North East estate agency business LSL Property Services has warned profits may not reach last year's levels, citing inflationary pressures and slower-than-anticipated deal completions.
The Newcastle business – owner of E.surv Chartered Surveyors, Your Move and Reeds Rains – updated shareholders on its performance ahead of its AGM, saying a strong market had driven group revenues to £104.5m in the first four months of 2022.
It said that, over that period, its purchase and re-mortgage lending rose 9% to top £10bn, and it also saw 5% revenue growth in the financial services network business, which it said was a solid performance in a smaller market.
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The LSL board said it was particularly pleased with its surveying division, where revenue was up 11% year on year - but said that its estate agency division saw a 9% drop in revenues, largely driven by a fall of 16% in residential exchange income.
However, it said deals made by its joint venture Pivotal Growth were taking longer than it previously expected.
The group launched Pivotal Growth last April with Pollen Street Capital, to “buy and build” a leading national mortgage broker, making at least £200m available to fund acquisitions.
The business, based at Newcastle Business Park, said it was pleased to make its third acquisition recently, but said completions have been slower than expected, leaving the JV in an investment phase for longer than anticipated.
Meanwhile, it has also continued to invest in capability and technology, in particular, across the financial services division, and says that more investments will follow.
Net cash stood at £30.4m on April 30 2022, compared to net debt of £7.8m at the same date last year.
Looking ahead, the firm warned of inflation issues as well as pressures on its estate agency division profits.
The stock market update said: “Geopolitical uncertainties remain which have added to inflationary cost pressures, particularly in relation to energy and employee costs. We continue to focus on proactive management of our cost base, to limit the impact of these pressures, and consequently expect these pressures to have only a modest impact on profitability.
"At the start of the year, we expected to deliver full year profits at broadly the same level as our record results in 2021, in markets with reduced levels of activity.
“Recent market estimates indicate that residential pipeline conversion rates should improve resulting in full year 2022 house purchases not being materially behind previous expectations.
“Assuming activity is in line with these estimates, overall profit is expected to be slightly behind the record profits posted in 2021, principally reflecting slower than anticipated deal flow in Pivotal Growth, and the limited impact of cost inflation."
