M Winkworth PLC (WINK) Earnings Call Transcript & Summary

Good morning, and welcome to the M Winkworth PLC Interim Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I'd now like to hand you over to Dominic Agace, CEO. Good morning to you.

Good morning, everyone. It's a pleasure to be here to present our H1 2026 results. I'm Dominic Agace, CEO of Winkworth, and this is Andrew Nicol, CFO, and good morning, everyone. Pleasure to go through the slides now. We start with this slide for those who don't know, just give a bit of background on the company and where we've come from, where we are today. So, and the model itself. Winkworth was established over 190 years ago in 1835. It came to franchising in 1981, which was the first estate agency in the U.K. to franchise, starting in Central London and franchising out from there, which has given us today 105 offices in total, 102 franchise offices and 659 in London, London being, I suppose, the heartland from which we've grown and very much sort of USP versus other franchise organizations or real estate businesses that don't have that network, established network across London. The model effectively is to provide a platform for an independent business, independent agency to operate under our name and compete in the top 3 in the local marketplace. So we like to think of this as that they may have been working for a wholly owned business and they can come and set up their own business and take control of their destiny within our sort of manuals and rules of the road and have everything at the end of the phone that they're used to having as an employee. And hopefully, for that, that enables them to compete better than they could do on their own. So for that, we sort of basically charge an 8% royalty fee of gross revenues. There are some additional fees, which if you sort of put them all together in relation to sort of training and website and -- website, put those together, then around just shy of 11% of the average office. We obviously, the local franchisee takes the lease in their own name, and we take options on those premises should we need to step in. So we have a very light fixed cost model. And we bill centrally so that all the sales contracts are paid to us, and then we distribute and deduct our franchise fee, which is obviously sort of very good for our cash flow. So yes, that's a little bit about us as a background. And so with that, we'll sort of go into the presentation. Let's start with an operational overview. H1 2026 is broadly in line with management expectations. The underlying '26 PBT expected to be slightly ahead, but reported PBT for full year, materially below market expectation due to ongoing legal and advisory costs. We had a good sales performance though when compared to 2025 and H1 2026. Last year in the first half, we obviously had stamp duty changing, which kind of created another artificial surge of activity. And so to be so close to it in terms of sales performance was actually a fantastic result in the first half of 2026. We continue to grow lettings, which in the face of changing legislation in that market in terms of the Renters' Rights Act, which came on in May, is a fantastic achievement as well and shows the strength of the network in terms of the advising they're giving their clients and the landlords are managing to retain and convert to property management as well as acquire new ones. We've supported a franchisee to acquire 4 new offices, which is our largest assisted acquisition to date. It's in the sort of North Cotswolds area, a couple in North Cotswolds, Warwickshire area, and it created a whole new hub for us really sort of alongside the others we've talked previously, this is a new point of growth with some really good operating supported and some really good talent we brought into the business. We consolidated our equity offices in Warwickshire businesses. Sort of we closed down the Development and Commercial Investment business. Really, we felt that there's risk attached to it. It was profitable last year, but risk in this market without the sort of recurring revenue underneath it and perhaps therefore wasn't suitable for us at this time to be involved in. And Crystal Palace, we sold on to a neighboring franchisee, which fits well with the geography and adds to his own network. Profits, as we said, were impacted by exceptional legal costs relating to the Board and shareholder matters. The Board is in the process of resolving that. We are considering ways to strengthen the Board and the company's wider governance to come out better and stronger from it all. And then finally, really to say we retain the position of having no debt. We're highly cash generative with cash generated from operating activities up 39% in the first half versus the first half last year.

In terms of the actual numbers themselves, network revenue was GBP 31.6 million, was down 1% on H1 2025. With that, as Dom alluded to earlier, network sales revenue of GBP 16.1 million was 5% down on the same period last year and lettings revenue of GBP 15.5 million was 3% up on the previous year. And the lettings sales split had gone from 53 sales, 47 lettings in 2025 on the back of the stamp duty surge that Dominic alluded to, 51-49. In terms of Winkworth's actual revenue, Dom alluded to the sale of Crystal Palace and the deconsolidation of the Development and Commercial business. So Winkworth's revenue was down to GBP 4.7 million, 10% down on the last year. I'll be providing a bit more detail on that on a subsequent slide. Operating profit before exceptional items is the trading element of the business was 9% up at GBP 0.84 million versus last year. But with the exceptional items, profit before tax was down 5% at GBP 0.78 million. The sale of Crystal Palace and wind down of DCI had an impact on the owned offices. So their revenue was down 30%, and they were roughly breakeven, a loss of about GBP 10,000 at the half year. Cash was GBP 3.73 million at the half year and ordinary dividends declared were 6.6p in the period. To give a bit more flavor, as I said, about the impact of the sale of Crystal Palace and the wind down of our Development and Commercial business, this chart -- these charts are designed to give a bit of a flavor around that. So the left-hand blocks are the position as at H1 2025 and the blocks moving across show the movements to get to H1 2026. So on the revenue side, even though the 8% revenue from sales and that was down slightly, 50,000 or so down on H1 2025, overall revenue was up. We had some small increases in our ancillary fees. We made more money from our CSD business in the first half. And the deconsolidation of Crystal Palace meant that 47,000 of revenue, which would have been excluded in previous years, actually registered as revenue for this year. That's why that's up. Pimlico was up 26% revenue half year on half year. Tooting was up 14% half year on half year. And then the downs, the decreases are the wind down of DCI and the closure of Crystal Palace getting us from hike GBP 202 (sic) [ GBP 5.2 million ] to GBP 4.7 million . On the PBT side, the trading element of the franchising business was up by GBP 111,000 year-on-year PBT. That's basically driven by cost savings. We didn't have the one-offs that we've had in H1 2025. So there was no investment in Prime Central London marketing, which had been 100,000 this time last year. And we didn't have an office move, which cost us GBP 70,000 or so in the first half of last year. There were some cost savings and some small cost increases. The net effect was a significant profit uptick. Pimlico's profitability was up by 24,000. Tooting was down slightly, basically on the back of the appointment of a high-performing sales director in the business and the timing difference around the sales pipeline. So the start of Q3, slightly frustratingly, has been phenomenally strong. It would have been good if that had started a month earlier. So hey, we are where we are. DCI was down year-on-year as we went through the final knockings of the pipeline. Crystal Palace is up because it actually lost money at the half year last year. And then the major element down on the far right is the exceptional legal fees of GBP 105,000. I'm afraid we can't talk much about that.

So, just to give you a flavor of the network and some movers -- movers and shakers, the different elements of the business and how they performed in the first half. I suppose part this shows the mix of Winkworth and all the different areas and revenue streams and how they move to kind of create a nice revenue that's supported by diverse income streams. When you look at this, I suppose, some of this sales is against the stamp duty and clearly, Central London less affected, but we've also seen the benefit from our investment in Central London where larger deals helped support revenue growth in H1. So that's been positive. It's still a difficult market, but it has made a difference. And country markets, we're growing in. So it's not still, that slightly offsets general market trends. And out of London, where we're very mature with well-established high market share businesses was more affected by the sort of different incentives that, or change in incentives, I should say, that kind of stamp duty change last year created. On the lettings side of things, you can see that, again, it's a bit of a change in the country where we're growing. So with the highest increase of revenue. It is also a slightly different market for us where there is more growth in buy-to-let landlords still because the economics are different because the value of the property is cheaper and therefore, the business case for landlords stacks up to a greater degree. So both of those things are coming together to ensure greater growth in that part of the business. Out of London continues to perform very strongly, close to the landlords. They are communicating they're getting new business from supporting landlords and other landlords looking for advice through the change of the Renters' Rights Act as well as, as you'll see below, offsetting lettings reduction, so 3% down in lettings with increase of property management revenue, so 4% increase. So what we're seeing is that with greater legislation, our franchisees are providing, able to provide more advice, add greater value and be able to charge for that to their clients. So that is basically playing out as we've discussed previously. Central London really slightly suffers from the malaise of the higher ticket lettings properties not being so popular at the moment. And so that has affected rental income in Central London as well as the fact that actually there's one part of the business where the monthly charges were more upfront and that has to change during Renters' Rights Act and therefore, there is a change in accounting for those offices of how they account for the lettings fees. So really further into the balance of the business. And again, this is a familiar slide, but we always put it up sort of shows the ebb and flow really one side picks up the slack from another, and that's the 50-50, it's not quite 50-50 split that we spent many years getting to. And now it's providing very useful to ensure the business continues to be incredibly resilient. And the offices are well fitted out to meet both requirements. The sales and market they can act quickly and create value there and equally in the lettings and they are underpinned by solid lettings revenue. So that's hopefully shows moved a bit by a slightly weaker sales market, which is directly fed through to the division. And then the revenue by area, again, this is the distinct areas we look at as we feel they have different dynamics, and so yes, often move at different times really. Clearly, we've been talking about Central London growing its share for a while, and there are still reasons why that isn't. We are investing in areas like Central London to ensure the quality of our business improves and therefore, we're able to take advantage of uplifts. And you can see the natural growth in the country where, as I say, we're sort of growing the network. So again this is really for sort of market and so feedback. And I think what you can see is sort of the lettings is easier, sort of demand is improving. I think you saw rental prices sort of overshoot and therefore, demand dropped by, they want to stay as long as possible to avoid having to move to new rental properties and therefore, I say dropped off. We're seeing that improve again. There is a shortening of supply certainly in the face of the rental as some landlords decided they didn't want to be part of the post regulatory environment in the rental market. But you're seeing fairly solid business increases in rent again and more shortening of supply, particularly in London. In the sales sector, I think this is a reflection of supply. We saw last year really sort of big kick of supply of properties to sell. And that, I think, is a reflection of increased costs over the years that we talked about in terms of mortgage rates going up, that on school fees, costs going up for building houses, everything having gone up over a number of years has meant that there's more movement as people readjust their lives to a different cost base in many cases. So I think the numbers reducing to sort of 6 and 5 per property is driven not really by, I mean, the drop in, there was a drop in applicants of 3% or so but really also an increase in supply. So I think that's feeding through to weakness in pricing. We've seen that for a while, but we're sort of seeing that in the wider market where there's lots to choose from for a buyer. And therefore, whilst there is not huge stress because of the nature of the mortgage market and employment market, you are seeing potential decline in prices.

The dividend was maintained for H1 2026. Future dividend decisions will be made prudently taking account of trading the group's cash requirements, investment opportunities and clearly the costs arising from the ongoing matters. Just to reinforce, dividends are absolutely in our DNA.

The drivers of growth, again, it's a familiar slide as the 4 parts really as we see it. The new franchising element, it's very simple that comes to us and open new locations or convert those existing estate agents to us. The assisted acquisition, which is the sort of big story is the acquisition of the Peter Clarke business in the Cotswolds. That's sort of largest to date, portfolio management where we're trying to headhunt and collect the best talent in the industry to come and join Winkworth and deliver sort of internal network growth. I think we haven't put this time, but we'll talk a little bit about how that's affecting market share and own businesses, which again, we will talk about in a little bit. So this is a consistent slide, and it shows the ebb and flow of the offices over a period of time. And some of this is asset positioning. Our view really has always been that better to have a strong network and walk away from offices that may be struggling and therefore, no benefit to the franchisee or ourselves with the strength of the reinforcement of the network and our proposition and our ability to evolve and invest in the newest things that need to be done to ensure we can compete in the top 3. So when you look at this year, obviously, you've seen the acquisitions, assisted acquisitions, some fantastic new offices joining us, sadly several closing, in particular Dartmouth and Milford-on-Sea, I saw those questions and it's, they are unfortunately being hit by, they're very low volume areas, I should say, but they have their buzzing time. But clearly, tax and agendas against taxation against second homes and local council tax changes have meant that the sort of holiday home market is very difficult. And there's a big readjustment going on in these areas. I think we're seeing that not only the demand stock, but the different type of buyers, so the buyers of the holiday homes in the center of these towns is not the same as the local buyers. So there's adjustment going on. And so those offices sadly weren't viable. Paddington was disappointing, suffered from sort of prime Central London difficulties and a multisite operator, which we elect to consolidate into these 2 other offices and service it now currently from neighboring offices maintaining revenue. So going forward, I think we have 6 offices in the pipeline, 1 new office, which is one of our regional hubs who is going forward with another new office to add to its localized network. And then some resales and some good opportunities to resell some important offices to some new talent that we think will boost them significantly and therefore, make our network stronger and grow our 8%. So we started doing this as a sort of series, and these are the some of the stars around the network and Jamie and Kylee are sort of the, our Norfolk network are really our Norfolk network. They also have Southwold, but predominantly Norfolk, and are soon to be opening a new office. They are fantastic operators, ambitious and are sort of leading the charge with the Winkworth brand in the area and creating a fantastic reputation. They opened in 2018 and have done that, so it says '19 for Burnham, and have done that since then with our sort of backing of Burnham, Hellesdon, Eaton, Southwold. The revenue last year was GBP 1.9 million. We continue to support people like Jamie and Kylie where they look to expand because we have our trust in them. So, owned offices. Yes, a bit of change, and I think we talked about a little bit upfront. We consolidated it. The less, I suppose there's less exposure to them as a venture within our business. We have Crystal Palace, we sold on. It was a situation where we were set to lose the office due to protracted disputes. And so we took it on, we put in a good manager. The manager didn't in the end wish to take it on themselves. So we sold it to a neighboring franchisee who is sort of a great operator, has a number of offices, it slots in very neatly to his localized network. So we kept the revenue stream from the area, actually boosted it many times over, I think, in terms of 8% and now put it in a place where we continue to deliver that for years to come. In terms of commercial investments, as I said, it's a very difficult market for that sector of the business. We felt that, that posed a risk to us in our sort of high dividend paying nature and so better to sort of wind it down if we didn't have the recurring revenue under it to support it through a difficult time. So again, we reduced our exposure. And the Pimlico and Tooting are 2 examples of this strategy. So Pimlico again was something that we, the office would have been lost. We felt it was important to maintain it. So we stepped in and put in a good operator in there. Therefore, we need to have the office and it is growing its revenue. The Tooting business is something that we took our time to acquire. It has delivered a lot of different value in different areas. It produced -- increases 8% from revenue -- gross revenue from GBP 200,000 to GBP 1.6 million or GBP 1.5 million, got a great operations network. We went on actually to 2 others, which are now doing fantastically well. We had, then we had a manager that didn't deliver as much as hoped, but we maintained his profitability, and we've now got another star player in there and hopefully he'll go on to own more of it or all of it in due course. So I suppose in the meantime, we'd be benefiting from the increased 8% and profit generation over the years. So operating performance, this really just gives you a nice flavor of the network and how it performs. And so a couple of the stats we take from the industry sort of data company, which is TwentyEA. They generally sort of have the data for the industry and produce the statistics. So first thing to say is it going to have a #1 property sold in subject to contract across the area we operate in. So that's fantastic, obviously. And then we put, I mean, we'll do it at the end of the year. We put in a slide normally where it started in the slide where we say how many more of our offices we've got in the top 3 years showing -- I suppose, to show the work that goes into improving the quality of our network and how we are improving and therefore, continuing to move revenue forward. And this is to say that we've improved our market share in London 24% in the last 5 years. That is another way, I suppose, of demonstrating that the existing network is going forward, perhaps on the back of portfolio management and the new talent we're bringing in, hopefully our efforts to improve our platform. And then just some other statistics. This is against the operating area. With us, you're more likely to agree a sale. You're more likely to exchange that property once you agreed it, you're less likely to withdraw your property from our services and we're less likely to have a sale fall through. So hopefully, those all bode well for a healthy network. And we have digital evolution. Really, we call Winkworth OS, and this is, I suppose, to break it down, to make some clear, we look at it as lead generation, how can we ensure that our digital investment generates more leads for our franchisees. Clearly, that's being, getting involved with ensuring that AIs can read our website and read our properties within it more easily, and that's an investment in our website to ensure that can happen and therefore, we can get more searches and more inquiries as people move some of their searching or a lot of their searching through these AI language models away from traditional routes. So we can cover that off and we have invested and we'll continue to invest. We've done some of the work, and we've got more to come. We also will be with the new website a platform where we'll be able to provide more options for clients to be able to do things themselves should they wish. Obviously, our whole purpose is we are a people business, and the front and center. So we want to do things that support our people and support them in communicating with their clients. And then there's obviously there are operating efficiencies, how we can communicate with our franchisee network, how we can use the data we have in our network, how, as I said, M Winkworth can help clients manage or have transparency around their property transaction and their property dealings. And obviously, franchisee economics. So what can we look at that doesn't undermine our people-first business but gives them savings, hopefully, and ensures them they're more efficient and that they can add value to their business. So these are, that's our thinking of how we do it. Obviously, there is, I mean, a number of projects that are running. First and foremost, is our new website platform, which should be with us sort of this year, which will be the first step and other parts are followed. So again, really the website is the center of the network really. And hopefully, we've always aspired to have a best-in-class website. We feel it's something that franchisees can hang their hat off and it can deliver a lot of value to our franchisees. And this just really gives you the leads. I mean what's interesting on the leads visit side is obviously I think you see the surges in the market in 2021 first half, but also the stuff, which is worth noting. And we've seen a significant pickup and part of that is AI generated. So more searches coming from AI, which has boosted our visits significantly from this more recent trajectory. And then just to give you an idea, obviously looking at the charts on the left, valuation leads sort of around 6,000 to the network a year. That's quite a big engine of delivering business and shows the value we add to an individual business through this sort of platform we invest in to ensure it's best. So looking back and looking ahead, H1 broadly in line with management expectations. We continue with our plan of recruiting new talent to uplift our revenue and improve the network. We do have, we had a stream of new talent through the Peter Clarke business joining our business, improving the mix of it. We got franchisees have done really well and managed the Renters' Rights Act transition and managed to grow the lettings and management revenue through that uncertain time. And we've deployed strong increasing cash flow to do that acquisition and support franchisees whilst maintaining the dividend in the first half. So going forward, some of these goals are always consistent goals, being the first option, wishing to, aspiring to be the first option for agents, wishing to set up their own business, operating in prime markets and continue to offer a platform allowing successful agents to rank in the top 3 in their area. So they're profitable in all markets, as said, manage the portfolio to grow the quality of the network, reputation and income, provide a menu of options to ensure that we can track the best operators out there to join the Winkworth network through one of those options. Continue to invest in our brand and digital platforms to support our franchisees, remain a people-led business backed by state-of-the-art technology. Obviously, we've talked to launching our new website, adapt to the new role AI is playing in property search, ensure that we're therefore, adapted and providing value to our franchisees because of that adaptation. We have a strong balance sheet, enabling us to invest in opportunities as they arise through the cycle. And finally, share earnings strength for shareholders through regular dividend distributions. So thank you. That's the presentation. Let us move on to any questions.

That's great, Dominic, Andrew. Thank you very much indeed for your presentation. [Operator Instructions] I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can be accessed via the investor dashboard. Dominic, Andrew, if I may now hand back to you and take us through the Q&A session. Kindly ask you to read out the questions where appropriate to do so, and I'll pick up from you both at the end.

We have a pre-submitted question. Investors are, of course, keen to hear the latest news on whether or not the current directors are likely to still be on the premises. Certainly interested to hear more about 34% shareholder. Irene Ho Kim Lee, Chair's wife, who was hitherto unknown, throwing her weight around. I can't really talk about that at all, I'm afraid. Sort of ending, meanwhile, back at the coalface, pleased to see the Leamington franchisee thriving and expanding. More concerning is the closure of the South Coast branches, Dartmouth and Milford.

Maybe I can answer that. I think, yes, we've got a really talented guy in Leamington and he's doing great things. And so we're really pleased that we backed them and that's going really well, and it's a happy ship with great potential. So that's fantastic. The Dartmouth and Milford, hopefully I explained a bit, they are -- there's been a big change in the second-hand market for holiday -- holiday homes has really struggled due to recent sort of steps, disincentive tax changes, I suppose, they sadly were not viable. What are the sales transactions expected in London market in 2026 vs 2025? I think you're seeing it probably come in slightly below the, yes, I think it's been pretty resilient. Obviously, it has started off with great hopes to move significantly ahead as is the way with the property market of late, macro events have affected things. But I think we'll see it land within overall U.K. transactions I think [ Repro ] saying sort of 4% down. So I think that seems reasonable.

So a question of the 104 offices currently in the network how many would you classify as mature? And how much revenue growth is typically achievable from a mature franchise?

Yes, I don't know if we have that categorized it that way. Sort of basically, our London network is very mature. So those 59, they've been there for a very long time, most of them and have great market share. It does vary by area. Every area has got different transaction numbers and different property price points, which all feed in different commissions and therefore, opportunities. What we did when we, I suppose we look at that. And when we did, for example, Tooting, we looked at it and said, okay, well, that's got a lot of transactions young professionals, houses flats, a lot of movement. It doesn't have perhaps the big gardens of some areas, which means people stay there forever. So it has huge potential. So we invested in it to make sure we realize that potential. It's not a direct answer, but we explained that we do look at it. But there is generally more potential in the London market because the more movement than perhaps a country market where people move less often.

So a question from Stephen B. With the equity-owned businesses now representing a smaller proportion of the group, should we expect the underlying margin profile to become more stable?

Yes. Yes, there's lower risk from the, well, especially in particular the fluctuations of DCI was a good, let's say it's profitable based on significant deals. So there was more risk. I think, yes, yes, I think we're taking, a slightly uncertain backdrop and we're taking a cautious approach. And it's one of the tools we use to improve our network revenue and bring quality people into it. As I said, we go back to the initial Tooting story, the chap came on board, wouldn't have bought it and didn't have the funds to buy it. Owns neighboring offices, which are sort of quick rapidly moving to the top 10 in Winkworth. So it brought in some really good talent and generated some money along the way. So it's one of the tools, but we're wary to not overcommit to it.