PRELIMINARY ANNOUNCEMENT

RNS Number : 2223H

LSL Property Services

12 March 2015

For immediate release

12 March 2015

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

PRELIMINARY ANNOUNCEMENT

LSL Property Services plc, a leading provider of residential property services incorporating both estate agency and surveying businesses, announces preliminary results for the year ended 31^st December 2014.

	2014	2013	% change
Group revenue £m	287.5	258.6	11
Group Underlying Operating Profit¹ £m	42.0	37.1	13
Group Underlying Operating Margin %	14.6	14.3
Profit before tax £m	31.9	17.1	87
Underlying profit before tax¹ £m Basic Earnings Per Share- pence	39.8 24.5	33.9 13.6	17 80
Adjusted Basic Earnings Per Share - pence²	30.5	25.3	21
Net Bank Debt at 31^st December £m³	34.7	26.3
Final proposed ordinary dividend per share - pence	8.3	7.2
Full year ordinary dividend per share - pence	12.3	10.5	17
Special dividend per share - pence	16.5	-	-

· Underlying operating profit of £42.0m is a record result for the Group

· Excellent progress in the Estate Agency Division

· Strong market growth in the first half followed by slowing activity in the second half

· Major contracts secured in the Surveying Division and on-going investment in capacity management

· Excellent value creation from investment in Zoopla - Total value created of £42.2m (as at IPO), £19.8m exceptional profit, special dividend of 16.5p per share and retention of 51% of original shareholding valued at £21.3m as at 31^st December 2014

· Exceptional charge of £24.6m related to PI provisions relating to the 2004 to 2008 high risk lending period. Balance sheet provision of £38.7m (2013: £25.9m)

· Strong operational cash flow, balance sheet and dividend growth

· Acquisition of Hawes & Co and 10 lettings books during 2014 and the acquisition of Thomas Morris and six lettings books since the start of 2015

1 Underlying Operating Profit and underlying profit before tax is before exceptional gains and exceptional costs, contingent consideration, amortisation of intangible assets and share-based payments

2 Refer to Note 3 for the calculation

3 Refer to Note 7 for the calculation

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

"I am very pleased to report that 2014 was a record year for the Group with underlying Operating Profit higher than LSL achieved in the property market peak of 2007. The year saw the orderly transition of senior management with Ian Crabb's first full year as Group CEO and Adrian Gill assuming responsibility for the Estate Agency Division. The year also saw the achievement of our profitability per branch target that we set in 2011 whilst Marsh & Parsons expanded its branch footprint in a difficult market. The Surveying division secured new contracts on improved margins.

I was also delighted that our investment in Zoopla delivered an exceptional return to shareholders.

The Group has a robust balance sheet with relatively low levels of gearing and is extremely cash generative at the operational level. The business is well positioned to capitalise on the changing market conditions to increase shareholder value."

For further information, please contact:

Ian Crabb, Group Chief Executive Officer

Andrew Burchall, Interim Group Finance Director

LSL Property Services plc 0207 382 0360

Richard Darby, Sophie McNulty

Buchanan 0207 466 5000

Notes to Editors:

LSL is a leading provider of residential property services to its key customer groups. Services to consumers include: residential sales, lettings, surveying, conveyancing and advice on mortgages and non investment insurance products. Services to mortgage lenders include: valuations and panel management services, asset management and property management services. For further information and a copy of the full annual report, please visit LSL's website: www.lslps.co.uk

Chairman's Statement

Introduction

I am pleased to report that against a rapidly changing market backdrop the Group has continued to make good progress, reporting Group Underlying Operating Profit of £42.0m (2013: £37.1m) for the year. This Group Underlying Operating Profit is higher than LSL achieved in the property market peak of 2007. Group Revenue increased by 11% whilst Group Underlying Operating Profit increased by 13% compared to 2013. On a statutory basis, operating profit was £33.9m (2013: £19.6m), an increase of 73%. The first half of the year saw Group Underlying Operating Profit growth of 31% against the same period in 2013 with the second half showing a more muted performance against strong comparatives.

The Estate Agency Division, in particular, has delivered a strong performance. Residential Sales income increased by 15%, Financial Services income grew by 22% and Lettings income increased largely organically by 12%. In line with our stated strategy, we saw profitability per owned branch increase by 44% to £46k achieving our medium term target for profit per branch set in 2011. We acquired Hawes & Co within LSLi and added a further ten small lettings acquisitions across our Estate Agency businesses. The Surveying Division delivered a solid performance during 2014 with a number of efficiency initiatives significantly improving profitability in the second half of the year.

The UK residential property services market in 2014 was very much a story of two halves. The year started very strongly continuing the trend we saw in the second half of 2013 with house purchase approvals, as measured by the Bank of England, up 35% year on year in the first quarter of 2014 and by 19% in the first half for the year. Year on year growth then moderated in the second quarter before contracting by 16% in the final quarter of the year. April also saw the implementation of changes to mortgage application processing by lenders following the Mortgage Market Review (MMR). These changes impacted the market from the second quarter onwards. Changes to stamp duty introduced at the start of December 2014 also had an impact, particularly in prime Central London, but overall there was a general slowing of activity as consumer sentiment weakened in the second half of the year.

The business remains extremely cash generative at the operational level and has a strong balance sheet. I am delighted to report an increase in our proposed final dividend of 15% to 8.3 pence per share (2013: 7.2 pence). This will result in the total dividend for the year, excluding the special dividend of 16.5 pence relating to our disposal of Zoopla shares, increasing by 17% to 12.3 pence per share (2013: 10.5 pence), recognising our confidence in the future earnings prospects of the business.

Financial Results

Group revenue increased by 11% to £287.5m (2013: £258.6m) and Group Underlying Operating Profit increased by 13% to £42.0m (2013: £37.1m) with the Group Underlying Operating Margin improving to 14.6% (2013: 14.3%).

The Estate Agency Division increased operating profit by 16% to £33.9m (2013: £29.1m). This performance was delivered in a market where house purchase approvals for the whole year increased by 5% to 769,000¹ (2013: 736,000). This moderate full year growth masked a changing market during the year with volume growth of 19% in first half of the year followed by a 7% contraction in the second half of 2014 against the prior year. Sequentially, the market in the first half of the year was 1% down on the second half of 2013 whilst the second half in 2014 was 6% lower than the first half. There was strong revenue growth in Residential Sales income, Financial Services and Lettings income. Marsh & Parsons continued its expansion strategy with four new branch openings and made good progress in a prime Central London market where market conditions were challenging in the second half of the year. In line with previous trends, repossession volumes fell by a further 27% to 21,000² in the year (2013: 28,900) which impacted revenue and profit in our asset management activities.

The Surveying Division faced a broadly flat market for mortgage approval transactions. Total mortgage approvals were 1,280,000 (2013: 1,286,000), including a 2% decrease in remortgages to 385,000 (2013: 393,000). Although the number of jobs completed reduced by 6% to 372,000, the revenue per job increased resulting in a 3% increase in total revenue to £62.2m. During the year, we were delighted to secure multi-year valuation services contracts with Barclays Bank PLC and Lloyds Banking Group. Subsequent to the year end, we secured a multi-year contract as lead valuer, this time with the mortgage division of Santander UK. These non-exclusive contracts are all on contract terms reflecting improved conditions in the mortgage valuation market.

Towards the end of the year, the Surveying Division concluded a project to improve operational performance and productivity whilst improving working practices, which includes the consolidation of all administrative functions at its Kettering location. The associated one off costs of this exercise of £0.7m will be recovered in savings during the first half of 2015. The one off costs are included as an exceptional item in 2014. Operating profit was marginally ahead at £13.3m (2013: £13.1m) with operating margin of 21.4% (2013: 21.7%).

1 Source: Bank of England for “House Purchase Approvals” 2014

2 Source: Council of Mortgage Lenders arrears and repossessions data relating to properties taken into possession by first-charge mortgage lenders for 2014.

As previously announced in December 2014, we have needed to further increase our PI provisions relating to the 2004 to 2008 high risk lending period. The announcement indicated a range of between £20.0m and £25.0m and following further work, we have provided an additional reserve of £24.6m which is included in 2014 as an exceptional item. Whilst the cause is a historic market issue relating to historic periods, it remains disappointing. The additional provision reflects a number of factors. Although we have seen the reduction in the rate of notification that we had expected during the year, and assumed in setting the previous level of provision, a greater proportion of the notifications are deteriorating into claims. Claims are also hardening with the more difficult and complex claims now being progressed. This is resulting in an increase in the average cost per claim, particularly in respect of legal costs reflecting the complexity of the arguments. The additional provision represents the Group's current best estimate of likely claims costs but the process of resolving open claims and estimating future claims is on-going. The review was conducted with the overall aim of ensuring a high degree of confidence that the total PI provision will be adequate to cover the remaining risk relating to the 2004 to 2008 high lending period. The provision required is highly sensitive to the run rates of new claims and the costs per claim for both new and existing claims. Claims experience since the high risk lending period has significantly improved as a result of both structural changes in the market place and the overhaul of internal procedures.

Profit before tax, amortisation, share based payments, contingent consideration and exceptional costs increased by 17% to £39.8m (2013: £33.9m). Net exceptional operating costs of £6.2m (2013: £13.0m) included PI costs of £24.6m (2013: £12.0m) noted above. Exceptional operating income includes a £19.8m exceptional profit on the part disposal of the Group's investment in Zoopla. There was also a non-cash credit of £0.4m (2013: £2.8m charge) relating to employment related contingent consideration in acquisitions and amortisation of intangible assets during the year was £0.6m (2013: £0.4m). Profit before tax increased to £31.9m (2013: £17.1m) and profit after tax was £25.2m (2013: £14.0m). On an adjusted basis, earnings per share increased by 21% to 30.5 pence (2013: 25.3 pence). Unadjusted undiluted basic earnings per share were 24.5 pence (2013: 13.6 pence).

Cash generated from operations was £25.7m (2013: £26.9m). Operating cash flow included PI cash settlements of £13.3m (2013: £14.4m). Capital expenditure increased to £9.2m (2013: £7.9m) including investment in new IT systems, including a common platform for our Financial Services businesses and the development of enhanced lettings systems in Marsh & Parsons, Your Move and Reeds Rains.

Net Bank Debt at 31^st December 2014 was £34.7m compared to £26.3m at 31^st December 2013 after investing £9.7m in acquisitions, financial assets, joint ventures and the settlement of deferred consideration (2013: £5.4m) and the purchase of LSL shares by LSL's Employee Benefit Trust. Net Bank Debt increased in the year primarily because of the increase in PI cash settlement costs. The Group has a £100m committed bank facility until August 2017.

Net assets decreased by £16.2m to £83.1m at 31^st December 2014 (2013: £99.3m), as a result of the special dividend paid following the realisation of the investment in Zoopla on its initial public offering (IPO).

Dividend

As a result of the growth in underlying Group profitability and the Board's positive view of future prospects for the business, an increase in the final dividend of 15% to 8.3 pence per share (2013: 7.2 pence) will be proposed to Shareholders at the forthcoming AGM, increasing the total dividend for 2014, excluding the one off special dividend related to Zoopla of 16.5 pence, by 17% to 12.3 pence per share (2013: 10.5 pence per share). The proposed dividend payment is at the upper end of our previously stated policy of applying a dividend payout ratio of between 30% to 40% of Group Underlying Operating Profit after interest and tax and reflects our confidence in the future.

The ex dividend date for the final dividend is 26^th March 2015 with a record date of 27^th March 2015 and a payment date of 7^th May 2015. Shareholders have the opportunity to elect to reinvest their cash dividend and purchase existing shares in LSL through a dividend reinvestment plan.

Divisional performance

Estate Agency Division

2014 has been another year of excellent progress combined with major investment in the Estate Agency Division. Profit per owned branch, excluding Marsh & Parsons, increased by 44% to £46,000 (2013: £32,000) compared to the medium term target of £30,000 to £50,000 which the Board set in 2011 when profit per owned branch was £5,000. The Board has accordingly reviewed the target for branch profitability and has increased the target to £80,000 to £100,000 per owned branch in the medium term on the expectation of longer term stability in the UK residential property sector. All key income streams in the Estate Agency Division other than our countercyclical Asset Management business have grown strongly and operating margin increased to 15.0% (2013: 14.7%).

Residential Sales exchange income, excluding Marsh & Parsons, increased by 20% to £76.8m (2013: £64.1m) driven mainly by improved mix and good progress increasing the average Estate Agency fee. The rate of income growth varied during the year in line with the fluctuations in the market. Our Lettings business has continued to perform well with Lettings income, excluding Marsh & Parsons, increasing by 10% to £43.3m (2013: £39.2m). We continue to invest in our Financial Services, Lettings and conveyancing activities as well as looking for ways to improve back office efficiency.

Marsh & Parsons made good progress in the volatile prime Central London market where stock levels remained challenging all year driving increased price expectations in the first half of the year which then ameliorated in the second half. Total revenue increased by 9% to £32.5m (2013: £29.9m) with Residential Sales broadly flat but with excellent Lettings growth of 18%. Operating profit was £6.5m (2013: £6.7m), impacted by the investment in opening four new branches and of putting in place infrastructure to support the on-going branch opening programme.

Financial Services income delivered through our Estate Agency Division branches and Financial Services intermediary networks increased by 22% during 2014 to £43.7m (2013: £35.8m). Activity levels are growing ahead of the market reflecting the breadth and depth of the Group's Financial Services offerings. The Group arranged total mortgage lending completions of £11.6bn in 2014 (2013: £7.6bn).

Asset Management delivered another solid result in a countercyclical market. Revenue declined by 18% to £11.7m (2013: £14.3m) in a market where repossession volumes reduced by 27% to 21,000 (2013: 28,900). Repossessions have now fallen for five years running by a total of 57%. The business is continuing to target new property management contracts.

Surveying Division

The underlying profit performance was maintained during the year as a result of contract wins and efficiency improvements offset by a decline in volumes. After a strong first half of the year, our Surveying Division's volumes declined in the second half of year resulting in a 6% reduction in our volumes year on year. Total mortgage approvals remained broadly flat year on year at 1.280m (2013: 1.286m).

The operating profit margin in the second half year was 24.5% (2013: 24.1%) and was achieved through improved efficiency and tight cost control. The operating profit of £7.6m (2013: £7.7m) in the second half of the year represented a 33% increase on the first half of the year. As reported last year, the Surveying Division reduced its focus on developing surveying services for private buyers to focus on higher margin valuation services for corporate clients. As a result the full year revenue from surveying services for private buyers reduced by 18% to £4.0m (2013: £4.9m).

Despite incurring the costs of recruiting graduates into the new surveyor training scheme, operating profit levels were maintained. Full year operating margin was maintained at 21.4% against a 2013 comparative of 21.7%.

Developments

During 2014, we have continued to invest in the business with the acquisition in March 2014 of Hawes & Co which is a South West London based agent with six branches offering Residential Sales and Lettings services. We have also purchased a further 10 small lettings books during 2014 for a total consideration of £1.8m. We will continue to look to acquire attractive businesses. Subsequent to the year end, we acquired Thomas Morris a multi award winning estate agency and lettings business with seven branches in Cambridgeshire, Bedfordshire and Hertfordshire together with a further six lettings books. In the Surveying business our graduate surveyor recruitment and training programme continues to be a success. In 2013 and 2014 we hired 43 and 60 new graduates respectively with the expectation that the graduates would take 12 months to train. The 2013 intake became productive midway through 2014.

During the year, Marsh & Parsons opened four branches in Shepherd's Bush, Camden, East Sheen and Richmond which are performing in line with management's expectations. The business remains committed to an opening programme of new branches which will result in doubling the number of branches which were acquired with the business in 2011 over the next four to five years.

We were extremely pleased to announce in our interim statement that the IPO of Zoopla was successful and represented significant value creation for the Group. The cost of the investment was £1.9m and this had increased to a value of £44.1m on IPO. We took the decision to sell 48.9% of our shareholding in Zoopla at IPO. As a result, we have generated an £19.8m exceptional profit on disposal while still retaining a 2.6% shareholding which has been revalued in the balance sheet at £21.3m. In addition, we received a total dividend of £1.1m from Zoopla during the year (2013: £0.5m).

Board and Corporate Governance

In January 2014, we appointed Bill Shannon as an independent Non Executive Director and Chairman of the Remuneration Committee, and on the same date Mark Pain stepped down from the Board as an independent Non Executive Director. Bill has significant PLC board experience in strategy, operations, finance and governance in consumer, financial services, residential and commercial property sectors. We would like to thank Mark for his significant contribution to LSL. Bill was subsequently appointed Non Executive Deputy Chairman and Senior Independent Director on 1^st January 2015.

On 24^th November 2014, as part of an orderly transition in the management of our Estate Agency business, Adrian Gill was appointed as Executive Director, Estate Agency and he took over from David Newnes on 1^st January 2015 following a transition period. Adrian has considerable experience in the sector, having spent over 10 years as an Executive Director at Connells Limited, the national estate agency business of the Skipton Building Society and two years as an independent Non Executive Director of LSL. David Newnes retired from the Board on 31^st December 2014 and we would like to thank David for his substantial contribution to the development of LSL over a long and distinguished career with the Group. In December 2014, David Newnes, in recognition of over 35 years' service to the estate agency industry, received the 'Outstanding Contribution to Estate Agency Award' at the prestigious Sunday Times Estate Agency of the Year Awards.

After many years of excellent service to the Group, Roger Matthews retired as Chairman on 31^st December 2014. I would personally like to add my thanks to those of the Board for the guidance and support that Roger has provided since he joined the Board as Chairman on the IPO of the Group in 2006.

During the latter part of 2014, Roger Mathews as Chairman, consulted with a number of our major Shareholders regarding the future composition of the Board, including my change of role and Bill Shannon's new responsibilities. Whilst as Chairman, I am not independent on appointment, Shareholders, the Nominations Committee and the Board supported my change of role as it facilitates an orderly succession and reflects the Board's desire to retain my knowledge and expertise of the residential property market, maintain contacts with key stakeholders and benefit from my record of delivering shareholder value.

Steve Cooke, the Group Finance Director, left the Board on 19^th December 2014. Andrew Burchall was appointed as Interim Group Finance Director on 5^th January 2015 and the search is on-going for a permanent Group Finance Director.

The Board remains committed to high levels of corporate governance. In respect of 2014, the Board has again conducted an annual review of its effectiveness and that of its Committees, taking into account the balance of skills, experience, independence and knowledge of our businesses and we concluded that the Board and its Committees are effective and are able to discharge their respective duties and responsibilities appropriately.

In September 2014, the FRC updated the UK Corporate Governance Code (the Code) and whilst this Report includes disclosures that reflect the 2012 edition of the Code, we have looking forward, ensured that for 2015 we are operating in accordance with the 2014 edition of the Code. This includes the implementation of our Remuneration Policy, further details of which are set out in the Directors' Remuneration Report.

The Board has during the year also reviewed its composition, which at the date of this Report includes three independent Non Executive Directors and two Executive Directors. We have also commenced a process to appoint an additional independent Non Executive director to the Board. Further, the Board continues to recognise the benefits of diversity in the boardroom, including gender and racial diversity. The current Board composition includes one female Director, Helen Buck, who is an independent Non Executive Director. Whilst we remain of the view that the setting of targets for the number of female directors on the Board is not necessary, and that we will continue to appoint on merit, I will continue to ensure that our searches for new directors take into account diversity, including gender and race.

LSL remains committed to promoting diversity throughout the Group and in 2014 we continued to build on the diversity reviews conducted during the previous years. Further details of the study and its conclusions are set out in our Corporate Social Responsibility Report.

As Chairman, with the responsibility for leadership of the Board, I personally review its effectiveness on all aspects of its role and encourage feedback.

People

The Group expanded significantly during 2013 through investment to build capacity and through a number of small bolt-on acquisitions in both lettings books and residential sales businesses. During 2014, headcount reduced towards the end of the year in light of the softening in the market. In total, the number of Group employees decreased to 5,222 (2013: 5,299).

Our success is ultimately dependent on the customer service provided by colleagues in all parts of the business. We have had a successful year in 2014 and I would like to thank all of our employees for their hard work and commitment which has contributed to this result and wish them well in their careers with LSL.

Current trading and outlook

The forthcoming year is expected to see uncertain market conditions in the first half with the potential for improved market conditions during the second half of the year. Year on year market comparatives in the first quarter are expected to be adverse in part due to the lower opening pipeline of activity following the weaker last quarter of 2014. Whilst we are seeing improvements in February, the second quarter is expected to be impacted by the upcoming general election.

Against this uncertain market backdrop, the Group remains committed to driving profitable organic growth across the business. In light of the changed market conditions, a review of headcount and other costs by business has been completed and the necessary actions are being taken. We will continue to evaluate selective acquisitions and will capitalise fully on the investments made in 2014 to optimise profitability.

The Group has started the year in line with management's expectations and through a series of internally generated initiatives and an expectation of a stronger market in the second half, the business is well placed to deliver a solid performance in 2015.

Simon Embley

Chairman

12^th March 2015

Business Review - Estate Agency Division

The Estate Agency Division delivered excellent profit growth

Financial	2014 £m	2013 £m	% change
Residential Sales exchange income	92.1	80.0	15
Lettings income	58.5	52.2	12
Asset Management income	11.7	14.3	(18)
Financial Services income	43.7	35.8	22
Other income¹	19.3	15.9	21

Total income	225.3	198.2	14
Operating expenditure	(191.4)	(169.1)	13
Operating profit⁵	33.9	29.1	16

KPIs

Exchange units	29,704	27,512	8
Exchange units²	29,111	27,352	6
Operating margin (%)	15.0%	14.7%
Fees per unit	3,101	2,908	7
Fee per unit²	2,968	2,877	3

House purchases (000s)³	769	736	5
Repossessions⁴	21,000	28,900	(27)

1 'Other income' includes franchising income, conveyancing services, EPCs, Home Reports, utilities and other products and services to clients of the branch network.
2 Exchange units and fee per exchange are on a like-for-like basis (excluding branch openings and closures)
3 Source Bank of England for "House Purchase Approvals" 2014
4 Source Council of Mortgage Lenders arrears and repossessions data relating to properties taken into possession by first-charge mortgage lenders for 2014.
5 Operating Profit is before exceptional items, contingent consideration, amortisation of intangible assets and share-based payments

Estate Agency Division Performance

The UK residential property services market in 2014 was very much a story of two halves. The year started very strongly continuing the trend seen in the second half of 2013 with house purchase approvals up 35% year on year in the first quarter of 2014 and by 19% in the first half for the year. Year on year growth then moderated in the second and third quarters before contracting by 16% in the final quarter of the year. April also saw the implementation of changes to mortgage application processing by lenders following the MMR. These changes impacted the market from the second quarter onwards. Changes to stamp duty introduced at the start of December 2014 also had an impact, particularly in prime Central London, but there was a general slowing of activity as consumer sentiment weakened in the second half of the year.

Allowing for this seasonal volatility, the total market, as measured by mortgage approvals for house purchases, for the full year increased by a modest 4.5% to 769,000 (2013: 736,000)³ which compares to historic normalised levels of 1.2m approvals per annum. Allowing for the lag between mortgage approval and completion, it is estimated that the number of mortgage completions in the year, which is the key driver for LSL's Residential Sales income, increased by 11% to 677,000 (2013: 609,000).

LSL has a balanced Estate Agency model and over the last seven years has significantly built its exposure to non-cyclical income and countercyclical streams such as Lettings and Asset Management income. These income streams have grown at a compound annual rate of 15% over the period, increasing from £40.4m in 2010 to £70.2m in 2014. Given expectations for the housing transaction volumes in the UK residential property market in 2015, the Group expects to continue to target these income streams through an active programme of organic growth and acquiring lettings books across the UK portfolio. The Estate Agency Division delivered an excellent performance in 2014 with total income growing by 14% to £225.3m (2013: £198.2m). The benefit of operational gearing can be seen as 18% of the increase in revenue fell through to operating profit even after investment to support future growth. Operating profit increased by 16% to £33.9m (2013: £29.1m). The business therefore improved its operating profit margin to 15.0% (2013: 14.7%). As the market in 2015 tightens, particularly in the first half, the Group will be looking at further ways to improve efficiency.

3 Bank of England for “House Purchase Approvals”, “Remortgage approvals” and “Total Mortgage Approvals” 2014

Investment in the Estate Agency Division during 2014 included the recruitment of additional employees into Lettings and Financial Services which will allow the Estate Agency Division to capitalise on market opportunities in 2015. In addition, Marsh & Parsons opened four new branches which will allow it to grow in new geographies within the prime Central London market place.

Estate Agency Division Branches

Your Move, Reeds Rains and the LSLi brands all continued to perform well during the year. Residential Sales income increased by 15% to £92.1m (2013: £80.0m) due mainly to an improvement in volume and the average fee which increased by 7% to £3,101 (2013: £2,908) driven partly by improved mix. Excluding the impact of Marsh & Parsons, the average fee increased by 10% to £2,654 (2013: £2,407).

Marsh & Parsons

Marsh & Parsons delivered a solid performance in a challenging prime Central London market. Although there was significant house price appreciation in prime Central London in the first half of 2014, these conditions significantly ameliorated in the second half of the year. There continues to be a scarcity of stock for both residential sales exchanges and lettings in prime Central London markets. This has created pressure on volume growth although commission percentages have been maintained and the average fee per exchange has increased by 11% in the year. Against this backdrop, Marsh & Parsons revenue increased by 8.7% to £32.5m (2013: £29.9m) with Lettings growth of 18% which is a strong result. Operating profit was £6.5m (2013: £6.7m).

Operating profit reduced marginally year on year because of an increase in the cost base driven by further investment in new branch openings to give the business greater coverage of the prime Central London market and the capacity to further expand going forward. During 2014, four new branches were opened in Shepherd's Bush, Camden, East Sheen and Richmond which are performing in line with the Board's expectations. The Group is targeting further new branch openings in 2015.

Financial Services

Total Financial Services income delivered through the intermediary networks of First Complete and Pink Home Loans, the Estate Agency Division's branches and Linear Financial Solutions increased substantially by 22% during 2014 to £43.7m (2013: £35.8m). Revenue has continued to grow consistently since 2010 as a result of significant organic growth including the successful roll out of Financial Services to all Estate Agency branches and the acquisition of new intermediary networks. In total the Group arranged mortgage lending completions of £11.6bn during 2014 (2013: £7.6bn) giving the Group an important position as a mortgage distributor for lender clients as well as a growing revenue and profit stream.

CounterCyclical Income

LSL continues to focus on growing Lettings income across all of its businesses through organic growth and through selective acquisitions of lettings books. LSL's on-going focus on growing Lettings income reflects the recurring nature of the revenue stream along with attractive economics. LSL is continuing to invest in acquiring lettings businesses and has recruited additional Lettings consultants during the year. Total Lettings income grew by 12% year on year, an improvement on the growth rate of 9% in the prior year. Growth was also consistent throughout the year with 12% growth sustained in both the first half and the second half of the year.

With the improvements in the economy and continued low interest rates, repossession volumes again fell. The rate of market contraction increased to 27% from 15% in 2013 with the total number of repossessions now down to 21,000 in 2014 (2013: 28,900)⁴. The market has now declined for each of the last five years and is now well below half of the total of 48,900 in 2009. During this period LSL's market share in Asset Management has increased. However, the acceleration in the decline in the size of the market in 2014 as well as continued fee pressure has resulted in an 18% reduction (2013: 8% reduction) in revenue to £11.7m (2013: £14.3m). Despite this contraction, the Asset Management business is well positioned to capitalise on an increase in repossession volumes which may occur if and when interest rates start to rise.

In order to offset the decline in repossession volumes, the Asset Management business has further developed its corporate property management offering.

The Group now benefits from total counter-cyclical income from Lettings and Asset Management of £70.2m compared to £66.5m in 2013, which represents 31% of the Estate Agency Division's revenue and 24% of Group revenue.

4 Source: Council of Mortgage Lenders arrears and repossessions data relating to properties taken into possession by first-charge mortgage lenders for 2014

Developments

After many years with LSL, most recently as an Executive Director, David Newnes retired at the end of 2014. He was succeeded by Adrian Gill, who was, until November, a Non Executive Director of the Group. Adrian has considerable experience in the residential property sector, having spent over 10 years as Executive Director at Connells Limited, the national estate agency business of the Skipton Building Society. Over the next few months, Adrian as Executive Director, Estate Agency will be reviewing and updating the Group's strategy for the Estate Agency Division.

As well as investing in headcount in 2014 to increase Lettings and Financial Services capacity, LSL also continued a programme of investment in new front end systems in Your Move, Reeds Rains and the LSLi brands which was started in 2013. LSL provides excellent service to its customers and this has been underpinned by high quality systems. In 2013 the Group began a project to design and implement next generation front end lettings systems. This was successfully rolled out during 2014 and further upgrades are planned into 2015 to enhance the functionality and capabilities of the applications.

In addition LSL is in the process of rolling out a new common IT platform across our Financial Services intermediary networks, trading as Pink Home Loans and First Complete, which will improve customer service and support the ongoing provision of appropriate financial outcomes to consumers and increase operational efficiency.

The MMR was implemented on 26^th April 2014. The FCA's aim for the MMR was to deliver a 'sustainable market for all participants that is flexible for consumers'. In 2014, LSL has made substantial investment and took significant steps to prepare for the new requirements including the selection of and investment in new software and training of the employed and network employees as required. The implementation has gone well and the market has settled in to the new lending criteria regime.

At the start of 2015, the online property portal market saw the launch of 'OnTheMarket.com', the portal of Agents Mutual. LSL has not joined OnTheMarket.com and continues to use both Rightmove and Zoopla and their associated portals as LSL believes that this approach offers the best service to the Estate Agency customers.

During 2014, the Group has continued to make selective acquisitions and has added to the Estate Agency Division in the South East through the acquisitions of Hawes & Co and ten lettings books.

In 2015 LSL will continue with the same strategy focusing on driving organic growth in Residential Sales, Lettings and Financial Services and rolling out new branches in Marsh & Parsons. The Group will also continue to evaluate selective estate agency acquisitions. Subsequent to the year end, LSL acquired Thomas Morris a multi award winning estate agency and lettings business with seven branches in Cambridgeshire, Bedfordshire and Hertfordshire together with a further six lettings books.

Regulation - Financial Services

First Complete and Pink Home Loans (the trading name of Advance Mortgage Funding) are both directly authorised by the FCA in relation to the sale of mortgage, pure protection and general insurance products. Your Move, Reeds Rains Financial Services, Reeds Rains and Embrace Mortgage Services along with the LSLi subsidiaries are all appointed representatives of First Complete, while Linear Financial Solutions is an appointed representative of Advance Mortgage Funding for mortgage and insurance business and also an appointed representative of Openwork for investment business.

As a result of Linear Financial Solutions' appointment by Openwork, LSL has a small indirect shareholding of Openwork.

Regulation - Residential Sales and Lettings

The LSL Estate Agency Division's branches adhere to the Codes of Practice issued by industry professional and regulatory bodies, The Property Ombudsman (TPO) and/or the Association of Residential Lettings Agents (ARLA). Further, in June 2014, Your Move's Lettings Director became the President of ARLA.

This is in addition to observing compliance with relevant legislation, such as the Consumer Protection Regulations, guidance material published by relevant regulators, including the Competition and Markets Authority (CMA) (and its predecessor the Office of Fair Trading (OFT)), the National Trading Standards Agency/Trading Standards Institute (TSI), HMRC and codes published by other relevant bodies, including the Advertising Standards Authority (ASA). LSL from time to time also enters into direct dialogue with the regulators and consumer groups, such as Which. During 2014, the CMA, TSI, HMRC and FCA took over responsibilities from the OFT in relation to Residential Sales and Lettings regulation (including Anti-Money Laundering) and Consumer Credit.

Branch numbers

Breakdown of Estate Agency branches as at 31^st December 2014.

	Owned	Franchised	Totals
Your Move	218	72	290
Reeds Rains	124	45	169
LSLi	52	6	58
Marsh & Parsons	22	-	22
Total	416	123	539

The above branch numbers include four virtual branches

Surveying Division

Strong second half performance

Financial	2014 £m	2013 £m	% Change
Revenue	62.2	60.4	3
Operating expenditure	(48.9)	(47.3)	3
Operating Profit¹	13.3	13.1	2

KPIs
Profit margin (%)	21.4	21.7
Jobs Performed (000s)	372	396	(6)
Revenue from private surveys (£m)	4.0	4.9	(18)
Income per job (£)	167	153	9
PI provision (Balance Sheet) provision at 31^st December (£m)	36.7	25.9
Number of qualified surveyors at 31^stDecember	361	386	(6)

Mortgage approvals (000's)⁵	1,280	1,286	-

1 Operating Profit is before exceptional items, amortisation of intangible assets and share-based payments

Surveying Division Performance

Total mortgage approvals remained broadly flat year on year at 1.280m (2013: 1.286m) with growth in the first half followed by a 10% decrease in total mortgage approvals in the second half compared to the same period last year. This slowdown in the second half can be attributed to consumer sentiment and the impact of the MMR.

Surveying turnover was £62.2m (2013: £60.4m) an increase of 3% on last year and the total number of jobs performed was 372,000 (2013: 396,000). The reduction in volumes was driven by the slowdown of the mortgage market in the second half of the year, with volumes down by nearly 10% year on year. Additionally the decision of a major lender client to improve commercial terms but transfer some of their valuations to another provider of valuation services also impacted on the second half.

Despite a 1% reduction in the Surveying Division's turnover to £31.0m (2013: £32.0m) in the second half versus the first half of the year, the operating profit margin in the second half year was 24.5% (2013: 24.1%) through improved efficiency and tight cost control. The operating profit of £7.6m (2013: £7.7m) also represented a 33% increase on the first half of the year. As reported last year, the Surveying Division reduced the focus on developing surveying services for private buyers to focus on higher margin surveying for corporate clients. As a result the full year revenue from surveying services for private buyers reduced by 18% to £4.0m (2013: £4.9m).

As reported in 2013 in response to the surveying market's capacity constraints, the Group launched a new graduate recruitment and training programme. This represents a major investment for the business. In 2014 a further 60 graduates were hired in addition to 43 hired during 2013. The benefits of this investment commenced in the second half of the year and will be further realised in 2015. The constrained capacity in the first half of 2014 resulted in an improvement in the pricing environment and the benefits were realised in the longer term contracts renewed in the year and the major new contract won.

Operating profit was £13.3m (2013: £13.1m) and the operating profit margin was 21.4% (2013: 21.7%). These figures are stated after deducting the cost of investment in the graduate programme. Adjusting for this cost, on a like-for-like basis, operating profit increased to £15.4m (2013: £13.6m), an increase of 13.2% and the operating margin was 24.8% (2013: 22.5%).

5 Bank of England for "Total Mortgage Approvals" 2014

Surveying Division Developments

The major initiative in the Surveying Division of investing in a new graduate recruitment and training programme to increase capacity has continued in 2014. Whilst the overall market conditions worsened in the second half of 2014, some geographically concentrated capacity constraints remain, particularly in London and the South East. The graduate programme has enabled LSL to respond to this challenge by moving surveyors around the country.

In the final quarter of the year the Surveying Division concluded a project to optimise operational performance and productivity whilst improving its working practices; this included the consolidation of all administrative functions at its Kettering support services location. The associated one off costs of £0.7m associated with this exercise will be recovered in savings during the first half of 2015.

The Surveying Division serves key lender clients through both exclusive contracts and through panel management arrangements. LSL is continuing to invest in the business in order to maintain high service levels for all clients.

The Surveying Division had a number of contracts up for renewal in 2014 and all of the major contracts were successfully renewed with improved pricing. There will be fewer renewals and new opportunities in 2015 but the Surveying Division will vigorously pursue those available. The uncertain economic conditions, including any impact of the general election, may impact the overall housing market and consequently surveying volumes, nevertheless the renewal of existing major contracts in 2014 secures a significant proportion of expected revenues.

PI Costs

As previously announced on 19^th December 2014, LSL has needed to further increase the PI provisions relating to the 2004 to 2008 high risk lending period. The announcement indicated a range of between £20.0m and £25.0m and following further work, including a case by case independent review by specialist external legal counsel, LSL has provided an additional reserve of £24.6m which is included in 2014 as an exceptional item. Whilst the cause is an historic market issue relating to historic periods, it remains disappointing. The additional provision reflects a number of factors. Although LSL has seen the reduction in the rate of notifications that had been expected during the year, and assumed in setting the previous level of provision, a greater proportion of the notifications are deteriorating into claims. Claims are also hardening with the more difficult and complex claims now being progressed. This is resulting in an increase in the average cost per claim, particularly in respect of legal costs reflecting the complexity of the arguments. The additional provision represents the Group's current best estimate of likely claims costs but the process of resolving open claims and estimating future claims is on-going. The review was conducted with the overall aim of ensuring a high degree of confidence that the total PI provision will be adequate to cover the remaining risk relating to the 2004 to 2008 high lending period. The provision required is highly sensitive to the run rates of new claims and the costs per claim for both new and existing claims. Claims experience since the high risk lending period is substantially improved as a result of both structural changes in the market place and the overhaul of internal procedures.

Financial Review

The key drivers of the financial performance of LSL in 2014 are summarised below:

Income statement

Revenue

Revenue increased by 11.2% to £287.5m in the year ended 31^stDecember 2014 (2013: £258.6m).

Operating Expenses Excluding Exceptional Costs, Amortisation and Share Based Payment

Operating expenses increased by 10.5% to £249.3m (2013: £225.6m). This was mainly in the Estate Agency Division and included investment to support revenue growth in 2014 on the back of ten months of market growth seen in 2013. The average number of full time equivalent employees during the year was 4,760 (2013: 4,327).

Underlying Operating Profit

Group Underlying Operating Profit (before exceptional gains and exceptional costs, contingent consideration, amortisation of intangible assets and share-based payments) increased by 13.2% to £42.0m (2013: £37.1m) with the Underlying Operating Profit Margin of 14.6% (2013: 14.3%). On a statutory basis, the Group operating profit increased by 72.7% to £33.9m (2013: £19.6m) with the Operating Profit Margin of 11.8% (2013: 7.6%).

Exceptional Items

Total net exceptional costs in 2014 were £6.2m (2013: £13.0m). The main exceptional costs in 2014 were comprised of PI Costs of £24.6m (for further details see Provision for PI claims and notifications below). The total exceptional cost also includes acquisition related costs (£0.4m) and restructuring, redundancy and other associated branch closure costs including onerous lease provisions (£1.1m). These exceptional costs were partly offset by a small gain on the disposal of freehold properties and on the sale of part of LSL's investment in Zoopla on its IPO totalling £19.8m. In 2013 exceptional costs comprised of PI Costs of £12.0m, acquisitions related costs of £0.2m and redundancy and other associated branch closure costs of £0.9m. These costs were offset by a gain on the sale of freehold properties totalling £0.1m.

Provision for PI claims and notifications

Since early in 2012, the Group has experienced a high level of claims relating to the 2004 to 2008 period, which was a period of relatively high risk lending characterised by higher house prices, high loan-to-value ratios and considerable levels of buy-to-let and sub-prime lending. As a result the provision for PI Costs was increased by £17.3m in June 2012 and again by £12.0m in November 2013. Following a further deterioration in claims experience in 2014, the provision for PI Costs was increased by £24.6 million in 2014.

Contingent consideration

Certain contingent consideration arrangements have been accounted for as remuneration as the arrangements potentially involve the vendors forfeiting amounts otherwise due if continued services are not provided. These amounts are shown separately on the face of the Income Statement.

Contingent consideration relating to the 2011 acquisition of Marsh & Parsons has been treated as an expense of £2.3m (2013: £0.4m) in 2014. Further, LSLi has acquired a number of subsidiaries whereby the contingent consideration is also considered to be remuneration under IFRS 3. A credit of £2.7m (2013: £2.4m expense) was recorded in 2014 reflecting revisions to future earn out assumptions.

Net Financial Costs

Net financial costs (excluding exceptional finance costs) amounted to £2.2m (2013: £3.1m). The finance costs related principally to interest and fees on the revolving credit facility, however, £0.1m (2013: £0.7m) of the costs relates to the unwinding of discounts on provisions.

Taxation

The UK standard corporation tax rate has reduced from 28% as at 1^st January 2011 to 21% from 1^st April 2014 with a further reduction to 20% occurring on 1^st April 2015. The effective rate of corporation tax for the year was 21.1% (2013: 21.4%) excluding prior year adjustments. The effective tax rate for 2014 and 2013 was impacted by non-taxable income for joint ventures and dividends, the impact of a rate change on the deferred tax liability, contingent consideration recognised as an expense and the impact of temporary differences on certain non-qualifying properties no longer being recognised. Excluding these impacts the effective tax rate is 22.0% (2013: 24.0%). Income tax charged directly to other comprehensive income was £2.7m (2013: £4.4m); this is comprised of a credit of £4.1m and a charge of £1.4m and relates to the revaluation of financial assets. Income tax credited directly to the share based payment reserve is £nil (2013: £nil).

Adjusted Basic Earnings Per Share

The Basic Earnings Per Share was 24.5 pence (2013: 13.6 pence). The Adjusted Basic Earnings Per Share (as calculated in Note 10 to the Financial Statements) is 30.5 pence (2013: 25.3 pence). The Directors consider that the adjustments made to exclude the after tax effect of exceptional items, contingent acquisition consideration treated as remuneration, and amortisation of acquisition intangibles provides a better and more consistent indicator of the Group's underlying performance.

Balance Sheet

Capital Expenditure

Total capital expenditure in the year amounted to £8.5m (2013: £7.1m) and an additional £0.7m (2013: £0.7m) has been spent internally on developing new software which has been treated as an intangible asset.

Bank Facilities

LSL refinanced its bank facility in 2013 with a £100.0m revolving credit facility in place until August 2017 (2013: £100.0m). During the period under review, the Group complied with all of the financial covenants contained within the facility.

Net Bank Debt

As at 31^st December 2014 Net Bank Debt was £34.7m (2013: £26.3m) and Shareholders' funds amounted to £83.1m (2013: £99.3m) giving balance sheet gearing of 41.8% (2013: 26.5%). The increase in Net Bank Debt arose as a result of the acquisitions and further investment in joint ventures and financial assets for various new acquisitions by the Estate Agency Divisions and payment of PI claims of £13.3m (2013: £14.4m). Net Bank Debt represented 11.2% of the Group's market capitalisation at 31^st December 2014, and 74.0% of the Group's adjusted EBITDA for the year (2013: 5.8% and 64.0% respectively).

Cash Flow

The Group generated £42.0m (2013: £42.4m) of operating cash flow which is before capital expenditure including software of £9.2m (2013: £7.9m) and before PI claims paid out of £13.3m (2013: £14.4m) and exceptional costs of £1.5m (2013: £1.1m). The marginal decrease was due to improved Group Underlying Operating Profit offset by investment in working capital. During the year the Group sold a number of freehold properties receiving net proceeds of £0.1m (2013: £1.4m) and generating an exceptional profit of £nil (2013: £0.1m).

Zoopla IPO

On 18^th June 2014, Zoopla underwent an IPO and as part of this, LSL sold 48.9% of its stake in Zoopla for £20.8m, net of associated costs and £16.8m net of tax. The total gain on the sale of the shares was £19.8m net of associated costs.

Zoopla's share price at 31^st December 2014 was £1.965 per share. The fair value of the Group's remaining 2.60% stake in Zoopla is calculated to be £21.3m at 31^st December 2014.

Net Assets

The Group's net assets as at 31^st December 2014 were £83.1m (2013: £99.3m). The Group's investment in Zoopla had largely been revalued ahead of its realisation on IPO. Accordingly, the exceptional gain in the year had already been largely reflected in group net assets and the £16.8m special dividend paid during the year therefore reduces net assets compared with December 2013.

Treasury and Risk Management

LSL has an active debt management policy. During the first half of 2014, the Group had interest rate swaps in place which fixes the interest on borrowings up to £25.0m at an average LIBOR rate of 2.93%, which provided a degree of predictability on finance costs. The interest rate swaps expired and were not renewed. LSL continues to review debt management policy and will consider additional hedging in due course. LSL does not hold or issue derivatives or other financial instruments for trading purposes.

Post Balance Sheet Events

Subsequent to the year end, LSL acquired Thomas Morris a multi award winning estate agency and lettings business with seven branches in Cambridgeshire, Bedfordshire and Hertfordshire for an initial consideration of £4.0m, and six small lettings book acquisitions for a total initial consideration of £1.8m. In addition, via LSLi, LSL acquired the remaining shares in JNP for a consideration of £54k and following the transaction, LSL holds 100% of the shares in JNP.

Management is in the process of allocating the purchase price in accordance with IFRS 3. As a result the initial accounting for the acquisition is currently incomplete, so a fair value table of the identifiable assets and liabilities has not been presented.

International Financial Reporting Standards (IFRS)

The Financial Statements have been prepared under IFRS as adopted by the European Union.

Principal Risks and Uncertainties

During 2014, in line with FRC guidance, LSL's risk management and internal controls framework included:

a. ownership of the risk management and internal controls framework by the Board, supported by the Company Secretary, Head of Risk and Internal Audit and Group Finance;

b. a network of Risk Owners in each of LSL's businesses with specific responsibilities relating to risk management and internal controls;

c. the documentation and monitoring of risks are recorded and managed through standardised risk registers which undergo regular reviews and scrutiny by local boards and the Head of Risk and Internal Audit;

d. the Board regularly identifies, reviews and evaluates the principal risks which may impact the Group as part of the planning and reporting cycle to ensure that such risks are identified, monitored and mitigated; and

e. reporting by the Chairman of the Audit Committee to the Board on any matters which have arisen from the Audit Committee's review of the way in which the risk management and internal control framework has been applied together with any breakdowns in, or exceptions to, these procedures.

In line with 2014 edition of the Code and the FRC's 'Guidance on Risk Management, Internal Control and Related Financial and Business Report', which integrates and replaces the FRC's previous guidance ('Internal Control: Revised Guidance for Directors on the Combined Code' and 'Going Concern and Liquidity Risk Guidance for Directors of UK Companies') which was published in September 2014, LSL has adopted a Group-wide risk appetite statement and framework. The new framework will be applied during 2015, and LSL will report on its progress in the 2015 Report.

Listed below are the risks which the Board has identified at the date of this Report as being therefore the principal risks and uncertainties faced by LSL at the date of this Report, together with details of key management and mitigation initiatives, which are subject to regular review.

LSL also faces other risks which, although important and subject to regular review, have been assessed as less significant and are not listed below. This may include some risks which are not currently known to the Group or that LSL currently deems as immaterial, or were included in previous Annual Report and Accounts and through changes in external factors and careful management, are no longer deemed to be material to the Group as a whole.

However, these risks may individually or cumulatively also have a material adverse effect together with other risk factors which are beyond the direct control of LSL, and may have a material adverse impact on LSL's business, results of operations and/or financial condition. The risk management framework and procedures in place can only provide reasonable but not absolute assurance that the principal risks and uncertainties are managed to an acceptable level.

Further information relating to how LSL managed these risks and uncertainties during 2014 is set out in the Audit Committee Report (Internal Controls) of the Annual Report & Accounts 2014.

Principal Risk and Uncertainty

Description and Impact:

Management and Mitigation

Housing Market - UK:

• The UK residential housing market in 2014 was a story in two halves, with some market improvement in the first quarter, followed by a weakening from the second quarter which continued for the remainder of the year.

• Market trends in 2014 were linked in the first half of the year to the implementation of MMR, and in the second half of the year to the tightening of lending criteria together with some cooling of sentiment in the housing market generally. In addition, looking forward there is some short term political risk around the 2015 general election. Any impact on transaction volumes (both house purchase and remortgage) and house prices may adversely affect the profitability and cash flow of all key brands and businesses.

The Board regularly reviews trends in market volumes and monitors the Group's operational gearing to decide on the appropriate level of resourcing. In addition, the Board regularly focuses on non-cyclical and counter cyclical income streams, in particular Lettings, to offset any impact on residential transaction numbers.

Further, regular reviews of trends in market volumes are undertaken and decisions made on any cost base reductions measures.

Housing Market - Central London:

• LSL has an exposure to the prime Central London property market via Marsh & Parsons. While historically the London market has been more robust compared to the rest of the UK, there is a risk that the London market fails to grow or that LSL fails to maximise the potential growth.

Marsh & Parsons has an incentivised and established management team with a growth strategy. It operates in all segments of the prime Central London market and has opened four new branches in 2014 with further new openings planned for 2015 to improve geographical coverage. The Board closely monitors the company's performance.

Client Contracts:

• A failure to secure or renew, key Valuation Services or Asset Management contracts, or any significant reduction in volumes combined with a pressure on fees, either as a result of adverse market conditions, market consolidation, competition or inadequate service delivery.

There continues to be investment in customer services to retain existing clients and to attract new ones. In addition, LSL continues to provide private survey services to provide a supplemental income stream to the core B2B arrangements.

Group-wide relationship management arrangements are in place to ensure that LSL uses its networks to strengthen relationships with key lender clients.

Professional Services:

• Liabilities arising from the provision of inaccurate professional services advice to clients (e.g. valuation services) arising from employee errors and/or a failure by LSL businesses to put in place and to maintain appropriate internal controls.

• The period from 2004 to 2008 is identified as the high risk lending period and notifications relating to this period are still being received. Accordingly, the PI provisions disclosed in the Report is the Group's best estimate of likely claim costs, and this remains sensitive to the rate of new notifications and the average cost of current and future claims.

• The costs and management resources applied in responding to claims and notifications diverts resources away from value adding activities.

• Costs and losses arising from a failure to manage any actual or threatened legal claims.

Monitoring arrangements include oversight by the Board (including regular review of the PI provision relating to Surveying and Valuation Services) and appropriate quality controls and Risk and Internal Audit reviews of services provided on a sample basis. There are also specific operational controls implemented within the Surveying Division which includes a risk based criteria for the identification of transactions to be subject to enhanced review measures.

During 2014 LSL completed a detailed review of its PI claims and the associated PI provision and further initiatives to improve internal controls and related reporting are continuing into 2015.

The Board regularly review the PI provision to ensure that the cost per claim, number of notifications and the rate of deterioration from notifications to claims are in line with the parameters used to calculate the provision.

Regulatory and Government:

• Failure to comply with existing legislation/regulation or changes to legislation/regulation and/or Government/EU policy which may impact on business results or the UK housing market in general.

• Changes in macro Government economic policy or specific initiatives in respect of the UK Residential Housing sector following the forthcoming election may impact upon the business.

LSL business units are supported by the Compliance and Legal Services teams who closely monitor existing business practices and any reform proposals. Where appropriate Government departments and/or trade bodies are engaged in a dialogue.

The Board also monitors the impacts of changes and assess changes to business practices which may be required to respond to Government policy changes and to ensure compliance with any new legislation.

Where necessary external specialists are engaged to provide advice to ensure that all laws and regulations are adhered to and that a culture of ensuring appropriate customer outcomes is embedded across the Group.

Financial Services Regulation (including FCA requirements):

• Failure to comply with relevant legislation including FCA requirements or changes to Financial Services legislation which would result in a fine, adverse publicity, reputational damage and could result in loss of authorisations which would impact on business results.

• The continued growth of LSL's Financial Services business in 2014 has resulted in increased interaction with the FCA.

The Group has improved its Financial Services compliance framework through the enhancement of technology solutions and the inception of new Compliance roles operating across the breadth of Financial Services operations.

LSL has a proactive engagement strategy with the FCA and the Board closely monitors the Financial Services business and receives regular updates on its communications with the FCA.

Acquisitions:

• Failure to identify and secure appropriate targets for acquisition and once acquired, the businesses are not successfully integrated into the Group.

• Liabilities arising from a failure to carry out appropriate due diligence prior to an acquisition.

Each Division has plans in place to identify acquisition opportunities and wherever necessary additional external consultants are hired to assist with this process.

Further, the Group has in place dedicated teams to deliver, monitor and integrate acquisitions. Where opportunities arise, thorough due diligence is carried out and all significant acquisitions are approved by the Board, to ensure acquisitive growth is delivered within strategic financial parameters. Detailed 100 day integration plans are prepared by management and implemented once the business has been acquired.

A post acquisition review is presented to the Board on the financial and operational success of each significant acquisition, the integration of the business within the Group and any learnings and improvements arising from the process.

IT Systems, Infrastructure and Security:

• Failures, interruptions or security breaches of any Group IT services on which any business is reliant for operational performance and financial information.

Dedicated in house IT departments with specialist staffing. Maintenance of Group policies, including a formalised business continuity infrastructure and contingency plans in the event of a system failure. Regular monitoring by subsidiary company management, external specialists and Risk and Internal Audit, with any system issues highlighted to the Board.

Retention and Recruitment:

• Failure to retain/recruit qualified or experienced individuals with the necessary skills and experience into the senior management team which is key to delivering the future growth strategy of the Group.

The executive team focuses on the retention of all senior management and ensures that adequate remuneration policies, management development and succession plans are in place. This is supported by annual reviews by the Remuneration and Nominations Committees.

The Group HR Department includes a dedicated Talent Acquisition Team focusing on the recruitment of high quality employees. The Group also has in place a range of graduate recruitment and training schemes.

Group Income Statement

for the year ended 31^st December 2014

		2014	2013
	Note	£'000	£'000

Revenue	2	287,498	258,603

Operating expenses:
Employee and subcontractor costs		(167,581)	(150,158)
Establishment costs		(18,852)	(19,386)
Depreciation on property, plant and equipment		(4,918)	(3,977)
Other		(57,938)	(52,125)
		(249,289)	(225,646)

Other operating income		2,404	2,376
Gain on sale of property, plant and equipment		13	38

Group's share of profit after tax in joint ventures		1,383	1,731

Group operating profit before contingent consideration, exceptional items, amortisation and share-based payments
		42,009	37,102

Share-based payments		(1,775)	(1,323)
Amortisation of intangible assets		(565)	(375)
Exceptional gains	4	19,841	134
Exceptional cost	4	(26,035)	(13,124)
Contingent consideration	4	405	(2,793)
Group operating profit	2	33,880	19,621

Finance income		14	7
Finance costs		(2,181)	(3,154)
Exceptional finance credits	4	230	606
Net financial costs		(1,937)	(2,541)

Profit before tax		31,943	17,080

Taxation	6
- related to exceptional items and contingent consideration		1,146	2,879
- others		(7,931)	(5,945)
		(6,785)	(3,066)

Profit for the year		25,158	14,014
Attributable to
- Owners of the parent		25,103	14,001
- Non-controlling interest		55	13



Earnings per share expressed in pence per share:
Basic	3	24.5	13.6
Diluted	3	24.3	13.5
Adjusted - basic	3	30.5	25.3
Adjusted - diluted	3	30.2	25.2

Group Statement of Comprehensive Income

for the year ended 31^st December 2014

	2014	2013
	£'000	£'000

Profit for the year	25,158	14,014

Items to be reclassified to profit and loss in subsequent periods:
Reclassification adjustments for disposal of financial assets	(20,568)	-
Income tax effect	4,114	-
Revaluation of financial assets	6,903	23,806
Income tax effect	(1,381)	(4,380)
Net other comprehensive income to be reclassified to profit and loss in subsequent periods:
	(10,932)	19,426

Total other comprehensive income for the year, net of tax	(10,932)	19,426

Total comprehensive income for the year, net of tax	14,226	33,440

Attributable to
- Owners of the parent	14,171	33,427
- Non-controlling interest	55	13

Group Balance Sheet Company No. 05114014

as at 31^st December 2014

	2014	2013
	£'000	£'000

Non-current assets
Goodwill	131,560	125,642
Other intangible assets	20,110	19,080
Property, plant and equipment	20,272	16,230
Financial assets	23,033	36,574
Investments in joint ventures	9,121	3,239
Total non-current assets	204,096	200,765

Current assets
Trade and other receivables	36,165	35,340
Current tax receivables	-	771
Cash and cash equivalents	-	469
Total current assets	36,165	36,580
Non-current assets held for sale	-	276
Total assets	240,261	237,621

Current liabilities
Financial liabilities	(4,659)	(5,113)
Trade and other payables	(50,336)	(54,090)
Current tax liabilities	(373)	-
Provisions for liabilities	(16,539)	(8,458)
Total current liabilities	(71,907)	(67,661)

Non-current liabilities
Financial liabilities	(56,420)	(43,749)
Deferred tax liability	(6,462)	(9,014)
Provisions for liabilities	(22,372)	(17,881)
Total non-current liabilities	(85,254)	(70,644)

Total liabilities	(157,161)	(138,305)

Net assets	83,100	99,316

Equity
Share capital	208	208
Share premium account	5,629	5,629
Share-based payment reserve	3,498	2,475
Treasury shares	(7,922)	(4,292)
Fair value reserve	16,715	27,647
Retained earnings	64,835	67,567
Equity attributable to owners of parent	82,963	99,234
Non-controlling interests	137	82

Total equity	83,100	99,316

Group Statement of Cash Flows

for the year ended 31^st December 2014

		2014		2013

	£'000	£'000	£'000	£'000
Cash generated from operating activities
Profit before tax		31,943		17,080

Adjustments to reconcile profit before tax to net cash from operating activities

Exceptional operating items and contingent consideration (non-cash)	4,324		15,491
Amortisation of intangible assets	565		375
Finance income	(14)		(7)
Finance costs	2,181		3,580
Exceptional finance (credit)	(230)		(606)
Share-based payments	1,775		1,323
Total adjustments		8,601		20,156
Group operating profit before amortisation and share-based payments		40,544		37,236
Depreciation	4,918		3,977
Dividend income	(1,579)		(1,141)
Share of results of joint ventures	(1,383)		(1,731)
Gain on sale of property, plant and equipment	(48)		(172)
		1,908		933
Increase in trade and other receivables	(449)		(4,656)
(Decrease)/increase in trade and other payables	(4,263)		4,881
Decrease in provisions	(12,075)		(11,544)
		(16,787)		(11,319)
Cash generated from operations		25,665		26,850

Interest paid	(1,764)		(2,142)
Payment of contingent consideration relating to remuneration	(1,426)		-
Loan refinance costs paid			(1,128)
Tax paid	(1,339)		(2,537)
		(4,529)		(5,807)
Net cash generated from operating activities		21,136		21,043

Cash flows from investing activities
Cash acquired on purchase of subsidiary undertaking	250		24
Acquisitions of subsidiaries and other businesses	(4,963)		(3,515)
Payment of contingent consideration	-		(520)
Investment in joint venture	(2,422)		-
Investment in financial assets	(1,155)		(847)
Cash received on sale of financial assets	20,838		-
Tax on Sale of Zoopla	(4,015)
Dividends received from joint venture	1,302		805
Dividends received from financial assets	1,579		1,141
Interest received	14		7
Purchase of property, plant and equipment and intangible assets	(9,244)		(7,859)
Proceeds from sale of property, plant and equipment	195		1,475
Net cash generated/(expended) on investing activities		2,379		(9,289)
Cash flows from financing activities
Drawdown of loans	8,233		510
Payment of deferred consideration	-		(494)
Purchase of LSL shares by the employee benefit trust (EBT) (Treasury Shares)	(5,621)		(2,625)
Proceeds from exercise of share options	1,690		1,084
Dividends paid	(28,286)		(9,985)

Net cash used in financing activities		(23,984)		(11,510)

Net (decrease)/increase in cash and cash equivalents		(469)		244
Cash and cash equivalents at the beginning of the year		469		225

Cash and cash equivalents at the end of the year		-		469

Group Statement of Changes in Equity

Year ended 31^st December 2014

	Share capital	Share premium account	Share- based payment reserve	Treasury shares	Fair value Reserve	Retained earnings	Total equity	Non-controlling interests
									Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1^stJanuary 2014	208	5,629	2,475	(4,292)	27,647	67,567	99,234	82	99,316
Disposal of financial assets (net of tax)	-	-	-	-	(16,454)	-	(16,454)	-	(16,454)
Revaluation of financial assets (net of tax)	-	-	-	-	5,522	-	5,522	-	5,522
Other comprehensive income for the year	-	-	-	-	(10,932)	-	(10,932)	-	(10,932)
Profit for the year	-	-	-	-	-	25,103	25,103	55	25,158
Total comprehensive income for the year	-	-	-	-	(10,932)	25,103	14,171	55	14,226
Investment in Treasury Shares	-	-	-	(5,621)	-	-	(5,621)	-	(5,621)
Exercise of options	-	-	(752)	1,991	-	451	1,690	-	1,690
Share-based payments	-	-	1,775	-	-	-	1,775	-	1,775
Tax on share based payments	-	-	-	-	-	-	-	-	-
Dividend payment	-	-	-	-	-	(28,286)	(28,286)	-	(28,286)
At 31^stDecember 2014	208	5,629	3,498	(7,922)	16,715	64,835	82,963	137	83,100

Year ended 31^st December 2013

	Share capital	Share premium account	Share- based payment reserve	Treasury shares	Fair value Reserve	Retained earnings	Total equity	Non-controlling interests
									Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1^stJanuary 2013	208	5,629	1,526	(2,691)	8,221	63,117	76,010	69	76,079
Revaluation of financial assets (net of tax)	-	-	-	-	19,426	-	19,426	-	19,426
Other comprehensive income for the year	-	-	-	-	19,426	-	19,426	-	19,426
Profit for the year	-	-	-	-	-	14,001	14,001	13	14,014
Total comprehensive income for the year	-	-	-	-	19,426	14,001	33,427	13	33,440
Investment in Treasury Shares	-	-	-	(2,625)	-	-	(2,625)	-	(2,625)
Exercise of options	-	-	(374)	1,024	-	434	1,084	-	1,084
Share-based payments	-	-	1,323	-	-	-	1,323	-	1,323
Dividend payment	-	-	-	-	-	(9,985)	(9,985)	-	(9,985)
At 31^stDecember 2013	208	5,629	2,475	(4,292)	27,647	67,567	99,234	82	99,316

Notes to the Preliminary Results

The financial information in this preliminary announcement does not constitute LSL's statutory financial statements for the year ended 31^st December 2014 but has been extracted from the Financial Statements, and as such, does not contain all information required to be disclosed in the financial statements prepared in accordance with IFRS.

Statutory financial statements for this year will be filed following the AGM. The auditors have reported on these financial statements. Their report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006

1. Basis of preparation

The accounting policies adopted are consistent with those of the previous financial year except for the adoption of new Standards and Interpretations as of 1^st January 2014 which are applicable to the Group. During the year ended 31^st December 2014, the Group has adopted a number of new IFRS, IAS or amendments issued by the IASB or interpretations issued by the IFRS Interpretations Committee which have had a significant impact on the Group's consolidated financial statements. These are as follows:

IFRS 13 Fair Value Measurement

IFRS 13 establishes a single source of guidance for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The resulting calculations under IFRS 13 affected the principles that the Group uses to assess the fair value, but the assessment of fair value under IFRS 13 has not materially changed the fair values recognised or disclosed. IFRS 13 mainly impacts the disclosures of the Group. It requires specific disclosures about fair value measurements and disclosures of fair values, some of which replace existing disclosure requirements in other standards.

IAS 1 Presentation of Items of Other Comprehensive Income - Amendments to IAS 1

The amendments to IAS 1 became effective 1^st July 2012 and were first applied by the Group on 1st January 2013. The amendments introduce a grouping of items presented in other comprehensive income (OCI). Items that will be reclassified ('recycled') to profit or loss at a future point in time (e.g. net loss or gain on available-for-sale financial assets) have to be presented separately from items that will not be reclassified (e.g. revaluation reserve). The amendment affected presentation only and had no impact on the Group's financial position or performance.

Recoverable Amount Disclosures for Non-Financial Assets - Amendments to IAS 36 Impairment of Assets

These amendments remove the unintended consequences of IFRS 13 on the disclosures required under IAS 36. In addition, these amendments require disclosure of the recoverable amounts for the assets or CGUs for which impairment loss has been recognised or reversed during the period. These amendments are effective retrospectively for annual periods beginning on or after 1st January 2014 with earlier application permitted, provided IFRS 13 is also applied. The Group has early adopted these amendments to IAS 36 in the current period since the amended/additional disclosures provide useful information as intended by the IASB. Accordingly, these amendments have been considered while making disclosures for impairment of non-financial assets. These amendments would continue to be considered for future disclosures.

2. Segment analysis of revenue and operating profit

For management purposes, the Group is organised into business units based on their products and services and has two reportable operating segments as follows:

· The Estate Agency and Related Services provides services related to the sale and letting of housing. It operates a network of high street branches. As part of this process, the division also provides marketing and conveyancing services. In addition, it provides repossession asset management services to a range of lenders. It also sells mortgages for a number of lenders and sells life assurance and critical illness policies, etc for a number of insurance companies via the Estate Agency branch and Linear Mortgage Network. It also operates a financial services segment as a separate mortgage and insurance distribution company providing products and services to financial intermediaries. The results of this financial services segment, which does not meet the quantitative criteria for separate reporting under IFRS have been aggregated with those of Estate Agency and Related Services.

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

Each segment has various products and services and the revenue from these products and services are disclosed in the Business Review section of the Strategic Report of the Annual Report and Accounts 2014.

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

Operating segments

The following table presents revenue and profit information regarding the Group's operating segments for the financial year ended 31^st December 2014 and financial year ended 31^st December 2013 respectively.

Year ended 31^st December 2014

	Estate Agency and Related Services	Surveying and Valuation Services	Unallocated	Total
	£'000	£'000	£'000	£'000
Income statement information
Segmental revenue	225,274	62,224	-	287,498
Segmental result:
- before exceptional costs, contingent consideration, amortisation and share-based payments	33,892	13,331	(5,214)	42,009
- after exceptional costs, contingent	52,310	(12,611)	(5,819)	33,880
consideration, amortisation and share-based payments

Finance income				14
Finance costs				(2,181)
Exceptional finance credits				230
				31,943
Profit before tax
Taxation				(6,785)
Profit for the year				25,158

Year ended 31^st December 2013

	Estate Agency and Related Services £'000	Surveying and Valuation Services £'000	Unallocated £'000	Total £'000

Segmental revenue	198,170	60,433	-	258,603

Segmental result:
- before exceptional costs, contingent consideration, amortisation and share-based payments	29,116	13,096	(5,110)	37,102
- after exceptional costs, contingent
consideration, amortisation and share-based payments	25,966	204	(6,123)	20,047

Finance income				7
Finance costs				(3,580)
Exceptional finance costs				606

Profit before tax				17,080
Taxation				(3,066)
Profit for the year				14,014

3. 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.

	Profit after tax £'000	Weighted average number of shares	2014 Per share amount Pence	Profit after tax £'000	Weighted average number of shares	2013 Per share amount Pence

Basic EPS	25,103	102,479,989	24.5	14,001	102,955,662	13.6
Effect of dilutive share options	-	925,536	-	-	410,999	-
Diluted EPS	25,103	103,405,525	24.3	14,001	103,366,661	13.5

There have been no other transactions involving Ordinary Shares or potential Ordinary Shares between the reporting date and the date of completion of these Financial Statements.

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

	2014 £'000	2013 £'000

Group operating profit before contingent consideration in acquisitions linked to employment, exceptional costs, share-based payments and amortisation (excluding non-controlling interest):	41,954	37,089

Net finance costs (excluding exceptional costs)	(2,167)	(3,147)
Normalised taxation	(8,554)	(7,892)
Adjusted profit after tax¹ before exceptional costs, share-based payments and amortisation	31,233	26,050

Adjusted basic and diluted EPS

	Adjusted profit after tax¹ £'000	Weighted average number of shares	2014 Per share amount Pence	Adjusted profit after tax¹ £'000	Weighted average number of shares	2013 Per share amount Pence

Adjusted Basic EPS	31,233	102,479,989	30.5	26,050	102,955,662	25.3
Effect of dilutive share options	-	925,536	-	-	410,999	-
Adjusted Diluted EPS	31,233	103,405,525	30.2	26,050	103,366,661	25.2

1 This represents adjusted profit after tax attributable to equity holders of the parent. Effective tax rate considered to calculate normalised taxation in 2014 is 21.5% (2013: 23.25%).

4. Exceptional items and contingent consideration

	2014 £'000	2013 £'000
Exceptional costs:
Branch closure and restructuring costs including redundancy costs	1,092	924
Acquisition related costs	373	200
Provision for professional indemnity claims/notifications	24,570	12,000
	26,035	13,124

Contingent consideration on acquisitions	(405)	2,793

Exceptional gains:
Gain on disposal of freehold properties	(35)	(134)
Gain on disposal of Zoopla shares	(19,806)	-
	(19,841)	(134)

Exceptional finance credits:
Movement in fair value of interest rate swap	(230)	(606)
	5,559	15,177

5. Dividends paid and proposed

	2014	2013
	£'000	£'000
Declared and paid during the year:
Equity dividends on ordinary shares:
2012 Final: 6.4p	-	6,584
2013 Interim: 3.3p	-	3,401
2013 Final: 7.2p	7,406	-
2014 Interim: 4.0p	4,074	-
2014 Special dividend: 16.5p	16,806
	28,286	9,985
Dividends on Ordinary Shares proposed (not recognised as a liability as at 31^stDecember):
Equity dividends on Ordinary Shares:
Dividend: 8.3p per share (2013: 7.2p)	8,453	7,395

6. Taxation

(a) Tax on profit on ordinary activities

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

	2014	2013
	£'000	£'000

UK corporation tax - current year	6,460	4,474
- adjustment in respect of prior years	144	(574)
	6,604	3,900
Deferred tax:
Origination and reversal of temporary differences	98	(814)
Adjustment in respect of prior year	83	(20)
Total deferred tax credit/ charge	181	(834)
Total tax charge/(benefit) in the income statement	6,785	3,066

Income tax credited directly to other comprehensive income is £2.7m (2013: charge of £4.4m); this is comprised of a credit of £4.1m and a charge of £1.4m and relates to the disposal and revaluation of financial assets. Income tax credited directly to the share based payment reserve is £nil (2013: £ nil).

In March 2013, the UK government announced proposals to reduce the main rate of corporation tax to 20% from 1^stApril 2015. As of 31^st December 2014 reductions to the main rate of corporation tax to 20% had been enacted. Accordingly this is the rate at which deferred tax has been provided.

(b) Factors affecting tax charge for the year

The tax assessed in the profit and loss account is lower (2013: lower) than the standard UK corporation tax rate, because of the following factors:

	2014	2013
	£'000	£'000

Profit on ordinary activities before tax	31,943	17,080

Tax calculated at UK standard rate of corporation tax rate of 21.5% (2013 - 23.25%)	6,868	3,971
Non taxable goodwill	-	(127)
Non taxable income from joint ventures and dividends	(641)	(667)
Benefit of deferred tax asset and brought forward losses not previously recognised	(249)	(62)
Disallowable expenses	394	248
Impact of movement in contingent consideration charge to Income Statement	(87)	650
Share-based payment relief	281	62
Temporary differences on non-qualifying properties no longer recognised	-	(94)
Impact of rate change on deferred tax	(8)	(321)
	6,558	3,660
Prior period adjustments - current tax	144	(574)
Prior period adjustment - deferred tax	83	(20)
Total taxation charge	6,785	3,066

7. Analysis of net bank debt (excluding loan notes)

	2014	2013
	£'000	£'000

Interest bearing loans and borrowings
- Current	4,659	5,113
- Non-current	56,420	43,749
	61,079	48,862
Less: Unsecured loan notes	(9,744)	(9,339)
Add: cash and short-term deposits	-	(469)
Less: deferred and contingent consideration	(16,617)	(12,745)
Net Bank Debt at the end of the year	34,718	26,309

During the year, the Group has drawn down £10m (2013: repaid £0.5m) of the revolving credit facility. The utilisation of this revolving credit facility may vary each month as long as this does not exceed the maximum £100.0m facility (2013: £100.0m).

8. Acquisitions during the year

The Group acquired the following businesses during the year:

a. Lettings books

During the period the Group acquired ten lettings businesses for a total consideration of £1,828,000. The entire purchase price for the acquisitions has been assumed to be goodwill except £182,000 assigned to fixed assets.

The combined fair values of the identifiable assets and liabilities at the date of above acquisition have been determined as below:

	Fair value recognised on acquisition
	£'000
Property, plant and equipment	182
Total identifiable net liabilities acquired	182
Purchase consideration	1,828
Goodwill	1,646

Purchase consideration discharged by:

Cash	1,773
Deferred consideration	55
	1,828

Analysis of cash flow on acquisition	£'000
Transaction costs (included in cash flows from operating activities)	18
Net cash acquired with the subsidiary (included in cash flows from investing activities)	-
Purchase consideration discharged in cash (included in cash flows from investing activities)	1,773
Net cash outflow on acquisition	1,791

b. Hawes

In March 2014, the Group acquired 65% of Hawes & Co, a 6 branch estate agency chain based in South West London for an initial consideration of £3.2m. The remaining 35% is subject to put and call options which are exercisable between 2016 and 2019 dependent on profit performance. Due to the nature of the payment terms, the contingent consideration is considered to be a capital payment for accounting purposes.

The fair value of the identifiable assets, except for cash and cash equivalents, and liabilities of Hawes & Co as at the date of acquisition have been determined as below:

	Fair value recognised on acquisition
	£'000
Intangible assets	942
Property, plant and equipment	58
Trade and other receivables	384
Cash and cash equivalents	250
Trade and other payables	(466)
Current tax liabilities	-
Total identifiable net liabilities acquired	1,168
Purchase consideration	5,440
Goodwill	4,272

Purchase consideration discharged by:

Cash	3,190
Contingent consideration	2,250
	5,440

Analysis of cash flow on acquisition	£'000
Transaction costs (included in cash flows from operating activities)	81
Net cash acquired with the subsidiary (included in cash flows from investing activities)	(250)
Purchase consideration discharged in cash (included in cash flows from investing activities)	3,190
Net cash outflow on acquisition	3,021

9. Annual General Meeting (AGM)

The AGM will be held at the London offices of LSL, 1-3 Sun Street, London EC2A 2EP on 30^th April 2015 starting at 2.30pm.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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