Winkworth shares rise despite lower profits

Shares in Winkworth rose close to their recent highs yesterday despite the agency franchise brand reporting a drop in revenues and profit for 2022.

The listed agency brand revealed in its annual results yesterday that revenues declined by 1% to £9.31m in 2022 while pre-tax profits fell by 23% to £2.46m.

The decline was blamed on the reversal of the ‘race for space’ as well as the October 2022 mini-Budget, “when confidence was upset by the sharp rise in interest rates.”
Winkworth shares closed at 180p, up 2.86% on a daily basis and close to the recent high of 183p reached in March 2023, which was the highest level since September 2022.
The share price is now up 15% so far this year.

Dominic Agace, chief executive of Winkworth highlighted that the brand’s revenues, profit before tax and net cash position were all some 50% higher than the pre-pandemic levels achieved in 2019. 
He said: “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 London.”
Winkworth’s 2023 outlook remains positive.

Agace added: “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, Agace said: “We see a rebased market emerging, with UK transactions reverting closer to the long-term average of around 1m per year. 

“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.”