TIDMLSL
RNS Number : 2669O
LSL Property Services
04 March 2009
?
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| For Immediate Release | 4 March 2009 |
+-------------------------------------+-------------------------------------+
LSL Property Services plc
("LSL" or "the Group")
PRELIMINARY 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 2008.
Highlights:
Group
* Group Revenue down 26% to GBP161.8m (2007: GBP219.5m)
* Underlying Group Operating Profit1 at GBP18.2m (2007: GBP 37.2m). Loss before
tax was GBP4.8m (2007: Profit before tax of GBP22.3m)
* Operating costs reduced by 21% to GBP144.3m (2007: GBP183.4m)
* Exceptional costs of GBP8.2m (2007: GBP1.4m), primarily reorganisation and
restructuring costs necessary to reduce operating costs in line with lower
activity levels
* Adjusted Basic Earnings Per Share2 of 9.8p per share (2007: 23.4p per share).
Basic loss per share was 3.3p per share (2007: Basic EPS was 15.8p)
* Management focus on reducing costs and conserving cash
* No final dividend declared (2007: total dividend 6.86p)
* Net cash inflow from operations of GBP3.2m (2007: GBP29.4m)
* Net debt at the year end of GBP49.2m (2007: GBP48.7m)
* Bank facility of GBP75.0m extended to July 2011
Surveying Performance
* Resilient surveying profits up 8% to GBP28.6m (2007:GBP26.4m), supported by the
contract wins of 2007.
Estate Agency & Financial Services Performance
* Estate Agency and Financial Services results reflect the market reduction in
housing transactions with Underlying Operating Losses of GBP8.4m (2007: Profits
GBP13.0m)
* Strong growth in non exchange income, including lettings and repossessions, in
our core estate agency brands up 17% to GBP29.2m (2007: GBP24.9m)
1 Underlying Group Operating Profit/Loss is before exceptional costs,
amortisation of intangible assets and share based payments
2 See note 4 of the Notes to the Preliminary Results for calculation
Commenting on today's announcement, Roger Matthews, Chairman said:
"Given the current macroeconomic environment, the Board remains cautious on
market conditions for 2009 and the timing of any recovery is uncertain. In 2009
to date, buyer enquiries and activity levels within our estate agency businesses
have been encouraging, however this is balanced by the lack of supply in the
mortgage market. The Group is well placed to benefit from the actions taken in
2008 with significantly reduced operating costs, strong growth in new income
streams, and a diversified customer base which will underpin surveying
profitability.
Longer term, the underlying macroeconomic conditions in the residential property
market remain positive. LSL has a track record of profitability and business
development, both organically and through acquisition, and is well placed to
benefit from the opportunities that will arise to grow market share in each of
our business segments through the current cycle."
For further information please contact:
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| Simon Embley, Group Chief | |
| Executive Officer | |
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| Dean Fielding, Group Finance | |
| Director | |
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| LSL Property Services plc | 01904 |
| | 715 |
| | 324 |
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| | |
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| Richard Darby, Catherine Breen | |
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| Buchanan Communications | 020 |
| | 7466 |
| | 5000 |
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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
Against a backdrop of unprecedented market conditions, we are pleased to report
a satisfactory Underlying Operating Profit for the year ended 31 December 2008
of GBP18.2m (2007: GBP37.2m).
Market conditions for our Estate Agency business were extremely challenging.
Transaction volumes in the housing market reached a record low of 512,000
transactions in 2008 (2007: 1,260,000) due to the well publicised issues in the
banking sector which dramatically impacted the supply of credit, compounded by a
reduction in buyer confidence and demand. The volumes of mortgage approvals, a
principal driver of our surveying business, were supported by a strong
re-mortgage market in the first half of 2008, but then fell significantly in the
second half, as the availability of credit was further compounded by the
escalation of the banking crisis.
The operating result has been underpinned by:
* the diversified business model,
* the strength of the surveying business, which has continued to grow market
share,
* the first full year impact of the major survey contract gains in 2007,
* the early and significant action taken by management to reduce the cost base,
and conserve cash and
* the continued focus on growing and developing new and counter-cyclical income
streams such as lettings and repossessions asset management.
Financial results
Group revenue has declined by 26% to GBP161.8m (2007: GBP219.5m) and the
Underlying Operating Profit by 51% to GBP18.2m, reflecting a reduction in the
Underlying Operating profit margin from 16.9% to 11.3%.
On a segmental basis, the surveying division delivered an Underlying Operating
Profit of GBP28.6m (2007: GBP26.4m). The estate agency and financial services
business has been impacted in line with the market, with house sale exchanges
down by over 50% on a like for like basis, resulting in a combined Underlying
Operating Loss of GBP8.4m (2007: Underlying Operating Profit of GBP13.0m).
Exceptional costs of GBP8.2m (2007: GBP1.4m) were incurred in the financial
year, reflecting the unprecedented market conditions and the need to restructure
the business in line with lower activity levels. As a result operating costs
were reduced by GBP39.1m. These exceptional costs primarily relate to
restructuring costs and onerous lease provisions of GBP4.1m, additional
provisions for claims in surveying amounting to GBP2m and a non cash impairment
charge of GBP1.1m relating to financial services companies.
Net finance costs for the year were GBP3.9m (2007: GBP2.7m) resulting in a
profit before tax and amortisation of GBP6.4m (2007: GBP32.4m). Amortisation of
GBP10.1m (2007: GBP9.1m) was incurred, giving a loss before tax and adjustment
of goodwill of GBP3.7m (2007: profit GBP23.3m). The loss after tax, exceptionals
and amortisation was GBP3.3m (2007: profit GBP16.4m).
The adjusted basic earnings per share was 9.8p (2007: 23.4p).
The Group generated net cash from operations of GBP3.2m (2007: GBP29.4m). The
lower cash generation is due principally to the reduced profitability, the high
level of exceptional costs incurred and a negative movement in working capital
of GBP1.5m. Cash generation is expected to improve in 2009 due to lower
exceptional costs and the non recurrence of the one off factors affecting cash
flow in 2008. The Group is well capitalised, with net debt as at 31st December
2008 of GBP49.2m (2007:GBP48.7m).
The Group also took the opportunity to re-finance its existing banking facility
during the second half of 2008, securing an extension of the banking facility
through to the middle of 2011 and more favourable financial covenants, providing
headroom if the market deterioration continues on a longer term basis. As part
of this arrangement, LSL reduced its revolving credit facility from GBP95.0m to
GBP75.0m.
The unprecedented conditions in the housing market make it prudent to preserve
cash until there is greater visibility over when market conditions will improve,
accordingly the Board has decided not to recommend a final dividend. In the
longer term the Board remains committed to our previously stated dividend
policy.
Developments
Our surveying business continues to make progress, underpinned by the major
contract gains achieved in 2007, with Barclays and C&G.
Despite a 40% decline in mortgage approvals, the surveying business has
continued to provide service excellence and to grow market share. Overall the
volume of jobs performed is down by 13% from 533,903 to 461,403. The result has
been supported by the first full year of trading of Barnwoods which delivered
turnover of GBP21.7m (2008:GBP11.4m).
Our estate agency business, commensurate with the challenging market conditions,
is focussed on delivering cost efficiencies and maximising all non exchange
income. Lettings income from our core brands Your Move and Reeds Rains,
increased by 24%, to GBP15.8m and within those brands - despite a 59% fall in
exchange income - overall revenue fell by only 39%.
As previously reported, we set up LSL Corporate Client Department (LSL CCD) our
repossessions asset manager, at the start of the year, which has been
successfully launched in the market securing a number of substantial new
contracts. Despite investment during the first half of 2008 from a standing
start, the business traded profitably in the second half of 2008 and is expected
to contribute significantly to profits in 2009.
In addition, LSL CCD has invested in a corporate residential property management
team focused on major landlords and aspiring multiple property landlords across
the UK. This has successfully secured a number of key contracts during the year
and as a result, it is expected to support the continued growth of lettings
income in 2009. This is another example of the Group investing and growing its
counter-cyclical income streams.
Main Board
There were a number of changes to the Board during 2008. Peter Hales resigned in
June 2008 to concentrate on other business interests and the Board subsequently
appointed Robert Sharpe to the Board as a Non Executive Director and Chair of
the Remuneration Committee in September 2008. However, following his appointment
as CEO of West Bromwich Building Society, Robert felt unable to make the
appropriate contribution or commitment to LSL going forward and resigned in
December 2008. The process to recruit a replacement for Robert has commenced and
a further announcement will be made in due course.
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.
LSL operates two employee share schemes, a Save As You Earn and a Buy As You
Earn, offering employees the opportunity to share in the future success of LSL.
A number of senior management employees, including the executive directors
currently own approximately 32% of LSL (2007: 34%). The interests of these
senior managers/directors are closely aligned with the interests of other
shareholders.
Trading conditions in 2008 have presented considerable challenges for our
management and employees. There are less people now employed in our businesses,
and those that remain are working harder and often for less tangible reward. The
Board and I are particularly grateful for the input and motivation of our team.
Current Trading & Outlook
Given the current macroeconomic environment, the Board remains cautious on
market conditions for 2009 and the timing of any recovery is uncertain. In 2009
to date, buyer enquiries and activity levels within our estate agency businesses
have been encouraging, however this is balanced by the lack of supply in the
mortgage market. The Group is well placed to benefit from the actions taken in
2008 with significantly reduced operating costs, strong growth in new income
streams and a diversified customer base which will underpin surveying
profitability.
Longer term, the underlying macroeconomic conditions in the residential property
market remain positive. Additionally, LSL has a track record of profitability
and business development, both organically and through acquisition, and is well
placed to benefit from the opportunities that will arise to grow market share in
each of our business segments through the current cycle.
Roger Matthews
4th March 2009
Business Review & Directors' Report
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
* LSL has demonstrated some resilience against the cycles of the housing market,
largely due to the performance of its surveying division
* The estate agency division has a network of 378 branches, making it the third
largest estate agency business in the UK3
* The Group has low capital expenditure (2008: GBP1.0m) (2007: GBP2.4m) and in
spite of the unprecedented market conditions has generated net cash inflow from
operating activities of GBP3.2m (2007: GBP29.4m)
* 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 since 2004
Strategy
The Group's strategy is to grow long term profitability in the provision of
residential property services and to continue to develop counter-cyclical income
streams that will strengthen its ability to trade successfully through market
downturns.
Profit growth will be achieved through surveying by developing strong
relationships with lenders and maintaining service excellence in order to
continue to drive market share. Profitable growth will be achieved in the
estate agency and financial services divisions by continuing to provide a
service proposition that recognises the customers' needs and maximises income
across the value chain.
In addition, LSL continues to review opportunities for organic growth and during
2008 has successfully launched a lettings corporate client department and a
repossessions asset management department which are both expected to contribute
significantly to future profits, and also deliver incremental value to the core
agency businesses. Further, LSL will continue to assess acquisition
opportunities in residential property services. It is however unlikely to
complete any transactions until there is an improvement in the market
conditions.
The market backdrop provides significant opportunities for market share growth
for well capitalised and managed businesses across the estate agency, financial
services and surveying segments. Overall, LSL is well placed to benefit from a
recovery in the UK housing market.
Principal Risks & Uncertainties
The Board continually identify, evaluate and manage material risks and
uncertainties which could adversely affect the business, operating results and
financial condition of LSL. These risks are recorded and managed through a risk
register, and the principal risks and uncertainties identified are:
* The continued volatility and uncertainty of the UK housing market. In
particular, transaction volumes (both house purchase and re-mortgage), falling
house prices and the availability of credit which will adversely affect the
profitability and cash flow of all our key brands/businesses. Any significant
further deterioration in market conditions could impact the financial covenants
as contained within our banking facility.
* Liability for inaccurate professional services advice to clients (eg inaccurate
valuations). This risk has increased as a result of an increased level of
repossessions and falling house prices which are a result of the current
unprecedented market conditions. Associated with this risk, is LSL's ability to
maintain appropriate risk management arrangements including insurance.
* Loss of key surveying clients or significant reduction in volumes, either as a
result of adverse market conditions, market consolidation, competition or
inadequate service delivery.
3 Estate Agency News Jan09
* The reputation and profitability of LSL could be adversely affected by the
actions of one or a limited number of employees or franchisees.
* Failure or interruptions of information technology services on which the Group
is reliant for operational performance and financial information.
* The development of alternative products and services in competition with
traditional estate agency and surveying services, such as supermarket property
websites and Automated Valuation Models.
* Changes in legislation or regulation may impact on business results or the UK
housing market in general.
* Loss of any licences or permission necessary for the performance of the Group's
businesses.
Further information relating to the management of these risks and uncertainties
will be set out in the Corporate Governance Review (Internal Controls) of the
Annual Report & Accounts 2008.
Business Review & Directors' Report - Surveying Division
The surveying businesses have performed well in 2008 against a difficult market
backdrop.
Key Performance Indicators:
+----------------------------+----------------+------------+--------------+
| Surveying Division | 2008 | 2007 | % Change |
| | GBPm | GBPm | |
+----------------------------+----------------+------------+--------------+
| Turnover | 80.0 | 89.9 | -11% |
+----------------------------+----------------+------------+--------------+
| Expenditure | (51.4) | (63.5) | -19% |
+----------------------------+----------------+------------+--------------+
| Underlying Operating | 28.6 | 26.4 | 8% |
| Profit | | | |
+----------------------------+----------------+------------+--------------+
| Margin | 36% | 29% | |
+----------------------------+----------------+------------+--------------+
| | | | |
+----------------------------+----------------+------------+--------------+
| Total Number of Jobs | 461,403 | 533,093 | -13% |
| Performed | | | |
+----------------------------+----------------+------------+--------------+
Surveying - Key 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
Surveying Division Performance
Despite extremely challenging conditions, particularly in the second half of
2008, the surveying division performed well. Overall mortgage approvals were
down by 40%, whereas the volume of jobs performed within the Group fell by 13%,
indicating continued market share gains.
While e.surv's volumes were affected by the difficult market conditions and the
withdrawal from the market of some key lenders, its contribution to the
division's Underlying Operating Profit was GBP15.8m (2007: GBP20.3m). Further,
the volumes of the division were underpinned by the contracts gained in mid 2007
and in particular by the full year contribution of Barnwoods, which delivered
turnover of GBP21.7m (2007: GBP11.4m).
Overall, turnover for the division has reduced by 11%. However, as a result of a
continued focus on driving efficiency improvements and the profit contribution
of Barnwoods, the overall margin has improved from 29% to 36%, giving an
Underlying Operating Profit for 2008 of GBP28.6m (2007: GBP26.4m).
In line with the deterioration in the UK housing market, the Board has decided
that it is appropriate to make a one off exceptional increase in its provisions
of GBP2m to take account of the increase in the number of recovery claims made
and likely to be made for inaccurate valuations.
Lender Relationships & Service Quality
LSL's surveying division has panel management arrangements with a significant
number of lenders. A number of these arrangements are exclusive and they will
involve the servicing and distribution of valuation instructions to these
lenders' own teams of employed surveyors and/or other valuation providers. LSL
has strong relationships with these lenders.
Service quality is a significant factor in maintaining relationships with these
lenders and in seeking to win new panel management contracts. It also
differentiates LSL's surveying division from its competitors. One of the key
factors that lenders use in assessing service quality is turnaround time for
valuation instructions. LSL's turnaround time is consistently better than many
of its competitors, largely as a result of the flexibility of the panel
management model and its use of sophisticated technology.
Competition
LSL's major competitors in the surveying market are principally other national
estate agency chains which provide panel management services, such as
Countrywide and Connells. In addition, a number of lenders have their own
in-house workforce, such as Abbey National and Alliance & Leicester. Further,
while Automated Valuation Models (AVMs) are a competitor to traditional
valuation methods, their use in the current market is under careful review by
lenders.
Hometrack Data Systems
LSL owns 14.2% of Hometrack, the leading provider of AVMs. This investment was
made in 2003 and provides LSL with an insight into the AVM market. A dividend of
GBP0.3m was received in 2008 (2007: GBP0.4m).
Business Review & Directors' Report - Estate Agency Division
The estate agency business has performed satisfactorily in the context of
unprecedented market conditions.
Key Performance Indicators:
+----------------------------+--------------+--------------+--------------+
| Estate Agency | 2008 | 2007 | % |
| | GBPm | GBPm | Change |
+----------------------------+--------------+--------------+--------------+
| | | | |
+----------------------------+--------------+--------------+--------------+
| Your Move & Reeds Rains* | | | |
+----------------------------+--------------+--------------+--------------+
| | | | |
+----------------------------+--------------+--------------+--------------+
| Exchange Fees | 28.6 | 69.3 | -59% |
+----------------------------+--------------+--------------+--------------+
| Other income | 29.2 | 24.9 | 17% |
+----------------------------+--------------+--------------+--------------+
| Turnover | 57.8 | 94.2 | -39% |
+----------------------------+--------------+--------------+--------------+
| Expenditure | (64.0) | (80.5) | -20% |
+----------------------------+--------------+--------------+--------------+
| Underlying Operating | (6.2) | 13.7 | |
| (Loss)/Profit | | | |
+----------------------------+--------------+--------------+--------------+
| Margin | -10.7% | 14.5% | |
+----------------------------+--------------+--------------+--------------+
| | | | |
+----------------------------+--------------+--------------+--------------+
| KPIs | | | |
+----------------------------+--------------+--------------+--------------+
| Exchange Units | 13,683 | 31,277 | -56% |
+----------------------------+--------------+--------------+--------------+
| Average Fee | GBP2,089 | GBP2,214 | -6% |
+----------------------------+--------------+--------------+--------------+
| | | | |
+----------------------------+--------------+--------------+--------------+
| ^Other Brands | | | |
+----------------------------+--------------+--------------+--------------+
| Underlying Operating | (1.1) | - | |
| (Loss)/Profit | | | |
+----------------------------+--------------+--------------+--------------+
| | | | |
+----------------------------+--------------+--------------+--------------+
| Total Estate Agency | | | |
+----------------------------+--------------+--------------+--------------+
| Turnover | 66.7 | 107.1 | -38% |
+----------------------------+--------------+--------------+--------------+
| Expenditure | (74.0) | (93.4) | -21% |
+----------------------------+--------------+--------------+--------------+
| Underlying Operating | (7.3) | 13.7 | |
| (Loss)/Profit | | | |
+----------------------------+--------------+--------------+--------------+
| Margin | -10.9% | 12.8% | |
+----------------------------+--------------+--------------+--------------+
| | | | |
+----------------------------+--------------+--------------+--------------+
^ Other brands include Homefast, property-careers.com, LSLi subsidiaries (David
Frost Estate Agents, JNP Estate Agents and Intercounty) and First Complete.
* within Your Move & Reeds Rains turnover, expenditure and profit intra group
transactions have been included
Estate Agency - Competitive Strengths & Growth Opportunities
* Strong established high street brands and, with 378 branches, LSL is ranked
third largest in the UK by Estate Agency News (January 2009)
* Strong and growing counter-cyclical income streams, such as the generation of
lettings and repossession instructions
* Highly profitable business in normal market conditions
* Technically advanced proprietary browser based IT systems (including Preview and
Quicklet) with one IT solution across all brands providing a customer
relationship management ability to sell income streams on an automated basis
* Successful franchise model
* www.your-move.co.uk-the number 1 UK estate agency branded website by Hitwise
(February 2009)
* Growing repossessions asset management business with a strong service ethos
Estate Agency Performance
Transaction volumes for house purchase were at an unprecedented low in 2008 with
mortgage approvals for house purchase falling by 59% from 1.26m in 2007 to 0.51m
in 2008. As a result, the exchange income of Your Move and Reeds Rains, our main
agency brands fell by 59%. This was partially offset by a growth in other income
(principally lettings and HIPS) of 17%. Overall turnover within Your Move and
Reeds Rains was down by 39% from GBP94.2m to GBP57.8m.
In the context of the market there has been a significant focus on driving
efficiency improvements and action was taken early in 2008 to reduce the cost
base in line with anticipated lower activity levels. An overall cost reduction
of GBP16.5m has been achieved in Your Move and Reeds Rains. Despite this, the
core agency brands had an Underlying Operating Loss of GBP6.2m in 2008 (2007:
Underlying Operating Profit GBP13.7m).
Estate Agency Revenue
The main drivers of estate agency revenue are:
* Exchange fee income, which is linked to housing transaction volumes, prices and
commission rates
* Franchising income, which is generated from initial deposits on new openings, a
monthly service fee of 8% of turnover, plus charges for the provision of IT
services
* Lettings income, which is generated from providing a range of services to
landlords and tenants. Branch based lettings services have been expanded across
the Group and as at 31 December 2008 lettings services were provided from 378
offices across the LSL network (figure includes franchised branches) (2007:
340). Income growth was experienced in 2008 and further growth is expected in
2009
* Additional commission income generated through the sale of general insurance,
conveyancing services, home information packs, home reports, 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 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 Connells 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.
Developing Businesses:
The Estate Agency division continues to develop new businesses, including the
following:
First Complete
As previously reported, we set up LSL Corporate Client Department (a trading
name of First Complete), our repossessions asset manager at the start of 2008,
which has been successfully launched in the market securing a number of
substantial new contracts. Despite investment during the first half of 2008 from
a standing start, the business traded profitably in the second half of 2008 and
is expected to contribute significantly to profits in 2009.
In addition LSL CCD has invested in a corporate residential property management
team focused on major landlords and aspiring multiple property landlords across
the UK, and which has successfully secured a number of key contracts during the
year. As a result, it is expected to support the continued growth of lettings
income across the estate agency brands in 2009. This is another example of the
Group investing and growing its counter-cyclical income streams.
property-careers.com
property-careers.com is a national property training and marketing organisation
specialising in the property and financial services sector. It is also regarded
as a leading provider of training services to individuals wishing to become Home
Inspectors and Domestic Energy Assessors. During 2008 it developed and launched
the Inventory Portal, enabling individuals to obtain accreditation from the
Licensed Inventory Provider Scheme. 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.
LSLi
This business was launched in early 2007 and is the primary vehicle through
which LSL has pursued its strategy to acquire small to medium independent estate
agency businesses. At 31 December 2008 it operated a network of 15 branches
(2007: 16 branches) based in the home counties under the following strong local
brands:
* ICIEA Limited, trading as "Intercounty" (8 branches) (2007: 9 branches)
* David Frosts Estate Agents Limited, trading as "Frosts" (3 branches) (2007: 3
branches)
* JNP (Estate Agents) Limited, trading as "The JNP Partnership" (4 branches)
(2007: 4 branches)
The Board does not anticipate making any further acquisitions in the estate
agency sector until market conditions improve.
Business Review & Directors' Report - Financial Services Division
Key Performance Indicators:
+----------------------------+----------+-----------+----------+
| | 2008 | 2007 | % Change |
| | GBPm | GBPm | |
+----------------------------+----------+-----------+----------+
| Financial Services | | | |
+----------------------------+----------+-----------+----------+
| Turnover | 15.0 | 22.5 | -34% |
+----------------------------+----------+-----------+----------+
| Expenditure | (16.2) | (23.4) | -31% |
+----------------------------+----------+-----------+----------+
| Underlying Operating Loss | (1.2) | (0.8) | -50% |
+----------------------------+----------+-----------+----------+
| Financial Consultant | 179 | 328 | -45% |
| Numbers | | | |
+----------------------------+----------+-----------+----------+
| Mortgages applications | 1.63bn | GBP3.31bn | -51% |
| value | | | |
+----------------------------+----------+-----------+----------+
Financial Services - Competitive Strengths & Growth Opportunities
* One of the UK's largest estate agency brokers, providing lending of in excess of
GBP1.63bn (2007: GBP3.31bn)
* Strong relationships with a broad panel of lenders
* A significant customer database for the sale of products and services available
via the Group (e.g. financial services products, including the operation of
remortgage clubs)
* A strong customer offering providing mortgages from a broad range of lenders,
life and mortgage protection insurance products, and general insurance products
Financial Services Performance
Transaction volumes in the mortgage market have been significantly affected by
market conditions. As a result, turnover fell by 34% and was impacted by the
well reported funding issues in the general mortgage market. Overall mortgage
approvals fell by 40% to 1,980,000 (2007: 3,292,000) according to the Bank of
England (January 2009).
Overall the cost base was reduced by 31% and as a result the Underlying
Operating Loss increased from GBP0.8m to GBP1.2m
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.
Business Review & Directors' Report - Financial Review
The key drivers of the financial performance of LSL are summarised below.
Income statement
Revenue
Revenue fell by 26% in the year ended 31 December 2008 from GBP219.5m to
GBP161.8m. This was a reflection of market conditions.
Operating Expenses excluding exceptional costs, amortisation and share based
payments
Operating expenses were reduced by GBP39.1m, or approximately 21% from GBP183.4m
to GBP144.3m. The principal saving, which amounted to GBP31.1m, were emoluments.
The cost reductions were made in response to unprecedented market conditions and
were across all business segments.
Underlying Operating Profit
Underlying Operating Profit was GBP18.2m (2007: GBP37.2m) with the Underlying
Operating Profit margin down 16.9% to 11.3%.
Exceptional Costs
Exceptional costs in the year ended 31 December 2008 amounted to GBP8.2m (2007:
GBP1.4m) (of which operating exceptional costs were GBP7.7m (2007: GBP1.4m) and
finance exceptional costs were GBP0.4m (2007: nil)) due to the unprecedented
market conditions.
These were split as follows:-
a. onerous lease provisions as a result of branch closures GBP1.7m;
b. redundancy costs GBP2.4m;
c. fees for renegotiation of the bank facility GBP0.4m;
d. aborted deal and project costs GBP0.2m;
e. increase in provisions of GBP2m to take account of the increase in numbers of
recovery claims made and likely to be made for inaccurate valuations due to the
deterioration in the UK housing market
f. Linear goodwill and brand non cash impairment charge GBP1.1m
Net Financial Costs
Net financial costs amounted to GBP3.9m (2007: GBP2.7m). The Net Financial costs
for 2008 included investment income from Hometrack of GBP0.3m (2007: GBP0.4m)
Taxation
The effective rate of corporation tax after excluding the effect of the deferred
tax adjustment to goodwill for the year is 16.7% (2007: 29.5%)
Adjusted Basic Earnings Per Share
The Adjusted Basic Earnings Per Share (as calculated in Note 4) is 9.8p (2007:
23.4p). 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 GBP1.0m (2007: GBP2.4m). The
capital expenditure predominantly comprised fixtures, fittings and computer
equipment.
Financial Structure
As at 31 December 2008 Net Debt was GBP49.2m (2007: GBP48.7m). LSL has a GBP75m
revolving credit facility in place (2007: GBP95.0m).
Cash Flow
The business is cash generative and has low capital expenditure requirements.
The Group generated net cash from operations of GBP3.2m (2007: GBP29.4m). The
lower cash generation is due principally to the reduced profitability, the high
level of exceptional costs incurred and a negative movement in working capital
of GBP1.5m. As reported in the first half year, the working capital outflow is
due to one off factors including a reduction in outsourced surveys and the
introduction of home information packs for which the Group initially provided
short term credit.
Cash generation is expected to improve in 2009 due to lower exceptional costs
and the non recurrence of the one off factors affecting cash flow in 2008. The
Group is well capitalised with net debt as at 31 December 2008 of GBP49.2m
(2007: GBP48.7m).
Net Assets
The net assets as at 31 December 2008 were GBP33.7m (2007: GBP42.9m).
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 GBP30.0m 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.
+-------------------------------------+-------------------------------------+
| Simon Embley | Dean Fielding |
| Group Chief Executive Officer | Group Finance Director |
+-------------------------------------+-------------------------------------+
Group Income Statement
For the year ended 31 December 2008
+-----------------------------------------------+------+------------+------------+
| | | 2008 | 2007 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| |Note | GBP'000 | GBP'000 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Revenue | 2 | 161,773 | 219,518 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Operating expenses: | | | |
+-----------------------------------------------+------+------------+------------+
| Employee and | | 88,912 | 120,054 |
| subcontractor costs | | | |
+-----------------------------------------------+------+------------+------------+
| Establishment costs | | 12,485 | 12,364 |
+-----------------------------------------------+------+------------+------------+
| Depreciation on | | 2,299 | 2,227 |
| property, plant and | | | |
| equipment | | | |
+-----------------------------------------------+------+------------+------------+
| Other | | 40,638 | 48,804 |
+-----------------------------------------------+------+------------+------------+
| | | (144,334) | (183,449) |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Rental income | | 765 | 1,125 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Group operating profit before exceptional | 2 | 18,204 | 37,194 |
| costs, amortisation and share-based payments | | | |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Share-based payments | | (138) | (650) |
+-----------------------------------------------+------+------------+------------+
| Amortisation of intangible assets | | (10,111) | (9,145) |
+-----------------------------------------------+------+------------+------------+
| Exceptional costs | 3 | (7,735) | (1,413) |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Group operating profit | | 220 | 25,986 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Dividend income | | 334 | 373 |
+-----------------------------------------------+------+------------+------------+
| Finance income | | 190 | 357 |
+-----------------------------------------------+------+------------+------------+
| Finance costs | | (4,035) | (3,429) |
+-----------------------------------------------+------+------------+------------+
| Exceptional finance costs | 3 | (432) | - |
+-----------------------------------------------+------+------------+------------+
| Net financial costs | | (3,943) | (2,699) |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| (Loss)/profit before tax before | | (3,723) | 23,287 |
| adjustment to goodwill | | | |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Adjustment to goodwill in respect of | | (1,048) | (1,000) |
| subsequent recognition of deferred tax | | | |
| asset | | | |
+-----------------------------------------------+------+------------+------------+
| (Loss)/profit before tax | | (4,771) | 22,287 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Taxation | | - | - |
+-----------------------------------------------+------+------------+------------+
| - related to exceptional costs | | 2,022 | (424) |
+-----------------------------------------------+------+------------+------------+
| - others | | (600) | (5,443) |
+-----------------------------------------------+------+------------+------------+
| | | 1,422 | (5,867) |
+-----------------------------------------------+------+------------+------------+
| (Loss)/profit for the year * | | (3,349) | 16,420 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| * All attributable to equity | | | |
| shareholders of the parent | | | |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| (Loss)/earnings per share expressed in | | | |
| pence per share: | | | |
+-----------------------------------------------+------+------------+------------+
| Basic | 4 | (3.3) | 15.8 |
+-----------------------------------------------+------+------------+------------+
| Diluted | 4 | (3.3) | 15.7 |
+-----------------------------------------------+------+------------+------------+
Statement of Group Recognised Income and Expenses
For the year ended 31 December 2008
Total recognised income and expense for the year:
+-----------------------------------------------+------+------------+------------+
| | | 2008 | 2007 |
+-----------------------------------------------+------+------------+------------+
| | Note | GBP'000 | GBP'000 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| (Loss)/profit for the year | | (3,349) | 16,420 |
+-----------------------------------------------+------+------------+------------+
| Available-for-sale investments: | | | |
+-----------------------------------------------+------+------------+------------+
| Valuation (losses)/gains taken | | (1,600) | 5,500 |
| to equity | | | |
+-----------------------------------------------+------+------------+------------+
| Total recognised income and expense * | | (4,949) | 21,920 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| * All attributable to equity holders of | | | |
| the parent | | | |
+-----------------------------------------------+------+------------+------------+
Group balance sheet
As at 31 December 2008
+-----------------------------------------------+------+------------+------------+
| | | 2008 | 2007 |
+-----------------------------------------------+------+------------+------------+
| | Note | GBP'000 | GBP'000 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Non-current assets | | | |
+-----------------------------------------------+------+------------+------------+
| Goodwill | | 66,422 | 69,572 |
+-----------------------------------------------+------+------------+------------+
| Other intangible assets | | 31,413 | 41,562 |
+-----------------------------------------------+------+------------+------------+
| Property, plant and equipment | | 2,841 | 4,600 |
+-----------------------------------------------+------+------------+------------+
| Financial assets | | 4,052 | 5,650 |
+-----------------------------------------------+------+------------+------------+
| Other receivables | | 5 | 129 |
+-----------------------------------------------+------+------------+------------+
| Total non-current assets | | 104,733 | 121,513 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Current assets | | | |
+-----------------------------------------------+------+------------+------------+
| Trade and other receivables | | 13,919 | 21,458 |
+-----------------------------------------------+------+------------+------------+
| Current tax assets | | 255 | - |
+-----------------------------------------------+------+------------+------------+
| Cash and cash equivalents | | 647 | 2,326 |
+-----------------------------------------------+------+------------+------------+
| Total current assets | | 14,821 | 23,784 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Total assets | | 119,554 | 145,297 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Current liabilities | | | |
+-----------------------------------------------+------+------------+------------+
| Financial liabilities | | 1,273 | 17,350 |
+-----------------------------------------------+------+------------+------------+
| Trade and other payables | | 27,564 | 39,909 |
+-----------------------------------------------+------+------------+------------+
| Current tax liabilities | | - | 4,957 |
+-----------------------------------------------+------+------------+------------+
| Provisions for liabilities and charges | | 1,195 | 339 |
+-----------------------------------------------+------+------------+------------+
| Total current liabilities | | 30,032 | 62,555 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Non-current liabilities | | | |
+-----------------------------------------------+------+------------+------------+
| Financial liabilities | 7 | 48,611 | 33,640 |
+-----------------------------------------------+------+------------+------------+
| Trade and other payables | | 39 | 97 |
+-----------------------------------------------+------+------------+------------+
| Deferred tax liability | | 557 | 1,892 |
+-----------------------------------------------+------+------------+------------+
| Provisions for liabilities and charges | | 6,586 | 4,175 |
+-----------------------------------------------+------+------------+------------+
| | | 55,793 | 39,804 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Net assets | | 33,729 | 42,938 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Equity | | | |
+-----------------------------------------------+------+------------+------------+
| Share capital | | 208 | 208 |
+-----------------------------------------------+------+------------+------------+
| Share premium account | | 5,629 | 5,629 |
+-----------------------------------------------+------+------------+------------+
| Share-based payment reserve | | 531 | 560 |
+-----------------------------------------------+------+------------+------------+
| Investment in treasury shares | | (2,934) | (2,669) |
+-----------------------------------------------+------+------------+------------+
| Unrealised gain reserve | | 3,900 | 5,500 |
+-----------------------------------------------+------+------------+------------+
| Retained earnings | | 26,395 | 33,710 |
+-----------------------------------------------+------+------------+------------+
| | | | |
+-----------------------------------------------+------+------------+------------+
| Total equity | | 33,729 | 42,938 |
+-----------------------------------------------+------+------------+------------+
Group cash flow statement
For year ended 31 December 2008
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| | | | 31 Dec 2008 | | 31 Dec 2007 |
+----------------------------------+------+--+--------------------+---+----------------------+
| |Note | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Cash generated from operating | | | | | | | |
| activities | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| (Loss)/profit before tax | | | | (4,771) | | | 22,287 |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Adjustments to reconcile | | | | | | | |
| (loss)/profit before tax to net | | | | | | | |
| cash inflows from operating | | | | | | | |
| activities | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Amortisation of intangible | | | 10,111 | | | 9,145 | |
| assets | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Dividend income | | | (334) | | | (373) | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Finance income | | | (190) | | | (357) | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Finance costs | | | 4,035 | | | 3,429 | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Adjustment in relation to | | | 1,048 | | | 1,000 | |
| deferred tax asset | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| | | | | 14,670 | | | 12,844 |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Group operating profit before | | | | 9,899 | | | 35,131 |
| amortisation | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Depreciation | | | 2,299 | | | 2,227 | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Impairment of goodwill | 3 | | 1,036 | | | 130 | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Impairment of intangible assets | 3 | | 38 | | | - | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Impairment of property, plant | 3 | | - | | | 207 | |
| and equipment | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Loss/(profit) on sale of | | | 419 | | | (30) | |
| property, plant and equipment | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Share-based payments | | | 138 | | | 650 | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| | | | 3,930 | | | 3,184 | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Decrease in trade and other | | | 7,663 | | | 2,050 | |
| receivables | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| (Decrease)/increase in trade and | | | (9,152) | | | 2,139 | |
| other payables and provisions | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| | | | | 2,441 | | | 7,373 |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Cash generated from operations | | | | 12,340 | | | 42,504 |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Interest paid | | | (3,993) | | | (3,429) | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Tax paid | | | (5,126) | | | (9,662) | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| | | | | (9,119) | | | (13,091) |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Net cash from operating | | | | 3,221 | | | 29,413 |
| activities | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Cash flows from investing | | | | | | | |
| activities | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Purchase of subsidiary | | | (276) | | | (3,806) | |
| undertakings, minority interest | | | | | | | |
| and commercial business | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Purchase of intangible assets | | | - | | | (30,192) | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Interest received | | | 190 | | | 357 | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Dividends received | | | 334 | | | 373 | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Purchase of property, plant and | | | (1,043) | | | (2,422) | |
| equipment | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Proceeds from sale of property, | | | 84 | | | 139 | |
| plant and equipment | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Purchase of available for sale | | | (2) | | | (2) | |
| financial assets | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| Net cash expended on investing | | | | (713) | | | (35,553) |
| activities | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| | | | | 2,508 | | | (6,140) |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
| | | | | | | | |
+----------------------------------+------+--+----------+---------+---+-----------+----------+
Group cash flow statement
For year ended 31 December 2008
+----------------------------------+------+--+----------+---------+---+----------+---------+
| | | | 31 Dec 2008 | 31 Dec 2007 |
+----------------------------------+------+--+--------------------+------------------------+
| | Note | | GBP'000 | GBP'000 | | GBP'000 | GBP'000 |
+----------------------------------+------+--+----------+---------+---+----------+---------+
| | | | | | | | |
+----------------------------------+------+--+----------+---------+---+----------+---------+
| Net cash from operating | | | | 2,508 | | | (6,140) |
| activities less cash expended on | | | | | | | |
| investing activities | | | | | | | |
+----------------------------------+------+--+----------+---------+---+----------+---------+
| | | | | | | | |
+----------------------------------+------+--+----------+---------+---+----------+---------+
| Cash flows from financing | | | | | | | |
| activities | | | | | | | |
+----------------------------------+------+--+----------+---------+---+----------+---------+
| Repayment of loans | | | - | | | (5,402) | |
+----------------------------------+------+--+----------+---------+---+----------+---------+
| Proceeds from loans | | | 44 | | | 18,785 | |
+----------------------------------+------+--+----------+---------+---+----------+---------+
| Purchase of treasury shares | | | (265) | | | (2,371) | |
+----------------------------------+------+--+----------+---------+---+----------+---------+
| Dividends paid | | | (3,966) | | | (3,124) | |
+----------------------------------+------+--+----------+---------+---+----------+---------+
| | | | | | | | |
+----------------------------------+------+--+----------+---------+---+----------+---------+
| Net cash (used)/generated in | | | | (4,187) | | | 7,888 |
| financing activities | | | | | | | |
+----------------------------------+------+--+----------+---------+---+----------+---------+
| | | | | | | | |
+----------------------------------+------+--+----------+---------+---+----------+---------+
| Net (decrease)/increase in cash | | | | (1,679) | | | 1,748 |
| and cash equivalents | | | | | | | |
+----------------------------------+------+--+----------+---------+---+----------+---------+
| Cash and cash equivalents at the | | | | 2,326 | | | 578 |
| beginning of the year | | | | | | | |
+----------------------------------+------+--+----------+---------+---+----------+---------+
| Cash and cash equivalents at the | | | | 647 | | | 2,326 |
| end of the year | | | | | | | |
+----------------------------------+------+--+----------+---------+---+----------+---------+
Notes to the Preliminary Results
As at 31 December 2008
1. The financial information in this preliminary announcement does not
constitute LSL's statutory financial
statements for the year
ended 31 December 2008 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
2007 which are available on LSL's website at www.lslps.co.uk with exception of
adoption of IFRIC 11 IFRS 2 - Group and Treasury Share Transactions during the
year. Adoption of this revised interpretation did not have any effect on the
financial statements of the Group. 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 2008 as applied in
accordance with the provisions of the Companies Act 1985.
2. Segment reporting
The segment results for the year ended 31st December 2008 are as follows:
Year ended 31 December 2008
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| | Estate | Surveying | Financial | Unallocated | Total |
| | agency | and | services | GBP'000 | GBP'000 |
| | and | valuation | GBP'000 | | |
| | related | services | | | |
| | activities | GBP'000 | | | |
| | GBP'000 | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Income statement | | | | | |
| information | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Segmental revenue | 66,716 | 80,073 | 14,984 | - | 161,773 |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Segmental result: | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| - before exceptional | (7,250) | 28,590 | (1,185) | (1,951) | 18,204 |
| costs, | | | | | |
| amortisation and | | | | | |
| share-based | | | | | |
| payments | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| - after exceptional | | | | | |
| costs, | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| amortisation and | (11,407) | 17,099 | (3,625) | (1,847) | 220 |
| share-based | | | | | |
| payments | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Dividend income | | | | | 334 |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Finance income | | | | | 190 |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Finance costs | | | | | (4,035) |
| Exceptional finance costs | | | | | (432) |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Loss | | | | | (3,723) |
| before | | | | | |
| tax | | | | | |
| before | | | | | |
| adjustment | | | | | |
| to | | | | | |
| goodwill | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Adjustment | | | | | (1,048)* |
| to | | | | | |
| goodwill | | | | | |
| in respect | | | | | |
| of | | | | | |
| subsequent | | | | | |
| recognition | | | | | |
| of deferred | | | | | |
| tax asset | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Loss before tax | | | | | (4,771) |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Taxation | | | | | 1,422 |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Loss for the year | | | | | (3,349) |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
*This relates to the estate agency and related activities segment.
Notes to the Preliminary Results
As at 31 December 2008
2. Segmented reporting (continued)
Year ended 31 December 2007
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| | Estate | Surveying | Financial | Unallocated | Total |
| | agency | and | services | GBP'000 | GBP'000 |
| | and | valuation | GBP'000 | | |
| | related | services | | | |
| | activities | GBP'000 | | | |
| | GBP'000 | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Income statement | | | | | |
| information | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Segmental revenue | 107,110 | 89,866 | 22,542 | - | 219,518 |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Segmental result: | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| - before exceptional | | | | | |
| costs, | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| amortisation and | 13,758 | 26,415 | (833) | (2,146) | 37,194 |
| share-based | | | | | |
| payments | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| - after exceptional | | | | | |
| costs, | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| amortisation and | 10,373 | 20,149 | (1,995) | (2,541) | 25,986 |
| share-based | | | | | |
| payments | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Dividend income | | | | | 373 |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Finance income | | | | | 357 |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Finance costs | | | | | (3,429) |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Profit | | | | | 23,287 |
| before | | | | | |
| tax | | | | | |
| before | | | | | |
| adjustment | | | | | |
| to | | | | | |
| goodwill | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Adjustment | | | | | (1,000)* |
| to | | | | | |
| goodwill | | | | | |
| in respect | | | | | |
| of | | | | | |
| subsequent | | | | | |
| recognition | | | | | |
| of deferred | | | | | |
| tax asset | | | | | |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Profit before tax | | | | | 22,287 |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Taxation | | | | | (5,867) |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
| Profit for the year | | | | | 16,420 |
+---------------------------------+-------------+-----------+-----------+-------------+-----------+
* This relates to the estate agency and related activities segment.
Notes to the Preliminary Results
As at 31 December 2008
3. Exceptional costs
+-----------------------------------------------------+------------+------------+
| | 2008 | 2007 |
+-----------------------------------------------------+------------+------------+
| | GBP'000 | GBP'000 |
+-----------------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------------+------------+------------+
| Establishment costs | | |
+-----------------------------------------------------+------------+------------+
| Onerous leases provision due to branch closures | 1,709 | 501 |
+-----------------------------------------------------+------------+------------+
| Employee costs | | |
+-----------------------------------------------------+------------+------------+
| Redundancy costs due to branch closures and | 2,410 | 575 |
| business reorganisation | | |
+-----------------------------------------------------+------------+------------+
| Other | | |
+-----------------------------------------------------+------------+------------+
| Impairment of property, plant and equipment | - | 207 |
+-----------------------------------------------------+------------+------------+
| Impairment of brand | 38 | - |
+-----------------------------------------------------+------------+------------+
| Impairment of goodwill | 1,036 | 130 |
+-----------------------------------------------------+------------+------------+
| Costs of aborted acquisition of businesses and | 242 | - |
| financing project | | |
+-----------------------------------------------------+------------+------------+
| Accelerated depreciation due to branch closures | 269 | - |
+-----------------------------------------------------+------------+------------+
| Provision for professional indemnity claims | 2,031 | - |
+-----------------------------------------------------+------------+------------+
| Total Operating Exceptional Costs | 7,735 | 1,413 |
| Finance Costs | | |
+-----------------------------------------------------+------------+------------+
| Banking fees incurred for renegotiation of facility | 432 | - |
+-----------------------------------------------------+------------+------------+
| | 8,167 | 1,413 |
+-----------------------------------------------------+------------+------------+
Exceptional costs were incurred in 2008 as shown above reflecting the
unprecedented market conditions and the need to restructure the business in line
with lower activity levels.
In 2008 given the deterioration in the UK housing market the Board has decided
that it is appropriate to make a one off increase in its professional indemnity
claims provision of GBP2,031,000 to take account of the increase in numbers of
recovery claims made and likely to be made for inaccurate valuations.
In 2008, Linear Financial Services Limited and Linear Mortgage Network Limited
continued to incur operating losses and an impairment review was conducted in
accordance with the accounting policy. As a result of this impairment review the
entire value of brand in intangible assets of GBP38,000 and carrying value of
goodwill relating to both companies of GBP1,036,000 were impaired.
Notes to the Preliminary Results
As at 31 December 2008
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.
+------------------------+---------+-------------+--------+---------+-------------+---------+
| | Loss | Weighted | 2008 | Profit | Weighted | 2007 |
| | after | average | Per | after | average | Per |
| | tax | number of | share | tax | number of | Share |
| | GBP'000 | shares | amount | GBP'000 | shares | Amount |
| | | | Pence | | | Pence |
+------------------------+---------+-------------+--------+---------+-------------+---------+
| | | | | | | |
+------------------------+---------+-------------+--------+---------+-------------+---------+
| Basic EPS | (3,349) | 102,845,156 | (3.3) | 16,420 | 103,647,347 | 15.8 |
+------------------------+---------+-------------+--------+---------+-------------+---------+
| Effect of dilutive | - | 195,615 | - | - | 609,076 | - |
| share options | | | | | | |
+------------------------+---------+-------------+--------+---------+-------------+---------+
| Diluted EPS | (3,349) | 103,040,771 | (3.3) | 16,420 | 104,256,423 | 15.7 |
+------------------------+---------+-------------+--------+---------+-------------+---------+
| | | | | | | |
+------------------------+---------+-------------+--------+---------+-------------+---------+
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.
The Directors consider that the adjusted earnings shown below give a better and
more consistent indication of the Group's underlying performance:
+-----------------------------------------------------+-----------+-------------+
| | 2008 | 2007 |
| | GBP'000 | GBP'000 |
+-----------------------------------------------------+-----------+-------------+
| | | |
+-----------------------------------------------------+-----------+-------------+
| (Loss)/profit after tax attributable to equity | (3,349) | 16,420 |
| holders of the parent | | |
+-----------------------------------------------------+-----------+-------------+
| Adjusted after tax for: | | |
+-----------------------------------------------------+-----------+-------------+
| Exceptional costs | 6,145 | 989 |
+-----------------------------------------------------+-----------+-------------+
| Amortisation | 7,229 | 6,401 |
+-----------------------------------------------------+-----------+-------------+
| Share-based payment | 99 | 455 |
+-----------------------------------------------------+-----------+-------------+
| Adjusted profit after tax attributable to equity | 10,124 | 24,265 |
| holders of the parent | | |
+-----------------------------------------------------+-----------+-------------+
Adjusted basic and diluted EPS
+-----------------------+----------+-------------+---------+----------+-------------+-------+-----+
| | Adjusted | Weighted | 2008 | Adjusted | Weighted | 2007 |
| | Profit | average | Per | Profit | average | Per |
| | after | number of | share | after | number of | Share |
| | tax1 | shares | amount | tax | shares | Amount |
| | GBP'000 | | Pence | GBP'000 | | Pence |
+-----------------------+----------+-------------+---------+----------+-------------+-------------+
| | | | | | | |
+-----------------------+----------+-------------+---------+----------+-------------+-------------+
| Adjusted Basic EPS | 10,124 | 102,845,156 | 9.8 | 24,265 | 103,647,347 | 23.4 |
+-----------------------+----------+-------------+---------+----------+-------------+-------------+
| Effect of dilutive | - | 195,615 | - | - | 609,076 | - |
| share options | | | | | | |
+-----------------------+----------+-------------+---------+----------+-------------+-------------+
| Adjusted Diluted EPS | 10,124 | 103,040,771 | 9.8 | 24,265 | 104,256,423 | 23.3 |
+-----------------------+----------+-------------+---------+----------+-------------+-------+-----+
1 This represents adjusted profit after tax attributable to equity holders of
the parent.
Notes to the Preliminary Results
As at 31 December 2008
5. Dividends paid and proposed
+------------------------------------------------------+------------+------------+
| | 2008 | 2007 |
+------------------------------------------------------+------------+------------+
| | GBP'000 | GBP'000 |
+------------------------------------------------------+------------+------------+
| Declared and paid during the year: | | |
+------------------------------------------------------+------------+------------+
| Equity dividends on ordinary shares: | | |
+------------------------------------------------------+------------+------------+
| Final dividend for 2007: 3.86 pence (2007: nil) | 3,966 | - |
+------------------------------------------------------+------------+------------+
| Interim dividend for 2008: nil pence (2007: 3 | - | 3,124 |
| pence) | | |
+------------------------------------------------------+------------+------------+
| | 3,966 | 3,124 |
+------------------------------------------------------+------------+------------+
| Proposed for approval at AGM (not recognised as a | | |
| liability as at 31 December): | | |
+------------------------------------------------------+------------+------------+
| Equity dividends on ordinary shares: | | |
+------------------------------------------------------+------------+------------+
| Final dividend for 2008: nil pence per share (2007: | - | 3,976 |
| 3.86 pence) | | |
+------------------------------------------------------+------------+------------+
6. Taxation
Tax on (loss)/profit
Tax (credited)/charged in the income statement comprises:
+----------------+------------------------------------+------------+------------+
| | 2008 | 2007 |
+-----------------------------------------------------+------------+------------+
| | GBP'000 | GBP'000 |
+-----------------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------------+------------+------------+
| UK corporation | - current year | 755 | 9,494 |
| tax | | | |
+----------------+------------------------------------+------------+------------+
| | - tax overprovided in prior year | (42) | (285) |
+----------------+------------------------------------+------------+------------+
| | - utilisation of tax losses | (800) | (1,000) |
+----------------+------------------------------------+------------+------------+
| | (87) | 8,209 |
+-----------------------------------------------------+------------+------------+
| Deferred tax: | | |
+-----------------------------------------------------+------------+------------+
| Origination and reversal of temporary differences | (1,271) | (2,342) |
+-----------------------------------------------------+------------+------------+
| Adjustment in respect of prior year | (64) | - |
+-----------------------------------------------------+------------+------------+
| Total deferred tax | (1,335) | (2,342) |
+-----------------------------------------------------+------------+------------+
| Total tax (credit)/charge in the income statement | (1,422) | 5,867 |
+----------------+------------------------------------+------------+------------+
The tax assessed in the profit and loss account is higher (2007: lower) than the
standard UK corporation tax rate, because of the following factors:
+-----------------------------------------------------+------------+------------+
| | 2008 | 2007 |
+-----------------------------------------------------+------------+------------+
| | GBP'000 | GBP'000 |
+-----------------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------------+------------+------------+
| (Loss)/profit on ordinary activities before tax | (4,771) | 22,287 |
+-----------------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------------+------------+------------+
| (Loss)/profit on ordinary activities multiplied | (1,336) | 6,686 |
| by rate of corporation tax rate in the UK of 28% | | |
| (2007: 30%) | | |
+-----------------------------------------------------+------------+------------+
| Non taxable income | (164) | - |
+-----------------------------------------------------+------------+------------+
| Disallowable expenses | 954 | 780 |
+-----------------------------------------------------+------------+------------+
| Change in current tax rate in period | 17 | (48) |
+-----------------------------------------------------+------------+------------+
| Reduction in deferred taxes resulting from | - | (228) |
| reduction in tax rate | | |
+-----------------------------------------------------+------------+------------+
| Other | 13 | (38) |
+-----------------------------------------------------+------------+------------+
| | (516) | 7,152 |
+-----------------------------------------------------+------------+------------+
| Utilisation of tax losses on which deferred tax | (800) | (1,000) |
| asset was not recognised previously | | |
+-----------------------------------------------------+------------+------------+
| Prior period adjustments - current tax | (42) | (285) |
+-----------------------------------------------------+------------+------------+
| Prior period adjustment - deferred tax | (64) | - |
+-----------------------------------------------------+------------+------------+
| Total taxation (credit)/charge | (1,422) | 5,867 |
+-----------------------------------------------------+------------+------------+
Notes to the Preliminary Results
As at 31 December 2008
7. Financial liabilities
Included in the non-current financial liabilities are the secured bank loans
totalling GBP47.8m (2007: GBP47.4m). They are secured by a debenture over the
Group's assets excluding certain subsidiaries
The secured bank loans relate to the revolving credit facility. The utilisation
of this revolving credit facility may vary each month as long as this does not
exceed the maximum GBP75m facility (2007: GBP95m). The banking facility expires
in July 2010 but can be extended at that date until July 2011 only at the option
of the company.
8. Net Debt Summary
+-----------------------------------------------------+------------+------------+
| | 2008 | 2007 |
+-----------------------------------------------------+------------+------------+
| | GBP'000 | GBP'000 |
+-----------------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------------+------------+------------+
| Interest bearing loans and borrowings | 49,884 | 50,990 |
+-----------------------------------------------------+------------+------------+
| Less: Cash and short term deposit | 647 | (2,326) |
+-----------------------------------------------------+------------+------------+
| Net debt | 49,237 | 48,664 |
+-----------------------------------------------------+------------+------------+
| | | |
+-----------------------------------------------------+------------+------------+
9. Annual General Meeting
The Annual General Meeting will be held on 22 April 2009.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SSLFADSUSEFD
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