TIDMLSL
RNS Number : 3040I
LSL Property Services PLC
11 December 2020
11 December 2020
LSL Property Services plc ("LSL" or "The Group")
TRADING UPDATE
LSL reports strong trading in H2 with full year 2020 Group
Underlying Operating Profit expected to be marginally ahead of
2019
LSL, a leading provider of residential property services
incorporating mortgage intermediation and other financial services,
estate agency, and surveying and valuation businesses, issues a
trading update for the ten-month period up to 31 October 2020.
Highlights
-- Trading was strong in the period from July to October with
all three Divisions reporting encouraging front-end sales
metrics
-- In the Financial Services Division, total financial advisers
at 31 October was 2,528, an increase of 8% year on year, with a
strong pipeline of new advisors
-- The value of LSL's mortgage completions in the ten months to
31 October 2020, was GBP25.8bn, representing around 9% market
share(1)
-- LSL's PRIMIS Mortgage Network awarded Best Network, and
e.surv awarded Best Surveyor / Valuer at the October 2020 annual
Mortgage Strategy Awards and PRIMIS awarded Mortgage Network of the
Year at the December 2020 annual Mortgage Introducer Awards
-- Residential sales exchange pipeline at 31 October was the
highest for the Group in over ten years(2) and was more than 50%
above the same date in 2019
-- Surveying revenue recovered quickly following easing of
lockdown restrictions in May 2020, benefiting from strong lender
pipelines and increased new business activity
-- The Government has reiterated its intention to enable the
housing market to operate as normally as possible, and the Group's
estate agency, surveying and financial services operations remain
open and operating in line with guidance and with the safety of
staff and customers as our highest priority
-- The Board expects to deliver a full year 2020 Group
Underlying Operating Profit(3) marginally ahead of 2019. This is
stated before the recognition of Covid-19 related net costs as set
out in the 2020 Interims
-- Net Banking Debt remains modest and at GBP14.1m has reduced
significantly from the same date in 2019. (31 October 2019:
GBP54.8m). Adjusting for Covid-19 related payment deferrals, mainly
in relation to tax payments due in agreement with HMRC, the
underlying Net Banking Debt position at 31 October 2020 was
approximately GBP31m
Financial performance
Gr oup r evenues f o r t he t en mon t hs ended 31 October 2020
decreased by 18 % to GBP214.3m (2019: GBP262.8m), being materially
impacted by Covid-19, as well as the reshaping of the Your Move and
Reeds Rains networks in February 2019, and the tenant fee ban
introduced in June 2019.
Revenue has been improving since the end of the first lockdown
in May. Group revenue was down 14% year on year in June, reducing
to only 5% down year on year for the month of October. Transactions
are taking longer to move through to completion, impacting the
Financial Services and Estate Agency Divisions, which is reflected
in significant increases in sales pipelines and revenue yet to be
recognised.
This steady increase in revenues over the period can be seen in
the table below:
Revenues (year 10 months 3 months 4 months
on year) to 31 to 30 to 31
Oct Sept Oct
Group -18% -10% -9%
---------- --------- ---------
Financial Services
Division -16% -14% -13%
---------- --------- ---------
Estate Agency Division -21% -13% -12%
---------- --------- ---------
Surveying Division -15% -1% +1%
---------- --------- ---------
Financial Services
Mortgage and protection insurance business volumes have
continued to grow strongly over the summer months. In the four
months ended October 2020, PRIMIS mortgage applications were up 14%
and protection applications up 15% compared to the same period in
2019. This activity will help support future revenue as mortgages
complete.
In the four months to October 2020, we registered around 100,000
potential new mortgage and insurance customers across the PRIMIS
network and increased the advisor numbers operating within the
PRIMIS network by more than 100, taking the total advisor base to
over 2,500. This represents growth of 8% year on year, with a
pipeline of a further 250 advisors currently undergoing the
application process.
Financial Services revenue excluding Estate Agency in the ten
months to 31 October 2020 was down 14%, due to a number of factors,
including the impact of Covid-19 on trading, and a mix effect of
increased penetration of product transfers, particularly during the
lockdown period when remortgages and product transfers represented
an increased proportion of written business. Increased sales
pipelines and revenue yet to be recognised will flow through in the
next few months.
Estate Agency
The very significant increase in house sales agreed following
the end of the May lockdown has given rise to significant pressures
in parts of the housing chain, notably a market-wide shortage in
conveyancing capacity. This has meant that the average time taken
to exchange and complete on agreed sales has increased in the
market generally.
This has resulted in significant growth in the residential
exchange pipeline, which at 31 October 2020 stood at circa GBP24m
(2019: GBP16m). This is the highest level in over ten years in Your
Move and Reeds Rains keystone branches, the highest since LSL has
owned the LSLi brands and the highest in over four years in Marsh
& Parsons.
Surveying
With high levels of residential sales and mortgage activity,
Surveying Division revenues, being more front-loaded than other
parts of the Group, recovered faster and in the four months to 31
October 2020 were marginally ahead of prior year.
Operating profit margin has benefited from the back-office cost
savings made in Q4 2019 and 2020.
LSL continues to invest in the training and development of new
surveyors, adding 41 successful new qualifying Assoc RICS and SAVA
candidates in the year to date.
Current trading
Sales activity in November continued to reflect a strong market,
with all of LSL's key front-end sales metrics ahead of the prior
year, and with the sales exchange pipeline at 30 November 2020
maintained at the same level as at 31 October 2020 and 60% ahead of
last year. There is currently no evidence of a material increase in
residential fall-through trends, although the elongation in the
time taken to complete may put pressure on this across the market
generally. We continue to monitor this closely.
Revenue was up year on year in November in each of the
Divisions, with Group Revenue around 6% above prior year,
demonstrating the continuation of the trend of improving revenue
performance since the ending of the first lockdown in May 2020.
Balance Sheet Update
The Group has a strong underlying business, with diversified
revenue streams, which have demonstrated their resilience through
highly stressed economic conditions. The Board continues to monitor
cash carefully and carry out regular stress testing.
The Group has a revolving credit facility of GBP100m committed
to May 2022. Careful cash management has resulted in modest N et
Banking Debt at 31 October 2020 of GBP14.1m ( 20 19: GBP54.8m).
Adjusting for Covid-19 related payment deferrals, mainly in
relation to tax payments due as agreed with HMRC, the underlying
Net Banking Debt position at 31 October 2020 was approximately
GBP31m. We anticipate a net cash inflow between 31 October and 31
December.
Commenting on today's announcement, David Stewart, Group Chief
Executive Officer, said:
"I am pleased to report that the Group has taken advantage of
the strong rebound in activity levels following the end of the
first lockdown, and as a result we now expect to be able to report
2020 Group Underlying Operating Profit marginally ahead of
2019.
We look forward to reporting on our full year results in the
early part of 2021, when we will also set out details of the
progress we have made on implementing our strategy. I would like
once again to place on record my thanks to all our staff for their
tremendous support they have given LSL this year."
Notes to trading update:
1. Market share calculated excluding Product Transfers
2. Pipelines for Your Move and Reeds Rains keystone branches,
LSLi branches and March & Parsons branches
3. Group Underlying Operating Profit is before exceptional
costs, Covid-19 related net costs, contingent consideration,
amortisation of intangible assets, share-based payments and
includes amounts receivable pursuant to the Coronavirus Job
Retention Scheme and utilised to pay employee salaries for those
placed on furlough
For further information, please contact:
David Stewart, Group Chief
Executive Officer
Adam Castleton, Group Chief
Financial Officer
LSL Property Services plc investorrelations@lslps.co.uk
Helen Tarbet 07872 604453
Simon Compton 07979 497324
Buchanan 0207 466 5000
Notes on LSL
LSL is a leading provider of residential property services in
three key markets: financial services, estate agency and surveying
and valuation services. Services to consumers and businesses
include: mortgage and non-investment insurance brokerage and
intermediary network services, residential sales, lettings, land
and new homes, surveying, conveyancing support, surveying, and
mortgage and non-investment insurance brokerage and intermediary
network 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
Forward Looking Statement
This announcement contains certain statements that are
forward-looking statements. They appear in a number of places
throughout this update and include statements regarding LSL's
intentions, beliefs or current expectations and those of its
officers, directors and employees concerning, amongst other things,
LSL's results of operations, financial condition, liquidity,
prospects, growth, strategies and the business it operates. By
their nature, these statements involve uncertainty since future
events and circumstances can cause results and developments to
differ materially from those anticipated. The forward-looking
statements reflect knowledge and information available at the date
of preparation of this update and, unless otherwise required by
applicable law, LSL undertakes no obligation to update or revise
these forward-looking statements. Nothing in this update should be
construed as a profit forecast. LSL and its Directors accept no
liability to third parties in respect of this update save as would
arise under English law.
Any forward-looking statements in this update speak only at the
date of this announcement and LSL undertakes no obligation to
update publicly or review any forward-looking statement to reflect
new information or events, circumstances or developments after the
date of this update.
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