Lsl Property Services Plc · LSE:LSL
Lsl Property Services — FY2015 Earnings Presentation
36 slides from Lsl Property Services's earnings presentation, March 2016
Slide 1: LSL Property Services plc Preliminary Results
LSL Property Services plc Preliminary Results Year ended 31 December 2015
Slide 2: Agenda
Agenda 1. Executive Summary 2. Financial Performance 3. Strategy 4. Market and Outlook 5. Q&A 2015 YEAR END RESULTS PRESENTATION 1
Slide 3: Record operating profit - Higher than achieved during the property peak in 2007
Record operating profit - Higher than achieved during the property peak in 2007 Group Revenue £300.6m ▲4.6% Underlying Operating Profit 1 (£m) Group Underlying Operating Profit 1 £42.9m ▲2.0% 42.0 42.9 CAGR Profit Before Tax £38.6m ▲20.8% 31.1 35.1 37.1 8.4% ▲ Exceptionals 2 £0.3m 95.8% 2011 2012 20
Slide 4: Strong performance across the Group in 2015
Strong performance across the Group in 2015 – Consistent execution of LSL Strategy as communicated in March 2015 Strategy – 2015 H1 house purchase approvals down 3.3% against strong pre MMR 2014 Q1 and pre election market uncertainty in Q2 2015 1 – 2015 H2 saw modest post general election market rec
Slide 5: Agenda
Agenda 1. Executive Summary 2. Financial Performance 3. Strategy 4. Market and Outlook 5. Q&A 2015 YEAR END RESULTS PRESENTATION 4
Slide 6: Group Financials – Summary
Group Financials – Summary £m Actual Consistently delivering on guidance 2015 2014 % change – Delivered on financial guidance made at the time of P&L the interim results announced in August 2015 – Strong second half revenue growth of 9% (H1: 0%) Revenue 300.6 287.5 5% – Double digit profit growth in
Slide 7: Group Financials
Group Financials Group Revenue (£m) Group Operating Profit (£m) CAGR 8.3% CAGR 8.4% 300.6 42.0 42.9 287.5 258.6 37.1 243.8 35.1 218.4 31.1 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 2015 YEAR END RESULTS PRESENTATION 6
Slide 8: Group Financials – Cashflow
Group Financials – Cashflow Operating cashflows (£m) 2015 2014 Business is extremely cash generative Operating profit 42.9 42.0 at the operational level Depreciation 5.3 4.9 – Strong operational cash generation converting £42.9m operating profit to Dividend Income (0.8) (1.6) £36.5m cashflow from op
Slide 9: Financial Performance – Estate Agency
Financial Performance – Estate Agency 2015 2014 % change Revenue growth of 5% from the continued execution P&L (£m) of our strategy Exchange Income 92.9 92.1 1% – Residential income: H1 revenues down 5%, H2 revenues up 7% vs P/Y Lettings income 65.4 58.5 12% – Exchange units lower by 1%, fees per un
Slide 10: Estate Agency Strategy – Driving incremental revenue and gross margin
Estate Agency Strategy – Driving incremental revenue and gross margin across all business streams Revenue Performance Exchange fees Lettings fees Financial Services Income (£m) (£m) (£m) CAGR CAGR CAGR 92.1 92.9 65.4 13% 58.5 22% 50.5 16% 80.0 72.0 52.2 43.7 48.1 35.8 56.7 31.8 27.6 29.5 2011 2012 2
Slide 11: Financial Performance – Marsh & Parsons
Financial Performance – Marsh & Parsons1 P&L (£m) 2015 2014 % change Strong performance despite a challenging Prime Central London market in 2015 Total Revenue 35.3 32.5 9% – Strong lettings performance (+10%), growth in Expenditure land and new homes and resilience in (28.4) (26.0) 9% residential s
Slide 12: Financial Performance – Surveying
Financial Performance – Surveying P&L (£m) 2015 2014 % change Surveying delivered very strong profit growth Total Revenue 64.1 62.2 3% – Mix of volume and income per job was Expenditure (46.0) (48.9) (6)% optimised – Full year impact of 2014 contract renewals Operating Profit 18.1 13.3 36% / wins an
Slide 13: Financial Performance – Surveying Professional Indemnity costs
Financial Performance – Surveying Professional Indemnity costs PI Cost Provision (£m) 2015 2014 The PI provision is unwinding in line with expectations: – Positive progress made in addressing historic claims 31st December 29.7 38.7 – Reduction in the rate of notifications and claims in line with exp
Slide 14: Agenda
Agenda 1. Executive Summary 2. Financial Performance 3. Strategy 4. Market and Outlook 5. Q&A 2015 YEAR END RESULTS PRESENTATION 13
Slide 15: Strategy
Strategy – LSL remains committed to the strategy communicated in March 2015 LSL Strategy – Drive operating profit per branch to £80k to £100k in the medium term Agency – Selective acquisitions Strategy – Grow recurring and counter cyclical income streams – Continued investment in Marsh & Parsons new
Slide 16: Estate Agency Strategy – Market context
Estate Agency Strategy – Market context LSL operates in a large, fragmented Estate Agency market – The market has seen continual new entrants over the past five years – Non-traditional new entrants currently represent around 4% of the market 1 Our market position – LSL has selectively acquired Estat
Slide 17: Estate Agency Strategy – Investment in LSL brands
Estate Agency Strategy – Investment in LSL brands Ongoing investment in customer experience and brands Your Move Your Move Your Move National TV brand campaign National TV brand campaign National TV brand campaign January 2016 January 2016 January 2016 LSLi Lauristons Marsh & Parsons Reeds Rains Ken
Slide 18: Estate Agency Strategy: EA profit per branch
Estate Agency Strategy Your Move, Reeds Rains and LSLi: EA profit per branch The ambition going forwards is to achieve £80k to £100k profit per branch in the medium term Progress on ambition Estate Agency Operating Profit per Branch (£’000) Targeting increased operating profit per branch in 2016 as
Slide 19: Estate Agency Strategy – Marsh & Parsons
Estate Agency Strategy – Marsh & Parsons 2015 Branch Profitability (£k) London market Marsh & Parsons delivers strong – In 2015 property values in the 5 prime 298 branch profitability London boroughs fell by 9%, whilst in – Strong Lettings business and growing outer prime Central London values Land
Slide 20: Estate Agency Strategy – Marsh & Parsons branch openings
Estate Agency Strategy – Marsh & Parsons branch openings 2016 (to date) 2013 South Kensington Bishops Park Marylebone January 2013 June 2013 June 2013 2015 2016 2014 (to date) Shepherd’s Bush East Sheen Richmond Camden Shoreditch Queens Park Tooting March 2014 September 2014 September 2014 October 2
Slide 21: Estate Agency Strategy – Acquisitions: LSLi
Estate Agency Strategy – Acquisitions: LSLi LSLi has been a significant growth vehicle and we continue to evaluate new acquisition opportunities LSLi Revenue (£m) CAGR 2015 2014 2013 38.8 32.7% 33.0 23.7 2012 2012 2010 18.3 12.5 2007 2007 2007 2011 2012 2013 2014 2015 2015 YEAR END RESULTS PRESENTAT
Slide 22: Estate Agency Strategy – Acquisitions: Lettings Books
Estate Agency Strategy – Acquisitions: Lettings Books In line with LSL’s strategy, there is an on-going focus on letting book acquisitions: LSL acquired 30 letting books in 2015 for a total consideration1 of £9.6m, a significant increase on calendar 2014 Number of lettings book acquisitions 2013 201
Slide 23: Acquisitions of Group First and Thomas Morris
Acquisitions of Group First and Thomas Morris Group First Acquired an interest in Group First in February 2016 – LSL continues its strategy of selectively – LSL acquired a 65% interest with put and call options enabling LSL to acquire the remaining 35% acquiring Estate Agency businesses into – Provi
Slide 24: Estate Agency Strategy
Estate Agency Strategy Strategy is to grow recurring and, where market conditions permit, counter-cyclical revenue streams Recurring revenue Total agency revenue: split by type Lettings £m Proportion of revenue streams % 21% 26% 26% 26% 28% 10% 9% 7% 5% 3% 65.4 69% 67% 69% 69% 58.5 65% 48.1 52.2 29.
Slide 25: Estate Agency Strategy – Financial Services
Estate Agency Strategy – Financial Services Strategy Value of LSL Financial Services – Consistent delivery of appropriate outcomes for consumers mortgage completions (£bn) – Capitalise on mortgage market shift towards intermediary distribution 14.5 – Investment in selective acquisitions. Mortgage Fi
Slide 26: Estate Agency Strategy Joint Ventures and investments
Estate Agency Strategy Joint Ventures and investments Joint Ventures and investments LSL has a holding of 2.7% of Zoopla Zoopla with a market value of £27.1m at 31st December 2015 Performing in-line with TM, LMS, expectations GPEA Notes: TM provides property searches; LMS provides conveyancing servi
Slide 27: Surveying Strategy
Surveying Strategy Strategy Total Approvals 1 - % growth – The strategy is to focus on the B2B market where the economics are most favourable – The decision has been taken to de-emphasise the B2C segment – Technology refresh in 2016 to drive further customer 25% enhancements and quality improvements
Slide 28: Agenda
Agenda 1. Executive Summary 2. Financial Performance 3. Strategy 4. Market and Outlook 5. Q&A 2015 YEAR END RESULTS PRESENTATION 27
Slide 29: Market: volume trends
Market: volume trends In 2015, market volumes marginally improved, but still substantially below 2003 – 2007 market activity levels BoE: 5 Year average volume 1 HMRC: Annual property 3592 transactions at £40k or Remortgage above 2 and other 2291 1266 1219 1231 1074 House 885 932 564 1301 purchase 70
Slide 30: Market: house price trends
Market: house price trends In 2015, all UK regions (excluding Prime Central London) saw positive house price growth England and Wales – house price changes 1 % – In year ended December 2015 average house prices in England and Wales increased by 6.6% to £292k – Significant regional variations: • Lond
Slide 31: LSL Property Services plc – Outlook
LSL Property Services plc – Outlook – Started the year positively across the Group –LSL Strategy Estate Agency Division • Trading in line with expectations with good activity levels with quality buyers and good availability of mortgages • Whilst there remains a shortage of stock, sales conversion re
Slide 32: Agenda
Agenda 1. Executive Summary 2. Financial Performance 3. Strategy 4. Market and Outlook 5. Q&A 2015 YEAR END RESULTS PRESENTATION 31
Slide 33: Appendix LSL Property Services plc Business Overview
Appendix LSL Property Services plc Business Overview
Slide 34: LSL Property Services plc – Business Overview
LSL Property Services plc – Business Overview Estate Surveying 2015 Revenue Estate Agency Revenue Split Agency Channel £300.6m 21% B2C B2B Marsh & Parsons 17% Central London LSLi 18% London / SE Geography Reeds Rains 22% Predominantly UK UK Agency 1 North Surveying National coverage Consumer brands
Slide 35: 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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