We could not find any results for:
Make sure your spelling is correct or try broadening your search.
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 : 6594M
LSL Property Services
01 August 2017
For Immediate Release 1(st) August 2017
LSL Property Services plc ("LSL" or "The Group")
Interim Results For the six months ended 30(th) june 2017
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 2017.
2017 2016 change ---------------------------------------------- ------ ------ --------- Group revenue - GBPm 151.5 151.4 - Group Underlying Operating Profit(1) - GBPm 15.5 11.3 +37% Group Underlying Operating Margin - % 10.2 7.5 ---------------------------------------------- ------ ------ --------- Group operating profit - GBPm 14.3 8.9 +61% Profit before tax - GBPm 13.2 8.4 +57% Exceptional gain - GBPm 1.1 - Basic Earnings Per Share - pence 10.3 6.3 +63% Adjusted Basic Earnings Per Share(2) - pence 11.5 8.6 +34% Net Bank Debt(3) at 30(th) June - GBPm 31.7 61.7 -49% 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 5)
2 Refer to Note 6 for the calculation 3 Refer to Note 13 for the calculation
Strong first half Group financial performance
-- Strong performance with Group Underlying Operating Profit(1) up 37% to GBP15.5m (2016: GBP11.3m)
o Operating profit in Estate Agency up 37% and Surveying up 16%
-- Group revenue in line with 2016 at GBP151.5m with resilient performance in the context of the market conditions
-- The Estate Agency Division delivered a robust revenue performance in line with the same period last year which benefited from a very strong first quarter ahead of stamp duty changes
-- The Lettings businesses delivered positive income growth of 4% year on year (organic growth 3%)
-- Financial Services income growth of 16% delivered through strong organic growth (12%) and the benefit of the acquisition of Group First during the first quarter of 2016
-- Marsh & Parsons delivered a resilient performance despite a challenging London market with total revenue down 4% whilst Lettings revenue performed positively with growth of 8%
-- The Surveying Division delivered revenue growth of 2% with an EBIT margin of 28.4% (2016: 24.9%)
-- Continued positive progress in addressing historic Professional Indemnity (PI) claims with a GBP1.1m exceptional provision release
-- Net Bank Debt of GBP31.7m (2016: GBP61.7m) with modest gearing of 0.71x EBITDA (2016: 1.26)
-- Interim dividend of 4.0 pence (2016: 4.0 pence)
-- Strong operational cash flow and low level of gearing
-- LSL continues to explore a wide range of options to capitalise on digital opportunities and during the second quarter of 2017 completed the research and planning phase for a new ways of working programme across our Estate Agency business
Commenting on today's announcement, Simon Embley, Chairman, said:
"The Group has delivered a strong first half performance against a challenging residential sales exchange market and as announced in our pre-interim results trading update issued on 17(th) July 2017 these results are ahead of the Board's original expectations. I am particularly pleased with the profit growth in both Estate Agency and Surveying Divisions, as well as the positive Lettings income and Financial Services income growth.
Whilst we expect Residential Sales volumes to remain suppressed in the second half, trends in other parts of our business are expected to be more resilient. Our Lettings business continues to perform well, now representing 30% of total Estate Agency Division income. Mortgage cost and availability remain positive for the UK housing market with increasing distribution of products through intermediary channels which will support our growing Financial Services businesses which now represents 29% of total Estate Agency Division income.
The Group has strong fundamentals with a robust balance sheet and relatively low levels of gearing. The business is well positioned to navigate the changing market conditions. I am confident LSL will continue to deliver long-term value to our shareholders."
For further information, please contact:
Ian Crabb, Group Chief Executive Officer Adam Castleton, Group Chief Financial Officer LSL Property Services plc 0207 382 0360 Richard Darby, Sophie Cowles 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 has delivered a strong first half financial performance with revenue of GBP151.5m which is in line with 2016 despite challenging market conditions and a strong first quarter 2016 which benefited from increased activity ahead of stamp duty changes. Profit was significantly up in both Divisions.
The UK residential housing market continues to be challenging with activity remaining subdued as consumer confidence continues to be impacted by uncertainty. Total mortgage approvals for house purchases were 2.8% lower in the first half of the year compared to the same period in 2016(2) .
Financial Results
Group revenue was flat at GBP151.5m (2016: GBP151.4m). Group Underlying Operating Profit(1) was up 37% to GBP15.5m (2016: GBP11.3m) and Group Underlying Operating Profit Margin(1) was improved at 10.2% (2016: 7.5%).
Group operating profit was up 61% to GBP14.3m (2016: GBP8.9m) reflecting the increase in margin in both Divisions and including a credit to the share based payment reserve as well as an exceptional release of GBP1.1m in relation to the PI Costs provision.
During the first half of 2017 net finance costs were GBP1.2m. In the first half of 2016 net finance costs of GBP0.5m included a one off credit of accrued interest on loan note liabilities. The effective tax rate for the period was 19.8% (2016: 23.1%), compared to the current headline rate of corporation tax rate of 19.25%. Group profit after tax was GBP10.6m (2016: GBP6.4m). Basic Earnings Per Share were 10.3p (2016: 6.3p) and Adjusted Earnings Per Share were 11.5p (2016: 8.6p).
Cash generated by operations was GBP10.5m (2016: GBP7.2m). Operating cash flow included PI Costs settlements of GBP2.0m (2016: GBP3.8m). Capital expenditure, including intangibles, was GBP1.8m (2016: GBP3.6m), including one new Marsh & Parsons branch opened during the period, in Brixton.
Net assets at 30(th) June 2017 were GBP134.5m (2016: GBP108.4m). Net Bank Debt at 30(th) June 2017 was GBP31.7m compared to GBP61.7m at 30(th) June 2016. Compared to 31(st) December 2016, Net Bank Debt has increased by GBP11.4m driven by the normal seasonality of the Estate Agency Division cash flows, continuing PI Costs claims related payments, the payment of the deferred and contingent consideration in relation to previous acquisitions as well as the payment of dividends, taxes and bonuses. During the first half of 2017 the Group has been cautious in the deployment of capital and there have been no lettings book acquisitions during the period.
On 12(th) July 2017 the Group completed the sale of its investment in the Guild of Professional Estate Agents (GPEA) with consideration made up of cash (GBP3m) and shares in eProp Services plc which is disclosed in this Interim Statement as a post balance sheet event.
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 (2016: 4.0 pence). The ex-dividend date for the interim dividend is 10(th) August 2017, with a record date of 15(th) August 2017 and a payment date of 8(th) September 2017. Shareholders have the opportunity to elect to reinvest their cash dividend and purchase existing shares in LSL through a dividend reinvestment plan.
Estate Agency Division
The Estate Agency Division revenue was flat at GBP118.4m (2016: GBP118.9m) reflecting 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) increased by 37% to GBP9.4m (2016: GBP6.9m).
Year on year profit comparatives benefited from a Your Move media campaign in the first half of 2016 which was not repeated in the first half of 2017 resulting in lower marketing expenses for the period. There was also a gain on the sale of a commercial property in Marsh & Parsons in the first half of 2017.
Residential Sales income decreased by 13% to GBP37.0m (2016: GBP42.5m) as a result of lower exchange volumes (-10%) in the context of lower market activity and the impact of branch closures in the second half of 2016. The impact of competition on constrained stock levels impacted Residential Sales exchange fees which fell by 4%.
The Group's Lettings income continued to grow and was 4% higher than the same period in 2016 at GBP35.7m (2016: GBP34.3m after adjusting for a reclassification between income categories in the first half of 2016), with organic growth of 3%. The lettings books acquired in 2016 are performing in line with expectations. No lettings books were acquired during the period.
Marsh & Parsons total revenues were down 4% to GBP16.4m (2016: GBP17.1m). Marsh & Parsons Underlying Operating Profit(1) decreased by 23% to GBP1.7m (2016: GBP2.2m) with operating margins of 10.4% (2016: 12.9%). Residential Sales were down 16% whilst Lettings performed positively again, up 8% on an underlying basis. One new Marsh & Parsons branch opened during the period, in Brixton, which is trading in line with expectations. Marsh & Parsons is planning to open a new branch in Islington in September 2017.
Financial Services revenue increased by 16% to GBP34.1m (2016: GBP29.5m) with organic growth of 12% driven by the continued investment in increasing the level of Financial Services personnel, as well as growth in the intermediary networks. This strong growth in the value of mortgage completions represents an increase in LSL's market share to 7.8% in 2017 (2016: 7.1%). LSL continues to operate as the second largest network (measured by combined numbers of advisors across both networks)(4) .
The Financial Services business continues to display good organic growth across all products which include mortgage and re-mortgage products, pure protection products and general insurance products. Group First, which was acquired in February 2016, continues to perform in line with expectations and has contributed to the strong performance in Financial Services in the first half of 2017.
Asset Management outperformed the market(3) for repossessions management with a fall in revenue of 6% in the period to GBP3.3m (2016: GBP3.5m) against a repossessions market fall of 10%(3) .
LSL notes the contents of the Queen's speech in June 2017 which confirmed the Government's intention to bring forward legislation to ban letting agent fees to tenants. LSL continues to monitor the proposed changes and to consider its commercial response to the legislative changes as further details emerge.
Surveying Division
The Surveying Division performed strongly in the first half with revenue up 2% and Underlying Operating Profit(1) up 16%. Revenue per job was up 2% to GBP207 (2016: GBP203) reflecting a favourable mix across lenders and the types of jobs performed, with jobs performed remaining at the same level as 2016.
The technology roll-out has continued during the first half of 2017 with additional functionality releases.
Surveyor headcount continues to be a focus for management and investment in graduates continues to ensure business requirements are met with 320 qualified surveyors employed at the end of the period (2016: 335). Profit margin increased to 28.4% (2016: 24.9%) with a continued focus on the cost base and operational efficiency.
At 30(th) June 2017, the total provision for PI Costs was GBP17.9m (2016: GBP26.2m). In 2017 the Group continued to make positive progress in addressing historic claims and there has been an exceptional release of GBP1.1m.
Strategy
LSL remains committed to delivering on the stated strategy which is as follows:
-- LSL's continuing Estate Agency strategy is to increase operating profit per branch; expand the number of Marsh & Parsons branches; grow recurring and where market conditions permit, counter-cyclical income streams and evaluate selective acquisitions.
-- LSL's continuing Surveying strategy is to optimise contract performance and revenue generation from B2B customers, achieve further improvement in efficiency and capacity utilisation, use technology to target further improvements in customer satisfaction and performance and continue the graduate training programme.
In total the Group arranged mortgage lending of GBP9.3bn during the first half of 2017 (2016: GBP8.3bn). Financial Services remains a clear focus for the Group as LSL sees further growth opportunities in this space to enhance its position as a leading mortgage broker.
Following the extensive independent research carried out in the second half of 2016 to assess customer needs for the future, LSL continues to explore a wide range of options to capitalise on digital opportunities created by the continued growth in consumer acceptance of online and hybrid estate agency business models. LSL has made positive progress in the first half 2017 and a further update will be provided later in 2017.
As part of this assessment process, during the second quarter LSL completed the research and planning phase for a new ways of working programme across our Estate Agency business to respond to the changing landscape and customer demands. This programme will bring together a number of initiatives including piloting new technology to improve customer experience, streamlining processes (e.g. customer management) and deliver cost efficiencies.
The findings to date of the programme confirm LSL's view that there is an important role for the "traditional" branch led model in the future, but it will evolve over time including the deployment of technology.
Traditional estate agents currently represent the vast majority of the residential sales market. LSL expects this to continue and anticipates that traditional estate agents will continue to represent the substantial majority of the sales market through 2025. Whilst LSL expects to evolve its operating model over time to capitalise on this trend, in the foreseeable future LSL does not expect any rationalisation from the current number of its Estate Agency brands (12) nor any material change to the size of its branch estate.
LSL will also focus on maintaining a robust balance sheet and will continue to use a highly selective and disciplined approach to all investment activity.
Outlook
2017 is expected to see a reduced volume of house purchase transactions compared to the prior year, with modest house price inflation outside prime Central London. However, mortgage costs and availability remain positive and the medium to longer term fundamentals of the UK housing market remain robust.
Trading in the Estate Agency and Surveying Divisions continues to perform well. To date LSL has not seen any material change in market conditions following the triggering of Article 50 on 29(th) March 2017 and the outcome of UK General Election on 8(th) June 2017. LSL will continue to monitor market conditions carefully throughout the year and adapt the businesses to any material market changes.
The Board are positive regarding the outlook for the business, committed to driving profitable organic growth, continuing to evaluate selective acquisitions and progress LSL's digital plans. As reported in the pre-interim results trading update issued on 17(th) July 2017, the Board expects a more equal weighting between the first and second half financial results compared to prior years.
The Group has a balanced business portfolio including Asset Management, and the Letting and Financial Services businesses are both proving more resilient to residential housing market fluctuations. LSL will continue to benefit from the increasing proportion of the business represented by these revenue streams.
In Surveying, LSL will continue to use technology to drive further customer enhancements, quality improvements and improvement in efficiency and capacity utilisation. LSL will also continue to optimise contract performance and revenue generation from B2B customers.
The Group has strong fundamentals, with a robust balance sheet. The business is well positioned to adapt to the evolving market as it has in the past. The Board remains confident LSL will continue to deliver long-term value to shareholders.
Ian Crabb
Group Chief Executive
1(st) August 2017
(1) Group Underlying Operating Profit is before exceptional costs, contingent consideration, amortisation of intangible assets and share-based payments (as defined in Note 5)
(2) Source: Bank of England for "House Purchase Approvals" January-June 2016/2017 and HMRC for total transactions
(3) First half market performance estimated. Per first quarter CML market statistics there was a 9.5% decline in the repossession market compared to the same period in 2016
(4) Source: CML "Gross mortgage lending estimate June 2017"
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 2016 on pages 22 to 25. The Annual Report and Accounts 2016 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 -- 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, continuing uncertainties caused by the outcome of Brexit negotiations, new regulatory changes (such as the implementation of the 4(th) Anti-Money Laundering Directive, the proposed ban in relation to tenants fees announced in the Queen's Speech and the implementation of General Data Protection Regulation in May 2018) and the impact of emerging alternative online models for delivery of property related services. 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 2016.
Forward-Looking Statements
This statement may contain forward-looking statements with respect to certain plans, 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, and they may cause the actual results or performance of LSL to be materially different from the results or performance implied by such statements. Any forward-looking statements will be by reference to the date of this statement only and must not be regarded as guarantees of future performance. Further, nothing in this statement should be construed as a profit forecast. Some of the factors which may affect LSL's actual future financial conditions, business performance and results are contained within the Group's Annual Report and Accounts 2016 on pages 22 to 25 and in this Statement, together with information on the management of the principal risks and uncertainties faced by LSL.
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 2016 (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
Interim Group Income Statement
for the six months ended 30(th) June 2017
Unaudited Audited Six Months Ended Year Ended 30(th) 30(th) 31(st) December June June 2016 2017 2016 Note GBP'000 GBP'000 GBP'000 --------- --------- --------------- Revenue 3,4 151,520 151,367 307,750 Operating expenses: Employee and subcontractor costs (91,778) (92,631) (182,687) Establishment costs (10,174) (10,257) (19,888) Depreciation on property, plant and equipment (2,629) (2,565) (5,475) Other (33,000) (35,776) (67,282) --------- --------- --------------- (137,581) (141,229) (275,332) Other operating income 3 278 639 1,165 Gain/(Loss) on sale of property, plant and equipment 668 3 (9) Income from joint ventures 654 535 1,049 Group Underlying Operating Profit 4 15,539 11,315 34,623 Share-based payments 145 (746) (1,263) Amortisation of intangible assets (2,227) (2,065) (3,914) Contingent consideration 7 (230) 365 3,785 Exceptional gains 7 1,100 - 34,531 Exceptional costs 7 - - (2,341) Group operating profit 4 14,327 8,869 65,421 Finance costs (1,176) (502) (1,896) Net finance costs (1,176) (502) (1,896) Profit before tax 4 13,151 8,367 63,525 Taxation (charge) - related to exceptional items and contingent consideration (212) (33) (6,432) - other (2,386) (1,898) (6,601)) --------- --------- --------------- 9 (2,598) (1,931) (13,033) Profit for the period/year 10,553 6,436 50,492 --------- --------- --------------- Attributable to: - Owners of the parent 10,555 6,439 50,493 - Non-controlling interest (2) (3) (1) Earnings per share expressed in pence per share: Basic 6 10.3 6.3 49.2 Diluted 6 10.2 6.2 49.0
Interim Group Statement of Comprehensive Income
for the six months ended 30(th) June 2017
Unaudited Audited Six Months Ended Year Ended 30(th) 30(th) 31(st) June June December 2017 2016 2016 GBP'000 GBP'000 GBP'000 --------- -------- ----------- Profit for the period 10,553 6,436 50,492 Items to be reclassified to profit and loss in subsequent periods: Reclassification adjustments for disposal of financial assets - - (33,022) Income tax effect - - 5,914 Revaluation of financial assets 2,146 2,998 11,816 Income tax effect (365) (469) (2,015) --------- -------- ----------- Net other comprehensive income to be reclassified to profit and loss in subsequent periods: 1,781 2,529 (17,307) --------- -------- ----------- Total other comprehensive income, net of tax 1,781 2,529 (17,307) --------- -------- ----------- Total comprehensive income, net of tax 12,334 8,965 33,185 --------- -------- ----------- Attributable to - Owners of the parent 12,336 8,968 33,186 - Non-controlling interest (2) (3) (1) --------- -------- -----------
Interim Group Balance Sheet
as at 30(th) June 2017
Unaudited Audited Six Months Year Ended Ended 30(th) 30(th) 31(st) June June December 2017 2016 2016 Note GBP'000 GBP'000 GBP'000 ---------- ---------- ---------- Non-current assets Goodwill 151,901 152,009 151,901 Other intangible assets 31,185 33,969 33,249 Property, plant and equipment 17,052 20,204 18,842 Financial assets 10 7,473 31,869 4,603 Investments in joint ventures 8,627 8,246 8,762 ---------- Total non-current assets 216,238 246,297 217,357 ---------- Current assets Trade and other receivables 37,964 37,452 32,263 Cash and cash equivalents - - - ---------- ---------- ---------- Total current assets 37,964 37,452 32,263 ---------- ---------- ---------- Total assets 254,202 283,749 249,620 ---------- ---------- ---------- Current liabilities Financial liabilities 11 (8,501) (20,409) (10,739)
Trade and other payables (52,280) (50,507) (50,900) Current tax liabilities (2,923) (1,398) (7,581) Provisions for liabilities (4,220) (10,887) (5,742) ---------- ---------- ---------- Total current liabilities (67,924) (83,201) (74,962) ---------- ---------- ---------- Non-current liabilities Financial liabilities 11 (33,762) (68,219) (26,469) Deferred tax liability (3,887) (8,623) (3,801) Provisions for liabilities 12 (14,141) (15,331) (15,622) ---------- ---------- ---------- Total non-current liabilities (51,790) (92,173) (45,892) ---------- ---------- ---------- Total Liabilities (119,714) (175,374) (120,854) ---------- Net assets 134,488 108,375 128,766 ---------- ---------- ---------- Equity Share capital 208 208 208 Share premium account 5,629 5,629 5,629 Share-based payment reserve 4,124 3,773 4,303 Treasury shares (5,331) (5,462) (5,368) Fair value reserve 5,352 23,407 3,571 Retained earnings 124,324 80,638 120,239 ---------- ---------- ---------- Equity attributable to owners of parent 134,306 108,193 128,582 Non-controlling interests 182 182 184 Total equity 134,488 108,375 128,766 ---------- ---------- ----------
Interim Group Cash Flow Statement
for the six months ended 30(th) June 2017
Unaudited Unaudited Audited 30(th) June 30(th) June 31(st) December 2017 2016 2016 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Cash generated from operating activities Profit before tax 13,151 8,367 63,525 Adjustments to reconcile profit before tax to net cash from operating activities Exceptional operating income and costs and contingent consideration (non-cash) (870) (365) (35,975) Amortisation of intangible assets 2,227 2,065 3,914 Finance costs 1,176 502 1,896 Share-based payments (145) 746 1,263 ------------- -------- --------- 2,388 2,948 (28,902) -------- -------- --------- Group underlying operating profit 15,539 11,315 34,623 Depreciation 2,629 2,565 5,475 Dividend income - (293) (492) Share of results of joint ventures (654) (535) (1,049) (Gain)/Loss on sale of property, plant and equipment (668) (3) 9 ------------- -------- --------- 1,307 1,734 3,943 (Increase)/decrease in trade and other receivables (5,637) (1,178) 3,265 Increase/(decrease) in trade and other payables 1,280 (1,107) (614) (Decrease) in provisions (2,003) (3,607) (8,561) ------------- -------- --------- (6,360) (5,892) (5,910) -------- -------- --------- Cash generated from operations 10,486 7,157 32,656 Interest paid (831) (979) (1,948) Tax paid (7,504) (3,386) (8,861) ------------- -------- (8,335) (4,365) (10,809) -------- -------- --------- Net cash generated from operating activities 2,151 2,792 21,847 Unaudited Unaudited Audited 30(th) June 30(th) June 31(st) December 2017 2016 2016 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Cash flows from investing activities Cash acquired on purchase of subsidiary undertaking - 1,542 1,593 Acquisition of subsidiaries and other businesses - (8,525) (8,451) Payment of contingent consideration (2,088) (2,352) (3,537) Investment in joint venture - - (2) Cash received on sale of financial assets - - 35,991 Dividends received from financial assets - 579 778 Purchase of property, plant and equipment and intangible assets (1,765) (3,580) (6,064) Proceeds from sale of property, plant and equipment 1,500 35 69 -------- -------- --------- Net cash (used in)/ from investing activities (2,353) (12,301) 20,377 Cash flows from financing activities Repayment of loans - - (25,243) Drawdown of loans 11,420 16,190 - Repayment of loan notes - (1,720) (7,294) Payment of deferred consideration (4,752) (1,968) (2,422) Proceeds from exercise of share options - 216 48 Dividends paid (6,466) (8,812) (12,916) -------- -------- --------- Net cash from/(used in) financing activities 202 3,906 (47,827) Net decrease in cash and cash equivalents - (5,603) (5,603) Cash and cash equivalents at the beginning of the year - 5,603 5,603 -------- --------- --------- Cash and cash equivalents at the end of the year - - - -------- --------- ---------
Interim Group Statement of changes in equity
for the six months ended 30(th) June 2017
Unaudited six months ended 30(th) June 2017
Share- Share based Fair Share premium payment Treasury value Retained Total Non-controlling capital account reserve shares Reserve earnings equity interest Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 At 1(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.
Unaudited six months ended 30(th) June 2016
Share- Share based Fair Share premium payment Treasury value Retained Total Non-controlling capital account reserve shares Reserve earnings equity interest Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 At 1(st) January 2016 208 5,629 3,564 (5,988) 20,878 82,880 107,171 185 107,356 Revaluation of financial assets (net of tax) - - - - 2,529 - 2,529 - 2,529 Other comprehensive income for the period - - - - 2,529 - 2,529 - 2,529 Profit for the period - - - - - 6,439 6,439 (3) 6,436 Total comprehensive income for the period - - - - 2,529 6,439 8,968 (3) 8,965 Exercise of options - - (441) 526 - 131 216 - 216 Share-based payments - - 650 - - - 650 - 650 Dividend payment - - - - - (8,812) (8,812) - (8,812) At 30(th) June 2016 208 5,629 3,773 (5,462) 23,407 80,638 108,193 182 108,375 --------- --------- -------- ---------- --------- ---------- -------- ----------------- --------
During the six month period to 30(th) June 2016 a total of 150,082 share options were exercised relating to LSL's various share option schemes resulting in the shares being sold by the Trust. LSL received GBP216,000 on exercise of these options.
Audited year ended 31(st) December 2016
Share- Share based Fair Share premium payment Treasury value Retained Total Non-controlling capital account reserve Shares Reserve earnings equity interest Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 At 1(st) January 2016 208 5,629 3,564 (5,988) 20,878 82,880 107,171 185 107,356 Disposal of financial assets (net of tax) - - - - (27,108) - (27,108) - (27,108) Revaluation of financial assets (net of tax) - - - - 9,801 - 9,801 - 9,801 Other comprehensive income for the year - - - - (17,307) - (17,307) - (17,307) Profit for the year - - - - - 50,493 50,493 (1) 50,492 Total comprehensive income for the year - - - - (17,307) 50,493 33,186 (1) 33,185 Exercise of options - - (524) 620 - (218) (122) - (122) Share-based payments - - 1,263 - - - 1,263 - 1,263 Dividend payment - - - - - (12,916) (12,916) - (12,916) At 31(st) December 2016 208 5,629 4,303 (5,368) 3,571 120,239 128,582 184 128,766 --------- --------- -------- ---------- --------- ---------- --------- ----------------- ---------
During the year ended 31(st) December 2016, the Trust acquired nil shares. During the period 176,955 share options were exercised relating to LSL's various share option schemes resulting in the Shares being sold by the Trust. LSL received GBP49,000 on exercise of these options.
Notes to the Interim Condensed Group Financial Statements
The Interim Condensed Group Financial Statements for the period ended 30(th) June 2017 were approved by the LSL Board on 31(st) July 2017. The interim financial statements are not the statutory accounts. The financial information for the year ended 31(st) December 2016 is extracted from the audited statutory accounts for the year ended 31(st) December 2016, 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 2017 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and IAS 34 Interim Financial Reporting (as adopted by the EU). The interim condensed consolidated group financial statements have been prepared on a going concern basis.
The interim condensed consolidated group financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31(st) December 2016 which are included in LSL's Annual Report and Accounts 2016.
Significant accounting policies
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 2016.
Management continue to evaluate the new standards that that will have an effective date of 1(st) January 2018, IFRS 2, IFRS 9 and IFRS 15. A project is being undertaken in relation to IFRS 15 which will ensure that all revenue contracts have been reviewed, ensure that any changes in the way revenue is recognised have been identified and the impact of this is fully evaluated and quantified. The impact of IFRS 2, IFRS 9 and IFRS 15 will be quantified by the year end and further information disclosed within the annual accounts. IFRS 16 will become effective from 1(st) January 2019 and work has commenced on its implementation.
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 2016. These assumptions are discussed in detail in the Group's Annual Report and Accounts 2016. 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 -- Intangible assets -- Deferred tax 1. Basis of preparation (continued)
Significant accounting policies (continued)
Estimates
The key assumptions affected by future uncertainty that have a significant risk of causing material adjustment to the carrying value of assets and liabilities within the next financial year are:
-- Lapse provision -- Assessment of the useful life of an intangible asset -- Valuation of financial assets -- Professional Indemnity (PI) claims -- Valuations in acquisitions -- Impairment of intangible assets -- Contingent consideration -- Income tax
.
New standards and interpretations
There are no accounting standards or interpretations that have become effective in the current reporting period which have had a material effect on the net assets, results and disclosures of the Group. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
Going concern
The Group meets its day to day working capital requirements through a revolving credit facility. The Group currently has a GBP100m credit facility which was extended in May 2016 and will now expire in May 2020. As shown in Note 13, the Group had available GBP68.3m 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.
2. 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. However, as reported in the pre-interim results trading update issued on 17(th) July 2017, the Board expects a more equal weighting between the first and second half financial results compared to prior years.
3. Revenue Six months ended Year Ended 30(th) 30(th) 31(st) June June December 2017 2016 2016 GBP'000 GBP'000 GBP'000 Revenue from services 151,520 151,367 307,750 --------- --------- ---------- Operating revenue 151,520 151,367 307,750 --------- --------- ---------- Rental income 278 346 673 Dividend income - 293 492 Other operating income 278 639 1,165 --------- --------- ---------- Total revenue 151,798 152,006 308,915 --------- --------- ---------- 4. 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, Pink Homes Loans, First Complete, Embrace Mortgage Services, First2Protect, Mortgage First, Insurance Brokers First and Linear Financial Services. 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 2016 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.
4. Segment analysis of revenue and operating profit (continued)
Operating segments
The following tables presents revenue and profit information regarding the Group's operating segments for the six months ended 30(th) June 2017, for the six months ended 30(th) June 2016 and for the year ended 31(st) December 2016.
Six months ended 30(th) June 2017
Estate Surveying agency and valuation and related services services GBP'000 Unallocated Total Income statement information GBP'000 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).
4. Segment analysis of revenue and operating profit (continued)
Operating segments
Six months ended 30(th) June 2016
Estate Surveying agency and valuation and related services services GBP'000 Unallocated Total Income statement information GBP'000 GBP'000 GBP'000 ------------- -------------- ------------- --------- Segmental revenue 118,894 32,473 - 151,367 ------------- -------------- ------------- --------- Segmental result: - before exceptional costs, contingent consideration, amortisation and share-based payments 6,882 8,078 (3,645) 11,315 - after exceptional costs, contingent 4,714 7,749 (3,594) 8,869 consideration, amortisation and share-based payments ------------- -------------- ------------- --------- Finance income - Finance costs (502) Profit before tax 8,367 Taxation (1,931) Profit for the period 6,436 ---------
In the period ended 30(th) June 2016, there were no single customers that accounted for 10% or more of the Group's total revenue.
Balance sheet information Segment assets - intangible 174,084 11,894 - 185,978 Segment assets - other 87,612 9,131 1,028 97,771 -------- -------- -------- --------- Total Segment assets 261,696 21,025 1,028 283,749 Total Segment liabilities (55,785) (38,403) (81,186) (175,374) -------- -------- -------- --------- Net assets/(liabilities) 205,911 (17,378) (80,158) 108,375 -------- -------- -------- ---------
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 (GBP9,000), other assets (GBP1,020,000), accruals (GBP923,000), financial liabilities (GBP8,553,000), deferred and current tax liabilities (GBP10,021,000), overdraft (GBP6,690,000) and revolving credit facility overdraft (GBP55,000,000).
4. Segment analysis of revenue and operating profit (continued)
Operating segments
Year ended 31(st) December 2016
Estate Surveying agency and valuation and related services services GBP'000 Unallocated Total Income statement information GBP'000 GBP'000 GBP'000 ------------- -------------- ------------- --------- Segmental revenue 243,036 64,714 - 307,750 ------------- -------------- ------------- --------- Segmental result: - before exceptional costs, contingent consideration, amortisation and share-based payments 24,500 17,508 (7,385) 34,623 - after exceptional costs, contingent consideration, amortisation and share-based payments 22,344 18,030 25,047 65,421 ------------- -------------- ------------- --------- Finance income - Finance costs (1,896) Profit before tax 63,525 Taxation (13,033) Profit for the year 50,492 ---------
In the period ended 31(st) December 2016, there were no single customers that accounted for 10% or more of the Group's total revenue.
Estate Surveying agency and valuation and services related GBP'000 Unallocated Total activities GBP'000 GBP'000 GBP'000 ------------------ -------------- ------------- --------- Balance sheet information Segment assets - intangible 172,736 12,414 - 185,150 Segment assets - other 56,574 6,873 1,023 64,470 ------------------ -------------- ------------- --------- Total Segment assets 229,310 19,287 1,023 249,620 Total Segment liabilities (53,997) (32,780) (34,077) (120,854) ------------------ -------------- ------------- --------- Net assets/(liabilities) 175,313 (13,493) (33,054) 128,766 ------------------ -------------- ------------- ---------
Unallocated net liabilities comprise plant and equipment (GBP8,000), other assets (GBP1,015,000), accruals (GBP436,000), financial liabilities (GBP5,759,000), deferred and current tax liabilities (GBP11,382,000), revolving credit facility (GBP16,500,000).
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. 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 below 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 and a reconciliation of Group Underlying Operating Profit is shown below:
30(th) 30(th) 31st June June December 2017 2016 2016 Note GBP'000 GBP'000 GBP'000 -------- -------- ---------- Group operating profit 4 14,327 8,869 65,421 Share-based payments (145) 746 1,263 Amortisation of intangible assets 2,227 2,065 3,914 Exceptional gains 7 (1,100) - (34,531) Exceptional costs 7 - - 2,341 Contingent consideration 7 230 (365) (3,785) -------- -------- ---------- Group Underlying Operating Profit 15,539 11,315 34,623 -------- -------- ---------- 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.
Six months ended 30(th) June
Weighted 2017 Weighted 2016 Profit average Per Profit average Per after number share after number share tax of shares amount tax of shares amount GBP'000 Pence GBP'000 Pence Basic EPS 10,555 102,636,868 10.3 6,439 102,658,362 6.3 Effect of dilutive share options - 741,376 - - 469,387 - Diluted EPS 10,555 103,378,244 10.2 6,439 103,127,749 6.2 ---------- ------------ -------- ---------- ------------ -------- 6. Earnings per share (EPS) (continued) Year ended 31(st) 2016 December 2016 Profit Weighted Per after average share tax number amount GBP'000 of shares Pence --------- ----------- ------- Basic EPS 50,493 102,575,484 49.2 Effect of dilutive share options - 519,565 - Diluted EPS 50,493 103,095,049 49.0 --------- ----------- -------
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:
Year Six months ended Ended 30(th) 31(st) 30(th) June June December 2017 2016 2016 GBP'000 GBP'000 GBP'000 Group operating profit before contingent consideration, exceptional items, share-based payments and amortisation 15,539 11,315 34,624 Add back non-controlling interest 2 3 1 Group operating profit before contingent consideration, exceptional items, share-based payments and amortisation (excluding non-controlling interest) 15,541 11,318 34,625 Net finance costs (excluding exceptional items and contingent consideration items) (931) (335) (1,410) Normalised taxation (2,812) (2,197) (6,643) Adjusted profit after tax(1) before exceptional items, share-based payments and amortisation 11,798 8,786 26,572 ------------ --------- ----------
Six months ended 30(th) June
Adjusted 2017 Adjusted 2016 profit Weighted Per profit Weighted Per after average share after average share tax(1) number amount tax(1) number amount GBP'000 of shares Pence GBP'000 of shares Pence Adjusted basic EPS 11,798 102,636,868 11.5 8,786 102,658,362 8.6 Effect of dilutive share options 741,376 469,387 Adjusted diluted EPS 11,798 103,378,244 11.4 8,786 103,127,749 8.5 --------- ------------ -------- --------- ------------ -------- 6. Earnings per share (EPS) (continued)
Year ended 31(st) December 2016
Adjusted 2016 profit Weighted Per after average share tax(1) number amount GBP'000 of shares Pence Adjusted basic EPS 26,572 102,575,484 25.9 Effect of dilutive - 519,565 - share options Adjusted diluted EPS 26,572 103,095,049 25.8 ----------- ------------ --------
(1) This represents adjusted profit after tax attributable to equity holders of the parent. Tax has been adjusted to exclude the prior year tax adjustments, and the tax impact of exceptional items, amortisation and share-based payments. The effective tax rate used is 19.25% (30(th) June 2016: 20.00%; 31(st) December 2016: 20.00%).
7. Exceptional items and contingent consideration Six Months Year Ended Ended 30(th) 30(th) 31(st) June June 2016 December 2017 2016 Exceptional costs: GBP'000 GBP'000 GBP'000 ----------- ------------- ------------- Branch/centre closure and restructuring costs including redundancy costs - - 2,341 Total operating exceptional costs - - 2,341 Deferred and contingent consideration on acquisitions 230 (365) (3,785) ----------- ------------- ------------- 230 (365) (1,444) ----------- ------------- ------------- Exceptional gains: Gain on disposal of Zoopla shares - - (32,931) Provision for PI claims/notifications (PI Costs) (1,100) - (1,600) ----------- ------------- ------------- (1,100) - (34,531) ----------- ------------- ------------- Net exceptional (gain) and contingent consideration (870) (365) (35,975) ----------- ------------- -------------
Contingent consideration on acquisitions
The contingent consideration recognised in the period relates to a charge of GBP129,000 in LSLi and a charge of GBP101,000 in Group First (31(st) December 2016 a credit of GBP3,785,000 and 30(th) June 2016: credit of GBP365,000).
Professional Indemnity
Positive progress in addressing historic PI Costs has resulted in a GBP1,100,000 release of the provision (31(st) December 2016: release of GBP1,600,000; 30(th) June 2016: nil)
8. Dividends paid and proposed
Dividends per share
A final dividend in respect of the year ended 31(st) December 2016, of 6.3 pence per share (December 2015: 8.6 pence per share), amounting to GBP6.5m was paid in the period ended 30(th) June 2017. An interim dividend has been announced amounting to 4.0 pence per share (June 2016: 4.0 pence).
Interim dividends are recognised when paid.
9. Taxation
The major components of income tax charge in the interim Group income statements are:
Six Months Ended Year Ended 30(th) 30(th) 31(st) June June December 2017 2016 2016 GBP'000 GBP'000 GBP'000 ----------- ---------- ---------- UK corporation tax: - current year 2,851 1,881 12,703 - adjustment in respect of prior years (2) 162 1,009 ----------- ---------- 2,849 2,043 13,712 Deferred tax: Origination and reversal of temporary differences (221) (85) (500) Adjustment in respect of prior year (30) (27) (179) ----------- ---------- ---------- (251) (112) (679) ----------- ---------- ---------- Total tax charge in the income statement 2,598 1,931 13,033 ----------- ---------- ----------
Income tax charged directly to other comprehensive income is GBP365,000 (31(st) December 2016: GBP3,899,000 credit; 30(th) June 2016: GBP469,000 charge) and relates to the revaluation of financial assets. Income tax credited directly to the share based payment reserve is GBP29,000 (and 31(st) December 2016: GBP65,000 and 30(th) June 2016: GBP96,000).
The headline rate of corporation tax has decreased from 20% to 19%, effective from 1(st) April 2017 resulting in an expected effective corporation tax rate of 19.25% for the year ended 31(st) December 2017. 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.
10. Financial assets
Six Months Ended Year Ended Available-for-sale financial 30(th) 30(th) 31(st) assets June June December 2017 2016 2016 GBP'000 GBP'000 GBP'000 -------- -------- ---------- Unquoted shares at fair value 6,653 1,774 4,603 Quoted shares at fair value 820 30,095 - -------- -------- ---------- 7,473 31,869 4,603 -------- -------- ---------- Opening balance 4,603 28,871 28,871 Acquisitions 724 - - Disposals - - (36,083) Fair value adjustment recorded through other comprehensive income 2,146 2,998 11,815 Closing balance 7,473 31,869 4,603 -------- -------- ----------
10. Financial assets (continued)
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 15).
Zoopla
Financial assets also include warrants in ZPG Plc (Zoopla). These were issued in accordance with the 2016 services agreement with Zoopla. Zoopla's share price at 30(th) June 2017 was GBP3.62 per share. The Directors consider the best estimate of the fair value of LSL's warrants to be the share price which values the Group's stake in Zoopla at GBP820,000. These warrants are therefore valued using a level 1 valuation technique.
Other investments
The carrying value of the Group's investment in Vibrant Energy Matter (VEM) at 30(th) June 2017 has been assessed as GBP912,000 (31(st) December 2016: GBP912,000).
The carrying value of the Group's investment in GPEA Limited (GPEA) at 30(th) June 2017 has been assessed as GBP5,741,000 (31(st) December 2016: GBP3,691,000), reflecting the proposed consideration for the sale of the investment Note 17).
11. Financial liabilities
Six Months Ended Year Ended 30(th) 30(th) 31(st) June June December 2017 2016 2016 GBP'000 GBP'000 GBP'000 -------- -------- ---------- Current Overdraft 6,176 6,690 3,756 2% unsecured loan notes 2,000 5,569 - Deferred consideration 38 5,081 4,790 Contingent consideration 287 3,069 2,193 8,501 20,409 10,739 -------- -------- ---------- Non-current Bank loans - revolving credit facility (RCF) 25,500 55,000 16,500 2% unsecured loan notes - 2,000 2,000 Deferred consideration 58 - 66 Contingent consideration 8,204 11,219 7,903 33,762 68,219 26,469 -------- -------- ----------
Contingent consideration -
Six Months Ended Year Ended 30(th) 30(th) 31(st) June June December 2017 2016 2016 GBP'000 GBP'000 GBP'000 -------- -------- ---------- Marsh & Parsons Growth Shares - 1,746 - LSLi contingent consideration 1,517 5,002 3,419 LMS 1 530 1 Group First Limited 6,636 6,581 6,339 Other 337 429 337 -------- -------- ---------- 8,491 14,288 10,096 -------- -------- ---------- Opening balance 10,096 9,886 9,886 Cash paid (2,088) (2,352) (3,537) Acquisition - 6,581 6,598 Amounts recorded though income statement 483 173 (2,851) -------- -------- ---------- Closing balance 8,491 14,288 10,096 -------- -------- ----------
11. Financial liabilities (continued)
The GBP2,000,000 unsecured loan notes, payable to a former Marsh & Parsons director are due in March 2018, subject to certain conditions being satisfied. The contingent consideration relating to the Marsh & Parsons growth shares is nil (31(st) December 2016: nil and 30(th) June 2016: GBP1,746,000).
GBP1,517,000 (31(st) December 2016: GBP3,419,000 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 2016: GBP1,000 and 30(th) June 2016: GBP530,000) of contingent consideration relates to payments to third parties in relation to the acquisition of LMS in September 2014.
GBP6,636,000 of contingent consideration relates to Group First (31(st) December 2016: GBP6,339,000; 30(th) June 2016: GBP6,581,000). 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.
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 30(th) 30(th) 31(st) relating to amounts accounted June June December for as: 2017 2016 2016 GBP'000 GBP'000 GBP'000 -------- -------- ---------- Remuneration - 3,800 2,076 Put options over non-controlling interests 1 530 1 Arrangement under IFRS 3 8,490 9,958 8,019 -------- -------- ---------- Closing balance 8,491 14,288 10,096 -------- -------- ---------- Contingent consideration profit and loss impact in the period relating to amounts accounted for as: Remuneration 13 379 (1,412) Put options over non-controlling interests - (268) (268) Arrangement under IFRS 3 225 (105) (1,657) Unwinding of discount on contingent consideration 245 167 486 -------- -------- ---------- Charge/(credit) 483 173 (2,851) -------- -------- ----------
12. Provisions for liabilities
Six months ended 30(th) June:
2017 2016 Professional Professional indemnity indemnity claim Onerous claim Onerous provision leases Total provision leases Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------------- ------------- ----------- ------------- ----------- ----------- Balance at 1(st) January 20,686 678 21,364 29,672 53 29,725 Acquired in the period - - - - 17 17 Amount utilised (2,045) (148) (2,293) (3,954) - (3,954) Amount released (1,100) (82) (1,182) - (40) (40) Unwinding of discount 100 - 100 100 - 100 Provided in the period 270 2 372 370 - 370 Balance at 30(th) June 17,911 450 18,361 26,188 30 26,218 ---------------- ------------- ----------- ------------- ----------- ----------- Current 4,098 122 4,220 10,871 16 10,887 Non-current 13,813 328 14,141 15,317 14 15,331 17,911 450 18,361 26,188 30 26,218 ---------------- ------------- ----------- ------------- ----------- -----------
Year ended 31(st) December 2016
Professional indemnity Onerous claim leases Total provision GBP'000 GBP'000 GBP'000 ---------------- ------------- ----------- Balance at 1(st) January 29,672 53 29,725 Amount utilised (8,126) (137) (8,263) Amount released (1,600) (6) (1,606) Unwinding of discount 200 - 200 Provided in the period (including exceptional costs) 540 768 1,308 Balance at 31(st) December 20,686 678 21,364 ---------------- ------------- ----------- Current 5,385 357 5,742 Non-current 15,301 321 15,622 20,686 678 21,364 ---------------- ------------- -----------
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 2017 the total provision for PI Costs was GBP17.9m. The Directors have considered the sensitivity analysis on the key risks and uncertainties discussed above.
12. Provisions for liabilities (continued)
Cost per claim
A substantial element of the 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 GBP1.4m 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 GBP0.3m.
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 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.
13. Analysis of Net Bank Debt
Six Months Ended Year Ended 30(th) 30(th) 31(st) June June December 2017 2016 2016 GBP'000 GBP'000 GBP'000 -------- -------- ---------- Interest bearing loans and borrowings * Current 8,501 20,409 10,739 * Non-current 33,762 68,219 26,469 -------- -------- ---------- 42,263 88,628 37,208 Less: 2% unsecured loan notes (2,000) (7,569) (2,000) Less: deferred and contingent consideration (8,587) (19,369) (14,952) -------- -------- ---------- Net Bank Debt at the end of the period 31,676 61,690 20,256 -------- -------- ----------
Net Bank Debt at 30(th) June 2017 was GBP31.7m.
14. 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 2016. 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 2016.
The Group has a current ratio of net bank debt (excluding loan notes) to EBITDA of 0.71 (31(st) December 2016: 0.51 and 30(th) June 2016: 1.26). 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.
15. 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 financial statements.
Fair value hierarchy
As at 30(th) June 2017, 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 1 2 3 2017 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 Liabilities for which fair values are disclosed Interest-bearing loans and borrowings: Floating rate borrowings 25,500 - 25,500 - 2% unsecured loan notes 2,000 - 2,000 - Deferred consideration 96 - - 96 30(th) Level Level Level June 1 2 3 2016 GBP'000 GBP'000 GBP'000 GBP'000 --------- -------- --------- -------- Assets measured at fair value Financial assets 31,869 30,095 1,774 Liabilities measured at fair value Contingent consideration 14,288 14,288 Liabilities for which fair values are disclosed Interest-bearing loans and borrowings: Floating rate borrowings 55,000 - 55,000 - 12% unsecured loan notes 7,569 - 7,569 - Deferred consideration 77 77 -- 31(st) Level Level Level Dec 1 2 3 2016 GBP'000 GBP'000 GBP'000 GBP'000 --------- -------- --------- -------- Assets measured at fair value Financial assets 4,603 - - 4,603 Liabilities measured at fair value Contingent consideration 10,096 - - 10,096 Liabilities for which fair values are disclosed Interest-bearing loans and borrowings: Floating rate borrowings 16,500 - 16,500 - 2% unsecured loan notes 2,000 - 2,000 - Deferred consideration 4,856 4,856
15. Fair values of financial assets and financial liabilities (continued)
Of the investments totalling GBP7,473,000, GBP6,653,000 are valued using Level 3 valuation techniques. The Directors reviewed the fair value of the financial assets at 30(th) June 2017. The underlying value of the investments will be driven by the profitability of these businesses. If this was to drop by 10%, the implied valuation is likely to also drop by around 10%, GBP0.7m.
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 11.
Fair values of the Group's interest-bearing borrowings and loans are determined by using DCF methodology using a discount rate that reflects the issuer's borrowing rate as at the end of the reporting period. The own non-performance risk as at 30(th) June 2017 was assessed to be insignificant.
16. Acquisitions
There have been no acquisitions in the six month period to 30(th) June 2017. The following information relates to the comparative six month period ended 30(th) June 2016:
During the comparative period the Group acquired nine lettings businesses for a total consideration of GBP4.0m. The fair value of the identifiable assets and liabilities of these businesses as at the date of acquisition were determined as below:
Fair value recognised on acquisition 31(st) 30(th) December June 2016 2016 GBP'000 GBP'000 Intangible assets 3,834 3,825 Deferred tax liabilities - (688) -------------- ------------- Total identifiable net assets acquired 3,834 3,137 Purchase consideration 3,975 3,825 -------------- ------------- Goodwill 141 688 -------------- -------------
In February 2016, the Group, through a wholly owned subsidiary, acquired 65% interest in Group First, who provide mortgage and protection brokerage services to the purchasers of new homes through its subsidiaries, Mortgages First Limited and Insurance First Brokers Limited. The consideration for the initial investment was GBP9.1m cash with 50% paid on completion, and a further 50% paid in the first half of 2017. The remaining 35% is subject to put and call options which are exercisable between 2018 and 2020. The contingent consideration was management's best estimation of the probable discounted payout (using a rate of 6.5%), based upon current forecasts over the earn-out period (GBP6,636,000 at 30(th) June 2017 - note 11). 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 of as at the date of acquisition were determined as below:
16. Acquisitions (continued) Fair value recognised on acquisition 30(th) 31st December June 2016 2016 GBP'000 GBP'000 Intangible assets 809 809 Property, plant and equipment 847 847 Trade and other receivables (No impairment identified) 127 127 Cash and cash equivalents 1,542 1,542 Trade and other payables (1,527) (1,501) Current tax (216) (216) Deferred tax liabilities (38) 160 Total identifiable net assets acquired 1,544 1,768 Purchase consideration 15,681 15,681 -------------- ----------------- Goodwill 14,137 13,913 -------------- -----------------
Purchase consideration discharged by:
Cash 4,550 4,550 Deferred consideration 4,550 4,550 Contingent consideration 6,581 6,581 ------- ------- 15,681 15,681 ------- -------
The acquisition accounting above was considered provisional at 30(th) June 2016 as LSL was reviewing the estimates of the likely payments under the contract, but the calculation above represented the Directors best estimate at 30(th) June 2016. In addition, work was on-going to identify acquired intangibles in the Group. This work was finalised in the Group's Financial Statements for the year ended 31(st) December 2016 and at that stage any deferred tax liability was recognised. None of the goodwill was expected to be deductible for tax purposes.
The goodwill of Group First comprises certain intangible assets that cannot be individually separated and reliably measured from the acquiree due to their nature. These items include an experienced management team with a good record of delivering a quality service to customers, the expected value of synergies and the potential to significantly grow the business. Group First had contributed GBP795,000 profit before tax and GBP2,750,000 revenue in the comparative period since acquisition. If it had been acquired at the beginning of the comparative year then the consolidated revenue would have been GBP920,000 higher and the consolidated profit before tax would have been GBP222,000 higher. An analysis of cash-flow on acquisition is given in the table below.
From the date of acquisition to 30(th) June 2016, the acquisitions in aggregate, including Group First, had contributed GBP3,032,000 of revenue and GBP982,000 profit before tax to the Group, excluding the impact of movements in the contingent consideration recorded through the profit and loss. If all of these combinations had taken place at the beginning of the year, the consolidated revenue would have been higher by GBP1,200,000 and the consolidated profit before tax would have been higher by GBP409,000. Transaction costs have been expensed.
GBP'000 Transaction costs 52 Net cash acquired with the subsidiaries and other businesses (1,542) Purchase consideration discharged 8,525 -------- Net Cash outflow on acquisition 7,035 --------
17. Post Balance Sheet event
Subsequent to the period end the Company has sold it's holding in GPEA for GBP5.7m, for cash of GBP3m and shares in eProp Services plc.
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 2017 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 17. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 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
1 August 2017
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DFLFXDDFFBBX
(END) Dow Jones Newswires
August 01, 2017 02:00 ET (06:00 GMT)
1 Year Lsl Property Services Chart |
1 Month Lsl Property Services Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions