Franchising business Winkworth has reported a slide in revenues and a major drop in pre-tax profits after an 18% fall in the number of properties sold.
In the six months to the end of June, its interim revenues were down 7.6% to £2.54m, while pre-tax profits plunged 25.2% to £0.54m, down from £0.72m for the same period last year.
The figures relate to the fee income earned by Winkworth from its 96 franchisee offices.
Income in the franchised office network fell by 9% to £21.4m, down from £23.6m.
House sales fell 18% to £11.7m (£14.3m for the same period last year), lettings down 2% to £6.0m (£6.1m) but property management up 15% to £3.7m (£3.2m).
Despite the figures, dividends of 3.6p were declared and paid during the period – up from 3.5p last year.
CEO Dominic Agace said that comparisons between the first half of this year and the first half of last were difficult, because the introduction of the 3% Stamp Duty surcharge last April skewed the market with a spike in transactions, distorting sales performance.
As a result, 2016 was the first year for Winkworth in which its second half was weaker than the first.
Agace said: “We expect our seasonal performance to revert to normal in 2017 after an 18% year-on-year fall in the number of transactions in H1.”
He said the sales market has remained unsettled. However, house price falls of 15% in central London over the last two years and a cheaper pound had led to more international buyers. Winkworth’s sales income in this sector was up by 7%.
In outer London, affordability issues continue, Agace said.
The lettings and management business grew, now responsible for 45% of total gross revenues for the franchisees.
The average price of a property rose by 2% – £750,000 in London, and £594,000 across the UK.
Winkworth signed up seven new offices in the first half of this year and said it continues to attract high quality new franchise applicants.
More new offices are due to launch early next year.
It said start-up franchisees are “typically successful managers whose earnings are depressed by current market conditions, and who are looking to own equity in their own business … and no longer be hamstrung by the corporate requirements of larger well-known brands dragging down their earnings potential”.
Being part of a franchise is a great way to have a sustainable business. I’d definitely check out hunters before you sign anything with anyone else.
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Strange. From memory they had 99 offices two years ago.
The excitement of Franchising is that you feel you will be running your own business. Reality can be quite different. My advice is that you pay well to get advice and make sure you nail down who has control.
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The office in Cobham closed down and has now turned into Century 21 franchise
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With a franchise you still have people/contracts/royalties that you are answerable to…so you aren’t quite as enterpreneurial/independent as you might like to believe, but the advantage is that a start up has an established brand behind them. The stats are that franchises result in less start up failures, but like all businesses, there are a lot that find they don’t earn as much as they think they will…lots of royalties and corporate charges. At least you feel as though you are part of a big group….ironic when the sales pitch is that you run your own biz. Good for some!
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