A major reorganisation of Newcastle-based LSL Property Services is underway as the group has franchised its network of 183 estate agent branches.
The firm says long term agreements for 143 of the locations have already been reached, with the remaining 40 at advanced stages of talks. Investors were told the move is part of a strategic plan LSL is implementing to streamline its business, and one it thinks will bring higher margins.
It follows a slump in profits for the group, which includes the Your Move and Reeds Rains brands, amid the fallout from the Liz Truss Government's mini-Budget which derailed momentum and caused what it called a "market-wide hiatus of mortgage activity". LSL said that franchising would bring down costs and mean it was less exposed to volatility created by housing market cycles.
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The action, combined with the £29m sale of the Marsh & Parsons estate agency business earlier this year, is hoped to eliminate most of the group's estate agency division cost base - bringing it down from £125m to £2.5m. LSL also pointed to about £30m cost reductions in its financial services division following the recent disposal of its D2C brokerages to Pivotal Growth.
Once the franchising model is implemented, LSL says it will provide estate agency services to more than 300 branches operated by 62 franchisees under the Your Move, Reeds Rains and LSLi group brands. And in its update to the market, the group indicated it has designs on growing that network further by recruiting new franchisees.
Paul Hardy, previously financial services division commercial director and estate agency division finance director, has been appointed to lead the new look estate agency franchise business, having led the reorganisation so far. And around 1,200 of LSL's estate agency division staff, mainly branch-based personnel, will transfer to the franchisees.
David Stewart, LSL group chief executive, said: "Today's announcement is a significant milestone in the execution of our strategy and is the culmination of a substantial effort on the part of colleagues across the business.
"The estate agency franchise model is similar to our financial services network and it will make us a much simpler, more resilient business whilst opening up new opportunities to grow our Estate Agency Division. I am delighted we have been able to complete this major project and excited about the growth opportunities ahead."
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