Estate agency and related services provider LSL Property Services (LSL) trades 3.8% lower at 360.5p as interim pre-tax profits collapsed 80%. The group, which owns 12 estate agency brands including Your Move, is seeing a massive slowdown in residential sales, slashing pre-tax profits from £31.4 million a year ago to just £6.2 million.
The company is blaming uncertainty in the General Election run-in that has stubbornly refused to budge. Management reckons home buyers delayed plans over new properties.
Residential sales are still LSL’s main driving force, accounting for two-thirds of its operating profit in 2014. Arranging mortgages and surveying generating the rest.
Last week, rival estate agency Countrywide (CWD) produced the first evidence that the recovery was not moving as fast as expected. Its transactions slipped 12% in the first half when a 10% decline was forecast.
But LSL’s directors refuse to be downcast, believing that full-year expectations will be met as the wheels of house buying again start to turn. But you can't blame investors for being sceptical, such a hefty crash in profits leaves the company playing a serious game of catch-up as the second half unfolds. Analysts expect pre-tax profits to be around £40 million this year, which would be quite the achievement from here.
Numis still believes that the medium-term story remains positive. 'In our view, the update highlights that 2015 is likely to be the reverse of 2014, ie. slow market conditions in the first half, improving market trends in the second.' The analysts accept that risks remain around numbers, but what this means for the near-term remains a very different question.