LSL Property Services 'resilient' amid tough market conditions

LSL Property Services reported a 4% improvement in group revenue in its preliminary announcement for the year on Tuesday, to £324.6m.

The London-listed residential property services provider said its revenue and underlying operating profit was “highly resilient” in the context of challenging residential market conditions, with group underlying operating profit slipping 4% to £35.9m for the year ended 31 December.

Group adjusted EBITDA fell 3% to £41.6m.

The board proposed a final dividend of 6.9p, which would bring the full-year dividend to 10.9p per share - at the upper end of the range of its stated policy.

On the strategic front, LSL said it held a number of leading market positions, claiming to be the market leader in surveying, the second-largest combined network in financial services, and maintaining a market-leading position for its estate agency operations.

Overall estate agency division income was up 3% year-on-year, with operating profit down 24%, which LSL said reflected the effect of operational gearing on lower residential sales exchange volumes, which more than offset the benefits from financial services income and lettings income growth.

In the surveying division, overall revenue was ahead 9% year-on-year, which reportedly benefitted from the new Lloyds Bank contract, and operating profit was up 8%.

During the year, LSL wrote down its investment in Yopa by £12.2m.

Net bank debt stood at £32.1m at year-end, widening slightly from £30.0m year-on-year, with the board reporting a low level of gearing at 0.8x EBITDA, compared to 0.7x 12 months earlier.

“The Group delivered a highly resilient revenue and underlying operating profit performance in 2018 despite challenging residential property market conditions,” said LSL Property Services chairman Simon Embley.

“We continue to deliver a range of proactive self-help initiatives demonstrating the breadth of opportunity across the group.”

Embley said market conditions in 2019 had been notably softer than the equivalent period in 2018, while its financial performance so far in 2019 was marginally behind the board's expectations.

“Nevertheless, at this early stage in the year, the board's current expectation is that the group will deliver a full year underlying operating profit in line with its prior expectations, as the business is expected to continue to benefit from the range of LSL's ongoing self-help measures.

“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.”

The group had a “robust” balance sheet, Embley explained, with relatively low levels of gearing, and was “highly cash generative” at an operational level.

“The board remain confident of the opportunities for further positive progress for the group.”