 and interim 2016 paid - 7.1p per 
  share (2015 - 8.3p per share)                     904,060     1,053,154 
 
   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.

 
                                                              2016 
                                                            Weighted 
                                                             average             Per-share 
                                         Earnings           number of             amount 
                                            GBP              shares                pence 
 
 Basic EPS 
 Earnings attributable to ordinary 
  shareholders                          1,126,020               12,733,238              8.84 
 Effect of dilutive securities 
 Options                                          -                      -                 - 
 Diluted EPS 
 Adjusted earnings                      1,126,020               12,733,238            8.84 
 

The share options are underwater as at 31 December 2016.

 
                                                         2016 
                                                       Weighted 
                                                        average        Per-share 
                                         Earnings      number of        amount 
                                            GBP         shares           pence 
 
 Basic EPS 
 Earnings attributable to ordinary 
  shareholders                          1,515,451     12,681,548             11.95 
 Effect of dilutive securities 
 Options                                          -       41,298                 - 
 Diluted EPS 
 Adjusted earnings                      1,515,451     12,722,846             11.91 
 
 
4.  RECONCILIATION OF PROFIT BEFORE TAX TO CASH GENERATED FROM 
     OPERATIONS 
 
 
                                                 2016         2015 
                                                  GBP          GBP 
 Group 
 Profit before tax                             1,416,939     1,907,029 
 Depreciation amortisation and impairment        368,249       275,466 
 Share based payments                                  -        15,829 
 Finance income                                 (71,383)      (89,839) 
                                               1,713,805     2,108,485 
 Increase in trade and other receivables        (96,985)     (276,100) 
 (Decrease)/increase in trade and 
  other payables                                (47,635)        81,284 
 
 Cash generated from operations                1,569,185     1,913,669 
 
                                                 2016         2015 
                                                  GBP          GBP 
 Company 
 Profit before tax                               906,131     1,055,102 
 Dividend income                               (906,139)   (1,055,233) 
                                                     (8)         (131) 
 Decrease/(increase) in trade and 
  other receivables                              229,198     (229,198) 
 Cash generated from operations                  229,190     (229,329) 
 
 
   5.                     CALLED UP SHARE CAPITAL 
 
                                            2016        2015 
                                             GBP         GBP 
 Authorised: 
                    Ordinary shares of 
 20,000,000          0.5p                  100,000     100,000 
 
 
                                            2016        2015 
                                             GBP         GBP 
 Issued and fully 
  paid: 
                    Ordinary shares of 
 12,733,238          0.5p                   63,666      63,666 
 
   6.          FINANCIAL INFORMATION 

The financial information contained within this preliminary announcement for the year ended 31 December 2016 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 2015 have been filed with the Registrar of Companies and those for the year ended 31 December 2016 will be filed following the Company's annual general meeting. The auditors' reports on the statutory accounts for the years ended 31 December 2016 and 31 December 2015 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 2016 together with the notice of the Annual General Meeting to be held at the offices of M Winkworth Plc on 28 April 2017, 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

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