UK-based LSL Property Services PLC (GB:LSL) shares plunged after the company warned of lower profits for the full year 2023. The company has substantially decreased its previously projected annual profit outlook due to the negative impact of multiple interest rate hikes on lending activities. Following the news, the shares experienced a decline of approximately 13% on Monday, ultimately concluding the session with a loss of 7.38%. In the last 12 months, the stock has been trading down by 16.7%.
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LSL is the leading provider of services in the UK property market, including surveying, valuation, agency services, and more.
Profits Hit by Sluggish Housing Market
The UK housing market is currently undergoing a significant slowdown, with strong mortgage expenses and strict credit conditions dampening demand. The Bank of England (BoE) has incrementally raised interest rates 14 times since December 2021, reaching 5.25%, in an effort to address persistent inflation.
In its trading update for the first half, the company reported revenues of £104 million, a decline from £160.9 million in the corresponding period of the previous year. The company’s purchase lending declined by 27%, which was slightly lower than the overall market decrease of 30%. Remortgage lending also saw a 15% decline, performing better than the market, which experienced a 21% drop. Underlying operating profit also decreased to £3.5 million from £14.2 million, aligning closely with its anticipated performance.
Looking ahead to the second half of 2023, the company expects a decline in buying and remortgaging activities in the UK, affecting its numbers. The company also stated that its profits will now be “substantially lower” than previously projected. However, the profits in the second half of the year will show improvement compared to the first half.
The company’s half-year results are expected in the latter part of September.
What is the Stock Price Forecast for LSL?
On TipRanks, LSL stock has a Moderate Buy rating based on one Buy recommendation from Numis. The broker has a price target of 400p, which implies an upside of almost 60% in the share price.
