AGM Statement

RNS Number : 4605X

LSL Property Services

30 April 2019

 

For immediate release                                                                                                                         30^th April 2019

LSL Property Services plc ("LSL" or "Group")

AGM Statement

LSL Property Services plc, a leading provider of residential property services incorporating estate agency, financial services and surveying businesses, will hold its Annual General Meeting (AGM) today in London at 3:30pm where the following comments will be made regarding current trading, financial performance and outlook for the current financial year.

Overview:

Group revenue for the three months ended 31^st March 2019 has increased by 5.7% year on year as the business continues to benefit from the range of LSL's ongoing self-help measures including a significant revenue impact from the new Lloyds Bank plc surveying contract awarded in May 2018. The Board's current expectation is that the Group will deliver a full year Underlying Operating Profit in line with its prior expectation.

Market Backdrop:

Market conditions in Quarter 1 ("Q1") 2019 have been notably softer than the equivalent period in 2018. The RICS March 2019 Residential Market Survey¹ reported that agreed sales and new instructions continued to decline in the residential market amid an uncertain political backdrop and that the RICS new buyer enquiries tracker has been negative for the eighth successive month. 

Group Performance:

The revenue for Q1 2018 and Q1 2019 and the percentage year on year changes in revenue are set out below:

	Q1 20182	Q1 2019	% Change
Group	£72.9m	£77.1m	+5.7%
Estate Agency2	£42.8m	£39.2m	-8.5%
Financial Services2	£15.3m	£17.1m	+11.7%
Surveying	£14.8m	£20.8m	+40.7%

Estate Agency:

LSL announced the reshaping of its Your Move and Reeds Rains branch networks on 5^th February 2019. We are pleased that the implementation of this programme is progressing in-line with our expectations despite the scale and complexity of the project. As a result, the revenue in the keystone branch network in Q1 was slightly ahead of the LSL business plan. During Q1, the Your Move and Reeds Rains estate agency branch network was reshaped from 308 owned branches to 144 keystone branches following the closure and merging of 81 neighbouring branches into the keystone branch network, the franchising of 39 branches and the closure of 44 branches. This reshaping was in-line with LSL's intentions announced on 5^th February 2019.  We continue to expect these changes to deliver a material improvement to underlying operating profit in Your Move and Reeds Rains, assuming no material change in market conditions.

Total Estate Agency financial performance in Q1 was as follows:

·     Total Estate Agency revenue decreased by 8.5% year on year impacted by the soft market conditions and the reduction in the size of the Your Move and Reeds Rains branch networks during Q1 2019. Your Move and Reeds Rains total revenue declined by 9.3% in Q1 versus prior year²

·     Total Residential Sales exchange revenue was down by 13.7% year on year. On a like for like basis, adjusting for the closure of the Your Move and Reeds Rains branches during Q1, total residential income decreased by 9.4%

·     Total Lettings income was down by 4.4% year on year. On a like for like basis, adjusting for the closure of the Your Move and Reeds Rains branches during Q1, total Lettings income increased by 1.0%

·     Two lettings books have been acquired during 2019, in line with LSL's stated strategy, for a total consideration of £1.0m

·     The London market conditions continued to be challenging in Q1 as anticipated. Marsh & Parsons Q1 total revenue declined 10.0% year on year

·     In line with our stated strategy, Marsh & Parsons opened two new branches in April 2019 in Willesden and Streatham Hill

Financial Services:

As communicated in the LSL Preliminary Announcement on 5^th March 2019, to reflect the growth and increased importance of LSL's Financial Services businesses, effective from 1^st January 2019, this business is now reported separately.

·     Total Financial Services revenue is ahead of the same period in 2018 by 11.7%²

·     Financial Services organic growth, excluding Estate Agency, in Q1 was 2.4%

·     Mortgage completions in the period were £7.3bn, an 18% increase year on year

·     Number of appointed representatives as at 31^st March 2019 were 866 (31^st March 2018: 859)

·     The roll out of the new Financial Services technology system is progressing in line with expectations

	Q1 2019
Total Financial Services segment revenue2	+11.7%
Financial Services3	+21.1%
Your Move & Reeds Rains2	-6.4%
Other Estate Agency2	-3.2%

·     Financial Services³ revenue growth of 21.1% reflected the acquisitions of PTFS and RSC in Q1 2018, on an organic basis Financial Services³ revenue increased by 2.4%

·     Your Move and Reeds Rains financial services revenue was down by 6.4%² reflecting the reduction in size of the Your Move and Reeds Rains branch networks during Q1 2019

·     Other Estate Agency financial services income was down by 3.2%² reflecting the soft market conditions

Surveying:

Revenue in the Surveying Division for the first three months of 2019 was significantly ahead of the same period in 2018 due to the new contract with Lloyds Bank plc which was awarded in May 2018.  This has offset the softer market conditions and lender mix during the period.

·     Surveying income increased by +40.7% year on year

·     The initial performance of the Lloyds Bank plc contract has been in line with expectations and the integration of the existing Lloyds bank plc surveyors transferred to e.surv as part of the contract  has progressed positively

·     Technology enhancements continue to be implemented during 2019 with further functionality releases designed to drive quality and efficiency improvements

·     Continued progress has been made to address historic Professional indemnity claims

Outlook:

Market conditions remain notably softer than the equivalent period in 2018, whilst LSL's financial performance in 2019 is slightly behind the Board's expectations. LSL continues to benefit from its range of proactive self-help measures across the business and the Board's current expectation is that the Group will deliver a full year Underlying Operating Profit in line with its prior expectation.

We continue to remain cautious on the residential property market outlook for 2019 given the current uncertainty over the UK and global political and economic environment and the potential impact on UK consumer confidence. Although Brexit and the current political environment continues to create uncertainty, it is too early to judge if the Brexit outcome will further impact consumer sentiment. The final arrangements for the planned exit from the European Union are uncertain. In the eventuality that the outcome leads to a changed impact on consumer confidence and our business, we will update our Shareholders.

Legislation banning tenant fees will come into effect on 1^st June 2019. LSL has made the necessary plans to implement the required changes across LSL's Estate Agency brands. LSL continues to implement self-help measures in lettings e.g. the acquisition of lettings books, with the aim of optimising lettings income.

LSL continues to execute on its stated strategy and the Board is confident that the Group, with its market leading brands, broad portfolio of residential property services and the benefits from the proactive self-help measures, remains well positioned to perform well given a range of potential market conditions, in order to maximise Shareholder value. The Board remains confident of the opportunities for further positive progress for the Group.

Notes

1.     Source: RICS March 2019 Residential Market Survey

2.     Following the change to LSL's segment reporting effective from 1^st January 2019, the Estate Agency Division receives a commercially agreed commission payment from the Financial Services segment. This arrangement reflects Financial Services income generated from the Estate Agency segment.  The 2018 revenue has been restated on this basis to assist comparison

3.     Includes revenue from Primis, Group First and RSC

For further information, please contact:

Ian Crabb, Group Chief Executive Officer

Adam Castleton, Group Chief Financial Officer

LSL Property Services plc                                                              0207 382 0360

Helen Tarbet

Sophie Wills 

Buchanan                                                                                            0207 466 5000

Notes on LSL:

LSL is a leading provider of residential property services to its key customer groups.  Services to consumers include: residential sales, lettings, surveying, conveyancing support, and mortgage, pure protection and general insurance brokerage services. Services to mortgage lenders include: valuations and panel management services, and asset management and property management services. For further information, please visit LSL's website: lslps.co.uk

 

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