M Winkworth

29 July 2024
By Maynard Paton

FY 2023 results summary for M Winkworth (WINK):

• Only the dividend advanced higher (+6%) as a suppressed property market alongside greater costs left franchise-network income 8% lower, revenue unchanged and profit down 25%.

• Requiring every franchisee to be a “top three contender” prompted nine branch closures but underpinned industry-leading sales, lettings and conversion statistics versus (now anonymous) rival agents.

• Company-owned offices now include Pimlico and collectively reported a £0.48m profit, although divisional progress remains dominated by Tooting — the exit strategy for which is unclear.

• After reporting a lower margin, adverse cash conversion and weaker employee productivity, a post-FY update heralded a stronger FY 2024 that supports a possible 12-14x P/E and near-6% yield.

• Celebrations marking the chairman’s 50-year tenure invite bid speculation, especially following the appointment of two non-execs with M&A backgrounds and sector merger activity involving Property Franchise and Belvoir. I continue to hold.

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31 March 2024
By Maynard Paton

H1 2023 results summary for M Winkworth (WINK):

• Only the dividend advanced higher (+7%) after a “more challenging” property market alongside greater costs caused franchisee network income to decline 5%, revenue to remain flat and profit to drop 26%. 

• WINK’s franchisees continue to report greater SSTCs and exchanges versus other agents, with sales commissions improving to an estimated £5.4k per transaction and “new blood” being sought to 3-4x franchise revenue at certain London branches. 

• A third company-owned office seems on the horizon, although the departure of WINK’s successful Tooting manager plus unclear financial progress at Crystal Palace do raise questions about the in-house approach.  

• A lower margin and adverse cash generation reflected this H1’s reduced sales activity, but a post-H1 update indicated a stronger H2 2023 that ought to include greater returns from franchisee loans. 

• Projected earnings of c12p per share may limit increases to the 11.7p per share dividend, although net cash of £4m alongside owner-directors committed to a “progressive” payout should sustain the 6.9% yield. I continue to hold.

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21 July 2023
By Maynard Paton

FY 2022 results summary for M Winkworth (WINK):

• An acceptable FY performance that revealed ordinary dividends up 18% and remarkably took FY franchisee income close to the £64.8m exceptional level of FY 2021.

• A subsequent trading update rather overshadowed the figures by admitting a “more challenging” housing market had “delayed” agreed sales and in turn caused current-year profit to run below expectations.

• The “uncertain economic outlook“‘ had already reduced the proportion of franchisee commissions converted into revenue to 10% — WINK’s lowest percentage since at least 2009.  

• Healthy rental commissions, favourable competitor comparisons, resilient company-owned branches and cash-flush accounts suggest WINK should be well prepared for any house-price downturn. 

• Possible earnings around 12p per share may limit advances to the 11.4p per share trailing dividend, although net cash of £5m plus owner-directors who “prioritise” income should sustain the 7.6% yield. I continue to hold.

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04 November 2022
By Maynard Paton

Results summary for M Winkworth (WINK):

• An acceptable H1 performance that would always struggle against the comparable (and exceptional) H1 but encouragingly matched the preceding H2.

• The subsequent Q3 update provided reassuring ‘mini-budget’ commentary, reiterated an earlier £2.1m profit forecast and announced a further 23% quarterly dividend lift.

• Claims of a leading SSTC market share may contradict statistics from Foxtons, with fresh leadership at the London rival set to create stiffer competition. 

• A robust 25% margin plus £4m net cash left the accounts in good order, although cash conversion was impacted by rising intangible expenditure and more franchisee loans.

• The gloomy outlook for the economy and housing market looks responsible for the possible 10-13x P/E and yield that approaches 7%. I continue to hold.

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08 July 2022
By Maynard Paton

Results summary for M Winkworth (WINK):

• “Extraordinary levels of activity” due to pandemic stamp-duty reductions ensured an outstanding FY 2021 with underlying profit up 167%.

• Talk of sales income again exceeding lettings income plus lifting the Q1 2022 dividend by 23% underpinned a promising FY 2022.  

• Earnings at the company-owned Tooting office may have slumped during the year, although the effective return on the branch’s valuation remains impressive.  

• A super 34% margin, net cash at more than 20% of the share price and trade receivables at just 7% of revenue leave the accounts in good order.

• A possible 9-12x P/E and 6% yield match WINK’s past rating as investors presumably worry about potential problems within the housing market. I continue to hold.

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13 January 2022
By Maynard Paton

Results summary for M Winkworth (WINK):

• An “extraordinarily active” sales market led to an exceptional six-month performance, with the H1 £2m profit exceeding WINK’s peak annual profit from FY 2014.

• Subsequent trading updates then lifted FY 2021 expectations and announced a record quarterly dividend alongside the third special payout of the year.

• Market-share gains versus London rival Foxtons plus very encouraging progress at the company-owned Tooting office underpin the prospect of a “busy” FY 2022. 

• The accounts remain in good order, with this H1 showing a super 38% margin and net cash and investments supporting close to 20% of the share price.

• Near-term earnings may well subside if housing activity cools, but WINK’s reliable dividends may limit the downside with a possible 5% income. I continue to hold.

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30 April 2021
By Maynard Paton

Results summary for M Winkworth (WINK):

• A revitalised property market led to a much stronger H2, with management optimism underlined by a record dividend for Q1 2021.

• Impressive market-share gains continue to be won from London rival Foxtons.

• Early contributions from in-house branches are encouraging, with implied returns on investment of 38%.

• The accounts remain in good order with net cash, respectable margins, positive cash flow and satisfactory returns on equity.

• A possible P/E of 11-14 and a potential 5% income may offer upside should buoyant trading convert into much higher earnings. I continue to hold.

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11 September 2020
By Maynard Paton

Results summary for M Winkworth (WINK):

• A very acceptable lockdown performance, with underlying half-year revenue down 17% and profit down 20%.

• Temporary stamp-duty changes have supported a “significant uplift in activity” and ought to herald a much stronger second half.

• Extremely impressive market-share gains continue to be won from London rival Foxtons.

• Despite a number of accounting re-jigs, the books remain in good shape with respectable margins and net cash.

• A possible P/E of 11-14 and potential income of at least 4% may offer upside should earnings one day regain their momentum. I continue to hold.

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31 May 2020
By Maynard Paton

Results summary for M Winkworth (WINK):

• Acceptable full-year figures that showed revenue up 8% and profit up 12% following an encouraging second half.

• The declaration of a Q1 dividend for 2020 implies possible resilience to Covid-19 and hints at a better-than-expected pandemic performance.

• Very impressive market-share gains continue to be won from London rival Foxtons.

• Despite a number of accounting niggles, the books remain in pretty good shape with high margins and net cash.

• A possible P/E of 8-12 and a potential income of 6% may offer upside should earnings revive and then one day thrive following Brexit, stamp-duty changes and Covid-19. I continue to hold.

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23 September 2019
By Maynard Paton

Results summary for M Winkworth (WINK):

• A standstill London property market left first-half revenue down 3% and profit unchanged. 

• Subdued trading conditions have persisted since the Brexit vote and are likely to continue until the “political and economic uncertainty” clears. 

• Further market-share gains have been won from London rival Foxtons, while the online competition continues to struggle.

• The accounts remain simple, high-margin and cash-flush.

• A possible P/E of 10 and yield of 6.6% do not appear expensive should earnings ever resume their momentum. I continue to hold.

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