The strong UK housing recovery, coupled with a prescient strategy of expanding into new London commuter zones during the downturn, pushed first-half sales up by a fifth at estate agent M Winkworth (WINK). The business model works on a franchised basis, with each independent outlet paying a percentage of revenue in exchange for using the Winkworth brand and other services.
Mindful of a cooling central London market, Winkworth has been busy building its presence elsewhere, notably in the west and south west of England. This bet paid off in the first half: whereas total franchisee transaction volumes grew by 28 per cent, franchisees outside London signed a full 43 per cent more deals. Gross property revenue from franchisees consequently rose by 23 per cent to £23.5m, within which rental income was up 11 per cent at £7.9m.
However, the capital remains key to the group. While transaction volumes in the prime London postcodes remained broadly flat, Winkworth's offices posted strong growth, thanks both to market share gains and a 20 per cent increase in rental income. Management expects the frantic pace of house price inflation in London to moderate to around 5 per cent next year - "subject to some extent to the outcome of the general election in May 2015".
Analysts at Liberum are forecasting full-year pre-tax profits of £1.9m and EPS of 11.4p (from £1.7m and 10p in 2013).
| M WINKWORTH (WINK) | ||||
|---|---|---|---|---|
| ORD PRICE: | 165p | MARKET VALUE: | £ 21m | |
| TOUCH: | 162-168p | 12-MONTH HIGH: | 210p | LOW: 148p |
| DIVIDEND YIELD: | 3.5% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 33p* | NET CASH: | £2.3m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 2.1 | 0.6 | 3.7 | 2.6 |
| 2014 | 2.5 | 0.8 | 4.9 | 3.0** |
| % change | +20 | +33 | +32 | +12 |
*Including intangible assets of £1.1m or 9p a share **Second quarter dividend paid on 5 Sep | ||||
