LSL delivered remarkably strong results this morning, and declared its faith in the traditional high street model, saying it would represent the “substantial majority of the sales market” until 2025. Nevertheless it will continue to look at digital opportunities.
LSL also said it could not see any change in market conditions created by the Brexit process or the general election.
Although group revenue was only slightly up, at £151.5m in the first six months of this year, compared with £151.4m for the same period last year, profits rose spectacularly.
Group operating profit was up 61%, to £14.3m (£8.9m last year), and pre-tax profits were up 57% to £13.2m.
Operating profits in its core estate agency business were up 37%, with brands including Your Move and Reeds Rains delivering a “robust revenue performance in line with the same period last year which benefited from a very strong first quarter ahead of Stamp Duty changes”.
London brand Marsh Parsons also delivered “a resilient performance despite a challenging London market” with total revenue down 4%, to £16.4m. Underlying operating profit decreased by 23% to £1.7m (2016: £2.2m) with operating margins of 10.4% (2016: 12.9%).
LSL, in its interim results for the first half of this year, also announced that it is continuing to explore “a wide range of options to capitalise on digital opportunities and during the second quarter of 2017 completed the research and planning phase for new ways of working programme across our estate agency business”.
Chairman Simon Embley confirmed the results were ahead of LSL’s own expectations.
Today’s report to the stock market also says: “On 12th July 2017 the group completed the sale of its investment in the Guild of Professional Estate Agents (GPEA) with consideration made up of cash (£3m) and shares in eProp Services plc.”
There is no indication as to whether LSL could use easyProperty to launch any online offering. Today’s report says: “LSL continues to explore a wide range of options to capitalise on digital opportunities created by the continued growth in consumer acceptance of online and hybrid estate agency business models. LSL has made positive progress in the first half 2017 and a further update will be provided later in 2017.”
It continues: “The findings to date of the programme confirm LSL’s view that there is an important role for the “traditional” branch led model in the future, but it will evolve over time including the deployment of technology.
“Traditional estate agents currently represent the vast majority of the residential sales market. LSL expects this to continue and anticipates that traditional estate agents will continue to represent the substantial majority of the sales market through 2025.
“Whilst LSL expects to evolve its operating model over time to capitalise on this trend, in the foreseeable future LSL does not expect any rationalisation from the current number of its estate agency brands (12) nor any material change to the size of its branch estate.”
The strong results compare with weak ones reported by competitor Countrywide, which last week reported a plunge in profits.
City analyst Anthony Codling of Jefferies said: “LSL’s first half results were the exact opposite of its peers, profits went up rather than down, surprising perhaps as LSL has so far done the least to embrace the world of digital estate agency.
“Whilst many believe that the future of estate agency is purely digital, LSL believes that the traditional high street estate agency will be as important in 2025 as it is today. The Group expects that digital technology will assist rather than replace the traditional high street branch.
“LSL is the only listed estate agent to post a significant increase in profits so far this year, so perhaps the smart money will be found invested in bricks not clicks after all.”