LSL has just announced its results for the six months ended 30 June 2024 with Group underlying operating profit of £14.4m (H1 2023: £3.2m).

Results are in line with upgraded expectations as announced with the preliminary results in April, and materially ahead of prior year. The board’s expectations for the full year remain unchanged.

Looking specifically at LSL’s estate agency franchising division:

·    Benefits of new business model are reflected in an Underlying Operating Profit of £3.1m (H1 2023: loss from total operations of £0.7m) in the first half of the year, achieved in a flat housing market, with an underlying operating margin of 24%

·    Scope remains for further cost efficiency gains within Estate Agency business as the operating model approaches target state

·    The number of properties under management reduced marginally to 36,987 (30 June 2023: 37,960)

·    Continued to support the growth of franchisees, including the first loans granted to facilitate territory expansion and lettings book acquisitions completed in August, adding over 600 properties to the lettings portfolio

David Stewart, group chief executive, commented: “Following a period of significant strategic transformation, we have delivered a robust financial performance in the first half of 2024 during a period in which our end markets have been fairly muted. Each of our businesses has achieved strong market share whilst focusing on delivering against our strategic priorities and putting in place a solid platform for future growth.

“Today, LSL is a more streamlined, agile Group comprising three strong businesses, each with attractive organic growth opportunities that are well positioned to capitalise from any further improvement in the housing and mortgage markets. Our focus is on maximising the performance of our businesses to deliver value to shareholders.”

Here is LSL’s statement in full:

 

STRATEGIC AND OPERATIONAL HIGHLIGHTS

Following the successful completion of our significant restructuring and transformation programmes in 2023, LSL is now a much simpler Group, well positioned to deliver higher operating margins, and more consistent earnings through market cycles.

·    Strong market share across all divisions with Financial Services enhanced by the purchase of TenetLime. Our Surveying business delivered a slight increase on its already very strong position, whilst our Estate Agency franchisees have maintained their national market share

·    Annualised total operating costs reduction of c.£140m following the restructuring of the Group in 2023

·    Surveying B2C revenue 60% above H1 2023 with investment continuing to drive future growth

·    Renewal and improvement in terms of two main lender contracts in Surveying in H1 2024 with further contractual gains and increased allocations from other lenders

·    TenetLime performance in line with management expectations with high levels of appointed representative (AR) firm and adviser retention boosting our share of the mortgage market

·    Estate Agency Franchising continues to support the growth of franchisees, to facilitate territory expansion and supporting lettings book acquisitions completed in August

·      Acquisition during 2024 of five businesses by our Pivotal Growth JV, with advisers increasing to over 450 (c.50% increase on H1 2023)

·      Interim dividend maintained at 4p per share

·      Adrian Collins appointed as Chair and Michael Stoop as Non-Executive Director

 

 FINANCIAL HIGHLIGHTS

H1 financial metrics1	2024	Restated2 2023	Var
Group Revenue (£m)	85.4	72.5	18%
Group Underlying Operating Profit from total operations3 (£m)	14.4	3.2	354%
Group Underlying Operating margin (%)	17%	3%	+1390bps
Group Underlying Operating Profit3 (£m)	14.4	4.2	247%
Exceptional Gains (£m)	0.4	9.0	(96)%
Exceptional Costs (£m)	(0.5)	(4.3)	89%
Group operating profit (£m)	13.0	7.6	72%
Profit before tax (£m)	13.8	7.4	85%
Loss from discontinued operations4 (£m)	(0.2)	(42.9)	99%
Basic Earnings per Share (pence)	9.9	5.3	87%
Adjusted Basic Earnings per Share5 (pence)	11.0	2.6	323%
Net Cash5 at 30 June (£m)	32.5	36.3	(11)%
Interim Dividend per share (pence)	4.0	4.0	–

·    Group Revenue¹ was £85.4m (H1 2023: £72.5m). After adjusting for disposals, revenue was 27%⁶ above prior year in a market in which total mortgage lending was flat and house sales were 1% higher

·    Group Underlying Operating Profit was £14.4m (H1 2023: £3.2m from total operations^1,3, £4.2m from continuing operations^1,3), significantly ahead of the prior year, with particularly strong recovery in the Surveying & Valuations Division

·    Material improvement in Group operating margin to 17% (H1 2023: 3%)

·    Net Exceptional costs⁷ of £0.1m (H1 2023: net gains £4.7m)

·    Group operating profit was £13.0m (H1 2023: £7.6m)

·    Net Cash⁸ of £32.5m at 30 June 2024 (31 December 2023: £35.0m, 30 June 2023: £36.3m), with a cash flow conversion rate⁸ of 81% (H1 2023: (220)%)

 

DIVISIONAL PERFORMANCE

Surveying & Valuation Division

·    Surveying & Valuation performance included benefits from improving market conditions and contract extensions with improved terms and allocations with Underlying Operating Profit³ increasing to £12.9m (H1 2023: £3.7m)

·    Mortgage approvals⁹ in H1 were 14% above H1 2023, driven by higher purchase approvals (up 23%) with remortgage and other approvals broadly flat

·    We estimate that our market share of physical and remote valuation instructions⁹ increased marginally to 40% (H1 2023: 39%)

·    Long-term contract extension with Lloyds Banking Group, underpinning the Group’s leading market position. Furthermore, we also secured a substantial improvement in terms and allocation with another major lender

·    Retained contracts with all lending customers with no loss in allocations

·    Developing B2C revenue, survey and valuation work performed for the end consumer, is a strategic objective and in the first half of 2024 it increased by 60% to £2.8m (H1 2023: £1.8m)

·    Investments made to support B2C/Home Buyer activities, with acceleration of marketing activity, and also data and model development initiatives. These investments will increase further in the second half of the year to support the Group’s strategy to grow new income lines in future years

 

Financial Services Division

·    Financial Services Network business traded resiliently in soft market conditions, reporting Underlying Operating Profit³ of £4.3m (H1 2023: £3.8m)

·    After adjusting for businesses disposed of during H1 2023, revenue was up 1%. Total revenue was £23.6m (H1 2023: £28.0m)

·    Increased market share of the UK purchase and remortgage market¹⁰ of 11.1% (H1 2023: 10.5%)

·    LSL advisers continue to adapt effectively to changes in the mortgage market, increasing product transfer mortgage completions by 20%, resulting in a substantially increased share of the product transfer market to 7.2% (H1 2023: 5.8%)

·    The weighting of margin dilutive product transfers in the refinancing market remained above the long-term average

·      Network protection revenue increased by 3% to £5.7m (2023: £5.6m) after adjusting for disposals

·    The number of Network firms increased to 1,146 as at 30 June 2024 (H1 2023: 986), including 151 TenetLime firms. Network firms remained cautious on adviser levels due to challenging market conditions, advisers increased to 2,847 as at 30 June (30 June 2023: 2,718) including 255 TenetLime advisers

 

Estate Agency Franchising Division

·    Benefits of new business model are reflected in an Underlying Operating Profit³ of £3.1m (H1 2023: loss from total operations of £0.7m) in the first half of the year, achieved in a flat housing market, with an underlying operating margin of 24%

·    Scope remains for further cost efficiency gains within Estate Agency business as the operating model approaches target state

·    The number of properties under management reduced marginally to 36,987 (30 June 2023: 37,960)

·    Continued to support the growth of franchisees, including the first loans granted to facilitate territory expansion and lettings book acquisitions completed in August, adding over 600 properties to the lettings portfolio

 

Pivotal Growth Joint Venture

·    Acquisition during 2024 of five businesses, including John Charcol with 150 mortgage and protection advisers

·    Pivotal Growth now has over 450 advisers, making it one of the largest mortgage and protection brokers in the UK, giving it critical mass to leverage its scale to attract deals and drive revenue synergies and profitability

·    Pivotal Growth’s underlying financial performance has steadily improved as it has increased in scale and moved out of its establishment phase

·    Following trading EBITDA growth before transaction costs in H1 2024 compared to prior year, our share of Pivotal profit/loss after tax is expected to continue to improve in future periods

 

ECONOMIC AND MARKET ENVIRONMENT

·    The market remains supressed compared to the long-term average, with new lending 10% below the 10-year average¹⁰ and housing transactions¹¹ 14% below. Sticky inflation and delays to interest rate reductions impacted consumer confidence in H1

·    Although markets remained muted, front-end activity in the mortgage and housing markets has improved, with mortgage approvals 14% ahead of H1 2023 and sales agreed 15% ahead. These trends will support the performance of our Financial Services and Estate Agency Franchising businesses in the second half of the year

·    The mortgage lending market¹⁰ in H1 2024 was around 2% smaller than H1 2023. Purchase lending increased by 9%, and remortgage lending decreased by 8% whilst product transfer lending reduced by 5%

·    Total lending arranged by LSL was 12% higher than H1 2023, with an increased share in each of the purchase, remortgage and in particular product transfer markets, and more heavily weighted than previously to product transfers. LSL’s share of the total purchase and remortgage market increased to 11.1%¹⁰ (H1 2023: 10.5%). LSL’s market share of product transfers increased to 7.2% (H1 2023: 5.8%)

·    Bank of England mortgage approvals⁹ were 14% higher than H1 2023 driven by purchase approvals being 23% higher with remortgage and other mortgage approvals broadly flat. The more specialist Buy-to-Let and Equity Release markets remain subdued as a result of higher interest rates. Total jobs performed by the Surveying & Valuation Division increased by 18%, above the market as a whole, reflecting a small increase in market share¹⁰

·    Total UK HMRC recorded residential transactions¹¹ were 1% higher in H1 2024 at 488k (H1 2023: 483k)

 

CURRENT TRADING AND OUTLOOK

The first half of the year showed a significant improvement in trading with some improvement in sentiment and, more recently, lower mortgage rates which are starting to drive more activity across our core markets. We have seen an increase in mortgage approvals which will be reflected in future housing transactions and the start of a normalisation in product mix in our mortgage business. In the first half of 2024, these conditions particularly benefited our Surveying & Valuation business, where there has been a very substantial increase in activity and profits.

The improved trading reflects better market conditions but also the benefits of the new Estate Agency franchise model, improved lender contracts, and our decision to retain surplus capacity throughout the second half of 2023. The Board remains confident that the Group will deliver a full year Underlying Operating Profit in line with its prior expectations and significantly above 2023.