LSL Property Services (LSE:LSL) announced on Wednesday an underlying operating profit of £14.8 million for the first half of 2025, reflecting a 3% increase compared with the same period last year.

In a separate update, Jefferies maintained a “buy” rating on the shares, assigning a price target that implies upside of more than 30%.

The company reiterated its guidance for full-year 2025 underlying operating profit at £33 million, consistent with analyst expectations.

“Transformed to a capital light model in the past 2 years, LSL now makes a ROCE of >30%, while still offering significant operational leverage to a recovery in housing transactions in the UK,” the brokerage said.

Net cash at the end of June was £22 million, down from £32.3 million at year-end 2024. The decline reflected a £7.4 million working capital outflow, following a £5.9 million inflow in the second half of last year. Cash conversion reached 50% in H1, compared with 114% in H2 2024. During the period, the group invested £1.1 million in loans to franchisees for lettings and returned £3 million of a £7 million buyback.

Operating margin was 16.5%, down 40 basis points year-on-year. Reported profits included £1.8 million in exceptional costs: £0.6 million for financial services restructuring, £0.7 million for central restructuring, and £0.5 million linked to the administration of TenetLime seller.

Surveying and valuation revenues grew 9%, supported by changes to stamp duty, although margins fell 410 basis points from the prior year due to surveyor incentives normalising from unusually low 2024 levels. Margins were up 270 basis points versus H2 2024.

Financial services revenue remained flat. Adviser numbers declined 7% as the company moved away from protection-only services, while completions per adviser rose 8% and fees per completion increased 3%. Operating profit was flat, with the shift from protection-only business negatively impacting results by £1.6 million, partly offset by a £0.8 million gain from the Pivotal Growth joint venture. Pivotal reported £0.5 million profit in H1 after completing two acquisitions, bringing the total to 19.

Estate agency revenue and operating profit increased 1%, with branch numbers and lettings portfolios both up 1%, while income per branch jumped 22%. Residential sales rose 24%, offset by lower land and new homes revenue due to a lost contract.

Jefferies anticipates over 15% operating profit growth for 2025 and notes that earnings are closely tied to UK housing transactions. “We calculate that a 10% upside in mortgage approvals from our current +5% assumption in 2026 can offer >15% upside to our group EBIT estimates,” the brokerage said.

According to Jefferies, the franchise model has halved capital employed and reduced both capex and working capital requirements. Free cash flow is projected at 13–16% of sales, with net cash expected to reach £26.7 million by the end of 2025 and rise above £70 million, excluding potential proceeds from a Pivotal Growth sale.

Jefferies set a price target of 381p, based on an 11x 2026 P/E for the core business plus Pivotal Growth at 10x EV/EBITDA. “Valuing on a DCF suggests a price target of >500p, with potential for a step up in capital returns to catalyse the recognition of this value,” it added.

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