TIDMLSL
RNS Number : 7054L
LSL Property Services
04 August 2011
4 August 2011
LSL Property Services plc ("LSL")
Interim Results
LSL Property Services plc, a leading provider of residential
property services incorporating both estate agency and surveying
businesses, announces interim results for the six months ended 30
June 2011.
Highlights
Group
-- Group revenue increased by 2% to GBP103.4m (2010:
GBP101.1m)
-- Group Underlying Operating Profit(1) was GBP11.8m (2010:
GBP13.4m). Reduction in profit as expected after planned investment
of GBP2.6m in growing market share in estate agency
-- Operating margin was 11.5% (2010: 13.3%).
-- Profit before tax decreased to GBP6.5m (2010: GBP19.7m) as
2010 included an exceptional gain of GBP13.4m arising on
acquisition of Halifax Estate Agencies Limited.
-- Basic earnings per share 4.7p (2010: 19.4p). Adjusted basic
earnings per share decreased by 12.5% to 7.7p (2010: 8.8p)
-- Half Year dividend increased by 12% to 2.8p per share (2010 :
2.5p)
-- Continued strong cash generation. Net debt reduced by GBP8.1m
to GBP6.2m at 30 June 2011 (30 June 2010: GBP14.3m)
Surveying Performance
-- Underlying Operating Profit was GBP12.8m (2010: GBP15.2m).
Surveying operating margin 33.3% (2010: 36.0%)
-- Revenue decline driven by reduction in mortgage approvals and
particularly strong comparatives for key lenders
-- Strong growth in provision of surveying services to private
buyers resulting in revenue of GBP1.3m during the period
Estate Agency Performance
-- Underlying Operating Profit was GBP0.6m (2010: loss of
GBP0.6m)
-- Market share increased to 4.5% (2010: 4.0%) and pipeline
growth of 5% against the backdrop of a further fall in mortgage
approvals
-- Profit held back by planned GBP2.6m investment in people and
call centre
-- Agency branches revenue growth supported by improved
contribution from lettings up 19% to GBP13.6m and financial
services up 42% to GBP8.7m. Ex Halifax Estate Agency branches on
track for three year profit improvement plan.
(1) Underlying Operating Profit is before exceptional costs,
amortisation of intangible assets and share-based payments
Commenting on today's announcement, Roger Matthews, Chairman,
said:
"Against the backdrop of an ongoing challenging housing market,
we have continued to strengthen our market positions and drive new
revenue streams in both Estate Agency and Surveying. As a result,
the Board remains confident of delivering further progress in 2011,
a confidence that is reflected in our decision to announce a 12%
increase in the interim dividend payment to 2.8p per share."
For further information, please contact:
Simon Embley, Group Chief Executive Officer
Steve Cooke, Group Finance Director
LSL Property Services plc 0207 382 0360
Richard Darby, Nicola Cronk
Buchanan 0207 466 5000
An analysts' briefing will be held today at 09.30am at the
offices of Buchanan Communications 107 Cheapside, London EC2V
6DN.
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
Underlying Operating Profit(1) for the 6 months ended 30 June
2011 was GBP11.8m (2010: GBP13.4m) after the Group invested GBP2.6m
as planned to grow its market share in Estate Agency. Market
conditions remained extremely challenging with mortgage approvals
for house purchase falling by 4% to 284,000 compared to the same
period in 2010 and total mortgage approvals was 2% lower.
Despite the tough market, our new Surveying services for private
buyers and the market share growth initiatives in Estate Agency are
achieving excellent early results. We are confident that the
investments made in the business in the first half will result in
volume increases in the second half of the year and into the longer
term. Estate Agency pipelines at 30 June 2011 were 5% higher than
in June 2010 and are continuing to build despite the decline in
market volumes.
Estate Agency delivered an impressive result given the market
conditions and the substantial up-front investment in the cost
base. The Estate Agency business made further market share gains
which continued the momentum generated during 2010, and achieved
significant increases in lettings and financial services income
especially in the ex Halifax Estate Agency branches.
Our Surveying division has delivered a robust performance
despite a further contraction in the market from what were already
historically low levels. In addition to the reduction in market
volumes a number of our key lender clients were trading against
strong 2010 comparatives but we expect activity levels to pick up
in the second half of the year against the comparative.
Operating cash generation in the period was again strong with
net debt reduced by GBP8.1m from GBP14.3m at 30 June 2010 to
GBP6.2m at 30 June 2011. The Group has a strong balance sheet and
committed bank facilities of GBP75m through to March 2014.
Financial Results
-- Group revenue increased by 2% to GBP103.4m (2010:
GBP101.1m)
-- Underlying Group Operating Profit(1) decreased by 11.8% to
GBP11.8m (2010: GBP13.4m) after the planned investment of GBP2.6m
in Estate Agency
-- Operating margin was 11.5% (2010: 13.3%)
-- Net interest payable was GBP0.8m (2010: GBP1.1m) and the
Group profit before tax, amortisation and exceptional cost/profit
was GBP10.7m (2010: GBP10.4m).
-- Profit before tax was GBP6.5m (2010: GBP19.7mincluding an
exceptional gain of GBP13.4m arising on acquisition of Halifax
Estate Agencies Limited).
-- The effective rate of tax was 26.3%. The underlying effective
tax rate, excluding exceptional and prior year tax adjustments, was
28%.
-- Earnings per share of 4.7p (2010: 19.4p); adjusted basic
earnings per share of 7.7p (2010: 8.8p)
-- Half Year dividend increased by 12% to 2.8p per share (2010 :
2.5p)
(1) Underlying Operating Profit is before exceptional costs,
amortisation of intangible assets and share-based payments
Divisions
-- Estate Agency turnover increased by 11% to GBP65.0m (2010:
GBP58.8m) and generated an Underlying Operating Profit of GBP0.6m
(2010: Underlying Operating Loss of GBP0.6m)
-- Surveying turnover decreased by 9% to GBP38.3m (2010:
GBP42.3m), and the Underlying Operating Profit decreased by 16% to
GBP12.8m (2010: GBP15.2m). The overall Surveying margin was 33.3%
(2010: 36.0%)
Balance Sheet
Net assets at 30 June 2011 were GBP66.3m (2009: GBP60.9m). Net
debt at 30 June 2011 was GBP6.2m representing a reduction of
GBP8.1m from June 2010.
Cashflow and Capital Expenditure
The Group has delivered strong cash generation in the first half
of 2011 with cash inflow from operations pre exceptionals of
GBP7.2m (2010: GBP14.5m). There were working capital cash outflows
during the period relating to deferred marketing fees, VAT
instalment payments and some residual Halifax Estate Agencies
Limited costs. Total capital expenditure during the first half of
2011 was GBP1.6m mainly relating to investment in developing our IT
infrastructure.
Net debt at 30 June 2010 benefited from inclusion of all of the
cash received relating to the acquisition of the Halifax Estate
Agency business while some of the costs of integration of the
business were incurred in the second half of 2010. Net debt has
increased slightly compared to GBP4.9m at 31 December 2010,
reflecting the relatively weak seasonal agency cash inflows in the
first half of the year combined with planned cash outflows relating
to dividends, tax and employee related share purchases.
Interim Dividend
The Board has declared an interim dividend payable of 2.8 pence
per share, an increase of 12% on last year (2010: 2.5p). The
dividend payment reflects our positioning at the top end of our
previously stated policy of applying a dividend payout ratio of
between 30% to 40% of Underlying Group Profit after Tax. The
dividend will be paid on 9 September 2011 to shareholders on the
register at 12 August 2011.
Developments
The surveying market has been particularly challenging during
the first half due to the combination of a further reduction in
mortgage approval volumes and tough comparatives for certain key
lender clients. In addition, while remortgage volumes increased by
19% during the period much of the increase did not result in
physical survey valuations because the transactions were at low
loan to value ratios. However we have continued to invest in the
provision of market leading service levels to lender clients which
has resulted in key contract renewals during the period and as a
result the Surveying operating margin reduced to 33.3% (2010:
36.0%). Professional Indemnity claims continued at a high level
across the sector but our costs have been running at budgeted
levels during the period.
One of our key organic growth initiatives is the expansion of
Surveying services for private buyers which began with the trial of
the new RICS Condition Report in late 2010. Since then we have
successfully mobilised several distribution channels. Revenue for
these services was GBP1.3m during the period and the annualised
average daily run rate during June 2011 was GBP3.0m. In addition
the margin on this business is higher than had been expected as the
majority of buyers are trading up to more detailed reports.
Our Estate Agency division has once again made excellent
progress despite a further 4% decline in activity levels in the
house purchase market. The first stage of a programme of market
share improvement initiatives focusing on investment in branch
management was started during 2010. This has been continued during
2011 while a second stage started in January 2011 with the launch
of 'The Bridge' call centre. The overall result has been an
increase in market share from 4.0% in the first half of 2010 to
4.5% in the first half of 2011 together with a 5% increase in
pipelines compared to June 2010, the benefit from which should
convert into profit in the second half of the year. We have also
continued to grow lettings and financial services income streams
especially in the ex Halifax Estate Agency branches that were
acquired in January 2010 and which had not previously offered these
services to customers. During the first half, total lettings income
grew by 19% compared to the previous year and financial services
income grew by 42%.
The Group invested an additional GBP2.6m in the Estate Agency
division during the period, principally in branch management and
'The Bridge' call centre. We have achieved very encouraging
increases in market share and pipelines to date but the full
benefits of this investment will be seen in the second half of 2011
and beyond.
The Group remains committed to building counter cyclical income
streams in Estate Agency and the latest increase in lettings
performance now takes this core income stream from a level that was
GBP6.5m in the first half of 2008 to GBP13.6m in the first half of
2011. Our other key counter cyclical business is asset management,
which contributed revenue of GBP7.4m during the first half. While
this was 5% lower than the first half of 2010 all of the reduction
was due to a decline in market volumes as estimated repossessions
of 18,000 in the first half were 10% lower than the same period
last year.
Further to the financial services acquisitions in 2010, we have
made good progress during the period in building a simplified
operating model across LSL's intermediary networks, including First
Complete and Pink Home Loans and as a result profitability is
improving as expected. In line with our strategy of making
strategically important acquisitions in the sector we acquired 'The
Mortgage Alliance,' the mortgage distribution business of Santander
UK plc (with GBP250,000 net assets) in July 2011.
In July 2011 we also acquired an interest of 33.33% in Legal
Marketing Services Limited (LMS) and LMS Direct Conveyancing
Limited (LMS DC) through investment in Cybele Solutions Holdings
Limited (the ultimate parent company of LMS and LMS DC (LMS Group).
The LMS Group operates a conveyancing and remortgage panel
management business mainly for lender clients and also provides
conveyancing services.
Outlook
While market conditions remain extremely challenging with
volumes at less than 50% of historic norms, we are pleased with
progress during the first half year which included substantial
investment in key organic growth initiatives. LSL retains a
cautious view of the market for 2011 given the continued shortage
of available mortgage finance and the general economic uncertainty
particularly in the financial sector.
Despite this backdrop the results from the first half have
reaffirmed our strategy of growing market share in Estate Agency
and developing Surveying services for private buyers and the Board
remains confident of delivering further progress in 2011. Even
without recovery in market transaction volumes the Group is well
positioned to increase shareholder value both through the delivery
of the organic growth initiatives and from further value accretive
acquisitions.
Roger Matthews
4 August 2011
Principal risks and uncertainties
There are a number of risks and uncertainties facing the
business in the second half of the financial year. The Board has
reconsidered the risks and uncertainties as described on page 21 of
the 2010 Report & Accounts, dated 2 March 2011 (a copy of which
is available on the Group's website at www.lslps.co.uk) and
consider these to be still appropriate. In addition to the risks
and uncertainties mentioned therein we believe that the current
economic uncertainty especially in the financial sector could
impact lender behaviour in the UK market and have a consequential
impact on mortgage availability.
Responsibility statement of the directors in respect of the
half-yearly financial report
We confirm that to the best of our knowledge:
-- The condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by
the EU;
-- The interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
By order of the Board
Sapna B FitzGerald
Company Secretary
Interim Group Income Statement
for the six months ended 30 June 2011
Unaudited Audited
Six Months Ended Year Ended
30 June 30 June 31 December
2011 2010 2010
Note GBP'000 GBP'000 GBP'000
-------- -------- -----------
Revenue 3 103,365 101,084 206,607
Operating expenses:
Employee and subcontractor costs (60,308) (54,382) (115,763)
Establishment costs (8,485) (7,564) (14,891)
Depreciation on property, plant
and equipment (1,121) (706) (1,748)
Other (22,448) (25,834) (43,960)
-------- -------- -----------
(92,362) (88,486) (176,362)
Rental income 555 825 1,690
Group's share in post tax profits
of joint ventures 9 286 - -
Group operating profit before
exceptional (costs)/income,
amortisation and share-based
payments 3 11,844 13,423 31,935
Share-based payments (340) (208) (298)
Amortisation of intangible assets (3,952) (4,038) (8,077)
Exceptional (costs)/profit 5 (245) 13,275 12,189
Gain on sale of available-for-sale
financial assets - - 3,923
Group operating profit 7,307 22,452 39,672
Dividend income - 516 516
Finance income 6 2 5
Finance costs (821) (1,114) (2,228)
Exceptional finance costs 5 - (2,186) (2,007)
Net financial costs (815) (2,782) (3,714)
Profit before tax 3 6,492 19,670 35,958
Taxation
- related to exceptional costs 69 3,841 4,911
- others (1,779) (3,574) (6,334)
-------- -------- -----------
7 (1,710) 267 (1,423)
Profit for the period/year 4,782 19,937 34,535
-------- -------- -----------
Attributable to:
- Owners of the parent 4,794 19,937 34,500
- Non-controlling interest (12) - 35
Earnings per share expressed in
pence per share:
Basic 4 4.7 19.4 33.6
Diluted 4 4.7 19.3 33.4
Basic (adjusted) 4 7.7 8.8 21.0
Diluted (adjusted) 4 7.7 8.8 20.9
Interim Group Statement of Comprehensive Income
for the six months ended 30 June 2011
Unaudited Audited
Six Months Ended Year Ended
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
-------- -------- -----------
Profit for the period/year 4,782 19,937 34,535
-------- -------- -----------
Recycling of unrealised gains reserve - (3,900)
Recycling of cash flow hedge - 87 87
Income tax - (24) (24)
-------- -------- -----------
Other comprehensive income for the
period/year, net of tax - 63 (3,837)
Total comprehensive income for the
period/year, net of tax 4,782 20,000 30,698
======== ======== ===========
Attributable to:
- Owners of the parent 4,794 20,000 30,663
- Non-controlling interest (12) - 35
Interim Group Balance Sheet as at 30 June 2011
Unaudited Audited
At 30 June At 30 June At 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
----------- ----------- ---------------
Non-current assets
Goodwill 74,932 72,416 74,742
Other intangible assets 13,661 21,355 17,613
Property, plant and equipment 14,350 11,708 13,850
Financial assets 347 4,798 1,097
Investments accounted for
under the equity method 700 - -
Other receivables - 150 -
Total non-current assets 103,990 110,427 107,302
----------- ----------- ---------------
Current assets
Trade and other receivables 30,795 27,891 25,136
Current tax assets - 433 -
Cash and cash equivalents 269 1,783 338
----------- ----------- ---------------
Total current assets 31,064 30,107 25,474
----------- ----------- ---------------
Total assets 135, 054 140,534 132,776
----------- ----------- ---------------
Current liabilities
Financial liabilities - (556) (92)
Trade and other payables (46,924) (50,401) (45,085)
Current tax liabilities (1,903) - (258)
Provisions for liabilities and
charges (440) (665) (584)
----------- ----------- ---------------
Total current liabilities (49,267) (51,622) (46,019)
----------- ----------- ---------------
Non-current liabilities
Financial liabilities (6,494) (15,537) (5,155)
Trade and other payables - (1,128) -
Deferred tax liability (2,135) (1,011) (2,183)
Provisions for liabilities and
charges (10,848) (10,379) (11,309)
----------- ----------- ---------------
Total non-current liabilities (19,477) (28,055) (18,647)
----------- ----------- ---------------
Net Assets 66,310 60,857 68,110
----------- ----------- ---------------
Equity
Share capital 208 208 208
Share premium account 5,629 5,629 5,629
Share-based payment reserve 467 1,090 1,014
Treasury shares (3,109) (2,272) (3,139)
Unrealised gain reserve - 3,900 -
Retained earnings 63,092 52,302 64,363
----------- ----------- ---------------
Equity attributable to owners
of parent 66,287 60,857 68,075
Non-controlling interests 23 - 35
Total Equity 66,310 60,857 68,110
----------- ----------- ---------------
Interim Group Statement of Cash Flows
for the six months ended 30 June 2011
Audited Year
Unaudited - Six Months Ended Ended
31 December
30 June 2011 30 June 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- --------- --------- --------- ---------
Cash generated from
operating activities
Profit before tax 6,492 19,670 35,958
Adjustments to
reconcile profit
before tax to net
cash generated from
operating
activities
Negative goodwill - (29,145) (29,825)
Exceptional
operating costs
(excluding negative
goodwill and
share-based
payments) 245 15,870 17,636
Gain on sale of
available-for-sale
financial asset - - (3,923)
Amortisation of
intangible assets 3,952 4,038 8,077
Dividend income - (516) (516)
Exceptional finance
costs - 2,186 2,007
Finance income (6) (2) (5)
Finance costs 821 1,114 2,228
Share-based payments 340 208 298
5,352 (6,247) (4,023)
Group operating
profit before
exceptional costs,
amortisation and
share-based
payments 11,844 13,423 31,935
Share of post tax
profit of joint
venture (286) - -
Depreciation 1,121 706 1,748
Loss/(gain) on sale
of property, plant
and equipment 6 - (17)
-------- --------- ---------
841 706 1,731
(Increase)/decrease
in trade and other
receivables (6,640) (1,862) 4,679
Increase/(decrease)
in trade and other
payables and
provisions 1,194 2,213 (2,675)
-------- --------- ---------
(5,446) 351 2,004
-------- --------- ---------
Cash generated from
operations pre
exceptional costs 7,239 14,480 35,670
Exceptional costs
paid (245) (13,726) (18,560)
Cash generated from
operations 6,994 754 17,110
Interest paid (821) (1,145) (1,957)
Tax paid (113) (3,638) (3,485)
Net cash from
operating
activities 6,060 (4,029) 11,668
Cash flows from
investing activities
Cash acquired on
purchase of
subsidiary
undertakings and
commercial
business - 25,972 25,946
Purchase of
subsidiary
undertakings,
minority interest
and commercial
business (150) (1,993) (3,742)
Dividends received 336 516 516
Interest received 6 2 5
Purchase of property,
plant and equipment (1,627) (1,935) (4,982)
Proceeds from sale
of property, plant
and equipment - 719 738
Purchase of
available-for-sale
financial asset - - (195)
Repayment of amounts
due from sale of
available-for-sale
financial asset 981 - 1,961
Net cash from
investing
activities (454) 23,281 20,247
---------------------- -------- -------- --------- --------- --------- ---------
Interim Group Statement of Cash Flows
for the six months ended 30 June 2011
Audited Year
Unaudited - six months ended Ended
31 December
30 June 2011 30 June 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- --------- --------- --------- ---------
Cash flows from
financing activities
Proceeds from revolving
credit facility 1,247 - -
Repayment of revolving
credit facility - (13,154) (23,692)
Purchase of treasury
shares (net of
consideration
received on reissue
of treasury shares) (857) 394 (597)
Dividends paid (6,065) (5,567) (8,146)
Net cash used in
financing activities (5,675) (18,327) (32,435)
Net
increase/(decrease)
in cash and cash
equivalents (69) 925 (520)
Cash and cash
equivalents at the
beginning of the
year 338 858 858
Cash and cash
equivalents at the
end of the year 269 1,783 338
------------------------ -------- -------- --------- --------- --------- ---------
Interim Group Statement of Changes in Equity
for the six months ended 30 June 2011
Unaudited six months ended 30 June 2011
Share- Investment
Share based in
Share premium payment treasury Hedging Retained Total Minority
capital account reserve shares reserve earnings equity interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2011 208 5,629 1,014 (3,139) - 64,363 68,075 35 68,110
Profit for the
period - - - - - 4,794 4,794 (12) 4,782
Other
comprehensive
income - - - - - - - - -
-------- -------- -------- ----------- -------- --------- -------- --------- --------
Total
comprehensive
income 208 5,629 1,014 (3,139) - 69,157 72,869 23 72,892
Investment in
treasury
shares - - - (1,751) - - (1,751) - (1,751)
Reissuance of
treasury
shares - - (887) 1,781 - - 894 - 894
Share-based
payments - - 340 - - - 340 - 340
Dividend paid - - - - - (6,065) (6,065) - (6,065)
At 30 June
2011 208 5,629 467 (3,109) - 63,092 66,287 23 66,310
-------- -------- -------- ----------- -------- --------- -------- --------- --------
Treasury shares represent the cost of LSL Property Services plc
shares purchased in the market and held by the Employee Benefit
Trust to satisfy future exercise of options under the Group's share
options schemes. At 30 June 2011 the Group held 1,311,109 (31
December 2010: 1,381,907) of its own shares at an average cost of
GBP2.37 (31 December 2010: GBP2.27). The market value of the shares
at 30 June 2011 was GBP3,668,000. The nominal value of each share
is 0.2p.
Unaudited six months ended 30 June 2010
Share- Investment
Share based in Unrealised
Share premium payment treasury gains Hedging Retained Total Minority
capital account reserve shares reserve reserve earnings equity interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1
January
2010 208 5,629 2,259 (2,805) 3,900 (63) 36,729 45,857 - 45,857
Profit for the
period - - - - - - 19,937 19,937 - 19,937
Other
comprehensive
income - - - - - 63 - 63 - 63
Total
comprehensive
income 208 5,629 2,259 (2,805) 3,900 - 56,666 65,857 - 65,857
Reissuance of
treasury
shares - - (1,377) 533 - - 1,203 359 - 359
Share-based
payments - - 208 - - - - 208 - 208
Dividend paid - - - - - - (5,567) (5,567) - (5,567)
At 30 June
2010 208 5,629 1,090 (2,272) 3,900 - 52,302 60,857 - 60,857
-------- -------- -------- ----------- ----------- -------- --------- -------- --------- --------
Interim Group Statement of Changes in Equity
Year ended 31 December 2010
Share- Investment
Share based in Unrealised
Share premium payment treasury gains Hedging Retained Total Minority
capital account reserve shares reserve reserve earnings equity interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2010 208 5,629 2,259 (2,805) 3,900 (63) 36,729 45,857 - 45,857
Profit for the
year - - - - - - 34,500 34,500 35 34,535
Other
comprehensive
income - - - - (3,900) 63 - (3,837) - (3,837)
Total
comprehensive
income 208 5,629 2,259 (2,805) - - 71,229 76,520 35 76,555
Purchase of
treasury
shares - - - (1,007) - - - (1,007) - (1,007)
Reissuance of
treasury
shares - - (1,543) 673 - - 1,280 410 - 410
Share-based
payments - - 298 - - - - 298 - 298
Dividend paid - - - - - - (8,146) (8,146) - (8,146)
At 31 December
2010 208 5,629 1,014 (3,139) - - 64,363 68,075 35 68,110
-------- -------- -------- ----------- ----------- -------- --------- -------- --------- --------
Notes to the Interim Condensed Group Financial Statements
The interim condensed group financial statements for the year
ended 30 June 2011 was approved by the board of directors on 4
August 2011. The Group's published financial statements for the
year ended 31 December 2010 have been reported on by the Group's
auditors and filed with the Registrar of Companies. The auditor's
report on those accounts, which have been filed with the Registrar
of Companies, was unqualified and did not contain an emphasis of
matter paragraph, and did not make a statement under section 498 of
the Companies Act 2006.
1 Basis of preparation
The interim condensed group financial statements for the year
ended 30 June 2011 have been prepared in accordance with the
Disclosure and Transparency Rules of the Financial Services
Authority and IAS 34 Interim Financial Reporting (as adopted by the
EU). The interim condensed group financial statements have been
prepared on a going concern basis.
The interim condensed group financial statements do not include
all the information and disclosures required in the annual
financial statements, and should be read in conjunction with the
Group's annual financial statements as at 31 December 2010.
Significant accounting policies
The accounting policies adopted in the preparation of the
interim condensed group financial statements are consistent with
those followed in the preparation of the Group's annual financial
statements for the year ended 31 December 2010. Also see note
9.
Judgements and estimates
The preparation of financial information in conformity with IFRS
as adopted by European Union requires management to make
judgements, estimates and assumptions that affect the application
of policies and reporting amounts of assets and liabilities, income
and expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form
the basis of making the judgements about carrying values of assets
and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
The key assumptions concerning the future and other key sources
of estimation uncertainty at the balance sheet date, that have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next six months are
largely the same a those as at 31 December 2010. These assumptions
are discussed in detail on page 51 and in notes 14 and 21 of the
Group's annual financial statements for the year ended 31 December
2010. The assumptions discussed are as follows:
-- Impairment of intangible assets
-- Professional indemnity claims
New standards and interpretations
The amendments to the following standards below did not have any
impact on the accounting policies, financial position or
performance of the Group:
-- IAS 32 Amendments to IAS 32 Classification of Rights
Issue
-- IAS 24 Related Party Disclosures (Revised)
-- Improvements to International Financial Reporting Standards
2010
-- IFRIC 14 Amendments to IFRIC 14 - Prepayments of a minimum
funding requirement
-- IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments
-- IAS 39 Financial Instruments: Recognition and Measurement -
Eligible hedged items (Amendment)
1. Basis of preparation (continued)
Significant accounting policies (continued)
New standards and interpretations (continued)
The following new standards, new interpretations and amendments
to standards and interpretations have been issued but are not
effective for the financial year beginning 1 January 2011 and have
not been early adopted:
International Accounting Standards (IAS/IFRSs) Effective
date*
IFRS Financial Instruments: Classification and 1 January
9 Measurement 2013
* The effective dates stated here are those given in the
original IASB/IFRIC standards and interpretations. As the Group has
elected to prepare their financial statements in accordance with
IFRS as adopted by the European Union, the application of new
standards and interpretations will be subject to their having been
endorsed for use in the EU via the EU Endorsement mechanism. In the
majority of cases this will result in an effective date consistent
with that given in the original standard or interpretation but the
need for endorsement restricts the Group's discretion to adopt
standards early.
Going concern
The Group has in place borrowing facilities to March 2014 to a
maximum of GBP75m. These facilities are subject to financial
performance covenants. The Board has prepared a working capital
forecast based upon assumptions as to trading and has concluded
that the Group has adequate working capital, will meet the
financial performance covenants and that therefore it is
appropriate to use the going concern basis of preparation for this
financial information.
2. Seasonality of operations
Due to the seasonal nature of the property market turnover is
normally higher in the second half of the year.
3. Segment analysis of revenue and operating profit
For management purposes, the group is organised into business
units based on their products and services and has two reportable
operating segments as follows:
-- The estate agency and related services provides services
related to the sale and letting of housing via a network of high
street branches. In addition, it provides repossession asset
management services to a range of lenders. It also sells mortgages
for a number of lenders and sells life assurance and critical
illness policies, etc for a number of insurance companies via the
estate agency branch and Linear network. It also operates as a
mortgage and insurance distribution company providing products and
services to financial intermediaries.
-- The surveying and valuation segment provides a professional
valuation service of domestic properties to various lending
corporations and professional survey service to individual
customers.
No operating segments have been aggregated to form the above
reported operating segments.
Management monitors the operating results of its business units
separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is
evaluated based on operating profit or loss which in certain
respects, as explained in the table below, is measured differently
from operating profit or loss in the consolidated financial
statements. Head office costs, group financing (including finance
costs and finance incomes) and income taxes are managed on a group
basis and are not allocated to operating segments.
3. Segment analysis of revenue and operating profit
(continued)
Operating segments
The following table present revenue and profit information
regarding the group's operating segments for the years ended 30
June 2011 and 2010.
Estate
agency and Surveying
related and valuation
Six Months ended 30 June activities services Unallocated Total
2011 GBP'000 GBP'000 GBP'000 GBP'000
----------- -------------- ----------- --------
Income statement
information
Segmental revenue 65,011 38,354 - 103,365
----------- -------------- ----------- --------
Segmental result:
-- before exceptional
costs, amortisation and
share-based payments 583 12,789 (1,528) 11,844
----------- -------------- ----------- --------
-- after exceptional
costs, amortisation and
share based payments (743) 9,624 (1,575) 7,307
----------- -------------- ----------- --------
Dividend income -
Finance income 6
Finance costs (821)
--------
Profit before tax 6,492
Taxation (1,710)
--------
Profit for the period 4,782
--------
In the period ended 30 June 2011, there is no revenue from one
customer that accounts for 10% or more of the Group's total revenue
(2010 - none).
Six months ended 30 June 2010
Estate
agency and Surveying
related and valuation
activities services Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000
----------- -------------- ----------- --------
Income statement
information
Segmental revenue 58,761 42,323 - 101,084
----------- -------------- ----------- --------
Segmental result:
-- before exceptional
costs, amortisation and
share-based payments (606) 15,217 (1,188) 13,423
----------- -------------- ----------- --------
-- after exceptional
costs, amortisation and
share based payments 11,514 9,940 (1,188) 20,266
----------- -------------- ----------- --------
Dividend income 516
Finance income 2
Finance costs (1,114)
--------
Profit before tax 19,670
Taxation 267
--------
Profit for the period 19,937
--------
3. Segment analysis of revenue and operating profit
(continued)
Operating segments (continued)
Estate
agency and Surveying
related and valuation
Year ended 31 December activities Services Unallocated Total
2010 GBP'000 GBP'000 GBP'000 GBP'000
----------- -------------- ----------- --------
Income statement
information
Segmental revenue 125,672 80,934 - 206,606
----------- -------------- ----------- --------
Segmental result:
- before exceptional
costs, amortisation
and share-based payments 7,236 27,301 (2,602) 31,935
----------- -------------- ----------- --------
- after exceptional costs,
amortisation
and share-based payments 20,447 22,139 (2,914) 39,672
----------- -------------- ----------- --------
Dividend income 516
Finance income 5
Finance costs (2,228)
Exceptional finance costs (2,007)
--------
Profit before tax 35,958
Taxation (1,423)
--------
Profit for the year 34,535
--------
4. Earnings per share
Basic earnings/(loss) per share amounts are calculated by
dividing net profit/(loss) for the period attributable to ordinary
equity holders of the parent by the weighted average number of
ordinary shares outstanding during the period.
Diluted earnings/(loss) per share amounts are calculated by
dividing the net profit/(loss) attributable to ordinary equity
holders of the parent by the weighted average number of ordinary
shares outstanding during the period 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.
Six months ended 30 June
2010
Weighted 2011 Per Profit Weighted Per
Profit average share after average share
after tax number of Amount tax number amount
GBP'000 shares Pence GBP'000 of shares Pence
--------- ----------- --------- -------- ----------- --------
Basic EPS 4,794 102,847,841 4.7 19,937 102,970,688 19.4
Effect of
dilutive
share
options 66,451 - 556,589 -
Diluted
EPS 4,794 102,914,292 4.7 19,937 103,527,278 19.3
--------- ----------- --------- -------- ----------- --------
2010
Profit Weighted Per
After average Share
Year ended 31 December tax number Amount
2010 GBP'000 of shares Pence
-------- ----------- --------
Basic EPS 34,500 102,777,043 33.6
Effect of dilutive
share options - 418,857 -
Diluted EPS 34,500 103,195,900 33.4
-------- ----------- --------
4. Earnings per share (continued)
The Directors consider that the adjusted earnings shown below
give a better and more consistent indication of the Group's
underlying performance:
Six months ended Year Ended
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
Group operating profit before
exceptional costs, share-based payments
and amortisation (excluding amount
attributable to non-controlling
interests) 11,856 13,423 31,900
Tax relating to profit of joint venture 2 - -
Net finance costs (815) (596) (1,707)
Normalised taxation (3,091) (3,756) (8,654)
Adjusted profit after tax(1) before
exceptional costs, share-based payments
and amortisation 7,952 9, 071 21,539
--------- --------- ------------
Adjusted basic and diluted EPS
Six months ended 30 June
Adjusted 2011 Adjusted 2010 Per
Profit Weighted Per Profit Weighted share
after average share after average amount
tax(1) number amount tax number Restated
GBP'000 of shares Pence GBP'000 of shares Pence
Adjusted
Basic
EPS 7,952 102,847,841 7.7 9, 071 102,970,688 8.8
Effect of
dilutive
share
options 66,451 - 556,589 -
Adjusted
Diluted
EPS 7,952 102,914,292 7.7 9, 071 103,527,277 8.8
--------- ------------ ------- --------- ------------ ---------
Year ended 31 December 2010
Adjusted 2010
Profit Weighted Per share
after average amount
tax number Restated
GBP'000 of shares Pence
Adjusted Basic EPS 21,539 102,777,043 21.0
Effect of dilutive
share options - 418,857 -
Adjusted Diluted
EPS 21,539 103,195,900 20.9
--------- ------------ -----------
(1) This represents adjusted profit after tax attributable to
equity holders of the parent. Tax has been adjusted to exclude the
prior year tax adjustments, and the tax impact of exceptional
items, amortisation and share-based payments. The effective tax
rate used is 28% (2010 - 29%).
5. Exceptional profit and other exceptional costs
Six Months Ended Year Ended
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
Exceptional profit arising through
acquisition of HEAL:
Negative goodwill arising on acquisition - (29,145) (29,825)
Employee costs
Redundancy costs due to branch closures and
business reorganisation of the
acquisition - 7,242 7,730
Other
Acquisition and re-branding costs - 6,125 6,125
-------- -------- -----------
- (15,778) (15,970)
Other exceptional costs:
Employee costs
Redundancy costs due to branch closures
and business reorganisation 180 358 756
Accelerated share-based payments - 27 -
Other
Acquisition related costs 65 88 96
Others - - 133
Provision for professional indemnity
claims - 2,030 2,796
Total operating exceptional costs 245 2,503 (12,189)
Finance costs
Banking fees incurred for extension
of facility - 886 924
Interest rate swap - 1,300 1,083
-------- -------- -----------
245 2,186 2,007
-------- -------- -----------
245 (11,089) (10,182)
-------- -------- -----------
6. Dividends paid and proposed
Six Months Ended Year Ended
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
-------- -------- -----------
Declared and paid during the period:
Equity dividends on ordinary shares:
Final dividend for full year 2010:5.9
pence 6,065 5,567 5,567
======== ======== ===========
Dividends on ordinary shares proposed
(not recognised as a liability as at
30 June):
Interim dividend for 2011: 2.8 pence
per share (2010 - 2.50 pence) 2,879 2,577 2,579
======== ======== ===========
7. Taxation
The major components of income tax charge/(credit) in the
interim group income statements are:
Six Months Ended Year Ended
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
-------- -------- -----------
UK corporation tax
- current year 1,767 940 1,280
- tax underprovided/(overprovided)
in prior year (9) - 281
-------- -------- -----------
1,758 940 1,561
Deferred tax:
Origination and reversal of temporary
differences (210) (2,214) (966)
Impact of rate change on deferred tax - - (80)
Adjustment in respect of prior year 162 1,007 908
-------- -------- -----------
Total deferred tax (48) (1,207) (138)
-------- -------- -----------
Total tax charge/(credit) in the income
statement 1,710 (267) 1,423
-------- -------- -----------
The Group's current taxation credit comprises corporation tax
calculated at estimated effective tax rates for the year.
Income tax charged directly to equity is GBPnil (2010 -
GBP24,000) which relates to deferred tax on the net loss on the
cash flow hedge.
In March 2011, the UK government announced its intention to
accelerate the planned phased decrease in the rate of corporation
tax with a reduction to 26% on 1 April 2011 and further reducing by
1% per annum until it reaches 23% on 1 April 2014. At 30 June 2011
the change in corporation tax rate from the planned 27% to 26% on 1
April 2011 had been substantively enacted and therefore the
deferred tax assets and liabilities included within these results
have been calculated based on the reduced current UK corporation
tax rate of 26%. The forecast effect of the proposed reductions in
the corporation tax rate by 2014 would be to decrease the net
deferred tax liability by GBP246,000.
8. Analysis of net debt
Six Months Ended Year Ended
30 June 30 June 31 December
2011 2010 2010
GBP'000 GBP'000 GBP'000
--------- --------- -----------
Interest bearing loans and borrowings 6,494 16,093 5,247
Less: cash and short-term deposits (269) (1,783) (338)
Net debt at the end of the year 6,225 14,310 4,909
--------- --------- -----------
9. Results of joint venture
As part of acquisition of Halifax Estate Agencies Limited (HEAL)
in 2010 the Group had acquired a stake TM Group UK Limited. This
was classified as an available-for-sale investment in 2010. In 2011
this is classified as a Joint Venture as joint control is being
exercised on this entity and consequently adopted 'equity method'
as permitted under IAS 31 'Interests in Joint Ventures' to account
for this joint venture.
The Group's share of profit after tax in joint venture included
in the Income Statement in the six months to 30 June 2011 is
summarised below:
Six months
ended
30 June
2011
GBP'000
-----------
Revenue 5,216
Operating expenses (4,937)
Operating profit 279
Finance income 9
-----------
Profit before tax 288
Taxation (2)
-----------
Profit after tax 286
-----------
10. Post balance sheet events
In July 2011 the Group acquired 'The Mortgage Alliance' (the
mortgage distribution business of Santander UK plc (with GBP250,000
net assets). The Group also entered into an equal share joint
venture with Connells Limited and management of Legal Marketing
Services Limited and LMS Direct Conveyancing Limited. The Group
paid GBP672,000 for its share of 33.33% in the joint venture. The
effects of the acquisition on the Group's assets and liabilities
have not been disclosed as the Group is currently in the process of
determining the fair value of the net assets acquired.
Independent Review Report to LSL Property Services plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
year ended 30 June 2011 which comprises the Interim Group Income
Statement, the Interim Group Statement of Comprehensive Income, the
Interim Group Balance Sheet, the Interim Group Statement of Cash
Flows, the Interim Group Statement of Changes in Equity and the
related notes 1 to 9. We have read the other information contained
in the half yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
This report is made solely to the Company in accordance with
guidance contained in ISRE 2410 (UK and Ireland) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" issued by the Auditing Practices Board. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our work, for this report, or
for the conclusions we have formed.
Directors' Responsibilities
The yearly financial report is the responsibility of, and has
been approved by, the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the
Disclosure and Transparency Rules of the United Kingdom's Financial
Services Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2011 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Services Authority.
Ernst & Young LLP
Leeds
4 August 2011
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR QXLFBFVFFBBK
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