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

AGM Statement

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

Market Backdrop:

The number of House Purchase Approvals¹ for the two months to 28^th February 2017 were down by 5.4% compared to the same period in 2016 when market volumes accelerated sharply ahead of the Stamp Duty increases  on 1^st April 2016. Although market volumes from the Bank of England are not yet available for March 2017, market estimates indicate that Bank of England House Purchase Approvals for March 2017 will be down against March 2016 when volumes continued to reflect the immediate run up to the changes in Stamp Duty.

Remortgage¹ volumes were up by 7.8% for the two months to 28^th February 2017 against the same comparative period last year reflecting favorable mortgage costs and availability. The number of Total Mortgage Approvals¹ for the two months to 28^th February 2017, were up 0.8% relative to the corresponding period last year.

Group Performance:

The Group has traded slightly ahead of the Board's expectations in Q1 2017. Group revenues for the three months ended 31^st March 2017 have decreased by 3.3% year on year with the Estate Agency Division impacted by very strong market volumes in Q1 2016 compared to the same period in 2017. The strong volumes in Q1 2016 were the result of a sharp acceleration ahead of the Stamp Duty increases on 1^st April 2016. The Surveying Division delivered robust growth in Q1 2017.

The percentage changes in revenue for each of the two and three month periods ended 28^th February 2017 and 31^st March 2017 respectively are set out below:

Estate Agency and Related Services:

The Estate Agency Division has traded slightly ahead of the Board's expectations during the first three months of 2017. The continued growth in Lettings income and Financial Services income demonstrated the benefits of LSL's Estate Agency strategy. Exchange income was impacted by Q1 market conditions. 

·      Total Estate Agency revenue decreased by 5.5% year on year

·      Exchange income decreased by 24.8% year on year reflecting the spike in transactions in Q1 2016 ahead of the Stamp Duty changes on 1^st April 2016

·      Lettings delivered income growth of 4.6% year on year (organic growth 3.2%)

·      Financial Services income growth of 20.0% year on year (organic growth 9.6%)

·      Marsh & Parsons revenue decreased by 15.8% year on year reflecting reduced exchange volumes

·      Marsh & Parsons Lettings income growth was strong at 8.2% year-on-year

·      Marsh & Parsons opened a new branch in Brixton during the period to date in 2017 which is trading well

Surveying and Valuation Services:

The Surveying Division has traded positively during the first three months of 2017:

·      Surveying income increased by 4.8% year on year

·      Continued focus on capacity utilisation and optimising contract performance and revenue generation from B2B customers

·      Professional indemnity costs were in-line with the Board's expectations during the period

·      Phase 2 implementation of LSL's Surveying IT system is on track

Strategy:

We remain committed to delivering on our stated strategy. LSL's continuing Estate Agency strategy is to increase operating profit per branch; expand the number of Marsh & Parsons branches; grow recurring and where market conditions permit counter-cyclical income streams and evaluate selective acquisitions. LSL's continuing Surveying strategy is to optimise contract performance and revenue generation from B2B customers, achieve further improvement in efficiency and capacity utilisation, use technology to target further improvements in customer satisfaction and performance and continue the graduate training programme.

In addition to delivering on our stated strategy, as communicated at the 2016 Preliminary Results announcement and in the 2016 Annual Report and Accounts, we are also exploring options to capitalise on digital opportunities created by the growth in consumer acceptance of online and hybrid estate agency business models. We have made positive progress in Q1 2017. A further update will be provided during 2017.

Outlook:

2017 is expected to see a reduced volume of house purchase transactions compared to the prior year, with modest house price inflation outside prime Central London. However, mortgage costs and availability remain positive and the medium to longer-term fundamentals of the UK housing market remain robust.

It is too early to judge if the triggering of Article 50 on 29^th March 2017 or the recent announcement of a UK General Election on 8^th June 2017 will impact consumer sentiment. To date we have not seen any change in market trends.

Trading in Estate Agency and Surveying is performing well and the Group outlook for the year as a whole is slightly ahead of expectations. We are positive regarding the outlook for the business, committed to driving profitable organic growth, continuing to evaluate selective acquisitions and progressing our digital plans.  

The Group has a robust balance sheet with relatively low levels of gearing and is very cash generative at an operational level. The business is well placed to capitalise on market conditions to increase shareholder value.

1.   Source: Bank of England for "House Purchase Approvals ", "Total Mortgage Approvals" and "Remortgage levels" 2016 & 2017

For further information, please contact:

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 and mortgage, pure protection and general insurance brokerage services. Services to mortgage lenders include: valuations and panel management services, asset management and property management services. For further information, please visit LSL's website: www.lslps.co.uk