RNS Number:8182O
LSL Property Services
27 February 2008
For Immediate Release 27 February 2008
LSL Property Services plc
("LSL" or "the Group")
PRELIMINARY RESULTS
"Record full year results"
LSL Property Services plc, a leading provider of residential property services,
incorporating both estate agency and surveying businesses, announces preliminary
results for the year ended 31 December 2007.
Highlights
Group
*Record Underlying Operating Profit up 13.0% to �36.5m (2006: �32.3m)
*Adjusted Proforma Earnings Per Share(1) up 17.0% to 23.3p per share
(2006: 19.8p per share) (Basic and Diluted Earnings Per Share 15.8p and
15.7p (2006: 23.1p and 23.1p)).
*Excellent cashflow generation - net cashflow from operating activities of
�29.4m (2006: �30.3m)
*Final dividend of 3.86p per share, giving a total dividend for the year
of 6.86p per share.
Business Diversification
*Surveying business significantly expanded during the year by the major
contract gains from C&G and Barclays.
*Surveying now represents 72% of Group profits (2006: 65%).
Surveying Performance
*Turnover increased by 21.4% to �89.8m.
*Underlying Operating Profit(2) up 25.2% to �26.3m (2006: �21.0m).
*Integration of the C&G and Barclays contracts has gone smoothly and both
are performing in line with expectations.
*Despite difficult market conditions, with mortgage approvals during the
final quarter of 2007 down by 23%, the business has proven to be resilient
with e.surv job numbers down by only 10% in the final quarter of 2007.
Estate Agency Performance
*Despite difficult market conditions experienced during the second half of
2007 Underlying Operating Profit up 2.5% to �13.7m (2006: �13.4m).
*Cost saving actions already taken in 2007 are expected to generate
significant savings in 2008.
Financial Services Performance
*Growth in financial services with the value of mortgage applications
up 10% to �3.31bn (2006: �3.00bn).
*Continued investment in financial services growth has resulted in an
Underlying Operating Loss for the year of �0.9m (2006: �0.8m).
Commenting on today's announcement, Roger Matthews, Chairman said:
"I am very pleased to be reporting record full year financial results,
particularly when set against the background of what was a challenging second
half.
During 2007, we have strategically expanded and strengthened our surveying
division which is a more defensive area of our overall business and now
represents 72% of Group profits.
Although we remain cautious regarding market conditions during 2008, we are
confident that the macroeconomic factors in the residential property market
remain positive and the Board is confident in the long term growth prospects for
the business."
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 clients who
are principally mortgage lenders, as well as buyers and sellers of residential
properties.
For further information, please visit our website: www.lslps.co.uk
Chairman's Statement
We are pleased to report that 2007 has been a record year for LSL, with
Underlying Operating Profit increasing by 13.0% to �36.5m (2006: �32.3m).
Our surveying business expanded significantly during the year through major
contract gains from C&G and Barclays and, as a result, surveying represented 72%
(2006: 65%) of the Group's profits. The surveying division's performance has
proven to be resilient during the final quarter of 2007 due to its flexible
operating model and recent contract gains. Underlying Operating Profit for the
year increased by 25.2% to �26.3m (2006: �21.0m).
Despite challenging market conditions in the second half of 2007, the estate
agency division has performed satisfactorily, increasing its Underlying
Operating Profit for the year by 2.5% to �13.7m (2006: �13.4m).
The Group has continued to invest in and expand its financial services division
resulting in an increase in the volume of mortgage applications to �3.31bn
(2006: �3.00bn). This investment has resulted in a loss for the year of �0.9m
(2006: �0.8m).
The business is strongly cash generative, and as a result the board has proposed
a final dividend of 3.86p per share giving a total dividend for the year of
6.86p per share (2006: nil).
Financial results
Group revenue has increased by 10.9% to �219.5m (2006: �198.0m) and the
Underlying Operating Profit by 13% to �36.5m (2006: �32.3m), reflecting a
continued improvement in Underlying Operating Profit margin from 16.3% to 16.7%.
Exceptional costs of �1.4m were incurred across the Group in the second half of
2007. These result from actions taken to reduce our operating cost base in light
of the lower activity levels as well as integration costs arising from the
Barclays surveying contract. These actions will generate significant savings in
2008. Exceptional costs also include a �0.3m non cash impairment charge in
connection with the conveyancing division. These exceptional costs are lower
than previously indicated in our pre close trading statement issued on 3 January
2008.
Net finance costs for the year were �2.7m (2006: �4.2m) resulting in a profit
before tax (before adjustment to goodwill) and amortisation of �32.4m. The
amortisation charge for the year of �9.1m includes �3.0m, which is tax
deductible, in respect of the C&G contract which is being amortised on a
straight line basis over five years in line with the expected economic benefit.
The profit after tax was �16.4m (2006: �13.4m) for the year, and the Adjusted
Proforma Earnings Per Share was 23.3p (2006: 19.8p per share).
The Group is strongly cash generative reporting a net cash inflow from operating
activities of �29.4m (2006: �30.3m) and a low level of capital expenditure of
�2.4m. The Group benefits from a strong balance sheet with net debt as at 31
December 2007 of �48.7m (2006: �34.2m), after incurring the cash consideration
of �30.2m for the C&G contract. LSL has a �95.0m revolving credit facility in
place.
The Board is proposing a final dividend of 3.86p per share, which gives a total
dividend of 6.86p per share (2006: nil). The dividend policy reflects the
cash-generative nature of the Group, and their long-term earnings potential
whilst maintaining resources to continue the Group's growth, by investment in
the existing businesses as well as in selective acquisitions. The final dividend
will be paid on 30 April 2008 to those shareholders on the register on 25 March
2008.
Market
The housing market has been challenging during the second half of 2007, with
housing transaction volumes for LSL's two main estate agency brands down by
circa one third in the second half. The fall in volume arose following five
successive interest rate rises, which have created affordability issues and have
impacted on consumer confidence. The introduction of Home Information Packs
(HIPs) also created some short term dislocation in supply.
Whilst LSL is dependent on the activity levels in the UK housing market, the
operating model demonstrates some resilience to the housing market cycle with
LSL's profitability being biased towards surveying. Surveying demonstrates more
resilience during a housing market downturn principally due to the flexibility
of the Group's surveying panel management model under which an increasing
proportion of jobs are performed within e.surv rather than outsourced. Surveying
now represents an increased proportion of the Group's Underlying Operating
Profit.
Developments
LSL has continued to invest for the future, particularly in both the surveying
and the financial services divisions.
The surveying division has made strong progress during the year, by gaining two
major contracts with Barclays and C&G. The C&G contract is an exclusive
agreement to provide panel management services for five years, for a cash
consideration of �30.2m. The contract started on 1 July 2007 and has contributed
�11.4m to turnover, with an operating profit and margin of �5.4m and 48.0%
respectively. This contract will significantly enhance earnings and profits in
2008 will reflect a full year contribution.
On 9 July 2007, we announced a contract with Barclays to provide exclusive panel
management services for an initial term of three years. This contract started on
1 August 2007 and has been successfully integrated into the existing e.surv
business. Since the well publicised issues in the lending market, some existing
client volumes have declined significantly, reinforcing the importance of the
above contract gains to the division.
The estate agency business has continued to develop its customer offer. In the
current difficult market conditions, the focus is on delivering cost
efficiencies and expanding counter cyclical activities, such as lettings and our
recently launched repossessions business. During 2007, we purchased a majority
shareholding in three small agency businesses adding 16 new branches to the
Group's estate agency division.
LSL's financial services division has increased the value of its mortgage
applications by 10% in 2007 to �3.31bn (2006: �3.00bn). This has been achieved
through an investment in additional financial services consultants both in Reeds
Rains and Linear, which has resulted in a loss for the year of �0.9m (2006:
�0.8m).
HIPs were introduced in September 2007 for four bed roomed properties and
subsequently phased into the rest of the market. We have introduced a number of
customer offerings including an integrated HIP and conveyancing proposition
providing choice to customers depending on their circumstances.
LSL announced its intention to cease trading as a provider of conveyancing
services on 20 February 2008. It will continue to provide conveyancing referrals
to its panel of law firms.
Main Board
The Board of LSL was established prior to the flotation in November 2006. There
were no changes to the Board during 2007. The Board, in addition to myself,
consists of three executives and three non executive directors. Mark Morris was
appointed the Senior Independent Director on 24 October 2007.
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 customers.
In January 2008, LSL launched an HMRC approved Share Incentive Plan (Buy As You
Earn) under which employees, including executive directors, can purchase shares
on a monthly basis within statutory limits. This together with the Save As Your
Earn Scheme launched in January 2007 has enabled the Company to provide its
employees with the opportunity to share in the future success of LSL.
A number of senior management employees, including the executive directors
currently own approximately 34% of LSL. The interests of these senior management
employees/directors are therefore closely aligned with the interests of other
shareholders.
I would like to take this opportunity to welcome new employees to the Group and
to thank all employees for their continued dedication and professionalism.
Current Trading & Outlook
Market conditions during the second half of 2007 were challenging and
transaction volumes softened further in the first eight weeks of 2008. The Board
expects these challenging market conditions to continue for some time. Market
recovery will be dependent upon improvements in consumer confidence and
liquidity in the lending markets.
Our estate agency business will be affected by the lower activity levels in
2008, whereas the surveying division will be supported by its flexible operating
model and the full year contribution from 2007 contract gains as evidenced by
recent market share gains by e-surv.
Furthermore, we have a strong balance sheet and a track record of business
development, both organically and through acquisition and are therefore well
placed to take advantage of value creating acquisition opportunities, which are
expected to arise as the year progresses.
Beyond 2008, the macroeconomic factors in the residential property market remain
positive and the Board is confident in the long term growth prospects for the
business.
Roger Matthews
27 February 2008
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,
and advice on mortgages and non-investment insurance products. The Group also
provides mortgage lenders with surveys and panel management services, asset
management and property management services 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.
* The surveying division has again demonstrated its excellent service
provision by securing two major contract wins from C&G and Barclays during
2007.
* LSL has demonstrated some resilience against the cycles of the housing
market largely due to its surveying division which represents 72% of the
Group's profits and due to the flexibility of e.surv's panel management
model.
* The estate agency division has a network of 454 branches, making it the
third largest estate agency business in the UK(3). LSL is well placed to
exploit consolidation opportunities in this fragmented market.
* The Group has low capital expenditure (2007: �2.4m) (2006: �2.1m) and
strong cash generation with net cash flow from operating activities at
�29.4m (2006: �30.3m).
* LSL has made a number of successful acquisitions, including Reeds Rains,
Chancellors Associates, Linear and Barnwoods.
* 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 longer term growth both organically and through
selective acquisitions.
Our surveying division continues to be successful in driving market share
largely due to its service reputation which is demonstrated by the major
contract wins from Barclays and C&G in 2007.
On the acquisition front LSL is well placed to act as a consolidator in a
largely fragmented market. The acquisitions made through 2005, 2006 and 2007
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.
However, given current market conditions, LSL is unlikely to make further
acquisitions within the estate agency sector until after the early part of 2008.
Surveying
The surveying businesses have performed well in 2007, growing profitability and
turnover.
Key Performance Indicators:
Surveying 2007 2006 % Change
e.surv
Turnover �71.8m �68.3m 5.0%
Underlying Operating Profit �20.3m �20.3m 0.0%
Margin 28.2% 29.7%
Total Number of Jobs Performed 443,529 433,810 2.2%
Chancellors Associates & Other Business(4)
Turnover �6.6m �5.7m 15.8%
Underlying Operating Profit �0.6m �0.6m 0.0%
Margin 9.1% 10.5%
Barnwoods(5)
Turnover �11.4m -
Underlying Operating Profit �5.4m -
Margin 48.0%
Total Surveying Business
Turnover �89.8m �74.0m 21.4%
Underlying Operating Profit �26.3m �21.0m 25.2%
Margin 29.3% 28.4%
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
* Some 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 drive synergies from the new surveying
contracts wins
Surveying Division
LSL operates its surveying division under its brands, e.surv, Chancellors
Associates and Barnwoods and its customers are primarily mortgage lenders.
As one of the UK's leading panel managers of valuation services, LSL's surveying
division is the panel manager for seven of the top ten UK lenders. During 2007,
443,529 (2006: 433,810) valuations were carried out by e.surv's employed
surveyors and sub contractors.
Contract Wins
During 2007 two key contracts were won. C&G's surveying business, with a
projected annual turnover in excess of �20.0m, now trading as Barnwoods, and
Ekins (the Barclays Bank surveying business), with a projected annual turnover
of in excess of �10.0m, which was transferred into e.surv.
The surveying contract with C&G is for an initial period of 5 years and includes
exclusive panel management rights whilst the agreement with Barclays is for an
initial period of 3 years.
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. e.surv has strong 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.
Hometrack Data Systems
LSL owns 14.2% of Hometrack, the leading provider of 'Automated Valuation Model'
(AVM). This investment was made in 2003 and provides LSL with an insight into
the AVM market and a dividend was received in 2007 amounting to �0.4m.
Estate Agency Division
The estate agency business performed well in a very difficult market. Overall
the division has grown its profits during the year by 2.5% to �13.7m (2006:
�13.4m).
Key Performance Indicators:
Estate Agency 2007 2006 %
Change
Your Move & Reeds Rains
Exchange Fees �69.3m �76.0m -8.8%
Turnover �94.2m �100.9m -6.5%
Underlying Operating Profit �13.7m �14.6m -6.2%
Margin 14.5% 14.5%
KPIs
Exchange Units 31277 35255 -11.3%
Average Fee �2214 �2156 2.7%
Expenditure(6) �80.5m �86.3m -6.7%
^Other Brands
Turnover �12.9m �2.2m 486%
Underlying Operating Profit �0.0m -�1.2m -
Total Estate Agency
Turnover �107.1m �103.1m 3.9%
Underlying Operating Profit �13.7m �13.4m 2.5%
Margin 12.8% 13.0%
^ Other brands include Homefast, property-careers.com, LSLi subsidiaries (David
Frost Estate Agents (acquired in July 2007), JNP Estate Agents (acquired in
September 2007) and Intercounty (acquired in February 2007) and First Complete.)
Estate Agency - Competitive Strengths & Growth Opportunities
*No 3 in the UK by number of branches(7)
*Improving financial performance in Your Move in spite of down turn
*Technically advanced proprietary browser based IT systems (Preview and
Quicklet)
*www.your-move.co.uk-the number 1 UK estate agency branded website(8)
*Successful franchise model
*Increasing level of sales to customers of additional financial and other
property related services
*Growing lettings business
Estate Agency Performance
Difficult market conditions in the second half of 2007 resulted in a reduction
in exchange units within the main estate agency brands, Your Move and Reeds
Rains, of 11%. This was offset by a marginal increase in fees by 2.7% from
�2,156 to �2,214 and by a growth of penetration into other income streams. The
businesses also took actions to reduce their cost base from �86.3m to �80.5m.
Growth in fee levels, other income streams and cost efficiencies will be a key
focus in 2008.
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.
* Franchising income, which is generated from initial deposits on new
openings, a monthly service fee of 8% of turnover, plus charges for IT
provision, 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 2007 lettings services were provided from 340 offices across the
LSL network (figure includes franchised branches). Income growth was
experienced in 2007 and further growth is expected in 2008.
* 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. HIPs potentially provide a significant future
revenue stream.
Service Quality
LSL's estate agency businesses place strong emphasis on the quality of service
they provide to customers and are founder 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.
property-careers.com
property-careers.com (it changed its registered name from homeinspectors.co.uk
to property-careers.com in March 2007 and continues to use homeinspectors.co.uk
as a trading name) is now regarded as a leading provider of training services to
individuals wishing to become Home Inspectors (trading here as
homeinspectors.co.uk) and more latterly Domestic Energy Assessors.
In addition, property-careers.com also provides panel management services to HIP
suppliers in relation to the supply of Energy Performance Certificates and the
management of Domestic Energy Assessors, trading as the energy-portal.
First Complete
First Complete is a brand that has been developed to supply lettings management
services (trading as LSL Corporate Client Department) and an auctions business
(trading as Baxtons). Both of these businesses were launched in 2007, and in
January 2008 the business launched a repossession services business and is
currently developing a tenant, landlord and guarantor referencing service
(trading as First Complete Referencing).
LSLi
This business was launched in early 2007 and is the primary vehicle through
which LSL is pursuing its strategy to acquire small to medium independent estate
agency businesses. In 2007, it acquired the following estate agency businesses
and has a network of 16 branches based in the home counties:
* ICIEA Limited, trading as "Intercounty" (acquired in February 2007 -
9 branches)
* David Frosts Estate Agents Limited, trading as "Frosts" (acquired in
July 2007 - 3 branches)
* JNP (Estate Agents) Limited, trading as "The JNP Partnership"
(acquired in September 2007 - 4 branches)
Financial Services Division
Financial Services - Competitive Strengths & Growth Opportunities
* Growth of 10% in mortgage applications from �3.00bn to �3.31bn
* Strong relationships with a broad panel of lenders.
* Further mortgage growth opportunities in Linear as a result of placing
financial consultants in independent agencies.
Linear Financial Services and Linear Mortgage Network (together Linear) are
brands placing mortgage advisors in the offices of Group agencies, franchisees
and independent estate agents. The Linear brands will lose money whilst in their
growth phase. Overall the business performance is in line with our plans.
Key Performance Indicators:
2007 2006 % Change
Financial Services
Turnover �22.6m �20.8m 8.2%
Underlying Operating Loss (�0.9m) (�0.8m) -13.9%
Financial Consultant Numbers 328 312 5.1%
Mortgages applications value �3.31bn �3.00bn 10.0%
Financial Services Performance
The Group has continued to invest in additional financial consultants during the
year. As at 31 December 2007, LSL had 328 (2006: 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.
The value of mortgage applications has increased by 10.0% to �3.31bn (2006:
�3.00bn), making LSL one of the largest mortgages intermediaries in the UK.
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 all
of the other estate agency businesses 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 those companies has a small indirect shareholding of
Openwork.
FINANCIAL REVIEW
The key drivers of the financial performance of LSL are summarised below.
Income statement
Revenue
Revenue increased by 10.9% in the year ended 31 December 2007 to �219.5m (2006:
�198.0m). The increase was supported by a contribution from Barnwoods of �11.4m
and market share growth within surveying.
Operating Expenses excluding exceptional costs and amortisation
Operating expenses increased by 10.3% to �184.1m (2006: �166.9m). Excluding
Barnwoods, expenses are up 6.7% reflecting the additional costs from estate
agency acquisitions and the survey and administration headcount growth within
e.surv as a result of the contract win from Barclays.
Underlying Operating Profit
Underlying Operating Profit was �36.5m (2006: �32.3m) up by 13.0% on 2006. This
results in a continued improvement in the Underlying Operating Profit margin
from 16.4% to 16.6%.
Exceptional Costs & Amortisation
Exceptional costs in the year ended 31 December 2007 amounted to �1.4m (2006:
�3.5m). These costs related to redundancy and closure costs incurred in the last
quarter of 2007 and included the impairment of assets within our conveyancing
business, Homefast.
Net Financial Costs
Net financial costs amounted to �2.7m (2006: �4.2m). Net financial costs for
2007 included investment income from Hometrack of �0.4m (2006: nil). The 2006
net financial costs figure included a one off dividend payment of �1.3m relating
to B shares in issue prior to flotation.
Taxation
The effective rate of corporation tax including the deferred tax adjustment to
goodwill for the year is 29.5% (2006: 30.4%).
Adjusted Proforma Earnings Per Share
The Adjusted Proforma Earnings Per Share (as defined in the Definitions section)
is 23.3p (2006: 19.8p). The directors consider this provides a better and more
consistent indicator of the Group's underlying performance as the Group's
capital structure changed at flotation in November 2006.
Balance Sheet
Capital Expenditure
Total capital expenditure in the year amounted to �2.4m (2006: �2.1m). The
capital expenditure predominantly comprised investment in IT development and
branch refurbishment.
Financial Structure
As at 31 December 2007 the Net Debt of LSL was �48.7m (2006: �34.2m). This
reflects a one off payment for the C&G contract of �30.2m, the purchase of
treasury shares of �2.4m and the acquisition of other subsidiaries (including
deferred consideration, but net of cash acquired) of �6.7m. LSL has a �95.0m
revolving credit facility in place providing some flexibility for acquisitions.
This gives a Net Debt to Underlying Operating Profit ratio of 1.3 to 1 (2006: 1:
1 to 1).
Cash Flow
The business is highly cash generative and has low capital expenditure
requirements. Net cash inflows from operating activities amounted to �29.4m
(2006: �30.3m).
Net Assets
The net assets as at 31 December 2007 were �42.9m (2006: �26.0m).
Treasury & Risk Management
LSL has an active debt management policy and has purchased an interest rate cap,
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
LSL Property services plc
Group income statement
For the year ended 31 December 2007
2007 2006
(reclassified)*
Note �'000 �'000
--------- ---------
Revenue 2 219,518 197,996
Operating expenses:
Employee and subcontractor costs 120,054 110,141
Share-based payments 650 13
--------- ---------
Total employee and subcontractor costs 120,704 110,154
Establishment costs 12,364 12,274
Depreciation on property, plant and equipment 2,227 2,706
Other 48,804 41,727
--------- ---------
(184,099) (166,861)
Rental income 1,125 1,218
--------- ---------
Group operating profit before exceptional
costs and 36,544 32,353
amortisation
Amortisation of intangible assets (9,145) (5,452)
Exceptional costs 3 (1,413) (3,514)
--------- ---------
Group operating profit 25,986 23,387
--------- ---------
Dividend income 373 -
Finance income 357 660
Finance costs (3,429) (4,824)
--------- ---------
Net financial costs (2,699) (4,164)
Profit before tax before adjustment to 23,287 19,223
goodwill
Adjustment to goodwill in respect of
subsequent (1,000) -
recognition of deferred tax asset --------- ---------
Profit before tax 22,287 19,223
Taxation 6 (5,867) (5,847)
--------- ---------
Profit for the year 16,420 13,376
--------- ---------
Attributable to:
Equity holders of the parent 16,420 13,058
Minority interests - 318
--------- ---------
16,420 13,376
--------- ---------
Dividend proposed (final) (3.86p per share) 5 3,976 -
Dividend paid (interim) (3.00p per share) 5 3,124 -
Earnings per share expressed in pence per
share:
Basic 4 15.8 23.1
--------- ---------
Diluted 4 15.7 23.1
--------- ---------
*The Group has restated 2006 revenue by �545,000 to include other lettings
income as these are in the nature of revenue rather than other operating income.
The subcontractor costs of �10.2m were classified as part of other operating
expenses during the previous year. This has been reclassified and included under
employee and subcontractor costs as these relate to outsourced surveying.
LSL Property services plc
Statement of Group recognised income and expenses
For the year ended 31 December 2007
Total recognised income and expense for the year:
2007 2006
Note �'000 �'000
--------- ---------
Profit for the year 16,420 13,376
Available-for-sale investments:
Valuation gains taken to equity 8 5,500 -
--------- ---------
Total recognised income and expense 21,920 13,376
--------- ---------
- Attributable to equity holders of the parent 21,920 13,058
- Attributable to minority interest - 318
--------- ---------
21,920 13,376
--------- ---------
LSL Property services plc
Group balance sheet
For the year ended 31 December 2007
2007 2006
Note �'000 �'000
--------- ---------
Non-current assets
Goodwill 69,572 65,463
Other intangible assets 7 41,562 17,669
Property, plant and equipment 4,600 4,321
Financial assets 8 5,650 148
Other receivables 129 229
--------- ---------
Total non-current assets 121,513 87,830
--------- ---------
Current assets
Trade and other receivables 21,458 22,187
Cash and cash equivalents 2,326 578
--------- ---------
Total current assets 23,784 22,765
--------- ---------
--------- ---------
Total assets 145,297 110,595
--------- ---------
Current liabilities
Financial liabilities 17,350 5,402
Trade and other payables 39,909 36,915
Current tax liabilities 4,957 5,575
Provisions for liabilities and charges 339 130
--------- ---------
Total current liabilities 62,555 48,022
--------- ---------
Non-current liabilities
Financial liabilities 33,640 29,337
Trade and other payables 97 -
Deferred tax liability 1,892 3,424
Provisions for liabilities and charges 4,175 3,846
--------- ---------
39,804 36,607
--------- ---------
--------- ---------
Net assets 42,938 25,966
--------- ---------
Equity
Share capital 208 208
Share premium account 5,629 5,629
Share-based payment reserve 560 13
Investment in treasury shares (2,669) (298)
Unrealised gain reserve 5,500 -
Retained earnings 33,710 20,414
--------- ---------
42,938 25,966
Minority interests - -
--------- ---------
Total equity 42,938 25,966
--------- ---------
LSL Property services plc
Group cash flow statement
For the year ended 31 December 2007
31 Dec 2007 31 Dec 2006
�'000 �'000 �'000 �'000
-------- ------- ---- --------- -------
Cash generated from operating
activities
Profit before tax 22,287 19,223
Adjustments to reconcile profit
before tax to net cash inflows from
operating activities
Amortisation 9,145 5,452
Dividend income (373) -
Finance income (357) (660)
Finance costs 3,429 4,824
Adjustment in relation to deferred
tax 1,000 -
asset -------- ---------
12,844 9,616
------- -------
Group operating profit before 35,131 28,839
amortisation
IPO costs - 3,514
Depreciation 2,227 2,706
Impairment of goodwill 130 -
Impairment of property, plant and 207 -
equipment
(Profit)/loss on sale of property,
plant (30) 21
and equipment
Share-based payments 650 13
Amounts written off available for
sale - 345
financial assets -------- ---------
3,184 6,599
Decrease/(increase) in trade and
other 2,050 (4,394)
receivables
Increase in trade and other
payables and 2,139 9,657
provisions -------- ---------
7,373 11,862
------- -------
Cash generated from operations 42,504 40,701
Interest paid (3,429) (3,272)
Dividends paid on 'B' shares prior
to - (1,320)
listing
Tax paid (9,662) (5,852)
-------- ---------
(13,091) (10,444)
------- -------
Net cash from operating activities 29,413 30,257
Cash flows from investing
activities
Purchase of subsidiary
undertakings, (3,806) (38,449)
minority interest and commercial
business
Purchase of intangible assets (30,192) -
Interest received 357 660
Dividends received 373 -
Purchase of property, plant and (2,422) (2,073)
equipment
Proceeds from sale of property,
plant and 139 6,134
equipment
Purchase of available for sale
financial (2) -
assets -------- ---------
Net cash expended on investing (35,553) (33,728)
activities ------- -------
(6,140) (3,471)
LSL Property services plc
Group cash flow statement
For the year ended 31 December 2007
31 Dec 2007 31 Dec 2006
�'000 �'000 �'000 �'000
Net cash from operating activities
less (6,140) (3,471)
cash expended on investing activities
Cash flows from financing
activities
Repayment of loans (5,402) (42,075)
Proceeds from loans 18,785 33,414
Purchase of treasury shares (2,371) (298)
IPO costs - (3,514)
Dividends paid (3,124) -
-------- --------
Net cash generated/(used) in
financing 7,888 (12,473)
activities
------- -------
Net increase/(decrease) in cash and
cash 1,748 (15,944)
equivalents
Cash and cash equivalents at the
beginning 578 16,522
of the period ------- -------
Cash and cash equivalents at the end
of the 2,326 578
period ------- -------
LSL Property Services plc
Notes to the Preliminary results
as at 31 December 2007
1. The financial information in this preliminary announcement does not
constitute LSL's statutory financial statements for the year ended 31
December 2007 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 in the Group's financial statements for the year-ended 31 December
2006 which are available on LSL's website at www.lslps.co.uk with exception
of amendments in presentation and disclosures as required by new accounting
standards IFRS 7 Financial Instruments; Disclosures and IAS 1 Amendment -
Presentation of Financial Statements. The applied IFRS accounting policies
were selected by management considering all applicable International
Financial Reporting Standards issued by the International Accounting
Standards Boards (IASB) as adopted by the European Union as they apply to
the financial statements of the Group for the year ended 31 December 2007
as applied in accordance with the provisions of the Companies Act 1985.
LSL Property Services plc
Notes to the Preliminary results
as at 31 December 2007
2. Segment reporting
The segment results for the year ended 31st December 2007 are as follows:
Year ended 31 December 2007
--------- --------- --------- --------- ---------
Estate Surveying and Financial Unallocated Total
agency and valuation services
related services
activities
�'000 �'000 �'000 �'000 �'000
--------- --------- --------- --------- ---------
Income statement
information
Segmental
revenue 107,110 89,866 22,542 - 219,518
--------- --------- --------- --------- ---------
Segmental result:
- before
exceptional costs
and
amortisation
of intangible
assets 13,708 26,312 (870) (2,606) 36,544
--------- --------- --------- --------- ---------
- after
exceptional costs
and
amortisation
of intangible
assets 10,373 20,149 (1,995) (2,541) 25,986
--------- --------- --------- --------- ---------
Dividend income 373
Finance income 357
Finance costs (3,429)
---------
Profit before
tax before
adjustment
to goodwill 23,287
Adjustment to
goodwill in
respect of
subsequent
recognition of
deferred tax
asset (1,000)*
---------
Profit before tax 22,287
Taxation (5,867)
---------
Profit for the
year 16,420
---------
*this relates to the estate agency and related activities segment.
Year ended 31 December 2006 (reclassified)
--------- --------- --------- --------- ---------
Estate Surveying and Financial Unallocated Total
agency and valuation services
related services
activities
�'000 �'000 �'000 �'000 �'000
--------- --------- --------- --------- ---------
Income statement
information
Segmental
revenue 103,118 74,041 20,837 - 197,996
--------- --------- --------- --------- ---------
Segmental result:
- before
exceptional costs
and
amortisation
of intangible
assets 13,372 21,008 (764) (1,263) 32,353
--------- --------- --------- --------- ---------
- after
exceptional costs
and
amortisation
of intangible
assets 11,669 18,261 (1,766) (4,777) 23,387
--------- --------- --------- --------- ---------
Finance income 660
Finance costs (4,824)
---------
Profit before
tax 19,223
Taxation (5,847)
---------
Profit for the
year 13,376
---------
LSL Property Services plc
Notes to the Preliminary results
as at 31 December 2007
3. Exceptional costs
2007 2006
�'000 �'000
--------- ---------
IPO costs - 3,514
Establishment costs
Onerous leases provision due to branch closures 501 -
Employee costs
Redundancy costs due to branch closures 575 -
Other
Impairment of property, plant and equipment 207 -
Impairment of goodwill 130 -
--------- ---------
1,413 3,514
--------- ---------
Homefast Property Lawyers Limited ('Homefast') has continued to incur operating
losses during the year and an impairment review was conducted in accordance with
the accounting policy. As a result of this impairment review the entire net book
value of property, plant and equipment of �207,000 and carrying value of
goodwill relating to Homefast of �130,000 were impaired. There is no further
value associated to any non-current assets in this business.
4. 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.
Profit after Weighted 2007 Profit after Weighted 2006
tax average Per share tax average number Per Share
number amount �'000 of shares Amount
�'000 of shares Pence Pence
Basic 16,420 103,647,347 15.8 13,058 56,622,461 23.1
EPS
Effect of
dilutive
share - 609,076 - - 14,303 -
options ------- --------- ------- ------- -------- -------
Diluted 16,420 104,256,423 15.7 13,058 56,636,764 23.1
EPS ------- --------- ------- ------- -------- -------
There have been no other transactions involving ordinary shares or potential
ordinary shares between the reporting date and the date of completion of these
financial statements.
LSL Property Services plc
Notes to the Preliminary results
as at 31 December 2007
The Directors consider that the adjusted earnings shown below give a better and
more consistent indication of the Group's underlying performance:
-------- ----------
2007 2006
�'000 �'000
-------- ----------
Profit after tax 16,420 13,058
Adjusted after tax for:
Exceptional costs 989 2,460
Amortisation 6,401 3,816
Dividend on 'B' ordinary shares - 1,320
Share-based payment 455 9
-------- ----------
Adjusted profit after tax 24,265 20,663
-------- ----------
5. Dividends paid and proposed
2007 2006
�'000 �'000
--------- ---------
Declared and paid during the year:
Equity dividends on ordinary shares:
Interim dividend for 2007: 3 pence (2006: nil) 3,124 -
--------- ---------
Proposed for approval at AGM (not recognised as a liability
as at 31 December):
Equity dividends on ordinary shares:
Final dividend for 2007: 3.86 pence per share (2006: nil) 3,976 -
--------- ---------
6. Taxation
Tax charged in the income statement comprises:
2007 2006
�'000 �'000
--------- ---------
UK corporation tax - current year 9,494 8,918
- tax overprovided in prior year (285) (142)
- utilisation of tax losses (1,000) -
--------- ---------
8,209 8,776
---
Deferred tax:
---------------
Origination and reversal of
temporary differences (2,342) (2,929)
--------- ---------
Total deferred tax (2,342) (2,929)
--------- ---------
Total tax charge in the
income statement 5,867 5,847
--------- ---------
The utilisation of tax losses relate to tax losses which have been realised
during the year. However, a deferred tax asset related to these tax losses was
not recognised at the time of accounting for the business combination in
accordance with IFRS 3 Business Combinations and consequently on realisation in
2007 goodwill has been adjusted in accordance with IFRS 3..
LSL Property Services plc
Notes to the Preliminary results
as at 31 December 2007
7. Intangible assets
The net book value of intangible assets as at 31 December 2007 include �27.2m
customer contracts which are in respect of the acquisition of the surveying
contract from C&G.
8. Financial assets
In 2003, the Group acquired 84 'A' ordinary share of �0.01 each in Hometrack
Data Systems Limited for a consideration of �1. This amounted to a 14.19%
shareholding in that company. The investment is classified as available-for-sale
financial assets in 2006 and 2007. In 2006, the financial asset was carried at
cost as the fair value could not be reliably measured. In 2007, the fair value
of the unlisted equity shares in Hometrack Data Systems Limited has been
estimated at �5,500,000 on the basis of the present value of the expected future
dividend to perpetuity and assumed earnings growth of 3% per annum and a
discount rate of 12%. The Directors consider this is the best proxy of current
value.
9. Net debt summary
2007 2006
�'000 �'000
--------- ---------
Interest bearing loans and borrowings 50,990 34,739
Less: cash and short term deposit (2,326) (578)
--------- ---------
Net debt 48,664 34,161
--------- ---------
LSL Property Services plc
Notes to the Preliminary results
as at 31 December 2007
10. Post balance sheet event
In December 2007, the Group announced the details of a Buy As You Earn share
scheme available to all group employees, commencing in January 2008. The scheme
allows employees to purchase shares in the Group on a monthly basis.
On 20th Feb 2008 the Group announces its intention to cease trading as a
provider of conveyancing services. The results for 2007 and 2006 are shown
below:
2007 2006
�'000 �'000
--------- ---------
Revenue 2,719 3,132
--------- ---------
Operating loss (877) (648)
--------- ---------
Net current liabilities (1,390) (1,031)
--------- ---------
Impairment on property, plant and equipment and goodwill (337) -
--------- ---------
--------------------------
(1) Reflects the after tax effects of Underlying Operating Profit (as set out in
note 4 of the notes to the preliminary results) divided by the number of shares
in issue as at the year end.
(2) Underlying Operating Profit/Loss is before exceptional costs and
amortisation.
(3) Estate Agency News January 2008
(4) Estate Agency News, January 2008
(5) Hitwise, February 2008
(6) Expenditure is excluding exceptional costs and amortisation of intangible assets.
(7) Estate Agency News, January 2008
(8) Hitwise, February 2008
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SEAESMSASEDE
Lsl Property Services (LSE:LSL)
Historical Stock Chart
From Jun 2024 to Jul 2024
Lsl Property Services (LSE:LSL)
Historical Stock Chart
From Jul 2023 to Jul 2024
