LSL issued a Trading Update last Friday which contains interesting information about how the company reacted to the Covid-19 crisis and the group trading activity in April, at the height of the lockdown.

The Update said:

The Board reacted quickly to the emergence of the COVID-19 virus, and the announcement of the national lockdown on 23 March 2020.

In formulating its measures, the Board’s priorities were to:

· Safeguard the health and well-being of staff and customers

· Optimise short-term financial performance

· Safeguard cash and manage liquidity in a sustainable way in line with the banking covenants

· Understand the impact of extreme scenarios and put in place plans to safeguard the Group’s financial health under plausible worst-case conditions

· Retain the capability required to take early advantage of any improvement

The resulting measures taken include:

· Implementation of the annual pay review immediately suspended for all directors and staff.

· All Board and Executive Committee members agreed a voluntary reduction of up to one third in salary and fees from 1 April 2020. This will be kept under review by LSL’s Remuneration Committee

· In response to the drop in transaction volumes, at 30 April 2020, 73% of Group employees were on furlough, as part of the UK Government’s Coronavirus Job Retention Scheme

· All discretionary expenditure halted, and improved terms negotiated with a number of key suppliers

· Residential Sales exchange income and Lettings income from new instructions for essential pipeline transactions secured in line with Government guidance

· Implemented non-physical (remote) valuations with the majority of lender clients, allowing a proportion of revenue to be secured

· Focus on meeting consumer demand for remortgage and protection products in Financial Services businesses

Impact of lockdown on business volumes

As anticipated, the impact of the lockdown on housing market transactions was significant.

Average metrics for LSL in the twelve weeks prior to the lockdown announced on 23 March 2020, compared to the average for the seven-week lockdown period up to 11 May 2020 were as follows:

· In the Estate Agency branch networks, Residential Sales Exchange Income per week reduced by 63% whilst new lettings and renewals reduced by 24%

· Mortgage applications (excluding Estate Agency network) reduced by 25%, with continuing demand for advice for remortgages and product transfers

· Average Protection completions (excluding Estate Agency network) were highly resilient remaining at the same level in the period after lockdown

· General Insurance renewals (excluding Estate Agency network) were also highly resilient, being in line with the period before lockdown

· Average weekly Surveying valuations reduced by 80%, with all remaining valuations conducted on a remote basis, in line with lockdown requirements

Financial performance in April 2020

Notwithstanding the full national lockdown that commenced on 23 March 2020 and continued throughout the whole of April and into May, LSL delivered a robust financial performance:

· The Group generated an Underlying Operating Profit in April 2020 of £1.6m (2019: £2.9m)

· In line with Group accounting policy, £1.2m of costs have been recognised and classed as exceptional due to the unprecedented situation related to the COVID-19 situation

· Group revenue reduced by 56% compared to prior year

· Estate Agency and Surveying Divisions were more affected than Financial Services, which benefited from remortgage and protection activities as well as the resilience of our General Insurance business predominantly driven by renewals

· Financial Services revenue, excluding Estate Agency, reduced by only 18% compared to 2019, notwithstanding the significant market wide reduction in house purchase mortgages

· Financial Services contributed increased operating profit of £0.9m in April (2019: £0.7m) benefitting in particular from the arrangement of remortgage and protection products

LSL had already put in place detailed contingency plans in preparation for any future relaxation of the lockdown rules.

As a result of this preparation, we have been able to recommence business quickly and in a way that safeguards the health and well-being of staff and customers as far as possible.

Estate Agency branches have been reconfigured to allow essential social distancing to take place, and equipped with precautionary elements, such as perspex screens and additional cleaning items, with all meetings scheduled by appointment and limited to 15 minutes.

The Group has conducted rigorous risk assessments of its premises, and put in place detailed training and guides to ensure they are conducted in relation to all of the re-opened premises. We hope that the robust measures will provide reassurance to staff and customers alike.

The response from staff and customers has been extremely encouraging, following the easing of the lockdown restrictions:

Financial Services Division

· The daily run rate of PRIMIS purchase related mortgage applications in the three weeks since lockdown restrictions has increased by 44% compared to the seven weeks of lockdown

· Mortgage search activity and customer enquiry activity increased following the easing of the lockdown restrictions

· Following a shift to refinance mortgage applications in April (86% re-mortgage / 14% purchase), in the last week of May as purchase activity increased, the mix shifted back towards purchase (67% refinance / 33% purchase)

· Mortgage completions notified by mortgage lenders in the first three weeks since restrictions have increased strongly as refinance mortgages arranged during the lockdown period and house purchases delayed by lockdown move through to completion

· Strong pipeline of potential advisers and Appointed Representative firms seeking to join the network

Estate Agency Division

· 207 LSL Estate Agency branches now open in England and Northern Ireland of LSL’s owned and operated network totaling 231 branches. Branches in Scotland and Wales will open as appropriate and in line with Government advice

· 50% of employees previously furloughed in Estate Agency branches have now returned to work

· In the three weeks following easing of lockdown restrictions, average weekly residential sales exchange income has so far recovered to 34% below the pre lockdown period, compared to the 63% reduction experienced during lockdown

· Physical property valuations recommenced with higher than expected levels of buyer activity with over two thousand valuations carried out in the first three weeks since restrictions eased and a further one thousand bookings being taken

· Tenant registration levels have returned to pre lockdown levels

· Video tours have been received positively by customers as a prelude to physical viewings. In Marsh & Parsons, for example, in the last week of May, 85% of first viewings for tenants were via video

Surveying Division

· Physical surveying valuations recommenced on 18 May 2020, starting gradually and increasing as clarification was issued by RICs on physical valuation guidelines

· Daily average volume of valuations post-lockdown have returned to 60% of pre-lockdown levels

· 60% of employees previously furloughed have returned to work with further returns planned during June to increase capacity to service a growing lender demand and an increased pipeline of physical valuations