North East estate agency LSL saw its full year revenues fall 4% after a major shake-up of its high street branch network.
The Newcastle firm owns and operates a number of well known brands across the Ƶ including Your Move, Reeds Rains and Marsh & Parsons, but it last year announced a number of closures as it sought to reshape its portfolio.
During the first quarter of the year, the Your Move and Reeds Rains Estate Agency branch network was whittled down from 308 owned branches to 144, following the closure and merging of 81 neighbouring branches, the franchising of 39 and the closure of 44.
Now directors have released results for 2019, saying the firm put in a positive performance and was ahead of expectations, despite the financial impact of the shake-up and the scale and complexity of the project.
It said 2020 had started well, but sounded a note of caution over the coronavirus outbreak, saying it had recently seen a softening in sales indicators in its estate agency division.
During 2019 the firm posted a 22% fall in group operating profit, from £25.4m to £19.7m, but after stripping out the exceptional costs, amortisation of intangible assets and share-based payments, underlying operating profit actually rose 3% from £35.9m to £37m.
Group revenue fell 4% from £324.6m to £311.1m but on a like-for-like group revenues increased by 4%, which it said was “a highly resilient performance in the context of challenging residential market conditions during 2019”.
Exceptional costs of £15.7m were recognised in the period, predominantly from the reshaping of the Your Move and Reeds Rains branch networks.
The publication of the accounts comes two weeks after the board of LSL confirmed it was in discussions with rival firm Countrywide, owner of Bairstow Eves and other brands, regarding a possible merger.
The talks – which come as the industry is being hugely disrupted by online technologies – have prompted fears of job losses, with the companies operating more than 1,000 branches between them and having more than 14,000 employees.
The firm said: “Discussions between Countrywide and LSL are ongoing. At this stage, there can be no certainty that any offer will ultimately be made for Countrywide. Further announcements will be made in due course as appropriate.”
LSL has until 5pm on March 23 to announce a firm intention to make an offer for Countrywide or walk away.
Simon Embley, chairman of LSL, added: “The group delivered a highly resilient revenue and underlying operating profit performance in 2019 in the context of challenging residential market conditions and the introduction of the tenant fee ban on 1st June 2019.
“Market conditions to date in 2020 have been encouraging, reflected by our estate agency sales pipeline at 29th February 2020 being £3.6m ahead of the Board’s prior expectations, benefiting from a favourable estate agency net sales performance during January and February.
“Whilst we have been encouraged by the residential property market conditions to date in 2020, the situation regarding the COVID-19 virus is rapidly evolving and we have in recent days, seen some slight softening of our lead sales indicators in estate agency.
“We are monitoring the situation very closely as it may create headwinds for our business in 2020 if changes in consumer behaviour impact residential property market conditions. As and when any potential impact on the group becomes clearer, we will provide updates as necessary.”
