HALF YEAR RESULTS TO 30 JUNE 2022

RNS Number : 6911U

LSL Property Services PLC

03 August 2022

 

                                                          3 August 2022

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

HALF YEAR RESULTS TO 30 JUNE 2022

HIGHLIGHTS

Record revenue in Financial Services Network and Surveying & Valuation highlighting benefits of diversification strategy and reduced exposure to housing market cycles

· Financial Services Network Underlying Operating Profit^1,2 in line with 2021 record

· Highest first half Underlying Operating Profit^1,2 in Surveying & Valuation for 10 years

· Financial Services Network revenue up 10% year-on-year in substantially smaller mortgage and protection markets

· Record Surveying revenue of £50.5m, up 9% over the previous record in H1 2021

· LSL's share of the total UK purchase and re-mortgage market increased to 10.1%³ (H1 2021: 9.0%)

· Financial adviser numbers increased to 2,930 at 30 June 2022 (30 June 2021: 2,744) with strong financial advisor recruitment pipeline

· Significant further progress in strategic objective of developing income from private surveys and data, which increased by 73% to £1.9m

Estate Agency retained market share gains made in 2021, building a record pipeline to carry into H2

· The Estate Agency Division consolidated the market share gains made during 2021, maintaining share of instructions in the locations we trade, and growing our market share of housing transactions on a national level

· Residential sales exchange pipeline conversion speed remained extremely slow across the market principally due to the continuing industry-wide capacity issues in conveyancing, which impacted residential exchange income which contributed to an Underlying Operating Loss^1,2 of £1.0m in H1 2022. Had the residential pipeline exchanged at its normal conversion speed, it is estimated that Estate Agency Underlying Operating Profit would have been over £6m higher

· The residential sales exchange pipeline grew significantly and now stands at a record level of £26.7m (31 December 2021: £20.7m, 30 June 2021: £21.2m)

Resilient financial performance reflects expected return to usual phasing, with momentum established and Group well positioned for strong H2. The impact on H1 profits of delayed residential sales conversion in Estate Agency is estimated at over £6m with additional amounts in Financial Services

· The split of H1:H2 profit in 2022 is expected to revert to a more typical profile with a significant skew to H2, after record housing transactions in H1 2021, and this is reflected in Group Underlying Operating Profit⁴ in H1 2022 of £14.2m (H1 2021: £27.3m). On a statutory basis, Group operating profit was £8.7m (H1 2021: £26.7m)

· Surveying & Valuation Division delivered an extremely strong performance with Underlying Operating Profit^1,2 up 14% to £13.1m (H1 2021: £11.4m), and Underlying Operating Margin¹ improving to 26% (H1 2021: 25%)

· Financial Services Network business reported Underlying Operating Profit^1,2 of £7.5m in line with the 2021 record (H1 2021: £7.4m) which was a very robust performance in substantially smaller mortgage and protection markets, and delivered during a period of ongoing investment in the business

· Estate Agency Division comparative financial performance reflected the significantly reduced market activity against 2021 which was boosted substantially by the Stamp Duty deadline, the significant delays in conversion of residential sales exchange pipelines and cost-inflationary pressures. This led to an Underlying Operating Loss^1,2 of £1.0m in H1 2022 (H1 2021: profit of £12.5m). The estimated profit impact in Estate Agency in H1 2022 of the delayed conversion is over £6m, which highlights the strong underlying performance of the Group as a whole

· Notwithstanding the significant impact on profits of delayed residential sales conversions, Group Underlying Operating Profit in H1 2022 was 17% above H1 2019, whilst residential market transaction volumes were at more similar levels with conversion much slower, highlighting the Group's reduced exposure to housing market volatility

Strategy remains on track with Group well placed to deliver increased profitability in H2 and beyond

· Momentum in both the Financial Services Network business and Surveying & Valuation, with a record residential sales exchange pipeline expected to support H2 2022 profit materially ahead of H1 2022

· Net cash at 30 June 2022 of £30.7m (30 June 2021: £17.0m), providing flexibility to make further investments to support growth

· We will continue to invest in capability and technology across the Financial Services Division in the second half of the year with new technology to be rolled out to member firms

· Pivotal Growth, LSL's financial services Joint Venture with Pollen Street Capital, has now announced four acquisitions and with a strong deal pipeline in place, we remain excited about its potential

· The trajectory in the Financial Services Network business and the opportunities we have identified in Surveying & Valuation continue to offer opportunities for growth and we remain confident that our strategy remains on track

Current trading and outlook

· The Financial Services Network business is trading strongly with mortgage completions in July beating the previous monthly record set in June 2021

· Very strong performance continues in Surveying & Valuations

· Estate Agency front end sales activity remains stable with a good level of buyer demand 

· The conversion of residential sales pipeline remains very slow, a trend we expect to continue throughout H2

· The consequence of continuing slow pipeline conversion will be to delay profit on some H2 activity into 2023 and as result we now anticipate full year profits to be lower than our previous expectations whilst remaining significantly above the pre-COVID 19 performance reported in 2019

· The benefits of the pipeline built up at 30 June 2022 will be realised in the second half of the year and we expect that H2 Operating Profits will be substantially stronger than H2 2021 and H2 2019

Commenting on today's announcement, David Stewart, Group Chief Executive said:

"These results show that our strategy is on track and that LSL continues to trade strongly. Our Surveying & Valuation and Financial Services businesses delivered record revenues and our Estate Agency Division retained the market share gains made in 2021, in doing so building a strong residential sales pipeline as significant profits were delayed by the continuing slow speed of exchange experienced across the market. We are well placed to deliver a strong performance in the second half of the year and to grow in 2023 as we increasingly reap the benefits of our financial services led growth strategy."

This announcement has been determined to contain inside information.

Notes:

1  Divisional Underlying Operating Profit and Divisional Underlying Operating Margin are stated on the same basis as Group

2  Refer to note 4 of the Financial Statements for reconciliation of Divisional Underlying Operating Profit to statutory operating profit

3  New mortgage lending by purpose of loan, UK (BOE) - Table MM23

4  Group Underlying Operating Profit is before exceptional items, contingent consideration, amortisation of intangible assets and share-based payments (see note 5 of the Financial Statements)

FINANCIAL RESULTS

H1	2022	2021	Var
Group Revenue (£m)	160.9	166.5	(3)%
Group Underlying Operating Profit1 (£m)	14.2	27.3	(48)%
Group Underlying Operating margin (%)	9%	16%	-760bps
Exceptional Gains (£m)	-	4.3	nm
Exceptional Costs (£m)	(2.0)	(1.7)	(21)%
Group operating profit (£m)	8.7	26.7	(67)%
Profit before tax (£m)	7.4	25.5	(71)%
Basic Earnings per Share2 (pence)	5.7	21.8	(74)%
Adjusted Basic Earnings per Share2 (pence)	10.7	20.9	(49)%
Net Cash3 at 30 June (£m)	30.7	17.0	80%
Interim Dividend (pence)	4.0	4.0	-

Notes:

1  Group Underlying Operating Profit is before exceptional costs, contingent consideration, amortisation of intangible assets and share-based payments (as set out in Note 5 of the financial statements)

2  Refer to Note 6 of the Financial Statements for the calculation

3  Refer to Note 14 to the Financial Statements for the calculation

nm  not meaningful

For further information, please contact:

David Stewart, Group Chief Executive Officer
Adam Castleton, Group Chief Financial Officer
LSL Property Services plc	[e-mail]
Helen Tarbet
Simon Compton
George Beale
Buchanan	0207 466 5000 / [e-mail]

Notes on LSL

LSL is one of the largest providers of services to mortgage intermediaries and mortgage and protection advice to estate agency customers, completing around 41bn of mortgages in 2021. It represents around 10% of the total purchase and re-mortgage market with over 2,900 financial advisers. PRIMIS was named Best Network by Money Marketing in their 2021 awards and Best Network, 300+ appointed representatives at the 2022 Mortgage Strategy Awards.

LSL is one of the UK's largest providers of surveying and valuation services, supplying seven out of the ten largest lenders in the UK, employing around 500 operational surveyors, and performing over 500,000 valuations and surveys per annum for key lender clients. e.surv was named Best Surveying Firm at the 2022 Mortgage Finance Gazette Awards and Best Surveyor at the 2022 Equity Release Awards with Mortgage Solutions.

LSL also operates a network of 225 owned and 127 franchised estate agency branches.

For further information please visit LSL's website:  lslps.co.uk 

Group Chief Executive's Review

Our financial performance in the first half of 2022 highlights the benefits of our strategy to further reduce the Group's exposure to housing market cycles. Although our H1 2022 results were impacted significantly by continuing market-wide delays in the rate of residential sales exchanges, the result of which was to delay profits by over £6m, Group Underlying Operating Profit¹ of £14.2m was significantly higher than the £12.2m we reported in H1 2019, the most recent year when housing market conditions were comparable.

We expect that the H1:H2 profit split will revert to its long-term profile, in which we earn the majority of profits in the second half of the year. As a result of this re-phasing, and the delay in residential sales conversion, the first half Underlying Operating Profit was below the £27.3m reported in H1 2021, when volumes were boosted significantly by the Stamp Duty holiday. On a statutory basis, Group operating profit was £8.7m (H1 2021: £26.7m).

Our Financial Services Network business is at the heart of our strategy. The number of advisers in our Network has increased consistently over many years, illustrated by the growth from 2,321 to 2,858 over the three years to 31 December 2021. The number of advisers increased further to 2,930 at 30 June with a strong pipeline in place for further growth during the rest of the year. This total is yet to reflect benefit from acquisitions by Pivotal Growth, our joint venture "buy-and-build" mortgage broker, which we expect to boost membership further.

Small, independent mortgage brokers typically perform well in more difficult market conditions, and this can be seen in the strong performance of our Financial Services Network business. Our brokers arranged purchase and re-mortgage completions totalling £15.2bn, representing an increase of 11% over 2021 in a smaller overall market (H1 2022: £151.4bn, H1 2021: £168.5bn). This represents our highest-ever market share² of 10.1%, up from 9.0% last year. There was a general shift away from house purchase to re-mortgage business, as consumers sought to secure their payments in the light of increased economic uncertainty and rising interest rates. Across the market, this was reflected in lower protection sales, but we estimate that LSL advisers increased their protection market share further, building on past success we have had in increasing the focus on this area.

This strong revenue performance and further growth in membership helped our Financial Services Network businesses deliver a half year Underlying Operating Profit³ of £7.5m, in line with the record performance in H1 2021 of £7.4m, and ahead of the £6.9m reported in H2 2021, indicating the continued momentum in this business. These results would have been stronger had the mortgage and protection cases relating to delayed residential sales exchanges been reflected in the half year.

Given the significant potential for further growth offered by the Financial Services Network business, we have continued to invest in building our capability, including developing Mortgage Gym technology for our Financial Services Network members. We will start to roll out this enhanced functionality later this year.

In our AGM statement, we noted that Pivotal Growth had been slower to complete deals than we initially expected, and, in the short term, this had increased costs and limited its contribution to our Financial Services Network business. I am pleased to report that Pivotal Growth has now announced four acquisitions and we remain excited about its prospects.

I am delighted to say that our Surveying & Valuation business performed very strongly, delivering record half-year performance. In a flat valuations market, we carried out more jobs whilst continuing to build on the efficiency improvements reported in 2021. Underlying Operating Profits³ increased by 14% to £13.1m (H1 2021: £11.4m), with an Underlying Operating Profit Margin³ of 25.9% (H1 2021: 24.7%). This is a very significant increase on the 14.8% we reported in 2019, demonstrating the material improvements we have made in this business.

I am particularly encouraged by the rapid growth in our Direct-to-Consumer and data services revenue streams in our Surveying & Valuation business, with income increasing by 73% to £1.9m (H1 2021: £1.1m) and further growth targeted. A key element of this improvement to date has been referrals from our Financial Services Network members, demonstrating the opportunities we have to benefit more widely from our market-leading distribution position. We will shortly launch a new Direct-to-Consumer survey website and will continue to develop our new data revenue streams, which we believe has exciting potential for further growth.

Our Estate Agency business also traded very well, maintaining lettings income, and holding on to the residential sales market share gains made in 2021 in the areas in which we trade and increasing our national market share. However, continued market-wide delays in completing agreed sales means that much of the benefit of this good trading is yet to be reflected in income. The Division reported an Underlying Operating Loss³ of £1.0m (H1 2021 Profit: £12.5m). The prior year performance was significantly boosted by the exceptional volume generated by the Stamp Duty holiday. This performance should be assessed in light of the very substantial increase in the residential sales pipeline to £26.7m at 30 June, above our previous record of £26.4m in May 2021, just prior to the Stamp duty deadline. Had agreed sales exchanged at a more usual rate, Underlying Operating Profit would have been over £6m higher, a result which would have been better than the Underlying Operating Profit of £4.0m for the same period in 2019, where market conditions and the split between H1 and H2 profitability was relatively similar to the current year.

Strong Balance Sheet

Our balance sheet and strong cash generation enables further investment to deliver the Group ' s ambitious growth strategy, including continued investment in capability and technology, expected investment in Pivotal Growth D2C brokerage acquisitions, and potential acquisition targets to build our Financial Services Network business. The Board will continue to actively review capital allocation regularly to ensure we maintain an efficient balance sheet.

Dividend & Share Buy Back

Our Dividend policy is to pay out 30% of Group Underlying Operating Profit¹ after finance and normalised tax charges and the Board has declared an interim dividend of 4.0 pence per share (H1 2021: 4.0p).

The ex-dividend date for the interim dividend is 11 August 2022, with a record date of 12 August 2022 and a payment date of 16 September 2022. Shareholders can elect to reinvest their cash dividend and purchase existing shares in LSL through a dividend reinvestment plan. The election date is 25 August 2022.

In April 2022, we announced the commencement of a share buyback programme of up to £10.0m, which has been extended to 30 Sept 2022, with repurchased shares placed into Treasury. At 30 June 2022, there were 504,273 shares being held in Treasury for a total consideration of £1.8m.

Looking Ahead

I am encouraged by the strong growth we have reported in Surveying & Valuation and by the very resilient performance of our Financial Services Network business in smaller markets. Our Estate Agency business has also performed very well, retaining previous market share gains, and we enter the second half of the year with a record pipeline of pending exchanges.

Current trading is also encouraging. In July, mortgage completions in our Financial Services Network business were at their highest level ever. The Surveying & Valuations division continues to perform strongly and front-end sales activity within Estate Agency is stable with good levels of buyer demand.

The conversion of residential sales pipeline remains very slow, a trend we expect to continue throughout the second half. The consequence of this will be to delay expected profit on some H2 activity into 2023 and as a result we now anticipate full year profits to be lower than our previous expectations whilst remaining significantly above the pre- COVID 19 performance reported in 2019. The benefits of the pipeline built up at 30 June 2022 will be realised in the second half of the year and we expect that H2 Operating Profits will be substantially stronger than H2 2021 and H2 2019.

LSL has an exciting future. Our Estate Agency business is trading well having gained market share and built a record pipeline. The Financial Services Network business continues to grow and is now responsible for over 10% of mortgage advice in the UK providing an unrivalled distribution capability, offering significant opportunities to grow in existing and new markets. In Surveying & Valuation we have been able to win new business and significantly improve efficiency whilst emerging data services provide an exciting opportunity for growth.

I believe that our resilient performance and the growth expected over the second half of the year and beyond demonstrates that we have the right strategy in place. I am clear that the Group has significant potential and I look forward to reporting further progress in the future.

David Stewart
Group Chief Executive Officer
2 August 2022

Notes:

1  Group Underlying Operating Profit is before exceptional items, contingent consideration, amortisation of intangible assets and share-based payments (see note 5 of the Financial Statements)

2  Mortgage lending excluding product transfers - New mortgage lending by purpose of loan, UK (BOE) - Table MM23

3  Divisional Underlying Operating Profit and Divisional Underlying Operating Margin are stated on the same basis as Group

FINANCIAL REVIEW

H1 (£m)	2022	2021	Var
Divisional Group Revenue
Financial Services Network (net revenue)	20.5	18.7	10%
Financial Services Other	19.4	20.4	(5)%
Financial Services	39.8	39.1	2%
Surveying & Valuation	50.5	46.2	9%
Estate Agency	70.6	81.2	(13)%
Group Revenue	160.9	166.5	(3)%
Divisional Underlying Operating Profit1, 3
Financial Services Network	7.5	7.4	0%
Financial Services Other	(1.3)	0.4	nm
Financial Services	6.1	7.8	(22)%
Surveying & Valuation	13.1	11.4	14%
Estate Agency	(1.0)	12.5	nm
Unallocated Central Costs	(4.0)	(4.5)	10%
Group Underlying Operating Profit 2	14.2	27.3	(48)%

H1 (£m)	2022	2021	Var
Divisional operating profit 3
Financial Services	4.9	3.9	24%
Surveying & Valuation	12.9	12.4	4%
Estate Agency	(4.3)	15.5	nm
Unallocated Central Costs	(4.7)	(5.0)	6%
Group operating profit	8.7	26.7	(67)%

Notes:

1  Divisional Underlying Operating Profit and Divisional Underlying Operating margin are stated on the same basis as Group

2  Group Underlying Operating Profit is before exceptional items, contingent consideration, amortisation of intangible assets and share-based payments (see note 5 of the Financial Statements)

3  Refer to note 4 of the Financial Statements for reconciliation of Divisional Underlying Operating Profit to statutory operating profit

nm  Not meaningful

Group summary

In the context of the H1 residential exchange transactions market being down 29% year on year and the mortgage lending market being down 10%, the Group results in the first half demonstrated the resilience of our Financial Services Network business and the significant progress made in Surveying & Valuation. The Financial Services Network business profit was in line with the very strong performance in H1 2021. The Surveying & Valuation Division delivered the highest ever revenues in a single half and the highest profit in over 10 years. The financial performance in H1 across Financial Services and Surveying & Valuation is in line with the Board's expectations.

The Estate Agency Division and, to a lesser extent, our Financial Services D2C businesses were impacted by lower activity levels in the new purchase market and continued delays in conversion of our residential sales pipelines caused by conveyancing issues in the market. We have yet to see evidence of an improvement in these issues which we had expected to ameliorate during H1.

We have absorbed inflationary increases in operating expenditure, particularly in the Estate Agency Division, and we have continued to invest in our Financial Services Division businesses. 

Group results

Group Revenue for the 6 months to 30 June 2022 was £160.9m, only slightly behind the record revenue last year (H1 2021: £166.5m). Financial Services Network Revenue increased by 10% and Surveying & Valuation Revenue increased by 9% on the same period in 2021. These increases were offset by a 13% reduction in Estate Agency and 5% reduction in Financial Services Other Revenue, both impacted by lower new purchase activity and conveyancing delays. If the residential sales pipeline had converted at pre-COVID 19 rates, Revenue would have been at record levels of c.£169m.

Group Underlying Operating Profit¹ for the 6 months to June 2022 was £14.2m, which whilst materially lower than the record results posted last year (H1 2021: £27.3m), was 17% higher than the equivalent period in 2019, the most recent comparable market, and would have been over £6m higher had residential sales conversion been at historical rates, which would have been a profit over £20m, behind only the record-breaking profit in H1 2021. On a statutory basis, Group operating profit was £8.7m (H1 2021: £26.7m).

Total adjusted operating expenditure

Total adjusted operating expenses increased in the 6 months to 30 June 2022, by 5% to £147.6m (H1 2021: £140.9m). The majority of this increase was due to a growth of more than £4m in employee costs particularly in headcount investment in the Financial Services Network business to support growth, annual pay awards across the Group and reflecting the increase in employers NIC from April 2022. Additionally, during H1 2022, the Group returned to a more normalised level of operating expenses following the disruption of COVID-19 on ways of working over the previously reported periods. Furthermore, there have been cost increases in other areas, notably, utilities.  

Other operating income, gain on sale of property, plant, and equipment

Other income was £1.1m (H1 2021: £0.5m). Rental income was £0.3m (H1 2021: £0.5m), reducing year on year following the disposal during 2021 of several freehold properties previously leased out. During the period the fair value of units held in The Openwork Partnership LLP was reassessed to £0.8m and is recognised in other operating income.

Income / (loss) from joint ventures and associates

Losses from joint ventures and associates of £0.2m (H1 2021: £0.9m profit) primarily relate to our share of set up costs of Pivotal Growth. The prior year income mainly comprised our share of LMS and TM Group profits prior to the disposal of our investments.

Share-based payments

The share-based payment charge of £ 1.5m (H1 2021: £0.5m) consists of a charge in the period of £1.8m, offset by lapses and adjustments for leavers and options exercised in the period. The lower relative charge in 2021 largely resulted from scheme lapses offsetting existing scheme charges.

Amortisation of intangible assets

The amortisation charge for H1 2022 was £2.1m (H1 2021: £2.7m). The year-on-year decrease was as a result of some Lettings books and intangible software investments reaching full amortisation during 2021.

Exceptional items

There were exceptional costs of £2.0m in H1 2022 (H1 2021: £1.7m), reflecting an impairment of goodwill in Marsh & Parsons². Prior year exceptional gains of £4.3m (H1 2022: £nil) related to the disposal of the Group's joint venture holding in LMS and a release in the PI Costs provision, netted off against the Shareholder circular and restructuring costs.

Contingent consideration

The credit to the income statement in H1 2022 of £0.1m (H1 2021: charge £0.04m), relates mainly to the reassessment of the contingent consideration liability for RSC, due to be paid in 2023.

Net finance costs

Net finance costs amounted to £1.3m (H1 2021: £1.3m) and related principally to unwinding of the IFRS 16 lease liability of £0.7m (H1 2021: £0.7m) and interest and fees on the revolving credit facility of £0.5m (H1 2021: £0.5m).

Profit before tax

Profit before tax was £7.4m (H1 2021: £25.5m). This decrease was largely driven by the reduction in Group Operating Profit, and the prior year exceptional gain on the sale of the investment in the LMS.

Taxation

The tax charge of £1. 6m (H1 2021: £2.9m) represents an effective tax rate of 21.6%, slightly higher than the headline UK tax rate of 19% largely as a result of disallowable expenses. Deferred tax assets and liabilities are measured at 25% (2021: 25%), the tax rate effective from 1 April 2023.

Earnings Per Share ³

The Basic Earnings Per Share was 5.7 pence (H1 2021: 21.8 pence), with diluted Earnings Per Share of 5.7 pence (H1 2021: 21.4 pence).  The Adjusted Basic Earnings Per Share was 10.7 pence (H1 2021: 20.9 pence), a decrease of 49%, with adjusted diluted Earnings Per Share of 10.7 pence (H1 2021: 20.6 pence).

Notes:

1  Group Underlying Operating Profit is before exceptional items, contingent consideration, amortisation of intangible assets and share-based payments (as set out in note 5 of the Financial Statements)

2  Refer to note 10 of the Financial Statements

3  Refer to note 6 of the Financial Statements for the calculation

DIVISIONAL REVIEW

Financial Services Division

Summary

Financial Services Division reported an increase in revenue of 2% in H1 2022 compared to the same period in 2021 in a lending market which was 10% lower. The Financial Services Network Underlying Operating Profit was in line with the record prior year. This was offset by a decrease in Financial Services Other profit due to a materially smaller purchase market, resulting in overall divisional Underlying Operating Profit for the half year of £6.1m (H1 2021: £7.8m).

Total financial advisers at 30 June 2022 were up 186 to 2,930 on the same time last year, a 7% increase. Our share of the UK mortgage market grew to 10.1%¹, further consolidating our position as the UK's largest mortgage and insurance network².

We continued to support the future growth of our Financial Services Division, with investment during the year in technology and capability, across our Network and D2C businesses. We also announced two acquisitions in the Pivotal Growth joint venture in H1, and one in July taking the total to four. Whilst suppressing profits in the short term, the investment made and future expected Pivotal growth will start to show tangible returns, with more material benefits expected in future periods.

Financial overview

Total revenue reported for the period was up 2% to £39.9m (H1 2021: £39.2m). Core Financial Services Network Revenue grew by 10% year-on-year benefiting from higher advisor numbers. Financial Services Other revenue decreased by £1.7m versus the same period last year mainly as a result of the materially smaller purchase market. Financial Services Division Underlying Operating Profit³ was £6.1m (H1 2021: £7.8m). On a statutory basis, operating profit was £4.9m (H1 2021: £3.9m).

The Division's revenue mix by product continues to highlight the significance of our insurance business and its success in arranging insurance products both on a standalone basis as well as when needed at the time of a mortgage being arranged. In H1, these remain broadly an equal split between mortgage related and insurance related revenue. The split of Revenue by product type in H1 2022 was 39% for mortgage fees (H1 2021: 39%), 42% for insurance fees (H1 2021: 45%) and 19% in other fees (H1 2021: 16%).

Financial Services Network business

Our gross purchase and re-mortgage completion lending increased by 11% to £15.2bn for the period (H1 2021: £13.7bn) representing an increased share of the lending market excluding product transfers² to 10.1% (2021: 9.0%). Including product transfers, total gross mortgage lending was £20.5bn in H1 2022 (H1 2021: £19.3bn).

Gross revenues generated by the Financial Services Network business (including the TMA mortgage club) increased by 1% to £146.2m (H1 2021: £144.1m).

Gross revenue per average adviser in H1 was £43.6k (H1 2021: £46.6k). In general, advisers joining the Financial Services Network business take some time to reach maximum productivity, and as such make a relatively small contribution to turnover in the year of their joining. Revenue in the rest of 2022 will therefore benefit from a full year of the advisers who joined in H2 2021 and H1 2022.

Underlying Operating Profit³ increased marginally to £7.5m (H1 2021: £7.4m) with Underlying Operating margin⁴ decreasing to 36% (H1 2021: 40%) as we continue to invest in our businesses and brought some cost categories in line with pre- COVID 19 levels e.g. broker events and marketing support.

Financial Services Other

Financial Services Other generated an Underlying Operating Loss³ of £1.3m (H1 2022: profit £0.4m), which is stated after our continued investment in the businesses that make it up, including costs of the TPFG contract and the Pivotal Growth joint venture set up costs. As previously reported, the TPFG contract will continue to act as a drag on profitability in 2022. As well as significant investment in the Mortgage Gym platform, we continued to invest in the Financial Services Network business technology platform (Toolbox), to deliver benefits to firms and their advisers and create further efficiencies and improved functionality. Financial Services Other D2C businesses were impacted by lower activity levels in the new purchase market and continued delays in conversion of our residential sales pipelines caused largely by conveyancing issues in the market.

The Pivotal Growth joint venture was established in April 2021, with a net loss in H1 2022 of £0.2m after acquisition costs and overheads. The slower than expected momentum in acquisitions has prevented reporting a profit as deal costs outweigh income but a positive contribution is expected in 2023.

Surveying & Valuation Division

Summary

The Surveying & Valuation Division's Underlying Operating Profit³ increased by 14% in the 6 months to 30 June 2022 in comparison to the same period in 2021, in a flat market for mortgage and re-mortgage approvals. Surveyor capacity utilisation continues to improve, with 8% more jobs performed whilst employing similar levels of operational surveyors. Underlying Operating margin⁴ increased to 26% for the period (H1 2021: 25%), due mainly to improved utilisation and a leading position in the growing higher margin equity release segment.

We estimate that we increased market share in H1 2022, while maintaining operational resilience and providing high-quality service. We were named Best Surveying Firm at the 2022 Mortgage Finance Gazette Awards and Best Surveyor at the 2022 Equity Release Awards with Mortgage Solutions. During the 6 months to 30 June 2022, one key supplier contract was renewed in addition to one renewal at the end of December 2021, increasing allocations.  We also achieved increases in allocations from some existing lender clients.  More than three quarters of our total annual volume is currently secured for two or more years. Significant further progress was made in our strategic objective of developing income from private surveys and data, which increased by 73% to £1.9m.

Financial overview

Revenue increased by 9% to a record £50.5m (H1 2021: £46.2m). Underlying Operating Profit³ increased by 14% to £13.1m (H1 2021: £11.4m) the highest for 10 years. On a statutory basis, operating profit was £12.9m (H1 2021: £12.4m).

Income per job increased by 1% to £175 (H1 2021: £173), with the higher volume of jobs performed reflecting the improved capacity management with similar levels of operational surveyors. During H1 2022, 73% of the Division's jobs derived from its top five lender clients. This is broadly consistent with the concentration of mortgage lending in the UK, where it is estimated that the six largest lenders collectively account for around 70% of the market. The total number of jobs performed during the period was 288,000, which was 8% greater than the same period in 2021.

At 30 June 2022, the total provision for professional indemnity (PI) costs was £3.9m (31 December 2021: £3.9m, 30 June 2021: £5.5m).  The Group continued to make positive progress in addressing historic PI claims and the number of new valuation claims provided for in the period remained very low.

The number of operational surveyors employed (FTE) at 30 June 2022 was 497, which was in line with June 2021 and an increase on 31 December 2021 at 489. The increase was as a result of our graduate and trainee mentoring programmes, which continue to provide new productive surveyors, to alleviate any capacity constraints in the market.

Estate Agency Division

Summary

Residential sales exchange pipeline conversion rates remained extremely slow across the market principally due to the continuing industry-wide capacity issues in conveyancing, which impacted residential exchange income and contributed to an Underlying Operating Loss³ of £1.0m in H1 2022. The residential sales exchange pipeline grew significantly and now stands at a record level of £26.7m, having increased by around £6m since 31 December 2021.

Financial overview

Revenue for the 6 months to 30 June 2022 at £70.6m was 13% behind the period last year, a period of unusually high activity ahead of the end of the Stamp Duty deadline (H1 2021: £81.2m). Underlying Operating Loss³ was £1.0m for the 6 months to 30 June 2022, reflecting the residential market dynamics described above with lower new purchase activity and conveyancing issues. If the sales pipeline had converted at pre-COVID rates, residential and ancillary revenue would have been c.£8m higher, with a total Divisional revenue of c.£79m. Had residential sales agreed exchanged at this more usual rate, Underlying Operating Profits would have been over £6m higher, a £1m increase on the £4.0m achieved in H1 2019. On a statutory basis, operating loss was £4.3m (H1 2021: profit £15.5m).

Residential Sales

Residential Sales exchange income decreased by 24% to £30.8m (H1 2021: £40.4m). The Estate Agency Division consolidated the market share gains made during 2021, maintaining share of instructions in the locations we trade, and growing our market share of housing transactions on a national level . The residential sales pipeline increased significantly to £26.7m at 30 June 2022 (an LSL record, previous high at £26.4m in May 2021 just prior to the Stamp Duty deadline), with no indication of a material increase in fall-throughs.

Lettings

In the Lettings market there has been a very limited supply of new instructions. Our focus has therefore been on reletting and retaining our managed property portfolio. The total number of managed properties at 30 June 2022 was 24,376, slightly below the same date in 2021.  Therefore, t otal Lettings income is flat year-on-year at £30.1m supported by average rent increases across all brands.

Other income

Other income was down 10% to £9.7m (H1 2021: £10.8m) reflecting the impact of the slowdown in exchange volumes as conveyancing and financial services income directly linked to exchange volumes. Asset Management is slightly ahead of 2021 however market repossession volumes remain very low, albeit ahead of the exceptionally low 2021 which was severely impacted by COVID-19.

Notes:

1  New mortgage lending by purpose of loan, UK (BOE) - Table MM23 - May YTD

2  UK's largest mortgage and insurance network based on LSL estimates

3  Refer to note 4 of the Financial Statements

4  Divisional Underlying Operating Profit and Divisional Underlying Operating Margin are stated on the same basis as Group

BALANCE SHEET REVIEW

Goodwill

The carrying value of goodwill is £158.9m (H1 2021: £160.9m) reflecting an impairment of £2m which was identified and recognised in Marsh & Parsons at 30 June 2022¹.

Other intangible assets and property, plant and equipment

We continued to invest in technology during the first half of the year and total capital expenditure in the half amounted to £2.2m (H1 2021: £3.0m), including £1.1m (H1 2021: £0.6m) for further development of the Toolbox platform in the Financial Services Division and investment by the Estate Agency Division in third-party property software.

Financial assets and investments in joint ventures and associates

Financial assets

Financial assets of £6.1m at 30 June 2022 (31 December 2021: £5.7m, 30 June 2021: £7.7m) comprise investments in equity instruments in unlisted companies. The largest investment is an 8.8% shareholding in Yopa Property Limited, a UK-based online hybrid estate agent. The carrying value of this investment has been assessed and a fair value reduction of £0.4m has been made through the Statement of Other Comprehensive Income. The carrying value of the Group's investment at 30 June 2022 is £4.1m (31 December 2021: £4.5m, 30 June 2021: £6.5m). During the period the fair value of units held in The Openwork Partnership LLP was reassessed to £0.8m (31 December 2021: £nil, 30 June 2021: £nil).

Joint ventures

In April 2021 the Group established the Pivotal Growth joint venture and hold a 47.8% interest at 30 June 2022. The joint venture is equity accounted and is held on the balance sheet at £2.3m at 30 June 2022 (31 December 2021: £1.6m, 30 June 2021: £0.3m), representing equity investment during the period less our share of profit/losses after tax for the period. Pivotal Growth announced two further acquisitions in H1 2022 and another during July 2022, taking the total to four, one of which is subject to change of control approval by the FCA.

During 2021, we disposed of our entire holding in both non-core businesses LMS (May 2021) and TM Group (July 2021) for total proceeds of £41.3m. At 30 June 2022, TMG was held at £3.0m under non-current assets held for sale.

Bank facilities / Net Bank Cash / Liquidity

At 30 June 2022, Net Cash was at a record high at a half year at £30.7m (31 December 2021: Net Cash £48.5m, 30 June 2021: Net Cash £17.0m) , providing flexibility to make further investments to support growth. The Group has a £90 million committed revolving credit facility, with a maturity date of May 2024, and a £30m accordion, to be requested by LSL at any time, subject to bank approval.

The Group generated adjusted cash from operations of £6.1m (H1 2021: £26.9m). After adjusting for tax payment deferrals agreed with HMRC relating to 2020, the cash-flow conversion² rate in H1 2022 reverted to pre COVID-19 levels at 43%. H1 2021 conversion was 100% due to significantly higher EA revenues with high immediate cash drop-through. The reported cash-flow conversion rate before adjusting for tax deferral payments, was 37% (H1 2021: 68%).

The net decrease in cash and cash equivalents of £17.7m during H1 2022 (H1 2021: £5.6m increase) included further investment in Pivotal Growth (£0.9m), capital expenditure of £2.2m (H1 2021: £3.0m), commencement of the share buy-back programme (£1.8m), the purchase of £5.0m LSL shares for  employee share schemes (EBT) and payment of the 2021 Final dividend of £7.7m (H1 2021: £nil dividends paid).

In April 2022, LSL announced the commencement of a share buyback programme of up to £10.0m, with the repurchased shares placed into Treasury. At 30 June 2022, there were 504,273 shares being held in Treasury for a total consideration of £1.8m.

The Financial Services Network business has a regulatory capital requirement associated with its regulated revenues. The regulatory capital requirement was £5.9m at 30 June 2022 (31 December 2021: £4.9m, 30 June 2021: £5.0m), with a surplus of £13.4m (31 December 2021: £14.2m, 30 June 2021: £14.6m).

Contingent consideration liabilities

Contingent consideration liabilities at end of H1 2022 was £2.9m (H1 2021: £5.8m, 31 December 2021 £3.0m). Contingent consideration liabilities relate primarily to the cost of acquiring the remaining shares in RSC. The year-on-year reduction reflects part settlement and an update to forecasts in relation to RSC and the final settlement of the acquisition of the remaining shares in Group First.

Treasury and Risk Management

We have an active debt management policy. The Group does not hold or issue derivatives or other financial instruments for trading purposes. Further details on the Group's financial commitments, as well as the Group's treasury and risk management policies are set out in our Annual Report and Accounts 2021.

International Financial Reporting Standards (IFRS)

The Interim Condensed Consolidated Group Financial Statements for the period ended 30 June 2022 have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and UK adopted International Accounting Standards.

Notes:

1  Refer to note 10 of the Financial Statements

2  Adjusted cash-flow conversion defined as cash generated from operations (pre PI and post lease liabilities) divided by Group Underlying Operating Profit

Principal Risks and Uncertainties

The principal risks and uncertainties relating to the Group's operations remain consistent with those disclosed on pages 23 to 25 of the Group's Annual Report and Accounts 2021 (which can be accessed on the Group's website: www.lslps.co.uk). Having reconsidered these principal risks and uncertainties which are summarised below, the Board has concluded that the principal risks and uncertainties of the Group remain the same as those included within the Annual Report and Accounts 2021.

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

We confirm that to the best of our knowledge:

· The Interim Condensed Consolidated Group Financial Statements for the period ended 30 June 2022 have been prepared in accordance with UK adopted International Accounting Standard 34;

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

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

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

By order of the Board

David Stewart  Adam Castleton

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

2 August 2022  2 August 2022

Interim Group Income Statement

for the six months ended 30 June 2022

		Unaudited   Six Months Ended		Audited Year Ended
		30 June 2022	30 June 2021	31 December 2021
Continuing Operations	Note	£'000	£'000	£'000
Revenue	4	160,869	166,456	326,832
Operating expenses:
Employee and subcontractor costs		(104,851)	(100,493)	(202,269)
Establishment costs		(4,590)	(4,684)	(10,071)
Depreciation on property, plant and equipment		(5,871)	(6,303)	(12,500)
Other operating costs		(32,259)	(29,418)	(55,339)
		(147,571)	(140,898)	(280,179)
Other operating income		1,085	496	937
(Loss) / gain on sale of property, plant and equipment		(2)	280	1,061
(Loss) / Income from joint ventures and associates		(208)	934	668
Share-based payments		(1,500)	(454)	(1,916)
Amortisation of intangible assets		(2,051)	(2,677)	(4,534)
Exceptional gains		-	4,311	31,050
Exceptional costs	7	(2,000)	(1,656)	(2,045)
Contingent consideration		115	(44)	710
Group operating profit		8,737	26,748	72,584
Finance income		6	-	14
Finance costs		(1,310)	(1,286)	(2,709)
Net finance costs		(1,304)	(1,286)	(2,695)
Profit before tax		7,433	25,462	69,885
Taxation charge	9	(1,608)	(2,917)	(7,985)
Profit for the period/year		5,825	22,545	61,904
Attributable to:
Owners of the parent		5,876	22,566	61,941
Non-controlling interest		(51)	(21)	(37)
Earnings per share expressed in pence per share:
Basic	6	5.7	21.8	59.6
Diluted	6	5.7	21.4	59.2

Interim Group Statement of Comprehensive Income

for the six months ended 30 June 2022

		Unaudited  Six Months Ended		Audited Year Ended
		30 June  2022	30 June  2021	31 December 2021
		£'000	£'000	£'000
Profit for the period		5,825	22,545	61,904
Items not to be reclassified to profit and loss in subsequent periods:
Revaluation of financial assets not recycled through income statement	11	(370)	443	(1,557)
Tax on revaluation		-	(119)	(132)
Net other comprehensive income		(370)	324	-
Total comprehensive income, net of tax		5,455	22,869	60,215
Attributable to:
Owners of the parent		5,506	22,890	60,252
Non-controlling interest		(51)	(21)	(37)

Interim Group Balance Sheet

as at 30 June 2022

		Unaudited Six Months Ended		Audited Year Ended
		30 June 2022	30 June 2021	31 December 2021
	Note	£'000	£'000	£'000
Non-current assets
Goodwill	10	158,865	160,865	160,865
Other intangible assets		28,788	29,908	29,604
Property, plant and equipment		33,550	40,551	37,070
Financial assets	11	6,095	7,737	5,748
Investments in joint venture	15	2,338	268	1,610
Contract assets		521	836	733
Total non-current assets		230,157	240,165	235,630
Current assets
Trade and other receivables		38,944	38,449	33,829
Contract assets		424	424	424
Current tax asset		3,499	1,673	1,142
Cash and cash equivalents		30,708	17,039	48,464
Total current assets		73,575	57,585	83,859
Non-current assets held for sale		-	3,016	-
Total assets		303,732	300,766	319,489
Current liabilities
Financial liabilities	13	(10,462)	(11,083)	(8,523)
Trade and other payables	12	(58,380)	(73,918)	(64,206)
Provisions for liabilities		(870)	(2,908)	(775)
Total current liabilities		(69,712)	(87,909)	(73,504)
Non-current liabilities
Financial liabilities	13	(18,088)	(25,678)	(22,602)
Deferred tax liability		(1,933)	(1,916)	(2,073)
Provisions for liabilities		(3,037)	(2,694)	(3,191)
Total non-current liabilities		(23,058)	(30,288)	(27,866)
Total Liabilities		(92,770)	(118,197)	(101,370)
Net assets		210,962	182,569	218,119
Equity
Share capital		210	210	210
Share premium account		5,629	5,629	5,629
Share-based payment reserve		5,830	4,483	5,263
Shares held by EBT		(6,814)	(4,165)	(3,036)
Treasury shares		(1,767)	-	-
Fair value reserve		(15,643)	(13,260)	(15,273)
Retained earnings		223,047	189,135	224,832
Equity attributable to the owners of the parent		210,492	182,032	217,598
Non-controlling interest		470	537	521
Total Equity		210,962	182,569	218,119

Interim Group Cash Flow Statement

for the six months ended 30 June 2022

		Unaudited Six Months Ended		Audited Year Ended
		30 June 2022	30 June 2021	31 December 2021
	Note	£'000	£'000	£'000
Profit before tax		7,433	25,462	68,889
Adjustments for:
Exceptional operating items and contingent consideration		1,885	(2,612)	(29,716)
Depreciation of tangible assets		5,871	6,303	12,500
Amortisation of intangible assets		2,051	2,677	4,534
Share-based payments		1,500	454	1,916
Loss /(profit) on disposal of fixed assets		2	(280)	(1,061)
Loss/(profit) from joint ventures		208	(934)	(688)
Finance income		(6)	-	(14)
Finance costs		1,310	1,286	2,709
Operating cash flows before movements in working capital		20,254	17,117	60,089
Movements in working capital
Increase in trade and other receivables		(5,653)	(9,779)	(3,439)
(Decrease) / increase in trade and other payables		(5,486)	1,327	(8,919)
Decrease in provisions		(59)	(1,576)	(3,213)
		(11,198)	(10,028)	(15,571)
Cash generated from operations		9,056	22,328	44,518
Interest paid		(1,277)	(1,215)	(2,554)
Income taxes paid		(4,052)	(4,451)	(8,528)
Exceptional costs paid		-	(2,466)	(2,045)
Net cash generated from operating activities		3,727	14,196	31,191
Cash flows used in investing activities
Acquisitions of subsidiaries and other businesses		-	(730)	(730)
Payment of contingent consideration	13	(76)	(302)	(2,462)
Investment in joint venture		(936)	(765)	(2,477)
Investment in financial assets	11	-	(4)	(14)
Dividend received from joint venture		-	1,178	1,178
Cash received on sale of joint venture		-	12,000	41,349
Receipt of lease income		33	26	20
Purchase of property, plant and equipment and intangible assets		(2,231)	(2,957)	(6,902)
Proceeds from sale of property, plant and equipment		6	431	431
Net cash (expended) / generated on investing activities		(3,204)	8,877	30,393
Repayment of loans		-	(13,000)	(13,000)
Payment of deferred consideration		-	(92)	(122)
Purchase of LSL shares by the EBT		(5,026)	-	-
Purchase of treasury shares		(1,767)	-	-
Proceeds from the exercise of share options		263	429	1,447
Payments of lease liabilities		(4,095)	(4,814)	(8,922)
Dividends paid		(7,654)	-	(4,166)
Net cash expended in financing activities		(18,279)	(17,451)	(24,763)
Net (decrease) / increase in cash and cash equivalents		(17,756)	5,596	37,021
Cash and cash equivalents at the end of the period / year		30,708	17,039	48,464

Interim Group Statement of changes in equity

Unaudited - for the six months ended 30 June 2022 

	Share capital	Share premium account	Share- based payment reserve	Shares held by EBT	Treasury Shares	Fair value Reserve	Retained earnings	Equity attributable to owners of the parent	Non- controlling interest	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2022	210	5,629	5,263	(3,063)	-	(15,273)	224,832	217,598	521	218,119
Other comprehensive income for the period
Revaluation of financial assets	-	-	-	-	-	(370)	-	(370)	-	(370)
Profit for the period	-	-	-	-	-	-	5,876	5,876	(51)	5,825
Total comprehensive income for the period	-	-	-	-	-	(370)	5,876	5,506	(51)	5,455
Acquisition of subsidiary	-	-	-	-	-	-	-		-	-
Shares repurchased into Treasury	-	-	-	-	(1,767)	-	-	(1,767)	-	(1,767)
Shares repurchased into EBT	-	-	-	(5,026)	-	-	-	(5,026)	-	(5,026)
Exercise of options	-	-	(1,005)	1,275		-	(7)	263	-	263
Dividend paid	-	-	-	-	-	-	(7,654)	(7,654)	-	(7,654)
Share-based payments	-	-	1,500	-	-	-	-	1,500	-	1,500
Tax on share-based payments	-	-	72	-	-	-	-	72	-	72
At 30 June 2022	210	5,629	5,830	(6,814)	(1,767)	(15,643)	223,047	210,492	470	210,962

During the six-month period to 30 June 2022 a total of 431,336 share options were exercised relating to LSL's various share option schemes resulting in the shares being sold by the

Trust. LSL received £263,000 on exercise of these options.

Interim Group Statement of changes in equity

Unaudited - for the six months ended 30 June 2021

	Share capital	Share premium account	Share- based payment reserve	Shares held by EBT	Fair value Reserve	Retained earnings	Non- controlling interest	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2021	210	5,629	3,942	(5,012)	(13,584)	166,569	-	157,754
Other comprehensive income for the period
Revaluation of financial assets	-	-	-	-	324	-	-	324
Profit for the period	-	-	-	-	-	22,566	(21)	22,545
Total comprehensive income for the period	-	-	-	-	324	22,566	(21)	22,869
Acquisition of subsidiary	-	-	-	-	-	-	558	558
Exercise of options	-	-	(418)	847	-	-	-	429
Share-based payments	-	-	454	-	-	-	-	454
Tax on share-based payments	-	-	505	-	-	-	-	505
At 30 June 2021	210	5,629	4,483	(4,165)	(13,260)	189,135	537	182,569

During the six-month period to 30 June 2021 a total of 241,476 share options were exercised relating to LSL's various share option schemes resulting in the shares being sold by the

Trust. LSL received £429,000 on exercise of these options.

Group Statement of Changes in Equity 

for the year ended 31 December 2021

	Share  capital	Share premium account	Share- based payment reserve	Shares held by EBT	Fair value reserve	Retained earnings	Equity attributable to owners of the parent	Non-controlling interest	Total  Equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2021	210	5,629	3,942	(5,012)	(13,584)	166,569	157,754	-	157,754
Profit for the year	-	-	-	-	-	61,941	61,941	(37)	61,904
Revaluation of financial assets	-	-	-	-	(1,557)	-	(1,557)	-	(1,557)
Tax on revaluations	-	-	-	-	(132)	-	(132)	-	(132)
Total comprehensive income for the year	-	-	-	-	(1,689)	61,941	60,252	(37)	60,215
Acquisition of subsidiary	-	-	-	-	-	-	-	558	558
Issued share capital in the year	-	-	-	-	-	-	-	-	-
Exercise of options	-	-	(990)	1,949	-	488	1,447	-	1,447
Dividend paid	-	-	-	-	-	(4,166)	(4,166)	-	(4,166)
Share-based payments	-	-	1,916	-	-	-	1,916	-	1,916
Tax on share based payments	-	-	395	-	-	-	395	-	395
At 31 December 2021	210	5,629	5,263	(3,063)	(15,273)	224,832	217,598	521	218,119

During the year ended 31 December 2021, the Trust acquired nil LSL Shares. During the period, 555,824 share options were exercised relating to LSL's various share option schemes resulting in the Shares being sold by the Trust.  LSL received £1.4m on exercise of these options.

Notes to the Interim Condensed Consolidated Group Financial Statements

The Interim Condensed Consolidated Group Financial Statements for the period ended 30 June 2022 were approved by the LSL Board on 2 August 2022.  The interim Financial Statements are not the statutory accounts.  The financial information for the year ended 31 December 2021 is extracted from the audited statutory accounts for the year ended 31 December 2021, which have been filed with the Registrar of Companies.  The auditor's report on those 2021 full year statutory accounts was unqualified and did not contain an emphasis of matter paragraph and did not make a statement under section 498 (2) or (3) of the Companies Act 2006.

1.  Basis of preparation

The Interim Condensed Consolidated Group Financial Statements for the period ended 30 June 2022 have been prepared in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority, and should be read in conjunction with the Group's annual Financial Statements as at 31 December 2021 which are included in LSL's Annual Report and Accounts 2021. The Group's annual Financial Statements for the year ending 31 December 2022 will be prepared in accordance with UK adopted International Accounting Standards.

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

Going Concern

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

The Group expects to continue to meet its day to day working capital requirements through a revolving credit facility. The Group's banking facility, a £90 million committed revolving credit facility has a maturity date of May 2024. As shown in Note 12 to these interim condensed consolidated Group Financial Statements, the Group have not currently utilised the facility leaving £90 million of available undrawn committed borrowing facilities in respect of which all conditions precedent had been met.

LSL has continued to run a variety of scenario models throughout H1 to help the ongoing assessment of risks and opportunities. A severe downside scenario has been modelled as part of the Going Concern assessment, which includes the pessimistic assumption that there is a significant reduction in market transaction volumes reducing close to the low point experienced during the Global Financial Crisis. The scenario modelling also excludes further actions that could be taken, such as cost mitigations that could be applied in a severe scenario. Underpinned by LSL's strong balance sheet and diverse business revenue streams, the severe downside financial scenario modelling confirmed that the Group's current liquidity position would enable the Group to operate under this scenario to 31 December 2023 within the terms of its current facilities with no breach of banking covenants and therefore it is appropriate to use the Going Concern basis of preparation for this financial information.  

Having due regard to the scenarios above and after making appropriate enquiries, the Directors have a reasonable expectation that the Group and the Company have adequate resources to remain in operation to 31 December 2023. The Board have therefore continued to adopt the Going Concern basis in preparing the Interim Condensed consolidated Financial Statements.

2.  Changes in significant accounting policies

The accounting policies adopted in the preparation of the Interim Condensed Consolidated Group Financial Statements are consistent with those followed in the preparation of the Group's annual Financial Statements for the year ended 31 December 2021.

3.  Judgements and estimates

The preparation of financial information in conformity with UK adopted International Accounting Standards and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority requires management to make judgements, estimates and assumptions that affect the application of policies and reporting amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

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

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next six months are the same as those as at 31 December 2021. The assumptions are discussed in detail in the Group's Annual Report and Accounts 2021.  The assumptions discussed are as follows:

Judgements

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

· Deferred tax

Estimates

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

· Professional Indemnity (PI) claims

· Lapse Provision

· Valuation of financial assets

· Impairment of intangible assets

· Contingent consideration

· Income tax

Goodwill

At the period ended 30 June 2022, the Management Team undertook sensitivity analysis to determine the effect of changes in assumptions on the H1 2022 impairment reviews. Marsh & Parsons was impaired by £2.0m at the period end. A reasonable possible change in either latest forecasts or the discount rate applied could lead to further impairment. A reduction in the growth rate of 1.0% would mean a further impairment of £5.0m would be required and a reduction in each of the three years of cash-flows forecast by 7.5% (which represents a reduction of £0.5m in the third year of cash-flow forecasts) would lead to a further impairment of £5.0m. An increase to the discount factor applied from 12.2% to 13.2% would lead to a further impairment of £6.0m. Management do not consider there to be any further impairment indicators for the Marsh & Parsons goodwill at 30 June 2022.

4 .  Segment analysis of revenue and operating profit

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

· The Financial Services segment arranges mortgages for a number of lenders and arranges pure protection and general insurance policies for a panel of insurance companies. Embrace Financial Services and First2Protect, subsidiaries within the Financial Services Division, make a commercially agreed introducers fee to the Estate Agency Division;

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

· The Estate Agency segment provides services related to the sale and letting of residential properties. It operates a network of high street branches. As part of this process, the Estate Agency Division also provides marketing and arranges conveyancing services. In addition, it provides repossession and asset management services to a range of lenders. Embrace Financial Services and First2Protect, subsidiaries within the Financial Services Division, make a commercially agreed introducers fee to the Estate Agency Division.

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

Operating segments

The following tables presents revenue and profit information regarding the Group's operating segments for the six months ended 30 June 2022, for the six months ended 30 June 2022 and for the year ended 31 December 2021.

Unaudited - Six months ended 30 June 2022

Revenue Split by Stream - Unaudited - Six Months ended 30 June 2022
	Financial Services £'000	Surveying and Valuation Services  '000	Residential Sales exchange (EA) £'000	Lettings (EA) £'000	Asset Management (EA) £'000	Other (EA) £'000	Total  '000
Timing of revenue recognition
Services transferred at a point in time	42,646	50,451	30,759	15,184	1,318	4,989	145,347
Services transferred over time	-	-	-	14,929	593	-	15,522
Total revenue from contracts with customers	42,646	50,451	30,759	30,113	1,911	4,989	160,869

Income statement information	Financial Services £'000	Surveying and Valuation Services £'000	Estate Agency £'000	Unallocated £'000	Total £'000
Revenue from external customers	42,646	50,451	67,772	-	160,869
Introducers fee	(2,832)	-	2,832	-	-
Total revenue	39,814	50,451	70,604	-	160,869
Segmental result:
Underlying Operating Profit	6,104	13,066	(973)	(4,024)	14,173
Share-based payments	95	(185)	(700)	(710)	(1,500)
Amortisation of intangible assets	(1,309)	(16)	(726)	-	(2,051)
Exceptional gains	-	-	-	-	-
Exceptional costs	-	-	(2,000)	-	(2,000)
Contingent consideration credit/(charge)	-	-	115	-	115
Operating profit / (loss)	4,890	12,865	(4,284)	(4,734)	8,737
Finance income					6
Finance costs					(1,310)
Profit before tax					7,433
Taxation					(1,608)
Profit for the period					5,825

Group Underlying Operating Profit is as defined in note 5 to these condensed financial statements.

	Financial Services	Surveying and Valuation Services	Estate Agency	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000
Balance sheet information
Segment assets - intangible	20,328	11,116	156,137	72	187,653
Segment assets - other	11,322	15,148	51,077	38,532	116,079
Total Segment assets	31,650	26,264	207,214	38,604	303,732
Total Segment liabilities	(21,385)	(20,219)	(46,390)	(4,776)	(92,770)
Net assets	10,265	6,045	160,824	33,828	210,962

The joint venture interests of the Group are recorded in the Financial Services and Estate Agency segments.

Unallocated net assets comprise other intangibles £72,000, PPE £2,751,000, cash £30,708,000, other assets £1,574,000, current tax £3,499,000, other taxes £74,000, accruals £(2,420,000), payables £(183,000), IFRS16 liabilities (£323,000) and deferred tax £(1,933,000).

Unaudited - Six months ended 30 June 2021

Revenue Split by Stream - Unaudited - Six Months ended 30 June 2021
	Financial Services £'000	Surveying and Valuation Services  '000	Residential Sales exchange (EA) £'000	Lettings (EA) £'000	Asset Management (EA) £'000	Other (EA) £'000	Total  '000
Timing of revenue recognition
Services transferred at a point in time	42,340	46,159	40,425	16,132	1,071	5,792	151,919
Services transferred over time	-	-	-	13,948	589	-	14,537
Total revenue from contracts with customers	42,340	46,159	40,425	30,080	1,660	5,792	166,456

Income statement information	Financial Services £'000	Surveying and Valuation Services £'000	Estate Agency £'000	Unallocated £'000	Total £'000
Revenue from external customers	42,340	46,159	77,957	-	166,456
Introducers fee	(3,232)	-	3,232	-	-
Total revenue	39,108	46,159	81,189	-	166,456
Segmental result:
Underlying Operating Profit	7,823	11,419	12,527	(4,501)	27,268
Share-based payments	(43)	32	(67)	(376)	(454)
Amortisation of intangible assets	(1,374)	(230)	(914)	(159)	(2,677)
Exceptional gains	(1,764)	1,131	4,944	-	4,311
Exceptional costs	(714)	-	(942)	-	(1,656)
Contingent consideration credit/(charge)	-	-	(44)	-	(44)
Operating profit / (loss)	3,928	12,352	15,504	(5,036)	26,748
Finance income					-
Finance costs					(1,286)
Profit before tax					25,462
Taxation					(2,917)
Profit for the period					22,545

	Financial Services	Surveying and Valuation Services	Estate Agency	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000
Balance sheet information
Segment assets - intangible	18,834	11,051	158,634	2,254	190,773
Segment assets - other	10,890	14,956	59,275	24,872	109,993
Total Segment assets	29,724	26,007	217,909	27,126	300,766
Total Segment liabilities	(25,513)	(24,489)	(62,131)	(6,064)	(118,197)
Net assets	4,211	1,518	155,778	21,062	182,569

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

Unallocated net assets comprise other intangibles £2,253,000, assets held for sale £3,016,000, cash £17,039,000, other assets £3,138,000, other taxes £(182,000), accruals £(3,912,000), payables £(266,000), deferred and current tax £(24,000).

Audited - Year ended 31 December 2021

Revenue Split by Stream - Audited - Year ended 31 Dec 2021
	Financial Services £'000	Surveying and Valuation Services  '000	Residential Sales exchange (EA) £'000	Lettings (EA) £'000	Asset Management (EA) £'000	Other (EA) £'000	Total  '000
Timing of revenue recognition
Services transferred at a point in time	84,818	93,699	71,737	32,268	2,217	11,162	295,901
Services transferred over time	-	-	-	29,783	1,148	-	30,931
Total revenue from contracts with customers	84,818	93,699	71,737	62,051	3,365	11,162	326,832

	Financial Services	Surveying and Valuation Services	Estate Agency	Unallocated	Total
Income Statement information	£'000	£'000	£'000	£'000	£'000
Revenue from external customers	84,818	93,699	148,315	-	326,832
Introducers fee	(6,287)	-	6,287	-	-
Total revenue	78,531	93,699	154,602	-	326,832
Segmental result:
Underlying Operating Profit	14,787	23,609	18,430	(7,507)	49,319
Share-based payments	(270)	(147)	(429)	(1,070)	(1,916)
Amortisation of intangible assets	(2,496)	(382)	(1,656)	-	(4,534)
Exceptional gains	-	1,641	29,409	-	31,050
Exceptional costs	(2,045)	-	-	-	(2,045)
Contingent consideration credit/(charge)	-	-	710	-	710
Operating profit / (loss)	9,976	24,721	46,464	(8,577)	72,584
Finance Income					14
Finance costs					(2,709)
Profit before tax					69,889
Taxation					(7,985)
Profit for the year					61,904
Balance sheet information
Segment assets - intangible	20,779	11,086	158,531	73	190,469
Segment assets - other	9,891	12,772	55,046	51,311	129,020
Total Segment assets	30,670	23,858	213,577	51,384	319,489
Total Segment liabilities	(25,343)	(20,621)	(50,130)	(5,276)	(101,370)
Net assets / (liabilities)	5,327	3,237	163,447	46,108	218,119

In the year the Group sold its interests in the two joint ventures recorded in the Estate Agency Division, results for these joint ventures are recorded to their disposal dates. The Group acquired an interest in a joint venture in the Financial Services Division during April 2021.

Unallocated net assets comprise intangible assets and plant and equipment £0.1m, other assets £3.0m, cash £48.5m, accruals and other payables £3.4m, current and deferred tax liabilities £2.1m. Unallocated result comprises costs relating to the Parent Company.

5.  Adjusted performance measures

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

The three adjusted measures reported by the Group are:

· Group Underlying Operating Profit

· Adjusted Basic EPS

· Adjusted diluted EPS

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

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

The calculations of adjusted basic and adjusted diluted EPS are given in Note 6 to these Interim Condensed Consolidated Group Financial Statements and a reconciliation of Group Underlying Operating Profit is shown below:

		Unaudited Six months ended 30 June		Audited Year ended 31 December
		2022	2021	2021
		£'000	£'000	£'000
Group operating profit		8,737	26,748	72,584
Share-based payments		1,500	454	1,916
Amortisation of intangible assets		2,051	2,677	4,534
Exceptional gains		-	(4,311)	(31,050)
Exceptional costs		2,000	1,656	2,045
Contingent consideration (credit)/charge		(115)	44	(710)
Group Underlying Operating Profit		14,173	27,268	49,319

6.  Earnings per share (EPS)

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

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

Unaudited - Six months ended 30 June 

	Profit after tax £'000	Weighted average number of shares	2022 Per share amount Pence	Profit after tax £'000	Weighted average number of shares	2021 Per share amount Pence
Basic EPS	5,876	103,099,292	5.7	22,566	103,691,129	21.8
Effect of dilutive share options		401,613			1,737,509
Diluted EPS	5,876	103,500,905	5.7	22,566	105,428,638	21.4

Audited - Year ended 31 December 2021

				Profit after tax £'000	Weighted  average number of shares	2021 Per share amount Pence
Basic EPS				61,941	103,912,148	59.6
Effect of dilutive share options					688,806
Diluted EPS				61,941	104,600,954	59.2

Adjusted basic and diluted EPS

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

	Unaudited Six months ended		Audited Year Ended
	30 June 2022 £'000	30 June 2021 £'000	31 December 2021 £'000
Group Underlying Operating Profit	14,173	27,268	49,319
Loss attributable to non-controlling interest	51	21	37
Net finance costs (excluding exceptional items, contingent consideration items and discounting on lease liabilities)	(549)	(511)	(1,047)
Normalised taxation (tax rate 19%)	(2,599)	(5,084)	(9,171)
Adjusted profit after tax before exceptional items, share-based payments and amortisation	11,076	21,694	39,138

Unaudited - Six months ended 30 June

	Adjusted profit after tax £'000	Weighted average number of shares	2022 Per share amount Pence	Adjusted profit after tax £'000	Weighted average number of shares	2021 Per share amount Pence
Adjusted basic EPS	11,076	103,099,292	10.7	21,694	103,691,129	20.9
Effect of dilutive share options		401,613			1,737,509
Adjusted diluted EPS	11,076	103,500,905	10.7	21,694	105,428,638	20.6

Audited - Year ended 31 December 2021

				Adjusted profit after tax £'000	Weighted average number of shares	2021 Per share amount Pence
Adjusted basic EPS				39,138	103,912,148	37.7
Effect of dilutive share options					688,806
Adjusted diluted EPS				39,138	104,600,954	37.4

This represents adjusted profit after tax attributable to equity holders of the parent.  Tax has been adjusted to exclude the prior year tax adjustments, and the tax impact of exceptional items, amortisation, and share-based payments.  The effective tax rate used is 19.00% (30 June 2021: 19.00% and 31 December 2021: 19.00%).

7.  Exceptional items

	Unaudited Six months ended		Audited Year ended
	30 June 2022	30 June 2021	31 December  2021
	£'000	£'000	£'000
Exceptional costs:
Impairment to subsidiary Marsh & Parsons	2,000	-	-
Exceptional costs in relation to investment in joint venture	-	943	1,179
Embrace Financial Services Limited restructuring project	-	713	714
Dissolution and impairment of associate Mortgage Gym Limited	-	-	152
	2,000	1,656	2,045

Exceptional costs

Goodwill Impairment:

There was an impairment review carried out which resulted in an impairment to goodwill in relation to Marsh & Parsons.

8.  Dividends paid and declared

A final dividend in respect of the year ended 31 December 2021 at 7.4 pence per share (December 2020: £Nil) was paid in the period ended 30 June 2022.  An interim dividend has been announced amounting to 4.0 pence per share (June 2021: 4.0 pence per share).  Interim dividends are recognised when paid.

9.  Taxation

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

		Unaudited   Six Months Ended		Audited Year Ended
		30 June 2022	30 June 2021	31 December 2021
		£'000	£'000	£'000
UK corporation tax:
- current year charge		1,687	3,008	7,873
- adjustment in respect of prior years		-	(1)	(251)
		1,687	3,007	7,622
Deferred tax:
Origination and reversal of temporary differences		(61)	(214)	(179)
Adjustment in respect of prior year		(18)	1	(20)
Changes in tax rates		-	123	562
		(79)	(90)	363
Total tax charge in the income statement		1,608	2,917	7,985

The headline UK rate of corporation tax for the period is 19% (2021: 19%), and the rate at which deferred tax has been provided is 25% (2021: 25%). The expected impact on deferred tax balances of the rate increase is estimated to be £(97,000).

Deferred tax charged directly to other comprehensive income relating to the revaluation of financial assets is £nil.  In the six months ended 30 June 2021 £119,000 and year ended 31 December 2021 £132,000.

10.  Goodwill

	£'000
Cost
At 1 January 2021	160,865
Arising on acquisitions	-
At 31 December 2021	160,865
Arising on acquisitions	-
Impairment	(2,000)
At 30 June 2022	158,865
Net book value
At 30 June 2022	158,865
At 31 December 2021	160,865

The carrying amount of goodwill by cash generating unit is given below:

	2022	2021
	£'000	£'000
Financial Services
Group First	13,913	13,913
RSC New Homes	7,128	7,128
First Complete	3,998	3,998
Advance Mortgage Funding	2,604	2,604
Personal Touch Financial Services	348	348
Direct Life and Pension Services	1,002	1,002
	28,993	28,993
Surveying and Valuation segment company
e.surv	9,569	9,569
Estate Agency segment companies
Your Move & Reeds Rains	58,800	58,800
Marsh & Parsons	38,307	40,307
LSLi	22,512	22,512
Templeton LPA	336	336
Others	348	348
	120,303	122,303
Total	158,865	160,865

Impairment of goodwill

Goodwill has been allocated for impairment testing purposes to statutory companies or Groups of statutory companies which are managed as one cash generating unit as follows:

· Financial Services companies

o  Group First

o  RSC New Homes

o  First Complete

o  Advance Mortgage Funding which includes BDS

o  Personal Touch Financial Services

o  Direct Life and Pensions Services Limited

· Surveying and Valuation Services company

o  e.surv

· Estate Agency companies

o  Your Move and Reeds Rains (including its share of cash-flows from LSL Corporate Client Department)

o  Marsh & Parsons

o  LSLi

o  Templeton LPA

o  St Trinity

Recoverable amount of companies

The recoverable amount of the Financial Services, Surveying and Valuation services and Estate Agency companies has been determined based on a value-in-use calculation using cash-flow projections based on financial budgets approved by the Board and in the three-year plan. The discount rate applied to cash-flow projections is 12.2% (2021: 12.2%) and cash-flows beyond the three year plan are extrapolated using a 2.0% growth rate (2021: 2.0%).

Key assumptions used in value-in-use calculations

The calculation of value-in-use for each of the Financial Services, Surveying and Valuation Services and Estate Agency companies is most sensitive to the following assumptions:

· Discount rates.

· Performance in the market.

Discount rates

Reflect the Management Team's estimate of the post-tax Weighted Average Cost of Capital (WACC) of the Group and this is grossed up to arrive at a pre-tax discount rate (using a tax rate of 19.0%) of 12.2% (2021: 12.2%); external advice has been sought for certain elements of the source data. This is the benchmark used by the Management Team to assess operating performance and to evaluate future acquisition proposals. 

Performance in the market

Reflects how the Management Team believes the business will perform over the three-year period and is used to calculate the value-in-use of the CGUs.

There has been an impairment recorded in respect of the carrying amount of goodwill in Marsh and Parsons of £2m within the Estate Agency segment. In consideration of trading performance, market conditions and subsequent revisions to cash-flow forecasts, we concluded that an impairment review was required for Marsh and Parsons. The recoverable amount, as determined by the Value in Use, has reduced to £52.3m (December 2021: £60.4m). The carrying value of the brand remains unchanged at £11.7m (2021: £11.7m). Refer also to note 3 of the Financial Statements.

11.  Financial assets

	Unaudited Six Months Ended		Audited Year Ended
	30 June 2022	30 June 2021	31 December 2021
	£'000	£'000	£'000
Investment in equity instruments - at fair value
Unquoted shares at fair value (FVOCI)	5,049	7,417	5,418
Unquoted shares at fair value (FVPL)	751	-	-
IFRS 16 lessor financial assets	295	320	330
Total Financial Assets	6,095	7,737	5,748
Opening balance	5,748	9,561	9,561
Additions	-	14	14
Fair value adjustment (OCI)	(370)	443	(1,557)
Fair value adjustment (P&L)	751	-	-
Disposals	(34)	(2,281)	(2,270)
Closing balance	6,095	7,737	5,748
Non-current assets	6,095	7,737	5,748
Current assets	-	-	-
	6,095	7,737	5,748

Investment in equity instruments 

The financial assets include unlisted equity instruments which are carried at fair value. Fair value is judgemental given the assumptions required and have been valued using a level 3 valuation techniques (see Note 32 to the December 2021 Group Financial Statements). 

Vibrant Energy Matters Limited (VEM)

The carrying value of the Group's investment in VEM at 30 June 2022 has been assessed as £729,000 (June 2021: £729,000 and December 2021: £729,000), following a share transaction between third party shareholders which valued LSLs holding at £729,000.

NBC Property Master Limited

The carrying value of the Group's investment at 30 June 2022 has been assessed as £78,000 (June 2021: £78,000 and December 2021: £78,000).

Global Property Ventures Limited

On 6 January 2020, LSL acquired 76,000 additional shares in Global Property Ventures Limited, for a consideration of £8,275.

The carrying value of the Group's investment in Global Property Ventures Limited at 30 June 2022 has been assessed as £115,000 (June 2021: £101,000 and December 2021: £101,000).

Yopa Property Limited

The carrying value of the Group's investment in Yopa at 30 June 2022 has been assessed as £4,125,000 (June 2021: £6,495,000 and December 2021: £4,495,000), resulting in a £370,000 fair value reduction. The method for valuing the Group's investment in Yopa was changed in 2021 from a market approach to an income-based valuation. This change was made due to the increasing age of the most recent market transaction data previously used in the valuation, resulting in management no longer considering this to be an appropriate basis for the valuation.

Openwork Units

During the period the fair value of units held in The Openwork Partnership LLP was reassessed to £751,000 (31 December 2021: £nil, 30 June 2021: £nil), recognised in other operating income.

12.  Trade and other payables

	Unaudited Six Months Ended		Audited Year Ended   31 December 2021
	30 June 2022	30 June 2021
	£'000	£'000	£'000
Current
Trade payables	10,179	9,568	8,207
Other taxes and social security payable	12,645	19,664	12,247
Other payables	2,177	3,852	3,600
Accruals	28,634	35,873	35,222
Lapse provision	4, 745	4,961	4,930
	58,380	73,918	64,206

Lapse Provision

Certain subsidiaries sell life assurance products which are cancellable without a notice period, and if cancelled within a set period require that a portion of the commission earned must be repaid. The lapse provision is recognised as a reduction in revenue which is based on historic lapses which have occurred. The provision is managements best estimate of future clawed back commission on life assurance policies, taking into account historic lapse rates in each subsidiary.

13.  Financial liabilities

	Unaudited Six Months Ended		Audited Year Ended
	30 June 2022	30 June 2021	31 December 2021
	£'000	£'000	£'000
Current
IFRS 16 lessee financial liabilities	7,925	9,583	8,447
Deferred consideration	-	30	-
Contingent consideration	2,537	1,470	76
	10,462	11,083	8,523
Non-current
IFRS 16 lessee financial liabilities	17,775	21,313	19,670
Contingent consideration	313	4,365	2,932
	18,088	25,678	22,602

Contingent consideration -

	Unaudited Six Months Ended		Audited Year Ended
	30 June 2022	30 June 2021	31 December 2021
	£'000	£'000	£'000
Group First	-	1,470	-
RSC	2,537	3,786	2,615
DLPS	313	579	393
	2,850	5,835	3,008
Opening balance	3,008	5,447	5,447
Cash paid	(76)	(302)	(2,462)
Acquisition	-	579	579
Amounts recorded though income statement	(82)	111	(556)
Closing balance	2,850	5,835	3,008

£2,537,000 of contingent consideration relates to RSC New Homes (June 2021: £3,786,000 and December 2021: £2,615,000). The additional consideration will be calculated using earnings multiples of between five and six times EBITA (plus excess cash in the business) and has been capped at a maximum of £7.5m.

£313,000 of contingent consideration relates to Direct Life and Pension Services Limited, acquired in January 2021. The additional consideration will be calculated using earnings multiples of between five and six times EBITA and has been capped at a maximum of £1.5m.

In the period ending 30 June 2022 £76,000 (June 2021: £302,000 and December 2021: £2,462,000) of contingent consideration was paid to former shareholders.

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

	Unaudited Six Months Ended		Audited Year Ended
Contingent consideration balances relating to amounts accounted for as:	30 June 2022	30 June 2021	31 December 2021
	£'000	£'000	£'000
Arrangement under IFRS 3	(115)	44	(710)
Unwinding of discount on contingent consideration	33	67	154
Charge / (credit)	(82)	111	(556)

The contingent consideration charged to the Income Statement in the period excluding the unwinding of discount relates to previous acquisitions and relates to the acquisition of RSC New Homes credit of £92,000 (June 2021: credit £44,000 and December 2021: credit £417,000) and Direct Life and Pension Services credit of £23,000 (June 2021: credit £nil and December 2021: credit £248,000).

14.  Analysis of Net cash

	Unaudited Six Months Ended		Audited Year Ended
	30 June 2022	30 June 2021	31 December 2021
	£'000	£'000	£'000
Interest bearing loans and borrowings (including loan notes, overdraft, IFRS16 lease liabilities, contingent and deferred consideration
-  Current	10,462	11,083	8,523
-  Non-current	18,088	25,678	22,602
	28,550	36,761	31,125
Less: cash and short-term deposits	(30,708)	(17,039)	(48,464)
IFRS 16 Lessee financial liabilities	(25,700)	(30,896)	(28,117)
Less: deferred and contingent consideration	(2,850)	(5,865)	(3,008)
Net (cash) / Bank Debt at the end of the period	(30,708)	(17,039)	(48,464)

15.  Investments in Joint Ventures and associates

	30 June 2022	31 December 2021
	£'000	£'000
Investment in joint ventures and associates	2,338	1,610

Investment in joint ventures

Opening balance (1 January)	1,610	11,406
Disposal of LMS	-	(8,249)
Disposal of TM Group	-	(3,120)
Dividend received from LMS	-	(1,178)
Equity investment in Pivotal Growth	936	2,477
Equity accounted (loss) / profit	(208)	274
Closing balance	2,338	1,610

In February 2022, the group invested a further £0.9m in Pivotal Growth and maintains a 47.8% holding in the entity.

16.  Financial Instruments

Risk management

The financial risks the Group faces, and the methods used to manage these risks have not changed since 31 December 2021.  Further details of the risk management policies of the Group are disclosed in Note 32 of the Group's Financial Statements for the year ended 31 December 2021.

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

Fair values of financial assets and financial liabilities

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

Fair value hierarchy

As at 30 June 2022, the Group held the following financial instruments measured at fair value. The Group uses the following hierarchy for determining and disclosing the fair value of the financial instruments by valuation technique:

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

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

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

Unaudited - 30 June 2022	Total	Level 1	Level 2	Level 3
	£'000	£'000	£'000	£'000
Assets measured at fair value
Financial assets	6,095	-	751	5,344
Liabilities measured at fair value
Contingent consideration	2,851	-	-	2,851

Unaudited - 30 June 2021	Total	Level 1	Level 2	Level 3
	£'000	£'000	£'000	£'000
Assets measured at fair value
Financial assets	7,417	-	729	6,688
Liabilities measured at fair value
Contingent consideration	5,835	-	-	5,835

Audited - 31 December 2021	Total	Level 1	Level 2	Level 3
	£'000	£'000	£'000	£'000
Assets measured at fair value
Financial assets	5,748	-	-	5,748
Liabilities measured at fair value
Contingent consideration	3,008	-	-	3,008

Of the investments totalling £6,095,000, £5,344,000 are valued using Level 3 valuation techniques. The Directors reviewed the fair value of the financial assets at 30 June 2022. The underlying value of the investments will be driven by the profitability of these businesses.  If this was to drop by 10%, the implied valuation is likely to also drop by around 10%, approximately £0.6m. The £751,000 uplift in Openwork Units, has been valued using Level 2 valuation techniques. The valuation is based on recent external sales between independent 3rd parties.

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

17.  Events after the reporting period

On 8 July 2022, the Group invested an additional £1.4m in its Pivotal Growth joint venture to fund its buy and build growth strategy.

Forward-Looking Statements

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

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

Definitions

Definitions for words and expressions referred to and included in this statement which are not expressly defined within, can be found in LSL's Annual Report and Accounts 2021 (a copy of which is available on LSL's website at: www.lslps.co.uk ). All references to 'note(s)' in this statement are, unless expressly stated otherwise, references to the 'Notes to the Interim Condensed Group Financial Statements' included in this statement.

INDEPENDENT REVIEW REPORT TO LSL PROPERTY SERVICES PLC

Conclusion

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2022 which comprises the Interim Group Income Statement, the Interim Group Statement of Comprehensive Income, the Interim Group Balance Sheet, the Interim Group Cash Flow Statement, the Interim Group Statement of Changes in Equity and the related Notes 1 to 17. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2022 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Basis for Conclusion

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

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

Conclusions Relating to Going Concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis of Conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with this ISRE, however future events or conditions may cause the entity to cease to continue as a going concern.

Responsibilities of the directors

The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

In preparing the half-yearly financial report, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

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

Ernst & Young LLP

Liverpool

2 August 2022

 

END

 

 

IR UUAARUNUWRUR