A combination of flat revenues, a steeper wage bill and an increased contingent consideration relating to acquisitions halved reported profits for LSL Property Services (LSL) at the half-year mark, with the underlying operating margin down 2.6-percentage points to 7.6 per cent. What’s more, the slump in profitability, combined with adverse working capital movements, meant that operating cash flow of £1.06m was a tenth of that generated at the equivalent stage in 2017.
The property services group highlighted a “resilient revenue performance” – impressive given the cyclical turn in property markets, but there’s no escaping the oscillations in residential sales. And there’s only so much management can do to mitigate weakness in this arena. The cyclical downturn was laid bare at Marsh & Parsons, the group’s London premium brand estate agency, which suffered a six percentage point decline in the operating margin to 4.4 per cent, along with a 15 per cent fall in residential sales.
The group’s financial services business isn't immune to weakness in the residential property market, either, although this part of the Estate Agency division has been building market share, both organically and through acquisitions, in areas such as mortgage completions. This sent segmental revenues up 20 per cent in the period. Shareholders can also take heart from the recent long-term contract award from Lloyds Banking for e.surv, the group’s residential surveying business.
| LSL PROPERTY SERVICES (LSL) | ||||
| ORD PRICE: | 258p | MARKET VALUE: | £ 265m | |
| TOUCH: | 255-260p | 12-MONTH HIGH: | 298p | LOW: 208p |
| DIVIDEND YIELD: | 4.4% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 142p* | NET DEBT: | 43% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 152 | 13.2 | 10.3 | 4.0 |
| 2018 | 153 | 6.4 | 4.7 | 4.0 |
| % change | +1 | -51 | -54 | - |
| Ex-div: | 09 Aug | |||
| Payment: | 14 Sep | |||
| *Includes intangible assets of £192m, or 187p a share | ||||
