Lsl Prop Regulatory News (LSL)

9 Aug 2007 07:00

LSL Property Services09 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 propertyservices, incorporating estate agency brands Your Move and Reeds Rains andsurveying brands e.surv and Chancellors Associates, announces interim resultsfor 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 of2007. This provides us with a strong foundation for the full year, although weremain cautious about the short term housing cycle given the recent successiveinterest rate rises. However, we remain confident that underlying macro-economicfactors, such as a shortage of housing supply and net population growth, willsupport 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 highproportion of the Group's profits. The Group is well placed to deliver futuregrowth." For further information please contact: Simon Embley, Group Chief Executive OfficerDean Fielding, Group Finance DirectorLSL Property Services plc 01904 715 324 Richard Darby, Nicola Cronk, Catherine BreenBuchanan Communications 020 7466 5000 Notes to editors: LSL is one of the leading residential property services companies in the UK andprovides a broad range of services to its customers who are principally mortgagelenders, as well as buyers and sellers of residential properties. LSL's mainoperations are its surveying business, which operates under the e.surv andChancellors Associates brands, its estate agency business, which operates underthe 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 June2007 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 ourbusinesses both organically and by acquisition. We have acquired two smallestate agency businesses in the year to date and recently secured two majorcontract gains in the surveying division where we will be the exclusive supplierof panel management services to both Cheltenham & Gloucester plc (C&G) andBarclays Bank plc (Barclays Bank). The UK housing market has remained relatively robust with house sale exchangesin our core estate agency brands down 4%, versus a strong comparative periodduring the first half of 2006. Against this backdrop, we have continued to growboth the profits and margins of our estate agency and surveying divisions, whilecontinuing 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 theprevious 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 £30.2mcash consideration paid to C&G on 29 June 2007 for an exclusive panel managementservices contract. In June 2007, the Group increased its borrowing facility by £15.0m to £95.0m toprovide additional flexibility and fund future growth. Cashflow/Capital Expenditure The business remained significantly cash generative during the first half of2007 with cash flow generated from operating activities of £10.0m (2006: £8.4m). The business has low capital expenditure requirements as reflected by thefirst half of 2007 spend of £0.9m (2006: £1.1m). Interim Dividend In view of these results and our significant cash flow generation, the firstinterim dividend is declared at 3.0 pence per ordinary share. This dividend isin line with our stated policy of a pay out ratio of between 30% and 40%. Thedividend is payable on 17 September 2007 to those shareholders on the registerof members at the close of business on 17 August 2007. Development We remain focussed on delivering growth organically and through progressingselective acquisitions. Estate agency acquisitions must meet our core criteriaof strong management, excellent brand with a good reputation in their localmarket and the opportunity to grow profits. Two small estate agency acquisitions have been completed during 2007 to date andwe continue to assess further estate agency acquisitions. Following the introduction of revised regulations concerning Home InformationPacks and Energy Performance Certificates, our estate agency businesses haveprepared for phased introduction of Home Information Packs, which started on 1August 2007. There is no evidence of disruption to the market at this earlystage. We have recently announced two major contracts in our surveying division. On 29June 2007, we announced an exclusive agreement with C&G to provide panelmanagement services for an initial period of 5 years, for a cash considerationof £30.2m. Based on the agreed valuation fee and current cost base it willdeliver an enhanced profit margin well in excess of the current survey marginand this contract is expected to enhance earnings significantly. This contractbecame effective on 1 July 2007 and the transition has gone smoothly and duringthe first month, the contract has performed in line with our expectations. On 9 July 2007, we announced a second major contract to provide exclusive panelmanagement services to Barclays Bank for an initial term of three years. Theintegration of this operation into our existing e.surv business means that forthe remainder of 2007 this contract is expected to be broadly earnings neutraland in 2008 is expected to be earnings enhancing. This contract became effectiveon 1 August 2007. These contracts are significant with estimated annual turnover in excess of£32.0m and provide excellent opportunities to leverage assets across oursurveying business, as well as increasing our employed surveyor base by c. 50%(to just under 500 employed surveyors). We welcome all these new employees intothe LSL Group. OutlookWe are pleased to report excellent profit growth for the first half year of2007. This provides us with a strong foundation for the full year, although weremain cautious about the short term housing cycle given the recent successiveinterest rate rises. These rises are starting to affect affordability andconsumer confidence generally which is likely to result in lower housingtransaction volumes in the second half of 2007. However, we remain confidentthat underlying macro-economic factors, such as a shortage of housing supply andnet population growth, will support a strong housing market in the longer term. Our operating model demonstrates resilience to the housing market, particularlyas the less cyclical surveying division now represents a high proportion of theGroup's profits. The Group is well placed to deliver future growth. Roger Matthews9 August 2007 LSL Property Services plc Group income statementfor 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 99,940Share-based payment costs 265 - 13Establishment costs 6,003 5,800 12,274Depreciation on property, plant andequipment 1,074 1,420 2,706Other 29,387 23,293 51,928 (87,988) (79,697) (166,861) Other operating income 706 1,643 1,763 Group operating profit beforeexceptional 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 660Finance 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 13,058Minority interests 95 84 318 8,553 5,237 13,376 Dividend proposed per share inthe period (pence) 3.0 - - Dividend proposed during the period ended 30 June 2007 is £3.17m. Earnings per share expressed in pence per share:restatedBasic and diluted 3 8.1 10.3 23.1 LSL Property Services plc Statement of group recognised income and expensefor 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 13,058Minority interest 95 84 318Total profit for the period 8,553 5,237 13,376 LSL Property Services plc Group balance sheetas at 30 June 2007 Unaudited Audited At 30 June At 31 Dec 2007 2006 2006 Note £'000 £'000 £'000 Non-current assetsGoodwill 66,850 22,333 65,463Other intangible assets 7 46,321 19,776 17,669Property, plant and equipment 4,256 4,687 4,321Financial assets 148 493 148Other debtors 134 147 229Total non-current assets 117,709 47,436 87,830 Current assetsTrade and other receivables 26,883 24,320 22,187Cash and cash equivalents 486 38,886 578Total current assets 27,369 63,206 22,765Total assets 145,078 110,642 110,595 Current liabilitiesFinancial liabilities 4,988 51,353 5,402Trade and other payables 40,502 33,240 36,915Current tax liabilities 6,170 5,393 5,575Provisions for liabilities and charges 95 17 130Total current liabilities 51,755 90,003 48,022 Non-current liabilitiesAccruals and deferred income - 36 -Financial liabilities 51,845 100 29,337Deferred tax liability 2,639 3,604 3,424Provisions for liabilities and charges 3,727 2,927 3,846 58,211 6,667 36,607 Net assets 35,112 13,972 25,966 EquityShare capital 208 100 208Share premium account 5,629 400 5,629Share-based payment reserve 278 - 13Investment 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 statementfor 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 £'000Cash generated from operatingactivities Profit before tax 12,058 6,961 19,223Adjustments to reconcile profit beforetax to net cash inflows from operatingactivities Amortisation 2,664 3,030 5,452Exceptional costs - - 3,514Dividend income (298) - -Finance income (134) (485) (660)Finance costs 1,322 3,762 4,824Depreciation 1,074 1,420 2,706(Profit)/loss on sale of property, plant - (49) 21and equipmentShare-based payments 265 - -Amounts written off available for sale financial assets - - 345 4,893 7,678 16,202Increase 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 21,478Cash generated from operations 15,582 11,957 40,701Interest 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 30,257Cash flows from investing activities Purchase of subsidiary undertakings,minority interest and commercialbusiness (1,077) - (38,449)Purchase of intangible assets (30,217) - -Dividend income 298 - -Interest received 134 485 660Purchase of property, plant andequipment (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 activitiesRepayment of long term loans (582) (11,361) (42,075)Proceeds from long term loans 22,319 - 33,414Purchase of treasury shares - - (298)IPO costs - - (3,514) Net cash generated/(used) in 21,737 (11,361) (12,473) financing activitiesNet (decrease)/increase in cashAnd cash equivalents (92) 2,481 (15,944) Cash and cash equivalents at thebeginning of the period 578 16,522 16,522 Cash and cash equivalents at theend of the period 5 486 19,003 578 LSL Property Services plc Reconciliation of changes in equityfor 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 8,735Debt reclassification - - 100Issue of shares - - 5,237Purchase of shares - - (298)Minority interest on acquisition of subsidiaries 328 - -Share-based awards 265 - 13Profit for the period 8,553 5,237 13,376Acquisition 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'sstatutory accounts for that period but have been extracted from the statutoryaccounts. 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 monthsended 30 June 2007. The Group's published financial statements for the yearended 31 December 2006 have been reported on by the Group's auditors and filedwith the Registrar of Companies. The auditor's report on those accounts, whichhave been filed with the Registrar of Companies, was unqualified and did notcontain 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 theequivalent period in 2006 has not been audited. 1. Basis of preparation The interim results have been prepared using the accounting policies disclosedin 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 £'000Income 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 134Finance 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 £'000Income statement informationSegmental revenue 47,460 34,444 9,418 - 91,322 Segmental result:- before exceptional costs andamortisation of intangibles 4,554 9,776 (583) (479) 13,268- after exceptional costs andamortisation of intangibles 3,431 8,403 (1,117) (479) 10,238 Finance income 485Finance 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 £'000Income 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 theperiod attributable to ordinary equity holders of the parent by the weightedaverage number of ordinary shares outstanding during the period. Diluted earnings per share amounts are calculated by dividing the net profitattributable to ordinary equity holders of the parent by the weighted averagenumber of ordinary shares outstanding during the period plus the weightedaverage number of ordinary shares that would be issued on the conversion of allthe 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 10.3Effect 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 23.1Effect of dilutive shareoptions - 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 10peach. On 31 October 2006, the ordinary shares of 10p each were subdivided intoordinary shares of 0.2p each and a further 2,051,050 ordinary shares of 0.2peach 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 thesubdivision 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 asshare capital as they were converted into ordinary shares prior to flotation inNovember 2006. 3. Earnings per share (continued) The Directors consider that the adjusted earnings shown below give a better andmore consistent indication of the Group's underlying performance, and iscalculated 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 13,058Adjusted after tax for:Exceptional costs - 50 2,460Amortisation 1,865 2,121 3,816Dividend on 'B' ordinary shares - 684 1,320Share-based payment 185 - 9Adjusted 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 atestimated effective tax rates for the year. 5. Cash and cash equivalents For the purpose of the consolidated cash flow statement, cash and cashequivalents 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 578Bank overdrafts - (19,883) - 486 19,003 578 The fair value of cash and cash equivalents is £0.49m (30 June 2006: £38.89m and31 December 2006: £0.58m). At 30 June 2007, the Group had available £29.3m ofundrawn committed borrowing liabilities in respect of which all conditionsprecedent had been met (30 June 2006: £nil and 31 December 2006: £46.7m). InJune 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 £'000Decrease/(increase) in cash and cashequivalents 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) 251Movement in net debt in the period 22,186 (12,220) 9,374Net debt at the beginning of the period 34,161 24,787 24,787Net 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 amountpaid in June 2007 in respect of the acquisition of the surveying contract fromCheltenham & Gloucester plc. 8. Post balance sheet event On 9 July 2007, the Group acquired the rights to a major contract to supplyexclusive panel residential survey management services to Barclays Bank plc fora cash consideration of £1. The contract will include the transfer of theexisting 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 agencycompany 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 forthe six months ended 30 June 2007 which comprises the Group Income Statement,Group Balance Sheet, Group Cash Flow Statement, Group Statement of RecognisedIncome and Expense, Reconciliation of movements in Equity and the related notes1 to 8. We have read the other information contained in the interim report andconsidered whether it contains any apparent misstatements or materialinconsistencies with the financial information. This report is made solely to the company in accordance with guidance containedin Bulletin 1999/4 'Review of interim financial information' issued by theAuditing Practices Board. To the fullest extent permitted by law, we do notaccept 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, isthe responsibility of, and has been approved by, the directors. The directorsare responsible for preparing the interim report in accordance with the ListingRules of the Financial Services Authority which require that the accountingpolicies and presentation applied to the interim figures should be consistentwith those applied in preparing the preceding annual accounts except where anychanges, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board, for use in the United Kingdom. A reviewconsists principally of making enquiries of group management and applyinganalytical procedures to the financial information and underlying financialdata, and based thereon, assessing whether the accounting policies andpresentation have been consistently applied unless otherwise disclosed. Areview excludes audit procedures such as tests of controls and verification ofassets liabilities and transactions. It is substantially less in scope than anaudit performed in accordance with International Standards on Auditing (UK andIreland) 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 thatshould be made to the financial information as presented for the six monthsended 30 June 2007. Ernst & Young LLPLeeds9 August 2007 -------------------------- (1) Underlying Group operating profit is before exceptional costs andamortisation of intangibles (2) Underlying adjusted earnings per share reflects the after tax effects ofadjusted earnings as calculated in note 3 divided by the weighted average numberof shares in issue during the first half of 2007. This information is provided by RNS The company news service from the London Stock Exchange