Slide 1: LSL Property Services plc Interim Results
LSL Property Services plc Interim Results Half year ended 30th June 2017
Slide 2: Agenda
Agenda 1. Group Highlights 2. Financial Performance 3. Market Overview, Strategy and Outlook 4. Q&A 5. Appendices 1 2017 INTERIM RESULTS PRESENTATION
Slide 3: Group Highlights - H1 2017
Group Highlights - H1 2017 Delivering on our Strong operating Strong Balance Sheet existing strategy and performance planning for the future • Group revenue flat • Gearing ratio remains low at • Estate Agency • Group Underlying Operating 0.71x 2017 EBITDA (2016: – Increased recurring revenue Profit
Slide 4: Group Operating Performance
Group Operating Performance Strong operating performance Adjusted Earnings Group Revenue £151.5m Flat per Share 11.5p ▲ 34% Group Underlying Interim dividend 4.0p Operating Profit 1 £15.5m ▲ 37% per Share Unchanged Profit Before Net Banking ▲ 57% £31.7m ▲ Tax £13.2m Debt 49% Exceptional gain £1.1m G
Slide 5: 2017 Market Dynamics
2017 Market Dynamics Market impacted in 2017 by uncertain conditions and strong Q1 2016 comparatives Approvals for house purchases1 Share of new sales instructions 2 (% YoY Growth) 100% 100% 100% 100% 100% 23% Traditional 19% Agents 10% 6% 98% 97% 96% 94% 93% 3% 3% 0% Online / Hybrid Jan Feb Mar Apr
Slide 6: LSL Strategy
LSL Strategy LSL continues to implement its stated strategy and is pursuing initiatives to best position the Group for the future 2017 Drive operating profit per branch to £80k-£100k Ongoing focus: medium term ambition Brixton opened Q1 2017. M&P is planning to open a new branch in Islington M&P bra
Slide 7: Agenda
Agenda 1. Group Highlights 2. Financial Performance 3. Market Overview, Strategy and Outlook 4. Q&A 5. Appendices 2017 INTERIM RESULTS PRESENTATION 6
Slide 8: Group Financials: Summary
Group Financials: Summary Strong first half performance 2017 2016 Change Financial Summary P&L (£m) • Total revenues flat with resilient performance in Revenue 151.5 151.4 - Estate Agency and growth in Surveying Group Underlying Operating Profit 1 15.5 11.3 37% • Revenue broadly flat due to mix of r
Slide 9: Estate Agency Revenues
Estate Agency Revenues Successfully diversifying revenue streams over the last 5 years1 H1 Exchange Income H1 Lettings Income H1 Financial Services Income CAGR CAGR CAGR (£m) (£m) (£m) 1% 10% 21% % of EA Revenue 44.4 42.0 42.5 34.3 35.7 34.1 37.0 30.6 29.5 34.9 27.7 24.7 22.8 19.9 15.7 2013 2014 201
Slide 10: Financial Performance: Estate Agency
Financial Performance: Estate Agency Continued revenue growth in Lettings and FS 2017 2016 Change • Residential Sales exchange income impacted by uncertain market conditions, strong comparative period P&L (£m) in Q1 2016 and selective branch closures in H2 2016 Residential Sales exchange Income 37.0
Slide 11: Financial Performance: Marsh & Parsons
Financial Performance: Marsh & Parsons1 Resilient performance despite a challenging London market • Residential Sales exchange income down by 2017 2016 Change 16% held up well given the challenging London market. P&L (£m) • LSL estimates that residential sales volumes in Total Revenue 16.4 17.1 -4%
Slide 12: Financial Performance: Average LSL Residential Sales H1 exchange fee
Financial Performance: Average LSL Residential Sales H1 exchange fee1 (£) Some fee pressure but LSL has been highly disciplined in its Residential Sales exchange fee strategy CAGR 2% 3,150 3,076 3,161 3,048 2,802 H1 2013 H1 2014 H1 2015 H1 2016 H1 2017 1 CAGR’ measured over period 2013-2017 2017 INT
Slide 13: Financial Performance: Surveying
Financial Performance: Surveying Strong margin performance • Favourable mix across lenders and types of 2017 2016 Change jobs performed maximised results P&L (£m) • Optimising the productivity of surveyors Total Revenue 33.1 32.5 2% and a continued focus on costs led to an improvement in profit marg
Slide 14: Financial Performance: Joint Ventures and Other Investments
Financial Performance: Joint Ventures and Other Investments TM Group, LMS, GPEA • 33.33% interest in TM Group, a joint venture whose principal activity is to provide property searches • 50.00% interest in LMS, a joint venture whose principal activity is to provide conveyancing panel management servi
Slide 15: Financial Performance: Exceptional items and PI Costs provision
Financial Performance: Exceptional items and PI Costs provision 2017 2016 PI provision (£m) • Exceptional release of £1.1m on the PI Costs provision held following continued positive Exceptional gain: progress in settling historical claims PI Costs provision release 1.1 - • Valuation controls contin
Slide 16: Group Financials: Cashflow
Group Financials: Cashflow Business is extremely cash generative at the operational level 2017 2016 • Strong operational cash generation converting 68% Operating Cashflows (£m) of operating profit to cashflow from operations (2016: 64%) Operating profit 15.5 11.3 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 2017 INTERIM 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 LSL’s existing strategy 2 Planning for the future 3 Outlook 4 2017 INTERIM RESULTS PRESENTATION 17
Slide 19: Market Overview: Volume Trends
1 Market Overview: Volume Trends A challenging market in 2017 BoE: YoY House Purchase and Total Approvals 1 H1 Mortgage and House Purchase Approvals 1 (% YoY) 1,831 15% 1,800 10% 1,200 1,165 740 742 5% 594 656 650 0% 600 259 326 340 261 266 667 334 397 384 414 402 -5% 0 5 Yr Avg 2013 2014 2015 2016
Slide 20: Market Overview: House Price Trends
1 Market Overview: House Price Trends UK regions (excluding prime Central London) saw modest house price growth in 2017 England and Wales – House Price Changes 1 • In the 12 months ended 30th June 2017, average (% YoY) house prices in England and Wales increased by 3.8% to £301k 8.8 • Significant re
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 has increased (£k) since 2013 and
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 H1 2017 Branch Profitability 26th office opened in Jan ’17, Brixton (£k) Marsh & Parsons delivers strong branch profitability • Lettings business now accounting for
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 H1 Revenue (Lettings) • The business continues to grow Lettings through organic growth in the highly fragmented market (£m)
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 acquisition made per year 2013 2014 2015 2016 1 50% paid in 2016, 50% deferred consideration paid in 201
Slide 25: Estate Agency Strategy: Financial Services
2 Estate Agency Strategy: Financial Services Value of H1 LSL Financial Services Growth in value of mortgage completions1 mortgage completions (£bn) • Strong growth in the value of mortgage completions representing an increase in LSL market share to 7.8% in 2017 (2016: 7.1%) with the second largest n
Slide 26: Surveying Strategy
2 Surveying Strategy Strategy New technology • The strategy is to focus on the B2B market where • In 2016 the Surveying Division moved its technology base away the economics are most favourable from traditional industry systems and set the foundations for new • Optimise contract performance and reve
Slide 27: Strategy & Planning for the Future
3 Strategy & Planning for the Future • LSL is committed to delivering on its previously stated strategy • Financial Services remains a clear focus for the Group as we see further growth opportunities in this space to enhance our position as a leading mortgage broker • Completed the research and plan
Slide 28: Outlook
4 Outlook • 2017 is expected to see a reduced volume of house purchase transactions compared to the prior year, with modest house price inflation outside prime Central London. However, mortgage costs and availability remain positive and the medium to longer term fundamentals of the UK housing market
Slide 29: Agenda
Agenda 1. Group Highlights 2. Financial Performance 3. Market Overview, Strategy and Outlook 4. Q&A 5. Appendices 2017 INTERIM RESULTS PRESENTATION 28
Slide 30: Appendices
Appendices
Slide 31: LSL Property Services plc – Business Overview
LSL Property Services plc – Business Overview H1 2017 Revenue H1 2017 Operating Profit H1 2017 Average FTE 2 £151.5m 22% £15.5m 4,499 14% 1 50% 50% 1 1 Agency Agency Agency 78% 86% Surveying Surveying Surveying 1 Includes Estate Agency branches, Financial Services, Asset Management 2 FTE (Full Time
Slide 32: 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 33: 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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