Pre-tax profits at LSL plunge by over half – but group upbeat for rest of this year

Profits at LSL plunged by over half in the first six months of this year compared with the same period in 2017, the group reported this morning.

This was despite group revenue rising slightly – 1% – from £151.5m to £152.9m.

Pre-tax profits fell by 51%, from £13.2m to £6.4m.

Net bank debt rose 45%, and as at June 30, stood at £46m. The group said this was in part due to the £20m strategic investment in a 17.3% stake in online estate agency Yopa.

There will be the same dividend per share as last year, 4p.

Residential sales were down 11%, with income at £32.9m compared with £37m the year before, and were impacted by market conditions and the closure of eight owned branches in the final quarter of last year. The estate agency division made a profit of £5m in the six months to the end of June, compared with £9.4m in the same period last year.

At flagship brand Marsh & Parsons, there was a 15% fall in sales revenue, but lettings revenue grew 6%. Altogether, Marsh & Parsons’ total revenues were down 3%, to £15.9m.

However, lettings and financial services both put in strong performances at the group, with respective growth of 4% and 5%.

LSL – parent company to Your Move, Reeds Rains and Marsh & Parsons – said it is upbeat about its full year performance.

It says that residential sales pipelines are ahead of previous expectations. It is also continuing to administer “self-help initiatives” including strong cost control.

Group chief executive Ian Crabb said that while LSL expects to see a reduction in house purchase transactions, the medium to longer term fundamentals of the UK housing market remain strong, and that LSL has a robust balance sheet.

Chairman Simon Embley said: “The group has delivered a resilient first half revenue performance in the context of challenging residential property market conditions.

“Whilst residential sales volumes remained suppressed, revenue trends in other parts of our business are more robust due to our ongoing self-help measures. Our Lettings and Financial Services businesses continue to perform positively and Financial Services income now represents 33% of total Estate Agency Division income.

“During the first half, Lloyds Bank plc awarded LSL a material five-year contract to deliver surveying and valuation services which demonstrates the market leading proposition that we are able to offer our customers and reflects well on our technology investment.

“Whilst market conditions in the first half of 2018 have been softer than the board’s expectations and the equivalent period in 2017, LSL’s financial performance in the first half of 2018 was in line with the board’s expectations.

“Given residential sale pipelines are above previous expectations, current trading in surveying is positive and the range of self-help initiatives in progress, the board is confident of delivering a full year group underlying operating profit in line with expectations.”

City analyst Anthony Codling of Jefferies said this morning: “Whilst facing the same market conditions as the other UK estate agents, LSL appears to be making a better fist of it and remains confident of meeting existing full year expectations.

“It would have been easy to trim expectations citing declining housing transactions, and the fact LSL has not implies to us that LSL’s high street has firm foundations offering a safe harbour to home buyers, home sellers and its local property experts.”

 Today’s LSL results follow those of Foxtons yesterday, showing the agency had plunged £2.5m into the red in the first six months of this year, compared with a £3.8m profit for the same period in 2017. The City did not seem to mind Foxtons’ news, with shares yesterday shooting up 9.4%% to finish at around 52p.

Meanwhile, Countrywide is due to announce its interim results, together with its recovery plan, by Thursday. Yesterday shares in Countrywide fell 5.3%, to finish at 45.5p.

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3 Comments

  1. 40yearvetran08

    Well they are still making a profit which in these tough times is a result. I wonder if they are still pleased they made a £20m investment in Yopa? It really is baffling why would a strong high street agent should take such a punt. No doubt some management consultant told them that on line is the way to go. Lets see what Countrywide can offer up later this week, who knows perhaps LSL will swallow them up! They should seriously look at JDW & Hamptons as an add on to their LSLi network. That £20m would have done nicely!!

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  2. P-Daddy

    Yes, its a ‘who blinks first’ situation bearing in mind the Yopa investment. The futurologists will have told them to hedge their bets for the future, in other words, if this virtual agent malarkey takes off, you want to be in on the ground floor. The risk is that this debt is now weighing on the parent company and that can be dangerous unless they can fire sell it if the market will put up with another high valuation on a loss making business. If it doesn’t pay off, that will be a big write off, if it does, someone smells of roses, and they will then have to decide if they remain on the High Street and if the business remains in its current shape. Otherwise not bad numbers by LSL

    I see Jeffries now describes everyone in agency as a local property expert. There you are, the industry is disrupted…you are no longer estate agents….just LPE’s 🙂

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  3. Property Poke In The Eye

    At least they are upbeat, which is also very important.

    Most agents are painting a rosy picture, I look around and try and figure out how much the directors are pumping in every month.  Something will give very soon.

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