Lsl Property Services Plc · LSE:LSL
Lsl Property Services — FY2014 Earnings Presentation
35 slides from Lsl Property Services's earnings presentation, March 2015
Slide 1: Preliminary Results – Year ended 31 December 2014
Preliminary Results Year ended 31 December 2014
Slide 2: Agenda
Agenda 1. Executive Summary 2. Financial Performance 3. Strategy 4. Market and Outlook 5. Q&A 01 YEAR END RESULTS PRESENTATION MARCH 2015
Slide 3: Strong performance in a changing market
Strong performance in a changing market Underlying Operating Profit2 (£m) Group Revenue £287.5m 11% Group Underlying 42.0 Operating Profit2 £42.0m 13% 31.9 31.1 35.1 37.1 Profit Before Tax £31.9m 87% Adjusted Earnings 2010 2011 2012 2013 2014 per Share 30.5p 21% CAGR 7.1% Ordinary Dividend per S
Slide 4: Strong performance in a changing market
Strong performance in a changing market Market – Strong volume growth across the UK in H1, followed by YOY reduction in H2 – House price inflation across the UK of 8.9%1 – Central London – very strong H1 volume growth and house price appreciation followed by H2 reversal Estate agency – Strong perfor
Slide 5: Diversified exposure to the UK residential property market
Diversified exposure to the UK residential property market Agency Revenue Split Business Channel Geography Consumer Marsh & Parsons 16% Central London brands LSLi 17% London / SE Estate Agency B2C UK 12 Your Move 44% National coverage Surveying B2B UK N/A Reeds Rains 23% Predominantly North 2014 Rev
Slide 6: Agenda
Agenda 1. Executive Summary 2. Financial Performance 3. Strategy 4. Market and Outlook 5. Q&A 05 YEAR END RESULTS PRESENTATION MARCH 2015
Slide 7: Group Financials
Group Financials Ordinary dividend increase of 17%; total dividend increase of 174% £m Actual Exceptionals £m 2014 2013 % change PI provision (24.6) P&L Zoopla gain 19.8 Revenue 287.5 258.6 11% Other (1.4) Underlying Group Operating Profit(1) 42.0 37.1 13% (6.2) Margin 14.6% 14.3% Exceptionals (6.2)
Slide 8: Group Financials
Group Financials Group revenue (£m) Group Operating Profit (£m) 42.0 Record Group 37.1 operating profit in 287.5 35.1 2014 – ahead of 2007 258.6 243.8 31.9 31.1 level (£37.2m) despite 218.4 2014 transaction 206.6 volumes being nearly 40% below 2007 levels 2010 2011 2012 2013 2014 2010 2011 2012 2013
Slide 9: Group Financials
Group Financials Continued strong operational cash generation £m 2014 2013 – Strong operational cash Operating Cashflows generation Operating Profit 42.0 37.1 – Increased investment in the Depreciation 4.9 3.9 business, acquisitions and JV (1.4) (1.7) capital expenditure Working Capital (3.5) 3.1 -
Slide 10: Professional Indemnity costs
Professional Indemnity costs Market – PI costs have impacted the whole UK market – claims relate to the 2004 – 2008 high risk lending period LSL – As part of the 2014 year end process, LSL has undertaken a detailed review on a case by case basis of all notifications and claims relating to the 2004 t
Slide 11: Financial Performance – Estate Agency
Financial Performance – Estate Agency 2014 2013 % change – Good growth across all the main income streams P&L (£m) – Investment in lettings and financial Exchange Income 92.1 80.0 15% services staff – Margin improvement to 15.0% FS Income (incl intermediary networks) 43.7 35.8 22% – Asset management
Slide 12: Financial Performance – Marsh & Parsons
Financial Performance – Marsh & Parsons1 2014 2013 % change – Residential sales income down 3% reflecting challenging conditions in P&L (£m) Central London Market – Lettings income up 21% year-on- Total Revenue 32.5 29.9 9% year Expenditure 25.9 23.2 12% – Operating profit impacted by investment in
Slide 13: Financial Performance – Surveying
Financial Performance – Surveying 2014 2013 Inc/(Dec) – Income per job increasing – Graduate program ongoing P&L (£m) – Focus on operational efficiency Total Revenue 62.2 60.4 3.0% Expenditure (48.9) (47.3) 3.0% Operating Profit 13.3 13.1 2.0% Operating Margin 21.4% 21.7% KPIs Jobs performed (000’s)
Slide 14: Agenda
Agenda 1. Executive Summary 2. Financial Performance 3. Strategy 4. Market and Outlook 5. Q&A 13 YEAR END RESULTS PRESENTATION MARCH 2015
Slide 15: Strategy
Strategy LSL Strategy – Focus on optimising profitable organic growth through strategies that are not wholly linked to market volumes – Utilise strong operational cash flow and balance sheet for selective acquisitions – Explore new revenue streams Agency – Drive operating profit per branch Strategy
Slide 16: Estate Agency Strategy – Your Move, Reeds Rains, LSLi
Estate Agency Strategy – Your Move, Reeds Rains, LSLi Strategy is to drive operating profit per branch Operating profit per branch (£k) Initiatives to drive branch 45.6 profitability include: – Focus on exchange volumes and exchange fee growth – Further investment in land and new 30.1 homes team – S
Slide 17: Estate Agency Strategy
Estate Agency Strategy Ongoing investment in customer experience and brands Examples of Your Move, Reeds Rains branch refurbishments Reeds Rains Reeds Rains St Helens St Helens Merseyside WA10 Merseyside WA10 Your Move Your Move Hampton Hill Twickenham London TW12 London TW1 16 YEAR END RESULTS PRES
Slide 18: Estate Agency Strategy – Marsh & Parsons
Estate Agency Strategy – Marsh & Parsons 2014 Branch Profitability (£k) Awards – Marsh & Parsons branch Estate Agency of the Year 308 profitability is strong Awards 2014, sponsored by – Ambition is to expand the the Sunday Times 46 number of branches to 36 by 2019, COO appointed – Best London Estate
Slide 19: Estate Agency Strategy – Marsh & Parsons new branch openings
Estate Agency Strategy- Marsh & Parsons new branch openings 2014 2015 (to date) Shepherd’s Bush East Sheen Richmond Camden Shoreditch March 2014 September 2014 September 2014 October 2014 February 2015 18 YEAR END RESULTS PRESENTATION MARCH 2015
Slide 20: Estate Agency Strategy
Estate Agency Strategy Strategy is to drive incremental revenue and gross margin across all business streams Exchange fees (£m) Lettings fees (£m) Financial Services Income (£m) 92.1 43.7 58.5 80.0 72.0 52.2 35.8 48.1 31.8 56.7 27.6 52.4 29.5 24.6 18.6 2010 2011 2012 2013 2014 2010 2011 2012 2013 20
Slide 21: Estate Agency Strategy
Estate Agency Strategy Strategy is to grow recurring and, where market conditions permit, counter-cyclical revenue streams Recurring revenue (lettings) £m Total Agency Revenue 58.5 52.2 32% 32% 35% 34% 31% 48.1 29.5 24.6 68% 69% 65% 67% 69% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Recurring
Slide 22: Estate Agency Strategy – Financial Services
Estate Agency Strategy – Financial Services Value of LSL Financial Services mortgage completions Strategy (£bn) – Consistent delivery of appropriate outcomes for consumers – Capitalise on mortgage market shift towards 11.6 intermediary distribution – Investment in additional mortgage advisors in est
Slide 23: Estate Agency Strategy – Acquisitions – Lettings Books
Estate Agency Strategy – Acquisitions – Lettings Books The economics of lettings books acquisitions are very accretive. The ambition in 2015 is to grow the rate of lettings book acquisitions (number and investment) versus 2014 Number of lettings book acquisitions 2013 2014 2015 Investment 2013 2014
Slide 24: Estate Agency Strategy – Acquisitions – LSLi
Estate Agency Strategy – Acquisitions – LSLi LSLi has been a significant growth vehicle Business Year acquired and we continue to consider new acquisition opportunities 2007 2007 Revenue (£m) 2007 33.0 2010 2012 23.7 18.3 2012 11.1 12.5 2013 2014 2010 2011 2012 2013 2014 2015 9 completed CAGR 31% 23
Slide 25: Estate Agency Strategy – joint ventures, other investments and portals
Estate Agency Strategy – joint ventures, other investments and portals Joint Ventures and other investments Current investments Status Zoopla £1.9 million investment was worth £44.1m at IPO. 2.6% holding retained post IPO – market value £21.3m at 31st December 2014. The proceeds from disposal net of
Slide 26: Surveying Strategy
Surveying Strategy — The strategy is to focus on the New customer B2B market where the economics are most favourable. Customer Contract term Status Contract start date — The decision has been taken to de-emphasise the B2C segment. LBG Multi-year Non-exclusive 1 August 2014 — A project is currently u
Slide 27: Surveying Strategy – Capacity management
Surveying Strategy – Capacity management Total Approvals1 - % growth – Total approval volumes increased significantly in Q2 2013 to Q1 2014 – To meet customer demand and expand 24% 25% capacity, a graduate recruitment programme 23% was implemented to expand capacity. 43 graduates were hired in 2013
Slide 28: Surveying Strategy – Surveying Economics
Surveying Strategy – Surveying Economics Return The underlying economics 2005 – 2014 inclusive £m on sales of surveying are strong with a 21% ROS net of all PI costs Average annual revenue 71.3 for the 2004 – 2014 period Average annual operating profit 23.5 33% The business continues to be highly ca
Slide 29: Summary
Summary LSL Strategy – Focus on optimising profitable organic growth through strategies that are not wholly linked to market volumes – Utilise strong operational cash flow and balance sheet for selective acquisitions – Explore new revenue streams Agency – Drive operating profit per branch Strategy –
Slide 30: Agenda
Agenda 1. Executive Summary 2. Financial Performance 3. Strategy 4. Market and Outlook 5. Q&A 29 YEAR END RESULTS PRESENTATION MARCH 2015
Slide 31: Market Volume Trends
Market Volume Trends 5 Year average volumes (‘000’s) Monthly volume growth % 50% 40% 2291 30% Total approvals1 20% House purchase1 10% 573 0% 1301 657 -10% -20% 2003-2007 2010-2014 -30% Feb Mar May Aug Sep Feb Mar May Aug Sep Apr Apr Jan-13 Jan-14 Jun Oct Nov Dec Jun Oct Nov Dec Jul Jul House purcha
Slide 32: House price trends
Market House price trends England and Wales – house price changes1 % – In year ended December 2014 average house prices in England and Wales increased by 8.9% to £277k 8.9 – Average house prices for England and Wales 6.1 are now 13% above the February 2008 peak 2.6 4.1 – Significant regional variati
Slide 33: Outlook
Outlook Current trading – The forthcoming year is expected to see uncertain market conditions in the first half with the potential for and outlook improved market conditions during the second half of the year. Year-on-year market comparatives in the first quarter are expected to be adverse in part d
Slide 34: Agenda
Agenda 1. Executive Summary 2. Financial Performance 3. Strategy 4. Market and Outlook 5. Q&A 33 YEAR END RESULTS PRESENTATION MARCH 2015
Slide 35: Disclaimer
Disclaimer This document contains certain statements that are knowledge and information available at the date of forward-looking statements. They appear in a preparation of this document and, unless otherwise number of places throughout this document and required by applicable law, the Company inclu