January 2008

LSL hit by sharp drop in business

LSL Property Services, the parent company of Your Move and Reeds Rains, has been closing branches and cutting staff amid a sharp drop in business during the final quarter of 2007.

 Its trading update for shareholders, ahead of its full year results due February 27, confirmed difficult times for the housing market.

 Compared with the final quarter of 2006, the number of transactions during the final quarter of 2007 was down 40 per cent.

 Dean Fielding, LSL Group Finance Director, said: “Based on sales agreed, our figures show a 40 per cent drop in transactions compared with a year earlier, and comparing the second half of 2007 with 2006, the figures were down by a third.

 “If the current market conditions continue until June this year, then the annual volume of transactions could be as few as 900,000, compared with an average of 1.3 million during the past few years.

 “This fall off in volume has obvious implications for the estate agency business as a whole.”

 However, LSL forecasts the market might return to more normal conditions during the second half of this year and that there will be no significant fall in house prices, except in specific areas where there is over-supply of new-build flats.

 “For the market to return to more normal conditions, we will need more than one interest rate cut and for cuts in base rate to be passed on to borrowers,” said Mr Fielding.

 Simon Embley, chief executive of LSL, said the cuts in branches and staff was “simply good housekeeping” and started in September when LSL saw trouble looming.

 Altogether 12 branches have been closed so far, and 200 staff cut from the estate agency division, although EAN’s latest League table covering office volume actually shows a group increase of 40 over the year. A further 115 jobs in administration and surveying have also gone.

 “Most of the staff cuts were through natural wastage and non replacement rather than redundancies,” said Mr Fielding. “We saw problems ahead and began trimming early. Unless the market deteriorates even further, I do not expect further major cuts.”

 By contrast, Savills expected full year profits for 2007 to be “slightly ahead of expectations” in a trading statement issued ahead of its full year results due on March 23.

 Chief executive Aubrey Adams said the prime UK residential market had proved “more resilient” to the credit squeeze than lower-priced property, although conditions in the UK and US residential and commercial property markets are “challenging”.

 Asian and European markets, where Savills have built up business, have also proved more resilient.

City analysts, who had predicted £81 million pre-tax profits for Savills for 2007, now expect £85 million.