LSL Property Services plc

Good morning. Thank you for joining LSL's interim results presentation. I'm Adam Castleton, LSL's Groups CEO and I'm here with David Wolff, Interim Groups CFO. I'll first cover highlights, market context and progress we've made in our divisions. David will then take you through a financial review. I'll then talk about outlook and some key takeaways and we'll take questions at the end. We are recording this event and a replay will be available on the LSL IR website. These are my maiden set of results as Group CEO. I'm really pleased to report the results are in line with expectations and we continue to make good operational progress. Revenue and profit are up with operating margin maintained at a 15 year high. Return on capital employed of 31% for the last 12 months is much higher than historical levels. These reflect the improvements we've achieved following the transformation of the group in recent years and this was achieved while continuing to invest for growth. This performance underlines that our Capital Light resilient model is delivering consistently while we are reinvesting for the future and the full year outlook remains unchanged. Moving to key financial highlights. Group revenue increased by 5% to £89.7 million and we maintained our strong market share. Group underlying operating profit was up 3% to £14.8 million, while we continued to invest strategically in our business and absorbed the national insurance increase. We are a highly cash generative business. Our cash conversion for the last 12 months was 95%. This is at the upper end of our target range of 75% to 100%. We performed well in a recovering market. Total mortgage lending in the market increased by 5% with a very different picture in new lending which was up 22% whilst product transfers rebalanced back 10% year on year. We gained market share with our new mortgage lending up 23%. UK residential sales were up 17% with a pull forward of demand given the stamp duty changes. We maintained our market share of this market. Mortgage approvals increased 10% with a change in our lender mix slightly reducing our estimated share in surveying and valuations with revenue up 9%. We operate three divisions with leading market positions Each benefit from strong, long-standing client relationships with scale and strength in their markets, as well as their expertise and deep domain knowledge. Each delivered operational progress during the period. In surveying and valuation, productivity per surveyor increased by 8%, B2C revenue increased by 43%, and we renewed a top 5 lender contract and started working with another new lender. In financial services, new mortgage lending was up 23%, revenue per advisor increased by 8% and the implementation of the new CRM is progressing well. In our estate agency franchising division, we increased the size of our lettings portfolio, making three acquisitions during the period with a strong pipeline and we added three new branches to our franchise network. In summary, each division continues to execute well while maintaining discipline on margins and returns. I'll now hand over to David to take you through the financial review in more detail. Thank you, Adam.

Good morning. I'm David Wolfe, interim CFO at LSL, previously CFO at a number of high-growth, tech-driven and listed businesses. Let's look at the group's financial performance in more detail. In the half year, revenue grew 5% to £89.7 million, driven by 9% growth in our largest division, Surveying and Valuation. Underlying operating profit increased to £14.8 million, up 3% year on year, and I'll come back to that increase in just a moment. Operating margin remains strong at 17% at the upper end of our historical range. Cash from operations at 7.4 million reflects shareholder distributions, planned investment and some working capital timing. Again, more on that shortly. Return on capital employed for the last 12 months increased to 31%, very strong compared to historical levels. So the first half has delivered continuing growth while maintaining a high return on capital profile. Coming back to that operating profit increase, there are two main points to highlight. First, we have made positive operating performance progress with an underlying increase of 3 million before strategic and investment decisions. This progress is driven by our volume growth across the business, improved pricing and the first positive contribution from the pivotal joint venture. Second, we made strategic decisions in two areas which reduced profit in the period. We stepped away from some protection only business as we rebalanced our advisor firms towards mortgage and protection or composite firms. We made investment across financial services and surveying to drive future growth. So the headline growth of 3% is a combination of that underlying progress and the growth investment. Turning now to cash flow and capital allocation. In the half, we delivered positive operating cash flow of £7.4 million after working capital movements around the 2024 year end. I'll come back to this in just a moment. We deployed capital in two key areas in the period. First, in shareholder returns, we distributed £9 million in dividends and share buybacks. The interim dividend is maintained at 4.0p and the buyback programme continues with 3 million deployed to date. Second, in strategic investment, 3.6 million of cash was spent across CRM development, data and lettings books acquisitions to drive future growth. Our balance sheet remains robust. With June cash at 22 million and a 60 million unutilised facility, we have strong liquidity and our Capitalite model ensures ongoing flexibility. Looking at the positive operating cash flow and working capital in a bit more detail now. The line at the bottom of this slide shows our adjusted cash from operations performance over the last few half periods. The 7.4 million we reported in H1 presents as a lower number than last year, but we had a timing effect of 4 million excess working capital inflow just before the 2024 year end that then unwound into an outflow into 2025. You can see this in the lines above. In operating profit, we have stable progression. depreciation is flat and low reflecting our capital light operating model cash on lease liabilities continues to moderate after the transformation of the estate agency business but on working capital h2 2024 inflow of 5.9 million you'll see in the box was an outlier which illustrates these timing effects around the year end The unwind in H1 of 2025 makes our cash conversion look suppressed in the half, even though on a rolling 12 months basis we made really good progress. We expect that the second half and full year 2025 cash conversion should be normalising towards our target of 75 to 100%. Taking each division in turn, let's run through the story of the half. In surveying and valuation, revenue grew 9% to $53.2 million, within which B2C was up 43%. Underlying operating profit was $11.9 million, with margins at 22%. This is down on the elevated levels of H1 last year, with surveyor commissions now normalised, and this effect is in line with what we had flagged before. but in sequential performance compared to the second half of 2024 we have made good margin progress up 200 basis points volumes grew with jobs up 7% fee per job was up 2% with better terms and more B2C activity and we improved surveyor productivity in jobs per surveyor which was up 8% in financial services Revenue was flat overall, but this illustrates the combination of mortgage-related revenue up 21% and protection revenue down 12%, following our strategic repositioning away from protection-only brokers. As a result, advisor numbers were down to 2637, but advisor productivity increased 8% in completions per advisor, and we grew FIPA completion by 3%. But overall, at a divisional level, despite the broker repositioning and some P&L investment in CRM, operating profit grew 23% to £4.8 million, with Pivotal making that positive contribution. In estate agency franchising, revenue overall grew 1%. But while residential sales revenue was up 24% and lettings revenue up 4%, our land and new homes business was pushed back by a contract change. As a result, underlying operating profit margin remained flat at 24%, but we are expecting improvement in the second half with cost savings feeding through. Branches grew by 1% after three more openings in the half, with overall sales income per branch up 22%. The lettings portfolio now stands at over 37,400 properties after seven lettings books acquisitions since mid 2024. with overall income per property now at 1%. So, with progress in each of the divisions, the group delivered on expectations in the first half whilst at the same time positioning itself for stronger growth in the second half of the year. And with that, I'll hand you back to Adam to take you through the outlook.

Thank you, David. Expectations for the full year remain unchanged. In the second half, we expect a sequential step up in profit in each division with an increase in refinancing activity, a strong activity in two year and five year mortgages in 2020 and 2023 mature in large numbers. We've already seen this in July and August, with July the strongest refinancing month for us this year. We also came into the half with residential sales pipelines increased from this time last year. We will continue to invest in our business in the second half, for example in lettings books and the FSCRM system. Indeed in September we have already completed on a further three lettings books. When I presented our preliminary results back in April, just before I started out as Groups CEO, I set out my early thoughts and priorities. These remain unchanged and I am pleased with early progress. Our senior leadership teams are responding well and are raising their sights and ambitions even higher for the future. We continue our investments in technology and data, notably the new CRM in FS and data in surveying and valuations, whilst we are also trialling new AI-enabled solutions to improve productivity. I am already working closely with our divisional business leaders on the opportunity to leverage group strengths and I am encouraged by the early signs that I am seeing. I'm working very hard on even more transparent and clear communication, both internally and to the market. For example, we've just rolled out the first wave of updates to our IR website, adding some fresh new elements to allow greater accessibility and transparency. This is all steady, deliberate progress and I look forward to sharing news of our ongoing progress. We are a diversified, resilient, cash generative group, strategically positioned for growth. We're delivering, performing in line with expectations, and we're investing carefully while maintaining shareholder distributions. We're building consistently. The LSL of today is stronger and leaner, delivering higher quality earnings. It is early days in my tenure as CEO, and I'm excited about the growth opportunities open to us as a group. With 2025 on track, we are looking ahead with renewed ambition and with confidence about our future. With that, operator can we please move to Q&A.