Slimmed down estate agency and surveying group LSL Property Services says its move to a franchise model is working ahead of plan.
The Newcastle-based group, which recently transferred its network of 183 estate agent branches to franchisees as a way to insulate itself from challenges in the housing market, told investors it was confident of delivering profits "materially ahead" of 2023. Revenues have been slashed as result of last year's move, falling from £217m to £144m as LSL - which based the decision on hopes for higher margins - estimates like-for-like revenue is down 10% after adjusting for the disposals.
The group said the estate agency division, which includes Reeds Rains and Your Move brands, was operating ahead of plan for revenue and profits, providing a second half operating margin of about 30%. Franchising of the network was hope to eliminate most of a £125m cost base.
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But amidst a housing slump the group's surveying division saw weaker demand for valuations. Bosses said there were signs of improvements towards the end of 2023 giving them expectations that surveying earnings would be better this year. Last month the division secured an extension to a contract to provide surveying and valuation to Lloyds Banking Group - that will now take it to September 2028.
Elsewhere, the group's financial services arm was said to be resilient with profits tracking ahead of plan. LSL said it had slightly improved its share of the º£½ÇÊÓƵ purchase and remortgage market - securing 10.7%, up from 10.5%.
Investors were also told the group's £12.9m acquisition of the TenetLime mortgage network, announced last August, had now received Financial Conduct Authority approval. Plans are now being drawn up to integrate the group of 133 advisory firms into LSL.
LSL's trading update said: "The group's trading in January was in line with management expectations and ahead of 2023. At this early stage of the year, we remain on track to deliver a material increase in profit for 2024 compared to 2023 due mainly to the benefits of improved performance in surveying, as well as a full year of operating the franchising model. A further update on current trading and outlook will be shared with the release of our preliminary results."
LSL said it boasted a strong balance sheet with net cash of £34.9m at the end of December.
