Interim Results
LSL Property Services
09 August 2007
For Immediate Release 9 August 2007
LSL Property Services plc
INTERIM RESULTS
'Strong Interim Results'
LSL Property Services plc (LSL), a leading provider of residential property
services, incorporating estate agency brands Your Move and Reeds Rains and
surveying brands e.surv and Chancellors Associates, announces interim results
for the six months ended 30 June 2007.
Highlights
• Strong half year results
• Group revenue up 13% to £102.9m (2006: £91.3m)
• Underlying Group operating profit(1) up 18% to £15.6m (2006: £13.3m)
• Underlying Group operating profit margin up to 15.2% (2006: 14.5%)
• Group profit before tax and amortisation of £14.7m
• Underlying adjusted earnings per share(2) of 10.1p
• Solid underlying operating results from the estate agency and surveying
divisions
• Surveying profits up 19% to £11.7m (2006: £9.8m)
• Estate agency and financial services profits up 34% to £5.3m (2006: £4.0m)
• Two major contract gains in the surveying division with C&G and Barclays
Bank which will enhance earnings
• Maiden interim dividend declared of 3.0 pence per share
• Good cashflow generation in the period from operating activities at £10.0m
(2006: £8.4m)
• Net debt of £56.3m at 30 June 2007
• Well positioned for further growth both organically and from acquisitions
Roger Matthews, Chairman, commented:
'We are pleased to report excellent profit growth for the first half year of
2007. This provides us with a strong foundation for the full year, although we
remain cautious about the short term housing cycle given the recent successive
interest rate rises. However, we remain confident that underlying macro-economic
factors, such as a shortage of housing supply and net population growth, will
support a strong housing market in the longer term.
Our operating model demonstrates resilience to the housing market cycle,
particularly as the less cyclical surveying division now represents a high
proportion of the Group's profits. The Group is well placed to deliver future
growth.'
For further information please contact:
Simon Embley, Group Chief Executive Officer
Dean Fielding, Group Finance Director
LSL Property Services plc 01904 715 324
Richard Darby, Nicola Cronk, Catherine Breen
Buchanan Communications 020 7466 5000
Notes to editors:
LSL is one of the leading residential property services companies in the UK and
provides a broad range of services to its customers who are principally mortgage
lenders, as well as buyers and sellers of residential properties. LSL's main
operations are its surveying business, which operates under the e.surv and
Chancellors Associates brands, its estate agency business, which operates under
the Your Move and Reeds Rains brands, and its financial services business.
For further information, please visit LSL's website: www.lslps.co.uk
Chairman's Statement
I am pleased to report a strong set of results for the six months ended 30 June
2007 where underlying Group operating profit has increased 18% to £15.6m (2006:
£13.3m).
In line with our stated strategy we have made good progress in growing our
businesses both organically and by acquisition. We have acquired two small
estate agency businesses in the year to date and recently secured two major
contract gains in the surveying division where we will be the exclusive supplier
of panel management services to both Cheltenham & Gloucester plc (C&G) and
Barclays Bank plc (Barclays Bank).
The UK housing market has remained relatively robust with house sale exchanges
in our core estate agency brands down 4%, versus a strong comparative period
during the first half of 2006. Against this backdrop, we have continued to grow
both the profits and margins of our estate agency and surveying divisions, while
continuing our investment in growing our financial services distribution.
Financial Results
• Group revenue increased by 13% to £102.9m (2006: £91.3m).
• Underlying Group operating profit increased by 18% to £15.6m (2006:
£13.3m) and the operating margin increased to 15.2% (2006: 14.5%).
• In the surveying division, turnover rose by 16% to £40.0m (2006:
£34.4m) and underlying operating profit by 19% to £11.7m (2006: £9.8m). The
overall surveying margin increased from 28.4% to 29.1% as a consequence of
continued improvements in efficiency.
• The estate agency turnover increased by 11% to £52.8m (2006: £47.5m)
and the underlying operating profit increased by 42% to £6.5m (2006: £4.5m).
The overall estate agency margin increased to 12.3% (2006: 9.6%) largely
reflecting the continued improvement in Your Move and the contribution from new
businesses.
• The financial services losses in the first half of the year increased
to £1.1m (2006: £0.6m) reflecting the continued investment in growing our
financial services distribution with gross lending of mortgage applications
up by 22% to £1.88 billion (2006: £1.54 billion).
• Employee costs include £0.3m of non-cash share based payment costs (2006:
nil).
• Net income from investments was £0.3m (2006: nil) reflecting the dividend
paid by Hometrack.
• Net interest payable was £1.2m (2006: £3.3m) reflecting the average
borrowings of £37.5m during the first half of 2007.
• Group profit before tax and amortisation of £14.7m
• Underlying adjusted earnings per share of 10.1p.
• The effective rate of corporation tax for the period was 29.1% (year ended
31 December 2006: 30.4%)
Balance Sheet
Net assets as at 30 June 2007 were £35.1m, an increase of £9.1m from the
previous year end. Net debt as at 30 June 2007 was £56.3m, an increase of
£22.2m over the six month period. The half year borrowings reflect the £30.2m
cash consideration paid to C&G on 29 June 2007 for an exclusive panel management
services contract.
In June 2007, the Group increased its borrowing facility by £15.0m to £95.0m to
provide additional flexibility and fund future growth.
Cashflow/Capital Expenditure
The business remained significantly cash generative during the first half of
2007 with cash flow generated from operating activities of £10.0m (2006: £8.4m).
The business has low capital expenditure requirements as reflected by the
first half of 2007 spend of £0.9m (2006: £1.1m).
Interim Dividend
In view of these results and our significant cash flow generation, the first
interim dividend is declared at 3.0 pence per ordinary share. This dividend is
in line with our stated policy of a pay out ratio of between 30% and 40%. The
dividend is payable on 17 September 2007 to those shareholders on the register
of members at the close of business on 17 August 2007.
Development
We remain focussed on delivering growth organically and through progressing
selective acquisitions. Estate agency acquisitions must meet our core criteria
of strong management, excellent brand with a good reputation in their local
market and the opportunity to grow profits.
Two small estate agency acquisitions have been completed during 2007 to date and
we continue to assess further estate agency acquisitions.
Following the introduction of revised regulations concerning Home Information
Packs and Energy Performance Certificates, our estate agency businesses have
prepared for phased introduction of Home Information Packs, which started on 1
August 2007. There is no evidence of disruption to the market at this early
stage.
We have recently announced two major contracts in our surveying division. On 29
June 2007, we announced an exclusive agreement with C&G to provide panel
management services for an initial period of 5 years, for a cash consideration
of £30.2m. Based on the agreed valuation fee and current cost base it will
deliver an enhanced profit margin well in excess of the current survey margin
and this contract is expected to enhance earnings significantly. This contract
became effective on 1 July 2007 and the transition has gone smoothly and during
the first month, the contract has performed in line with our expectations.
On 9 July 2007, we announced a second major contract to provide exclusive panel
management services to Barclays Bank for an initial term of three years. The
integration of this operation into our existing e.surv business means that for
the remainder of 2007 this contract is expected to be broadly earnings neutral
and in 2008 is expected to be earnings enhancing. This contract became effective
on 1 August 2007.
These contracts are significant with estimated annual turnover in excess of
£32.0m and provide excellent opportunities to leverage assets across our
surveying business, as well as increasing our employed surveyor base by c. 50%
(to just under 500 employed surveyors). We welcome all these new employees into
the LSL Group.
Outlook
We are pleased to report excellent profit growth for the first half year of
2007. This provides us with a strong foundation for the full year, although we
remain cautious about the short term housing cycle given the recent successive
interest rate rises. These rises are starting to affect affordability and
consumer confidence generally which is likely to result in lower housing
transaction volumes in the second half of 2007. However, we remain confident
that underlying macro-economic factors, such as a shortage of housing supply and
net population growth, will support a strong housing market in the longer term.
Our operating model demonstrates resilience to the housing market, particularly
as the less cyclical surveying division now represents a high proportion of the
Group's profits. The Group is well placed to deliver future growth.
Roger Matthews
9 August 2007
LSL Property Services plc
Group income statement
for the six months ended 30 June 2007
Unaudited Audited
Six months ended Year ended
30 June 30 June 31 Dec
2007 2006 2006
£'000 £'000 £'000
Revenue 102,894 91,322 197,451
Operating expenses:
Employee costs 51,259 49,184 99,940
Share-based payment costs 265 - 13
Establishment costs 6,003 5,800 12,274
Depreciation on property, plant and
equipment
1,074 1,420 2,706
Other 29,387 23,293 51,928
(87,988) (79,697) (166,861)
Other operating income 706 1,643 1,763
Group operating profit before
exceptional costs and amortisation 15,612 13,268 32,353
Amortisation of intangibles (2,664) (3,030) (5,452)
Exceptional costs (IPO costs) - - (3,514)
Group operating profit 12,948 10,238 23,387
Dividend income 298 - -
Finance income 134 485 660
Finance costs (1,322) (3,762) (4,824)
Net financial costs (1,188) (3,277) (4,164)
Profit before tax 12,058 6,961 19,223
Taxation 4 (3,505) (1,724) (5,847)
Profit for the period 8,553 5,237 13,376
Attributable to:
Equity holders of the parent 8,458 5,153 13,058
Minority interests 95 84 318
8,553 5,237 13,376
Dividend proposed per share in
the period (pence) 3.0 - -
Dividend proposed during the period ended 30 June 2007 is £3.17m.
Earnings per share expressed in pence per share:
restated
Basic and diluted 3 8.1 10.3 23.1
LSL Property Services plc
Statement of group recognised income and expense
for the six months ended 30 June 2007
Total recognised income and expense for the period:
Unaudited Audited
Six months ended Year ended
30 June 30 June 31 Dec
2007 2006 2006
£'000 £'000 £'000
Profit for the period attributable to:
Equity holders of the parent 8,458 5,153 13,058
Minority interest 95 84 318
Total profit for the period 8,553 5,237 13,376
LSL Property Services plc
Group balance sheet
as at 30 June 2007
Unaudited Audited
At 30 June At 31 Dec
2007 2006 2006
Note £'000 £'000 £'000
Non-current assets
Goodwill 66,850 22,333 65,463
Other intangible assets 7 46,321 19,776 17,669
Property, plant and equipment 4,256 4,687 4,321
Financial assets 148 493 148
Other debtors 134 147 229
Total non-current assets 117,709 47,436 87,830
Current assets
Trade and other receivables 26,883 24,320 22,187
Cash and cash equivalents 486 38,886 578
Total current assets 27,369 63,206 22,765
Total assets 145,078 110,642 110,595
Current liabilities
Financial liabilities 4,988 51,353 5,402
Trade and other payables 40,502 33,240 36,915
Current tax liabilities 6,170 5,393 5,575
Provisions for liabilities and charges 95 17 130
Total current liabilities 51,755 90,003 48,022
Non-current liabilities
Accruals and deferred income - 36 -
Financial liabilities 51,845 100 29,337
Deferred tax liability 2,639 3,604 3,424
Provisions for liabilities and charges 3,727 2,927 3,846
58,211 6,667 36,607
Net assets 35,112 13,972 25,966
Equity
Share capital 208 100 208
Share premium account 5,629 400 5,629
Share-based payment reserve 278 - 13
Investment in treasury shares (298) - (298)
Retained earnings 28,872 12,509 20,414
34,689 13,009 25,966
Minority interests 423 963 -
Total equity 35,112 13,972 25,966
LSL Property Services plc
Group cash flow statement
for the six months ended 30 June 2007
Unaudited Audited
Six months ended Year ended
30 June 30 June 31 Dec
2007 2006 2006
Note £'000 £'000 £'000 £'000 £'000 £'000
Cash generated from operating
activities
Profit before tax 12,058 6,961 19,223
Adjustments to reconcile profit before
tax to net cash inflows from operating
activities
Amortisation 2,664 3,030 5,452
Exceptional costs - - 3,514
Dividend income (298) - -
Finance income (134) (485) (660)
Finance costs 1,322 3,762 4,824
Depreciation 1,074 1,420 2,706
(Profit)/loss on sale of property, plant - (49) 21
and equipment
Share-based payments 265 - -
Amounts written off available for sale
financial assets - - 345
4,893 7,678 16,202
Increase in trade and other receivables (4,978) (6,510) (4,381)
Increase in trade and other payables 3,609 3,524 3,828 4,996 9,657 21,478
Cash generated from operations 15,582 11,957 40,701
Interest paid (1,322) (1,964) (3,272)
Dividends paid on 'B' shares prior to - - (1,320)
listing
Tax paid (4,303) (5,625) (1,637) (3,601) (5,852) (10,444)
Net cash from operating activities 9,957 8,356 30,257
Cash flows from investing activities
Purchase of subsidiary undertakings,
minority interest and commercial
business (1,077) - (38,449)
Purchase of intangible assets (30,217) - -
Dividend income 298 - -
Interest received 134 485 660
Purchase of property, plant and
equipment (927) (1,094) (2,073)
Proceeds from sale of property,
plant and equipment 3 6,095 6,134
Net cash from investing activities (31,786) 5,486 (33,728)
Cash flows from financing activities
Repayment of long term loans (582) (11,361) (42,075)
Proceeds from long term loans 22,319 - 33,414
Purchase of treasury shares - - (298)
IPO costs - - (3,514)
Net cash generated/(used) in 21,737 (11,361) (12,473)
financing activities
Net (decrease)/increase in cash
And cash equivalents (92) 2,481 (15,944)
Cash and cash equivalents at the
beginning of the period 578 16,522 16,522
Cash and cash equivalents at the
end of the period 5 486 19,003 578
LSL Property Services plc
Reconciliation of changes in equity
for the six months ended 30 June 2007
Unaudited Audited
Year
Six months ended ended
30 June 30 June 31 Dec
2007 2006 2006
£'000 £'000 £'000
Total equity at the start of the period 25,966 8,735 8,735
Debt reclassification - - 100
Issue of shares - - 5,237
Purchase of shares - - (298)
Minority interest on acquisition of subsidiaries 328 - -
Share-based awards 265 - 13
Profit for the period 8,553 5,237 13,376
Acquisition of minority interest - - (1,197)
Total equity at the end of the period 35,112 13,972 25,966
LSL Property Services plc
Notes to the accounts
The figures for the year ended 31 December 2006 do not constitute the Company's
statutory accounts for that period but have been extracted from the statutory
accounts.
The interim statement was approved by the board of directors on 9 August 2007.
IAS34 on Interim Financial Reporting has not been adopted for the six months
ended 30 June 2007. The Group's published financial statements for the year
ended 31 December 2006 have been reported on by the Group's auditors and filed
with the Registrar of Companies. The auditor's report on those accounts, which
have been filed with the Registrar of Companies, was unqualified and did not
contain any statement under section 237 (2) or (3) of the Companies Act 1985.
The financial information for the half year ended 30 June 2007 and the
equivalent period in 2006 has not been audited.
1. Basis of preparation
The interim results have been prepared using the accounting policies disclosed
in the Annual Report and Accounts 2006.
2. Segment analysis of turnover and operating profit
Six months ended 30 June 2007
Estate Surveying
agency and and
related valuation Financial
activities services services Unallocated Total
£'000 £'000 £'000 £'000 £'000
Income statement information
Segmental revenue 52,795 40,016 10,083 - 102,894
Segmental result:
- before exceptional costs and
amortisation of intangibles 6,472 11,661 (1,147) (1,374) 15,612
- after exceptional costs and
amortisation of intangibles 5,671 10,285 (1,634) (1,374) 12,948
Dividend income 298
Finance income 134
Finance costs (1,322)
Profit before tax 12,058
Income taxes (3,505)
Profit for the period 8,553
2. Segment analysis of turnover and operating profit (continued)
Six months ended 30 June 2006
Estate Surveying
agency and and
related valuation Financial
activities services services Unallocated Total
£'000 £'000 £'000 £'000 £'000
Income statement information
Segmental revenue 47,460 34,444 9,418 - 91,322
Segmental result:
- before exceptional costs and
amortisation of intangibles 4,554 9,776 (583) (479) 13,268
- after exceptional costs and
amortisation of intangibles 3,431 8,403 (1,117) (479) 10,238
Finance income 485
Finance costs (3,762)
Profit before tax 6,961
Income taxes (1,724)
Profit for the period 5,237
Year ended 31 December 2006
Estate Surveying
agency and and
related valuation Financial
activities services services Unallocated Total
£'000 £'000 £'000 £'000 £'000
Income statement information
Segmental revenue 102,573 74,041 20,837 - 197,451
Segmental result:
- before exceptional costs and
amortisation of intangibles 13,372 21,008 (764) (1,263) 32,353
- after exceptional costs and
amortisation of intangibles 11,669 18,261 (1,766) (4,777) 23,387
Finance income 660
Finance costs (4,824)
Profit before tax 19,223
Income taxes (5,847)
Profit for the year 13,376
3. Earnings per share
Basic earnings per share 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 earnings per share amounts are calculated by dividing the net profit
attributable to ordinary equity holders of the parent by the weighted average
number of ordinary shares outstanding during the period plus the weighted
average number of ordinary shares that would be issued on the conversion of all
the dilutive potential ordinary shares into ordinary shares.
Six months ended 30 June
2007
Weighted Per Weighted 2006
average share average Per share
Earnings number of Amount Earnings number of Amount
£'000 shares Pence £'000 shares Pence
Basic EPS 8,458 104,158,950 8.1 5,153 50,000,000 10.3
Effect of dilutive share
options - 716,546 - - - -
Diluted EPS 8,458 104,875,496 8.1 5,153 50,000,000 10.3
Year ended 31 December 2006
Weighted 2006
average Per share
Earnings Number of Amount
£'000 shares Pence
Basic EPS 13,058 56,622,461 23.1
Effect of dilutive share
options - 14,303 -
Diluted EPS 13,058 56,636,764 23.1
On 25 July 2006, the number of shares in issue increased to 1,037,158 of 10p
each. On 31 October 2006, the ordinary shares of 10p each were subdivided into
ordinary shares of 0.2p each and a further 2,051,050 ordinary shares of 0.2p
each were issued and the total number of shares increased to 104,158,950.
The comparative figure for June 2006 has been restated to take account of the
subdivision of the ordinary shares into 0.2p shares as required by IAS 33 '
Earnings per Share'.
The weighted average shares disclosed above for June 2006 exclude the 'B'
shares, which were classified as debt as per IAS32 and have been reclassified as
share capital as they were converted into ordinary shares prior to flotation in
November 2006.
3. Earnings per share (continued)
The Directors consider that the adjusted earnings shown below give a better and
more consistent indication of the Group's underlying performance, and is
calculated as follows:
Six months ended Year ended
30 June 30 June 31 Dec
2007 2006 2006
£'000 £'000 £'000
Profit after tax 8,458 5,153 13,058
Adjusted after tax for:
Exceptional costs - 50 2,460
Amortisation 1,865 2,121 3,816
Dividend on 'B' ordinary shares - 684 1,320
Share-based payment 185 - 9
Adjusted profit after tax 10,508 8,008 20,663
4. Taxation
Tax charged in the profit and loss account comprises:
Six months ended Year ended
30 June 30 June 31 Dec
2007 2006 2006
£'000 £'000 £'000
UK corporation tax - current year 4,598 4,378 8,918
- tax over provided in prior year - - (142)
4,598 4,378 8,776
Deferred tax:
Origination and reversal of temporary differences (868) (2,654) (2,929)
Adjustment due to change in tax rate (225) - -
Total tax in income statement 3,505 1,724 5,847
The Group's current taxation charge comprises corporation tax calculated at
estimated effective tax rates for the year.
5. Cash and cash equivalents
For the purpose of the consolidated cash flow statement, cash and cash
equivalents comprise the following at 30 June:
Six months ended Year ended
30 June 30 June 31 Dec
2007 2006 2006
£'000 £'000 £'000
Cash at bank and in hand - 38,886 -
Short - term deposits 486 - 578
486 38,886 578
Bank overdrafts - (19,883) -
486 19,003 578
The fair value of cash and cash equivalents is £0.49m (30 June 2006: £38.89m and
31 December 2006: £0.58m). At 30 June 2007, the Group had available £29.3m of
undrawn committed borrowing liabilities in respect of which all conditions
precedent had been met (30 June 2006: £nil and 31 December 2006: £46.7m). In
June 2007, the total borrowing facility was increased from £80m to £95m.
6. Analysis of movement in net debt
Six months ended Year ended
30 June 30 June 31 Dec
2007 2006 2006
£'000 £'000 £'000
Decrease/(increase) in cash and cash
equivalents in the period 92 (2,481) 15,944
(Decrease)/increase in short-term net debt (414) 19,247 (6,821)
Increase/(decrease) in long-term net debt 22,508 (28,986) 251
Movement in net debt in the period 22,186 (12,220) 9,374
Net debt at the beginning of the period 34,161 24,787 24,787
Net debt at the end of the period 56,347 12,567 34,161
7. Acquisition of intangible assets
Net book value of intangible assets at 30 June 2007 includes £30.2m being amount
paid in June 2007 in respect of the acquisition of the surveying contract from
Cheltenham & Gloucester plc.
8. Post balance sheet event
On 9 July 2007, the Group acquired the rights to a major contract to supply
exclusive panel residential survey management services to Barclays Bank plc for
a cash consideration of £1. The contract will include the transfer of the
existing valuations infrastructure of Barclays Bank plc including people,
premises and technology. The initial contract period is for three years.
The Group also acquired the majority shareholding in a small estate agency
company for £2.14m (£1.55m of which was cash) in July 2007.
Independent review report to LSL Property Services plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 June 2007 which comprises the Group Income Statement,
Group Balance Sheet, Group Cash Flow Statement, Group Statement of Recognised
Income and Expense, Reconciliation of movements in Equity and the related notes
1 to 8. We have read the other information contained in the interim report and
considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
This report is made solely to the company in accordance with guidance contained
in Bulletin 1999/4 'Review of interim financial information' 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 interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board, for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial
data, and based thereon, assessing whether the accounting policies and
presentation have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets liabilities and transactions. It is substantially less in scope than an
audit performed in accordance with International Standards on Auditing (UK and
Ireland) and therefore provides a lower level of assurance than an audit.
Accordingly we do not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2007.
Ernst & Young LLP
Leeds
9 August 2007
--------------------------
(1) Underlying Group operating profit is before exceptional costs and
amortisation of intangibles
(2) Underlying adjusted earnings per share reflects the after tax effects of
adjusted earnings as calculated in note 3 divided by the weighted average number
of shares in issue during the first half of 2007.
This information is provided by RNS
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