Final Results

RNS Number : 2669O

LSL Property Services

04 March 2009

For Immediate Release

4 March 2009

LSL Property Services plc

('LSL' or 'the Group')

PRELIMINARY RESULTS

LSL Property Services plc, a leading provider of residential property services, incorporating both estate agency and surveying businesses, announces preliminary results for the year ended 31 December 2008.

Highlights:

Group

Group Revenue down 26% to £161.8m (2007: £219.5m)

Underlying Group Operating Profit1 at £18.2m (2007: £ 37.2m). Loss before tax was £4.8m (2007: Profit before tax of £22.3m)

Operating costs reduced by 21% to £144.3m (2007: £183.4m)

Exceptional costs of £8.2m (2007: £1.4m), primarily reorganisation and restructuring costs necessary to reduce operating costs in line with lower activity levels

Adjusted Basic Earnings Per Share2 of 9.8p per share (2007: 23.4p per share). Basic loss per share was 3.3p per share (2007: Basic EPS was 15.8p)

Management focus on reducing costs and conserving cash

No final dividend declared (2007: total dividend 6.86p)

Net cash inflow from operations of £3.2m (2007: £29.4m)

Net debt at the year end of £49.2m (2007: £48.7m)

Bank facility of £75.0m extended to July 2011

Surveying Performance

Resilient surveying profits up 8% to £28.6m (2007:£26.4m), supported by the contract wins of 2007.

Estate Agency & Financial Services Performance

Estate Agency and Financial Services results reflect the market reduction in housing transactions with Underlying Operating Losses of £8.4m (2007: Profits £13.0m)

Strong growth in non exchange income, including lettings and repossessions, in our core estate agency brands up 17% to £29.2m (2007: £24.9m)

1 Underlying Group Operating Profit/Loss is before exceptional costs, amortisation of intangible assets and share based payments

2 See note 4 of the Notes to the Preliminary Results for calculation

Commenting on today's announcement, Roger Matthews, Chairman said:

'Given the current macroeconomic environment, the Board remains cautious on market conditions for 2009 and the timing of any recovery is uncertain. In 2009 to date, buyer enquiries and activity levels within our estate agency businesses have been encouraging, however this is balanced by the lack of supply in the mortgage market. The Group is well placed to benefit from the actions taken in 2008 with significantly reduced operating costs, strong growth in new income streams, and a diversified customer base which will underpin surveying profitability.

Longer term, the underlying macroeconomic conditions in the residential property market remain positive. LSL has a track record of profitability and business development, both organically and through acquisition, and is well placed to benefit from the opportunities that will arise to grow market share in each of our business segments through the current cycle.'

For further information please contact:

Simon Embley, Group Chief Executive Officer
Dean Fielding, Group Finance Director
LSL Property Services plc	01904 715 324

Richard Darby, Catherine Breen
Buchanan Communications	020 7466 5000

Notes to Editors:

LSL Property Services plc is one of the leading residential property services companies in the UK and provides a broad range of services to its clients who are principally mortgage lenders, as well as buyers and sellers of residential properties. For further information, please visit our website: www.lslps.co.uk.

Chairman's Statement

Against a backdrop of unprecedented market conditions, we are pleased to report a satisfactory Underlying Operating Profit for the year ended 31 December 2008 of £18.2m (2007: £37.2m).

Market conditions for our Estate Agency business were extremely challenging. Transaction volumes in the housing market reached a record low of 512,000 transactions in 2008 (2007: 1,260,000) due to the well publicised issues in the banking sector which dramatically impacted the supply of credit, compounded by a reduction in buyer confidence and demand. The volumes of mortgage approvals, a principal driver of our surveying business, were supported by a strong re-mortgage market in the first half of 2008, but then fell significantly in the second half, as the availability of credit was further compounded by the escalation of the banking crisis.

The operating result has been underpinned by:

the diversified business model,
the strength of the surveying business, which has continued to grow market share,
the first full year impact of the major survey contract gains in 2007,
the early and significant action taken by management to reduce the cost base, and conserve cash and
the continued focus on growing and developing new and counter-cyclical income streams such as lettings and repossessions asset management.

Financial results

Group revenue has declined by 26% to £161.8m (2007: £219.5m) and the Underlying Operating Profit by 51% to £18.2m, reflecting a reduction in the Underlying Operating profit margin from 16.9% to 11.3%.

On a segmental basis, the surveying division delivered an Underlying Operating Profit of £28.6m (2007: £26.4m). The estate agency and financial services business has been impacted in line with the market, with house sale exchanges down by over 50% on a like for like basis, resulting in a combined Underlying Operating Loss of £8.4m (2007: Underlying Operating Profit of £13.0m).

Exceptional costs of £8.2m (2007: £1.4m) were incurred in the financial year, reflecting the unprecedented market conditions and the need to restructure the business in line with lower activity levels. As a result operating costs were reduced by £39.1m. These exceptional costs primarily relate to restructuring costs and onerous lease provisions of £4.1m, additional provisions for claims in surveying amounting to £2m and a non cash impairment charge of £1.1m relating to financial services companies.

Net finance costs for the year were £3.9m (2007: £2.7m) resulting in a profit before tax and amortisation of £6.4m (2007: £32.4m). Amortisation of £10.1m (2007: £9.1m) was incurred, giving a loss before tax and adjustment of goodwill of £3.7m (2007: profit £23.3m). The loss after tax, exceptionals and amortisation was £3.3m (2007: profit £16.4m).

The adjusted basic earnings per share was 9.8p (2007: 23.4p).

The Group generated net cash from operations of £3.2m (2007: £29.4m). The lower cash generation is due principally to the reduced profitability, the high level of exceptional costs incurred and a negative movement in working capital of £1.5m. Cash generation is expected to improve in 2009 due to lower exceptional costs and the non recurrence of the one off factors affecting cash flow in 2008. The Group is well capitalised, with net debt as at 31st December 2008 of £49.2m (2007:£48.7m).

The Group also took the opportunity to re-finance its existing banking facility during the second half of 2008, securing an extension of the banking facility through to the middle of 2011 and more favourable financial covenants, providing headroom if the market deterioration continues on a longer term basis. As part of this arrangement, LSL reduced its revolving credit facility from £95.0m to £75.0m.

The unprecedented conditions in the housing market make it prudent to preserve cash until there is greater visibility over when market conditions will improve, accordingly the Board has decided not to recommend a final dividend. In the longer term the Board remains committed to our previously stated dividend policy.

Developments

Our surveying business continues to make progress, underpinned by the major contract gains achieved in 2007, with Barclays and C&G.

Despite a 40% decline in mortgage approvals, the surveying business has continued to provide service excellence and to grow market share. Overall the volume of jobs performed is down by 13% from 533,903 to 461,403. The result has been supported by the first full year of trading of Barnwoods which delivered turnover of £21.7m (2008:£11.4m).

Our estate agency business, commensurate with the challenging market conditions, is focussed on delivering cost efficiencies and maximising all non exchange income. Lettings income from our core brands Your Move and Reeds Rains, increased by 24%, to £15.8m and within those brands - despite a 59% fall in exchange income - overall revenue fell by only 39%.

As previously reported, we set up LSL Corporate Client Department (LSL CCD) our repossessions asset manager, at the start of the year, which has been successfully launched in the market securing a number of substantial new contracts. Despite investment during the first half of 2008 from a standing start, the business traded profitably in the second half of 2008 and is expected to contribute significantly to profits in 2009.

In addition, LSL CCD has invested in a corporate residential property management team focused on major landlords and aspiring multiple property landlords across the UK. This has successfully secured a number of key contracts during the year and as a result, it is expected to support the continued growth of lettings income in 2009. This is another example of the Group investing and growing its counter-cyclical income streams.

Main Board

There were a number of changes to the Board during 2008. Peter Hales resigned in June 2008 to concentrate on other business interests and the Board subsequently appointed Robert Sharpe to the Board as a Non Executive Director and Chair of the Remuneration Committee in September 2008. However, following his appointment as CEO of West Bromwich Building Society, Robert felt unable to make the appropriate contribution or commitment to LSL going forward and resigned in December 2008. The process to recruit a replacement for Robert has commenced and a further announcement will be made in due course.

People

LSL is a people business and as such we are reliant on the commitment and enthusiasm of our employees on whom we depend to provide the high level of service that we strive to achieve for our customers.

LSL operates two employee share schemes, a Save As You Earn and a Buy As You Earn, offering employees the opportunity to share in the future success of LSL.

A number of senior management employees, including the executive directors currently own approximately 32% of LSL (2007: 34%). The interests of these senior managers/directors are closely aligned with the interests of other shareholders.

Trading conditions in 2008 have presented considerable challenges for our management and employees. There are less people now employed in our businesses, and those that remain are working harder and often for less tangible reward. The Board and I are particularly grateful for the input and motivation of our team.

Current Trading & Outlook

Given the current macroeconomic environment, the Board remains cautious on market conditions for 2009 and the timing of any recovery is uncertain. In 2009 to date, buyer enquiries and activity levels within our estate agency businesses have been encouraging, however this is balanced by the lack of supply in the mortgage market. The Group is well placed to benefit from the actions taken in 2008 with significantly reduced operating costs, strong growth in new income streams and a diversified customer base which will underpin surveying profitability.

Longer term, the underlying macroeconomic conditions in the residential property market remain positive. Additionally, LSL has a track record of profitability and business development, both organically and through acquisition, and is well placed to benefit from the opportunities that will arise to grow market share in each of our business segments through the current cycle.

Roger Matthews

4th March 2009

Business Review & Directors' Report

Introduction

LSL provides a broad range of services to its two key customer groups, who are mortgage lenders and private consumers. The Group provides various property services to consumers including estate agency, lettings, valuation, surveying, and advice on mortgages and non-investment insurance products. The Group also provides mortgage lenders with surveys and panel management services, asset management and property management services and also refers mortgage business from its customers to mortgage lenders.

Key Strengths

LSL has the following key strengths

It is one of the leading residential property services groups in the UK
LSL has demonstrated some resilience against the cycles of the housing market, largely due to the performance of its surveying division
The estate agency division has a network of 378 branches, making it the third largest estate agency business in the UK3
The Group has low capital expenditure (2008: £1.0m) (2007: £2.4m) and in spite of the unprecedented market conditions has generated net cash inflow from operating activities of £3.2m (2007: £29.4m)
The current executive directors have been with the Group since 2001 and have a track record of improving profitability as a result of organic growth and a number of successful acquisitions since 2004

Strategy

The Group's strategy is to grow long term profitability in the provision of residential property services and to continue to develop counter-cyclical income streams that will strengthen its ability to trade successfully through market downturns.

Profit growth will be achieved through surveying by developing strong relationships with lenders and maintaining service excellence in order to continue to drive market share. Profitable growth will be achieved in the estate agency and financial services divisions by continuing to provide a service proposition that recognises the customers' needs and maximises income across the value chain.

In addition, LSL continues to review opportunities for organic growth and during 2008 has successfully launched a lettings corporate client department and a repossessions asset management department which are both expected to contribute significantly to future profits, and also deliver incremental value to the core agency businesses. Further, LSL will continue to assess acquisition opportunities in residential property services. It is however unlikely to complete any transactions until there is an improvement in the market conditions.

The market backdrop provides significant opportunities for market share growth for well capitalised and managed businesses across the estate agency, financial services and surveying segments. Overall, LSL is well placed to benefit from a recovery in the UK housing market.

Principal Risks & Uncertainties

The Board continually identify, evaluate and manage material risks and uncertainties which could adversely affect the business, operating results and financial condition of LSL. These risks are recorded and managed through a risk register, and the principal risks and uncertainties identified are:

The continued volatility and uncertainty of the UK housing market. In particular, transaction volumes (both house purchase and re-mortgage), falling house prices and the availability of credit which will adversely affect the profitability and cash flow of all our key brands/businesses. Any significant further deterioration in market conditions could impact the financial covenants as contained within our banking facility.
Liability for inaccurate professional services advice to clients (eg inaccurate valuations). This risk has increased as a result of an increased level of repossessions and falling house prices which are a result of the current unprecedented market conditions. Associated with this risk, is LSL's ability to maintain appropriate risk management arrangements including insurance.
Loss of key surveying clients or significant reduction in volumes, either as a result of adverse market conditions, market consolidation, competition or inadequate service delivery.

3 Estate Agency News Jan09

The reputation and profitability of LSL could be adversely affected by the actions of one or a limited number of employees or franchisees.
Failure or interruptions of information technology services on which the Group is reliant for operational performance and financial information.
The development of alternative products and services in competition with traditional estate agency and surveying services, such as supermarket property websites and Automated Valuation Models.
Changes in legislation or regulation may impact on business results or the UK housing market in general.
Loss of any licences or permission necessary for the performance of the Group's businesses.

Further information relating to the management of these risks and uncertainties will be set out in the Corporate Governance Review (Internal Controls) of the Annual Report & Accounts 2008.

Business Review & Directors' Report - Surveying Division

The surveying businesses have performed well in 2008 against a difficult market backdrop.

Key Performance Indicators:

Surveying Division	2008 £m	2007 £m	% Change
Turnover	80.0	89.9	-11%
Expenditure	(51.4)	(63.5)	-19%
Underlying Operating Profit	28.6	26.4	8%
Margin	36%	29%

Total Number of Jobs Performed	461,403	533,093	-13%

Surveying - Key Strengths

The UK's largest distributor of valuations providing greater operational flexibility than competitors - even in a market downturn
Robust customer relationships with the leading lending institutions
Some proven resilience of profits to variable residential property market conditions
Proven systems that drive operational efficiencies
Strong customer ethos with quick turn around times for valuations

Surveying Division Performance

Despite extremely challenging conditions, particularly in the second half of 2008, the surveying division performed well. Overall mortgage approvals were down by 40%, whereas the volume of jobs performed within the Group fell by 13%, indicating continued market share gains.

While e.surv's volumes were affected by the difficult market conditions and the withdrawal from the market of some key lenders, its contribution to the division's Underlying Operating Profit was £15.8m (2007: £20.3m). Further, the volumes of the division were underpinned by the contracts gained in mid 2007 and in particular by the full year contribution of Barnwoods, which delivered turnover of £21.7m (2007: £11.4m).

Overall, turnover for the division has reduced by 11%. However, as a result of a continued focus on driving efficiency improvements and the profit contribution of Barnwoods, the overall margin has improved from 29% to 36%, giving an Underlying Operating Profit for 2008 of £28.6m (2007: £26.4m).

In line with the deterioration in the UK housing market, the Board has decided that it is appropriate to make a one off exceptional increase in its provisions of £2m to take account of the increase in the number of recovery claims made and likely to be made for inaccurate valuations.

Lender Relationships & Service Quality

LSL's surveying division has panel management arrangements with a significant number of lenders. A number of these arrangements are exclusive and they will involve the servicing and distribution of valuation instructions to these lenders' own teams of employed surveyors and/or other valuation providers. LSL has strong relationships with these lenders.

Service quality is a significant factor in maintaining relationships with these lenders and in seeking to win new panel management contracts. It also differentiates LSL's surveying division from its competitors. One of the key factors that lenders use in assessing service quality is turnaround time for valuation instructions. LSL's turnaround time is consistently better than many of its competitors, largely as a result of the flexibility of the panel management model and its use of sophisticated technology.

Competition

LSL's major competitors in the surveying market are principally other national estate agency chains which provide panel management services, such as Countrywide and Connells. In addition, a number of lenders have their own in-house workforce, such as Abbey National and Alliance & Leicester. Further, while Automated Valuation Models (AVMs) are a competitor to traditional valuation methods, their use in the current market is under careful review by lenders.

Hometrack Data Systems

LSL owns 14.2% of Hometrack, the leading provider of AVMs. This investment was made in 2003 and provides LSL with an insight into the AVM market. A dividend of £0.3m was received in 2008 (2007: £0.4m).

Business Review & Directors' Report - Estate Agency Division

The estate agency business has performed satisfactorily in the context of unprecedented market conditions.

Key Performance Indicators:

Estate Agency	2008 £m	2007 £m	% Change

Your Move & Reeds Rains*

Exchange Fees	28.6	69.3	-59%
Other income	29.2	24.9	17%
Turnover	57.8	94.2	-39%
Expenditure	(64.0)	(80.5)	-20%
Underlying Operating (Loss)/Profit	(6.2)	13.7
Margin	-10.7%	14.5%

KPIs
Exchange Units	13,683	31,277	-56%
Average Fee	£2,089	£2,214	-6%

^Other Brands
Underlying Operating (Loss)/Profit	(1.1)	-

Total Estate Agency
Turnover	66.7	107.1	-38%
Expenditure	(74.0)	(93.4)	-21%
Underlying Operating (Loss)/Profit	(7.3)	13.7
Margin	-10.9%	12.8%

^ Other brands include Homefast, property-careers.com, LSLi subsidiaries (David Frost Estate Agents, JNP Estate Agents and Intercounty) and First Complete.

* within Your Move & Reeds Rains turnover, expenditure and profit intra group transactions have been included

Estate Agency - Competitive Strengths & Growth Opportunities

Strong established high street brands and, with 378 branches, LSL is ranked third largest in the UK by Estate Agency News (January 2009)
Strong and growing counter-cyclical income streams, such as the generation of lettings and repossession instructions
Highly profitable business in normal market conditions
Technically advanced proprietary browser based IT systems (including Preview and Quicklet) with one IT solution across all brands providing a customer relationship management ability to sell income streams on an automated basis
Successful franchise model
www.your-move.co.uk-the number 1 UK estate agency branded website by Hitwise (February 2009)
Growing repossessions asset management business with a strong service ethos

Estate Agency Performance

Transaction volumes for house purchase were at an unprecedented low in 2008 with mortgage approvals for house purchase falling by 59% from 1.26m in 2007 to 0.51m in 2008. As a result, the exchange income of Your Move and Reeds Rains, our main agency brands fell by 59%. This was partially offset by a growth in other income (principally lettings and HIPS) of 17%. Overall turnover within Your Move and Reeds Rains was down by 39% from £94.2m to £57.8m.

In the context of the market there has been a significant focus on driving efficiency improvements and action was taken early in 2008 to reduce the cost base in line with anticipated lower activity levels. An overall cost reduction of £16.5m has been achieved in Your Move and Reeds Rains. Despite this, the core agency brands had an Underlying Operating Loss of £6.2m in 2008 (2007: Underlying Operating Profit £13.7m).

Estate Agency Revenue

The main drivers of estate agency revenue are:

Exchange fee income, which is linked to housing transaction volumes, prices and commission rates
Franchising income, which is generated from initial deposits on new openings, a monthly service fee of 8% of turnover, plus charges for the provision of IT services
Lettings income, which is generated from providing a range of services to landlords and tenants. Branch based lettings services have been expanded across the Group and as at 31 December 2008 lettings services were provided from 378 offices across the LSL network (figure includes franchised branches) (2007: 340). Income growth was experienced in 2008 and further growth is expected in 2009
Additional commission income generated through the sale of general insurance, conveyancing services, home information packs, home reports, utilities and other products and services to clients of the branch network

Service Quality

LSL's estate agency businesses place strong emphasis on the quality of service they provide to customers and are founder members of the Ombudsman for Estate Agents Scheme. All branch based employees of the estate agency business complete a specially designed training programme and the quality of service is monitored on a monthly basis.

Competition

LSL's major competitors in the estate agency market vary from national estate agency chains such as Countrywide and Connells to local independent estate agents. It is estimated that the top five estate agency chains, including LSL, account for circa 20% of all estate agency branches in the UK, regional chains account for a further 10%, and independents make up the rest.

Developing Businesses:

The Estate Agency division continues to develop new businesses, including the following:

First Complete

As previously reported, we set up LSL Corporate Client Department (a trading name of First Complete), our repossessions asset manager at the start of 2008, which has been successfully launched in the market securing a number of substantial new contracts. Despite investment during the first half of 2008 from a standing start, the business traded profitably in the second half of 2008 and is expected to contribute significantly to profits in 2009.

In addition LSL CCD has invested in a corporate residential property management team focused on major landlords and aspiring multiple property landlords across the UK, and which has successfully secured a number of key contracts during the year. As a result, it is expected to support the continued growth of lettings income across the estate agency brands in 2009. This is another example of the Group investing and growing its counter-cyclical income streams.

property-careers.com

property-careers.com is a national property training and marketing organisation specialising in the property and financial services sector. It is also regarded as a leading provider of training services to individuals wishing to become Home Inspectors and Domestic Energy Assessors. During 2008 it developed and launched the Inventory Portal, enabling individuals to obtain accreditation from the Licensed Inventory Provider Scheme. In addition, property-careers.com also provides panel management services to HIP suppliers in relation to the supply of Energy Performance Certificates and the management of Domestic Energy Assessors, trading as the energy-portal.

LSLi

This business was launched in early 2007 and is the primary vehicle through which LSL has pursued its strategy to acquire small to medium independent estate agency businesses. At 31 December 2008 it operated a network of 15 branches (2007: 16 branches) based in the home counties under the following strong local brands:

ICIEA Limited, trading as 'Intercounty' (8 branches) (2007: 9 branches)
David Frosts Estate Agents Limited, trading as 'Frosts' (3 branches) (2007: 3 branches)
JNP (Estate Agents) Limited, trading as 'The JNP Partnership' (4 branches) (2007: 4 branches)

The Board does not anticipate making any further acquisitions in the estate agency sector until market conditions improve.

Business Review & Directors' Report - Financial Services Division

Key Performance Indicators:

	2008 £m	2007 £m	% Change
Financial Services
Turnover	15.0	22.5	-34%
Expenditure	(16.2)	(23.4)	-31%
Underlying Operating Loss	(1.2)	(0.8)	-50%
Financial Consultant Numbers	179	328	-45%
Mortgages applications value	1.63bn	£3.31bn	-51%

Financial Services - Competitive Strengths & Growth Opportunities

One of the UK's largest estate agency brokers, providing lending of in excess of £1.63bn (2007: £3.31bn)
Strong relationships with a broad panel of lenders
A significant customer database for the sale of products and services available via the Group (e.g. financial services products, including the operation of remortgage clubs)
A strong customer offering providing mortgages from a broad range of lenders, life and mortgage protection insurance products, and general insurance products

Financial Services Performance

Transaction volumes in the mortgage market have been significantly affected by market conditions. As a result, turnover fell by 34% and was impacted by the well reported funding issues in the general mortgage market. Overall mortgage approvals fell by 40% to 1,980,000 (2007: 3,292,000) according to the Bank of England (January 2009).

Overall the cost base was reduced by 31% and as a result the Underlying Operating Loss increased from £0.8m to £1.2m

Regulation

Your Move and First Complete are directly authorised by the FSA in relation to the sale of mortgage, pure protection and general insurance products, while all of the other estate agency businesses and Linear are appointed representatives of Openwork. Reeds Rains is also an appointed representative of Letsure for the sale of rent indemnity insurance. LSL's financial services business places strong emphasis on the quality of service it provides to customers and all advisers complete a specially designed comprehensive training programme which is supplemented by effective supervision, regular monitoring and regular refresher training sessions. As a result of Reeds Rains' and Linear's appointments by Openwork, LSL through those companies has a small indirect shareholding of Openwork.

Business Review & Directors' Report - Financial Review

The key drivers of the financial performance of LSL are summarised below.

Income statement

Revenue

Revenue fell by 26% in the year ended 31 December 2008 from £219.5m to £161.8m. This was a reflection of market conditions.

Operating Expenses excluding exceptional costs, amortisation and share based payments

Operating expenses were reduced by £39.1m, or approximately 21% from £183.4m to £144.3m. The principal saving, which amounted to £31.1m, were emoluments. The cost reductions were made in response to unprecedented market conditions and were across all business segments.

Underlying Operating Profit

Underlying Operating Profit was £18.2m (2007: £37.2m) with the Underlying Operating Profit margin down 16.9% to 11.3%.

Exceptional Costs

Exceptional costs in the year ended 31 December 2008 amounted to £8.2m (2007: £1.4m) (of which operating exceptional costs were £7.7m (2007: £1.4m) and finance exceptional costs were £0.4m (2007: nil)) due to the unprecedented market conditions.

These were split as follows:-

a. onerous lease provisions as a result of branch closures £1.7m;

b. redundancy costs £2.4m;

c. fees for renegotiation of the bank facility £0.4m;

d. aborted deal and project costs £0.2m;

e. increase in provisions of £2m to take account of the increase in numbers of recovery claims made and likely to be made for inaccurate valuations due to the deterioration in the UK housing market

f. Linear goodwill and brand non cash impairment charge £1.1m

Net Financial Costs

Net financial costs amounted to £3.9m (2007: £2.7m). The Net Financial costs for 2008 included investment income from Hometrack of £0.3m (2007: £0.4m)

Taxation

The effective rate of corporation tax after excluding the effect of the deferred tax adjustment to goodwill for the year is 16.7% (2007: 29.5%)

Adjusted Basic Earnings Per Share

The Adjusted Basic Earnings Per Share (as calculated in Note 4) is 9.8p (2007: 23.4p). The directors consider this provides a better and more consistent indicator of the Group's underlying performance.

Balance Sheet

Capital Expenditure

Total capital expenditure in the year amounted to £1.0m (2007: £2.4m). The capital expenditure predominantly comprised fixtures, fittings and computer equipment.

Financial Structure

As at 31 December 2008 Net Debt was £49.2m (2007: £48.7m). LSL has a £75m revolving credit facility in place (2007: £95.0m).

Cash Flow

The business is cash generative and has low capital expenditure requirements.

The Group generated net cash from operations of £3.2m (2007: £29.4m). The lower cash generation is due principally to the reduced profitability, the high level of exceptional costs incurred and a negative movement in working capital of £1.5m. As reported in the first half year, the working capital outflow is due to one off factors including a reduction in outsourced surveys and the introduction of home information packs for which the Group initially provided short term credit.

Cash generation is expected to improve in 2009 due to lower exceptional costs and the non recurrence of the one off factors affecting cash flow in 2008. The Group is well capitalised with net debt as at 31 December 2008 of £49.2m (2007: £48.7m).

Net Assets

The net assets as at 31 December 2008 were £33.7m (2007: £42.9m).

Treasury & Risk Management

LSL has an active debt management policy and has purchased an interest rate cap, which expires in August 2009 and restricts LIBOR to 6% for £30.0m of debt. LSL does not hold or issue derivatives or other financial instruments for trading purposes.

International Financial Reporting Standards (IFRS)

The Financial Statements have been prepared under IFRS. LSL commenced reporting under IFRS from 1 January 2005.

Simon Embley

Group Chief Executive Officer

Dean Fielding

Group Finance Director

Group Income Statement

For the year ended 31 December 2008

		2008	2007

	Note	£'000	£'000

Revenue	2	161,773	219,518

Operating expenses:
Employee and subcontractor costs		88,912	120,054
Establishment costs		12,485	12,364
Depreciation on property, plant and equipment		2,299	2,227
Other		40,638	48,804
		(144,334)	(183,449)

Rental income		765	1,125

Group operating profit before exceptional costs, amortisation and share-based payments	2	18,204	37,194

Share-based payments		(138)	(650)
Amortisation of intangible assets		(10,111)	(9,145)
Exceptional costs	3	(7,735)	(1,413)

Group operating profit		220	25,986

Dividend income		334	373
Finance income		190	357
Finance costs		(4,035)	(3,429)
Exceptional finance costs	3	(432)	-
Net financial costs		(3,943)	(2,699)

(Loss)/profit before tax before adjustment to goodwill		(3,723)	23,287

Adjustment to goodwill in respect of subsequent recognition of deferred tax asset		(1,048)	(1,000)
(Loss)/profit before tax		(4,771)	22,287


Taxation		-	-
- related to exceptional costs		2,022	(424)
- others		(600)	(5,443)
		1,422	(5,867)
(Loss)/profit for the year *		(3,349)	16,420

* All attributable to equity shareholders of the parent

(Loss)/earnings per share expressed in pence per share:
Basic	4	(3.3)	15.8
Diluted	4	(3.3)	15.7

Statement of Group Recognised Income and Expenses

For the year ended 31 December 2008

Total recognised income and expense for the year:

		2008	2007
	Note	£'000	£'000

(Loss)/profit for the year		(3,349)	16,420
Available-for-sale investments:
Valuation (losses)/gains taken to equity		(1,600)	5,500
Total recognised income and expense *		(4,949)	21,920

* All attributable to equity holders of the parent

Group balance sheet

As at 31 December 2008

		2008	2007
	Note	£'000	£'000

Non-current assets
Goodwill		66,422	69,572
Other intangible assets		31,413	41,562
Property, plant and equipment		2,841	4,600
Financial assets		4,052	5,650
Other receivables		5	129
Total non-current assets		104,733	121,513

Current assets
Trade and other receivables		13,919	21,458
Current tax assets		255	-
Cash and cash equivalents		647	2,326
Total current assets		14,821	23,784

Total assets		119,554	145,297

Current liabilities
Financial liabilities		1,273	17,350
Trade and other payables		27,564	39,909
Current tax liabilities		-	4,957
Provisions for liabilities and charges		1,195	339
Total current liabilities		30,032	62,555

Non-current liabilities
Financial liabilities	7	48,611	33,640
Trade and other payables		39	97
Deferred tax liability		557	1,892
Provisions for liabilities and charges		6,586	4,175
		55,793	39,804

Net assets		33,729	42,938

Equity
Share capital		208	208
Share premium account		5,629	5,629
Share-based payment reserve		531	560
Investment in treasury shares		(2,934)	(2,669)
Unrealised gain reserve		3,900	5,500
Retained earnings		26,395	33,710

Total equity		33,729	42,938

Group cash flow statement

For year ended 31 December 2008

		31 Dec 2008		31 Dec 2007
	Note	£'000	£'000	£'000	£'000

Cash generated from operating activities
(Loss)/profit before tax			(4,771)		22,287
Adjustments to reconcile (loss)/profit before tax to net cash inflows from operating activities
Amortisation of intangible assets		10,111		9,145
Dividend income		(334)		(373)
Finance income		(190)		(357)
Finance costs		4,035		3,429
Adjustment in relation to deferred tax asset		1,048		1,000
			14,670		12,844
Group operating profit before amortisation			9,899		35,131
Depreciation		2,299		2,227
Impairment of goodwill	3	1,036		130
Impairment of intangible assets	3	38		-
Impairment of property, plant and equipment	3	-		207
Loss/(profit) on sale of property, plant and equipment		419		(30)
Share-based payments		138		650
		3,930		3,184
Decrease in trade and other receivables		7,663		2,050
(Decrease)/increase in trade and other payables and provisions		(9,152)		2,139
			2,441		7,373
Cash generated from operations			12,340		42,504
Interest paid		(3,993)		(3,429)
Tax paid		(5,126)		(9,662)
			(9,119)		(13,091)
Net cash from operating activities			3,221		29,413
Cash flows from investing activities
Purchase of subsidiary undertakings, minority interest and commercial business		(276)		(3,806)
Purchase of intangible assets		-		(30,192)
Interest received		190		357
Dividends received		334		373
Purchase of property, plant and equipment		(1,043)		(2,422)
Proceeds from sale of property, plant and equipment		84		139
Purchase of available for sale financial assets		(2)		(2)

Net cash expended on investing activities			(713)		(35,553)
			2,508		(6,140)

Group cash flow statement

For year ended 31 December 2008

		31 Dec 2008		31 Dec 2007
	Note	£'000	£'000		£'000	£'000

Net cash from operating activities less cash expended on investing activities			2,508			(6,140)

Cash flows from financing activities
Repayment of loans		-			(5,402)
Proceeds from loans		44			18,785
Purchase of treasury shares		(265)			(2,371)
Dividends paid		(3,966)			(3,124)

Net cash (used)/generated in financing activities			(4,187)			7,888

Net (decrease)/increase in cash and cash equivalents			(1,679)			1,748
Cash and cash equivalents at the beginning of the year			2,326			578
Cash and cash equivalents at the end of the year			647			2,326

Notes to the Preliminary Results

As at 31 December 2008

1.      The financial information in this preliminary announcement does not constitute LSL's statutory financial
           statements for the year ended 31 December 2008 but has been extracted from the financial statements,
         and as such, does not contain all information required to be disclosed in the financial statements prepared
           in accordance with IFRS.

Statutory financial statements for this year will be filed following the Annual General Meeting. The auditors have reported on these financial statements. Their report was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985.

Basis of preparation

The financial statements have been prepared using the accounting policies published in the Group's financial statements for the year ended 31 December 2007 which are available on LSL's website at www.lslps.co.uk with exception of adoption of IFRIC 11 IFRS 2 - Group and Treasury Share Transactions during the year. Adoption of this revised interpretation did not have any effect on the financial statements of the Group. The applied IFRS accounting policies were selected by management considering all applicable International Financial Reporting Standards issued by the International Accounting Standards Boards (IASB) as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 December 2008 as applied in accordance with the provisions of the Companies Act 1985.

2. Segment reporting

The segment results for the year ended 31st December 2008 are as follows:

Year ended 31 December 2008

	Estate agency and related activities £'000	Surveying and valuation services £'000	Financial services £'000	Unallocated £'000	Total £'000
Income statement information

Segmental revenue	66,716	80,073	14,984	-	161,773

Segmental result:
- before exceptional costs, amortisation and share-based payments	(7,250)	28,590	(1,185)	(1,951)	18,204
- after exceptional costs,
amortisation and share-based payments	(11,407)	17,099	(3,625)	(1,847)	220

Dividend income					334
Finance income					190
Finance costs Exceptional finance costs					(4,035) (432)
Loss before tax before adjustment to goodwill					(3,723)
Adjustment to goodwill in respect of subsequent recognition of deferred tax asset					(1,048)*
Loss before tax					(4,771)
Taxation					1,422
Loss for the year					(3,349)

*This relates to the estate agency and related activities segment.

Notes to the Preliminary Results

As at 31 December 2008

2. Segmented reporting (continued)

Year ended 31 December 2007

	Estate agency and related activities £'000	Surveying and valuation services £'000	Financial services £'000	Unallocated £'000	Total £'000
Income statement information

Segmental revenue	107,110	89,866	22,542	-	219,518

Segmental result:
- before exceptional costs,
amortisation and share-based payments	13,758	26,415	(833)	(2,146)	37,194
- after exceptional costs,
amortisation and share-based payments	10,373	20,149	(1,995)	(2,541)	25,986

Dividend income					373
Finance income					357
Finance costs					(3,429)
Profit before tax before adjustment to goodwill					23,287
Adjustment to goodwill in respect of subsequent recognition of deferred tax asset					(1,000)*
Profit before tax					22,287
Taxation					(5,867)
Profit for the year					16,420

* This relates to the estate agency and related activities segment.

Notes to the Preliminary Results

As at 31 December 2008

3. Exceptional costs

	2008	2007
	£'000	£'000

Establishment costs
Onerous leases provision due to branch closures	1,709	501
Employee costs
Redundancy costs due to branch closures and business reorganisation	2,410	575
Other
Impairment of property, plant and equipment	-	207
Impairment of brand	38	-
Impairment of goodwill	1,036	130
Costs of aborted acquisition of businesses and financing project	242	-
Accelerated depreciation due to branch closures	269	-
Provision for professional indemnity claims	2,031	-
Total Operating Exceptional Costs Finance Costs	7,735	1,413
Banking fees incurred for renegotiation of facility	432	-
	8,167	1,413

Exceptional costs were incurred in 2008 as shown above reflecting the unprecedented market conditions and the need to restructure the business in line with lower activity levels.

In 2008 given the deterioration in the UK housing market the Board has decided that it is appropriate to make a one off increase in its professional indemnity claims provision of £2,031,000 to take account of the increase in numbers of recovery claims made and likely to be made for inaccurate valuations.

In 2008, Linear Financial Services Limited and Linear Mortgage Network Limited continued to incur operating losses and an impairment review was conducted in accordance with the accounting policy. As a result of this impairment review the entire value of brand in intangible assets of £38,000 and carrying value of goodwill relating to both companies of £1,036,000 were impaired.

Notes to the Preliminary Results

As at 31 December 2008

4. Earnings per share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

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

	Loss after tax £'000	Weighted average number of shares	2008 Per share amount Pence	Profit after tax £'000	Weighted average number of shares	2007 Per Share Amount Pence

Basic EPS	(3,349)	102,845,156	(3.3)	16,420	103,647,347	15.8
Effect of dilutive share options	-	195,615	-	-	609,076	-
Diluted EPS	(3,349)	103,040,771	(3.3)	16,420	104,256,423	15.7

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements.

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

	2008 £'000	2007 £'000

(Loss)/profit after tax attributable to equity holders of the parent	(3,349)	16,420
Adjusted after tax for:
Exceptional costs	6,145	989
Amortisation	7,229	6,401
Share-based payment	99	455
Adjusted profit after tax attributable to equity holders of the parent	10,124	24,265

Adjusted basic and diluted EPS

	Adjusted Profit after tax1 £'000	Weighted average number of shares	2008 Per share amount Pence	Adjusted Profit after tax £'000	Weighted average number of shares	2007 Per Share Amount Pence

Adjusted Basic EPS	10,124	102,845,156	9.8	24,265	103,647,347	23.4
Effect of dilutive share options	-	195,615	-	-	609,076	-
Adjusted Diluted EPS	10,124	103,040,771	9.8	24,265	104,256,423	23.3

1 This represents adjusted profit after tax attributable to equity holders of the parent.

Notes to the Preliminary Results

As at 31 December 2008

5. Dividends paid and proposed

	2008	2007
	£'000	£'000
Declared and paid during the year:
Equity dividends on ordinary shares:
Final dividend for 2007: 3.86 pence (2007: nil)	3,966	-
Interim dividend for 2008: nil pence (2007: 3 pence)	-	3,124
	3,966	3,124
Proposed for approval at AGM (not recognised as a liability as at 31 December):
Equity dividends on ordinary shares:
Final dividend for 2008: nil pence per share (2007: 3.86 pence)	-	3,976

6. Taxation

Tax on (loss)/profit

Tax (credited)/charged in the income statement comprises:

		2008	2007
		£'000	£'000

UK corporation tax	- current year	755	9,494
	- tax overprovided in prior year	(42)	(285)
	- utilisation of tax losses	(800)	(1,000)
		(87)	8,209
Deferred tax:
Origination and reversal of temporary differences		(1,271)	(2,342)
Adjustment in respect of prior year		(64)	-
Total deferred tax		(1,335)	(2,342)
Total tax (credit)/charge in the income statement		(1,422)	5,867

The tax assessed in the profit and loss account is higher (2007: lower) than the standard UK corporation tax rate, because of the following factors:

	2008	2007
	£'000	£'000

(Loss)/profit on ordinary activities before tax	(4,771)	22,287

(Loss)/profit on ordinary activities multiplied by rate of corporation tax rate in the UK of 28% (2007: 30%)	(1,336)	6,686
Non taxable income	(164)	-
Disallowable expenses	954	780
Change in current tax rate in period	17	(48)
Reduction in deferred taxes resulting from reduction in tax rate	-	(228)
Other	13	(38)
	(516)	7,152
Utilisation of tax losses on which deferred tax asset was not recognised previously	(800)	(1,000)
Prior period adjustments - current tax	(42)	(285)
Prior period adjustment - deferred tax	(64)	-
Total taxation (credit)/charge	(1,422)	5,867

Notes to the Preliminary Results

As at 31 December 2008

7. Financial liabilities

Included in the non-current financial liabilities are the secured bank loans totalling £47.8m (2007: £47.4m). They are secured by a debenture over the Group's assets excluding certain subsidiaries

The secured bank loans relate to the revolving credit facility. The utilisation of this revolving credit facility may vary each month as long as this does not exceed the maximum £75m facility (2007: £95m). The banking facility expires in July 2010 but can be extended at that date until July 2011 only at the option of the company.

8. Net Debt Summary