LSL writes down value of Yopa stake as it pins faith ...

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05 March 2019

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LSL writes down value of Yopa stake as it pins faith in High Street branches

LSL Property Services, the parent company of Your Move and Reeds Rains, has substantially 'written down' its investment in online estate agency Yopa.

Although this sounds an accounting technicality, it in reality recognises the reduced value of an asset - and the figures show the dramatic decline of LSL’s belief in online agencies.

Preliminary figures for 2018 released by LSL this morning includes these paragraphs: “LSL retains a strong position in its traditional Estate Agency business. We continue to believe that traditional estate agents will represent the substantial majority of the Residential Sales and Lettings markets for the foreseeable future and that Estate Agency branches will continue to remain core to providing the service our customers expect.

“LSL has a 14.7% minority shareholding in Yopa. LSL's previous carrying value of £20.0m for Yopa has been written down through reserves by £12.2m to £7.8m as at 31 December 2018 to reflect the Board's assessment of fair value.”

This means a dramatic writedown of 61 per cent in how much LSL's board believes Yopa is worth.

Reaction has been swift to the news, with celebrated estate agency industry analyst Anthony Codling - formerly of Jefferies consultancy - tweeting that the writedown "equates to a daily cost of more than £25,100" since LSL acquired its stake in the online operator in September 2017.

In the lengthy figures document, space is given to the company's strategy for 2019 and beyond - and Yopa is not mentioned.

Elsewhere in its figures this morning, LSL - which last month separately announced a restructuring of branches including closures and sell-offs - says its group revenue rose four per cent in 2018, representing a “highly resilient … performance in the context of challenging residential market conditions.”

Estate Agency Division income was up three per cent year-on-year but operating profit was down 24 per cent because of lower sales transaction volumes, which more than offset growth in lettings and financial services income. Operating profit per owned Your Move and Reeds Rains branch in 2018 was £18,300 - little more than half the (2017 figure of £32,000.

Chairman Simon Embley gives a warning that this current year will be even tougher, however.

“Market conditions in 2019 have been notably softer than the equivalent period in 2018, whilst LSL's financial performance so far in 2019 has been marginally behind the Board's expectations. Nevertheless, at this early stage in the year, the Board's current expectation is that the Group will deliver a full year Underlying Operating Profit in line with its prior expectations, as the business is expected to continue to benefit from the range of LSL's ongoing self-help measures.

“We continue to remain cautious on the residential property market outlook for 2019 given the current uncertainty over the UK and global political and economic environment and the potential impact on UK consumer confidence. The Group has a robust balance sheet with relatively low levels of gearing and is highly cash generative at an operational level. The Board remain confident of the opportunities for further positive progress for the Group."

LSL also owns London agency Marsh & Parsons and its figures this morning remain upbeat about the brand despite sales volumes in the prime central London market falling up to 20 per cent in 2018 with Greater London house prices falling by 1.1 per cent.

Marsh & Parsons sales income fell by 13 per cent; however, lettings revenue now represents 63% of Marsh & Parson's total revenue.

Despite the challenges of the London market, one new Marsh & Parsons office was opened last year - taking the total to 28 - and LSL says it aims to have 36 M&P offices in the medium term, with new branches likely to be outside prime central London.