REG - LSL Property Svcs. - FULL YEAR RESULTS
13/04/2023 07:00
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RNS Number : 0392W LSL Property Services PLC 13 April 2023
13 April 2023
LSL Property Services plc (LSL or Group)
FULL YEAR RESULTS FOR THE YEAR ENDED 31 DECEMBER 2022
RESILIENT TRADING AND STRONG BALANCE SHEET TO SUPPORT FUTURE GROWTH
LSL has today released its Preliminary Results for the year ended 31 December
2022.
David Stewart, Group CEO, commented:
"I am pleased to report that LSL is in good shape. In 2022, the Group traded
well in challenging market conditions, whilst making substantial progress in
the execution of our strategy to grow and to become a B2B financial services
provider. As a result, we remain well-placed to deliver on our strategy and
capitalise on the significant opportunities we see available."
Highlights
· All Divisions traded well and gained market share
· FY22 performance in line with the Board's November guidance
· Group Revenue resilient at £321.7m (2021: £326.8m)
· Group Underlying Operating Profit(1) of £36.9m (2021: £49.3m),
impacted by smaller purchase market and adverse effect of mini-budget on our
Surveying & Valuation business in Q4 2022
· Group operating loss of £56.7m (2021: £72.6m profit) after the
Board reduced the carrying value of goodwill by £87.2m. This is a non-cash
item reflecting the impact of more conservative mid-term housing market
assumptions, higher discount rates and the disposal of non-core businesses. In
2021, the statutory operating profit was boosted by a £29.4m gain on the
disposal of interests in joint ventures, which was also part of our strategy
to exit from non-core businesses
· The Group is highly cash-generative with £35.2m generated from
operations in FY22
· Share of UK purchase and re-mortgage market increased to a record
10.4%(2) (2021: 9.6%)
· Surveying & Valuation performed strongly, delivering resilient
margins and profits
· Estate Agency retained local market share gains made in 2021, and
slightly increased national market share(3)
· Significant strategic progress to simplify the Group and focus on
business-to-business services (B2B), with the disposal of direct-to-consumer
(D2C) financial services businesses to our Pivotal Growth joint venture and
the Marsh & Parsons disposal
· Very strong balance sheet with Net Cash(4) of £40.1m at 31 December
2022 (2021: £48.5m)
· Full year dividend maintained at 11.4p
· Improved trading momentum in challenging markets, with higher levels
of activity in all divisions, will support stronger performance expected in
the second half of 2023
Outlook
· We expect market conditions to remain challenging during H1 but to
improve in H2 and thereafter, supported by a strong re-mortgage market, and
further improvements in consumer confidence and transaction levels assisted by
recent reductions in mortgage rates
· Trading in our Financial Services Network and Estate Agency
businesses is in line with expectations, with signs of increasing momentum
· In Surveying & Valuation, valuations in more specialist areas
such as equity release and buy-to-let have recovered less quickly after the
rise in interest rates and market disruption which followed the 2022
mini-budget, with these segments still trending significantly below 2022
· We will manage costs pro-actively as market conditions evolve
· Planned investment for the longer term will continue, underpinning
confidence for the future
· LSL remains very well-placed to benefit as market conditions improve
Notes:
1 Group Underlying Operating Profit is before exceptional
items, contingent consideration, amortisation of intangible assets and
share-based payments (see note 5 of the Financial Statements)
2 Mortgage lending excluding product transfers - New mortgage
lending by purpose of loan, UK (BOE) - Table MM23 (published 31 January 2023)
3 Number of residential property transaction completions with
value £40,000 or above, HMRC (published 24 January 2023)
4 Refer to note 11 to the Financial Statements for the
calculation
FINANCIAL RESULTS
Full Year 2022 2021 Var
Group Revenue (£m) 321.7 326.8 (2)%
Group Underlying Operating Profit(1) (£m) 36.9 49.3 (25)%
Group Underlying Operating margin (%) 11% 15% (370)bps
Exceptional Gains (£m) 0.7 31.1 (98)%
Exceptional Costs (£m) (88.9) (2.0) nm
Group operating (loss)/profit (£m) (56.7) 72.6 (178)%
(Loss)/Profit before tax (£m) (59.1) 69.9 (185)%
Basic Earnings per Share(2) (pence) (62.3) 59.6 (205)%
Adjusted Basic Earnings per Share(2) (pence) 28.4 37.7 (25)%
Net Cash(3) at 31 December (£m) 40.1 48.5 (17)%
Final Proposed dividend (pence) 7.4 7.4 -
Full Year Dividend (pence) 11.4 11.4 -
Notes:
1 Group Underlying Operating Profit is before exceptional
costs, contingent consideration, amortisation of intangible assets and
share-based payments (as set out in note 5 of the Financial Statements)
2 Refer to note 6 of the Financial Statements for the
calculation
3 Refer to note 11 of the Financial Statements for the
calculation
nm not meaningful
GROUP CHIEF EXECUTIVE'S REVIEW
Review of 2022 Performance
I am pleased to confirm that LSL remains in good shape and is well-positioned
to grow once market conditions improve.
Although the mortgage and housing markets have been adversely impacted by
economic and political uncertainty, the Group has continued to trade well and
backed by a strong balance sheet, we expect to remain resilient throughout
2023 in what are anticipated to be difficult, but steadily improving, market
conditions.
Furthermore, we have made very substantial progress in executing our Financial
Services-led growth strategy, significantly reducing our exposure to housing
market cycles. With a strong balance sheet, including Net Cash(1) balances
of £40.1m at the year end, and a business model that remains highly
cash-generative, LSL is well placed to benefit as soon as market conditions
normalise.
Group Revenue was broadly in line with 2021 at £321.7m. This included record
revenue of £81.7m in Financial Services, and a very strong H1 2022
performance in Surveying & Valuation, which was subsequently impacted by
the significant and unexpected market disruption resulting from economic and
political uncertainty in Q4 2022.
Group Underlying Operating Profit(2) was down 25% compared to 2021 at £36.9m,
which is mostly attributable to reduced volumes in Surveying & Valuation
during Q4 2022 and the impact of a slowdown in the residential sales market in
Estate Agency. On a statutory basis, the Group operating loss was £(56.7)m,
after the Board reduced the carrying value of goodwill by £87.2m. This is a
non-cash item reflecting the impact of more conservative mid-term housing
assumptions, higher discount rates and the disposal of non-core businesses,
including Marsh & Parsons. In 2021, the Group reported a statutory
operating profit of £72.6m, which was boosted by a £29.4m gain on the
disposal of interests in joint ventures, which was also part of our strategy
to exit from non-core businesses.
In Financial Services, the Underlying Operating Profit(2) of our Network
business was £15.5m, ahead of the record result in 2021 (£14.4m). Although
member firms were naturally cautious about adviser numbers in H2, there was
also modest further year-on-year growth in the number of advisers, bringing
the year-end total to 2,867. In addition, more than 700 other firms submitted
business through LSL's mortgage club, further boosting our market share.
The Financial Services Division as a whole secured an 11% increase in overall
lending, well ahead of the whole market which had only modest growth of 1.9%.
This resulted in a substantial market share improvement to 10.4%(3) from 9.6%
in 2021.
Underlying Operating Profit(2) for the Financial Services Division as a whole
reduced by £1.5m, as the Group's D2C advice businesses were impacted by lower
levels of activity in the new build market in particular, and the house
purchase market in general. Our direct-to-consumer financial services
businesses were transferred during the early part of 2023 to our joint venture
with Pollen Street Capital, Pivotal Growth, in line with LSL's strategy to
focus its activities on B2B services. We believe Pivotal Growth, in which the
Group has a 48% equity share, is better placed to take these businesses
forward for the benefit of our shareholders.
Surveying & Valuation traded very strongly through to the end of Q3 2022,
capitalising on recent contract wins and increased allocations as well as
further growth of 73% in D2C and data revenues. Its excellent performance was
interrupted by the market-wide hiatus in mortgage activity in October and
November, as lenders remained cautious whilst the political and economic
impact of the events that followed September's mini-budget became clearer.
This is estimated to have directly reduced H2 Underlying Operating Profit in
the Surveying & Valuation Division by at least £5m.
Nevertheless, the Surveying & Valuation Division still reported Underlying
Operating Profit(2) of £20.4m, down £3.2m on 2021, but still £4.1m or 25%
higher than the pre-COVID-19 performance of £16.3m reported in 2019. Despite
the market pressure, the Underlying Operating Profit margin(2) remained
resilient at 22%. Income-per-job increased slightly to £175, £2 up on 2021.
Estate Agency revenues were down 5% on 2021, when performance was boosted
substantially by the extension of the stamp duty holiday. H2 2022 improved
materially year-on-year on the back of the pipeline built up in H1. Lettings
revenue was resilient and increased by 4%, on a like for like basis, over the
prior year.
Estate Agency retained the residential sales market share gains made in its
core catchment areas in 2021, and as a result slightly increased its national
market share(4) to 1.30% (2021: 1.28%). Conversion of its exchange pipeline
remained slow throughout the year, impacting H1 performance in particular. H2
2022 saw fewer new properties coming to market and fewer sales agreed but the
strong pipeline built in H1 secured an operating profit double the size of H2
2021. Unsurprisingly, given increased economic and housing market uncertainty,
there was a trend towards more fall-throughs, largely affecting more recently
agreed sales, both of which will impact performance in Q1 2023.
Lettings revenue was resilient, increasing by 4%, on a like for like basis,
over 2021. The impact of slow exchange speeds, reduced house purchase activity
and a solid lettings performance combined to produce Underlying Operating
Profit(2) for the Estate Agency Division of £10.5m, £7.9m below the
performance in 2021 which had benefited significantly from the extension of
the stamp duty holiday to 30 June 2021. The performance during H2 was 4% ahead
of H2 2021.
Strategic priorities and developments
The Group has made substantial progress with the strategy we set out in 2020
to reduce our exposure to housing market cycles, simplify the business and
focus investment on high-growth areas, notably our Financial Services Network
business.
In January 2023, we announced the disposal of our London estate agency
business, Marsh & Parsons, to Dexters for a consideration of £29m. Marsh
& Parsons, which contributed £1.5m to 2022 Underlying Operating Profit,
has a relatively low volume, high fee business model when compared to the rest
of the Estate Agency Division, and was particularly exposed to London housing
market cycles giving rise to a relatively volatile earnings profile. Other
steps to simplify the Group include the disposal of our small property
management business PRSim and the consolidation of our asset management
operations within our Surveying & Valuation Division.
Throughout 2022 we maintained our level of investment in Mortgage Gym and
DLPS, the technology businesses acquired in April 2021 to support our
Financial Services growth plans. Work continued to adapt and develop the
technology with a view to deployment across our Financial Services Network,
with the first stage of this work to be completed during 2023. This technology
investment helps our Network members become more efficient as well as
generating additional income for them and the Group.
In 2023, we will complete our work to re-focus these businesses, which will be
absorbed into the Financial Services Network reflecting what is now their
predominant business focus.
Our Financial Services led growth plans are centred on the B2B service offered
to our Network members where we believe there are significant opportunities to
grow further by expanding the number of advisers and the product range they
distribute. The Network business offers a highly scalable, low-cost platform
through which strong margins can be sustained in different market conditions
and is consistent with our vision of LSL as a B2B service provider.
We previously concluded that it would be better to pursue the considerable
opportunities in the D2C mortgage broking market under a different ownership
structure to that of the Group, so that significant capital could be deployed
and entrepreneurs incentivised appropriately through different economic
cycles. This led to the announcement in 2021 of our Pivotal Growth
"buy-and-build" joint venture with Pollen Street Capital.
Pivotal Growth has now acquired eight businesses, comprising around 330
advisers, including the Group First and RSC, Embrace Financial Services and
First2Protect direct-to-consumer businesses transferred from LSL. The
consideration for RSC, Group First and Embrace Financial Services will be
based on their financial performance in 2024. The consideration for F2P is
payable at completion.
I believe this is an exciting move for both Pivotal Growth and LSL, providing
increased scale for Pivotal Growth and the right environment for these
businesses to grow further. It has also helped simplify the LSL Group
considerably, substantially reducing our cost base and exposure to housing
market cycles whilst also reducing management stretch to enable us to focus on
the substantial opportunity to grow the remaining Financial Services Network,
Surveying & Valuation and Estate Agency businesses.
In Surveying & Valuation we have continued to diversify our revenue
streams. In May 2022, we launched a consumer-facing website to support the
growth of our enhanced direct-to-consumer proposition, where we achieved a 60%
increase in revenue year-on-year. Providing data services to lenders has
strengthened our relationships and helped secure contract wins and increased
allocations of valuation instructions, whilst we have established a strong
position in the equity release valuation segment, a sector we expect to grow
significantly over the medium term. Equity release instructions accounted for
approximately 16% of revenue in 2022 (2021: 12%).
Strong balance sheet
Our cash generation in the year resulted in a Net Cash balance of £40.1m.
This was boosted further in January 2023 following the disposal of Marsh &
Parsons for a consideration of £29m. Our strong balance sheet and continuing
strong cash generation enables us to invest with confidence throughout the
economic cycle, including restructuring the Group to deliver our ambitious
growth strategy. In 2023, we will continue to invest in capability and
technology, support Pivotal Growth in its acquisition of D2C brokerages, and
consider potential acquisition targets to build our Financial Services Network
business. The Board will continue to actively review its capital allocation
policy to ensure we maintain an efficient balance sheet.
To provide further flexibility to our balance sheet, during February 2023 we
agreed an amended and restated banking facility with a maturity date of May
2026, arranged on materially the same terms, replacing the previous £90m with
a £60m revolving credit facility with major mainstream UK lenders, available
on request at any time.
Dividend
The Board has considered the proposed dividend in light of the Group's policy
to pay out 30% of Group Underlying Operating Profit after finance and
normalised tax charges, such that dividend cover is held at approximately
three times earnings over the business cycle. This policy was designed to
provide clarity to shareholders and ensure the Group retained a strong balance
sheet for all market conditions.
Although economic conditions have affected current earnings, we have made
significant progress in executing our strategic shift to develop a business
that is less exposed to the housing market cycle.
As part of that shift and the associated rationalisation of certain businesses
such as the recent sale of Marsh & Parsons, we have built significant Net
Cash balances, which at 31 December 2022 and prior to the disposal of Marsh
& Parsons, stood at £40.1m. In light of this exceptionally strong cash
position and the Board's confidence in the future prospects of the Group, the
Board recommends a final dividend of 7.4 pence. If approved, this would give a
total dividend of 11.4 pence per share, unchanged from last year.
The ex-dividend date is 27 April 2023 with a record date of 28 April 2023 and
a payment date of 2 June 2023. Shareholders can elect to reinvest their cash
dividend and purchase additional shares in LSL through a dividend reinvestment
plan. The election date is 11 May 2023.
The Board continues to keep its capital allocation policy and balance sheet
structure under close review to ensure it is fit for purpose for our evolving
business model and will seek to update shareholders on this as appropriate.
Living Responsibly
The Board believes that success is measured by more than just profits and our
Living Responsibly programme is at the centre of our sustainability strategy.
Put simply, our objective is to have a positive effect on the communities in
which we operate, whether that is measured by the impact we have on the
environment, the opportunities we provide to colleagues, the way we serve our
customers or the work we undertake in our communities.
In our ESG and our Living Responsibly reports, we set out some of the steps we
have taken to limit our environmental impact, help ensure LSL is a supportive
and inclusive workplace and provide support to good causes.
It is vital that our Living Responsibly programme has real substance and is
reflected in everything we do. We are helped to achieve this by a number of
independent colleague forums and working groups which provide additional
insight in key areas. Further information on these, including the
establishment in 2023 of LSL Voices is also set out in our Living Responsibly
Report. I am grateful to the very many colleagues who have willingly given
their time and energy to support this work.
I am equally grateful for the hard work and commitment of all our staff during
what has been a hugely challenging period and which has helped ensure LSL is
well-positioned to thrive in all market conditions, and would like to take
this opportunity to thank them for their effort and support.
Looking Ahead
We have made significant progress in re-shaping the Group in line with our
strategy and each of our core businesses are performing well. After a strong
start to 2022 which saw us build substantial pipelines in Estate Agency and
Financial Services, market conditions deteriorated as a result of political
instability and sharply rising interest rates and although we expect to see a
steady improvement in activity over the course of the year, it is clear that
conditions will remain challenging throughout 2023.
However, LSL remains well-positioned for future growth. Independent mortgage
brokers typically perform well in challenging markets, being agile and close
to their client's needs, and this will help ensure our Financial Services
Network businesses will remain resilient. In addition, although some areas of
the valuation market remain depressed following the market uncertainty which
followed the 2022 mini-budget, our Surveying & Valuation business remains
very well-placed for medium-term growth, helped by recent contract wins and
good progress made in developing new income streams.
We have made substantial progress in restructuring and re-focusing the Group's
activities and will continue this work in 2023. Our very strong balance sheet
allows us to continue to invest for the future with confidence, and I am
excited about the Group's potential and look forward to reporting growth in
2024 and beyond.
David Stewart
Group Chief Executive Officer
12 April 2023
For further information, please contact:
David Stewart, Group Chief Executive Officer
Adam Castleton, Group Chief Financial Officer
LSL Property Services plc investorrelations@lslps.co.uk
Helen Tarbet
Simon Compton
George Beale
Buchanan 0207 466 5000 / LSL@buchanan.uk.com
Notes on LSL
LSL is one of the largest providers of services to mortgage intermediaries and
mortgage and protection advice to estate agency customers,
completing around £46bn of mortgages in 2022. It represents over 10% of
the total purchase and re-mortgage market with almost 2,900 financial
advisers. PRIMIS was named Best Network, 300+ appointed representatives at the
2022 Mortgage Strategy Awards.
LSL is one of the UK's largest providers of surveying and valuation
services, supplying seven out of the ten largest lenders in the UK,
employing around 500 operational surveyors, and performing over 500,000
valuations and surveys per annum for key lender clients. e.surv was named
Best Surveying Firm at the 2022 Mortgage Finance Gazette Awards and Best
Surveyor at the 2022 Equity Release Awards with Mortgage Solutions.
LSL also operates a network of 182 owned and 127 franchised estate agency
branches.
For further information please visit LSL's website: lslps.co.uk
(http://www.lslps.co.uk/)
Notes:
1 Refer to note 11 to the Financial Statements for the
calculation
2 Refer to note 5 of the Financial Statements for
reconciliation of Group and Divisional Underlying Operating Profit to
statutory operating (loss)/profit
3 Mortgage lending excluding product transfers - New mortgage
lending by purpose of loan, UK (BOE) - Table MM23
4 Number of residential property transaction completions with
value £40,000 or above, HMRC
P&L (£m) 2022 2021 Var
Divisional Group Revenue
Financial Services Network (net revenue) 41.6 38.3 9%
Financial Services Other 40.0 40.2 (0)%
Financial Services 81.7 78.5 4%
Surveying & Valuation 93.2 93.7 (1)%
Estate Agency 146.8 154.6 (5)%
Group Revenue 321.7 326.8 (2)%
Divisional Underlying Operating Profit(1)
Financial Services Network 15.5 14.4 8%
Financial Services Other (2.3) 0.4 nm
Financial Services 13.3 14.8 (10)%
Surveying & Valuation 20.4 23.6 (14)%
Estate Agency 10.5 18.4 (43)%
Unallocated Central Costs (7.3) (7.5) 3%
Group Underlying Operating Profit 36.9 49.3 (25)%
P&L (£m) 2022 2021 Var
Divisional operating (loss)/profit(1)
Financial Services (6.8) 10.0 (169)%
Surveying & Valuation 20.8 24.7 (16)%
Estate Agency (61.8) 46.5 (233)%
Unallocated Central Costs (8.8) (8.6) (3)%
Group operating (loss)/profit (56.7) 72.6 (178)%
Notes:
1 Refer to note 5 of the Financial Statements for
reconciliation of Group and Divisional Underlying Operating Profit to
statutory operating (loss)/profit
nm Not meaningful
FINANCIAL REVIEW
Overview
Group summary (P&L)
Group Revenue of £321.7m was 2% below the record revenue last year (2021:
£326.8m), with Financial Services Division revenue up 4%, Surveying &
Valuation revenue down 1% and Estate Agency revenue down 5%.
In the Financial Services Division, Financial Services Network revenue
increased by 9% which was a positive performance in a broadly flat mortgage
market. Financial Services Other revenue was in line with prior year as our
D2C businesses were impacted by slower residential activity, offset by
re-mortgage activity. Surveying & Valuation revenue was impacted in the
aftermath of the UK mini-budget, illustrated by October YTD revenue running at
9% ahead of prior year whilst 1% back for the full year. Estate Agency revenue
was back 5% in a market with purchase activity 15% lower.
Group Underlying Operating Profit(1) was £36.9m compared to the record
results posted last year (2021: £49.3m) and in line with 2019, the most
recent comparable market. The Group Underlying Operating Profit of £22.7m in
H2 was 3% above last year (2021: £22.0m), despite the adverse market impact
on the Q4 Surveying & Valuation Revenue, as the Group returned to a more
normalised profit profile with 62% of operating profit delivered in H2, in
line with the pre-COVID-19 levels. During H2 the residential exchange pipeline
converted as expected however front-end activity was materially lower,
impacted by the UK mini-budget, resulting in the closing pipeline being below
expectations.
Our strategic focus is on the Financial Services Network where Underlying
Operating Profit(1) increased by 8%. Financial Services Other posted a loss,
impacted by lower activity in the purchase and new build markets, and included
continued technology investment. Estate Agency Underlying Operating Profit was
down against prior year due mainly to the impact of the smaller purchase
transaction market. Unallocated central costs of £7.3m reduced by 3%.
On a statutory basis, Group operating loss was £(56.7)m (2021: profit
£72.6m). The 2022 results include a £87.2m non-cash impairment charge for
goodwill and other intangibles following the annual impairment review, as
detailed later in this Financial Review, and 2021 results included the gain on
sale of our holdings in two joint venture businesses sold during the year.
Operating expenditure
Total adjusted operating expenses(2) increased by 2% to £285.7m (2021:
£280.2m) with costs managed carefully, mitigating the impact of the
inflationary cost environment with H2 2022 costs 5% below H1. Our emoluments
increased by 2% in 2022, with annual pay and NI increases, and a cost of
living award for lower paid staff, mitigated by headcount reductions in H2
2022 in response to market conditions. Property and related costs increased by
12%, reflecting energy price inflation which drove utilities costs up by
£1.6m and prior year business rates relief. Other material costs, including
IT, were largely protected by previously negotiated fixed-price long-term
contracts.
Other operating income
Total other operating income was £1.3m (2021: £0.9m). Of this, rental income
was £0.7m (2021: £0.9m), reducing year-on-year following the disposal during
2021 of several freehold properties previously leased out.
The fair value of units held in The Openwork Partnership LLP was reassessed to
£0.7m and is recognised in other operating income. In 2021, there was a gain
on sale of £1.1m generated from the disposal of the freehold properties.
(Loss) / income from joint ventures and associates
Losses from joint ventures and associates of £0.5m (2021: £0.7m profit)
primarily relate to our equity share of Pivotal Growth which is still in a
growth phase. The prior year income comprised our share of LMS and TM Group
profits prior to the disposal of our shares in these investments and our share
of set up costs of Pivotal Growth.
Share-based payments
The share-based payment charge of £2.0m (2021: £1.9m) consists of a charge
in the period of £3.1m, offset by lapses and adjustments for leavers and
options exercised in the period. The prior year included a lower charge of
£2.6m, offset by lower lapse and leaver adjustments.
Amortisation of intangible assets
The amortisation charge for 2022 was £4.1m (2021: £4.5m). The year-on-year
decrease was as a result of some lettings books acquisitions and intangible
software investments becoming fully amortised during 2021.
Exceptional items
The exceptional gain of £0.7m (2021: £31.1m) relates to a release in the PI
costs provision, as we continue to make progress with settling historic PI
claims where actual settlement costs have been lower than expected. The prior
year exceptional gain included the gains on disposals of the Group's joint
venture holdings in LMS and TM Group.
Exceptional costs of £88.9m (2021: £2.0m), related principally to the
outcome of the annual impairment review, which led to non-cash goodwill and
other intangibles impairment of £87.2m (2021: £nil) in a number of
subsidiaries(3): Your Move and Reeds Rains (£42.0m), Marsh & Parsons
(£27.7m), DLPS (£1.1m), Group First (£10.3m) and RSC (£6.1m).
The non-cash goodwill impairments result from the deterioration in the
near-term outlook for cash flows due to market conditions and the significant
increase in discount rates since the previous review, impacting Your Move and
Reeds Rains and DLPS, and the strategic decision to sell Marsh & Parsons,
Group First and RSC. The disposals of Marsh & Parsons, Group First and RSC
were announced in January 2023.
Further exceptional costs of £1.7m (2021: £nil) were recognised as a result
of 12 branch closures, as part of a restructuring programme in the Estate
Agency Division.
Contingent consideration
The credit to the income statement in 2022 of £0.7m (2021: credit £0.7m),
relates to the reduction of the contingent consideration liability for RSC and
DLPS, based on revisions to profit forecasts.
Net finance costs
Net finance costs amounted to £2.4m (2021: £2.7m) and related principally to
unwinding of the IFRS 16 lease liability of £1.4m (2021: £1.5m) and
commitment and non-utilisation fees on the revolving credit facility of £1.0m
(2021: £1.0m). Finance income increased to £0.1m (2021: £nil) resulting
from increased interest received on funds held on deposit.
Loss before tax
Loss before tax was £59.1m (2021: profit before tax of £69.9m). The
year-on-year movement is due to the non-cash impairments to goodwill and other
intangibles during 2022, the lower Group Underlying Operating Profit, and the
prior year exceptional gain of £29.4m on the sale of the investments in the
LMS and TM Group joint ventures.
Taxation
The tax charge of £4.9m (2021: £8.0m) represents an effective tax rate of
(8.3)%, which is higher than the headline UK tax rate of 19% largely as a
result of the inclusion within the loss before tax of exceptional impairments
to subsidiaries, which are not deductible for corporation tax purposes.
Deferred tax assets and liabilities are measured at 25% (2021: 25%), the tax
rate effective from 1 April 2023.
Earnings per Share(4)
Basic Earnings per Share was (62.3) pence (2021: 59.6 pence), with diluted
Earnings per Share of (62.3) pence (2021: 59.2 pence). The Adjusted Basic
Earnings per Share was 28.4 pence (2021: 37.7 pence), a decrease of 25%, with
adjusted diluted Earnings per Share of 28.1 pence (2021: 37.4 pence).
Notes:
1 Refer to note 5 of the Financial Statements for
reconciliation of Group and Divisional Underlying Operating Profit to
statutory operating (loss)/profit
2 Total adjusted operating expenses include employee costs,
depreciation and other operating costs as shown in Group Income Statement
3 Refer to note 10 of the Financial Statements
4 Refer to note 6 of the Financial Statements for the
calculation
DIVISIONAL REVIEW
Financial Services Division
Highlights
· Record Financial Services Network Underlying Operating Profit(1) of
£15.5m (2021: £14.4m) up 8%
· Record total lending of £45.6bn, up 11% (2021: £41.1bn)
· Further increase in share of UK purchase and re-mortgage market to
10.4%(2) (2021: 9.6%), reflecting strength of Network mortgage advisers in
re-mortgages, a segment we expect to increase further in importance in 2023
· Gross revenue per adviser(3) up 4%
· Total LSL advisers increased to 2,867 (2021: 2,858)
· Total Financial Services Division Underlying Operating Profit(1) was
£13.3m (2021: £14.8m) reflecting further investment in technology and impact
of lower purchase market on D2C brokerages subsequently sold to Pivotal
Growth
Financial overview
Total revenue reported was up 4% to £81.7m (2021: £78.5m). Core Financial
Services Network Revenue grew by 9% year-on-year benefiting from higher
adviser numbers and strong renewal volumes. Financial Services Other revenue
was in line with last year due to stronger H2 (£1m ahead of 2021) in line
with increased market activity. Financial Services Division Underlying
Operating Profit was £13.3m (2021: £14.8m). On a statutory basis, operating
loss was £6.8m (2021: profit £10.0m).
The Division's revenue mix by product continues to highlight the significance
of our insurance business and its success in arranging insurance products both
on a standalone basis and when needed at the time of a mortgage being
arranged. In 2022, there remained a broadly equal split between mortgage
related and insurance related revenue. The split of revenue by product type in
2022 was £36.5m for mortgage fees (2021: £33.7m), £34.2m for protection and
insurance fees (2021: £35.2m) and £10.9m in other fees (2021: £9.6m).
Financial Services Network business
Gross purchase and re-mortgage completion lending increased by 11% to £32.7bn
(2021: £29.5bn) representing an increased share of the lending market
excluding product transfers to 10.4% (2021: 9.6%). Including product
transfers, total gross mortgage lending was £45.6bn in 2022 (2021: £41.1bn).
Gross revenues generated by the Financial Services Network business (including
the TMA mortgage club) increased by 7% to £316.6m (2021: £295.9m).
Gross revenue per average adviser in 2022 was £93.9k (2021: £90.1k). Whilst
AR firms in the network have been understandably cautious about growing
adviser numbers in the midst of the economic and political uncertainty, and as
a result the Financial Services Network business saw modest growth in adviser
numbers, this indicates that through the turnover of advisers, there is a net
improvement in the most productive.
Financial Services Network business focused heavily on helping member firms
look after the mortgage needs of their existing customers during 2022,
particularly during periods of rapidly changing interest rates. This
deliberate focus helped member firms grow their revenue through increased
volumes of re-mortgage and product switches, despite the decline in the
housing market.
Underlying Operating Profit increased 8% to £15.5m (2021: £14.4m) with
Underlying Operating margin decreasing marginally to 37% (2021: 38%) as we
continue to invest in our businesses and some cost categories returned to
levels more in line with pre-COVID-19 periods e.g. broker events and marketing
support.
Financial Services Other
Financial Services Other generated an Underlying Operating Loss of £2.3m
(2021: profit £0.4m), which is stated after our continued investment in the
businesses that make it up, including costs of the TPFG contract and the
Pivotal Growth joint venture.
As well as continued investment in the Mortgage Gym platform, we continued to
invest in the Financial Services Network business technology platform
(Toolbox), to deliver benefits to firms and their advisers and create further
efficiencies and improved functionality. Financial Services Other D2C
businesses were impacted by lower activity levels in the new purchase market
but took advantage of the increased refinancing activity which peaked in H2
and was impacted in part by the UK mini-budget.
The Pivotal Growth joint venture was established in April 2021, with a net
loss in 2022 of £0.5m after acquisition costs and overheads. The slower than
expected momentum in acquisitions means it is still in the investment phase,
and we expect a positive contribution in 2023.
Notes:
1 Refer to note 5 of the Financial Statements for
reconciliation of Group and Divisional Underlying Operating Profit to
statutory operating (loss)/profit
2 Mortgage lending excluding product transfers - New mortgage
lending by purpose of loan, UK (BOE) - Table MM23
3 Gross revenue per adviser is calculated as Financial
Services Network gross revenue (excluding the TMA mortgage club) per active
adviser
Surveying & Valuation Division
Highlights
· Surveying & Valuation Division once again performed strongly
· Despite the sudden and unexpected market disruption, Underlying
Operating margin(1) remained resilient at 22% (2021: 25%), and well ahead of
the pre-COVID-19 period (2019: 19%)
· Underlying Operating Profit(1) of £20.4m (2021: £23.6m), despite an
estimated £5m profit impact from Q4 market disruption
· D2C and data services income increased by 73% to £3.8m
· Jobs performed was broadly in line with FY21 at 532k despite market
disruption
Summary
The Surveying & Valuation Division's Underlying Operating Profit reduced
by 14% compared to 2021, materially impacted by the disruption to mortgage
lending in Q4 2022 as a result of political and economic uncertainty. Revenue
growth for the first three quarters of FY22, immediately prior to the
Government's mini-budget was 9% year-on-year against broadly flat lending
market growth of 2%.
Surveyor capacity utilisation remains above historic levels, with the slight
reduction compared to the prior year resulting from the market slowdown in Q4
with record levels of capacity utilisation to that point. Jobs per average
Surveyor reduced slightly in the period to 1,065 (2021: 1,079) due mainly to
the H2 graduate intake which is expected to drive a benefit in 2023 as these
surveyors become fully operational. Underlying Operating margin reduced to 22%
(2021: 25%), largely as a result of a 4% increase in operating costs linked to
strategic headcount investment and inflationary cost pressures.
We estimate that we increased market share in 2022, while maintaining
operational resilience and providing high-quality service. We were named Best
Surveying Firm at the 2022 Mortgage Finance Gazette Awards and Best Surveyor
at the 2022 Equity Release Awards with Mortgage Solutions. During the 12
months to 31 December 2022, one key supplier contract was renewed in addition
to one renewal at the end of December 2021, increasing valuation instruction
allocations. We also achieved increases in allocations from some existing
lender clients. Almost two thirds of our total annual volume is currently
secured for at least 18 months. Significant further progress was made with our
strategic objective of developing income from private surveys and data, which
increased by 73% to £3.8m.
Financial overview
Revenue reduced by 1% to £93.2m (2021: £93.7m), impacted by a material
market slowdown in Q4. Surveying & Valuation Division revenue YTD October
was 9% above the same period in 2021. Underlying Operating Profit reduced by
14% to £20.4m (2021: £23.6m). On a statutory basis, operating profit was
£20.8m (2021: £24.7m).
Income per job increased by 1% to £175 (2021: £173), with the higher volume
of jobs performed reflecting the improved capacity management with similar
levels of operational surveyors. During 2022, 72% of the Division's jobs
derived from its top five lender clients. This is broadly consistent with the
concentration of mortgage lending in the UK, where it is estimated that the
six largest lenders collectively account for around 70% of the market. The
total number of jobs performed during the period was 532,000, which was 2%
lower than in 2021.
At 31 December 2022, the total provision for professional indemnity (PI) costs
was £2.3m (31 December 2021: £3.9m). The Group continued to make positive
progress in addressing historic PI claims and the number of new valuation
claims provided for in the year remained very low.
The number of operational surveyors employed(2) at 31 December 2022 was 512,
which was an increase on 31 December 2021 at 489. Our graduate and trainee
mentoring programmes continue to provide new productive surveyors, to
alleviate any capacity constraints in the market.
Notes:
1 Refer to note 5 of the Financial Statements for
reconciliation of Group and Divisional Underlying Operating Profit to
statutory operating (loss)/profit
2 Full Time Equivalent (FTE)
Estate Agency Division
Highlights
· Estate Agency national market share(1) increased to 1.30% (2021:
1.28%)
· Estate Agency Underlying Operating Profit(2) of £10.5m (2021:
£18.4m) in a reduced purchase market
· Underlying Operating Profit in H2 of £11.5m materially ahead of
prior year (H2 2021: £5.9m)
Summary
As a result of the marginal increase in national market share, the residential
sales income reduction was 12% compared to the prior year in a market that was
15% lower, with the higher pipeline entering the year also supporting the
performance. H2 exchanges were in line with our previous expectations after
the delays to pipeline conversion experienced in H1.
However, market activity slowed further in H2, driven by affordability issues.
As a result, the residential sales pipeline entering 2023 of £15.3m has
reduced materially from the record high in June of £26.7m and is 26% lower
than the pipeline on 31 December 2021 (£20.7m). Lettings income increased 2%
compared to the prior year and represented 43% (2021: 40%) of total Estate
Agency Division income, due to an improved average rent in a market where the
supply of new stock remained limited.
Financial overview
Revenue for the year of £146.8m was 5% behind prior year (2021: 154.6m), with
residential sales income 12% below what was a year of unusually high activity
due to the temporary reductions of stamp duty. Underlying Operating Profit was
£10.5m, reflecting the lower residential market activity and inflationary
costs pressures within the branch network, specifically higher energy costs
and business rates now at pre-COVID-19 levels, with no rates relief in 2022.
On a statutory basis, operating loss was £61.8m (2021: profit £46.5m) due to
exceptional goodwill impairment charges of £71.4m in the period and gains
from the sale of joint ventures during 2021 of £29.4m.
Residential Sales
Residential Sales exchange income decreased by 12% to £63.5m (2021: £71.7m).
The Estate Agency Division consolidated the market share gains made during
2021, broadly maintaining share of instructions in the locations we trade, and
with marginal growth of our market share of housing transactions on a national
level. The residential sales pipeline (including Marsh & Parsons)
decreased to £15.3m at 31 December 2022 (31 December 2021: £20.7m).
Conversion of the residential exchange pipeline remained slow throughout the
year, impacting H1 2022 performance in particular. H2 2022 saw fewer new
properties coming to market and lower levels of sales agreed. There was also
a trend towards an increase in the number of fall-throughs, largely affecting
more recently agreed sales, both of which will impact performance in Q1 2023.
Lettings
In the Lettings market there has been a very limited supply of new
instructions. Our focus has therefore been on reletting and retaining our
managed property portfolio. The total number of managed properties at 31
December 2022 was 23,881, slightly below the 24,372 at same date in 2021.
Stronger average rental prices resulted in like-for-like lettings income up 4%
year-on-year at £63.3m.
Other income
Other income was down 4% to £20.1m (2021: £20.8m) reflecting the impact of
the lower exchange volumes on conveyancing and financial services income
directly linked to exchange volumes. Asset management was 17% ahead of 2021.
However market repossession volumes remain low, albeit ahead of the
exceptionally low market in 2021 which was severely impacted by COVID-19.
Notes:
1 Number of residential property transaction completions with
value £40,000 or above, HMRC
2 Refer to note 5 of the Financial Statements for
reconciliation of Group and Divisional Underlying Operating Profit to
statutory operating (loss)/profit
Balance Sheet Review
Goodwill
The carrying value of goodwill is £56.5m(1) (31 December 2021: £160.9m)
reflecting the non-cash impairment of £87.0m in Your Move and Reeds Rains,
Marsh & Parsons, Group First, RSC, and DLPS at 31 December 2022. During
December 2022 the Group made the strategic decision to sell both Group First
and RSC to its joint venture Pivotal Growth and separately made the decision
to sell Marsh & Parsons to Dexters. This resulted in the reclassification
of these businesses as held for sale, with a reduction of £17.3m in goodwill.
The sales of all three businesses were announced in January 2023.
Other intangible assets and property, plant and equipment
Total capital expenditure in the year amounted to £4.9m (2021: £6.9m),
primarily reflecting the continued investment in technology in the year,
including £2.0m (2021: £2.2m) for further development of the Toolbox
platform and other technologies in the Financial Services Division. The higher
prior-year expenditure also reflected investment by the Estate Agency Division
in third-party property software, IT infrastructure investment, and an element
of spend deferred from 2020, when cash conservation measures had been taken.
Financial assets and investments in joint ventures and associates
Financial assets
Financial assets of £1.0m at 31 December 2022 (2021: £5.7m) comprise
investments in equity instruments in unlisted companies. The carrying value of
the Group's investment in Yopa at 31 December 2022 has been assessed as £nil
(2021: £4.5m), with the reduction recognised through the Statement of
Comprehensive Income. In determining the carrying value the Group considered
both the historic and current trading performance of Yopa, which continued to
be loss making and the general market share decline of hybrid estate agencies.
In January 2023, the Group agreed to sell its shares in Yopa for £nil
consideration based on third party valuations provided to the existing
shareholders.
The carrying value of the Group's investment in VEM at 31 December 2022 has
been assessed as £0.2m (2021: £0.7m). Our valuation is based on a four-year
weighted EBITDA multiple applied to actual and forecast profits, with the
reduction recognised through the Statement of Comprehensive Income. In March
2023, the Group agreed to sell its shares in VEM for £0.2m consideration.
During the period the fair value of units held in The Openwork Partnership LLP
was reassessed to £0.7m (31 December 2021: £nil), with the gain recognised
in other operating income.
Joint ventures
In April 2021 the Group established the Pivotal Growth joint venture and holds
a 47.8% interest at 31 December 2022. The joint venture is accounted for using
the equity method and is held on the balance sheet at £5.1m at 31 December
2022 (31 December 2021: £1.6m), representing the Group's equity investment in
Pivotal Growth during the period, less our share of losses after tax for the
period.
During 2021, we disposed of our entire holding in both non-core businesses LMS
(May 2021) and TM Group (July 2021) for total proceeds of £41.3m.
Bank facilities/ Liquidity
In February 2023, LSL agreed an amendment and restatement of our banking
facility, with a £60m committed revolving credit facility, and a maturity
date of May 2026, which replaced the previous £90m facility due to mature in
May 2024. The terms of the facility have remained materially the same as the
previous facility. The facility is provided by the same syndicate members as
before, namely Barclays Bank UK plc, NatWest Bank plc and Santander UK plc.
In arranging the banking facility, the Board took the opportunity to review
the Group's borrowing requirements, considering our strong cash position and
the Group's aim of reducing its reliance on the housing market. We therefore
reduced the size of the committed facility and the costs associated with it.
To provide further flexibility to support growth, the facility retains a £30m
accordion, to be requested by LSL at any time, subject to bank approval.
At 31 December 2022, Net Cash was £40.1m (31 December 2021: Net Cash
£48.5m). The net decrease in cash and cash equivalents of £8.4m in 2022
included further investment in Pivotal Growth (£4.0m), capital expenditure of
£4.9m (2021: £6.9m), a share buyback programme (£4.0m), the loan of £5.0m
to the EBT for the acquisition of LSL shares to satisfy employee share
schemes, payment of the 2021 final and 2022 interim dividends of £11.8m
(2021: £4.2m dividends paid) and reduced corporation tax payments of £6.1m
(2021: £8.5m). Provisions also decreased by £0.8m (2021: decrease of
£3.2m), due to the positive progress in addressing historic PI claims.
The Group generated adjusted cash from operations(2) of £28.8m (2021:
£37.7m). After adjusting for tax payment deferrals agreed with HMRC relating
to 2020, the cash flow conversion(3) rate was 78%. The 2021 conversion of 106%
was supported by significantly higher Estate Agency revenues, with high
immediate cash drop-through.
The Financial Services Network business has a regulatory capital requirement
associated with its regulated revenues. The regulatory capital requirement was
£5.9m at 31 December 2022 (31 December 2021: £4.9m), with a surplus of
£24.9m (31 December 2021: £14.2m).
Contingent consideration liabilities
Contingent consideration liabilities at 31 December 2022 were £2.3m (31
December 2021: £3.0m). Contingent consideration liabilities relate primarily
to the cost of acquiring the remaining shares in RSC. The year-on-year
reduction reflects an update to forecasts in both RSC and Direct Life Quote
Holdings Limited, and a small part-settlement of the latter. Ahead of the
disposal of RSC in January 2023, we settled the contingent consideration of
£2.3m.
Treasury and Risk Management
We have an active debt management policy. The Group does not hold or issue
derivatives or other financial instruments for trading purposes. Further
details on the Group's financial commitments, as well as the Group's treasury
and risk management policies, are set out in the Annual Report and Accounts.
International Accounting Standards (IAS)
The Financial Statements have been prepared in accordance with UK-adopted IAS.
Notes:
1 Refer to note 10 of the Financial Statements
2 Adjusted cash flow from operations is defined as cash
generated from operations, less the repayment of lease liabilities, plus the
utilisation of PI provisions.
3 Adjusted cash flow conversion defined as cash generated from
operations (pre PI and post lease liabilities) divided by Group Underlying
Operating Profit
Group Income Statement
for the year ended 31 December 2022
2022 2021
Note £'000 £'000
Continuing Operations:
Revenue 3 321,738 326,832
Employee costs (206,569) (202,269)
Depreciation on property, plant and equipment (11,629) (12,500)
Other operating costs (67,500) (65,410)
Other operating income 1,334 937
Gain on sale of property, plant and equipment and right-of-use assets 8 1,061
Share of post-tax (loss)/profit from joint ventures and associates (494) 668
Share-based payments (1,977) (1,916)
Amortisation of intangible assets (4,112) (4,534)
Exceptional gains 7 694 31,050
Exceptional costs 7 (88,898) (2,045)
Contingent consideration 696 710
Group operating (loss)/profit (56,709) 72,584
Finance income 80 14
Finance costs (2,497) (2,709)
Net finance costs (2,417) (2,695)
(Loss)/profit before tax (59,126) 69,889
Taxation charge 9 (4,891) (7,985)
(Loss)/profit for the year (64,017) 61,904
Attributable to:
Owners of the parent (63,924) 61,941
Non-controlling interest (93) (37)
Earnings per share (expressed in pence per share):
Basic 6 (62.3) 59.6
Diluted 6 (62.3) 59.2
Group Statement of Comprehensive Income
for the year ended 31 December 2022
2022 2021
£'000 £'000
(Loss)/profit for the year (64,017) 61,904
Items not to be reclassified to profit and loss in subsequent periods:
Revaluation of financial assets not recycled through income statement (5,096) (1,557)
Tax on revaluation 130 (132)
(4,966) (1,689)
Total other comprehensive loss for the year, net of tax (4,966) (1,689)
Total comprehensive (loss)/income for the year, net of tax (68,983) 60,215
Attributable to:
Owners of the parent (68,890) 60,252
Non-controlling interest (93) (37)
Group Balance Sheet
as at 31 December 2022
Note 2022
2021
£'000 £'000
Non-current assets
Goodwill 10 56,530 160,865
Other intangible assets 15,747 29,604
Property, plant and equipment and right-of-use assets 15,570 37,070
Financial assets 1,045 5,748
Investments in joint ventures and associates 5,068 1,610
Contract assets 431 733
Total non-current assets 94,391 235,630
Current assets
Trade and other receivables 26,608 33,829
Contract assets 348 424
Current tax assets 3,063 1,142
Cash and cash equivalents 36,755 48,464
66,774 83,859
Assets held for sale 56,437 -
Total current assets 123,211 83,859
Total assets 217,602 319,489
Current liabilities
Financial liabilities (6,949) (8,523)
Trade and other payables (47,030) (64,206)
Provisions for liabilities (660) (775)
(54,639) (73,504)
Liabilities held for sale (21,930) -
Total current liabilities (76,569) (73,504)
Non-current liabilities
Financial liabilities (6,277) (22,602)
Deferred tax liability (2,008) (2,073)
Provisions for liabilities (1,695) (3,191)
Total non-current liabilities (9,980) (27,866)
Total liabilities (86,549) (101,370)
Net assets 131,053 218,119
Equity
Share capital 210 210
Share premium account 5,629 5,629
Share-based payment reserve 5,331 5,263
Shares held by employee benefit trust (5,457) (3,063)
Treasury shares (3,983) -
Fair value reserve (20,239) (15,273)
Retained earnings 149,134 224,832
Total equity attributable to owners of the parent 130,625 217,598
Non-controlling interest 428 521
Total equity 131,053 218,119
Group Statement of Cash Flows
for the year ended 31 December 2022
2022
2021
£'000 £'000
(Loss)/profit before tax (59,126) 69,889
Adjustments for:
Exceptional operating items 88,204 (29,005)
Contingent consideration 7 (696) (710)
Depreciation of tangible assets 11,629 12,500
Amortisation of intangible assets 4,112 4,534
Share-based payments 1,977 1,916
Profit on disposal of property, plant and equipment and right-of-use assets (8) (1,061)
Loss/(profit) from joint ventures 494 (668)
Recognition of investments at fair value through the income statement (678) -
Decrease in contract assets 378 471
Finance income (80) (14)
Finance costs 2,497 2,709
Operating cash flows before movements in working capital 48,703 60,561
Movements in working capital
Increase in trade and other receivables (1,491) (3,911)
Decrease in trade and other payables (11,243) (8,919)
Decrease in provisions (799) (3,213)
(13,533) (16,043)
Cash generated from operations 35,170 44,518
Interest paid (2,342) (2,554)
Income taxes paid (6,109) (8,528)
Exceptional costs paid (384) (2,045)
Net cash generated from operating activities 26,335 31,391
Cash flows used in investing activities
Acquisitions of subsidiaries and other businesses, net of cash acquired - (730)
Payment of contingent consideration (76) (2,462)
Investment in joint venture (3,952) (2,477)
Investment in financial assets - (14)
Dividend received from joint venture - 1,178
Cash received on sale of joint venture - 41,349
Receipt of lease income 68 20
Purchase of property, plant and equipment and intangible assets (4,907) (6,902)
Proceeds from sale of property, plant and equipment 1,304 431
Net cash (expended)/generated on investing activities (7,563) 30,393
Cash flows used in financing activities
Repayment of loans - (13,000)
Payment of deferred consideration - (122)
Purchase of LSL shares by the employee benefit trust (5,026) -
Repurchase of treasury shares (3,983) -
Proceeds from exercise of share options 825 1,447
Payment of lease liabilities (7,170) (8,922)
Dividends paid 8 (11,773) (4,166)
Net cash expended in financing activities (27,127) (24,763)
Net (decrease)/increase in cash and cash equivalents (8,355) 37,021
Cash and cash equivalents at the end of the year 40,109 48,464
Closing cash and cash equivalents includes £3.4m (2021: £nil) presented in
assets held for sale on the Group Balance Sheet (see note 11).
Group Statement of Changes in
Equity
for the year ended 31 December 2022
Share- based payment reserve
Share premium account
Share Shares held by EBT Treasury shares Fair value reserve Retained earnings Equity attributable to owners of the parent Non-controlling interest Total
capital equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 210 5,629 5,263 (3,063) - (15,273) 224,832 217,598 521 218,119
Loss for the year - - - - - - (63,924) (63,924) (93) (64,017)
Revaluation of financial assets - - - - - (5,096) - (5,096) - (5,096)
Tax on revaluations - - - - - 130 - 130 - 130
Total comprehensive loss for the year - - - - - (4,966) (63,924) (68,890) (93) (68,983)
Shares repurchased into Treasury - - - - (3,983) - - (3,983) - (3,983)
Shares repurchased into EBT - - - (5,026) - - - (5,026) - (5,026)
Exercise of options - - (1,806) 2,632 - - (1) 825 - 825
Dividend paid - - - - - - (11,773) (11,773) - (11,773)
Share-based payments - - 1,977 - - - - 1,977 - 1,977
Tax on share-based payments - - (103) - - - - (103) - (103)
At 31 December 2022 210 5,629 5,331 (5,457) (3,983) (20,239) 149,134 130,625 428 131,053
During the year ended 31 December 2022, the Trust acquired 1,351,000 LSL
Shares. During the period, 890,146 share options were exercised relating to
LSL's various share option schemes resulting in the shares being sold by the
Trust. LSL received £0.8m on exercise of these options.
Group Statement of Changes in Equity
for the year ended 31 December 2021
Share- based payment reserve
Share premium account
Share Shares held by EBT Fair value reserve Retained earnings Equity attributable to owners of the parent Non-controlling interest Total
capital equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2021 210 5,629 3,942 (5,012) (13,584) 166,569 157,754 - 157,754
Profit for the year - - - - - 61,941 61,941 (37) 61,904
Revaluation of financial assets - - - - (1,557) - (1,557) - (1,557)
Tax on revaluations - - - - (132) - (132) - (132)
Total comprehensive income for the year - - - - (1,689) 61,941 60,252 (37) 60,215
Acquisition of subsidiary - - - - - - - 558 558
Exercise of options - - (990) 1,949 - 488 1,447 - 1,447
Dividend paid - - - - - (4,166) (4,166) - (4,166)
Share-based payments - - 1,916 - - - 1,916 - 1,916
Tax on share-based payments - - 395 - - - 395 - 395
At 31 December 2021 210 5,629 5,263 (3,063) (15,273) 224,832 217,598 521 218,119
During the year ended 31 December 2021, the Trust acquired nil LSL Shares.
During the period, 555,824 share options were exercised relating to LSL's
various share option schemes resulting in the Shares being sold by the Trust.
LSL received £1.4m on exercise of these options.
Notes to the Preliminary Results Announcement
The above results and the accompanying notes do not constitute statutory
accounts within the meaning of Section 435 of the Companies Act 2006.
Statutory financial statements for this year will be filed following the 2023
AGM and will be available on LSL's website: lslps.co.uk. The auditors have
reported on these Financial Statements. Their report was unqualified and did
not contain a statement under section 498 (2), (3) or (4) of the Companies Act
2006.
1. Directors' responsibility statement
Each of the Directors confirm that, to the best of their knowledge, the
Financial Statements, prepared in accordance with UK-adopted IAS, give a fair,
balanced and understandable view of the assets, liabilities, financial
position and profit or loss of the issuer and the undertakings included in the
consolidation taken as a whole; and the Directors' Report includes a fair
review of the development and performance of the business and the position of
the issuer and the undertakings included in the consolidation taken as a
whole, together with a description of the principal risks and uncertainties
that they face.
2. Basis of preparation
The Financial Statements have been prepared on a going concern basis and on a
historical cost basis, except for certain debt and equity financial assets
that have been measured at fair value. The accounting policies applied by the
Group in these consolidated preliminary results are the same as those applied
by the Group in the LSL annual Financial Statements for the year ended 31
December 2021. The Group's Financial Statements are presented in pound
sterling and all values are rounded to the nearest thousand pounds (£'000)
except when otherwise indicated.
Going Concern
The Directors have considered the Group's current and future prospects,
principal risks and uncertainties set out in the risk management objectives
and policies, and its availability of financing, and are satisfied that the
Group can continue to pay its liabilities as they fall due for the period to
30 April 2024. For this reason, the Directors continue to adopt the going
concern basis of preparation for these financial statements. Further detailed
information is provided in the going concern statement in the Directors'
Report in the Annual Report and Accounts 2022.
In preparing the Group Financial Statements Management has considered the
impact of climate change, taking into account the relevant disclosures in the
Strategic Report, including those made in accordance with the recommendations
of the Taskforce on Climate‐related Financial Disclosures. Recognising that
the environmental impact of the Group's operations is relatively low, no
issues were identified that would impact the carrying values of the Group's
assets or have any other impact on the Financial Statements.
3. Revenue
The Group's operations and main revenue streams are those described in the
latest annual Financial Statements.
Disaggregation of revenue
Set out below is the disaggregation of the Group's revenue from contracts with
customers:
Year ended 31 December 2022
Financial Services £'000 Surveying & Valuation
£'000 Residential Sales exchange Asset Management £'000 Other Total
£'000 Lettings £'000 £'000
£'000
Timing of revenue recognition
Services transferred at a point in time 87,437 93,228 63,473 60,941 2,811 10,361 318,251
Services transferred over time - - - 2,337 1,150 - 3,487
Total revenue from contracts with customers 87,437 93,228 63,473 63,278 3,961 10,361 321,738
Year ended 31 December 2021
Financial Services £'000 Surveying & Valuation
£'000 Residential Sales exchange Asset Management £'000 Other Total
£'000 Lettings* £'000 £'000
£'000
Timing of revenue recognition
Services transferred at a point in time 84,818 93,699 71,737 59,885 2,217 11,162 323,518
Services transferred over time - - - 2,166 1,148 - 3,314
Total revenue from contracts with customers 84,818 93,699 71,737 62,051 3,365 11,162 326,832
2022 2021
£'000 £'000
Revenue from services 321,738 326,832
Operating revenue 321,738 326,832
Rental income 656 937
Gain on fair value 678 -
Other operating income 1,334 937
Total revenue 323,072 327,769
*2021 lettings revenue has been restated to reclassify £27.7m of revenue from
services transferred over time to services transferred at a point in time.
There has been no change in the Group's accounting policy in the prior or
current period.
4. Segment analysis of revenue and operating profit
For the year ended 31 December 2022 LSL has reported three operating segments:
Financial Services; Surveying & Valuation; and Estate Agency:
- The Financial Services segment arranges mortgages for a number
of lenders and arranges pure protection and general insurance policies for a
panel of insurance companies. Embrace Financial Services and First2Protect,
subsidiaries within the Financial Services Division, make a commercially
agreed introducers fee to the Estate Agency Division;
- The Surveying & Valuation segment provides a valuations and
professional surveying service of residential properties to both lenders and
individual customers, as well as data services to lenders; and
- The Estate Agency 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 and asset management services to a range of lenders. Embrace
Financial Services and First2Protect, subsidiaries within the Financial
Services Division, make a commercially agreed introducers fee to the Estate
Agency Division.
Operating segments
The Management Team monitors the operating results of its segments separately
for the purpose of making decisions about resource allocation and performance
assessment. Segment performance is evaluated based on operating profit or loss
which in certain respects, as explained in the table below, is measured
differently from operating profit or loss in the Group Financial Statements.
Head office costs, Group financing (including finance costs and finance
income) and income taxes are managed on a Group basis and are not allocated to
operating segments.
Reportable segments
The following table presents revenue and profit information regarding the
Group's reportable segments for the financial year ended 31 December 2022 and
financial year ended 31 December 2021 respectively.
Year ended 31 December 2022
Financial Services Surveying Estate Agency Unallocated Total
& Valuation
Income statement information £'000 £'000 £'000 £'000 £'000
Revenue from external customers 87,437 93,228 141,073 - 321,738
Introducers fee (5,756) - 5,756 - -
Total revenue 81,681 93,228 146,829 - 321,738
Segmental result:
- Group Underlying Operating Profit 13,260 20,378 10,546 (7,296) 36,888
- Operating Profit/(Loss) (6,839) 20,799 (61,847) (8,822) (56,709)
Finance income (2,497)
Finance costs 80
Loss before tax (59,126)
Taxation (4,891)
Loss for the year (64,017)
Balance sheet information
Segment assets - intangible 11,932 11,217 49,056 72 72,277
Segment assets - other 24,182 9,236 66,950 44,957 145,325
Total segment assets 36,114 20,453 116,006 45,029 217,602
Total segment liabilities (20,983) (14,926) (46,440) (4,200) (86,549)
Net assets / (liabilities) 15,131 5,527 69,566 40,829 131,053
Other segment items
Capital expenditure including intangible assets (2,307) (736) (1,521) (343) (4,907)
Depreciation (810) (1,755) (7,759) (1,305) (11,629)
Amortisation of intangible assets (2,625) (36) (1,451) - (4,112)
Exceptional gains - 694 - - 694
Exceptional costs (17,458) - (71,440) - (88,898)
Share of results in joint ventures and associate (494) - - - (494)
PI Costs provision - 2,341 - - 2,341
Onerous leases provision - - 14 - 14
Share-based payment (16) (237) (197) (1,527) (1,977)
Group Underlying Operating Profit is as defined in note 5 to these condensed
Financial Statements.
Unallocated net assets comprise intangible assets and plant and equipment
£2.0m, other assets £6.2m, cash £36.8m, accruals and other payables £2.2m
current and deferred tax liabilities £2.0m. Unallocated result comprises
costs relating to the Parent Company.
Year ended 31 December 2021
Financial Services Surveying Estate Agency Unallocated Total
& Valuation
Income statement information £'000 £'000 £'000 £'000 £'000
Revenue from external customers 84,818 93,699 148,315 - 326,832
Introducers fee (6,287) - 6,287 - -
Total revenue 78,531 93,699 154,602 - 326,832
Segmental result:
- Group Underlying Operating Profit 14,787 23,609 18,430 (7,507) 49,319
- Operating Profit 9,976 24,721 46,464 (8,577) 72,584
Finance income 14
Finance costs (2,709)
Profit before tax 69,889
Taxation (7,985)
Profit for the year 61,904
Balance sheet information
Segment assets - intangible 20,779 11,086 158,531 73 190,469
Segment assets - other 9,891 12,772 55,046 51,311 129,020
Total segment assets 30,670 23,858 213,577 51,384 319,489
Total segment liabilities (25,343) (20,621) (50,130) (5,276) (101,370)
Net assets / (liabilities) 5,327 3,237 163,447 46,108 218,119
Other segment items
Capital expenditure including intangible assets (1,086) (657) (5,157) (2) (6,902)
Depreciation (824) (1,926) (9,746) (4) (12,500)
Amortisation of intangible assets (2,496) (382) (1,656) - (4,534)
Exceptional gains - 1,641 29,409 - 31,050
Exceptional costs (714) - - (1,331) (2,045)
Share of results in joint ventures and associate (869) - 1,537 - 668
PI Costs provision - 3,907 - - 3,907
Onerous leases provision - - 59 - 59
Share-based payment (270) (147) (430) (1,069) (1,916)
In the year the Group sold its interests in the two joint ventures recorded in
the Estate Agency Division, results for these joint ventures are recorded to
their disposal dates. The Group acquired an interest in a joint venture in the
Financial Services Division during April 2021.
Unallocated net assets comprise intangible assets and plant and equipment
£0.1m, other assets £3.0m, cash £48.5m, accruals and other payables £3.4m
current and deferred tax liabilities £2.1m. Unallocated result comprises
costs relating to the parent company.
5. Group and Divisional Underlying Operating Profit
Group and Divisional Underlying Operating Profit are alternative performance
measures (APMs) used by the Directors and Group Management to monitor
performance of operating segments against budget. It is calculated as
profit/(loss) before tax adjusted for the items set out below.
Year ended 31 December 2022
Financial Services Surveying Estate Agency Unallocated Total
& Valuation
£'000 £'000 £'000 £'000 £'000
(Loss)/profit before tax (6,843) 20,921 (63,102) (10,102) (59,126)
Net finance cost 4 (122) 1,255 1,280 2,417
Operating (loss)/profit per income statement (6,839) 20,799 (61,847) (8,822) (56,709)
Operating Margin (7.8%) 22.3% (42.1%) - (17.6%)
Share-based payments 16 237 197 1,527 1,977
Amortisation of intangible assets 2,625 36 1,451 - 4,112
Exceptional gains - (694) - - (694)
Exceptional costs 17,458 - 71,440 - 88,898
Contingent consideration - - (696) - (696)
Underlying Operating Profit/(Loss) 13,260 20,378 10,546 (7,296) 36,888
Underlying Operating Margin 16.2% 21.9% 7.2% - 11.4%
Year ended 31 December 2021
Financial Services Surveying Estate Agency Unallocated Total
& Valuation
£'000 £'000 £'000 £'000 £'000
(Loss)/profit before tax 9,934 24,714 45,001 (9,760) 69,889
Net finance cost 42 7 1,463 1,183 2,695
Operating (loss)/profit per income statement 9,976 24,721 46,464 (8,577) 72,584
Operating Margin 12.7% 26.4% 30.0% - 22.2%
Share-based payments 270 147 430 1,069 1,916
Amortisation of intangible assets 2,496 382 1,656 - 4,534
Exceptional gains - (1,641) (29,409) - (31,050)
Exceptional costs 2,045 - - - 2,045
Contingent consideration credit - - (710) - (710)
Underlying Operating Profit/(Loss) 14,787 23,609 18,430 (7,507) 49,319
Underlying Operating Margin 18.8% 25.2% 11.9% - 15.1%
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.
Loss after tax Weighted average number of shares 2022 Profit after tax Weighted average number of shares 2021
£'000 Per share amount £'000 Per share amount
pence pence
Basic EPS (63,924) 102,659,027 (62.3) 61,941 103,912,148 59.6
Effect of dilutive share options - - 688,806
Diluted EPS (63,924) 102,659,027 (62.3) 61,941 104,600,954 59.2
The Directors (who were members of the Board at 31 December 2022) consider
that the adjusted earnings shown below give a better and more consistent
indication of the Group's underlying performance:
2022 2021
£'000 £'000
Group Underlying Operating Profit 36,888 49,319
Loss attributable to non-controlling interest 93 37
Net finance costs (excluding exceptional and contingent consideration items (968) (1,047)
and discounting on lease liabilities)
Normalised taxation (tax rate 19% 2021:19%) (6,843) (9,171)
Adjusted profit after tax attributable to owners of the parent 29,170 39,138
This represents adjusted profit after tax attributable to equity holders of
the parent. Tax has been adjusted to exclude the prior year tax adjustments,
and the tax impact of exceptional items, amortisation and share-based
payments. The effective tax rate used is 19.0% (31 December 2021: 19.0%).
Adjusted basic and diluted EPS
Adjusted profit after tax Weighted average number of shares 2022 Adjusted profit after tax Weighted average number of shares 2021
£'000 Per Share amount £'000 Per Share amount
pence
pence
Adjusted basic EPS 29,170 102,659,027 28.4 39,138 103,912,148 37.7
Effect of dilutive share options 1,275,216 688,806
Adjusted diluted EPS 29,170 103,934,243 28.1 39,138 104,600,954 37.4
7. Exceptional items
2022 2021
£'000 £'000
Exceptional costs:
Goodwill and intangible asset impairment (note 10) 87,158 -
Estate Agency restructuring costs 1,740 -
Costs relating to investment in joint venture - 1,179
Financial Services restructuring costs - 714
Dissolution and impairment of associate Mortgage Gym - 152
88,898 2,045
Exceptional gains:
Exceptional gain in relation to historic PI Costs (694) (1,641)
Exceptional gain in relation to sale of joint ventures - (29,409)
(694) (31,050)
Exceptional costs
Goodwill and Intangible asset impairment
During the period there has been an impairment to goodwill of £87.0m (2021:
£nil) and an impairment to other intangible assets of £0.1m (2021: £nil),
refer to note 10 for further detail.
Estate Agency restructuring costs
The Group initiated a branch closure programme in the Estate Agency Division
in response to challenging trading conditions during the year. As a result of
the programme the Group incurred non-recurring exceptional costs of £1.7m
(2021: £nil).
Exceptional Gains
Provision for professional indemnity (PI) claims and insurance claim
notification
The Group continued to make positive progress in settling historic PI claims,
in which actual settlement costs have been lower than expected, and therefore
there has been a release of £0.7m in 2022 (December 2021: £1.6m) in relation
to exceptional PI claims. The treatment of historic PI claims (relating to the
2004 to 2008 high risk lending period) as exceptional is consistent with the
original recognition of the provision.
8. Dividends paid and proposed
2022 2021
£'000 £'000
Declared and paid during the year:
2022 Interim: 4.0 pence per share (2021 Interim: 4.0 pence) 4,084 4,166
4,084 4,166
Dividends on Ordinary Shares proposed (not recognised as a liability as at 31
December):
Equity dividends on shares:
Dividend: 7.4 pence per share (2021: 7.4 pence) 7,616 7,689
9. Taxation
The major components of income tax charge in the Group Income Statement are:
2022 2021
£'000 £'000
UK corporation tax - current year 5,783 7,873
- (824) (251)
adjustment in respect of prior years
4,959 7,622
Deferred tax:
Origination and reversal of temporary differences (176) (179)
Changes in tax rates (56) 562
Adjustment in respect of prior year 164 (20)
Total deferred tax (credit)/charge (68) 363
Total tax charge in the income statement 4,891 7,985
Corporation tax is recognised at the headline UK corporation tax rate of 19%
(2021: 19%).
The opening and closing deferred tax balances in the financial statements were
measured at 25%. This is in line with rates enacted by the Finance Act 2021
which was enacted on 10 June 2021 and comes into effect from 1 April 2023.
The effective rate of tax for the year was (8.3%) (2021: 11.4%). The effective
tax rate for 2022 is higher than the headline UK tax rate of 19% largely as a
result of the inclusion within the loss before tax of exceptional impairments
to subsidiaries, which are not deductible for corporation tax purposes.
Deferred tax credited directly to other comprehensive income is £0.1m (2021:
£0.1m). Income tax debited directly to the share-based payment reserve is
£0.1m (2021: £0.4m).
There is a prior year adjustment of £0.2m in relation to deferred tax, the
majority of this adjustment relates to a lower tax base being attributable to
intangible asset than anticipated at the tax provisioning stage.
10. Goodwill
Goodwill
£'000
Cost
At 1 January 2021 159,863
Arising on acquisitions 1,002
At 31 December 2021 160,865
Impairment (87,041)
Reclassified as held for sale (17,294)
At 31 December 2022 56,530
Net book value
At 31 December 2022 56,530
At 31 December 2021 160,865
The carrying amount of goodwill by CGU is summarised below:
2022 2021
£'000 £'000
Financial Services
Group First (reclassified as held for sale) - 13,913
RSC New Homes (reclassified as held for sale) - 7,128
First Complete 3,998 3,998
Advance Mortgage Funding 2,604 2,604
Personal Touch Financial Services 348 348
Direct Life and Pension Services (DLPS) - 1,002
6,950 28,993
Surveying & Valuation segment company
e.surv 9,569 9,569
Estate Agency segment companies
Your Move & Reeds Rains 16,815 58,800
Marsh & Parsons (reclassified as held for sale) - 40,307
LSLi 22,512 22,512
Templeton LPA 336 336
Others 348 348
40,011 122,303
Total 56,530 160,865
Impairment of goodwill and other intangibles with indefinite useful lives
The Group tests goodwill and the indefinite life intangible assets annually
for impairment, or more frequently if there are indicators of impairment.
Goodwill and brands acquired through business combinations have been allocated
for impairment testing purposes to statutory companies or Groups of statutory
companies which are managed as one CGU as follows:
· Financial Services companies
o Group First
o RSC New Homes (RSC)
o First Complete
o Advance Mortgage Funding which includes BDS
o Personal Touch Financial Services
o Direct Life and Pensions Services Limited (DLPS)
· Surveying & Valuation Services company
o e.surv
· Estate Agency companies
o Your Move and Reeds Rains (including its share of cash flows from LSL
Corporate Client Department)
o Marsh & Parsons (M&P)
o LSLi
o Templeton LPA
o St Trinity
Recoverable amount of companies
The recoverable amount of the Financial Services, Surveying & Valuation
and Estate Agency companies has been determined based on a value-in-use (VIU)
calculation using cash flow projections based on financial budgets and
forecasts approved by the Board and in the three-year plan. Where cash
generating units have been designated as held for sale at the balance sheet
date the recoverable amount has been calculated as the CGUs fair value less
costs to sell (FVLCTS). The fair value of Group First, RSC and Marsh &
Parsons has been determined using the arm's length sales price for each
business, which is the equivalent of the consideration we expect to receive
(discounted where appropriate) less transaction costs. This is a level 3
measurement per the fair value hierarchy, based on a combination of earnings
multiples and unobservable inputs. The key assumptions are discount rate and
earnings. The impairment review of Group First, RSC and Marsh & Parsons
was triggered by the Group's decision to sell these CGUs. The discount rate
applied to cash flow projections used in the VIU models is 14.2% (2021: 12.2%)
and cash flows beyond the three-year plan are extrapolated using a 2.0% growth
rate (2021: 2.0%).
Following the impairment review, an impairment loss on goodwill of £87.0m
(2021: £nil) was recognised in the income statement. The impairment loss was
split between Financial Services £17.3m and Estate Agency £69.7m and further
disaggregated by CGU as follows; Your Move and Reeds Rains (£42.0m), Marsh
& Parsons (£27.7m), DLPS (£1.0m), Group First (£10.3m) and RSC
(£6.0m). There were no impairment reversals during the period.
During December 2022 the Group made the strategic decision to sell both Group
First and RSC to its joint venture partner Pivotal Growth and separately made
the decision to sell Marsh & Parsons. The decision to sell Group First and
RSC is consistent with the Group's wider strategic objectives to simplify the
Group structure and grow the Financial Services business, Pivotal Group's
focus is on the development of D2C mortgage brokering and as such they are
better placed to maximise the value of the companies. The sale of Group First
and RSC completed on 13 January 2023. Similar to Group First and RSC, the
decision to sell Marsh & Parsons was made to further simplify the Group
structure and focus on core opportunities in Financial Services, whilst also
reducing exposure to the volatile London housing market.
In respect of Your Move and Reeds Rains and DLPS, changes in market conditions
have resulted in a downwards revisions to future cash flow forecasts in
comparison to December 2021 and this has been further exacerbated by a
significant increase in discount rates.
11. Net Cash/ Bank Debt
Net cash/ debt is defined as current and non-current borrowings, less cash on
short-term deposits, IFRS 16 financial liabilities, deferred and contingent
consideration and where applicable cash held for sale.
2022 2021
Net Bank Cash/Debt is defined as follows:
£'000 £'000
Interest-bearing loans and borrowings (including loan notes, overdraft, IFRS
16 Leases, contingent and deferred consideration)
- Current 6,949 8,523
- Non-current 6,277 22,602
13,226 31,125
Less: cash and short-term deposits (36,755) (48,464)
Less: IFRS 16 lessee financial liabilities (10,915) (28,117)
Less: deferred and contingent consideration (2,311) (3,008)
Less: cash included in held for sale (3,355) -
Net Bank Cash/Debt (40,109) (48,464)
12. Events after the reporting period
On 13 January 2023, the Group announced the sale of Group First Limited (Group
First) and RSC New Homes Limited (RSC) to Pivotal Growth Limited (Pivotal
Growth), the Group's joint venture with Pollen Street Capital. The
consideration payable will be 7x the combined Group First and RSC EBITDA in
calendar year 2024, subject to working capital adjustments, capped at a
maximum of £20m. The contingent consideration relating to the Group's
original acquisition of RSC of £2.3m was settled prior to the disposal.
On 26 January 2023, the Group announced the sale of Marsh & Parsons
(Holdings) Limited and its subsidiary Marsh & Parsons Limited, together
"Marsh & Parsons" to a subsidiary of Dexters London Limited for a
consideration of £29m payable on completion, subject to working capital
adjustments.
In February 2023, the Group amended and restated its banking facility which
runs to May 2026 with a new limit of £60m; this replaced the previous RCF
which had a maturity date of May 2024 and credit limit of £90m.
On 30 March 2023 the Group sold its 15.37% shareholding in VEM to Connells for
a consideration of £0.2m, at 31 December 2022 the Group held its investment
in VEM at a fair value of £0.2m.
On 11 April 2023, the Group announced the disposal of two further
subsidiaries, Embrace Financial Services (EFS) and First 2 Protect (F2P) to
Pivotal Growth, in line with the Group's objective to simplify its structure
and focus on the development of B2B opportunities in Financial Services. The
consideration payable for EFS will be 7x the EBITDA in calendar year 2024,
subject to working capital adjustments, capped at a maximum of £10m and
payable in H1 2025. The consideration for F2P is £7.8m, which is 7x 2022
EBITDA and is payable on completion.
In April 2023, the Group invested an additional £0.2m into Pivotal Growth to
continue to support its buy and build growth strategy.
The accounting for all disposals noted above will be included in the 2023
Interim Financial Statements.
Forward-Looking Statement
This announcement may contain certain statements that are forward‐looking
statements. They appear in a number of places throughout this announcement and
include statements regarding LSL's intentions, beliefs or current expectations
and those of its officers, directors and employees concerning, amongst other
things, LSL's results of operations, financial condition, liquidity,
prospects, growth, strategies and the business it operates. By their nature,
these statements involve uncertainty since future events and circumstances can
cause results and developments to differ materially from those anticipated.
The forward‐looking statements reflect knowledge and information available
at the date of preparation of this update and, unless otherwise required by
applicable law, LSL undertakes no obligation to update or revise these
forward-looking statements. Nothing in this announcement should be construed
as a profit forecast. LSL and its Directors accept no liability to third
parties in respect of this announcement save as would arise under English law.
Any forward‐looking statements in this announcement speak only at the date
of this announcement and LSL undertakes no obligation to update publicly or
review any forward‐looking statement to reflect new information or events,
circumstances or developments after the date of this announcement.
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