REG - LSL Property ServPLC - PRELIMINARY ANNOUNCEMENT <Origin Href="QuoteRef">LSL.L</Origin> - Part 3
07/03/2017 07:06
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Group Income Statement
for the year ended 31st December 2016
2016 2015
Note £'000 £'000
Revenue 3 307,750 300,594
Operating expenses:
Employee and subcontractor costs (182,687) (171,216)
Establishment costs (19,888) (19,012)
Depreciation on property, plant and equipment (5,475) (5,296)
Other (67,282) (65,180)
(275,332) (260,704)
Other operating income 1,165 1,865
(Loss) on sale of property, plant and equipment (9) (44)
Group's share of profit after tax in joint ventures 1,049 1,156
Group operating profit 4 34,623 42,867
Share-based payments (1,263) (871)
Amortisation of intangible assets (3,914) (1,803)
Exceptional gains 5 34,531 -
Exceptional cost 5 (2,341) (258)
Contingent consideration 5 3,785 1,477
Group operating profit 3 65,421 41,412
Finance income - 5
Finance costs (1,896) (2,817)
Net financial costs (1,896) (2,812)
Profit before tax 63,525 38,600
Taxation
- related to exceptional items and contingent consideration (6,432) 52
- others (6,601) (8,190)
8 (13,033) (8,138)
Profit for the year 50,492 30,462
Attributable to
- Owners of the parent 50,493 30,414
- Non-controlling interest (1) 48
Earnings per share expressed in pence per share:
Basic 6 49.2 29.7
Diluted 6 49.0 29.5
Group Statement of Comprehensive Income
for the year ended 31st December 2016
2016 2015
£'000 £'000
Profit for the year 50,492 30,462
Items to be reclassified to profit and loss in subsequent periods:
Reclassification adjustments for disposal of financial assets (33,022) (440)
Income tax effect 5,914 53
Revaluation of financial assets 11,816 5,130
Income tax effect (2,015) (580)
Net other comprehensive (loss)/income to be reclassified to profit and loss in subsequent periods:
(17,307) 4,163
Total other comprehensive (loss)/income for the year, net of tax (17,307) 4,163
Total comprehensive income for the year, net of tax 33,185 34,625
Attributable to
- Owners of the parent 33,186 34,577
- Non-controlling interest (1) 48
Group Balance Sheet
as at 31st December 2016
2016 2015
£'000 £'000
Non-current assets
Goodwill 151,901 136,395
Other intangible assets 33,249 30,517
Property, plant and equipment 18,842 19,393
Financial assets 4,603 28,871
Investments in joint ventures 8,762 8,778
Total non-current assets 217,357 223,954
Current assets
Trade and other receivables 32,263 35,366
Cash and cash equivalents - 5,603
Total current assets 32,263 40,969
Total assets 249,620 264,923
Current liabilities
Financial liabilities (10,739) (15,777)
Trade and other payables (50,900) (50,102)
Current tax liabilities (7,581) (2,525)
Provisions for liabilities (5,742) (12,100)
Total current liabilities (74,962) (80,504)
Non-current liabilities
Financial liabilities (26,469) (52,511)
Deferred tax liability (3,801) (6,927)
Provisions for liabilities (15,622) (17,625)
Total non-current liabilities (45,892) (77,063)
Total Liabilities (120,854) (157,567)
Net assets 128,766 107,356
Equity
Share capital 208 208
Share premium account 5,629 5,629
Share-based payment reserve 4,303 3,564
Treasury shares (5,368) (5,988)
Fair value reserve 3,571 20,878
Retained earnings 120,239 82,880
Equity attributable to owners of parent 128,582 107,171
Non-controlling interests 184 185
Total equity 128,766 107,356
Group Statement of Cash Flows
for the year ended 31st December 2016
31stDecember 2016 31st December 2015
£'000 £'000 £'000 £'000
Cash generated from operating activities
Profit before tax 63,525 38,600
Adjustments to reconcile profit before tax to net cash from operating activities
Exceptional operating items and (35,975) (1,219)
contingent consideration
Amortisation of intangible assets 3,914 1,803
Finance income - (5)
Finance costs 1,896 2,817
Share-based payments 1,263 871
Total adjustments (28,902) 4,267
Group operating profit before amortisation and share-based payments 34,623 42,867
Depreciation 5,475 5,296
Dividend income (492) (835)
Share of results of joint ventures (1,049) (1,156)
Loss/(Gain) on sale of property, plant and equipment and financial assets 9 (253)
3,943 3,052
Decrease in trade and other receivables 3,265 975
(Decrease) in trade and other payables (614) (1,026)
(Decrease) in provisions (8,561) (9,345)
(5,910) (9,396)
Cash generated from operations 32,656 36,523
Interest paid (1,948) (1,852)
Tax paid (8,861) (5,613)
(10,809) (7,465)
Net cash generated from operating activities 21,847 29,058
Cash flows from investing activities
Cash acquired on purchase of subsidiary 1,593 774
undertaking
Acquisitions of subsidiaries and other businesses (8,451) (13,202)
Payment of contingent consideration (3,537) (4,015)
Investment in financial assets - (1,178)
Investment in joint venture (2) -
Cash received on sale of financial assets 35,991 297
Dividends received from joint venture - 1,499
Dividends received from financial assets 778 549
Interest received - 5
Purchase of property, plant and equipment and intangible assets (6,064) (7,991)
Proceeds from sale of property, plant and 69 328
equipment
Net cash generated / (expended) on investing activities 20,377 (22,934)
Cash flows from financing activities
Repayment of loans (25,243) -
Drawdown of loans - 11,500
Repayment of overdraft (718)
Repayment of loan notes (7,294) (63)
Payment of deferred consideration (2,422) -
Proceeds from exercise of share options 48 1,314
Dividends paid (12,916) (12,554)
Net cash used in financing activities (47,827) (521)
Net (decrease) / increase in cash and cash equivalents (5,603) 5,603
Cash and cash equivalents at the beginning of the year 5,603 -
Cash and cash equivalents at the end of the year - 5,603
Group Statement of Changes in Equity
for the year ended 31st December 2016
Share capital Share premium account Share- based payment reserve Treasury shares Fair value Reserve Retained earnings Total equity Non-controlling interests Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1stJanuary 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 31stDecember 2016 208 5,629 4,303 (5,368) 3,571 120,239 128,582 184 128,766
Year ended 31st December 2015
Share capital Share premium account Share- based payment reserve Treasury shares Fair value Reserve Retained earnings Total equity Non-controlling interests Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1stJanuary 2015 208 5,629 3,498 (7,922) 16,715 64,835 82,963 137 83,100
Disposal of financial assets (net of tax) - - - - (387) - (387) - (387)
Revaluation of financial assets (net of tax) - - - - 4,550 - 4,550 - 4,550
Other comprehensive income for the year - - - - 4,163 - 4,163 - 4,163
Profit for the year - - - - - 30,414 30,414 48 30,462
Total comprehensive income for the year - - - - 4,163 30,414 34,577 48 34,625
Exercise of options - - (805) 1,934 - 185 1,314 - 1,314
Share-based payments - - 871 - - - 871 - 871
Dividend payment - - - - - (12,554) (12,554) - (12,554)
At 31stDecember 2015 208 5,629 3,564 (5,988) 20,878 82,880 107,171 185 107,356
Notes to the Preliminary Results Announcement
The financial information in this preliminary results announcement does not
constitute LSL's statutory financial statements for the year ended 31st
December 2016 but has been extracted from the Financial Statements included in
LSL's Annual Report & Accounts 2016 and as such, does not contain all
information required to be disclosed in the financial statements prepared in
accordance with IFRS.
Statutory financial statements for this year will be filed following the 2017
AGM. The auditors have reported on these financial statements. Their report
was unqualified and did not contain a statement under section 498 (2) or (3)
of the Companies Act 2006.
1. Directors responsibility statement
Each of the current Directors confirms that, to the best of their knowledge,
the financial statements, prepared in accordance with IFRS as adopted by EU
standards, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the issuer and the undertakings included in the
consolidation taken as a whole; and the Directors' Report includes a fair
review of the development and performance of the business and the position of
the issuer and the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and uncertainties
that they face.
2. Basis of preparation
The accounting policies adopted are consistent with those of the previous
financial year except for the adoption of new Standards and interpretations as
of 1st January 2016 which are applicable to the Group. For the Financial
Statements for the year ended 31st December 2016, there were no IFRS,
amendments or IFRIC interpretations effective for the first time this
financial year that had a material impact on the Group. This is with the
exception of IFRS 16, for which we continue to evaluate the impact.
3. 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 and as part of its business model, the Estate
Agency Division also provides associated services including arranging
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 Solutions. 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 the Estate Agency
and Related Services segment.
· The Surveying and Valuation Services segment provides a valuations and
professional survey service of residential properties to various lending
corporations and individual customers.
Each segment has various products and services and the revenue from these
products and services are disclosed in the Business Review section of the
Strategic Report of the Annual Report and Accounts 2016.
The Management Teams monitor the operating results of each 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 table presents revenue and profit information regarding the
Group's operating segments for the financial year ended 31st December 2016 and
financial year ended 31st December 2015 respectively.
Year ended 31st December 2016
Estate Agency and Related Services Surveying Unallocated Total
and Valuation Services
Income statement information £'000 £'000 £'000 £'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
Year ended 31st December 2015
Estate Agency and Related Services Surveying Unallocated Total
and Valuation Services
Income statement information £'000 £'000 £'000 £'000
Segmental revenue 236,525 64,069 - 300,594
Segmental result:
- before exceptional costs, contingent consideration, amortisation and share-based payments 31,288 18,104 (6,525) 42,867
- after exceptional costs, contingent 29,347 17,459 (5,394) 41,412
consideration, amortisation and share-based payments
Finance income 5
Finance costs (2,817)
Profit before tax 38,600
Taxation (8,138)
Profit for the year 30,462
4. 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:
2016 2015
Note £'000 £'000
Group operating profit 3 65,421 41,412
Share-based payments 1,263 871
Amortisation of intangible assets 3,914 1,803
Exceptional gains 5 (34,531) -
Exceptional costs 5 2,341 258
Contingent consideration 5 (3,785) (1,477)
Group Underlying Operating Profit 34,623 42,867
5. Exceptional items and contingent consideration
2016 2015
£'000 £'000
Exceptional costs:
Branch closure and restructuring costs including redundancy costs 2,341 258
Contingent consideration on acquisitions (3,785) (1,477)
Exceptional gains:
Gain on disposal of Zoopla shares (32,931) -
Provision for PI Costs (claims and notifications) (1,600) -
(34,531) -
6. Earnings per share (EPS)
Basic EPS amounts are calculated by dividing net profit for the year
attributable to ordinary equity holders of the parent by the weighted average
number of Ordinary Shares outstanding during the year.
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 year plus the weighted average number
of Ordinary Shares that would be issued on the conversion of all the dilutive
potential Ordinary Shares into Ordinary Shares.
Profit after tax £'000 Weighted average number of shares 2016Per share amountPence Profit after tax£'000 Weighted average number of shares 2015Per share amountPence
Basic EPS 50,493 102,575,484 49.2 30,414 102,406,770 29.7
Effect of dilutive share options 519,565 791,256
Diluted EPS 50,493 103,095,049 49.0 30,414 103,198,026 29.5
There have been no other transactions involving Ordinary Shares or potential
Ordinary Shares between the reporting date and the date of completion of these
Financial Statements.
The Directors consider that the adjusted earnings shown below give a better
and more consistent indication of the Group's underlying performance:
2016£'000 2015£'000
Group Underlying Operating Profit (excluding non-controlling interest) (Note 4): 34,625 42,819
Net finance costs (excluding exceptional costs and contingent consideration) (1,410) (2,360)
Normalised taxation (6,643) (8,193)
Adjusted profit after tax1 before exceptional costs, share-based payments and amortisation 26,572 32,266
Adjusted basic and diluted EPS
Adjusted profit after tax1£'000 Weighted average number of shares 2016Per share amount Adjusted profit after tax1£'000 Weighted average number of shares 2015Per share amount
Pence Pence
Adjusted Basic EPS 26,572 102,575,484 25.9 32,266 102,406,770 31.5
Effect of dilutive share options 519,565 791,256
Adjusted Diluted EPS 26,572 103,095,049 25.8 32,266 103,198,026 31.3
Note 1 -This represents adjusted profit after tax attributable to equity
holders of the parent. The normalised tax rate in 2016 is 20.00% (2015:
20.25%).
7. Dividends paid and proposed
2016 2015
£'000 £'000
Declared and paid during the year:
Equity dividends on Ordinary Shares:
2014 Final: 8.3pence per share2015 Interim: 4.0pence per share 8,4584,096
2015 Final: 8.6 pence per share 8,812
2016 Interim: 4.0 pence per share 4,104
12,916 12,554
Dividends on Ordinary Shares proposed (not recognised as a liability as at 31st December):
Equity dividends on Ordinary Shares:
Dividend: 6.3 pence per share (2015: 8.6 pence per share) 6,466 8,808
8. Taxation
(a) Tax on profit on ordinary activities
The major components of income tax charge in the Group income statements are:
2016 2015
£'000 £'000
UK corporation tax - current year 12,703 7,787
- adjustment in respect of prior years 1,009 391
13,712 8,178
Deferred tax:
Origination and reversal of temporary differences (500) (470)
Adjustment in respect of prior year (179) 430
Total deferred tax (credit) (679) (40)
Total tax charge in the income statement 13,033 8,138
The 2015 Summer Budget announced that the headline rate of Corporation Tax in
the UK would be further reduced from the current rate of 20% to 19% effective
from 1st April 2017, and further reduced to 18%, effective from 1st April
2020. The Budget of March 2016 announced that from 1st April 2020, the
proposed corporation tax will be lowered further still to 17%. Following the
substantive enactment of Finance Bill 2016 in September 2016, the corporation
tax rate of 17% has been confirmed. Accordingly this is the rate at which
deferred tax has been provided (2015: 18%). Corporation tax is recognised at
the headline UK effective rate of 20% (2015: 20.25%).
The effective rate of tax for the year was 20.5% (2015: 21.1%). The effective
tax rate for 2016 was decreased as a result of reducing the rate at which
deferred tax is provided resulting from the reduction in the headline rate of
corporation tax. Deferred tax credited directly to other comprehensive income
is £3.8m (2015: charge of £0.5m); this is comprised of a credit of £5.9m and a
charge of £2.1m and relates to the disposal and revaluation of financial
assets. Income tax credited directly to the share based payment reserve is
£0.1m (2015: £nil).
(b) Factors affecting tax charge for the year
The tax assessed in the profit and loss account is higher (2015: higher) than
the standard UK corporation tax rate, because of the following factors:
2016 2015
£'000 £'000
Profit on ordinary activities before tax 63,525 38,600
Tax calculated at UK standard rate of corporation tax rate of20.0% (2015 - 20.25%) 12,705 7,816
Non-taxable income from joint ventures and dividends (95) (403)
Other income not taxable (510) -
Benefit of deferred tax asset and brought forward losses not previously recognised - (32)
Disallowable expenses 577 381
Impact of movement in contingent consideration credited to the Income Statement (757) (295)
Capital gains in excess of accounting profit 183 -
Share-based payment relief 251 57
Impact of rate change on deferred tax (151) (207)
Prior period adjustments - current tax 1,009 391
Prior period adjustment - deferred tax (179) 430
Total taxation charge 13,033 8,138
9. Analysis of Net Bank Debt (excluding loan notes)
2016 2015
£'000 £'000
Interest bearing loans and borrowings
- Current 10,851 15,777
- Non-current 26,357 52,511
37,208 68,288
Less: Unsecured loan notes (2,000) (10,033)
Less: cash and short-term deposits - (5,603)
Less: deferred and contingent consideration (14,952) (12,755)
Net Bank Debt at the end of the year 20,256 39,897
During the year, the Group has repaid £29.0m (2015: drawn down £11.5m) of the
revolving credit facility. The utilisation of this revolving credit facility
may vary each month provided that it does not exceed the maximum £100.0m
facility (2015: £100.0m).
10. Acquisitions during the year
The Group acquired the following businesses during the year:
a. Lettings books and other
During the period the Group acquired nine lettings books and a two branch
estate agency business from a franchisee for a total combined consideration of
£4,241,000. The fair values 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
£'000
Intangible Assets 4,190
Cash and cash equivalents 51
Deferred tax liabilities (1,593)
Total identifiable net liabilities acquired 2,648
Purchase consideration 4,241
Goodwill 1,593
Purchase consideration discharged by:
Cash 4,241
Analysis of cash flow on acquisition £'000
Transaction costs (included in cash flows from operating activities) 55
Net cash acquired with the subsidiary (included in cash flows from investing activities) (51)
Purchase consideration discharged in cash (included in cash flows from investing activities) 3,883
Net cash outflow on acquisition 3,887
b. Group First
In February 2016, the Group, through a wholly owned subsidiary, acquired 65%
interest in Group First, which provides mortgage and protection brokerage
services to the purchasers of new homes through its subsidiaries, Mortgages
First and Insurance First Brokers. The consideration for the initial
investment is £9.1m cash with 50% paid on completion, and a further 50%
payable in 2017. The remaining 35% is subject to put and call options which
are exercisable between 2018 and 2020. The contingent consideration is the
Director'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 as below:
Fair value recognised on acquisition
£'000
Intangible assets 809
Property, plant and equipment 847
Trade and other receivables 127
Cash and cash equivalents 1,542
Trade and other payables (1,501)
Current tax liabilities (216)
Deferred tax liabilities 160
Total identifiable net assets acquired 1,768
Purchase consideration 15,681
Goodwill 13,913
Purchase consideration discharged by:
Cash 4,550
Deferred consideration 4,550
Contingent consideration 6,581
15,681
c. Total Acquisitions
At 31st December 2016, the acquisitions in aggregate, including Group First,
have contributed £7,979,000 of revenue and £2,609,000 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 £1,749,000 and the consolidated profit before tax would have been
higher by £593,000. Transaction costs have been expensed.
£'000
Transaction costs 55
Net cash acquired with the subsidiaries and other businesses (1,593)
Purchase consideration discharged 8,433
Net Cash outflow on acquisition 6,895
11. Annual General Meeting (AGM)
The AGM will be held at the London offices of LSL, 1-3 Sun Street, London EC2A
2EP on 27th April 2017 starting at 4.00pm.
This information is provided by RNS
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