LSL Property Services (LSL) is making a textbook strategic transition away from the torrid market for lender home valuations towards growth areas such as lettings and central London. For the first time, underlying operating profits were higher last year in the estate agency division (£24.4m) than in surveying (£13.9m). The acquisition of London specialist Marsh & Parsons in late 2011 helped, but estate agency profits grew 78 per cent, even on a like-for-like basis.
That offset a dismal performance from the valuation unit. Barclays renegotiated its contract at a much lower rate, Lloyds brought its valuation operation in-house and Santander unexpectedly slashed its mortgage lending by 38 per cent. Together these problems dragged divisional sales down by 19 per cent, with profits a full 41 per cent lower.
As if that wasn't bad enough, LSL also saw a rapid increase in professional indemnity claims based on over-optimistic valuations concluded before 2008. The £17.3m provision announced last July explains the plunge in statutory profits for the year. The good news is that the pace of claims since has not increased, says finance director Steve Cooke - suggesting that all skeletons are now out of the closet.
Broker Numis Securities expects adjusted pre-tax profit to rise from 2012's £32.5m to £35m in 2013, giving EPS of 25.1p.
LSL PROPERTY SERVICES (LSL) | ||||
|---|---|---|---|---|
| ORD PRICE: | 297p | MARKET VALUE: | £309m | |
| TOUCH: | 293-300p | 12-MONTH HIGH: | 300p | 197p |
| DIVIDEND YIELD: | 3.2% | PE RATIO: | 44 | |
| NET ASSET VALUE: | 73p* | NET DEBT: | 35% | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 162 | -6.18 | -4.60 | nil |
| 2009 | 158 | 16.6 | 11.4 | 5.40 |
| 2010 | 207 | 36.0 | 33.6 | 8.40 |
| 2011 | 218 | 17.6 | 12.9 | 8.70 |
| 2012 | 244 | 6.73 | 6.80 | 9.50 |
| % change | +12 | -62 | -47 | +9 |
Ex-div: 10 Apr Payment: 10 May *Including intangible assets of £138m, or 133p a share | ||||
