M Winkworth (LSE:WINK) — Interim Results

0:00 Good morning, and welcome to the M WINKWORTH PLC Interim Results Investor Presentation. Tonight's recorded meeting. Attendees will be in listen only mode. Questions can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Just simply type in your question and press send. The company may not be in a position to answer every question received during today's event. However, we'll have the ability to publish responses where appropriate to do so on the investment company platform. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to the executive management team, Dominic Andrew. Good morning to you.

0:31 Good morning, everyone. I'm Dominic Eggies, CEO of WINKWORTH. I'm Sandra Nicholl, the CFO of WINKWORTH. It's a pleasure to be here again to talk through the first half results of 2025. So let basically look further ado, we'll start the presentation. So really for those of you, some of you have been on these presentations before, but sort of for those that haven't, we always do a little recap of the model just to give this sort of fundamentals. WINKWORTH is franchising model. It was established in 1835, which is hundred and ninetieth year, but it didn't franchise until 1981, which was actually the first time I'm stating to be franchised in The UK. So it was a trailblazer in that regard. Today, it stands with 100 UK franchised offices 57 of which are in London 43 outside of London and three of which we own and are in London.

1:28 The model itself grew out before anyone else started franchising as a result, grew from London outwards. That in essence is it's a defining characteristic to a large extent. It has this network of 57 offices that grew at a time when it was affordable to grow offices as independent businesses across London. The network therefore grows in areas that affiliate with London, particularly look at markets, the obvious ones being the commuter belt where people when they come to sell the house, look to use an agent as access to London buyers. That's what we provide an independent business to allow them to attract better clients, properties to sell. So that's very much so shaped us also shaped our market positioning is obviously we have been competing in the golden postcodes of London for many years now and that ensures our positioning as a sort of prime market mid to upper family house market agency.

2:24 The model itself, we charge 8% royalty on gross revenues. If you took the there are as we've rolled additional fees that have been brought on as things evolve, say, for example, the internet, if you put all those additional fixed fees, which are our monthly fixed costs onto the 8%, then it would equate to 11% of the average turnover of a franchise office. We do not take leases, the leases are held by franchisees, and therefore have a low fixed cost base, have options should we require to take over those leases. Our aspiration as a business is to provide a platform that enables an independent state agency to operate in the top three of its marketplace.

3:10 That is, suppose, a marriage of the investment we make into our platform and being able to find the talented operators that can operate at that level. In essence, we believe in growing by backing talented individuals and bringing them into our business. So on that note, on to the slide of operational overview of h1. Business very strong in the first half, network sales were 26% up. We had this growth in lettings.

3:45 We were the largest sales agent in our operating area. We opened three new offices, we refranchised two offices, which is an important part of us is bringing in new talent, where those might be looking to retire and re energizing parts of our network. We made a significant investment into prime Central London to follow the acquisition of a talented operator into our Knightsbridge office last year. We increased our investment in consultancy to support systems development to ensure that we're evolving the platform as we go to support these operators to make sure the sort of top three ambition can be realized. So on that, I suppose Andrew can talk you through the numbers. Thanks, Dominic. In terms of the network revenue, as Dom said, it was a strong performance in H1. Network revenue was up 15% to €32,000,000 in H1.

4:39 Within that, the network lettings revenue increased by 3% to €15,100,000 The real driver behind the growth was though the sales side, which grew by 27% to €16,900,000 That increase in sales revenue drove the sales lettings split to reverse from last year and in H1 was 53% sales, 47% lettings. In terms of our revenue, our revenue of 5,200,000 was up 1% on last h '1. Two elements to that, the owned offices were up 11% to 1,670,000.

5:29 And within the franchising business, the strong growth in sales and lettings was offset by timing differences on revenues booked on new or resold franchise agreements, in particular the ongoing proceeds from the sale of the Kennington lettings business that happened in 2023.

5:53 The cost of sales were down slightly due to the change in split commissions on one of the equity offices. The admin expenses were up by just under 400,000 in the half, as Dominic said, a combination of of of one off fees. So we

6:23 put a 100 k into Prime Central London marketing and the new Knightsbridge franchisee. We had a head office move that we've moved costs and double rent per month or so was cost of 70 k, and we put 50 k into consultancy work to help build our systems. Overall, the cost went up, as I say, by just under 400 k. So the profit before tax in h one was 830,000, which was down 19% on H1 last year. In terms of the owned offices, they were profitable in H1 and we'll come into more detail on that as we go through the presentation.

7:12 Cash at the end of June was 3,860,000 versus 4.12 in h one twenty four. And we declared dividends per ordinary share of 6.6 P in the half versus 6 P per share in H1 twenty twenty four. Savior operationals, we saw this to break down the sales and lettings performance of the business in the first half. With the various regions, I suppose as we categorize them, so Central London, and Outer London, and the country markets outside of London. As you can see, they all grew pretty healthily. As effectively, we had some momentum from q of q4 last year based on, you know, the end of fiscal tightening, and the sort of lowering the mortgage rates, encouraging people to transact, as well as a change to stamp duty in April, which encouraged people to transact more quickly in order to beat that that timeframe.

8:17 I suppose interesting to note the different regions, the strong region, which is the majority of our business, in terms of highest growth was out of London. You know, this is a needs based market with families. There are lots more properties available at the moment, where families are reorganizing their lives come out of a period of increased costs. And perhaps, you know, back on school fees, all these things feed into reasons why people would like to transact at the moment. So you can see that in the kind of buoyancy of Outer London, the country market slightly, like others, you know, in large part, there was a significant growth of the COVID in the rush to the country. And that is sort of being digested that sort of 20% price increases are now coming off somewhat and therefore there's lesser activity.

9:04 I think the thing to note on this also is, you know, there is this sort of overhang of the market is divided with the higher end of the market has more uncertainty in it. You know, that is for that is meant traditionally, those houses, the higher end have sort of been accused for, because there's a higher cost budgets are reined in. And because of the concern around taxation on some of these larger properties, and the wealthier, particularly in London, you know, we're seeing them more sticky than previously. So it's led by the sort of middle market rather than the higher end. Lettings revenue, you know, what was was great result to see here was, you know, it broadly reflects activity in a way people are buying or they're not letting and vice versa. And we have higher growth rates in the country because we have new offices. So this sort of maturity of London means a slightly lower natural growth in lettings.

9:59 And there's also I suppose one would say more a few more landlords exiting because of the costs of increased interest rates. The great thing to see here is, you know, the mix of our lettings revenues, the revenue for letting a property has reduced by 4% in the first half, that itself is not fantastic. We look at the management income, and that's grown by 10%. So what you're seeing is a net increase of 3% of our lettings and management business, which is sort of make for the best of h1 WINKWORTH had. Because where there might be some landlords exiting the sector, we are managing more properties and offering that service to our existing landlords and therefore the net effect is growth of 3%. So moving on to the breakdown by region, we sort of talked about this slightly already, but it shows you know, this is the Outer London, our stronghold, I suppose WINKWORTH where we've been there many years, we're deeply embedded.

10:55 And it delivers a large proportion of our income. That they say broadly in similar margins, we do feel there is a moment where Central London and William proved significantly, we made the efforts to invest in individuals that obviously takes time. But we see that growing sector of the of the chart. It just needs a bit of a break on political news. On the lettings and sales splits, you can see that, you know, it's swung in favor of sales. But as I said in the previous slide, that's still letting still grow grew by 3%. So it's not from lettings not growing. It's just that as cost of finance reduce, and people just get on with their transacting, we saw sales grow at a faster rate.

11:50 So sales by demand, and this is for further breakdown, which I was thinking is interesting. Because it's the number of people registering to buy a buy a property, so number of buyers per property for sale. And on the on the right, it's the number of tenants per property to let say, you know, in effect, you know, if your prices were going up, you'd see more people registering to buy per property for sale. What you're seeing is kind of that, you know, a lot of properties on the market, I think there are 45 more properties than there were three years ago on the market. To put that in context, though, that's still 50% less than they were in 2009. So it's been a lower volume market for many years. And it's kind of shows where potential volume headroom is. What it also shows is that, you know, we're saying really, which is there is, is not price growth, but what there is, is there is a desire to transact and that's driven by say, you know, had a period of far higher costs people may have spent on that, doing out the house, they may be becoming off fixed mortgages, they may find all sorts of things that mean that perhaps they either downscale or they have people have reasons to transact.

13:01 And obviously, business is driven by transactions rather than price increases. On the letting side, you know, it's been there's a tightening of supply. And we should talk about the fact that we're managing more, which is offsetting a tightening of supply in terms of reduction of landlords. I think the ultimately, we've seen the significant growth in rents, know, postcode, a lot of mass movement, and now setting down and it will track wage inflation plus one, which it was historically does, because ultimately, rents can only, you know, there's an affordability ceiling to them. But clearly, there are issues in this market where, you know, there is not the same number of new bike lap bound landlords coming in, as they have been previously.

13:49 In terms of our dividends, this chart shows the progressive nature of the dividends we pay. We pay our dividends quarterly. And we would look to continue paying a progressive dividend, circumstances, trading conditions, etc. Allowing. So we're moving on to drivers of growth to remind everyone as to where we you know, how we look to move the business forward. They said ultimately overriding all of this, it is kind of belief in finding the right individual and investing in them. That's that's the sort of overarching vision. And then this breaks down into, you know, four parts of our business. So the new franchising part, which is new people coming to us and opening offices under the WINKWORTH system and brand assisted acquisition where we're supporting talented people by existing WINKWORTH franchises if they didn't quite have the money or by other estate and see businesses to add to their own portfolio.

14:56 So that would be an example would be some lettings portfolios and the like. Portfolio management would be looking at where some of is maybe looking to being there for a long time looking to exit and making sure we can find the best possible people for that sort of opportunity that for the one moment is a big opportunity to, to make sure that every time a business sells, the next person in is even better and it goes forward. And then own businesses, which is the sort of final part, which is clearly there are some opportunities out there that we look at that, you know, we have the perfect person for and they can't afford it or perhaps they're at a position in life, but they don't quite want to take the risk. And so, you know, we would look at owning that business and they're building a stake and eventually buying it off us in due course, as a way of getting this talent into the network.

15:49 So on the franchising territory, sort of the new franchising ebb and flow, you know, we've opened three so far this year. There are one hopefully two further new offices set for the remainder of the year, of five for the year. We have resold two offices and with the furthest of four to come. So approximately 11 sort of new franchise, new people coming into our business this year, which we feel will be able to move forward, move our business forward. And enough, eight of those 11 are related to London. You know, we see this positive because I suppose the London has, I think the highest potential in terms of revenue per area due to the value of the properties and the sort of mix those properties, flats houses and the and the churn because obviously, it is a relatively young marketplace where people are moving up through their lives and buying and selling properties along the way.

16:53 So it leads to the other part, which we always try and do a slide of introducing someone, you know, people, characters in the network and and the full year, we'll do a slide on the border, hopefully compounding effect of all these investments in people. But at the half year part, we will talk about Neil, Neil was as franchisors in Johns Wood, very experienced agent. He bought has always been very good offers for us. So Johns Wood, but he's got a very big territory as part of franchise, we grant these exclusive territories, and it was very old business. So this territory covered. For those of you who know made avail West Hamsters, also his park all within this area, obviously huge potential to develop for WINKWORTH and generate more fees. So with his enthusiasm, we have supported him to open further offices, second office and made available twenty twenty one West Hamster 2023, Belsize Park beginning of this year.

17:52 You know, and in that time, the net result is not any more offices, but increase in revenue of 101100%, which is fantastic is exactly what we want to be doing is good people backing them, developing the opportunities. These areas have great, great brand awareness, because they're already cheap by jowls and thought is and we already have data in the area of clients we can we can approach so so they're sort of easier wins in many ways. Then we move to the own businesses and profit revenue. So we sort of Pimlico was the most recent in 2023. So it's very early days, it's sort of one on its trajectory of a sort of hopefully three year, three year turn to get to sort of maturity.

18:40 We, you know, the revenue is growing as the profits as time comes, we will look to potentially exit one of these to management and then due course at the right time, add an add an exit and can kind of continue to use it as tool to bring talent in. And obviously have the benefits of income over and above 8% from areas that we've assessed and analyzed as having significant potential uplift for WINKWORTH.

19:13 So moving to operating area and performance. But this is just to say hopefully that the combination of the strategy and the people within the business, you know, are delivering, it's a fantastic concept really to have people owning their own business within a network where they get the benefits of that network, but have the drive and ambition to reach their own heights. As a result, you know, we they also are very efficient, know, they

19:46 are telling their clients their long term in their areas and they're sending clients what they need to be told in order to sell the house the best possible value. Therefore, you know, we're number one in converting new instructions, new listings to sell property to, to sold across our area. So to sold subjects contract, I should say and then beyond that, we're number one from agreeing that sale of sale to getting into exchange. So I think it shows the efficiency of having good people,

20:14 you know, running that running these businesses. And you know, it's all part of building the goodwill of the name because people have good experiences and they're getting their sales with and it's not falling through like, at the same rate as perhaps others. So let me go into this revolution. So we've talked a lot about people. And this part really, I suppose is to reflect that the bit, you know, we are trying to get to the next slide, if I can do.

20:45 We are investing in our capabilities. We want to make sure we pick our roots through it, where we respect the role of the individual and the importance they have, and the value they have. So we want to do things that support them rather than take away from what we believe is important, which is a personal experience for clients. So these are just examples really, you know, say,

21:10 WINKWORTH sort of effectively where people can go to the section of the website and follow their transaction proceeding through the process. That's one idea from one concept that's coming through there. And the other one is, you know, just simple use of an example, you know, we're looking at AI solutions just where, you know, they can obviously take notes on the phone calls. And that means the whole data quality of the whole network will improve significantly by having that functionality. So really sort of practical use of it. And next slide, we just talk about another area, you know, simple, some sub sorry, so WINKWORTH HUB and bringing all that together so that we get better support to our franchisees in terms of all the information they need and regulation increases, we can provide more support through this, we can give the sort of greater connectivity for those individuals by having it as a space where they can, they can communicate, and ideas can be shared. And, and, know, we hope that it's a tool that we've, we've had, but this is a vast improvement step forward as we always try and try and do to allow people to do to know to benefit and ultimately to run better businesses that generate more money.

22:29 So then I suppose the next one is just to talk about the long standing WINKWORTH website, which I believe was maybe the first estate agency to have a website of 1992. So it's been been around a while it this surface is the engine room of the franchise network. Ultimately, delivers, increasingly delivers the leads, the all important leads to value property, which is the sort of lifeblood of an safety office.

22:55 If you look at this in around 100 offices in the first half, it's living around 40 valuations per office. So on that basis, you know, it is more than paying its way for the value for the 8% royalty fee that we charge for franchisee to be part of WINKWORTH. So looking back and looking ahead, so let's check-in where where we are. I mean, was a strong first half in line with our expectations. You know, we've continued really to as we do continue through always to execute plan to bring in new talent. And we've sort of accelerated our investment in some of that talent in recent times, and are comfortable continuing to do that because we can see that this just gives us our forward pipeline of growth.

23:44 We opened three offices, we refranchised two. Got net cash generating operational activities doubled to 960,000 and we increased the dividend for the year by 10%. So going forward, and these are very much some of these are ongoing, obviously ongoing, have been ongoing for a while as aspirations aim to be the first option for estate agents to wishing to set up their own business operating in prime markets. That's all. I suppose that's another way of explaining the sort of top three strategy we have of building something that is best in class or top three within their areas. Do that just to remind everyone because we think that's not only that's where there's durability in the market, if there's always enough transactions if you're in the top three, to ensure that you can run a profitable business in all markets. So we feel that's a sustainable goal for our franchise network, which is obviously made up of independent businesses that are long term and often cases, only family health.

24:47 So continues to evolve this menu to attract new franchisees and work out ways to grow new sites, but also within existing territories and improve existing offices. We have the continued investment in digital. We remain a business that is led by people and guided by available talent. And that feeds into to all the things we do. We target new active participation businesses with key talent in suitable areas where that's available. And we see further growth in the majority owned businesses, and we have a strong balance sheet. And obviously, we'll always look to pay a progressive dividend as we go forward. I think that's the presentation.

25:32 Thank you for listening. Fantastic. Thank you very much indeed for the presentation. Ladies and gentlemen, do please continue to submit your questions just using that Q and A tab situated in the right hand corner of your screen. Just while the team take a few moments to review those questions submitted today, I'd like to remind you that recording the presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. Let me just pop your cameras up guys. Bear me one second. There we go. As you can see, we we've received a number of questions throughout today's presentation, also pre submitted. If I may just ask you to to click on that q and a tab where appropriate to do so, just read out the question, give you a response, and I'll pick up from you at the end. Great. So the first question is, WINKWORTH WIMMERDON recently closed and there is a debt to WINKWORTH.

26:22 Does this have an impact on outstanding loans or provisions for WINKWORTH franchise limited? And the answer is, I was a constant comment in full that it doesn't have an impact. There were no loans from us to that franchise. So there was no need for any provisions in regard to any monies due. So another pre submitted question, what interest rate are you able to obtain on your cash balance? At the moment, we're getting just over 4%. That's down slightly from the start of the year on the monies we have in the money market or through treasury bills. In terms of build to rent, how do you see this impacting the market versus private landlords who exit?

27:16 Who exit does it matter, make for large concentration of clients properties. I think obviously, there is a big push for build to rent. It is a long way off covering the market and we're a long way away from covering the market. And so I think there's probably landlords are needed. Also, I think the sort of real thing is private landlords, you know, it is a great investment. The issue that's happened over the years is that the debt to if you have a bit of property having debtors made less sense, so you have less debt now. But clearly, if you can afford a bit of property for your pension pot, then it's a fantastic asset. So I think that will that will endure. Question.

28:03 Today's results referred to the ongoing proceeds from the Kennington sale. Can management outline the scale of these proceeds and when they were recognized? So this relates to the successful High Court action we took to change one of our franchisees, it resulted in us getting the Pimlico office, which is one of our owned offices, and also in the acquisition of the Kennington lettings business, which we sold to the Kennington sales franchisee. He paid 500,000 upfront, 100,000 in 2023,400,000 in 2024.

28:48 And then there are three subsequent tranches of 100,000 each in this year, 2026 and 2027 assuming that various performance targets are met and the twenty twenty five one was duly paid over earlier on in the year. Great. So this question for me, all franchisees seem to pay a flat 8% or commissions, but what flexibility is there on that 8%? The very best agents might become more attracted to WINKWORTH on a percentage lower than 8%. And you actually generate more income to WINKWORTH overall than a less talented agent on 8% due to much greater commission values. So your question, I think, you know, we are have been set in stone that from 1981.

29:33 So we would rather invest in that talented individual and maintain our fee structure because obviously, we believe that fee structure supports the evolution of the systems we need to support the agent. So rather than sort of go down that spiral, we'd rather put our money to helping that agent acquire WINKWORTH office in the first place or another office that's outside of WINKWORTH. So I suppose that's our mindset on on that question. There's a question from James C. Oh, yeah. Sorry. How do you found franchise autonomy with maintaining brand consistency and quality across the network? So that is a life's work of of running franchise organization there. Ultimately, the best way is get the right person in the first place. You know, once they're in, you've got a good quality person who believes in the same standards and values as you then, you know, you're you're off to a winning start. Beyond that there is a huge investment and number of people involved in ensuring that we do continue to I suppose, monitor respect, but monitor, you know, the standards offered by WINKWORTH offices and support them.

30:55 We try and do it as a supportive basis rather than a sort of school mastery basis, because we respect them as individuals and business owners. But we also need to ensure that everyone no one lets down another one. So we try and be very, you know, as business deserves mature in our conversations about it. And hopefully, we've achieved that to date. And then final question. On the interim dividend, when will it be paid? Will dividends be paid quarterly still? Yes, we will always be looking to pay quarterly dividends. Think the next one is due to be announced in mid October for the Q2 dividend answers that one. Great.

31:47 I think those are the those are all the questions. So thank you, everyone, for those. I think that's covered for each one presentation. Thanks very much, everybody. Thank you very much indeed for taking those questions. Can, of course, the company can review all further questions that are submitted and publish response on the investor meet company platform. Dominic, perhaps just before redirecting investors to give their feedback, if you did have any closing comments, otherwise, I'll wrap up. I suppose, done a few times, but accessing the opportunity accessing the talented people is the opportunity. It's kind of like that is the bit that we believe will shape our growth and where we can't access them that we're limited. So as a business, we we believe in that sincerely. And that's the number one pursuit.

32:37 Fantastic. Dominic, Andrew, thanks indeed for updating investors today. Can I please ask investors not to close the session? It should be automatically redirected to provide your feedback, nor the team can better understand your views and expectations. This may take a few moments to complete, and that's greatly valued by the company. Behalf of the management team of M WINKWORTH PLC, we'd like to thank you for attending today's presentation. That concludes today's session, and good morning to you all.