CEO's Statement

In a year of fiscal tightening, the property market remained remarkably resilient until the mini budget in October 2022, when confidence was upset by the sharp rise in interest rates. Our results for 2022, while below those recorded by an exceptionally strong performance in 2021, were very satisfactory. It is worth noting that in 2022 our revenues, profit before tax and net cash position were all some 50% higher than the pre-pandemic levels achieved in 2019. Our ordinary dividends declared for 2022 showed an increase of 18% over the prior year and were 41% above those declared in 2019.

Despite the upwards drift in the cost of finance, prices peaked at record levels in August 2022, but after the budget we saw pricing being tested and a predictable slowdown in activity, with early signs being for a soft landing rather than significant weakness.

The ongoing reversal of the Covid-induced race for space, with a reversion to office working and city life returning to business as usual, translated into gross revenues of the franchised network in London being down by only 1% year-on-year, compared to a fall of 9% in the country markets. As expected, Central London benefitted from the return of international travel, with income 11% ahead of 2021.

Over the course of the year, we retained our position as the second agency by number of properties exchanged in inner London¹.

The rental market remained incredibly strong across all regions, with price increases of over 10% in many areas due to a shortage of supply following the sell-off of many buy-to-let properties by landlords facing the higher tax and regulatory changes that have reduced the viability of this activity in recent years. This, combined with a significant movement of people to and from the country driven by pandemic-related factors, led to notable price movements. Increased market share and higher rents resulted in our network revenue growing by 11%, led by central London where the additional factor of the return of international travel boosted growth to 16%.

In 2022, gross revenues of the franchised network of £63.1m were down by 3% year-on-year (2021: £64.8m). Sales income was down by 12% at £34.3m (2021: £39.0m) while Lettings and Management increased by 11% to £28.7m (2021: £25.8), producing a 54:46 revenue split between these two activities, compared to a 60:40 ratio in 2021, as the sales market eased in the second half of 2022 and lettings revenue continued to grow.

Winkworth's revenues declined by 1% to £9.31m (2021: £9.45m) and profit before taxation fell by 23% at £2.46m (2021: £3.21m). The Group's cash position at year end increased to £5.25m (2021: £5.02m). Dividends of 11.0p per share were declared for the year (2021: 9.3p per share).

We continued to grow our franchise base, opening two new offices and developing regional networks by backing existing successful franchisees. Our Exeter franchisee opened a new office in Crediton and our Bath franchisee opened in Bristol through acquisition. We successfully resold our leading office in Shepherds Bush to a new generation franchisee to take it on to the next level. While some openings expected to complete in the second half were delayed, our pipeline remains healthy with five new offices in new markets expected. We continue to see opportunities to support both key talent in the network and outstanding candidates in the industry to acquire new businesses and expand the Winkworth brand.

Our owned offices in Tooting and Crystal Palace, and our Development and Commercial Investment ("DCI") business showed significant progress over 2021 in terms of their combined contribution to both revenues and profit before taxation.

Tooting retained its position as number one for 'Sold Subject to Contract' in its area and Crystal Palace continued to grow its revenue and improve its market share, rising from 7th to 4th in its area and growing its revenue by 30% over 2021. DCI revenues more than doubled in 2022.

Overall, our partnered businesses revenue grew by 27% from £2.2m to £2.8m. We will seek to grow the revenues and profitability of our partnered businesses and plan to launch a new homes operation within our DCI venture as part of its evolution.

OUTLOOK

The sales market continues to be supported by the shortage and high cost of rental property, pent-up savings post-pandemic, a strong employment market, and private sector wage inflation. After a positive start to the year, we expect the property market to perform towards the higher end of expectations, albeit at transaction levels more closely aligned to historic averages than the boom levels of the last two years, with the increased cost of finance leading to prices drifting down by 5%.

A severe shortage of supply continues to underpin rental prices, particularly in London where the return to city living is driving demand and buy-to-let landlords have sold down portfolios in response to the increased costs of finance and management. Affordability ceilings are, however, now being reached and, as financing costs fall from peak levels, some landlords may now be tempted back into the market.

With mortgages rates having fallen from the peak levels seen after the mini budget and now settling at more historic norms of around 4%, we see a rebased market emerging, with UK transactions reverting closer to the long-term average of around 1m per annum. As such we see opportunities to invest in the right talented people in the industry, supporting their entrepreneurial ambition to own a business, and in existing franchisees seeking to grow the revenue of their existing offices or open new ones.

Note¹: based on postcodes where Winkworth has listed a property - Source: twentyea

Dominic Agace

Chief Executive Officer

18 April 2023

M WINKWORTH PLC

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2022

M WINKWORTH PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 DECEMBER 2022

M WINKWORTH PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2022

WINKWORTH PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2022 

1.    STATUTORY INFORMATION

M Winkworth Plc is a public company, registered in England and Wales and quoted on AIM. The Company's registered number and registered office address can be found on the Company Information page of the Annual Report.

2.    ACCOUNTING POLICIES

Basis of preparation

The financial statements have been prepared under the historical cost convention, with the exception of financial instruments as set out below, and in accordance with International Financial Reporting Standards adopted by the European Union ("IFRS"). The financial statements are presented in pound sterling, which is also the company's functional currency. The following principal accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements.

Going concern

The Directors have, at the time of approving the financial statements, a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.

The Group has a strong cash base and no borrowings, with a high level of discretionary expenditure, which can be cut at short notice. Income would need to fall substantially for a prolonged period, beyond six months, before a cash shortfall arose, at which point stronger measures would be taken to cut costs. Thus, the Directors continue to adopt the going concern basis of accounting in preparing the accounts.

Revenue

Revenue represents the value of commissions and subscriptions due to the Group under franchise agreements, together with the value of fees earned by its subsidiary lettings business. Revenue in respect of commissions due on house sales is recognised at the point of the relevant property sale having been completed by the franchisee. Revenue in respect of commissions due on lettings, property management and administration services is recognised in the period to which the services relate. The Group earns a straight 8% by value on all sales and lettings income generated by the franchisees.

3.    SEGMENTAL REPORTING

The board of directors, as the chief operating decision making body, review financial information and make decisions about the Group's business and have identified a single operating segment, that of estate agency and related services and the franchising thereof.

The directors believe that there are two material revenue streams relevant to estate agency franchising.

4.    TAXATION

      Analysis of tax expense

         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: