LSL Property Services, parent firm of Your Move and Reeds Rains, says the company’s branch closure programme was a success with profits per remaining branch up, despite a dip in overall agency revenue.
During the first half of the year the Your Move and Reeds Rains networks were downsized from 308 owned branches to 144 so-called ‘keystone’ branches following the closure and merging of 81 neighbouring offices, the franchising of 39 branches and the closure of 44 branches.
As a result, this morning’s trading statement from LSL says the estate agency division delivered a strong performance with underlying operating profit increasing to £4.0m (last year it was £1.4m).
However, the same cannot be said of LSL's investment in online agency Yopa, which in the past has also received substantial funding from Savills. This morning LSL revealed another write down of its 14.7 per cent minority shareholding in Yopa from £7.8m to £6.5m as of late June "to reflect the board's assessment of fair value."
The statement continues: “LSL expect the changes to the branch networks to continue to deliver a material improvement to underlying operating profit in Your Move and Reeds Rains, assuming no material change in market conditions.”
Profit per Your Move and Reeds Rains branch increased to £48,400 (in 2018 it was only £24,900) on what LSL calls “a rolling 12 month basis” as a result of the benefit from the reshaping of the agencies' networks.
However, total estate agency revenue decreased by 13 per cent to £77.1m (2018: £88.9m) “impacted by the soft market conditions and the reduction in the size of the Your Move and Reeds Rains branch networks during Q1 2019.”
Adjusting for the closure of the Your Move and Reeds Rains branches during Q1 2019, like-for-like revenue was down five per cent year on year. Again, adjusting for closures, LSL’s residential sales exchange income was down six per cent year on year.
The firm says London market conditions remain “challenging” - yet against this, LSL-owned Marsh & Parsons delivered what the company describes as “a resilient revenue performance” despite total revenue dropping 5.5 per cent.
Marsh & Parsons opened two new branches in April 2019 in so-called “outer prime central London” - Willesden Green and Streatham Hill - while the national lettings division of LSL acquired three lettings books in the first six months of this year for £1.4m
Meanwhile LSL’s financial services division saw underlying operating profit up 20 per cent to £4.3m, reflecting increased business following acquisitions. Total financial services division revenue rose four per cent to £34.3m. LSL’s surveying division income increased by 37 per cent to £42.7m due to the new contract with Lloyds Bank, awarded in May 2018.
LSL chairman Simon Embley says: "The group delivered a positive financial performance in the first half of 2019, with positive growth in revenue and underlying operating profit, despite subdued residential property market conditions. The Board remains confident 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.
"Whilst 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 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 in a strong position to perform well given a range of potential market conditions, in order to maximise shareholder value."