This is a company that I expect to release poor results tomorrow morning, and am suitably positioned short.
LSL is entirely exposed to the property sector with its principal operations being its surveying business, which operates under the e.surv and Chancellors Associates brands, its estate agency business, which operates under the Your Move and Reed Rains brands, and its financial services business. LSL provides a broad range of property related services to its customers, who are principally mortgage lenders and buyers and sellers of residential property in Great Britain.
At the interim stage LSL was loss-making and I fully expect things to have worsened over the second half of 2008.
EPS Record
| Year | H1 | H2 | Full year |
| 2006 | 10.3p | 12.8p | 23.1p |
| 2007 | 8.1p | 7.7p | 15.8p |
| 2008 | -0.6p |
A drop in EPS from 15.8p to potentially a negative number should see the share price fall from the current 65p. However, I am wary of such predictions as other companies where I have expected falls have actually increased due to 'window-dressing' in the accounts with comparative periods (CPR) and the dropping of key segmental analysis (RMV) to allow proper comparison between periods. The difference between LSL and RMV in this instance is that Rightmove were able to increase advertising revenues to surprise the market with its growth last week - LSL has no other revenue-routes away from the property market-facing businesses.
The other area to look out for is debt. Net debt at the interim stage of 2008 was £61.7m, up from £48m at end-2007. With borrowing facilities of £95m and £37m headroom last June, there must be a nervous FD in LSL Towers! Costcutting measures taken over 2008 will be key to keeping within the loan covenants.
One other area I will be looking out for is further writedowns of goodwill and other intangibles, which make up for nearly all the net assets.
Are there any followers of LSL here?
SM
