Updates, Upgrades and Downgrades
Tue 29 Apr 2014
While the rising tide has lifted the boats of most property services companies, shares in LSL have frustratingly remained below our tip price. This is due to sluggish 4% rise in underlying pre-tax profit and 6% growth in eps to 33.9m and 25.3p respectively in 2013. This reflects increased investment in new staff abut also an unexpected 12m increase in PI provisions at its surveying division (covering claims for negligence due to over-valuations in the last boom) The PI claims meant net debt was disappointingly unchanged at 26.3m (2012: 26.6m).
Excluding PI claims, surveying profit fell 6% to 13.1m reflecting the loss of a contact that was bought back in-house. Two other contracts are also up for renewal this year but with the rising increase in surveying volumes, the outlook is set fair.
Within its estate agency side, which comprises the Your Move, Marsh & Parson and Reed Rains chains, Profit rose 19% to 29.1m as residential sale, letting and financial services all enjoyed good growth. Three new Marsh & Parsons branches opened last year and 3-4 more will open in 2014.
Numis forecasts eps to increase to 31.9p this year and 35.8p next. Assuming no further PI provisions in surveying come out of the woodwork, the shares should track the housing market higher. Hold.