REG - LSL Property Svcs. - HALF YEAR RESULTS TO 30 JUNE 2024
18/09/2024 07:00
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RNS Number : 5974E LSL Property Services PLC 18 September 2024
18 September 2024
LSL Property Services plc ("LSL" or "Group")
HALF YEAR RESULTS TO 30 JUNE 2024
LSL reports its results for the six months ended 30 June 2024 with Group
Underlying Operating Profit of £14.4m (H1 2023: £3.2m). Results are in line
with upgraded expectations as announced with the Preliminary results in April,
and materially ahead of prior year. The Board's expectations for the full year
remain unchanged.
David Stewart, Group Chief Executive commented:
"Following a period of significant strategic transformation, we have delivered
a robust financial performance in the first half of 2024 during a period in
which our end markets have been fairly muted. Each of our businesses has
achieved strong market share whilst focusing on delivering against our
strategic priorities and putting in place a solid platform for future growth.
"Today, LSL is a more streamlined, agile Group comprising three strong
businesses, each with attractive organic growth opportunities that are well
positioned to capitalise from any further improvement in the housing and
mortgage markets. Our focus is on maximising the performance of our businesses
to deliver value to shareholders."
STRATEGIC AND OPERATIONAL HIGHLIGHTS
Following the successful completion of our significant restructuring and
transformation programmes in 2023, LSL is now a much simpler Group, well
positioned to deliver higher operating margins, and more consistent earnings
through market cycles.
· Strong market share across all divisions with Financial Services
enhanced by the purchase of TenetLime. Our Surveying business delivered a
slight increase on its already very strong position, whilst our Estate Agency
franchisees have maintained their national market share
· Annualised total operating costs reduction of c.£140m following the
restructuring of the Group in 2023
· Surveying B2C revenue 60% above H1 2023 with investment continuing to
drive future growth
· Renewal and improvement in terms of two main lender contracts in
Surveying in H1 2024 with further contractual gains and increased allocations
from other lenders
· TenetLime performance in line with management expectations with high
levels of appointed representative (AR) firm and adviser retention boosting
our share of the mortgage market
· Estate Agency Franchising continues to support the growth of
franchisees, to facilitate territory expansion and supporting lettings book
acquisitions completed in August
· Acquisition during 2024 of five businesses by our Pivotal Growth
JV, with advisers increasing to over 450 (c.50% increase on H1 2023)
· Interim dividend maintained at 4p per share
· Adrian Collins appointed as Chair and Michael Stoop as
Non-Executive Director
FINANCIAL HIGHLIGHTS
H1 financial metrics(1) 2024 Restated(2) Var
2023
Group Revenue (£m) 85.4 72.5 18%
Group Underlying Operating Profit from total operations(3) (£m) 14.4 3.2 354%
Group Underlying Operating margin (%) 17% 3% +1390bps
Group Underlying Operating Profit(3) (£m) 14.4 4.2 247%
Exceptional Gains (£m) 0.4 9.0 (96)%
Exceptional Costs (£m) (0.5) (4.3) 89%
Group operating profit (£m) 13.0 7.6 72%
Profit before tax (£m) 13.8 7.4 85%
Loss from discontinued operations(4) (£m) (0.2) (42.9) 99%
Basic Earnings per Share (pence) 9.9 5.3 87%
Adjusted Basic Earnings per Share(5) (pence) 11.0 2.6 323%
Net Cash(5) at 30 June (£m) 32.5 36.3 (11)%
Interim Dividend per share (pence) 4.0 4.0 -
· Group Revenue(1) was £85.4m (H1 2023: £72.5m). After adjusting for
disposals, revenue was 27%(6) above prior year in a market in which total
mortgage lending was flat and house sales were 1% higher
· Group Underlying Operating Profit was £14.4m (H1 2023: £3.2m from
total operations(1,3), £4.2m from continuing operations(1,3)), significantly
ahead of the prior year, with particularly strong recovery in the Surveying
& Valuations Division
· Material improvement in Group operating margin to 17% (H1 2023: 3%)
· Net Exceptional costs(7) of £0.1m (H1 2023: net gains £4.7m)
· Group operating profit was £13.0m (H1 2023: £7.6m)
· Net Cash(8) of £32.5m at 30 June 2024 (31 December 2023: £35.0m, 30
June 2023: £36.3m), with a cash flow conversion rate(8) of 81% (H1 2023:
(220)%)
DIVISIONAL PERFORMANCE
Surveying & Valuation Division
· Surveying & Valuation performance included benefits from
improving market conditions and contract extensions with improved terms and
allocations with Underlying Operating Profit(3) increasing to £12.9m (H1
2023: £3.7m)
· Mortgage approvals(9) in H1 were 14% above H1 2023, driven by higher
purchase approvals (up 23%) with remortgage and other approvals broadly flat
· We estimate that our market share of physical and remote valuation
instructions(9) increased marginally to 40% (H1 2023: 39%)
· Long-term contract extension with Lloyds Banking Group, underpinning
the Group's leading market position. Furthermore, we also secured a
substantial improvement in terms and allocation with another major lender
· Retained contracts with all lending customers with no loss in
allocations
· Developing B2C revenue, survey and valuation work performed for the
end consumer, is a strategic objective and in the first half of 2024 it
increased by 60% to £2.8m (H1 2023: £1.8m)
· Investments made to support B2C/Home Buyer activities, with
acceleration of marketing activity, and also data and model development
initiatives. These investments will increase further in the second half of the
year to support the Group's strategy to grow new income lines in future years
Financial Services Division
· Financial Services Network business traded resiliently in soft market
conditions, reporting Underlying Operating Profit(3) of £4.3m (H1 2023:
£3.8m)
· After adjusting for businesses disposed of during H1 2023, revenue
was up 1%. Total revenue was £23.6m (H1 2023: £28.0m)
· Increased market share of the UK purchase and remortgage market(10)
of 11.1% (H1 2023: 10.5%)
· LSL advisers continue to adapt effectively to changes in the mortgage
market, increasing product transfer mortgage completions by 20%, resulting in
a substantially increased share of the product transfer market to 7.2% (H1
2023: 5.8%)
· The weighting of margin dilutive product transfers in the refinancing
market remained above the long-term average
· Network protection revenue increased by 3% to £5.7m (2023:
£5.6m) after adjusting for disposals
· The number of Network firms increased to 1,146 as at 30 June 2024 (H1
2023: 986), including 151 TenetLime firms. Network firms remained cautious on
adviser levels due to challenging market conditions, advisers increased to
2,847 as at 30 June (30 June 2023: 2,718) including 255 TenetLime advisers
Estate Agency Franchising Division
· Benefits of new business model are reflected in an Underlying
Operating Profit(3) of £3.1m (H1 2023: loss from total operations of £0.7m)
in the first half of the year, achieved in a flat housing market, with an
underlying operating margin of 24%
· Scope remains for further cost efficiency gains within Estate Agency
business as the operating model approaches target state
· The number of properties under management reduced marginally to
36,987 (30 June 2023: 37,960)
· Continued to support the growth of franchisees, including the first
loans granted to facilitate territory expansion and lettings book acquisitions
completed in August, adding over 600 properties to the lettings portfolio
Pivotal Growth Joint Venture
· Acquisition during 2024 of five businesses, including John Charcol
with 150 mortgage and protection advisers
· Pivotal Growth now has over 450 advisers, making it one of the
largest mortgage and protection brokers in the UK, giving it critical mass to
leverage its scale to attract deals and drive revenue synergies and
profitability
· Pivotal Growth's underlying financial performance has steadily
improved as it has increased in scale and moved out of its establishment phase
· Following trading EBITDA growth before transaction costs in H1 2024
compared to prior year, our share of Pivotal profit/loss after tax is expected
to continue to improve in future periods
ECONOMIC AND MARKET ENVIRONMENT
· The market remains supressed compared to the long-term average, with
new lending 10% below the 10-year average(10) and housing transactions(11) 14%
below. Sticky inflation and delays to interest rate reductions impacted
consumer confidence in H1
· Although markets remained muted, front-end activity in the mortgage
and housing markets has improved, with mortgage approvals 14% ahead of H1 2023
and sales agreed 15% ahead. These trends will support the performance of our
Financial Services and Estate Agency Franchising businesses in the second half
of the year
· The mortgage lending market(10) in H1 2024 was around 2% smaller than
H1 2023. Purchase lending increased by 9%, and remortgage lending decreased by
8% whilst product transfer lending reduced by 5%
· Total lending arranged by LSL was 12% higher than H1 2023, with an
increased share in each of the purchase, remortgage and in particular product
transfer markets, and more heavily weighted than previously to product
transfers. LSL's share of the total purchase and remortgage market increased
to 11.1%(10) (H1 2023: 10.5%). LSL's market share of product transfers
increased to 7.2% (H1 2023: 5.8%)
· Bank of England mortgage approvals(9) were 14% higher than H1 2023
driven by purchase approvals being 23% higher with remortgage and other
mortgage approvals broadly flat. The more specialist Buy-to-Let and Equity
Release markets remain subdued as a result of higher interest rates. Total
jobs performed by the Surveying & Valuation Division increased by 18%,
above the market as a whole, reflecting a small increase in market share(10)
· Total UK HMRC recorded residential transactions(11) were 1% higher in
H1 2024 at 488k (H1 2023: 483k)
CURRENT TRADING AND OUTLOOK
The first half of the year showed a significant improvement in trading with
some improvement in sentiment and, more recently, lower mortgage rates which
are starting to drive more activity across our core markets. We have seen an
increase in mortgage approvals which will be reflected in future housing
transactions and the start of a normalisation in product mix in our mortgage
business. In the first half of 2024, these conditions particularly benefited
our Surveying & Valuation business, where there has been a very
substantial increase in activity and profits.
The improved trading reflects better market conditions but also the benefits
of the new Estate Agency franchise model, improved lender contracts, and our
decision to retain surplus capacity throughout the second half of 2023. The
Board remains confident that the Group will deliver a full year Underlying
Operating Profit in line with its prior expectations and significantly above
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 (mailto:investorrelations@lslps.co.uk)
Helen Tarbet
Sophie Wills
George Beale
Burson Buchanan 0207 466 5000 / LSL@buchanan.uk.com (mailto:LSL@buchanan.uk.com)
Notes:
1 Stated on basis of continuing operations unless otherwise
stated. Following the conversion of the entire owned estate agency network to
franchises in H1 2023, the previously owned network was classified as a
discontinued operation and is now presented as such in the Financial
Statements. Refer to note 6 to the Financial Statements
2 Refer to note 14 to the Financial Statements for details
regarding the restatement
3 Group (and Divisional) Underlying Operating Profit is
stated before exceptional items, contingent consideration assets &
liabilities, amortisation of intangible assets and share-based payments. Refer
to note 5 to the Financial Statements for reconciliation of Group and
Divisional Underlying Operating Profit to statutory operating profit/(loss)
for continuing, discontinued and total operations
4 Following the conversion of the entire owned estate agency
network to franchises in H1 2023, the previously owned network was classified
as a discontinued operation and is now presented as such in the Financial
Statements. Refer to note 6 to the Financial Statements
5 Refer to note 5 to the Financial Statements for the
calculation
6 Revenue: £84.5m in H1 2024 with statutory revenue of
£85.4m less £0.9m revenue due to acquisitions in 2024, as compared to
£66.4m in H1 2023 with statutory revenue of £72.5m less £6.1m revenue from
businesses disposed in 2023
7 Refer to note 7 to the Financial Statements
8 Refer to note 5 to the Financial Statements for the
calculation
9 Number of approvals for lending secured on dwellings, BoE
via UK Finance (Jul 2024)
10 Mortgage lending excluding product transfers - new mortgage
lending by purpose of loan, UK (BOE) - Table MM23 (Jul 2024)
11 Number of residential property transaction completions with
value £40,000 or above, HMRC (Jul 2024)
nm Not meaningful
Notes on LSL
LSL is one of the largest providers of services to mortgage intermediaries and
estate agent franchisees.
Over 2,800 advisers representing around 11% of the total purchase and
remortgage market.
Its 61 estate agency franchisees operate in 308 territories.
LSL is also one of the UK's largest providers of surveying and valuation
services, supplying seven out of the ten largest lenders in the UK.
For further information please visit LSL's website: lslps.co.uk
(http://www.lslps.co.uk/)
GROUP CHIEF EXECUTIVE'S REVIEW
I am pleased to report the Group has delivered a robust performance in the
first half of 2024 as we focused on the execution of our growth plans across
our three market leading businesses. Although we have been subject to less of
a headwind than in 2023, the markets in which we operate remain muted. The
significant growth in profitability highlights the benefits of the strategic
transformation undertaken last year. More broadly, because of the work we have
done, LSL is now well-positioned to drive greater shareholder value and to
perform more consistently through market cycles, supported by a strong balance
sheet.
With the benefit of the restructuring and transformation programmes complete,
management is focused on maximising the operational potential in each of our
businesses and ensuring that this potential is appropriately reflected in the
wider perceptions of LSL. The Board continues to focus on driving shareholder
value, including delivering on our return on investment criteria and
maintaining the appropriate capital structure.
Our financial and operational progress has been delivered against what is
still a relatively sluggish market backdrop, with some signs of green shoots
in the mortgage and housing markets as mortgage rates started to come down.
I would like to thank all my colleagues for their continued hard work and
exceptional support in the transformation of the Group.
Review of H1 2024 Performance
The Group's performance benefitted strongly from a recovery in demand and
contract wins for our Surveying & Valuation Division as well as the
structural benefit of moving to a franchise operating model for our Estate
Agency Division. Our Financial Services Division traded resiliently in the
soft market conditions, gaining share in each of the mortgage market segments
and executing effectively its acquisition of Tenet advisers.
Group Revenue(1) was £85.4m (H1 2023: £72.5m). After adjusting for
disposals, revenue was 27%(2) higher than prior year in a total lending market
that reduced by 2% by value and was broadly flat in terms of housing
transactions.
Group Underlying Operating Profit from continuing operations(1,3) was £14.4m
(H1 2023: £3.2m from total operations(1,3), £4.2m from continuing
operations(1,3)).
Strategic priorities and development
The Group has made substantial progress in implementing its strategy to
simplify the business, reduce earnings volatility, and focus investment in
high growth areas.
Following this restructuring we now have a strong platform across all three of
our divisions to further develop the strategic priorities for each business
and leverage our market leading positions as lending and housing activity
recovers from a difficult market in 2023.
Surveying & Valuation contract renewals and investment in growth
We delivered a significant increase in profit in the Surveying & Valuation
Division, driven by several contract extensions, including that of Lloyds
Banking Group. The benefit of our decision to retain our surveying capacity in
the difficult conditions we faced in 2023 was demonstrated as the market
improved and with cost efficiency initiatives we saw a 29% increase in
surveyor revenue per day.
During the half, we have continued to invest in new business opportunities in
data and direct-to-consumer services. We increased our marketing activity to
support our D2C business, with encouraging results, and added senior headcount
into our data and model development teams. We continue to see exciting
opportunities from becoming the leading provider of the full range of
valuation methodologies our clients use.
The Surveying & Valuation Division has driven a culture of continuous
improvement and efficiency gains, including the introduction of a Robotic
Process Automation (RPA) platform in 2021, with over 50 Robots implemented.
The platform is responsible for driving automation across all business
processes to improve efficiencies, quality, compliance and service levels all
whilst supporting product development.
Increasing scale in the Financial Services Network
We completed the purchase of the TenetLime mortgage and protection network on
2 February 2024, adding more than 250 advisers across 151 firms and building
on our share of over 10% of the UK house purchase and remortgage markets. We
have been working hard to integrate TenetLime into our PRIMIS business and are
pleased with the way in which we have executed our plans. The transaction will
be earnings enhancing in 2024. Our total share of the purchase and remortgage
market in H1 2024 was a record at 11.1%(4).
Across the PRIMIS network trading performance was resilient, as PRIMIS
advisers increased their share of each of the purchase, remortgage and product
transfer segments.
Building for the future in Financial Services
Our focus is now firmly fixed on putting in place the foundations for
medium-term growth. We continue to recognise the long-term potential
opportunities in our network business and will make the investment needed to
realise this potential.
Over the past 12 months we have recruited a new senior management team and
absorbed the Mortgage Gym and DLPS technology businesses into the PRIMIS
network. Our protection "e-sub" service is in test with PRIMIS members with a
view to a more extensive roll out during the second half of the year. The use
of this new quoting system will deliver benefits to members and incremental
revenue to PRIMIS in 2025.
The provision of compliance services is one of the main reasons why mortgage
and protection brokers join networks, and LSL's size means we are well placed
to continue to make the investment needed to provide this support as
regulatory expectations increase in our markets. During 2023, we established a
new governance framework for our regulated financial services entities,
including the appointment of a divisional non-executive Chair and two other
experienced non-executive directors.
The team has also undertaken significant work to better understand our
members' needs and align our proposition with those services that deliver most
value to our members. We have worked with third party experts to review our
offering and have identified the potential from enhanced broker and central
office IT systems, to improve our service, increase efficiency of both
advisers and central operations and facilitate greater sales of related
products. We are finalising our plans in this area.
Focus on B2B in Financial Services
Over the last 18 months, we have simplified our Financial Services Division,
reducing both costs and earnings volatility with a focus on B2B services. Our
joint venture Pivotal Growth provides exposure to B2C market segments.
Estate Agency Franchising model
The strength of our new operating model in Estate Agency was demonstrated by
the financial performance over the first half of the year. We are ahead of the
plans we set for reducing costs and increasing margin.
With the completion of the conversion of our Estate Agency business to a
franchise model during 2023, we are now focused on further enhancing our
franchising expertise to bring on new partners and develop our services for
franchisees.
The Group has supported the acquisition of 2 lettings books by franchisees in
2024, providing total funding of £0.5m (in August) and adding over 600
properties to the existing portfolio of 36,987. This deal will deliver returns
in excess of Group cost of capital. We see scope for further similar deals
within the Estate Agency Franchise business.
During 2024 the Estate Agency Franchising Division has invested in
strengthening leadership capability with key senior appointments within
propositions and operations, with these roles funded from its cost reduction
programme.
Pivotal Growth Joint Venture
Pivotal Growth, our joint venture with Pollen Street Capital (PSC),
established to execute a buy-and-build strategy in the mortgage and protection
intermediary markets, was launched in 2021. Our joint aim is to build the
business together with a view to an exit event over a three-to-six-year period
after launch.
Pivotal has now acquired 14 businesses, including five acquisitions made in
2024 (three in the first half). With over 450 advisers, Pivotal is now one of
the UK's largest mortgage and protection brokers.
We have invested £13m in Pivotal since 2021 and we continue to closely
monitor Pivotal's performance to maximise returns for shareholders and it
remains on track to deliver returns ahead of the Group's WACC.
Dividend
The improvement in performance in H1 2024 underpins the Board's confidence in
the underlying fundamentals and prospects of the Group's businesses and
therefore the Board has declared an interim dividend payment amounting to 4.0
pence per share (H1 2023: 4.0 pence). The Groups dividend policy continues to
be a pay-out of 30% of Group Underlying Operating Profit after finance and
normalised tax charges.
The ex-dividend date for the interim dividend is 26 September 2024, with a
record date of 27 September 2024 and a payment date of 8 November 2024.
Shareholders can elect to reinvest their cash dividend and purchase additional
shares in LSL through a dividend reinvestment plan. The election date is 11
October 2024.
Share buyback
The Board's approach to capital allocation remains unchanged, as set out in
the Preliminary results announced on 25 April 2024. We will continue to deploy
the share buyback in a measured way and there are no plans to allocate cash
reserved for the buyback into other Group activities. To date, £0.3m of the
share buyback programme announced on 25 April 2024 has been deployed.
Change of auditor
As highlighted in the Audit & Risk Committee Report in the Annual Report
and Accounts 2023, an audit tender exercise had commenced in advance of the
Group's current auditor's (Ernst & Young LLP ("EY")) tenure reaching its
maximum term limit. We have now completed the comprehensive formal tender
process for our group audit, overseen by the Audit & Risk Committee, which
carefully evaluated the offering of each participant. This has resulted in a
recommendation from the Audit & Risk Committee, which has now been
endorsed by the Board, that a resolution be put to shareholders for approval
at the 2025 Annual General Meeting (AGM), appointing Grant Thornton UK LLP as
the Group's auditor for the year ending 31 December 2025.
EY will continue in the role until that time and will therefore undertake the
group audit for the year ended 31 December 2024. EY will cease to hold office
as the Group's auditor at the conclusion of the Company's 2025 AGM.
Current trading and outlook
The first half of the year showed a significant improvement in trading with
some improvement in sentiment and, more recently, lower mortgage rates which
are starting to drive more activity across our core markets. We have seen an
increase in mortgage approvals which will be reflected in future housing
transactions and the start of a normalisation in product mix in our mortgage
business. In the first half of 2024, these conditions particularly benefited
our Surveying & Valuation business, where there has been a very
substantial increase in activity and profits.
The improved trading reflects better market conditions but also the benefits
of the new Estate Agency franchise model, improved lender contracts, and our
decision to retain surplus capacity throughout the second half of 2023. The
Board remains confident that the Group will deliver a full year Underlying
Operating Profit in line with its prior expectations and significantly above
2023.
David Stewart
Group Chief Executive Officer
17 September 2024
Notes:
1 Following the conversion of the entire owned estate agency
network to franchises in H1 2023, the previously owned network was classified
as a discontinued operation and is now presented as such in the Financial
Statements. Refer to note 6 to the Financial Statements
2 Revenue: £84.5m in H1 2024 with statutory revenue of
£85.4m less £0.9m revenue due to acquisitions in 2024, as compared to
£66.4m in H1 2023 with statutory revenue of £72.5m less £6.1m revenue from
businesses disposed in 2023
3 Group (and Divisional) Underlying Operating Profit is
before exceptional items, contingent consideration assets & liabilities,
amortisation of intangible assets and share-based payments. Refer to note 5 to
the Financial Statements for reconciliation of Group and Divisional Underlying
Operating Profit to statutory operating profit/(loss) for continuing,
discontinued and total operations
4 Mortgage lending excluding product transfers - new
mortgage lending by purpose of loan, UK (BOE) - Table MM23 (Jul 2024)
5 Refer to note 5 to the Financial Statements for the
calculation
H1 P&L (£m) 2024 Restated(1) Var
2023
Divisional Group Revenue(2)
Financial Services 23.6 28.0 (16)%
Surveying & Valuation 48.9 37.2 31%
Estate Agency Franchising 12.9 7.2 79%
Group Revenue 85.4 72.5 18%
Estate Agency - discontinued operations 0.0 32.3 (100)%
Group Revenue (incl. discontinued operations) 85.4 104.8 (19)%
Divisional Underlying Operating Profit/(Loss)(2,3)
Financial Services Network 4.3 3.8 14%
Pivotal joint venture (0.4) (0.2) (126)%
Financial Services 3.9 3.6 9%
Surveying & Valuation 12.9 3.7 249%
Estate Agency Franchising 3.1 0.3 939%
Unallocated Central Costs (5.5) (3.5) (60)%
Group Underlying Operating Profit from continuing operations 14.4 4.2 247%
Estate Agency - discontinued operations 0.0 (1.0) 100%
Group Underlying Operating Profit 14.4 3.2 354%
from total operations
Divisional operating profit/(loss)(2,3)
Financial Services 2.9 10.3 (72)%
Surveying & Valuation 12.9 1.6 693%
Estate Agency Franchising 2.6 (0.6) 526%
Unallocated Central Costs (5.3) (3.7) (42)%
Group operating profit/(loss) from continuing operations 13.0 7.6 72%
Estate Agency - discontinued operations (0.3) (41.5) 99%
Group Operating Profit / (Loss) 12.7 (33.9) 138%
from total operations
Notes:
1 Refer to note 4 and 14 to the Financial Statements
2 Following the conversion of the entire owned estate agency
network to franchises in H1 2023, the previously owned network was classified
as a discontinued operation and is now presented as such in the Financial
Statements. Refer to note 6 to the Financial Statements
3 Group (and Divisional) Underlying Operating Profit is
before exceptional items, contingent consideration assets & liabilities,
amortisation of intangible assets and share-based payments. Refer to note 5 to
the Financial Statements for reconciliation of Group and Divisional Underlying
Operating Profit to statutory operating profit/(loss) for continuing,
discontinued and total operations
FINANCIAL & DIVISIONAL REVIEWS
Group Income Statement Review(1)
Group Revenue was £85.4m (H1 2023: £72.5m). After adjusting for disposals
and for the purchase of TenetLime in H1 2024, revenue was 27%(2) above prior
year in a total lending market that reduced by 2% by value and a broadly flat
housing market. The increase was primarily in the Surveying & Valuation
Division with a 31% increase compared to prior year, driven by 2023 contract
wins and a 14% increase in total BoE mortgage approvals, and a 79% increase in
Estate Agency Franchising due to 6 months' trading in 2024 compared to only 2
months in H1 2023. After adjusting for businesses disposed of during H1 2023,
Financial Services Division revenue was up 1%, with total Divisional revenue
of £23.6m (H1 2023: £28.0m).
Group Underlying Operating Profit(3) recovered strongly to £14.4m (H1 2023:
£3.2m(4)), with a year on year increase in each Division. Group Underlying
Operating margin of 17% was the highest first half margin for over 15 years,
particularly reflecting high utilisation in Surveying and the benefits of the
franchising model in Estate Agency for the whole period. Group Underlying
Operating Profit from continuing operations was £14.4m (H1 2023: £4.2m).
Group Operating Profit increased to £13.0m (H1 2023: £7.6m), resulting from
the improved trading performance in the period, offset by £0.1m net
exceptional costs in H1 2024 (H1 2023: Net Exceptional Gain: £4.7m).
Adjusted operating expenditure(5), comprising Employee costs, Other operating
costs, and Depreciation totalled £70.9m in H1 2024, 4% higher than prior year
(H1 2023: £68.4m), with the movement comprising the net effect of the
following factors:
- Reduction of c.£7m due to disposed businesses during H1 2023
- After adjusting for disposed businesses, costs were flat in
Financial Services in line with revenue
- Increased variable costs in Surveying & Valuation arising from
31% increase in revenues
- The increased costs in Estate Agency reflect a full half year
period of franchise operations compared to the prior part year of operations
- Central (unallocated) costs of £5.5m (H1 2023: £3.5m) with the
increase primarily due to strategic investment, Board changes and additional
audit fees incurred in respect of the prior period reflecting the accounting
treatment for the Group transformation in 2023
This is broadly in line with expectations in comparison to the historical H1
operating expenditure levels of c.£140m, and the targeted annualised total
operations cost reduction of c.£140m following the restructuring of the Group
in 2023.
Other gains
Total other operating gains were £0.3m (H1 2023: £0.3m). This reflected the
movement in the fair value of shares held in an unlisted investment having
been reassessed at 30 June 2024 as £0.3m (31 December 2023: £nil).
Share of losses from joint venture
Losses from our equity share of Pivotal Growth increased to £0.4m (H1 2023:
£0.2m loss), reflecting increased acquisition transaction fees in comparison
to the prior period. Trading EBITDA before transaction costs has grown in H1
2024 compared to prior year.
Share-based payments
The share-based payment credit of £0.1m in 2023 (H1 2023: charge of £0.4m)
comprises, a charge in the period of £1.9m for LTIP, SAYE and BAYE schemes
granted in 2021 to 2024, offset by a credit of £2.0m reflecting lapses. The
prior year included a lower charge of £1.5m, offset by lower lapse and leaver
adjustments.
Amortisation of intangible assets(6,7)
Amortisation charge of £1.4m (H1 2023: £0.9m(7)), relates to amortisation of
intangible software investment, franchise agreements and relationship assets.
The year-on-year movement comprises a reduction in both lettings books and
certain software intangibles as they have been fully amortised, a full half
period in H1 2024 of amortisation for the newly established franchise
intangibles and acquired TenetLime intangible assets.
Exceptional items(8)
The exceptional gain of £0.4m (H1 2023: £9.0m) relates primarily to the
increase in contingent consideration receivable on the disposal of Group First
(£0.3m) and release of dilapidation provision (£0.1m). The gain on disposal
during H1 2023 related to the disposal of the Embrace and First2Protect
businesses to Pivotal Growth.
Exceptional costs of £0.5m (H1 2023: £4.3m), is primarily a decrease in
contingent consideration receivable on the disposal of RSC and EFS (£0.3m)
and corporate transaction costs. The prior year costs of £4.3m related to
restructuring activity and corporate transaction costs of £2.9m and the net
loss on disposals of Group First, RSC and Marsh & Parsons of £1.4m.
Finance income increased to £1.4m (H1 2023: £0.8m) resulting mainly from
increased interest received of £0.9m on funds held on deposit (H1 2023:
£0.7m) and the unwind of discounting on contingent consideration receivable
balances of £0.4m (H1 2023: £nil).
Finance costs of £0.7m (H1 2023: £0.9m) are related principally to the
unwinding of discount on lease liabilities of £0.2m (H1 2023: £0.1m),
commitment and non-utilisation fees on the revolving credit facility of £0.3m
(H1 2023: £0.5m), unwinding of discount on contingent consideration payable
of £0.1m (H1 2023: £0.3m) and £0.1m for the unwinding of discount on
dilapidations provisions (H1 2023: £nil).
Profit before tax
Profit before tax was £13.8m (H1 2023: £7.4m). The year-on-year movement is
primarily due to the materially higher Group Underlying Operating Profit in H1
2024, offset by the year on year movement in net exceptional gains in H1 2023
of £4.7m to a net exceptional cost in H1 2024 of £0.1m.
Taxation
The tax charge of £3.6m (H1 2023: £2.1m) represents an effective tax rate of
26.0% (H1 2023: 27.8%), which is slightly higher than the headline UK tax rate
of 25.0% primarily because of non-deductible expenditure and contingent
consideration, offset in part by the movement on deferred tax not recognised.
Deferred tax assets and liabilities are measured at 25.0% (2023: 25.0%), the
tax rate that came into effect from 1 April 2023.
Discontinued operations(1) loss of £0.2m (net of tax) in relation to an
increase in the restructuring costs in the previously owned Estate Agency
branch network (H1 2023: loss of £42.9m). The prior period reflects the
discontinued operations in Estate Agency Franchising which included
exceptional restructuring costs of £12.7m and write down of associated
disposed goodwill (£38.1m), offset in part by the exceptional gain on
recognition of intangible franchise agreements of £10.7m.
Earnings per Share(5)
H1 2024 H1 2023
Earnings per Share (pence) Basic Diluted Adjusted basic Adjusted basic diluted Basic Diluted Adjusted basic Adjusted basic diluted
Continuing 9.9 9.8 5.3 5.2
Discontinued (0.2) (0.2) (41.6) (41.1)
Total operations 9.7 9.6 11.0 10.9 (36.4) (35.9) 2.6 2.5
Business Reviews
Surveying & Valuation Division
To reflect the change in the structure of the Group our asset management
business which provides repossession services to corporate clients is now
reported within the Surveying & Valuation Division, as the key commercial
relationships for this business are with major lenders.
Surveying revenue increased significantly to £46.3m in the period, an
increase of 30% on H1 2023 (£35.5m), reflecting both the 18% increase in jobs
performed and the 11% increase in income per job on the comparative period.
The increase in jobs performed resulted in the market share of valuations
instructions increasing to 40.3% in H1 2024 (H1 2023: 38.6%). Growth in D2C in
recent years has continued in the period, with H1 2024 revenue of £2.8m
representing a 60% increase on H1 2023.
Surveying Underlying Operating Profit(3) increased materially to £11.7m (H1
2023: £3.4m), benefitting from the strong revenue growth and the self-help
cost measures taken in 2023.
Asset Management revenues grew by 49% to £2.6m in the period, reflecting the
moderately more active market. However, the market remains below long-run
trend levels. The profit generated by this business was £1.2m in H1 2024 (H1
2023: £0.3m).
Total Division revenue of £48.9m in the period was an increase of £11.7m
compared to H1 2023 (£37.2m). Underlying Operating Profit(3) increased
materially to £12.9m (H1 2023: £3.7m) reflecting the benefit of the revenue
increases in both the e.surv and asset management businesses. On a statutory
basis, operating profit was £12.9m (H1 2023: £1.6m).
Financial Services Division
Our Financial Services Division is reported in two business lines: our core
Financial Services Network business comprising PRIMIS and TMA mortgage club,
and our share of profit after tax of Pivotal Growth.
Total revenue was £23.6m (H1 2023: £28.0m). After adjusting for businesses
disposed of during H1 2023, revenue was up 1%. We increased our share of the
purchase and remortgage and of the product transfer markets, with a record
share of the purchase and remortgage (11.1%(9) up from 10.5%) and the product
transfer markets (7.2% up from 5.8%). Protection performance was also robust,
with Network protection revenue increasing by 3% after adjusting for disposed
businesses.
Network Underlying Operating Profit(3) was £4.3m (H1 2023: £3.8m), which was
marginally ahead of H1 2023 on an organic basis, in what was a flat market,
whilst also absorbing the cost of an extended governance framework and
restructuring costs.
Our share of losses after tax in our joint venture Pivotal Growth was £0.4m
(H1 2023: loss of £0.2m), reflecting the higher transaction costs. The
trading EBITDA of Pivotal was £0.2m ahead of the same period last year.
Total Financial Services Division Underlying Operating Profit(3) was £3.9m
(H1 2023: £3.6m, £4.0m after adjusting for disposed businesses). On a
statutory basis, operating profit was £2.9m (H1 2023: £10.3m).
The Financial Services Network business has a regulatory capital requirement
which represents 2.5% of its regulated revenues. The regulatory capital
requirement was £6.4m at 30 June 2024 (31 December 2023: £5.9m, H1 2023:
£6.1m), with a surplus of £22.9m (31 December 2023: £24.7m, H1 2023:
£24.4m).
Estate Agency Franchising Division
Estate Agency Franchising business revenue was £12.9m (H1 2023: £7.2m), with
the increase primarily reflecting the wholesale franchising of the division
only part way through H1 2023.
Underlying Operating Profit(1,3) of £3.1m was delivered in H1 2024 (H1 2023:
£0.3m) at a 24% operating margin. The greater consistency of the franchising
model was demonstrated at the start of 2024 when the Division reported a
profit in January for only the second time in its history. On a statutory
basis, operating profit was £2.6m (H1 2023: loss of £0.6m).
Group Balance Sheet Review
Goodwill - 30 June 2024: £16.9m (31 December 2023: £16.9m, 30 June 2023:
£16.9m)
The carrying value of Goodwill relates to previous acquisitions in the
Surveying & Valuation Division of £9.9m and Financial Services Division
of £7.0m.
Other intangible assets(6,7) - 30 June 2024: £30.2m (31 December 2023:
£21.5m, 30 June 2023: £23.9m)
Intangible relationship assets of £9.3m were recognised during the period
upon the purchase of TenetLime, with further additional investment in
Financial Services and Surveying of £0.8m. Total amortisation of £1.4m was
charged in the year (H1 2023: £0.9m). The carrying value of all franchise
agreements was £11.3m at 30 June 2024 (31 December 2023: £11.7m, H1 2023:
£12.2m) and the carrying value of the acquired relationship assets was £9.0m
at 30 June 2024 (31 December 2023: £nil, H1 2023: £nil).
For the year ended 31 December 2023, the Group revisited its accounting policy
in relation to customisation costs incurred in implementing Software as a
Service (SaaS) arrangements. The net impact of this restatement of results to
the income statement for H1 2023 was £0.4m credit and £0.4m to intangible
assets as at 30 June 2023, which was not cash adjusting.
Property, plant and equipment (PPE) and right-of-use assets (RoU assets) - 30
June 2024: £6.3m (31 December 2023: £6.9m, 30 June 2023: £6.3m)
Capital expenditure on owned PPE in the year amounted to £0.3m (H1 2023:
£0.5m), primarily reflecting ongoing investment in Financial Services and
Surveying & Valuation, and the year on year reduction due to the Estate
Agency Franchising operating model transformation in 2023. Total depreciation
of £1.6m was charged in the year (H1 2023: £1.6m).
Financial assets - 30 June 2024: £6.0m (31 December 2023: £5.5m, H1 2023:
£8.5m)
Contingent consideration receivable
During H1 2023 the Group disposed of Group First, RSC and Embrace B2C
brokerage businesses to Pivotal Growth, with contingent consideration
receivable in the first half of 2025 based on 7x 2024 EBITDA performance. As
at 30 June 2024, this asset is recorded at £5.1m (31 December 2023: £4.8m,
H1 2023: £8.0m).
The Group also has contingent consideration receivable in relation to disposed
lettings books, which are due in December 2024 and November 2025. As at 30
June 2024, this asset is recorded at £0.2m (31 December 2023: £0.3m, H1
2023: £nil).
Equity instruments in unlisted companies
No change in the fair value of units held in The Openwork Partnership LLP of
£0.4m at 30 June 2024 (31 December 2023: £0.4m, 30 June 2023: £0.5m). The
fair value had been reassessed down to £0.4m at 31 December 2023, with our
valuation based on an estimated strike price which has been calculated using
the average strike price from most recently executed trading windows.
The fair value of shares held in Twenty7tec Group Limited was reassessed at 30
June 2024 as £0.3m (31 December 2023: £nil, H1 2023: £nil). Twenty7tec is a
provider of technology to mortgage advisers and lenders.
Investment in joint ventures - 30 June 2024: £9.0m (31 December 2023: £9.4m,
30 June 2023: £9.6m)
Our 46.5% share of the Pivotal Growth joint venture is accounted for using the
equity method with the change in value resulting from our share of losses
after tax for the period.
Investment in sublease (total current and non-current) - 30 June 2024: £1.9m
(31 December 2023: £3.3m, 30 June 2023: £4.4m)
This reflects the situation whereby the Group is an intermediate lessor,
following the Estate Agency conversion to a wholly franchised model. As part
of the franchising transition, some of the leases held by the Group in respect
of the previously owned network have been transferred to the franchisees,
resulting in a reduction in both the investment in sublease balance by £1.0m
and a similar reduction in IFRS 16 lease financial liabilities. The balancing
movement reflects payments made by franchisees.
Loans to franchisees and appointed representatives (Network firms) - 30 June
2024: £1.5m (31 December 2023: £2.1m, 30 June 2023: £1.3m)
Various sized working capital loan facility agreements (largest of £1m) are
in place with several EA franchisees up to a cumulative maximum of £5.4m. At
30 June 2024, £0.9m was drawn down (31 December 2023: £0.8m, H1 2023:
£1.3m).
Loans to FS appointed representatives are granted in certain circumstances to
support brokers upon joining the PRIMIS network and were £0.6m as at 30 June
2024 (31 December 2023: £1.3m, 30 June 2023: £nil - having previously been
included in trade and other receivables).
Financial liabilities (total current and non-current) - 30 June 2024: £10.2m
(31 December 2023: £8.4m, 30 June 2023: £8.4m)
Contingent consideration liabilities - 30 June 2024: £3.7m (31 December 2023:
£0.07m, 30 June 2023: £0.03m)
Contingent consideration liabilities relate solely to the cost of acquiring
the intangible relationship assets in TenetLime in February 2024, with the
potential cash consideration of £4.6m payable in 2025 adjusted at 30 June
2024 for latest estimated forecast and discounting.
The remaining shares in Direct Life Quote Holdings Limited of £0.07m as at 31
December 2023 were subsequently acquired and paid in February 2024.
IFRS 16 lease financial liabilities - 30 June 2024: £6.5m (31 December 2023:
£8.3m, 30 June 2023: £8.4m)
The movement in the period reflects payment of lease liabilities of £1.9m and
disposals on assignment to franchisees of £0.9m, offset by new lease
additions and unwinding of discounting of £0.8m.
Provision for liabilities (total current and non-current) - 30 June 2024:
£11.7m (31 December 2023: £11.6m, 30 June 2023: £10.9m)
PI claim provisions of £3.0m (31 December 2023: £3.2m, 30 June 2023: £2.5m)
include the Surveying & Valuation PI provision of £2.3m (31 December
2023: £2.3m, 30 June 2023: £2.5m) and the Financial Services PI provision of
£0.7m (31 December 2023: £0.9m, 30 June 2023: £nil). The Group has
recognised an asset of £0.5m against received claims in other debtors at 30
June 2024 (31 December 2023: £0.6m, 30 June 2023: £nil).
Dilapidations and restructuring provisions primarily relating to the Estate
Agency Franchising Division following the wholesale franchising in 2023,
totalled £8.1m at 30 June 2024, the movement in the period relating to an
increase in the original provisions recognised in discontinued operations (31
December 2023: £7.8m, 30 June 2023: £8.4m).
A claims indemnity included in the sale agreement of LMS remains unchanged at
£0.6m at the period end (31 December 2023: £0.6m, 30 June 2023: £nil).
Group Statement of Cash flows - 30 June 2024: Net Cash(5) £32.5m (31 December
2023: Net Cash £35.0m, 30 June 2023: £36.3m)
Operating cashflows before movements in working capital were £16.2m (H1 2023:
£6.5m) reflecting the higher underlying operating profits generated in H1
2024. The business is highly cash generative and ordinarily achieves a cash
flow conversion rate(5) of 75% to 100%. The ratio in H1 2024 was 81%
reflecting the materially higher Underlying Operating Profit, with a ratio of
(220)% achieved in H1 2023.
Movements in working capital were an outflow of £2.8m (H1 2023: outflow of
£13.6m). The outflow in H1 2024 reflected higher Surveying billing in the
last months of H1 2024 compared to the end of 2023. The higher outflow in H1
2023 reflected the significant change in structure in the Group during that
period, especially in Estate Agency Franchising. The operating cycle of
working capital continues to settle following the completion of significant
restructuring and transformation programmes during 2023.
The first half of the year also included:
· the initial consideration of £5.7m for the purchase of TenetLime
assets
· capital expenditure on PPE and intangibles of £1.2m (H1 2023:
£1.4m). The transformation of the Group in 2023 has resulted in a less
capital-intensive business, with total capital expenditure expected to be
lower than in previous years, reflecting the franchise model in Estate Agency
· exceptional costs paid in relation to divisional restructure and
transformation programmes of £1.5m (H1 2023: £3.8m)
· payment of the 2023 final dividend of £7.6m (H1 2023: £7.6m)
and the repurchase of shares under the share buyback programme of £0.3m
· With the prior year losses brought forward, and previous payments
on account, there was no corporation tax paid in H1 2024 (H1 2023: £nil)
International Accounting Standards (IAS)
The Interim Condensed Consolidated Group Financial Statements for the period
ended 30 June 2024 have been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act
2006 and UK-adopted IAS.
Notes:
1 Based on continuing operations unless otherwise stated.
Following the conversion of the entire owned Estate Agency network to
franchisees in H1 2023, this was classified as a discontinued operation and is
now presented as such in the Financial Statements. Refer to 6 to the Financial
Statements
2 Revenue: £84.5m in H1 2024 with statutory revenue of
£85.4m less £0.9m revenue due to acquisitions in 2024, as compared to
£66.4m in H1 2023 with statutory revenue of £72.5m less £6.1m revenue from
businesses disposed in 2023
3 Group (and Divisional) Underlying Operating Profit is
before exceptional items, contingent consideration assets & liabilities,
amortisation of intangible assets and share-based payments. Refer to note 5 to
the Financial Statements for reconciliation of Group and Divisional Underlying
Operating Profit to statutory operating profit/(loss) for continuing,
discontinued and total operations
4 Stated on total operations basis
5 Refer to note 5 to the Financial Statements
6 Refer to note 3 and 10 to the Financial Statements
7 Refer to note 14 to the Financial Statements
8 Refer to note 7 to the Financial Statements
9 Mortgage lending excluding product transfers - new
mortgage lending by purpose of loan, UK (BOE) - Table MM23 (Jul 2024)
Principal Risks and Uncertainties
The principal risks and uncertainties relating to the Group's operations
remain consistent with those disclosed on pages 29 to 33 of the Group's Annual
Report and Accounts 2023 (which can be accessed on the Group's website:
www.lslps.co.uk). Having reconsidered these principal risks and uncertainties,
the Board has concluded that these remain the same as those included within
the Annual Report and Accounts 2023.
Responsibility statement of the Directors in respect of the half-yearly
financial report
We confirm that to the best of our knowledge:
· The Interim Condensed Consolidated Group Financial Statements for the
period ended 30 June 2024 have been prepared in accordance with UK adopted
International Accounting Standard 34;
· The interim management report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining
six months of the financial year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related-party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the
related-party transactions described in the last annual report that could do
so.
By order of the Board
David
Stewart
Adam Castleton
Director, Group Chief Executive Officer
Director, Group Chief Financial Officer
17 September 2024
17 September 2024
Interim Group Income Statement
for the six months ended 30 June 2024
Unaudited
Six months ended
30 June Restated*
2024
30 June
2023
Continuing operations: Note £'000 £'000
Revenue 4 85,394 72,494
Operating expenses:
Employee costs (50,639) (51,534)
Depreciation on property, plant and equipment and right-of-use assets (1,600) (1,644)
Other operating costs (18,657) (15,256)
Other gains 325 264
Share of post-tax loss from joint venture (377) (167)
Share-based payments 57 (377)
Amortisation of intangible assets (1,357) (941)
Exceptional gains 7 367 9,040
Exceptional costs 7 (482) (4,317)
Contingent consideration payable - 1
Group operating profit 13,031 7,563
Finance income 1,434 752
Finance cost (707) (884)
Net finance income/(cost) 727 (132)
Profit before tax from continuing operations 13,758 7,431
Taxation charge 9 (3,574) (2,063)
Profit for the period from continuing operations 10,184 5,368
Discontinued operations
Loss for period from discontinued operations 6 (227) (42,865)
Profit/(loss) for the period 9,957 (37,497)
Attributable to:
Owners of the parent 9,945 (37,421)
Non-controlling interest 12 (76)
( ) ( ) 9,957 (37,497)
( ) ( ) ( ) ( )
Earnings/(loss) per share from total operations (expressed as pence per
share):
Basic 9.7 (36.4)
Diluted 9.6 (35.9)
Earnings per share from continuing operations (expressed as pence per share):
Basic 9.9 5.3
Diluted 9.8 5.2
*See note 14 for details regarding the restatement.
Interim Group Statement of Comprehensive Income
for the six months ended 30 June 2024
Unaudited
Six Months Ended
30 June Restated*
2024
30 June
2023
£'000 £'000
Profit/(loss) for the period 9,957 (37,497)
Items that will not be reclassified to profit and loss in subsequent periods:
Revaluation of financial assets not recycled through income statement - (116)
Tax on revaluation - (1)
- (117)
Total comprehensive income/(loss), net of tax 9,957 (37,614)
Attributable to:
Owners of the parent 9,945 (37,538)
Non-controlling interest 12 (76)
9,957 (37,614)
*See note 14 for details regarding the restatement.
Interim Group Balance Sheet
as at 30 June 2024
Unaudited Audited
30 June 31 December 2023
2024
Note £'000 £'000
Non-current assets
Goodwill 16,855 16,855
Other intangible assets 10 30,212 21,461
Property, plant and equipment and right-of-use assets 6,305 6,917
Financial assets 11 758 5,407
Deferred tax asset - 166
Investment in sublease 11 1,106 1,756
Investment in joint venture 8,982 9,359
Contract 203 329
assets
Loans to franchisees and appointed representatives 11 873 1,655
Total non-current assets 65,294 63,905
Current assets
Trade and other receivables 27,261 23,206
Financial assets 11 5,276 54
Contract assets 111 40
Investment in sublease 11 773 1,582
Current tax asset - 2,183
Loans to franchisees and appointed representatives 11 654 444
Cash and cash equivalents 12 71,165 58,110
Total current assets 105,240 85,619
Total assets 170,534 149,524
Current liabilities
Financial liabilities 13 (5,740) (3,320)
Trade and other payables (30,947) (30,485)
Bank overdrafts 12 (38,700) (23,139)
Current tax liabilities (102) -
Provisions for liabilities (5,759) (5,903)
Total current liabilities (81,248) (62,847)
Non-current liabilities
Financial liabilities 13 (4,439) (5,085)
Deferred tax liability (885) -
Provisions for liabilities (5,951) (5,647)
Total non-current liabilities (11,275) (10,732)
Total liabilities (92,523) (73,579)
Net assets 78,011 75,945
Equity
Share capital 210 210
Share premium account 5,629 5,629
Share-based payment reserve 2,382 3,564
Shares held by employee benefit trust and share incentive plan (1,885) (2,871)
Treasury shares (4,319) (3,983)
Fair value reserve (385) (385)
Retained earnings 76,673 74,087
Equity attributable to the owners of the parent 78,305 76,251
Non-controlling interest (294) (306)
Total Equity 78,011 75,945
*See note 14 for details regarding the restatement.
Interim Group Statement of Cash Flows
for the six months ended 30 June 2024
Unaudited
Six Months Ended
Note 30 June 2024 Restated*
30 June
2023
Profit before tax from continuing operations 13,758 7,431
Loss before tax from discontinued operations (317) (41,572)
Profit /(loss) before tax 13,441 (34,141)
Adjustments for:
Exceptional costs 6,7 799 44,422
Exceptional gains 7 (367) (9,040)
Contingent consideration payable - (1)
Depreciation of tangible assets 1,600 2,794
Amortisation of intangible assets 1,357 1,268
Share-based payments (57) 432
Loss on disposal of property, plant and equipment and right-of-use assets - (2)
Loss from joint venture 377 167
Revaluation of investments at fair value through the income statement 11 (325) 180
Decrease in contract assets 55 151
Finance income (1,434) (752)
Finance costs 707 994
Operating cash flows before movements in working capital 16,153 6,472
Movements in working capital
(Increase) in trade and other receivables (3,758) (7,066)
Increase / (decrease) in trade and other payables 1,655 (6,663)
(Decrease) / increase in provisions (732) 158
(2,835) (13,571)
Cash generated from/(expended in) operations 13,318 (7,099)
Interest paid (leases) (215) (244)
Interest received (leases) 61 -
Exceptional costs paid (1,540) (3,780)
Net cash generated/(expended) from operating activities 11,624 (11,123)
Cash flows used in investing activities
Interest received 953 -
Disposal of businesses, net of cash disposed - 26,537
Payment of contingent consideration 13 (65) (2,280)
Receipt of contingent consideration 11 115 -
Investment in joint venture - (4,681)
Proceeds from sale of financial assets - 206
Franchisees and appointed representatives loans granted 11 (433) (1,335)
Franchisees and appointed representatives loan repayments 11 909 -
Receipt of lease income 463 116
Purchase of property, plant and equipment and intangible assets (1,165) (1,418)
Cash acquired on acquisition of subsidiary 10 503 -
Acquisition of subsidiary 10 (5,695) -
Net cash (expended)/generated on investing activities (4,415) 17,145
Cash flows used in financing activities
Repurchase of treasury shares (336) -
Proceeds from exercise of share options - 20
Payment of lease liabilities (1,733) (2,250)
Dividends paid (7,646) (7,601)
Net cash expended in financing activities (9,715) (9,831)
Net decrease in cash and cash equivalents (2,506) (3,809)
Cash and cash equivalents at the beginning of the period 34,971 40,109
Cash and cash equivalents at the end of the period 12 32,465 36,300
*See note 14 for details regarding restatements.
Interim Group Statement of Changes in Equity
Unaudited - for the six months ended 30 June
2024
Share- based payment reserve Shares held by employee benefit trust and share incentive plan
Share premium account
Share capital Treasury shares Fair value reserve Retained earnings Equity attributable to owners of the parent Non- controlling interest
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2024 210 5,629 3,564 (2,871) (3,983) (385) 74,087 76,251 (306) 75,945
Profit for the period - - - - - - 9,945 9,945 12 9,957
Total comprehensive income for the period - - - - - - 9,945 9,945 12 9,957
Exercise of options - - (682) 986 - - (304) - - -
Vested share options lapsed during the year - - (591) - - - 591 - - -
Dividend paid - - - - - - (7,646) (7,646) - (7,646)
Share-based payments - - (57) - - - - (57) - (57)
Tax on share-based payments - - 148 - - - - 148 - 148
Shares repurchased into treasury - - - - (336) - - (336) - (336)
At 30 June 2024 210 5,629 2,382 (1,885) (4,319) (385) 76,673 78,305 (294) 78,011
During the six-month period to 30 June 2024 a total of 267,796 share options
were exercised relating to LSL's various share option schemes resulting in the
shares being sold by the Trust. LSL received £nil on exercise of these
options.
During the six-month period to 30 June 2024, LSL had repurchased 112,000 LSL
shares at an average cost of £3.00 per share.
Interim Group Statement of Changes in Equity
Unaudited - for the six months ended 30 June
2023
Share- based payment reserve Shares held by employee benefit trust and share incentive plan
Share premium account
Share capital Treasury shares Fair value reserve Retained earnings Equity attributable to owners of the parent Non- controlling interest
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2023 210 5,629 5,331 (5,457) (3,983) (20,239) 146,715 128,206 428 128,634
Prior year restatements (net of tax), note 14 - - - - - - (2,582) (2,582) - (2,582)
Restated total equity at the beginning of the financial period 210 5,629 5,331 (5,457) (3,983) (20,239) 144,133 125,624 428 126,052
Loss for the period (restated) - - - - - - (37,421) (37,421) (76) (37,497)
Revaluation of financial assets - - - - - (116) - (116) - (116)
Tax on revaluation - - - - - (1) - (1) - (1)
Total comprehensive loss for the period (restated) - - - - - (117) (37,421) (37,538) (76) (37,614)
Acquisition of non-controlling interests - - - - - - 675 675 (675) -
Exercise of options - - (43) 53 - - 10 20 - 20
Dividend paid - - - - - - (7,601) (7,601) - (7,601)
Share-based payments - - 432 - - - - 432 - 432
Tax on share based payments - - 544 - - - - 544 - 544
Fair value reclassification following disposals - - - - - 19,971 (19,971) - - -
At 30 June 2023 (restated) 210 5,629 6,264 (5,404) (3,983) (385) 79,825 82,156 (323) 81,833
During the six-month period to 30 June 2023 a total of 17,984 share options
were exercised relating to LSL's various share option schemes resulting in the
shares being sold by the Trust. LSL received £0.02m on exercise of these
options.
Notes to the Interim Condensed Consolidated Group Financial Statements
The Interim Condensed Consolidated Group Financial Statements for the period
ended 30 June 2024 were approved by the LSL Board on 17 September 2024. The
interim Financial Statements are not statutory accounts. The financial
information for the year ended 31 December 2023 is extracted from the audited
statutory accounts for the year ended 31 December 2023, which have been filed
with the Registrar of Companies. The auditor's report on those 2023 full year
statutory accounts was unqualified and did not contain an emphasis of matter
paragraph and did not make a statement under section 498 (2) or (3) of the
Companies Act 2006.
1. Basis of preparation
The Interim Condensed Consolidated Group Financial Statements for the period
ended 30 June 2024 have been prepared in accordance with UK adopted
International Accounting Standard 34 and the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct Authority, and
should be read in conjunction with the Group's annual Financial Statements as
at 31 December 2023 which are included in LSL's Annual Report and Accounts
2023. The Group's annual Financial Statements for the year ending 31 December
2024 will be prepared in accordance with UK adopted International Accounting
Standards.
The Interim Condensed Consolidated Group Financial Statements do not include
all the information and disclosures required for a complete set of IFRS
Financial Statements. However, selected explanatory notes are included to
explain events and transactions that are significant to an understanding of
the changes in the Group's financial position and performance since the last
annual Financial Statements.
Going Concern
The UK Corporate Governance Code requires the Board to assess and report on
the prospects of the Group and whether the business is a Going Concern. In
considering this requirement, the Directors have taken into account the
Group's forecast cash flows, liquidity, borrowing facilities and related
covenant requirements and the expected operational activities of the Group.
The Group expects to continue to meet its day-to-day working capital
requirements through cashflows generated by its trading activities and
available cash resources (30 June 2024: £32.5m). The Group's banking
facility, a £60 million committed revolving credit facility has a maturity
date of May 2026. The Group have not currently utilised the facility leaving
£60 million of available undrawn committed borrowing facilities in respect of
which all conditions precedent had been met. The facility agreement contains
financial covenants, including minimum net debt to EBITDA ratio, which mean
that, under downside scenarios, the full facility would not be available in
the going concern period. The Group expects to renew its facility in advance
of the current maturity date, in line with previous renewals and timelines.
The Directors have continued to run a variety of scenario models throughout
the year to help the ongoing assessment of risks and opportunities covering
the period to 31 December 2025 ("the going concern period"). In the scenarios,
the Directors considered both current trading and external industry data. In
developing a base case forecast the Directors have assumed inflation and
interest rates of 3.0% and 5.25%, respectively, in 2024 and 3.0% and 5.25%,
respectively, in 2025.
The Directors have performed a reverse stress test to determine the events and
circumstances which would need to arise in order to threaten the Group's
ability to continue as a going concern. Such scenarios would require a
significant reduction in market transaction volumes below the low point
experienced during the Global Financial Crisis and in turn reduce Group
revenue by c. 25% compared to current performance. Under such a scenario, all
available cash balances would be utilised and the facility would be
unavailable due to financial covenants. If severe downside scenarios arose,
there are cost mitigations that could be applied, as well as cash conservation
action such as pausing dividend payments and planned investments. The
Directors have concluded that the likelihood of such a severe scenario arising
is remote and have concluded that there are no plausible threats to the
Group's ability to continue through the going concern period. Therefore, the
financial information has been prepared under the going concern basis of
preparation.
Having due regard to the scenarios above and after making appropriate
enquiries, the Directors have a reasonable expectation that the Group and the
Company have adequate resources to remain in operation to 31 December 2025.
The Board have therefore continued to adopt the going concern basis in
preparing the Interim Condensed consolidated Financial Statements.
2. Significant accounting policy information
The accounting policies adopted in the preparation of the Interim Condensed
Consolidated Group Financial Statements are consistent with those followed in
the preparation of the Group's annual Financial Statements for the year ended
31 December 2023. There were no new amendments, standards or interpretations
that had a material effect on the financial position or performance of the
Group in the period.
3. Judgements and estimates
In preparing these Condensed Consolidated Interim Financial Statements, the
significant judgements made by management in applying the Group's accounting
policies and they key sources of estimation uncertainty were the same as those
that applied to the Consolidated Financial Statements for the year ended 31
December 2023, with the exception of the following new significant judgement:
Asset acquisition - TenetLime
The Group acquired the entire issued share capital of TenetLime Limited
("TenetLime"), a subsidiary of Tenet Group Limited ("Tenet Group") on 2
February 2024. Judgement was required to determine whether the transaction
represented a business combination or an asset acquisition. The Group's
motivation for purchasing TenetLime was to expand its existing Financial
Services Network by increasing the number of appointed representatives (ARs)
using LSL's PRIMIS Network. The Group acquired contracts with 153 AR firms
through the acquisition of TenetLime and immediately transferred those firms
onto the PRIMIS Network.
Per IFRS 3, Management performed a concentration test to determine whether
substantially all the fair value of the gross assets acquired was concentrated
in a single identifiable asset. The test indicated that substantially all of
the value acquired was attributable to TenetLime's contractual relationships
with the AR firms.
Based on the assessment performed, Management concluded that the Group did not
acquire a business as part of the transaction and therefore the acquisition is
not a business combination. However, the Group did acquire an intangible asset
as per IAS 38, being the acquired contracts with each of the respective AR
firms which have been assigned a value based on the transaction price
excluding any cash acquired, please refer to note 10 for further details.
4. Segment analysis of revenue and operating profit
For the six months ended 30 June 2024 LSL has reported three operating
segments: Financial Services; Surveying & Valuation; and Estate Agency
Franchising.
The Estate Agency segment previously included the Group's owned network,
pre-existing franchise network, residential sales exchange, conveyancing
services, lettings and asset management businesses. The Estate Agency segment
was replaced by Estate Agency Franchising on 4 May 2023 which includes the
Group's franchise operations, residential sales exchange, and conveyancing
services.
During 2023 the Group disposed of its entire owned estate agency branch
network. In doing so the Group transitioned to be an operator of a franchising
estate agency business, providing services to its estate agency franchisees.
The Group has retained its smaller land and new homes business and its
conveyancing business, the results of which are reported within the Estate
Agency Franchising segment. The Group's asset management business was
transferred from Estate Agency Franchising to Surveying & Valuation
following changes in management responsibilities from 1 January 2024.
Management deemed the Group's asset management operations, including the class
of customer for its services, are more closely aligned to the Surveying &
Valuation Division after the Estate Agency Division's transformation into a
franchise model. Internally, the Chief Operating Decision Maker ("CODM") has
begun monitoring the performance of the asset management businesses as part of
the Surveying & Valuation segment from 1 January 2024. As a result, the
Group's operating segment disclosure for the six months ended 30 June 2023 and
the year ended 31 December 2023 have been restated to reflect this change.
Operating segments
The following tables presents revenue followed by profit information regarding
the Group's operating segments for the six months ended 30 June 2024, for the
six months ended 30 June 2023.
a) Revenue and operating profit by segment
Unaudited - Six months ended 30 June 2024
Income statement information
Financial Services Surveying Estate Agency Franchising
£'000 & Valuation £'000 Unallocated Total
£'000 £'000 £'000
Total revenue from external customers 23,555 48,890 12,949 - 85,394
Segmental result:
Underlying Operating Profit 3,923 12,923 3,138 (5,538) 14,446
Operating profit / (loss) 2,891 12,877 2,566 (5,303) 13,031
Finance income 1,434
Finance costs (707)
Profit before tax 13,758
Loss before tax from discontinued operations (317)
Taxation (3,484)
Profit for the period 9,957
Group Underlying Operating Profit is as defined in note 5 to these
Consolidated Condensed Financial Statements.
Estate Agency Franchising Unallocated Total
Financial Services Surveying
& Valuation
Balance sheet information £'000 £'000 £'000 £'000 £'000
Segment assets - intangible 18,040 12,132 16,895 - 47,067
Segment assets - other 24,730 15,360 7,531 75,846 123,467
Total Segment assets 42,770 27,492 24,426 75,846 170,534
Total Segment liabilities (14,758) (18,059) (17,427) (42,279) (92,523)
Net assets 28,012 9,433 6,999 33,567 78,011
The joint venture interests of the Group are recorded in the Financial
Services segment.
Unallocated net assets comprise PPE £0.7m, cash £71.1m, other assets £4.0m,
accruals and other payables of £(3.6)m, overdraft of £(38.7)m. Unallocated
result comprises costs relating to the Parent Company.
Unaudited - Six months ended 30 June 2023 (restated)
Income statement information
Financial Services Surveying Estate Agency Franchising
£'000 & Valuation £'000 Unallocated Total
£'000 £'000 £'000
Total revenue from external customers from continuing operations 29,619 37,237 7,230 - 74,086
Introducers fee (1,592) - - - (1,592)
Revenue from continuing operations 28,027 37,237 7,230 - 72,494
Revenue from external customers from discontinued operations - - 30,750 - 30,750
Introducers fee - - 1,592 - 1,592
Total revenue from continuing and discontinued operations 28,027 37,237 39,572 - 104,836
Segmental result:
Underlying Operating Profit 3,608 3,708 302 (3,460) 4,158
Operating profit / (loss) 10,274 1,623 (602) (3,732) 7,563
Finance income 752
Finance costs (884)
Profit before tax 7,431
Loss before tax from discontinued operations (41,572)
Loss before tax (34,141)
Taxation (3,356)
Loss for the period (37,497)
Group Underlying Operating Profit is as defined in note 5 to these
Consolidated Condensed Financial Statements.
Estate Agency Franchising Restated* Unallocated Restated* Total
Surveying
Financial Services & Valuation
Balance sheet information £'000 £'000 £'000 £'000 £'000
Segment assets - intangible 11,242 11,733 17,658 71 40,704
Segment assets - other 27,194 14,973 16,337 61,601* 120,105*
Total Segment assets 38,436 26,706 33,995 61,672* 160,809*
Total Segment liabilities (12,537) (15,126) (20,920) (30,393)* (78,976)*
Net assets 25,899 11,580 13,075 31,279 81,833
Unallocated net assets comprise other intangibles £0.1m, PPE £0.8m, cash
£57.3m, other assets £3.5m, accruals of £(6.6)m, payables £(0.1)m,
overdraft of £(21.0)m and current and deferred tax £(2.7)m. Unallocated
result comprises costs relating to the Parent Company.
*The Group has a bank offset arrangement that was previously recorded as part
of cash and cash equivalents. As part of the preparation of the 31 December
2023 Group Financial Statements, management reviewed its banking arrangements
and concluded that while the Group had a legally enforceable right of offset,
the Group did not intend to settle the period-end balance net. As a result,
the overdraft balances included within the offset arrangement should be
separately presented as at 30 June 2023. Consequently, a restatement has been
made with the effect that cash and cash equivalents and bank overdrafts as at
30 June 2023 increased by £21.0m. The restatement has no impact on net
assets, the Group's Income Statement or the Statement of Cash Flows.
b) Disaggregation of revenue from contracts with customers:
Unaudited - Six months ended 30 June 2024
Revenue Split by Stream - Unaudited - Six Months ended 30 June 2024
Financial Services Surveying & Valuation Residential sales exchange Lettings Estate Agency Franchising income Asset Management Other £'000
£'000 £'000 £'000 £'000 £'000 £'000 Total
£'000
Timing of revenue recognition
Services transferred at a point in time 23,555 46,307 2,082 314 9,372 2,583 442 84,655
Services transferred over time - - - - 739 - - 739
Total revenue from contracts with customers 23,555 46,307 2,082 314 10,111 2,583 442 85,394
Unaudited - Six months ended 30 June 2023
Revenue Split by Stream - Unaudited - Six Months ended 30 June 2023
Financial Services £'000 Surveying & Valuation Residential sales exchange Lettings Estate Agency Franchising income Asset Management Other £'000
£'000 £'000 £'000 £'000 £'000 Total
£'000
Timing of revenue recognition
Services transferred at a point in time 28,027 35,508 2,209 950 3,279 1,644 622 72,239
Services transferred over time - - - 170 - 85 - 255
Total revenue from contracts with customers 28,027 35,508 2,209 1,120 3,279 1,729 622 72,494
5. Adjusted performance measures
In reporting financial information, the Group presents APMs which are not
defined or specified under the requirements of IFRS. The Group believes that
the presentation of APMs provides stakeholders with additional helpful
information on the performance of the business but does not consider them to
be a substitute for or superior to IFRS measures. Definitions and
reconciliations of the financial APMs used to IFRS measures, are included
below.
The Group reports the following APMs:
a) Group and Divisional Underlying Operating Profit/(Loss)
Underlying Operating Profit represents the profit/(loss) before tax for the
period before net finance cost, share-based payments, amortisation of
intangible assets, exceptional items and contingent consideration. This is the
measure reported to the Directors as it considered to give a consistent
indication of both Group and Divisional underlying performance.
The closest equivalent IFRS measure to Underlying Operating Profit is
operating profit/(loss). Refer to below for a reconciliation between
profit/(loss) before tax and Group and Divisional Underlying Operating Profit.
Period ended 30 June 2024
Financial Services Surveying Estate Agency Franchising Unallocated IFRS reported total from
& Valuation continuing
operations
Total including discontinued operations
Discontinued Operations
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Profit/(loss) before tax 3,641 13,265 2,799 (5,947) 13,758 (317) 13,441
Net finance income/(cost) (750) (388) (233) 644 (727) - (727)
Operating profit/(loss) per income statement 2,891 12,877 2,566 (5,303) 13,031 (317) 12,714
Operating Margin 12.3% 26.3% 19.8% - 15.3% - 14.9%
Adjustments:
Share-based payments 16 16 146 (235) (57) - (57)
Amortisation of intangible assets 859 72 426 - 1,357 - 1,357
Exceptional gains (325) (42) - - (367) - (367)
Exceptional costs 482 - - - 482 317 799
Underlying Operating profit/(loss) 3,923 12,923 3,138 (5,538) 14,446 - 14,446
Underlying Operating Margin 16.7% 26.4% 24.2% - 16.9% - 16.9%
Period ended 30 June 2023 (restated)
Financial Services Surveying Estate Agency Franchising Unallocated IFRS reported total from
& Valuation continuing
operations
Total including discontinued operations
Discontinued Operations
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Profit/(loss) before tax 10,588 1,880 (706) (4,331) 7,431 (41,572) (34,141)
Net finance income/(cost) (314) (257) 104 599 132 110 242
Operating profit/(loss) per income statement 10,274 1,623 (602) (3,732) 7,563
(41,462) (33,899)
Operating Margin 36.7% 4.4% (8.3%) - 10.4% (128.2)% (32.3)%
Adjustments:
Share-based payments 25 81 (2) 273 377 55 432
Amortisation of intangible assets 862 10 69 - 941 327 1,268
Exceptional gains (9,040) - - - (9,040) - (9,040)
Exceptional costs 1,486 1,994 837 - 4,317 40,105 44,422
Contingent consideration payable - - - (1) (1) - (1)
Underlying Operating profit/(loss) 3,608 3,708 302 (3,460) 4,158
(975) 3,183
Underlying Operating Margin 12.9% 10.0% 4.2% - 5.7% (3.0)% 3.0%
b) Group and Divisional Underlying Operating Margin
Underlying Operating Margin is defined as Underlying Operating Profit divided
by revenue. Refer to above for the calculation of both Group and Divisional
Underlying Operating Margin. The closest equivalent IFRS measure to Underlying
Operating Margin is operating margin, refer to above for a reconciliation
between operating margin and Group Underlying Operating Margin.
c) Adjusted basic earnings per share, adjusted diluted earnings per
share and adjusted profit after tax
Adjusted basic earnings per share is defined as Group Underlying Operating
Profit adjusted for profit/(loss) attributed to non-controlling interests, net
finance cost (excluding exceptional and contingent consideration items and
discounting on leases) less normalised tax (to arrive at adjusted profit after
tax), divided by the weighted average number of shares in issue during the
financial period. The effect of potentially dilutive ordinary shares is
incorporated into the diluted measure.
The closest equivalent IFRS measures are basic and diluted earnings per share.
Unaudited
Six months ended
30 June 2024 Restated 30 June 2023
£'000 £'000
Group Underlying Operating Profit from total operations 14,446 3,183
(Profit)/Loss attributable to non-controlling interest (12) 76
Net finance costs (excluding exceptional items, contingent consideration items 588 203
and discounting on lease liabilities)
Normalised taxation (tax rate 25% (2023: 23.5%)) (3,756) (814)
Adjusted profit after tax before exceptional items, share-based payments and 11,266 2,647
amortisation
Unaudited - Six months ended 30 June
Adjusted profit after tax Weighted average number of shares 2024 Restated Adjusted profit after tax Weighted average number of shares Restated 2023
£'000 Per share amount £'000 Per share amount
Pence
Pence
Adjusted basic EPS 11,266 102,615,905 11.0 2,647 102,937,398 2.6
Effect of dilutive share options 830,587 - 1,250,962
Adjusted diluted EPS 11,266 103,446,492 10.9 2,647 104,188,360 2.5
d) Adjusted operating expenditure
Adjusted operating expenditure is defined as the total of employee costs,
depreciation on property, plant and equipment and other operating costs and is
considered to give a consistent indication of the Group's underlying operating
expenditure.
30 June 2024 Restated
30 June 2023
£'000 £'000
Total operating expenditure (72,363) (64,931)
Add back:
Other operating income (325) (264)
Share of post-tax (loss) from joint venture 377 167
Share-based payments (57) 377
Amortisation of intangible assets 1,357 941
Exceptional gains (367) (9,040)
Exceptional costs 482 4,317
Contingent consideration - (1)
Adjusted operating expenditure (70,896) (68,434)
e) Net cash/debt
Net cash/debt is defined as cash and short-term deposits less current and
non-current borrowings, add IFRS 16 financial liabilities, deferred and
contingent consideration and where applicable cash held for sale.
30 June 2024 31 December 2023
Net Cash:
£'000 £'000
Cash and short term deposits 71,165 58,110
Less: Interest-bearing loans and borrowings (including loan notes, overdraft,
IFRS 16 Leases, contingent and deferred consideration)
- Current (44,440) (26,459)
- Non-current (4,439) (5,085)
22,286 26,556
Add: IFRS 16 lease financial liabilities 6,515 8,340
Add: deferred and contingent consideration 3,664 65
Net Cash 32,465 34,971
f) Adjusted cash flow from operations
Adjusted cash flow from operations is defined as cash generated from
operations, less the repayment of the principal portion of lease liabilities,
plus the utilisation of PI provisions.
30 June 2024 Restated
30 June 2023
£'000 £'000
Cash generated from operations 13,318 (7,099)
Payment of principal portion of lease liabilities (1,733) (2,250)
PI provision utilisation 122 207
Adjusted cash flow from operations 11,707 (9,142)
g) Cash flow conversion rate
Cash flow conversion rate is defined as cash generated from operations (pre-PI
Costs and post-lease liabilities), divided by Group Underlying Operating
Profit.
30 June 2024 Restated
30 June 2023
£'000 £'000
Adjusted cash flow from operations 11,707 (9,142)
Group underlying operating profit from continuing operations 14,446 4,158
Cash flow conversion rate 81% (220)%
6. Discontinued operations
In 2023, the Group franchised its entire owned estate agency network of 183
branches, with the operations of the previously owned network disposed to a
combination of new and existing franchisees between 3 May and 31 May 2023. The
operations of the branches were sold to the franchisees through either asset
or share sales. The operations of the owned branch network were classified as
a discontinued operation and presented as such in both the Consolidated
Condensed Group Financial Statements for the six months ended 30 June 2023 and
the Group Financial Statements for the year ended 31 December 2023, please
refer to note 6 in both sets of financial statements for further information
on the financial performance of the discontinued operations for each
respective and comparative period.
During the six months to 30 June 2024 the Group recognised post tax losses
from discontinued operations of £0.2m (six months to 30 June 2023: £46.1m)
due to increases in dilapidation and restructuring provisions recognised as
part of the original asset and share sales, as per note 26 of the Group
Financial Statements for the year ended 31 December 2023.
7. Exceptional items
Unaudited
Six months ended
30 June 2024 Restated
30 June
2023
£'000 £'000
Exceptional costs:
Surveying & Valuation restructuring costs - 1,993
Financial Services acquisition costs 144 906
Loss on sale of disposal groups - 1,418
Reduction in contingent consideration receivable 338 -
482 4,317
Exceptional gains:
Gain on sale of disposal groups* - 9,040
Release of dilapidation provision 42 -
Increase in contingent consideration receivable 325 -
367 9,040
*Refer to note 14 for details regarding the restatement.
Exceptional costs
The reduction in contingent consideration receivable relates to contingent
consideration assets recognised on the disposal of RSC and EFS, the charge is
the result of a reduction in forecast FY24 profitability of both company's
(refer to note 9 in Group Financial Statements for the year ended 31 December
2023 for further information on both the initial and subsequent accounting for
both disposals).
Exceptional gains
The increase in contingent consideration receivable of £0.3m relates to the
contingent consideration asset recognised on the disposal of Group First and
is the result of an increase in forecast FY24 profitability (as per RSC and
EFS please refer to the Group's 2023 accounts for further information).
8. Dividends paid and declared
A final dividend in respect of the year ended 31 December 2023 at 7.4 pence
per share (December 2022: 7.4 pence per share) was paid in the period ended 30
June 2024. An interim dividend has been announced amounting to 4.0 pence per
share (June 2023: 4.0 pence per share). Interim dividends are recognised
when paid.
9. Taxation
The major components of income tax charge in the interim Group income
statements are:
Unaudited
Six Months Ended
30 June 30 June
2024 2023
£'000 £'000
UK corporation tax:
- current year charge 2,402 4,661
- adjustment in respect of prior years (27) -
2,375 4,661
Deferred tax:
Origination and reversal of temporary differences 1,227 (2,024)
Adjustment in respect of prior year (28) -
Rate differential - (574)
Deferred tax balances written back on disposal of subsidiaries - -
Total deferred tax charge/(credit) 1,199 (2,598)
Total tax charge in the income statement 3,574 2,063
For illustrative purposes, the total tax charge in the income statement split
between continuing and discontinued operations is:
Unaudited
Six Months Ended
30 June 30 June
2024 2023
£'000 £'000
Continuing operations 3,574 2,063
Discontinued operations (90) 1,293
Total tax charge in the income statement 3,484 3,356
The headline UK rate of corporation tax for the period is 25% (2023: 23.5%),
and the rate at which deferred tax has been provided is 25% (2023: 25%).
10. Intangible assets
On 2 February 2024, the Group acquired the entire issued share capital of
TenetLime Limited (TenetLime), a subsidiary of Tenet Group Limited (Tenet
Group).
The Group's motivation for purchasing TenetLime was to expand its existing
Financial Services Network by increasing the number of appointed
representatives (ARs) using LSL's PRIMIS Network. The Group acquired contracts
with 153 AR firms through the acquisition of TenetLime and immediately
transferred those firms onto the PRIMIS Network.
Management performed a concentration test (IFRS 3) to determine whether
substantially all the fair value of the gross assets acquired was concentrated
in a single identifiable asset. The test indicated that substantially all the
value acquired was attributable to TenetLime's contractual relationships with
the AR firms. Based on the assessment performed, management concluded that the
Group did not acquire a business as part of the transaction and therefore the
acquisition is not a business combination.
However, the Group did acquire an intangible asset, being the acquired
contracts with each of the respective AR firms which have been assigned a
value based on the transaction price excluding the cash acquired. The cost
paid for the relationship intangible asset represents initial consideration of
£5.7m and contingent consideration of £3.6m.
The contingent consideration will be payable one year after completion and
will be calculated by reference to each AR firm's turnover in 2022 and AR firm
retention at the payment date. The Group have assumed an AR firm attrition
rate of 7.6% which has been calculated using actual attrition rates
experienced in the PRIMIS Network over a five-year period. The contingent
consideration has been discounted at a rate of 4.3%, in line with the Group's
cost of debt and a finance cost of £0.1m has been recognised in the period
from acquisition to 30 June 2024 ('the period'). The AR relationship asset has
a useful life of 12 years, which is also based on PRIMIS Network attrition and
amortisation of £0.3m has been recognised in the period.
11. Financial assets
Unaudited Audited
Year Ended
June 2024 December
2023
£'000 £'000
(a) Financial assets at fair value through other comprehensive income
(FVOCI)
Unquoted shares at fair value - -
(b) Financial assets at fair value through income statement (FVPL)
Unquoted shares at fair value (Openwork units and Twenty7Tec) 717 399
Contingent consideration receivable 5,317 5,062
(c) Financial assets at amortised cost
Investment in sublease 1,879 3,338
Loans to franchisees and appointed representatives 1,527 2,099
9,440 10,898
Non-current assets 2,737 8,818
Current assets 6,703 2,080
9,440 10,898
(a) Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income (FVOCI)
include unlisted equity instruments which are carried at fair value and
measured using level 3 valuation techniques. During 2023, the Group revalued
its investment in Global Property Ventures to £nil and there has been no
further change. The Group also holds an equity instrument in NBC Property
Master Limited which is carried at £nil value.
(b) Financial assets at fair value through income statement
Financial assets through profit or loss (FVPL) include unquoted units in
Twenty7Tec Group Limited and Openwork Partnership LLP, and contingent
consideration receivable which are carried at fair value and measured using
level 2 and 3 valuation techniques. During the period, the following
gains/(losses) were recognised in the income statement:
June 2024 December 2023
£'000 £'000
Fair value gains/(losses) on equity investments at FVPL recognised in other 318 (279)
operating costs
Net fair value (losses) on contingent consideration recognised as exceptional (13) (4,093)
Finance income recognised on contingent consideration receivable 382 986
Openwork units
During the period the fair value of units held in The Openwork Partnership LLP
remained at £0.4m (31 December 2023: £0.4m). Our valuation is based on an
estimated strike price which has been calculated using the average strike
price from recently executed trading windows.
Twenty7Tec
The Group holds an equity instrument in Twenty7Tec Group Limited which was
historically valued at £nil. In H1 2024 the value of the Group's shareholding
was increased to £0.3m, this is based on a recent external valuation of the
business and is therefore indicative of a fair value.
Contingent consideration receivable
Contingent consideration receivable of £5.1m relates to EFS, Group First and
RSC which were sold in H1 2023 to Pivotal Growth. The consideration receivable
will be 7x the combined EBITDA in calendar year 2024, subject to working
capital adjustments and is payable in H1 2025. The fair value of the
contingent consideration receivable has been calculated for each of the three
disposals based on forecast profitability in calendar year 2024, discounted at
13.5% (Financial Services Division's weighted average cost of capital for a
12-month period).
The future cash flow and discount rate assumptions are key to the calculation,
if full year 2024 profitability was to reduce by 10% this would result in a
reduction in the receivable of £0.5m, if profitability were to increase, this
would result in an increase in the receivable of the same amount. If the
discount rate were to increase by 1%, the receivable would decrease by £0.1m,
and if the discount rate were to reduce by 1%, this would result in an
increase in the receivable of the same amount.
The remaining £0.2m of contingent consideration receivable relates to amounts
due from disposed lettings books, amounts are receivable in December 2024 and
November 2025.
Fair values of financial assets
There is no difference in the book amounts and fair values of all the Group's
financial assets that are carried in these Interim Condensed Consolidated
Group Financial Statements.
Fair value hierarchy
As at 30 June 2024, the Group held the following financial assets measured at
fair value. The Group uses the following hierarchy for determining and
disclosing the fair value of the financial assets by valuation technique:
· Level 1: quoted (unadjusted) prices in active markets for
identical assets;
· Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable, either directly
or indirectly; and
· Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable market
data.
Unaudited - 30 June 2024 Total Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000
Assets measured at fair value
Financial assets 6,034 - 318 5,716
Audited - 31 December 2023 Total Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000
Assets measured at fair value
Financial assets 5,461 - - 5,461
(c) Financial assets measured at amortised cost
Financial assets measured at amortised cost include investment in subleases
and loans to franchisees and appointed representatives.
Investment in subleases
The Group recognises an investment in sublease in scenarios where it is an
intermediate lessor, and the sublease is classified as finance lease. On
recognition, the investment in sublease is valued as the remaining fixed
payments due from the sublessor, discounted at the discount rate implicit in
the headlease. The Group recognises finance income over the remaining life of
the leases. An expected credit loss has been provided against the investment
in sublease of £0.1m, applying a 12-month expected credit loss model.
Loans to franchisees and appointed representatives
The loans to franchisees and appointed representatives balance includes loans
to franchisees in the Estate Agency Franchising segment and loans to appointed
representatives in Financial Services.
The franchisee loans reflect drawdowns on agreed facilities which have
availability over a range of periods from 31 December 2024 to 31 December
2025, are repayable in full within 24 months from the respective period end
and bear fixed rate interest at 8.5%. The Group has issued franchisee loans of
£0.2m during the period and has received principal repayments of £0.1m, an
expected credit loss has been provided against the facility of £0.1m applying
a 12-month expected credit loss model.
The Group issues loans to appointed representatives in the normal course of
business and on standard terms, the duration is typically three years and the
loans are offered on an interest-free basis. The Group has issued loans to
appointed representatives of £0.2m during the period and received principal
repayments of £0.8m. An expected credit loss has been provided against the
remaining facility of £0.2m, applying a 12-month expected credit loss
model.
12. Cash and cash equivalents
Bank overdrafts reflect the aggregate overdrawn balances of Group companies
(even if those companies have other positive cash balances). The overdrafts
are held with the Group's relationship banks.
For the purpose of the statement of cash flows, the Group's cash and cash
equivalents position is presented net, as shown below:
Unaudited Audited
Year Ended
June 2024 December 2023
£'000 £'000
Cash and cash equivalents 71,165 58,110
Bank overdrafts (38,700) (23,139)
Cash and cash equivalents 32,465 34,971
13. Financial liabilities
Unaudited Audited
Year Ended
30 June 31 December 2023
2024
£'000 £'000
Current
IFRS 16 lease financial liabilities 2,076 3,255
Contingent consideration liabilities 3,664 65
5,740 3,320
Non-current
IFRS 16 lease financial liabilities 4,439 5,085
4,439 5,085
Contingent consideration liabilities:
Unaudited Audited
Year Ended
30 June 31 December 2023
2024
£'000 £'000
TenetLime 3,664 -
DLPS - 65
3,664 65
Opening balance 65 2,311
Cash paid (65) (2,280)
Acquisition of relationship asset 3,600 -
Amounts recorded though income statement 64 34
Closing balance 3,664 65
Direct Life and Pensions Services Limited
£0.07m of contingent consideration relates to DLPS, acquired in January 2021,
and paid in February 2024.
TenetLime Limited
On 2 February 2024, the Group acquired the entire issued share capital of
TenetLime Limited ("TenetLime"), a subsidiary of Tenet Group Limited ("Tenet
Group"). The value of the company was concentrated in the contracts with the
appointed representative firms. Consequently, the transaction has been
accounted for as an asset acquisition. A relationship intangible asset of
£9.3m has been recognised, please refer to note 10. The cost paid for the
relationship intangible asset represents initial consideration of £5.7m and
contingent consideration of £3.6m. The Group expects to pay the contingent
consideration in H1 2025. The contingent consideration is based on the
retention rate of firms within LSL's PRIMIS network 12 months after the
transaction completed.
As part of the purchase agreement, Tenet Group agreed to provide a number of
services to LSL after the transaction. Subsequent to the purchase, LSL was
notified that Tenet Group Limited entered administration on 5 June 2024. As at
the 30 June 2024, there are no additional liabilities to recognise as a result
of the administration. We are in the process of assessing the future costs
which will fall to LSL as a consequence of Tenet Group Limited entering
administration. Further, we are in discussions with the administrators to
offset these amounts against the deferred consideration payable.
Risk management
The financial risks the Group faces, and the methods used to manage these
risks have not changed since 31 December 2023. Further details of the risk
management policies of the Group are disclosed in note 32 of the Group's
Financial Statements for the year ended 31 December 2023.
The business is cash generative with a low level of maintenance capital
expenditure requirement. In addition, the Group's other main priority is to
generate cash to support its operations and to fund any strategic
acquisitions.
Fair values of financial liabilities
There is no difference in the book amounts and fair values of all the Group's
financial liabilities that are carried in these Interim Condensed Consolidated
Group Financial Statements.
Fair value hierarchy
As at 30 June 2024, the Group held the following financial liabilities
measured at fair value. The Group uses the following hierarchy for determining
and disclosing the fair value of the financial instruments by valuation
technique:
· Level 1: quoted (unadjusted) prices in active markets for
identical liabilities;
· Level 2: other techniques for which all inputs which have a
significant effect on the recorded fair value are observable, either directly
or indirectly; and
· Level 3: techniques which use inputs which have a significant
effect on the recorded fair value that are not based on observable market
data.
Unaudited - 30 June 2024 Total Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000
Liabilities measured at fair value
Contingent consideration 3,664 - - 3,664
Audited - 31 December 2023 Total Level 1 Level 2 Level 3
£'000 £'000 £'000 £'000
Liabilities measured at fair value
Contingent consideration 65 - - 65
14. Prior period restatement
Customisation costs in computing arrangements
For the year ended 31 December 2023, the Group revisited its accounting policy
in relation to customisation costs incurred in implementing Software as a
Service (SaaS) arrangements. The Group's accounting policy has historically
been to capitalise costs directly attributable to the customisation of SaaS
platforms (typically the cost of employees), as intangible assets on the
balance sheet. The Group reviewed its SaaS arrangements during the second half
of 2023 prompted by the significant restructuring earlier in the year. The
Group concluded that the policy to capitalise SaaS customisation costs, which
was considered appropriate at the time, should be revised, and restated prior
period comparatives in the Group Financial Statements for the year ended 31
December 2023. Refer to note 36 in the aforementioned Financial Statements for
further information on the Group's updated policy.
The cumulative impact of the historic adjustment on retained earnings on 1
January 2023 was a reduction of £2.6m with a corresponding adjustment to
intangible assets. The impact to the income statement for the period ended 30
June 2023, was an increase in other operating costs of £0.2m, decrease in
amortisation charge of £0.1m, and an increase in exceptional gains of £0.5m
in relation to the Group's disposal of First2Protect Limited. The adjustment
was not cash adjusting.
Earnings per share
Basic and diluted earnings per share for June 2023 have also been restated, as
a result of the customisation costs in computing arrangements restatement. For
the period to 30 June 2023, the amount of the correction for total basic
earnings per share was an increase of 0.4 pence, total diluted earnings per
share was an increase of 0.9 pence.
Income statement (extract)
Reported six months ended 30 June 2023 Customisation costs Restated six months ended 30 June 2023 Continuing operations Discontinued operations
£'000 £'000 £'000 £'000 £'000
Other operating costs (26,608) (157) (26,765) (15,256) (11,509)
Amortisation of intangible assets (1,389) 121 (1,268) (941) (327)
Exceptional gains 8,583 457 9,040 9,040 -
Profit/(loss) for the year (37,918) 421 (37,497) 5,368 (42,865)
15. Related party transactions
The Group is party to one joint venture partner, Mottram TopCo Limited.
Transactions with Mottram TopCo and its subsidiaries
Unaudited
Six Months Ended
30 June 30 June
2024 2023
£'000 £'000
Gross commission received 8,898 6,796
Commissions paid to broker businesses (7,232) (4,506)
Revenue recognised 1,666 2,290
Receivable / (payable) 465 (1,614)
16. Events after the reporting period
Firstly, in July 2024, the Group invested an additional £2.2m into Pivotal
Growth to continue to support its buy and build strategy.
Secondly, subsequent to 30 June 2024, the Group's PRIMIS Network served notice
to one of its protection only appointed representative (AR) firms, made up of
two trading entities. The Group is responsible for the future reimbursements
of commissions received from product providers in the event that policies are
cancelled during an indemnity period, which is a maximum of 4 years. The Group
has agreements in place with its AR firms and certain advisers to recover
their contractual liability in respect of these amounts. In light of the
trading position of these AR firms, following notice being given, the PRIMIS
Board considers it is not likely to recover all future reimbursement of
commissions incurred.
At the date these Interim Condensed Consolidated Financial Statements were
issued, the Group estimates the maximum cancellable commissions relating to
relevant policies sold by these ARs is £3.4m. This potential exposure will
continue to reduce materially over time as active policies go beyond the
indemnity period, combined with the significant reduction in activity in the
latter months of the firms trading.
Forward-Looking Statements
This announcement contains certain statements that are forward-looking
statements. They appear in a number of places throughout this announcement and
include statements regarding our intentions, beliefs or current expectations
and those of our officers, directors and employees concerning, amongst other
things, our results of operations, financial condition, liquidity, prospects,
growth, strategies and the business we operate. 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 update should be construed as a
profit forecast. LSL and its Directors accept no liability to third parties in
respect of this update save as would arise under English law.
Any forward-looking statements in this update speak only at the date of this
document 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 document.
INDEPENDENT REVIEW REPORT TO LSL PROPERTY SERVICES PLC
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2024 which comprises the Interim Group Income Statement, the Interim
Group Statement of Comprehensive Income, the Interim Group Balance Sheet, the
Interim Group Statement of Cash Flows, the Interim Group Statement of Changes
in Equity and the related Notes 1 to 16. We have read the other information
contained in the half yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2024 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" (ISRE) issued by the Financial
Reporting Council. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in Note 1, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of the directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the Company or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the Company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the Company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
17 September 2024
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