TIDMLSL
RNS Number : 0968H
LSL Property Services
30 July 2019
For immediate release 30(th) July 2019
LSL Property Services plc ("LSL" or "The Group")
Interim Results For the six months ended 30(th) june 2019
LSL Property Services plc, a leading provider of residential
property services incorporating estate agency, financial services
and surveying and valuation businesses, announces its interim
results for the six months ended 30(th) June 2019.
2019 2018 change
---------------------------------------------- ------- ------ --------
Group Revenue - GBPm 154.1 152.9 +1%
Group Underlying Operating Profit(1) - GBPm 12.2 11.6 +5%
Group underlying operating margin - % 7.9 7.6
---------------------------------------------- ------- ------ --------
Group Adjusted EBITDA(2) - GBPm 19.7 14.4 +37%
Net Exceptional (cost) / gain - GBPm (12.8) 1.2
Group operating (loss) / profit - GBPm (2.8) 7.4
(Loss) / profit before tax - GBPm (4.6) 6.4
Basic (loss) / Earnings Per Share - pence (3.1) 4.7
Adjusted Basic Earnings Per Share(3) - pence 9.0 8.6 +5%
Net Bank Debt(4) at 30(th) June - GBPm 52.0 46.0 +13%
Interim dividend - pence 4.0 4.0
1 Group Underlying Operating Profit is before exceptional costs,
contingent consideration, amortisation of intangible assets and
share-based payments (as defined in Note 6 of the financial
statements). Excluding the impact of IFRS 16 Group Underlying
Operating Profit in H1 2019 was GBP11.8m
2 Group Adjusted EBITDA is Group Underlying Operating Profit
plus depreciation of right of use assets, plant, property and
equipment (as defined in Note 6 of the financial statements).
Excluding the impact of IFRS 16, Group Adjusted EBITDA in H1 2019
was GBP14.3m
3 Refer to Note 7 of the financial statements for the calculation
4 Refer to Note 14 of the financial statements for the calculation
Positive first half Group financial performance
-- Positive performance with Group Underlying Operating
Profit(2) up 5% to GBP12.2m (2018: GBP11.6m) and Group Adjusted
EBITDA(2) up 37%. Excluding the impact of IFRS 16, Group Underlying
Operating Profit was 2% ahead of prior year and Group Adjusted
EBITDA was broadly in line with prior year
-- Group Revenue up 1% to GBP154.1m (2018: GBP152.9m) with a
resilient performance in the context of subdued market
conditions
-- The Estate Agency Division delivered a strong performance
with Underlying Operating Profit(2) increasing to GBP4.0m (2018:
GBP1.4m), benefiting materially from the reshaping of the Your Move
and Reeds Rains branch networks, announced on 5(th) February
2019
-- The Financial Services Division delivered a strong
performance with Underlying Operating Profit(2) up 20% to GBP4.3m
(2018: GBP3.6m) reflecting growth in core businesses and the
benefit of the acquisitions of PTFS and RSC in Q1 2018
-- The Surveying Division delivered Underlying Operating
Profit(2) of GBP6.3m (2018: GBP8.6m) impacted by market conditions,
business mix and increased headcount from the transfer of Lloyds
Bank plc personnel to e.surv following the award of the new
contract in May 2018
-- Exceptional costs of GBP13.4m recognised in the period
predominantly from the reshaping of the Your Move and Reeds Rains
branch networks, announced on 5(th) February 2019. Continued
positive progress in addressing historic Professional Indemnity
(PI) claims with a GBP0.6m exceptional provision release as claims
were settled below previous expectations
Full year outlook
-- The Board remains confident that the Group will deliver a
full year Underlying Operating Profit in line with its prior
expectations, as the business is expected to continue to benefit
from the range of LSL's ongoing self-help measures
-- Interim dividend of 4.0 pence (2018: 4.0 pence)
Estate Agency Division Performance(1)
-- LSL announced the reshaping of its Your Move and Reeds Rains
branch networks on 5(th) February 2019. We are pleased that the
implementation of this programme has progressed in-line with our
expectations despite the scale and complexity of the project. As a
result, the revenue in the keystone branch network in H1 was
slightly ahead of the LSL business plan. During Q1, the Your Move
and Reeds Rains estate agency branch network was reshaped from 308
owned branches to 144 keystone branches following the closure and
merging of 81 neighbouring branches into the keystone branch
network, the franchising of 39 branches and the closure of 44
branches
-- The Estate Agency Division delivered a strong performance
with Underlying Operating Profit(2) increasing to GBP4.0m (2018:
GBP1.4m), benefiting materially from the reshaping of the Your Move
and Reeds Rains branch networks, announced on 5(th) February
2019
-- LSL expect the changes to the branch networks to continue to
deliver a material improvement to Underlying Operating Profit in
Your Move and Reeds Rains, assuming no material change in market
conditions
-- Profit per branch (Your Move, Reeds Rains and LSLi) increased
to GBP48.4k (2018: GBP24.9k) on a rolling twelve month basis as a
result of the benefit from the reshaping of Your Move and Reeds
Rains networks
-- The Estate Agency Revenues for H1 2019 and H1 2018 as
reported and on a like for like basis, adjusting for the closure of
the Your Move and Reeds Rains branches during Q1 2019 are set out
below:
H1 2019 H1 2018(1) %
Change % Change
(Reported) (LFL)
----------------- ---------- ------------ ------------ -----------
Total Estate
Agency Revenue GBP77.1m GBP88.9m -13% -5%
Residential
Sales exchange
Revenue GBP27.6m GBP32.9m -16% -6%
Lettings
income GBP33.8m GBP37.3m -9% 0%
-- Total Estate Agency Revenue decreased by 13% to GBP77.1m
(2018: GBP88.9m) impacted by the soft market conditions and the
reduction in the size of the Your Move and Reeds Rains branch
networks during Q1 2019. Adjusting for the closure of the Your Move
and Reeds Rains branches during Q1 2019, like for like Revenue was
down 5% year on year
-- Adjusting for the closure of the Your Move and Reeds Rains
branches during Q1 2019, Residential Sales Exchange income was down
6% year on year, impacted by market volumes and Lettings income
in-line with prior year on a like for like basis
-- The London market conditions continued to be challenging in
H1 2019 as anticipated. Marsh & Parsons delivered a resilient
Revenue performance despite the market conditions with total
Revenue down 5.5%
-- In line with LSL's stated strategy, Marsh & Parsons
opened two new branches in April 2019 in outer prime central
London, in Willesden Green and Streatham Hill. These new branches
are trading in line with expectations
-- Legislation banning tenant fees came into effect on 1(st)
June 2019 and LSL implemented the required changes across its
Estate Agency brands. LSL continues to implement self-help measures
in lettings
-- LSL continued its accretive lettings book acquisition
programme with three lettings books acquired during the period for
a total consideration of GBP1.4m
Financial Services Division Performance(1)
-- The Financial Services Division delivered a strong
performance with Underlying Operating Profit(2) up 20% to GBP4.3m
(2018: GBP3.6m) reflecting growth in core businesses and the
benefit of the acquisitions of PTFS and RSC in Q1 2018
-- Total Financial Services Division Revenue increased by 4% to
GBP34.3m (2018: GBP33.0m)
-- Financial Services organic growth, excluding Estate Agency,
in H1 2019 was 3%
-- The value of LSL's mortgage completions in the first half of
2019 increased to GBP14.7bn (2018: GBP13.2bn)
-- The number of appointed representative firms as at 30(th)
June 2019 increased to 860 (2018: 842)
-- The number of financial advisers as at 30(th) June 2019 was
2,277 (2018: 2,298)
-- The roll out of Toolbox, the new Financial Services
technology system is progressing in line with expectations
Surveying and Valuations Division Performance
-- The Surveying Division delivered Underlying Operating
Profit(2) of GBP6.3m (2018: GBP8.6m) impacted by market conditions,
business mix and increased headcount from the transfer of Lloyds
Bank plc personnel to e.surv following the award of the new
contract in May 2018
-- Surveying income increased by 37% to GBP42.7m (2018:
GBP31.1m) due to the new contract with Lloyds Bank plc, which was
awarded in May 2018
-- In June 2019, the Surveying Division was awarded an extension
to its contract to supply UK residential survey and valuation
services to a major high street bank
-- Continued positive progress in addressing historic PI claims
with a GBP0.6m exceptional provision release in H1 2019 as claims
were settled below previous expectations
-- Technology enhancements continue to be implemented during
2019 with further functionality releases designed to drive quality
and efficiency improvements
-- Work is ongoing to leverage the scale benefits of the
Surveying Division, with the aim of improving cost efficiency
Commenting on today's announcement, Simon Embley, Chairman,
said:
"The Group delivered a positive financial performance in the
first half of 2019, with positive growth in Revenue and Underlying
Operating Profit, despite subdued residential property market
conditions.
The Board remains confident that the Group will deliver a full
year Underlying Operating Profit in line with its prior
expectations, as the business is expected to continue to benefit
from the range of LSL's ongoing self-help measures.
Whilst we continue to remain cautious on the residential
property market outlook for 2019 given the current uncertainty over
the UK and global political and economic environment and the
potential impact on UK consumer confidence, the Board is confident
that the Group, with its market leading brands, broad portfolio of
residential property services and the benefits from the proactive
self-help measures, remains in a strong position to perform well
given a range of potential market conditions, in order to maximise
Shareholder value.
The Group has a robust balance sheet with relatively low levels
of gearing and is highly cash generative at an operational level.
The Board remain confident of the opportunities for further
positive progress for the Group."
For further information, please contact:
Ian Crabb, Group Chief Executive
Officer
Adam Castleton, Group Chief Financial
Officer
LSL Property Services plc 0207 382 0360
Helen Tarbet, Sophie Wills
Buchanan 0207 466 5000
Notes on LSL:
LSL is a leading provider of residential property services to
its key customer groups. Services to consumers include: residential
sales, lettings, surveying, conveyancing support, and mortgage,
pure protection and general insurance brokerage services. Services
to mortgage lenders include: valuations and panel management
services, and asset management and property management services.
For further information, please visit LSL's website:
lslps.co.uk
Group Chief Executive's Review
Introduction
The Group delivered a resilient first half Revenue performance
with Revenue up 1%. Group Underlying Operating profit(2) was up 5%
and Adjusted EBITDA(2) was up 37%. Adjusted for the impact of IFRS
16, Group Underlying Operating profit was up 2% year on year and
Adjusted EBITDA was broadly in line with prior year.
Market conditions in H1 2019 have been softer than the
equivalent period in 2018. The RICS June 2019 Residential Market
Survey(3) reported that that the RICS new buyer enquiries tracker
and the RICS newly agreed sales net balance was negative for five
of the six months in H1 2019. The RICS June 2019 Residential Market
Survey(3) reported average stock levels on estate agents books at
record lows and whilst buyer enquiries edged upwards in June 2019,
RICS reported significant declines in the early part of H1
2019.
Financial results
Group Revenue was up 0.8% to GBP154.1m (2018: GBP152.9m). Group
Underlying Operating Profit(2) was up 4.7% to GBP12.2m (2018:
GBP11.6m) and Group Underlying Operating Profit Margin(2) was 7.9%
(2018: 7.6%).
Group operating loss was GBP2.8m (2018: profit GBP7.4m) impacted
in the period by GBP13.4m of exceptional charges incurred,
predominantly as a result of the reshaping of the Your Move and
Reeds Rains estate agency networks, which delivered a material
improvement in financial performance in Your Move and Reeds Rains
in H1 2019. LSL expect the changes to the branch networks to
continue to deliver a material improvement to underlying operating
profit in Your Move and Reeds Rains, assuming no material change in
market conditions.
During the first half of 2019 net finance costs increased to
GBP1.8m (2018: GBP1.0m), due to the additional finance cost
resulting from the adoption of the new leasing standard, IFRS 16.
The expected effective tax rate for the period is 29.7% (June 2018:
24.2%), leading to tax credit of GBP1.4m. The effective tax rate
has increased to 29.7% primarily as a result of disallowable
expenditure within the exceptional costs in the year. Group loss
after tax was GBP3.2m (2018: profit of GBP4.9m). Basic Loss Per
Share was 3.1p (2018: earnings per share: 4.7p) and Adjusted
Earnings Per Share were 9.0p (2018: 8.6p).
Cash generated from operations increased to GBP9.5m (2018:
GBP1.1m), which excluded the repayments of lease liabilities
following the adoption of IFRS 16 , higher Group Underlying
Operating Profit(2) compared to the same period last year and an
improvement in working capital compared to the prior year.
Operating cash flow included PI Costs settlements of GBP1.5m (2018:
GBP0.6m). Capital expenditure, including intangibles, was GBP2.2m
(2018: GBP2.1m), including two new Marsh & Parsons branches
opened during the period, in Streatham Hill and Willesden
Green.
During the first half of 2019 the Group continued its accretive
lettings book acquisition programme with three lettings books
acquired during the period for a total consideration of
GBP1.4m.
Net assets at 30(th) June 2019 were GBP129.9m (2018: GBP146.0m).
Net Bank Debt at 30(th) June 2019 was GBP52.0m compared to GBP46.0m
at 30(th) June 2018. Compared to 31(st) December 2018, Net Bank
Debt has increased by GBP20m driven by the normal seasonality of
the Estate Agency Division cash flows, the funding of the three
strategic lettings book acquisitions, the payment of the deferred
consideration in relation to previous acquisitions, the exceptional
costs in relation to the reshaping of the Estate Agency network as
well as the payment of dividends and taxes. LSL has a 14.7%
minority shareholding in Yopa. LSL's previous carrying value of
GBP7.8m for Yopa has been written down through reserves by GBP1.3m
to GBP6.5m as at 30(th) June 2019 to reflect the Board's assessment
of fair value.
The Board remains confident in the underlying fundamentals and
prospects of the Group's businesses and has declared an interim
dividend payment amounting to 4.0 pence per share (2018: 4.0
pence). The ex-dividend date for the interim dividend is 8(th)
August 2019, with a record date of 9(th) August 2019 and a payment
date of 16(th) September 2019. Shareholders have the opportunity to
elect to reinvest their cash dividend and purchase existing shares
in LSL through a dividend reinvestment plan. The election date is
23(rd) August 2019.
Segment reporting
To reflect the increased importance of LSL's Financial Services
businesses over the last five years, from 1(st) January 2019, LSL's
Financial Services businesses are reported as a separate segment.
The Estate Agency Division receives and reports a commercially
agreed commission payment from the Financial Services segment,
which reflects Financial Services income generated from the Estate
Agency segment. Financial Services Revenue reported in this
statement for 2018 has therefore been restated on this basis to
assist comparison. The Surveying Division reporting is
unchanged.
Estate Agency Division(1)
LSL announced the reshaping of its Your Move and Reeds Rains
branch networks on 5(th) February 2019. We are pleased that the
implementation of this programme has progressed in-line with our
expectations despite the scale and complexity of the project. As a
result, the revenue in the keystone branch network in H1 was
slightly ahead of the LSL business plan. During Q1, the Your Move
and Reeds Rains estate agency branch network was reshaped from 308
owned branches to 144 keystone branches following the closure and
merging of 81 neighbouring branches into the keystone branch
network, the franchising of 39 branches and the closure of 44
branches. This reshaping was in-line with LSL announcement of 5(th)
February 2019.
Estate Agency Division total Revenue was down 13.2% at GBP77.1m
(2018: GBP88.9m) reflecting the reshaping of the Your Move and
Reeds Rains branch networks during the first quarter of 2019.
Adjusting for the closure of the Your Move and Reeds Rains branches
during the first quarter of 2019, like for like total Revenue
decreased by 4.8% compared to the same period in 2018.
The Estate Agency Division delivered a strong performance with
Underlying Operating Profit(2) increasing to GBP4.0m (2018:
GBP1.4m), benefiting materially, in line with expectations, from
the reshaping of the Your Move and Reeds Rains branch networks,
announced on 5(th) February 2019. Profit per branch (Your Move,
Reeds Rains and LSLi) increased to GBP48.4k (2018: GBP24.9k) on a
rolling twelve month basis as a result of the benefit from the
reshaping of the networks. We expect the changes to the branch
networks to continue to deliver a material improvement to
Underlying Operating Profit in Your Move and Reeds Rains, assuming
no material change in market conditions.
Residential Sales income decreased by 16% to GBP27.6m (2018:
GBP32.9m) due to the reshaping of the Your Move and Reeds Rains
branch networks and the market conditions. Adjusting for the
closure of the Your Move and Reeds Rains branches during Q1 2019,
Residential Sales income decreased by 6%. In a highly competitive
market, the Estate Agency Division has broadly maintained
residential market share and delivered an increase in average
residential fees of 7% to GBP3,247 (2018: GBP3,035). The average
residential fee in H1 2019 benefited from the closure of Your Move
and Reeds Rains branches which generated lower average fees. Like
for like, average residential fee in H1 2019 were maintained at the
same level compared to the same period last year.
Total Lettings income decreased by 9.2% to GBP33.8m (2018:
GBP37.3m). On a like for like basis, adjusting for the reshaping of
the Your Move and Reeds Rains branch networks, Lettings income was
in line with the prior year. The Group has recommenced its letting
books acquisitions programme with three lettings books acquired
during the period for a total consideration of GBP1.4m.
Marsh & Parsons total Revenues were down 5.5% to GBP15.0m
(2018: GBP15.9m). Marsh & Parsons Underlying Operating
Profit(2) decreased to GBP0.4m (2018: GBP0.7m) with operating
margins of 2.7% (2018: 4.4%). Adjusted EBITDA as reported for H1
2019 was GBP2.3m (2018: GBP1.2m). Excluding the impact of IFRS 16,
Adjusted EBITDA for H1 2019 was GBP0.7m (2018: GBP1.2m).
Marsh & Parsons Residential Sales were down 10.6%, against
an overall London market for sales transactions which LSL estimates
was down c.15% in the first half of 2019. The Residential Sales
performance was impacted by a reduced pipeline entering into 2019.
The pipeline has improved over the first half of 2019 which is an
encouraging metric, heading into the second half of the year.
Market stock levels in lettings are subdued, resulting in Lettings
income decreasing by 5.3% in the first half of 2019.
Prime Central London has been the area most impacted by the
market conditions whilst branches in outer prime Central London
areas have been less negatively impacted. Two new Marsh &
Parsons branches opened in outer prime Central London during the
period, in Streatham Hill and Willesden Green. These new branches
are trading in line with expectations. Despite the opening of two
new branches since 30(th) June 2018, with strong cost control,
total expenditure fell by 4% year on year.
Legislation banning tenant fees came into effect on 1(st) June
2019 and LSL implemented the required changes across its Estate
Agency brands. LSL continues to implement self-help measures in
lettings with the aim of optimising lettings income.
In the second half of 2019, the Estate Agency Division will
continue to benefit from the reshaping of the Your Move and Reeds
Rains branch networks, residential sales pipelines which are
currently ahead of the Board's expectations and continued cost
control across the LSL businesses.
Financial Services Division(1)
Financial Services Division Revenue increased by 4% to GBP34.3m
(2018: GBP33.0m). Financial Services organic growth, excluding
Estate Agency, in H1 2019 was 3%. The growth in the value of
mortgage completions represents an increase in LSL's market
share(4) to 8.5% in 2019 (2018: 8%). LSL is the second largest
combined network nationwide, measured by combined number of
appointed representative firms(5) . The number of financial
advisers as at 30(th) June 2019 was 2,277 (2018: 2,298).
The Financial Services Division delivered a strong performance
with Underlying Operating Profit(2) up 20% to GBP4.3m (2018:
GBP3.6m) reflecting growth in core businesses and the benefit of
the acquisitions of PTFS and RSC in Q1 2018. The Financial Services
business continues to display good organic growth across its
breadth of products including mortgage products, pure protection
products and general insurance products. The integration of PTFS,
which was acquired in January 2018, is delivering synergy benefits
in line with expectations.
The roll out of Toolbox, LSL's Financial Services technology
system is progressing in line with expectations.
Surveying and Valuations Division
Revenue in the Surveying Division in the first half of 2019
increased by 37% to GBP42.7m (2018: GBP31.1m), with a total number
of jobs performed of 250,695 (2018: 154,905). This increase was
driven by the contract signed in 2018 for the Surveying Division to
supply surveying and valuation services to Lloyds Bank Group plc
from September 2018. The initial operational performance of the
Lloyds Bank plc contract has been in line with expectations.
Market conditions in H1 2019 were notably softer than
anticipated and in the equivalent period in 2018. Income per job in
H1 2019 reduced to GBP170 (2018: GBP201) due to a change in the
business mix. Total Surveying Division expenditure increased due to
the additional headcount from the transfer of Lloyds Bank plc
personnel to e.surv following the award of the new contract in May
2018. As a result, LSL delivered a reduced Underlying Operating
Profit in H1 2019 of GBP6.3m (2018: GBP8.6m) with a profit margin
of 14.8% (2018: 27.7%).
The total number of qualified surveyors(6) at 30(th) June 2019
was 490 (2018: 314), with the increase due to the transfer of
Lloyds Bank plc employed surveyors into the LSL Surveying business
during H2 2018. The on-going graduate programme continues to be
successful and assists in alleviating the impact of capacity
constraints in the market.
At 30(th) June 2019, the total provision for PI Costs was
GBP10.9m (2018: GBP14.6m). In 2019 the Group continued to make
positive progress in addressing historic claims and there has been
an exceptional release of GBP0.6m.
During H1 2019, the Surveying Division was pleased to be awarded
an extension to its contract to supply UK residential survey and
valuation services to a major high street bank.
Work is ongoing to leverage the scale benefits of the Surveying
Division with the aim of improving cost efficiency.
Technology enhancements continue to be implemented during 2019
with further functionality releases designed to drive quality and
efficiency improvements.
Strategy
LSL remains committed to delivering on its stated strategy:
Estate Agency
-- Ambition to achieve GBP80k-GBP100k profit per branch in the
medium term based on the expectation of a normalised level of
market transactions
-- Ambition to expand the number of Marsh & Parsons branches
to a total of 36 in the medium term, particularly outside prime
Central London
-- Grow recurring and where market conditions permit counter-cyclical income streams
-- Evaluate selective acquisitions of Residential Sales businesses and lettings books
Financial Services
-- Enhance LSL's position as a leading distributor of mortgage
and non-investment insurance products
-- Consistent delivery of appropriate outcomes for consumers
with a focus on "best practice" standards of regulatory
compliance
-- Enhancement of technology solutions to improve the customer
experience and operational efficiency
-- Evaluate further selective Financial Services acquisitions
Surveying and Valuation Services
-- Optimise contract performance and revenue generation from business to business customers
-- Achieve further improvement in efficiency and capacity utilisation
-- Use technology to target further improvements in customer satisfaction and performance
-- Continue the graduate training programme
Outlook
The Board remains confident that the Group will deliver a full
year Underlying Operating Profit in line with its prior
expectations, as the business is expected to continue to benefit
from the range of LSL's ongoing self-help measures.
Whilst we continue to remain cautious on the residential
property market outlook for 2019 given the current uncertainty over
the UK and global political and economic environment and the
potential impact on UK consumer confidence, the Board is confident
that the Group, with its market leading brands, broad portfolio of
residential property services and the benefits from the proactive
self-help measures, remains in a strong position to perform well
given a range of potential market conditions, in order to maximise
Shareholder value.
The Group has a robust balance sheet with relatively low levels
of gearing and is highly cash generative at an operational level.
The Board remain confident of the opportunities for further
positive progress for the Group.
Ian Crabb
Group Chief Executive Officer
30(th) July 2019
(1) Following the change to LSL's segment reporting effective
from 1(st) January 2019, the Estate Agency Division receives a
commercially agreed commission payment from the Financial Services
segment. This arrangement reflects Financial Services income
generated from the Estate Agency segment. The 2018 revenue has been
restated on this basis to assist comparison
(2) Group Underlying Operating Profit is before exceptional
costs, contingent consideration, amortisation of intangible assets
and share-based payments; Group Adjusted EBITDA is Group Underlying
Operating Profit plus depreciation of right of use assets, plant,
property and equipment (both as defined in Note 6)
(3) Source: RICS UK Residential Market Survey, June 2019
(4) Source: UK Finance new mortgage lending by type of lender
(excludes product transfers), June 2019
(5) Source: Which-Network - network performance figures for Q1
2019 showing the combined numbers for PRIMIS
(6) FTE (full time equivalent)
Principal risks and uncertainties
The key risks and uncertainties relating to the Group's
operations remain consistent with those disclosed in the Group's
Annual Report and Accounts 2018 on pages 30 to 34. The Annual
Report and Accounts 2018 can be accessed on the Group's website:
www.lslps.co.uk. Having reconsidered these principal risks and
uncertainties which are summarised below, the Board continues to
consider them appropriate.
-- UK housing market
-- New UK housing market entrants
-- Investment, acquisitions and growth initiatives
-- Professional services
-- Client contracts
-- Business infrastructure (including IT)
-- Information security (including data protection)
-- Regulatory and compliance
-- Employees
A recent Group Risk Appetite Assessment exercise included an
evaluation of developing areas of key risks and the effectiveness
of related business response plans.
The Board has concluded that the principal risks and
uncertainties of the Group remain the same as those included within
the Annual Report and Accounts 2018.
Forward-Looking Statements
This statement may contain forward looking statements with
respect to certain plans and current goals and expectations
relating to the future financial condition, business performance
and results of LSL. By their nature, all forward looking statements
involve risk and uncertainty because they relate to future events
and circumstances that are beyond the control of LSL including,
amongst other things, UK domestic and global economic and business
conditions, market related risks such as fluctuations in interest
rates, inflation, deflation, the impact of competition, changes in
customer preferences, delays in implementing proposals, the timing,
impact and other uncertainties of future acquisitions or other
combinations within relevant industries, the policies and actions
of regulatory authorities, the impact of tax or other legislation
and other regulations in the UK. As a result LSL's actual future
condition, business performance and results may differ materially
from the plans, goals and expectations expressed or implied in
these forward looking statements. Nothing in this statement should
be construed as a profit forecast. Information about the management
of the Principal Risks and Uncertainties facing LSL is set out
within the Strategic Report in the Group's Annual Report and
Accounts 2018 on pages 30 to 34.
Definitions
Definitions for words and expressions referred to and included
in this statement which are not expressly defined within, can be
found in LSL's Annual Report and Accounts 2018 (a copy of which is
available on LSL's website at: www.lslps.co.uk). All references to
'note(s)' in this statement are, unless expressly stated otherwise,
references to the 'Notes to the Interim Condensed Group Financial
Statements' included in this statement.
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
Ian Crabb
Director, Group Chief Executive Officer
30(th) July 2019
Interim Group Income Statement
for the six months ended 30(th) June 2019
Unaudited Audited
Six Months Ended Year Ended
30(th) June 30(th) June 31(st) December
2019 2018 2018
Continuing Operations Note GBP'000 GBP'000 GBP'000
----------- ----------- ---------------
Revenue 4,5 154,115 152,891 324,640
Operating expenses:
Employee and subcontractor costs (96,958) (96,705) (203,095)
Establishment costs (7,341) (10,056) (20,614)
Depreciation on property, plant and
equipment (7,513) (2,772) (5,674)
Other (30,268) (31,737) (60,211)
----------- ----------- ---------------
(142,080) (141,270) (289,594)
Other operating income 459 388 557
Gain on sale of property, plant and
equipment (6) - 34
(Loss) / income from joint ventures
and associates (331) (399) 259
----------- ----------- ---------------
Group Underlying Operating Profit 6 12,157 11,610 35,896
Share-based payments (553) (590) (349)
Amortisation of intangible assets (2,236) (2,718) (5,301)
Exceptional gains 8 593 1,189 2,188
Exceptional costs 8 (13,380) - (5,234)
Contingent consideration 652 (2,057) (1,783)
Group operating (loss) / profit (2,767) 7,434 25,417
Finance income 5 - -
Finance costs (1,802) (1,018) (2,333)
Net finance costs (1,797) (1,018) (2,333)
(Loss) / profit before tax (4,564) 6,416 23,084
Taxation credit / (charge) 10 1,353 (1,555) (5,201)
(Loss) / profit for the period/year (3,211) 4,861 17,883
----------- ----------- ---------------
(Loss) / earnings per share expressed
in pence per share:
Basic 7 (3.1) 4.7 17.4
Diluted 7 (3.1) 4.7 17.3
----------- ----------- ---------------
Interim Group Statement of Comprehensive Income
for the six months ended 30(th) June 2019
Unaudited Audited
Six Months Ended Year Ended
30(th) 30(th) June 31(st) December
June 2018 2018
2019
GBP'000 GBP'000 GBP'000
----------- ----------- ---------------
(Loss) / profit for the period (3,211) 4,861 17,883
Items not to be reclassified to profit
and loss in subsequent periods:
Revaluation of financial assets not
recycled through income statement (3,006) - (12,200)
Income tax effect - - -
----------- ----------- ---------------
Net other comprehensive (loss): (3,006) - (12,200)
----------- ----------- ---------------
Total other comprehensive (loss) for
the year, net of tax (3,006) - (12,200)
----------- ----------- ---------------
Total comprehensive (loss) / income,
net of tax (6,217) 4,861 5,683
----------- ----------- ---------------
Interim Group Balance Sheet
as at 30(th) June 2019
Unaudited Audited
Six Months Ended Year Ended
30(th) 30(th) 31(st) December
June June 2018
2019 2018
Note GBP'000 GBP'000 GBP'000
---------- ---------- ----------------
Non-current assets
Goodwill 159,724 159,226 159,723
Other intangible assets 31,438 32,296 31,960
Property, plant and equipment 50,154 16,971 16,866
Financial assets 11 9,602 26,032 11,566
Investments in joint ventures and
associates 12,187 8,448 13,230
Contract assets 813 - 959
---------- ---------- ----------------
Total non-current assets 263,918 242,973 234,304
---------- ---------- ----------------
Current assets
Trade and other receivables 43,438 40,006 38,650
Contract assets 253 - 262
Current tax asset 1,500 - -
Cash and cash equivalents 4,984 516 2,405
Total current assets 50,175 40,522 41,317
---------- ---------- ----------------
Total assets 314,093 283,495 275,621
---------- ---------- ----------------
Current liabilities
Financial liabilities 12 (20,601) (10,226) (10,455)
Trade and other payables (58,826) (55,359) (63,980)
Current tax liabilities - (1,892) (2,688)
Provisions for liabilities 13 (5,734) (8,104) (6,616)
---------- ---------- ----------------
Total current liabilities (85,161) (75,581) (83,739)
---------- ---------- ----------------
Non-current liabilities
Financial liabilities 12 (90,375) (52,803) (41,156)
Deferred tax liability (2,634) (2,429) (2,189)
Provisions for liabilities 13 (6,052) (6,681) (5,944)
---------- ---------- ----------------
Total non-current liabilities (99,061) (61,913) (49,289)
---------- ---------- ----------------
Total Liabilities (184,222) (137,494) (133,028)
---------- ---------- ----------------
Net assets 129,871 146,001 142,593
---------- ---------- ----------------
Equity
Share capital 208 208 208
Share premium account 5,629 5,629 5,629
Share-based payment reserve 4,671 4,382 4,129
Shares held by EBT (5,224) (5,304) (5,261)
Fair value reserve (13,032) 473 (11,727)
Retained earnings 137,619 140,431 149,615
---------- ---------- ----------------
Equity attributable to owners of parent 129,871 145,819 142,593
Non-controlling interests - 182 -
Total equity 129,871 146,001 142,593
---------- ---------- ----------------
Interim Group Cash Flow Statement
for the six months ended 30(th) June 2019
Unaudited Audited
Six Months Ended Year Ended
30(th)
June 30(th) 31(st) December
2019 June 2018 2018
Note GBP'000 GBP'000 GBP'000
--------- ----------- ----------------
(Loss) / profit before tax (4,564) 6,416 23,084
Adjustments for:
Exceptional operating items and contingent
consideration 12,135 866 4,829
Depreciation of tangible owned and
lease assets 7,513 2,772 5,674
Amortisation of intangible assets 2,236 2,718 5,301
Share-based payments 553 590 349
Loss / (profit) on disposal of fixed
assets 6 - (34)
Loss / (profit) from joint ventures 331 399 (259)
Finance income (5) - -
Finance costs 1,802 1,018 2,333
Revaluation of financial assets through
the income statement - (737) -
Realisation of non-cash consideration
received for operating activities - - 1,529
Operating cash flows before movements in
working capital 20,007 14,042 42,806
--------- ----------- ----------------
Movements in working capital
(Increase) / decrease in trade and
other receivables (4,222) (5,388) (3,815)
(Decrease) / increase in trade and
other payables (5,423) (6,235) (111)
(Decrease) / increase in provisions (836) (1,363) (3,608)
(10,481) (12,986) (7,534)
--------- ----------- ----------------
Cash generated from operations 9,526 1,056 35,272
Interest paid (725) (720) (1,359)
Income taxes paid (2,685) (3,662) (6,875)
Exceptional costs paid (6,662) - (3,310)
Net cash generated from operating activities (546) (3,326) 23,728
--------- ----------- ----------------
Cash flows used in investing activities
Cash acquired on purchase of subsidiary
undertaking - 6,944 6,944
Acquisitions of subsidiaries and other
businesses (1,300) (6,507) (7,732)
Payment of contingent consideration 12 (133) (1,306) (1,392)
Investment in joint ventures and associates - - (4,100)
Investment in financial assets 11 (1,750) (13) (13)
Cash received on sale of financial
assets 1,015 - -
Rental receipts 33 - -
Purchase of property, plant and equipment
and intangible assets (2,154) (2,055) (5,877)
Proceeds from sale of property, plant
and equipment - - 156
Net cash (expended) / generated on
investing activities (4,289) (2,937) (12,014)
--------- ----------- ----------------
Drawdown of loans 12 22,500 16,521 4,521
Refinance costs - (250) (250)
Repayment of loan notes 12 - (2,000) (2,000)
Payment of deferred consideration (2,000) - -
Proceeds from the exercise of share
options 26 1 20
Repayments of lease liabilities (6,027) - -
Dividends paid (7,085) (7,493) (11,600)
Net cash expended in financing activities 7,414 6,779 (9,309)
--------- ----------- ----------------
Net increase / (decrease) in cash and
cash equivalents 2,579 516 2,405
--------- ----------- ----------------
Cash and cash equivalents at the end
of the period / year 4,984 516 2,405
--------- ----------- ----------------
Interim Group Statement of changes in equity
Unaudited - for the six months ended 30(th) June 2019
Share Share- based
Share premium payment Shares held Fair value Retained
capital account reserve by EBT* Reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- ------------- ------------- ------------- ------------- ------------- --------
At 1(st) January
2019 208 5,629 4,129 (5,261) (11,727) 149,615 142,593
Adjustment on
initial
application of
IFRS 16 - - - - - - -
------------- ------------- ------------- ------------- ------------- ------------- --------
Revised opening
balance at 1(st)
January 2019 208 5,629 4,129 (5,261) (11,727) 149,615 142,593
------------- ------------- ------------- ------------- ------------- ------------- --------
Revaluation of
financial assets - - - - (3,006) - (3,006)
Disposal of
financial asset - - - - 1,701 (1,701) -
Other
comprehensive
income for the
period - - - - (1,305) (1,701) (3,006)
Loss for the
period - - - - - (3,211) (3,211)
Total
comprehensive
income for
the period - - - - (1,305) (4,912) (6,217)
Exercise of
options - - (11) 37 - 1 27
Share-based
payments - - 553 - - - 553
Dividend
payment - - - - - (7,085) (7,085)
At 30(th) June
2019 208 5,629 4,671 (5,224) (13,032) 137,619 129,871
------------- ------------- ------------- ------------- ------------- ------------- --------
During the six month period to 30(th) June 2019 a total of
10,672 share options were exercised relating to LSL's various share
option schemes resulting in the shares being sold by the
Trust. LSL received GBP26,000 on exercise of these options.
*Treasury Shares have been renamed to Shares held by EBT.
Interim Group Statement of changes in equity
Unaudited for the six months ended 30(th) June 2018
Share- Shares
Share based held Fair
Share premium payment by value Retained Total Non-controlling
capital account reserve EBT* 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(st)
January 2018 208 5,629 3,802 (5,317) 494 143,578 148,394 182 148,576
--------- --------- -------- -------- --------- ------------ -------- ----------------- ------------
Adjustment on
initial
application of
IFRS 15 - - - - - (534) (534) - (534)
Adjustment on
initial
application of
IFRS 9 - - - - (21) 21 - - -
Revised opening
balance 208 5,629 3,802 (5,317) 473 143,065 147,860 182 148,042
Other
comprehensive
income for the
period - - - - - - - - -
Profit for the
period - - - - - 4,861 4,861 - 4,861
Total
comprehensive
income for
the period - - - - - 4,861 4,861 - 4,861
Exercise of
options - - (10) 13 - (2) 1 - 1
Share-based
payments - - 590 - - - 590 - 590
Dividend
payment - - - - - (7,493) (7,493) - (7,493)
At 30(th) June
2018 208 5,629 4,382 (5,304) 473 140,431 145,819 182 146,001
--------- --------- -------- -------- --------- ------------ -------- ----------------- ------------
During the six month period to 30(th) June 2018 a total of 3,661
share options were exercised relating to LSL's various share option
schemes resulting in the shares being sold by the Trust. LSL
received GBP1,000 on exercise of these options.
* Treasury Shares have been renamed to Shares held by EBT.
Interim Group Statement of changes in equity
Audited for the year ended 31(st) December 2018
Share-
Share based Shares Fair
Share premium payment held by value Retained Total Non-controlling
capital account reserve EBT 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(st)
January 2018 208 5,629 3,802 (5,317) 494 143,578 148,394 182 148,576
--------- --------- -------- ----------- --------- ---------- --------- ----------------- ---------
Adjustment on
initial
application of
IFRS 15 - - - - - (434) (434) - (434)
Adjustment on
initial
application of
IFRS 9 - - - - (21) 21 - - -
Revised opening
balance 208 5,629 3,802 (5,317) 473 143,165 147,960 182 148,142
Other
comprehensive
income for the
period
Revaluation of
financial assets - - - - (12,200) - (12,200) - (12,200)
Profit for the
period - - - - - 17,883 17,883 - 17,883
Total
comprehensive
(loss)/income
for the
period - - - - (12,200) 17,883 5,683 - 5,683
Exercise of
options - - (22) 56 - (15) 19 - 19
Share-based
payments - - 349 - - - 349 - 349
Acquisition of
minority
interest - - - - - 182 182 (182) -
Dividend
payment - - - - - (11,600) (11,600) - (11,600)
At 31(st)
December 2018 208 5,629 4,129 (5,261) (11,727) 149,615 142,593 - 142,593
--------- --------- -------- ----------- --------- ---------- --------- ----------------- ---------
During the year ended 31(st) December 2018, the Trust acquired
nil LSL Shares. During the period 15,966 share options were
exercised relating to LSL's various share option schemes resulting
in the Shares being sold by the Trust. LSL received GBP20,000 on
exercise of these options.
Notes to the Interim Condensed Group Financial Statements
The Interim Condensed Group Financial Statements for the period
ended 30(th) June 2019 were approved by the LSL Board on 30(th)
July 2019. The interim Financial Statements are not the statutory
accounts. The financial information for the year ended 31(st)
December 2018 is extracted from the audited statutory accounts for
the year ended 31(st) December 2018, which have been filed with the
Registrar of Companies. The auditor's report was unqualified and
did not contain an emphasis of matter paragraph, and did not make a
statement under section 498 (2) or (3) of the Companies Act
2006.
1. Basis of preparation
The Interim Condensed Consolidated Group Financial Statements
for the period ended 30(th) June 2019 have been prepared in
accordance with IAS 34 Interim Financial Reporting, and should be
read in conjunction with the Group's annual Financial Statements as
at 31(st) December 2018 which are included in LSL's Annual Report
and Accounts 2018.
The Interim Condensed Consolidated Group Financial Statements do
not include all the information and disclosures required for a
complete set of IFRS Financial Statements. However, selected
explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in the
Group's financial position and performance since the last annual
Financial Statements
This is the first set of the Group's Financial Statements where
IFRS 16 (Leases) has been applied. Changes to significant
accounting policies are disclosed in Note 2 to these Financial
Statements.
2. Changes in significant accounting policies
Except as described below, the accounting policies adopted in
the preparation of the Interim Condensed Consolidated Group
Financial Statements are consistent with those followed in the
preparation of the Group's annual Financial Statements for the year
ended 31(st) December 2018.
The changes in the accounting policies are also expected to be
reflected in the Group's Consolidated Financial Statements for the
year ending 31(st) December 2019.
The Group has initially adopted IFRS 16 Leases from 1(st)
January 2019, replacing the current lease guidance including IAS
17.
Previously all of the Group's leases were accounted for as
operating leases (see Note 25 of the 2018 Group Annual Report and
Accounts). Both properties and vehicles fall under the scope of
IFRS 16, with properties being the most significant by value.
The standard permits either a full retrospective or a modified
retrospective approach for the adoption. The Group has adopted the
standard using the modified retrospective approach, with the right
of use asset being equal to the lease liability at the point of
original recognition. Therefore, the cumulative impact of the
adoption is recognised in retained earnings as of 1(st) January
2019 and the comparatives are not restated.
As a lessee
Under IFRS 16 Leases are accounted for on the right of use
model. The Income Statement presentation and expense recognition
pattern is similar to that required for finance leases by IAS 17
previously adopted by the Group.
At inception, the Group assesses whether a contract contains a
lease. This assessment involved the exercise of judgement about
whether the Group obtains substantially all the economic benefits
from the use of that asset, and whether the Group has the right to
direct the use of the asset.
IFRS 16 permits lessees to elect not to apply the recognition
requirements to short term leases and leases for which the
underlying asset is of low value. The Group has elected not to
recognise short term leases of less than one year at inception and
low value leases which will continue to be reflected in the Income
Statement. This will be the ongoing policy adopted by the Group.
There are no right of use assets or lease liabilities recognised
for these leases, and the expense is recognised in the Income
Statement on a straight line basis.
In addition the Group has chosen to apply the relief option,
which allows it to adjust the right of use by the amount of any
provision for onerous leases recognised in the balance sheet
immediately before the date of initial application.
As a lessor
At inception, the Group assesses whether a contract contains a
lease. This assessment involved the exercise of judgement about
whether the Group obtains substantially all the economic benefits
from the use of that asset, and whether the Group has the right to
direct the use of the asset.
When the Group is an intermediate lessor, it accounts for its
interests in the head lease and the sub lease separately. It
assesses the lease classification of a sub-lease with reference to
the asset arising from the head lease, not with reference to the
underlying asset. If the head lease is a short-term lease to which
the Group has applied the short-term lease exemption, then the sub
lease will follow that classification and be treated as an
operating lease.
Where the Group is an intermediate lessor in a sublease, IFRS 16
has resulted in the recognition of a financial asset, where the
sublease was previously classified as an operating lease under IAS
17.
The following reconciliation to the opening balance for IFRS 16
lease liabilities as at 1(st) January 2019 is based upon the
operating lease obligations at 31(st) December 2018:
Lease liabilities
GBP'000
---------
Operating lease obligations at 31(st) December 2018 39,909
Relief option for short term leases (165)
Relief option for leases of low value assets (245)
Extension and termination options reasonably certain to be
exercised 9,065
Other 447
---------
Operating lease obligations as at 31(st) December 2018 49,011
Discounted using the incremental borrowing rate at 1(st) January
2019 (5,578)
Lease liabilities recognised at 1(st) January 2019 43,433
---------
Leases are shown as follows in the balance sheet and Income
statement for the period ending 30th June 2019:
Consolidated balance sheet GBP'000
Non-current assets
Property, plant and equipment 36,436
Financial assets 307
---------
Current liabilities
Financial Liabilities (12,273)
---------
Non-current liabilities
Financial Liabilities (26,993)
---------
Consolidated income statement
Depreciation (5,030)
Finance Income 5
Finance costs (775)
---------
Short term leases of less than twelve months at inception and
low value leases are charged to the Income statement evenly over
the life of the lease. In the six month period ending 30(th) June
2019. GBP2,318,000 relating to short period and low value leases
were included in Operating expenses.
3. Judgements and estimates
The preparation of financial information in conformity with IFRS
as adopted by the 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
on-going 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 as those as at 31(st) December 2018, with the
exception of the adoption of IFRS 16: Leases which the Group
considers to be a key judgement given the judgement required in
assessing the appropriate treatment of individual leases. These
assumptions are discussed in detail in the Group's Annual Report
and Accounts 2018. The assumptions discussed are as follows:
Judgements
Areas of judgement that have the most significant effect on the
amounts recognised in the consolidated Financial Statements
are:
-- Intangible assets
-- Valuation of financial assets
-- Deferred tax
-- Exceptional items
-- Identification of leases
Estimates
The key assumptions affected by future uncertainty that have
significant risks of causing material adjustment to the carrying
value of assets and liabilities within the next financial year
are:
-- Professional Indemnity (PI) claims
-- Lapse Provision
-- Valuations in acquisitions
-- Impairment of intangible assets
-- Contingent consideration
-- Income tax
Going concern
The Group meets its day to day working capital requirements
through a revolving credit facility. The Group currently has a
GBP100 million credit facility which was extended in January 2018
and will now expire in May 2022. As shown in Note 12 to these
interim condensed consolidated Group Financial Statements, the
Group has utilised GBP57 million of the facility leaving GBP43
million of available undrawn committed borrowing facilities in
respect of which all conditions precedent had been met. The Group's
forecasts and projections, taking account of reasonably possible
changes in trading performance, show that the Group is expected to
operate within the terms of its current facilities and that
therefore it is appropriate to use the going concern basis of
preparation for this financial information.
4. Revenue
The Group's operations and main revenue streams are those
described in the latest Annual Financial Statements.
Disaggregation of Revenue
Set out below is the disaggregation of the Group's revenue from
contracts with customers:
Unaudited Six Months ended 30(th) June 2019
Surveying
Residential and
Sales Asset Financial Valuation
exchange Lettings Management Services Services Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Timing of
revenue
recognition
Services
transferred
at a point
in
time 27,575 18,587 1,762 41,108 42,669 6,492 138,193
Services
transferred
over time - 15,234 688 - - - 15,922
--------------- ------------ -------------- ------------- ------------- ----------- -------------
Total
revenue
from
contracts
with
customers 27,575 33,821 2,450 41,108 42,669 6,492 154,115
--------------- ------------ -------------- ------------- ------------- ----------- -------------
Unaudited Six Months ended 30(th) June 2018
Surveying
Residential and
Sales Asset Financial Valuation
exchange Lettings Management Services Services Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Timing of
revenue
recognition
Services
transferred
at a point
in
time 32,873 19,756 2,784 40,798 31,060 8,012 135,283
Services
transferred
over time - 17,503 105 - - - 17,608
---------------- ------------- --------------- -------------- ------------- ------------ -------------
Total
revenue
from
contracts
with
customers 32,873 37,259 2,889 40,798 31,060 8,012 152,891
---------------- ------------- --------------- -------------- ------------- ------------ -------------
Audited year ended 31(st) December 2018
Surveying
Residential Asset Financial and
Sales Lettings Management Services Valuation Other Total
exchange GBP'000 GBP'000 GBP'000 Services GBP'000 GBP'000
GBP'000 GBP'000
Timing of
revenue
recognition
Services
transferred
at a point
in
time 69,854 40,696 3,906 87,427 69,798 15,522 287,203
Services
transferred
over time - 35,880 1,557 - - - 37,437
---------------- ------------- --------------- -------------- ------------- ------------ ------------
Total
revenue
from
contracts
with
customers 69,854 76,576 5,463 87,427 69,798 15,522 324,640
---------------- ------------- --------------- -------------- ------------- ------------ ------------
5. Segment analysis of revenue and operating profit
To reflect the increased importance of LSL's Financial Services
businesses, the LSL Board has updated the Group segmental reporting
effective from 1(st) January 2019. For the six months ended 30(th)
June 2019, LSL reports three segments: Estate Agency; Financial
Services; and Surveying and Valuation Services:
-- The Estate Agency and Related Services segment provides
services related to the sale and letting of residential properties.
It operates a network of high street branches. As part of this
process, the Estate Agency Division also provides marketing and
arranges conveyancing services. In addition, it provides
repossession and asset management services to a range of lenders.
Following the change to LSL's segment reporting, the Estate Agency
Division receives a commercially agreed commission payment from the
Financial Services Division (from Embrace Financial Services and
First2Protect). This arrangement reflects Financial Services income
generated by the Estate Agency Division.
-- The Financial Services Segment arranges mortgages for a
number of lenders and arranges pure protection and general
insurance policies for a panel of insurance companies via the
Estate Agency branches, PRIMIS, Embrace Financial Services,
First2Protect, Mortgages First, Insurance First Brokers and Linear
Financial Services and RSC New Homes.
-- The Surveying and Valuation Services segment provides a
valuations and professional surveying service of residential
properties to various lenders and individual customers.
The Management Team 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 Group Financial Statements.
Head Office costs, Group financing (including finance costs and
finance income) and income taxes are managed on a Group basis and
are not allocated to operating segments.
The Financial Services segment incorporates all LSL's Financial
Services businesses. The Estate Agency segment primarily
incorporates the results from the Estate Agency branch networks
(Your Move, Reeds Rains, LSLi and Marsh & Parsons) and Asset
Management. The Surveying and Valuation Services segment is
unchanged from the previous segment reporting.
Operating segments
The following tables presents revenue and profit information
regarding the Group's operating segments for the six months ended
30(th) June 2019, for the six months ended 30(th) June 2018 and for
the year ended 31(st) December 2018.
Six months ended 30(th) June 2019
Estate Agency Surveying
and Related Financial and Valuation
Services Services Services Unallocated Total
Income statement information GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ------------- ---------------- ------------- -----------
Revenue from external
customers 70,338 41,108 42,669 - 154,115
Intersegment revenue 6,797 (6,797) - - -
--------------- ------------- ---------------- ------------- -----------
Total revenue 77,135 34,311 42,669 - 154,115
--------------- ------------- ---------------- ------------- -----------
Segmental result:
- before exceptional
costs, contingent
consideration, amortisation
and
share-based payments 4,017 4,326 6,318 (2,504) 12,157
--------------- ------------- ---------------- ------------- -----------
- after exceptional costs,
contingent consideration,
amortisation and
share-based payments (10,354) 4,020 6,342 (2,775) (2,767)
--------------- ------------- ---------------- -------------
Finance costs (1,797)
-----------
Profit before tax (4,564)
Taxation 1,353
Profit for the period (3,211)
-----------
Six months ended 30(th) June 2019 (continued)
Estate Agency Surveying
and Related Financial and Valuation
Services Services Services Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ----------- -------------- ----------- ---------
Balance sheet information
Segment assets - intangible 160,382 18,805 11,975 - 191,162
Segment assets - other 85,316 12,271 17,007 8,337 122,931
--------------- ----------- -------------- ----------- ---------
Total Segment assets 245,698 31,076 28,982 8,337 314,093
Total Segment liabilities (73,416) (22,383) (28,741) (59,682) (184,222)
--------------- ----------- -------------- ----------- ---------
Net assets/(liabilities) 172,282 8,693 241 (51,345) 129,871
--------------- ----------- -------------- ----------- ---------
The joint venture interests of the Group are recorded in the
Estate Agency and Related Services segment, with the associate
interest recorded in the Financial Services.
Unallocated net liabilities comprise plant and equipment
GBP12,000, IFRS 16 plant and equipment GBP63,000, other assets
GBP1,779,000, other taxes GBP49,000, accruals GBP(35,000), IFRS 16
financial liabilities GBP(63,000), deferred and current tax
GBP(1,134,000), and revolving credit facility overdraft
GBP(52,016,000).
Six months ended 30(th) June 2018
Estate Agency
and Related Financial Surveying
Services Services and Valuation
(Restated)* (Restated)* Services Unallocated Total
Income statement information GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ------------- --------------- --------------- -----------
Revenue from external customers 81,033 40,798 31,060 - 152,891
Intersegment revenue 7,843 (7,843) - - -
--------------- ------------- --------------- --------------- -----------
Total revenue 88,876 32,955 31,060 - 152,891
--------------- ------------- --------------- --------------- -----------
Segmental result:
- before exceptional costs,
contingent
consideration, amortisation
and
share-based payments 1,388 3,616 8,604 (1,998) 11,610
--------------- ------------- --------------- --------------- -----------
- after exceptional costs,
contingent consideration,
amortisation and
share-based payments (2,513) 2,671 9,496 (2,220) 7,434
--------------- ------------- --------------- ---------------
Finance costs (1,018)
-----------
Profit before tax 6,416
Taxation (1,555)
-----------
Profit for the period 4,861
-----------
Balance sheet information
Segment assets - intangible 160,231 18,968 12,323 - 191,522
Segment assets - other 72,826 8,178 9,194 1,775 91,973
-------- -------- -------- -------- ---------
Total Segment assets 233,057 27,146 21,517 1,775 283,495
Total Segment liabilities (39,505) (22,202) (24,165) (51,622) (137,494)
-------- -------- -------- -------- ---------
Net assets / (liabilities) 193,552 4,944 (2,648) (49,847) 146,001
-------- -------- -------- -------- ---------
*The prior period has been restated to reflect the current
segmental reporting which adjusts the previous Estate Agency and
Related Services segment to remove all of LSL's Financial Services
businesses to create the current Financial Services segment.
The joint venture interests of the Group are recorded in the
Estate Agency and Related Services segment, with the associate
interest recorded in the Financial Services.
Unallocated net liabilities comprise plant and equipment
GBP6,000, other assets GBP1,746,000, accruals GBP(307,000),
financial liabilities GBP(471,000), deferred and current tax
liabilities GBP(4,321,000), and revolving credit facility overdraft
GBP(46,500,000).
Year ended 31(st) December 2018
Estate Agency
and Related Financial Surveying
Services Services and Valuation
(Restated)* (Restated)* Services Unallocated Total
Income Statement information GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------------- ---------------- ------------ ----------
Revenue from external
customers 167,415 87,427 69,798 - 324,640
Intersegment revenue 16,424 (16,424) - - -
---------------- -------------- ---------------- ------------ ----------
Total revenue 183,839 71,003 69,798 - 324,640
---------------- -------------- ---------------- ------------ ----------
Segmental result:
- before exceptional
costs, contingent consideration,
amortisation and
share-based payments 11,107 9,461 20,426 (5,098) 35,896
---------------- -------------- ---------------- ------------ ----------
- after exceptional
costs, contingent consideration,
amortisation and share-based
payments 3,605 7,996 19,022 (5,206) 25,417
---------------- -------------- ---------------- ------------
Finance costs (2,333)
----------
Profit before tax 23,084
Taxation (5,201)
----------
Profit for the year 17,883
----------
Balance sheet information
Segment assets - intangible 160,944 18,568 12,171 - 191,683
Segment assets - other 59,014 9,429 11,659 3,836 83,938
---------------- -------------- ---------------- ------------ ----------
Total Segment assets 219,958 27,997 23,830 3,836 275,621
Total Segment liabilities (40,100) (24,789) (27,828) (40,311) (133,028)
---------------- -------------- ---------------- ------------ ----------
Net assets / (liabilities) 179,858 3,208 (3,998) (36,475) 142,593
---------------- -------------- ---------------- ------------ ----------
*The prior period has been restated to reflect the current
segmental reporting which adjusts the previous Estate Agency and
Related Services segment to remove all of LSL's Financial Services
businesses to create the current Financial Services segment.
The joint venture interests of the Group are recorded in the
Estate Agency and Related Services segment, with the associate
interest recorded in the Financial Services.
Unallocated net liabilities comprise plant and equipment
GBP15,000, other assets GBP3,822,000, accruals GBP(922,000),
deferred and current tax liabilities GBP(4,890,000), and revolving
credit facility overdraft GBP(34,500,000).
6. Adjusted performance measures
In addition to the various performance measures defined under
IFRS, the Group reports a number of alternative performance
measures that are designed to assist with the understanding of the
underlying performance of the Group. The Group seeks to present a
measure of underlying performance which is not impacted by the
inconsistency in profile of exceptional gains and exceptional
costs, contingent consideration, amortisation of intangible assets
and share-based payments. Share based payments are excluded from
the underlying performance due to the fluctuations that can impact
the charge, such as lapses and the level of annual grants.
The four adjusted measures reported by the Group are:
-- Group Underlying Operating Profit
-- Adjusted Basic EPS
-- Adjusted diluted EPS
-- Group Adjusted EBITDA
The amortisation of intangible assets is not representative of
the underlying costs of the business, and is therefore excluded
from adjusted earnings.
The Directors consider that these adjusted measures shown above
give a better and more consistent indication of the Group's
underlying performance. These measures form part of management's
internal financial review and are contained within the monthly
management information reports reviewed by the Board.
The calculations of adjusted basic and adjusted diluted EPS are
given in Note 8 to these Interim Condensed Consolidated Group
Financial Statements and a reconciliation of Group Underlying
Operating Profit is shown below:
30(th) 30(th) 31(st)
June June December
2019 2018 2018
GBP'000 GBP'000 GBP'000
-------- ---------- ----------
Group operating (loss) / profit (2,767) 7,434 25,417
Share-based payments 553 590 349
Amortisation of intangible assets 2,236 2,718 5,301
Exceptional gains (593) (1,189) (2,188)
Exceptional costs 13,380 - 5,234
Contingent consideration charge (652) 2,057 1,783
-------- ---------- ----------
Group Underlying Operating Profit 12,157 11,610 35,896
Depreciation on owned property, plant
and equipment 2,483 2,772 5,674
Depreciation on leased property, plant 5,030 - -
and equipment
-------- ---------- ----------
Group Adjusted EBITDA 19,670 14,382 41,570
-------- ---------- ----------
7. Earnings per share (EPS)
Basic EPS amounts are calculated by dividing net profit for the
period attributable to ordinary equity holders of the parent by the
weighted average number of Ordinary Shares outstanding during the
period.
Diluted EPS amounts are calculated by dividing the net profit
attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the
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(th) June
Weighted 2019 Weighted 2018
Profit average Per share Profit average Per share
after number amount after number amount
tax of shares Pence tax of shares Pence
GBP'000 GBP'000
Basic EPS (3,211) 102,666,615 (3.1) 4,861 102,646,794 4.7
Effect of dilutive
share options 984,381 1,038,545
Diluted EPS (3,211) 103,650,996 (3.1) 4,861 103,685,339 4.7
---------- ------------ ---------- ------------
Year ended 31st December 2018
Weighted 2018
Profit average Per share
after tax number of amount
GBP'000 shares Pence
---------- ----------- ------------
Basic EPS 17,883 102,653,447 17.4
Effect of dilutive
share options 839,935
Diluted EPS 17,883 103,493,382 17.3
---------- -----------
Adjusted basic and diluted EPS
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(th) 31(st) December
30(th) June 2018
June 2019 2018 GBP'000
GBP'000 GBP'000
Group operating profit before contingent
consideration, exceptional items, share-based
payments and amortisation (excluding non-controlling
interest) 12,157 11,610 35,896
Net finance costs (excluding exceptional
items and contingent consideration items) (788) (741) (1,401)
Normalised taxation (2,160) (2,065) (6,554)
Adjusted profit after tax before exceptional
items, share-based payments and amortisation 9,209 8,804 27,941
-------------- ------------ -------------------
Six months ended 30th June
Adjusted Adjusted
profit Weighted 2019 profit Weighted 2018
after average Per share after average Per share
tax number amount tax number amount
GBP'000 of shares Pence GBP'000 of shares Pence
Adjusted basic EPS 9,209 102,666,615 9.0 8,804 102,646,794 8.6
Effect of dilutive
share options 984,381 1,038,545
Adjusted diluted EPS 9,209 103,650,996 8.9 8,804 103,685,339 8.5
--------- ------------ --------- ------------
Year ended 31st December 2018
Adjusted
profit Weighted 2018
after average Per share
tax number amount
GBP'000 of shares Pence
Adjusted basic EPS 27,941 102,653,447 27.2
Effect of dilutive
share options 839,935
Adjusted diluted EPS 27,941 103,493,382 27.0
--------- -------------
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 19.00% (30(th) June 2018: 19.00% and 31(st) December 2018:
19.00%)
8. Exceptional items
Six months ended Year Ended
30(th) 30(th) 31(st) December
June June 2018
2019 2018
GBP'000 GBP'000 GBP'000
--------- -------- ----------------
Exceptional costs:
Branch / centre closure and restructuring
costs including redundancy costs 13,081 - 1,993
Transition costs relating to surveying
contracts 299 - 3,241
--------- -------- ----------------
13,380 - 5,234
--------- -------- ----------------
Exceptional gains:
--------- -------- ----------------
Exceptional gain in relation to historic
Professional Indemnity costs 593 1,189 2,188
--------- -------- ----------------
Exceptional costs
Initial non-recurring transition and integration costs of
GBP0.3m (June 2018: GBPNil, December 2018: GBP3.2m) relate to the
contract to supply surveying and valuation services to Lloyds Bank
plc.
In the Estate Agency Division there were GBP13.1m (June 2018:
GBPNil, December 2018: GBP2.0m) of non-recurring and material
exceptional costs relating to the planned Estate Agency
branch/centre closures and restructuring costs. The most
significant costs incurred are redundancy costs and leasehold
property costs with the balance including non-cash fixed asset
write-offs.
Exceptional Gains
Provision for professional indemnity (PI) claims and insurance
claim notification
In 2019 the Group has continued to make positive progress in
settling historic PI claims resulting in a release of the provision
of GBP0.6m (June 2018: GBP1.2m, December 2018: GBP2.2m)
9. Dividends paid and proposed
A final dividend in respect of the year ended 31(st) December
2018, of 6.9 pence per share (Year ended December 2017: 7.3 pence
per share), amounting to GBP7.1 million was paid in the period
ended 30(th) June 2019. An interim dividend has been announced
amounting to 4.0 pence per share (June 2018: 4.0 pence). Interim
dividends are recognised when paid.
10. Taxation
The major components of income tax charge in the interim Group
income statements are:
Six Months Ended Year Ended
30(th)
30(th) June June 31(st) December
2019 2018 2018
GBP'000 GBP'000 GBP'000
------------- -------- ---------------
UK corporation tax:
- current year credit / (charge) 1,503 (1,689) (5,931)
- adjustment in respect of prior years - - 205
------------- ---------------
1,503 (1,689) (5,726)
Deferred tax:
Origination and reversal of temporary differences (150) 134 322
Adjustment in respect of prior year - 203
------------- -------- ---------------
(150) 134 525
------------- -------- ---------------
Total tax credit / (charge) in the income
statement 1,353 (1,555) (5,201)
------------- -------- ---------------
The headline UK rate of corporation tax will decrease from 19%
to 17% effective from 1(st) April 2020, and the future rate of 17%
is the rate at which deferred tax has been provided (2018: 17%).
Corporation tax is recognised at a rate of 19% for the current
period (2018: 19%), although this will reduce to a blended rate of
17.5% for the year ended 31(st) December 2020.
Deferred tax charged directly to other comprehensive income
relating to the revaluation of financial assets is GBPNil. In the
six months ended 30(th) June 2018 GBPNil and year ended 31(st)
December 2018 GBPNil.
11. Financial assets
Six Months Ended Year Ended
30(th)
30(th) June June 31(st) December
2019 2018 2018
GBP'000 GBP'000 GBP'000
----------- ------- ---------------
Convertible loan notes - at fair value
Unsecured convertible loan notes - interest
free 750 - -
Secured convertible loan notes - 5% 1,000 - -
----------- ------- ---------------
1,750 - -
Investment in equity instruments - at fair
value
Unquoted shares at fair value 7,545 23,766 11,566
Quoted shares at fair value - 2,266 -
7,545 26,032 11,566
----------- ------- ---------------
Other financial instruments - at fair value
----------- ------- ---------------
IFRS 16 lessor financial assets 307 - -
----------- ------- ---------------
9,602 26,032 11,566
Opening balance 11,566 25,282 25,282
Adjustment on initial recognition of IFRS
16 329 - -
----------- ------- ---------------
11,895 25,282 25,282
Acquisitions 1,750 13 13
Disposals (1,037) - (2,266)
Fair value adjustment recorded through profit
and loss - 737 737
Fair value adjustment recorded through reserves (3,006) - (12,200)
Closing balance 9,602 26,032 11,566
----------- ------- ---------------
Non-current assets 9,602 26,032 11,566
Current assets - - -
----------- ------- ---------------
9,602 26,032 11,566
----------- ------- ---------------
Convertible loan notes at fair value
LSL has subscribed for GBP1,000,000 of Convertible Secured
Preference Loan Notes with Mortgage Gym Limited. Interest on the
Convertible Secured Preference Loan Notes is 5% per annum. The
final repayment date of the Convertible Secured Preference Loan
Notes is 5(th) June 2024. Repayment may take place before this
date. The Convertible Secured Preference Loan Notes are secured by
way of debenture.
LSL has subscribed for GBP750,000 of Unsecured Convertible Loan
Notes with Yopa Property Limited. The Unsecured Convertible Loan
Notes do not receive any interest. The final repayment date of the
Unsecured Convertible Loan Notes is 16(th) May 2020. Repayment may
take place before this date on the occurrence of certain
events.
Investment in equity instruments
The financial assets include unlisted equity instruments which
are carried at fair value. Fair value is judgemental given the
assumptions required and have been valued using a level 3 valuation
techniques (see Note 31 to the December 2018 Group Financial
Statements).
Vibrant Energy Matters Limited (VEM)
The carrying value of the Group's investment in VEM at 30(th)
June 2019 has been assessed as GBP722,000 (June 2018: GBP722,000
and December 2018: GBP722,000).
NBC Property Master Limited
The carrying value of the Group's investment at 30(th) June 2019
has been assessed as GBP78,000 (June 2018: GBP78,000 and December
2018: GBP78,000).
Global Property Ventures Limited
The carrying value of the Group's investment in Global Property
Ventures Limited at 30(th) June 2019 has been assessed as
GBP250,000 (June: 2018: GBP250,000 and December 2018:
GBP250,000).
eProp Services plc
In June 2019 the Group disposed of 100% of it's holding in eProp
Services plc for a consideration of GBP1,015,000. At the 30(th)
June 2018 and 31(st) December 2018 the investment was assessed as
GBP2,716,000. There were no tax effects resulting from the
disposal.
Yopa Property Limited
The carrying value of the Group's investment in Yopa at 30(th)
June 2019 has been assessed as GBP6,500,000 (June 2018:
GBP20,000,000 and December 2018: GBP7,800,000). The fair value of
the Group's investment in Yopa has been assessed by using Level 3
techniques. This has led to the recognition of a fair value
impairment of GBP1,305,000 (June 2018:GBPNil and 2018:
GBP12,200,000) which has been recognised in the Statement of Other
Comprehensive Income.
12. Financial liabilities
Six Months Ended Year Ended
30(th)
30(th) June June 31(st) December
2019 2018 2018
GBP'000 GBP'000 GBP'000
----------- ------- ---------------
Current
IFRS 16 lessee financial liabilities 12,273 - -
Deferred consideration 86 1,929 1,998
Contingent consideration 8,242 8,297 8,457
20,601 10,226 10,455
----------- ------- ---------------
Non-current
Bank loans - revolving credit facility (RCF) 57,000 46,500 34,500
IFRS 16 lessee financial liabilities 26,993 - -
Deferred consideration - 71 75
Contingent consideration 6,382 6,232 6,581
90,375 52,803 41,156
----------- ------- ---------------
Unsecured loan notes
A variation of the 2011 loan notes was issued as a part of the
satisfaction of the consideration of Marsh & Parsons. The first
instalment was paid in July 2016 and the final payment of GBP2.0m
was paid in March 2018.
Contingent consideration -
Six Months Ended Year Ended
30(th)
30(th) June June 31(st) December
2019 2018 2018
GBP'000 GBP'000 GBP'000
----------- ------- ---------------
LSLi contingent consideration 593 449 488
LMS - 1 -
Group First Limited 8,917 9,384 9,476
RSC 4,878 4,395 4,751
Other 236 300 323
----------- ------- ---------------
14,624 14,529 15,038
----------- ------- ---------------
Opening balance 15,038 9,059 9,059
Cash paid (133) (1,306) (1,392)
Acquisition 144 4,445 4,773
Amounts recorded though income statement (425) 2,331 2,598
----------- ------- ---------------
Closing balance 14,624 14,529 15,038
----------- ------- ---------------
GBP593,000 (June 2018: GBP449,000 and December 2018: GBP488,000)
of contingent consideration relates to amounts owed to third
parties in relation to the acquisition of LSLi and certain of its
subsidiaries between 2012 and 2016. This is typically payable
between three and five years after the acquisition dates depending
on the profitability of those subsidiaries in the relevant
years.
GBP8,917,000 of contingent consideration relates to Group First
(June 2018: GBP9,284,000 December 2018: GBP9,476,000). The
additional consideration will be calculated using earnings
multiples of between five and six times EBITA (plus excess cash in
the business) and has been capped at a maximum of GBP25.0m.
GBP4,878,000 of contingent consideration relates to RSC New
Homes (June 2018: GBP4,395,000 and December 2018: GBP4,751,000).
The additional consideration will be calculated using earnings
multiples of between five and six times EBITA (plus excess cash in
the business) and has been capped at a maximum of GBP7,500,000.
During 2019 GBP2,133,000 (June 2018: GBP1,305,000 and December
2018: GBP1,392,000) of deferred and contingent consideration was
paid to third parties.
The table below shows the allocation of the contingent
consideration balance and income charge between the various
categories:
Six Months Ended Year Ended
30(th)
Contingent consideration balances relating 30(th) June June 31(st) December
to amounts accounted for as: 2019 2018 2018
GBP'000 GBP'000 GBP'000
----------- ------- ---------------
Put options over non-controlling interests - 1 -
Arrangement under IFRS 3 14,624 14,528 15,038
----------- ------- ---------------
Closing balance 14,624 14,529 15,038
----------- ------- ---------------
Contingent consideration profit and loss
impact in the period relating to amounts
accounted for as:
Remuneration - - -
Put options over non-controlling interests - - 2
Arrangement under IFRS 3 (652) 2,055 1,781
Unwinding of discount on contingent consideration 227 277 815
----------- ------- ---------------
(Credit) / charge (425) 2,332 2,598
----------- ------- ---------------
13. Provisions for liabilities
Six months ended 30(th) June:
2019 2018
Professional Professional
indemnity Onerous indemnity Onerous
claim provision leases Total claim provision leases Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------------- ----------- -------------------- ----------- -----------
Balance at 1(st)
January 12,430 130 12,560 15,916 210 16,126
Amount utilised (1,507) (474) (1,981) (482) (3) (485)
Amount released (593) - (593) (1,189) (70) (1,259)
Unwinding of
discount 15 - 15 21 - 21
Provided in the
period 520 1,265 1,785 382 - 382
Balance at
30(th)
June 10,865 921 11,786 14,648 137 14,785
-------------------- ------------- ----------- -------------------- ----------- -----------
Current 5,228 506 5,734 8,061 43 8,104
Non-current 5,637 415 6,052 6,587 94 6,681
10,865 921 11,786 14,648 137 14,785
-------------------- ------------- ----------- -------------------- ----------- -----------
Year ended 31(st) December 2018
Professional
indemnity Onerous
claim provision leases Total
GBP'000 GBP'000 GBP'000
-------------------- ----------- -----------
Balance at 1(st) January 15,916 210 16,126
Amount utilised (1,985) (85) (2,070)
Amount released (2,187) (55) (2,242)
Unwinding of discount 43 - 43
Provided in financial year 643 60 703
Balance at 31(st) December 12,430 130 12,560
-------------------- ----------- -----------
Current 6,525 91 6,616
Non-current 5,905 39 5,944
12,430 130 12,560
-------------------- ----------- -----------
The PI Cost provision is to cover the costs of claims relating
to valuation services for clients which are not covered by PI
insurance. The PI Costs provision includes amounts for claims
already received from clients, claims yet to be received and any
other amounts which may be payable as a result of legal disputes
associated with provision of valuation services.
The provision is the Directors' best estimate of the likely
outcome of such claims, taking account of the incidence of such
claims and the size of the loss that may be borne by the claimant,
after taking account of actions that can be taken to mitigate
losses. The provision will be utilised as individual claims are
settled and the settlement amount may vary from the amount provided
depending on the outcome of each claim. It is not possible to
estimate the timing of payment of all claims and therefore a
significant proportion of the provision has been classified as
non-current.
At 30(th) June 2019 the total provision for PI Costs was
GBP10.9m (December 2018: GBP12.4m). The Directors have considered
the sensitivity analysis on the key risks and uncertainties
discussed above.
Cost per claim
A substantial element of the PI Cost provision relates to
specific claims where disputes are on-going. These specific cases
have been separately assessed and specific provisions have been
made. The average cost per claim has been used to calculate the
IBNR. Should the costs to settle and resolve these claims and
future claims increase by 10%, an additional GBP1.1m would be
required.
Rate of claim
The IBNR assumes that the rate of claim for the high risk
lending period in particular reduces over time. Should the rate of
reduction be lower than anticipated and the duration extend,
further costs may arise. An increase of 30% in notifications in
excess of that assumed in the IBNR calculations would increase the
required provision by GBP0.1m.
Notifications
The Group has received a number of notifications which have not
deteriorated into claims or loss. Should the rate of deterioration
increase by 50%, an additional provision of less than GBP0.1m would
be required.
Onerous leases
The provision for lease obligations relates to obligations under
leases on vacant properties. The provision is expected to be fully
utilised by January 2021. The final outcome depends upon the
ability of the Group to sublet or assign the lease over the related
properties.
14. Analysis of Net Bank Debt
Six Months Ended Year Ended
30(th)
June 30(th) June 31(st) December
2019 2018 2018
GBP'000 GBP'000 GBP'000
-------- ----------- ---------------
Interest bearing loans and borrowings
* Current 20,601 10,226 10,456
* Non-current 90,375 52,803 41,156
-------- ----------- ---------------
110,976 63,029 51,612
Less: cash and short-term deposits (4,984) (516) (2,405)
IFRS 16 Lessee financial liabilities (39,266) - -
Less: deferred and contingent consideration (14,710) (16,529) (17,112)
-------- ----------- ---------------
Net Bank Debt at the end of the period 52,016 45,984 32,095
-------- ----------- ---------------
15. Financial instruments - risk management
The financial risks the Group faces and the methods used to
manage these risks have not changed since 31(st) December 2018.
Further details of the risk management policies of the Group are
disclosed in Note 31 of the Group's Financial Statements for the
year ended 31(st) December 2018.
The business is cash generative with a low level of maintenance
capital expenditure requirement. The Group remains committed to its
stated dividend policy of 30% to 40% of adjusted operating profit
after interest and tax. In addition, the Group's other main
priority is to generate cash to support its operations and to fund
any strategic acquisitions.
16. Fair values of financial assets and financial liabilities
There is no difference in the book amounts and fair values of
all the Group's financial instruments that are carried in these
interim condensed consolidated Group Financial Statements
Fair value hierarchy
As at 30(th) June 2019, the Group held the following financial
instruments measured at fair value. The Group uses the following
hierarchy for determining and disclosing the fair value of the
financial instruments by valuation technique:
-- Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;
-- Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable,
either directly or indirectly; and
-- Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable
market data.
30(th) June 2019 Total Level Level 2 Level 3
1
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Assets measured at fair value
Financial assets 9,295 - - 9,295
-------- -------- -------- --------
Liabilities measured at fair value
Contingent consideration 14,624 - - 14,624
-------- -------- -------- --------
30(th) June 2018 Total Level Level 2 Level 3
1
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Assets measured at fair value
Financial assets 26,032 2,266 - 23,766
-------- -------- -------- --------
Liabilities measured at fair value
Contingent consideration 14,529 - - 14,529
-------- -------- -------- --------
31(st) December 2018 Total Level Level 2 Level 3
1
GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- --------
Assets measured at fair value
Financial assets 11,566 - - 11,566
-------- -------- -------- --------
Liabilities measured at fair value
Contingent consideration 15,038 - - 15,038
-------- -------- -------- --------
Of the investments totalling GBP9,602,000, all are valued using
Level 3 valuation techniques. The Directors reviewed the fair value
of the financial assets at 30(th) June 2019. Excluding loan notes,
the underlying value of the investments will be driven by the
profitability of these businesses. If this was to drop by 10%, the
implied valuation is likely to also drop by around 10%,
GBP0.8m.
The contingent consideration relates to amounts payable in the
future on acquisitions. The amounts payable are based on the
amounts agreed in the contracts and based on the future
profitability of each entity acquired. In valuing each provision,
estimates have been made as to when the options are likely to be
exercised and the future profitability of the entity at this date.
Further details of these provisions are shown in Note 13.
17. Acquisitions
Six months ended 30(th) June 2019
-- Lettings income
During the period the Group acquired three lettings books for
initial consideration paid of GBP1,300,000, and total consideration
of GBP1,445,000.
INDEPENT REVIEW REPORT TO LSL PROPERTY SERVICES PLC
Introduction
We have been engaged by the Company to review the Interim
Condensed Group Financial Statements in the half-yearly financial
report for the six months ended 30(th) June 2019 which comprises
the Interim Group Income Statement, the Interim Group Statement of
Comprehensive Income, the Interim Group Balance Sheet, the Interim
Group Cash Flow Statement, the Interim Group Statement of Changes
in Equity and the related Notes 1 to 17. 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 International Standard on Review Engagements
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 half-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 Conduct 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(th)
June 2019 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 Conduct Authority.
Ernst & Young LLP Leeds
30(th) July 2019
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BUGDRRUDBGCC
(END) Dow Jones Newswires
July 30, 2019 02:00 ET (06:00 GMT)
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