LSL — LSL Property Services News Story

0.000.00%

Last trade - 00:00

FinancialsAdventurousSmall CapNeutral

Market Cap
£315.74m
Enterprise Value
£282.69m
Revenue
£173.18m

All News

REG - LSL Property Svcs. - Interim Results

LSL Property ServicesAnnouncement

05/08/2020 07:01

RNS Number : 1363V

LSL Property Services PLC

05 August 2020

5 August 2020

LSL Property Services plc ("LSL" or "The Group")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2020

LSL reports Underlying Operating Profit 3% ahead of 2019, with strong trading in June and July following resilient performance during the Covid-19 lockdown

	2020	2019	change
Group Revenue - £m	114.9	154.1	-25%
Group Underlying Operating Profit¹ - £m	12.5	12.2	3%
Group Underlying Operating Margin - %	11%	8%	300bps
Covid-19 Related (cost) - £m	(2.8)	-	nm
Net Exceptional (cost) - £m	(4.4)	(12.8)	-65%
Group Operating Profit / (Loss) - £m	3.6	(2.8)	nm
Profit / (Loss) Before tax - £m	2.0	(4.6)	nm
Basic Earnings / (Loss) Per Share - pence	1.2	(3.1)	nm
Adjusted Basic Earnings Per Share² - pence	9.4	9.0	+4%
Net Bank Debt³ at 30 June - £m	12.7	52.0	-76%
Interim Dividend - pence	nil	4.0	nm

nm: not meaningful

1 Group Underlying Operating Profit is before exceptional costs, Covid-19 related costs, contingent consideration, amortisation of intangible assets, share-based payments and includes £13.8m of amounts receivable pursuant to the Coronavirus Job Retention Scheme and utilised to pay employee salaries for those placed on furlough (as set out in Note 6 of the financial statements). Segment Underlying Operating Profit is stated on the same basis as Group Underlying Operating profit.

2 Refer to Note 7 of the financial statements for the calculation

3 Refer to Note 14 of the financial statements for the calculation

HIGHLIGHTS

Robust financial performance, in context of the impact of the Covid-19 outbreak on the UK economy and the housing market

· Group Underlying Operating Profit¹ up by £0.3m to £12.5m over H1 2019.

· Reported Group Revenue fell 25% to £114.9m (2019: £154.1m).

· Revenue impacted by Covid-19, the closure in February 2019 of 164 estate agency branches to reshape the Your Move and Reeds Rains networks, and the tenant fee ban introduced in June 2019.

· Financial Services Underlying Operating Profit¹ up 14%.

· Estate Agency Underlying Operating Profit¹ up 3%.

· Surveying Underlying Operating Profit¹ down 23%, with activity significantly impacted by lockdown preventing the conducting of physical valuations.

· Group Underlying Operating Profit is stated before the recognition of £2.8m of Covid-19 related net costs, the charging of net exceptional costs of £4.4m, contingent consideration, amortisation, share based payments, and includes £13.8m of amounts receivable through the Coronavirus Job Retention Scheme, which has been used to meet the salary of employees placed on furlough to secure as many long term jobs as possible.

· Net Bank Debt⁴ at 30 June 2020 of £12.7m, resulting in modest gearing³ at 0.25 X Adjusted EBITDA².

Strong trading in June, which continued throughout July

· The Group generated an Underlying Operating Profit in June of £5.7m (2019: £3.4m), before £0.3m of Covid-19 related costs recognised in the period and including £2.9m of amounts receivable through the Coronavirus Job Retention Scheme.

· Underlying Operating Profits in June 2020 compared to 2019:

o Financial Services: in line with 2019 notwithstanding the contraction of the UK housing market in Q2.

o Estate Agency: +41% demonstrating a rapid recovery following the lockdown.

o Surveying: +150%, benefiting from a strong lender pipeline and back office cost savings following the closure of an administration centre during Q1 2020.

· July trading is extremely encouraging with strong front end sales metrics across all three divisions:

o Financial Services reporting mortgage applications more than 20% ahead of prior year, the highest month in 2020 and 16% ahead of June 2020.

o Estate Agency instructions c.20% ahead of July 2019 with sales exchange pipeline at 31 July up 12% on prior year. Net Sales and Instructions in July were the highest in 2020.

o Surveying valuation instruction volumes broadly in line with July 2019.

The Board's focus is to position the Group to compete strongly in 2021, whilst continuing to monitor market conditions closely

· As at 31 July, around 2,800 of the c.3,300 employees furloughed had returned to work, as the Group takes steps to secure market share during 2020 to provide a solid base on which to build in 2021.

· More staff are being returned to work in August.

· The Board will assess opportunities to recommence investment activities, including lettings books acquisitions, whilst taking full account of on-going risks to the markets in which the Group operates.

· Following a period of focus on cash conservation, a controlled increase is underway in marketing spend and other operational initiatives to build on strong market positions across all three Divisions.

· The Board remains alert to the risk of a further spike in Covid-19 cases, as well as to weakening economic conditions, and will take decisive action if necessary.

The Group remains well positioned to meet highly stressed economic conditions

· Revolving credit facility of £100m, committed to 11 May 2022.

· Resilient performance during lockdown demonstrated underlying strength of the business and its diversified revenue streams.

· Stress testing carried out on entry to lockdown, assuming significant market stress throughout 2020, indicated the Group would retain sufficient liquidity throughout the year.

· Group Net Banking Debt⁴ at 30 June 2020 was £12.7m, representing gearing³ of 0.31 x 12 month rolling adjusted EBITDA, against a covenant of 3.25 times.

· Cash monitored carefully, with regular stress testing, and decisive action will be put in place should market conditions deteriorate.

· The voluntary reduction of one third of salaries and fees by all Executive and Non-Executive directors was introduced on 1 April 2020 and was still in place at the end of July.

· The salaries of other senior managers who agreed a voluntary reduction were reinstated from 1 July 2020.

· No Interim dividend declared. Dividend policy remains under review.

Financial Services Division - H1 Review

· Underlying Operating Profit increased by 14% to £4.9m (30 June 2019: £4.3m), despite reduced activity during the lockdown period demonstrating the resilience of our Financial Services business.

· Total Financial Services Division Revenue decreased by 18%, reflecting the impact of the lockdown as well as the reshaping of the Your Move and Reeds Rains branch networks during Q1 2019.

· Mortgage completions were broadly in line with the prior year at £14.6bn, representing 9.2%⁶ of the market, highlighting the versatility of the range of product and service offerings.

· Total appointed representative firms at 30 June 2020 increased by 4% to 896 (30 June 2019: 860), with a strong pipeline of new applicants in place at 31 July 2020.

· The number of financial advisers increased by 7% over the past 12 months to 2,431.

Estate Agency Division - H1 Review

· Underlying Operating Profit increased to £4.1m (2019: £4.0m), including strong trading in Q1 2020, the impact of Covid-19 during the lockdown, followed by the easing of lockdown restrictions on 13 May 2020.

· Underlying Operating Profit benefited from the reshaping of the Your Move and Reeds Rains branch networks undertaken in 2019.

· Total like-for-like Residential Sales exchange income decreased by 25%.

· Total like-for-like Lettings income decreased by 18%.

· Total Estate Agency Revenue decreased 28% to £55.7m (2019: £77.1m), reflecting the fall in activity during the lockdown, the reduction in the size of the Your Move and Reeds Rains branch networks and the tenant fee ban introduced in June 2019.

· By 30 June 2020, the entire owned and operated branch network had reopened, with the exception of five locations under review.

· 87% of employees previously furloughed have now returned to work.

· Underlying Operating Profit is stated before the recognition of £1.7m of Covid-19 related costs, principally relating to property and other asset costs incurred whilst the lockdown was in place.

· The Group has not detected a material change in house prices caused by Covid-19.

Surveying Division - H1 Review

· Performance in Surveying impacted heavily by the restriction on physical valuations in England between 13 March and 18 May 2020.

· The lifting of the restriction took effect in Northern Ireland, Scotland and Wales in June 2020.

· During these periods all valuations undertaken remotely, with weekly volumes falling to approximately 20% of those in January and February 2020.

· Total revenue reduced from 2019 by 27% to £31.1m and Underlying Operating Profit by 23% to £4.9m

· Performance in the periods outside lockdown have been strong.

Outlook

Current trading conditions are extremely encouraging, with strong front-end metrics in all three divisions. The introduction by the Government of a Stamp Duty Holiday for properties up to £500,000 is expected to provide further support to the principal markets in which the Group operates.

However, the future course of the Covid-19 virus and its impact on the economy and markets in which the Group operates remains highly uncertain. In these conditions, it is not possible to make an accurate assessment of trading prospects, and the Board therefore is unable to provide financial guidance for the year ending 31 December 2020 and beyond. We will resume formal guidance as soon as the position becomes clearer.

Commenting on today's announcement, Simon Embley, Group Chairman, said:

"I am pleased to confirm that LSL has performed extremely well, during a period of unprecedented uncertainty and disruption. This is testament to the underlying strength of the Group, and its ability to respond quickly and effectively to rapidly changing market conditions.

After a strong first quarter, we reacted decisively to the emergence of the Covid-19 virus, managing our operations and cash position to secure the position of the Group, even in the event of the lockdown continuing throughout the year. This same agility served us well as restrictions eased, as we rebuilt our capability quickly to trade strongly throughout June.

As a result, I can report an Underlying Operating Profit slightly ahead of last year, and in so doing I cannot highlight strongly enough the exceptional contribution made by management and staff working in all parts of the Group. Their commitment to our customers and to the Group has been exemplary and I would again like to express my appreciation.

Although we remain alert to the risk of more disruption, and will take prompt action should it occur, I am increasingly optimistic about market conditions, and am confident in our ability to compete successfully. Our focus is increasingly turning to investing for future growth, as well as optimising current performance. We have performed extremely well in 2020, and I am confident about the future prospects of the Group."

For further information, please contact:

David Stewart, Group Chief Executive Officer
Adam Castleton, Group Chief Financial Officer
LSL Property Services plc	0207 382 0360

Helen Tarbet, Charlotte Slater
Buchanan	07872 604453, 07413 363367

Notes:

1 Group Underlying Operating Profit is before exceptional costs, COVID-19 related costs, contingent consideration, amortisation of intangible assets, share-based payments and includes £13.8m of amounts receivable through the Coronavirus Job Retention Scheme (as set out in Note 6 of the financial statements). Segment Underlying Operating Profit is stated on the same basis as Group Underlying Operating profit.

2 Group Adjusted EBITDA is Group Underlying Operating Profit plus depreciation of right of use assets, plant, property and equipment (as defined in Note 6 of the financial statements).

3 Gearing defined as Net Bank Debt divided by Group Adjusted EBITDA. Excluding the impact of IFRS 16 gearing, and as reporting for covenant purposes, is 0.31x, post IFRS 16 gearing is 0.25X.

4 Refer to Note 14 of the financial statements for the calculation

5 PRIMIS is the trading name of Advance Mortgage Funding Limited, Fist Complete Limited and Personal Touch Financial Services Limited.

6 Market share excludes Product Transfers and is as at May 2020

Notes on LSL

LSL is a leading provider of residential property services in three key markets: financial services, estate agency and surveying and valuation services. Services include: residential sales, lettings, land and new homes, surveying, conveyancing support, and mortgage and non-investment insurance brokerage and intermediary network services. Services to mortgage lenders include: valuations and panel management services, and asset management and property management services. For further information, please visit LSL's website: lslps.co.uk

Group Chief Executive's Review

Introduction

I am pleased to be able to report that LSL has performed strongly, after a period of unprecedented market disruption and uncertainty. Following a strong start to the year, we responded decisively to the emergence of the Covid-19 virus, in doing so highlighting our agility and focus, whilst our performance during that period demonstrated the benefits of conservative financial gearing. We reacted equally quickly to the easing of lockdown restrictions to rapidly rebuild our activity in each of our Divisions and help secure a Group Underlying Operating Profit for the half year marginally ahead of 2019.

None of this would have been possible without the hard work and support we received from colleagues working in all parts of our business. Once again, I would like to record the Board's appreciation for their tremendous efforts.

I would also note that in common with many other organisations, LSL made use of the Coronavirus Job Retention Scheme, through which we received £13.2m in the period. Around 3,300 colleagues were placed on furlough. I am pleased to report that this number has now reduced to around 500. This total includes some colleagues whose personal circumstances mean it is difficult for them to return to work at this time, factors which the Group continues to recognise and support. We will continue to return more colleagues in the coming months.

The future path of the virus remains impossible to predict with any certainty, nor is the outlook for either the general economy or housing market clear. Naturally, we will continue to monitor market conditions carefully, remaining ready to react to any adverse developments. However, we will also seek to maximise the opportunities afforded by what are currently much improved conditions whilst focusing on the further development of our strategy for long term growth.

Financial and Operating Results

Group

Group Financials Summary	Q1			Q2			H1
	2020	2019	change	2020	2019	change	2020	2019	change
P&L (£m)
Revenue	69.6	77.1	-10%	45.3	77.0	-41%	114.9	154.1	-25%
Revenue (LFL variance)			-6%			-41%			-24%
Group Underlying Operating Profit	3.4	2.1	62%	9.2	10.1	-9%	12.5	12.2	3%
Group Underlying Operating Margin	5%	3%	200bps	20%	13%	700bps	11%	8%	300bps
Group operating profit							3.6	(2.8)	nm

Group Underlying Operating Profit
Financial Services	2.3	1.8	27%	2.6	2.5	4%	4.9	4.3	14%
Estate Agency	(0.8)	(1.2)	-34%	4.9	5.2	-5%	4.1	4.0	3%
Surveying	2.9	2.8	3%	2.0	3.5	-44%	4.9	6.3	-23%
Unallocated Central Costs	(1.0)	(1.3)	-23%	(0.4)	(1.2)	-69%	(1.4)	(2.5)	-45%

Group Revenue in H1 2020 reduced by 25% to £114.9m. Much of this reduction resulted from the restrictions arising from the Covid-19 lockdown, between 23 March and 13 May 2020, which affected the last weeks of Q1 2020, and much of Q2 2020 trading.

In the three-month period to 31 March 2020, Group Revenue compared to the same period in 2019, decreased by 10% overall and by 6% on a like-for-like basis, once the effect of the steps taken in 2019 to reduce the size of the Estate Agency branch networks is excluded. Otherwise, trading was generally strong in each of the Divisions, with the remaining reduction attributed to the introduction of the tenant fee ban in June 2019, and to the fall in volumes both in the run up to and, more acutely, following the announcement of the lockdown on 23 March 2020.

Over the six-month period, Group Underlying Operating Profit increased by 3% to £12.5m. This figure excludes around £2.8m of Covid-19 related costs, the substantial part of which relates to property costs for locations closed during the period due to the lockdown and adherence to social distancing requirements.

The year started strongly as political uncertainty receded, with each of the Group's Divisions reporting improved performance over 2019, notwithstanding the impact of Covid-19 on March trading. Underlying Operating Profit in Q1 2020 increased from £2.1m in 2019 to £3.4m in 2020, and Underlying Operating Margin from 3% to 5%.

Naturally, profitability reduced significantly during the lockdown: April 2020 Group Underlying Operating Profit fell to £1.6m from £2.9m before recovering quickly as restrictions eased. June 2020 Group Underlying Operating Profit was £5.7m compared to the 2019 figure of £3.4m, as the Group benefited from new business and the clearance of pipelines and meeting pent-up customer demand. Strong trading continued in July across all three divisions:

o Financial Services reporting mortgage applications more than 20% ahead of prior year, the highest month in 2020 and 16% ahead of June 2020.

o Estate Agency instructions c.20% ahead of July 2019 with sales exchange pipeline at 31 July up 12% on prior year. Net Sales and Instructions in July were the highest in 2020.

o Surveying valuation instruction volumes broadly in line with July 2019.

In view of the significant improvement in trading, the Board has considered carefully whether to recommend payment of an interim dividend. The Board remains committed to its long term dividend policy which has resulted in payments of between 30% and 40% of Adjusted Profit After Tax, but also remains mindful of the uncertain economic backdrop, and at this stage has concluded that it is prudent not to pay an interim dividend as it has done in previous years. This position will continue to be kept under review.

Financial Services Division

Financial Services: Financials Summary	Q1			Q2			H1
	2020	2019	change	2020	2019	change	2020	2019	change
P&L (£m)
Total Revenue	16.2	17.1	-6%	11.9	17.2	-31%	28.1	34.3	-18%
Revenue excluding Estate Agency			-3%			-28%			-16%
Expenditure	(13.9)	(15.3)	-10%	(9.3)	(14.7)	-37%	(23.2)	(30.0)	-23%
Underlying Operating Profit	2.3	1.8	27%	2.6	2.5	4%	4.9	4.3	14%
Underlying Operating Margin	14%	11%	300bps	22%	15%	700bps	18%	13%	500bps

KPIs
LSL Mortgage Completion Lending (£bn)							14.6	14.7	-0.4%
LSL Market Share¹							9.2%	8.5%	70bps
Total advisers at 30 June							2,431	2,277	7%
Number of AR firms at 30 June							896	860	4%
FCA capital requirement							5.2	4.7	12.4%
Excess capital (£m) ²							10.6	10.8	-2.1%

1. Market share excludes Product Transfers and is as at May 2020

2. 2020 FCA capital requirement and excess capital as at Q1

The importance of Financial Services to the Group has increased consistently in recent years, reflecting the Board's strategy to develop a broader and less volatile income stream in areas in which it has significant experience. Over the 3 financial years ended 31 December 2019, Underlying Operating Profit increased by 41% to £11.6m.

In doing so, LSL has become a major player in the provision of mortgage brokerage, and in the first half of 2020 we provided services in relation to £14.6bn of mortgage completions, representing approximately 9.2%¹ of the UK market, up from 8.5% in 2019.

The benefits of this strategy can be seen in the strong performance of the Division in Q1 2020 and June 2020, as well as in the significant contribution made during the lockdown.

Over the first 3 months of the year, profitability grew strongly with Underlying Operating Profit up 27% to £2.3m, notwithstanding reduced activity levels during the latter part of March 2020. Total Financial Services Revenue during this period decreased by 6%, a figure which includes a reduction from the impact of the reshaping of the Your Move and Reeds Rains branch networks undertaken in 2019. Financial Services Revenue excluding Estate Agency's contribution decreased by 3%.

During April 2020, Financial Services Revenue reduced by 18% compared to the prior year, as activity focused on re-mortgage business with demand for house purchase mortgages reducing to negligible levels. Nevertheless, the Division still reported an increase in Underlying Operating Profit to £0.9m (April 2019: £0.7m).

Activity levels recovered significantly following the end of lockdown restrictions, to give rise to an overall increase in H1 2020 Underlying Operating Profit of £0.6m (14%). £0.3m of costs relating to Covid-19 have been excluded from the H1 2020 Underlying Operating Profit. In large part, this growth was secured through the Group's continuing success in attracting new appointed representatives ("AR") firms to its PRIMIS network. Over the past year, AR firms increased by 4% to 896, and the number of advisers by 7% to 2,431.

The business mix of mortgage applications between purchase and refinance, including both re-mortgage and product transfers, has returned to normalised levels at around a 50/50 split. In April, business was heavily skewed to re-finance at around 86%.

The growth in Financial Services brings with it different areas of focus, and risk. Work was undertaken in 2019 to prepare for the introduction by the Financial Conduct Authority ("FCA") of the Senior Managers and Certification Regime ("SMCR"), and the Nominations Committee has taken steps to ensure that the Board's composition includes directors with significant experience of operating in regulated financial services businesses. In addition, during 2020 the independent member of the Financial Services Management Committee took on the role of Chair of that Committee to enhance the Division's governance arrangements.

In common with other regulated businesses, LSL's Financial Services activities require the maintenance of minimum levels of regulatory capital, calculated on the basis of revenue in related activities. At the end of Q1 2020, the most recent regulatory reporting period, the relevant businesses held total capital of £15.8m, significantly ahead of the regulatory requirement of £5.2m, indicative of the Group's prudent approach to balance sheet management. This capital surplus could support significant further growth in FCA regulated activities.

Estate Agency Division

Estate Agency: Financials Summary	Q1			Q2			H1
	2020	2019	change	2020	2019	change	2020	2019	change
P&L (£m)
Residential Sales Exchange Income	11.4	13.5	-16%	7.2	14.1	-49%	18.6	27.6	-33%
Lettings Income	15.4	17.3	-11%	12.0	16.5	-27%	27.4	33.8	-19%
Financial Services Income	2.6	3.8	-31%	1.9	3.0	-36%	4.5	6.8	-33%
Conveyancing, Franchise and Other	2.3	3.4	-33%	0.9	3.0	-72%	3.2	6.5	-51%
Asset Management	1.3	1.2	9%	0.7	1.3	-47%	2.0	2.5	-20%
Total Revenue	33.0	39.2	-16%	22.7	37.9	-40%	55.7	77.1	-28%
Expenditure	(33.8)	(40.4)	16%	(17.8)	(32.7)	-45%	(51.6)	(73.1)	-29%
Underlying Operating Profit	(0.8)	(1.2)	-34%	4.9	5.2	-5%	4.1	4.0	3%
Underlying Operating margin	(2)%	(3)%	-100bps	22%	14%	800bps	7%	5%	200bps

KPIs
Branch numbers: owned	231	229	1%	226	231	-2%	226	231	-2%
Branch numbers: franchise	132	137	-4%	130	137	-5%	130	137	-5%
Exchange units (000's)	3,049	4,451	-31%	1,936	4,044	-52%	4,985	8,495	-41%
Managed properties (000's)	25,254	27,760	-9%	24,815	25,060	-1%	24,815	25,060	-1%
Average Residential Sales Exchange Fee per unit (£)	3,725	3,025	23%	3,739	3,489	7%	3,730	3,246	15%
Profit per branch (core) - rolling 12 months (£k)							47.3	49.6	-5%

Estate Agency Revenue was heavily impacted by significantly reduced activity levels, in particular Residential Sales, with a number of residential housing market activities banned between 23 March and 13 May 2020. These included viewings, physical valuations, removals and other essential parts of the residential sales and lettings processes.

Overall volumes were budgeted to fall from those reported in 2019 as a result of the reshaping in Q1, 2019 of the Your Move and Reeds Rains branch networks. The previous total of 308 branches was reduced to 144 keystone branches, following the closure and merger of 81 branches, the franchising of a further 39 and the closure of 44 locations.

These steps helped improve profitability at the start of the year, as well as containing costs during the lockdown. Adjusting for the reduced size of the network, first quarter like-for-like Residential Sales exchange income increased by 1%, a performance the Board regard as strong in view of the closure due to lockdown on 23 March 2020 and the slowdown in the days and weeks before.

Nevertheless, Underlying Operating Loss reduced in Q1 2020 by 34% to £0.8m, reflecting improved margins and the benefits of the branch restructuring undertaken last year.

Activity was extremely restricted in the period between 23 March and 13 May 2020. Over this period, weekly Residential Sales exchange income reduced by 63%, and new Lettings and Renewals by 24%. The Group responded quickly to the easing of restrictions, having put in place detailed contingency plans in preparation. As a result, by 31 May 2020, the Group had reopened 208 owned branches in England, with a further 18 branches in Scotland and Wales remaining closed until guidance changed on 29 June 2020. By the end of June 2020, the total branch estate had reopened with the exception of 5 branches under review and was operating with comprehensive health and safety protections in place. As at 30 June 2020, 1,334 furloughed colleagues (from the peak of 2,085) have returned back to work, with a further 473 brought back in July, as the Division implements measures to build market share in a controlled fashion.

We have yet to see the full benefit of much of this increased activity given the time taken between taking on a new listing and completion of sale. Nevertheless, Estate Agency income recovered significantly in June to £10.3m (2019: £12.4m).

Across the whole of the first-half of the year, Estate Agency Divisional Revenue was 28% below prior year at £55.7m. Adjusting for the reshaping of the Estate Agency networks, like-for-like revenue was down 25%. The benefits of the steps taken to rationalise the network and focus on the most productive branches, can be seen in improved average Sales Exchange Fees (up 15% from £3,246 to £3,730) and reduced costs (down 29% to £51.6m), which helped to drive a small increase in Underlying Operating Profit (up £0.1m to £4.1m). A total of £1.7m of 2020 costs have been separately identified as Covid-19 related costs and are excluded from these numbers.

The performance of Marsh & Parsons is affected by the particular conditions that pertain to the London markets. Q1, 2020 revenues increased 5% to £7.0m, whilst a strong recovery following the lockdown in June 2020 (revenue £2.4m compared to £2.8m in 2019), helped lift Underlying Operating Profit in June 2020 to £0.6m (2019: £0.5m), and that for the 6 months to £1.0m (2019: £0.4m).

Surveying Division

Surveying: Financials Summary	Q1			Q2			H1
	2020	2019	change	2020	2019	change	2020	2019	change
P&L (£m)
Total Revenue	20.5	20.8	-2%	10.6	21.9	-51%	31.1	42.7	-27%
Expenditure	(17.6)	(18.0)	-2%	(8.6)	(18.3)	-53%	(26.2)	(36.4)	-28%
Underlying Operating profit	2.9	2.8	3%	2.0	3.5	-44%	4.9	6.3	-23%
Underlying Operating margin	14%	13%	100bps	19%	16%	300bps	16%	15%	100bps

KPIs
Jobs performed (000's)	124	121	2%	73	129	-44%	196.6	250	-22%
Income per job (£)	166	171	-3%	146	169	-14%	158	170	-7%
Number of operational surveyors (FTE)	506	481	5%	507	486	4%	507	486	4%

In Q1 2020, a total of 124,000 valuations were completed, 3,000 more than in 2019, but at a slightly lower average income (£166 v £171). Average income per job is affected by a number of factors, including the proportion undertaken remotely, the nature of the valuation required and the work necessary to ensure an appropriate valuation is reached.

A number of steps have been undertaken to improve margins in the Division, a process that will continue. During Q1 2020, Surveying administration functions were rationalised, resulting in annualised savings of £1.0m. Notwithstanding the slight reduction in income, and the onset of the lockdown restrictions in March 2020, Underlying Operating Profit for Q1 2020 increased marginally over 2019 (£2.9m v £2.8m).

The Group undertook no physical valuations during the period between 23 March and 18 May 2020, although it continued to perform valuations on a remote basis, at a level equating to approximately 20% of normal activity. Following recommencing physical valuations on 18 May 2020, the number of inspections increased steadily and in June 2020 42,000 jobs were completed (2019: 42,000). It is estimated that around 55% of the work undertaken in June related to the clearance of lender pipelines, although the proportion of new instructions continues to build.

The Division reported Underlying Operating Profit for Q2 2020 of £2.0m (2019: £3.5m) to bring the half year total to £4.9m (2019: £6.3m). However, performance in June 2020 was strong, with Underlying Operating Profit of £2.4m, significantly ahead of the £0.9m in June 2019. A total of £0.8m has been excluded from these numbers and identified separately as Covid-19 related costs.

The availability of qualified surveyors is a factor that has been of some concern across the industry as a whole, and increasing the Group's capacity in this regard has been an area of focus. Against this background, the small increase in operational surveyors over the past 12 months (from 486 FTE to 507 FTE) will help to position the Group to meet future demand. At the half-year end, a small number of operational surveyors remained on furlough (15 out of the 440 placed on furlough), in large part reflecting personal circumstances which make it difficult to return to work at this time.

The Division continues to focus on meeting the needs of its lender customers, paying close attention to service standards whilst also seeking to develop new and improved products and services. During 2020, new technology enhancements were released, with more under development to deliver further quality and efficiency improvements. The Group was also pleased in June 2020 to secure a contract extension to supply UK residential survey and valuation works to a major High Street bank.

Currently, just over 70% of the Division's revenue is derived from its top five customers. This is not inconsistent with the concentration in mortgage lending in the UK, where the six biggest lenders collectively account for around 65% of the market.

Accounting for the impact of Covid-19 and Exceptional items

We have excluded Covid-19 related net costs of £2.8m from Underlying Operating Profit and shown them separately in note 6 of the Interim Statements. The majority of this total relates to property and other asset costs incurred whilst the lockdown was in place. These costs are net of property grants received and separately identified to give full transparency of the impact of Covid-19 on the Group.

Property Grants of £0.5m were received whilst premises were closed during the lockdown and have been excluded from Underlying Operating Profit. Following the re-opening of branches and other premises, property costs and grants are included in Underlying Operating Profit.

We have recognised £4.4m of exceptional costs in the period in line with the Group's Accounting Policies. This includes £1.7m relating to planned Surveying transformation and Estate Agency branch/centre closure costs and £2.4m of aborted deal costs in relation to the discussions for a potential all share combination between LSL and Countrywide plc, which did not result in an offer by LSL. Further details are set out in Note 8 to the financial statements.

Group Liquidity and Banking Covenants

The Group maintains a prudent approach to financial gearing. Reported Net Bank Debt at 30 June 2020 was £12.7m (June 2019: £52.0m), resulting in modest gearing² at 0.25 X Adjusted EBITDA¹ (June 2019: 1.11 X). Undrawn bank facilities at 30 June 2020 were £68.0m.

Net Bank Debt reduced between the end of Q1 and the end of Q2 2020, with careful cash control and cash conservation as well the receipt of Coronavirus Job Retention Scheme payments. The Net Bank Debt position was further reduced by payment deferrals put in place to conserve cash, mainly in relation to tax payments due, with deferrals agreed with HMRC. Adjusting for Covid-19 related payment deferrals, the underlying Net Bank Debt position at 30 June 2020 was approximately £45.6m, with notional adjusted gearing² at 1.12 X Adjusted EBITDA¹, and representing a fall on the equivalent position in 2019.

LSL has considered a range of scenario throughout H1 2020 to help the ongoing assessment of risks and opportunities. A highly pessimistic scenario was modelled as part of the Going Concern assessment, which included the pessimistic assumption that there is a further lock down from September 2020 for the remainder of 2020, impacting LSL's businesses, followed by a 2021 outlook in which market transaction volumes reduced to a level close to the low point experienced during the Global Financial Crisis.

The modelling has confirmed that the Group's current liquidity position would enable it to operate under this scenario for a period of at least 12 months from the date of signing these financial statements within the terms of its current facilities and that therefore it is appropriate to use the Going Concern basis of preparation for this financial information.

Having due regard to these matters and after making appropriate enquiries, the Board have therefore continued to adopt the Going Concern basis in preparing this interim financial statement.

Strategy

The Board has previously set out a number of strategic goals and objectives. We have developed these further during the course of 2020, with key elements including:

Group

· To align LSL's operations to deliver a more seamless proposition for the provision of residential property services;

· To grow counter-cyclical and recurring revenue streams;

· To leverage technology better to deliver product enhancements and operational efficiency improvements;

· To evaluate selective inorganic growth opportunities and pursue as appropriate;

· To remain close to the markets in which it operates, managing businesses with attention to detail and rigour; and

· To position the Group to compete effectively in the digital age, in each of its principal areas of activity.

Financial Services

· To grow further the Group's Financial Services activities, including considering entry to complementary markets in which the Group has competitive advantages either from its existing activities or its expertise;

· To consolidate LSL's leading position as a distributor of mortgages, and non-investment insurance products;

· To develop further its distribution capability, identifying new channels for client acquisition; and

· To maintain a rigorous, compliant and customer focused culture, in line with regulatory expectations and the Board's values.

Estate Agency

· To deliver first class service to vendors, landlords and other customers;

· To grow market share;

· To position LSL as a provider of choice for the provision of products and services throughout the house buying and letting chains;

· To become a leading (top 3) estate agency in each of the locations in which it has a physical presence, and in doing so to grow operating profit per branch in normalised market conditions;

· To enhance further the position of Marsh & Parsons as a leading estate agency in the markets it serves, including extension of its branch network to geographically contiguous locations, in particular outside Central London; and

· To grow its provision of lettings services, including the selective acquisition of lettings books.

Surveying and Valuation

· To remain the pre-eminent provider of surveying and valuation services to UK lenders;

· To develop market leading propositions that reflect changing consumer and lender needs, including the use of technology to reduce costs for the benefit of all market participants;

· To be the acknowledged expert in its core markets; and

· To improve operational efficiency, using its capacity effectively and minimising surveyor downtime.

The resilient performance throughout H1 2020 is testament to the underlying strength of the Group, its diversified revenue streams and progress achieved in previous periods. The Financial Services Division was a major contributor to performance through the period of the lockdown, whilst the benefits of earlier investment in technology was evidenced by the ability of all of the Group's principal businesses to continue to operate effectively and to secure such income opportunities as were available. The steps taken in 2019 to reduce the size of the Estate Agency branch networks to focus on profitable locations in which the Group has the potential to maintain a strong market share also helped underpin performance.

In the second half of 2020, the Group will continue to pursue these objectives. In view of the improved trading conditions, we have taken steps to increase capital expenditure and resume investment in new products, as well as to provide additional resources to management to build the Group's competitive position in each of the principal markets in which the Group operates. The Group will also work to develop its understanding of the opportunities to develop LSL's digital propositions further. This will include direct investment as well as working to maximise the value of strategic investments.

The Board also considers it is now appropriate to once again evaluate the benefits afforded by acquisitions, and in doing so will consider carefully all attendant risks, including those resulting from further widespread Covid-19 outbreaks, or worsening economic conditions.

Management will continue to review the appropriateness of these objectives, and develop new ones as appropriate, and more detailed updates on overall progress will be given when market conditions are clearer.

July trading and outlook

Current trading conditions are extremely encouraging with strong front-end metrics in each of the three divisions. The introduction by the Government of a Stamp Duty Holiday for properties up to £500,000 is expected to provide further support to many of the markets in which the Group operates, and should help underpin financial performance.

However, the future course of the Covid-19 virus and its impact on the economy and markets in which the Group operates remains highly uncertain. In these conditions, it is not possible to provide an accurate assessment of trading prospects, and the Board therefore is unable to provide financial guidance for the year ending 31 December 2020 and beyond. We will resume formal guidance as soon as the position becomes clearer.

David Stewart

Group Chief Executive Officer

5 August 2020

1 Group Adjusted EBITDA is Group Underlying Operating Profit plus depreciation of right of use assets, plant, property and equipment (as defined in Note 6 of the financial statements).

2 Gearing defined as Net bank debt divided by Group Adjusted EBITDA. Excluding the impact of IFRS 16 gearing, and as reporting for covenant purposes, is 0.31x, post IFRS 16 gearing is 0.25X.

Principal risks and uncertainties

The key risks and uncertainties relating to the Group's operations remain consistent with those disclosed in the Group's Annual Report and Accounts 2019 on pages 36 to 41. The Annual Report and Accounts 2019 can be accessed on the Group's website: www.lslps.co.uk. Having reconsidered these principal risks and uncertainties which are summarised below, the Board continues to consider them appropriate.

· Covid-19 virus

· UK housing market

· New UK housing market entrants

· Investment, acquisitions and growth initiatives

· Professional services

· Client contracts

· Business infrastructure (including IT)

· Information security (including data protection)

· Regulatory and compliance

· Employees

A recent Group Risk Appetite Assessment exercise included an evaluation of developing areas of key risks and the effectiveness of related business response plans.

The Board has concluded that the principal risks and uncertainties of the Group remain the same as those included within the Annual Report and Accounts 2019.

Forward Looking Statement

This announcement contains certain statements that are forward-looking statements. They appear in a number of places throughout this announcement and include statements regarding LSL's intentions, beliefs or current expectations and those of its officers, directors and employees concerning, amongst other things, LSL's results of operations, financial condition, liquidity, prospects, growth, strategies and the business it operates. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward-looking statements reflect knowledge and information available at the date of preparation of this update and, unless otherwise required by applicable law, LSL undertakes no obligation to update or revise these forward-looking statements. Nothing in this 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.

Definitions

Definitions for words and expressions referred to and included in this statement which are not expressly defined within, can be found in LSL's Annual Report and Accounts 2019 (a copy of which is available on LSL's website at: www.lslps.co.uk). All references to 'note(s)' in this statement are, unless expressly stated otherwise, references to the 'Notes to the Interim Condensed Group Financial Statements' included in this statement.

Responsibility statement of the Directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

· The Interim Condensed Consolidated Group Financial Statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

· The interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the Interim Condensed Consolidated Group 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

5 August 2020 5 August 2020

Interim Group Income Statement

for the six months ended 30 June 2020

		Unaudited Six Months Ended		Audited Year Ended
		30 June 2020	30 June 2019	31 December 2019
Continuing Operations	Note	£'000	£'000	£'000

Revenue	4,5	114,921	154,115	311,073

Operating expenses:
Employee and subcontractor costs		(71,113)	(96,958)	(194,207)
Establishment costs		(4,036)	(7,341)	(10,367)
Depreciation on property, plant and equipment		(7,184)	(7,513)	(14,842)
Other operating costs		(22,929)	(30,268)	(56,098)
		(105,262)	(142,080)	(275,514)

Other operating income		274	459	887
Gain / (loss) on sale of property, plant and equipment		16	(6)	148
(Loss) / income from joint ventures and associates		(224)	(331)	441
Share-based payments		673	(553)	(312)
Amortisation of intangible assets		(2,899)	(2,236)	(5,786)
Exceptional gains	8	-	593	2,487
Exceptional costs	8	(4,422)	(13,380)	(15,730)
Contingent consideration		504	652	2,054
Group operating profit / (loss)		3,581	(2,767)	19,748

Finance income		9	5	10
Finance costs		(1,579)	(1,802)	(3,744)
Net finance costs		(1,570)	(1,797)	(3,734)

Profit / (loss) before tax		2,011	(4,564)	16,014

Taxation credit / (charge)	10	(764)	1,353	(3,045)

Profit / (loss) for the period/year		1,247	(3,211)	12,969

Earnings / (loss) per share expressed in pence per share:
Basic	7	1.2	(3.1)	12.6
Diluted	7	1.2	(3.1)	12.6

Interim Group Statement of Comprehensive Income

for the six months ended 30 June 2020

	Unaudited Six Months Ended		Audited Year Ended
	30 June 2020	30 June 2019	31 December 2019
	£'000	£'000	£'000

Profit / (loss) for the period	1,247	(3,211)	12,969

Items not to be reclassified to profit and loss in subsequent periods:
Revaluation of financial assets not recycled through income statement	-	(3,006)	(3,558)
Net other comprehensive (loss):	-	(3,006)	(3,558)

Total other comprehensive income / (loss) for the year, net of tax	-	(3,006)	(3,558)

Total comprehensive income / (loss), net of tax	1,247	(6,217)	9,411

Interim Group Balance Sheet

as at 30 June 2020

		Unaudited Six Months Ended		Audited Year Ended
		30 June 2020	30 June 2019	31 December 2019
	Note	£'000	£'000	£'000

Non-current assets
Goodwill	3	159,863	159,724	159,863
Other intangible assets		28,584	31,438	30,906
Property, plant and equipment		44,944	50,154	49,570
Financial assets	11	9,324	9,602	9,326
Investments in joint ventures and associates		12,521	12,187	12,958
Contract assets		559	813	686
Total non-current assets		255,795	263,918	263,309

Current assets
Trade and other receivables		30,024	43,438	34,391
Contract assets		253	253	253
Current tax asset		-	1,500	-
Cash and cash equivalents		19,263	4,984	-
Total current assets		49,540	50,175	34,664

Total assets		305,335	314,093	297,953

Current liabilities
Financial liabilities	12	(13,699)	(20,601)	(11,113)
Trade and other payables		(79,705)	(58,826)	(60,007)
Current tax liabilities		(1,097)	-	(1,209)
Provisions for liabilities	13	(2,721)	(5,734)	(3,575)
Total current liabilities		(97,222)	(85,161)	(75,904)

Non-current liabilities
Financial liabilities	12	(59,147)	(90,375)	(73,951)
Deferred tax liability		(1,834)	(2,634)	(1,805)
Provisions for liabilities	13	(5,195)	(6,052)	(5,077)
Total non-current liabilities		(66,176)	(99,061)	(80,833)

Total Liabilities		(163,398)	(184,222)	(156,737)

Net assets		141,937	129,871	141,216

Equity
Share capital		208	208	208
Share premium account		5,629	5,629	5,629
Share-based payment reserve		3,369	4,671	4,429
Shares held by EBT		(5,021)	(5,224)	(5,224)
Fair value reserve		(13,584)	(13,032)	(13,584)
Retained earnings		151,336	137,619	149,758
Total equity		141,937	129,871	141,216

Interim Group Cash Flow Statement

for the six months ended 30 June 2020

		Unaudited Six Months Ended		Audited Year Ended
		30 June 2020	30 June 2019	31 December 2019
	Note	£'000	£'000	£'000
Profit / (loss) before tax		2,011	(4,564)	16,014
Adjustments for:
Exceptional operating items and contingent consideration		3,918	12,135	11,189
Depreciation of tangible assets		7,184	7,513	14,842
Amortisation of intangible assets		2,899	2,236	5,786
Share-based payments		(673)	553	312
(Profit) / loss on disposal of fixed assets		(16)	6	(148)
Loss / (profit) from joint ventures		224	331	(441)
Finance income		(9)	(5)	(10)
Finance costs		1,579	1,802	3,744
Operating cash flows before movements in working capital		17,117	20,007	51,288
Movements in working capital
Decrease / (increase) in trade and other receivables		4,708	(4,222)	5,462
Increase / decrease in trade and other payables		19,080	(5,423)	(6,181)
(Decrease) / increase in provisions		(737)	(836)	(3,908)
		23,051	(10,481)	(4,627)

Cash generated from operations		40,168	9,526	46,661

Interest paid		(1,411)	(725)	(3,289)
Income taxes paid		(937)	(2,685)	(5,355)
Exceptional costs paid		(3,952)	(6,662)	(8,799)
Net cash generated from operating activities		33,868	(546)	29,218

Cash flows used in investing activities
Acquisitions of subsidiaries and other businesses		(212)	(1,300)	(2,711)
Payment of contingent consideration	12	(55)	(133)	(7,890)
Investment in financial assets	11	(8)	(1,750)	(2,783)
Cash received on sale of financial assets		-	1,015	1,765
Purchase of property, plant and equipment and intangible assets		(1,656)	(2,154)	(4,892)
Proceeds from sale of property, plant and equipment		130	-	367
Net cash (expended) / generated on investing activities		(1,801)	(4,322)	(16,144)

(Repayment) / drawdown of loans	12	(9,883)	22,500	7,383
Payment of deferred consideration		-	(2,000)	(2,009)
Receipt of lease Income		19	33	76
Proceeds from the exercise of share options		147	26	26
Payments of lease liabilities		(3,087)	(6,027)	(9,761)
Dividends paid		-	(7,085)	(11,194)
Net cash expended in financing activities		(12,804)	7,447	(15,479)

Net increase / (decrease) in cash and cash equivalents		19,263	2,579	(2,405)

Cash and cash equivalents at the end of the period / year		19,263	4,984	-

Interim Group Statement of changes in equity

Unaudited - for the six months ended 30 June 2020

	Share capital	Share premium account	Share- based payment reserve	Shares held by EBT	Fair value Reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2020	208	5,629	4,429	(5,224)	(13,584)	149,758	141,216
Other comprehensive income for the period	-	-	-	-	-	-	-
Profit for the period	-	-	-	-	-	1,247	1,247
Total comprehensive income for the period	-	-	-	-	-	1,247	1,247
Exercise of options	-	-	(77)	203	-	21	147
Share-based payments	-	-	(983)	-	-	310	(673)
Dividend payment	-	-	-	-	-	-	-
At 30 June 2020	208	5,629	3,369	(5,021)	(13,584)	151,336	141,937

During the six month period to 30 June 2020 a total of 57,649 share options were exercised relating to LSL's various share option schemes resulting in the shares being sold by the

Trust. LSL received £147,000 on exercise of these options.

Interim Group Statement of changes in equity

Unaudited - for the six months ended 30 June 2019

	Share capital	Share premium account	Share- based payment reserve	Shares held by EBT	Fair value Reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2019	208	5,629	4,129	(5,261)	(11,727)	149,615	142,593
Adjustment on initial application of IFRS 16	-	-	-	-	-	-	-
Revised opening balance at 1 January 2019	208	5,629	4,129	(5,261)	(11,727)	149,615	142,593

Revaluation of financial assets	-	-	-	-	(3,006)	-	(3,006)
Disposal of financial asset	-	-	-	-	1,701	(1,701)	-
Other comprehensive income for the period	-	-	-	-	(1,305)	(1,701)	(3,006)
Loss for the period	-	-	-	-	-	(3,211)	(3,211)
Total comprehensive income for the period	-	-	-	-	(1,305)	(4,912)	(6,217)
Exercise of options	-	-	(11)	37	-	1	27
Share-based payments	-	-	553	-	-	-	553
Dividend payment	-	-	-	-	-	(7,085)	(7,085)
At 30 June 2019	208	5,629	4,671	(5,224)	(13,032)	137,619	129,871

During the six month period to 30 June 2019 a total of 10,672 share options were exercised relating to LSL's various share option schemes resulting in the shares being sold by the

Trust. LSL received £26,000 on exercise of these options.

Interim Group Statement of changes in equity

Audited - for the year ended 31 December 2019

	Share capital	Share premium account	Share- based payment reserve	Shares held by EBT	Fair value reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2019	208	5,629	4,129	(5,261)	(11,727)	149,615	142,593
Adjustment on initial application of IFRS 16	-	-	-	-	-	68	68
Revised opening balance	208	5,629	4,129	(5,261)	(11,727)	149,683	142,661
Other comprehensive income for the year
Revaluation of financial assets	-	-	-	-	(3,558)	-	(3,558)
Disposal of financial assets	-	-	-	-	1,701	(1,701)	-
Profit for the year	-	-	-	-	-	12,969	12,969
Total comprehensive (loss) / income for the year	-	-	-	-	(1,857)	11,268	9,411
Exercise of options	-	-	(12)	37	-	1	26
Share-based payments	-	-	312	-	-	-	312
Dividend payment	-	-	-	-	-	(11,194)	(11,194)
At 31 December 2019	208	5,629	4,429	(5,224)	(13,584)	149,758	141,216

During the year ended 31 December 2019, the Trust acquired nil LSL Shares. During the period, 10,672 share options were exercised relating to LSL's various share option schemes resulting in the Shares being sold by the Trust. LSL received £24,000 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 2020 were approved by the LSL Board on 4^th August 2020. The interim Financial Statements are not the statutory accounts. The financial information for the year ended 31 December 2019 is extracted from the audited statutory accounts for the year ended 31 December 2019, which have been filed with the Registrar of Companies. The auditor's report was unqualified and did not contain an emphasis of matter paragraph, and did not make a statement under section 498 (2) or (3) of the Companies Act 2006.

1. Basis of preparation

The Interim Condensed Consolidated Group Financial Statements for the period ended 30 June 2020 have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU, and should be read in conjunction with the Group's annual Financial Statements as at 31 December 2019 which are included in LSL's Annual Report and Accounts 2019.

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 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 a revolving credit facility. The Group currently has a £100 million credit facility which was extended in January 2019 and will now expire in May 2022. As shown in Note 12 to these interim condensed consolidated Group Financial Statements, the Group has utilised £32 million of the facility leaving £68 million of available undrawn committed borrowing facilities in respect of which all conditions precedent had been met. In the first half of 2020 the Group has utilised the Coronavirus Job Retentions Scheme receiving £13.2m of cash with an additional £0.6m received in July 2020.

LSL has continued to run a variety of scenario models throughout H1 to help the ongoing assessment of risks and opportunities. A severe downside scenario has been modelled as part of the Going Concern assessment, which includes the pessimistic assumption that there is a further nationwide lock down from September 2020 for the remainder of 2020, impacting LSL's businesses to the same degree as the nationwide lockdown in Q2 2020, and 2021 assumptions modelled with property market transaction volumes reducing close to the low point experienced during the Global Financial Crisis. The scenario modelling includes further prudent assumptions, for example, no upside has been assumed due to the temporary increase to the Stamp Duty Land Tax thresholds announced by the Government in July 2020. We have considered further mitigations that could be applied in a severe scenario and we have not applied them in this model. Underpinned by LSL's strong balance sheet and diverse business revenue streams, the severe downside financial scenario modelling confirmed that the Group's current liquidity position would enable the Group to operate under this scenario for a period of at least 12 months from the date of signing these financial statements within the terms of its current facilities with no breach of banking covenants and therefore it is appropriate to use the Going Concern basis of preparation for this financial information.

Having due regard to these matters and after making appropriate enquiries, the Directors have a reasonable expectation that the Group and the Company have adequate resources to remain in operation until at least 12 months after the approval of these Interim Condensed Financial Statements. The Board have therefore continued to adopt the Going Concern basis in preparing the Interim Condensed consolidated Financial Statements.

2. Changes in significant accounting policies

The accounting policies adopted in the preparation of the Interim Condensed Consolidated Group Financial Statements are consistent with those followed in the preparation of the Group's annual Financial Statements for the year ended 31 December 2019.

3. Judgements and estimates

The preparation of financial information in conformity with IFRS as adopted by the European Union requires management to make judgements, estimates and assumptions that affect the application of policies and reporting amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next six months are the same as those as at 31 December 2019. These assumptions are discussed in detail in the Group's Annual Report and Accounts 2019. The assumptions discussed are as follows:

Judgements

Areas of judgement that have the most significant effect on the amounts recognised in the consolidated Financial Statements are:

· Deferred tax

· Exceptional items

Estimates

The key assumptions affected by future uncertainty that have significant risks of causing material adjustment to the carrying value of assets and liabilities within the next financial year are:

· Professional Indemnity (PI) claims

· Lapse Provision

· Valuation of financial assets

· Valuations in acquisitions

· Impairment of intangible assets

· Contingent consideration

· Income tax

After a highly unusual H1 2020 due to Covid-19, the Board determined the need for the Group to conduct an impairment review at 30 June 2020 on the goodwill and intangible assets held on the balance sheet. Cash generating units remain unchanged from those identified in the Annual Report and Accounts 2019. The recoverable amounts of the cash generating units has been determined based on a value in use calculation using cash-flow projections considered reasonably likely by management and reflecting consensus of economists' views of the shape of the economic recovery from the Covid-19 pandemic. The discount rate applied to the cash-flow projections is 9.71% (2019: 9.51%). Management have concluded from this impairment review that no impairment is required. No reasonably possible change in assumptions would result in an impairment at the interim.

4. Revenue

The Group's operations and main revenue streams are those described in the latest Annual Financial Statements.

Disaggregation of Revenue

Set out below is the disaggregation of the Group's revenue from contracts with customers:

Unaudited - Six Months ended 30 June 2020
	Residential Sales exchange £'000	Lettings £'000	Asset Management £'000	Financial Services £'000	Surveying and Valuation Services £'000	Other £'000	Total £'000
Timing of revenue recognition
Services transferred at a point in time	18,595	12,640	1,463	32,611	31,095	3,151	99,555
Services transferred over time	-	14,874	492	-	-	-	15,366
Total revenue from contracts with customers	18,595	27,514	1,955	32,611	31,095	3,151	114,921

Unaudited - Six Months ended 30 June 2019
	Residential Sales exchange £'000	Lettings £'000	Asset Management £'000	Financial Services £'000	Surveying and Valuation Services £'000	Other £'000	Total £'000
Timing of revenue recognition
Services transferred at a point in time	27,575	18,587	1,762	41,108	42,669	6,492	138,193
Services transferred over time	-	15,234	688	-	-	-	15,922
Total revenue from contracts with customers	27,575	33,821	2,450	41,108	42,669	6,492	154,115

Audited - Year ended 31 December 2019
	Residential Sales exchange £'000	Lettings £'000	Asset Management £'000	Financial Services £'000	Surveying and Valuation Services £'000	Other £'000	Total £'000
Timing of revenue recognition
Services transferred at a point in time	57,676	37,782	4,311	83,353	86,358	11,098	280,578
Services transferred over time	-	29,535	960	-	-	-	30,495
Total revenue from contracts with customers	57,676	67,317	5,271	83,353	86,358	11,098	311,073

5. Segment analysis of revenue and operating profit

LSL reports three segments: Financial Services; Estate Agency; and Surveying and Valuation Services:

· The Financial Services Segment arranges mortgages for a number of lenders and arranges pure protection and general insurance policies for a panel of insurance companies via the Estate Agency branches, the PRIMIS networks, Embrace Financial Services, First2Protect, Mortgages First, Insurance First Brokers, Linear Financial Services and RSC New Homes.

· The Estate Agency segment provides services related to the sale and letting of residential properties. It operates a network of high street branches. As part of this process, the Estate Agency Division also provides property marketing services and arranges conveyancing services. In addition, it provides repossession and asset management services to a range of lenders. The Estate Agency Division receives a commercially agreed commission payment from the Financial Services Division (from Embrace Financial Services and First2Protect). This arrangement reflects Financial Services income generated by referrals from the Estate Agency Division.

· The Surveying and Valuation Services segment provides a valuations and professional surveying service of residential properties to various lenders and individual customers.

The Management Team monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the Group Financial Statements. Head Office costs, Group financing (including finance costs and finance income) and income taxes are managed on a Group basis and are not allocated to operating segments.

Operating segments

The following tables presents revenue and profit information regarding the Group's operating segments for the six months ended 30 June 2020, for the six months ended 30 June 2019 and for the year ended 31 December 2019.

Unaudited - Six months ended 30 June 2020

Income statement information	Financial Services £'000	Estate Agency £'000	Surveying and Valuation Services £'000	Unallocated £'000	Total £'000

Revenue from external customers	32,611	51,215	31,095	-	114,921
Intersegment revenue	(4,533)	4,533	-	-	-
Total revenue	28,078	55,748	31,095	-	114,921

Segmental result:
Group Underlying Operating Profit	4,932	4,147	4,850	(1,385)	12,544
Operating profit / (loss)	3,953	(1,567)	2,468	(1,273)	3,581

Finance income					9
Finance costs					(1,579)
Profit before tax					2,011
Taxation					(764)
Profit for the period					1,247

Group Underlying Operating Profit is as defined in note 6 to these condensed financial statements

	Financial Services	Estate Agency	Surveying and Valuation Services	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000
Balance sheet information
Segment assets - intangible	17,671	159,267	11,509		188,447
Segment assets - other	9,361	73,695	11,752	22,080	116,888
Total Segment assets	27,032	232,962	23,261	22,080	305,335
Total Segment liabilities	(28,252)	(69,066)	(28,311)	(37,769)	(163,398)
Net assets/(liabilities)	(1,220)	163,896	(5,050)	(15,689)	141,937

The joint venture interests of the Group are recorded in the Estate Agency segment, with the associate interest recorded in the Financial Services.

Unallocated net liabilities comprise plant and equipment £14,000, IFRS 16 plant and equipment £5,000, other assets £2,802,000, cash £19,263,000 other taxes £118,000, accruals £(2,376,000), Other payables £(492,000), IFRS 16 financial liabilities £(2,000), deferred and current tax £(3,014,000), and revolving credit facility overdraft £(32,000,000).

Unaudited - Six months ended 30 June 2019

Income statement information	Financial Services £'000	Estate Agency £'000	Surveying and Valuation Services £'000	Unallocated £'000	Total £'000

Revenue from external customers	41,108	70,338	42,669	-	154,115
Intersegment revenue	(6,797)	6,797	-	-	-
Total revenue	34,311	77,135	42,669	-	154,115

Segmental result:
Group Underlying Operating Profit	4,326	4,017	6,318	(2,504)	12,157
Operating profit / (loss)	4,020	(10,354)	6,342	(2,775)	(2,767)

Finance costs					(1,797)
Profit before tax					(4,564)
Taxation					1,353
Profit for the period					(3,211)

	Financial Services	Estate Agency	Surveying and Valuation Services	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000
Balance sheet information
Segment assets - intangible	18,805	160,382	11,975	-	191,162
Segment assets - other	12,271	85,316	17,007	8,337	122,931
Total Segment assets	31,076	245,698	28,982	8,337	314,093
Total Segment liabilities	(22,383)	(73,416)	(28,741)	(59,682)	(184,222)
Net assets/(liabilities)	8,693	172,282	241	(51,345)	129,871

The joint venture interests of the Group are recorded in the Estate Agency and Related Services segment, with the associate interest recorded in the Financial Services.

Unallocated net liabilities comprise plant and equipment £12,000, IFRS 16 plant and equipment £63,000, other assets £1,779,000, other taxes £49,000, accruals £(35,000), IFRS 16 financial liabilities £(63,000), deferred and current tax £(1,134,000), and revolving credit facility overdraft £(52,016,000).

Audited - Year ended 31 December 2019

	Financial Services	Estate Agency	Surveying and Valuation Services	Unallocated	Total
Income Statement information	£'000	£'000	£'000	£'000	£'000

Revenue from external customers	83,353	141,362	86,358	-	311,073
Intersegment revenue	(13,552)	13,552	-	-	-
Total revenue	69,801	154,914	86,358	-	311,073

Segmental result:
Group Underlying Operating Profit	11,642	14,453	16,343	(5,403)	37,035
Operating profit / (loss)	10,022	(2,206)	17,450	(5,518)	19,748

Finance Income					10
Finance costs					(3,744)
Profit before tax					16,014
Taxation					(3,045)
Profit for the year					12,969

Balance sheet information

Segment assets - intangible	18,088	160,942	11,739	-	190,769
Segment assets - other	9,078	81,934	14,822	1,350	107,184
Total Segment assets	27,166	242,876	26,561	1,350	297,953
Total Segment liabilities	(25,895)	(58,771)	(25,020)	(47,051)	(156,737)

Net assets / (liabilities)	1,271	184,105	1,541	(45,701)	141,216

The joint venture interests of the Group are recorded in the Estate Agency and Related Services segment, with the associate interest recorded in the Financial Services.

Unallocated net liabilities comprise plant and equipment £50,000, other assets £1,300,000, lease liabilities £(34,000), 12% loan notes £(66,000), Bank overdraft £(883,000), accruals £(1,916,000), deferred and current tax liabilities £(3,152,000), and revolving credit facility overdraft £(41,000,000).

6. Adjusted performance measures

In addition to the various performance measures defined under IFRS, the Group reports a number of alternative performance measures that are designed to assist with the understanding of the underlying performance of the Group. The Group seeks to present a measure of underlying performance which is not impacted by the inconsistency in profile of exceptional gains and exceptional costs, contingent consideration, amortisation of intangible assets, share-based payments and costs relating to Covid-19. Share based payments are excluded from the underlying performance due to the fluctuations that can impact the charge, such as lapses and the level of annual grants.

The four adjusted measures reported by the Group are:

· Group Underlying Operating Profit

· Adjusted Basic EPS

· Adjusted diluted EPS

· Group Adjusted EBITDA

The amortisation of intangible assets is not representative of the underlying costs of the business, and is therefore excluded from adjusted earnings.

The Directors consider that these adjusted measures shown above give a better and more consistent indication of the Group's underlying performance. These measures form part of Management's internal financial review and are contained within the monthly management information reports reviewed by the Board.

The calculations of adjusted basic and adjusted diluted EPS are given in Note 7 to these Interim Condensed Consolidated Group Financial Statements and a reconciliation of Group Underlying Operating Profit is shown below:

	Unaudited Six months ended 30 June		Audited Year ended 31 December
	2020	2019	2019
	£'000	£'000	£'000

Group operating profit / (loss)	3,581	(2,767)	19,748
Share-based payments	(673)	553	312
Amortisation of intangible assets	2,899	2,236	5,786
Covid-19 related establishment costs	580	-	-
Covid-19 related depreciation costs	1,646	-	-
Covid-19 related other costs	593	-	-
Exceptional gains	-	(593)	(2,487)
Exceptional costs	4,422	13,380	15,730
Contingent consideration charge	(504)	(652)	(2,054)
Group Underlying Operating Profit	12,544	12,157	37,035

Depreciation on property, plant and equipment (excluding Covid-19 depreciation charge)	5,538	7,513	14,842
Group Adjusted EBITDA	18,082	19,670	51,877

Costs relating to Covid-19 have been separately identified and excluded from Group Underlying Operating Profit as the Directors consider that these adjusted measures shown above give a better and more consistent indication of the Group's underlying performance. The most significant area of costs included in this relates to property and other asset costs incurred during the enforced closure of branches following the Government lockdown with any property grants received in the same period reported in this line to sure even-handedness in reporting. Group Underlying Operating Profit includes £13.8m of amounts receivable relating to the Coronavirus Job Retention Scheme.

7. Earnings per share (EPS)

Basic EPS amounts are calculated by dividing net profit for the period attributable to ordinary equity holders of the parent by the weighted average number of Ordinary Shares outstanding during the period.

Diluted EPS amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Unaudited - Six months ended 30 June

	Profit after tax £'000	Weighted average number of shares	2020 Per share amount Pence	Profit after tax £'000	Weighted average number of shares	2019 Per share amount Pence

Basic EPS	1,247	102,726,654	1.2	(3,211)	102,666,615	(3.1)
Effect of dilutive share options		363,335			984,381
Diluted EPS	1,247	103,089,989	1.2	(3,211)	103,650,996	(3.1)

Audited - Year ended 31 December 2019

	Profit after tax £'000	Weighted average number of shares	2019 Per share amount Pence

Basic EPS	12,969	102,669,719	12.6
Effect of dilutive share options		425,152
Diluted EPS	12,969	103,094,871	12.6

Adjusted basic and diluted EPS

The Directors consider that the adjusted earnings shown below give a better and more consistent indication of the Group's underlying performance:

	Unaudited Six months ended		Audited Year Ended
	30 June 2020 £'000	30 June 2019 £'000	31 December 2019 £'000
Group underlying operating profit	12,544	12,157	37,035
Net finance costs (excluding exceptional items, lease liabilities and contingent consideration items)	(625)	(788)	(1,600)
Normalised taxation	(2,265)	(2,160)	(6,733)
Adjusted profit after tax before exceptional items, share-based payments and amortisation	9,654	9,209	28,702

Unaudited - Six months ended 30 June

	Adjusted profit after tax £'000	Weighted average number of shares	2020 Per share amount Pence	Adjusted profit after tax £'000	Weighted average number of shares	2019 Per share amount Pence

Adjusted basic EPS	9,654	102,726,654	9.4	9,209	102,666,615	9.0
Effect of dilutive share options		363,335			984,381
Adjusted diluted EPS	9,654	103,089,989	9.4	9,209	103,650,996	8.9

Audited - Year ended 31 December 2019

	Adjusted profit after tax £'000	Weighted average number of shares	2019 Per share amount Pence

Adjusted basic EPS	28,702	102,669,719	28.0
Effect of dilutive share options		425,152
Adjusted diluted EPS	28,702	103,094,871	27.8

This represents adjusted profit after tax attributable to equity holders of the parent. Tax has been adjusted to exclude the prior year tax adjustments, and the tax impact of exceptional items, amortisation, share-based payments and costs related to Covid-19. The effective tax rate used is 19.00% (30 June 2019: 19.00% and 31 December 2019: 19.00%)

8. Exceptional items

	Unaudited Six months ended		Audited Year Ended
	30 June 2020	30 June 2019	31 December 2019
	£'000	£'000	£'000
Exceptional costs:
Branch / centre closure and restructuring costs including redundancy costs	1,667	13,081	14,645
Transition costs relating to surveying contracts	-	299	516
Aborted merger deal costs	2,403	-	-
Other	352	-	569
	4,422	13,380	15,730
Exceptional gains:
Exceptional gain in relation to historic Professional Indemnity costs	-	(593)	(2,487)

Exceptional costs

There were £1.7m (June 2019: £13.1m, December 2019: £14.6m) of non-recurring and material exceptional costs relating to the planned Surveying transformation in 2020 and Estate Agency branch/centre closures and restructuring costs in 2019.

There were £2.4m of non-recurring and material costs relating to aborted deal costs in relation to the discussions for a potential all share combination between LSL and Countrywide plc, which did not result in an offer by LSL.

In 2020 there were £0.4m of non-recurring costs in relation to head office restructuring.

Exceptional Gains

Provision for professional indemnity (PI) claims and insurance claim notification

Previous exceptional gains relate to the settling of historic PI claims. There has been no gain in the first half of 2020 (June 2019: £0.6m, December 2019: £2.5m).

9. Dividends paid and proposed

No final dividend in respect of the year ended 31 December 2019 (Year ended December 2018: 6.9 pence per share) was paid in the period ended 30 June 2020. An interim dividend will not be paid in 2020 (June 2019: 4.0 pence). Interim dividends are recognised when paid.

10. Taxation

The major components of income tax charge in the interim Group income statements are:

	Unaudited Six Months Ended		Audited Year Ended
	30 June 2020	30 June 2019	31 December 2019
	£'000	£'000	£'000
UK corporation tax:
- current year credit / (charge)	(802)	1,503	3,993
- adjustment in respect of prior years	-	-	(56)
	(802)	1,503	3,937
Deferred tax:
Origination and reversal of temporary differences	38	(150)	(588)
Adjustment in respect of prior year	-	-	(304)
	38	(150)	(892)

Total tax credit / (charge) in the income statement	(764)	1,353	3,045

A change to the main UK corporation tax rate, announced in the Budget on 11 March 2020, was substantively enacted on 17 March 2020. The rate applicable from 1 April 2020 now remains at 19%, rather than the previously enacted reduction to 17%.

The headline UK rate of corporation tax for the period is therefore 19% (2019: 19%), and the rate at which deferred tax has been provided is also 19% (2019: 17%)

Deferred tax charged directly to other comprehensive income relating to the revaluation of financial assets is £Nil. In the six months ended 30 June 2019 £Nil and year ended 31 December 2019 £0.1m.

11. Financial assets

	Unaudited Six Months Ended		Audited Year Ended
	30 June 2020	30 June 2019	31 December 2019
	£'000	£'000	£'000
Convertible loan notes - at fair value
Unsecured convertible loan notes - interest free	-	750	-
Secured convertible loan notes - 5%	2,000	1,000	2,000
	2,000	1,750	2,000
Investment in equity instruments - at fair value
Unquoted shares at fair value	6,960	7,545	6,952
Quoted shares at fair value	-	-	-
	6,960	7,545	6,952

IFRS 16 lessor financial assets	364	307	374

Total Financial Assets	9,324	9,602	9,326

Opening balance	9,326	11,566	11,566
Adjustment on initial recognition of IFRS 16	-	329	329
	9,326	11,895	11,895

Acquisitions	8	1,750	2,783
Additional Subleases	-	-	114
Disposals	(10)	(1,037)	(1,835)
Fair value adjustment recorded through OCI	-	(3,006)	(3,558)
Deferred tax on fair value adjustment through OCI	-	-	(73)
Closing balance	9,324	9,602	9,326

Non-current assets	9,324	9,602	9,326
Current assets		-	-
	9,324	9,602	9,326

Convertible loan notes at fair value

LSL has subscribed for £2,000,000 (June 2019: £1,000,000 and December 2019: £2,000,000) of Convertible Secured Preference Loan Notes with Mortgage Gym Limited. Interest on the Convertible Secured Preference Loan Notes is 5% per annum. The final repayment date of the Convertible Secured Preference Loan Notes is 5^th June 2024. Repayment may take place before this date. The Convertible Secured Preference Loan Notes are secured by way of debenture.

Investment in equity instruments

The financial assets include unlisted equity instruments which are carried at fair value. Fair value is judgemental given the assumptions required and have been valued using a level 3 valuation techniques (see Note 31 to the December 2019 Group Financial Statements).

Vibrant Energy Matters Limited (VEM)

The carrying value of the Group's investment in VEM at 30 June 2020 has been assessed as £287,000 (June 2019: £722,000 and December 2019: £287,000).

NBC Property Master Limited

The carrying value of the Group's investment at 30 June 2020 has been assessed as £78,000 (June 2019: £78,000 and December 2019: £78,000).

Global Property Ventures Limited

On 6 January 2020, LSL acquired 76,000 additional shares in Global Property Ventures Limited, for a consideration of £8,275.

The carrying value of the Group's investment in Global Property Ventures Limited at 30 June 2020 has been assessed as £101,000 (June: 2019: £250,000 and December 2019: £93,000).

Yopa Property Limited

The carrying value of the Group's investment in Yopa at 30 June 2020 has been assessed as £6,495,000 (June 2019: £6,495,000 and December 2019: £6,495,000).

12. Financial liabilities

	Unaudited Six Months Ended		Audited Year Ended
	30 June 2020	30 June 2019	31 December 2019
	£'000	£'000	£'000
Current
Overdraft	-	-	883
2% and 12% unsecured loan notes	-	-	65
IFRS 16 lessee financial liabilities	11,621	12,273	9,431
Deferred consideration	80	86	80
Contingent consideration	1,998	8,242	654
	13,699	20,601	11,113
Non-current
Bank loans - revolving credit facility (RCF)	32,000	57,000	41,000
IFRS 16 lessee financial liabilities	23,710	26,993	27,801
Contingent consideration	3,437	6,382	5,150
	59,147	90,375	73,951

Bank loans - RCF and overdraft

The bank loan totalling £32.0m (June 2019: £57.0m December 2019: £41.0m) and overdraft totalling £nil (June 2019: £nil December 2019: £0.9m) are secured via cross guarantees issued from all of the Group's subsidiaries excluding the following subsidiaries: Lending Solutions Limited, Homefast Property Services, Linear (Linear Mortgage Network and Linear Financial Services), Templeton LPA, Group First, Personal Touch Financial Services, and RSC New Homes.

The utilisation of the RCF may vary each month as long as this does not exceed the maximum £100.0m facility (2019: £100.0m). The Group's overdraft is also secured on the same facility, and the combined overdraft and RCF cannot exceed £100.0m (2019: £100.0m). The banking facility is repayable when funds permit on or by May 2022.

Interest and fees payable on the RCF amounted to £0.6m (June 2019: £0.7m, December 2019: £1.6m). The interest rate applicable to the facility is LIBOR plus a margin rate; the margin rate is linked to the leverage ratio of the Group and the margin rate is reviewed at six monthly intervals.

Contingent consideration -

	Unaudited Six Months Ended		Audited Year Ended
	30 June 2020	30 June 2019	31 December 2019
	£'000	£'000	£'000

LSLi contingent consideration	342	593	393
Group First	1,392	8,917	1,518
RSC	3,437	4,878	3,632
Other	264	236	261
	5,435	14,624	5,804

Opening balance	5,804	15,038	15,038
Cash paid	(55)	(133)	(7,890)
Acquisition	23	144	300
Amounts recorded though income statement	(337)	(425)	(1,644)
Closing balance	5,435	14,624	5,804

£342,000 (June 2019: £593,000 and December 2019: £393,000) of contingent consideration relates to amounts owed to third parties in relation to the acquisition of LSLi and certain of its subsidiaries between 2012 and 2016. This is typically payable between three and five years after the acquisition dates depending on the profitability of those subsidiaries in the relevant years.

£1,392,000 of contingent consideration relates to Group First (June 2019: £8,917,000 December 2019: £1,518,000) which is due for payment in the first half of 2021. The additional consideration will be calculated using earnings multiples of between five and six times EBITA (plus excess cash in the business) and has been capped at a maximum of £25.0m.

£3,437,000 of contingent consideration relates to RSC New Homes (June 2019: £4,878,000 and December 2019: £3,632,000). The additional consideration will be calculated using earnings multiples of between five and six times EBITA (plus excess cash in the business) and has been capped at a maximum of £7,500,000.

In the period ending 30 June 2020 £55,000 (June 2019: £2,133,000 and December 2019: £7,890,000) of contingent consideration was paid to third parties.

The table below shows the allocation of the contingent consideration balance and income charge between the various categories:

	Unaudited Six Months Ended		Audited Year Ended
Contingent consideration balances relating to amounts accounted for as:	30 June 2020	30 June 2019	31 December 2019
	£'000	£'000	£'000

Arrangement under IFRS 3	5,435	14,624	5,804
Closing balance	5,435	14,624	5,044

Contingent consideration profit and loss impact in the period relating to amounts accounted for as:

Arrangement under IFRS 3	(504)	(652)	(2,054)
Unwinding of discount on contingent consideration	167	227	410
(Credit) / charge	(337)	(425)	(1,644)

The contingent consideration charged to the Income statement in the period excluding the unwinding of discount relates to both new and previous acquisitions and relates to the acquisition of: LSLi charge of £4,000 (June 2019: charge of £8,000, December 2019: £14,000); Mortgage First credit of £175,000 (June 2019: charge of £623,000, December 2019: £641,000); RSC New Homes credit of £313,000 (June 2019: credit of £20,000, December 2019: £1,408,000).

13. Provisions for liabilities

Unaudited - Six months ended 30 June:

	2020			2019
	Professional indemnity claim provision	Onerous leases	Total	Professional indemnity claim provision	Onerous leases	Total
	£'000	£'000	£'000	£'000	£'000	£'000

Balance at 1 January	8,212	440	8,652	12,430	130	12,560
Amount utilised	(1,069)	(124)	(1,193)	(1,507)	(474)	(1,981)
Amount released	(4)	-	(4)	(593)	-	(593)
Unwinding of discount	1	-	1	15	-	15
Provided in the period	460		460	520	1,265	1,785
Balance at 30 June	7,600	316	7,916	10,865	921	11,786

Current	2,545	176	2,721	5,228	506	5,734
Non-current	5,055	140	5,195	5,637	415	6,052
	7,600	316	7,916	10,865	921	11,786

Audited - Year ended 31 December 2019

	Professional indemnity claim provision	Onerous leases	Total
	£'000	£'000	£'000

Balance at 1 January	12,430	130	12,560
Amount utilised	(2,257)	(897)	(3,154)
Amount released	(2,489)	-	(2,489)
Unwinding of discount	30	-	30
Provided in financial year	498	1,207	1,705
Balance at 31 December	8,212	440	8,652

Current	3,380	195	3,575
Non-current	4,832	245	5,077
	8,212	440	8,652

The PI Cost provision is to cover the costs of claims relating to valuation services for clients which are not covered by PI insurance. The PI Costs provision includes amounts for claims already received from clients, claims yet to be received and any other amounts which may be payable as a result of legal disputes associated with provision of valuation services.

The provision is the Directors' best estimate of the likely outcome of such claims, taking account of the incidence of such claims and the size of the loss that may be borne by the claimant, after taking account of actions that can be taken to mitigate losses. The provision will be utilised as individual claims are settled and the settlement amount may vary from the amount provided depending on the outcome of each claim. It is not possible to estimate the timing of payment of all claims and therefore a significant proportion of the provision has been classified as non-current.

At 30 June 2020 the total provision for PI Costs was £7.6m (June 2019: £10.9m, December 2019: £8.2m). The Directors have considered the sensitivity analysis on the key risks and uncertainties discussed above.

Cost per claim

A substantial element of the PI Cost provision relates to specific claims where disputes are on-going. These specific cases have been separately assessed and specific provisions have been made. The average cost per claim has been used to calculate the IBNR. Should the costs to settle and resolve these claims and future claims increase by 10%, an additional £0.9m would be required.

Rate of claim

The IBNR assumes that the rate of claim for the high-risk lending period in particular reduces over time. Should the rate of reduction be lower than anticipated and the duration extend, further costs may arise. An increase of 30% in notifications in excess of that assumed in the IBNR calculations would increase the required provision by £0.1m.

Notifications

The Group has received a number of notifications which have not deteriorated into claims or loss. Should the rate of deterioration increase by 50%, an additional provision of less than £0.1m would be required.

Onerous leases

The provision for lease obligations relates to obligations under leases on vacant properties. The final outcome depends upon the ability of the Group to sublet or assign the lease over the related properties.

14. Analysis of Net Bank Debt

	Unaudited Six Months Ended		Audited Year Ended
	30 June2020	30 June 2019	31 December 2019
	£'000	£'000	£'000
Interest bearing loans and borrowings (including loan notes, overdraft, IFRS16 lease liabilities, contingent and deferred consideration
- Current	13,699	20,601	11,113
- Non-current	59,147	90,375	73,951
	72,846	110,976	85,064

Unsecured loan notes	-	-	(65)
Less: cash and short-term deposits	(19,263)	(4,984)	-
IFRS 16 Lessee financial liabilities	(35,331)	(39,266)	(37,232)
Less: deferred and contingent consideration	(5,515)	(14,710)	(5,884)
Net Bank Debt at the end of the period	12,737	52,016	41,883

15. Financial instruments - risk management

The financial risks the Group faces and the methods used to manage these risks have not changed since 31 December 2019. Further details of the risk management policies of the Group are disclosed in Note 31 of the Group's Financial Statements for the year ended 31 December 2019.

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.

16. Fair values of financial assets and financial liabilities

There is no difference in the book amounts and fair values of all the Group's financial instruments that are carried in these interim condensed consolidated Group Financial Statements

Fair value hierarchy

As at 30 June 2020, the Group held the following financial instruments measured at fair value. The Group uses the following hierarchy for determining and disclosing the fair value of the financial instruments by valuation technique:

· Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

· Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and

· Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

Unaudited - 30 June 2020	Total	Level 1	Level 2	Level 3
	£'000	£'000	£'000	£'000
Assets measured at fair value
Financial assets	9,324	-	-	9,324
Liabilities measured at fair value
Contingent consideration	5,435	-	-	5,435

Unaudited 30 June 2019	Total	Level 1	Level 2	Level 3
	£'000	£'000	£'000	£'000
Assets measured at fair value
Financial assets	9,295	-	-	9,295
Liabilities measured at fair value
Contingent consideration	14,624	-	-	14,624

Audited - 31 December 2019	Total	Level 1	Level 2	Level 3
	£'000	£'000	£'000	£'000
Assets measured at fair value
Financial assets	9,326	-	-	9,326
Liabilities measured at fair value
Contingent consideration	5,804	-	-	5,804

Of the investments totalling £9,324,000, all are valued using Level 3 valuation techniques. The Directors reviewed the fair value of the financial assets at 30 June 2020. Excluding loan notes, the underlying value of the investments will be driven by the profitability of these businesses. If this was to drop by 10%, the implied valuation is likely to also drop by around 10%, £0.7m.

The contingent consideration relates to amounts payable in the future on acquisitions. The amounts payable are based on the amounts agreed in the contracts and based on the future profitability of each entity acquired. In valuing each provision, estimates have been made as to when the options are likely to be exercised and the future profitability of the entity at this date. Further details of these provisions are shown in Note 13.

17. Acquisitions

Six months ended 30 June 2020

· Lettings book acquisition

During the period, the Group acquired one lettings book for initial consideration paid of £211,500, and a total consideration of £235,000.

INDEPENDENT REVIEW REPORT TO LSL PROPERTY SERVICES PLC

Introduction

We have been engaged by the Company to review the Interim Condensed Consolidated Group Financial Statements in the half-yearly financial report for the six months ended 30 June 2020 which comprises the Interim Group Income Statement, the Interim Group Statement of Comprehensive Income, the Interim Group Balance Sheet, the Interim Group Cash Flow Statement, the Interim Group Statement of Changes in Equity and the related Notes 1 to 17. We have read the other information contained in the half- yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP

Leeds

5 August 2020

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

IR SSMFMLESSELA

LSL — LSL Property Services News Story

REG - LSL Property Svcs. - Interim Results

Unaudited
Six Months Ended

Recent news on LSL Property Services

REG - LSL Property Svcs. - Transaction in Own Shares

REG - LSL Property Svcs. - Transaction in Own Shares

REG - LSL Property Svcs. - Director/PDMR Shareholding

REG - LSL Property Svcs. - Transaction in own shares

REG - LSL Property Svcs. - Transaction in own shares

LSL — LSL Property Services News Story

REG - LSL Property Svcs. - Interim Results

Unaudited Six Months Ended

Recent news on LSL Property Services

REG - LSL Property Svcs. - Transaction in Own Shares

REG - LSL Property Svcs. - Transaction in Own Shares

REG - LSL Property Svcs. - Director/PDMR Shareholding

REG - LSL Property Svcs. - Transaction in own shares

REG - LSL Property Svcs. - Transaction in own shares

Unaudited
Six Months Ended