Preliminary Announcement

RNS Number : 6286B

LSL Property Services

06 March 2014

For immediate release

6 March 2014

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

PRELIMINARY ANNOUNCEMENT

LSL Property Services plc, a leading provider of residential property services incorporating both estate agency and surveying businesses, announces preliminary results for the year ended 31^st December 2013.

Highlights	2013	2012	% change
Group revenue £m	258.6	243.8	+6
Group Underlying Operating Profit¹ £m	37.1	35.1	+6
Group Underlying Operating Margin %	14.3	14.4	-0.1
Profit before tax £m	17.1	6.7	+155
Underlying profit before tax¹ £m	33.9	32.5	+4
Basic Earnings Per Share- pence	13.6	6.8	+100
Adjusted Basic Earnings Per Share - pence	25.3	23.8	+6
Cash inflow from operations before PI and exceptional costs £m	42.4	41.4	+2
Net Bank Debt³ at 31^st December £m	26.3	26.6	-1
Final proposed dividend per share - pence	7.2	6.4	+13
Full year dividend per share - pence	10.5	9.5	+11

Like-for-like² Group revenue - £m	258.6	238.3	+8
Like-for-like Group Underlying Operating Profit^1,2 £m	37.1	32.6	+14
Like-for-like operating profit margin %	14.3	13.7	+0.6

· Excellent progress in the Estate Agency Division

· Considerable improvement in the performance of the Surveying Division during the second half of the year

· Significant investment in capacity across both the Estate Agency and Surveying Divisions to provide a platform for growth in 2014

· Exceptional Professional Indemnity ("PI") charge confirmed, as announced in November 2013, with costs currently tracking as expected

· Strong operational cash flow, balance sheet and dividend growth

· Confidence in delivering growth and benefits from operational gearing in an improving market

______________________________

(1) Underlying Operating Profit and Underlying Profit before tax are before exceptional costs, contingent consideration, amortisation of intangible assets and share-based payments - refer Note 3 for calculation

(2) Like-for-like excludes the impact of the insourcing of a contract by a major Surveying client in June 2012 as announced in the Interim Results in July 2012

(3) Refer to Note 7 for the calculation

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

"Market volumes have now grown year on year for ten consecutive months. Feedback from lenders is that market transaction levels will continue to improve. This positive view, combined with recent encouraging news on unemployment and GDP growth, support the Board's positive view of the market for 2014.

The Group has started the year strongly and, with a robust balance sheet, relatively low levels of gearing and strong cash generation at the operational level, is well placed to deliver significant growth in 2014. The Board's confidence in the future prospects of the business is reflected in the 13% increase in the final dividend.

Overall, the business is well positioned to benefit from the organic growth and operational gearing potential in a recovering market, which combined with the possibility of bolt-on acquisitions, will increase shareholder value."

For further information, please contact:

Ian Crabb, Group Chief Executive Officer

Steve Cooke, Group Finance Director

LSL Property Services plc 0207 382 0360

Richard Darby, Sophie McNulty, Helen Greenwood

Buchanan 0207 466 5000

Notes to Editors:

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

Chairman's Statement

Introduction

After five years during which transaction volumes have been depressed at less than half of normal historical levels, the market has started to recover in 2013 with consistent growth since the second quarter.

I am pleased to report that against this improving backdrop the Group has made good progress, reporting Group Underlying Operating Profit of £37.1m for the year. Group Revenue and Group Underlying Operating Profit both increased by 6% compared to 2012 while on a like-for-like basis¹, Group revenue increased by 8% and Group Underlying Operating Profit by 14% even after significant investment in capacity for further growth.

The Estate Agency Division has delivered a strong performance, particularly in the second half of the year. Residential Sales income increased by 11% and Financial Services income by 13%. Lettings income grew largely organically by 8% in a market which continued to demonstrate strong growth. The Surveying Division delivered an excellent second half performance during which it also invested heavily to alleviate the capacity constraints which are impacting the whole sector.

The business is extremely cash generative at the operational level and has a strong balance sheet. I am delighted to report an increase in our proposed final dividend of 13% to 7.2 pence per share (2012: 6.4 pence). This will result in the total dividend for the year increasing by 11% to 10.5 pence per share (2012: 9.5 pence), recognising our confidence in the future growth prospects of the business.

The high level of year on year growth in the second half year in both the Surveying and Estate Agency Divisions and the significant increase in the Residential Sales pipeline at the end of the year provides evidence of a recovering housing market. This, together with the investment in capacity during the year, leaves the Group well placed to deliver growth in 2014.

Financial Results

Group revenue increased by 6% to £258.6m (2012: £243.8m) and Group Underlying Operating Profit increased by 6% to £37.1m (2012: £35.1m). Group Underlying Operating Margin was 14.3% (2012: 14.4%). On a like-for-like¹ basis, Group revenue increased by 8% to £258.6m (2012: £238.3m) and Group Underlying Operating Profit increased by 14% to £37.1m (2012: £32.6m), with like-for-like Group Underlying Operating Profit margin increasing from 13.7% in 2012 to 14.3%.

The Estate Agency Division increased Underlying Operating Profit by 19% to £29.1m (2012: £24.4m). This performance was delivered in a market where house purchase approvals increased by 21% to 736,000² (2012: 610,000). However, most of the market growth occurred in the second half of the year and part of the benefit of the fourth quarter market growth was reflected in the strength of the closing pipeline. There was strong revenue growth in Residential Sales income, Financial Services and Lettings. Marsh & Parsons continued its expansion strategy with three new branch openings and made good progress in a central London market where stock levels remained low. In line with previous trends, repossession volumes fell by 15% to 28,900³ in the year (2012: 33,900) which impacted revenue and profit, although the Asset Management business once again increased market share.

The Surveying Division faced a decline in market transaction levels in the first quarter followed by significant growth for the rest of the year. Turnover declined in 2013 as a result of the insourcing of a major contract in 2012, as previously noted. There has been a significant investment programme to

add capacity through a new graduate recruitment programme though the additional resource was generally not productive in 2013 as the new surveyors were still undergoing training. Total mortgage approvals increased by 12% to 1.29m² (2012: 1.16m), including a 16% increase in remortgages to 393,000 (2012: 340,000). Surveying Division revenue decreased by 3% and Underlying Operating Profit was £13.1m (2012: £13.9m) with Underlying Operating Margin of 21.7% (2012: 22.4%). On a like for like¹ basis, Surveying revenue increased by 7%, Underlying Operating Profit increased by 15% to £13.1m (2012: £11.4m) and Underlying Operating Margin increased to 21.7% (2012: 20.0%).

We have increased our PI provisions relating to the 2004 - 2008 high risk period by £12m as indicated in our Interim Management Statement in November 2013. This is disappointing and reflects the fact that the reduction in the rate of claims that we had expected during the year, and assumed in setting the previous level of provision, has not yet materialised. Since November 2013, the rate of new claims and cost per claim has been consistent with the assumptions behind the new provision. The additional provision represents the Group's current best estimate of likely claims costs but the process of resolving open claims and estimating future claims is on-going. The provision required is highly sensitive to the run rates of new claims and the costs per claim for both new and existing claims.

Profit before tax, amortisation, share based payments, contingent consideration and exceptional costs increased by 4% to £33.9m (2012: £32.5m). Exceptional operating costs of £13.0m (2012: £17.7m) included PI Costs of £12.0m (2012: £17.3m) noted above. There was also a non-cash charge of £2.8m (2012: £4.4m) relating to employment related contingent consideration in acquisitions and amortisation of intangible assets during the year was £0.4m (2012: £3.5m). Profit before tax increased to £17.1m (2012: £6.7m) and profit after tax was £14.0m (2012: £7.0m). On an adjusted basis, earnings per share, increased by 6% to 25.3p (2012: 23.8p).

Cash generated from operations net of capital expenditure was £19.0m (2012: £26.9m). Operating cashflow included PI cash settlements of £14.4m (2012: £7.7m), which increased as a result of the large rise in the number of claims received and because of an increase in negotiated settlements with some lender claimants. Capital expenditure increased to £7.9m (2012: £5.7m) through investment in a number of new IT systems, including a common platform for our Financial Services businesses and the development of enhanced lettings systems in Marsh & Parsons, Your Move and Reeds Rains.

Net Bank Debt at 31st December 2013 was £26.3m compared to £26.6m at 31st December 2012 after investing £4.6m in acquisitions (2012: £3.9m), the purchase of treasury shares via LSL's Employee Benefit Trust and additional shares in Zoopla. Net Bank Debt did not decline significantly in the year primarily because of the increase in PI cash settlement costs. It is anticipated that cash settlement costs will run at a similar level during 2014 and then decline.

Net assets increased to £99.3m at 31st December 2013 (2012: £76.1m), including a £22.5m valuation uplift following a review of the fair value of the investment in Zoopla.

Dividend

As a result of the strong growth in underlying Group profitability, the improving market conditions and the Board's positive view of future prospects for the business, an increase in the final dividend of 13% to 7.2p per share (2012: 6.4p) will be proposed to Shareholders at the forthcoming AGM, increasing the total dividend for 2013 by 11% to 10.5p per share (2012: 9.5p per share). The proposed dividend payment is slightly over the upper limit of our previously stated policy of applying a dividend payout ratio of between 30% to 40% of Group Underlying Operating Profit after interest and tax and reflects our confidence in the future.

The ex dividend date for the final dividend is 26th March 2014 with a record date of 28th March 2014 and a payment date of 29th April 2014. Shareholders have the opportunity to elect to reinvest their cash dividend and purchase existing shares in LSL through a dividend reinvestment plan.

Divisional performance

Estate Agency Division

2013 has been a year of excellent progress combined with major investment in the Estate Agency Division. Profit per owned branch, excluding Marsh & Parsons, increased to £32k (2012: £21k) compared to the medium term target of £30k to £50k which the Board set in 2011 when profit per owned branch was £5k. All key income streams in the Division other than Asset Management have grown strongly and operating margin increased to 14.7% (2012: 13.5%).

Residential Sales income, excluding Marsh & Parsons, increased by 10% to £64.1m (2012: £58.1m) mainly driven by improved mix and good progress increasing average fee. The rate of income growth has accelerated during the year in line with the improvement in the market. Our Lettings business has continued to perform well, despite some counter cyclical reduction in the rate of lettings market growth. Lettings income, excluding Marsh & Parsons, increased by 9% to £39.2m (2012: £35.8m).

Marsh & Parsons made good progress in a challenging central London market where stock levels remained flat all year. Total revenue increased by 10% to £29.9m (2012: £27.3m) with Residential Sales growth of 14% and Lettings growth of 6%. Operating profit was £6.7m (2012: £7.2m) including the cost of opening new branches and of putting in place infrastructure to support the on-going branch opening programme.

Financial Services income delivered through our Estate Agency Division branches and Financial Services intermediary networks increased by 13% during 2013 to £35.8m (2012: £31.8m). Growth was held back slightly by an exceptionally strong comparative where insurance business was accelerated into quarter four 2012 ahead of gender pricing changes in December 2012. Activity levels are growing in line with the improving market. The Group arranged total mortgage lending of £10.9bn in 2013 (2012: £7.1bn).

Asset Management delivered a solid result in a counter cyclical market. Revenue declined by 9% to £14.3m (2012: £15.6m) in a market where repossession volumes reduced by 15% to 28,900 (2012: 33,900) and have now fallen for four years running by a total of 41%. The business is continuing to target new property management contracts, although the tender processes are relatively slow so revenue improvement from this source will be geared to the medium term.

Surveying Division

Following a major contract insourcing in 2012 and mortgage transaction volumes contracting by 11% in the first quarter, the Surveying Division began to build new capacity once the early signs of market recovery appeared after Easter. Like-for-like volume growth was 3% for the year which combined with some early signs of fee improvement resulted in revenue growth of 7%.

Performance improved considerably during the year as the market began to grow. While revenue in the first half fell by 2% year on year in like-for-like terms, it increased by 15% year on year in the second half. Revenue from the provision of surveying services for private buyers continued to grow during the year, although we began to prioritise resource away from this area to the provision of valuation services to lender clients from the middle of the year. Despite incurring the costs of recruiting graduates into the new surveyor training scheme, there was a sharp increase in second half operating profit, helped by short term under capacity in the market leading to an easing of the pricing environment. Full year operating margin increased to 21.7% against a like-for-like comparative of 20.0%.

Developments

During 2013, we have continued to invest in the business with headcount in the Estate Agency businesses increasing by 487. In Surveying we launched a new graduate surveyor recruitment and training programme and hired 43 new graduates during the year bringing the total number of surveyors to 429. These new graduates take at least 12 months to train and so will not become fully productive until midway through 2014. This increase in headcount provides a good platform for delivering further revenue growth in both Estate Agency and Surveying with more investment is planned for 2014 especially in the Surveying Division where there remains a significant capacity shortfall across the sector.

During the year, Marsh & Parsons opened three new branches in South Kensington, Bishops Park and Marylebone, all of which are performing well. The business is committed to an opening programme of three to four branches a year which will result in doubling the number of branches over the next five years.

The Group has continued to make selective acquisitions and in September we acquired Lawlors, which is an Essex based agent with three branches offering residential sales and lettings services and have also added five lettings businesses across the Estate Agency Division.

Zoopla has continued to perform very strongly and in November 2013 LSL increased its shareholding in Zoopla by 0.12% at a cost of £0.8m to bring our total shareholding to 4.91%. The Board has reviewed the fair value of this shareholding and, using a value equal to the price paid per share in November 2013, we have increased the value of our holding to £35.1m (2012: £11.8m). In February 2014, DMGT, the largest shareholder in Zoopla, announced that the Board of Zoopla is exploring various strategic options for the business.

Board and Corporate Governance

During the year, the Nominations Committee and the Board considered at length the composition of the Board, which resulted in a number of changes, namely the appointment of Ian Crabb as Group Chief Executive Officer in September, when Simon Embley, the former Group Chief Executive Officer stepped into the role of Deputy Chairman.

Simon's new responsibilities took into account the Board's desire to affect a smooth handover to Ian and to allow Simon to support Ian on the execution of LSL's existing strategy to continue delivering shareholder value as the market recovers. The Directors feel that the changes reflect the Board's desire to implement an orderly succession to a new Group Chief Executive Officer whilst retaining Simon's significant knowledge of the residential property market and, in particular, maintaining key client and industry relations. Further, the recommendation for the appointment of Ian took into account his experience in growing entrepreneurial businesses in both 'business to business' and 'business to consumer' markets. I welcome Ian to the Board and I am delighted to report that the management transition is going extremely well.

In addition, in early January 2014, we appointed Bill Shannon as an independent Non Executive Director and Chairman of the Remuneration Committee, and at the same date Mark Pain stepped down from the Board as an independent Non Executive Director. Bill has significant PLC Board experience in strategy, operations, finance and governance in consumer, financial services, residential and commercial property sectors. I am confident that Bill will add significant value to LSL's business during its next phase of development and growth.

The Board is committed to high levels of corporate governance. In respect of 2013, the Board has conducted an annual review of its effectiveness and that of its Committees, taking into account the balance of skills, experience, independence and knowledge of our businesses and we concluded that the Board and its Committees are effective and are able to discharge their respective duties and responsibilities appropriately.

During 2013 and into 2014, the Board continues to recognise the benefits of diversity in the boardroom, including gender diversity. The current Board composition includes one female Director, Helen Buck, who is an independent Non Executive Director. Whilst we remain of the view that the setting of targets for the number of female directors on the Board is not necessary and that we will continue to appoint on merit, I will continue to ensure that our searches for new directors take into account diversity, including gender.

LSL remains committed to promoting diversity throughout the Group and in 2013 we continued to build on the gender reviews conducted during the previous two years. Further details of the study and its conclusions are set out in our Corporate Social Responsibility Report.

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

People

The Group expanded significantly during 2013 through investment to build capacity and through a number of small bolt-on acquisitions. In total the number of Group employees increased by 545 (11%) to 5,299 (2012: 4,754). I would like to extend a very warm welcome to all of our new colleagues and wish them well in their careers with LSL.

We are pleased that market conditions are improving but our markets are extremely competitive and our success is ultimately dependent on the customer service provided by colleagues in all parts of the business. We have had a successful year in 2013 and I would like to thank all of our employees for their hard work and commitment which has contributed to this result.

Current trading and outlook

Market volumes have now grown year on year for ten consecutive months. Feedback from lenders is that despite the recent changes to the 'Funding for Lending' Scheme that market transaction levels will continue to improve. The positive view from lenders, combined with recent encouraging news on unemployment and GDP growth, support the Board's positive view of the market for 2014.

The Group remains committed to its strategy of driving organic growth in all parts of the business in order to capitalise fully on the improved market conditions and of evaluating selective acquisitions. Significant investment was made during 2013 to provide a platform for future growth and we will continue to invest in 2014 in both Estate Agency and Surveying.

The Group has started the year strongly and is well placed to deliver significant growth in 2014.

The Group has a robust balance sheet with relatively low levels of gearing and is extremely cash generative at the operational level. The business is well positioned to benefit from the organic growth and operational gearing potential in a recovering market, which combined with the possibility of bolt on acquisitions, will increase shareholder value.

Roger Matthews

Chairman

6^th March 2014

¹Like for-like excludes the impact of the insourcing of a contract by a major Surveying client in June 2012 as announced in the Interim Results in July 2012.

² Bank of England

³ Council of Mortgage Lenders

Business Review - Estate Agency Division

The Estate Agency Division delivered excellent profit growth

Financial	2013 £m	2012 £m	% change
Residential Sales exchange income	80.0	72.0	11.0
Lettings income	52.2	48.0	8.5
Asset Management income	14.3	15.6	(8.5)
Financial Services income	35.8	31.8	12.8
Other income¹	15.9	14.1	17.9

Total income	198.2	181.6	9.1
Operating expenditure	(169.1)	(157.2)	7.5
Underlying Operating Profit	29.1	24.4	19.2

KPIs
Exchange units²	27,129	26,255	3.3
Underlying Operating Margin (%)	14.7	13.5	1.2
Fee per unit²	2,831	2,654	6.7

House purchases (000's)³	736	610	20.6
Repossessions⁴	28,900	33,900	(14.7)

1 'Other income' includes franchising income, conveyancing services, EPCs, Home Reports, utilities and other products and services to clients of the branch network.

2 Exchange units and fee per exchange are on a like for like basis (excluding branch openings and closures)

3 Source: Bank of England for "House Purchase Approvals" 2013

4 Source: Council of Mortgage Lenders arrears and repossessions data relating properties taken into possession by first-charge mortgage lenders for 2013.

Estate Agency Performance

After five years where transaction volumes have been depressed at less than half the normal historic levels, 2013 has been a year of transition for the Estate Agency Division with strong performance in key income lines together with investment in capacity to support further growth. After continued market contraction in the first quarter of the year there was strong transaction growth every month since April 2013. The number of mortgage approvals for house purchases for the full year increased by 21% to 736,000 (2012: 610,000)³ which compares to historic normalised levels of 1.2m. Allowing for the lag between mortgage approval and completion, it is estimated that the number of mortgage completions in the year, which is the key driver for LSL's Residential Sales income, increased by 14% to 687,000 (2012: 603,000)³.

LSL has a balanced Estate Agency model and over the last six years has significantly built its exposure to counter-cyclical and non-cyclical income streams such as Lettings and Asset Management Income. These income streams have grown at a compound annual rate of 32% over the period, increasing from £12.8m in 2007 to £66.5m in 2013. Given the change in the economic cycle in 2013, the Group expects to see a reduction in this growth rate during the next period in the cycle when housing transactions are expected to grow significantly. The Estate Agency Division delivered an excellent performance in 2013 with total income growing by 9% to £198.2m (2012: £181.6m). The benefit of operational gearing can be seen as 28% of the increase in revenue fell through to Underlying Operating Profit even after substantial investment to support future growth. Underlying Operating Profit increased by 19% to £29.1m (2012: £24.4m).

Investment in the Estate Agency Division during 2013 included the recruitment of an additional 487 heads, as well as the opening of three new Marsh & Parsons branches. This will allow the Estate Agency Division to capitalise on market growth in 2014 and beyond.

Estate Agency Division Branches

Your Move, Reeds Rains and the seven LSLi brands all continued to perform well during the year. Residential Sales income increased by 11% to £80.0m (2012: £72.0m) due mainly to an improvement in the average fee which increased by 12% to £2,908 (2012: £2,596) driven partly by improved mix. This change in mix has created a platform for making progress on both market share and fee growth moving into 2014.

Marsh & Parsons

Marsh & Parsons delivered a solid performance in a challenging Central London market. Although, there has been a favourable pricing environment during 2013, there has been a scarcity of stock particularly in Central London in which Marsh & Parsons operates. This has created pressure on both volume growth as well as commission percentages. Against this backdrop, Marsh & Parsons revenue increased by 10% to £29.9m (2012: £27.3m) and operating profit was £6.7m (2012: £7.2m).

Operating profit reduced year on year because of an increase in the cost base driven by investment in new branch openings as well as a new head office to give the business the capacity to expand going forward. During 2013, three branches were opened in South Kensington, Fulham and Marylebone which are performing well. The Group is targeting four new branch openings in 2014.

Financial Services

Total Financial Services income delivered through the Estate Agency Division's branches and intermediary networks of First Complete, Pink Homes Loans and Linear Mortgage Network increased by 13% during 2013 to £35.8m (2012: £31.8m). Revenue has grown by a compound annual growth rate of 24% since 2010 as a result of significant organic growth including the successful roll out of Financial Services to all branches and the acquisition of new intermediary networks. In total the Group arranged mortgage lending of £10.9bn during 2013 (2012: £7.1bn) giving the Group an important position as a mortgage distributor for lender clients as well as a growing revenue and profit stream.

Counter-Cyclical Income

Early 2013 was a turning point in the current economic cycle. Unsurprisingly with the improvement in the residential market, the Lettings market and LSL Lettings income will not continue to grow at the same rates as those experienced in recent years. However, the Group is continuing to invest in acquiring lettings businesses and has recruited additional Lettings consultants during the year. Total Lettings income grew by 8% year on year. This growth rate fell slightly during the year from 9% in the first half to 8% in the second half year.

The Group had previously set a target in a flat housing market of increasing Lettings Income to the same level as Residential Sales Income. As Residential Sales income grows strongly in this part of the cycle the ratio of Lettings Income to Residential Sales Income would be expected to reduce and in 2013, the ratio decreased to 65% (2012: 67%).

With the improvements in the economy, repossession volumes fell by a further 15% to 28,900 in 2013 (2013: 33,900)⁴. The market has now declined for each of the last four years from 48,900 in 2009. The Directors are pleased that during this period LSL's market share in Asset Management has increased and did so again in 2013. However, the decline in the size of the market as well as continued fee pressure has resulted in a 9% reduction in revenue to £14.3m (2012: £15.6m). Despite this contraction, LSL's Asset Management business is well positioned to capitalise on an increase in repossession volumes which may occur once interest rates start to rise.

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

The Group now benefits from total counter-cyclical income from Lettings and Asset Management of £66.5m compared to £63.7m in 2012 which represents 34% of the Estate Agency Division's revenue and 26% of Group revenue.

4 Council of Mortgage Lenders

Developments

As well as investing in headcount to increase capacity LSL also started a programme of investment in new front end systems in Your Move, Reeds Rains and the LSLi brands during 2013. LSL provides excellent service to its customers and this has been underpinned by high quality systems. In 2013 the Group began a project to design and implement next generation front end lettings systems and this is expected to complete in 2014.

LSL Land & New Homes was created in 2010. Following substantial investment, growth has been significant in 2013. Services now include Land Sales and Acquisition, Planning Advice, Conveyancing, Professional Photography, Audio Tours, EPCs, RICS surveys, Desktop valuations, New Homes Sales, PX & Assisted Move, Sales Management, Sale by Tender, Financial Services. LSL Part Exchange Hub is the only one to hold ISO certification (ISO 9001:2008). Further investment has been made at the start of 2014 and Manpower will double with particular emphasis on a growing specialist land team. LSL Land & New Homes conducts business with many of the top 25 national developers but also offers a one stop solution for the medium to small builders who are starting to return to the market.

In addition LSL is in the process of rolling out a new common platform across our Financial Services Intermediary networks, trading as Pink Home Loans, First Complete and Linear Mortgage Network which will improve customer service and increase operational efficiency.

The Mortgage Market Review will be implemented on 26th April 2014. The FCA's aim for the MMR is to deliver a 'sustainable market for all participants and is flexible for consumers'. LSL has made substantial investment and taken significant steps in readiness for the new requirements including selection and investment in new software and training of the employed and network financial services staff as required.

As noted earlier, Marsh & Parsons has continued with its branch opening programme. Marsh & Parsons has invested in a new head office and also in a new lettings system to provide a strong platform to support significant future growth.

LSL has also invested significantly in Asset Management to win new property management contracts and successfully brought the first of these on stream during 2013.

During 2013, the Group has continued to make selective acquisitions and has added to the Estate Agency Division in the South East through the acquisitions of Lawlors and five lettings businesses.

In 2014 LSL will continue with the same strategy focusing on driving organic growth in Residential Sales, Lettings and Financial Services and rolling out new branches in Marsh & Parsons. The Group will also continue to evaluate selective estate agency acquisitions funded from LSL's cash flows.

Regulation

First Complete and Pink Home Loans (the trading name of Advance Mortgage Funding) are both directly authorised by the Financial Conduct Authority in relation to the sale of mortgage, pure protection and general insurance products. Your Move, Reeds Rains Financial Services and Reeds Rains along with the LSLi subsidiaries are all appointed representatives of First Complete, while Linear Mortgage Network is an appointed representative of Advance Mortgage Funding for mortgage and insurance business and also an appointed representative of Openwork (for investment business). During 2013, Reeds Rains was also an appointed representative of Letsure Limited for the sale of rent indemnity insurance. This appointment ceased on 31st December 2013, and with effect from the 1st January 2014, Reeds Rains is authorised for the sale of rent indemnity insurance under its existing appointed representative arrangement with First Complete.

As a result of Linear Mortgage Network's appointment by Openwork, LSL has a small indirect shareholding of Openwork.

Branch numbers

Breakdown of Estate Agency branches as at 31^st December 2013

	Owned	Franchised	Totals
Your Move	214	79	293
Reeds Rains	123	48	171
LSLi	45	6	51
Marsh &Parsons	18	-	18
Totals	400	133	533

The above branch numbers include four virtual branches.

Surveying Division

Strong second half performance

	Total			Like for Like⁵
Financial	2013 £m	2012 £m	% Change	2013 £m	2012 £m	% Change
Revenue	60.4	62.2	(2.9)	60.4	56.7	6.6
Operating expenditure	(47.3)	(48.3)	2.0	(47.3)	(45.3)	(4.4)
Underlying Operating Profit	13.1	13.9	(5.8)	13.1	11.4	15.3

KPIs
Profit margin (%)	21.7	22.4	(0.7)	21.7	20.0	1.7
Jobs Performed (000s)	396	408	(3.0)	396	384	3.1
Revenue from private surveys (£m)	4.9	4.0	20.4	4.9	4.0	20.4
Income per job (£)	153	152	0.2	153	148	3.3
PI insurance (Balance Sheet) provision at 31^st Dec (£m)	25.9	24.2	7.0	25.9	24.2	7.0
Number of qualified surveyors at 31^st Dec	386	378	2.1	386	378	2.1

Mortgage approvals (000's)⁶	1,286	1,151	11.8

5 Like-for-like excludes the impact of the insourcing of a contract by a major Surveying client in June 2012 as announced in the Interim Results in July 2012

6 Bank of England for "Total Mortgage Approvals" 2013

Surveying Division Performance

After a difficult first quarter when transaction volumes fell by 11%, the surveying market has shown significant improvement since April. Total mortgage approvals have increased by 19% year on year for the period from April to December with a 12% full year increase in total mortgage approvals to 1.29m (2012: 1.15m).

Surveying turnover was £60.4m (2012: £62.2m) and the total number of jobs performed was 396,000 (2012: 408,000). The reduction in volumes was driven by the decision of a major lender client to transfer their valuations and associated panel management instructions back in house. On a like for like basis, excluding the impact of this contract, revenue increased by 7% to £60.4m (2012: £56.7m) and the total numbers of jobs performed increased by 3% to 396,000 (2012: 384,000). Since the improvement in the market in April 2013, on a like-for-like basis the number of jobs has increased by 7% following a decline of 8% in the first quarter of the year.

The surveying market is currently suffering from significant capacity constraints and in order to improve the Group's position a new graduate recruitment and training programme was launched during 2013. This represents a major investment for the business especially given the time required to train the new graduate surveyors. A total of 43 new graduates were hired during 2013 and a further 31 were taken on in January 2014. Constrained capacity is a wider market issue and has resulted in a short term improvement in the pricing environment. It is expected that some of this benefit will continue into early 2014 but it remains to be seen what the impact will be on negotiations relating to longer term contracts which come up for renewal later in the year. In prior years, the Division made excellent progress in developing surveying services for private buyers. Given the current capacity constraints LSL decided to reduce the focus on this area. Although full year revenue from surveying services for private buyers increased by 20% to £4.9m (2012: £4.0m) in the second half of the year it declined by 2% year on year instead.

Underlying Operating Profit was £13.1m (2012: £13.9m) and the Underlying Operating Profit margin was 21.7% (2012: 22.4%). On a like for like basis, Underlying Operating Profit increased by 15.3% to £13.1m (2012: £11.4m) and the Underlying Operating Profit margin was 21.7% (2012: 20.0%).

Surveying Division Developments

The major growth initiative in the Surveying Division has been investment in a new graduate recruitment and training programme to increase capacity. Capacity constraints have been geographically concentrated particularly in London and the South East and LSL has responded to this challenge by moving surveyors around the country on a short term basis. In addition, in order to meet obligations to provide valuation services to our major lender clients the Surveying Division has reduced the level of private surveys where possible.

The Surveying Division serves key lender clients through both exclusive contracts and through panel management arrangements. LSL is continuing to invest in the Surveying Division business in order to maintain high service levels for all clients. During 2013 LSL have successfully rolled out new tablet computers for surveyors to use when performing valuations on site and feedback has been positive.

The Surveying Division has a number of contracts which come up for renewal in 2014 and negotiations relating to some of these have commenced. Although it is too soon to predict the outcome of these discussions, the Surveying Division has also recently finalised a number of other contracts with lenders to provide surveying and valuation services with improved pricing. Given the capacity shortage in the market, if any volumes were lost from existing contracts, it is likely that e.surv could provide additional capacity to other lenders which would mitigate any reduction in revenue.

PI Costs

LSL has increased the PI provisions relating to the 2004 - 2008 high risk period by £12m as indicated in the Interim Management Statement issued in November 2013. This is disappointing and reflects the fact that a reduction in the rate of claims that LSL had expected during the year, and assumed in setting the previous level of provision, has not yet materialised. Since November 2013, the rate of new claims and cost per claim has been consistent with the assumptions behind the new provision. The additional provision represents the Group's current best estimate of likely claims costs but the process of resolving open claims and estimating future claims is on-going. The provision required is highly sensitive to the run rates of new claims and the costs per claim for both new and existing claims.

Financial Review

The key drivers of the financial performance of LSL in 2013 are summarised below:

Income statement

Revenue

Revenue increased by 6.0% to £258.6m in the year ended 31^st December 2013 (2012: £243.8m). On a like-for-like basis, excluding the impact of the insourcing of a contract by a major Surveying Division client in June 2012, revenue increased by 8.5% to £258.6m (2012: £238.3m).

Operating Expenses Excluding Exceptional Costs, Amortisation and Share Based Payment

Operating expenses increased by 6.9% to £225.6m (2012: £211.1m). This was mainly in the Estate Agency Division and included investment to support revenue growth in 2014. The average number of full time equivalent employees during the year was 4,327 (2012: 4,113).

Underlying Operating Profit

Group Underlying Operating Profit increased by 5.6% to £37.1m (2012: £35.1m) with the Underlying Operating Profit margin of 14.3% (2012: 14.4%). On a like for like basis, Group Underlying Operating Profit increased by 13.8% to £37.1m (2012: £32.6m) with the Underlying Operating Profit margin of 14.3% (2012: 13.7%).

Exceptional Items

Total net exceptional costs in 2013 were £15.2m (2012: £21.7m). The main exceptional costs in 2013 were PI Costs of £12.0m; movements in the provision for contingent consideration on acquisitions which were expensed of £2.8m; and redundancy and other associated branch closure costs of £0.9m. These costs were offset by a gain on the sale of freehold properties totalling £0.1m. In 2012, exceptional costs comprised of PI Costs of £17.3m; movements in the provision for contingent consideration on acquisitions which were expensed of £4.4m; and redundancy and other associated branch closure costs including onerous lease provisions of £1.9m. These costs were offset by a gain on the sale of freehold properties totalling £1.4m.

Provision for PI claims/notifications

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

The PI provision at 31st December 2013 was made up of a 'Specific Provision' and 'Incurred But Not Reported' (IBNR). The Specific Provision was based on the Group's review of any notifications or claims which had been made against the Group as at 31st December 2013. The main factors considered in quantifying the Specific Provision were the likelihood that a claim would be successful, an assessment of the likely cost for each claim, including any associated legal costs, and whether any reduction in the claim is considered likely due to contributory negligence of the lender. The IBNR provision, was based on the Directors' estimates of the number of claims which would be received in the future with regard to work completed before 31st December 2013. The Directors have then applied an average cost per case, based on historical averages, to estimate the IBNR provision.

In June 2012, it was assumed that the run rate of new claims would reduce significantly from July 2013 following the change in legislation governing civil litigation taking effect in April 2013 (the Jackson Reforms). This reduction has not yet materialised and the run rate of new cases has remained at the level established in June 2012. In addition, the cost per claim has increased and in most recent months has been running higher than assumed in 2012. The increasing trend in cost per claim has been driven by a relatively small number of high value claims and by increases in legal costs.

As announced in November 2013, an additional exceptional charge of £12.0m (c£9.2m after tax) has been made in the year ending 31^st December 2013 in order to increase the PI provision. Since November 2013, the rate of new claims and cost per claim has been consistent with the assumptions behind the new provision. This additional provision represents the Directors' current best estimate of likely claims costs but the process of resolving open claims and estimating future claims is on-going.

A number of risks and uncertainties remain, in particular the actual monthly run rate of new claims, the date at which the high rate of claims will significantly reduce, and the average cost per case both for existing open claims and for claims yet to be received. The cost of these factors could differ materially from the Board's estimates, which could result in a further provision being required.

At 31^st December 2013 the total provision for PI costs was £25.9m. The Board has considered sensitivity analysis on the key risks and uncertainties discussed above as set out in Note 22 of the Financial Statements. If the run rate of new claims was 10% higher or lower than assumed in the year end provision of £25.9m, an additional or lower provision of £3.1m would be required. If the average cost per case for both existing open claims and for claims yet to be received was 5% higher or lower than assumed in the year end provision of £25.9m, an additional or lower provision of £1.8m would be required.

Contingent consideration

Certain contingent consideration arrangements have been accounted for as remuneration as the arrangements potentially involve the vendors forfeiting amounts otherwise due if continued services are not provided.

Contingent consideration relating to the 2011 acquisition of Marsh & Parsons has been treated as an expense of £0.4m (2012: £1.8m) in 2013. LSLi has acquired a number of subsidiaries whereby the contingent consideration is also considered to be remuneration under IFRS 3. A further expense of £2.4m (2012: £2.6m) was recorded in 2013.

Net Financial Costs

Net financial costs (excluding exceptional finance costs) amounted to £3.1m (2012: £2.6m). The finance costs related principally to interest and fees on the revolving credit facility, however, £0.7m (2012: £0.5m) of the costs relates to the unwinding of discounts on provisions.

Taxation

The UK standard corporation tax rate has reduced from 28% as at 1st January 2011 to 23% at 31st December 2013 with a further reduction to 22% occurring on 5th April 2014. The effective rate of corporation tax for the year was 21.4% (2012: 19.0%) excluding prior year adjustments. The effective tax rate for 2013 and 2012 was impacted by non taxable income for joint ventures and dividends, the impact of a rate change on the deferred tax liability, contingent consideration recognised as an expense and the impact of temporary differences on certain non-qualifying properties no longer being recognised. Excluding these impacts the effective tax rate is 24.0% (2012: 28.6%). Income tax charged directly to other comprehensive income was £4.4m (2012:£2.5m) and related to the revaluation of financial assets (see Note 16).

Adjusted Basic Earnings Per Share

The Basic Earnings Per Share was 13.6p (2012: 6.8p). The Adjusted Basic Earnings Per Share (as calculated in Note 10 of the Financial Statements) is 25.3p (2012: 23.8p). The Directors consider that the adjustments made to exclude the after tax effect of exceptional items, contingent acquisition consideration treated as remuneration, and amortisation of acquisition intangibles provides a better and more consistent indicator of the Group's underlying performance.

Balance Sheet

Capital Expenditure

Total capital expenditure in the year amounted to £7.1m (2012: £5.3m) and an additional £0.7m (2012: £0.3m) has been spent internally on developing new software which has been treated as an intangible asset.

Bank Facilities

LSL refinanced its bank facility during the year and now has a £100.0m revolving credit facility in place until August 2017 (2012: £75.0m). Further details on the Group's financial commitments as well as the Group's treasury and risk management policies are set out in Note 29.

Net Bank Debt

As at 31st December 2013 Net Bank Debt was £26.3m (2012: £26.6m) and Shareholders' funds amounted to £99.3m (2012: £76.1m) giving balance sheet gearing of 26.5% (2012: 35%). The decrease in Net Bank Debt was achieved in spite of the payment of £5.4m for various new acquisitions by the Estate Agency Divisions and payment of PI claims of £14.4m (2012: £7.7m). Net Bank Debt represented 5.8% of the Group's market capitalisation at 31st December 2013, and 64% of the Group's adjusted EBITDA for the year (2012: 10% and 67% respectively).

Cash Flow

The Group produced £42.4m (2012: £41.4m) of operating cashflow which is before capital expenditure including software of £7.9m (2012: £5.7m) and before PI claims paid out of £14.4m (2012: £7.7m) and exceptional costs of £1.1m (2012: £1.1m). The increase was due to improved Group Underlying Operating Profit. During the year the Group sold a number of freehold properties receiving net proceeds of £1.4m (2012: £6.2m) and generating an exceptional profit of £0.1m (2012: £1.4m).

Zoopla

In November 2013, the Group increased its stake in Zoopla to 4.91% by acquiring a further 48,178 shares at £17.50 per share. Based on this transaction and the current profitability of Zoopla, the Directors increased the valuation of the Group's stake in Zoopla to £35.1m (2012:£11.8m).

Net Assets

The Group's net assets as at 31st December 2013 were £99.3m (2012: £76.1m).

Treasury and Risk Management

LSL has an active debt management policy. The Group has interest rate swaps in place which fixes the interest on borrowings up to £25.0m at an average LIBOR rate of 2.93%, which provides a degree of predictability on finance costs. The interest rate swaps expire in the first half of 2014 and LSL is currently considering whether additional hedging should be put in place once these expire. 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 as adopted by the European Union.

Principal Risks & Uncertainties

This risk management and internal controls framework includes:

a) Ownership of the risk management and internal controls framework by the Board, supported by the Company Secretary, Head of Risk and Internal Audit and the Group Financial Controller;

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

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

d) The Board regularly reviews a consolidated risk register as part of the planning and reporting cycle to ensure that risks which impact the Group are identified, monitored and mitigated; and

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

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

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

However, many risk factors remain beyond the direct control of LSL and the risk management framework and procedures can only provide reasonable but not absolute assurance that the principal risks and uncertainties are managed to an acceptable level.

Further information relating to the management of these risks and uncertainties is set out in the Audit Committee Report (Internal Controls) of the Annual Report & Accounts 2013.

Principal Risk and Uncertainty	Mitigation
• Although the UK housing market started to recover in 2013, there is still economic uncertainty in both the UK and finance sector and there is some dependence on stimuli added to the housing market through Help to Buy. In addition political uncertainty around the 2015 election may impact the market towards end of year and results in some uncertainty over whether the market improvement will be sustained. Any impact on transaction volumes (both house purchase and remortgage) and house prices may adversely affect the profitability and cash flow of all our key brands and businesses.	The Board regularly reviews trends in market volumes and monitors the Group's operational gearing to decide on the appropriate level of resourcing. In addition, the Board regularly focuses on counter-cyclical income streams to ensure that the growth in income in Lettings and Asset Management set off any impact on residential transaction numbers.
• LSL has an exposure to the Central London property market via Marsh & Parsons. While historically the London market has been more robust compared to the rest of the UK, there is a risk that the London market fails to grow or that LSL fails to maximise the potential growth.	Marsh & Parsons is a well managed business with a diversified strategy. It operates in all key segments of the London market. The Board closely monitors the company's performance. Further, regular reviews of trends in market volumes are undertaken and decisions made on any cost base reductions measures.
• Loss of key Surveying or Corporate Client Services clients or contracts at their renewal date or significant reduction in volumes combined with pressure on fees, either as a result of adverse market conditions, market consolidation, competition or inadequate service delivery. In 2014, a number of major Surveying contracts are up for retender increasing this risk.	There has been an increased investment in customer services to retain existing clients and attract new ones. In addition, LSL is continuing to develop its private survey proposition to provide an alternative income stream. Improvements in the market has led to an increased demand for valuation services which has reduced the risk on loss of contracts or reduced pricing when the surveying contracts come up for renewal in 2014.
• Liability for inaccurate professional services advice to clients (e.g. legal claims relating to valuation services) together with the risk that LSL fails to maintain appropriate risk management arrangements.	Monitoring arrangements include oversight by the Board (including regular review of the PI provision) and appropriate quality controls and Risk and Internal Audit reviews of services provided on a sample basis. There are also specific operational controls implemented within the Surveying Division which include a risk based criteria for the identification of transactions to be reviewed by on-site specialists. In light of the improving market and the availability of higher LTV mortgages, LSL have undertaken a review of the valuation controls and processes to mitigate this risk.
• Failure to effectively deliver and manage the market share and fee growth initiatives for the Estate Agency Division.	Regular monitoring by the Board is undertaken on the Estate Agency Division's progress.
• Failure to comply with existing legislation/ regulation or changes to legislation/regulation and/or Government policy which may impact on business results or the UK housing market in general.	LSL business units are supported by the Compliance and Legal Services teams who closely monitor existing business practices and any reform proposals. Where appropriate Government departments and/or trade bodies are engaged in a dialogue.
• In response to the financial crisis, significant changes to financial services regulations have occurred which have included the implementation of the recommendation from the Retail Distribution Review which came in on 31^st December 2012 and Mortgage Market Review which will come into effect on 26^th April 2014.	The Board is monitoring the impacts of these changes and assessing what changes to business practices may be required to ensure compliance with new legislation Where required, specialist have been engaged to provide advice on the impacts of the incentives review and Risk and Internal Audit have provided the Board with reports on the implementation of these recommendation. In addition, a new IT platform has been developed for the Financial Services business which will assist in ensuring compliance with the new legislation.
• The continued growth of LSL's Financial Services business may result in increased regulation from the FCA and increased compliance requirements particularly if new offerings are introduced.	The Board closely monitors any new service offering proposed by the Financial Services business as well as any new acquisition. Where necessary external specialists are engaged to provide advice to ensure that all laws and regulations are adhered to and that a culture of treating customers fairly is embedded in the Group.
• Failure to identify appropriate targets for acquisition and once acquired, the businesses are not successfully integrated into the Group.	Each Division has plans in place to identify acquisition opportunities and wherever necessary additional external consultants are hired to assist with this process. Where opportunities arise, thorough due diligence is carried out and all significant acquisitions are approved by the Board. A detailed 100 day plan is prepared by management and then implemented once the business has been acquired. Post acquisition, a review will be presented to the Board on the financial and operational success of the acquisition, the integration of the business and together with any learnings and improvements arising from the process. In addition, with the continued focus on acquisition, LSL is in the process of strengthening its acquisitions team.
• Failure or interruptions of IT services on which the Group is reliant for operational performance and financial information	Dedicated in house IT departments with specialist staffing. Maintenance of a formalised business continuity infrastructure and contingency plans in the event of a system failure. Regular monitoring by subsidiary company management, external specialists and Risk and Internal Audit, with any system issues highlighted to the Board
• Loss of senior management who are key to delivering the future growth strategy of the Group.	The executive team focuses on retention of all senior management and ensures that adequate remuneration policies management development and succession plans are in place. This is supported by annual reviews by the Remuneration and Nominations Committees.

Group Income Statement

for the year ended 31^st December 2013

		2013	2012
	Note	£'000	£'000

Revenue		258,603	243,845

Operating expenses:
Employee and subcontractor costs		(150,158)	(142,224)
Establishment costs		(19,386)	(18,459)
Depreciation on property, plant and equipment		(3,977)	(3,499)
Other		(52,125)	(46,926)
		(225,646)	(211,108)

Other operating income		2,376	1,120
Gain on sale of property, plant and equipment		38	-
Group's share of profit after tax in joint ventures		1,731	1,283

Group operating profit before contingent consideration, exceptional costs, amortisation and share-based payments		37,102	35,140

Share-based payments		(1,323)	(647)
Amortisation of intangible assets		(375)	(3,472)
Exceptional cost	4	(12,990)	(17,684)
Contingent consideration	4	(2,793)	(4,410)
Group operating profit	4	19,621	8,927

Finance income		7	10
Finance costs		(3,154)	(2,633)
Exceptional finance credits	4	606	429
Net financial costs		(2,541)	(2,194)

Profit before tax		17,080	6,733

Taxation
- related to exceptional costs and contingent consideration		2,879	5,288
- others		(5,945)	(5,004)
	6	(3,066)	284

Profit for the year		14,014	7,017
Attributable to - Owners of the parent - Non-controlling interest		14,001 13	7,001 16


Earnings per share expressed in pence per share:
Basic	3	13.6	6.8
Diluted	3	13.5	6.8
Adjusted - basic	3	25.3	23.8
Adjusted - diluted	3	25.2	23.8

Group Statement of Comprehensive Income

for the year ended 31^st December 2013

		2013	2012
	Note	£'000	£'000

Profit for the year		14,014	7,017

Items to be reclassified to profit and loss in subsequent periods:
Revaluation of financial assets		23,806	10,677
Income tax effect		(4,380)	(2,456)
Net other comprehensive income to be reclassified to profit and loss in subsequent periods:		19,426	8,221

Other comprehensive income for the year, net of tax		19,426	8,221

Total comprehensive income for the year, net of tax		33,440	15,238

Attributable to - Owners of the parent - Non-controlling interest		33,427 13	15,222 16

Group Balance Sheet Company No. 05114014

as at 31^st December 2013

		2013			2012
	Note		£'000	£'000

Non-current assets
Goodwill		125,642			120,361
Other intangible assets		19,080			18,509
Property, plant and equipment		16,230			13,501
Financial assets		36,574			11,921
Investments in joint ventures		3,239			2,313
Total non-current assets		200,765			166,605

Current assets
Trade and other receivables		35,340			29,432
Current tax receivables		771			2,242
Cash and cash equivalents		469			225
Total current assets		36,580			31,899
Non-current assets held for sale		276			1,097
Total assets		237,621			199,601

Current liabilities
Financial liabilities		(5,113)			(2,396)
Trade and other payables		(54,090)			(48,297)
Provisions for liabilities		(8,458)			(2,305)
Total current liabilities		(67,661)			(52,998)

Non-current liabilities
Financial liabilities		(43,749)			(42,165)
Deferred tax liability		(9,014)			(5,464)
Provisions for liabilities		(17,881)			(22,895)
Total non-current liabilities		(70,644)			(70,524)

Total Liabilities		(138,305)			(123,522)

Net assets		99,316			76,079

Equity
Share capital		208			208
Share premium account		5,629			5,629
Share-based payment reserve		2,475			1,526
Treasury shares		(4,292)			(2,691)
Fair value reserve		27,647			8,221
Retained earnings		67,567			63,117
Equity attributable to owners of parent		99,234			76,010
Non-controlling interests		82			69

Total equity		99,316			76,079

Group Statement of Cash Flows

for the year ended 31^st December 2013

		31 December 2013		31 December 2012
	Note	£'000	£'000	£'000	£'000
Cash generated from operating activities
Profit before tax			17,080		6,733

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

Exceptional operating costs and contingent consideration (non-cash)	4	15,491		23,262
Amortisation of intangible assets		375		3,472
Finance income		(7)		(10)
Finance costs		3,580		2,891
Exceptional finance credit		(606)		(429)
Share-based payments		1,323		647
Total adjustments			20,156		29,833
Group operating profit before amortisation and share-based payments			37,236		36,566
Depreciation		3,977		3,499
Dividend income		(1,141)
Share of results of joint ventures		(1,731)		(1,283)
Gain on sale of property, plant and equipment		(172)		(1,426)
			933		790
(Increase)/decrease in trade and other receivables		(4,656)		12
Increase/(decrease) in trade and other payables		4,881		(2,078)
Decrease in provisions		(11,544)		(2,699)
			(11,319)		(4,765)
Cash generated from operations			26,850		32,591

Interest paid		(3,270)		(2,084)
Tax paid		(2,537)		(7,252)
			(5,807)		(9,336)
Net cash generated from operating activities			21,043		23,255

Cash flows from investing activities
Cash acquired on purchase of subsidiary undertaking		24		223
Acquisitions of subsidiaries and other businesses		(3,515)		(3,926)
Payment of contingent consideration		(520)		-
Investment in joint venture		-		(10)
Investment in financial assets		(847)		(897)
Dividends received from joint venture		805		748
Dividends received from financial assets		1,141		-
Interest received		7		10
Purchase of property, plant and Equipment and intangible assets		(7,859)		(5,680)
Proceeds from sale of property, plant and equipment		1,475		6,290
Net cash expended on investing activities			(9,289)		(3,242)

		31 December 2013		31 December 2012
	Note	£'000	£'000	£'000	£'000


Cash flows from financing activities
Drawdown/(repayment) of loans		510		(10,962)
Payment of deferred consideration		(494)		-
Purchase of treasury shares		(2,625)		-
Proceeds from exercise of share options		1,084		-
Dividends paid		(9,985)		(9,261)

Net cash used in financing activities			(11,510)		(20,223)

Net increase/(decrease) in cash and cash equivalents			244		(210)
Cash and cash equivalents at the beginning of the year			225		435
Cash and cash equivalents at the end of the year			469		225

Group Statement of Changes in Equity

Year ended 31^st December 2013

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

Year ended 31^st December 2012

	Share capital	Share premium account	Share- based payment reserve	Treasury shares	Fair value Reserve	Retained earnings	Total equity	Non-controlling interests	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1^st January 2012	208	5,629	912	(2,747)	-	68,328	72,330	53	72,383
Profit for the year	-	-	-	-	-	7,001	7,001	16	7,017
Other comprehensive income	-	-	-	-	8,221	-	8,221	-	8,221
Total comprehensive income for the year	-	-	-	-	8,221	7,001	15,222	16	15,238
Exercise of options	-	-	(33)	56	-	(23)	-	-	-
Put option over non-controlling interests	-	-	-	-	-	(2,928)	(2,928)	-	(2,928)
Share-based payments	-	-	647	-	-	-	647	-	647
Dividend payment	-	-	-	-	-	(9,261)	(9,261)	-	(9,261)
At 31^st December 2012	208	5,629	1,526	(2,691)	8,221	63,117	76,010	69	76,079

Notes to the Preliminary Results

The financial information in this preliminary announcement does not constitute LSL's statutory financial statements for the year ended 31^st December 2013 but has been extracted from the Financial Statements, and as such, does not contain all information required to be disclosed in the financial statements prepared in accordance with IFRS.

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

1. Basis of preparation

The accounting policies adopted are consistent with those of the previous financial year except for the adoption of new Standards and Interpretations as of 1^st January 2013 which are applicable to the Group. During the year ended 31^st December 2013, the Group has adopted a number of new IFRS, IAS or amendments issued by the IASB or interpretation issued by the IFRS Interpretations Committee which have had a significant impact on the Group's consolidated financial statements. These are as follows:

IFRS 13 Fair Value Measurement

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

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

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

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

These amendments remove the unintended consequences of IFRS 13 on the disclosures required under IAS 36. In addition, these amendments require disclosure of the recoverable amounts for the assets or CGUs for which impairment loss has been recognised or reversed during the period. These amendments are effective retrospectively for annual periods beginning on or after 1st January 2014 with earlier application permitted, provided IFRS 13 is also applied. The Group has early adopted these amendments to IAS 36 in the current period since the amended/additional disclosures provide useful information as intended by the IASB. Accordingly, these amendments have been considered while making disclosures for impairment of non-financial assets in Note 14. These amendments would continue to be considered for future disclosures.

2. Segment analysis of revenue and operating profit

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

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

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

Each segment has various products and services and the revenue from these products and services are disclosed in the Business Review section of the Strategic Report of the Annual Report and Accounts 2013.

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

2. Segment analysis of revenue and operating profit (continued)

Operating segments

The following table presents revenue and profit information regarding the Group's operating segments for the financial year ended 31^st December 2013 and financial year ended 31^st December 2012 respectively.

Year ended 31^st December 2013

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

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

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

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

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

Year ended 31^st December 2012

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

Segmental revenue	181,627	62,218	-	243,845

Segmental result:
- before exceptional costs, contingent consideration, amortisation and share-based payments	24,430	13,910	(3,200)	35,140
- after exceptional costs, contingent
consideration, amortisation and share-based payments	20,168	(6,070)	(4,913)	9,185

Finance income				10
Finance costs				(2,891)
Exceptional finance costs				429

Profit before tax				6,733
Taxation				284
Profit for the year				7,017

3. Earnings per share (EPS)

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

	Profit after tax £'000	Weighted average number of shares	2013 Per share amount Pence	Profit after tax £'000	Weighted average number of shares	2012 Per share amount Pence

Basic EPS	14,001	102,955,662	13.6	7,001	102,912,662	6.8
Effect of dilutive share options	-	410,999	-	-	-	-
Diluted EPS	14,001	103,366,661	13.5	7,001	102,912,662	6.8

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.

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:

	2013 £'000	2012 £'000

Group operating profit before contingent consideration in acquisitions linked to employment, exceptional costs, share-based payments and amortisation (excluding non-controlling interest):	37,089	35,124

Net finance costs (excluding exceptional costs and unwinding of discount on contingent consideration)	(3,147)	(2,623)
Normalised taxation	(7,892)	(7,963)
Adjusted profit after tax⁽¹⁾ before exceptional costs, share-based payments and amortisation	26,050	24,538

	Adjusted profit ⁽¹⁾ £'000	Weighted average number of shares	2013 Per share amount Pence	Adjusted profit⁽¹⁾ £'000	Weighted average number of shares	2012 Per share amount Pence

Adjusted Basic EPS	26,050	102,955,662	25.3	24,538	102,912,662	23.8
Effect of dilutive share options	-	410,999	-	-	-	-
Adjusted Diluted EPS	26,050	103,366,661	25.2	24,538	102,912,662	23.8

⁽¹⁾This represents adjusted profit after tax attributable to equity holders of the parent. Effective tax rate considered to calculate normalised taxation in 2013 is 23.25% (2012: 24.5%)

4. Exceptional items and contingent consideration

	2013	2012
	£'000	£'000
Exceptional costs:
Branch closure costs including redundancy costs	924	1,200
Acquisition related costs	200	(98)
Gain on disposal of freehold properties	(134)	(1,426)
Onerous leases	-	675
Provision for professional indemnity claims/notifications	12,000	17,333
Total operating exceptional costs	12,990	17,684
Contingent consideration:
Contingent consideration on acquisitions	2,793	4,410
	2,793	4,410
Exceptional finance credits:
Movement in fair value of interest rate swap	(606)	(429)
	(606)	(429)
	15,177	21,665

5. Dividends paid and proposed

	2013	2012
	£'000	£'000
Declared and paid during the year:
Equity dividends on ordinary shares:
2011 Final: 5.9p	-	6,071
2012 Interim: 3.1p	-	3,190
2012 Final: 6.4p	6,584	-
2013 Interim: 3.3p	3,401	-
	9,985	9,261
Dividends on Ordinary Shares proposed (not recognised as a liability as at 31^st December):
Equity dividends on Ordinary Shares:
Dividend: 7.2p per share (2012: 6.4p)	7,395	6,584

6. Taxation

(a) Tax on profit on ordinary activities

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

		2013	2012
		£'000	£'000

UK corporation tax	- current year	4,474	2,997
	- adjustment in respect of prior years	(574)	(1,407)
		3,900	1,590
Deferred tax:
Origination and reversal of temporary differences		(814)	(1,718)
Adjustment in respect of prior year		(20)	(156)
Total deferred tax credit		(834)	(1,874)
Total tax charge/(benefit) in the income statement		3,066	(284)

Income tax charged directly to other comprehensive income is £4,380,000 (2012:£2,456,000) and relates to the revaluation of financial assets (Note 16)

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

(b) Factors affecting tax charge for the year

The tax assessed in the profit and loss account is lower (2012: lower) than the standard UK corporation tax rate, because of the following factors:

	2013	2012
	£'000	£'000

Profit on ordinary activities before tax	17,080	6,733

Tax calculated at UK standard rate of corporation tax rate of 23.25% (2012 - 24.5%)	3,971	1,650
Non taxable goodwill	(127)	-
Non taxable income from joint ventures and dividends	(667)	(314)
Benefit of deferred tax asset not previously recognised	-	(49)
Disallowable expenses	248	295
Impact of movement in contingent consideration charge to Income Statement	650	1,017
Share-based payment relief	62	29
Temporary differences on non-qualifying properties no longer recognised	(94)	(1,060)
Brought forward losses not previously recognised utilised	(62)	-
Impact of rate change on deferred tax	(321)	(289)
	3,660	1,279
Prior period adjustments - current tax	(574)	(1,407)
Prior period adjustment - deferred tax	(20)	(156)
Total taxation charge/(benefit)	3,066	(284)

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

	2013	2012
	£'000	£'000

Interest bearing loans and borrowings
- Current	5,113	2,396
- Non-current	43,749	42,165
	48,862	44,561
Less: 12% unsecured loan notes	(9,339)	(8,660)
Add: cash and short-term deposits	(469)	(225)
Less: deferred and contingent consideration	(12,745)	(9,028)
Net bank debt at the end of the year	26,309	26,648

During the year, the Group has repaid £0.5m (2012: repaid £10.4m) of the revolving credit facility. The utilisation of this revolving credit facility may vary each month as long as this does not exceed the maximum £100.0m facility (2012: £75.0m).

8. Acquisitions during the year

The Group acquired the following businesses during the year

a. Walker Fraser Steele LLP

In June 2013, the Group acquired the trade and assets of Walker Fraser Steele LLP, a Scottish surveying business for an initial consideration of £25,000 and a contingent consideration, valued based on estimates of the payments due under the contract, calculated to be to £1,081,000. The fair value of the identifiable assets, except for cash and cash equivalents, and liabilities of Walker Fraser Steele LLP as at the date of acquisition have been determined as below:

	Provisional fair value recognised on acquisition
	£'000
Intangible assets	24
Total identifiable net liabilities acquired	24
Purchase consideration	1,106
Goodwill	1,082

Purchase consideration discharged by:

Cash	25
Contingent consideration	1,081
	1,106

Analysis of cash flow on acquisition	£'000
Transaction costs (included in cash flows from operating activities)	54
Net cash acquired with the subsidiary (included in cash flows from investing activities)	-
Purchase consideration discharged in cash (included in cash flows from investing activities)	25
Net cash outflow on acquisition	79

9. Acquisitions during the year (continued)

The acquisition accounting above, is considered provisional as LSL is still reviewing estimates of the likely payments under the contract, but the calculation above represents our best estimate at 31^st December 2013.

The goodwill of Walker Fraser Steele LLP comprises certain intangible assets that cannot be individually separated and reliably measured from the acquiree due to their nature. These items include an experienced management team with a good record of delivering a quality service to customers against the backdrop of challenging market conditions, the expected value of synergies and the potential to significantly grow the business. No determination has been made yet as to what proportion, if any, of the goodwill will be tax deductible.

b. Lawlors Limited

In September 2013 the Group acquired 75% of Lawlors, a 3 branch estate agency chain operating in Essex for a cash consideration of £2.0m. The remaining 25% is subject to put and call options which are exercisable in two tranches in 2017 and 2019 dependent on profit performance. Due to the nature of the payment terms, the deferred consideration is considered to be a capital payment for accounting purposes.

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

	Provisional fair value recognised on acquisition
	£'000
Intangible assets	202
Property, plant and equipment	23
Trade and other receivables	124
Cash and cash equivalents	24
Trade and other payables	(138)
Current tax liabilities	(108)
Total identifiable net liabilities acquired	127
Purchase consideration	2,870
Goodwill	2,743

Purchase consideration discharged by:

Cash	2,006
Deferred consideration	864
	2,870

Analysis of cash flow on acquisition	£'000
Transaction costs (included in cash flows from operating activities)	73
Net cash acquired with the subsidiary (included in cash flows from investing activities)	(24)
Purchase consideration discharged in cash (included in cash flows from investing activities)	2,006
Net cash outflow on acquisition	2,055

9. Acquisitions during the year (continued)

The goodwill of Lawlors comprises certain intangible assets that cannot be individually separated and reliably measured from the acquiree due to their nature. These items include the high quality, dynamic and experienced management team with a good record of delivering strong and profitable growth against the backdrop of challenging market conditions, the expected value of synergies and the potential to significantly grow the business.

c. Lettings acquisitions

During the year, Your Move and LSLi (through its subsidiaries) acquired 5 lettings businesses for an aggregate consideration of £1,536,000 of which £52,000 has been deferred which have then been amalgamated into the existing businesses. The combined fair values of the identifiable assets and liabilities as at the date of acquisition of the above acquisitions as at the date of acquisition have been determined as below:

	Provisional fair value recognised on acquisition
	£'000
Property, plant and equipment	26
Current tax liabilities	(4)
Total identifiable net liabilities acquired	22
Purchase consideration	1,536
Goodwill	1,514

Purchase consideration discharged by:

Cash	1,484
Deferred consideration	52
	1,536

Analysis of cash flow on acquisition	£'000
Transaction costs (included in cash flows from operating activities)	73
Net cash acquired with the subsidiary (included in cash flows from investing activities)	-
Purchase consideration discharged in cash (included in cash flows from investing activities)	1,484
Net cash outflow on acquisition	1,557

9. Acquisitions during the year (continued)

Transaction costs have been expensed and are included under exceptional costs (see Note 4) and totalled £200,000 in the year. The goodwill of the acquired businesses comprises certain intangible assets that cannot be individually separated and reliably measured from the acquiree due to their nature. These items include the high quality, dynamic and experienced management team with an outstanding record of delivering strong and profitable growth against the backdrop of challenging market conditions, the expected value of synergies and the potential to significantly grow the business.

From the date of acquisition to 31^st December 2013, the acquisitions in aggregate have contributed to £1.3m of revenue and £0.4m profit before tax of the Group, excluding the impact of movements in the contingent consideration recorded through the profit and loss. If all of these combinations had taken place at the beginning of the year, the consolidated revenue would have been higher by £3.4m and the consolidated profit before tax would have been higher by £1.0m. Of the total goodwill arising on all acquisitions, none is expected to be deductible for tax purposes.

9. Annual General Meeting (AGM)

The AGM will be held at the London offices of LSL, 1-3 Sun Street, London EC2A 2EP on 24^th April 2014 starting at 2.30pm.

Definitions

"2011 EBT" employee benefit trust established in November 2011 as part of the acquisition of Marsh & Parsons

"Adjusted Basic Earnings Per Share" is defined at note 10of the Financial Statements

"AGM" Annual General Meeting

"AMF" and "Advance Mortgage Funding" are trading names of Advance Mortgage Funding Limited

"AMI" Association of Mortgage Intermediaries

"ARLA"Association of Residential Lettings Agents

"ASA"Advertising Standards Authority

"Asset Management" refers to LSL's repossessions asset management and property management for multi property landlords services

"Audit Committee" LSL's audit committee

"Auditor Independence Policy" LSL policy relating to non audit services provided by the external auditor

"Basic Earnings Per Share" is defined at Note 10 of the Financial Statements

"BDS" and "BDS Mortgage Group " are trading names of BDS Mortgage Group Limited

"Board" the Board of Directors of LSL

"BSi" British Standards Institute

"Committees" refers to LSL's Nominations Committee, the Audit Committee and the Remuneration Committee

"Companies Act" Companies Act 2006

"Corporate Client Services"comprising LSL Corporate Client Services Limited, Templeton LPA Limited and St Trinity Limited providing repossession, asset management and corporate letting services

"Chancellors Associates" trading name of Chancellors Associates Limited

"Chairman" Roger Matthews

"Chairman of the Audit Committee"Mark Morris

"CML" Council of Mortgage Lenders

"Code" UK Code of Corporate Governance by the Financial Reporting Council (September 2012)

"Company Secretary" Sapna B FitzGerald

"Connells" Connells Limited

"CSOP" company share ownership plan

"CSR" corporate social responsibility

"Davis Tate" trading name of Davis Tate Limited

"Director" an Executive Director or Non Executive Director of LSL

"DMGT" trading name of Daily Mail and General Trust plc

"EBITDA" earnings, before interest, taxes, depreciation and amortisation

"EPC" energy performance certificate

"EPS" earnings per share

"Ernst & Young" Ernst & Young LLP

"ESG" environmental, social and governance

"ESOT" LSL's employee share trust

"Estate Agency Division" or "Estate Agency" includes LSL's Residential Sales, Lettings, Financial Services, LPA fixed charge receiver and Asset Management businesses

"Estate Agency and Related Services" refers to LSL's Estate Agency Division

"e.surv" or "e.surv Chartered Surveyors" trading names of e.surv Limited

"Executive Director(s)" refers to Steve Cooke, Ian Crabb, Simon Embley and David Newnes.

"FCA" Financial Conduct Authority

"Financial Services" refers to LSL's financial services (including mortgage and protection brokerage and the operation of intermediary networks

"First Complete" trading name of First Complete Limited

"Financial Statements" financial statements contained in this Report

"FRC" Financial Reporting Council

"Frosts" trading name of David Frost Estate Agents Limited

"FSA" Financial Services Authority

"FSMA" Financial Services and Markets Act 2000

"Group" LSL Property Services plc and its subsidiaries

"Group Chief Executive Officer" Ian Crabb

"Group Finance Director" Steve Cooke

"Growth Shares" the B1, B2 and C classes of ordinary shares (each £0.001) in Marsh & Parsons (Holdings) Limited

"Goodfellows" trading name of GFEA Limited

"HEAL" or "Halifax" Halifax Estate Agencies Limited

"HEAL Business" HEAL branches and St Trinity Asset Management (formerly HEAL Corporate Services)

"HEAL Corporate Services" the asset management business operated by HEAL

"Home of Choice" or "HoC" division within First Complete

"Home Report" a report which includes a single survey, energy report and property questionnaire and which must accompany all residential property marketing in Scotland

"IBNR" incurred but not report and relates to the Surveying Divisions' PI claims

"IFRS" International Financial Reporting Standards

"Intercounty" trading name of ICIEA Limited

"JNP" trading name of JNP Estate Agents Limited

"JSOP" joint share ownership plan

"KPI" key performance indicators

"Lauristons" trading name of Lauristons Limited

"Lawlors" trading name of Lawlors Limited.

"Legal Marketing Services"trading name of Cybele Solutions Holdings Limited

"Lettings" refers to LSL's residential property lettings and property management services

"Linear" and "Linear Financial Services" are trading names of Linear Mortgage Network Limited and Linear Financial Services Limited

"Lloyds Banking Group" Lloyd Bank plc group of companies

"LMS Direct Conveyancing"trading name of LMS Direct Conveyancing Limited

"LPA" the Law of Property Act 1925

"LSLi" LSLi Limited and its subsidiaries JNP, Intercounty, Frosts, Goodfellows, Davis Tate, Lauristons and Lawlors

"LSL" LSL Property Services plc and its subsidiaries

"LSL Corporate Client Department" trading name of LSL Corporate Client Services Limited

"LSL Land & New Homes"trading style used by members of the Estate Agency Division

"LTIP" long term incentive plan

"Lush Retail" Lush Retail Limited

"Management Team" senior management teams within the Group including the Executive Directors

"Marsh & Parsons" trading name of Marsh & Parsons Limited

"NAEA" National Association of Estate Agents

"NBS" New Bridge Street Limited

"Net Bank Debt" see Note 30 of the Financial Statements

"NFoPP"National Federation of Property Professional

"Non Executive Director"refers to Helen Buck, Adrian Gill, Roger Matthews, Mark Morris and Bill Shannon (since January 2014) and in respect of 2013 Mark Pain.

"Notice of Meeting" the circular made available to shareholders setting out details of the AGM

"Note" refers to notes to the Financial Statements

"OCI" refers to other comprehensive income

"Openwork" trading name of Openwork Limited

"Ordinary Shares" 0.2p ordinary shares in LSL

"PI" professional indemnity

"PI Costs" costs relating to ongoing and expected future legal claims relating to Surveying and Valuation Services

"Pink Home Loans" or "Pink" are trading names for Advance Mortgage Funding Limited and BDS Mortgage Group Limited

"RCF" revolving credit facility

"Reeds Rains" trading name of Reeds Rains Limited

"Reeds Rains Financial Services"trading name of Reeds Rains Financial Services Limited

"Registered Office" Newcastle House, Albany Court, Newcastle Business Park, NE4 7YB

"Report" LSL's annual report and accounts 2013

"Residential Sales" refers to LSL's services for residential property sales

"RICS" Royal Institution of Chartered Surveyors

"Sainsbury's" Sainsbury's Supermarkets Limited

"SAYE" save-as-you-earn

"Senior Independent Non Executive Director" Mark Morris

"Shareholders" shareholders of LSL

"SIP" share incentive plan

"St Trinity Asset Management"trading name of St Trinity Limited

"Surveying Division" or"Surveying" includes LSL's surveying and valuation businesses

"Surveying and Valuation Services" or"Surveying Services" refers to LSL's Surveying Division

"Templeton" trading name of Templeton LPA Limited

"The Mortgage Alliance" or"TMA" are trading names of First Completes' mortgage club

"TPO" The Property Ombudsman

"Trust" or "Employee Benefit Trust" LSL Property Services plc Employee Benefit Trust

"Trustees" Capita Trustee Limited

"TSI" Trading Standards Institute

"TSR" total shareholder return "Underlying Group Operating Margin" Group Operating Profit before exceptional costs, amortisation and share based payments shown as a percentage of turnover

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

"VEM" Vibrant Energy matters Limited

"Walker Fraser Steele" a trading name of e.surv

"Your Move" trading name of your-move.co.uk Limited

"Zoopla" trading name of Zoopla Property Group Limited

This information is provided by RNS

The company news service from the London Stock Exchange

END

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