Preliminary Results

RNS Number : 9344C

M Winkworth Plc

09 May 2012

 

M Winkworth Plc ("Winkworth" or the "Company")

Preliminary results for the year to 31 December 2011

FINANCIAL HEADLINES

§ Sales up by 7.3% to £3.98 million (2010: £3.7 million)

§ Profit before taxation £1.2 million (2010: £1.1 million) up 8.1%

§ Basic earnings per ordinary share 7.11p (2010: 7.03p)

§ Cash generated from operations of £1.12 million (2010: £1.15 million)

§ Final interim dividend of 1.6p bringing the total dividend payable to 4.6p per ordinary share (2010: 4.3p)

Business Highlights

§ Gross property sales and lettings turnover of franchised offices of £35.9 million up 7.4% on 2010

§ 11 new offices opened

§ London property sales account for 83% of the group total

§ Average price of Winkworth country properties sold up 10% on 2010

§ Lettings and management up by 40% in the country, 7% in London and 9% overall

Chairman's Statement

Winkworth continued to grow in 2011. While benefitting from the strength of the London market we began to focus more fully on the expansion of our presence in the country in order to profit from anticipated future growth there.

We further expanded our marketing department to take advantage of the roll-out of our strengthened brand and to develop new support levels for our franchisees. From our historical knowledge of estate agency boom and slump cycles, we judged that our market place was likely to experience many pressures over the coming years, and so throughout the course of 2011 concentrated on improving the fundamentals of our franchise network to secure a solid platform for growth in 2012-2015.

Encouraged by the success of our expansion into selected, high quality country areas and the growth of our new offices, we intend to accelerate our investment in 2012 into this fast evolving part of our network.  To expand into a market downturn is never easy, but our decision to do so has been based both on a track record of success and on our efforts to improve our structure and system regardless of outside influences. We have concluded that this is the best way to optimise our medium term growth prospects. 

We remain in the fortunate position of having cash available to us and strong profitability. This has enabled us to seize opportunities at a time when others have felt the strain from rising overheads. Our franchise model allows us to plan our expansion progressively and without the risk of having to make dramatic cuts should the market falter. The breadth of our exposure to both London and, increasingly, the country market has diversified our risk profile and should protect us against a potential downturn in prime central London as a result of the recent increases in stamp duty, which we expect will affect a large number of non-domiciled home owners and near-term demand in central London. 

We remain, therefore, very positive for the future of the business. The decisions taken in 2011 have proven to be very good for Winkworth's short-term growth and our focus now is to continue to broaden the base of the business and build for the medium term. 

CEO's Statement

Overall, 2011 followed a similar pattern to 2010 as mortgage availability and economic concerns weighed on the residential property market, with the national market witnessing a 2% drop in transactions from 762,000 to 749,000. Against this background, the gross property sales and lettings revenues of our franchises grew by 7.4% to £35.9 million and sales transactions increased by 14% in the country, 1% in London, and 4% in total. 

M Winkworth Plc's turnover grew to £3.98 million, an increase of 7.3% on the 2010 level of £3.7 million, while at £1.2 million our profits before tax were 8.1% higher than 2010's result of £1.1 million, allowing us to pay a dividend of 4.6p per sharecompared to 4.3p per share in 2010.

The London sales market, which accounted for 83% of group property sales, saw further price rises driven by an acute lack of supply, while in the country all but the most prime properties saw prices flat or drifting down at the lower end. Family houses purchases, which are characterised by higher deposits, have continued to be the focal point for our activity and saw the greatest price appreciation.  

In the rental market prices were pushed up in the middle segment as some would-be buyers unable to access sufficient mortgage financing chose to rent. At the top end of the market there was a drop off in rental prices due to cuts in corporate budgets. Our lettings and management business, accounting for 36% of the gross turnover of Winkworth's offices, grew by 40% in the country, 7% in London and 9% overall and achieved a record level of annual turnover.

2011 saw us meet our financial targets and exceed our growth targets. In a still weak environment we achieved an increase in market share as the strength of our brand and client proposition further improved, with fees rising at over 7% compared to a 4% increase in transactions.   This was most notable in the country where, with prices generally still in decline, we saw our average price of property sold move up by 10% up as businesses converted to the Winkworth brand improved their client proposition.

As part of our programme of expanding and upgrading our network of offices, we are very pleased to have opened a record number of 11 new franchises in 2011, 10 of which were conversions from existing businesses, compared to seven openings in 2010. After the consolidation of some existing franchises, the total net number of offices under the Winkworth banner increased by five to a total of 89 by the end of the year. The new offices include key target areas which affiliate with London such as Oxford, Chalfont St Peter, Petersfield, Farnham, Harrow and Chislehurst, as well as a chain of four offices in the Bournemouth area.

During the course of the year we relocated our premises to Mayfair where we anchored the new country house department, facilitating the marketing of country agents' properties in a prime London location and providing a focal point for marketing country properties through our London offices. We expect this prestige address to help us to gain further share in the prime family house market.

Outlook

The opening months of the year have presented us with a mixed picture for London residential property but with some encouraging signs. As anticipated, the Budget focused on the higher end of the market and the changes introduced there will no doubt have an impact on £2m+ properties and the appetite of the international buyer for investing in prime central London.

At the other end of the market, the re-instatement of stamp duty will add an extra burden for first-time buyers still struggling to secure the necessary financing to get a foot on the ladder. Rental demand here will remain strong for these reasons.

But it is the middle market of family houses in Greater London, where prices have risen but transaction volumes have been limited by a shortage of available stock, which is finally showing renewed signs of life. The typical buyer in this segment is a professional individual or couple with a minimum of 20% equity to invest in a new loan. Already a homeowner, the need here is for more space for a growing family. It is, therefore, very encouraging to report that our offices have witnessed a 20% year-on-year increase in sales instructions over the first two months of the year and a 12% rise in buyer registrations. Over the same period, completed transactions rose by almost a quarter.

We believe that this activity is being driven by an improvement in mortgage availability for applicants with equity of over 20% to invest, sellers being tempted to test the market after an increase in prices over the second half of last year to levels close to their peak and, finally, returning confidence in job prospects. Despite ongoing uncertainty in the global economy, we are confident that transactions in the London family home market will increase by 5-10% this year against a background of stable prices. We do envisage a slow down over the Olympics but this could result in the final months of the year being particularly active.

We have also seen a positive start to the country market, with an increase in applicants registering with Winkworth offices. With property instructions remaining tight, this is encouraging news for prices in the country house market in 2012 and we believe that this will lead an increase in activity on 2011.  Perhaps most encouragingly, we are seeing a rise in the number of buyers of country houses originating from London, suggesting not only that our network is working well, but also that the opening up of a price gap between London and the country has led to more people looking to make the move out.

Having so far this year already added offices in Canterbury, Grantham, Worcester Park and Cheam, we will continue to invest in new offices outside of London in 2012 despite the ongoing low volume of transactions. With the launch of a new brand strategy, website and national advertising campaign, we will also work to make our proposition even more compelling.  The gains that we are making in market share lead us to believe that these are the right conditions under which to grow our footprint across the South East and South West of England and, in anticipation of an eventual upturn in transaction, to add value to the brand by acquiring revenues at depressed values. 

For further information please contact:

M Winkworth Plc	Tel: [phone]
Dominic Agace (Chief Executive Officer)
Chris Neoh (Chief Financial Officer)
Milbourne (Financial PR)	Tel: [phone]
Tim Draper
FinnCap	Tel: [phone]
Matthew Robinson/Rose Herbert (Corporate Finance)
Stephen Norcross (Corporate Broking)

About Winkworth

Winkworth is a leading franchisor of residential real estate agencies and is admitted to trading on the AIM Market of the London Stock Exchange.

Established in Mayfair in 1835, Winkworth has a pre-eminent position in the mid to upper segments of the central London residential sales and lettings markets. In total, the company operates from over 80 offices in the UK, France and Portugal, having doubled in size in recent years.

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. Franchisees deliver in-depth local knowledge and a highly personalised service to their clients.

For further information please visit: www.winkworthplc.com

M WINKWORTH PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2011

					2011		2010
				Notes	£		£
CONTINUING OPERATIONS
Revenue					3,978,662		3,707,543
Cost of sales					(843,095)		(840,240)
GROSS PROFIT					3,135,567		2,867,303
Administrative expenses					(1,944,760)		(1,758,691)
OPERATING PROFIT					1,190,807		1,108,612
Finance income					10,667		2,805
PROFIT BEFORE TAXATION					1,201,474		1,111,417
Taxation				1	(325,042)		(313,050)
PROFIT FOR THE YEAR					876,432		798,367
OTHER COMPREHENSIVE INCOME
Unrealised exchange loss					(6,258)		(9,543)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR					870,174		788,824
Profit attributable to:
Owners of the parent					878,334		803,981
Non-controlling interests					(1,902)		(5,614)
					876,432		798,367
Total comprehensive income attributable to:
Owners of the parent					872,076		795,392
Non-controlling interests					(1,902)		(6,568)
					870,174		788,824
Earnings per share expressed
in pence per share:				3
Basic and diluted					7.11		7.03

M WINKWORTH PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 DECEMBER 2011

		2011		2010
	Notes	£		£
ASSETS
NON-CURRENT ASSETS
Goodwill		203,437		208,965
Intangible assets		894,701		203,463
Property, plant and equipment		309,885		265,107
Investments		7,200		7,200
Trade and other receivables		135,574		100,000
		1,550,797		784,735
CURRENT ASSETS
Trade and other receivables		503,535		398,320
Cash and cash equivalents		1,878,306		1,600,649
		2,381,841		1,998,969
TOTAL ASSETS		3,932,638		2,783,704
EQUITY
SHAREHOLDERS' EQUITY
Share capital	5	63,381		57,144
Share premium		1,718,469		777,213
Translation reserve		34,167		40,425
Retained earnings		1,394,193		1,044,720
		3,210,210		1,919,502
Non-controlling interests		-		1,902
TOTAL EQUITY		3,210,210		1,921,404
LIABILITIES
NON-CURRENT LIABILITIES
Deferred tax		34,347		29,700
CURRENT LIABILITIES
Trade and other payables		457,614		451,361
Bank borrowings		77,447		92,089
Tax payable		153,020		177,150
Provisions		-		112,000
		668,081		832,600
TOTAL LIABILITIES		722,428		862,300
TOTAL EQUITY AND LIABILITIES		3,932,638		2,783,704

M WINKWORTH PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2011

			Share capital £		Share premium £			Translation reserve £				Retained earnings £					Shareholders' equity £
Balance at 1 January 2010		Notes	57,144		777,213			49,014				640,745					1,524,116
Dividends paid		2	-		-			-				(400,006)					(400,006)
Total comprehensive income			-		-			(8,589)				803,981					795,392
Balance at 31 December 2010			57,144		777,213			40,425				1,044,720					1,919,502
Issue of share capital			6,237		941,256			-				-					947,493
Dividends paid		2	-		-			-				(528,861)					(528,861)
Total comprehensive income			-		-			(6,258)				878,334					872,076
Balance at 31 December 2011			63,381		1,718,469			34,167				1,394,193					3,210,210
											Non-controlling					Total
											interests					equity
											£					£
Balance at 1 January 2010											8,470					1,532,586
Total comprehensive income											(6,568)					788,824
Dividends paid		2									-					(400,006)
Balance at 31 December 2010											1,902					1,921,404
Issue of share capital											-					947,493
Total comprehensive income											(1,902)					870,174
Dividends paid		2									-					(528,861)
Balance at 31 December 2011											-					3,210,210

M WINKWORTH PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2011

			2011		2010
	Notes		£		£
Cash flows from operating activities
Cash generated from operations	4		1,118,136		1,154,313
Tax paid			(344,525)		(394,052)
Net cash from operating activities			773,611		760,261
Cash flows from investing activities
Purchase of intangible assets			(772,744)		(100,035)
Purchase of property, plant & equipment			(137,867)		(55,589)
Purchase of fixed asset investments			-		(150)
Interest received			10,667		2,806
Net cash used in investing activities			(899,944)		(152,968)
Cash flows from financing activities
Share issue			947,493		-
Equity dividends paid			(528,861)		(400,006)
Net cash from/(used in) financing activities			418,632		(400,006)
Increase in cash and cash equivalents			292,299		207,287
Cash and cash equivalents at beginning of year			1,508,560		1,301,273
Cash and cash equivalents at end of year			1,800,859		1,508,560

M WINKWORTH PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2011

1.          TAXATION

             Analysis of the tax charge

                                                                                                                                                                       2011                     2010

                                                                                                                                                                          £                           £

             Current tax                                                                                                                                      320,395                305,550

             Deferred tax                                                                                                                                        4,647                    7,500

             Total tax charge in statement of comprehensive income                                                        325,042                313,050

             Factors affecting the tax charge

The tax assessed for the year is higher (2010 - higher) than the standard rate of corporation tax in the UK. The difference is explained below:

	2011		2010
	£		£
Profit on ordinary activities before taxation	1,201,474		1,111,417
Profit on ordinary activities
multiplied by the standard rate of corporation tax
in the UK of 26.500% (2010 - 28%)	318,391		311,197
Effects of:
Expenses not deductible for tax purposes	3,027		(29)
Adjustment in respect of prior periods	313		1,751
Different tax rates	5,553		150
Capital allowances in excess of depreciation	(6,889)		(7,519)
Total current tax	320,395		305,550
Deferred tax	4,647		7,500
Total tax charge in statement of comprehensive income	325,042		313,050

2.          DIVIDENDS

	2011					2010
	£					£
Ordinary shares of 0.5p each
Interim paid 2011 - 4.3p per share (2010 - 3.5p per share)		528,861			400,006

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 outstanding during the period.

There are no dilutive potential shares in issue.

			Weighted
			average		Per-share
	Earnings		number		amount
	£		of shares		pence
2011	878,334		12,345,752		7.11
2010	803,981		11,428,750		7.03

4.	RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

	2011		2010
	£		£
Profit before taxation	1,201,474		1,111,417
Depreciation and amortisation	141,215		80,858
Loss on disposal of fixed assets	35,600		-
Reclassification of intangible assets	-		259
Exchange rate variance	(2,950)		(1)
Finance income	(10,667)		(2,805)
	1,364,672		1,189,728
Increase in trade and other receivables	(140,789)		(140,489)
(Decrease)/increase in trade and other payables and provisions	(105,747)		105,074
Cash generated from operations	1,118,136		1,154,313

5.                          SHARE CAPITAL

Authorised:			2011		2010
			£		£
20,000,000	Ordinary shares of 0.5p		100,000		100,000
Issued and fully paid:			2011		2010
			£		£
12,676,238 (2010 - 11,428,750)	Ordinary shares of 0.5p		63,381		57,144

6.          FINANCIAL INFORMATION

             The financial information set out in this preliminary announcement, which has been extracted from the draft report and financial statements, does not constitute the company's statutory accounts for the year ended 31 December 2011.

             The auditor has indicated that the report and financial statements for the year ended 31 December 2011 will not be qualified and will not include a statement under s498(2) or s498(3) of the Companies Act 2006.                       

7.          ANNUAL REPORT AND ACCOUNTS

             Copies of the annual report and accounts for the year ended 31 December 2011 together with the notice of the Annual General Meeting to be held at the offices of M Winkworth Plc on 12 June 2012, 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.                       

 

END

 

 

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