RNS Number:4637S
LSL Property Services
07 March 2007
For Immediate Release 7 March 2007
LSL Property Services plc
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006
LSL Property Services plc (LSL), a leading provider of residential property
services, incorporating estate agency brands Your Move and Reeds Rains and
surveying brands e.surv and Chancellors Associates, announces preliminary
results for the year ended 31 December 2006.
Highlights
* Strong maiden results
* Turnover up 46% to #197.5m (2005: #134.9m)
* Underlying Operating Profit(1) up 73% to #32.3m (2005: #18.7m)
* Underlying Operating Profit(1) margin up from 13.9% to 16.4%
* Adjusted Proforma Earnings per share(2) up 83% to 19.8p (2005: 10.8p)
(Basic and diluted earnings per share up to 23.1p (2005: 16.0p))
* Strong underlying operating results from all divisions
* Surveying profits up 21% to #21.0m (2005: #17.4m)
* Estate Agency and Financial Services profits up from #1.7m to #12.6m
(including first full year contribution from Reeds Rains)
* Mortgage lending up circa 50% to #3.0bn supported by investment in Linear
* Excellent cash flow generation with net cash flow from operating
activities after capital expenditure #28.2m (2005: #15.2m)
* Net Debt(3) reduced to #34.2m
* Well positioned for further growth both organically and from acquisitions
FOOTNOTES:
1. Underlying Operating Profit is before exceptional costs and amortisation.
2. Adjusted Proforma Earnings per share reflects the after tax effects of
Underlying Operating Profit (as set out in note 3 of the notes to the
preliminary results) divided by the number of shares in issue as at 31 December
2006. This assumes that the 'B' ordinary shares which are classified as debt
under IFRS and were converted to ordinary shares prior to listing in November
2006 were converted to ordinary shares at 1 January 2005
3. Net Debt is defined as financial liabilities less cash and cash equivalents
Roger Matthews, Chairman, commented:
"LSL's trading performance in 2006 and its balance sheet provides a strong
platform to deliver future growth. This will be achieved by continuing to
improve the profitability and margin of our estate agency brands and continuing
to build on the strength of our surveying business. We will also pursue
selective acquisitions as we are well placed to act as a consolidator in the
estate agency sector, which is a highly fragmented market."
For further information please contact:
Simon Embley, Group Chief Executive Officer
Dean Fielding, Group Finance Director
LSL Property Services plc 01904 715 324
Richard Darby, Nicola Cronk, Catherine Breen
Buchanan Communications 020 7466 5000
Notes to editors:
LSL Property Services plc is one of the leading residential property services
companies in the UK and provides a broad range of services to its customers who
are principally mortgage lenders, as well as buyers and sellers of residential
properties. LSL's main operations are its surveying business, which operates
under the e.surv and Chancellors Associates brands, its estate agency business,
which operates under the Your Move and Reeds Rains brands, and its financial
services business.
For further information, please visit LSL's website: www.lslps.co.uk
Chairman's Statement
I am delighted to report a strong set of maiden results following our flotation
in November 2006. The Underlying Operating Profit (see footnote 1) of LSL is
#32.3m for the year ended 31 December 2006.
The results across each division reflect a significant growth in profitability.
This has been supported by an improved housing market, the full year's
contribution of Reeds Rains (acquired in October 2005), the continued growth in
profit and operating margin of Your Move and the continued strength and profits
from the surveying division.
Financial Results
Group revenue has increased by 46% to #197.5m (2005: #134.9m) and the Underlying
Operating Profit (see footnote 1) by 73% to #32.3m (2005: #18.7m) reflecting an
improvement in margin from 13.9% to 16.4%
The profit after tax is #13.4m (2005: #8.0m) for the year. The Adjusted Proforma
Earnings (see footnote 2) per share are 19.8p (2005: 10.8p) (as set out in the
Financial Review section of this statement).
The business is highly cash-generative with low capital requirements resulting
in a net cash inflow from operating activities after capital expenditure of
#28.2m for the year (2005: #15.2m). The Net Debt (see footnote 3) at the year
end was #34.2m.
As indicated at the time of flotation in November 2006, no dividend is payable
for the short period between flotation and the year end. The first dividend
payable will be the interim dividend in August 2007.
The directors intend to adopt a dividend policy which reflects the
cash-generative nature of the businesses, the long term earnings potential of
the Group and the opportunities to invest in organic growth and growth through
selective acquisitions.
Market
The residential property market has shown strength throughout the year despite
higher interest rates. The number of housing transactions in 2006 increased
over 2005 with the number of mortgage approvals for house purchase increasing by
some 20% to 1.43m. House prices increased on average by around 10% during 2006.
The macroeconomic factors for long-term growth in the residential property
market remain positive.
Transaction volumes have generally been driven in recent years by an increase in
owner occupation levels. This increase has occurred partly as a result of an
increase in migration, a greater number of single-person households and multiple
home owners. Transaction volumes have also been driven by an increase in the
number of people buying property for investment purposes.
Nonetheless whilst LSL is dependent on the activity levels in the UK housing
market the operating model demonstrates some resilience to the housing market
cycle.
LSL's profitability is biased towards surveying, which in 2006 represented 65%
of the Group's Underlying Operating Profit (see footnote 1), whose resilience is
principally due to the flexibility of e.surv's panel management model.
Additionally, the franchising model of the estate agency business may provide
some resilience in the event of a market downturn.
Developments
LSL has continued to invest for the future and grow the business.
The estate agency division has grown both its turnover and profitability during
the year. This was achieved by continuing to develop our customer offering,
increasing sales of conveyancing, utilities, lettings and other products. The
estate agency branch footprint has continued to grow through franchising. At
the 31 December 2006 there were 92 franchise branches, compared to 68 at the end
of 2005.
LSL's financial services division has significantly increased its mortgage
lending by circa 50% year on year to #3.0bn. This was helped by the growth of
LSL's new financial services brand, Linear, which sells financial services
products via independent estate agents and Your Move franchised branches.
The surveying division has continued to deliver a strong performance growing
market share, turnover and profits. It reported an Underlying Operating Profit
(see footnote 1) margin of 30% excluding Reeds Rains surveying and Chancellors
Associates. Chancellors Associates which was acquired in July 2006,
predominantly utilises self-employed surveyors and this acquisition will provide
new flexible capacity as well as an additional profit stream for LSL.
Since the year end, LSL has completed the acquisition of a majority interest in
a small estate agency business. The business was valued at circa #3.0m, which
reflects its underlying profitability and its strong brand and management.
Main Board
The Board of LSL was established on 11 October 2006. The Board, in addition to
myself, comprises three executive and three non-executive directors. I welcome
Peter Hales, Mark Morris and Mark Warburton to the Board who I am confident will
provide invaluable support to the executive team.
People
LSL is a people business and as such we are reliant on the commitment and
enthusiasm of our employees on whom we depend to provide the high level of
service that we strive to achieve for our clients and customers.
The recent flotation has provided the opportunity for our employees to share in
the future success of the business via a Save As You Earn scheme which was
launched in December 2006 and became effective in January 2007. The scheme was
well received and was taken up by a third of our employees.
A number of senior management employees including the executive directors
currently own 35% of LSL. We have also established a Long Term Incentive Plan
to ensure all key employees are properly incentivised and fully committed to the
longer term growth of the business. I would like to take this opportunity to
thank all employees for their dedication and professionalism, which has enabled
a successful flotation and strong profit growth during the year.
Outlook
The business is dependent in part on the activity levels in the UK housing
market. Activity will be influenced by the level of any future interest rate
increases and the introduction of Home Information Packs into the UK housing
market planned for June this year.
Activity levels in the last quarter of 2006 were strong resulting in a good
pipeline going into 2007 and have been encouraging since the start of the year.
LSL's trading performance in 2006 and its balance sheet provides a strong
platform to deliver future growth. This will be achieved by continuing to
improve the profitability and margin of our estate agency brands and continuing
to build on the strength of our surveying division. We will also pursue
selective acquisitions as we are well placed to act as a consolidator in the
estate agency sector, which is a highly fragmented market.
Roger Matthews
7 March 2007
Business Review
Introduction
LSL provides a broad range of services to its two key customer groups, who are
mortgage lenders and private consumers. The Group provides various property
services to consumers including estate agency, lettings, valuation, surveying,
advice on mortgage and non-investment insurance products and conveyancing. The
Group also provides mortgage lenders with surveys and panel management services,
conveyancing and marketing of repossessed properties and also refers mortgage
business from its customers to mortgage lenders.
Key Strengths
LSL has the following key strengths:
* It is one of the leading residential property services groups in the UK,
including at 31 December 2006 a network of 420 estate agency branches and
one of the UK's leading surveying businesses.
* The surveying division is highly profitable and is one of the leading
panel managers of residential mortgage valuations in the UK with a strong
service reputation.
* LSL has demonstrated some resilience against the cycles of the housing
market, largely due to the flexibility of e.surv's panel management model.
* The Group has strong operating cash flows and capital expenditure is low
(2006: #2.1m).
* Since 2004 LSL has made a number of successful acquisitions, including Reeds
Rains and Linear.
* The current executive directors have been with the Group since 2001 and have
a track record of improving profitability as a result of organic growth
and a number of successful acquisitions.
Strategy
LSL is well positioned for future growth both organically and through selective
acquisitions.
Our surveying division continues to be successful in driving market share
largely due to its service reputation and we are well placed to capitalise on
new revenue opportunities such as Energy Performance Certificates. LSL's proven
franchise model in our estate agency division continues to gain momentum whilst
we are seeing some encouraging signs in leveraging our relationships to increase
the volume of part exchange and repossession sales.
On the acquisition front, LSL is well placed to act as a consolidator in a
largely fragmented market. The acquisitions made through 2005 and 2006 have
overall been successfully integrated into the Group and are earnings enhancing.
LSL has a range of propositions to target companies that we believe are
attractive and that leverage both group relationships and individual brands.
Business Review - Surveying Division
The surveying businesses have performed well in 2006, growing profitability and
turnover.
2006 2005 % Change
e.surv
Turnover #68.3m #56.4m 21%
Underlying Operating Profit+ #20.4m #17.6m 16%
Margin 29.9% 31.2%
Total Number of Jobs Managed 935,256 674,730 38%
Total Number of Jobs Performed 433,870 378,328 15%
Other Brands*
Turnover #5.7m #0.6m
Underlying Operating Profit+ #0.6m (#0.2m)
Total Surveying Business
Turnover #74.0m #57.0m 30%
Underlying Operating Profit+ #21.0m #17.4m 21%
Margin 28.4% 30.5%
*'Other Brands' reflects the results of Chancellors Associates acquired in July
2006 and Reeds Rains, acquired in October 2005. The Reeds Rains results were
amalgamated into e.surv's results from October 2006 following the transfer of
Reeds Rains surveyors into e.surv.
+ see footnote 1
Surveying: Competitive Strengths
* The UK's largest distributor of valuations providing greater operational
flexibility than competitors - even in a market downturn
* Robust customer relationships with the leading lending institutions
* Proven resilience of profits to variable residential property market
conditions
* Proven systems that drive operational efficiencies
* Strong customer ethos with quick turn-around times for valuations
* Further opportunities to consolidate the market and acquire additional
surveying capacity
Surveying Division
LSL operates its surveying division under its brands, e.surv and Chancellors
Associates. The surveying division of Reeds Rains was incorporated into the
e.surv business in October 2006.
LSL's surveying division customers are primarily mortgage lenders. As one of
the UK's leading panel managers, e.surv is the panel manager for five of the top
ten UK lenders. e.surv managed circa 935,000 surveys and valuations in 2006 out
of total mortgage approvals in the UK of circa 3.5 m*.
During 2006, circa 433,870 valuations were carried out by e.surv's employed
surveyors. Chancellors Associates also carry out residential surveys and
valuations for e.surv and other panel managers.
As at 31 December 2006 the surveying division had in excess of 300 employed
Chartered Surveyors and had relationships with over 300 self-employed
consultants, performing valuation services for the surveying division.
In 2006, the surveying business had turnover of #74.0m (2005: #57.0m) and
Underlying Operating Profit (see footnote 1) of #21.0m (2005: #17.4 m).
Lender Relationships
e.surv has panel management arrangements with a significant number of lenders. A
number of these arrangements are exclusive and involve the servicing and
distribution of valuation instructions to these lenders' own teams of employed
surveyors. esurv has solid relationships with these lenders and the
relationship is enhanced by the generation of referrals from LSL's financial
services operations.
Service Quality
Service quality is a significant factor in maintaining relationships with
lenders and in seeking to win new panel management contracts. It also
differentiates e.surv from its competitors. One of the key factors that lenders
use in assessing service quality is turnaround time for valuation instructions.
e.surv's turnaround time is better than many of its competitors, largely as a
result of the flexibility of the panel management model and its use of
sophisticated technology.
Chancellors Associates
In July 2006, LSL completed the acquisition of the Chancellors Associates
business from Chancellors Estate Agents. At the year end Chancellors Associates
operated a network of 119 self-employed surveyors and it receives valuation
instructions from e.surv and other surveying panel managers. This acquisition
increases the surveying divisions' self-employed consultant surveying capacity
and provides access to a wider customer base and a better geographical
footprint.
* Bank of England Data - January 2007
Hometrack Data Systems
LSL owns circa 15% of Hometrack, the leading provider of 'Automated Valuation
Model' (AVM) technology in the UK. This investment was made in 2003 and
provides LSL with an insight into the AVM market.
Business Review - Estate Agency Division
The estate agency business performed well in a very strong market. Both brands,
Reeds Rains and Your Move, have grown profitability and made pleasing progress
in 2006. The franchise proposition continues to grow and, as at the end of
2006, there were 92 franchised branches.
2006 2005 2006 2005*
Estate Agency - Your Move Estate Agency - Reeds Rains
Turnover #63.8m #54.5m Turnover #34.6m #6.8m
Underlying Operating Profit+ #7.8m #2.6m Underlying Operating Profit+ #6.4m #1.8m
Margin 12.2% 4.8% Margin 18.4% 26.5%
Exchange Units 20,920 18,636 Exchange Units 14,335 3,200
Average Commission 1.59% 1.63% Average Commission 1.31% 1.22%
Average house price #146,000 #133,000 Average house price #143,000 #135,000
Estate Agency Related **
Turnover #4.1m #2.5m
Loss (#0.8m) (#0.7m)
Total Estate Agency
Turnover #102.5m #63.8m
Underlying Operating Profit+ #13.4m #3.7m
Margin 13.1% 5.8%
* Figures for Reeds Rains in 2005 reflect the period post acquisition from 1
October 2005 to 31 December 2005.
** Other brands included in the estate agency result are Homefast (the
conveyancing business), Homeinspectors.co.uk (training organisation) and First
Complete (call centre operation).
+ see footnote 1
Estate Agency - Competitive Strengths & Growth Opportunities
* No.3 in the UK by number of branches 4
Estate Agency News February 2007)
* Improving Financial Performance
* Technology
- advance proprietary browser based IT systems ("Preview" and "Quicklet").
- www.your-move.co.uk - the number 1 UK estate agency branded website
((make this is footnote 5 to appear on this page) Hitwise, February 2007)
* Successful franchise model
* Increasing level of sales to customers of additional financial and other
property related services
4: Estate Agency News February 2007
Estate Agency Division
Your Move's branch network operates throughout England and Scotland while Reeds
Rains predominately operates in the north of England and has a presence in
Wales.
During 2006, the estate agency business had turnover of #102.5m (2005: #63.8m)
and Underlying Operating Profit (see footnote 1) of #13.4m (2005: #3.7m).
Estate Agency Revenue
The main drivers of estate agency revenue are:-
* Exchange fee income which is linked to housing transaction prices and
commission rates. LSL is focused on increasing commission rates despite market
conditions. Reeds Rains' commissions have increased in 2006 from 1.22% to 1.31%
and Your Move's commissions have fallen marginally from 1.63% to 1.59%
reflecting market conditions.
* Franchising income, which is generated from initial deposits on new
openings, a monthly service fee of 8% of turnover, plus some IT costs, continues
to grow in line with the increase in the franchise footprint.
* Lettings income is generated from providing a range of services to
landlords and tenants. Lettings has been expanded within Your Move and as at 31
December 2006 there were 268 lettings offices across LSL. LSL is well
positioned to grow income in this area of the business in 2007.
* Additional commission income is generated through the sale of general
insurance, conveyancing services, utilities and other products and services to
clients of the branch network.
Service Quality
LSL's estate agency businesses place strong emphasis on the quality of service
they provide to customers and both Your Move and Reeds Rains are members of the
Ombudsman for Estate Agents Scheme. All branch based employees of the estate
agency business complete a specially designed training programme and the quality
of service is monitored on a monthly basis.
Competition
LSL's major competitors in the estate agency market vary from national estate
agency chains such as Countrywide and Halifax Estate Agencies to local
independent estate agents. It is estimated that the top five estate agency
chains, including LSL, account for circa 20% of all estate agency branches in
the UK, regional chains account for a further 10%, and independents make up the
rest.
Homefast Property Lawyers
Homefast Property Lawyers provides conveyancing services to consumers introduced
to it by estate agents and lenders. The business was acquired in February 2005.
Home Inspectors.co.uk
Home Inspectors.co.uk was established in August 2005 and is now regarded as a
leading provider of training services to individuals wishing to become Home
Inspectors and more latterly Energy Assessors. It may also provide other
training services to LSL.
Business Review - Financial Services Division
Over the year there has been significant growth in the number of mortgages
arranged by the financial services division. Linear Financial Services and
Linear Mortgage Network (together Linear) are new brands placing mortgage
advisors in the offices of Your Move franchisees and independent estate agents.
The Linear brands will lose money whilst in their growth phase. Overall the
business performance is satisfactory.
2006 2005 % Change
Financial Services*
Turnover #20.8m #14.0m 49%
Underlying Operating Profit+ (#0.8m) (#2.0m) 60%
Financial Consultant Numbers 312 250 25%
Mortgages arranged value (circa) #3bn #2bn 51%
*These figures include results from Your Move, Reeds Rains, Linear Mortgage
Network, and Linear Financial Services.
+ see footnote 1
Financial Services - Competitive Strengths & Growth Opportunities
* Strong performance - mortgage applications amounted to #3bn of
lending. Growth of circa 50%
* Strong relationships with a broad panel of lenders
* Significant further mortgage growth opportunities in Linear as a
result of placing financial consultants in independent agencies
* Linear - currently a loss making developing business, expected to
deliver significant value creation over the next three years and future profits
Financial Services Division
As at 31 December 2006, LSL had 312 branch based financial consultants employed
by Your Move, Reeds Rains and Linear. The financial services business seeks to
enhance the revenue derived from the estate agency operations through the sale
of mortgages and related protection products. In return LSL receives a
combination of commissions on product sales and procuration fees from lenders.
For 2006, the financial services business had a turnover of #20.8 m (2005:
#14.0m).
Financial Services Brands
As at 31 December 2006, Your Move employed 172 financial consultants. Since 31
December 2005, LSL has increased the number of employed financial consultants in
Reeds Rains branches to 88. This has resulted in increased penetration rates for
mortgage and other financial services sales in Reeds Rains branches.
In addition, LSL has invested in Linear Mortgage Network (acquired October 2005)
and Linear Financial Services (acquired July 2006) which is placing financial
consultants into Your Move franchised branches and independent estate agency
branches. As at 31 December 2006, the Linear businesses employed 52 financial
consultants. Linear is targeted to significantly grow the number of financial
consultants in 2007. After this growth phase Linear will provide a new profit
stream for the Group.
Mortgage Lending
The volume of mortgage application referrals has increased by circa 50% to
#3.0bn, making LSL one of the largest mortgages intermediaries in the UK. Growth
of its financial services business is a key focus area for LSL in 2007 as it
continues to expand the number of financial consultants employed by Linear.
Regulation
Your Move and First Complete are directly authorised by the FSA in relation to
the sale of mortgage, pure protection and general insurance products, while
Reeds Rains and Linear are appointed representatives of Openwork. Reeds Rains is
also an appointed representative of Letsure for the sale of rent indemnity
insurance. LSL's financial services business places strong emphasis on the
quality of service it provides to customers and all advisers complete a
specially designed comprehensive training programme which is supplemented by
effective supervision, regular monitoring and regular refresher training
sessions. As a result of Reeds Rains' and Linear's appointments by Openwork,
LSL through these companies has a small indirect shareholding of Openwork.
Business Review - Financial Review
Financial Review
The key drivers of the financial performance of LSL are summarised below.
Income statement
Revenue
Revenue increased by 46% to #197.5m in the year ended 31 December 2006 (2005:
#134.9m). The increase was supported by a full year's trading from Reeds Rains,
an improving housing market, and market share growth within surveying.
Operating Expenses
Operating expenses increased by 42% to #166.9m, reflecting a full year's trading
of Reeds Rains, increased bonus payments which are linked to turnover and profit
and the cost of funding the developing businesses such as Linear.
Underlying Operating Profit
Underlying Operating Profit (see footnote 1 on page 1) was #32.3m up by 73% on
2005. This results in an improvement in the Underlying Operating Profit (see
footnote 1) margin from 13.9% to 16.4%.
Exceptional Costs & Amortisation
Exceptional costs in the year ended 31 December 2006 amounted to #3.5m (2005:
nil). These costs related to the flotation of LSL. In addition amortisation of
intangible assets amounted to #5.5m (2005: #4.7m).
Net Financial Costs
Net financial costs amounted to #4.2m (2005: #2.8m). These costs include #1.3m
of dividends on B shares paid prior to the flotation and to the cancellation of
the B shares. The B Shares which were classified as debt under IFRS (defined
below) and were converted into ordinary shares in LSL prior to flotation.
Taxation
The effective rate of corporation tax for the year is 30% (2005: 29%).
Adjusted Proforma Earnings Per Share
The Adjusted Proforma Earnings (see footnote 2 on page 1) per share are 19.8p
(2005: 10.8p). The directors consider this provides a better and more
consistent indicator of the Group's underlying performance.
Balance Sheet
Capital Expenditure
Total capital expenditure in the year amounted to #2.1m (2005: #1.8m). The
capital expenditure predominantly comprised investment in IT development and
branch refurbishment.
Financial Structure
As at 31 December 2006 the Net Debt (see footnote 3) of LSL was #34.2m (2005:
#24.8m). LSL has an #80m overdraft and credit facility in place providing some
flexibility for acquisitions. This gives a Net Debt (see footnote 3)to
Underlying Operating Profit (see footnote 1) ratio of 1.06 to 1.
Cash Flow
The business is highly cash generative and has low capital expenditure
requirements. Net cash inflows from operating activities after capital
expenditure amounted to #28.2m (2005: #15.2m).
Net Assets
The net assets as at 31 December 2006 were #26.0m (2005: #8.7m)
Treasury & Risk Management
LSL has an active debt management policy and has purchased two interest rate
caps: one which expires in September 2007 and restricts LIBOR to 6.5%; and one
which expires in August 2009 and restricts LIBOR to 6% for #30.0m of debt. LSL
does not hold or issue derivatives or other financial instruments for trading
purposes.
International Financial Reporting Standards (IFRS)
The Financial Statements have been prepared under IFRS. LSL commenced reporting
under IFRS from 1 January 2005.
S D Embley
Group Chief Executive Officer
D A Fielding
Group Finance Director
7 March 2007
LSL Property Services plc
Group Income Statement
for the year ended 31 December 2006
2006 2005
Note #'000 #'000
Revenue 197,451 134,871
Operating expenses:
Employee costs 99,953 74,338
Establishment costs 12,274 9,596
Depreciation on property, plant and
equipment 2,706 2,947
Other 51,928 31,065
(166,861) (117,946)
Other operating income 1,763 1,783
Group operating profit before
exceptional costs and amortisation 2 32,353 18,708
Amortisation of intangibles (5,452) (4,688)
Exceptional costs (IPO costs) (3,514) -
Group operating profit 2 23,387 14,020
Finance income 660 1,248
Finance costs (4,824) (4,036)
Net financial costs (4,164) (2,788)
Profit before tax 19,223 11,232
Taxation (5,847) (3,218)
Profit for the year 13,376 8,014
Attributable to:
Equity holders of the parent 13,058 8,018
Minority interests 318 (4)
13,376 8,014
Earnings per share expressed in pence per share: restated
Basic and diluted 3 23.1 16.0
LSL Property Services plc
Statement of group recognised income and expense
for the year ended 31 December 2006
Total recognised income and expense for the year:
2006 2005
#'000 #'000
Profit for the year attributable to:
Equity holders of the parent 13,058 8,018
Minority interest 318 (4)
Total profit for the year 13,376 8,014
LSL Property Services plc
Group Balance Sheet
as at 31 December 2006
2006 2005
Note #'000 #'000
Non-current assets
Goodwill 5 65,463 22,333
Other intangible assets 17,669 22,806
Property, plant and equipment 4,321 5,081
Financial assets 148 493
Other debtors 229 120
Total non-current assets 87,830 50,833
Current assets
Trade and other receivables 22,187 23,772
Cash and cash equivalents 578 42,767
Total current assets 22,765 66,539
Total assets 110,595 117,372
Current liabilities
Financial liabilities 5,402 38,468
Trade and other payables 36,915 29,267
Current tax liabilities 5,575 2,651
Provisions for liabilities and charges 130 59
Total current liabilities 48,022 70,445
Non-current liabilities
Financial liabilities 29,337 29,086
Deferred tax liability 3,424 6,258
Provisions for liabilities and charges 3,846 2,848
36,607 38,192
Net assets 25,966 8,735
Equity
Share capital 208 100
Share premium account 5,629 400
Share-based payment reserve 13 -
Investment in treasury shares (298) -
Retained earnings 20,414 7,356
25,966 7,856
Minority interests - 879
Total equity 25,966 8,735
LSL Property Services plc
Group Cash Flow Statement
as at 31 December 2006
#'000 #'000 #'000 #'000
Cash generated from operating activities
Group operating profit before exceptional costs
and amortisation of intangibles
32,353 18,708
Adjustments to reconcile Group operating profit
to net cash inflows from operating activities
Depreciation 2,706 2,947
Loss/(profit) on sale of property, plant and
equipment 21 (7)
Amounts written off available for sale
financial assets 345 46
3,072 2,986
Increase in trade and other receivables (4,381) (1,954)
Increase in trade and other payables 9,657 3,017
8,348 4,049
Cash generated from operations 40,701 22,757
Interest paid (3,272) (3,274)
Dividends paid on 'B' shares prior to listing (1,320) -
Tax paid (5,852) (10,444) (2,474) (5,748)
Net cash from operating activities 30,257 17,009
Cash flows from investing activities
Purchase of subsidiary undertakings, minority
interest and commercial business (38,449) (16,614)
Reimbursement of purchase consideration related - 555
to acquisitions in 2004
Interest received 660 1,248
Purchase of property, plant and equipment (2,073) (1,805)
Proceeds from sale of property, plant and
equipment 6,134 819
Purchase of available for sale financial assets - (493)
Net cash expended from investing activities (33,728) (16,290)
Cash flows from financing activities
Repayment of long term loans (42,075) (7,300)
Proceeds from long term loans 33,414 -
Purchase of treasury shares (298) -
IPO costs (3,514) -
Net cash used in financing activities (12,473) (7,300)
Net decrease in cash and cash equivalents (15,944) (6,581)
Cash and cash equivalents at the beginning of
the year 16,522 23,103
Cash and cash equivalents at the end of the
year 578 16,522
LSL Property Services
Notes to the Preliminary results
as at 31 December 2006
1. The financial information in this preliminary announcement does not
constitute LSL's statutory financial statements for the year ended 31 December
2006 but has been extracted from the financial statements, and as such, does not
contain all information required to be disclosed in the financial statements
prepared in accordance with IFRS.
Statutory financial statements for this year will be filed following the Annual
General Meeting. The auditors have reported on these financial statements. Their
report was unqualified and did not contain a statement under section 237(2) or
(3) of the Companies Act 1985.
Basis of preparation
The financial statements have been prepared using the accounting policies
published by LSL in its prospectus on 16 November 2006 which are available on
LSL's website at www.lslps.co.uk. The applied IFRS accounting policies were
selected by management considering all applicable International Financial
Reporting Standards issued by the International Accounting Standards Board
(IASB) by 31 December 2006. The financial information has been prepared on the
basis of IFRS in effect for the year ended 31 December 2006.
2. Business Segments
The segment results for the year ended 31 December 2006 are as follows:
Estate Surveying
agency and and
related valuation Financial
activities services services Unallocated Total
#'000 #'000 #'000 #'000 #'000
Income statement information
Segmental revenue 102,573 74,041 20,837 - 197,451
Segmental result:
- before exceptional costs and
amortisation of intangibles 13,372 21,008 (764) (1,263) 32,353
- after exceptional costs and
amortisation of intangibles 11,669 18,261 (1,766) (4,777) 23,387
Finance income 660
Finance costs (4,824)
Profit before tax 19,223
Income taxes (5,847)
Profit for the year 13,376
LSL Property Services
Notes to the Preliminary results
as at 31 December 2006
The segment results for the year ended 31 December 2005 are as follows:
Estate Surveying
agency and and
related valuation Financial
activities services services Unallocated Total
#'000 #'000 #'000 #'000 #'000
Income statement information
Segmental revenue 63,842 57,018 14,011 - 134,871
Segmental result:
- before exceptional costs and
amortisation of intangibles 3,687 17,386 (1,954) (411) 18,708
- after exceptional costs and
amortisation of intangibles 2,283 14,639 (2,491) (411) 14,020
Finance income 1,248
Finance costs (4,036)
Profit before tax 11,232
Income taxes (3,218)
Profit for the year 8,014
3. Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the
year attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the year plus the weighted average
number of ordinary shares that would be issued on the conversion of all the
dilutive potential ordinary shares into ordinary shares.
Weighted 2006 Weighted 2005
average average
Profit number of Per share Profit number of Per share
after tax shares Amount after tax shares Amount
#'000 Pence #'000 Pence
Basic EPS 13,058 56,622,461 23.1 8,018 50,000,000 16.0
Effect of dilutive share options - 14,303 - - - -
Diluted EPS 13,058 56,636,764 23.1 8,018 50,000,000 16.0
On 25 July 2006, the number of shares in issue increased to 1,037,158 of 10p
each. On 31 October 2006, the ordinary shares of 10p each were subdivided into
ordinary shares of 0.2p each and a further 2,051,050 ordinary shares of 0.2p
each were issued and the total number of shares increased to 104,158,950.
The comparative figure for 2005 has been restated to take account of the
subdivision of the ordinary shares into 0.2p shares as required by IAS 33 "
Earnings per Share".
LSL Property Services
Notes to the Preliminary results
as at 31 December 2006
The weighted average shares disclosed above for 2005 exclude the B shares, which
were classified as debt as per IAS32 and have been reclassified as share capital
as they were converted into ordinary shares prior to flotation.
The directors consider that the adjusted earnings shown below give a better and
more consistent indication of the Group's underlying performance, and is
calculated as follows:
2006 2005
#'000 #'000
Profit after tax 13,058 8,018
Adjusted after tax for:
Exceptional costs 2,460 -
Amortisation of intangibles 3,816 3,282
Dividend on 'B' ordinary shares 1,320 -
Share-based payment 9 -
Adjusted profit after tax 20,663 11,300
4. Key Reconciling Items between UK GAAP and IFRS
a. IFRS 3 Business Combinations
IFRS 3 has been applied to acquisitions of subsidiaries that occurred on or
after 1 July 2004.
b. Reversal of goodwill amortisation
Under UK GAAP goodwill is required to be amortised over its expected useful
life, and that life should not be greater than 20 years. However, under IAS36:
Intangible assets, amortisation of goodwill is not permitted, instead goodwill
should be reviewed annually for any impairment.
Under UK GAAP, amortisation of #1,572,000 was charged in respect of subsidiaries
in the year to 31 December 2005 (2004: #685,000). Upon transition to IFRS, these
charges have been reversed and carrying value of goodwill on 1 July 2004 has
been adopted as the carrying amount of goodwill in the opening IFRS balance
sheet.
c. Reclassification of separately identifiable intangible assets on
acquisition and amortisation of intangible assets
A wider range of intangible assets are recognised under IFRS, particularly in
respect of business combinations. Under both IFRS and UK GAAP, an intangible
asset is an identifiable non-monetary asset without physical substance. Under
IAS 38, Intangible assets, an asset is identifiable when it is separable (that
is, capable of being sold separately from the entity) or arises from contractual
or other legal rights (regardless of whether those rights are separable), whilst
under UK GAAP (FRS 10) the assets must be capable of separate disposal without
disposing of the related business. Where intangibles are identified in business
combinations this has the impact of reducing goodwill (which is not amortised
under IFRS) and recognising other types of intangible assets, which are
amortised over their estimated useful lives.
LSL Property Services
Notes to the Preliminary results
as at 31 December 2006
5. Goodwill
2006 2005
#'000 #'000
Cost
At 1 January 22,333 11,148
Acquisition of subsidiary undertaking 727 11,610
Acquisition of surveying business 1,810 130
Acquisition of minority interest in existing subsidiaries 40,593 -
Reimbursement of purchase consideration related to acquisitions in 2004 - (555)
At 31 December 65,463 22,333
After initial recognition, goodwill is stated at cost less any accumulated
impairment losses, with the carrying value being reviewed for impairment, at
least annually and whenever events or changes in circumstances indicate that the
carrying value may be impaired. A previously recognised impairment loss with
respect to goodwill is not reversed in later years.
For the purpose of impairment testing, goodwill is allocated to the related
cash-generating units monitored by management, usually at business segment
level. Where the recoverable amount of the cash-generating unit is less than its
carrying amount, including goodwill, an impairment loss is recognised in the
income statement.
The carrying amount of goodwill allocated to a cash-generating unit is taken
into account when determining the gain or loss on disposal of the unit, or of an
operation within it.
Included within the acquisition of minority interests in existing subsidiaries
are the following material transactions:
* On 25 July 2006, LSL acquired the minority interest (8.33%) in a
subsidiary company, Lending Solutions Holdings Limited for #34.7m in cash and
the issue of 10,000 shares in the parent company.
* On 25 July 2006, LSL acquired a 6.4852% shareholding in a subsidiary
company, Reeds Rains Limited for #300,000 in cash and the issue of 32,158
shares in the parent company.
* On 29 September 2006, LSL acquired the remaining 3.704% shareholding
in a subsidiary company, Reeds Rains Limited for #1.5m cash.
6. The Annual General Meeting will be held on 23 May 2007.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EANDKELNXEFE
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