TIDMLSL

RNS Number : 1363V

LSL Property Services PLC

05 August 2020

5 August 2020

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

INTERIM RESULTS FOR THE SIX MONTHSED 30 JUNE 2020

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

 
                                                  2020     2019    change 
----------------------------------------------  ------  -------  -------- 
 Group Revenue - GBPm                            114.9    154.1      -25% 
 Group Underlying Operating Profit(1) - GBPm      12.5     12.2        3% 
 Group Underlying Operating Margin - %             11%       8%    300bps 
 Covid-19 Related (cost) - GBPm                  (2.8)        -        nm 
 Net Exceptional (cost) - GBPm                   (4.4)   (12.8)      -65% 
 Group Operating Profit / (Loss) - GBPm            3.6    (2.8)        nm 
 Profit / (Loss) Before tax - GBPm                 2.0    (4.6)        nm 
 Basic Earnings / (Loss) Per Share - pence         1.2    (3.1)        nm 
 Adjusted Basic Earnings Per Share(2) - pence      9.4      9.0       +4% 
 Net Bank Debt(3) at 30 June - GBPm               12.7     52.0      -76% 
 Interim Dividend - pence                          nil      4.0        nm 
----------------------------------------------  ------  -------  -------- 
 

nm: not meaningful

1 Group Underlying Operating Profit is before exceptional costs, Covid-19 related costs, contingent consideration, amortisation of intangible assets, share-based payments and includes GBP13.8m of amounts receivable pursuant to the Coronavirus Job Retention Scheme and utilised to pay employee salaries for those placed on furlough (as set out in Note 6 of the financial statements). Segment Underlying Operating Profit is stated on the same basis as Group Underlying Operating profit.

   2                      Refer to Note 7 of the financial statements for the calculation 
   3                      Refer to Note 14 of the financial statements for the calculation 

HIGHLIGHTS

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

   --    Group Underlying Operating Profit(1) up by GBP0.3m to GBP12.5m over H1 2019. 
   --    Reported Group Revenue fell 25% to GBP114.9m (2019: GBP154.1m). 

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

   --    Financial Services Underlying Operating Profit(1) up 14%. 
   --    Estate Agency Underlying Operating Profit(1) up 3%. 

-- Surveying Underlying Operating Profit(1) down 23%, with activity significantly impacted by lockdown preventing the conducting of physical valuations.

-- Group Underlying Operating Profit is stated before the recognition of GBP2.8m of Covid-19 related net costs, the charging of net exceptional costs of GBP4.4m, contingent consideration, amortisation, share based payments, and includes GBP13.8m of amounts receivable through the Coronavirus Job Retention Scheme, which has been used to meet the salary of employees placed on furlough to secure as many long term jobs as possible.

-- Net Bank Debt(4) at 30 June 2020 of GBP12.7m, resulting in modest gearing(3) at 0.25 X Adjusted EBITDA(2) .

Strong trading in June, which continued throughout July

-- The Group generated an Underlying Operating Profit in June of GBP5.7m (2019: GBP3.4m), before GBP0.3m of Covid-19 related costs recognised in the period and including GBP2.9m of amounts receivable through the Coronavirus Job Retention Scheme.

   --    Underlying Operating Profits in June 2020 compared to 2019: 

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

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

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

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

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

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

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

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

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

   --    More staff are being returned to work in August. 

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

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

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

The Group remains well positioned to meet highly stressed economic conditions

   --    Revolving credit facility of GBP100m, committed to 11 May 2022. 

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

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

-- Group Net Banking Debt(4) at 30 June 2020 was GBP12.7m, representing gearing(3) of 0.31 x 12 month rolling adjusted EBITDA, against a covenant of 3.25 times.

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

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

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

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

Financial Services Division - H1 Review

-- Underlying Operating Profit increased by 14% to GBP4.9m (30 June 2019: GBP4.3m), despite reduced activity during the lockdown period demonstrating the resilience of our Financial Services business.

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

-- Mortgage completions were broadly in line with the prior year at GBP14.6bn, representing 9.2%(6) of the market, highlighting the versatility of the range of product and service offerings.

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

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

Estate Agency Division - H1 Review

-- Underlying Operating Profit increased to GBP4.1m (2019: GBP4.0m), including strong trading in Q1 2020, the impact of Covid-19 during the lockdown, followed by the easing of lockdown restrictions on 13 May 2020.

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

   --    Total like-for-like Residential Sales exchange income decreased by 25%. 
   --    Total like-for-like Lettings income decreased by 18%. 

-- Total Estate Agency Revenue decreased 28% to GBP55.7m (2019: GBP77.1m), reflecting the fall in activity during the lockdown, the reduction in the size of the Your Move and Reeds Rains branch networks and the tenant fee ban introduced in June 2019.

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

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

-- Underlying Operating Profit is stated before the recognition of GBP1.7m of Covid-19 related costs, principally relating to property and other asset costs incurred whilst the lockdown was in place.

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

Surveying Division - H1 Review

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

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

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

-- Total revenue reduced from 2019 by 27% to GBP31.1m and Underlying Operating Profit by 23% to GBP4.9m

   --    Performance in the periods outside lockdown have been strong. 

Outlook

Current trading conditions are extremely encouraging, with strong front-end metrics in all three divisions. The introduction by the Government of a Stamp Duty Holiday for properties up to GBP500,000 is expected to provide further support to the principal markets in which the Group operates.

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

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

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

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

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

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

For further information, please contact:

 
 David Stewart, Group Chief Executive 
  Officer 
 Adam Castleton, Group Chief Financial 
  Officer 
                                         --------------------------- 
 LSL Property Services plc                0207 382 0360 
                                         --------------------------- 
 
 Helen Tarbet, Charlotte Slater 
                                         --------------------------- 
 Buchanan                                 07872 604453, 07413 363367 
                                         --------------------------- 
 
 

Notes:

1 Group Underlying Operating Profit is before exceptional costs, COVID-19 related costs, contingent consideration, amortisation of intangible assets, share-based payments and includes GBP13.8m of amounts receivable through the Coronavirus Job Retention Scheme (as set out in Note 6 of the financial statements). Segment Underlying Operating Profit is stated on the same basis as Group Underlying Operating profit.

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

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

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

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

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

Notes on LSL

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

Group Chief Executive's Review

Introduction

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

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

I would also note that in common with many other organisations, LSL made use of the Coronavirus Job Retention Scheme, through which we received GBP13.2m in the period . Around 3,300 colleagues were placed on furlough. I am pleased to report that this number has now reduced to around 500. This total includes some colleagues whose personal circumstances mean it is difficult for them to return to work at this time, factors which the Group continues to recognise and support. We will continue to return more colleagues in the coming months.

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

Financial and Operating Results

Group

 
 Group Financials Summary                 Q1                         Q2                           H1 
                                2020     2019    change    2020     2019    change     2020        2019     change 
 P&L (GBPm) 
----------------------------  -------  -------  -------  -------  -------  -------  ----------  ---------  ------- 
 Revenue                         69.6     77.1     -10%     45.3     77.0     -41%       114.9      154.1     -25% 
 Revenue (LFL variance)                             -6%                       -41%                            -24% 
 Group Underlying Operating 
  Profit                          3.4      2.1      62%      9.2     10.1      -9%        12.5       12.2       3% 
 Group Underlying Operating 
  Margin                           5%       3%   200bps      20%      13%   700bps         11%         8%   300bps 
 Group operating profit                                                                    3.6      (2.8)       nm 
 
 Group Underlying Operating 
  Profit 
----------------------------  -------  -------  -------  -------  -------  -------  ----------  ---------  ------- 
 Financial Services               2.3      1.8      27%      2.6      2.5       4%         4.9        4.3      14% 
 Estate Agency                  (0.8)    (1.2)     -34%      4.9      5.2      -5%         4.1        4.0       3% 
 Surveying                        2.9      2.8       3%      2.0      3.5     -44%         4.9        6.3     -23% 
 Unallocated Central 
  Costs                         (1.0)    (1.3)     -23%    (0.4)    (1.2)     -69%       (1.4)      (2.5)     -45% 
                              -------  -------  -------  -------  -------  -------  ----------  ---------  ------- 
 

Group Revenue in H1 2020 reduced by 25% to GBP114.9m. Much of this reduction resulted from the restrictions arising from the Covid-19 lockdown, between 23 March and 13 May 2020, which affected the last weeks of Q1 2020, and much of Q2 2020 trading.

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

Over the six-month period, Group Underlying Operating Profit increased by 3% to GBP12.5m. This figure excludes around GBP2.8m of Covid-19 related costs, the substantial part of which relates to property costs for locations closed during the period due to the lockdown and adherence to social distancing requirements.

The year started strongly as political uncertainty receded, with each of the Group's Divisions reporting improved performance over 2019, notwithstanding the impact of Covid-19 on March trading. Underlying Operating Profit in Q1 2020 increased from GBP2.1m in 2019 to GBP3.4m in 2020, and Underlying Operating Margin from 3% to 5%.

Naturally, profitability reduced significantly during the lockdown: April 2020 Group Underlying Operating Profit fell to GBP1.6m from GBP2.9m before recovering quickly as restrictions eased. June 2020 Group Underlying Operating Profit was GBP5.7m compared to the 2019 figure of GBP3.4m, as the Group benefited from new business and the clearance of pipelines and meeting pent-up customer demand. Strong trading continued in July across all three divisions:

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

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

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

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

Financial Services Division

 
 Financial Services: Financials 
  Summary                                     Q1                         Q2                            H1 
                                    2020     2019    change    2020     2019    change      2020       2019     change 
 P&L (GBPm) 
--------------------------------  -------  -------  -------  -------  -------  --------  ---------  ---------  ------- 
 Total Revenue                       16.2     17.1      -6%     11.9     17.2      -31%       28.1       34.3     -18% 
 Revenue excluding Estate 
  Agency                                                -3%                        -28%                           -16% 
 Expenditure                       (13.9)   (15.3)     -10%    (9.3)   (14.7)      -37%     (23.2)     (30.0)     -23% 
 Underlying Operating Profit          2.3      1.8      27%      2.6      2.5        4%        4.9        4.3      14% 
 Underlying Operating Margin          14%      11%   300bps      22%      15%    700bps        18%        13%   500bps 
 
 KPIs 
--------------------------------  -------  -------  -------  -------  -------  --------  ---------  ---------  ------- 
 LSL Mortgage Completion 
  Lending (GBPbn)                                                                             14.6       14.7    -0.4% 
 LSL Market Share(1)                                                                          9.2%       8.5%    70bps 
 Total advisers at 30 June                                                                   2,431      2,277       7% 
 Number of AR firms at 30 
  June                                                                                         896        860       4% 
 FCA capital requirement                                                                       5.2        4.7    12.4% 
 Excess capital (GBPm) (2)                                                                    10.6       10.8    -2.1% 
--------------------------------  -------  -------  -------  -------  -------  --------  ---------  ---------  ------- 
 
   1.         Market share excludes Product Transfers and is as at May 2020 
   2.         2020 FCA capital requirement and excess capital as at Q1 

The importance of Financial Services to the Group has increased consistently in recent years, reflecting the Board's strategy to develop a broader and less volatile income stream in areas in which it has significant experience. Over the 3 financial years ended 31 December 2019, Underlying Operating Profit increased by 41% to GBP11.6m.

In doing so, LSL has become a major player in the provision of mortgage brokerage, and in the first half of 2020 we provided services in relation to GBP14.6bn of mortgage completions, representing approximately 9.2%(1) of the UK market, up from 8.5% in 2019.

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

Over the first 3 months of the year, profitability grew strongly with Underlying Operating Profit up 27% to GBP2.3m, notwithstanding reduced activity levels during the latter part of March 2020. Total Financial Services Revenue during this period decreased by 6%, a figure which includes a reduction from the impact of the reshaping of the Your Move and Reeds Rains branch networks undertaken in 2019. Financial Services Revenue excluding Estate Agency's contribution decreased by 3%.

During April 2020, Financial Services Revenue reduced by 18% compared to the prior year, as activity focused on re-mortgage business with demand for house purchase mortgages reducing to negligible levels. Nevertheless, the Division still reported an increase in Underlying Operating Profit to GBP0.9m (April 2019: GBP0.7m).

Activity levels recovered significantly following the end of lockdown restrictions, to give rise to an overall increase in H1 2020 Underlying Operating Profit of GBP0.6m (14%). GBP0.3m of costs relating to Covid-19 have been excluded from the H1 2020 Underlying Operating Profit. In large part, this growth was secured through the Group's continuing success in attracting new appointed representatives ("AR") firms to its PRIMIS network. Over the past year, AR firms increased by 4% to 896, and the number of advisers by 7% to 2,431.

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

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

In common with other regulated businesses, LSL's Financial Services activities require the maintenance of minimum levels of regulatory capital, calculated on the basis of revenue in related activities. At the end of Q1 2020, the most recent regulatory reporting period, the relevant businesses held total capital of GBP15.8m, significantly ahead of the regulatory requirement of GBP5.2m, indicative of the Group's prudent approach to balance sheet management. This capital surplus could support significant further growth in FCA regulated activities.

Estate Agency Division

 
 Estate Agency: 
  Financials Summary                  Q1                             Q2                              H1 
                            2020      2019    change      2020       2019     change     2020        2019       change 
 P&L (GBPm) 
=======================  =========  =======  ========  =========  =========  =======  =========  ============  ======= 
 Residential Sales 
  Exchange Income             11.4     13.5      -16%        7.2       14.1     -49%       18.6          27.6     -33% 
 Lettings Income              15.4     17.3      -11%       12.0       16.5     -27%       27.4          33.8     -19% 
 Financial Services 
  Income                       2.6      3.8      -31%        1.9        3.0     -36%        4.5           6.8     -33% 
 Conveyancing, 
  Franchise 
  and Other                    2.3      3.4      -33%        0.9        3.0     -72%        3.2           6.5     -51% 
 Asset Management              1.3      1.2        9%        0.7        1.3     -47%        2.0           2.5     -20% 
 Total Revenue                33.0     39.2      -16%       22.7       37.9     -40%       55.7          77.1     -28% 
 Expenditure                (33.8)   (40.4)       16%     (17.8)     (32.7)     -45%     (51.6)        (73.1)     -29% 
 Underlying Operating 
  Profit                     (0.8)    (1.2)      -34%        4.9        5.2      -5%        4.1           4.0       3% 
 Underlying Operating 
  margin                      (2)%     (3)%   -100bps        22%        14%   800bps         7%            5%   200bps 
 
 KPIs 
=======================  =========  =======  ========  =========  =========  =======  =========  ============  ======= 
 Branch numbers: 
  owned                        231      229        1%        226        231      -2%        226           231      -2% 
 Branch numbers: 
  franchise                    132      137       -4%       130         137      -5%        130           137      -5% 
 Exchange units 
  (000's)                    3,049    4,451      -31%      1,936      4,044     -52%      4,985         8,495     -41% 
 Managed properties 
  (000's)                   25,254   27,760       -9%     24,815     25,060      -1%     24,815        25,060      -1% 
 Average Residential 
  Sales Exchange 
  Fee per unit (GBP)         3,725    3,025       23%      3,739      3,489       7%      3,730         3,246      15% 
 Profit per branch 
  (core) - rolling 
  12 months (GBPk)                                                                         47.3          49.6      -5% 
                         ---------  -------  --------  ---------  ---------  -------  ---------  ------------  ------- 
 

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

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

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

Nevertheless, Underlying Operating Loss reduced in Q1 2020 by 34% to GBP0.8m, reflecting improved margins and the benefits of the branch restructuring undertaken last year.

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

We have yet to see the full benefit of much of this increased activity given the time taken between taking on a new listing and completion of sale. Nevertheless, Estate Agency income recovered significantly in June to GBP10.3m (2019: GBP12.4m).

Across the whole of the first-half of the year, Estate Agency Divisional Revenue was 28% below prior year at GBP55.7m. Adjusting for the reshaping of the Estate Agency networks, like-for-like revenue was down 25%. The benefits of the steps taken to rationalise the network and focus on the most productive branches, can be seen in improved average Sales Exchange Fees (up 15% from GBP3,246 to GBP3,730) and reduced costs (down 29% to GBP51.6m), which helped to drive a small increase in Underlying Operating Profit (up GBP0.1m to GBP4.1m). A total of GBP1.7m of 2020 costs have been separately identified as Covid-19 related costs and are excluded from these numbers.

The performance of Marsh & Parsons is affected by the particular conditions that pertain to the London markets. Q1, 2020 revenues increased 5% to GBP7.0m, whilst a strong recovery following the lockdown in June 2020 (revenue GBP2.4m compared to GBP2.8m in 2019), helped lift Underlying Operating Profit in June 2020 to GBP0.6m (2019: GBP0.5m), and that for the 6 months to GBP1.0m (2019: GBP0.4m).

Surveying Division

 
 Surveying: Financials 
  Summary                             Q1                         Q2                           H1 
                            2020     2019    change    2020      2019    change    2020       2019     change 
                          -------  -------  -------                              --------  ---------  ------- 
 P&L (GBPm) 
------------------------  -------  -------  -------  --------  -------  -------  --------  ---------  ------- 
 Total Revenue               20.5     20.8      -2%      10.6     21.9     -51%      31.1       42.7     -27% 
 Expenditure               (17.6)   (18.0)      -2%     (8.6)   (18.3)     -53%    (26.2)     (36.4)     -28% 
 Underlying Operating 
  profit                      2.9      2.8       3%       2.0      3.5     -44%       4.9        6.3     -23% 
 Underlying Operating 
  margin                      14%      13%   100bps       19%      16%   300bps       16%        15%   100bps 
 
 KPIs 
------------------------  -------  -------  -------  --------  -------  -------  --------  ---------  ------- 
 Jobs performed (000's)       124      121       2%        73      129     -44%     196.6        250     -22% 
 Income per job (GBP)         166      171      -3%       146      169     -14%       158        170      -7% 
 Number of operational 
  surveyors (FTE)             506      481       5%       507      486       4%       507        486       4% 
------------------------  -------  -------  -------  --------  -------  -------  --------  ---------  ------- 
 

In Q1 2020, a total of 124,000 valuations were completed, 3,000 more than in 2019, but at a slightly lower average income (GBP166 v GBP171). Average income per job is affected by a number of factors, including the proportion undertaken remotely, the nature of the valuation required and the work necessary to ensure an appropriate valuation is reached.

A number of steps have been undertaken to improve margins in the Division, a process that will continue. During Q1 2020, Surveying administration functions were rationalised, resulting in annualised savings of GBP1.0m. Notwithstanding the slight reduction in income, and the onset of the lockdown restrictions in March 2020, Underlying Operating Profit for Q1 2020 increased marginally over 2019 (GBP2.9m v GBP2.8m).

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

The Division reported Underlying Operating Profit for Q2 2020 of GBP2.0m (2019: GBP3.5m) to bring the half year total to GBP4.9m (2019: GBP6.3m). However, performance in June 2020 was strong, with Underlying Operating Profit of GBP2.4m, significantly ahead of the GBP0.9m in June 2019. A total of GBP0.8m has been excluded from these numbers and identified separately as Covid-19 related costs.

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

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

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

Accounting for the impact of Covid-19 and Exceptional items

We have excluded Covid-19 related net costs of GBP2.8m from Underlying Operating Profit and shown them separately in note 6 of the Interim Statements. The majority of this total relates to property and other asset costs incurred whilst the lockdown was in place. These costs are net of property grants received and separately identified to give full transparency of the impact of Covid-19 on the Group.

Property Grants of GBP0.5m were received whilst premises were closed during the lockdown and have been excluded from Underlying Operating Profit. Following the re-opening of branches and other premises, property costs and grants are included in Underlying Operating Profit.

We have recognised GBP4.4m of exceptional costs in the period in line with the Group's Accounting Policies. This includes GBP1.7m relating to planned Surveying transformation and Estate Agency branch/centre closure costs and GBP2.4m of aborted deal costs in relation to the discussions for a potential all share combination between LSL and Countrywide plc, which did not result in an offer by LSL. Further details are set out in Note 8 to the financial statements.

Group Liquidity and Banking Covenants

The Group maintains a prudent approach to financial gearing. Reported Net Bank Debt at 30 June 2020 was GBP12.7m (June 2019: GBP52.0m), resulting in modest gearing(2) at 0.25 X Adjusted EBITDA(1) (June 2019: 1.11 X). Undrawn bank facilities at 30 June 2020 were GBP68.0m.

Net Bank Debt reduced between the end of Q1 and the end of Q2 2020, with careful cash control and cash conservation as well the receipt of Coronavirus Job Retention Scheme payments. The Net Bank Debt position was further reduced by payment deferrals put in place to conserve cash, mainly in relation to tax payments due, with deferrals agreed with HMRC. Adjusting for Covid-19 related payment deferrals, the underlying Net Bank Debt position at 30 June 2020 was approximately GBP45.6m, with notional adjusted gearing(2) at 1.12 X Adjusted EBITDA(1) , and representing a fall on the equivalent position in 2019.

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

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

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

Strategy

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

Group

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

   --    To grow counter-cyclical and recurring revenue streams; 

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

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

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

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

Financial Services

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

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

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

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

Estate Agency

   --    To deliver first class service to vendors, landlords and other customers; 
   --    To grow market share; 

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

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

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

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

Surveying and Valuation

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

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

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

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

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

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

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

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

July trading and outlook

Current trading conditions are extremely encouraging with strong front-end metrics in each of the three divisions. The introduction by the Government of a Stamp Duty Holiday for properties up to GBP500,000 is expected to provide further support to many of the markets in which the Group operates, and should help underpin financial performance.

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

David Stewart

Group Chief Executive Officer

5 August 2020

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

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

Principal risks and uncertainties

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

   --    Covid-19 virus 
   --    UK housing market 
   --    New UK housing market entrants 
   --    Investment, acquisitions and growth initiatives 
   --    Professional services 
   --    Client contracts 
   --    Business infrastructure (including IT) 
   --    Information security (including data protection) 
   --    Regulatory and compliance 
   --    Employees 

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

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

Forward Looking Statement

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

Any forward-looking statements in this update speak only at the date of this document and LSL undertakes no obligation to update publicly or review any forward-looking statement to reflect new information or events, circumstances or developments.

Definitions

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

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

We confirm that to the best of our knowledge:

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

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

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the Interim Condensed Consolidated Group Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

David Stewart Adam Castleton

Director, Group Chief Executive Officer Director, Group Chief Financial Officer

5 August 2020 5 August 2020

Interim Group Income Statement

for the six months ended 30 June 2020

 
 
                                                     Unaudited            Audited 
                                                  Six Months Ended     Year Ended 
                                                 30 June    30 June   31 December 
                                                    2020       2019          2019 
Continuing Operations                    Note    GBP'000    GBP'000       GBP'000 
                                               ---------  ---------  ------------ 
 
 Revenue                                 4,5     114,921    154,115       311,073 
 
 Operating expenses: 
  Employee and subcontractor costs              (71,113)   (96,958)     (194,207) 
 Establishment costs                             (4,036)    (7,341)      (10,367) 
 Depreciation on property, plant and 
  equipment                                      (7,184)    (7,513)      (14,842) 
 Other operating costs                          (22,929)   (30,268)      (56,098) 
                                               ---------  ---------  ------------ 
                                               (105,262)  (142,080)     (275,514) 
 
 Other operating income                              274        459           887 
 Gain / (loss) on sale of property, 
  plant and equipment                                 16        (6)           148 
 (Loss) / income from joint ventures 
  and associates                                   (224)      (331)           441 
 Share-based payments                                673      (553)         (312) 
 Amortisation of intangible assets               (2,899)    (2,236)       (5,786) 
 Exceptional gains                        8            -        593         2,487 
 Exceptional costs                        8      (4,422)   (13,380)      (15,730) 
 Contingent consideration                            504        652         2,054 
                                                                     ------------ 
 Group operating profit / (loss)                   3,581    (2,767)        19,748 
 
 Finance income                                        9          5            10 
 Finance costs                                   (1,579)    (1,802)       (3,744) 
 Net finance costs                               (1,570)    (1,797)       (3,734) 
 
 Profit / (loss) before tax                        2,011    (4,564)        16,014 
 
 Taxation credit / (charge)               10       (764)      1,353       (3,045) 
 
 Profit / (loss) for the period/year               1,247    (3,211)        12,969 
                                               ---------  ---------  ------------ 
 
 Earnings / (loss) per share expressed 
  in pence per share: 
  Basic                                   7          1.2      (3.1)          12.6 
  Diluted                                 7          1.2      (3.1)          12.6 
                                               ---------  ---------  ------------ 
 

Interim Group Statement of Comprehensive Income

for the six months ended 30 June 2020

 
                                                 Unaudited            Audited 
                                              Six Months Ended     Year Ended 
                                               30 June   30 June  31 December 
                                                  2020      2019         2019 
                                               GBP'000   GBP'000      GBP'000 
                                           -----------  --------  ----------- 
 
 Profit / (loss) for the period                  1,247   (3,211)       12,969 
 
 Items not to be reclassified to profit 
  and loss in subsequent periods: 
 Revaluation of financial assets not 
  recycled through income statement                  -   (3,006)      (3,558) 
 Net other comprehensive (loss):                     -   (3,006)      (3,558) 
                                           -----------  --------  ----------- 
 
 Total other comprehensive income / 
  (loss) for the year, net of tax                    -   (3,006)      (3,558) 
                                           -----------  --------  ----------- 
 
 Total comprehensive income / (loss), 
  net of tax                                     1,247   (6,217)        9,411 
                                           -----------  --------  ----------- 
 
 

Interim Group Balance Sheet

as at 30 June 2020

 
                                                   Unaudited             Audited 
                                                Six Months Ended      Year Ended 
                                               30 June     30 June   31 December 
                                                  2020        2019          2019 
                                      Note     GBP'000     GBP'000       GBP'000 
                                            ----------  ----------  ------------ 
 
 Non-current assets 
 Goodwill                              3       159,863     159,724       159,863 
 Other intangible assets                        28,584      31,438        30,906 
 Property, plant and equipment                  44,944      50,154        49,570 
 Financial assets                      11        9,324       9,602         9,326 
 Investments in joint ventures and 
  associates                                    12,521      12,187        12,958 
 Contract assets                                   559         813           686 
                                            ----------  ----------  ------------ 
 Total non-current assets                      255,795     263,918       263,309 
                                            ----------  ----------  ------------ 
 
 Current assets 
 Trade and other receivables                    30,024      43,438        34,391 
 Contract assets                                   253         253           253 
 Current tax asset                                   -       1,500             - 
 Cash and cash equivalents                      19,263       4,984             - 
                                                                    ------------ 
 Total current assets                           49,540      50,175        34,664 
                                            ----------  ----------  ------------ 
 
 Total assets                                  305,335     314,093       297,953 
                                            ----------  ----------  ------------ 
 
 Current liabilities 
 Financial liabilities                 12     (13,699)    (20,601)      (11,113) 
 Trade and other payables                     (79,705)    (58,826)      (60,007) 
 Current tax liabilities                       (1,097)           -       (1,209) 
 Provisions for liabilities            13      (2,721)     (5,734)       (3,575) 
                                            ----------  ----------  ------------ 
 Total current liabilities                    (97,222)    (85,161)      (75,904) 
                                            ----------  ----------  ------------ 
 
 Non-current liabilities 
 Financial liabilities                 12     (59,147)    (90,375)      (73,951) 
 Deferred tax liability                        (1,834)     (2,634)       (1,805) 
 Provisions for liabilities            13      (5,195)     (6,052)       (5,077) 
                                            ----------  ----------  ------------ 
 Total non-current liabilities                (66,176)    (99,061)      (80,833) 
                                            ----------  ----------  ------------ 
 
 Total Liabilities                           (163,398)   (184,222)     (156,737) 
                                            ----------  ----------  ------------ 
 
 Net assets                                    141,937     129,871       141,216 
                                            ----------  ----------  ------------ 
 
 Equity 
 Share capital                                     208         208           208 
 Share premium account                           5,629       5,629         5,629 
 Share-based payment reserve                     3,369       4,671         4,429 
 Shares held by EBT                            (5,021)     (5,224)       (5,224) 
 Fair value reserve                           (13,584)    (13,032)      (13,584) 
 Retained earnings                             151,336     137,619       149,758 
                                            ----------  ----------  ------------ 
 Total equity                                  141,937     129,871       141,216 
                                            ----------  ----------  ------------ 
 

Interim Group Cash Flow Statement

for the six months ended 30 June 2020

 
                                                             Unaudited            Audited 
                                                          Six Months Ended     Year Ended 
                                                         30 June    30 June   31 December 
                                                            2020       2019          2019 
                                                 Note    GBP'000    GBP'000       GBP'000 
                                                       ---------  ---------  ------------ 
 Profit / (loss) before tax                                2,011    (4,564)        16,014 
 Adjustments for: 
 Exceptional operating items and contingent 
  consideration                                            3,918     12,135        11,189 
 Depreciation of tangible assets                           7,184      7,513        14,842 
 Amortisation of intangible assets                         2,899      2,236         5,786 
 Share-based payments                                      (673)        553           312 
 (Profit) / loss on disposal of fixed 
  assets                                                    (16)          6         (148) 
 Loss / (profit) from joint ventures                         224        331         (441) 
 Finance income                                              (9)        (5)          (10) 
 Finance costs                                             1,579      1,802         3,744 
 Operating cash flows before movements in 
  working capital                                         17,117     20,007        51,288 
                                                       ---------  ---------  ------------ 
 Movements in working capital 
 Decrease / (increase) in trade and 
  other receivables                                        4,708    (4,222)         5,462 
 Increase / decrease in trade and other 
  payables                                                19,080    (5,423)       (6,181) 
 (Decrease) / increase in provisions                       (737)      (836)       (3,908) 
                                                          23,051   (10,481)       (4,627) 
                                                       ---------  ---------  ------------ 
 
 Cash generated from operations                           40,168      9,526        46,661 
 
 Interest paid                                           (1,411)      (725)       (3,289) 
 Income taxes paid                                         (937)    (2,685)       (5,355) 
 Exceptional costs paid                                  (3,952)    (6,662)       (8,799) 
 Net cash generated from operating activities             33,868      (546)        29,218 
                                                       ---------  ---------  ------------ 
 
 Cash flows used in investing activities 
 Acquisitions of subsidiaries and other 
  businesses                                               (212)    (1,300)       (2,711) 
 Payment of contingent consideration              12        (55)      (133)       (7,890) 
 Investment in financial assets                   11         (8)    (1,750)       (2,783) 
 Cash received on sale of financial 
  assets                                                       -      1,015         1,765 
 Purchase of property, plant and equipment 
  and intangible assets                                  (1,656)    (2,154)       (4,892) 
 Proceeds from sale of property, plant 
  and equipment                                              130          -           367 
 Net cash (expended) / generated on 
  investing activities                                   (1,801)    (4,322)      (16,144) 
                                                       ---------  ---------  ------------ 
 
 (Repayment) / drawdown of loans                  12     (9,883)     22,500         7,383 
 Payment of deferred consideration                             -    (2,000)       (2,009) 
 Receipt of lease Income                                      19         33            76 
 Proceeds from the exercise of share 
  options                                                    147         26            26 
 Payments of lease liabilities                           (3,087)    (6,027)       (9,761) 
 Dividends paid                                                -    (7,085)      (11,194) 
 Net cash expended in financing activities              (12,804)      7,447      (15,479) 
                                                       ---------  ---------  ------------ 
 
 Net increase / (decrease) in cash and 
  cash equivalents                                        19,263      2,579       (2,405) 
                                                       ---------  ---------  ------------ 
 
 Cash and cash equivalents at the end 
  of the period / year                                    19,263      4,984             - 
                                                       ---------  ---------  ------------ 
 

Interim Group Statement of changes in equity

Unaudited - for the six months ended 30 June 2020

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

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

Trust. LSL received GBP147,000 on exercise of these options.

Interim Group Statement of changes in equity

Unaudited - for the six months ended 30 June 2019

 
 
                                           Share   Share- based 
                            Share        premium        payment    Shares held     Fair value       Retained 
                          capital        account        reserve         by EBT        Reserve       earnings     Total 
                          GBP'000        GBP'000        GBP'000        GBP'000        GBP'000        GBP'000   GBP'000 
                    -------------  -------------  -------------  -------------  -------------  -------------  -------- 
 At 1 January 2019            208          5,629          4,129        (5,261)       (11,727)        149,615   142,593 
 Adjustment on 
 initial 
 application of 
 IFRS 16                        -              -              -              -              -              -         - 
                    -------------  -------------  -------------  -------------  -------------  -------------  -------- 
 Revised opening 
  balance at 1 
  January 2019                208          5,629          4,129        (5,261)       (11,727)        149,615   142,593 
                    -------------  -------------  -------------  -------------  -------------  -------------  -------- 
 
 Revaluation of 
  financial assets              -              -              -              -        (3,006)              -   (3,006) 
 Disposal of 
  financial asset               -              -              -              -          1,701        (1,701)         - 
 Other 
  comprehensive 
  income for the 
  period                        -              -              -              -        (1,305)        (1,701)   (3,006) 
 Loss for the 
  period                        -              -              -              -              -        (3,211)   (3,211) 
    Total 
     comprehensive 
     income for 
     the period                 -              -              -              -        (1,305)        (4,912)   (6,217) 
    Exercise of 
     options                    -              -           (11)             37              -              1        27 
    Share-based 
     payments                   -              -            553              -              -              -       553 
    Dividend 
     payment                    -              -              -              -              -        (7,085)   (7,085) 
 At 30 June 2019              208          5,629          4,671        (5,224)       (13,032)        137,619   129,871 
                    -------------  -------------  -------------  -------------  -------------  -------------  -------- 
 

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

Trust. LSL received GBP26,000 on exercise of these options.

Interim Group Statement of changes in equity

Audited - for the year ended 31 December 2019

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

During the year ended 31 December 2019, the Trust acquired nil LSL Shares. During the period, 10,672 share options were exercised relating to LSL's various share option schemes resulting in the Shares being sold by the Trust. LSL received GBP24,000 on exercise of these options.

Notes to the Interim Condensed Consolidated Group Financial Statements

The Interim Condensed Consolidated Group Financial Statements for the period ended 30 June 2020 were approved by the LSL Board on 4(th) August 2020. The interim Financial Statements are not the statutory accounts. The financial information for the year ended 31 December 2019 is extracted from the audited statutory accounts for the year ended 31 December 2019, which have been filed with the Registrar of Companies. The auditor's report was unqualified and did not contain an emphasis of matter paragraph, and did not make a statement under section 498 (2) or (3) of the Companies Act 2006.

   1.     Basis of preparation 

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

The Interim Condensed Consolidated Group Financial Statements do not include all the information and disclosures required for a complete set of IFRS Financial Statements. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last annual Financial Statements.

Going Concern

The Corporate Governance Code requires the Board to assess and report on the prospects of the Group and whether the business is a Going Concern. In considering this requirement, the Directors have taken into account the Group's forecast cash flows, liquidity, borrowing facilities and related covenant requirements and the expected operational activities of the Group.

The Group expects to continue to meet its day to day working capital requirements through a revolving credit facility. The Group currently has a GBP100 million credit facility which was extended in January 2019 and will now expire in May 2022. As shown in Note 12 to these interim condensed consolidated Group Financial Statements, the Group has utilised GBP32 million of the facility leaving GBP68 million of available undrawn committed borrowing facilities in respect of which all conditions precedent had been met. In the first half of 2020 the Group has utilised the Coronavirus Job Retentions Scheme receiving GBP13.2m of cash with an additional GBP0.6m received in July 2020.

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

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

   2.     Changes in significant accounting policies 

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

   3.     Judgements and estimates 

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

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

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

Judgements

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

   --      Deferred tax 
   --      Exceptional items 

Estimates

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

   --      Professional Indemnity (PI) claims 
   --      Lapse Provision 
   --      Valuation of financial assets 
   --      Valuations in acquisitions 
   --      Impairment of intangible assets 
   --      Contingent consideration 
   --      Income tax 

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

   4.      Revenue 

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

Disaggregation of Revenue

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

 
                                          Unaudited - Six Months ended 30 June 2020 
                                                                                    Surveying 
                      Residential                                                         and 
                            Sales                         Asset      Financial      Valuation 
                         exchange      Lettings      Management       Services       Services        Other          Total 
                          GBP'000       GBP'000         GBP'000        GBP'000        GBP'000      GBP'000        GBP'000 
    Timing of 
    revenue 
    recognition 
    Services 
     transferred 
     at a point 
     in 
     time                  18,595        12,640           1,463         32,611         31,095        3,151         99,555 
    Services 
     transferred 
     over time                  -        14,874             492              -              -            -         15,366 
                  ---------------  ------------  --------------  -------------  -------------  -----------  ------------- 
    Total 
     revenue 
     from 
     contracts 
     with 
     customers             18,595        27,514           1,955         32,611         31,095        3,151        114,921 
                  ---------------  ------------  --------------  -------------  -------------  -----------  ------------- 
 
 
 
                                           Unaudited - Six Months ended 30 June 2019 
                                                                                    Surveying 
                      Residential                                                         and 
                            Sales                         Asset      Financial      Valuation 
                         exchange      Lettings      Management       Services       Services        Other          Total 
                          GBP'000       GBP'000         GBP'000        GBP'000        GBP'000      GBP'000        GBP'000 
    Timing of 
    revenue 
    recognition 
    Services 
     transferred 
     at a point 
     in 
     time                  27,575        18,587           1,762         41,108         42,669        6,492        138,193 
    Services 
     transferred 
     over time                  -        15,234             688              -              -            -         15,922 
                  ---------------  ------------  --------------  -------------  -------------  -----------  ------------- 
    Total 
     revenue 
     from 
     contracts 
     with 
     customers             27,575        33,821           2,450         41,108         42,669        6,492        154,115 
                  ---------------  ------------  --------------  -------------  -------------  -----------  ------------- 
 
 
                                              Audited - Year ended 31 December 2019 
                                                                                        Surveying 
                       Residential                           Asset       Financial            and 
                             Sales       Lettings       Management        Services      Valuation         Other         Total 
                          exchange        GBP'000          GBP'000         GBP'000       Services       GBP'000       GBP'000 
                           GBP'000                                                        GBP'000 
    Timing of 
    revenue 
    recognition 
    Services 
     transferred 
     at a point 
     in 
     time                   57,676         37,782            4,311          83,353         86,358        11,098       280,578 
    Services 
     transferred 
     over time                   -         29,535              960               -              -             -        30,495 
                  ----------------  -------------  ---------------  --------------  -------------  ------------  ------------ 
    Total 
     revenue 
     from 
     contracts 
     with 
     customers              57,676         67,317            5,271          83,353         86,358        11,098       311,073 
                  ----------------  -------------  ---------------  --------------  -------------  ------------  ------------ 
 
   5.            Segment analysis of revenue and operating profit 

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

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

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

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

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

Operating segments

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

Unaudited - Six months ended 30 June 2020

 
                                                                         Surveying 
                                    Financial                        and Valuation 
                                     Services      Estate Agency          Services    Unallocated        Total 
 Income statement information         GBP'000            GBP'000           GBP'000        GBP'000      GBP'000 
                                -------------  -----------------  ----------------  -------------  ----------- 
 
  Revenue from external 
   customers                           32,611             51,215            31,095              -      114,921 
  Intersegment revenue                (4,533)              4,533                 -              -            - 
                                -------------  -----------------  ----------------  -------------  ----------- 
  Total revenue                        28,078             55,748            31,095              -      114,921 
                                -------------  -----------------  ----------------  -------------  ----------- 
 
  Segmental result: 
  Group Underlying Operating 
   Profit                               4,932              4,147             4,850        (1,385)       12,544 
                                -------------  -----------------  ----------------  -------------  ----------- 
  Operating profit / (loss)             3,953            (1,567)             2,468        (1,273)        3,581 
                                -------------  -----------------  ----------------  ------------- 
 
  Finance income                                                                                             9 
  Finance costs                                                                                        (1,579) 
                                                                                                   ----------- 
  Profit before tax                                                                                      2,011 
  Taxation                                                                                               (764) 
  Profit for the period                                                                                  1,247 
                                                                                                   ----------- 
 

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

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

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

Unallocated net liabilities comprise plant and equipment GBP14,000, IFRS 16 plant and equipment GBP5,000, other assets GBP2,802,000, cash GBP19,263,000 other taxes GBP118,000, accruals GBP(2,376,000), Other payables GBP(492,000), IFRS 16 financial liabilities GBP(2,000), deferred and current tax GBP(3,014,000), and revolving credit facility overdraft GBP(32,000,000).

Unaudited - Six months ended 30 June 2019

 
                                                                         Surveying 
                                    Financial                        and Valuation 
                                     Services      Estate Agency          Services    Unallocated        Total 
 Income statement information         GBP'000            GBP'000           GBP'000        GBP'000      GBP'000 
                                -------------  -----------------  ----------------  -------------  ----------- 
 
  Revenue from external 
   customers                           41,108             70,338            42,669              -      154,115 
  Intersegment revenue                (6,797)              6,797                 -              -            - 
                                -------------  -----------------  ----------------  -------------  ----------- 
  Total revenue                        34,311             77,135            42,669              -      154,115 
                                -------------  -----------------  ----------------  -------------  ----------- 
 
  Segmental result: 
  Group Underlying Operating 
   Profit                               4,326              4,017             6,318        (2,504)       12,157 
                                -------------  -----------------  ----------------  -------------  ----------- 
  Operating profit / (loss)             4,020           (10,354)             6,342        (2,775)      (2,767) 
                                -------------  -----------------  ----------------  ------------- 
 
  Finance costs                                                                                        (1,797) 
                                                                                                   ----------- 
  Profit before tax                                                                                    (4,564) 
  Taxation                                                                                               1,353 
  Profit for the period                                                                                (3,211) 
                                                                                                   ----------- 
 
 
 
                                                                 Surveying 
                                Financial                    and Valuation 
                                 Services    Estate Agency        Services  Unallocated      Total 
                                  GBP'000          GBP'000         GBP'000      GBP'000    GBP'000 
                              -----------  ---------------  --------------  -----------  --------- 
Balance sheet information 
Segment assets - intangible        18,805          160,382          11,975            -    191,162 
Segment assets - other             12,271           85,316          17,007        8,337    122,931 
                              -----------  ---------------  --------------  -----------  --------- 
Total Segment assets               31,076          245,698          28,982        8,337    314,093 
Total Segment liabilities        (22,383)         (73,416)        (28,741)     (59,682)  (184,222) 
                              -----------  ---------------  --------------  -----------  --------- 
Net assets/(liabilities)            8,693          172,282             241     (51,345)    129,871 
                              -----------  ---------------  --------------  -----------  --------- 
 

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

Unallocated net liabilities comprise plant and equipment GBP12,000, IFRS 16 plant and equipment GBP63,000, other assets GBP1,779,000, other taxes GBP49,000, accruals GBP(35,000), IFRS 16 financial liabilities GBP(63,000), deferred and current tax GBP(1,134,000), and revolving credit facility overdraft GBP(52,016,000).

Audited - Year ended 31 December 2019

 
                                                                      Surveying 
                                   Financial                      and Valuation 
                                    Services    Estate Agency          Services    Unallocated       Total 
  Income Statement information       GBP'000          GBP'000           GBP'000        GBP'000     GBP'000 
                                 -----------  ---------------  ----------------  -------------  ---------- 
 
 Revenue from external 
  customers                           83,353          141,362            86,358              -     311,073 
 Intersegment revenue               (13,552)           13,552                 -              -           - 
                                 -----------  ---------------  ----------------  -------------  ---------- 
 Total revenue                        69,801          154,914            86,358              -     311,073 
                                 -----------  ---------------  ----------------  -------------  ---------- 
 
 Segmental result: 
 Group Underlying Operating 
  Profit                              11,642           14,453            16,343        (5,403)      37,035 
                                 -----------  ---------------  ----------------  -------------  ---------- 
 Operating profit / (loss)            10,022          (2,206)            17,450        (5,518)      19,748 
                                 -----------  ---------------  ----------------  ------------- 
 
 Finance Income                                                                                         10 
 Finance costs                                                                                     (3,744) 
                                                                                                ---------- 
 Profit before tax                                                                                  16,014 
 Taxation                                                                                          (3,045) 
                                                                                                ---------- 
 Profit for the year                                                                                12,969 
                                                                                                ---------- 
 
 Balance sheet information 
 
 Segment assets - intangible          18,088          160,942            11,739              -     190,769 
 Segment assets - other                9,078           81,934            14,822          1,350     107,184 
                                 -----------  ---------------  ----------------  -------------  ---------- 
 Total Segment assets                 27,166          242,876            26,561          1,350     297,953 
 Total Segment liabilities          (25,895)         (58,771)          (25,020)       (47,051)   (156,737) 
                                 -----------  ---------------  ----------------  -------------  ---------- 
 
 Net assets / (liabilities)            1,271          184,105             1,541       (45,701)     141,216 
                                 -----------  ---------------  ----------------  -------------  ---------- 
 
 

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

Unallocated net liabilities comprise plant and equipment GBP50,000, other assets GBP1,300,000, lease liabilities GBP(34,000), 12% loan notes GBP(66,000), Bank overdraft GBP(883,000), accruals GBP(1,916,000), deferred and current tax liabilities GBP(3,152,000), and revolving credit facility overdraft GBP(41,000,000).

   6.     Adjusted performance measures 

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

The four adjusted measures reported by the Group are:

   --      Group Underlying Operating Profit 
   --      Adjusted Basic EPS 
   --      Adjusted diluted EPS 
   --      Group Adjusted EBITDA 

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

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

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

 
                                                      Unaudited          Audited 
                                                   Six months ended     Year ended 
                                                       30 June          31 December 
                                                     2020       2019           2019 
                                                  GBP'000    GBP'000        GBP'000 
                                                ---------  ---------  ------------- 
 
 Group operating profit / (loss)                    3,581    (2,767)         19,748 
 Share-based payments                               (673)        553            312 
 Amortisation of intangible assets                  2,899      2,236          5,786 
 Covid-19 related establishment costs                 580          -              - 
 Covid-19 related depreciation costs                1,646          -              - 
 Covid-19 related other costs                         593          -              - 
 Exceptional gains                                      -      (593)        (2,487) 
 Exceptional costs                                  4,422     13,380         15,730 
 Contingent consideration charge                    (504)      (652)        (2,054) 
                                                ---------  ---------  ------------- 
 Group Underlying Operating Profit                 12,544     12,157         37,035 
 
 Depreciation on property, plant and 
  equipment (excluding Covid-19 depreciation 
  charge)                                           5,538      7,513         14,842 
 Group Adjusted EBITDA                             18,082     19,670         51,877 
                                                ---------  ---------  ------------- 
 

Costs relating to Covid-19 have been separately identified and excluded from Group Underlying Operating Profit as the Directors consider that these adjusted measures shown above give a better and more consistent indication of the Group's underlying performance. The most significant area of costs included in this relates to property and other asset costs incurred during the enforced closure of branches following the Government lockdown with any property grants received in the same period reported in this line to sure even-handedness in reporting. Group Underlying Operating Profit includes GBP13.8m of amounts receivable relating to the Coronavirus Job Retention Scheme .

   7.     Earnings per share (EPS) 

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

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

Unaudited - Six months ended 30 June

 
                                       Weighted         2020                  Weighted      2019 
                           Profit       average    Per share      Profit       average       Per 
                            after     number of       amount       after        number     share 
                              tax        shares        Pence         tax     of shares    amount 
                          GBP'000                                GBP'000                   Pence 
 
 Basic EPS                  1,247   102,726,654          1.2     (3,211)   102,666,615     (3.1) 
   Effect of dilutive 
        share options                   363,335                                984,381 
          Diluted EPS       1,247   103,089,989          1.2     (3,211)   103,650,996     (3.1) 
                       ----------  ------------               ----------  ------------ 
 

Audited - Year ended 31 December 2019

 
                                           Weighted          2019 
                                Profit      average     Per share 
                             after tax    number of        amount 
                               GBP'000       shares         Pence 
                            ----------  -----------  ------------ 
 
Basic EPS                       12,969  102,669,719          12.6 
    Effect of dilutive 
     share options                          425,152 
    Diluted EPS                 12,969  103,094,871          12.6 
                            ----------  ----------- 
 

Adjusted basic and diluted EPS

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

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

Unaudited - Six months ended 30 June

 
                        Adjusted                              Adjusted 
                          profit      Weighted         2020     profit      Weighted         2019 
                           after       average    Per share      after       average    Per share 
                             tax        number       amount        tax        number       amount 
                         GBP'000     of shares        Pence    GBP'000     of shares        Pence 
 
 Adjusted basic EPS        9,654   102,726,654          9.4      9,209   102,666,615          9.0 
   Effect of dilutive 
        share options                  363,335                               984,381 
     Adjusted diluted 
                  EPS      9,654   103,089,989          9.4      9,209   103,650,996          8.9 
                       ---------  ------------               ---------  ------------ 
 

Audited - Year ended 31 December 2019

 
                             Adjusted 
                               profit       Weighted         2019 
                                after        average    Per share 
                                  tax         number       amount 
                              GBP'000      of shares        Pence 
 
 Adjusted basic EPS            28,702    102,669,719         28.0 
        Effect of dilutive 
             share options                   425,152 
                            ---------  ------------- 
      Adjusted diluted EPS     28,702    103,094,871         27.8 
                            ---------  ------------- 
 

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

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

Exceptional costs

There were GBP1.7m (June 2019: GBP13.1m, December 2019: GBP14.6m) of non-recurring and material exceptional costs relating to the planned Surveying transformation in 2020 and Estate Agency branch/centre closures and restructuring costs in 2019.

There were GBP2.4m of non-recurring and material costs relating to aborted deal costs in relation to the discussions for a potential all share combination between LSL and Countrywide plc, which did not result in an offer by LSL.

In 2020 there were GBP0.4m of non-recurring costs in relation to head office restructuring.

Exceptional Gains

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

Previous exceptional gains relate to the settling of historic PI claims. There has been no gain in the first half of 2020 (June 2019: GBP0.6m, December 2019: GBP2.5m).

   9.     Dividends paid and proposed 

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

   10.   Taxation 

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

 
                                               Unaudited           Audited 
                                            Six Months Ended    Year Ended 
                                            30 June   30 June  31 December 
                                               2020      2019         2019 
                                            GBP'000   GBP'000      GBP'000 
                                          ---------  --------  ----------- 
 UK corporation tax: 
 - current year credit / (charge)             (802)     1,503        3,993 
 - adjustment in respect of prior 
  years                                           -         -         (56) 
                                          ---------  --------  ----------- 
                                              (802)     1,503        3,937 
 Deferred tax: 
 Origination and reversal of temporary 
  differences                                    38     (150)        (588) 
 Adjustment in respect of prior year              -         -        (304) 
                                          ---------  --------  ----------- 
                                                 38     (150)        (892) 
                                          ---------  --------  ----------- 
 
 Total tax credit / (charge) in the 
  income statement                            (764)     1,353        3,045 
                                          ---------  --------  ----------- 
 

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

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

Deferred tax charged directly to other comprehensive income relating to the revaluation of financial assets is GBPNil. In the six months ended 30 June 2019 GBPNil and year ended 31 December 2019 GBP0.1m.

   11.   Financial assets 
 
                                                      Unaudited           Audited 
                                                   Six Months Ended    Year Ended 
                                                   30 June   30 June  31 December 
                                                      2020      2019         2019 
                                                   GBP'000   GBP'000      GBP'000 
                                                 ---------  --------  ----------- 
 Convertible loan notes - at fair value 
 Unsecured convertible loan notes - interest 
  free                                                   -       750            - 
 Secured convertible loan notes - 5%                 2,000     1,000        2,000 
                                                 ---------  --------  ----------- 
                                                     2,000     1,750        2,000 
                                                 ---------  --------  ----------- 
 Investment in equity instruments - at fair 
  value 
 Unquoted shares at fair value                       6,960     7,545        6,952 
 Quoted shares at fair value                             -         -            - 
                                                     6,960     7,545        6,952 
                                                 ---------  --------  ----------- 
 
 IFRS 16 lessor financial assets                       364       307          374 
                                                 ---------  --------  ----------- 
 
 Total Financial Assets                              9,324     9,602        9,326 
 
 Opening balance                                     9,326    11,566       11,566 
 Adjustment on initial recognition of IFRS 
  16                                                     -       329          329 
                                                 ---------  --------  ----------- 
                                                     9,326    11,895       11,895 
 
 Acquisitions                                            8     1,750        2,783 
 Additional Subleases                                    -         -          114 
 Disposals                                            (10)   (1,037)      (1,835) 
 Fair value adjustment recorded through OCI              -   (3,006)      (3,558) 
 Deferred tax on fair value adjustment through 
  OCI                                                    -         -         (73) 
 Closing balance                                     9,324     9,602        9,326 
                                                 ---------  --------  ----------- 
 
 Non-current assets                                  9,324     9,602        9,326 
 Current assets                                                    -            - 
                                                 ---------  --------  ----------- 
                                                     9,324     9,602        9,326 
                                                 ---------  --------  ----------- 
 

Convertible loan notes at fair value

LSL has subscribed for GBP2,000,000 (June 2019: GBP1,000,000 and December 2019: GBP2,000,000) of Convertible Secured Preference Loan Notes with Mortgage Gym Limited. Interest on the Convertible Secured Preference Loan Notes is 5% per annum. The final repayment date of the Convertible Secured Preference Loan Notes is 5(th) June 2024. Repayment may take place before this date. The Convertible Secured Preference Loan Notes are secured by way of debenture.

Investment in equity instruments

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

Vibrant Energy Matters Limited (VEM)

The carrying value of the Group's investment in VEM at 30 June 2020 has been assessed as GBP287,000 (June 2019: GBP722,000 and December 2019: GBP287,000).

NBC Property Master Limited

The carrying value of the Group's investment at 30 June 2020 has been assessed as GBP78,000 (June 2019: GBP78,000 and December 2019: GBP78,000).

Global Property Ventures Limited

On 6 January 2020, LSL acquired 76,000 additional shares in Global Property Ventures Limited, for a consideration of GBP8,275.

The carrying value of the Group's investment in Global Property Ventures Limited at 30 June 2020 has been assessed as GBP101,000 (June: 2019: GBP250,000 and December 2019: GBP93,000).

Yopa Property Limited

The carrying value of the Group's investment in Yopa at 30 June 2020 has been assessed as GBP6,495,000 (June 2019: GBP6,495,000 and December 2019: GBP6,495,000).

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

Bank loans - RCF and overdraft

The bank loan totalling GBP 32.0m (June 2019: GBP57.0m December 2019: GBP41.0m) and overdraft totalling GBPnil (June 2019: GBPnil December 2019: GBP0.9m) are secured via cross guarantees issued from all of the Group's subsidiaries excluding the following subsidiaries: Lending Solutions Limited, Homefast Property Services, Linear (Linear Mortgage Network and Linear Financial Services), Templeton LPA, Group First, Personal Touch Financial Services, and RSC New Homes.

The utilisation of the RCF may vary each month as long as this does not exceed the maximum GBP100.0m facility (2019: GBP100.0m). The Group's overdraft is also secured on the same facility, and the combined overdraft and RCF cannot exceed GBP100.0m (2019: GBP100.0m). The banking facility is repayable when funds permit on or by May 2022.

Interest and fees payable on the RCF amounted to GBP0.6m (June 2019: GBP0.7m, December 2019: GBP1.6m). The interest rate applicable to the facility is LIBOR plus a margin rate; the margin rate is linked to the leverage ratio of the Group and the margin rate is reviewed at six monthly intervals.

Contingent consideration -

 
                                                 Unaudited           Audited 
                                              Six Months Ended    Year Ended 
                                              30 June   30 June  31 December 
                                                 2020      2019         2019 
                                              GBP'000   GBP'000      GBP'000 
                                            ---------  --------  ----------- 
 
 LSLi contingent consideration                    342       593          393 
 Group First                                    1,392     8,917        1,518 
 RSC                                            3,437     4,878        3,632 
 Other                                            264       236          261 
                                            ---------  --------  ----------- 
                                                5,435    14,624        5,804 
                                            ---------  --------  ----------- 
 
 Opening balance                                5,804    15,038       15,038 
 Cash paid                                       (55)     (133)      (7,890) 
 Acquisition                                       23       144          300 
 Amounts recorded though income statement       (337)     (425)      (1,644) 
                                            ---------  --------  ----------- 
 Closing balance                                5,435    14,624        5,804 
                                            ---------  --------  ----------- 
 

GBP342,000 (June 2019: GBP593,000 and December 2019: GBP393,000) of contingent consideration relates to amounts owed to third parties in relation to the acquisition of LSLi and certain of its subsidiaries between 2012 and 2016. This is typically payable between three and five years after the acquisition dates depending on the profitability of those subsidiaries in the relevant years.

GBP1,392,000 of contingent consideration relates to Group First (June 2019: GBP8,917,000 December 2019: GBP1,518,000) which is due for payment in the first half of 2021. The additional consideration will be calculated using earnings multiples of between five and six times EBITA (plus excess cash in the business) and has been capped at a maximum of GBP25.0m.

GBP3,437,000 of contingent consideration relates to RSC New Homes (June 2019: GBP4,878,000 and December 2019: GBP3,632,000). The additional consideration will be calculated using earnings multiples of between five and six times EBITA (plus excess cash in the business) and has been capped at a maximum of GBP7,500,000.

In the period ending 30 June 2020 GBP55,000 (June 2019: GBP2,133,000 and December 2019: GBP7,890,000) of contingent consideration was paid to third parties.

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

 
                                                          Unaudited           Audited 
                                                       Six Months Ended    Year Ended 
 
   Contingent consideration balances relating          30 June   30 June  31 December 
   to amounts accounted for as:                           2020      2019         2019 
                                                       GBP'000   GBP'000      GBP'000 
                                                     ---------  --------  ----------- 
 
 Arrangement under IFRS 3                                5,435    14,624        5,804 
                                                     ---------  --------  ----------- 
 Closing balance                                         5,435    14,624        5,044 
                                                     ---------  --------  ----------- 
 
 Contingent consideration profit and loss 
  impact in the period 
  relating to amounts accounted for as: 
 
 Arrangement under IFRS 3                                (504)     (652)      (2,054) 
 Unwinding of discount on contingent consideration         167       227          410 
                                                     ---------  --------  ----------- 
 (Credit) / charge                                       (337)     (425)      (1,644) 
                                                     ---------  --------  ----------- 
 

The contingent consideration charged to the Income statement in the period excluding the unwinding of discount relates to both new and previous acquisitions and relates to the acquisition of: LSLi charge of GBP4,000 (June 2019: charge of GBP8,000, December 2019: GBP14,000); Mortgage First credit of GBP175,000 (June 2019: charge of GBP623,000, December 2019: GBP641,000); RSC New Homes credit of GBP313,000 (June 2019: credit of GBP20,000, December 2019: GBP1,408,000).

   13.   Provisions for liabilities 

Unaudited - Six months ended 30 June:

 
                                              2020                                             2019 
                              Professional                                      Professional 
                                 indemnity        Onerous                          indemnity      Onerous 
                           claim provision         leases        Total       claim provision       leases        Total 
                                   GBP'000        GBP'000      GBP'000               GBP'000      GBP'000      GBP'000 
                      --------------------  -------------  -----------  --------------------  -----------  ----------- 
 
    Balance at 1 
     January                         8,212            440        8,652                12,430          130       12,560 
    Amount utilised                (1,069)          (124)      (1,193)               (1,507)        (474)      (1,981) 
    Amount released                    (4)              -          (4)                 (593)            -        (593) 
    Unwinding of 
     discount                            1              -            1                    15            -           15 
    Provided in the 
     period                            460                         460                   520        1,265        1,785 
    Balance at 30 
     June                            7,600            316        7,916                10,865          921       11,786 
                      --------------------  -------------  -----------  --------------------  -----------  ----------- 
 
    Current                          2,545            176        2,721                 5,228          506        5,734 
    Non-current                      5,055            140        5,195                 5,637          415        6,052 
                                     7,600            316        7,916                10,865          921       11,786 
                      --------------------  -------------  -----------  --------------------  -----------  ----------- 
 

Audited - Year ended 31 December 2019

 
                                         Professional 
                                            indemnity      Onerous 
                                      claim provision       leases        Total 
                                              GBP'000      GBP'000      GBP'000 
                                 --------------------  -----------  ----------- 
 
    Balance at 1 January                       12,430          130       12,560 
    Amount utilised                           (2,257)        (897)      (3,154) 
    Amount released                           (2,489)            -      (2,489) 
    Unwinding of discount                          30            -           30 
    Provided in financial year                    498        1,207        1,705 
    Balance at 31 December                      8,212          440        8,652 
                                 --------------------  -----------  ----------- 
 
    Current                                     3,380          195        3,575 
    Non-current                                 4,832          245        5,077 
                                                8,212          440        8,652 
                                 --------------------  -----------  ----------- 
 

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

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

At 30 June 2020 the total provision for PI Costs was GBP7.6m (June 2019: GBP10.9m, December 2019: GBP8.2m). The Directors have considered the sensitivity analysis on the key risks and uncertainties discussed above.

Cost per claim

A substantial element of the PI Cost provision relates to specific claims where disputes are on-going. These specific cases have been separately assessed and specific provisions have been made. The average cost per claim has been used to calculate the IBNR. Should the costs to settle and resolve these claims and future claims increase by 10%, an additional GBP0.9m would be required.

Rate of claim

The IBNR assumes that the rate of claim for the high-risk lending period in particular reduces over time. Should the rate of reduction be lower than anticipated and the duration extend, further costs may arise. An increase of 30% in notifications in excess of that assumed in the IBNR calculations would increase the required provision by GBP0.1m.

Notifications

The Group has received a number of notifications which have not deteriorated into claims or loss. Should the rate of deterioration increase by 50%, an additional provision of less than GBP0.1m would be required.

Onerous leases

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

   14.   Analysis of Net Bank Debt 
 
                                                     Unaudited           Audited 
                                                  Six Months Ended    Year Ended 
                                                                     31 December 
                                         30 June2020   30 June 2019         2019 
                                             GBP'000        GBP'000      GBP'000 
                                        ------------  -------------  ----------- 
Interest bearing loans and borrowings 
 (including loan notes, overdraft, 
 IFRS16 lease liabilities, contingent 
 and deferred consideration 
 
   *    Current                               13,699         20,601       11,113 
 
   *    Non-current                           59,147         90,375       73,951 
                                        ------------  -------------  ----------- 
                                              72,846        110,976       85,064 
 
Unsecured loan notes                               -              -         (65) 
Less: cash and short-term deposits          (19,263)        (4,984)            - 
IFRS 16 Lessee financial liabilities        (35,331)       (39,266)     (37,232) 
Less: deferred and contingent 
 consideration                               (5,515)       (14,710)      (5,884) 
                                        ------------  -------------  ----------- 
Net Bank Debt at the end of the 
 period                                       12,737         52,016       41,883 
                                        ------------  -------------  ----------- 
 
   15.   Financial instruments - risk management 

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

The business is cash generative with a low level of maintenance capital expenditure requirement. In addition, the Group's other main priority is to generate cash to support its operations and to fund any strategic acquisitions.

   16.   Fair values of financial assets and financial liabilities 

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

Fair value hierarchy

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

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

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

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

 
 Unaudited - 30 June 2020                Total     Level   Level 2   Level 3 
                                                       1 
                                       GBP'000   GBP'000   GBP'000   GBP'000 
                                      --------  --------  --------  -------- 
 Assets measured at fair value 
 Financial assets                        9,324         -         -     9,324 
                                      --------  --------  --------  -------- 
 Liabilities measured at fair value 
 Contingent consideration                5,435         -         -     5,435 
                                      --------  --------  --------  -------- 
 
 
 Unaudited 30 June 2019                  Total     Level   Level 2   Level 3 
                                                       1 
                                       GBP'000   GBP'000   GBP'000   GBP'000 
                                      --------  --------  --------  -------- 
 Assets measured at fair value 
 Financial assets                        9,295         -         -     9,295 
                                      --------  --------  --------  -------- 
 Liabilities measured at fair value 
 Contingent consideration               14,624         -         -    14,624 
                                      --------  --------  --------  -------- 
 
 
 Audited - 31 December 2019              Total     Level   Level 2   Level 3 
                                                       1 
                                       GBP'000   GBP'000   GBP'000   GBP'000 
                                      --------  --------  --------  -------- 
 Assets measured at fair value 
 Financial assets                        9,326         -         -     9,326 
                                      --------  --------  --------  -------- 
 Liabilities measured at fair value 
 Contingent consideration                5,804         -         -     5,804 
                                      --------  --------  --------  -------- 
 

Of the investments totalling GBP9,324,000, all are valued using Level 3 valuation techniques. The Directors reviewed the fair value of the financial assets at 30 June 2020. Excluding loan notes, the underlying value of the investments will be driven by the profitability of these businesses. If this was to drop by 10%, the implied valuation is likely to also drop by around 10%, GBP0.7m.

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

   17.   Acquisitions 

Six months ended 30 June 2020

   --      Lettings book acquisition 

During the period, the Group acquired one lettings book for initial consideration paid of GBP211,500, and a total consideration of GBP235,000.

INDEPENT REVIEW REPORT TO LSL PROPERTY SERVICES PLC

Introduction

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

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

Directors' Responsibilities

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

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

Our Responsibility

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

Scope of Review

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

Conclusion

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

Ernst & Young LLP

Leeds

5 August 2020

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

END

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(END) Dow Jones Newswires

August 05, 2020 02:00 ET (06:00 GMT)