Termination: Termination of coverage

Edison Investment Research is terminating coverage on M Winkworth (WINK) Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.

Update: Market non-recovery confirmed

Challenging market conditions, especially in central London property, should not have come as any surprise. Management confidence in its franchise is emphasised by continued investment, and the tone of its commentary indicates that it expects payback in 2016. Growing franchise enquiries may give some company-specific support. Confirmation of these conditions means we have cut 2015 earnings estimates by 7%.

Update: Revenue growth despite challenging market

Winkworth’s revenue grew 3% H115 on H114 despite challenging markets and unlike some London-based peers that have reported falls. Rental income continued to grow, offsetting pressure on revenue from house sales. Company-specific growth also came from the centralised services including the international desk. Management notes low mortgage rates, improved post-election sentiment and wage increases underpinning a much improved market outlook in H215.

Update: Growth as expected

Winkworth delivered strong growth in 2015 (revenue up 11%, pre-tax profits up 14%). Central London saw 15% lower transactions, but still generated revenue growth. Non-London offices grew revenue by 21%. The group continues to expand its footprint and 35% of revenue comes from lettings/property management. It cannot be immune to election-related uncertainty, but we still expect steady progress in 2015.

Institutional Comment: Daily comment

Update: Country growth over twice that of London

Winkworth saw sales up 20% gaining share especially in its increasing non-London (‘country’) network. It has exploited the leverage from rising house prices in the capital, and also invested in a country network to maximise its brand. H114 also saw an increasing financial services contribution and the roll out of a cross-referral department. We expect supply bottlenecks to ease in London creating some growth opportunities even as house prices stabilise there. We also expect Winkworth to cont...