TIDMLSL
RNS Number : 8939E
LSL Property Services PLC
16 March 2022
For immediate release 16 March 2022
LSL Property Services plc ("LSL" or "The Group")
FULL YEAR RESULTS FOR THE YEARED 31 DECEMBER 2021
RECORD UNDERLYING OPERATING PROFIT WITH SIGNIFICANT INVESTMENT
TO SUPPORT FINANCIAL SERVICES LED GROWTH STRATEGY
KEY HIGHLIGHTS
Record Group financial performance and historically strong
balance sheet enabling further investment to deliver the Group's
ambitious growth strategy
-- Group Underlying Operating Profit(1) increased by 40% to GBP49.3m (2020: GBP35.2m)
-- Record Underlying Operating Profit stated after expensing
c.GBP3m in 2021 to develop Financial Services technology and Direct
to Consumer ("D2C") business
-- Profit before tax up 234% to GBP69.9m (2020: GBP20.9m)
-- Net Cash of GBP48.5m at 31 December 2021 (2020: Net Debt: GBP1.6m)
Strong profit growth in each of the Group's core businesses
-- Financial Services Division: Underlying Operating Profit of
the core Financial Services Network business increased by 34% to
GBP14.4m (2020(2) : GBP10.7m)
-- Financial adviser numbers increased by a record 273
year-on-year to total 2,858 at 31 December 2021
-- Gross revenue per advisor(3) increased by 7%
-- LSL's share of the total UK purchase and remortgage market increased to almost 10%
-- Surveying & Valuation Division Underlying Operating
Profit up 46% to GBP23.6m (2020: GBP16.2m), with Operating margin
improving significantly to c.25% (2020(2) : 21%), benefiting from
operational efficiency and improved income per job
-- Estate Agency Division Underlying Operating Profit increased
by 53% to GBP18.4m (2020: GBP12.1m), reflecting increasing
residential market share across its core catchment areas and
overall growth in the value of housing transactions
Substantial progress in executing our Financial Services led
growth strategy
-- Announced five-year agreement to provide mortgage and
protection advice services to franchisees of The Property Franchise
Group
-- Established GBP200m Pivotal Growth joint venture to "buy and
build" a leading national mortgage broker, with two acquisitions
made to date
-- Completed acquisitions to strengthen digital capabilities in Financial Services
-- Restructured D2C Financial Services business, to take
advantage of increased opportunities in Estate Agency and New Build
sectors
-- Sold investments in two non-core businesses for a combined
GBP41.3m, simplifying the Group and providing funds to make further
investment to deliver the Group's ambitious Financial Services led
growth strategy
We expect 2022 financial performance to benefit from continued
growth in Financial Services in a more challenging housing market,
demonstrating reduced cyclicality of earnings
-- Latest market estimates suggest the mortgage market will be
around 11% lower than 2021, and housing transactions in 2022 around
19% lower than 2021
-- Mortgage and housing market activity levels are expected to be at similar levels as 2019
-- The Group's strategic focus on FS and the significant
progress made in Surveying & Valuation, has reduced LSL's
exposure to housing market volatility with the result that we
expect a more limited impact on the Group's results in 2022 than
would historically have been the case
-- Overall front-end sales activity across the Group in the year
to date is in line with internal expectations
-- The financial performance across Financial Services and
Surveying & Valuation in the first two months of 2022 is in
line with the Board's expectations
-- The Board is encouraged by front end sales activity in Estate
Agency. However, residential pipeline conversion remains slow,
impacted by continuing industry-wide capacity issues in
conveyancing and this has delayed Estate Agency profits. The Group
retained a strong residential pipeline at 28 February 2022, which
had increased by 10% compared to 31 December 2021, with
fall-throughs remaining at normal levels
-- In 2022 the Board expects mortgage and housing transactions
to revert to pre-COVID levels with geopolitical uncertainties
adding to existing inflationary cost pressures. The Board has also
considered the impact of a market-wide continuation of slower
residential pipeline conversion. Nevertheless, at this early stage
in the year, the Board's current expectation is 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 execution of its financial services led growth
strategy and strong performance of its Surveying & Valuation
business
-- The split of H1:H2 profit in 2022 is expected to revert to a
more typical profile with a skew to H2, after record housing
transactions in H1 2021
-- The Financial Services Division remains on track to be the
most profitable Division by 2023, with further organic growth in
network financial advisers expected, supported by additional
advisers from Pivotal Growth firms and to service distribution
agreements
Commenting on today's announcement, David Stewart, Group Chief
Executive said:
"I am pleased to report that LSL's core businesses are
performing well and that our Financial Services led growth strategy
has made good progress.
"We expect mortgage and housing transactions to revert to
pre-COVID levels with geopolitical uncertainties adding to existing
inflationary pressures. These will affect our Estate Division in
particular, and as always, we will be agile and respond to market
conditions as required.
"However, the benefits of both our growth strategy in Financial
Services and the significant progress made in Surveying &
Valuation, mean that we expect the housing market cycle to have a
more limited impact on the Group's results. We look forward to
reporting further growth in Financial Services, alongside continued
investment in building our D2C businesses and I remain excited
about the Group's longer-term opportunities."
Notes:
1. Group Underlying Operating Profit is before exceptional
items, contingent consideration, amortisation of intangible assets
and share-based payments (see note 5 of the financial statements).
In 2020 COVID-19 costs of GBP6.4m were recognised in Group
Underlying Operating Profit. Stated before COVID-19 costs, Group
Underlying Operating Profit in 2020 was GBP41.5m
2. Divisional Underlying Operating Profit and Divisional
Underlying Operating margin comparatives for 2020 are stated on the
same basis as Group
3. Gross revenue per adviser is calculated as FS Network gross
revenue (excluding the TMA mortgage club) per average adviser
FINANCIAL RESULTS
2021 2020 Var
----------- -----------
Group Revenue (GBPm) 326.8 266.7 23%
Group Underlying Operating
Profit(1) (GBPm)
(post COVID-19 costs) 49.3 35.2 40%
Group Underlying Operating
margin
(post COVID-19 costs) 15% 13% +190bps
Exceptional Gains (GBPm) 31.1 0.7 nm
Exceptional Costs (GBPm) (2.0) (7.1) 71%
Group operating profit
(GBPm) 72.6 23.9 205%
Profit before tax (GBPm) 69.9 20.9 234%
------------------------------------ ----------- ----------- ------------
Basic Earnings per Share(2)
(pence) 59.6 15.9 275%
Adjusted Basic Earnings
per Share(2) (pence) 37.7 31.9 18%
Net Cash / (Net Bank Debt)(3)
(GBPm) 48.5 (1.6) nm
Final proposed dividend
(pence) 7.4 nil nm
Full year dividend (pence) 11.4 nil nm
------------------------------------ ----------- ----------- ------------
Notes:
1 Group Underlying Operating Profit is before exceptional items,
contingent consideration, amortisation of intangible assets and
share-based payments (as set out in note 5 of the Financial
Statements).
2 Refer to note 6 of the Financial Statements for the calculation
3 Refer to note 11 to the Financial Statements for the calculation
nm Not meaningful
For further information, please contact:
David Stewart, Group CEO
Adam Castleton, Group CFO
LSL Property Services plc investorrelations@lslps.co.uk
Helen Tarbet
Sophie Wills
Buchanan 0207 466 5000 / LSL@buchanan.uk.com
GROUP CHIEF EXECUTIVE'S REVIEW
I am pleased to report that we achieved a record year of
profits, with strong performances in each of our core businesses -
Financial Services Network, Surveying & Valuation, and our
owned and franchised estate agencies. We continue to benefit from
our Financial Services led growth strategy and we expect the
investments we made during 2021 to contribute to our performance in
future years.
Record Group results
Group Revenue grew by 23% to GBP327m, contributing to Group
Underlying Operating Profit of GBP49.3m, an increase of 40%. We
ended the year with record Net Cash of GBP48.5m.
In Financial Services, Underlying Operating Profit of our
Network business rose by 34%, supported by further growth in our
network of financial advisers, which grew by 11% year-on-year to
2,858 advisers. Underlying Operating Profit for Financial Services
as a whole increased by 20%, with further investment being made in
technology and our Direct-to-Consumer ('D2C') businesses. Surveying
& Valuation improved its operational efficiency and income per
job, contributing to a 46% rise in the Division's Underlying
Operating Profit.
Estate Agency increased its residential market share across its
core catchment areas and its Underlying Operating Profit was 53%
higher. Conversion of its pipeline slowed in the second half,
following the record market levels experienced in the lead up to
the Stamp Duty deadline, as well as industry-wide capacity issues
in conveyancing. The Division had a strong pipeline going into
2022.
Strategic and operational developments to support growth
During the year, we invested significantly in growth
opportunities in Financial Services, reflecting the substantial
long-term potential in this market. This included strengthening our
digital capabilities through the acquisitions of Mortgage Gym and
Direct Life Quote Holdings Limited and launching our Pivotal Growth
joint venture with Pollen Street Capital. Pivotal Growth aims to
"buy and build" a leading national mortgage broker and it completed
its first acquisition in December 2021, purchasing one of
Scotland's largest mortgage brokers. A further acquisition was made
in February 2022, purchasing a specialist new build mortgage and
insurance brokerage. We are also investing in our D2C financial
services model. In addition to capital investment and exceptional
costs, we expensed costs of c.GBP3m in the year as we progressed
these initiatives, with further investment planned in 2022. Over
the medium-term, we are confident these actions will deliver
substantial value for shareholders.
Our focus on our core businesses led us to dispose of two
non--core holdings in 2021. These were LMS, which we sold in May,
and TMG, which completed in July. The combined consideration was
GBP41.3m in cash. We estimate that the lost profit contribution
from these businesses was approximately GBP1m in 2021.
We have continued to add strength and depth to the management
team, with key hires including a Group Chief Operating Officer, to
drive our IT strategy and transformation programme, a highly
experienced leader for our Financial Services D2C operation and a
new Chief Financial Officer for Financial Services.
Strategic priorities
Our two overarching strategic objectives are to:
1) Put Financial Services at the heart of our strategy, focussing on growth markets
2) Reduce earnings exposure to housing market volatility by
generating more resilient and reliable revenues
In Financial Services, we aim to increase our number of
financial advisers and increase revenue per adviser.
In Surveying & Valuation, we aim to gain market share in
both the B2B and D2C markets, as well as develop new, data-enriched
services for lenders.
In Estate Agency, we aim to grow profitable market share,
optimise operating efficiency, and develop our franchising
proposition.
Our Living Responsibly and ESG programmes will play a central
role in the development and execution of our strategy and has been
given a high priority by our Board.
Strong balance sheet
The combination of the disposals discussed above and our cash
generation in the year resulted in a record Net Cash balance of
GBP48.5m at the year-end. Our balance sheet and strong cash
generation enables further investment to deliver the Group's
ambitious growth strategy, including continued investment in
capability and technology, expected investment in Pivotal Growth
D2C brokerage acquisitions, and potential acquisition targets to
build our Financial Services Network business. The Board will
continue to actively review capital allocation regularly to ensure
we maintain an efficient balance sheet.
Dividend
Our policy is to pay out 30% of Group Underlying Operating
Profit after finance and normalised tax charges. Having declared an
interim dividend of 4.0 pence per share, the Board has recommended
a final dividend of 7.4 pence. This, if approved by shareholder,
would give a total dividend for the year of 11.4 pence per share,
in line with the policy.
The ex--dividend date is 28 April 2022 with a record date of 29
April 2022 and a payment date of 3 June 2022. Shareholders can
elect to reinvest their cash dividend and purchase existing shares
in LSL through a dividend reinvestment plan. The election date is
12 May 2022.
A responsible business
We are keenly aware that sustained success is about more than
just profits. The Board is committed to ensuring that we are, first
and foremost, a responsible business and one that has a positive
impact on the communities in which we operate. In our ESG Report
and in our Living Responsibly Report, you can read more about our
focus on inclusion and diversity, limiting our environmental impact
and our work in our communities. It is important that what we do
has real substance and is reflected in everything we do, and to
help achieve this we have set up independent colleague forums and
working groups to drive us forward in each of these areas.
The last couple of years have been hugely challenging and we
could not have achieved what we have without the help, hard work
and commitment of our staff. I want to thank everyone in the Group
on behalf of the Board. I also thank our shareholders for their
continued support.
Outlook
Our strategy is on track and our core businesses are performing
well. Following the COVID-19 led boom we expect housing and
mortgage transactions in 2022 to be more in line with the levels we
saw prior to the pandemic, with inflation and the pressure on
household finances also having an impact. Geopolitical uncertainty
adds further risk. These issues are expected to affect our Estate
Agency Division in particular, and as always, we will be agile and
respond to market conditions as necessary.
However, the benefits of both our growth strategy in Financial
Services and the significant progress made in Surveying &
Valuation, mean that we expect the housing market cycle to have a
more limited impact on the Group's results. We look forward to
reporting further growth in Financial Services, alongside continued
investment in building our D2C businesses. We look forward to the
future with confidence.
David Stewart
Group Chief Executive Officer
15 March 2022
FINANCIAL REVIEW
Group summary (P&L)
We achieved record Group profit, with growth in the core
Financial Services Network business, strong execution in Surveying
& Valuation and profitable market share gains in Estate Agency.
The Group's financial result was in line with the Board's
expectations.
We supported the future growth of our Financial Services
businesses and expensed c.GBP3m in FS technology and D2C. The
technology investment is expected to begin to show tangible returns
in the second half of 2022 as we roll it out through our Financial
Services Network, making our proposition more attractive to
potential recruits, increasing our efficiency, and generating
additional income from subscription fees. We expect to see the
major benefits to start coming through in 2023 and beyond. We also
continued to invest in other parts of the Group, notably key Group
hires and sustained marketing in Estate Agency to build the sales
pipeline for 2022.
Group Revenue increased by 23% to GBP326.8m (2020: GBP266.7m),
with year-on-year revenue up by 29% in the Financial Services
Division, 21% in the Surveying & Valuation Division and 20% in
the Estate Agency Division. H1 Group Revenue was up 45%, as we
traded well in a favourable housing market, with record transaction
levels ahead of the extended Stamp Duty holiday at the end of June
2021. The prior year comparatives for H1 were impacted by COVID-19.
H2 Group Revenue was up 6%, reflecting the lower relative level of
market activity as well as industry-wide capacity issues in
conveyancing impacting pipeline conversion in Estate Agency and
slower completion of purchase mortgages in Financial Services.
Group Underlying Operating Profit(1) of GBP49.3m was a record
result, 15% more than the previous best in 2015, 40% more than 2020
(2020: GBP35.2m) and 36% more than 2019 (2019: GBP37.0m). Group
Underlying Operating margin of 15.1% was up year-on-year by 190
bps. On a statutory basis, Group operating profit increased 204% to
GBP72.6m (2020: GBP23.9m).
The split of H1:H2 profit in 2022 will revert to a more typical
profile with a skew to H2, after record housing transactions in H1
2021.
Our profit turns into cash at a high rate, with adjusted
cash-flow conversion(2) of 106%. The Group finished the year with a
very strong balance sheet, reporting Net Cash of GBP48.5m (2020:
Net Bank Debt GBP1.6m).
Total adjusted operating expenditure
Total adjusted operating expenses increased by 20% to GBP280.2m
(2020: GBP232.9m). This increase was predominantly in employee
costs, with higher commissions linked to the 23% year-on-year
increase in revenue, while prior-year employee costs included
GBP15.7m of Government Coronavirus Job Retention Scheme (CJRS)
support, reduced payments whilst colleagues were on furlough, the
cancellation of all Executive Director bonuses, and other Senior
Management Team bonuses which were limited to a maximum of 5%.
Other discretionary costs also increased towards normalised levels
in 2021 following lower expenditure in 2020 resulting from the
impact of COVID-19, which included reduced marketing, office and
travel expenditure and other reductions in discretionary costs.
Group Underlying Operating Profit
Group Underlying Operating Profit of GBP49.3m was 40% above 2020
(GBP35.2m). In 2020, COVID-19 costs(3) of GBP6.4m were recognised
in Group Underlying Operating Profit. Stated before these COVID-19
costs, Group Underlying Operating Profit in 2020 was GBP41.5m. The
Group has not benefited from any CJRS funds in 2021.
Other operating income, gain on sale of property, plant, and
equipment
Other income, relating to rental income, was GBP0.9m (2020:
GBP0.8m). A gain on sale of GBP1.1m (2020: GBP0.02m) was generated
from the disposal of seven commercial properties in the Estate
Agency Division, for total consideration of GBP1.7m.
Income from joint ventures and associates
Income from joint ventures and associates of GBP0.7m (2020:
GBP0.5m) mainly comprised our share of LMS and TM Group profits
prior to disposal, and our share of set up costs of Pivotal
Growth.
Share-based payments
The share-based payment charge of GBP1.9m (2020: GBP0.02m)
consists of a charge in the period of GBP2.6m, offset by lapses and
adjustments for leavers and options exercised in the period. The
low charge in 2020 was largely as a result of scheme lapses
offsetting existing scheme charges.
Amortisation of intangible assets
The amortisation charge for 2021 was GBP4.5m (2020: GBP5.4m).
The year-on-year decrease was as a result, of some lettings books
reaching full amortisation during 2020.
Exceptional items
The exceptional gain of GBP31.1m (2020: GBP0.7m) relates to a
GBP29.5m gain on disposal of the Group's joint venture holdings in
LMS (GBP3.2m gain) and TM Group (GBP26.3m gain) for total proceeds
of GBP41.3m and a release in the PI Costs provision of GBP1.6m.
The exceptional cost of GBP2.0m (2020: GBP7.1m) relates to the
formation of the joint venture Pivotal Growth (GBP1.2m),
restructuring costs in Embrace Financial Services (GBP0.7m) and
costs relating to the dissolution of the previously owned associate
holding in Mortgage Gym Limited.
Contingent consideration
The credit to the income statement in 2021 of GBP0.7m (2020:
credit GBP0.5m), relates mainly to the reassessment of the
contingent consideration liability for RSC, due to be paid in
2023.
Net financial costs
Net financial costs amounted to GBP2.7m (2020: GBP3.0m) and
related principally to unwinding of the IFRS 16 lease liability of
GBP1.5m (H1 2020: GBP1.6m) and interest and fees on the revolving
credit facility of GBP1.0m (2020: GBP1.2m).
Profit before tax
Profit before tax increased to GBP69.9m (2020: GBP20.9m). This
increase was largely driven by the improvement in Group Underlying
Operating Profit, the exceptional gains on the sale of the
investments in the LMS and TM Group joint ventures and the
reduction in exceptional costs.
Taxation
The tax charge of GBP8.0m (2020: GBP4.6m) represents an
effective tax rate of 11.4%, lower than the headline UK tax rate of
19%, mainly due to profits on the sale of joint venture investments
not being subject to corporation tax. Adjusting for the profits on
the sale of joint venture investments, the effective tax rate was
18.8%. Deferred tax assets and liabilities are revalued to 25%
(2020: 19%), the tax rate effective from 1 April 2023.
Basic and Adjusted Basic Earnings Per Share(4)
The Basic Earnings Per Share was 59.6 pence (2020: 15.9 pence).
The Adjusted Basic Earnings Per Share was 37.7 pence (2020: 31.9
pence), an increase of 18%.
Notes:
1 Group Underlying Operating Profit is before exceptional items,
contingent consideration, amortisation of intangible assets and
share-based payments (as set out in note 5 of the Financial
Statements)
2 Adjusted cash-flow conversion defined as cash generated from
operations (pre PI and post lease liabilities) divided by Group
Underlying Operating Profit
3 In 2020 costs relating to COVID-19 were separately identified
relating to employee costs and property and related costs (as set
out in note 5 of the Financial Statements)
4 Refer to note 6 of the Financial Statements for the calculation
DIVISIONAL REVIEW
Financial Services Division
Financial Summary FY
2021 2020 Var
P&L (GBPm)
=================================== ====== ====== ========
Financial Services Network
Gross revenue 295.9 243.5 26%
Financial Services Network
(Net revenue) 38.3 31.3 23%
Financial Services Other 40.2 29.7 35%
Total revenue 78.5 61.0 29%
Mortgage net revenue 33.7 25.9 30%
Protection and general
insurance net revenue 35.2 26.2 34%
Other net revenue 9.6 8.9 8%
Total revenue 78.5 61.0 29%
------ ------ --------
Financial Services Network 14.4 10.7 34%
Financial Services Other 0.4 1.6 (73)%
Underlying Operating Profit(1)
(post COVID-19 costs) 14.8 12.3 20%
Financial Services Network
Margin 38% 34% +320bps
Financial Services, Other
Margin 1% 5% -420bps
Underlying Operating margin
(post COVID-19 costs) 19% 20% -130bps
Underlying Operating Profit(1)
(pre COVID-19 costs) 14.8 13.5 10%
KPIs
=================================== ====== ====== ========
LSL mortgage completion
lending(2) (GBPbn) 41.1 32.6 26%
Total advisers 2,858 2,585 11%
Gross Revenue per ave adviser(3)
(FS Network) (GBP'000s) 92.5 86.1 7%
Annualised premium equivalent
(GBPm) 70.3 53.5 31%
------ ------ --------
Notes:
1 Underlying Operating Profit is stated on the same basis as
Group Underlying Operating profit (as set out in Note 5 of the
Financial Statements)
2 LSL mortgage completions lending quoted includes product transfers
3 Gross revenue per adviser is calculated as Financial Services
Network gross revenue (excluding the TMA mortgage club) per active
adviser
Summary
Financial Services Division Revenue increased by 29%, with
profit up by 20%. Profits in the core Financial Services Network
business increased by 34%, with operating margins up 400bps to 38%
(2020: 34%).
Total financial advisers at 31 December 2021 were up by a record
273 year-on-year to 2,858 and our share of the UK mortgage market
grew to around 10%, further consolidating our position as the UK's
largest mortgage and insurance network(1) .
We continued to support the future growth of our Financial
Services businesses, with significant investment during the year in
technology, development of capability, headcount to support growth,
the establishment of the Pivotal Growth joint venture and
development of our D2C business. Whilst suppressing profits in the
short term, the investment will start to show tangible returns in
the second half of 2022, with more material benefits expected in
2023 and beyond.
Financial overview
Net revenue reported for the year was up 29% to GBP78.5m (2019:
GBP61.0m). H1 revenue increased by 39%, benefiting from a strong
purchase mortgage market and COVID-19 impacted comparatives.
Revenue was up 20% in H2 reflecting stronger relative comparatives,
with higher refinancing volumes and slower completion of purchase
mortgages.
Underlying Operating Profit was up 20% to GBP14.8m (2019:
GBP12.3m). In 2020, COVID-19 costs of GBP1.2m were recognised in
the Financial Services Division. Stated before COVID-19 costs,
Underlying Operating Profit in 2020 was GBP13.5m and Underlying
Operating Profit growth in 2021 was 10%.
The Division's revenue mix by product highlights the
significance of our insurance business and its success in arranging
insurance products both on a standalone basis as well as when
needed at the time of a mortgage being arranged. There is a broadly
equal split between mortgage related and insurance related revenue.
The split of Revenue by product type in 2021 was 43% for mortgage
fees (2021: GBP33.7m), 45% for insurance fees (2021: GBP35.2m) and
12% in other fees (2021: GBP9.6m).
For the first time, we are separately disclosing the profit of
our core Financial Services Network business, which comprises the
PRIMIS Network and the TMA mortgage club. This provides greater
transparency and demonstrates the consistent growth and strong
margins of this core part of the Financial Services Division.
Financial Services Other comprises our New Homes businesses, D2C
businesses, technology businesses (Mortgage Gym and Direct Life
Quote Holdings Limited) which were both acquired during 2021 and
the Pivotal Growth Joint Venture.
Financial Services Network business
Our gross mortgage completion lending increased by 26% to
GBP41.1bn (202: GBP32.6bn) representing an increased share of the
lending market excluding product transfers(2) of 9.6% (2020:
9.0%).
Our accounting policy is to recognise Financial Services Network
revenue as the net amount of commission retained by the network. To
provide additional information, we now also disclose gross
revenues. Gross revenues generated by the Financial Services
Network (including the TMA mortgage club) increased by 22% to
GBP295.9m (2020: GBP243.5m). Financial Services Network net revenue
increased by 23% to GBP38.3m (2020: GBP31.3m).
Gross revenue per average adviser of GBP93k was a 7% increase
(2020: GBP86k per adviser). In general, advisers joining the
Financial Services Network take some time to reach maximum
productivity, and as such make a relatively small contribution to
turnover in the year of their joining. Revenue in 2022 will
therefore benefit from a full year of the advisers who joined in
2021.
Underlying Operating Profit increased by 34% to GBP14.4m (2020:
GBP10.7m) with the Underlying Operating margin rising to 38% (2020:
34%), notwithstanding significant investment in headcount made to
support future growth. Profit was up 87% in H1 and 3% in H2,
reflecting the more buoyant market in H1 compared to H2, the weaker
COVID-19 impacted comparatives in H1 2020 and the strong
bounce-back from lockdown in H2 2020.
Financial Services Other
Financial Services Other revenue increased by 35%, largely
reflecting the acquisition of Direct Life Quote Holdings Limited in
Q1 2021 and growth in our D2C business, as a result of stronger
housing transactions as well as the benefit of the change of
commercials between the Financial Services Division and the Estate
Agency Division, which was reported in the 2021 Interims. Revenue
in New Build was broadly flat. Financial Services Other Underlying
Operating Profit reduced to GBP0.4m (2020: GBP1.6m), reflecting the
investment for future growth, weaker execution in New Build, and
D2C profit increasing in the more buoyant market, albeit with
weaker conversion rates from our owned and franchised Estate Agency
leads as we switched resources to focus on launching the TPFG
deal.
Financial Services Other profit is stated after expensing
c.GBP3m in FS technology and D2C, including costs of the TPFG
contract and the Pivotal Growth joint venture set up costs. As
anticipated, the TPFG contract will continue to act as a drag on
profitability in 2022 and is expected to generate a positive
contribution by 2023. The Pivotal Growth joint venture was
established in April 2021, with a net loss in 2021 of GBP0.9m
representing set-up costs and overheads. A positive contribution is
expected in 2022, dependant on the profile of acquisition
undertaken and the financing means used.
As well as significant investment in Mortgage Gym, we continued
to invest in the Financial Services Network technology platform
(Toolbox), to deliver benefits to firms and their advisers and
create further efficiencies and improved functionality. Capital
investment in the platform amounted to GBP0.5m in 2021 (2020:
GBP0.5m).
Notes:
1 UK's largest mortgage and insurance network based on LSL estimates
2 New mortgage lending by purpose of loan, UK (BOE) - Table MM23
Surveying & Valuation Division
Financial Summary FY
2021 2020 Var
P&L (GBPm)
================================= ====== ===== =======
Total revenue 93.7 77.1 21%
Underlying Operating Profit(1)
(post COVID-19 costs) 23.6 16.2 46%
Underlying Operating margin
(post COVID-19 costs) 25% 21% 420bps
Underlying Operating Profit(1)
(pre COVID-19 costs) 23.6 17.9 32%
Underlying Operating margin
(pre COVID-19 costs) 25% 23% 200bps
KPIs
================================= ====== ===== =======
Jobs performed (000's) 541 487 11%
Jobs per average Surveyor 1,079 947 14%
Revenue from private surveys
(GBPm) 2.2 1.1 96%
Income per job (GBP) 173 159 9%
Operational surveyors employed
(FTE(2) ) 489 513 (5)%
------ ----- -------
Notes:
1 Underlying Operating Profit is stated on the same basis as
Group Underlying Operating profit (as set out in note 5 of the
Financial Statements)
2 Full Time Equivalent (FTE)
Summary
The Surveying & Valuation Division's Underlying Operating
Profit increased by 46%, as we traded very well in favourable
markets during H1 and benefited in H2 from increased key lender
allocations. Surveyor capacity utilisation also improved in 2021,
with 11% more jobs performed whilst employing fewer operational
surveyors. Underlying Operating margin increased to 25% (2020:
21%), due to improved utilisation and higher income per job.
We estimate that we increased market share in 2021, while
maintaining operational resilience and providing high-quality
service in a very busy market. We were named Mortgage Surveyor of
the Year at the 2021 Mortgage Awards organised by Money Age. During
2021, two key supplier contracts were renewed, increasing
allocations, and we also achieved increases in allocations from
some existing lender clients. Around three quarters of our total
annual volume is currently secured for two or more years.
Financial overview
Revenue increased by 21% to a record GBP93.7m (2020: GBP77.1m).
H1 revenue was up 48% compared to COVID-19 impacted H1 2020. H2
revenue was up 3%, which was a very strong performance given H2
total mortgage approvals for house purchases were down 22% compared
to the same period in the prior year. At the 2021 Interims, we
identified the opportunity to commercialise valuable data gathered
as part of the valuation process. Revenue for data services of
GBP0.1m was generated for the first time during H2.
Underlying Operating Profit increased by 46% to GBP23.6m (2020:
GBP16.2m), up 179% in H1 and up 1% in H2. In 2020, COVID-19 costs
of GBP1.7m were recognised in the Surveying & Valuation
Division. Stated before COVID-19 costs, Underlying Operating Profit
in 2020 was GBP17.9m.
Income per job increased by 9% to GBP173 (2020: GBP159),
reflecting an improved lender mix, house price inflation and a
slightly lower proportion of remote valuations in 2021 of 18%,
compared to the COVID-19 impacted period in 2020, during which
remote valuations made up 24% of the total.
During 2021, 71% of the Division's revenues derived from its top
five customers. This is broadly consistent with the concentration
of mortgage lending in the UK, where it is estimated that the six
largest lenders collectively account for around 70% of the market.
The total number of jobs performed during the period was 541,000,
which was 11% greater than 2020.
At 31 December 2021, the total provision for professional
indemnity (PI) costs was GBP3.9m (31 December 2020: GBP7.0m). The
Group continued to make positive progress in addressing historic PI
claims and there was a net GBP1.6m exceptional gain in the year.
The number of new valuation claims provided for in the period
remained very low.
The number of operational surveyors employed (FTE) at 31
December 2021 slightly reduced to 489 (31 December 2020: 513). Our
graduate and trainee mentoring programmes continue to provide new
productive surveyors, to alleviate any capacity constraints in the
market.
Estate Agency Division
Financial Summary FY
2021 2020 Var
P&L (GBPm)
================================= ======= ======= =======
Residential Sales exchange
income 71.7 48.8 47%
Lettings Income 62.0 58.6 6%
Other Income 20.8 21.2 (2)%
Total revenue 154.6 128.7 20%
Underlying Operating Profit(1)
(post COVID-19 costs) 18.4 12.1 53%
Underlying Operating margin
(post COVID-19 costs) 12% 9% 250bps
Underlying Operating Profit(1)
(pre COVID-19 costs) 18.4 15.5 18%
Underlying Operating margin
(pre COVID-19 costs) 12% 12% -20bps
KPIs
================================= ======= ======= =======
Exchange units 18,845 12,921 46%
Managed properties 24,372 24,804 (2)%
Owned branches 225 225 -
Franchise branches 128 131 -2%
Total Estate Agency branches 353 356 -1%
------- ------- -------
Notes:
1 'Other income' includes franchise, conveyancing services,
Asset Management, EPCs, Home Reports, utilities and other products
and services to clients of the branch network
2 Underlying Operating Profit is stated on the same basis as
Group Underlying Operating profit (as set out in note 5 of the
Financial Statements)
Summary
Estate Agency Division Underlying Operating Profit increased by
53%, with Underlying Operating margin up to 12% (2020: 9%),
benefiting from good trading in favourable residential markets in
H1 and an increase during the year in our residential market share
across the core catchment areas in which we compete.
The strong sales pipelines coming into 2021, favourable market
conditions and very high exchange volumes in the lead up to the
extended Stamp Duty holiday that ended in June, contributed to very
strong residential sales exchange income in H1. Estate Agency
residential pipeline conversion slowed in H2 2021, following the
record market levels experienced in the lead up to the 30 June 2021
Stamp Duty deadline and capacity issues in the conveyancing
market.
Financial overview
Total Estate Agency Division revenue increased by 20% to
GBP154.6m (2020: GBP128.7m), increasing by 46% in H1 and 1% in H2,
reflecting the residential market dynamics described above.
Estate Agency Underlying Operating Profit increased by 53% to
GBP18.4m (2020: GBP12.1m). H1 2021 Underlying Operating Profit of
GBP12.5m was very significantly higher than H1 2020 (H1 2020:
GBP2.4m), benefiting from the strong opening pipelines and very
strong Residential Sales performance. Profits in H2 were GBP5.9m
(2020: GBP9.7m) largely reflecting reduced pipelines following the
record June 2021 exchanges, a flat housing market in H2 compared to
the prior year and the slowdown in exchanges in Q4 2021. In
addition, lost profit contribution following the disposal of the
non-core holdings in LMS and TM Group, reduced comparative profit
further in H2 by a total of c.GBP1m. Underlying Operating Profit
also benefited from the improved franchise revenues of GBP2.7m in
2021 (2020: GBP1.7m).
In 2020, COVID-19 costs of GBP3.4m were recognised in the Estate
Agency Division. Stated before COVID-19 costs, Underlying Operating
Profit in 2020 was GBP15.5m.
Residential Sales
Residential Sales exchange income increased by 47% to GBP71.7m
(2020: GBP48.8m). The number of exchange units increased by 46% on
the prior year. This is ahead of the overall market trend on a
national level, reflecting the increase in market share in the
locations we trade in. Residential Sales exchange income was up by
117% in H1 and 4% in H2. The Residential Sales exchange pipeline at
31 December 2021 was 7% lower than the record pipeline reported at
the same date in 2020.
Lettings
In the lettings market there was a very limited supply of new
instructions and we therefore focused on reletting and retaining
our managed property portfolio. The total number of managed
properties at 31 December 2021 was 24,372, broadly in line with the
same date in 2020. Total Lettings income increased by 6% to
GBP62.0m (2020: GBP58.6m) largely reflecting an increase in Q2 2021
compared to the COVID-19 impacted prior year in the same
period.
Other income
Other income was down 2% to GBP20.8m (2020: GBP21.2m) with
strong residential markets benefiting conveyancing and other income
(up 43%) and franchise income (up 64%). These increases were more
than offset by falls in Estate Agency share of Financial Services
income, which was down 36% primarily reflecting the changed
commercial arrangement with the Financial Services Division, as
reported at the 2021 Interim Results Statement, and Asset
Management (down 10%) due to lower market repossession volumes.
BALANCE SHEET REVIEW
Goodwill
The carrying value of goodwill is GBP160.9m (31 December 2020:
GBP159.9m), with GBP1.0m added due to the acquisition of Direct
Life Quote Holdings Limited. No impairment is required from the
Group's annual impairment testing.
Other intangible assets and property, plant and equipment
Total capital expenditure in the year amounted to GBP6.9m (2020:
GBP4.1m). We continued to invest in technology and the capital
expenditure in the year, including GBP2.2m (2020: GBP1.8m) for
further development of the Toolbox platform in the Financial
Services Division and investment by the Estate Agency Division in
third-party property software. The prior year also reflected cash
conservation measures taken during the lockdown, which focused
capital spend on essential projects.
Financial assets and investments in joint ventures and
associates
Financial assets
Financial assets of GBP5.7m at 31 December 2021 (2020: GBP9.6m)
comprise investments in equity instruments in unlisted companies.
The largest investment is an 8.8% shareholding in Yopa Property
Limited, a UK-based online hybrid estate agent. The carrying value
of this investment has been assessed and a fair value impairment of
GBP2.0m has been made through the Statement of Other Comprehensive
Income. The carrying value of the Group's investment at 31 December
2021 is GBP4.5m (2020: GBP6.5m).
The decrease in the year also included settlement of secured
loan notes, as consideration for the purchase of the trade and
assets of Mortgage Gym Limited.
Joint ventures
The Group established the Pivotal Growth joint venture during
the year and held a 47.8% interest at 31 December 2021. The joint
venture is equity accounted and is held on the balance sheet at
GBP1.6m at 31 December 2021, representing equity investment during
the period less our share of costs for the period.
During 2021, we disposed of our entire holding in both non-core
businesses LMS (May 2021) and TM Group (July 2021) for total
proceeds of GBP41.3m. At 31 December 2020, these businesses had
been held on the balance sheet at GBP11.4m.
As reported at the 2021 Interims, as part of the LMS sale we
agreed to provide an indemnity to a maximum of GBP2m in relation to
claims of fraud by an LMS panel law firm. We are required to assess
the fair value of the most probable outcome on this indemnity.
There is uncertainty around how likely a claim can be made by the
four banks with identified losses. We have assessed the available
information on the claims and in line with the accounting
standards, a provision for our share of these claims has been
included of GBP0.6m, offsetting the gain on disposal of LMS.
Mortgage Gym
In February 2021, the Group acquired the trade and assets of
Mortgage Gym Limited, a former associate of the Group, for GBP2.4m.
The loan notes valued at GBP2.24m at 31 December 2020 were offset
against the consideration for the purchase from the administrators,
reducing the balance of these loan notes to nil. The exceptional
write down of the GBP2.0m carrying value of the investment in
Mortgage Gym Limited was recognised in the Financial Statements in
the Annual Report and Accounts 2020.
Bank facilities / Net Bank Debt / Liquidity
On 24 February 2021, we announced a new banking facility,
providing the Group with balance sheet flexibility to take
advantage of growth opportunities, particularly in Financial
Services. A GBP90 million committed revolving credit facility, with
a maturity date of May 2024, arranged on competitive terms,
replaced the previous GBP100m facility that was due to mature in
May 2022.
In arranging the banking facility, the Board took the
opportunity to review the Group's borrowing requirements in light
of our strong cash generation and the Group's aim of reducing its
reliance on the housing market. We therefore reduced the size of
the committed facility and the costs associated with it. To provide
further flexibility to support growth, the facility includes a
GBP30m accordion, to be requested by LSL at any time, subject to
bank approval.
The facility is provided by Barclays Bank PLC and Santander UK
plc, two long-standing banking partners, alongside NatWest Bank
plc, a new member of the banking syndicate. We have a strong and
long-standing relationship with NatWest Bank plc, through our
Financial Services and Surveying & Valuation Divisions.
At 31 December 2021, Net Cash was at a historic high of GBP48.5m
(2020: Net Bank Debt: GBP1.6m).
The Group generated adjusted cash from operations of GBP37.7m
(2020: GBP66.3m). After adjusting for payments made during 2021 for
tax payment deferrals agreed with HMRC relating to 2020, the
cash-flow conversion(1) rate in 2021 was 106% (2020: 122%). The
reported cash-flow conversion rate before adjusting for tax
deferral payments, was 76% (2020: 159%).
The net increase in cash and cash equivalents of GBP37.0m during
2021 (2020: GBP11.4m increase) included GBP41.3m proceeds from the
sale of investments in LMS and TM Group, investments in Pivotal
Growth (GBP2.5m) and Direct Life Quote Holdings Limited (GBP1.8m),
capital expenditure of GBP6.9m (2020: GBP4.1m) and payment of the
reinstated 2021 Interim dividend of GBP4.2m (2020: GBPnil dividends
paid). Working capital out-flows included payments for tax
deferrals from 2020, with provisions also decreasing by GBP3.2m
(2019: decrease of GBP1.5m), due to the positive progress in
addressing historic PI claims.
Contingent consideration
Contingent consideration at 31 December 2021 was GBP3.0m (31
December 2020: GBP5.4m). Contingent consideration relates primarily
to the cost of acquiring the remaining shares in RSC. The
year-on-year reduction reflects part settlement and an update to
forecasts, both relating to RSC, with additions in the period due
to the acquisition of Direct Life and Quote Holdings Limited.
Treasury and Risk Management
We have an active debt management policy. The Group does not
hold or issue derivatives or other financial instruments for
trading purposes. Further details on the Group's financial
commitments, as well as the Group's treasury and risk management
policies are set out in the Annual Report and Accounts.
International Financial Reporting Standards (IFRS)
The Financial Statements have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and UK adopted International
Accounting Standards.
Notes:
1 Adjusted cash-flow conversion defined as cash generated from
operations (pre PI and post lease liabilities) divided by Group
Underlying Operating Profit
Group Income Statement
for the year ended 31 December 2021
2021 2020
Note GBP'000 GBP'000
------------------------------ ----------
Continuing Operations:
Revenue 3, 4 326,832 266,742
Operating expenditure:
Employee and subcontractor costs (202,269) (162,455)
Establishment costs (10,071) (9,528)
Depreciation on property, plant and equipment (12,500) (13,929)
Other operating costs (55,339) (46,938)
------------------------------ ----------
(280,179) (232,850)
Other operating income 937 783
Gain on sale of property, plant and equipment 1,061 15
Income from joint ventures and associates 668 493
Share-based payments (1,916) (18)
Amortisation of intangible assets (4,534) (5,395)
Exceptional gains 7 31,050 674
Exceptional costs 7 (2,045) (7,076)
Contingent consideration 710 544
Group operating profit 72,584 23,912
------------------------------ ----------
Finance costs (2,709) (3,134)
Finance income 14 144
------------------------------ ----------
Net finance costs (2,695) (2,990)
------------------------------ ----------
Profit before tax 69,889 20,922
Taxation charge 9 (7,985) (4,596)
Profit for the year 61,904 16,326
------------------------------ ----------
Attributable to:
Owners of the parent 61,941 16,326
Non-controlling interest (37) -
Earnings per Share expressed in pence per
Share:
Basic 6 59.6 15.9
Diluted 6 59.2 15.7
Group Statement of Comprehensive Income
for the year ended 31 December 2021
2021 2020
GBP'000 GBP'000
----------- -----------
Profit for the period 61,904 16,326
----------- -----------
Items not to be reclassified to profit and
loss in subsequent periods:
Revaluation of financial assets not recycled
through income statement (1,557) -
Tax on revaluation (132)
----------- -----------
(1,689) -
Total other comprehensive loss for the year,
net of tax (1,689) -
----------- -----------
Total comprehensive income, net of tax 60,215 16,326
----------- -----------
Attributable to:
Owners of the parent 60,252 16,326
Non-controlling interest (37) -
Group Balance Sheet
as at 31 December 2021
2021 2020
GBP'000 GBP'000
---------- ----------
Non-current assets
Goodwill 160,865 159,863
Other intangible assets 29,604 27,894
Property, plant and equipment 37,070 42,741
Financial assets 5,748 9,561
Investments in joint ventures and associates 1,610 11,406
Contract assets 733 433
---------- ----------
Total non-current assets 235,630 251,898
---------- ----------
Current assets
Trade and other receivables 33,829 28,438
Contract assets 424 253
Current tax asset 1,142 184
Cash and cash equivalents 48,464 11,443
Total current assets 83,859 40,318
---------- ----------
Total assets 319,489 292,216
---------- ----------
Current liabilities
Financial liabilities (8,523) (12,466)
Trade and other payables 10 (64,206) (72,936)
Provisions for liabilities (775) (2,998)
---------- ----------
Total current liabilities (73,504) (88,400)
---------- ----------
Non-current liabilities
Financial liabilities (22,602) (40,060)
Deferred tax liability (2,073) (1,822)
Provisions for liabilities (3,191) (4,180)
---------- ----------
Total non-current liabilities (27,866) (46,062)
---------- ----------
Total liabilities (101,370) (134,462)
---------- ----------
Net assets 218,119 157,754
---------- ----------
Equity
Share capital 210 210
Share premium account 5,629 5,629
Share-based payment reserve 5,263 3,942
Shares held by EBT (3,063) (5,012)
Fair value reserve (15,273) (13,584)
Retained earnings 224,832 166,569
---------- ----------
Total equity attributable to owners of the
parent 217,598 157,754
---------- ----------
Non-controlling interest 521 -
---------- ----------
Total equity 218,119 157,754
---------- ----------
Group Statement of Cash-Flows
for the year ended 31 December 2021
2021 2020
GBP'000 GBP'000
--------- ---------
Profit before tax 69,889 20,922
Adjustments for:
Exceptional operating items and contingent
consideration (29,716) 5,857
Depreciation of tangible assets 12,500 13,929
Amortisation of intangible assets 4,534 5,395
Share-based payments 1,916 18
Profit on disposal of fixed assets (1,061) (15)
Income from joint ventures and associates (668) (493)
Finance income (14) (144)
Finance costs 2,709 3,134
Operating cash-flows before movements in working
capital 60,089 48,603
--------- ---------
Movements in working capital
(Increase) / decrease in trade and other receivables (3,439) 8,553
(Decrease) / increase in trade and other payables (8,919) 13,606
Decrease in provisions (3,213) (1,474)
(15,571) 20,685
--------- ---------
Cash generated from operations 44,518 69,288
Interest paid (2,554) (2,581)
Income taxes paid (8,528) (6,093)
Exceptional costs paid (2,045) (7,311)
Net cash generated from operating activities 31,391 53,303
--------- ---------
Cash-flows used in investing activities
Acquisitions of subsidiaries and other businesses,
net of cash acquired (730) (293)
Payment of contingent consideration (2,462) (169)
Investment in joint venture (2,477)
Investment in financial assets (14) (418)
Dividend received from joint venture 1,178 -
Cash received on sale of joint venture 41,349 -
Receipt of lease income 20 -
Purchase of property, plant and equipment and
intangible assets (6,902) (4,050)
Proceeds from sale of property, plant and equipment 431 138
Net cash generated / (expended) on investing
activities 30,393 (4,792)
--------- ---------
(Repayment) / drawdown of loans (13,000) (28,883)
Payment of deferred consideration (122) (80)
Payments of lease liabilities (8,922) (8,304)
Receipt of lease Income - 23
Proceeds from the exercise of share options 1,447 176
Dividends paid (4,166) -
Net cash expended in financing activities (24,763) (37,068)
--------- ---------
Net increase / (decrease) in cash and cash
equivalents 37,021 11,443
--------- ---------
Cash and cash equivalents at the end of the
year 48,464 11,443
--------- ---------
Group Statement of Changes in Equity
for the year ended 31 December 2021
Share- Equity
Share based Shares Fair attributable
Share premium payment held value Retained to owners of Non-controlling Total
capital account reserve by EBT reserve earnings the parent interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- --------- -------- -------- --------- ---------- -------------- ----------------- --------
At 1 January
2021 210 5,629 3,942 (5,012) (13,584) 166,569 157,754 - 157,754
Profit for the
year - - - - - 61,941 61,941 (37) 61,904
Revaluation of
financial
assets - - - - (1,557) - (1,557) - (1,557)
Tax on
revaluations - - - - (132) - (132) - (132)
Total
comprehensive
income for
the year - - - - (1,689) 61,941 60,252 (37) 60,215
Acquisition of
subsidiary - - - - - - - 558 558
Issued share - - - - - - - - -
capital in the
year
Exercise of
options - - (990) 1,949 - 488 1,447 - 1,447
Dividend paid - - - - - (4,166) (4,166) - (4,166)
Share-based
payments - - 1,916 - - - 1,916 - 1,916
Tax on share
based
payments - - 395 - - - 395 - 395
At 31 December
2021 210 5,629 5,263 (3,063) (15,273) 224,832 217,598 521 218,119
--------- --------- -------- -------- --------- ---------- -------------- ----------------- --------
During the year ended 31 December 2021, the Trust acquired nil
LSL shares. During the period, 555,824 share options were exercised
relating to LSL's various share option schemes resulting in the
Shares being sold by the Trust. LSL received GBP1.4m on exercise of
these options.
The notes on pages [page] to [page] form part of these Financial
Statements.
Group Statement of changes in equity
for the year ended 31 December 2020
Share Share- based
Share premium payment Shares held Fair value Retained Total
capital account reserve by EBT reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ------------- ------------- ------------- ------------- -------------- ---------
At 1 January
2020 208 5,629 4,429 (5,224) (13,584) 149,758 141,216
Profit for the
year - - - - - 16,326 16,326
Total
comprehensive
income for
the year - - - - - 16,326 16,326
Issued share
capital in
the year 2 - - - - - 2
Exercise of
options - - (80) 212 - 44 176
Share-based
payments - - (423) - - 441 18
Tax on share
based
payments - - 16 - - - 16
At 31 December
2020 210 5,629 3,942 (5,012) (13,584) 166,569 157,754
---------- ------------- ------------- ------------- ------------- -------------- ---------
During the year ended 31 December 2020, the Trust acquired
167,083 LSL shares. During the period, 60,565 share options were
exercised relating to LSL's various share option schemes resulting
in the Shares being sold by the Trust. LSL received GBP176,000 on
exercise of these options.
Notes to the Preliminary Results Announcement
The above results and the accompanying notes do not constitute
statutory accounts within the meaning of Section 435 of the
Companies Act 2006.
Statutory financial statements for this year will be filed
following the 2021 AGM and will be available on LSL's website:
lslps.co.uk. The auditors have reported on these Financial
Statements. Their report was unqualified and did not contain a
statement under section 498 (2), (3) or (4) of the Companies Act
2006.
1. Directors' responsibility statement
Each of the current Directors who were members of the Board in
2021 confirm that, to the best of their knowledge, the Financial
Statements, prepared in accordance with IFRS as adopted by EU
standards, give a fair, balanced and understandable view of the
assets, liabilities, financial position and profit or loss of the
issuer and the undertakings included in the consolidation taken as
a whole; and the Directors' Report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
2. Basis of preparation
The Financial Statements have been prepared on a going concern
basis and on a historical cost basis, except for certain debt and
equity financial assets that have been measured at fair value. The
accounting policies applied by the Group in these consolidated
preliminary results are the same as those applied by the Group in
the LSL annual Financial Statements for the year ended 31 December
2020. The Group's Financial Statements are presented in pound
sterling and all values are rounded to the nearest thousand pounds
(GBP'000) except when otherwise indicated.
Going Concern
The Directors have considered the Group's current and future
prospects, risks and uncertainties set out in the risk management
objectives and policies, and its availability of financing, and are
satisfied that the Group can continue to pay its liabilities as
they fall due for the period to 30 March 2023. For this reason, the
Directors continue to adopt the going concern basis of preparation
for these financial statements. Further detailed information is
provided in the going concern statement in the Directors' Report in
the Annual Report and Accounts 2021.
In preparing the Group Financial Statements Management has
considered the impact of climate change, taking into account the
relevant disclosures in the Strategic Report, including those made
in accordance with the recommendations of the Taskforce on
Climate--related Financial Disclosures. Recognising that the
environmental impact of the Group's operations is relatively low,
no issues were identified that would impact the carrying values of
the Group's assets or have any other impact on the Financial
Statements.
3. 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:
Year ended 31 December 2021
Financial Surveying Residential Asset
Services & Valuation Sales exchange Lettings Management 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 84,818 93,699 71,737 32,268 2,217 11,162 295,901
Services
transferred
over time - - - 29,783 1,148 - 30,931
---------- ------------- ----------------- ----------- ---------------- ---------- ----------
Total revenue
from contracts
with customers 84,818 93,699 71,737 62,051 3,365 11,162 326,832
---------- ------------- ----------------- ----------- ---------------- ---------- ----------
Year ended 31 December 2020
Financial Surveying Residential Asset
Services & Valuation Sales exchange Lettings Management 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 70,845 77,125 48,821 29,211 2,602 7,592 236,196
Services
transferred
over time - - - 29,390 1,156 - 30,546
---------- ------------- ----------------- ----------- ---------------- ---------- ----------
Total revenue
from contracts
with customers 70,845 77,125 48,821 58,601 3,758 7,592 266,742
---------- ------------- ----------------- ----------- ---------------- ---------- ----------
2021 2020
GBP'000 GBP'000
Revenue from services 326,832 266,742
------------ ------------
Operating revenue 326,832 266,742
------------ ------------
Rental income 937 783
Other operating income 937 783
------------ ------------
Total revenue 327,769 267,525
------------ ------------
4. Segment analysis of revenue and operating profit
LSL reports three segments: Financial Services; Surveying &
Valuation; and Estate Agency:
-- The Financial Services Division is a provider of services to
mortgage intermediaries and specialist mortgage and insurance
advice to estate agency and new build customers
-- The Surveying & Valuation Division provides a valuations
and professional surveying service of residential properties to
various lenders and individual customers
-- The Estate Agency Division provides services related to the
sale and letting of residential properties. It operates a network
of high street branches, arranges conveyancing services and for a
range of lenders provides repossession and asset management
services.
Operating segments
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.
Reportable segments
The following tables presents revenue and profit information
regarding the Group's operating segments for the financial year
ended 31 December 2021 and the financial year ended 31 December
2020.
Year ended 31 December 2021
Financial Surveying Estate
Services & Valuation Agency Unallocated Total
Income Statement information GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ------------- --------- -------------- ----------
Revenue from external
customers 84,818 93,699 148,315 - 326,832
Introducer's fee (6,287) - 6,287 - -
---------- ------------- --------- -------------- ----------
Total revenue 78,531 93,699 154,602 - 326,832
---------- ------------- --------- -------------- ----------
Segmental result:
Group Underlying Operating
Profit 14,787 23,609 18,430 (7,507) 49,319
---------- ------------- --------- -------------- ----------
Operating profit / (loss) 9,976 24,721 46,464 (8,577) 72,584
---------- ------------- --------- --------------
Finance Income 14
Finance costs (2,709)
----------
Profit before tax 69,889
Taxation (7,985)
----------
Profit for the year 61,904
----------
Balance sheet information
Segment assets - intangible 20,779 11,086 158,531 73 190,469
Segment assets - other 9,891 12,772 55,046 51,311 129,020
---------- ------------- --------- -------------- ----------
Total Segment assets 30,670 23,858 213,577 51,384 319,489
Total Segment liabilities (25,343) (20,621) (50,130) (5,276) (101,370)
---------- ------------- --------- -------------- ----------
Net assets / (liabilities) 5,327 3,237 163,447 46,108 218,119
---------- ------------- --------- -------------- ----------
Group Underlying Operating Profit is as defined in note 6 to
these condensed Financial Statements.
In the year the Group sold its interests in the two joint
ventures recorded in the Estate Agency Division, results for these
joint ventures are recorded to their disposal dates. The Group
acquired an interest in a joint venture in the Financial Services
Division during April 2021.
Unallocated net assets comprise Intangible assets and plant and
equipment GBP0.1m, other assets GBP3.0m, cash GBP48.5m, accruals
and other payables GBP3.4m current and deferred tax liabilities
GBP2.1m. Unallocated result comprises costs relating to the parent
company.
Year ended 31 December 2020
Financial Surveying Estate
Services & Valuation Agency Unallocated Total
Income Statement information GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ------------- ---------- ------------ ----------
Revenue from external
customers 70,845 77,125 118,772 - 266,742
Introducer's fee (9,889) - 9,889 - -
---------- ------------- ---------- ------------ ----------
Total revenue 60,956 77,125 128,661 - 266,742
---------- ------------- ---------- ------------ ----------
Segmental result:
- Group Underlying
Operating Profit pre
COVID-19 costs 13,451 17,871 15,554 (5,335) 41,541
- Group Underlying Operating
Profit post COVID-19
costs 12,287 16,193 12,071 (5,368) 35,183
---------- ------------- ---------- ------------ ----------
- Operating Profit 10,679 14,680 3,802 (5,249) 23,912
---------- ------------- ---------- ------------
Finance Income 144
Finance costs (3,134)
----------
Profit before tax 20,922
Taxation (4,596)
----------
Profit for the year 16,326
----------
Balance sheet information
Segment assets - intangible 17,109 11,280 159,367 - 187,756
Segment assets - other 7,935 13,571 68,993 13,961 104,460
---------- ------------- ---------- ------------ ----------
Total segment assets 25,044 24,851 228,360 13,961 292,216
Total segment liabilities (26,010) (27,398) (63,640) (17,414) (134,462)
---------- ------------- ---------- ------------ ----------
Net assets / (liabilities) (966) (2,547) 164,720 (3,453) 157,754
---------- ------------- ---------- ------------ ----------
Group Underlying Operating Profit is as defined in note 6 to
these condensed Financial Statements.
The joint venture interests of the Group are recorded in the
Estate Agency segment, with the associate interest recorded in the
Financial Services.
Unallocated net liabilities comprise other assets GBP2.5m, cash
GBP11.4m, accruals and other payables GBP2.6m, current and deferred
tax liabilities GBP1.8m and revolving credit facility overdraft
GBP13m. Unallocated result comprises costs relating to the parent
company.
5. 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.
In the prior year, costs relating to COVID-19 were separately
identified and excluded from Group Underlying Operating Profit as
the Directors considered that these adjusted measures shown give a
better and more consistent indication of the Group's underlying
performance. The most significant areas of costs relating to
COVID-19 were employee costs and property and related asset costs.
In 2021, the group has not incurred separately identifiable costs
related to COVID-19 and has not excluded any from Group underlying
operating profit.
The three adjusted measures reported by the Group are:
-- Group Underlying Operating Profit
-- Adjusted Basic EPS
-- Adjusted diluted EPS
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 6 to these Condensed Consolidated Group Financial
Statements and a reconciliation of Group Underlying Operating
Profit is shown below:
2021 2020
GBP'000 GBP'000
--------- --------
Group operating profit 4 72,584 23,912
Share-based payments 1,916 18
Amortisation of intangible assets 4,534 5,395
Exceptional gains (31,050) (674)
Exceptional costs 2,045 7,076
Contingent consideration (credit)/ charge (710) (544)
Group Underlying Operating Profit 49,319 35,183
--------- --------
Total costs related to COVID-19 - 6,358
--------- --------
Group Underlying Operating Profit (pre
COVID-19 costs) 49,319 41,541
--------- --------
6. 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.
Profit 2021 2020
after Weighted Per Share Profit Weighted Per Share
tax average number amount after tax average number amount
GBP'000 of Shares Pence GBP'000 of Shares Pence
Basic EPS 61,941 103,912,148 59.6 16,326 102,939,680 15.9
Effect of dilutive
share options 688,806 947,704
Diluted EPS 61,941 104,600,954 59.2 16,326 103,887,384 15.7
--------- ---------------- ----------- ----------------
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:
2021 2020
GBP'000 GBP'000
-------- --------
Group Underlying Operating Profit 49,319 41,541
Loss attributable to non-controlling interest 37 -
Net finance costs (excluding exceptional and
contingent consideration items and discounting
on lease liabilities) (1,047) (1,062)
Normalised taxation (tax rate 19% 2019: 19%) (9,171) (7,691)
-------- --------
Adjusted profit after tax attributable to owners
of the parent 39,138 32,788
-------- --------
Adjusted basic and diluted EPS
Adjusted Weighted 2021 Adjusted 2020
profit average Per Share profit Weighted Per Share
after tax number of amount after tax average number amount
GBP'000 Shares Pence GBP'000 of Shares Pence
Adjusted basic
EPS 39,138 103,912,148 37.7 32,788 102,939,680 31.9
Effect of dilutive
share options 688,806 947,704
----------- ------------ ----------- ----------------
Adjusted diluted
EPS 39,138 104,600,954 37.4 32,788 103,887,384 31.6
----------- ------------ ----------- ----------------
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 19.0% (31 December 2020: 19.0%)
7. Exceptional items
2021 2020
GBP'000 GBP'000
---------- ----------
Exceptional costs:
Exceptional costs in relation to investment in 1,179 -
joint venture
Embrace Financial Services restructuring project 714 -
Branch / centre closure and restructuring costs
including redundancy costs - 2,312
Aborted merger deal costs - 2,350
Dissolution and impairment of associate Mortgage
Gym 152 1,992
Other - 422
---------- ----------
2,045 7,076
---------- ----------
Exceptional gains:
Exceptional gain in relation to historic PI costs (1,641) (674)
Exceptional gain in relation to sale of joint (29,409) -
ventures
---------- ----------
(31,050) (674)
---------- ----------
Exceptional costs
Exceptional costs in relation to investment in joint venture
Costs relating to class 1 circular, shareholder meeting and the
set-up of Pivotal Growth
There were GBP1.2 m (2020: nil) of non-recurring and material
exceptional costs relating to the formation of Pivotal Group, a new
joint venture. No further costs are expected in relation to
this.
Embrace Financial Services restructuring project
There were GBP0.7m (2020: nil) of non-recurring and material
exceptional costs relating to the restructure of Embrace Financial
Services. No further costs are expected in relation to this.
Dissolution of associate Mortgage Gym
Mortgage Gym associate went into administration in February
2021. At the time the Group held GBP2.0m on its Balance Sheet as an
investment in associate. The Group recognised an impairment for the
full value of it's holding in Mortgage Gym, and the administrator
fees of GBP0.2m. The GBP2.0m impairment was recognised in the 2020
Group Financial Statements as an event after the reporting period,
with the Administrator fees being recognised in 2021. No further
costs are expected in relation to this.
Exceptional Gains
Provision for professional indemnity (PI) claims and insurance
claim notification
The Group continued to make positive progress in settling
historic PI claims, in which actual settlement costs have been
lower than expected, and therefore there has been a release of
GBP1.6m in 2021 (December 2020: GBP0.7m) in relation to exceptional
PI claims.
Disposal of interest in joint ventures
In May 2021, the Group disposed of its 49.6% interest in Cybele
Solutions Holdings Limited ("LMS") for consideration of GBP12m. The
net gain recognised on sale of LMS was GBP3.2m.
In August 2021, the Group disposed of its 32.34% interest in TM
Group Limited ("TMG") for consideration of GBP29.3m. The net gain
recognised on sale of LMS was GBP26.2m.
8. Dividends paid and proposed
2021 2020
GBP'000 GBP'000
Declared and paid during the year:
2021 Interim: 4.0 pence per share 4,166 -
4,166 -
------- -------
Dividends on Ordinary Shares proposed (not
recognised as a liability as at 31 December):
Equity dividends on ordinary shares:
Dividend: [7.4] pence per share (2021: nil) 7,689 -
------- -------
9. Taxation
The major components of income tax charge in the interim Group
income statements are:
2021 2020
GBP'000 GBP'000
------- --------
UK corporation tax:
- current year charge 7,873 5,111
- adjustment in respect of prior years (251) (409)
------- --------
7,622 4,702
------- --------
Deferred tax:
Origination and reversal of temporary differences (179) (597)
Changes in tax rates 562 243
Adjustment in respect of prior year (20) 248
------- --------
363 (106)
------- --------
Total tax charge in the income statement 7,985 4,596
------- --------
Corporation tax is recognised at the headline UK corporation tax
rate of 19% (2020: 19%).
The opening deferred tax balances in the financial statements
were measured at 19%. For the year ended 31 December 2021, a tax
rate of 25% has been applied in line with rates enacted by the
Finance Act 2021 which was enacted on 10 June 2021. This gives rise
to a debit to the profit and loss account of GBP0.6m.
The effective rate of tax for the year was 11.4% (2020: 22.0%).
The effective tax rate for 2021 is lower than the headline UK tax
rate for several reasons, the most significant being the profit on
disposal of investments which are not taxable as they qualify for
Substantial Shareholders Exemption.
Deferred tax debited directly to other comprehensive income is
GBP0.1m (2020: GBPnil). Income tax credited directly to the
share-based payment reserve is GBP0.4m (2020: GBPnil).
10. Trade and other payables
2021 2020
GBP'000 GBP'000
-------- --------
Current
Trade payables 8,207 11,733
Other taxes and social security payable 12,247 24,971
Other payables 3,600 2,291
Accruals 35,222 29,412
Lapse provision 4,930 4,529
64,206 72,936
-------- --------
Lapse Provision
Certain subsidiaries sell life assurance products which are
cancellable without a notice period, and if cancelled within a set
period require that a portion of the commission earned must be
repaid. The lapse provision is recognised as a reduction in revenue
which is based on historic lapse experience. The provision is the
Management team's best estimate of future clawed back commission on
life assurance policies, taking into account historic lapse rates
in each subsidiary.
11. Analysis of Net Cash/ Bank Debt
2021 2020
GBP'000 GBP'000
-------- --------
Interest bearing loans and borrowings (including
loan notes, overdraft, IFRS16 lease liabilities,
contingent and deferred consideration
* Current 8,523 12,466
* Non-current 22,602 40,060
-------- --------
31,125 52,526
Unsecured loan notes - -
Less: cash and short-term deposits (48,464) (11,443)
Less: IFRS 16 Lessee financial liabilities (28,117) (33,957)
Less: deferred and contingent consideration (3,008) (5,569)
-------- --------
Net Bank (Cash)/Debt at the end of the period (48,464) 1,557
-------- --------
12. Events after the reporting period
In February 2022, LSL invested an additional GBP0.9m in its
Pivotal Growth joint venture to fund its buy and build growth
strategy.
Forward-Looking Statement
This announcement may contain certain statements that are
forward--looking statements. They appear in a number of places
throughout this announcement and include statements regarding LSL's
intentions, beliefs or current expectations and those of its
officers, directors and employees concerning, amongst other things,
LSL's results of operations, financial condition, liquidity,
prospects, growth, strategies and the business it operates. By
their nature, these statements involve uncertainty since future
events and circumstances can cause results and developments to
differ materially from those anticipated. The forward--looking
statements reflect knowledge and information available at the date
of preparation of this update and, unless otherwise required by
applicable law, LSL undertakes no obligation to update or revise
these forward-looking statements. Nothing in this update should be
construed as a profit forecast. LSL and its Directors accept no
liability to third parties in respect of this update save as would
arise under English law.
Any forward--looking statements in this announcement speak only
at the date of this announcement and LSL undertakes no obligation
to update publicly or review any forward--looking statement to
reflect new information or events, circumstances or developments
after the date of this update.
This information is provided by RNS, the news service of the
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END
FR BELLFLXLBBBQ
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March 16, 2022 03:00 ET (07:00 GMT)
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