LSL Property Services ((GB:LSL)) has held its Q2 earnings call. Read on for the main highlights of the call.
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The recent earnings call for LSL Property Services painted a generally positive picture, highlighting significant growth in key areas such as revenue, profit, and cash conversion. Despite facing some challenges, including a decline in protection revenue and a normalization of margins, the company is strategically positioned for future growth.
Revenue and Profit Increase
The company reported a 5% increase in group revenue, reaching GBP 89.7 million, alongside a 3% rise in underlying operating profit to GBP 14.8 million. This growth underscores the company’s robust performance in the current financial landscape.
High Return on Capital Employed
LSL Property Services achieved a return on capital employed of 31% over the last 12 months, significantly surpassing historical levels. This metric highlights the company’s efficient use of capital and its ability to generate substantial returns for shareholders.
Strong Cash Conversion
The company reported a cash conversion rate of 95% for the last 12 months, which is at the upper end of their target range of 75% to 100%. This strong cash conversion indicates effective cash management and operational efficiency.
Surveying & Valuation Growth
Revenue in the Surveying & Valuation division grew by 9% to GBP 53.2 million, with B2C revenue experiencing a remarkable 43% increase. Additionally, surveyor productivity rose by 8%, showcasing the division’s strong performance.
Financial Services Growth
New mortgage lending increased by 23%, and revenue per adviser grew by 8%. These figures reflect the company’s successful expansion in the financial services sector.
Estate Agency Expansion
The lettings portfolio saw growth through three acquisitions and the addition of three new branches to the franchise network, indicating strategic expansion in the estate agency sector.
Protection Revenue Decline
The company experienced a 12% decline in protection revenue within its Financial Services division due to a strategic shift away from protection-only brokers.
Operating Margin Decline in Surveying
Operating margins in the Surveying & Valuation division normalized to 21%-22%, down from previously elevated levels, aligning with company expectations.
Timing Effects on Cash Flow
Cash from operations was reported at GBP 7.4 million, lower than the previous year due to timing effects in working capital movements.
Forward-Looking Guidance
LSL’s leadership provided a comprehensive outlook, forecasting a sequential rise in profit across divisions driven by refinancing activity and a strong mortgage market. The company plans to continue investing in technology and data to leverage growth opportunities, maintaining a robust balance sheet with GBP 22 million in cash and a GBP 60 million unutilized facility.
In summary, LSL Property Services’ earnings call conveyed an optimistic sentiment, with notable growth in revenue and profit, strong cash conversion, and strategic investments positioning the company for future success. Despite some challenges, the company remains well-positioned to capitalize on market opportunities and drive continued growth.