Slide 1: LSL Property Services plc Preliminary Results 2016
LSL Property Services plc Preliminary Results Year ended 31st December 2016
Slide 2: Agenda
Agenda 1. Group Highlights 2. Financial Performance 3. Market Overview, Strategy and Outlook 4. Q&A 5. Appendices 2016 Year End Results Presentation 1
Slide 3: 2016 Group Highlights
2016 Group Highlights Solid operating Delivering on our performance in a Strong Balance Sheet existing strategy and changing market planning for the future • Group revenue up 2.4% • Balance sheet de-geared in light • Estate Agency • Group Underlying Operating of the changing market – Increased recur
Slide 4: 2016 Group Operating Performance
2016 Group Operating Performance Solid operating performance in a changing market Adjusted Earnings Group Revenue £307.8m ▲ 2.4% per Share 25.9p ▲ 17.8% Dividend pay- out 40% maintained at Group Underlying upper end of 10.3p ▲ Operating Profit 1 £34.6m ▲ 19.2% Proposed dividend per Share 18.3% polic
Slide 5: 2016 Market Dynamics
2016 Market Dynamics Market impacted in 2016 by stamp duty changes, EU referendum and evolving channel dynamics with online/hybrid agents Approvals for house purchases 1 Share of new sales instructions 2 (% YoY Growth) 100% 100% 100% 100% 17% 94% Traditional 2% 98% 97% 96% Agents -5% Online/Hybrid -
Slide 6: LSL Strategy in 2016, 2017 and Beyond
LSL Strategy in 2016, 2017 and Beyond We consistently implemented our stated strategy in 2016 to deliver a solid operating performance with a deleveraged balance sheet, and are pursuing initiatives to best position LSL for the future 2016 2017 Drive operating profit per branch to £80k-£100k Ongoing
Slide 7: Agenda
Agenda 1. Group Highlights 2. Financial Performance 3. Market Overview, Strategy and Outlook 4. Q&A 5. Appendices 2016 Year End Results Presentation 6
Slide 8: Group Financials: Summary
Group Financials: Summary Group delivered solid results despite changing market conditions % Financial Summary 2016 2015 Change P&L (£m) • Total revenues up 2% with growth in Estate Agency and Surveying Revenue 307.8 300.6 2% Group Underlying Operating Profit 1 34.6 42.9 (19)% • LSL performance impa
Slide 9: Estate Agency Revenues
Estate Agency Revenues Successfully driving growth across all key business streams over the last 5 years1 Exchange Income Lettings Income Financial Services Income CAGR CAGR CAGR (£m) (£m) (£m) 4% 10% 19% 92.1 92.9 71.4 64.1 83.8 65.4 80.0 72.0 58.5 50.5 52.2 43.7 48.1 35.8 31.8 2012 2013 2014 2015
Slide 10: Financial Performance: Estate Agency
Financial Performance: Estate Agency Strong revenue growth in Lettings and FS % • Fall in exchange units impacted operating profit and 2016 2015 Change operating margin P&L (£m) • Lettings income: 4% organic growth. Growth across all Exchange Income 83.8 92.9 (10)% brands. Now represents 29% of Esta
Slide 11: Financial Performance: Marsh & Parsons
Financial Performance: Marsh & Parsons1 Resilient performance despite a challenging London market in 2016 % • Exchange income down by 12% held up well 2016 2015 Change given the challenging London market2 P&L (£m) • Strong Lettings performance; Lettings revenue now represents more than half of total
Slide 12: Financial Performance: Average LSL residential exchange fee
Financial Performance: Average LSL residential exchange fee1 (£) LSL has been consistently disciplined in its residential exchange fee strategy CAGR 5% 3,101 3,170 3,102 2,908 2,596 2012 2013 2014 2015 2016 1 CAGR’ measured over period 2012-2016 2016 Year End Results Presentation 11
Slide 13: Financial Performance: Surveying
Financial Performance: Surveying Strong margins maintained % • Mix of volume and income per job 2016 2015 Change optimised delivering revenue growth P&L (£m) • Capacity optimisation maintained Total Revenue 64.7 64.1 1% underpinning a 27.1% profit margin Expenditure (47.2) (46.0) (3)% • LSL’s gradua
Slide 14: Financial Performance: Joint Ventures and Other Investments
Financial Performance: Joint Ventures and Other Investments TM, LMS, GPEA • 33.33% (2015: 33.33%) interest in TM Group, a joint venture whose principal activity is to provide property searches • 50.00% (2015 49.99%) interest in LMS, a joint venture whose principal activity is to provide conveyancing
Slide 15: Financial Performance: Exceptionals
Financial Performance: Exceptionals 2016 2015 Exceptional Items (£m) Exceptional gains: • Exceptional gain of £32.9m from the sale in H2 Gain on disposal of Zoopla shares 32.9 - of LSL’s holding of 11.3m shares generating PI Costs provision release 1.6 - total cash proceeds of £36m Branch closure an
Slide 16: Group Financials: Cashflow
Group Financials: Cashflow Business is extremely cash generative at the operational level 2016 2015 • Strong operational cash generation converting 94% Operating Cashflows (£m) of operating profit to cashflow from operations (2015: 85%) Operating profit 34.6 42.9 Working capital, depreciation, etc.
Slide 17: Agenda
Agenda 1. Group Highlights 2. Financial Performance 3. Market Overview, Strategy and Outlook 4. Q&A 5. Appendices 2016 Year End Results Presentation 16
Slide 18: Market Overview, Strategy and Outlook
Market Overview, Strategy and Outlook Market overview- volume & house price trends; market dynamics 1 Delivering on our existing strategy 2 Planning for the future 3 Outlook 4 2016 Year End Results Presentation 17
Slide 19: Market Overview: Volume Trends
1 Market Overview: Volume Trends A changing market in 2016 due to stamp duty changes and the impact of EU referendum BoE: YoY House Purchase and Total Approvals 1 BoE: 5 Year Average Approvals Volume 1 (% YoY) (k) 3,592 1,314 30% 2,291 570 20% 1,301 744 2003-2007 2012-2016 10% House purchase Remortg
Slide 20: Market Overview: House Price Trends
1 Market Overview: House Price Trends UK regions (excluding prime Central London) saw positive house price growth in 2016 England and Wales – House Price Changes 1 • Average house prices in England and Wales (% YoY) increased by 3.1% to £298k in 2016 • Significant regional variations: 8.9 6.1 6.6 –
Slide 21: Estate Agency Strategy: Drive Operating Profit per Branch
2 Estate Agency Strategy: Drive Operating Profit per Branch The ambition going forwards is to achieve £80k to £100k profit per branch in the medium term for Reeds Rains, Your Move and LSLi branches Estate Agency Operating Profit per Branch LSL’s branch profitability decline from (£k) 2014 to 2016 wa
Slide 22: Estate Agency Strategy: Marsh & Parsons Branch Rollout
2 Estate Agency Strategy: Marsh & Parsons Branch Rollout Marsh & Parsons is an award winning estate agency focused on the London market 2016 Branch Profitability Awards (£k) Marsh & Parsons delivers strong branch Estate Agency of the Year profitability Awards 2016, sponsored by The 176 Times & Sunda
Slide 23: Estate Agency Strategy: Recurring Income Streams
2 Estate Agency Strategy: Recurring Income Streams One of our key objectives is to grow recurring and where market conditions permit, counter-cyclical revenue streams Recurring Revenue (Lettings) • The business continues to grow Lettings through organic growth in the highly fragmented market (£m) CA
Slide 24: Estate Agency Strategy: Acquisitions
2 Estate Agency Strategy: Acquisitions LSL Group has been acquisitive and we continue to selectively evaluate new opportunities to continue our strategy of selective acquisitions Historically one to two acquisitions made per year 2012 2013 2014 2015 2016 Acquired a 65% interest in Group First in Feb
Slide 25: Estate Agency Strategy: Acquisitions – Lettings Books
2 Estate Agency Strategy: Acquisitions – Lettings Books • Nine letting books were acquired in H1 for a total consideration1 of £4.1m • Lettings book acquisitions paused in H2 2013 2014 2015 2016 2013 2014 2015 2016 Number of lettings book acquisitions Investment (£m) H1 2 3 13 9 H1 £0.5m £0.6m £3.9m
Slide 26: Estate Agency Strategy: Financial Services
2 Estate Agency Strategy: Financial Services Value of LSL Financial Services Growth in value of mortgage completions mortgage completions (£bn) • Strong growth in the value of mortgage completions representing an increase in LSL market share to 7.1% in 2016 (2015: 6.5%) with the second largest netwo
Slide 27: Surveying Strategy
2 Surveying Strategy Strategy New technology • The strategy is to focus on the B2B market where the economics are most favourable • In 2016 the Surveying Division moved its technology base away from legacy industry systems and set the foundations for new • Optimise contract performance and revenue f
Slide 28: Planning for the Future (1)
3 Planning for the Future (1) In H2 2016 we carried out extensive independent research to assess customer needs for the future. Sellers have a range of priorities when selling their homes “When you decided to put your property on the market, what were your main priorities for the sale?”1 (% responde
Slide 29: Planning for the Future (2)
3 Planning for the Future (2) “How important were the following criteria in choosing which estate agent would put your property on the market?”1 (Average score out of 5 where 1= Not Important and 5 = Very Important) • Local knowledge, accurate valuations Local knowledge / expertise 4.4 and quality o
Slide 30: Planning for the future
3 Planning for the future We are pursuing initiatives to best position LSL for the future and will provide a further update during 2017 2016 2017 Research to understand customer Planning Extensive customer and market research needs completed in H2 for the Explore and evaluate options future in Optio
Slide 31: Outlook
4 Outlook • We have started the year positively in both the Estate Agency and Surveying Divisions • LSL In theStrategy Estate Agency Division, trading is encouraging and in-line with expectations, with quality buyers and good availability of mortgages. Whilst there remains a shortage of stock, our s
Slide 32: Agenda
Agenda 1. Group Highlights 2. Financial Performance 3. Market Overview, Strategy and Outlook 4. Q&A 5. Appendices 2016 Year End Results Presentation 31
Slide 33: Appendices
Appendices
Slide 34: LSL Property Services plc – Business Overview
LSL Property Services plc – Business Overview 2016 Revenue 2016 Operating Profit 2016 Average FTE 2 £307.8m 21% £34.6m 4,630 14% 42% 1 Agency Agency 1 58% 1 Agency 79% 86% Surveying Surveying Surveying 1 Includes Estate Agency branches, Financial Services, Asset Management 2 FTE (Full Time Equivalen
Slide 35: Financial Performance: Operating Profit per Branch
Financial Performance: Operating Profit per Branch Break-down of Operating Profit per Branch 2016 2015 Operating Operating Operating Branch Operating Branch Profit Per Profit Per Profit £M Numbers Profit £M Numbers Branch £k Branch £k Estate Agency Branches (excluding Marsh & Parsons) Operating prof
Slide 36: Estate Agency Strategy: Marsh & Parsons Branch Rollout
2 Estate Agency Strategy: Marsh & Parsons Branch Rollout Branch Openings since 2013 2013 2014 South Kensington Bishop’s Park 2013 Marylebone Shepherd’s Bush East Sheen Richmond Camden January 2013 June 2013 June 2013 March 2014 September 2014 September 2014 October 2014 2015 2016 2017 (to date) Shor
Slide 37: Disclaimer
Disclaimer This document contains certain statements that are forward-looking statements. They appear in a number of places throughout this document and include statements regarding our intentions, beliefs or current expectations and those of our officers, directors and employees concerning, amongst
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