Winkworth's revenue rises in run-up to EU ref but followed by low sales

Revenue was up 6.7% to £2.75m for the six months ended 30 June, compared to the same period last year, which resulted in a 8.8% rise in profit before tax of £721,711.

Winkworth said during the first half of the year the property market landscape was dominated by the introduction of changes to stamp duty on buy-to-let properties in April, as well as uncertainty in the lead up to the EU referendum in June, which resulted in a surge in activity in the first quarter, followed by a slowdown in sales over the second quarter.

The average fee per property sold grew by 7% in London and 2% in the rest of the country, resulting in sales revenue being flat in London and growing by 26% in the country. Overall, sales transactions grew by 3% year-on-year.

Cash generated from operations more than doubled to £439,399, compared to last year.

Chief executive Dominic Agace, said: “Demand for properties has remained firm, with the key drivers of interest rates and unemployment continuing to fall. As a result, the number of forced sellers has been limited, while those concerned with economic uncertainty have delayed their decision to sell rather than accept a reduced price.

“This has had an impact on market transactions which still stand some 25% lower than the peak seen in 2006. This has been most accentuated above the £1m level, where stamp duty increases are still being absorbed. Below this level, record low mortgage rates have helped affordability and activity has been more brisk.”

Revenues for rentals rose by 11% year-on-year as London grew by 9% while our country offices grew by 23%. Property management fees increased by 19% and rental income now accounts for 40% of revenues compared to 38% this time last year.

The AIM-listed estate agent also said it incurred slightly higher expenditure than normal due to the relocation of its head office to Oxford Street in London.

Agace, added: “With interest rates remaining low and mortgages becoming even cheaper … and employment remaining high, we envisage that downward price pressure will be limited to the prime markets, as has been the case since the stamp duty changes of November 2014.

“In the wider market we envisage ongoing low stock levels as vendors wait for economic uncertainty to pass before marketing their property, but we do not expect to see significant price falls. Although uncertainty remains, we expect trading to pick up from the lows of June and July and to see growth in transactions in the country and suburban London markets.”

He said that it has net cash available in excess of £2.8m to invest in new franchising capacity to ensure it captures the best opportunities without endangering the dividend policy.

During the latest six months it opened five new franchises with two new offices and three were resold to new management.

"We believe Winkworth is a more defensive investment than its rating implies, reflecting a perceived slowdown in London housing. Its franchised operation, with lower fixed costs, and continued growth into lettings and management should bolster it against possible sales volumes declines," Stockdale's Alastair Stewart said in a research note sent to clients.

In the same note, the broker initiated its coverage of the company with a 'buy' recommendation and target price of 153.0p.

Dividend was 3.5p per share, up from 3.39p in 2015, and was paid during the period.

Shares in M Winkworth were up 4.72% to 111p at 0855 BST.