TIDMLSL
RNS Number : 0392W
LSL Property Services PLC
13 April 2023
13 April 2023
LSL Property Services plc (LSL or Group)
FULL YEAR RESULTS FOR THE YEARED 31 DECEMBER 2022
RESILIENT TRADING AND STRONG BALANCE SHEET TO SUPPORT FUTURE
GROWTH
LSL has today released its Preliminary Results for the year
ended 31 December 2022.
David Stewart, Group CEO, commented :
"I am pleased to report that LSL is in good shape. In 2022, the
Group traded well in challenging market conditions, whilst making
substantial progress in the execution of our strategy to grow and
to become a B2B financial services provider. As a result, we remain
well-placed to deliver on our strategy and capitalise on the
significant opportunities we see available."
Highlights
-- All Divisions traded well and gained market share
-- FY22 performance in line with the Board's November guidance
-- Group Revenue resilient at GBP321.7m (2021: GBP326.8m)
-- Group Underlying Operating Profit(1) of GBP36.9m (2021:
GBP49.3m), impacted by smaller purchase market and adverse effect
of mini-budget on our Surveying & Valuation business in Q4
2022
-- Group operating loss of GBP56.7m (2021: GBP72.6m profit)
after the Board reduced the carrying value of goodwill by GBP87.2m.
This is a non-cash item reflecting the impact of more conservative
mid-term housing market assumptions, higher discount rates and the
disposal of non-core businesses. In 2021, the statutory operating
profit was boosted by a GBP29.4m gain on the disposal of interests
in joint ventures, which was also part of our strategy to exit from
non-core businesses
-- The Group is highly cash-generative with GBP35.2m generated from operations in FY22
-- Share of UK purchase and re-mortgage market increased to a record 10.4%(2) (2021: 9.6%)
-- Surveying & Valuation performed strongly, delivering resilient margins and profits
-- Estate Agency retained local market share gains made in 2021,
and slightly increased national market share(3)
-- Significant strategic progress to simplify the Group and
focus on business-to-business services (B2B), with the disposal of
direct-to-consumer (D2C) financial services businesses to our
Pivotal Growth joint venture and the Marsh & Parsons
disposal
-- Very strong balance sheet with Net Cash(4) of GBP40.1m at 31 December 2022 (2021: GBP48.5m)
-- Full year dividend maintained at 11.4p
-- Improved trading momentum in challenging markets, with higher
levels of activity in all divisions, will support stronger
performance expected in the second half of 2023
Outlook
-- We expect market conditions to remain challenging during H1
but to improve in H2 and thereafter, supported by a strong
re-mortgage market, and further improvements in consumer confidence
and transaction levels assisted by recent reductions in mortgage
rates
-- Trading in our Financial Services Network and Estate Agency
businesses is in line with expectations, with signs of increasing
momentum
-- In Surveying & Valuation, valuations in more specialist
areas such as equity release and buy-to-let have recovered less
quickly after the rise in interest rates and market disruption
which followed the 2022 mini-budget, with these segments still
trending significantly below 2022
-- We will manage costs pro-actively as market conditions evolve
-- Planned investment for the longer term will continue, underpinning confidence for the future
-- LSL remains very well-placed to benefit as market conditions improve
Notes:
1 Group Underlying Operating Profit is before exceptional items,
contingent consideration, amortisation of intangible assets and
share-based payments (see note 5 of the Financial Statements)
2 Mortgage lending excluding product transfers - New mortgage
lending by purpose of loan, UK (BOE) - Table MM23 (published 31
January 2023)
3 Number of residential property transaction completions with
value GBP40,000 or above, HMRC (published 24 January 2023)
4 Refer to note 11 to the Financial Statements for the calculation
FINANCIAL RESULTS
Full Year 2022 2021 Var
------- ------
Group Revenue (GBPm) 321.7 326.8 (2)%
Group Underlying Operating
Profit(1) (GBPm) 36.9 49.3 (25)%
Group Underlying Operating
margin (%) 11% 15% (370)bps
Exceptional Gains (GBPm) 0.7 31.1 (98)%
Exceptional Costs (GBPm) (88.9) (2.0) nm
Group operating (loss)/profit
(GBPm) (56.7) 72.6 (178)%
(Loss)/Profit before tax
(GBPm) (59.1) 69.9 (185)%
-------------------------------- ------- ------ ---------
Basic Earnings per Share(2)
(pence) (62.3) 59.6 (205)%
Adjusted Basic Earnings
per Share(2) (pence) 28.4 37.7 (25)%
Net Cash(3) at 31 December
(GBPm) 40.1 48.5 (17)%
Final Proposed dividend
(pence) 7.4 7.4 -
Full Year Dividend (pence) 11.4 11.4 -
-------------------------------- ------- ------ ---------
Notes:
1 Group Underlying Operating Profit is before exceptional costs,
contingent consideration, amortisation of intangible assets and
share-based payments (as set out in note 5 of the Financial
Statements)
2 Refer to note 6 of the Financial Statements for the calculation
3 Refer to note 11 of the Financial Statements for the calculation
nm not meaningful
GROUP CHIEF EXECUTIVE'S REVIEW
Review of 2022 Performance
I am pleased to confirm that LSL remains in good shape and is
well-positioned to grow once market conditions improve.
Although the mortgage and housing markets have been adversely
impacted by economic and political uncertainty, the Group has
continued to trade well and backed by a strong balance sheet, we
expect to remain resilient throughout 2023 in what are anticipated
to be difficult, but steadily improving, market conditions.
Furthermore, we have made very substantial progress in executing
our Financial Services-led growth strategy, significantly reducing
our exposure to housing market cycles. With a strong balance sheet,
including Net Cash(1) balances of GBP40.1m at the year end, and a
business model that remains highly cash-generative, LSL is well
placed to benefit as soon as market conditions normalise.
Group Revenue was broadly in line with 2021 at GBP321.7m. This
included record revenue of GBP81.7m in Financial Services, and a
very strong H1 2022 performance in Surveying & Valuation, which
was subsequently impacted by the significant and unexpected market
disruption resulting from economic and political uncertainty in Q4
2022.
Group Underlying Operating Profit(2) was down 25% compared to
2021 at GBP36.9m, which is mostly attributable to reduced volumes
in Surveying & Valuation during Q4 2022 and the impact of a
slowdown in the residential sales market in Estate Agency. On a
statutory basis, the Group operating loss was GBP(56.7)m, after the
Board reduced the carrying value of goodwill by GBP87.2m. This is a
non-cash item reflecting the impact of more conservative mid-term
housing assumptions, higher discount rates and the disposal of
non-core businesses, including Marsh & Parsons. In 2021, the
Group reported a statutory operating profit of GBP72.6m, which was
boosted by a GBP29.4m gain on the disposal of interests in joint
ventures, which was also part of our strategy to exit from non-core
businesses.
In Financial Services, the Underlying Operating Profit(2) of our
Network business was GBP15.5m, ahead of the record result in 2021
(GBP14.4m). Although member firms were naturally cautious about
adviser numbers in H2, there was also modest further year-on-year
growth in the number of advisers, bringing the year-end total to
2,867. In addition, more than 700 other firms submitted business
through LSL's mortgage club, further boosting our market share.
The Financial Services Division as a whole secured an 11%
increase in overall lending, well ahead of the whole market which
had only modest growth of 1.9%. This resulted in a substantial
market share improvement to 10.4%(3) from 9.6% in 2021.
Underlying Operating Profit(2) for the Financial Services
Division as a whole reduced by GBP1.5m, as the Group's D2C advice
businesses were impacted by lower levels of activity in the new
build market in particular, and the house purchase market in
general. Our direct-to-consumer financial services businesses were
transferred during the early part of 2023 to our joint venture with
Pollen Street Capital, Pivotal Growth, in line with LSL's strategy
to focus its activities on B2B services. We believe Pivotal Growth,
in which the Group has a 48% equity share, is better placed to take
these businesses forward for the benefit of our shareholders.
Surveying & Valuation traded very strongly through to the
end of Q3 2022, capitalising on recent contract wins and increased
allocations as well as further growth of 73% in D2C and data
revenues. Its excellent performance was interrupted by the
market-wide hiatus in mortgage activity in October and November, as
lenders remained cautious whilst the political and economic impact
of the events that followed September's mini-budget became clearer.
This is estimated to have directly reduced H2 Underlying Operating
Profit in the Surveying & Valuation Division by at least
GBP5m.
Nevertheless, the Surveying & Valuation Division still
reported Underlying Operating Profit(2) of GBP20.4m, down GBP3.2m
on 2021, but still GBP4.1m or 25% higher than the pre-COVID-19
performance of GBP16.3m reported in 2019. Despite the market
pressure, the Underlying Operating Profit margin(2) remained
resilient at 22%. Income-per-job increased slightly to GBP175, GBP2
up on 2021.
Estate Agency revenues were down 5% on 2021, when performance
was boosted substantially by the extension of the stamp duty
holiday. H2 2022 improved materially year-on-year on the back of
the pipeline built up in H1. Lettings revenue was resilient and
increased by 4%, on a like for like basis, over the prior year.
Estate Agency retained the residential sales market share gains
made in its core catchment areas in 2021, and as a result slightly
increased its national market share(4) to 1.30% (2021: 1.28%).
Conversion of its exchange pipeline remained slow throughout the
year, impacting H1 performance in particular. H2 2022 saw fewer new
properties coming to market and fewer sales agreed but the strong
pipeline built in H1 secured an operating profit double the size of
H2 2021. Unsurprisingly, given increased economic and housing
market uncertainty, there was a trend towards more fall-throughs,
largely affecting more recently agreed sales, both of which will
impact performance in Q1 2023.
Lettings revenue was resilient, increasing by 4%, on a like for
like basis, over 2021. The impact of slow exchange speeds, reduced
house purchase activity and a solid lettings performance combined
to produce Underlying Operating Profit(2) for the Estate Agency
Division of GBP10.5m, GBP7.9m below the performance in 2021 which
had benefited significantly from the extension of the stamp duty
holiday to 30 June 2021. The performance during H2 was 4% ahead of
H2 2021.
Strategic priorities and developments
The Group has made substantial progress with the strategy we set
out in 2020 to reduce our exposure to housing market cycles,
simplify the business and focus investment on high-growth areas,
notably our Financial Services Network business.
In January 2023, we announced the disposal of our London estate
agency business, Marsh & Parsons, to Dexters for a
consideration of GBP29m. Marsh & Parsons, which contributed
GBP1.5m to 2022 Underlying Operating Profit, has a relatively low
volume, high fee business model when compared to the rest of the
Estate Agency Division, and was particularly exposed to London
housing market cycles giving rise to a relatively volatile earnings
profile. Other steps to simplify the Group include the disposal of
our small property management business PRSim and the consolidation
of our asset management operations within our Surveying &
Valuation Division.
Throughout 2022 we maintained our level of investment in
Mortgage Gym and DLPS, the technology businesses acquired in April
2021 to support our Financial Services growth plans. Work continued
to adapt and develop the technology with a view to deployment
across our Financial Services Network, with the first stage of this
work to be completed during 2023. This technology investment helps
our Network members become more efficient as well as generating
additional income for them and the Group.
In 2023, we will complete our work to re-focus these businesses,
which will be absorbed into the Financial Services Network
reflecting what is now their predominant business focus.
Our Financial Services led growth plans are centred on the B2B
service offered to our Network members where we believe there are
significant opportunities to grow further by expanding the number
of advisers and the product range they distribute. The Network
business offers a highly scalable, low-cost platform through which
strong margins can be sustained in different market conditions and
is consistent with our vision of LSL as a B2B service provider.
We previously concluded that it would be better to pursue the
considerable opportunities in the D2C mortgage broking market under
a different ownership structure to that of the Group, so that
significant capital could be deployed and entrepreneurs
incentivised appropriately through different economic cycles. This
led to the announcement in 2021 of our Pivotal Growth
"buy-and-build" joint venture with Pollen Street Capital.
Pivotal Growth has now acquired eight businesses, comprising
around 330 advisers, including the Group First and RSC, Embrace
Financial Services and First2Protect direct-to-consumer businesses
transferred from LSL. The consideration for RSC, Group First and
Embrace Financial Services will be based on their financial
performance in 2024. The consideration for F2P is payable at
completion.
I believe this is an exciting move for both Pivotal Growth and
LSL, providing increased scale for Pivotal Growth and the right
environment for these businesses to grow further. It has also
helped simplify the LSL Group considerably, substantially reducing
our cost base and exposure to housing market cycles whilst also
reducing management stretch to enable us to focus on the
substantial opportunity to grow the remaining Financial Services
Network, Surveying & Valuation and Estate Agency
businesses.
In Surveying & Valuation we have continued to diversify our
revenue streams. In May 2022, we launched a consumer-facing website
to support the growth of our enhanced direct-to-consumer
proposition, where we achieved a 60% increase in revenue
year-on-year. Providing data services to lenders has strengthened
our relationships and helped secure contract wins and increased
allocations of valuation instructions, whilst we have established a
strong position in the equity release valuation segment, a sector
we expect to grow significantly over the medium term. Equity
release instructions accounted for approximately 16% of revenue in
2022 (2021: 12%).
Strong balance sheet
Our cash generation in the year resulted in a Net Cash balance
of GBP40.1m. This was boosted further in January 2023 following the
disposal of Marsh & Parsons for a consideration of GBP29m. Our
strong balance sheet and continuing strong cash generation enables
us to invest with confidence throughout the economic cycle,
including restructuring the Group to deliver our ambitious growth
strategy. In 2023, we will continue to invest in capability and
technology, support Pivotal Growth in its acquisition of D2C
brokerages, and consider potential acquisition targets to build our
Financial Services Network business. The Board will continue to
actively review its capital allocation policy to ensure we maintain
an efficient balance sheet.
To provide further flexibility to our balance sheet, during
February 2023 we agreed an amended and restated banking facility
with a maturity date of May 2026, arranged on materially the same
terms, replacing the previous GBP90m with a GBP60m revolving credit
facility with major mainstream UK lenders, available on request at
any time.
Dividend
The Board has considered the proposed dividend in light of the
Group's policy to pay out 30% of Group Underlying Operating Profit
after finance and normalised tax charges, such that dividend cover
is held at approximately three times earnings over the business
cycle. This policy was designed to provide clarity to shareholders
and ensure the Group retained a strong balance sheet for all market
conditions.
Although economic conditions have affected current earnings, we
have made significant progress in executing our strategic shift to
develop a business that is less exposed to the housing market
cycle.
As part of that shift and the associated rationalisation of
certain businesses such as the recent sale of Marsh & Parsons,
we have built significant Net Cash balances, which at 31 December
2022 and prior to the disposal of Marsh & Parsons, stood at
GBP40.1m. In light of this exceptionally strong cash position and
the Board's confidence in the future prospects of the Group, the
Board recommends a final dividend of 7.4 pence. If approved, this
would give a total dividend of 11.4 pence per share, unchanged from
last year.
The ex-dividend date is 27 April 2023 with a record date of 28
April 2023 and a payment date of 2 June 2023. Shareholders can
elect to reinvest their cash dividend and purchase additional
shares in LSL through a dividend reinvestment plan. The election
date is 11 May 2023.
The Board continues to keep its capital allocation policy and
balance sheet structure under close review to ensure it is fit for
purpose for our evolving business model and will seek to update
shareholders on this as appropriate.
Living Responsibly
The Board believes that success is measured by more than just
profits and our Living Responsibly programme is at the centre of
our sustainability strategy. Put simply, our objective is to have a
positive effect on the communities in which we operate, whether
that is measured by the impact we have on the environment, the
opportunities we provide to colleagues, the way we serve our
customers or the work we undertake in our communities.
In our ESG and our Living Responsibly reports, we set out some
of the steps we have taken to limit our environmental impact, help
ensure LSL is a supportive and inclusive workplace and provide
support to good causes.
It is vital that our Living Responsibly programme has real
substance and is reflected in everything we do. We are helped to
achieve this by a number of independent colleague forums and
working groups which provide additional insight in key areas.
Further information on these, including the establishment in 2023
of LSL Voices is also set out in our Living Responsibly Report. I
am grateful to the very many colleagues who have willingly given
their time and energy to support this work.
I am equally grateful for the hard work and commitment of all
our staff during what has been a hugely challenging period and
which has helped ensure LSL is well-positioned to thrive in all
market conditions, and would like to take this opportunity to thank
them for their effort and support.
Looking Ahead
We have made significant progress in re-shaping the Group in
line with our strategy and each of our core businesses are
performing well. After a strong start to 2022 which saw us build
substantial pipelines in Estate Agency and Financial Services,
market conditions deteriorated as a result of political instability
and sharply rising interest rates and although we expect to see a
steady improvement in activity over the course of the year, it is
clear that conditions will remain challenging throughout 2023.
However, LSL remains well-positioned for future growth.
Independent mortgage brokers typically perform well in challenging
markets, being agile and close to their client's needs, and this
will help ensure our Financial Services Network businesses will
remain resilient. In addition, although some areas of the valuation
market remain depressed following the market uncertainty which
followed the 2022 mini-budget, our Surveying & Valuation
business remains very well-placed for medium-term growth, helped by
recent contract wins and good progress made in developing new
income streams.
We have made substantial progress in restructuring and
re-focusing the Group's activities and will continue this work in
2023. Our very strong balance sheet allows us to continue to invest
for the future with confidence, and I am excited about the Group's
potential and look forward to reporting growth in 2024 and
beyond.
David Stewart
Group Chief Executive Officer
12 April 2023
For further information, please contact:
David Stewart, Group Chief Executive
Officer
Adam Castleton, Group Chief Financial
Officer
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LSL Property Services plc investorrelations@lslps.co.uk
------------------------------------
Helen Tarbet
------------------------------------
Simon Compton
------------------------------------
George Beale
------------------------------------
Buchanan 0207 466 5000 / LSL@buchanan.uk.com
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Notes on LSL
LSL is one of the largest providers of services to mortgage
intermediaries and mortgage and protection advice to estate agency
customers, completing around GBP46bn of mortgages in 2022. It
represents over 10% of the total purchase and re-mortgage market
with almost 2,900 financial advisers. PRIMIS was named Best
Network, 300+ appointed representatives at the 2022 Mortgage
Strategy Awards.
LSL is one of the UK's largest providers of surveying and
valuation services, supplying seven out of the ten largest lenders
in the UK, employing around 500 operational surveyors, and
performing over 500,000 valuations and surveys per annum for key
lender clients. e.surv was named Best Surveying Firm at the 2022
Mortgage Finance Gazette Awards and Best Surveyor at the 2022
Equity Release Awards with Mortgage Solutions.
LSL also operates a network of 182 owned and 127 franchised
estate agency branches.
For further information please visit LSL's website:
lslps.co.uk
Notes:
1 Refer to note 11 to the Financial Statements for the calculation
2 Refer to note 5 of the Financial Statements for reconciliation
of Group and Divisional Underlying Operating Profit to statutory
operating (loss)/profit
3 Mortgage lending excluding product transfers - New mortgage
lending by purpose of loan, UK (BOE) - Table MM23
4 Number of residential property transaction completions with
value GBP40,000 or above, HMRC
P&L (GBPm) 2022 2021 Var
------ ------
Divisional Group Revenue
Financial Services Network
(net revenue) 41.6 38.3 9%
Financial Services Other 40.0 40.2 (0)%
Financial Services 81.7 78.5 4%
Surveying & Valuation 93.2 93.7 (1)%
Estate Agency 146.8 154.6 (5)%
Group Revenue 321.7 326.8 (2)%
----------------------------- ------ ------ ------
Divisional Underlying
Operating Profit(1)
Financial Services Network 15.5 14.4 8%
Financial Services Other (2.3) 0.4 nm
Financial Services 13.3 14.8 (10)%
Surveying & Valuation 20.4 23.6 (14)%
Estate Agency 10.5 18.4 (43)%
Unallocated Central Costs (7.3) (7.5) 3%
Group Underlying Operating
Profit 36.9 49.3 (25)%
----------------------------- ------ ------ ------
P&L (GBPm) 2022 2021 Var
------- ------
Divisional operating (loss)/profit(1)
Financial Services (6.8) 10.0 (169)%
Surveying & Valuation 20.8 24.7 (16)%
Estate Agency (61.8) 46.5 (233)%
Unallocated Central Costs (8.8) (8.6) (3)%
Group operating (loss)/profit (56.7) 72.6 (178)%
---------------------------------------- ------- ------ -------
Notes:
1 Refer to note 5 of the Financial Statements for reconciliation
of Group and Divisional Underlying Operating Profit to statutory
operating (loss)/profit
nm Not meaningful
FINANCIAL REVIEW
Overview
Group summary (P&L)
Group Revenue of GBP321.7m was 2% below the record revenue last
year (2021: GBP326.8m), with Financial Services Division revenue up
4%, Surveying & Valuation revenue down 1% and Estate Agency
revenue down 5%.
In the Financial Services Division, Financial Services Network
revenue increased by 9% which was a positive performance in a
broadly flat mortgage market. Financial Services Other revenue was
in line with prior year as our D2C businesses were impacted by
slower residential activity, offset by re-mortgage activity.
Surveying & Valuation revenue was impacted in the aftermath of
the UK mini-budget, illustrated by October YTD revenue running at
9% ahead of prior year whilst 1% back for the full year. Estate
Agency revenue was back 5% in a market with purchase activity 15%
lower.
Group Underlying Operating Profit(1) was GBP36.9m compared to
the record results posted last year (2021: GBP49.3m) and in line
with 2019, the most recent comparable market. The Group Underlying
Operating Profit of GBP22.7m in H2 was 3% above last year (2021:
GBP22.0m), despite the adverse market impact on the Q4 Surveying
& Valuation Revenue, as the Group returned to a more normalised
profit profile with 62% of operating profit delivered in H2, in
line with the pre-COVID-19 levels. During H2 the residential
exchange pipeline converted as expected however front-end activity
was materially lower, impacted by the UK mini-budget, resulting in
the closing pipeline being below expectations.
Our strategic focus is on the Financial Services Network where
Underlying Operating Profit(1) increased by 8%. Financial Services
Other posted a loss, impacted by lower activity in the purchase and
new build markets, and included continued technology investment.
Estate Agency Underlying Operating Profit was down against prior
year due mainly to the impact of the smaller purchase transaction
market. Unallocated central costs of GBP7.3m reduced by 3%.
On a statutory basis, Group operating loss was GBP(56.7)m (2021:
profit GBP72.6m). The 2022 results include a GBP87.2m non-cash
impairment charge for goodwill and other intangibles following the
annual impairment review, as detailed later in this Financial
Review, and 2021 results included the gain on sale of our holdings
in two joint venture businesses sold during the year.
Operating expenditure
Total adjusted operating expenses(2) increased by 2% to
GBP285.7m (2021: GBP280.2m) with costs managed carefully,
mitigating the impact of the inflationary cost environment with H2
2022 costs 5% below H1. Our emoluments increased by 2% in 2022,
with annual pay and NI increases, and a cost of living award for
lower paid staff, mitigated by headcount reductions in H2 2022 in
response to market conditions. Property and related costs increased
by 12%, reflecting energy price inflation which drove utilities
costs up by GBP1.6m and prior year business rates relief. Other
material costs, including IT, were largely protected by previously
negotiated fixed-price long-term contracts.
Other operating income
Total other operating income was GBP1.3m (2021: GBP0.9m). Of
this, rental income was GBP0.7m (2021: GBP0.9m), reducing
year-on-year following the disposal during 2021 of several freehold
properties previously leased out.
The fair value of units held in The Openwork Partnership LLP was
reassessed to GBP0.7m and is recognised in other operating income.
In 2021, there was a gain on sale of GBP1.1m generated from the
disposal of the freehold properties.
(Loss) / income from joint ventures and associates
Losses from joint ventures and associates of GBP0.5m (2021:
GBP0.7m profit) primarily relate to our equity share of Pivotal
Growth which is still in a growth phase. The prior year income
comprised our share of LMS and TM Group profits prior to the
disposal of our shares in these investments and our share of set up
costs of Pivotal Growth.
Share-based payments
The share-based payment charge of GBP2.0m (2021: GBP1.9m)
consists of a charge in the period of GBP3.1m, offset by lapses and
adjustments for leavers and options exercised in the period. The
prior year included a lower charge of GBP2.6m, offset by lower
lapse and leaver adjustments.
Amortisation of intangible assets
The amortisation charge for 2022 was GBP4.1m (2021: GBP4.5m).
The year-on-year decrease was as a result of some lettings books
acquisitions and intangible software investments becoming fully
amortised during 2021.
Exceptional items
The exceptional gain of GBP0.7m (2021: GBP31.1m) relates to a
release in the PI costs provision, as we continue to make progress
with settling historic PI claims where actual settlement costs have
been lower than expected. The prior year exceptional gain included
the gains on disposals of the Group's joint venture holdings in LMS
and TM Group.
Exceptional costs of GBP88.9m (2021: GBP2.0m), related
principally to the outcome of the annual impairment review, which
led to non-cash goodwill and other intangibles impairment of
GBP87.2m (2021: GBPnil) in a number of subsidiaries(3) : Your Move
and Reeds Rains (GBP42.0m), Marsh & Parsons (GBP27.7m), DLPS
(GBP1.1m), Group First (GBP10.3m) and RSC (GBP6.1m).
The non-cash goodwill impairments result from the deterioration
in the near-term outlook for cash flows due to market conditions
and the significant increase in discount rates since the previous
review, impacting Your Move and Reeds Rains and DLPS, and the
strategic decision to sell Marsh & Parsons, Group First and
RSC. The disposals of Marsh & Parsons, Group First and RSC were
announced in January 2023.
Further exceptional costs of GBP1.7m (2021: GBPnil) were
recognised as a result of 12 branch closures, as part of a
restructuring programme in the Estate Agency Division.
Contingent consideration
The credit to the income statement in 2022 of GBP0.7m (2021:
credit GBP0.7m), relates to the reduction of the contingent
consideration liability for RSC and DLPS, based on revisions to
profit forecasts.
Net finance costs
Net finance costs amounted to GBP2.4m (2021: GBP2.7m) and
related principally to unwinding of the IFRS 16 lease liability of
GBP1.4m (2021: GBP1.5m) and commitment and non-utilisation fees on
the revolving credit facility of GBP1.0m (2021: GBP1.0m). Finance
income increased to GBP0.1m (2021: GBPnil) resulting from increased
interest received on funds held on deposit.
Loss before tax
Loss before tax was GBP59.1m (2021: profit before tax of
GBP69.9m). The year-on-year movement is due to the non-cash
impairments to goodwill and other intangibles during 2022, the
lower Group Underlying Operating Profit, and the prior year
exceptional gain of GBP29.4m on the sale of the investments in the
LMS and TM Group joint ventures.
Taxation
The tax charge of GBP4.9m (2021: GBP8.0m) represents an
effective tax rate of (8.3)%, which is higher than the headline UK
tax rate of 19% largely as a result of the inclusion within the
loss before tax of exceptional impairments to subsidiaries, which
are not deductible for corporation tax purposes. Deferred tax
assets and liabilities are measured at 25% (2021: 25%), the tax
rate effective from 1 April 2023.
Earnings per Share(4)
Basic Earnings per Share was (62.3) pence (2021: 59.6 pence),
with diluted Earnings per Share of (62.3) pence (2021: 59.2 pence).
The Adjusted Basic Earnings per Share was 28.4 pence (2021: 37.7
pence), a decrease of 25%, with adjusted diluted Earnings per Share
of 28.1 pence (2021: 37.4 pence).
Notes:
1 Refer to note 5 of the Financial Statements for reconciliation
of Group and Divisional Underlying Operating Profit to statutory
operating (loss)/profit
2 Total adjusted operating expenses include employee costs,
depreciation and other operating costs as shown in Group Income
Statement
3 Refer to note 10 of the Financial Statements
4 Refer to note 6 of the Financial Statements for the calculation
DIVISIONAL REVIEW
Financial Services Division
Highlights
-- Record Financial Services Network Underlying Operating
Profit(1) of GBP15.5m (2021: GBP14.4m) up 8%
-- Record total lending of GBP45.6bn, up 11% (2021: GBP41.1bn)
-- Further increase in share of UK purchase and re-mortgage
market to 10.4%(2) ( 2021: 9.6%), reflecting strength of Network
mortgage advisers in re-mortgages, a segment we expect to increase
further in importance in 2023
-- Gross revenue per adviser(3) up 4%
-- Total LSL advisers increased to 2,867 (2021: 2,858)
-- Total Financial Services Division Underlying Operating Profit
(1) was GBP13.3m (2021: GBP14.8m) reflecting further investment in
technology and impact of lower purchase market on D2C brokerages
subsequently sold to Pivotal Growth
Financial overview
Total revenue reported was up 4% to GBP81.7m (2021: GBP78.5m).
Core Financial Services Network Revenue grew by 9% year-on-year
benefiting from higher adviser numbers and strong renewal volumes.
Financial Services Other revenue was in line with last year due to
stronger H2 (GBP1m ahead of 2021) in line with increased market
activity. Financial Services Division Underlying Operating Profit
was GBP13.3m (2021: GBP14.8m). On a statutory basis, operating loss
was GBP6.8m (2021: profit GBP10.0m).
The Division's revenue mix by product continues to highlight the
significance of our insurance business and its success in arranging
insurance products both on a standalone basis and when needed at
the time of a mortgage being arranged. In 2022, there remained a
broadly equal split between mortgage related and insurance related
revenue. The split of revenue by product type in 2022 was GBP36.5m
for mortgage fees (2021: GBP33.7m), GBP34.2m for protection and
insurance fees (2021: GBP35.2m) and GBP10.9m in other fees (2021:
GBP9.6m).
Financial Services Network business
Gross purchase and re-mortgage completion lending increased by
11% to GBP32.7bn (2021: GBP29.5bn) representing an increased share
of the lending market excluding product transfers to 10.4% (2021:
9.6%). Including product transfers, total gross mortgage lending
was GBP45.6bn in 2022 (2021: GBP41.1bn). Gross revenues generated
by the Financial Services Network business (including the TMA
mortgage club) increased by 7% to GBP316.6m (2021: GBP295.9m).
Gross revenue per average adviser in 2022 was GBP93.9k (2021:
GBP90.1k). Whilst AR firms in the network have been understandably
cautious about growing adviser numbers in the midst of the economic
and political uncertainty, and as a result the Financial Services
Network business saw modest growth in adviser numbers, this
indicates that through the turnover of advisers, there is a net
improvement in the most productive.
Financial Services Network business focused heavily on helping
member firms look after the mortgage needs of their existing
customers during 2022, particularly during periods of rapidly
changing interest rates. This deliberate focus helped member firms
grow their revenue through increased volumes of re-mortgage and
product switches, despite the decline in the housing market.
Underlying Operating Profit increased 8% to GBP15.5m (2021:
GBP14.4m) with Underlying Operating margin decreasing marginally to
37% (2021: 38%) as we continue to invest in our businesses and some
cost categories returned to levels more in line with pre-COVID-19
periods e.g. broker events and marketing support.
Financial Services Other
Financial Services Other generated an Underlying Operating Loss
of GBP2.3m (2021: profit GBP0.4m), which is stated after our
continued investment in the businesses that make it up, including
costs of the TPFG contract and the Pivotal Growth joint
venture.
As well as continued investment in the Mortgage Gym platform, we
continued to invest in the Financial Services Network business
technology platform (Toolbox), to deliver benefits to firms and
their advisers and create further efficiencies and improved
functionality. Financial Services Other D2C businesses were
impacted by lower activity levels in the new purchase market but
took advantage of the increased refinancing activity which peaked
in H2 and was impacted in part by the UK mini-budget.
The Pivotal Growth joint venture was established in April 2021,
with a net loss in 2022 of GBP0.5m after acquisition costs and
overheads. The slower than expected momentum in acquisitions means
it is still in the investment phase, and we expect a positive
contribution in 2023.
Notes:
1 Refer to note 5 of the Financial Statements for reconciliation
of Group and Divisional Underlying Operating Profit to statutory
operating (loss)/profit
2 Mortgage lending excluding product transfers - New mortgage
lending by purpose of loan, UK (BOE) - Table MM23
3 Gross revenue per adviser is calculated as Financial Services
Network gross revenue (excluding the TMA mortgage club) per active
adviser
Surveying & Valuation Division
Highlights
-- Surveying & Valuation Division once again performed strongly
-- Despite the sudden and unexpected market disruption,
Underlying Operating margin(1) remained resilient at 22% (2021:
25%), and well ahead of the pre-COVID-19 period (2019: 19%)
-- Underlying Operating Profit(1) of GBP20.4m (2021: GBP23.6m),
despite an estimated GBP5m profit impact from Q4 market
disruption
-- D2C and data services income increased by 73% to GBP3.8m
-- Jobs performed was broadly in line with FY21 at 532k despite market disruption
Summary
The Surveying & Valuation Division's Underlying Operating
Profit reduced by 14% compared to 2021, materially impacted by the
disruption to mortgage lending in Q4 2022 as a result of political
and economic uncertainty. Revenue growth for the first three
quarters of FY22, immediately prior to the Government's mini-budget
was 9% year-on-year against broadly flat lending market growth of
2%.
Surveyor capacity utilisation remains above historic levels,
with the slight reduction compared to the prior year resulting from
the market slowdown in Q4 with record levels of capacity
utilisation to that point. Jobs per average Surveyor reduced
slightly in the period to 1,065 (2021: 1,079) due mainly to the H2
graduate intake which is expected to drive a benefit in 2023 as
these surveyors become fully operational. Underlying Operating
margin reduced to 22% (2021: 25%), largely as a result of a 4%
increase in operating costs linked to strategic headcount
investment and inflationary cost pressures.
We estimate that we increased market share in 2022, while
maintaining operational resilience and providing high-quality
service. We were named Best Surveying Firm at the 2022 Mortgage
Finance Gazette Awards and Best Surveyor at the 2022 Equity Release
Awards with Mortgage Solutions. During the 12 months to 31 December
2022, one key supplier contract was renewed in addition to one
renewal at the end of December 2021, increasing valuation
instruction allocations. We also achieved increases in allocations
from some existing lender clients. Almost two thirds of our total
annual volume is currently secured for at least 18 months.
Significant further progress was made with our strategic objective
of developing income from private surveys and data, which increased
by 73% to GBP3.8m.
Financial overview
Revenue reduced by 1% to GBP93.2m (2021: GBP93.7m), impacted by
a material market slowdown in Q4. Surveying & Valuation
Division revenue YTD October was 9% above the same period in 2021.
Underlying Operating Profit reduced by 14% to GBP20.4m (2021:
GBP23.6m). On a statutory basis, operating profit was GBP20.8m
(2021: GBP24.7m).
Income per job increased by 1% to GBP175 (2021: GBP173), with
the higher volume of jobs performed reflecting the improved
capacity management with similar levels of operational surveyors.
During 2022, 72% of the Division's jobs derived from its top five
lender clients. This is broadly consistent with the concentration
of mortgage lending in the UK, where it is estimated that the six
largest lenders collectively account for around 70% of the market.
The total number of jobs performed during the period was 532,000,
which was 2% lower than in 2021.
At 31 December 2022, the total provision for professional
indemnity (PI) costs was GBP2.3m (31 December 2021: GBP3.9m). The
Group continued to make positive progress in addressing historic PI
claims and the number of new valuation claims provided for in the
year remained very low.
The number of operational surveyors employed(2) at 31 December
2022 was 512, which was an increase on 31 December 2021 at 489. Our
graduate and trainee mentoring programmes continue to provide new
productive surveyors, to alleviate any capacity constraints in the
market.
Notes:
1 Refer to note 5 of the Financial Statements for reconciliation
of Group and Divisional Underlying
Operating Profit to statutory operating (loss)/profit
2 Full Time Equivalent (FTE)
Estate Agency Division
Highlights
-- Estate Agency national market share(1) increased to 1.30% (2021: 1.28%)
-- Estate Agency Underlying Operating Profit(2) of GBP10.5m
(2021: GBP18.4m) in a reduced purchase market
-- Underlying Operating Profit in H2 of GBP11.5m materially
ahead of prior year (H2 2021: GBP5.9m)
Summary
As a result of the marginal increase in national market share,
the residential sales income reduction was 12% compared to the
prior year in a market that was 15% lower, with the higher pipeline
entering the year also supporting the performance. H2 exchanges
were in line with our previous expectations after the delays to
pipeline conversion experienced in H1.
However, market activity slowed further in H2, driven by
affordability issues. As a result, the residential sales pipeline
entering 2023 of GBP15.3m has reduced materially from the record
high in June of GBP26.7m and is 26% lower than the pipeline on 31
December 2021 (GBP20.7m). Lettings income increased 2% compared to
the prior year and represented 43% (2021: 40%) of total Estate
Agency Division income, due to an improved average rent in a market
where the supply of new stock remained limited.
Financial overview
Revenue for the year of GBP146.8m was 5% behind prior year
(2021: 154.6m), with residential sales income 12% below what was a
year of unusually high activity due to the temporary reductions of
stamp duty. Underlying Operating Profit was GBP10.5m, reflecting
the lower residential market activity and inflationary costs
pressures within the branch network, specifically higher energy
costs and business rates now at pre-COVID-19 levels, with no rates
relief in 2022. On a statutory basis, operating loss was GBP61.8m
(2021: profit GBP46.5m) due to exceptional goodwill impairment
charges of GBP71.4m in the period and gains from the sale of joint
ventures during 2021 of GBP29.4m.
Residential Sales
Residential Sales exchange income decreased by 12% to GBP63.5m
(2021: GBP71.7m). The Estate Agency Division consolidated the
market share gains made during 2021, broadly maintaining share of
instructions in the locations we trade, and with marginal growth of
our market share of housing transactions on a national level. The
residential sales pipeline (including Marsh & Parsons)
decreased to GBP15.3m at 31 December 2022 (31 December 2021:
GBP20.7m).
Conversion of the residential exchange pipeline remained slow
throughout the year, impacting H1 2022 performance in particular.
H2 2022 saw fewer new properties coming to market and lower levels
of sales agreed. There was also a trend towards an increase in the
number of fall-throughs, largely affecting more recently agreed
sales, both of which will impact performance in Q1 2023.
Lettings
In the Lettings market there has been a very limited supply of
new instructions. Our focus has therefore been on reletting and
retaining our managed property portfolio. The total number of
managed properties at 31 December 2022 was 23,881, slightly below
the 24,372 at same date in 2021. Stronger average rental prices
resulted in like-for-like lettings income up 4% year-on-year at
GBP63.3m.
Other income
Other income was down 4% to GBP20.1m (2021: GBP20.8m) reflecting
the impact of the lower exchange volumes on conveyancing and
financial services income directly linked to exchange volumes.
Asset management was 17% ahead of 2021. However market repossession
volumes remain low, albeit ahead of the exceptionally low market in
2021 which was severely impacted by COVID-19.
Notes:
1 Number of residential property transaction completions with
value GBP40,000 or above, HMRC
2 Refer to note 5 of the Financial Statements for reconciliation
of Group and Divisional Underlying Operating Profit to statutory
operating (loss)/profit
Balance Sheet Review
Goodwill
The carrying value of goodwill is GBP56.5m(1) (31 December 2021:
GBP160.9m) reflecting the non-cash impairment of GBP87.0m in Your
Move and Reeds Rains, Marsh & Parsons, Group First, RSC, and
DLPS at 31 December 2022. During December 2022 the Group made the
strategic decision to sell both Group First and RSC to its joint
venture Pivotal Growth and separately made the decision to sell
Marsh & Parsons to Dexters. This resulted in the
reclassification of these businesses as held for sale, with a
reduction of GBP17.3m in goodwill. The sales of all three
businesses were announced in January 2023.
Other intangible assets and property, plant and equipment
Total capital expenditure in the year amounted to GBP4.9m (2021:
GBP6.9m), primarily reflecting the continued investment in
technology in the year, including GBP2.0m (2021: GBP2.2m) for
further development of the Toolbox platform and other technologies
in the Financial Services Division. The higher prior-year
expenditure also reflected investment by the Estate Agency Division
in third-party property software, IT infrastructure investment, and
an element of spend deferred from 2020, when cash conservation
measures had been taken.
Financial assets and investments in joint ventures and
associates
Financial assets
Financial assets of GBP1.0m at 31 December 2022 (2021: GBP5.7m)
comprise investments in equity instruments in unlisted companies.
The carrying value of the Group's investment in Yopa at 31 December
2022 has been assessed as GBPnil (2021: GBP4.5m), with the
reduction recognised through the Statement of Comprehensive Income.
In determining the carrying value the Group considered both the
historic and current trading performance of Yopa, which continued
to be loss making and the general market share decline of hybrid
estate agencies. In January 2023, the Group agreed to sell its
shares in Yopa for GBPnil consideration based on third party
valuations provided to the existing shareholders.
The carrying value of the Group's investment in VEM at 31
December 2022 has been assessed as GBP0.2m (2021: GBP0.7m). Our
valuation is based on a four-year weighted EBITDA multiple applied
to actual and forecast profits, with the reduction recognised
through the Statement of Comprehensive Income. In March 2023, the
Group agreed to sell its shares in VEM for GBP0.2m
consideration.
During the period the fair value of units held in The Openwork
Partnership LLP was reassessed to GBP0.7m (31 December 2021:
GBPnil), with the gain recognised in other operating income.
Joint ventures
In April 2021 the Group established the Pivotal Growth joint
venture and holds a 47.8% interest at 31 December 2022. The joint
venture is accounted for using the equity method and is held on the
balance sheet at GBP5.1m at 31 December 2022 (31 December 2021:
GBP1.6m), representing the Group's equity investment in Pivotal
Growth during the period, less our share of losses after tax for
the period.
During 2021, we disposed of our entire holding in both non-core
businesses LMS (May 2021) and TM Group (July 2021) for total
proceeds of GBP41.3m.
Bank facilities/ Liquidity
In February 2023, LSL agreed an amendment and restatement of our
banking facility, with a GBP60m committed revolving credit
facility, and a maturity date of May 2026, which replaced the
previous GBP90m facility due to mature in May 2024. The terms of
the facility have remained materially the same as the previous
facility. The facility is provided by the same syndicate members as
before, namely Barclays Bank UK plc, NatWest Bank plc and Santander
UK plc.
In arranging the banking facility, the Board took the
opportunity to review the Group's borrowing requirements,
considering our strong cash position and the Group's aim of
reducing its reliance on the housing market. We therefore reduced
the size of the committed facility and the costs associated with
it. To provide further flexibility to support growth, the facility
retains a GBP30m accordion, to be requested by LSL at any time,
subject to bank approval.
At 31 December 2022, Net Cash was GBP40.1m (31 December 2021:
Net Cash GBP48.5m). The net decrease in cash and cash equivalents
of GBP8.4m in 2022 included further investment in Pivotal Growth
(GBP4.0m), capital expenditure of GBP4.9m (2021: GBP6.9m), a share
buyback programme (GBP4.0m), the loan of GBP5.0m to the EBT for the
acquisition of LSL shares to satisfy employee share schemes,
payment of the 2021 final and 2022 interim dividends of GBP11.8m
(2021: GBP4.2m dividends paid) and reduced corporation tax payments
of GBP6.1m (2021: GBP8.5m). Provisions also decreased by GBP0.8m
(2021: decrease of GBP3.2m), due to the positive progress in
addressing historic PI claims.
The Group generated adjusted cash from operations(2) of GBP28.8m
(2021: GBP37.7m). After adjusting for tax payment deferrals agreed
with HMRC relating to 2020, the cash flow conversion(3) rate was
78%. The 2021 conversion of 106% was supported by significantly
higher Estate Agency revenues, with high immediate cash
drop-through.
The Financial Services Network business has a regulatory capital
requirement associated with its regulated revenues. The regulatory
capital requirement was GBP5.9m at 31 December 2022 (31 December
2021: GBP4.9m), with a surplus of GBP24.9m (31 December 2021:
GBP14.2m).
Contingent consideration liabilities
Contingent consideration liabilities at 31 December 2022 were
GBP2.3m (31 December 2021: GBP3.0m). Contingent consideration
liabilities relate primarily to the cost of acquiring the remaining
shares in RSC. The year-on-year reduction reflects an update to
forecasts in both RSC and Direct Life Quote Holdings Limited, and a
small part-settlement of the latter. Ahead of the disposal of RSC
in January 2023, we settled the contingent consideration of
GBP2.3m.
Treasury and Risk Management
We have an active debt management policy. The Group does not
hold or issue derivatives or other financial instruments for
trading purposes. Further details on the Group's financial
commitments, as well as the Group's treasury and risk management
policies, are set out in the Annual Report and Accounts.
International Accounting Standards (IAS)
The Financial Statements have been prepared in accordance with
UK-adopted IAS.
Notes:
1 Refer to note 10 of the Financial Statements
2 Adjusted cash flow from operations is defined as cash
generated from operations, less the repayment of lease liabilities,
plus the utilisation of PI provisions.
3 Adjusted cash flow conversion defined as cash generated from
operations (pre PI and post lease liabilities) divided by Group
Underlying Operating Profit
Group Income Statement
for the year ended 31 December 2022
2022 2021
Note GBP'000 GBP'000
------------- ------------------------------
Continuing Operations:
Revenue 3 321,738 326,832
Employee costs (206,569) (202,269)
Depreciation on property, plant and equipment (11,629) (12,500)
Other operating costs (67,500) (65,410)
Other operating income 1,334 937
Gain on sale of property, plant and equipment
and right-of-use assets 8 1,061
Share of post-tax (loss)/profit from joint
ventures and associates (494) 668
Share-based payments (1,977) (1,916)
Amortisation of intangible assets (4,112) (4,534)
Exceptional gains 7 694 31,050
Exceptional costs 7 (88,898) (2,045)
Contingent consideration 696 710
Group operating (loss)/profit (56,709) 72,584
------------- ------------------------------
Finance income 80 14
Finance costs (2,497) (2,709)
------------- ------------------------------
Net finance costs (2,417) (2,695)
------------- ------------------------------
(Loss)/profit before tax (59,126) 69,889
Taxation charge 9 (4,891) (7,985)
(Loss)/profit for the year (64,017) 61,904
------------- ------------------------------
Attributable to:
Owners of the parent (63,924) 61,941
Non-controlling interest (93) (37)
Earnings per share (expressed in pence per
share):
Basic 6 (62.3) 59.6
Diluted 6 (62.3) 59.2
Group Statement of Comprehensive Income
for the year ended 31 December 2022
2022 2021
GBP'000 GBP'000
--------- --------
(Loss)/profit for the year (64,017) 61,904
--------- --------
Items not to be reclassified to profit and
loss in subsequent periods:
Revaluation of financial assets not recycled
through income statement (5,096) (1,557)
Tax on revaluation 130 (132)
--------- --------
(4,966) (1,689)
Total other comprehensive loss for the year,
net of tax (4,966) (1,689)
--------- --------
Total comprehensive (loss)/ income for the
year, net of tax (68,983) 60,215
--------- --------
Attributable to:
Owners of the parent (68,890) 60,252
Non-controlling interest (93) (37)
Group Balance Sheet
as at 31 December 2022
Note 2022 2021
GBP'000 GBP'000
--------- ----------
Non-current assets
Goodwill 10 56,530 160,865
Other intangible assets 15,747 29,604
Property, plant and equipment and right-of-use
assets 15,570 37,070
Financial assets 1,045 5,748
Investments in joint ventures and associates 5,068 1,610
Contract assets 431 733
Total non-current assets 94,391 235,630
---------
Current assets
Trade and other receivables 26,608 33,829
Contract assets 348 424
Current tax assets 3,063 1,142
Cash and cash equivalents 36,755 48,464
--------- ----------
66,774 83,859
Assets held for sale 56,437 -
--------- ----------
Total current assets 123,211 83,859
--------- ----------
Total assets 217,602 319,489
--------- ----------
Current liabilities
Financial liabilities (6,949) (8,523)
Trade and other payables (47,030) (64,206)
Provisions for liabilities (660) (775)
(54,639) (73,504)
Liabilities held for sale (21,930) -
--------- ----------
Total current liabilities (76,569) (73,504)
--------- ----------
Non-current liabilities
Financial liabilities (6,277) (22,602)
Deferred tax liability (2,008) (2,073)
Provisions for liabilities (1,695) (3,191)
--------- ----------
Total non-current liabilities (9,980) (27,866)
--------- ----------
Total liabilities (86,549) (101,370)
Net assets 131,053 218,119
--------- ----------
Equity
Share capital 210 210
Share premium account 5,629 5,629
Share-based payment reserve 5,331 5,263
Shares held by employee benefit trust (5,457) (3,063)
Treasury shares (3,983) -
Fair value reserve (20,239) (15,273)
Retained earnings 149,134 224,832
--------- ----------
Total equity attributable to owners of the
parent 130,625 217,598
Non-controlling interest 428 521
--------- ----------
Total equity 131,053 218,119
--------- ----------
Group Statement of Cash Flows
for the year ended 31 December 2022
2022 2021
GBP'000 GBP'000
--------- ---------
(Loss)/profit before tax (59,126) 69,889
Adjustments for:
Exceptional operating items 88,204 (29,005)
Contingent consideration 7 (696) (710)
Depreciation of tangible assets 11,629 12,500
Amortisation of intangible assets 4,112 4,534
Share-based payments 1,977 1,916
Profit on disposal of property, plant and equipment
and right-of-use assets (8) (1,061)
Loss/(profit) from joint ventures 494 (668)
Recognition of investments at fair value through
the income statement (678) -
Decrease in contract assets 378 471
Finance income (80) (14)
Finance costs 2,497 2,709
Operating cash flows before movements in working
capital 48,703 60,561
--------- ---------
Movements in working capital
Increase in trade and other receivables (1,491) (3,911)
Decrease in trade and other payables (11,243) (8,919)
Decrease in provisions (799) (3,213)
(13,533) (16,043)
--------- ---------
Cash generated from operations 35,170 44,518
Interest paid (2,342) (2,554)
Income taxes paid (6,109) (8,528)
Exceptional costs paid (384) (2,045)
Net cash generated from operating activities 26,335 31,391
--------- ---------
Cash flows used in investing activities
Acquisitions of subsidiaries and other businesses,
net of cash acquired - (730)
Payment of contingent consideration (76) (2,462)
Investment in joint venture (3,952) (2,477)
Investment in financial assets - (14)
Dividend received from joint venture - 1,178
Cash received on sale of joint venture - 41,349
Receipt of lease income 68 20
Purchase of property, plant and equipment and
intangible assets (4,907) (6,902)
Proceeds from sale of property, plant and equipment 1,304 431
Net cash (expended)/generated on investing
activities (7,563) 30,393
--------- ---------
Cash flows used in financing activities
Repayment of loans - (13,000)
Payment of deferred consideration - (122)
Purchase of LSL shares by the employee benefit
trust (5,026) -
Repurchase of treasury shares (3,983) -
Proceeds from exercise of share options 825 1,447
Payment of lease liabilities (7,170) (8,922)
Dividends paid 8 (11,773) (4,166)
Net cash expended in financing activities (27,127) (24,763)
--------- ---------
Net (decrease)/increase in cash and cash equivalents (8,355) 37,021
--------- ---------
Cash and cash equivalents at the end of the
year 40,109 48,464
--------- ---------
Closing cash and cash equivalents includes GBP3.4m (2021:
GBPnil) presented in assets held for sale on the Group Balance
Sheet (see note 11).
Group Statement of Changes in Equity
for the year ended 31 December 2022
Share- Equity
Share based Shares Fair attributable
Share premium payment held Treasury value Retained to owners of Non-controlling Total
capital account reserve by EBT shares reserve earnings the parent interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2022 210 5,629 5,263 (3,063) - (15,273) 224,832 217,598 521 218,119
Loss for the
year - - - - - - (63,924) (63,924) (93) (64,017)
Revaluation of
financial
assets - - - - - (5,096) - (5,096) - (5,096)
Tax on
revaluations - - - - - 130 - 130 - 130
Total
comprehensive
loss for the
year - - - - - (4,966) (63,924) (68,890) (93) (68,983)
Shares
repurchased
into Treasury - - - - (3,983) - - (3,983) - (3,983)
Shares
repurchased
into EBT - - - (5,026) - - - (5,026) - (5,026)
Exercise of
options - - (1,806) 2,632 - - (1) 825 - 825
Dividend paid - - - - - - (11,773) (11,773) - (11,773)
Share-based
payments - - 1,977 - - - - 1,977 - 1,977
Tax on
share-based
payments - - (103) - - - - (103) - (103)
At 31 December
2022 210 5,629 5,331 (5,457) (3,983) (20,239) 149,134 130,625 428 131,053
--------- --------- -------- -------- ---------- --------- ---------- -------------- ----------------- ---------
During the year ended 31 December 2022, the Trust acquired
1,351,000 LSL Shares. During the period, 890,146 share options were
exercised relating to LSL's various share option schemes resulting
in the shares being sold by the Trust. LSL received GBP0.8m on
exercise of these options.
Group Statement of Changes in Equity
for the year ended 31 December 2021
Share Share- based Shares Fair Equity attributable
Share premium payment held by value Retained to owners of the Non-controlling Total
capital account reserve EBT reserve earnings parent interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2021 210 5,629 3,942 (5,012) (13,584) 166,569 157,754 - 157,754
Profit for the
year - - - - - 61,941 61,941 (37) 61,904
Revaluation of
financial
assets - - - - (1,557) - (1,557) - (1,557)
Tax on
revaluations - - - - (132) - (132) - (132)
Total
comprehensive
income for
the year - - - - (1,689) 61,941 60,252 (37) 60,215
Acquisition of
subsidiary - - - - - - - 558 558
Exercise of
options - - (990) 1,949 - 488 1,447 - 1,447
Dividend paid - - - - - (4,166) (4,166) - (4,166)
Share-based
payments - - 1,916 - - - 1,916 - 1,916
Tax on
share-based
payments - - 395 - - - 395 - 395
At 31 December
2021 210 5,629 5,263 (3,063) (15,273) 224,832 217,598 521 218,119
--------- -------------- --------------- ---------- ---------- -------------- --------------------- ------------------- ------------
During the year ended 31 December 2021, the Trust acquired nil
LSL Shares. During the period, 555,824 share options were exercised
relating to LSL's various share option schemes resulting in the
Shares being sold by the Trust. LSL received GBP1.4m on exercise of
these options.
Notes to the Preliminary Results Announcement
The above results and the accompanying notes do not constitute
statutory accounts within the meaning of Section 435 of the
Companies Act 2006.
Statutory financial statements for this year will be filed
following the 2023 AGM and will be available on LSL's website:
lslps.co.uk. The auditors have reported on these Financial
Statements. Their report was unqualified and did not contain a
statement under section 498 (2), (3) or (4) of the Companies Act
2006.
1. Directors' responsibility statement
Each of the Directors confirm that, to the best of their
knowledge, the Financial Statements, prepared in accordance with
UK-adopted IAS, give a fair, balanced and understandable view of
the assets, liabilities, financial position and profit or loss of
the issuer and the undertakings included in the consolidation taken
as a whole; and the Directors' Report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
2. Basis of preparation
The Financial Statements have been prepared on a going concern
basis and on a historical cost basis, except for certain debt and
equity financial assets that have been measured at fair value. The
accounting policies applied by the Group in these consolidated
preliminary results are the same as those applied by the Group in
the LSL annual Financial Statements for the year ended 31 December
2021. The Group's Financial Statements are presented in pound
sterling and all values are rounded to the nearest thousand pounds
(GBP'000) except when otherwise indicated.
Going Concern
The Directors have considered the Group's current and future
prospects, principal risks and uncertainties set out in the risk
management objectives and policies, and its availability of
financing, and are satisfied that the Group can continue to pay its
liabilities as they fall due for the period to 30 April 2024. For
this reason, the Directors continue to adopt the going concern
basis of preparation for these financial statements. Further
detailed information is provided in the going concern statement in
the Directors' Report in the Annual Report and Accounts 2022.
In preparing the Group Financial Statements Management has
considered the impact of climate change, taking into account the
relevant disclosures in the Strategic Report, including those made
in accordance with the recommendations of the Taskforce on
Climate--related Financial Disclosures. Recognising that the
environmental impact of the Group's operations is relatively low,
no issues were identified that would impact the carrying values of
the Group's assets or have any other impact on the Financial
Statements.
3. Revenue
The Group's operations and main revenue streams are those
described in the latest annual Financial Statements.
Disaggregation of revenue
Set out below is the disaggregation of the Group's revenue from
contracts with customers:
Year ended 31 December 2022
Residential
Financial Surveying Sales Asset
Services & Valuation exchange Lettings Management Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Timing of revenue
recognition
Services transferred
at a point in
time 87,437 93,228 63,473 60,941 2,811 10,361 318,251
Services transferred
over time - - - 2,337 1,150 - 3,487
---------- ------------- -------------- ----------- ------------- ---------- ----------
Total revenue
from contracts
with customers 87,437 93,228 63,473 63,278 3,961 10,361 321,738
---------- ------------- -------------- ----------- ------------- ---------- ----------
Year ended 31 December 2021
Residential
Financial Surveying Sales Asset
Services & Valuation exchange Lettings* Management Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Timing of revenue
recognition
Services transferred
at a point in
time 84,818 93,699 71,737 59,885 2,217 11,162 323,518
Services transferred
over time - - - 2,166 1,148 - 3,314
---------- ------------- -------------- ------------ ------------- ---------- ----------
Total revenue
from contracts
with customers 84,818 93,699 71,737 62,051 3,365 11,162 326,832
---------- ------------- -------------- ------------ ------------- ---------- ----------
2022 2021
GBP'000 GBP'000
Revenue from services 321,738 326,832
------------ ------------
Operating revenue 321,738 326,832
------------ ------------
Rental income 656 937
Gain on fair value 678 -
------------ ------------
Other operating income 1,334 937
------------ ------------
Total revenue 323,072 327,769
------------ ------------
*2021 lettings revenue has been restated to reclassify GBP27.7m
of revenue from services transferred over time to services
transferred at a point in time. There has been no change in the
Group's accounting policy in the prior or current period.
4. Segment analysis of revenue and operating profit
For the year ended 31 December 2022 LSL has reported three
operating segments: Financial Services; Surveying & Valuation;
and Estate Agency:
- The Financial Services segment arranges mortgages for a number
of lenders and arranges pure protection and general insurance
policies for a panel of insurance companies. Embrace Financial
Services and First2Protect, subsidiaries within the Financial
Services Division, make a commercially agreed introducers fee to
the Estate Agency Division;
- The Surveying & Valuation segment provides a valuations
and professional surveying service of residential properties to
both lenders and individual customers, as well as data services to
lenders; and
- The Estate Agency segment provides services related to the
sale and letting of residential properties. It operates a network
of high street branches. As part of this process, the Estate Agency
Division also provides marketing and arranges conveyancing
services. In addition, it provides repossession and asset
management services to a range of lenders. Embrace Financial
Services and First2Protect, subsidiaries within the Financial
Services Division, make a commercially agreed introducers fee to
the Estate Agency Division.
Operating segments
The Management Team monitors the operating results of its
segments separately for the purpose of making decisions about
resource allocation and performance assessment. Segment performance
is evaluated based on operating profit or loss which in certain
respects, as explained in the table below, is measured differently
from operating profit or loss in the Group Financial Statements.
Head office costs, Group financing (including finance costs and
finance income) and income taxes are managed on a Group basis and
are not allocated to operating segments.
Reportable segments
The following table presents revenue and profit information
regarding the Group's reportable segments for the financial year
ended 31 December 2022 and financial year ended 31 December 2021
respectively.
Year ended 31 December 2022
Financial Surveying Estate
Services & Valuation Agency Unallocated Total
Income statement information GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------ ------------- -------------- ------------- -------------
Revenue from external
customers 87,437 93,228 141,073 - 321,738
Introducers fee (5,756) - 5,756 - -
------------ ------------- -------------- ------------- -------------
Total revenue 81,681 93,228 146,829 - 321,738
------------ ------------- -------------- ------------- -------------
Segmental result:
- Group Underlying
Operating
Profit 13,260 20,378 10,546 (7,296) 36,888
-------------
(56,709
- Operating Profit/(Loss) (6,839) 20,799 (61,847) (8,822) )
------------ ------------- -------------- ------------- -------------
Finance income (2,497)
Finance costs 80
-------------
(59,126
Loss before tax )
Taxation (4,891)
-------------
Loss for the year (64,017)
-------------
Balance sheet information
Segment assets - intangible 11,932 11,217 49,056 72 72,277
Segment assets - other 24,182 9,236 66,950 44,957 145,325
------------ ------------- -------------- ------------- -------------
Total segment assets 36,114 20,453 116,006 45,029 217,602
Total segment liabilities (20,983) (14,926) (46,440) (4,200) (86,549)
------------ ------------- -------------- ------------- -------------
Net assets / (liabilities) 15,131 5,527 69,566 40,829 131,053
------------ ------------- -------------- ------------- -------------
Other segment items
Capital expenditure
including
intangible assets (2,307) (736) (1,521) (343) (4,907)
Depreciation (810) (1,755) (7,759) (1,305) (11,629)
Amortisation of intangible
assets (2,625) (36) (1,451) - (4,112)
Exceptional gains - 694 - - 694
Exceptional costs (17,458) - (71,440) - (88,898)
Share of results in joint
ventures and associate (494) - - - (494)
PI Costs provision - 2,341 - - 2,341
Onerous leases provision - - 14 - 14
Share-based payment (16) (237) (197) (1,527) (1,977)
Group Underlying Operating Profit is as defined in note 5 to
these condensed Financial Statements.
Unallocated net assets comprise intangible assets and plant and
equipment GBP2.0m, other assets GBP6.2m, cash GBP36.8m, accruals
and other payables GBP2.2m current and deferred tax liabilities
GBP2.0m. Unallocated result comprises costs relating to the Parent
Company.
Year ended 31 December 2021
Financial Surveying Estate
Services & Valuation Agency Unallocated Total
Income statement information GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ------------- ------------ ------------- ----------
Revenue from external customers 84,818 93,699 148,315 - 326,832
Introducers fee (6,287) - 6,287 - -
---------- ------------- ------------ ------------- ----------
Total revenue 78,531 93,699 154,602 - 326,832
---------- ------------- ------------ ------------- ----------
Segmental result:
- Group Underlying Operating
Profit 14,787 23,609 18,430 (7,507) 49,319
----------
- Operating Profit 9,976 24,721 46,464 (8,577) 72,584
---------- ------------- ------------ ------------- ----------
Finance income 14
Finance costs (2,709)
----------
Profit before tax 69,889
Taxation (7,985)
----------
Profit for the year 61,904
----------
Balance sheet information
Segment assets - intangible 20,779 11,086 158,531 73 190,469
Segment assets - other 9,891 12,772 55,046 51,311 129,020
---------- ------------- ------------ ------------- ----------
Total segment assets 30,670 23,858 213,577 51,384 319,489
Total segment liabilities (25,343) (20,621) (50,130) (5,276) (101,370)
---------- ------------- ------------ ------------- ----------
Net assets / (liabilities) 5,327 3,237 163,447 46,108 218,119
---------- ------------- ------------ ------------- ----------
Other segment items
Capital expenditure including
intangible assets (1,086) (657) (5,157) (2) (6,902)
Depreciation (824) (1,926) (9,746) (4) (12,500)
Amortisation of intangible
assets (2,496) (382) (1,656) - (4,534)
Exceptional gains - 1,641 29,409 - 31,050
Exceptional costs (714) - - (1,331) (2,045)
Share of results in joint
ventures and associate (869) - 1,537 - 668
PI Costs provision - 3,907 - - 3,907
Onerous leases provision - - 59 - 59
Share-based payment (270) (147) (430) (1,069) (1,916)
In the year the Group sold its interests in the two joint
ventures recorded in the Estate Agency Division, results for these
joint ventures are recorded to their disposal dates. The Group
acquired an interest in a joint venture in the Financial Services
Division during April 2021.
Unallocated net assets comprise intangible assets and plant and
equipment GBP0.1m, other assets GBP3.0m, cash GBP48.5m, accruals
and other payables GBP3.4m current and deferred tax liabilities
GBP2.1m. Unallocated result comprises costs relating to the parent
company.
5. Group and Divisional Underlying Operating Profit
Group and Divisional Underlying Operating Profit are alternative
performance measures (APMs) used by the Directors and Group
Management to monitor performance of operating segments against
budget. It is calculated as profit/(loss) before tax adjusted for
the items set out below.
Year ended 31 December 2022
Financial Surveying Estate
Services & Valuation Agency Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ------------- --------- ------------ ---------
(Loss)/profit before
tax (6,843) 20,921 (63,102) (10,102) (59,126)
Net finance cost 4 (122) 1,255 1,280 2,417
---------- ------------- --------- ------------ ---------
Operating (loss)/profit
per income statement (6,839) 20,799 (61,847) (8,822) (56,709)
---------- ------------- --------- ------------ ---------
Operating Margin (7.8%) 22.3% (42.1%) - (17.6%)
---------- ------------- --------- ------------ ---------
Share-based payments 16 237 197 1,527 1,977
Amortisation of intangible
assets 2,625 36 1,451 - 4,112
Exceptional gains - (694) - - (694)
Exceptional costs 17,458 - 71,440 - 88,898
Contingent consideration - - (696) - (696)
---------- ------------- --------- ------------ ---------
Underlying Operating
Profit/(Loss) 13,260 20,378 10,546 (7,296) 36,888
---------- ------------- --------- ------------ ---------
Underlying Operating
Margin 16.2% 21.9% 7.2% - 11.4%
---------- ------------- --------- ------------ ---------
Year ended 31 December 2021
Financial Surveying Estate
Services & Valuation Agency Unallocated Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------- ------------- --------- ------------ ---------
(Loss)/profit before
tax 9,934 24,714 45,001 (9,760) 69,889
Net finance cost 42 7 1,463 1,183 2,695
---------- ------------- --------- ------------ ---------
Operating (loss)/profit
per income statement 9,976 24,721 46,464 (8,577) 72,584
---------- ------------- --------- ------------ ---------
Operating Margin 12.7% 26.4% 30.0% - 22.2%
---------- ------------- --------- ------------ ---------
Share-based payments 270 147 430 1,069 1,916
Amortisation of intangible
assets 2,496 382 1,656 - 4,534
Exceptional gains - (1,641) (29,409) - (31,050)
Exceptional costs 2,045 - - - 2,045
Contingent consideration
credit - - (710) - (710)
---------- ------------- --------- ------------ ---------
Underlying Operating
Profit/(Loss) 14,787 23,609 18,430 (7,507) 49,319
---------- ------------- --------- ------------ ---------
Underlying Operating
Margin 18.8% 25.2% 11.9% - 15.1%
---------- ------------- --------- ------------ ---------
6. Earnings per share (EPS)
Basic EPS amounts are calculated by dividing net profit for the
year attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the
year.
Diluted EPS amounts are calculated by dividing the net profit
attributable to ordinary equity holders of the parent by the
weighted average number of ordinary shares outstanding during the
year plus the weighted average number of ordinary shares that would
be issued on the conversion of all the dilutive potential ordinary
shares into ordinary shares.
2022 2021
Loss Weighted Per Profit Weighted Per
after average share after average share
tax number of amount tax number amount
GBP'000 shares pence GBP'000 of shares pence
Basic EPS (63,924) 102,659,027 (62.3) 61,941 103,912,148 59.6
Effect of dilutive
share options - - 688,806
Diluted EPS (63,924) 102,659,027 (62.3) 61,941 104,600,954 59.2
--------- ------------- --------- -------------
The Directors ( who were members of the Board at 31 December
2022 ) consider that the adjusted earnings shown below give a
better and more consistent indication of the Group's underlying
performance:
2022 2021
GBP'000 GBP'000
-------- --------
Group Underlying Operating Profit 36,888 49,319
Loss attributable to non-controlling interest 93 37
Net finance costs (excluding exceptional and
contingent consideration items and discounting
on lease liabilities) (968) (1,047)
Normalised taxation (tax rate 19% 2021:19%) (6,843) (9,171)
-------- --------
Adjusted profit after tax attributable to owners
of the parent 29,170 39,138
-------- --------
This represents adjusted profit after tax attributable to equity
holders of the parent. Tax has been adjusted to exclude the prior
year tax adjustments, and the tax impact of exceptional items,
amortisation and share-based payments. The effective tax rate used
is 19.0% (31 December 2021: 19.0%).
Adjusted basic and diluted EPS
Adjusted 2022 Adjusted 2021
profit Weighted Per profit Weighted Per
after average Share after average Share
tax number of amount tax number amount
GBP'000 shares pence GBP'000 of shares pence
Adjusted basic
EPS 29,170 102,659,027 28.4 39,138 103,912,148 37.7
Effect of dilutive
share options 1,275,216 688,806
--------- ------------- --------- ------------
Adjusted diluted
EPS 29,170 103,934,243 28.1 39,138 104,600,954 37.4
--------- ------------- --------- ------------
7. Exceptional items
2022 2021
GBP'000 GBP'000
-------- ---------
Exceptional costs:
Goodwill and intangible asset impairment (note 87,158 -
10)
Estate Agency restructuring costs 1,740 -
Costs relating to investment in joint venture - 1,179
Financial Services restructuring costs - 714
Dissolution and impairment of associate Mortgage
Gym - 152
-------- ---------
88,898 2,045
-------- ---------
Exceptional gains:
Exceptional gain in relation to historic PI
Costs ( 694) (1,641)
Exceptional gain in relation to sale of joint
ventures - (29,409)
-------- ---------
( 694) (31,050)
-------- ---------
Exceptional costs
Goodwill and Intangible asset impairment
During the period there has been an impairment to goodwill of
GBP87.0m (2021: GBPnil) and an impairment to other intangible
assets of GBP0.1m (2021: GBPnil), refer to note 10 for further
detail.
Estate Agency restructuring costs
The Group initiated a branch closure programme in the Estate
Agency Division in response to challenging trading conditions
during the year. As a result of the programme the Group incurred
non-recurring exceptional costs of GBP1.7m (2021: GBPnil).
Exceptional Gains
Provision for professional indemnity (PI) claims and insurance
claim notification
The Group continued to make positive progress in settling
historic PI claims, in which actual settlement costs have been
lower than expected, and therefore there has been a release of
GBP0.7m in 2022 (December 2021: GBP1.6m) in relation to exceptional
PI claims. The treatment of historic PI claims (relating to the
2004 to 2008 high risk lending period) as exceptional is consistent
with the original recognition of the provision.
8. Dividends paid and proposed
2022 2021
GBP'000 GBP'000
Declared and paid during the year:
2022 Interim: 4.0 pence per share (2021 Interim:
4.0 pence) 4,084 4,166
4,084 4,166
------- -------
Dividends on Ordinary Shares proposed (not recognised
as a liability as at 31 December):
Equity dividends on shares:
Dividend: 7.4 pence per share (2021: 7.4 pence) 7,616 7,689
------- -------
9. Taxation
The major components of income tax charge in the Group Income
Statement are:
2022 2021
GBP'000 GBP'000
---------- ----------
UK corporation tax - current year 5,783 7,873
- adjustment in respect of prior years (824) (251)
----------
4,959 7,622
Deferred tax:
Origination and reversal of temporary differences (176) (179)
Changes in tax rates (56) 562
Adjustment in respect of prior year 164 (20)
---------- ----------
Total deferred tax (credit)/charge (68) 363
---------- ----------
Total tax charge in the income statement 4,891 7,985
---------- ----------
Corporation tax is recognised at the headline UK corporation tax
rate of 19% (2021: 19%).
The opening and closing deferred tax balances in the financial
statements were measured at 25%. This is in line with rates enacted
by the Finance Act 2021 which was enacted on 10 June 2021 and comes
into effect from 1 April 2023.
The effective rate of tax for the year was (8.3%) (2021: 11.4%).
The effective tax rate for 2022 is higher than the headline UK tax
rate of 19% largely as a result of the inclusion within the loss
before tax of exceptional impairments to subsidiaries, which are
not deductible for corporation tax purposes.
Deferred tax credited directly to other comprehensive income is
GBP0.1m (2021: GBP0.1m). Income tax debited directly to the
share-based payment reserve is GBP0.1m (2021: GBP0.4m).
There is a prior year adjustment of GBP0.2m in relation to
deferred tax, the majority of this adjustment relates to a lower
tax base being attributable to intangible asset than anticipated at
the tax provisioning stage.
10. Goodwill
Goodwill
GBP'000
---------
Cost
At 1 January 2021 159,863
Arising on acquisitions 1,002
---------
At 31 December 2021 160,865
( 87,041
Impairment )
Reclassified as held for sale (17,294)
---------
At 31 December 2022 56,530
---------
Net book value
---------
At 31 December 2022 56,530
---------
At 31 December 2021 160,865
---------
The carrying amount of goodwill by CGU is summarised below:
2022 2021
GBP'000 GBP'000
-------- --------
Financial Services
Group First (reclassified as held for sale) - 13,913
RSC New Homes (reclassified as held for sale) - 7,128
First Complete 3,998 3,998
Advance Mortgage Funding 2,604 2,604
Personal Touch Financial Services 348 348
Direct Life and Pension Services (DLPS) - 1,002
-------- --------
6,950 28,993
-------- --------
Surveying & Valuation segment company
-------- --------
e.surv 9,569 9,569
-------- --------
Estate Agency segment companies
Your Move & Reeds Rains 16,815 58,800
Marsh & Parsons (reclassified as held for sale) - 40,307
LSLi 22,512 22,512
Templeton LPA 336 336
Others 348 348
-------- --------
40,011 122,303
-------- --------
Total 56,530 160,865
-------- --------
Impairment of goodwill and other intangibles with indefinite
useful lives
The Group tests goodwill and the indefinite life intangible
assets annually for impairment, or more frequently if there are
indicators of impairment. Goodwill and brands acquired through
business combinations have been allocated for impairment testing
purposes to statutory companies or Groups of statutory companies
which are managed as one CGU as follows:
-- Financial Services companies
o Group First
o RSC New Homes (RSC)
o First Complete
o Advance Mortgage Funding which includes BDS
o Personal Touch Financial Services
o Direct Life and Pensions Services Limited (DLPS)
-- Surveying & Valuation Services company
o e.surv
-- Estate Agency companies
o Your Move and Reeds Rains (including its share of cash flows
from LSL Corporate Client Department)
o Marsh & Parsons (M&P)
o LSLi
o Templeton LPA
o St Trinity
Recoverable amount of companies
The recoverable amount of the Financial Services, Surveying
& Valuation and Estate Agency companies has been determined
based on a value-in-use (VIU) calculation using cash flow
projections based on financial budgets and forecasts approved by
the Board and in the three-year plan. Where cash generating units
have been designated as held for sale at the balance sheet date the
recoverable amount has been calculated as the CGUs fair value less
costs to sell (FVLCTS). The fair value of Group First, RSC and
Marsh & Parsons has been determined using the arm's length
sales price for each business, which is the equivalent of the
consideration we expect to receive (discounted where appropriate)
less transaction costs. This is a level 3 measurement per the fair
value hierarchy, based on a combination of earnings multiples and
unobservable inputs. The key assumptions are discount rate and
earnings. The impairment review of Group First, RSC and Marsh &
Parsons was triggered by the Group's decision to sell these CGUs.
The discount rate applied to cash flow projections used in the VIU
models is 14.2% (2021: 12.2%) and cash flows beyond the three-year
plan are extrapolated using a 2.0% growth rate (2021: 2.0%).
Following the impairment review, an impairment loss on goodwill
of GBP87.0m (2021: GBPnil) was recognised in the income statement.
The impairment loss was split between Financial Services GBP17.3m
and Estate Agency GBP69.7m and further disaggregated by CGU as
follows; Your Move and Reeds Rains (GBP42.0m), Marsh & Parsons
(GBP27.7m), DLPS (GBP1.0m), Group First (GBP10.3m) and RSC
(GBP6.0m). There were no impairment reversals during the
period.
During December 2022 the Group made the strategic decision to
sell both Group First and RSC to its joint venture partner Pivotal
Growth and separately made the decision to sell Marsh &
Parsons. The decision to sell Group First and RSC is consistent
with the Group's wider strategic objectives to simplify the Group
structure and grow the Financial Services business, Pivotal Group's
focus is on the development of D2C mortgage brokering and as such
they are better placed to maximise the value of the companies. The
sale of Group First and RSC completed on 13 January 2023. Similar
to Group First and RSC, the decision to sell Marsh & Parsons
was made to further simplify the Group structure and focus on core
opportunities in Financial Services, whilst also reducing exposure
to the volatile London housing market.
In respect of Your Move and Reeds Rains and DLPS, changes in
market conditions have resulted in a downwards revisions to future
cash flow forecasts in comparison to December 2021 and this has
been further exacerbated by a significant increase in discount
rates.
11. Net Cash/ Bank Debt
Net cash/ debt is defined as current and non-current borrowings,
less cash on short-term deposits, IFRS 16 financial liabilities,
deferred and contingent consideration and where applicable cash
held for sale.
Net Bank Cash/Debt is defined as follows: 2022 2021
GBP'000 GBP'000
--------- ---------
Interest-bearing loans and borrowings (including
loan notes, overdraft, IFRS 16 Leases, contingent
and deferred consideration)
* Current 6,949 8,523
* Non-current 6,277 22,602
--------- ---------
13,226 31,125
Less: cash and short-term deposits (36,755) (48,464)
Less: IFRS 16 lessee financial liabilities (10,915) (28,117)
Less: deferred and contingent consideration (2,311) (3,008)
Less: cash included in held for sale (3,355) -
--------- ---------
Net Bank Cash/Debt (40,109) (48,464)
--------- ---------
12. Events after the reporting period
On 13 January 2023, the Group announced the sale of Group First
Limited (Group First) and RSC New Homes Limited (RSC) to Pivotal
Growth Limited (Pivotal Growth), the Group's joint venture with
Pollen Street Capital. The consideration payable will be 7x the
combined Group First and RSC EBITDA in calendar year 2024, subject
to working capital adjustments, capped at a maximum of GBP20m. The
contingent consideration relating to the Group's original
acquisition of RSC of GBP2.3m was settled prior to the
disposal.
On 26 January 2023, the Group announced the sale of Marsh &
Parsons (Holdings) Limited and its subsidiary Marsh & Parsons
Limited, together "Marsh & Parsons" to a subsidiary of Dexters
London Limited for a consideration of GBP29m payable on completion,
subject to working capital adjustments.
In February 2023, the Group amended and restated its banking
facility which runs to May 2026 with a new limit of GBP60m; this
replaced the previous RCF which had a maturity date of May 2024 and
credit limit of GBP90m.
On 30 March 2023 the Group sold its 15.37% shareholding in VEM
to Connells for a consideration of GBP0.2m, at 31 December 2022 the
Group held its investment in VEM at a fair value of GBP0.2m.
On 11 April 2023, the Group announced the disposal of two
further subsidiaries, Embrace Financial Services (EFS) and First 2
Protect (F2P) to Pivotal Growth, in line with the Group's objective
to simplify its structure and focus on the development of B2B
opportunities in Financial Services. The consideration payable for
EFS will be 7x the EBITDA in calendar year 2024, subject to working
capital adjustments, capped at a maximum of GBP10m and payable in
H1 2025. The consideration for F2P is GBP7.8m, which is 7x 2022
EBITDA and is payable on completion.
In April 2023, the Group invested an additional GBP0.2m into
Pivotal Growth to continue to support its buy and build growth
strategy.
The accounting for all disposals noted above will be included in
the 2023 Interim Financial Statements.
Forward-Looking Statement
This announcement may contain certain statements that are
forward--looking statements. They appear in a number of places
throughout this announcement and include statements regarding LSL's
intentions, beliefs or current expectations and those of its
officers, directors and employees concerning, amongst other things,
LSL's results of operations, financial condition, liquidity,
prospects, growth, strategies and the business it operates. By
their nature, these statements involve uncertainty since future
events and circumstances can cause results and developments to
differ materially from those anticipated. The forward--looking
statements reflect knowledge and information available at the date
of preparation of this update and, unless otherwise required by
applicable law, LSL undertakes no obligation to update or revise
these forward-looking statements. Nothing in this announcement
should be construed as a profit forecast. LSL and its Directors
accept no liability to third parties in respect of this
announcement save as would arise under English law.
Any forward--looking statements in this announcement speak only
at the date of this announcement and LSL undertakes no obligation
to update publicly or review any forward--looking statement to
reflect new information or events, circumstances or developments
after the date of this announcement.
This information is provided by RNS, the news service of the
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END
FR KLLFFXZLFBBZ
(END) Dow Jones Newswires
April 13, 2023 02:00 ET (06:00 GMT)
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