LSL has released its results for the 12 months ended 31 December 2023. 

It shows that group revenue from continuing operations was £144.4m, down from £217.5m in 2022. After adjusting for disposals and discontinued operations in estate agency, revenue was around 10% below prior year in a market in which purchase and remortgage lending was down 29% and residential property sales which were 19% lower. 

Group revenue, including discontinued operations in estate agency franchise, was £176.8m (2022: £321.7m)

Group operating profit was £3.7m (2022: loss of £21.7m)

Group underlying operating profit from total operations was £9.3m (2022: £35.8m), slightly ahead of expectations, with disrupted markets particularly impacting results in the Surveying & Valuations Division

Group Underlying Operating Profit from continued operations was £10.3m (2022: £29.9m)

Net Exceptional cost of £4.5m (2022: net costs £47.6m)

Net Cash of £35.0m at 31 December 2023 (31 December 2022: £40.1m)

Notes:

1          Stated on basis of continuing operations unless otherwise stated. Refer to notes 2 and 6 to the Financial Statements

2          Refer to note 36 to the Financial Statements for details regarding the restatement

3          Group (and Divisional) Underlying Operating Profit is stated before exceptional items, contingent consideration assets & liabilities, amortisation of intangible assets and share-based payments. Refer to note 5 to the Financial Statements for reconciliation of Group and Divisional Underlying Operating Profit to statutory operating profit/(loss) for continuing, discontinued and total operations

4          Following the conversion of the entire owned estate agency network to franchises in H1 2023, the previously owned network was classified as a discontinued operation and is now presented as such in the Financial Statements. Refer to notes 2 and 6 to the Financial Statements

5          Refer to note 12 to the Financial Statements for the calculation

6          Refer to note 35 to the Financial Statements for the calculation 

The conversion of its entire owned estate agency network to franchisees means that LSL is now one of the UK’s leading estate agency franchise businesses, supplying services to 308 territories. 

LSL also confirms that the disposal of Marsh & Parsons, the London estate agency brand, which did not fit into their overall franchising strategy, achieved a final consideration of £26.1m at an attractive multiple. 

Overall, the mortgage and housing markets were significantly disrupted in 2023, impacting the financial performance of the group. However, following a positive final quarter of 2023, the preliminary results are slightly ahead of expectations.

LSL says momentum has continued to build further in 2024, particularly in its surveying and valuation division. Over the first quarter, Underlying Operating Profit was materially above the same period in 2023, reflecting the benefits of the Group’s transformation programme completed in 2023 as well as improving market conditions.

The continued strong performance since their recent trading update on 6 March has reinforced the Board’s confidence, and group’s expectations for full year Underlying Operating Profit have increased again.

Net Cash was £35m at the year end with the final dividend maintained at 7.4p per share, and the Board today announces a Share Buy Back programme, following a review of capital structure and capital allocation policies. An initial £7m tranche will commence imminently.

Other strategic highlights:

+ The sale of the four direct-to-consumer (B2C) financial service advice businesses was completed in April 2023 to Pivotal Growth, LSL’s joint venture with Pollen Street Capital. LSL’s Financial Services core activities are now focused on business-to-business (B2B) services, while retaining the opportunity to capitalise on B2C opportunities through our equity share in Pivotal Growth

+ In August 2023, we announced the acquisition of TenetLime mortgage network, with completion taking place on 2 February 2024, following FCA approval and the successful migration and onboarding of over 150 network firms with over 250 advisers. The acquisition will be earnings enhancing in 2024 with the current financial performance in line with our targets

+ Completion of these projects means that the Group’s annualised cost base has been reduced by £140 million representing 50% savings on an annualised basis

Additional highlights:

+ Recruitment of a new Chair is well advanced, and that of a new Senior Independent Director is also well underway. We will provide a further update in due course

+ Following the expansion of Pivotal Growth, Simon Embley will not seek re-election at the upcoming AGM and will step down from the Board on 1 May 2024 to focus on executing Pivotal’s growth plans

+ Capital structure and capital allocation policy reviewed. Small net cash position to be maintained. Capital to be deployed at an appropriate risk adjusted margin above our Weighted Average Cost of Capital (WACC): currently 12%. Excess capital to be returned to shareholders

+ Share Buy Back programme announced today, with initial £7m tranche. Commencement of programme is imminent

+ Full year dividend of 11.4p (2022: 11.4p), with Final dividend maintained at 7.4p, reflecting strong balance sheet and Board’s confidence in prospects

+ Agreed new RCF in February 2023 of £60m with existing lenders, extending maturity to May 2026

David Stewart, Group Chief Executive of LSL, commented: “2023 marked a period of significant progress in our transformation to a higher margin, less capital-intensive business that will perform more consistently through market cycles. Against the backdrop of very challenging market conditions, we have simplified and restructured our Financial Services and Estate Agency businesses. Both are now focused on business-to-business services with a significantly lower cost base and the potential for higher free cash flow generation.

“Following this significant restructuring, LSL is now a more streamlined, agile Group comprising three market leading businesses with high return and organic growth opportunities that are well positioned to capitalise from the recent recovery in the housing and mortgage markets. Our focus is on maximising the performance of these businesses to deliver value to shareholders.

“I would also like to take the opportunity to give both my personal thanks and those of the rest of my colleagues to Simon Embley, who has decided to step down from the Board on 1 May. Simon’s contribution to LSL has been extraordinary, from its beginning in 2004 to the present day. I am delighted that we will continue to work closely with him as he focuses on the growth plans of our joint venture, Pivotal Growth, which has made substantial progress over the past year.”