LSL Property Services: A Profit Surge in 2024

In the ever-evolving landscape of the property services industry, LSL Property Services plc (LSL.L) has emerged as a standout performer, reporting a remarkable surge in profits for the year ended 31 December 2024. The company's profit before tax climbed to an impressive 23.01 million pounds, a significant leap from the 4.86 million pounds reported in the previous year. This substantial growth was primarily driven by a significantly higher Group Underlying Operating Profit in 2024, which was partially offset by net exceptional costs amounting to 2.4 million pounds, compared to 4.4 million pounds in the previous year.

The company's strategic transformation over the past two years has been instrumental in achieving this remarkable turnaround. By focusing on its core markets and reducing its emphasis on larger, pure protection brokerages, LSL Property Services has been able to grow its market share in the UK purchase and remortgage market to 11.8%, up from 10.6% in 2023. This strategic shift has resulted in increased market share, growth in mortgage lending, increased adviser numbers, improved financial performance, and a greater focus on its core market.

One of the key initiatives that have contributed to this growth is the company's investment in technology and products. LSL Property Services has invested around £1 million to develop surveying and valuation products and upgrade its financial services offering. This investment has supported an increase of 87% in direct-to-consumer (D2C) revenue, which reached £6.8 million. The company has also invested in a major programme to enhance its technology solutions, expecting to spend around £3 million in revenue and capital expenditure this year to support the programme.

The acquisition of TenetLime in February 2024 has also been a significant contributor to the company's growth. The integration of 145 TenetLime firms has increased the total adviser numbers by 75 to 2,736, including 247 TenetLime advisers. This increase in adviser numbers has helped the company to better serve its core market and drive revenue synergies and profitability.

The conversion of its estate agency business to a franchise model in 2023 has also helped the company become leaner and achieve better margins. The division supported franchises with the acquisition of three letting books during the year, adding around 700 properties to its portfolio, which stands at 37,000. This has resulted in an underlying operating profit of £7.6 million, up from £4.3 million in the year prior.

The surveying and valuation division has also benefited from contract extensions with improved terms and a recovery in market conditions. Revenue grew 36% year-on-year to £97.8 million, and mortgage approvals were 21% up on 2023 levels. The underlying operating profit for this division came to £22.5 million, an increase from £6.7 million.

The mortgage broker joint venture with Pollen Street Capital, Pivotal Growth, has also been a significant contributor to the company's growth. Pivotal Growth acquired eight businesses during 2024, boosting its adviser ranks to 500. This has made it one of the UK's largest mortgage and protection brokers, giving it critical mass to leverage its scale to attract deals and drive revenue synergies and profitability.

The company's financial performance for the year ended 31 December 2024 was also impressive. Group operating profit increased to 21.9 million pounds, from 3.7 million pounds last year. This growth was driven by improved trading performance during the period, though it was partially offset by 2.4 million pounds in net exceptional costs in 2024, compared to 4.4 million pounds in the previous year. Profit attributable to owners of the parent for the year was 17.36 million pounds or 16.8 pence per share compared to a loss of 38.00 million pounds or 36.6 pence per share last year. Adjusted earnings per share were 20.9 pence compared to 7.5 pence per share in the prior year.

The company's revenue for the year ended 31 December 2024 was 173.2 million pounds compared to 144.4 million pounds in the prior year. Revenue was 20% above prior year in a total mortgage lending market that was broadly flat and housing market that increased by 7%.

The Board has declared a final dividend of 7.4 pence per share, consistent with last year's final dividend of 7.4 pence. This results in a total dividend of 11.4 pence per share, matching the previous year's total dividend of 11.4 pence. The ex-dividend date for the final dividend is 8 May 2025, with a record date of 9 May 2025 and a payment date of 27 June 2025.

The company said it will continue to deploy share buybacks in a measured way and there are no plans to allocate cash reserved for the buyback into other Group activities. To date, 1.3 million pounds of the share buyback program announced on 25 April 2024 has been deployed. The current buyback program has been extended to the date of the 2025 AGM.

The company said it has made a positive start to the year with trading in line with expectations. The company's end markets have been operating broadly in line with its assumptions. The company continues to expect that in 2025 it will increase profits further over 2024 and the Board's expectations for the full year remain unchanged.

In conclusion, LSL Property Services' strategic transformation over the past two years has positioned it for higher operating margins and consistent earnings. The company's focus on its core markets, investment in technology and products, acquisitions and integration, franchise model for estate agency, and joint venture with Pollen Street Capital have all contributed to its significant increase in profits and revenue for the year 2024. The company's financial performance for the year ended 31 December 2024 was impressive, with a group underlying profit of £27.7 million, up from £10.3 million in 2023, and a 20% rise in revenue to £173.2 million. The company's dividend policy and share buyback program also reflect its commitment to returning value to shareholders. With a positive start to the year and expectations for further profit growth in 2025, LSL Property Services is well-positioned to continue its impressive performance in the years to come.