LSL Property Services has warned full-year profits will be lower than expected amid ‘more challenging’ trading conditions as higher interest rates and political uncertainty weighed heavy on the housing market.
LSL identified disruption created by September’s mini-budget and higher mortgage rates for a slowdown in new house sales.
Group revenue was slightly higher at £276.1m in the ten months to the end of October, thanks to a strong performance within its surveying arm, but its estate agency business saw a 6% fall.
The company now expects the overall group performance to be below its prior expectations.
It said full-year profit is anticipated to be in a range just above or just below that reported in 2019, having previously forecast a stronger performance.
LSL shares fell 10.6% to 236p at the close of trading on Friday, leaving the stock down 43.4% compared to a year ago.
David Stewart, LSL’s chief executive, commented: “As reported in our Interim Results, LSL traded strongly in the first half of the year, with our Surveying & Valuation and Financial Services businesses achieving record revenues. The Estate Agency Division retained the substantial market share gains made in 2021, in doing so building a strong sales pipeline as significant profits were delayed by the continuing slow speed of exchanges across the market. This meant that the Group entered the second half of 2022 well placed to deliver a strong H2 profit performance, ahead of the equivalent period in 2021.
“Since that time, market conditions have been more challenging than previously expected, with the mortgage and housing markets being disrupted by political uncertainty and sharply increasing interest rates. Across the market, this has given rise to a reduction in mortgage activity and new house sales, and an increase in fall-throughs of previously agreed sales.
“This challenging background means that there is a wider range of potential outcomes for the full year than previously expected.
“I am pleased to confirm that LSL’s performance has remained resilient, and we are confident that Underlying Group Operating Profit in the second half of 2022 will at least be broadly in line with the second half of 2021, with the possibility of a stronger performance depending on the volume of valuation instructions received from lenders. This includes additional costs incurred due to discretionary payments to over 2,000 colleagues to help alleviate the impact of significant increases in living costs. Around £0.6m of these costs will be reflected in 2022, with a further £0.8m to be paid in 2023 to cover the winter months.”
Comments (4)
The share price has halved since August last year. That in my mind is a terrible performance and I am surprised all the board are still there.
LSL main board do not have an Estate Agent on it. This is quite incredulous when the business has as many estate agent branches as it does. For the first 6 months the estate agent part of LSL lost £1m. I hate to think what the second half of the year will reveal. It is time for the board to have some estate agency experience, this is not a retail business as countrywide discovered. Look at Connells they have estate agents running estate agents.
I would imagine the second 6 months will be better but as with all/most agencies its will be 2023s first 6 months months which will be the tester. We will see a lot on consolidation in my opinion.
On Connells Stephen Shipperly was always the captain of this ship-and successfully led the company through many downturns .He has now retired very soon after the CWD acquisition ? so be interesting to see what happens next here.
Interesting times ahead.
I think you’re being a bit unfair. While independent agents can keep tight lipped about how quiet transactions have been since the end of the last SDLT holiday corporate agents cannot.
Looking at the numbers news like this was inevitable. It’s not the board, the staff or company, its the market we’re in.
When an independent agent can quietly go about doing what they need to do, bigger agencies cannot.
Where most commentators are fixated on property prices and are reliant on other people’s numbers, I monitor transaction prices and completions combined to give an indication of industry income levels. You are currently operating at income levels similar to those between 2010 and 2013. 2021 was a bumper year but the number of completions are currently on the floor and have been for 12 months