LSL Property Services Interim Management Statement (2947S)
November 06 2013 - 2:00AM
UK Regulatory
TIDMLSL
RNS Number : 2947S
LSL Property Services
06 November 2013
For Immediate Release 6 November 2013
LSL Property Services plc
("LSL" or "the Group")
Interim Management Statement
LSL, a leading provider of residential property services,
incorporating Estate Agency and Surveying businesses, issues this
Interim Management Statement for the period from 1 July 2013 to 5
November 2013.
The number of Total Mortgage Approvals(1) for the nine months to
30 September 2013 was 8.2% higher than for the same period in 2012.
House Purchase Approvals(1) were 16.8% higher on the same
comparative basis. Transaction volumes have now grown significantly
for the six months since April 2013. Market data is not yet
available for October.
The Group has traded in line with the Board's expectations
during the period. The percentage change in turnover for the four
months ended 31 October 2013 compared with the same period in 2012
is set out below. In addition, the percentage change in turnover
for the ten months ended 31 October 2013 compared with the same
period in 2012 is set out both in total and on an underlying(2)
basis:
Total Underlying Total
4 mths to 31 10 mths to 10 mths to
Oct 31 Oct 31 Oct
Group 13% 7% 4%
Estate Agency 13% 8% 8%
Surveying 12% 4% -7%
--------------- ------------- ----------- -----------
LSL activity levels have increased consistently since April and
trading momentum is now building on a month by month basis.
Investment has continued during the year to build capacity in the
improving estate agency and surveying markets.
Estate Agency & Related Services:
The Estate Agency division has traded strongly during the period
July to October 2013:
- Total income up 13% year on year
- Exchange income increased by 15% year on year
- Lettings income growth of 6% year on year
- Financial Services income up 25% year on year
- Pipeline volumes up 19% year on year at 31 October and
pipeline value up by 23% year on year for the same period
- Headcount increase of 179 in Agency branches since 1 July 2013
- Continued positive progress at Marsh & Parsons with three
new branch openings in 2013 and overall trading in line with
expectations
- Asset management has outperformed a difficult market where
repossession volumes(3) were down 13.3% year on year for the period
January to June. Market data is not yet available for the period
July - October 2013
Surveying & Valuation Services:
There has been a significant improvement in the performance of
the Surveying division in the period July to October 2013:
- Revenue increased by 12% year on year reflecting improved market conditions
- Substantial investment in recruitment to build capacity for clients
Professional Indemnity (PI) Costs:
In June 2012 an additional PI provision of GBP17.3m (GBP13.1m
after tax) was made due to the deterioration in claims experience
relating to the 2004 to 2008 high risk lending period. High levels
of claims relating to this period have continued to be an industry
wide problem. The additional provision included an increase in the
'Incurred But Not Reported' (IBNR) provision required for
notifications and claims estimated to be received in the future for
the 2004 to 2008 period. The primary statutory limitation for this
period ends during 2014. It was noted in June 2012 that this was
the Board's best estimate of future claims and the conclusions on
the appropriate level of IBNR provision were sensitive to small
changes in assumptions and are therefore highly subjective.
In June 2012, it was assumed that the run rate of new claims
would reduce significantly from July 2013 following the change in
legislation governing civil litigation taking effect in April 2013.
This reduction has not yet materialised and the run rate of new
cases has remained at the level established in June 2012. In
addition, the cost per claim has increased and in most recent
months has been running higher than assumed in July 2012. The
increasing trend in cost per claim has been driven by a relatively
small number of high value claims and by increases in legal
costs.
Therefore it is currently expected that an additional
exceptional charge of cGBP12.0m (cGBP9.2m after tax) will be made
in the financial accounts for the year ending 31(st) December 2013
in order to increase the PI provision. This additional provision
represents our current best estimate of likely claims costs but the
process of resolving open claims and estimating future claims is
on-going. A number of risks and uncertainties remain, in particular
the actual monthly run rate of new claims, the date at which the
high rate of claims will significantly reduce, and the average cost
per case both for existing open claims and for claims yet to be
received. The cost of these factors could differ materially from
the Board's estimates, which could result in a further provision
being required.
Outlook:
Market transaction levels have now shown year on year growth for
six consecutive months. Total mortgage volumes in the third quarter
of 2013 were 24% higher than in the same period in 2012. The Board
is confident of delivering trading performance in line with its
expectations for 2013.
Activity levels across LSL have increased and the business is
continuing to make significant investments in both Agency and
Surveying to build capacity for further growth. With the recent
launch of the Help to Buy Mortgage Guarantee Scheme, the outlook
from lenders continues to be positive and as a result the Board is
optimistic that market growth will continue throughout 2014.
The business is extremely cash generative and has a strong
balance sheet with relatively low levels of financial gearing. LSL
is very well placed to benefit from its operational gearing in the
improved market conditions and to combine this with further
selective value-accretive acquisitions to increase shareholder
value.
(1) Source: Bank of England
(2) Excluding the impact of a major surveying contract insourced
in 2012.
(3) Source: CML
For further information, please contact:
Ian Crabb, Group Chief Executive Officer
Steve Cooke, Group Finance Director
LSL Property Services plc 0207 382 0360
Richard Darby, Sophie McNulty and Helen Greenwood
Buchanan 0207 466 5000
Notes to Editors:
LSL Property Services plc is a leading provider of residential
property services to its two key customer groups. Services to
consumers include: residential sales, lettings, surveying and
advice on mortgages and non-investment insurance products. Services
to mortgage lenders include: valuations and panel management
services, asset management and property management services. For
further information, please visit our website: www.lslps.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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