Interim Results

RNS Number : 0968H

LSL Property Services

30 July 2019

For immediate release

30^th July 2019

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

Interim Results For the six months ended 30^th june 2019

LSL Property Services plc, a leading provider of residential property services incorporating estate agency, financial services and surveying and valuation businesses, announces its interim results for the six months ended 30^th June 2019.

	2019	2018	change
Group Revenue - £m	154.1	152.9	+1%
Group Underlying Operating Profit¹ - £m	12.2	11.6	+5%
Group underlying operating margin - %	7.9	7.6
Group Adjusted EBITDA² - £m	19.7	14.4	+37%
Net Exceptional (cost) / gain - £m	(12.8)	1.2
Group operating (loss) / profit - £m	(2.8)	7.4
(Loss) / profit before tax - £m	(4.6)	6.4
Basic (loss) / Earnings Per Share - pence	(3.1)	4.7
Adjusted Basic Earnings Per Share³ - pence	9.0	8.6	+5%
Net Bank Debt⁴ at 30^th June - £m	52.0	46.0	+13%
Interim dividend - pence	4.0	4.0

1 Group Underlying Operating Profit is before exceptional costs, contingent consideration, amortisation of intangible assets and share-based payments (as defined in Note 6 of the financial statements). Excluding the impact of IFRS 16 Group Underlying Operating Profit in H1 2019 was £11.8m

2 Group Adjusted EBITDA is Group Underlying Operating Profit plus depreciation of right of use assets, plant, property and equipment (as defined in Note 6 of the financial statements). Excluding the impact of IFRS 16, Group Adjusted EBITDA in H1 2019 was £14.3m

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

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

Positive first half Group financial performance

§ Positive performance with Group Underlying Operating Profit² up 5% to £12.2m (2018: £11.6m) and Group Adjusted EBITDA² up 37%. Excluding the impact of IFRS 16, Group Underlying Operating Profit was 2% ahead of prior year and Group Adjusted EBITDA was broadly in line with prior year

§ Group Revenue up 1% to £154.1m (2018: £152.9m) with a resilient performance in the context of subdued market conditions

§ The Estate Agency Division delivered a strong performance with Underlying Operating Profit² increasing to £4.0m (2018: £1.4m), benefiting materially from the reshaping of the Your Move and Reeds Rains branch networks, announced on 5^th February 2019

§ The Financial Services Division delivered a strong performance with Underlying Operating Profit² up 20% to £4.3m (2018: £3.6m) reflecting growth in core businesses and the benefit of the acquisitions of PTFS and RSC in Q1 2018

§ The Surveying Division delivered Underlying Operating Profit² of £6.3m (2018: £8.6m) impacted by market conditions, business mix and increased headcount from the transfer of Lloyds Bank plc personnel to e.surv following the award of the new contract in May 2018

§ Exceptional costs of £13.4m recognised in the period predominantly from the reshaping of the Your Move and Reeds Rains branch networks, announced on 5^th February 2019. Continued positive progress in addressing historic Professional Indemnity (PI) claims with a £0.6m exceptional provision release as claims were settled below previous expectations

Full year outlook

§ The Board remains confident that the Group will deliver a full year Underlying Operating Profit in line with its prior expectations, as the business is expected to continue to benefit from the range of LSL's ongoing self-help measures

§ Interim dividend of 4.0 pence (2018: 4.0 pence)

Estate Agency Division Performance¹

§ LSL announced the reshaping of its Your Move and Reeds Rains branch networks on 5^th February 2019. We are pleased that the implementation of this programme has progressed in-line with our expectations despite the scale and complexity of the project. As a result, the revenue in the keystone branch network in H1 was slightly ahead of the LSL business plan. During Q1, the Your Move and Reeds Rains estate agency branch network was reshaped from 308 owned branches to 144 keystone branches following the closure and merging of 81 neighbouring branches into the keystone branch network, the franchising of 39 branches and the closure of 44 branches

§ LSL expect the changes to the branch networks to continue to deliver a material improvement to Underlying Operating Profit in Your Move and Reeds Rains, assuming no material change in market conditions

§ Profit per branch (Your Move, Reeds Rains and LSLi) increased to £48.4k (2018: £24.9k) on a rolling twelve month basis as a result of the benefit from the reshaping of Your Move and Reeds Rains networks

§ The Estate Agency Revenues for H1 2019 and H1 2018 as reported and on a like for like basis, adjusting for the closure of the Your Move and Reeds Rains branches during Q1 2019 are set out below:

	H1 2019	H1 2018¹	% Change (Reported)	% Change (LFL)
Total Estate Agency Revenue	£77.1m	£88.9m	-13%	-5%
Residential Sales exchange Revenue	£27.6m	£32.9m	-16%	-6%
Lettings income	£33.8m	£37.3m	-9%	0%

§ Total Estate Agency Revenue decreased by 13% to £77.1m (2018: £88.9m) impacted by the soft market conditions and the reduction in the size of the Your Move and Reeds Rains branch networks during Q1 2019. Adjusting for the closure of the Your Move and Reeds Rains branches during Q1 2019, like for like Revenue was down 5% year on year

§ Adjusting for the closure of the Your Move and Reeds Rains branches during Q1 2019, Residential Sales Exchange income was down 6% year on year, impacted by market volumes and Lettings income in-line with prior year on a like for like basis

§ The London market conditions continued to be challenging in H1 2019 as anticipated. Marsh & Parsons delivered a resilient Revenue performance despite the market conditions with total Revenue down 5.5%

§ In line with LSL's stated strategy, Marsh & Parsons opened two new branches in April 2019 in outer prime central London, in Willesden Green and Streatham Hill. These new branches are trading in line with expectations

§ Legislation banning tenant fees came into effect on 1^st June 2019 and LSL implemented the required changes across its Estate Agency brands. LSL continues to implement self-help measures in lettings

§ LSL continued its accretive lettings book acquisition programme with three lettings books acquired during the period for a total consideration of £1.4m

Financial Services Division Performance¹

§ Total Financial Services Division Revenue increased by 4% to £34.3m (2018: £33.0m)

§ Financial Services organic growth, excluding Estate Agency, in H1 2019 was 3%

§ The value of LSL's mortgage completions in the first half of 2019 increased to £14.7bn (2018: £13.2bn)

§ The number of appointed representative firms as at 30^th June 2019 increased to 860 (2018: 842)

§ The number of financial advisers as at 30^th June 2019 was 2,277 (2018: 2,298)

§ The roll out of Toolbox, the new Financial Services technology system is progressing in line with expectations

Surveying and Valuations Division Performance

§ Surveying income increased by 37% to £42.7m (2018: £31.1m) due to the new contract with Lloyds Bank plc, which was awarded in May 2018

§ In June 2019, the Surveying Division was awarded an extension to its contract to supply UK residential survey and valuation services to a major high street bank

§ Continued positive progress in addressing historic PI claims with a £0.6m exceptional provision release in H1 2019 as claims were settled below previous expectations

§ Technology enhancements continue to be implemented during 2019 with further functionality releases designed to drive quality and efficiency improvements

§ Work is ongoing to leverage the scale benefits of the Surveying Division, with the aim of improving cost efficiency

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

"The Group delivered a positive financial performance in the first half of 2019, with positive growth in Revenue and Underlying Operating Profit, despite subdued residential property market conditions.

The Board remains confident that the Group will deliver a full year Underlying Operating Profit in line with its prior expectations, as the business is expected to continue to benefit from the range of LSL's ongoing self-help measures.

Whilst we continue to remain cautious on the residential property market outlook for 2019 given the current uncertainty over the UK and global political and economic environment and the potential impact on UK consumer confidence, the Board is confident that the Group, with its market leading brands, broad portfolio of residential property services and the benefits from the proactive self-help measures, remains in a strong position to perform well given a range of potential market conditions, in order to maximise Shareholder value.

The Group has a robust balance sheet with relatively low levels of gearing and is highly cash generative at an operational level. The Board remain confident of the opportunities for further positive progress for the Group."

For further information, please contact:

Ian Crabb, Group Chief Executive Officer
Adam Castleton, Group Chief Financial Officer
LSL Property Services plc	0207 382 0360

Helen Tarbet, Sophie Wills
Buchanan	0207 466 5000

Notes on LSL:

LSL is a leading provider of residential property services to its key customer groups. Services to consumers include: residential sales, lettings, surveying, conveyancing support, and mortgage, pure protection and general insurance brokerage services. Services to mortgage lenders include: valuations and panel management services, and asset management and property management services. For further information, please visit LSL's website: lslps.co.uk

Group Chief Executive's Review

Introduction

The Group delivered a resilient first half Revenue performance with Revenue up 1%. Group Underlying Operating profit² was up 5% and Adjusted EBITDA² was up 37%. Adjusted for the impact of IFRS 16, Group Underlying Operating profit was up 2% year on year and Adjusted EBITDA was broadly in line with prior year.

Market conditions in H1 2019 have been softer than the equivalent period in 2018. The RICS June 2019 Residential Market Survey³ reported that that the RICS new buyer enquiries tracker and the RICS newly agreed sales net balance was negative for five of the six months in H1 2019. The RICS June 2019 Residential Market Survey³ reported average stock levels on estate agents books at record lows and whilst buyer enquiries edged upwards in June 2019, RICS reported significant declines in the early part of H1 2019.

Financial results

Group Revenue was up 0.8% to £154.1m (2018: £152.9m). Group Underlying Operating Profit² was up 4.7% to £12.2m (2018: £11.6m) and Group Underlying Operating Profit Margin² was 7.9% (2018: 7.6%).

Group operating loss was £2.8m (2018: profit £7.4m) impacted in the period by £13.4m of exceptional charges incurred, predominantly as a result of the reshaping of the Your Move and Reeds Rains estate agency networks, which delivered a material improvement in financial performance in Your Move and Reeds Rains in H1 2019. LSL expect the changes to the branch networks to continue to deliver a material improvement to underlying operating profit in Your Move and Reeds Rains, assuming no material change in market conditions.

During the first half of 2019 net finance costs increased to £1.8m (2018: £1.0m), due to the additional finance cost resulting from the adoption of the new leasing standard, IFRS 16. The expected effective tax rate for the period is 29.7% (June 2018: 24.2%), leading to tax credit of £1.4m. The effective tax rate has increased to 29.7% primarily as a result of disallowable expenditure within the exceptional costs in the year. Group loss after tax was £3.2m (2018: profit of £4.9m). Basic Loss Per Share was 3.1p (2018: earnings per share: 4.7p) and Adjusted Earnings Per Share were 9.0p (2018: 8.6p).

Cash generated from operations increased to £9.5m (2018: £1.1m), which excluded the repayments of lease liabilities following the adoption of IFRS 16 , higher Group Underlying Operating Profit² compared to the same period last year and an improvement in working capital compared to the prior year. Operating cash flow included PI Costs settlements of £1.5m (2018: £0.6m). Capital expenditure, including intangibles, was £2.2m (2018: £2.1m), including two new Marsh & Parsons branches opened during the period, in Streatham Hill and Willesden Green.

During the first half of 2019 the Group continued its accretive lettings book acquisition programme with three lettings books acquired during the period for a total consideration of £1.4m.

Net assets at 30^th June 2019 were £129.9m (2018: £146.0m). Net Bank Debt at 30^th June 2019 was £52.0m compared to £46.0m at 30^th June 2018. Compared to 31^st December 2018, Net Bank Debt has increased by £20m driven by the normal seasonality of the Estate Agency Division cash flows, the funding of the three strategic lettings book acquisitions, the payment of the deferred consideration in relation to previous acquisitions, the exceptional costs in relation to the reshaping of the Estate Agency network as well as the payment of dividends and taxes. LSL has a 14.7% minority shareholding in Yopa. LSL's previous carrying value of £7.8m for Yopa has been written down through reserves by £1.3m to £6.5m as at 30^th June 2019 to reflect the Board's assessment of fair value.

The Board remains confident in the underlying fundamentals and prospects of the Group's businesses and has declared an interim dividend payment amounting to 4.0 pence per share (2018: 4.0 pence). The ex-dividend date for the interim dividend is 8^th August 2019, with a record date of 9^th August 2019 and a payment date of 16^th September 2019. Shareholders have the opportunity to elect to reinvest their cash dividend and purchase existing shares in LSL through a dividend reinvestment plan. The election date is 23^rd August 2019.

Segment reporting

To reflect the increased importance of LSL's Financial Services businesses over the last five years, from 1^st January 2019, LSL's Financial Services businesses are reported as a separate segment. The Estate Agency Division receives and reports a commercially agreed commission payment from the Financial Services segment, which reflects Financial Services income generated from the Estate Agency segment. Financial Services Revenue reported in this statement for 2018 has therefore been restated on this basis to assist comparison. The Surveying Division reporting is unchanged.

Estate Agency Division¹

LSL announced the reshaping of its Your Move and Reeds Rains branch networks on 5^th February 2019. We are pleased that the implementation of this programme has progressed in-line with our expectations despite the scale and complexity of the project. As a result, the revenue in the keystone branch network in H1 was slightly ahead of the LSL business plan. During Q1, the Your Move and Reeds Rains estate agency branch network was reshaped from 308 owned branches to 144 keystone branches following the closure and merging of 81 neighbouring branches into the keystone branch network, the franchising of 39 branches and the closure of 44 branches. This reshaping was in-line with LSL announcement of 5^th February 2019.

Estate Agency Division total Revenue was down 13.2% at £77.1m (2018: £88.9m) reflecting the reshaping of the Your Move and Reeds Rains branch networks during the first quarter of 2019. Adjusting for the closure of the Your Move and Reeds Rains branches during the first quarter of 2019, like for like total Revenue decreased by 4.8% compared to the same period in 2018.

The Estate Agency Division delivered a strong performance with Underlying Operating Profit² increasing to £4.0m (2018: £1.4m), benefiting materially, in line with expectations, from the reshaping of the Your Move and Reeds Rains branch networks, announced on 5^th February 2019. Profit per branch (Your Move, Reeds Rains and LSLi) increased to £48.4k (2018: £24.9k) on a rolling twelve month basis as a result of the benefit from the reshaping of the networks. We expect the changes to the branch networks to continue to deliver a material improvement to Underlying Operating Profit in Your Move and Reeds Rains, assuming no material change in market conditions.

Residential Sales income decreased by 16% to £27.6m (2018: £32.9m) due to the reshaping of the Your Move and Reeds Rains branch networks and the market conditions. Adjusting for the closure of the Your Move and Reeds Rains branches during Q1 2019, Residential Sales income decreased by 6%. In a highly competitive market, the Estate Agency Division has broadly maintained residential market share and delivered an increase in average residential fees of 7% to £3,247 (2018: £3,035). The average residential fee in H1 2019 benefited from the closure of Your Move and Reeds Rains branches which generated lower average fees. Like for like, average residential fee in H1 2019 were maintained at the same level compared to the same period last year.

Total Lettings income decreased by 9.2% to £33.8m (2018: £37.3m). On a like for like basis, adjusting for the reshaping of the Your Move and Reeds Rains branch networks, Lettings income was in line with the prior year. The Group has recommenced its letting books acquisitions programme with three lettings books acquired during the period for a total consideration of £1.4m.

Marsh & Parsons total Revenues were down 5.5% to £15.0m (2018: £15.9m). Marsh & Parsons Underlying Operating Profit² decreased to £0.4m (2018: £0.7m) with operating margins of 2.7% (2018: 4.4%). Adjusted EBITDA as reported for H1 2019 was £2.3m (2018: £1.2m). Excluding the impact of IFRS 16, Adjusted EBITDA for H1 2019 was £0.7m (2018: £1.2m).

Marsh & Parsons Residential Sales were down 10.6%, against an overall London market for sales transactions which LSL estimates was down c.15% in the first half of 2019. The Residential Sales performance was impacted by a reduced pipeline entering into 2019. The pipeline has improved over the first half of 2019 which is an encouraging metric, heading into the second half of the year. Market stock levels in lettings are subdued, resulting in Lettings income decreasing by 5.3% in the first half of 2019.

Prime Central London has been the area most impacted by the market conditions whilst branches in outer prime Central London areas have been less negatively impacted. Two new Marsh & Parsons branches opened in outer prime Central London during the period, in Streatham Hill and Willesden Green. These new branches are trading in line with expectations. Despite the opening of two new branches since 30^th June 2018, with strong cost control, total expenditure fell by 4% year on year.

Legislation banning tenant fees came into effect on 1^st June 2019 and LSL implemented the required changes across its Estate Agency brands. LSL continues to implement self-help measures in lettings with the aim of optimising lettings income.

In the second half of 2019, the Estate Agency Division will continue to benefit from the reshaping of the Your Move and Reeds Rains branch networks, residential sales pipelines which are currently ahead of the Board's expectations and continued cost control across the LSL businesses.

Financial Services Division¹

Financial Services Division Revenue increased by 4% to £34.3m (2018: £33.0m). Financial Services organic growth, excluding Estate Agency, in H1 2019 was 3%. The growth in the value of mortgage completions represents an increase in LSL's market share⁴ to 8.5% in 2019 (2018: 8%). LSL is the second largest combined network nationwide, measured by combined number of appointed representative firms⁵. The number of financial advisers as at 30^th June 2019 was 2,277 (2018: 2,298).

The Financial Services Division delivered a strong performance with Underlying Operating Profit² up 20% to £4.3m (2018: £3.6m) reflecting growth in core businesses and the benefit of the acquisitions of PTFS and RSC in Q1 2018. The Financial Services business continues to display good organic growth across its breadth of products including mortgage products, pure protection products and general insurance products. The integration of PTFS, which was acquired in January 2018, is delivering synergy benefits in line with expectations.

The roll out of Toolbox, LSL's Financial Services technology system is progressing in line with expectations.

Surveying and Valuations Division

Revenue in the Surveying Division in the first half of 2019 increased by 37% to £42.7m (2018: £31.1m), with a total number of jobs performed of 250,695 (2018: 154,905). This increase was driven by the contract signed in 2018 for the Surveying Division to supply surveying and valuation services to Lloyds Bank Group plc from September 2018. The initial operational performance of the Lloyds Bank plc contract has been in line with expectations.

Market conditions in H1 2019 were notably softer than anticipated and in the equivalent period in 2018. Income per job in H1 2019 reduced to £170 (2018: £201) due to a change in the business mix. Total Surveying Division expenditure increased due to the additional headcount from the transfer of Lloyds Bank plc personnel to e.surv following the award of the new contract in May 2018. As a result, LSL delivered a reduced Underlying Operating Profit in H1 2019 of £6.3m (2018: £8.6m) with a profit margin of 14.8% (2018: 27.7%).

The total number of qualified surveyors⁶ at 30^th June 2019 was 490 (2018: 314), with the increase due to the transfer of Lloyds Bank plc employed surveyors into the LSL Surveying business during H2 2018. The on-going graduate programme continues to be successful and assists in alleviating the impact of capacity constraints in the market.

At 30^th June 2019, the total provision for PI Costs was £10.9m (2018: £14.6m). In 2019 the Group continued to make positive progress in addressing historic claims and there has been an exceptional release of £0.6m.

During H1 2019, the Surveying Division was pleased to be awarded an extension to its contract to supply UK residential survey and valuation services to a major high street bank.

Work is ongoing to leverage the scale benefits of the Surveying Division with the aim of improving cost efficiency.

Technology enhancements continue to be implemented during 2019 with further functionality releases designed to drive quality and efficiency improvements.

Strategy

LSL remains committed to delivering on its stated strategy:

Estate Agency

· Ambition to achieve £80k-£100k profit per branch in the medium term based on the expectation of a normalised level of market transactions

· Ambition to expand the number of Marsh & Parsons branches to a total of 36 in the medium term, particularly outside prime Central London

· Grow recurring and where market conditions permit counter-cyclical income streams

· Evaluate selective acquisitions of Residential Sales businesses and lettings books

Financial Services

· Enhance LSL's position as a leading distributor of mortgage and non-investment insurance products

· Consistent delivery of appropriate outcomes for consumers with a focus on "best practice" standards of regulatory compliance

· Enhancement of technology solutions to improve the customer experience and operational efficiency

· Evaluate further selective Financial Services acquisitions

Surveying and Valuation Services

· Optimise contract performance and revenue generation from business to business customers

· Achieve further improvement in efficiency and capacity utilisation

· Use technology to target further improvements in customer satisfaction and performance

· Continue the graduate training programme

Outlook

Ian Crabb

Group Chief Executive Officer

30^th July 2019

(1) Following the change to LSL's segment reporting effective from 1^st January 2019, the Estate Agency Division receives a commercially agreed commission payment from the Financial Services segment. This arrangement reflects Financial Services income generated from the Estate Agency segment. The 2018 revenue has been restated on this basis to assist comparison

(2) Group Underlying Operating Profit is before exceptional costs, contingent consideration, amortisation of intangible assets and share-based payments; Group Adjusted EBITDA is Group Underlying Operating Profit plus depreciation of right of use assets, plant, property and equipment (both as defined in Note 6)

(3) Source: RICS UK Residential Market Survey, June 2019

(4) Source: UK Finance new mortgage lending by type of lender (excludes product transfers), June 2019

(5) Source: Which-Network - network performance figures for Q1 2019 showing the combined numbers for PRIMIS

(6) FTE (full time equivalent)

Principal risks and uncertainties

The key risks and uncertainties relating to the Group's operations remain consistent with those disclosed in the Group's Annual Report and Accounts 2018 on pages 30 to 34. The Annual Report and Accounts 2018 can be accessed on the Group's website: www.lslps.co.uk. Having reconsidered these principal risks and uncertainties which are summarised below, the Board continues to consider them appropriate.

· UK housing market

· New UK housing market entrants

· Investment, acquisitions and growth initiatives

· Professional services

· Client contracts

· Business infrastructure (including IT)

· Information security (including data protection)

· Regulatory and compliance

· Employees

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

The Board has concluded that the principal risks and uncertainties of the Group remain the same as those included within the Annual Report and Accounts 2018.

Forward-Looking Statements

This statement may contain forward looking statements with respect to certain plans and current goals and expectations relating to the future financial condition, business performance and results of LSL. By their nature, all forward looking statements involve risk and uncertainty because they relate to future events and circumstances that are beyond the control of LSL including, amongst other things, UK domestic and global economic and business conditions, market related risks such as fluctuations in interest rates, inflation, deflation, the impact of competition, changes in customer preferences, delays in implementing proposals, the timing, impact and other uncertainties of future acquisitions or other combinations within relevant industries, the policies and actions of regulatory authorities, the impact of tax or other legislation and other regulations in the UK. As a result LSL's actual future condition, business performance and results may differ materially from the plans, goals and expectations expressed or implied in these forward looking statements. Nothing in this statement should be construed as a profit forecast. Information about the management of the Principal Risks and Uncertainties facing LSL is set out within the Strategic Report in the Group's Annual Report and Accounts 2018 on pages 30 to 34.

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 2018 (a copy of which is available on LSL's website at: www.lslps.co.uk). All references to 'note(s)' in this statement are, unless expressly stated otherwise, references to the 'Notes to the Interim Condensed Group Financial Statements' included in this statement.

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

We confirm that to the best of our knowledge:

· The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

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

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the 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

Ian Crabb

Director, Group Chief Executive Officer

30^th July 2019

Interim Group Income Statement

for the six months ended 30^th June 2019

		Unaudited Six Months Ended		Audited Year Ended
		30^th June 2019	30^th June 2018	31^st December 2018
Continuing Operations	Note	£'000	£'000	£'000

Revenue	4,5	154,115	152,891	324,640

Operating expenses:
Employee and subcontractor costs		(96,958)	(96,705)	(203,095)
Establishment costs		(7,341)	(10,056)	(20,614)
Depreciation on property, plant and equipment		(7,513)	(2,772)	(5,674)
Other		(30,268)	(31,737)	(60,211)
		(142,080)	(141,270)	(289,594)

Other operating income		459	388	557
Gain on sale of property, plant and equipment		(6)	-	34
(Loss) / income from joint ventures and associates		(331)	(399)	259

Group Underlying Operating Profit	6	12,157	11,610	35,896

Share-based payments		(553)	(590)	(349)
Amortisation of intangible assets		(2,236)	(2,718)	(5,301)
Exceptional gains	8	593	1,189	2,188
Exceptional costs	8	(13,380)	-	(5,234)
Contingent consideration		652	(2,057)	(1,783)
Group operating (loss) / profit		(2,767)	7,434	25,417

Finance income		5	-	-
Finance costs		(1,802)	(1,018)	(2,333)
Net finance costs		(1,797)	(1,018)	(2,333)

(Loss) / profit before tax		(4,564)	6,416	23,084

Taxation credit / (charge)	10	1,353	(1,555)	(5,201)

(Loss) / profit for the period/year		(3,211)	4,861	17,883

(Loss) / earnings per share expressed in pence per share:
Basic	7	(3.1)	4.7	17.4
Diluted	7	(3.1)	4.7	17.3

Interim Group Statement of Comprehensive Income

for the six months ended 30^th June 2019

	Unaudited Six Months Ended		Audited Year Ended
	30^th June 2019	30^th June 2018	31^st December 2018
	£'000	£'000	£'000

(Loss) / profit for the period	(3,211)	4,861	17,883

Items not to be reclassified to profit and loss in subsequent periods:
Revaluation of financial assets not recycled through income statement	(3,006)	-	(12,200)
Income tax effect	-	-	-
Net other comprehensive (loss):	(3,006)	-	(12,200)

Total other comprehensive (loss) for the year, net of tax	(3,006)	-	(12,200)

Total comprehensive (loss) / income, net of tax	(6,217)	4,861	5,683

Interim Group Balance Sheet

as at 30^th June 2019

		Unaudited Six Months Ended		Audited Year Ended
		30^th June 2019	30^th June 2018	31^st December 2018
	Note	£'000	£'000	£'000

Non-current assets
Goodwill		159,724	159,226	159,723
Other intangible assets		31,438	32,296	31,960
Property, plant and equipment		50,154	16,971	16,866
Financial assets	11	9,602	26,032	11,566
Investments in joint ventures and associates		12,187	8,448	13,230
Contract assets		813	-	959
Total non-current assets		263,918	242,973	234,304

Current assets
Trade and other receivables		43,438	40,006	38,650
Contract assets		253	-	262
Current tax asset		1,500	-	-
Cash and cash equivalents		4,984	516	2,405
Total current assets		50,175	40,522	41,317

Total assets		314,093	283,495	275,621

Current liabilities
Financial liabilities	12	(20,601)	(10,226)	(10,455)
Trade and other payables		(58,826)	(55,359)	(63,980)
Current tax liabilities		-	(1,892)	(2,688)
Provisions for liabilities	13	(5,734)	(8,104)	(6,616)
Total current liabilities		(85,161)	(75,581)	(83,739)

Non-current liabilities
Financial liabilities	12	(90,375)	(52,803)	(41,156)
Deferred tax liability		(2,634)	(2,429)	(2,189)
Provisions for liabilities	13	(6,052)	(6,681)	(5,944)
Total non-current liabilities		(99,061)	(61,913)	(49,289)

Total Liabilities		(184,222)	(137,494)	(133,028)

Net assets		129,871	146,001	142,593

Equity
Share capital		208	208	208
Share premium account		5,629	5,629	5,629
Share-based payment reserve		4,671	4,382	4,129
Shares held by EBT		(5,224)	(5,304)	(5,261)
Fair value reserve		(13,032)	473	(11,727)
Retained earnings		137,619	140,431	149,615
Equity attributable to owners of parent		129,871	145,819	142,593

Non-controlling interests		-	182	-
Total equity		129,871	146,001	142,593

Interim Group Cash Flow Statement

for the six months ended 30^th June 2019

		Unaudited Six Months Ended		Audited Year Ended
		30^th June 2019	30^th June 2018	31^st December 2018
	Note	£'000	£'000	£'000
(Loss) / profit before tax		(4,564)	6,416	23,084
Adjustments for:
Exceptional operating items and contingent consideration		12,135	866	4,829
Depreciation of tangible owned and lease assets		7,513	2,772	5,674
Amortisation of intangible assets		2,236	2,718	5,301
Share-based payments		553	590	349
Loss / (profit) on disposal of fixed assets		6	-	(34)
Loss / (profit) from joint ventures		331	399	(259)
Finance income		(5)	-	-
Finance costs		1,802	1,018	2,333
Revaluation of financial assets through the income statement		-	(737)	-
Realisation of non-cash consideration received for operating activities		-	-	1,529
Operating cash flows before movements in working capital		20,007	14,042	42,806
Movements in working capital
(Increase) / decrease in trade and other receivables		(4,222)	(5,388)	(3,815)
(Decrease) / increase in trade and other payables		(5,423)	(6,235)	(111)
(Decrease) / increase in provisions		(836)	(1,363)	(3,608)
		(10,481)	(12,986)	(7,534)
Cash generated from operations		9,526	1,056	35,272
Interest paid		(725)	(720)	(1,359)
Income taxes paid		(2,685)	(3,662)	(6,875)
Exceptional costs paid		(6,662)	-	(3,310)
Net cash generated from operating activities		(546)	(3,326)	23,728
Cash flows used in investing activities
Cash acquired on purchase of subsidiary undertaking		-	6,944	6,944
Acquisitions of subsidiaries and other businesses		(1,300)	(6,507)	(7,732)
Payment of contingent consideration	12	(133)	(1,306)	(1,392)
Investment in joint ventures and associates		-	-	(4,100)
Investment in financial assets	11	(1,750)	(13)	(13)
Cash received on sale of financial assets		1,015	-	-
Rental receipts		33	-	-
Purchase of property, plant and equipment and intangible assets		(2,154)	(2,055)	(5,877)
Proceeds from sale of property, plant and equipment		-	-	156
Net cash (expended) / generated on investing activities		(4,289)	(2,937)	(12,014)
Drawdown of loans	12	22,500	16,521	4,521
Refinance costs		-	(250)	(250)
Repayment of loan notes	12	-	(2,000)	(2,000)
Payment of deferred consideration		(2,000)	-	-
Proceeds from the exercise of share options		26	1	20
Repayments of lease liabilities		(6,027)	-	-
Dividends paid		(7,085)	(7,493)	(11,600)
Net cash expended in financing activities		7,414	6,779	(9,309)

Net increase / (decrease) in cash and cash equivalents		2,579	516	2,405
Cash and cash equivalents at the end of the period / year		4,984	516	2,405

Interim Group Statement of changes in equity

Unaudited - for the six months ended 30^th June 2019

	Share capital	Share premium account	Share- based payment reserve	Shares held by EBT*	Fair value Reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1^st January 2019	208	5,629	4,129	(5,261)	(11,727)	149,615	142,593
Adjustment on initial application of IFRS 16	-	-	-	-	-	-	-
Revised opening balance at 1^st January 2019	208	5,629	4,129	(5,261)	(11,727)	149,615	142,593

Revaluation of financial assets	-	-	-	-	(3,006)	-	(3,006)
Disposal of financial asset	-	-	-	-	1,701	(1,701)	-
Other comprehensive income for the period	-	-	-	-	(1,305)	(1,701)	(3,006)
Loss for the period	-	-	-	-	-	(3,211)	(3,211)
Total comprehensive income for the period	-	-	-	-	(1,305)	(4,912)	(6,217)
Exercise of options	-	-	(11)	37	-	1	27
Share-based payments	-	-	553	-	-	-	553
Dividend payment	-	-	-	-	-	(7,085)	(7,085)
At 30^th June 2019	208	5,629	4,671	(5,224)	(13,032)	137,619	129,871

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

Trust. LSL received £26,000 on exercise of these options.

*Treasury Shares have been renamed to Shares held by EBT.

Interim Group Statement of changes in equity

Unaudited for the six months ended 30^th June 2018

	Share capital	Share premium account	Share- based payment reserve	Shares held by EBT*	Fair value Reserve	Retained earnings	Total equity	Non-controlling interest	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1^st January 2018	208	5,629	3,802	(5,317)	494	143,578	148,394	182	148,576
Adjustment on initial application of IFRS 15	-	-	-	-	-	(534)	(534)	-	(534)
Adjustment on initial application of IFRS 9	-	-	-	-	(21)	21	-	-	-
Revised opening balance	208	5,629	3,802	(5,317)	473	143,065	147,860	182	148,042
Other comprehensive income for the period	-	-	-	-	-	-	-	-	-
Profit for the period	-	-	-	-	-	4,861	4,861	-	4,861
Total comprehensive income for the period	-	-	-	-	-	4,861	4,861	-	4,861
Exercise of options	-	-	(10)	13	-	(2)	1	-	1
Share-based payments	-	-	590	-	-	-	590	-	590
Dividend payment	-	-	-	-	-	(7,493)	(7,493)	-	(7,493)
At 30^th June 2018	208	5,629	4,382	(5,304)	473	140,431	145,819	182	146,001

During the six month period to 30^th June 2018 a total of 3,661 share options were exercised relating to LSL's various share option schemes resulting in the shares being sold by the Trust. LSL received £1,000 on exercise of these options.

* Treasury Shares have been renamed to Shares held by EBT.

Interim Group Statement of changes in equity

Audited for the year ended 31^st December 2018

	Share capital	Share premium account	Share- based payment reserve	Shares held by EBT	Fair value Reserve	Retained earnings	Total equity	Non-controlling interest	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1^st January 2018	208	5,629	3,802	(5,317)	494	143,578	148,394	182	148,576
Adjustment on initial application of IFRS 15	-	-	-	-	-	(434)	(434)	-	(434)
Adjustment on initial application of IFRS 9	-	-	-	-	(21)	21	-	-	-
Revised opening balance	208	5,629	3,802	(5,317)	473	143,165	147,960	182	148,142
Other comprehensive income for the period
Revaluation of financial assets	-	-	-	-	(12,200)	-	(12,200)	-	(12,200)
Profit for the period	-	-	-	-	-	17,883	17,883	-	17,883
Total comprehensive (loss)/income for the period	-	-	-	-	(12,200)	17,883	5,683	-	5,683
Exercise of options	-	-	(22)	56	-	(15)	19	-	19
Share-based payments	-	-	349	-	-	-	349	-	349
Acquisition of minority interest	-	-	-	-	-	182	182	(182)	-
Dividend payment	-	-	-	-	-	(11,600)	(11,600)	-	(11,600)
At 31^st December 2018	208	5,629	4,129	(5,261)	(11,727)	149,615	142,593	-	142,593

During the year ended 31^st December 2018, the Trust acquired nil LSL Shares. During the period 15,966 share options were exercised relating to LSL's various share option schemes resulting in the Shares being sold by the Trust. LSL received £20,000 on exercise of these options.

Notes to the Interim Condensed Group Financial Statements

The Interim Condensed Group Financial Statements for the period ended 30^th June 2019 were approved by the LSL Board on 30^th July 2019. The interim Financial Statements are not the statutory accounts. The financial information for the year ended 31^st December 2018 is extracted from the audited statutory accounts for the year ended 31^st December 2018, which have been filed with the Registrar of Companies. The auditor's report was unqualified and did not contain an emphasis of matter paragraph, and did not make a statement under section 498 (2) or (3) of the Companies Act 2006.

1. Basis of preparation

The Interim Condensed Consolidated Group Financial Statements for the period ended 30^th June 2019 have been prepared in accordance with IAS 34 Interim Financial Reporting, and should be read in conjunction with the Group's annual Financial Statements as at 31^st December 2018 which are included in LSL's Annual Report and Accounts 2018.

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

This is the first set of the Group's Financial Statements where IFRS 16 (Leases) has been applied. Changes to significant accounting policies are disclosed in Note 2 to these Financial Statements.

2. Changes in significant accounting policies

Except as described below, 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^st December 2018.

The changes in the accounting policies are also expected to be reflected in the Group's Consolidated Financial Statements for the year ending 31^st December 2019.

The Group has initially adopted IFRS 16 Leases from 1^st January 2019, replacing the current lease guidance including IAS 17.

Previously all of the Group's leases were accounted for as operating leases (see Note 25 of the 2018 Group Annual Report and Accounts). Both properties and vehicles fall under the scope of IFRS 16, with properties being the most significant by value.

The standard permits either a full retrospective or a modified retrospective approach for the adoption. The Group has adopted the standard using the modified retrospective approach, with the right of use asset being equal to the lease liability at the point of original recognition. Therefore, the cumulative impact of the adoption is recognised in retained earnings as of 1^st January 2019 and the comparatives are not restated.

As a lessee

Under IFRS 16 Leases are accounted for on the right of use model. The Income Statement presentation and expense recognition pattern is similar to that required for finance leases by IAS 17 previously adopted by the Group.

At inception, the Group assesses whether a contract contains a lease. This assessment involved the exercise of judgement about whether the Group obtains substantially all the economic benefits from the use of that asset, and whether the Group has the right to direct the use of the asset.

IFRS 16 permits lessees to elect not to apply the recognition requirements to short term leases and leases for which the underlying asset is of low value. The Group has elected not to recognise short term leases of less than one year at inception and low value leases which will continue to be reflected in the Income Statement. This will be the ongoing policy adopted by the Group. There are no right of use assets or lease liabilities recognised for these leases, and the expense is recognised in the Income Statement on a straight line basis.

In addition the Group has chosen to apply the relief option, which allows it to adjust the right of use by the amount of any provision for onerous leases recognised in the balance sheet immediately before the date of initial application.

As a lessor

When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub lease separately. It assesses the lease classification of a sub-lease with reference to the asset arising from the head lease, not with reference to the underlying asset. If the head lease is a short-term lease to which the Group has applied the short-term lease exemption, then the sub lease will follow that classification and be treated as an operating lease.

Where the Group is an intermediate lessor in a sublease, IFRS 16 has resulted in the recognition of a financial asset, where the sublease was previously classified as an operating lease under IAS 17.

The following reconciliation to the opening balance for IFRS 16 lease liabilities as at 1^st January 2019 is based upon the operating lease obligations at 31^st December 2018:

Lease liabilities
	£'000

Operating lease obligations at 31^st December 2018	39,909
Relief option for short term leases	(165)
Relief option for leases of low value assets	(245)
Extension and termination options reasonably certain to be exercised	9,065
Other	447
Operating lease obligations as at 31^st December 2018	49,011

Discounted using the incremental borrowing rate at 1^st January 2019	(5,578)

Lease liabilities recognised at 1^st January 2019	43,433

Leases are shown as follows in the balance sheet and Income statement for the period ending 30th June 2019:

Consolidated balance sheet	£'000
Non-current assets
Property, plant and equipment	36,436
Financial assets	307
Current liabilities
Financial Liabilities	(12,273)
Non-current liabilities
Financial Liabilities	(26,993)
Consolidated income statement
Depreciation	(5,030)
Finance Income	5
Finance costs	(775)

Short term leases of less than twelve months at inception and low value leases are charged to the Income statement evenly over the life of the lease. In the six month period ending 30^th June 2019. £2,318,000 relating to short period and low value leases were included in Operating expenses.

3. Judgements and estimates

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

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

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next six months are largely the same as those as at 31^st December 2018, with the exception of the adoption of IFRS 16: Leases which the Group considers to be a key judgement given the judgement required in assessing the appropriate treatment of individual leases. These assumptions are discussed in detail in the Group's Annual Report and Accounts 2018. 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:

· Intangible assets

· Valuation of financial assets

· Deferred tax

· Exceptional items

· Identification of leases

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

· Valuations in acquisitions

· Impairment of intangible assets

· Contingent consideration

· Income tax

Going concern

The Group meets its day to day working capital requirements through a revolving credit facility. The Group currently has a £100 million credit facility which was extended in January 2018 and will now expire in May 2022. As shown in Note 12 to these interim condensed consolidated Group Financial Statements, the Group has utilised £57 million of the facility leaving £43 million of available undrawn committed borrowing facilities in respect of which all conditions precedent had been met. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group is expected to operate within the terms of its current facilities and that therefore it is appropriate to use the going concern basis of preparation for this financial information.

4. Revenue

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

Disaggregation of Revenue

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

Unaudited Six Months ended 30^th June 2019
	Residential Sales exchange £'000	Lettings £'000	Asset Management £'000	Financial Services £'000	Surveying and Valuation Services £'000	Other £'000	Total £'000
Timing of revenue recognition
Services transferred at a point in time	27,575	18,587	1,762	41,108	42,669	6,492	138,193
Services transferred over time	-	15,234	688	-	-	-	15,922
Total revenue from contracts with customers	27,575	33,821	2,450	41,108	42,669	6,492	154,115

Unaudited Six Months ended 30^th June 2018
	Residential Sales exchange £'000	Lettings £'000	Asset Management £'000	Financial Services £'000	Surveying and Valuation Services £'000	Other £'000	Total £'000
Timing of revenue recognition
Services transferred at a point in time	32,873	19,756	2,784	40,798	31,060	8,012	135,283
Services transferred over time	-	17,503	105	-	-	-	17,608
Total revenue from contracts with customers	32,873	37,259	2,889	40,798	31,060	8,012	152,891

Audited year ended 31^st December 2018
	Residential Sales exchange £'000	Lettings £'000	Asset Management £'000	Financial Services £'000	Surveying and Valuation Services £'000	Other £'000	Total £'000
Timing of revenue recognition
Services transferred at a point in time	69,854	40,696	3,906	87,427	69,798	15,522	287,203
Services transferred over time	-	35,880	1,557	-	-	-	37,437
Total revenue from contracts with customers	69,854	76,576	5,463	87,427	69,798	15,522	324,640

5. Segment analysis of revenue and operating profit

To reflect the increased importance of LSL's Financial Services businesses, the LSL Board has updated the Group segmental reporting effective from 1^st January 2019. For the six months ended 30^th June 2019, LSL reports three segments: Estate Agency; Financial Services; and Surveying and Valuation Services:

· The Estate Agency and Related Services 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. Following the change to LSL's segment reporting, the Estate Agency Division receives a commercially agreed commission payment from the Financial Services Division (from Embrace Financial Services and First2Protect). This arrangement reflects Financial Services income generated by the Estate Agency Division.

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

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

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

The Financial Services segment incorporates all LSL's Financial Services businesses. The Estate Agency segment primarily incorporates the results from the Estate Agency branch networks (Your Move, Reeds Rains, LSLi and Marsh & Parsons) and Asset Management. The Surveying and Valuation Services segment is unchanged from the previous segment reporting.

Operating segments

The following tables presents revenue and profit information regarding the Group's operating segments for the six months ended 30^th June 2019, for the six months ended 30^th June 2018 and for the year ended 31^st December 2018.

Six months ended 30^th June 2019

Income statement information	Estate Agency and Related Services £'000	Financial Services £'000	Surveying and Valuation Services £'000	Unallocated £'000	Total £'000

Revenue from external customers	70,338	41,108	42,669	-	154,115
Intersegment revenue	6,797	(6,797)	-	-	-
Total revenue	77,135	34,311	42,669	-	154,115

Segmental result:
- before exceptional costs, contingent consideration, amortisation and share-based payments	4,017	4,326	6,318	(2,504)	12,157
- after exceptional costs, contingent consideration, amortisation and share-based payments	(10,354)	4,020	6,342	(2,775)	(2,767)

Finance costs					(1,797)
Profit before tax					(4,564)
Taxation					1,353
Profit for the period					(3,211)

Six months ended 30^th June 2019 (continued)

	Estate Agency and Related Services	Financial Services	Surveying and Valuation Services	Unallocated	Total
	£'000	£'000	£'000	£'000	£'000
Balance sheet information
Segment assets - intangible	160,382	18,805	11,975	-	191,162
Segment assets - other	85,316	12,271	17,007	8,337	122,931
Total Segment assets	245,698	31,076	28,982	8,337	314,093
Total Segment liabilities	(73,416)	(22,383)	(28,741)	(59,682)	(184,222)
Net assets/(liabilities)	172,282	8,693	241	(51,345)	129,871

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

Unallocated net liabilities comprise plant and equipment £12,000, IFRS 16 plant and equipment £63,000, other assets £1,779,000, other taxes £49,000, accruals £(35,000), IFRS 16 financial liabilities £(63,000), deferred and current tax £(1,134,000), and revolving credit facility overdraft £(52,016,000).

Six months ended 30^th June 2018

Income statement information	Estate Agency and Related Services (Restated)* £'000	Financial Services (Restated)* £'000	Surveying and Valuation Services £'000	Unallocated £'000	Total £'000

Revenue from external customers	81,033	40,798	31,060	-	152,891
Intersegment revenue	7,843	(7,843)	-	-	-
Total revenue	88,876	32,955	31,060	-	152,891

Segmental result:
- before exceptional costs, contingent consideration, amortisation and share-based payments	1,388	3,616	8,604	(1,998)	11,610
- after exceptional costs, contingent consideration, amortisation and share-based payments	(2,513)	2,671	9,496	(2,220)	7,434

Finance costs					(1,018)
Profit before tax					6,416
Taxation					(1,555)
Profit for the period					4,861

Balance sheet information
Segment assets - intangible	160,231	18,968	12,323	-	191,522
Segment assets - other	72,826	8,178	9,194	1,775	91,973
Total Segment assets	233,057	27,146	21,517	1,775	283,495
Total Segment liabilities	(39,505)	(22,202)	(24,165)	(51,622)	(137,494)
Net assets / (liabilities)	193,552	4,944	(2,648)	(49,847)	146,001

*The prior period has been restated to reflect the current segmental reporting which adjusts the previous Estate Agency and Related Services segment to remove all of LSL's Financial Services businesses to create the current Financial Services segment.

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

Unallocated net liabilities comprise plant and equipment £6,000, other assets £1,746,000, accruals £(307,000), financial liabilities £(471,000), deferred and current tax liabilities £(4,321,000), and revolving credit facility overdraft £(46,500,000).

Year ended 31^st December 2018

	Estate Agency and Related Services (Restated)*	Financial Services (Restated)*	Surveying and Valuation Services	Unallocated	Total
Income Statement information	£'000	£'000	£'000	£'000	£'000

Revenue from external customers	167,415	87,427	69,798	-	324,640
Intersegment revenue	16,424	(16,424)	-	-	-
Total revenue	183,839	71,003	69,798	-	324,640

Segmental result:
- before exceptional costs, contingent consideration, amortisation and share-based payments	11,107	9,461	20,426	(5,098)	35,896
- after exceptional costs, contingent consideration, amortisation and share-based payments	3,605	7,996	19,022	(5,206)	25,417

Finance costs					(2,333)
Profit before tax					23,084
Taxation					(5,201)
Profit for the year					17,883

Balance sheet information

Segment assets - intangible	160,944	18,568	12,171	-	191,683
Segment assets - other	59,014	9,429	11,659	3,836	83,938
Total Segment assets	219,958	27,997	23,830	3,836	275,621
Total Segment liabilities	(40,100)	(24,789)	(27,828)	(40,311)	(133,028)

Net assets / (liabilities)	179,858	3,208	(3,998)	(36,475)	142,593

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

Unallocated net liabilities comprise plant and equipment £15,000, other assets £3,822,000, accruals £(922,000), deferred and current tax liabilities £(4,890,000), and revolving credit facility overdraft £(34,500,000).

6. Adjusted performance measures

In addition to the various performance measures defined under IFRS, the Group reports a number of alternative performance measures that are designed to assist with the understanding of the underlying performance of the Group. The Group seeks to present a measure of underlying performance which is not impacted by the inconsistency in profile of exceptional gains and exceptional costs, contingent consideration, amortisation of intangible assets 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 four adjusted measures reported by the Group are:

· Group Underlying Operating Profit

· Adjusted Basic EPS

· Adjusted diluted EPS

· Group Adjusted EBITDA

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

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

The calculations of adjusted basic and adjusted diluted EPS are given in Note 8 to these Interim Condensed Consolidated Group Financial Statements and a reconciliation of Group Underlying Operating Profit is shown below:

	30^th June 2019	30^th June 2018	31^st December 2018
	£'000	£'000	£'000

Group operating (loss) / profit	(2,767)	7,434	25,417
Share-based payments	553	590	349
Amortisation of intangible assets	2,236	2,718	5,301
Exceptional gains	(593)	(1,189)	(2,188)
Exceptional costs	13,380	-	5,234
Contingent consideration charge	(652)	2,057	1,783
Group Underlying Operating Profit	12,157	11,610	35,896

Depreciation on owned property, plant and equipment	2,483	2,772	5,674
Depreciation on leased property, plant and equipment	5,030	-	-
Group Adjusted EBITDA	19,670	14,382	41,570

7. Earnings per share (EPS)

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

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

Six months ended 30^th June

	Profit after tax £'000	Weighted average number of shares	2019 Per share amount Pence	Profit after tax £'000	Weighted average number of shares	2018 Per share amount Pence

Basic EPS	(3,211)	102,666,615	(3.1)	4,861	102,646,794	4.7
Effect of dilutive share options		984,381			1,038,545
Diluted EPS	(3,211)	103,650,996	(3.1)	4,861	103,685,339	4.7

Year ended 31st December 2018

	Profit after tax £'000	Weighted average number of shares	2018 Per share amount Pence

Basic EPS	17,883	102,653,447	17.4
Effect of dilutive share options		839,935
Diluted EPS	17,883	103,493,382	17.3

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:

	Six months ended		Year Ended
	30^th June 2019 £'000	30^th June 2018 £'000	31^st December 2018 £'000
Group operating profit before contingent consideration, exceptional items, share-based payments and amortisation (excluding non-controlling interest)	12,157	11,610	35,896
Net finance costs (excluding exceptional items and contingent consideration items)	(788)	(741)	(1,401)
Normalised taxation	(2,160)	(2,065)	(6,554)
Adjusted profit after tax before exceptional items, share-based payments and amortisation	9,209	8,804	27,941

Six months ended 30th June

	Adjusted profit after tax £'000	Weighted average number of shares	2019 Per share amount Pence	Adjusted profit after tax £'000	Weighted average number of shares	2018 Per share amount Pence

Adjusted basic EPS	9,209	102,666,615	9.0	8,804	102,646,794	8.6
Effect of dilutive share options		984,381			1,038,545
Adjusted diluted EPS	9,209	103,650,996	8.9	8,804	103,685,339	8.5

Year ended 31st December 2018

	Adjusted profit after tax £'000	Weighted average number of shares	2018 Per share amount Pence

Adjusted basic EPS	27,941	102,653,447	27.2
Effect of dilutive share options		839,935
Adjusted diluted EPS	27,941	103,493,382	27.0

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^th June 2018: 19.00% and 31^st December 2018: 19.00%)

8. Exceptional items

	Six months ended		Year Ended
	30^th June 2019	30^th June 2018	31^st December 2018
	£'000	£'000	£'000
Exceptional costs:
Branch / centre closure and restructuring costs including redundancy costs	13,081	-	1,993
Transition costs relating to surveying contracts	299	-	3,241
	13,380	-	5,234
Exceptional gains:
Exceptional gain in relation to historic Professional Indemnity costs	593	1,189	2,188

Exceptional costs

Initial non-recurring transition and integration costs of £0.3m (June 2018: £Nil, December 2018: £3.2m) relate to the contract to supply surveying and valuation services to Lloyds Bank plc.

In the Estate Agency Division there were £13.1m (June 2018: £Nil, December 2018: £2.0m) of non-recurring and material exceptional costs relating to the planned Estate Agency branch/centre closures and restructuring costs. The most significant costs incurred are redundancy costs and leasehold property costs with the balance including non-cash fixed asset write-offs.

Exceptional Gains

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

In 2019 the Group has continued to make positive progress in settling historic PI claims resulting in a release of the provision of £0.6m (June 2018: £1.2m, December 2018: £2.2m)

9. Dividends paid and proposed

A final dividend in respect of the year ended 31^st December 2018, of 6.9 pence per share (Year ended December 2017: 7.3 pence per share), amounting to £7.1 million was paid in the period ended 30^th June 2019. An interim dividend has been announced amounting to 4.0 pence per share (June 2018: 4.0 pence). Interim dividends are recognised when paid.

10. Taxation

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

	Six Months Ended		Year Ended
	30^th June 2019	30^th June 2018	31^st December 2018
	£'000	£'000	£'000
UK corporation tax:
- current year credit / (charge)	1,503	(1,689)	(5,931)
- adjustment in respect of prior years	-	-	205
	1,503	(1,689)	(5,726)
Deferred tax:
Origination and reversal of temporary differences	(150)	134	322
Adjustment in respect of prior year		-	203
	(150)	134	525

Total tax credit / (charge) in the income statement	1,353	(1,555)	(5,201)

The headline UK rate of corporation tax will decrease from 19% to 17% effective from 1^st April 2020, and the future rate of 17% is the rate at which deferred tax has been provided (2018: 17%). Corporation tax is recognised at a rate of 19% for the current period (2018: 19%), although this will reduce to a blended rate of 17.5% for the year ended 31^st December 2020.

Deferred tax charged directly to other comprehensive income relating to the revaluation of financial assets is £Nil. In the six months ended 30^th June 2018 £Nil and year ended 31^st December 2018 £Nil.

11. Financial assets

	Six Months Ended		Year Ended
	30^th June 2019	30^th June 2018	31^st December 2018
	£'000	£'000	£'000
Convertible loan notes - at fair value
Unsecured convertible loan notes - interest free	750	-	-
Secured convertible loan notes - 5%	1,000	-	-
	1,750	-	-
Investment in equity instruments - at fair value
Unquoted shares at fair value	7,545	23,766	11,566
Quoted shares at fair value	-	2,266	-
	7,545	26,032	11,566
Other financial instruments - at fair value
IFRS 16 lessor financial assets	307	-	-

	9,602	26,032	11,566

Opening balance	11,566	25,282	25,282
Adjustment on initial recognition of IFRS 16	329	-	-
	11,895	25,282	25,282

Acquisitions	1,750	13	13
Disposals	(1,037)	-	(2,266)
Fair value adjustment recorded through profit and loss	-	737	737
Fair value adjustment recorded through reserves	(3,006)	-	(12,200)
Closing balance	9,602	26,032	11,566

Non-current assets	9,602	26,032	11,566
Current assets	-	-	-
	9,602	26,032	11,566

Convertible loan notes at fair value

LSL has subscribed for £1,000,000 of Convertible Secured Preference Loan Notes with Mortgage Gym Limited. Interest on the Convertible Secured Preference Loan Notes is 5% per annum. The final repayment date of the Convertible Secured Preference Loan Notes is 5^th June 2024. Repayment may take place before this date. The Convertible Secured Preference Loan Notes are secured by way of debenture.

LSL has subscribed for £750,000 of Unsecured Convertible Loan Notes with Yopa Property Limited. The Unsecured Convertible Loan Notes do not receive any interest. The final repayment date of the Unsecured Convertible Loan Notes is 16^th May 2020. Repayment may take place before this date on the occurrence of certain events.

Investment in equity instruments

The financial assets include unlisted equity instruments which are carried at fair value. Fair value is judgemental given the assumptions required and have been valued using a level 3 valuation techniques (see Note 31 to the December 2018 Group Financial Statements).

Vibrant Energy Matters Limited (VEM)

The carrying value of the Group's investment in VEM at 30^th June 2019 has been assessed as £722,000 (June 2018: £722,000 and December 2018: £722,000).

NBC Property Master Limited

The carrying value of the Group's investment at 30^th June 2019 has been assessed as £78,000 (June 2018: £78,000 and December 2018: £78,000).

Global Property Ventures Limited

The carrying value of the Group's investment in Global Property Ventures Limited at 30^th June 2019 has been assessed as £250,000 (June: 2018: £250,000 and December 2018: £250,000).

eProp Services plc

In June 2019 the Group disposed of 100% of it's holding in eProp Services plc for a consideration of £1,015,000. At the 30^th June 2018 and 31^st December 2018 the investment was assessed as £2,716,000. There were no tax effects resulting from the disposal.

Yopa Property Limited

The carrying value of the Group's investment in Yopa at 30^th June 2019 has been assessed as £6,500,000 (June 2018: £20,000,000 and December 2018: £7,800,000). The fair value of the Group's investment in Yopa has been assessed by using Level 3 techniques. This has led to the recognition of a fair value impairment of £1,305,000 (June 2018:£Nil and 2018: £12,200,000) which has been recognised in the Statement of Other Comprehensive Income.

12. Financial liabilities

	Six Months Ended		Year Ended
	30^th June 2019	30^th June 2018	31^st December 2018
	£'000	£'000	£'000
Current
IFRS 16 lessee financial liabilities	12,273	-	-
Deferred consideration	86	1,929	1,998
Contingent consideration	8,242	8,297	8,457
	20,601	10,226	10,455
Non-current
Bank loans - revolving credit facility (RCF)	57,000	46,500	34,500
IFRS 16 lessee financial liabilities	26,993	-	-
Deferred consideration	-	71	75
Contingent consideration	6,382	6,232	6,581
	90,375	52,803	41,156

Unsecured loan notes

A variation of the 2011 loan notes was issued as a part of the satisfaction of the consideration of Marsh & Parsons. The first instalment was paid in July 2016 and the final payment of £2.0m was paid in March 2018.

Contingent consideration -

	Six Months Ended		Year Ended
	30^th June 2019	30^th June 2018	31^st December 2018
	£'000	£'000	£'000

LSLi contingent consideration	593	449	488
LMS	-	1	-
Group First Limited	8,917	9,384	9,476
RSC	4,878	4,395	4,751
Other	236	300	323
	14,624	14,529	15,038

Opening balance	15,038	9,059	9,059
Cash paid	(133)	(1,306)	(1,392)
Acquisition	144	4,445	4,773
Amounts recorded though income statement	(425)	2,331	2,598
Closing balance	14,624	14,529	15,038

£593,000 (June 2018: £449,000 and December 2018: £488,000) of contingent consideration relates to amounts owed to third parties in relation to the acquisition of LSLi and certain of its subsidiaries between 2012 and 2016. This is typically payable between three and five years after the acquisition dates depending on the profitability of those subsidiaries in the relevant years.

£8,917,000 of contingent consideration relates to Group First (June 2018: £9,284,000 December 2018: £9,476,000). 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 £25.0m.

£4,878,000 of contingent consideration relates to RSC New Homes (June 2018: £4,395,000 and December 2018: £4,751,000). 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 £7,500,000.

During 2019 £2,133,000 (June 2018: £1,305,000 and December 2018: £1,392,000) of deferred and contingent consideration was paid to third parties.

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

	Six Months Ended		Year Ended
Contingent consideration balances relating to amounts accounted for as:	30^th June 2019	30^th June 2018	31^st December 2018
	£'000	£'000	£'000

Put options over non-controlling interests	-	1	-
Arrangement under IFRS 3	14,624	14,528	15,038
Closing balance	14,624	14,529	15,038

Contingent consideration profit and loss impact in the period relating to amounts accounted for as:

Remuneration	-	-	-
Put options over non-controlling interests	-	-	2
Arrangement under IFRS 3	(652)	2,055	1,781
Unwinding of discount on contingent consideration	227	277	815
(Credit) / charge	(425)	2,332	2,598

13. Provisions for liabilities

Six months ended 30^th June:

	2019			2018
	Professional indemnity claim provision	Onerous leases	Total	Professional indemnity claim provision	Onerous leases	Total
	£'000	£'000	£'000	£'000	£'000	£'000

Balance at 1^st January	12,430	130	12,560	15,916	210	16,126
Amount utilised	(1,507)	(474)	(1,981)	(482)	(3)	(485)
Amount released	(593)	-	(593)	(1,189)	(70)	(1,259)
Unwinding of discount	15	-	15	21	-	21
Provided in the period	520	1,265	1,785	382	-	382
Balance at 30^th June	10,865	921	11,786	14,648	137	14,785

Current	5,228	506	5,734	8,061	43	8,104
Non-current	5,637	415	6,052	6,587	94	6,681
	10,865	921	11,786	14,648	137	14,785

Year ended 31^st December 2018

	Professional indemnity claim provision	Onerous leases	Total
	£'000	£'000	£'000

Balance at 1^st January	15,916	210	16,126
Amount utilised	(1,985)	(85)	(2,070)
Amount released	(2,187)	(55)	(2,242)
Unwinding of discount	43	-	43
Provided in financial year	643	60	703
Balance at 31^st December	12,430	130	12,560

Current	6,525	91	6,616
Non-current	5,905	39	5,944
	12,430	130	12,560

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

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

At 30^th June 2019 the total provision for PI Costs was £10.9m (December 2018: £12.4m). The Directors have considered the sensitivity analysis on the key risks and uncertainties discussed above.

Cost per claim

A substantial element of the PI Cost provision relates to specific claims where disputes are on-going. These specific cases have been separately assessed and specific provisions have been made. The average cost per claim has been used to calculate the IBNR. Should the costs to settle and resolve these claims and future claims increase by 10%, an additional £1.1m would be required.

Rate of claim

The IBNR assumes that the rate of claim for the high risk lending period in particular reduces over time. Should the rate of reduction be lower than anticipated and the duration extend, further costs may arise. An increase of 30% in notifications in excess of that assumed in the IBNR calculations would increase the required provision by £0.1m.

Notifications

The Group has received a number of notifications which have not deteriorated into claims or loss. Should the rate of deterioration increase by 50%, an additional provision of less than £0.1m would be required.

Onerous leases

The provision for lease obligations relates to obligations under leases on vacant properties. The provision is expected to be fully utilised by January 2021. The final outcome depends upon the ability of the Group to sublet or assign the lease over the related properties.

14. Analysis of Net Bank Debt

	Six Months Ended		Year Ended
	30^th June 2019	30^th June 2018	31^st December 2018
	£'000	£'000	£'000
Interest bearing loans and borrowings
- Current	20,601	10,226	10,456
- Non-current	90,375	52,803	41,156
	110,976	63,029	51,612
Less: cash and short-term deposits	(4,984)	(516)	(2,405)
IFRS 16 Lessee financial liabilities	(39,266)	-	-
Less: deferred and contingent consideration	(14,710)	(16,529)	(17,112)
Net Bank Debt at the end of the period	52,016	45,984	32,095

15. Financial instruments - risk management

The financial risks the Group faces and the methods used to manage these risks have not changed since 31^st December 2018. Further details of the risk management policies of the Group are disclosed in Note 31 of the Group's Financial Statements for the year ended 31^st December 2018.

The business is cash generative with a low level of maintenance capital expenditure requirement. The Group remains committed to its stated dividend policy of 30% to 40% of adjusted operating profit after interest and tax. In addition, the Group's other main priority is to generate cash to support its operations and to fund any strategic acquisitions.

16. Fair values of financial assets and financial liabilities

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

Fair value hierarchy

As at 30^th June 2019, 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.

30^th June 2019	Total	Level 1	Level 2	Level 3
	£'000	£'000	£'000	£'000
Assets measured at fair value
Financial assets	9,295	-	-	9,295
Liabilities measured at fair value
Contingent consideration	14,624	-	-	14,624

30^th June 2018	Total	Level 1	Level 2	Level 3
	£'000	£'000	£'000	£'000
Assets measured at fair value
Financial assets	26,032	2,266	-	23,766
Liabilities measured at fair value
Contingent consideration	14,529	-	-	14,529

31^st December 2018	Total	Level 1	Level 2	Level 3
	£'000	£'000	£'000	£'000
Assets measured at fair value
Financial assets	11,566	-	-	11,566
Liabilities measured at fair value
Contingent consideration	15,038	-	-	15,038

Of the investments totalling £9,602,000, all are valued using Level 3 valuation techniques. The Directors reviewed the fair value of the financial assets at 30^th June 2019. Excluding loan notes, the underlying value of the investments will be driven by the profitability of these businesses. If this was to drop by 10%, the implied valuation is likely to also drop by around 10%, £0.8m.

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

17. Acquisitions

Six months ended 30^th June 2019

· Lettings income

During the period the Group acquired three lettings books for initial consideration paid of £1,300,000, and total consideration of £1,445,000.

INDEPENDENT REVIEW REPORT TO LSL PROPERTY SERVICES PLC

Introduction

We have been engaged by the Company to review the Interim Condensed Group Financial Statements in the half-yearly financial report for the six months ended 30^th June 2019 which comprises the Interim Group Income Statement, the Interim Group Statement of Comprehensive Income, the Interim Group Balance Sheet, the Interim Group Cash Flow Statement, the Interim Group Statement of Changes in Equity and the related Notes 1 to 17. We have read the other information contained in the half- yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

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

Directors' Responsibilities

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

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

Our Responsibility

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

Scope of Review

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

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30^th June 2019 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP Leeds

30^th July 2019

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

END

IR BUGDRRUDBGCC