REG - LSL Property ServPLC - Replacement - INTERIM RESULTS <Origin Href="QuoteRef">LSL.L</Origin> - Part 2
29/10/2014 10:18
- Part 2: For the preceding part double click ID:nRSE2260Oa
1,323 - 1,323
Dividend payment - - - - - (9,985) (9,985) - (9,985)
At 31st December 2013 208 5,629 2,475 (4,292) 27,647 67,567 99,234 82 99,316
During the year ended 31st December 2013, the EBT acquired 640,485 shares in the Group for £2,625,000. In addition, during
the period 442,625 share options were exercised relating to LSL's various share option schemes resulting in the shares
being sold by the EBT. LSL received £1,084,000 on exercise of these options.
Notes to the Interim Condensed Group Financial Statements
The interim condensed group financial statements for the period ended 30th June 2014 were approved by the LSL Board on 4th
August 2014. The interim financial statements are not the statutory accounts. The financial information for the year ended
31st December 2013 is extracted from the audited statutory accounts for the year ended 31st December 2013, 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 group financial statements for the period ended 30th June 2014 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 group financial statements have been prepared on a going concern basis.
The interim condensed 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 31st December
2013.
There have been no significant related party transactions in the period to 30th June 2014.
Significant accounting policies
The accounting policies adopted in the preparation of the interim condensed group financial statements are consistent with
those followed in the preparation of the Group's annual financial statements for the year ended 31st December 2013.
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 ongoing 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 31st December 2013. These assumptions are discussed in detail on pages 79
and 80 and in notes 7, 14, 16, 21 and 22 of the Group's annual financial statements for the year ended 31st December 2013.
The assumptions discussed are as follows:
· Valuation in acquisitions
· Impairment of intangible assets
· Assessment of the useful life of an intangible asset
· Professional indemnity claims
· Contingent consideration
· Valuation of financial assets
1. Basis of preparation (continued)
Significant accounting policies (continued)
New standards and interpretations
The following new standards, new interpretations and amendments to standards and interpretations have been issued and were
effective from 1st January 2014.
International Accounting Standards (IAS/IFRSs) Effective date
IFRS 10 Consolidated Financial Statements 1stJanuary 2014
IFRS 11 Joint Arrangements 1stJanuary 2014
IFRS 12 Disclosure of Interests in Other Entities 1stJanuary 2014
IAS 27 (Revised) Separate Financial Statements 1stJanuary 2014
IAS 28 (Revised) Investments in Associates and Joint Ventures 1stJanuary 2014
IFRIC Interpretation 21 Levies 1stJanuary 2014
Amendments to IAS 32 Offsetting Financial Assets and Financial Liabilities 1stJanuary 2014
The adoption of the above standards and interpretations did not have a material impact on the Group's Financial Statements,
other than additional disclosures, in the period of initial application.
Going concern
The Group has a £100m banking facility which expires in August 2017. These facilities are subject to financial performance
covenants. The Board has prepared a working capital forecast based upon assumptions as to trading and has concluded that
the Group has adequate working capital, will meet the financial performance covenants 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 property market turnover is normally higher in the second half of the year.
3. Revenue
Six months ended Year Ended
30th June2014£'000 30th June2013£'000 31st December2013£'000
Revenue from services 139,838 118,767 258,603
Operating revenue 139,838 118,767 258,603
Rental income 453 282 1,235
Dividend income 1,160 489 1,141
Other operating income 1,613 771 2,376
Finance income - 10 7
Total revenue 141,451 119,548 260,986
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 and Linear
Mortgage Network. The financial services segment included within the Estate Agency division includes two mortgage and
insurance distribution networks providing products and services for sale via financial intermediaries. The results of this
financial services segment, does not meet the quantitative criteria for separate reporting under IFRS and has therefore
been aggregated with those of Estate Agency and Related Services.
· 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 2013 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 30th June 2014, for the six months ended 30th June 2013 and for the year ended 31st December 2013.
Six months ended 30th June 2014
Income statement information Estate agency and related services£'000 Surveying and valuation services£'000 Unallocated £'000 Total£'000
Segmental revenue 108,568 31,270 - 139,838
Segmental result:
- before exceptional costs, contingent consideration, amortisation and share-based payments 12,235 5,685 (2,822) 15,098
- after exceptional costs, contingent
consideration, amortisation and share-based payments 30,976 5,365 (3,944) 32,397
Finance income -
Finance costs (1,217)
Exceptional finance credit 230
Profit before tax 31,410
Taxation (6,503)
Profit for the period 24,907
In the period ended 30th June 2014, there is no revenue from one customer that accounts for 10% or more of the Group's
total revenue (2013 - none). The Estate Agency and Related Services segment result includes a gain of £17,989,000 relating
to sale of Zoopla shares (see note 9)
Balance sheet information
Segment assets - intangible 139,602 10,887 - 150,489
Segment assets - other 79,097 10,569 1,960 91,626
Total Segment assets 218,699 21,456 1,960 242,115
Total Segment liabilities (61,681) (34,229) (32,952) (128,862)
Net assets/(liabilities) 157,018 (12,773) (30,992) 113,253
All of the joint venture interests of the Group are recorded in the Estate Agency and Related Services segment.
Unallocated net liabilities comprise certain property, plant and equipment (£29,000), cash and bank balances (£1,025,000),
other assets (£906,000), other taxes and liabilities (£217,000), accruals (£1,120,000), financial liabilities (£19,761,000)
and deferred and current tax liabilities (£11,854,000).
4. Segment analysis of revenue and operating profit (continued)
Operating segments
Six months ended 30th June 2013
Income statement information Estate agency and related services£'000 Surveying and valuation services£'000 Unallocated £'000 Total£'000
Segmental revenue 90,297 28,470 - 118,767
Segmental result:
- before exceptional costs, contingent consideration, amortisation and share-based payments 8,374 5,425 (2,267) 11,532
- after exceptional costs, contingent
consideration, amortisation and share-based payments 7,862 4,619 (3,096) 9,385
Finance income 10
Finance costs (1,334)
Exceptional finance credit 308
Profit before tax 8,369
Taxation (1,902)
Profit for the period 6,467
Balance sheet information
Segment assets - intangible 129,668 10,780 - 140,448
Segment assets - other 56,306 8,131 1,522 65,959
Total Segment assets 185,974 18,911 1,522 206,407
Total Segment liabilities (57,309) (31,635) (40,168) (129,112)
Net assets/(liabilities) 128,665 (12,724) (38,646) 77,295
All of the joint venture interests of the Group are recorded in the Estate Agency and Related Services segment.
Unallocated net liabilities comprise certain property, plant and equipment (£30,000), cash and bank balances (£218,000),
other assets (£1,274,000), other taxes and liabilities (£219,000), accruals (£1,288,000), financial liabilities
(£31,382,000), deferred and current tax liabilities (£6,750,000), interest rate swap (£528,000).
4. Segment analysis of revenue and operating profit (continued)
Operating segments
Year ended 31st December 2013
Income statement information Estate agency and related services£'000 Surveying and valuation services£'000 Unallocated £'000 Total£'000
Segmental revenue 198,170 60,433 - 258,603
Segmental result:
- before exceptional costs, contingent consideration, amortisation and share-based payments 29,116 13,096 (5,110) 37,102
- after exceptional costs, contingent
consideration, amortisation and share-based payments 25,540 204 (6,123) 19,621
Finance income 7
Finance costs (3,154)
Exceptional finance credit 606
Profit before tax 17,080
Taxation (3,066)
Profit for the year 14,014
Estate agency andrelated activities£'000 Surveying and valuationservices£'000 Unallocated£'000 Total£'000
Balance sheet information
Segment assets - intangible 133,840 10,882 - 144,722
Segment assets - other 79,907 10,640 2,352 92,899
Total Segment assets 213,747 21,522 2,352 237,621
Total Segment liabilities (61,209) (39,444) (37,652) (138,305)
Net assets/(liabilities) 152,538 (17,922) (35,300) 99,316
All of the joint venture interests of the Group are recorded in the Estate Agency and Related Services segment.
Unallocated net liabilities comprise certain property, plant and equipment (£28,000), cash and bank balances (£469,000),
other assets (£1,084,000), other taxes and liabilities (£219,000), accruals (£1,642,000) financial liabilities
(£26,548,000), deferred and current tax liabilities (£8,243,000), interest rate swap (£230,000).
5. 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 30th June
Profit after tax£'000 Weighted average number of shares 2014Per share amountPence Profit after tax£'000 Weighted average number of shares 2013Per share amountPence
Basic EPS 24,887 102,993,275 24.2 6,471 103,016,142 6.3
Effect of dilutive share options - 1,031,362 - - 426,217 -
Diluted EPS 24,887 104,024,637 23.9 6,471 103,442,359 6.3
Year ended 31st December 2013 Profitafter tax£'000 Weighted average number of shares 2013Per shareamountPence
Basic EPS 14,001 102,955,662 13.6
Effect of dilutive share options - 410,999 -
Diluted EPS 14,001 103,366,661 13.5
Adjusted basic and diluted EPS
The Directors consider that the adjusted earnings shown below give a better and more consistent indication of the Group's
underlying performance:
Six months ended Year Ended
30th June2014£'000 30th June2013£'000 31st December2013£'000
Group operating profit before contingent consideration in acquisitions linked to employment, exceptional costs, share-based payments and amortisation (excluding non-controlling interest) 15,078 11,536 37,089
Net finance costs (excluding exceptional costs and unwinding of discount on contingent consideration) (1,217) (1,324) (3,147)
Normalised taxation (2,980) (2,374) (7,892)
Adjusted profit after tax(1) before exceptional costs, share-based payments and amortisation 10,881 7,838 26,050
5. EPS (continued)
Six months ended 30th June
Adjusted profit after tax1£'000 Weighted average number of shares 2014Per share amount Adjustedprofit after tax1£'000 Weighted average number of shares 2013Per share amount Pence
Pence
Adjusted basic EPS 10,881 102,993,275 10.6 7,838 103,016,142 7.6
Effect of dilutive share options - 1,031,362 - - 426,217 -
Adjusted diluted EPS 10,881 104,024,637 10.5 7,838 103,442,359 7.6
Year ended 31st December 2013
Adjustedprofit after tax1£'000 Weighted average number of shares 2013Per share amount Pence
Adjusted basic EPS 26,050 102,955,662 25.3
Effect of dilutive share options - 410,999 -
Adjusted diluted EPS 26,050 103,366,661 25.2
(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 21.5% (30th June 2013: 23.25%; 31st December 2013: 23.25%).
6. Exceptional items
Six Months Ended Year Ended
30th June 2014 30th June 2013 31st December 2013
Exceptional costs: £'000 £'000 £'000
Provision for professional indemnity claims/notifications - - (12,000)
Branch closure costs including redundancy costs (170) (672) (924)
Acquisition related costs (128) (35) (200)
Total operating exceptional costs (298) (707) (13,124)
Contingent consideration on acquisitions 915 (1,036) (2,793)
915 (1,036) (2,793)
Exceptional gains
Gain on disposal of freehold properties 35 43 134
Settlement of legal dispute 87 - -
Sale of Zoopla shares 17,989 - -
18,111 43 134
Finance costs
Movement in fair value of interest rate swap 230 308 606
230 308 606
Net exceptional gain/(cost) 18,958 (1,392) (15,177)
6. Exceptional items (continued)
Provision for professional indemnity (PI) claims/notifications
Since early 2012 the Group has experienced a high level of claims relating to the 2004 to 2008 period, which was a period
of relatively high risk lending characterised by higher house prices, high loan-to-value ratios and considerable levels of
buy-to-let and sub-prime lending. As a result the provision for PI Costs was increased by £17.3m in June 2012 and again by
£12.0m in November 2013.
The PI Costs provision at 30th June 2014 was made up of a 'Specific Provision' and 'Incurred But Not Reported' (IBNR). The
Specific Provision was based on the Group's review of any notifications or claims which had been made against the Group as
at 30th June 2014. The main factors considered in quantifying the Specific Provision were the likelihood that a claim
would be successful, an assessment of the likely cost for each claim, including any associated legal costs, and whether any
reduction in the claim is considered likely due to contributory negligence of the lender.
The IBNR provision was based on the Directors estimates of the number of claims which would be received in the future with
regard to work completed before 30th June 2014. The Directors have then applied an average cost per case, based on
historical averages, to estimate the IBNR provision.
In June 2012, it was assumed that the run rate of new claims would reduce significantly from July 2013 following the change
in legislation governing civil litigation taking effect in April 2013 (the Jackson Reforms). This reduction has not yet
materialised and the run rate of new cases has remained at the level established in June 2012. In addition, the cost per
claim has increased and in most recent months has been running higher than assumed in 2012. The increasing trend in cost
per claim has been driven by a relatively small number of high value claims and by increases in legal costs. An additional
exceptional charge of £12.0m (c£9.2m after tax) was made in the year ending 31st December 2013 in order to increase the PI
Costs provision. Since December 2013, the rate of new claims and cost per claim has overall been consistent with the
assumptions behind the provision. This provision represents our current best estimate of likely claims costs but the
process of resolving open claims and estimating future claims is on-going.
A number of risks and uncertainties remain, in particular the actual monthly run rate of new claims, the date at which the
high rate of claims will significantly reduce, and the average cost per case both for existing open claims and for claims
yet to be received. The cost of these factors could differ materially from the Directors' estimates, which could result in
a further provision being required.
At 30th June 2014 the total provision for PI Costs was £20.8m. The Directors have considered sensitivity analysis on the
key risks and uncertainties discussed which is set out in note 12. The Group has continued to build a provision for
estimated PI Costs relating to valuations completed since 2009, and an income statement charge has been made in these
results, which has been considered as an operating expense rather than as an exceptional cost.
Sale of Zoopla shares
On 18th June 2014, Zoopla underwent an IPO and successfully completed a listing on the London Stock Exchange. As part of
the IPO, LSL sold 8,889,317 Zoopla shares at an average price of £2.19 per share. The total gain on sale of the shares was
£17,989,000 net of associated costs. LSL estimates that it will pay tax of £3,626,000 on sale of these shares. Further
details on the transaction are disclosed in note 9.
Freehold properties
During the period, freehold properties with a book value totalling £29,000 (31st December 2013: £1,227,000 and 30th June
2013: £846,000) were sold for net proceeds of £64,000 (31st December 2013: £1,361,000 and 30th June 2013: £889,000)
resulting in a gain on disposal of £35,000 (31st December 2013: £134,000 and 30th June 2013: £43,000).
Contingent consideration on acquisitions
The expense for contingent consideration on the acquisition of Marsh & Parsons (in 2011) amounted to £731,000 (Dec 2013:
£352,000 and June 2013: £610,000). The exceptional contingent consideration credit recognised in the year relating to other
acquisitions, all by LSLi, is £1,646,000 (31st December 2013: £2,441,000 expense and 30th June 2013: £426,000 expense).
7. Dividends paid and proposed
Six Months Ended Year Ended
30th June2014£'000 30th June2013£'000 31st December2013£'000
Declared and paid during the period
Equity dividends on ordinary shares:
Interim dividend for 2013: 3.3 pence - - 3,401
Final dividend for full year 2013: 7.2 pence (full year 2012: 6.4 pence) 7,406 6,584 6,584
Dividends on ordinary shares proposed (not recognised as a liability as at 30th June):
Interim dividend for 2014: 4.0 pence per share (201: 3.3 pence) 4,074 3,401 7,406
Special dividend for 2014: 16.5 pence per share (2013: nil pence) 16,805 - -
8. Taxation
The major components of income tax charge in the interim Group income statements are:
Six Months Ended Year Ended
30th June 2014 30th June 2013 31st December 2013
£'000 £'000 £'000
UK corporation tax:
- current year 6,305 2,058 4,474
- adjustment in respect of prior years (10) (56) (574)
6,295 2,002 3,900
Deferred tax:
Origination and reversal of temporary differences 74 (93) (814)
Adjustment in respect of prior year 134 (7) (20)
208 (100) (834)
Total tax charge in the income statement 6,503 1,902 3,066
Income tax charged directly to other comprehensive income is £2,120,000 (30th June 2013: £201,000 and 31st December 2013:
£4,380,000) and relates to the revaluation of financial assets. Income tax credited directly to the share based payment
reserve is £164,000 (30th June 2013 and 31st December 2013: £ nil).
In March 2013, the UK government announced additional proposals to reduce the main rate of corporation tax to 20% from 1st
April 2015. As of 30thJune 2014 reductions to the main rate of corporation tax to 20% had been enacted. Accordingly this
is the rate at which deferred tax has been provided.
9. Financial assets
Six Months Ended Year Ended
Available-for-sale financial assets 30th June 2014 30th June 2013 31st December 2013
£'000 £'000 £'000
Unquoted shares at fair value 1,687 13,096 36,574
Quoted shares at fair value 27,176 - -
28,863 13,096 36,574
Opening balance 36,574 11,921 11,921
Acquisitions 1,155 - 847
Disposals (19,463) - -
Fair value adjustment recorded through other comprehensive income 10,597 1,175 23,806
Closing balance 28,863 13,096 36,574
9. 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). Financial assets also
include shares Zoopla which are listed on the London Stock Exchange and again are carried at fair value. These shares are
valued using a level 1 valuation technique.
Zoopla
On 18th June 2014, Zoopla underwent an IPO. Prior to the IPO, LSL owned 4.91% of Zoopla which was valued at £17.50 per
share, £35.1m As part of the IPO, LSL received 10 shares in the new company for each share it owned reducing the value to
£1.75 per new share. The IPO price was £2.20 per share so revaluing LSL's investment prior to the IPO at £44,039,000.
LSL sold 44.3% of its stake in Zoopla for £18,850,000, net of associated costs, £15,224,000 net of tax. The gain on the
disposal of the shares recognised in the income statement was £17,989,000 gross, £14,363,000 net of tax. As part of the
IPO, LSL was invited to acquire an additional 619,318 shares for £1,090,000, which was at a 20% discount to the IPO price
due to its existing customer relationship with Zoopla. A gain of £273,000 was recorded through other comprehensive income
to revalue these shares back to the IPO price.
Following the above transactions, the Group continues to own 2.82% of Zoopla. Under the terms of the IPO, the Group is
unable to sell any additional shares in Zoopla until 18th December 2014 (6 months from the IPO date).
Zoopla's share price at 30th June 2014 was £2.305 per share. The Directors consider this to be the best estimate of the
fair value of LSL's investment in Zoopla to be the current share price which values the Group's stake in Zoopla at
£27,176,000. An additional valuation uplift of £1,237,000 has been recorded through other comprehensive income to reflect
the change in share price since the IPO.
The total revaluation amount of £10,597,000 comprises of:
£'000
Revaluation of Zoopla shares up to IPO price of £2.20 per share 8,933
Revaluation of Zoopla shares bought at a discount on IPO up to IPO price of £2.20 273
Revaluation of Zoopla shares from £2.20 to £2.305 per share post IPO 1,237
Revaluation movements of other investments 154
Closing balance 10,597
On 3rd July 2014, the Group sold a further 926,813 shares as part of the IPO over allotment and received proceeds of
£1,978,000, £1,589,000 net of tax. To date the Group has received proceeds net of associated tax costs of £16,814,000.
The Directors have decided that a special distribution of 16.5 pence per share be declared to return this exceptional gain
to Shareholders.
Other investments
The Group acquired additional shares in Vibrant Energy Matters Limited (VEM) during the period, increasing its stake to
16.5%. The price paid for the VEM shares has been deemed by the Directors to be a good approximation of fair value as at
30th June 2014 and the Group's entire stake has been revalued upwards to £824,000 with the movement recorded through other
comprehensive income.
Due to the issue of additional shares to management, the Group's stake in GPEA Limited (GPEA) was reduced to 16.8% during
the period. This resulted in a small decrease in the fair value of the investment which has been recorded through other
comprehensive income. The carrying value of the investment at 30th June 2014 has been assessed as £862,000.
10. Assets held for sale
During the period the Group classified £nil (31st December 2013: £276,000 and 30th June 2013: £654,000) as assets held for
sale. These assets were part of the Estate Agency and Related Services segment.
11. Financial liabilities
Six Months Ended Year Ended
30th June 2014 30th June 2013 31st December 2013
£'000 £'000 £'000
Current
Overdraft 261 882 2,548
Contingent consideration 3,957 559 2,335
Derivatives carried at fair value - 528 230
4,218 1,969 5,113
Non-current
Bank loans - revolving credit facility(RCF) 19,500 30,500 24,000
12% unsecured loan notes 9,507 9,172 9,339
Deferred consideration 446 401 446
Contingent consideration 8,429 9,469 9,964
37,882 49,542 43,749
Bank loans - RCF and overdraft
A £100m loan facility which expires in August 2017 was arranged in June 2013. Loan refinance costs of £1,128,000 were
incurred in June 2013 which have been capitalised and are being amortised over the life of the loan facility.
The bank loan totalling £19.5m (31st December 2012: £24.0m and 30th June 2013: £30.5m) and overdraft totalling £0.3m (31st
December 2013: £2.5m and 30th June 2013: £0.9m) are secured via cross guarantees issued from all of the Group's
subsidiaries excluding the following subsidiaries, Lending Solutions, Homefast Property Services, Linear Mortgage Network,
Linear Financial Services, Templeton LPA, property-careers.com, Chancellors Associates and LSLi and the LSLi subsidiaries.
The utilisation of the revolving credit facility may vary each month as long as this does not exceed the maximum
£100m facility (31st December and 30th June 2013: £100m). The Group's overdraft is also secured on the same facility but
cannot exceed £5m and the combined overdraft and revolving credit facility cannot exceed £100m (Dec and June 2013: £100m).
The banking facility is repayable when funds permit on or by August 2017.
Interest and fees payable on the RCF facility amounted to £1.0m (31st December 2013: £2.1m and 30th 30th June 2013: £0.8m).
The interest rate applicable to the facility is LIBOR plus a margin rate of 1.50% (31st December and 30th June 2013: LIBOR
plus 1.50%). The margin rate is linked to the leverage ratio of the Group and the margin rate is reviewed at six monthly
intervals. An additional fee is charged if the facility is more than 33% drawn with a further fee due if the facility is
more than 67% drawn.
12% unsecured loan notes
12% unsecured loan notes with a face value of £6,146,000 and a fair value of £8,660,000 were issued as part satisfaction of
the consideration for acquisition of Marsh & Parsons in November 2011. These loan notes carry a coupon of 12% which is
compounded every year on 1st January and rolled up to redemption. The loan notes are redeemable at par value plus rolled
up interest at any time after 31st March 2016 at the option of the loan note holder. However, if that option is not
exercised by the loan note holder they are redeemable on 31st March 2020. The amounts shown in the table above include
accrued interest of £847,000 (31st December 2013: £679,000 and 30th June 2013: £512,000).
11. Financial liabilities (continued)
Contingent consideration
Six Months Ended Year Ended
30th June 2014 30th June 2013 31st December 2013
£'000 £'000 £'000
Marsh & Parsons Growth Shares 2,951 2,478 2,220
LSLi contingent consideration 8,599 6,575 9,206
Other 836 975 873
12,386 10,028 12,299
Opening balance 12,299 8,088 8,088
Cash paid (1,248) (12) (520)
Acquisition 2,250 987 1,997
Fair value adjustment recorded against goodwill - (71) (58)
Amounts recorded though income statement (915) 1,036 2,792
Closing balance 12,386 10,028 12,299
£2,951,000 (31st December 2013: £2,220,000 and 30th June 2013: £2,478,000) of contingent consideration relates to the
Growth Shares acquired by to the management of Marsh & Parsons subsequent to acquisition as an incentive to grow the Marsh
& Parsons business. Holders of Growth Shares will have the option to require LSL to buy their Growth Shares at any time
between 31st March 2016 and 1st April 2020, at their discretion, at a price determined by a multiple of EBITDA in the
previous financial year. The payment of the consideration is contingent on the holder of the Growth Shares being
continuously employed by the relevant company and consequently the expected value of the Growth Shares is charged to the
income statement over the earn-out period.
£8,599,000 (31st December 2013: £9,206,000 and 30th June 2013: £6,575,000) of contingent consideration relates to payments
to third parties in relation to the acquisition of LSLi and certain of its subsidiaries between 2007 and 2014. This is
payable between three and five years after the acquisition dates depending on the profitability of those subsidiaries in
the relevant years. In 2014, the contingent consideration has been recalculated based on the Directors' latest expectation
using a discount rate of 6.5% (31st December 2013 and 30th June 2013: 6.5%).
The table below shows the allocation of the contingent consideration balance and income charge between the various
categories:
Six Months Ended Year Ended
Contingent consideration balances relating to amounts accounted for as: 30th June 2014 30th June 2013 31st December 2013
£'000 £'000 £'000
Remuneration 4,806 4,754 5,624
Put options over non-controlling interests 3,062 3,524 4,371
Arrangement under IFRS 3 4,518 1,750 2,304
Closing balance 12,386 10,028 12,299
Contingent consideration profit and loss impact in the period relating to amounts accounted for as:
Remuneration 343 636 1,506
Put options over non-controlling interests (1,310) 375 1,223
Arrangement under IFRS 3 52 25 63
(Credit)/charge (915) 1,036 2,792
Deferred consideration
During the prior period the Group paid £438,000 with regard to deferred consideration. Deferred consideration totalling
£446,000 is payable at any time between 31st March 2016 and 31st March 2020 at the option of the management shareholders.
Derivatives carried at fair value -interest rate swap
See note 14 below.
12. Provisions for liabilities
Six months ended 30th June:
2014 2013
Professional indemnity claim provision Onerousleases Total Professional indemnity claim provision Onerousleases Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 1st January 25,864 475 26,339 24,163 1,037 25,200
Amount utilised (6,469) (65) (6,534) (4,990) (236) (5,226)
Unwinding of discount 75 - 75 342 - 342
Provided in the period (including exceptional costs) 1,292 (97) 1,195 1,309 - 1,309
Balance at 30th June 20,762 313 21,075 20,824 801 21,625
Current 8,032 313 8,345 2,528 482 3,010
Non-current 12,730 - 12,730 18,296 319 18,615
20,762 313 21,075 20,824 801 21,625
Year ended 31st December 2013
Professional indemnity claim provision Onerousleases Total
£'000 £'000 £'000
Balance at 1st January 24,163 1,037 25,200
Amount utilised (14,445) (506) (14,951)
Amount released - (90) (90)
Unwinding of discount 683 - 683
Provided in the period (including exceptional costs) 15,463 34 15,497
Balance at 31st December 25,864 475 26,339
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