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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Lsl Property Services Plc | LSE:LSL | London | Ordinary Share | GB00B1G5HX72 | ORD 0.2P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 4.00 | 1.34% | 302.00 | 298.00 | 301.00 | 306.00 | 300.00 | 306.00 | 32,889 | 16:35:12 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Agents & Mgrs | 323.77M | -63.92M | -0.6148 | -4.88 | 311.95M |
TIDMLSL
RNS Number : 2106W
LSL Property Services
31 July 2018
For Immediate Release 31(st) July 2018
LSL Property Services plc ("LSL" or "The Group")
Interim Results For the six months ended 30(th) june 2018
LSL Property Services plc, a leading provider of residential property services incorporating both estate agency and surveying businesses, announces its interim results for the six months ended 30(th) June 2018.
Hot Features
Premium
2018 2017 change
---------------------------------------------- ------ ------ --------
Group revenue - GBPm 152.9 151.5 +1%
Group Underlying Operating Profit(1) - GBPm 11.6 15.5 -25%
Group underlying operating margin - % 7.6 10.2
---------------------------------------------- ------ ------ --------
Group Adjusted EBITDA(2) - GBPm 14.4 18.2 -21%
Group operating profit - GBPm 7.4 14.3 -48%
Profit before tax - GBPm 6.4 13.2 -51%
Exceptional gain - GBPm 1.2 1.1 +9%
Basic Earnings Per Share - pence 4.7 10.3 -54%
Adjusted Basic Earnings Per Share(3) - pence 8.6 11.5 -25%
Net Bank Debt(4) at 30(th) June - GBPm 46.0 31.7 +45%
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 7)
2 Group Adjusted EBITDA is Group Underlying Operating Profit plus depreciation plant, property and equipment (as defined in Note 7)
3 Refer to Note 8 for the calculation 4 Refer to Note 15 for the calculation
Revenue growth delivered in challenging market conditions
-- Resilient revenue performance in the context of challenging residential property market conditions with Group revenue up 1%
-- Ongoing self-help measures continue to deliver organic revenue growth in the Estate Agency Division in both Lettings (+4%) and Financial Services (+5%)
-- Residential Sales exchange revenue was down by 11%, impacted by the market conditions and the closure of eight owned branches in the final quarter of 2017
-- Estate Agency Division profit was negatively impacted by a number of factors including the reduction in Residential Sales exchange revenue whilst in the previous period there was a one-off gain on the sale of a Marsh & Parsons leasehold property amounting to GBP0.7m
-- The Surveying Division was awarded a material five-year contract for the supply of surveying and valuation services to Lloyds Bank plc
-- Whilst Surveying Division revenue was down 6.2% impacted by market conditions and Lender mix, strong operating margins were delivered of 27.7% (2017: 28.4%) through strong cost control
-- Continued positive progress in addressing historic Professional Indemnity (PI) claims with a GBP1.2m exceptional provision release as claims were settled below previous expectations
Full year outlook
-- The LSL Board remains confident of delivering full year Group Underlying Operating Profit in line with expectations. As reported in the LSL AGM statement on 26(th) April 2018, the 2018 Group Underlying Operating Profit performance is expected to be weighted more to H2 than in 2017 and more in line with LSL's historical average. This outlook takes into consideration:
o In Estate Agency, the Residential Sales pipelines are ahead of the Board's previous expectations
o In Surveying, current trading is positive and additional volumes will come on stream from the Lloyds Bank plc surveying and valuation services contract
o Contribution from Financial Services acquisitions made during the first half of the year
o Continued self-help initiatives across the business including strong cost control
-- Interim dividend of 4.0 pence (2017: 4.0 pence) reflecting the Board's confidence in the outlook for the second half of the year
Estate Agency Division Performance
-- Revenue increased by 3% year on year with the continued self-help measures driving 4% growth in Lettings income (organic 4%) and 20% growth in Financial Services income (5% organic), both of which combined to more than offset the 11% reduction in Residential Sales exchange income
-- Residential property market share maintained at broadly stable levels with residential average fees slightly up
-- Like for like expenditure(1) has been broadly maintained at the same level as prior year as costs are closely managed whilst continuing to invest in our growth businesses
-- Estate Agency Division Underlying Operating Profit(2) of GBP5.0m (2017: GBP9.4m) was negatively impacted by a number of factors including the reduction in Residential Sales exchange revenue whilst in the previous period there was a one-off gain on the sale of a Marsh & Parsons leasehold property amounting to GBP0.7m
-- Marsh & Parsons delivered a resilient revenue performance despite a challenging London market with total revenue down 3% as Lettings revenue continued to perform positively with growth of 6% largely offsetting the 15% fall in Residential Exchange revenue
-- Continued progress with the ways of working programme with the objective of delivering improvements to the Estate Agency operational performance and enhancing market competitiveness, including the evaluation of further growth opportunities in our Financial Services business
Surveying Division Performance
-- Revenue down by 6% impacted by market conditions and lender mix
-- Strong cost control with total expenditure down 5%
-- The Surveying Division continued to deliver strong operating margins of 27.7% (2017: 28.4%)
-- Continued positive progress in addressing historic PI claims with a GBP1.2m exceptional provision release as claims were settled below previous expectations
Commenting on today's announcement, Simon Embley, Chairman, said:
"The Group has delivered a resilient first half revenue performance in the context of challenging residential property market conditions. Whilst Residential Sales volumes remained suppressed, revenue trends in other parts of our business are more robust due to our ongoing self-help measures. Our Lettings and Financial Services businesses continue to perform positively and Financial Services income now represents 33% of total Estate Agency Division income.
During the first half, Lloyds Bank plc awarded LSL a material five-year contract to deliver surveying and valuation services which demonstrates the market leading proposition that we are able to offer our customers and reflects well on our technology investment.
Whilst market conditions in the first half of 2018 have been softer than the Board's expectations and the equivalent period in 2017, LSL's financial performance in the first half of 2018 was in line with the Board's expectations. Given Residential Sale pipelines are above previous expectations, current trading in Surveying is positive and the range of self-help initiatives in progress, the Board is confident of delivering a full year Group Underlying Operating Profit in line with expectations."
For further information, please contact:
Ian Crabb, Group Chief Executive Officer Adam Castleton, Group Chief Financial Officer LSL Property Services plc 0207 382 0360 David Rydell Sophie Wills Gemma Mostyn-Owen 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 and mortgage, pure protection and general insurance brokerage services. Services to mortgage lenders include: valuations and panel management services, asset management and property management services. For further information, please visit LSL's website: www.lslps.co.uk
Group Chief Executive's Review
Introduction
The Group delivered a resilient first half revenue performance with revenue up 1% to GBP152.9m despite challenging market conditions. Profit in both Divisions was broadly in line with Board expectations.
The UK residential housing market remained challenging in the first half of 2018 as consumer confidence continued to be impacted by uncertainty. Approvals for house purchases were 4.7% lower in the first five months of the year reported to date compared to the same period in 2017(3) .
Financial Results
Group revenue was ahead at GBP152.9m (2017: GBP151.5m). Group Underlying Operating Profit(2) was down 25% to GBP11.6m (2017: GBP15.5m) and Group Underlying Operating Profit Margin(2) was 7.6% (2017: 10.2%).
Group operating profit was down 48% to GBP7.4m (2017: GBP14.3m) reflecting the decrease in margin in both Divisions, an increase in contingent consideration relating to acquisitions and a charge of GBP0.6m to the share based payment reserve, in contrast to the credit booked in the first half of 2017.
During the first half of 2018 net finance costs were GBP1.0m, slightly lower than the same period in 2017. The effective tax rate for the period was 24.2% (2017: 19.8%), compared to the current headline rate of corporation tax rate of 19.0%. The effective tax rate has increased due to a number of factors including an increase in contingent consideration and non-qualifying depreciation, as well as reduction in profit after tax from joint venture interests which are all non-deductible expenses or non-taxable income. Group profit after tax was GBP4.9m (2017: GBP10.6m). Basic Earnings Per Share were 4.7p (2017: 10.3p) and Adjusted Earnings Per Share were 8.6p (2017: 11.5p).
Cash generated from operations was GBP1.1m (2017: GBP10.5m) impacted by lower Group Underlying Operating Profit compared to the same period last year and a seasonal movement in working capital. Operating cash flow included PI Costs settlements of GBP0.6m (2017: GBP2.0m). Capital expenditure, including intangibles, was GBP2.1m (2017: GBP1.8m), including one new Marsh & Parsons branch opened during the period, in Chiswick.
During the first half of 2018 the Group acquired the entire issued share capital of Personal Touch Financial Services Limited (PTFS) and its subsidiary company, Personal Touch Administration Services Limited (PTAS). The initial consideration for the acquisition was GBP2.8m. The Group also acquired 60% of the share capital of RSC New Homes Limited ("RSC") for an initial consideration of GBP2.5m. RSC is a Financial Services business specialising in new build mortgages. In addition, the Group has restarted its accretive lettings book acquisition programme during the period with two lettings books acquired during the period for a total consideration of GBP0.5m.
Net assets at 30(th) June 2018 were GBP146.0m (2017: GBP134.5m). Net Bank Debt at 30(th) June 2018 was GBP46.0m compared to GBP31.7m at 30(th) June 2017, in part due to the GBP20m strategic acquisition of a 17.3% shareholding in Yopa Property Limited during September 2017. Compared to 31(st) December 2017, Net Bank Debt has increased by GBP16m driven by the normal seasonality of the Estate Agency Division cash flows, the funding of the two strategic Financial Services acquisitions (PTFS and RSC), the repayment of unsecured loan notes, the recommencement of the lettings book acquisitions and the payment of the deferred and contingent consideration in relation to previous acquisitions as well as the payment of dividends, taxes and bonuses.
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 (2017: 4.0 pence). The ex-dividend date for the interim dividend is 9(th) August 2018, with a record date of 10(th) August 2018 and a payment date of 14(th) September 2018. 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 2018.
Estate Agency Division
The Estate Agency Division revenue was up 3% at GBP121.8m (2017: GBP118.4m) reflecting the growth in both Lettings income and Financial Services income offsetting a fall in Residential Sales exchange Income. The Estate Agency Division Underlying Operating Profit(1) decreased to GBP5.0m (2017: GBP9.4m). Organic revenue was 1% down on the same period in 2017.
Residential Sales income decreased by 11% to GBP32.9m (2017: GBP37.0m) as a result of lower exchange volumes (-11%) in the context of lower market activity during the period, reduced pipelines at the start of the first half following the subdued market in the fourth quarter of 2017 and the closure of eight owned branches in the fourth quarter of 2017. In a highly competitive market, the Estate Agency Division has broadly maintained residential market share and delivered a small increase in average residential fees per unit.
The Group's Lettings income delivered growth of 4% (organic growth 4%) compared to the same period in 2017 with total Lettings income of GBP37.3m (2017: GBP35.7m). The Group has recommenced the letting books acquisitions programme with two lettings books acquired during the period.
Marsh & Parsons total revenues were down 3% to GBP15.9m (2017: GBP16.4m). Marsh & Parsons Underlying Operating Profit(2) decreased to GBP0.7m (2017: GBP1.7m) with operating margins of 4.4% (2017: 10.4%). Residential Sales were down 15%, against an overall London market for sales transactions which LSL estimates was down c.20% in the first half. Lettings performance continued to deliver organic growth of 6% (total growth of 6%). One new Marsh & Parsons branch opened during the period, in Chiswick, which is trading in line with expectations. Despite the opening of two new branches since 30(th) June 2017, with strong cost control, total expenditure fell by 1% year on year. The prior year benefited from the gain on the sale of a leasehold property amounting to GBP0.7m.
Financial Services revenue increased by 20% to GBP40.8m (2017: GBP34.1m) with organic growth of 5%. Financial Services income now represents 33% of total Estate Agency Division income. Growth has been delivered across the Estate Agency brands as well in the intermediary networks. The growth in the value of mortgage completions represents an increase in LSL's market share(4) to 9.0% in 2018 (2017: 6.9%). LSL continues to operate as the second largest network nationwide, measured by combined number of appointed representative firms(5) .
The Financial Services business continues to display good organic growth across all products including mortgage products, pure protection products and general insurance products. PTFS, which was acquired in January 2018, and RSC New Homes Limited, acquired in March 2018, are both performing in line with expectations and have contributed to the strong performance in Financial Services in the first half of 2018.
Following LSL's strategic acquisition of a 17.3% shareholding in Yopa in September 2017, Yopa has continued to expand its business, invest in marketing and build its brand.
We have continued progress with the ways of working programme with the objective of delivering improvements to the Estate Agency operational performance and enhancing market competitiveness, including the evaluation of further growth opportunities in our Financial Services business.
In the second half of 2018, the Estate Agency Division will benefit from continued self-help measures to drive organic growth in Lettings income and Financial Services revenue, pipelines which were ahead of the Board's expectations at the beginning of the period, continued cost control and the contribution from the Financial Services acquisitions completed in the first half of the year. The prior year benefited from the one-off gain on the sale of a leasehold property in Marsh & Parsons amounting to GBP0.7m.
Surveying Division
On 16(th) May 2018 LSL announced that e.surv Limited (e.surv), its residential surveying and valuation services operation was awarded a material contract to supply surveying and valuation services to Lloyds Bank plc. The initial contract period is for five years.
The contract is expected to enhance the Group's future earnings and provides a positive opportunity to leverage the LSL surveying assets to drive growth. It also demonstrates the market leading proposition that e.surv is able to offer its customers and reflects well on the technology investment which e.surv has made to enhance its proposition through the development of a market leading surveying IT platform.
Integration and transition is progressing well and includes the transfer to e.surv of the existing Lloyds Bank plc surveyors and back-office employees. The provision of valuation services by e.surv in relation to the Lloyds Bank plc contract is expected to commence in the third quarter of 2018.
Revenue in the Surveying Division in the first half was down by 6% impacted by market conditions and Lender mix. Strong cost control was maintained with total expenditure down 5%. The Surveying Division continued to deliver strong operating margins of 27.7% (2017: 28.4%). Underlying Operating Profit(2) was down 8.4%.
Surveyor headcount continues to be a focus for management and whilst overall Surveyor numbers fell slightly to 314 (2017: 320), e.surv's on-going graduate programme continues to be successful with an intake of graduates in March 2018, with more cohorts planned in the year.
At 30(th) June 2018, the total provision for PI Costs was GBP14.6m (2017: GBP17.9m). In 2018 the Group continued to make positive progress in addressing historic claims and there has been an exceptional release of GBP1.2m.
So far trading in the second half in the Surveying Division has been positive and there will be a continued focus on cost control in the second half.
Strategy
LSL remains committed to delivering on its stated strategy and continues to invest for the future, positioning the Group for success across a range of market conditions:
Estate Agency
-- Ambition to drive operating profit per branch to between GBP80,000 and GBP100,000 in the medium term
-- 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
-- Progress the ways of working programme with the objective of delivering improvements to the Estate Agency operational performance and market competitiveness, including the evaluation of further growth opportunities in our Financial Services business
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
Market conditions in the first half of 2018 were softer than the Board's expectations and the equivalent period in 2017, but despite this LSL's first half financial performance was in line with the Board's expectations.
As reported in the LSL AGM statement on 26(th) April 2018, the Board expects LSL's financial performance to be more weighted to the second half in 2018 compared to the same period in 2017 and therefore more in line with historical averages, supported by a range of initiatives including the recent Financial Services acquisitions.
LSL continues to execute on its stated strategy and is well placed to deliver increased Shareholder value. The Board is positive regarding the outlook for the business with current Residential Sales pipelines above previous expectations, current positive trading in Surveying and continued progress with the range of ongoing self-help initiatives. The Board is confident of delivering a full year Group Underlying Operating Profit in line with expectations.
LSL expects to see a reduction in the volume of house purchase transactions compared to the prior year, with modest House Price Inflation. Mortgage costs continue to be low by historic standards and mortgage availability remains good. The medium to longer term fundamentals of the UK housing market remain solid.
The Group has a robust balance sheet with relatively low levels of gearing and is highly cash generative at an operational level. The business is well placed to capitalise on market conditions to increase Shareholder value.
Ian Crabb
Group Chief Executive
31(st) July 2018
(1) The Estate Agency like for like expenditure comparative is after adjustments for acquisitions, share of profit/loss after tax from joint ventures and the one-off gain on sale of the leasehold property in Marsh & Parsons in H1 2017
(2) Group Underlying Operating Profit is before exceptional costs, contingent consideration, amortisation of intangible assets and share-based payments (as defined in Note 7)
(3) Source: Bank of England House Purchase Approvals January-May 2017/2018
(4) Source: UK Finance new mortgages sold via intermediaries January-May 2017/2018, excluding product transfers
(5) Source: Which-Network - network performance figures for Q1 2018 showing the combined numbers for PRIMIS
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 2017 on pages 22 to 27. The Annual Report and Accounts 2017 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 -- Information technology infrastructure -- Information security -- Regulatory and compliance -- Employees
The recent Group Risk Appetite Assessment exercise includes an evaluation of developing areas of key risks and the effectiveness of related business response plans. Recent notable examples include the capture of political and economic developments e.g. Brexit.
Other examples include investment activities to improve market share and economies of scale (e.g. acquisition of PTFS and the surveying and valuation services contract with Lloyds Bank plc; focus on market segments and harnessing new technology-based sales mediums; new regulatory changes (such as responses to the new General Data Protection Regulation and evolving tenant protection legislation); initiatives to address particular areas of staff attrition risk; and Board-level emphasis on the evaluation and promotion of a positive organisational culture.
The Board has concluded that such aspects are included in the principal risk and uncertainties noted above. Therefore the principal risks and uncertainties of the Group remain the same as those included within the Annual Report and Accounts 2017.
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 2017 on pages 22 to 27.
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 2017 (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
31(st) July 2018
Interim Group Income Statement
for the six months ended 30(th) June 2018
Unaudited Audited
Six Months Ended Year Ended
30(th) June 30(th) June 31(st) December
2018 2017 2017
Note GBP'000 GBP'000 GBP'000
----------- ----------- ---------------
Revenue 5,6 152,891 151,520 311,540
Operating expenses:
Employee and subcontractor costs (96,705) (91,778) (186,307)
Establishment costs (10,056) (10,174) (19,057)
Depreciation on property, plant
and equipment (2,772) (2,629) (5,216)
Other (31,737) (33,000) (66,269)
----------- ----------- ---------------
(141,270) (137,581) (276,849)
Other operating income 388 278 555
Gain on sale of property, plant
and equipment - 668 668
Income from joint ventures (399) 654 1,583
Group Underlying Operating Profit 7 11,610 15,539 37,497
Share-based payments (590) 145 (47)
Amortisation of intangible assets (2,718) (2,227) (4,083)
Contingent consideration (2,057) (230) (654)
Exceptional gains 9 1,189 1,100 9,337
Group operating profit 7,434 14,327 42,050
Finance costs (1,018) (1,176) (1,952)
Net finance costs (1,018) (1,176) (1,952)
Profit before tax 6,416 13,151 40,098
Taxation (charge) 11 (1,555) (2,598) (6,686)
----------- ---------------
(1,555) (2,598) (6,686)
Profit for the period/year 4,861 10,553 33,412
----------- ----------- ---------------
Attributable to:
- Owners of the parent 4,861 10,555 33,414
- Non-controlling interest - (2) (2)
Earnings per share expressed in
pence per share:
Basic 8 4.7 10.3 32.6
Diluted 8 4.7 10.2 32.4
Interim Group Statement of Comprehensive Income
for the six months ended 30(th) June 2018
Unaudited Audited
Six Months Ended Year Ended
30(th) June 30(th) June 31(st) December
2018 2017 2017
GBP'000 GBP'000 GBP'000
----------- ----------- ---------------
Profit for the period 4,861 10,553 33,412
Items to be reclassified to profit
and loss in subsequent periods:
Reclassification adjustments for
disposal of financial assets - - (5,593)
Income tax effect - - 951
Revaluation of financial assets - 2,146 1,885
Income tax effect - (365) (320)
----------- ----------- ---------------
Net other comprehensive income to
be reclassified to profit and loss
in subsequent periods: - 1,781 (3,077)
----------- ----------- ---------------
Total other comprehensive income,
net of tax - 1,781 (3,077)
----------- ----------- ---------------
Total comprehensive income, net of
tax 4,861 12,334 30,335
----------- ----------- ---------------
Attributable to
- Owners of the parent 4,861 12,336 30,337
- Non-controlling interest - (2) (2)
----------- ----------- ---------------
Interim Group Balance Sheet
as at 30(th) June 2018
Unaudited Audited
Six Months Ended Year Ended
30(th) 30(th) June 31(st) December
June 2017 2017
2018
Note GBP'000 GBP'000 GBP'000
---------- ------------ ----------------
Non-current assets
Goodwill 159,226 151,901 151,901
Other intangible assets 32,296 31,185 29,729
Property, plant and equipment 16,971 17,052 17,763
Financial assets 12 26,032 7,473 25,282
Investments in joint ventures 8,448 8,627 9,556
----------
Total non-current assets 242,973 216,238 234,231
----------
Current assets
Trade and other receivables 40,006 37,964 31,357
Cash and cash equivalents 516 - -
---------- ------------ ----------------
Total current assets 40,522 37,964 31,357
---------- ------------ ----------------
Total assets 283,495 254,202 265,588
---------- ------------ ----------------
Current liabilities
Financial liabilities 13 (10,226) (8,501) (6,454)
Trade and other payables (55,359) (52,280) (53,418)
Current tax liabilities (1,892) (2,923) (3,662)
Provisions for liabilities 14 (8,104) (4,220) (2,850)
---------- ------------ ----------------
Total current liabilities (75,581) (67,924) (66,384)
---------- ------------ ----------------
Non-current liabilities
Financial liabilities 13 (52,803) (33,762) (34,654)
Deferred tax liability (2,429) (3,887) (2,698)
Provisions for liabilities 14 (6,681) (14,141) (13,276)
---------- ------------ ----------------
Total non-current liabilities (61,913) (51,790) (50,628)
---------- ------------ ----------------
Total Liabilities (137,494) (119,714) (117,012)
---------- ------------ ----------------
Net assets 146,001 134,488 148,576
---------- ------------ ----------------
Equity
Share capital 208 208 208
Share premium account 5,629 5,629 5,629
Share-based payment reserve 4,382 4,124 3,802
Shares held by EBT (5,304) (5,331) (5,317)
Fair value reserve 473 5,352 494
Retained earnings 140,431 124,324 143,578
---------- ------------ ----------------
Equity attributable to owners
of parent 145,819 134,306 148,394
Non-controlling interests 182 182 182
Total equity 146,001 134,488 148,576
---------- ------------ ----------------
Interim Group Cash Flow Statement
for the six months ended 30(th) June 2018
Unaudited Audited
Six Months Ended Year
Ended
30(th) June 30(th) 31(st) December
2018 June 2017 2017
Note GBP'000 GBP'000 GBP'000
-------------- ------------ --------------------
Profit before tax 6,416 13,151 40,098
Adjustments for:
Exceptional operating items and
contingent consideration 866 (870) (7,640)
Depreciation of tangible assets 2,772 2,629 5,216
Amortisation of intangible assets 2,718 2,227 4,083
Share-based payments 590 (145) 47
(Profit) on disposal of fixed assets - (668) (668)
Loss/(profit) from joint ventures 399 (654) (1,584)
Finance costs 1,018 1,176 1,952
Revaluation of financial asset 12 (737)
Dividend income/rebates received
via non-cash consideration - - (1,503)
Operating cash flows before movements
in working capital 14,042 16,846 40,001
------------------------------------------ ----- -------------- ------------ --------------------
Movements in working capital
(Increase)/decrease in trade and
other receivables (5,388) (5,637) 1,695
(Decrease)/increase in trade and
other payables (6,235) 1,280 5,262
Decrease in provisions (1,363) (2,003) (5,440)
(12,986) (6,360) 1,517
------------------------------------------ ----- -------------- ------------ --------------------
Cash generated from operations 1,056 10,486 41,518
------------------------------------------ ----- -------------- ------------ --------------------
Interest paid (720) (831) (1,268)
Income taxes paid (3,662) (7,504) (11,113)
Net cash generated from operating
activities (3,326) 2,151 29,137
------------------------------------------ ----- -------------- ------------ --------------------
Cash flows used in investing activities
Cash acquired on purchase of subsidiary
undertaking 18 6,944 - -
Acquisitions of subsidiaries and
other businesses 18 (6,507) - -
Payment of contingent consideration 13 (1,306) (2,088) (2,175) Investment in financial assets 12 (13) - (20,315) Cash received on sale of financial assets - - 3,024 Purchase of property, plant and equipment and intangible assets (2,055) (1,765) (5,489) Proceeds from sale of property, plant and equipment - 1,500 1,457 Net cash (expended)/generated on investing activities (2,937) (2,353) (23,498) ------------------------------------------ ----- -------------- ------------ -------------------- Cash flows used in financing activities Drawdown of loans 13 16,521 11,420 9,723 Repayment of loan notes 13 (2,000) - - Payment of deferred consideration 13 - (4,752) (4,790) Proceeds from exercise of share 1 - - options Refinance costs (250) - - Dividends paid (7,493) (6,466) (10,572) Net cash generated / (expended) in financing activities 6,779 202 (5,639) ------------------------------------------ ----- -------------- ------------ -------------------- Net increase/(decrease) in cash - and cash equivalents 516 - ------------------------------------------ ----- -------------- ------------ -------------------- Cash and cash equivalents at the - end of the period/ year 516 - ------------------------------------------ ----- -------------- ------------ --------------------
Interim Group Statement of changes in equity
for the six months ended 30(th) June 2018
Unaudited 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.
Unaudited six months ended 30(th) June 2017
Share-
Share based Share Fair
Share premium payment held value Retained Total Non-controlling
capital account reserve by 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 2017 208 5,629 4,303 (5,368) 3,571 120,239 128,582 184 128,766
Revaluation of
financial
assets (net
of tax) - - - - 1,781 - 1,781 - 1,781
Other
comprehensive
income for
the period - - - - 1,781 - 1,781 - 1,781
Profit for the
period - - - - - 10,555 10,555 (2) 10,553
Total
comprehensive
income for
the period - - - - 1,781 10,555 12,336 (2) 12,334
Exercise of
options - - (34) 37 - (4) (1) - (1)
Share-based
payments - - (145) - - - (145) - (145)
Dividend
payment - - - - - (6,466) (6,466) (6,466)
At 30(th) June
2017 208 5,629 4,124 (5,331) 5,352 124,324 134,306 182 134,488
--------- --------- -------- -------- --------- ---------- -------- ----------------- --------
During the six month period to 30(th) June 2017 a total of 10,689 share options were exercised relating to LSL's various share option schemes resulting in the shares being sold by the
Trust. LSL received nil on exercise of these options.
Audited year ended 31(st) December 2017
Share Share Share- Shares Fair Retained Total Non-controlling Total
capital premium based held value earnings equity interests
account payment by EBT Reserve
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1(st) January
2017 208 5,629 4,303 (5,368) 3,571 120,239 128,582 184 128,766
Disposal of financial
assets (net of tax) - - - - (4,642) - (4,642) - (4,642)
Revaluation of financial
assets (net of tax) - - - - 1,565 - 1,565 - 1,565
-------- -------- -------- -------- -------- --------- --------- ---------------- ---------
Other comprehensive
income for the year - - - - (3,077) - (3,077) - (3,077)
Profit for the year - - - - - 33,414 33,414 (2) 33,412
Total comprehensive
income for the year - - - - (3,077) 33,414 30,337 (2) 30,335
Exercise of options - - (46) 51 - (5) - - -
Share-based payments - - (455) - - 502 47 - 47
Dividend payment - - - - - (10,572) (10,572) - (10,572)
At 31(st) December
2017 208 5,629 3,802 (5,317) 494 143,578 148,394 182 148,576
-------- -------- -------- -------- -------- --------- --------- ---------------- ---------
During the year ended 31(st) December 2017, the Trust acquired nil LSL Shares. During the period 14,661 share options were exercised relating to LSL's various share option schemes resulting in the Shares being sold by the Trust. LSL received nil 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 2018 were approved by the LSL Board on 31(st) July 2018. The interim financial statements are not the statutory accounts. The financial information for the year ended 31(st) December 2017 is extracted from the audited statutory accounts for the year ended 31(st) December 2017, 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 2018 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 2017 which are included in LSL's Annual Report and Accounts 2017.
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 15 (Revenue from Contracts with Customers) and IFRS 9 have 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 2017.
The changes in the accounting policies are also expected to be reflected in the Group's consolidated financial statement as at and for the year ending 31(st) December 2018.
The Group has initially adopted IFRS 15 Revenue from Contracts with Customers (see A) and IFRS 9 Financial Instruments (See B) from 1(st) January 2018.
The impact of IFRS 9 does not have a material impact to the interim condensed consolidated group financial statements.
A. IFRS 15 Revenue from Contracts with Customers
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced IAS 18 Revenue, IAS 11 Construction Contracts and related interpretations.
The Group has adopted IFRS 15 using the cumulative catch up method (without practical expedients), with the effect of initially applying this standard recognised at the date of initial application (i.e. 1(st) January 2018) for all contracts. Accordingly, the information presented for 2017 has not been restated - i.e. it is presented, as previously reported, under IAS 18, IAS 11 and related interpretations.
The following table summarises the impact of transition to IFRS 15 on retained earnings and NCI at 1 January 2018.
Impact of adopting
IFRS 15 at 1(st)
January 2018
GBP'000
------------------
Retained earnings
Management services 388
Rent collection 146
------------------
Impact at 1(st) January 2018 534
------------------
The Management team have identified revenue relating to management services and rent collection have been affected by the timing difference on revenue recognition.
Under IFRS 15, revenue is recognised when a customer obtains control of the goods or services. Determining the timing of transfer of control - at a point in time or over time - requires judgement.
The impact of adopting IFRS 15 on the Group's interim statement of financial position as at 30(th) June 2018 and its interim statement of profit or loss and Other Comprehensive Income for the six months ended for each of the line items affected is a reduction in revenue of GBP232,000.
B. IFRS 9 Financial Instruments i. Classification of financial assets
IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for financial instruments: classification and measurement; impairment; and hedge accounting.
The Group has adopted the modified transition approach and chosen not to restate comparatives. In relation to investments in equity instruments the Group has not made an election to recognise the change in the value of financial assets relating to ZPG plc through other comprehensive income.
ii. Impairment of financial assets
IFRS 9 replaces the "incurred loss" model in IAS 39 with the "expected credit loss" model that applies to trade and receivables. The impact of this model does not have a material impact to the interim condensed consolidated group financial statements.
IFRS 16: Leases
IFRS 16, 'Leases', is effective for periods beginning on or after 1(st) January 2019 and replaces IAS 17, 'Leases'. The new standard requires lessees to recognise a right-of-use asset and a lease liability based on discounted future lease payments leased assets with some exemptions available for short-term or low value leases.
The impact of this standard on Group will be to replace the current straight-line operating lease expense currently recognised under IAS 17, with the right-of-use assets, lease liabilities, depreciation and interest charges.
The Group is currently assessing the impact of this standard. The standard permits either a full retrospective or a modified retrospective approach for the adoption. Group intends to adopt the standard using the modified retrospective approach which means the cumulative impact of the adoption will be recognised in retained earnings as of 1(st) January 2019 and the comparatives will not be restated.
3. Judgements and estimates
The preparation of financial information in conformity with IFRS as adopted by European Union requires management to make judgements, estimates and assumptions that affect the application of policies and reporting amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an 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 2017. These assumptions are discussed in detail in the Group's Annual Report and Accounts 2017. The assumptions discussed are as follows:
Judgements
Areas of judgment that have the most significant effect on the amounts recognised in the consolidated financial statements are:
-- Revenue Recognition -- Exceptional Items -- Assessment of the useful life of an intangible asset -- Valuation of financial assets -- Intangible assets -- Deferred tax
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 -- 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 13 to these interim condensed consolidated group financial statements, the Group had available GBP54.0 million of 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. Seasonality of operations
Due to the seasonal nature of the residential housing market, turnover and operating profits are normally higher in the second half of the year. As reported in the AGM statement issued on 26(th) April 2018, the Board expects this to continue and anticipates that 2018 financial performance will be more weighted to H2 than in 2017.
5. Revenue
The Group's operations and main revenue streams are those described in the latest annual financial statements.
The nature and effect of initially applying IFRS 15 on the Group's interim financial statements are disclosed in Note 2 to these Financial Statements.
Disaggregation of Revenue
Set out below is the disaggregation of the Group's revenue from contracts with customers:
Six Months ended 30 June 2018
Residential Lettings Financial Asset Surveying Other Total
Sales Services Management and
exchange valuation
services
Timing of
revenue
recognition
Services
transferred
at a point
in
time 32,873 19,756 40,798 2,784 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 40,798 2,889 31,060 8,012 152,891
--------------- ------------ ------------- -------------- -------------- --------- -----------
*30(th) June 31(st) December
2017 2017
GBP'000 GBP'000
Revenue from services 151,520 311,540
---------------- -------------------
Operating revenue 151,520 311,540
---------------- -------------------
Rental income 278 555
Other operating income 278 555
---------------- -------------------
Total revenue 151,798 312,095
---------------- -------------------
*The Group has initially applied IFRS 15 as at 1(st) January 2018. Under the transition methods chosen, comparative information is not restated.
6. Segment analysis of revenue and operating profit
For management purposes, the Group is organised into business units based on their products and services and has two reportable operating segments as follows:
-- The Estate Agency and Related Services 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 asset management services to a range of lenders. It also 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 Mortgage Services, First2Protect, Mortgage First, Insurance Brokers First and Linear Financial Services, Personal Touch Financial Services and RSC. The Financial Services revenue included within the Estate Agency Division includes two mortgage and insurance distribution networks providing products and services for sale via financial intermediaries. A significant proportion of the results of the Financial Services are inextricably linked to the Estate Agency business. They have therefore been aggregated with those of Estate Agency and Related Service segment.
-- The Surveying and Valuation Services segment provides a valuations and professional survey service of residential properties to various lenders and individual customers.
Each segment has various products and services and the revenue from these products and services are disclosed in the LSL's Annual Report and Accounts 2017 within the Business Review section of the Strategic Report.
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 incomes) and income taxes are managed on a Group basis and are not allocated to operating segments.
Operating segments
The following tables presents revenue and profit information regarding the Group's operating segments for the six months ended 30(th) June 2018, for the six months ended 30(th) June 2017 and for the year ended 31(st) December 2017.
Six months ended 30(th) June 2018
Estate agency Surveying
and related and valuation
services services
GBP'000 GBP'000 Unallocated Total
Income statement information GBP'000 GBP'000
--------------- ---------------- --------------- -----------
Segmental revenue 121,831 31,060 - 152,891
--------------- ---------------- --------------- -----------
Segmental result:
- before exceptional costs,
contingent
consideration, amortisation
and
share-based payments 5,004 8,604 (1,998) 11,610
- after exceptional costs,
contingent 158 9,496 (2,220) 7,434
consideration, amortisation
and
share-based payments
--------------- ---------------- --------------- -----------
Finance costs (1,018)
Profit before tax 6,416
Taxation (1,555)
Profit for the period 4,861
-----------
In the period ended 30(th) June 2018, there were no single customers that accounted for 10% or more of the Group's total revenue.
Balance sheet information
Segment assets - intangible 179,199 12,323 - 191,522
Segment assets - other 81,004 9,194 1,775 91,973
-------- -------- -------- ---------
Total Segment assets 260,203 21,517 1,775 283,495
Total Segment liabilities (61,707) (24,165) (51,622) (137,494)
-------- -------- -------- ---------
Net assets/(liabilities) 198,496 (2,648) (49,847) 146,001
-------- -------- -------- ---------
All of the joint venture interests of the Group are recorded in the Estate Agency and Related Services segment. Unallocated net liabilities comprise plant and equipment (GBP6,000), other assets (GBP1,746,000), accruals (GBP307,000), financial liabilities (GBP471,000), deferred and current tax liabilities (GBP4,321,000), and revolving credit facility overdraft (GBP46,500,000)
Six months ended 30(th) June 2017
Estate agency Surveying
and related and valuation
services services
GBP'000 GBP'000 Unallocated Total
Income statement information GBP'000 GBP'000
--------------- ---------------- --------------- --------------
Segmental revenue 118,424 33,096 - 151,520
--------------- ---------------- --------------- --------------
Segmental result:
- before exceptional costs,
contingent
consideration, amortisation
and
share-based payments 9,428 9,390 (3,279) 15,539
- after exceptional costs,
contingent 6,921 10,342 (2,936) 14,327
consideration, amortisation
and
share-based payments
--------------- ---------------- --------------- --------------
Finance costs (1,176)
Profit before tax 13,151
Taxation (2,598)
Profit for the period 10,553
--------------
In the period ended 30(th) June 2017, there were no single customers that accounted for 10% or more of the Group's total revenue.
Balance sheet information
Segment assets - intangible 170,528 12,558 - 183,086
Segment assets - other 61,392 7,896 1,828 71,116
-------- -------- -------- ---------
Total Segment assets 231,920 20,454 1,828 254,202
Total Segment liabilities (48,149) (29,729) (41,836) (119,714)
-------- -------- -------- ---------
Net assets/(liabilities) 183,771 (9,275) (40,008) 134,488
-------- -------- -------- ---------
All of the joint venture interests of the Group are recorded in the Estate Agency and Related Services segment. Unallocated net liabilities comprise plant and equipment (GBP8,000), other assets (GBP1,820,000), accruals (GBP1,350,000), financial liabilities (GBP2,000,000), deferred and current tax liabilities (GBP6,810,000), overdraft (GBP6,176,000) and revolving credit facility overdraft (GBP25,500,000).
Operating segments
Year ended 31(st) December 2017
Estate Agency Surveying
and Related and Valuation
Services Services Unallocated Total
Income Statement information GBP'000 GBP'000 GBP'000 GBP'000
----------
Segmental revenue 247,410 64,130 311,540
---------------- --------------- ------------ ----------
Segmental result:
- before exceptional costs,
contingent consideration,
amortisation and share-based
payments 26,942 18,877 (8,322) 37,497
- after exceptional costs,
contingent
consideration, amortisation
and share-based payments 22,124 22,466 (2,540) 42,050
---------------- --------------- ------------ ----------
Finance costs (1,952)
Profit before tax 40,098
Taxation (6,686)
Profit for the year 33,412
----------
Estate Agency Surveying
and Related and Valuation
Services Services Unallocated Total
Balance sheet information GBP'000 GBP'000 GBP'000 GBP'000
---------------- --------------- ------------ ----------
Segment assets - intangible 169,113 12,517 - 181,630
Segment assets - other 75,453 7,306 1,200 83,959
Total Segment assets 244,566 19,823 1,200 265,589
Total Segment liabilities (49,851) (25,793) (41,367) (117,011)
----------
Net assets/(liabilities) 194,715 (5,970) (40,167) 148,578
---------------- --------------- ------------ ----------
Other segment items
Capital expenditure including
intangible assets 5,178 312 - 5,490
Depreciation (5,036) (180) - (5,216)
Amortisation of intangible
assets (4,013) (70) - (4,083)
Share of results of joint
venture 1,583 - - 1,583
PI Costs provision - (15,916) - (15,916)
Onerous leases provision (210) - - (210)
Share based payment (152) (85) 190 (47)
---------------- --------------- ------------ ----------
Unallocated net liabilities comprise plant and equipment (GBP9,000), other assets (GBP1,191,000), accruals (GBP3,032,000), financial liabilities (GBP4,979,000), deferred and current tax liabilities (GBP6,360,000), RCF (GBP27,000,000).
7. 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 intangibles 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) 31st December
June June 2017
2018 2017
GBP'000 GBP'000 GBP'000
---------- -------- --------------
Group operating profit 7,434 14,327 42,050
Share-based payments 590 (145) 47
Amortisation of intangible assets 2,718 2,227 4,083
Exceptional gains (1,189) (1,100) (9,337)
Contingent consideration charge 2,057 230 654
---------- -------- --------------
Group Underlying Operating Profit 11,610 15,539 37,497
---------- -------- --------------
Depreciation on property, plant and
equipment 2,772 2,629 5,216
---------- -------- --------------
Group Adjusted EBITDA 14,382 18,168 42,713
---------- -------- --------------
8. 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 2018 Weighted 2017
Profit average Per share Profit average Per share
after number of amount after number of amount
tax shares Pence tax shares Pence
GBP'000 GBP'000
Basic EPS 4,861 102,646,794 4.7 10,555 102,636,868 10.3
Effect of dilutive
share options 1,038,545 - 741,376 -
Diluted EPS 4,861 103,685,339 4.7 10,555 103,378,244 10.2
---------- ------------ ---------- ------------
Year ended 31(st) 2017
December 2017 Profit Weighted average Per share
after tax number of amount
GBP'000 shares Pence
----------- -------------------- ------------
Basic EPS 33,414 102,640,363 32.6
Effect of dilutive
share options 635,058
Diluted EPS 33,414 103,275,421 32.4
----------- --------------------
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)
30(th) June June December
2018 2017 2017
GBP'000 GBP'000 GBP'000
Group operating profit before contingent
consideration, exceptional items,
share-based payments and amortisation
(excluding non-controlling interest) 11,610 15,541 37,497
Net finance costs (excluding exceptional
items and contingent consideration
items) (741) (931) (1,468)
Normalised taxation (2,065) (2,812) (6,936)
Adjusted profit after tax(1) before
exceptional items, share-based payments
and amortisation 8,804 11,798 29,093
--------------- ------------ ----------------
Six months ended 30(th) June
Adjusted Adjusted
profit Weighted 2018 profit Weighted 2017
after average Per share after average Per share
tax(1) number of amount tax(1) number amount
GBP'000 shares Pence GBP'000 of shares Pence
Adjusted basic EPS 8,804 102,646,794 8.6 11,798 102,636,868 11.5
Effect of dilutive
share options 1,038,545 741,376
Adjusted diluted
EPS 8,804 103,685,339 8.5 11,798 103,378,244 11.4
--------- ------------ --------- ------------
Year ended 31(st) December 2017
Adjusted
profit Weighted 2017
after average Per share
tax(1) number of amount
GBP'000 shares Pence
Adjusted basic EPS 29,093 102,640,363 28.3
Effect of dilutive
share options 635,058
Adjusted diluted EPS 29,093 103,275,421 28.2
----------- ------------
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 % (30(th) June 2017: 19.25%; 31(st) December 2017: 19.25%
9. Exceptional items
30th June 30th June 31st December
2018 2017 2017
GBP'000 GBP'000 GBP'000
------------ ------------ ----------------
Exceptional gains:
Gain on disposal of Financial Assets - - 5,593
Exceptional gain in relation to historic
PI costs 1,189 1,100 3,744
------------ ------------ ----------------
1,189 1,100 9,337
------------ ------------ ----------------
Provision for professional indemnity (PI) claims and insurance claim notification
The Group continue to make positive progress in addressing the historic PI claims resulting in a release of GBP1,189,000 (31st December 2017: release of GBP2,700,000 and GBP1,000,000 settlement).
10. Dividends paid and proposed
Dividends per share
A final dividend in respect of the year ended 31(st) December 2017, of 7.3 pence per share (December 2016: 6.3 pence per share), amounting to GBP7.5 million was paid in the period ended 30(th) June 2017. An interim dividend has been announced amounting to 4.0 pence per share (June 2017: 4.0 pence).
Interim dividends are recognised when paid.
11. Taxation
The major components of income tax charge in the interim Group income statements are:
Six Months Ended Year Ended
30(th) June 30(th) June 31(st) December
2018 2017 2017
GBP'000 GBP'000 GBP'000
----------- ----------- ---------------
UK corporation tax:
- current year 1,689 2,851 7,537
- adjustment in respect of prior years - (2) (345)
----------- ---------------
1,689 2,849 7,192
Deferred tax:
Origination and reversal of temporary
differences (134) (221) (442)
Adjustment in respect of prior year - (30) (64)
----------- ----------- ---------------
(134) (251) (506)
----------- ----------- ---------------
Total tax charge in the income statement 1,555 2,598 6,686
----------- ----------- ---------------
Income tax charged directly to other comprehensive income is GBPnil. In the six months ended 30(th) June 2017, GBP365k was charged directly to other comprehensive income (31(st) December 2017: GBP631k credit) relating to the revaluation of financial assets. Income tax credited directly to the share based payment reserve is GBP1,000 (31(st) December 2017: charge of GBP32,000 and 30th June 2017: credit of GBP29,000)
The headline rate of corporation tax decreased from 20% to 19%, effective from 1(st) April 2017 resulting in an effective corporation tax rate of 19% for the year ended 31(st) December 2018. A further decrease in the corporation tax rate to 17% will be effective from 1(st) April 2020, and this is the rate at which deferred tax has been provided.
12. Financial assets
Six Months Ended Year Ended
Investment in equity instruments 30(th) June 30(th) June 31(st) December
2018 2017 2017
GBP'000 GBP'000 GBP'000
----------------------------- ----------- ---------------
Unquoted shares at fair value 23,766 6,653 23,753
Quoted shares at fair value 2,266 820 1,529
----------------------------- ----------- ---------------
26,032 7,473 25,282
----------------------------- ----------- ---------------
Opening balance 25,282 4,603 4,603
Acquisitions 13 724 24,534
Disposals - - (5,740)
Fair value adjustment recorded through
profit and loss 737 - -
Fair value adjustment recorded through
reserves - 2,146 1,885
Closing balance 26,032 7,473 25,282
----------------------------- ----------- ---------------
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 17 to these interim condensed consolidated group financial statements).
ZPG plc
Financial assets include warrants in ZPG plc. These warrants have been issued pursuant to terms agreed with ZPG plc relating to the provision of portal services to LSL's Estate Agency businesses. The Directors consider the best estimate of the fair value of LSL's warrants to be the share price and therefore valued using level 1 valuation techniques. ZPG plc's share price at 30th June 2018 was GBP4.90. These warrants were revalued to GBP2,266,191.
NBC Property Master Limited
In June 2018, LSL subscribed for a further 1,230 ordinary shares in NBC Property Master Limited for a consideration of GBP13,013.40.
Vibrant Energy Matter (VEM)
The carrying value of the Group's investment in Vibrant Energy Matter (VEM) at 30th June 2018 has been assessed as GBP722,000 (31st December 2017: GBP722,000).
Global Property Ventures Limited
The carrying value of the Group's investment in Global Property Ventures Limited at 30th June 2018 has been assessed as GBP250,000 (31st December 2017: GBP250,000).
E Property Services plc
The carrying value of the Group's investment in E Property Services plc at 30th June 2018 has been assessed as GBP2,716,000 (31st December 2017: GBP2,716,000).
Yopa
The carrying value of the Group's investment in Yopa at 30th June 2018 has been assessed as GBP20,000,000 (31st December 2017: GBP20,000,000).
13. Financial liabilities
Six Months Ended Year Ended
30(th) June 30(th) June 31(st) December
2018 2017 2017
GBP'000 GBP'000 GBP'000
----------- ----------- ---------------
Current
Overdraft - 6,176 2,978
2% unsecured loan notes - 2,000 2,000
Deferred consideration 1,929 38 71
Contingent consideration 8,297 287 1,405
10,226 8,501 6,454
----------- ----------- ---------------
Non-current
Bank loans - revolving credit facility
(RCF) 46,500 25,500 27,000
Deferred consideration 71 58 -
Contingent consideration 6,232 8,204 7,654
52,803 33,762 34,654
----------- ----------- ---------------
Unsecured loan notes
A variation of the 2011 loan notes, was issued as part satisfaction of the consideration of Marsh & Parsons. The first instalment was paid in July 2016, and a final payment of GBP2.0 million was paid in March 2018.
Contingent consideration -
Six Months Ended Year Ended
30(th) June 30(th) June 31(st) December
2018 2017 2017
GBP'000 GBP'000 GBP'000
----------- ----------- ---------------
LSLi contingent consideration 449 1,517 1,710
LMS 1 1 1
Group First Limited 9,384 6,636 7,098
RSC 4,395 - -
Other 300 337 250
----------- ----------- ---------------
14,529 8,491 9,059
----------- ----------- ---------------
Opening balance 9,059 10,096 10,096
Cash paid (1,306) (2,088) (2,175)
Acquisition 4,445 - -
Amounts recorded though income statement 2,331 483 1,138
----------- ----------- ---------------
Closing balance 14,529 8,491 9,059
----------- ----------- ---------------
GBP449,000 (31(st) December 2017: GBP1,710,000 and 30(th) June 2016: GBP5,002,000) of contingent consideration relates to payments 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.
GBP1,000 (31(st) December 2017: GBP1,000 and 30(th) June 2017: GBP1,000) of contingent consideration relates to payments to third parties in relation to the acquisition of LMS in September 2014.
GBP9,384,000 of contingent consideration relates to Group First (31(st) December 2017: GBP7,098,000; 30(th) June 2017: GBP6,636,000). The additional consideration will be calculated on an earnings multiple of between five and six times EBITA (plus excess cash in the business) and has been capped at a maximum of GBP25 million.
GBP4,395,000 of contingent consideration relates to RSC. The additional consideration will be calculated on an earnings multiple of between five and six times EBITA (plus excess cash in the business) and has been capped at a maximum of GBP7,500,000.
The table below shows the allocation of the contingent consideration balance and income charge between the various categories:
Six Months Ended Year Ended
Contingent consideration balances relating 30(th) June 30(th) June 31(st) December
to amounts accounted for as: 2018 2017 2017
GBP'000 GBP'000 GBP'000
----------- ----------- ---------------
Put options over non-controlling interests 1 1 1
Arrangement under IFRS 3 14,528 8,490 9,058
----------- ----------- ---------------
Closing balance 14,529 8,491 9,059
----------- ----------- ---------------
Contingent consideration profit and loss
impact in the period relating to amounts
accounted for as:
Remuneration - 13 13
Arrangement under IFRS 3 2,055 225 641
Unwinding of discount on contingent consideration 277 245 484
----------- ----------- ---------------
Charge/(credit) 2,332 483 1,138
----------- ----------- ---------------
14. Provisions for liabilities
Six months ended 30(th) June:
2018 2017
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 15,916 210 16,126 20,686 678 21,364
Amount utilised (482) (3) (485) (2,045) (148) (2,193)
Amount released (1,189) (70) (1,259) (1,100) (82) (1,182)
Unwinding of
discount 21 - 21 100 - 100
Provided in the
period 382 - 382 270 2 272
Balance at
30(th)
June 14,648 137 14,785 17,911 450 18,361
-------------------- ------------- ----------- -------------------- ----------- -----------
Current 8,061 43 8,104 4,098 122 4,220
Non-current 6,587 94 6,681 13,813 328 14,141
14,648 137 14,785 17,911 450 18,361
-------------------- ------------- ----------- -------------------- ----------- -----------
Year ended 31(st) December 2017
Professional
indemnity claim Onerous
provision leases Total
GBP'000 GBP'000 GBP'000
-------------------- ------------- -----------
Balance at 1(st) January 20,686 678 21,364
Amount utilised (3,342) (263) (3,605)
Amount released (2,714) (229) (2,943)
Unwinding of discount 200 - 200
Reallocated from provisions 290 - 290
Provided in the period 796 24 820
-------------------- ------------- -----------
Balance at 31(st) December 15,916 210 16,126
-------------------- ------------- -----------
Current 2,740 110 2,850
Non-current 13,176 100 13,276
-------------------- ------------- -----------
15,916 210 16,126
-------------------- ------------- -----------
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 2018 the total provision for PI Costs was GBP14.6 million. 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 GBP0.2m.
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.
15. Analysis of Net Bank Debt
Six Months Ended Year Ended
30(th) June 30(th) June 31(st) December
2018 2017 2017
GBP'000 GBP'000 GBP'000
----------- ----------- ---------------
Interest bearing loans and borrowings
* Current 10,226 8,501 6,454
* Non-current 52,803 33,762 34,654
----------- ----------- ---------------
63,029 42,263 41,108
Less: 2% unsecured loan notes - (2,000) (2,000)
Less: cash and short-term deposits (516)
Less: deferred and contingent consideration (16,529) (8,587) (9,129)
----------- ----------- ---------------
Net Bank Debt at the end of the period 45,984 31,676 29,979
----------- ----------- ---------------
Net Bank Debt at 30(th) June 2018 was GBP46.0 million
16. 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 2017. Further details of the risk management policies of the Group are disclosed in Note 30 of the Group's Financial Statements for the year ended 31(st) December 2017.
The Group has a current ratio of net bank debt (excluding loan notes) to EBITDA of 1.18 (31(st) December 2017: 0.70 and 30(th) June 2017: 0.71). 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.
17. 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 2018, 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) Level Level Level
June 2018 1 2 3
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
30(th) Level Level Level
June 2017 1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
----------- -------- -------- --------
Assets measured at fair value
Financial assets 7,473 820 - 6,653
Liabilities measured at fair
value
Contingent consideration 8,491 - - 8,491
31(st) Level Level Level
Dec 2017 1 2 3
GBP'000 GBP'000 GBP'000 GBP'000
---------- -------- -------- --------
Assets measured at fair value
Financial assets 25,282 1,529 - 23,753
Liabilities measured at fair
value
Contingent consideration 9,059 - - 9,059
Of the investments totalling GBP26,032,000, GBP23,766,000 are valued using Level 3 valuation techniques. The Directors reviewed the fair value of the financial assets at 30(th) June 2018. 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%, GBP2.6m.
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.
18. Acquisitions
Six months to 30th June 2018
The Group acquired the following businesses during the period to 30(th) June 2018:
-- Lettings books
During the period the Group acquired two Lettings books for a total consideration of GBP495,000. The fair value of the identifiable assets and liabilities of these businesses as at the date of acquisition have been provisionally determined as below:
Fair value recognised
on acquisition
GBP'000
----------------------
Intangible Assets 495
Cash and cash equivalents -
Deferred tax liabilities (84)
----------------------
Total identifiable net liabilities acquired 411
Purchase consideration 495
Goodwill 84
Purchase consideration discharged by: GBP'000
----------------------
Cash 445
----------------------
Contingent consideration 50
----------------------
495
----------------------
Analysis of cash flow on acquisition GBP'000
----------------------
Transaction costs (included in cash flows from operating
activities) -
----------------------
Net cash acquired with the subsidiaries and other
businesses -
----------------------
Purchase consideration discharged in cash (included
in cash flows from investing activities) 495
----------------------
Net cash outflow on acquisition 495
======================
-- Personal Touch Financial Services
In January 2018, the Group acquired the entire issued share capital of Personal Touch Financial Services Limited (PTFS) and its subsidiary company, Personal Touch Administration Services Limited (PTAS) from Personal Touch Holdings Limited. PTFS is a financial services business specialising in the provision of mortgage and other financial services products via its network of intermediaries. PTFS is authorised by the Financial Conduct Authority with 200 appointed representative firms and 474 advisers
The consideration for the investment was GBP5.4 million with GBP3.6 million paid on completion and a fair value consideration of GBP1.8 million payable in January 2019. The fair value of the identifiable assets and liabilities as at the date of acquisition have been determined below
Fair value recognised
on acquisition
GBP'000
----------------------
Intangible assets 4,305
Property, plant and equipment 121
Trade and other receivables 3,617
Cash and cash equivalents 6,795
Deferred tax asset 921
Trade and other payables (7,974)
Provision for liabilities (2,034)
Deferred tax liability (657)
----------------------
Total identifiable net assets acquired 5,094
Purchase consideration 5,440
Goodwill 346
Purchase consideration discharged by: GBP'000
----------------------
Cash 3,562
----------------------
Present value of deferred consideration 1,878
----------------------
5,440
----------------------
Analysis of cash flow on acquisition GBP'000
----------------------
Transaction costs (included in cash flows from operating
activities) 518
----------------------
Net cash acquired with the subsidiaries and other
businesses (6,795)
----------------------
Purchase consideration discharged in cash (included
in cash flows from investing activities) 3,562
----------------------
Net cash outflow on acquisition (2,716)
======================
As defined in IFRS 3 the Group has recognised, separately from goodwill, the identifiable intangible assets acquired in the business combination. The assets identified include the in-house developed software Toolbox.
From the date of acquisition, PTFS has contributed GBP3.8 million of revenue and GBP0.07 million to the profit before tax from the continuing operations of the Group. If the acquisition had taken place at the beginning of the year, revenue from continuing operations would have been GBP4.7 million and the profit from continuing operations for the period would have been GBP0.1 million.
-- RSC
In March 2018, the Group, through wholly owned subsidiary, acquired 60% interest in RSC, who provide mortgage and protection brokerage services to the purchases of new homes. The consideration for the investment is GBP6.9 million cash, with GBP2.5 million paid on completion and the remaining subject to put and call options which are exercisable between 2022 and 2023. All of the remaining 40% interest in RSC is subject to put and call options and therefore are considered to represent a present ownership interest and therefore nil non-controlling interest is recognised. The contingent consideration is Management Team's best estimation of the probable discounted payout (using a rate of 6.5%), based upon current forecasts over the earn-out period. Due to the nature of the payment terms, the contingent consideration is considered to be a capital payment for accounting purposes. The fair value of the identifiable assets and liabilities as at the date of acquisition have been determined below
Fair value recognised
on acquisition
GBP'000
----------------------
Intangible assets 271
Property, plant and equipment 19
Trade and other receivables 181
Cash and cash equivalents 149
Trade and other payables (370)
Current tax liability (202)
Deferred tax liability (47)
----------------------
Total identifiable net assets acquired 1
Purchase consideration 6,895
Goodwill 6,894
Purchase consideration discharged by: GBP'000
----------------------
Cash 2,500
----------------------
Contingent consideration 4,395
----------------------
6,895
----------------------
Analysis of cash flow on acquisition GBP'000
----------------------
Transaction costs (included in cash flows from operating
activities) 29
----------------------
Net cash acquired with the subsidiaries and other
businesses (149)
----------------------
Purchase consideration discharged in cash (included
in cash flows from investing activities) 2,500
----------------------
Net cash outflow on acquisition 2,380
======================
As defined in IFRS 3 the Group has recognised, separately from goodwill, the identifiable intangible assets acquired in the business combination. The assets identified include the RSC brand and the pipeline of work acquired. As disclosed to the market on acquisition, there are strong customer relationships between RSC and key house builders, however, these relationships do not qualify as an intangible asset given they do not fulfil either the separability criterion or the contractual-legal criterion. This has been fully explored by the Management Team who are confident that given that no economic benefit passes between the two parties in this relationship (the housebuilder and RSC) there is no asset that can be "separated or divided" and "sold, transferred, licensed, rented or exchanged".
From the date of acquisition, RSC has contributed GBP1.1 million of revenue and GBP0.2 million to the net profit before tax from the continuing operations of the Group. If the acquisition had taken place at the beginning of the year, revenue from continuing operations would have been GBP2.0 million and the profit from continuing operations for the period would have been GBP0.1 million
19. Post Balance Sheet event
Mortgage Gym Limited
Subsequent to the period end the Company has acquired a 33.85% holding in Mortgage Gym Limited, a digital mortgage business, for cash consideration of GBP4 million.
INDEPENDENT REVIEW REPORT TO LSL PROPERTY SERVICES PLC
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 which comprises the Interim Group Income Statement, the Interim Group Statement of Comprehensive Income, the Group Balance Sheet, the Interim Group Cash Flow Statement, the Interim Group Statement of Changes in Equity and the related Notes 1 to 19. 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 June 2018 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
31(st) July 2018
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
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