LSL’s 2021 profits surge to £69.9m as mortgage business grows

LSL’s 2021 profits surge to £69.9m as mortgage business grows

 

This was a record for the group and partially attributed to its financial services business. Its underlying operating profit rose 40 per cent to £49.3m while group revenue increased by nearly a quarter to £326.8m, compared to the previous year’s £226.7m.

Last year was the first year the group separately reported results from its financial services division.

 

Financial services performance

Underlying operating profit of the financial services business rose by 34 per cent year-on-year to £14.4m and the number of advisers increased by a record 273 to 2,858.

LSL’s share of the house purchase and remortgage market also expanded by nearly 10 per cent over the year.

The gross revenue generated per adviser rose by seven per cent to an average of £93,000 in 2021. LSL said joining advisers typically took some time to reach maximum productivity, so it therefore expected revenue in 2022 to fully benefit from those who joined last year.

Overall, financial services revenue rose by 29 per cent while profit increased by a fifth. These represented a net revenue of £78.5m and an underlying operating profit of £14.8m.

Revenue within this division was robust in the first half of the year with a 39 per cent increase on the same period in 2020. LSL said this reflected the strong purchase mortgage market and the impact of Covid-19 on comparative periods. In the second half of the year, revenue rose by 20 per cent attributed to higher volumes of refinancing and slower purchase completions.

Its financial services revenue mix by product “highlighted the group’s success” in arranging insurance products on both a standalone basis and while a mortgage was being arranged, LSL said.

The split of revenue between mortgages and insurance was broadly equal, with mortgage fees accounting for 43 per cent or £33.7m and insurance fees making up 45 per cent or £35.2m. Other fees contributed 12 per cent or £9.6m towards the £78.5m total.

Within this division, gross mortgage completion lending increased by 26 per cent to £41.1bn. LSL said this represented a 9.6 per cent increased share of the lending market excluding product transfers.

 

Increase in network commission

LSL recognises network revenue as the net amount of commission retained by the network. In 2021, gross revenues generated by the financial services network including the PRIMIS and TMA Mortgage Club rose by 22 per cent to £295.9m while net revenue increased by 23 per cent to £38.3m.

 

Financial services strategy

This year, LSL launched broker firm Pivotal Growth with an aim to establish a national business. This was part of its strategy to focus on financial services which saw the group sell its stakes in LMS and TM Group for total proceeds of £41.3m.

So far, Pivotal Growth has made two acquisitions including the Lifetime Finance Group and Grange Mortgage and Protection Services.

As of 31 December 2021, LSL holds a 47.8 per cent share in Pivotal Growth which is headed up by former LSL chairman Simon Embley.

As part of this venture, LSL also announced a five-year agreement to provide mortgage and protection advice services to the estate agents within The Property Franchise Group.

LSL also purchased Mortgage Gym last February to target new-build expansion.

The group said its financial services division was on track to become the most profitable division by 2023 with further organic growth in the number of network advisers expected.

This will likely be supported by additional advisers acquired by Pivotal Growth and service distribution agreements.

Looking ahead, it expects mortgage and housing transactions in 2022 to revert to pre-Covid levels.

 

Other businesses

The underlying operating profit of LSL’s estate agency business increased by 53 per cent to £18.4m. Its surveying and valuation division recorded an underlying operating profit of £23.6m, which was a 46 per cent rise on 2020.

David Stewart, group chief executive of LSL (pictured), said: “I am pleased to report that LSL’s core businesses are performing well and that our financial services led growth strategy has made good progress.

“We expect mortgage and housing transactions to revert to pre-Covid levels with geopolitical uncertainties adding to existing inflationary pressures. These will affect our estate division in particular, and as always, we will be agile and respond to market conditions as required.

He added: “However, the benefits of both our growth strategy in financial services and the significant progress made in surveying and valuation, mean that we expect the housing market cycle to have a more limited impact on the group’s results.

“We look forward to reporting further growth in financial services, alongside continued investment in building our direct-to-consumer businesses and I remain excited about the group’s longer-term opportunities.”