Preliminary Results (4414Y)

TIDMLSL

RNS Number : 4414Y

LSL Property Services

01 March 2012

 
 For Immediate Release   1 March 2012

LSL Property Services plc ("LSL")

PRELIMINARY ANNOUNCEMENT

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(st) December 2011.

Highlights

Group

-- Group revenue increased by 6% to GBP218.4m (2010: GBP206.6m)

-- Group Underlying Operating Profit([1]) was GBP31.1m (2010: GBP31.9m) and Underlying Operating Margin([2]) was 14.3% (2010: 15.4%) after increased revenue investment of GBP6.1m into the Estate Agency Division([3]) .

-- Profit before tax decreased to GBP17.6m (2010: GBP36.0m) after net exceptional costs of GBP2.4m arising principally from the acquisition of Marsh & Parsons([4]) (2010: exceptional gain of GBP10.2m arising principally from the acquisition of HEAL([5]) and a one off profit of GBP3.9m on the sale of an investment)

-- Adjusted Basic Earnings Per Share([6]) 21.0p (2010: 21.0p). Basic earnings per share 12.9p (2010: 33.6p).

-- Final dividend proposed of 5.9p per share. Total dividend for the full year increased 4% to 8.7p per share (2010: 8.4p)

-- Continued strong cash generation. Net debt([7]) increased by GBP33.5m to GBP38.4m (2010: GBP4.9m) after the acquisition of Marsh & Parsons for an initial consideration of GBP45.4m.

Surveying and Valuation Services Performance

-- Revenue decline of 5% primarily because of strong comparatives for certain key lenders. Revenue fell by 1.0% in the second half.

-- Underlying Operating Profit was GBP23.7m (2010: GBP27.3m).

-- Underlying Operating Margin 31.0% (2010: 33.7%) after continued investment in customer service.

-- Renewal of Barclays contract to June 2014.

-- Revenue from provision of surveying services to private buyers of GBP2.8m (2010: nil).

Estate Agency and Related Services Performance

-- Revenue increased by 13% to GBP141.8m (2010: GBP125.7m).

-- Underlying Operating Profit increased by 42% to GBP10.3m (2010: GBP7.2m) after a revenue investment of GBP6.1m in people and call centre.

-- Market share increased to 4.7% (2010: 4.5%) and pipeline growth of 7%.

-- Strong contribution from lettings with revenue up 20% to GBP29.6m (2010: GBP24.6m) and financial services revenue up 49% to GBP27.6m (2010:18.6m).

-- LSL acquired Marsh & Parsons in November 2011 for an enterprise value of GBP50m.

-- Marsh & Parsons is an excellent strategic fit for LSL providing exposure to the prime Central London market and offering a significant growth opportunity.

([1]) Underlying Operating Profit is before exceptional costs, amortisation of intangible assets and share based payments

[2] Underlying Operating Margin is Group Operating Profit before exceptional costs, amortisation and share based payments shown as a percentage of turnover

[3] Estate Agency Division includes LSL's residential sales, lettings, asset management and financial services businesses

[4] Marsh & Parsons Limited

[5] Halifax Estate Agencies Limited

[6] The calculation of the Adjusted Basic Earnings per Share is given in note 3

([7]) Net debt excludes loan notes issued on the acquisition of Marsh & Parsons as calculated in note 7

Commenting on today's announcement, Roger Matthews, Chairman, said:

"In a market where transaction levels remained exceptionally low, 2011 was a year of investment for the future and one of strong progress for the Group. We will continue to focus on growing market share and profitability in Estate Agency and on the retention of key lender clients for surveying and valuation services. There are also significant opportunities to build on the strong start made in providing surveying services to private buyers and to expand our presence in the prime central London market through Marsh & Parsons.

The Group is extremely cash generative and has a strong balance sheet. We will retain a prudent approach to leverage, which will place a premium on delivery of organic growth but with a scope for further acquisitions. The Group is well placed to increase shareholder value through the execution of this strategy."

For further information please contact:

 
Simon Embley, Group CEO 
 Steve Cooke, Group Finance Director 
 
 LSL Property Services plc              0207 382 0360 
 
Richard Darby 
 Nicola Cronk 
 
 Buchanan                               0207 466 5000

Notes to Editors

LSL Property Services plc is one of the leading residential property services companies in the UK and provides a broad range of services to its clients who are principally mortgage lenders, as well as buyers and sellers of residential properties. For further information, please visit our website: www.lslps.co.uk.

Chairman's Statement

Introduction

In a market where transaction levels remained exceptionally low, 2011 was a year of investment for the future and one of strong progress for the Group. LSL delivered a 6% increase in revenue to GBP218.4m (2010: GBP206.6m) and Underlying Operating Profit of GBP31.1m (2010: GBP31.9m) after increased investment of GBP6.1m in Estate Agency initiatives. We invested as planned in key programmes in the Estate Agency businesses to drive revenue growth and were able to increase both market share and profitability in this part of the Group. We were delighted to renew the Barclays surveying and valuation services contract and to make an encouraging start in delivering surveying services to private buyers. Our strong balance sheet and cash generation allowed us to take the opportunity of acquiring Marsh & Parsons which is an excellent strategic fit for LSL.

Marsh & Parsons gives our Estate Agency Division exposure to the prime Central London market through a business that has a consistent record of profitable growth, a balanced business model with an equal split of residential sales and lettings, and which is led by a high calibre management team.

Market transaction volumes for both Surveying and Estate Agency increased slightly during 2011 but are still at an extremely low point in the cycle and we are now entering a fourth year of trading at these levels. Repossession volumes fell slightly during the year which was somewhat surprising given the general difficulties in the housing market and the steady stream of disappointing economic news.

Financial Results

Group revenue increased by 6% to GBP218.4m (2010: GBP206.6m) generating Group Underlying Operating Profit of GBP31.1m (2010: GBP31.9m). Group Underlying Operating Margin decreased from 15.4% to 14.3%, after the planned investment of GBP6.1m in initiatives to increase Estate Agency market share over the medium term.

The Estate Agency Division increased Underlying Operating Profit by 42% to GBP10.3m (2010: GBP7.2m) a year when house purchase approvals fell by 4% in the first half of the year and then increased by 10% in the second half, resulting in a full year increase of 3% to 593,000 (2010: 575,000). Repossession volumes fell by 1% to 35,800 in the year (2010: 36,300). The Estate Agency Division outperformed the market through continued profit improvement in the ex HEAL branches, market share gains, strong growth in Lettings and Financial Services and benefits from the first year of integration of our mortgage intermediary businesses which were acquired in 2010.

The Surveying Division traded well in a difficult market. Although total mortgage approvals increased by 2% to 1.2m (2010: 1.2m) this included a 14% increase in remortgages to 387,000 (2010: 339,000), the majority of which did not result in a physical valuation. Surveying revenue decreased by 5% and Underlying Operating Profit decreased by 13% to GBP23.7m (2010: GBP27.3m) with Underlying Operating Margin of 31.0% (2010: 33.7%). The revenue decline occurred mostly in the first half during which many of our key lender clients were trading against particularly challenging comparatives. In addition, profitability and margin were impacted by continued investment in industry leading service levels.

Professional Indemnity ('PI') claims in the market have continued at high levels especially relating to valuations undertaken in the period between 2005 and 2007. There has been a net reduction in the provision for inaccurate valuations to GBP9.6m (2010: GBP10.9m) as a result of the increase relating to new and possible expected claims being offset by the settlement of a number of existing claims. While the income statement charge in 2011 was in line with budgeted levels, cash payments for settlement of claims have run at a higher rate particularly in the second half.

Profit before tax, amortisation and exceptional costs was GBP28.5m (2010: GBP33.9m). The prior year included a one-off gain on the sale of an investment amounting to GBP3.9m. Acquisition costs relating to Marsh & Parsons contributed to an overall net exceptional cost of GBP2.4m (2010: exceptional profit GBP10.2m). The 2010 net exceptional profit was mostly as a result of the acquisition of the assets of HEAL. Amortisation during the year was GBP8.5m (2010: GBP8.1m) giving a profit before tax of GBP17.6m (2010: GBP36.0m). The profit after tax was GBP13.2m (2010: GBP34.5m). On an adjusted basis, earnings per share, benefitted from a lower tax rate and was flat at 21.0p (2010: 21.0p).

Cash generated from operations before exceptional costs was GBP22.4m (2010: GBP30.7m) after capital expenditure of GBP3.2m (2010: GBP5.0m) and revenue investment in the Estate Agency initiatives of GBP6.1m (2010: nil). Cashflow was lower compared to the previous year because of an increase in working capital driven by the loss of HIPs income, an increase in deferred marketing fees, higher PI cash payments and investment in Asset Management work in progress. Without the acquisition of Marsh & Parsons, the strong cashflow would have resulted in net debt improving from GBP4.9m at 31(st) December 2010 to net cash of GBP7.1m even after payment of GBP1.1m for a number of lettings businesses, investment in joint ventures of GBP0.7m and an increase in dividends paid in the year of GBP0.8m. After the payment of an initial cash consideration of GBP45.4m for Marsh & Parsons, acquisition costs paid of GBP0.9m and cash acquired of GBP5.7m; net debt was GBP38.4m as at 31(st) December 2011 (2010: GBP4.9m).

Dividend

As a result of the strong underlying profitability of the Group and the Board's view of future prospects for the business following the many positive developments during 2011, a maintained final dividend of 5.9p per share will be proposed to shareholders at the forthcoming AGM, bringing the total dividend for 2011 to 8.7p per share. This represents a 4% increase on the 2010 dividend of 8.4p per share. The proposed dividend payment is slightly higher than our previously stated policy of applying a dividend payout ratio of between 30% to 40% of Group Underlying Operating Profit after interest and tax and reflects our confidence in the future and cash generative characteristics of the Group The ex dividend date for the final dividend is 28(th) March 2012 with a record date of 30(th) March 2012 and a payment date of 27(th) April 2012. Shareholders have the opportunity to elect to reinvest their cash dividend and purchase existing shares in LSL through a dividend reinvestment plan.

Developments

In Surveying we have continued to invest in industry leading solutions and service levels and have secured a number of key contract renewals during the period, most notably extending our relationship with Barclays for the provision of UK residential survey and valuation services for a new 30 month term from January 2012.

We are particularly pleased with the progress we have made during 2011 in expanding the provision of surveying services for private buyers. This is a key strategic initiative for the Group and has delivered revenue of GBP2.8m in the year. This result has primarily been achieved by accessing private buyers through Group distribution channels. We are now expanding our product range and distribution channels.

The Estate Agency Division has performed well in a market in which mortgage approvals increased by 3%, although all of the increase occurred in the final four months of the year. The typical three month lag between a mortgage approval and house completion resulted in market completions falling by an estimated 5% year on year. Our market share has increased from 4.5% in 2010 to 4.7% in 2011 but was somewhat depressed by the significant increase in mortgage approvals in the final few months of the year, the benefit of which will not be felt until early 2012. The market share increase has been driven by the GBP6.1m investment made in branch management, 'The Bridge' call centre and in additional online activity. We are well placed going into 2012 with the pipeline 7% higher in December 2011 than in December 2010.

Lettings and Financial Services income streams have grown by 20% and 49% respectively during the year with a particularly strong contribution from the ex HEAL branches. More generally, the ex HEAL business contributed an improvement in operating profit of GBP3.2m in 2011 compared to 2010.

A key development for the Estate Agency Division was the acquisition of Marsh & Parsons which has an excellent geographic and strategic fit with LSL. It gives LSL exposure to the prime Central London market where volumes and commission rates have been consistently strong compared to other parts of the UK. The business represents a trusted premium brand with consistently high customer satisfaction levels and is led by a high quality and experienced management team who have an excellent track record and have built a business model balanced equally between residential sales and lettings. The management team has exciting growth plans for the future including two new openings during 2012. In addition, LSL is prepared to augment these plans with 'bolt on' acquisition opportunities where appropriate.

Our Asset Management business increased its market share once again. Although Asset Management income of GBP13.9m was the same as in the prior year (2010: GBP13.9m) this was against a reduction of 1% in market volumes. When combined with Lettings income of GBP29.6m (2010: GBP24.6m) this resulted in total counter cyclical income of GBP43.5m (2010: GBP38.5m) which is a now a key profit driver for LSL. Lettings income accounted for 21% of total Estate Agency revenues in 2011 (2010: 19%) and this is expected to increase further during 2012.

Corporate Governance and Board

The Board is committed to high levels of corporate governance as defined by the June 2010 UK Corporate Governance Code. We conduct an annual review of matters reserved for the Board and we have reviewed the terms of reference of its Committees during the year. We will be adopting the practice of all our Directors standing for re-election at this year's AGM.

The Nominations Committee have considered at length the composition of the Board, the balance of skills and experience required to optimise shareholder value, and its policy on diversity. In this context, I am delighted that we recently announced the appointment of Helen Buck as an additional Non executive Director with effect from 1(st) December 2011. Helen is currently on the Board of Sainsbury's Supermarkets Limited as Retail Director and previously held senior retail and marketing positions at Marks & Spencer PLC and Safeway PLC. I am sure Helen will make a valuable contribution to the Board and to the growth of the business. Amongst our Non Executive Directors, we have experience in surveying, financial services, residential housing building, retail and marketing, operations, business services, entrepreneurial private and public companies and finance.

We have also recognised the benefits of gender diversity on the Board. We now have two female Directors representing 22% of the Board. We have also reviewed gender diversity across the management teams within the Group businesses through a gender diversity survey. I am reassured by the feedback as it confirms that the Group is sufficiently diverse and positive to our female employees We do not believe in setting targets for the number of female directors on the Board and while we will continue to appoint on merit, I will ensure that our searches take into account diversity.

I also continuously review and encourage feedback on the effectiveness of the Board and undertake an annual evaluation. Whilst no significant issues requiring action arose from these evaluations, a number of recommendations were made to further improve the effectiveness of the Board.

People

The Group expanded further during 2011 through both investment in our existing businesses and through acquisitions. I would like to extend a very warm welcome to all new colleagues and wish them well in their careers with the group. In total, the number of Group employees increased by 341 (8%) to 4,831 (2010: 4,490).

This has been another particularly challenging year and our Group revenues have been underpinned by exceptional customer service in the face of ever increasing competition in a low transaction environment. Such service is dependent on the skills and efforts of our employees and I would like to thank them all for the tremendous commitment they have shown during the year.

Current trading and outlook

Housing transaction volumes remain at less than half of normal historic levels and the Group retains a cautious view of 2012. The housing market is now entering a fourth year that will be impacted by a shortage of available mortgage finance added to which the ongoing general economic uncertainty is adversely impacting consumer confidence.

Against this difficult backdrop the Group will continue to focus on growing market share and profitability in Estate Agency and on the retention of key lender clients for Surveying and Valuation Services. There are also significant opportunities to build on the strong start made in providing surveying services to private buyers and to expand our presence in the prime Central London market through Marsh & Parsons.

Activity levels to the end of February 2012 are in line with our expectations with market volumes still constrained. We are making further progress as planned with our organic growth initiatives across the Group and Marsh & Parsons is trading well.

The Group is extremely cash generative and has a strong balance sheet. We will retain a prudent approach to leverage which will place a premium on delivery of organic growth but with scope for further acquisitions. The Group is well placed to increase shareholder value through the execution of this strategy.

Roger Matthews

1(st) March 2012

Surveying and Valuation Services

In 2011 e.surv Chartered Surveyors renewed a major contract with a key lender client and continued to develop services for the private survey market.

 
                                       2011    2010 
Financial                              GBPm    GBPm 
-----------------------------------  ------  ------ 
  Revenue                              76.6    80.9 
  Operating expenditure              (52.9)  (53.6) 
  Underlying Operating Profit          23.7    27.3 
-----------------------------------  ------  ------ 
 
KPIs 
-----------------------------------  ------  ------ 
  Profit margin (%)                     31%     34% 
  Jobs Performed (000s)                 500     531 
  Revenue from private surveys 
   (GBPm)                               2.8       - 
  Income per job (GBP)                  153     153 
  Professional Indemnity insurance 
   provision (GBPm)                     9.6    10.9 
  Underlying Operating Margin           31%     34% 
  Number of surveyors                   425     412 
-----------------------------------  ------  ------

Surveying Division Performance

While total mortgage approvals during 2011 increased by 2% to 1.2m, this included a 14% increase in remortgages, not all of which result in a physical valuation. In addition, key lender clients were trading against challenging comparatives, particularly in the first half of the year. Against this backdrop the Surveying Division has traded well. Turnover fell by 5% to GBP76.6m (2010: GBP80.9m) with the total numbers of jobs performed reducing by 6% to 500,000 (2010: 531,000). The Division made excellent progress in developing surveying services for private buyers and delivered revenue of GBP2.8m in the year (2010: nil).

Underlying Operating Profit reduced by 13% and the Underlying Operating Profit margin decreased to 31% (2010: 34%) which reflected both the overall revenue decline and further investment in provision of high service levels for all lender clients. As part of this investment there was a switch towards the use of employed surveyors rather than contractors and the total number of employed surveyors increased to 425 (2010: 412).

PI claims in the market have continued at high levels especially relating to valuations undertaken in the period between 2005 and 2007. There has been a net reduction in the provision for inaccurate valuations to GBP9.6m (2010: GBP10.9m) as a result of the increase relating to new and possible expected claims being offset by the settlement of a number of existing claims. While the income statement cost in 2011 was in line with budgeted levels, cash payments for settlement of claims have run at a higher rate particularly in the second half.

Surveying Developments

2011 saw a successful start to the delivery of our private survey initiative and levels of revenue and margin have exceeded expectations. The Group has an unparalleled potential distribution network for private surveying services including other key lender clients, the Group's Estate Agency branch network including, online activity, direct marketing and through the e.surv Chartered Surveyors and Barnwoods brands. We will be accelerating the roll out of our offer through additional distribution channels during 2012.

e.surv Chartered Surveyors successfully renewed the Barclays surveying and valuation services contract for a 30 month term commencing from 1(st) January 2012. This was an excellent achievement in what continues to be very uncertain market conditions and is a reflection of our market leading service levels. The C&G contract contributed GBP12.5m of turnover in 2011 compared to GBP13.6m in 2010 due to the impact of Lloyds Banking Group's mortgage strategy and is due for renewal in July 2012.

The Surveying Division has a number of key relationships which are managed both on an exclusive basis and through panel management arrangements. We continue to remain committed to providing excellent quality advice and service levels to all lender clients and have underpinned this with further investment during the year.

Feedback from both our lender clients and private customers is consistently positive and we particularly differentiate ourselves on meeting demanding key service measures. For lender clients these include turnaround time for valuations reflecting our use of innovative technology, the flexibility of our panel management arrangements and assisting lenders in the management of the risk of mortgage fraud. Our Surveying Division's risk management arrangements have been widely acknowledged by our lender clients as being market leading and unique.

During 2011 e.surv Chartered Surveyors' risk management and relationship management arrangements have received recognition through the nomination for the Managing Partners and European Leadership Awards and the CCR Credit Excellence Awards. Further details relating to these nominations are set out below together with details of how we manage customer relationships.

Looking forward, we expect the tough market conditions combined with the ongoing cycle of key contract renewals to increase pressure on margins in this division but in the medium term we expect to be able to mitigate this margin pressure by capitalising on what is a major opportunity to not only claim a significant share of the current private survey market and also to expand the market through education of customers.

e.surv Chartered Surveyors Achievements & Awards 2011 & 2012

e.surv Chartered Surveyors, LSL's largest surveying business, has achieved a number of awards and accreditations:

Mortgage Strategy Awards 2012

e.surv Chartered Surveyors received the Best Surveyor/Valuer award on 28(th) February 2012.

Marketing Week Engage Awards 2011

e.surv Chartered Surveyors was a finalist in the Design category at the 2011 Marketing Week Engage Awards - a great achievement for competing against the biggest brands in the industry.

Sunday Times - Best Companies 2012 - one to watch

e.surv Chartered Surveyors received this award in February 2012, having come extremely close to being in the top 100 in 2011.

IIP Accreditation

The Investors In People accreditation was achieved at e.surv Chartered Surveyors' Head Office location in Kettering.

Mortgage Strategy Awards 2011 - Finalist for Best Surveyor/Valuer

e.surv Chartered Surveyors was a finalist and came second in the Best Surveyor/Valuer category at the Mortgage Strategy Awards.

Managing Partners and European Leadership Awards 2012 Best Innovation in Client Service or Relationship Management Nominee

Having been listed as a finalist at the MPF European Practice Management Awards for Risk Management in 2011, e.surv Chartered Surveyors has once again received a nomination in 2012. This time the nomination for the Managing Partners and European Leadership Awards relates to client services and relationship management. These awards recognise the integrated and embedded approach and active involvement to relationship management promoted by e.surv Chartered Surveyors.

BSi ISO 9001 Accreditation Extended

e.surv Chartered Surveyors once again secured an extension to its ISO 9001:2008, which was originally achieved in 1996. e.surv Chartered Surveyors again conformed 100% to the requirements of the internationally recognised standard, when independently reviewed by the leading global provider of standards and certification body, British Standards Institution (BSi). This also covers quality management systems, maintained by the International Organisation for Standardisation.

CCR Credit Excellence Awards 2011

e.surv Chartered Surveyors was selected as a finalist in the CCR Credit Excellence Awards 2011 in the category for "Credit Excellence in Risk". The position within this category was awarded for continued development of risk management and mitigation controls to support its lender clients.

"e.surv Chartered Surveyors is objectively recognised by our clients and professional indemnity insurers as leading the way in the management of risk within the Surveying Industry. The business embraces risk management as a tool to "de-risk" the business, derive a unique selling point and secure new and strengthen existing client contractual relationships."

Estate Agency and Related Services

In 2011 LSL acquired Marsh & Parsons in line with our acquisition strategy to expand our presence in the prime Central London residential sales and lettings markets

 
                                   Actual - including        Like-for-like - excluding 
                                     Marsh & Parsons              Marsh & Parsons 
                                   2011     2010        %       2011      2010         % 
Financial                          GBPm     GBPm   change       GBPm      GBPm    change 
------------------------------  -------  -------  -------  ---------  --------  -------- 
  Exchange fees                    56.8     52.4       9%       54.8      52.4        5% 
  Lettings income                  29.6     24.6      20%       29.1      24.6       18% 
  Asset management income          13.9     13.9       0%       13.9      13.9        0% 
  Financial Services income        27.6     18.6      49%       27.6      18.6       49% 
  Other income(1)                  13.9     16.2     -14%       13.8      16.2      -14% 
 
  Total income                    141.8    125.7      13%      139.2     125.7       11% 
  Operating expenditure         (131.5)  (118.5)      11%    (129.5)   (118.5)        9% 
  Underlying Operating Profit      10.3      7.2      42%        9.7       7.2       34% 
------------------------------  -------  -------  -------  ---------  --------  -------- 
 
KPIs 
------------------------------  -------  -------  -------  ---------  --------  -------- 
  Exchange units                 27,643   25,766       7%     27,540    25,766        7% 
  Market Share                     4.7%     4.5%       4%      4.64%     4.48%        4% 
  Underlying Operating Margin      7.2%     5.8%      26%       7.0%      5.8%       21%

1 'Other income' includes franchising income, conveyancing services, Energy Performance Certificates, Home Reports, utilities and other products and services to clients of the branch network.

Estate Agency Performance

The Estate Agency Division acquired Marsh & Parsons in November 2011 and the trading has so far had a small impact on the overall performance of the division but is expected to have a significant impact in 2012. Therefore the results are presented on both an actual and like-for-like basis (excluding Marsh & Parsons). Further details about Marsh & Parsons are set out below and in the Circular to Shareholders dated 4(th) November 2011, which is available at www.lslps.co.uk/investors-relations/investor-communications.

The Estate Agency Division delivered a strong performance in 2011 with excellent growth in lettings and financial services income streams. The number of mortgage approvals for house purchases increased by 3% to 593,000 (2010: 575,000) which compares to historic normalised levels of 1.2m. The increase in approvals all occurred in the final four months of the year and the typical three month lag between a mortgage approval and house purchase completion actually meant that market completions in 2011 fell by an estimated 5% year on year.

Against this background, total Estate Agency income increased by 13% to GBP141.8m (2010: GBP125.7m) and on a like-for-like basis by 11% to GBP139.2m (2010: GBP125.7m). Underlying Operating Profit increased by 42% to GBP10.3m (2010: GBP7.2m) and on a like for like basis by 34% to GBP9.7m (2010: GBP7.2m) after investment of GBP6.1m in people and the new call centre. The HEAL business which was acquired in January 2010 delivered a break even performance in 2011 (2010: GBP3.2m operating loss) driven by significant increases in Lettings and Financial Services income in the ex HEAL branches. These income streams have also increased in the original, non HEAL branches and this is discussed later in this review.

The acquisition of Marsh & Parsons provides a business with an excellent geographic and strategic fit for LSL. It gives LSL exposure to prime Central London property market where volumes and commission rates have been consistently high and strong compared to other parts of the UK. For the short period between acquisition and the year-end, Marsh & Parsons has traded in line with the Directors' expectations. The management team at Marsh & Parsons is very experienced, has built a business model balanced equally between residential sales and lettings and has an excellent track record in delivering growth.

Estate Agency Branches

Your Move, Reeds Rains and the LSLi brands all continued to perform well during a year in which mortgage approvals reduced in the first half year and then increased significantly in the final four months. LSL has historically measured market share by comparing exchanges against house purchase mortgage approvals data issued by the Bank of England. Using this measure our market share increased from 4.5% to 4.7% in 2011. However, taking into account the three month time lag between mortgage approval and house purchase completions, market completions fell by an estimated 5% in 2011. Our market share of 4.7% was depressed by the significant increase in mortgage approvals in the final months of the year, the benefit of which can be seen in the 7% year on year increase in the pipeline. This increase in market share in our Estate Agency Division has mainly been driven by the investment in people and the new call centre.

Counter Cyclical Income

The counter cyclical income streams of Lettings and Asset Management are particularly important to LSL in depressed market conditions. In 2011 LSL has focussed on growing lettings income especially in the ex HEAL branches to minimise the impact of the market downturn. During 2011 like-for-like Lettings income grew by an impressive 18%. Despite the uncertain economic conditions impacting the housing market and the steady stream of disappointing economic news the repossessions volume fell by 1% to 35,800 in 2011 (2010: 36,300). We are pleased that our market share in Asset Management has increased during the year with revenue remaining at GBP13.9m (2010: GBP13.9m) in a declining market. Our Asset Management business is well positioned to capitalise on an increase in repossession volumes when they eventually occur.

Financial Services

Financial services income has increased by 49% in 2011 to GBP27.6m (2010: GBP18.6m). This was due to a combination of increase in financial services income from the residential sales branches and also full year revenue benefit from the acquisition of the Home of Choice network, (which was acquired by First Complete in May 2010) and Pink Home Loans (acquired in November 2010). We have now successfully integrated the 2010 acquisitions and simplified our regulatory operating model with Your Move and Reeds Rains becoming the appointed representatives of First Complete. Total gross mortgage lending arranged through our financial services network in 2011 was GBP6.8 billion (2010: GBP2.6 billion).

Developments

The key Estate Agency developments during 2011 were the continued focus on execution of the market share growth initiatives started in 2010 and also the acquisition of Marsh & Parsons.

The market share growth initiatives have been built on the platform of an Estate Agency branch network which had been expanded by the acquisition of the HEAL business in January 2010. Following a successful integration of HEAL, all branches have offered a service covering Residential Sales, Lettings and Financial Services since mid 2010. Lettings and Financial Services growth has been targeted with excellent results and is on track to follow a three to five year growth maturity curve with prospects enhanced by favourable conditions in the lettings market. In addition, a number of individual lettings books have been acquired in various locations across the country on a tactical basis.

The key element of the organic growth initiative was to increase market share in Residential Sales. The initiative was started in 2010 with refurbishment of all branches and with investment in people at the branch level. This has continued during 2011 and in January 2011 our new call centre 'The Bridge', was opened. 'The Bridge' operates to help generate instructions for the branches and has had a very successful first year. Overall, market share has increased from 4.5% to 4.7% during the year and pipelines in December 2011 were 7% higher compared to December 2010.

We have also been aiming to increase our market share of higher value properties, against the backdrop of Your Move and Reeds Rains typically selling houses at the national average house price of circa GBP160,000. This has proved more difficult in the prevailing market conditions and while we have had some success this area remains a major opportunity for the future.

Marsh & Parsons

In November 2011, LSL acquired Marsh & Parsons, which is a leading London estate agency operating a premium brand in the mid-segment of the prime Central London property market where sale volumes have been robust and commission rates consistently strong in comparison with other parts of the UK.

About Marsh & Parsons

Headquartered in Hammersmith, Marsh & Parsons is a leading premium brand London estate agency operating exclusively in the prime London housing market of Central and South West London from its fourteen branches. It was originally established in 1856 when its founder, William T Marsh, established an estate agency on Kensington High Street.

From its inception, the firm has established itself as one of the leading residential estate agents in Central London and it is one of the longest established estate agents in the Royal Borough of Chelsea and Kensington. Marsh & Parsons' fourteen branches offices are based in Balham, Barnes, Battersea, Brook Green, Chelsea, Clapham, Fulham, Holland Park, Kensington, Little Venice, North Kensington, Notting Hill, Pimlico and there is also a virtual office in Mayfair.

The customer offering is predominantly residential sales and lettings services, but it also includes corporate relocation services, property management, residential development, advisory services and professional valuation services.

In June 2005, Marsh & Parsons was acquired by Sherry FitzGerald (Ireland's largest estate agency group) under the leadership of Peter Rollings (previously the Managing Director of Foxtons) and Liza-Jane Kelly. Since then, Marsh & Parsons has grown rapidly (turnover has increased from GBP10.4m in 2006 to GBP23.3m in 2010) following the opening of new branches and the acquisition and rebranding of Vanstons in 2007.

In 2010, Marsh & Parsons won the Sunday Times "Best Medium Sized London Agency" award, as well as the "Best Medium Sized UK Agency" award and the "Best Overall UK Estate Agency" award. It holds memberships of both the Association of Residential Lettings Agents (ARLA) and The Property Ombudsman (TPO).

Marsh & Parsons had 208 full time equivalent employees as at 31(st) December 2011.

The Acquisition

Marsh & Parsons was formerly a subsidiary of Sherry FitzGerald which owned 72% of the entire issued share capital, with the remaining 28% of the issued share capital being owned by the Marsh & Parsons Management Shareholders. Following LSL's acquisition, the Marsh & Parsons Management Shareholders have remained with the business and, as part of their commitment they have reinvested 50% of the net consideration that they received (GBP6.5m) back into the business.

The enterprise value of the acquisition was GBP50.0m. After accounting for cash and excess working capital of approximately GBP3.1m, LSL paid a total consideration of GBP53.4m (before fair value adjustment to loan notes), which was satisfied by GBP45.4m in cash, GBP7.6m in loan notes and GBP0.4m in Growth Shares for the entire issued share capital of Marsh & Parsons.

Marsh & Parsons Management Shareholders have been incentivised to grow the profitability of the business through the allocation of the GBP0.4m of Growth Shares which can be sold to LSL at any time between 31(st) March 2016 and 1(st) April 2020.

The transaction was funded using LSL's existing bank facility and is expected to significantly enhance adjusted earnings per share for LSL's shareholders in 2012.

Benefits of the Acquisition

The Directors believe that the transaction has a compelling strategic and financial rationale, with significant benefits for LSL's shareholders. The London estate agency market has historically proven to demonstrate more robust features through the property cycle. The acquisition of Marsh & Parsons provides LSL the opportunity to significantly increase its exposure in this key geographical location, and provides a vehicle to capitalise on further expansion opportunities in London and, in the medium term, to benefit from the market recovery.

Following the acquisition, Marsh & Parsons continues to operate independently as a separate business and brand within the Group, which already operates a number of estate agency brands and businesses.

The key benefits which flow from the transaction can be summarised as follows:

a. The transaction provides LSL with a presence in the mid-segment of the prime Central London estate agency market. Marsh & Parsons is geographically complementary to LSL's existing estate agency footprint and provides the wider Group with greater coverage of the UK property market.

b. The London property market has historically shown more robust characteristics than the wider UK property market, though transaction levels are still circa 40% lower than peak levels in 2007. The higher proportion of cash sales and greater participation of foreign buyers provide the London property market with higher levels of growth during stronger economic periods but also more resilience against restricted mortgage availability and general economic weakness. More generally, limited housing supply and strong demand for properties from both domestic and foreign buyers contribute to the inherent attractiveness of the London market.

c. The Marsh & Parsons business model is to drive revenue across both residential sales and lettings in order to reduce exposure to the natural cyclicality of the property market. This has been achieved and revenue in 2010 was broadly evenly split between residential sales and lettings.

d. Marsh & Parsons represents a trusted premium brand, established for over 150 years, which enjoys excellent customer satisfaction levels, enabling Marsh & Parsons to increase its market share by 66% since 2005, including the period of the recent market downturn.

e. LSL has gained a high quality, dynamic and experienced management team with an outstanding record of delivering strong and profitable growth against the backdrop of challenging market conditions. The team is led by Chief Executive Peter Rollings, who has over 25 years' experience of successfully growing estate agency businesses in the London market with both Foxtons and Marsh & Parsons, and Liza-Jane Kelly, who has over 18 years in the property market including experience with Sherry FitzGerald, Hamptons International and Marsh & Parsons. The Marsh & Parsons Management Shareholders remain committed to and will be reinvesting in the business.

f. The Marsh & Parsons Management Shareholders have exciting growth plans for the business which builds on their recent track record of doubling their number of offices. The next stage of the business plan includes increasing market share across the existing portfolio and further roll out of new offices across prime areas of London together with further bolt on acquisition opportunities.

g. While Marsh & Parsons will operate independently within the Group, there will be opportunities for synergies. LSL has a strong track record of encouraging its separately branded estate agency businesses to share best practice and, in particular, there may be opportunities for Marsh & Parsons to further develop certain revenue streams. In addition, it is possible that some existing LSL estate agency branches in London could be rebranded Marsh & Parsons.

h. In a challenging London market, Marsh & Parsons has demonstrated an excellent track record of delivery since 2005 through its investment in people, market, business model and brand. During this period, its market share has increased by 66%, revenue has increased by 53% per annum (compound annual average growth rate) and the operating result has improved from a loss of GBP0.6m in 2005 to a profit before tax of GBP6.3m in 2010. The business has also delivered excellent cash conversion during this time with high margins and relatively low levels of capital expenditure.

Regulation

First Complete, Advance Mortgage Funding and BDS Mortgage Group are all directly authorised by the Financial Services Authority in relation to the sale of mortgage, pure protection and general insurance products. Your Move and Reeds Rains along with the LSLi subsidiaries are all appointed representatives of First Complete, while Linear is an appointed representative of Advance Mortgage Funding for mortgage and insurance business and also an appointed representative of Openwork (for investment business). Reeds Rains is also an appointed representative of Letsure for the sale of rent indemnity insurance.

As a result of Linear's appointment by Openwork, LSL has a small indirect shareholding of Openwork.

Estate Agency and Related Services Awards 2011 & 2012:

The Estate Agency businesses, achieved the following industry awards demonstrating LSL's continued commitment to customer services:

The Sunday Times Estate Agency of the Year Awards are now a recognised benchmark for excellence throughout the estate agency industry. Competition is fierce from estate agencies nationwide and an award is a great achievement.

Your Move

Sunday Times Estate Agency of the Year Awards 2011:

Gold- Best Marketing

Silver - Best Financial Services

Sunday Times Lettings Agency of the Year Awards 2011:

Bronze - Best Property Management

Bronze - Best Lettings Franchise

Reeds Rains

Sunday Times Estate Agency of the Year Awards 2011:

Shortlisted Best Financial Services Provider

Marsh & Parsons

The Negotiator Awards 2011 - Quadruple Winners

At the 2011 Negotiator Awards Marsh & Parsons were winners of four categories - National Lettings Agency of the Year, Marketing Team of the Year, Leader of the Year, and named as overall "most admired estate agency" earning the Supreme Agency of the Year title.

National Lettings Agency of the Year - the judges were particularly impressed with Marsh & Parsons' newly launched initiatives, including an international desk offering 20 different languages and the 2012 Olympic Accommodation service run by their Corporate & Relocation Services team.

Marketing Team of the Year - Marsh & Parsons were particularly commended for their 0% campaign, designed to introduce the Marsh & Parsons' brand in areas where they were relatively unknown.

Leader of the Year - Peter Rollings, Chief Executive of Marsh & Parsons was announced as 2011's Estate Agency 'Leader of the Year'. The judges were impressed with his transformation of the Marsh & Parsons' brand, as well as his ability to get the best out of his employees, who "praise their leader for his energy, enthusiasm and commitment, but above all, for his passion for the business".

Overall Supreme Agency of the Year - this award is judged by The Negotiator's 'special academy' comprising 50 of the UK's leading property professionals, including Marsh & Parsons' rivals.

Sunday Times Lettings Agency of the Year Awards 2011 - Winner

Gold - Best Medium Letting Agent in London

Intercounty

Sunday Times Estate Agency of the Year Awards 2011 - Winner

Cecil Jackson Cole Award for Social and Corporate Responsibility

The award recognised the work they have been doing with Shelter during 2011 and 2012. The award helps to raise the profile of the issues related to homelessness and raise more money for the cause. Part of Intercounty's campaign included a sponsored sleep rough when some of the staff led by Greg Young, its MD undertook a 24 hour street collection outside three of its branches in aid of Shelter.

Pink Home Loans

Mortgage Strategy Awards 2011 and 2012 - Finalist

Pink Home Loans was a finalist in both years in the Best Mortgage Network Category.

Linear Financial Services

Mortgage Strategy Awards 2012 and 2011 - Winner

Linear Financial Services was the winner in both years of the Best Broker for Protection award.

First Complete

Mortgage Strategy Awards 2012 - Winner

First Complete won the Best Mortgage Network award

Mortgage Strategy Awards 2011 - Finalist

First Complete was a finalist in the Best Mortgage Network category.

LSL Corporate Client Department (LSL CCD)

LSL CCD accredited to ISO 9001:2008

In 2011 LSL Corporate Client Department became the first corporate asset manager to be accredited to ISO 9001:2008 leading the way and setting standard in this field. This was achieved when LSL CCD was independently reviewed by the leading global providers of standards and certification body - the British Standards Institution (BSI). This also covers quality management systems maintained by the International Organisation for Standardisation.

Mortgage Finance Gazette Award 2011 - Winner

LSL Corporate Client Department became the winner in the Excellence in Treating Customers Fairly - Non Lenders category. It was noted that: "Treating customers fairly is embedded in the culture of the company from staff training systems, auditing and complaint handling."

St Trinity Asset Management

St Trinity accredited to ISO 9001:2008

In 2011 St Trinity Asset Management became the first part-exchange asset manager in the UK to secure ISO 9001:2008 accreditation, leading the way and setting standard in this field. This was achieved when St Trinity was independently reviewed by the leading global providers of standards and certification body - the British Standards Institution (BSI). This also covers quality management systems maintained by the International Organisation for Standardisation.

LSL - The Bridge

Sunday Times Estate Agency of the Year Awards 2011 - Finalist

Bronze - Innovation

LSL Land & New Homes

Sunday Times Estate Agency of the Year Awards 2011 - Finalist

Bronze - Best New Homes

Business Review - Financial Review

The key drivers of the financial performance of LSL are summarised below

Income statement

Revenue

Revenue increased by 6% to GBP218.4m in the year ended 31(st) December 2011 (2010: GBP206.6m).

Operating Expenses Excluding Exceptional Costs, Amortisation and Share Based Payment

Operating expenses increased by 7% to GBP189.0m (2010: GBP176.4m). This was mainly in the Estate Agency and Related Services Division and was due to higher revenue. Average full time equivalent employees during the year was 3,930 (2010: 3,649).

Underlying Operating Profit

Group Underlying Operating Profit decreased by 2.6% to GBP31.1m (2010: GBP31.9m) with the Underlying Operating Profit margin of 14.3% (2010: 15.4%).

Exceptional Items

Acquisition costs of GBP1.6m relating to Marsh & Parsons contributed to an overall net exceptional cost of GBP2.4m (2010: exceptional profit GBP10.2m).

Net Financial Costs

Net financial costs (excluding exceptional finance costs) amounted to GBP1.8m (2010: GBP2.2m). The finance costs related principally to interest and fees on the revolving credit facility.

Taxation

The effective rate of corporation tax for the year was 24.6% (2010: 4%). The effective tax rate for the year was impacted by non taxable income for joint ventures and the impact of a rate change on the deferred tax liability. Excluding this impact the effective tax rate is 27.8%. The effective tax rate in the prior year was lower due to the impact of non-taxable income on profit made on disposal of the investment in Hometrack Data Systems Limited.

Adjusted Basic Earnings Per Share

The Adjusted Basic Earnings Per Share (as calculated in note 3) is 21.0p (2010: 21.0p). 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 GBP3.2m (2010: GBP5.0m). The capital expenditure predominantly comprised expenditure on investment in Estate Agency initiatives.

Financial Structure

As at 31(st) December 2011 net debt (excluding loan notes issued on the acquisition of Marsh & Parsons) was GBP38.4m (2010: GBP4.9m). LSL has a GBP75.0m revolving credit facility in place until March 2014 (2010: GBP75.0m). The net debt increase followed the payment of initial consideration of GBP45.4m for Marsh & Parsons and the payment of GBP1.1m for a number of lettings businesses, investment in joint ventures of GBP0.7m and an increase in dividend paid in the year of GBP0.8m.

Cash Flow

The Group produced GBP22.4m (2010: GBP30.7m) of operating cashflow after capital expenditure of GBP3.2m (2010: GBP5.0m) and revenue investment in Estate Agency initiatives of GBP6.1m (2010: nil). Cashflow was lower compared to the previous year because of an increase in working capital driven by the loss of HIPs income, an increase in deferred marketing fees, higher PI cash payments and investment in asset management work in progress. Without the acquisition of Marsh & Parsons, the strong cashflow would have resulted in net debt improving from GBP4.9m in December 2010 to net cash of GBP7.1m even after payment of GBP1.1m for a number of lettings businesses, investment in joint ventures of GBP0.7m and an increase in dividends paid in the year of GBP0.8m. After the payment of initial cash consideration of GBP45.4m for Marsh & Parsons, acquisition costs paid of GBP0.9m and cash acquired of GBP5.7m net debt was GBP38.4m as at 31(st) December 2011.

Net Assets

The net assets as at 31(st) December 2011 were GBP72.4m (2010: GBP68.1m).

Treasury & Risk Management

LSL has an active debt management policy and due to the cash generative nature of the business and the cash paid for the initial consideration on the acquisition of Marsh & Parsons of GBP45.4m, the Group's net debt position (excluding loan notes issued on the acquisition of Marsh & Parsons) at 31(st) December 2011 is GBP38.4m (2010: GBP4.9m). The Group has an interest rate swap in place which fixes the interest on borrowings up to GBP25m at an average rate of 2.93%. Which provides a degree of predictability on finance costs. 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 as adopted by the European Union. LSL commenced reporting under IFRS from 1(st) January 2005.

Principal Risks & Uncertainties

LSL's risk management arrangements form an integral part to its overall framework for the management of risks and maintaining internal controls. Through the framework, the Board continually identifies, evaluates and manages the principal risks and uncertainties faced by LSL and which could adversely affect its business, operating results and financial condition.

This risk management and internal controls framework includes:

a. Ownership of the risk management and internal controls framework by the Board, supported by the Company Secretary, Head of Risk & Audit and the Group Financial Controller;

b. A network of Risk Owners in each of LSL's business with specific responsibilities relating to risk management and internal controls;

c. The documentation and monitoring of risks are recorded and managed through standardised risk registers which undergo regular reviews and scrutiny by local boards and the Head of Risk & Audit;

d. The Board regularly reviews a consolidated risk register as part of planning and reporting cycle to ensure that risks which impact the Group are identified, monitored and mitigated; and

e. Reporting by the Chairman of the Audit Committee to the Board on any matters which have arisen from the Audit Committee's review of the way in which the risk management and internal control framework has been applied together with any breakdowns in, or exceptions to, these procedures.

Listed below are the risks which the Board has identified as being significant, and therefore the principal risks and uncertainties faced by LSL, together with details of key mitigation initiatives, which are subject to regular review.

 
 Principal Risk & Uncertainty                                     Mitigation 
---------------------------------------------------------------  ------------------------------------------------ 
 
   *    The continued volatility and economic uncertainty 
        within the UK. In particular, within the UK housing 
        market, transaction volumes (both house purchase and 
        remortgage) and house prices may adversely affect the 
        profitability and cash flow of all our key brands and 
        businesses. 
---------------------------------------------------------------  ------------------------------------------------ 
                                                                  The Board regularly focuses on counter-cyclical 
   *    The current economic uncertainty especially in the         income streams to ensure that the 
        financial sector (both within the Eurozone and the         growth in income in lettings and 
        UK) could also impact on lender behaviour and the          asset management set off the impact 
        availability of mortgage credit which will have a          of reduced transaction numbers. 
        consequential impact on the housing market by 
        impacting mortgage availability.                           The Board regularly reviews trends 
                                                                   in market volumes and decides whether 
                                                                   any actions such as cost base reductions 
                                                                   measures are required. 
---------------------------------------------------------------  ------------------------------------------------ 
                                                                  The Group CEO, the Group Finance 
   *    Following the acquisition of Marsh & Parsons, LSL now      Director and the Executive Director 
        has a new exposure to the Central London property          for Estate Agency are all members 
        market. While historically the London market has been      of the Marsh & Parsons' board and 
        more robust compared to the rest of the UK, there is       their presence ensures the close 
        a risk that the London market fails to grow or that        monitoring of the company's performance. 
        LSL fails to maximise the potential growth.                Further, regular reviews of trends 
                                                                   in market volumes are undertaken 
                                                                   and decisions made on any cost base 
                                                                   reductions measures. 
---------------------------------------------------------------  ------------------------------------------------ 
                                                                  There has been an increased investment 
   *    Loss of key surveying or corporate services clients        in customer services to retain existing 
        or contracts at their renewal date or significant          clients and attract new ones. In 
        reduction in volumes, either as a result of adverse        addition, we are continuing to develop 
        market conditions, market consolidation, competition       our private survey proposition to 
        or inadequate service delivery.                            provide an alternative income stream. 
---------------------------------------------------------------  ------------------------------------------------ 
                                                                  Monitoring arrangements include oversight 
     *    Liability for inaccurate professional services advice    by the Board (including regular review 
          to clients (e.g. inaccurate valuations) together with    of the PI provision) and appropriate 
          the risk that LSL fails to maintain appropriate risk     quality controls and Internal Audit 
          management arrangements.                                 reviews of services provided on a 
                                                                   sample basis. There are also specific 
                                                                   controls implemented within the Surveying 
                                                                   Division which include a risk based 
                                                                   criteria in the identification of 
                                                                   transactions to be audited. 
---------------------------------------------------------------  ------------------------------------------------ 
                                                                  Regular monitoring by the Board is 
     *    Failure to effectively deliver and manage the market     undertaken on the Division's progress. 
          share initiatives for Estate Agency. 
---------------------------------------------------------------  ------------------------------------------------ 
                                                                  LSL business units are supported 
     *    Changes in legislation or regulation or Government       by the Compliance and Legal Services 
          policy may impact on business results or the UK          teams who closely monitor any reform 
          housing market in general.                               proposals. Where appropriate Government 
                                                                   departments and/or trade bodies are 
                                                                   engaged in a dialogue. 
---------------------------------------------------------------  ------------------------------------------------

LSL also faces other risks which, although important and subject to regular review, have been assessed as less significant and are not listed here. This includes some risks which were reported in previous years' Annual Report & Accounts and which through changes in external factors and careful management are no longer material to the Group as a whole.

However, many risk factors remain beyond the direct control of LSL and the risk management framework and procedures can only provide reasonable but not absolute assurance that the principal risks and uncertainties are managed to an acceptable level.

Further information relating to the management of these risks and uncertainties is set out in the Corporate Governance Review (Internal Controls) of the Annual Report.

Relationships

The Corporate Social Responsibility (CSR) statement in the Annual Report details the arrangements for all LSL companies in relation to:

   --     Employment (including Equal Opportunities); 
   --     Health, Safety & Welfare; 
   --     Environmental; and 
   --     Social and Community Interests (including social and ethical issues).

Other than our shareholders, LSL's performance and value are influenced by other stakeholders, principally our customers, suppliers, employees, Government and our strategic partners. LSL's approach with all these parties is founded on the principles of open and honest dialogue based on a mutual understanding of needs and objectives.

For example:

-- Lenders' relationships are managed via dedicated account managers.

-- Employees are managed and consulted both on an individual basis and via representative groups with LSL recognising Unite as an employee representative body.

-- Group companies participate in relevant trade associations and industry groups, such as Royal Institute of Chartered Surveyors (RICS), the Association of Mortgage Intermediaries (AMI), the National Association of Estate Agents (NAEA), the Association of Residential Lettings Agents (ARLA), National Federation of Property Professionals (NFoPP) and The Property Ombudsman (TPO), because these give us genuine access to customer views and decision makers in Government and other regulatory bodies.

-- Further, the Group aims to build partnerships with the communities in which it operates and to offer support in addition to providing employment and training, using local services and suppliers where possible and paying taxes.

Environmental Matters

LSL recognises that the environment has an intrinsic value, central to the quality of life and underpins economic development. LSL understands that its stakeholders are interested in how LSL manages its impact on the environment and how it is performing. Further, stakeholders may also provide LSL with views and opinions which can strengthen LSL's approach to environmental management. Accordingly, LSL is committed to communicating on environmental matters with all interested parties .Appropriate guidance and training is also provided to all employees to ensure they have an awareness of their impact on the environment and the role that they play in managing the impact.

Group Income Statement