LSL Property Services Plc (LON:LSL) made good progress in H116 with revenues and profits in both divisions advancing on the previous year. The more stable, recurring revenue streams from lettings and financial services continued to progress strongly. Although we expect further progress in H2, the Brexit vote has added to uncertainty about the residential property market and our full year forecast is reduced. Nevertheless, a cash-generative, diversified business and a robust balance sheet leave LSL well placed to navigate this current market uncertainty. The prospective yield of more than 5% is well covered.
Responding to market changes
H116 revenues and costs both grew by 8% year-on-year, including a first time impact from Group First, with underlying operating profit ahead by 10%. Lettings revenues grew 11% and Financial Services by 29%. LSL had earlier warned on the more uncertain outlook for H2, following the unexpected EU referendum vote, indicating that it does not expect market conditions to improve sufficiently to meet previous full year expectations. Our revised forecasts (FY16e normalised EPS revised down by 24%, see page 6) assume no seasonal pick-up in H2 transactions and a flat market in 2017, which may prove to be conservative. Lettings and financial services remain the drivers of revenue growth, with management action having a positive impact on costs and efficiency.
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