LSL Property Services H1 Earnings Call Highlights

Key Points

• LSL delivered strong first-half financial growth: Revenue rose 3% to £92.3 million, underlying operating profit increased 11% to £15.9 million, and margins reached a 15-year high of just over 17%, despite weaker housing transactions.
• Performance was led by surveying, asset management and estate agency franchising, while financial-services profit declined due to investment in a new CRM platform and lower adviser numbers. Remortgaging, lettings and other recurring revenues helped offset softer residential sales activity.
• Management maintained its 2026 outlook for higher revenue and profit, supported by a transformation program expected to deliver at least £5 million in annualized benefits by 2027. LSL also launched a new share buyback of up to £12 million while maintaining its 4p interim dividend.

LSL Property Services LON: LSL reported higher first-half revenue, profit and margins, citing resilient activity in remortgaging, lettings and recurring revenue streams despite a modest decline in U.K. housing transactions.

Group Chief Executive Adam Castleton said the company’s markets developed broadly in line with expectations. Residential sales activity was slightly lower year over year, largely due to a stamp duty-related pull-forward in the prior-year comparison, while the mortgage market continued to recover and remortgaging activity was particularly strong.

“They were not particularly strong, but nor have we seen the deterioration that some of the wider market commentary might suggest,” Castleton said of market conditions.

Profit Growth and Margin Expansion

Revenue increased 3% to £92.3 million, while underlying operating profit rose 11% to £15.9 million, according to Group CFO David Tilak. Underlying operating margin increased by 130 basis points to just over 17%, which Tilak described as the group’s highest first-half margin in more than 15 years.

Adjusted diluted earnings per share increased 14% to £0.117, supported by higher after-tax profit and share buybacks. Return on capital employed rose to a record 36% from 31%, while operating cash conversion over the past 12 months was 91%.

Tilak said market changes contributed £0.7 million to operating profit, as stronger remortgaging and product-transfer activity more than offset lower housing transactions. Improved business performance added a further £1.7 million.

These gains came despite £2 million of costs from salary inflation and higher national insurance, as well as a further £0.9 million of investment, principally in a financial-services technology platform. Cost-management measures contributed £1.9 million, including a further £0.5 million reduction in central costs.

Divisional Performance

LSL’s surveying and valuation division reported revenue growth of 6% and underlying operating-profit growth of 11%, with margins reaching approximately 23%. The company renewed every lender contract due during the period and received additional allocation wins from two major lenders.

The B2C survey operation continued to grow and held a 4.8 Trustpilot score, Tilak said. Asset management was a standout performer, with revenue rising about 44% to £3.7 million and an operating margin of more than 50%.

Within financial services, mortgage lending revenue increased 8%, keeping pace with the market, while revenue per adviser rose 12%. However, Tilak said product mix reduced average fees per completion, and revenue declined 3% while underlying operating profit fell by £0.9 million. He attributed the profit decline principally to investment in a new customer relationship management platform and lower adviser numbers, including the prior-year departure of protection-only firms.

Tilak said the group sees opportunities to improve protection penetration and adviser productivity. LSL said around 12% of all U.K. mortgages flow through its adviser network.

Estate agency franchising revenue increased 2% to £13.2 million, despite U.K. housing transactions declining 4% against a comparison period affected by stamp duty changes. Underlying operating profit increased 24%, and the division’s margin expanded by about six percentage points to a record first-half level of 30%.

The managed lettings portfolio grew 4%, while average income per managed property increased 3%. The division added six branches and completed seven supported lettings-book acquisitions. It also acquired National Search Service and invested in collaborative conveyancing.

Transformation Program and Capital Allocation

LSL has launched a groupwide transformation program initially focused on finance and procurement. The initiative is expected to generate at least £5 million in annualized benefits progressively through 2027.

Tilak said the program will redesign support-function processes, remove duplication and create broader roles across businesses that had historically operated independently. Castleton said technology could become a greater focus over time as LSL seeks to simplify processes, improve operations and support its businesses.

The group ended the period with net cash of £22 million, after beginning with £27.8 million. Cash from operations totaled just over £17 million, while LSL invested £9 million in acquisitions and capital expenditure. It returned just over £12 million to shareholders through dividends and buybacks.

LSL maintained its interim dividend at £0.04 per share. Its dividend policy is based on 30% of underlying operating profit. The company completed a previous £7 million buyback program in January and began a new repurchase program of up to £12 million, which it expects to complete by January 2027.

Outlook Remains Unchanged

Management said trading since the period end has developed as anticipated and its expectations for 2026 remain unchanged. LSL expects increased revenue and another year of profit growth, which would mark its fourth consecutive year of profit growth.

The company continues to expect operating cash conversion of between 75% and 100% and capital expenditure of £3 million to £5 million for the year.

Castleton said the group’s revenue base is more resilient than may be assumed because a majority of income is not directly dependent on residential property transactions. He pointed to lettings, remortgaging, platform fees and other recurring or repeatable revenue streams.

“We have strong businesses, a highly cash generative model, and a growing opportunity to create more value by bringing those strengths together,” Castleton said.

About LSL Property Services (LON:LSL)

LSL Property Services plc, together with its subsidiaries, engages in the provision of business-to-business services to mortgage intermediaries and estate agency franchisees, and valuation services to lenders in the United Kingdom. The company operates through three segments: Financial Services, Surveying & Valuation, and Estate Agency Franchising. The Financial Services segment offers compliance and other services to mortgage and insurance networks. The Surveying & Valuation segment provides valuations and professional surveying services of residential properties to various lenders and individual customers; data services to lenders; and asset management services, including managing the sale of residential properties on behalf of corporate clients and property investors.

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