26 March 2025

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

FULL YEAR RESULTS TO 31 DECEMBER 2024

A YEAR OF POSITIVE PROGRESS AND SIGNIFICANT PROFIT GROWTH

LSL reports its results for the 12 months ended 31 December 2024 with Group Underlying Operating Profit^1,2 of £27.7m (2023: £10.3m). On a statutory basis Group Operating Profit was £21.9m (2023: £3.7m).

These results demonstrate the benefits of the strategic transformation of the Group over the last two years and are just above consensus expectations and materially ahead of prior year. We have made a positive start to the year with trading in line with our expectations in markets operating broadly in line with our assumptions. We continue to expect that in 2025 we will increase profits further over 2024 and the Board's expectations for the full year remain unchanged.

David Stewart, Group Chief Executive commented:

"2024 was a year of positive progress, as we built successfully on the restructuring work completed in 2023. We were able to grow profits materially, and at a faster rate than we had anticipated at the start of the year. Trading in the early months of the new year is in line with expectations, indicating we will be able to improve performance again in 2025. I believe the Group is now well positioned to build on solid foundations and I am sure that under the leadership of Adam Castleton, who will take over as Group CEO on 1 May, the Group will go from strength to strength."

STRATEGIC AND OPERATIONAL HIGHLIGHTS

2024 performance demonstrates the benefits of the successful completion of our significant restructuring and transformation programmes in 2023, as a result of which LSL is now a much simpler Group, well positioned to deliver higher operating margins, and more consistent earnings through market cycles.

This helped the Group to deliver a substantial profit increase in markets that remained supressed in 2024 compared to the long-term average, with new lending 6% below the 10-year average³ and housing transactions⁴ 9% below. Economic and geo-political uncertainty, sticky inflation and delays to interest rate reductions continued to impact consumer confidence during H2.

·    Significant recovery in profitability with Group Underlying Operating Profit increasing by £17.4m to £27.7m. All divisions reported increases in profitability

·    Investment to support future growth. During 2024, the Group invested £1m, £0.7m in H2, to develop new products in Surveying & Valuation and announced a major programme to upgrade its Financial Services technology offering, that will commence in 2025

·    Estate Agency Franchising continues to support the growth of franchisees, to facilitate territory expansion and by supporting three lettings book acquisitions completed in H2 2024

·    Acquisition during 2024 of eight businesses by our Pivotal Growth JV, with advisers increasing to over 500

·    Purchase of TenetLime mortgage network completed in February with integration programme on track and financial performance and adviser retention in line with expectations

·   In January 2025, LSL announced the appointment of Adam Castleton, previously Group CFO, as CEO Designate, formally taking up the CEO position on 1 May 2025, following David Stewart's notification to the Board of his intention to retire from his Executive role and the LSL Board

·    Strengthened management bench strength with a number of senior Divisional appointments  

·    Adrian Collins appointed as Chair and Michael Stoop as Non-Executive Director, strengthening the Group's Board

·    Full year dividend of 11.4p (2023: 11.4p), with final dividend maintained at 7.4p per share, reflecting strong balance sheet and Board's confidence in prospects

FINANCIAL HIGHLIGHTS

·    Group Revenue was £173.2m (2023: £144.4m). Revenue was 20% above prior year in a total mortgage lending market that was broadly flat and housing market that increased by 7%

·    Group Underlying Operating Profit was £27.7m (2023: £10.3m from continuing operations^1,2, £9.3m from total operations^1,2), significantly ahead of the prior year, with particularly strong recovery in the Surveying & Valuation Division

·    Material improvement in Group Underlying Operating margin to 16% (2023: 7%), representing the highest margin reported in over 15 years

·     Group operating profit was £21.9m (2023: £3.7m)

·   Net Cash⁷ of £32.4m at 31 December 2024 (31 December 2023: £35.0m), with adjusted cash flow from operations of £31.1m (2023: £(0.2)m) and cash flow conversion rate⁸ of 114% (2023: (2)%) reflecting a return to more normalised profit levels in the period

·   Net Exceptional costs⁸ of £2.4m (2024: £4.4m) primarily relating to costs incurred in the exit of a large protection only firm and costs associated with the administration of the company from which TenetLime was purchased (the latter of which we expect to be recovered against deferred consideration)

DIVISIONAL PERFORMANCE

Surveying & Valuation Division

·    Surveying & Valuation performance was strong reflecting the benefit of contract extensions with improved terms as well as a recovery in market conditions following the significant reduction experienced in 2023

·   Surveying & Valuation revenue increased significantly to £97.8m, an increase of 36% on 2023 (£71.9m), reflecting a 26% increase in jobs performed and 8% increase in income per job on the comparative period

·    Mortgage approvals⁹ were 21% above 2023, driven by higher purchase approvals (up 31%) with remortgage and other approvals 8% higher

·   We estimate that our market share of physical and remote valuation instructions⁷ was around 38%, representing a small increase over 2023 (c.37%)

·    Long-term contract extension with Lloyds Banking Group, underpinning the Group's leading market position. We also secured a substantial improvement in terms and allocation with another major lender

·     Retained contracts with all lending customers with no loss in allocations

·     Underlying Operating Profit² increased to £22.5m (2023: £6.7m)

·    Good progress continues against strategic objectives to develop new survey and valuation income from the end customer: B2C revenue increased by 87% to £6.8m (2023: £3.6m), having grown from £1.1m in 2020

·    Substantial investment made throughout 2024, increasing in H2, to support data and model development initiatives to diversify future revenue streams and meet lender client needs

Financial Services Division

·    Our Financial Services Network business increased its focus on its core market, serving the needs of smaller, mortgage-led financial services businesses, reflecting the strategic decision to reduce its focus on larger, pure protection brokerages

·    Successfully integrated 145 TenetLime firms with both profit contribution and adviser retention in line with expectations

·    Increased market share of the UK purchase and remortgage market³ of 11.8% (2023: 10.6%)

·   Total advisers increased by 75 to 2,736 as at 31 December 2024 (2023: 2,661) including 247 TenetLime advisers

·    The number of advisers that sell both mortgages and protection increased by 214 to 2,282. The number of protection only advisers was reduced by 137, following the decision to exit some firms whose business model was not in line with our risk appetite and strategic focus

·   LSL advisers continue to adapt effectively to changes in the mortgage market, increasing product transfer mortgage lending by 2%, resulting in a further increase in share of the product transfer market to 6.9% (2023: 6.1%)

·      Financial Services Network business traded resiliently, reporting Underlying Operating Profit² of £8.7m (2023: £7.4m)

·    The weighting of margin dilutive product transfers in the refinancing market remained above the long-term average

·      Network protection revenue remained broadly flat at £12.9m after adjusting for disposals

·    Total revenue of £48.4m was down 6% on the prior year as reported (2023: £51.7m), reflecting the net impact of the disposal of businesses in 2023 and the purchase of TenetLime in 2024

·    The number of Network firms increased to 1,108 as at 31 December 2024 (2023: 1,000), including 145 TenetLime firms

Estate Agency Franchising Division

·   Continued support of the growth of franchisees, including the first loans granted to support lettings book acquisitions, adding c.700 properties to the franchisee lettings portfolios

·   Benefits of new business model are reflected in a substantial increase in Underlying Operating Profit² to £7.6m (2023: £4.3m) with an underlying operating margin of 28%

·   Scope remains for further cost efficiency gains within Estate Agency business as the operating model approaches target state

·    The number of properties under franchisees management remained stable at 37,462 (31 December 2023: 37,502)

Pivotal Growth Joint Venture

·   Acquisition during 2024 of eight businesses, including John Charcol with 150 mortgage and protection advisers

·    Pivotal Growth now has over 500 advisers, making it one of the largest mortgage and protection brokers in the UK, giving it critical mass to leverage its scale to attract deals and drive revenue synergies and profitability

·    Pivotal Growth's financial performance has steadily improved (in trading EBITDA before transaction costs) as it has increased in scale and moved out of its establishment phase

·    Following material growth in trading EBITDA (before transaction costs) in 2024 compared to prior year, our share of Pivotal profit after tax is expected to continue to improve in future periods

CURRENT TRADING AND OUTLOOK

We have made a positive start to the year with trading in line with expectations. Our end markets have been operating broadly in line with our assumptions.

We continue to expect the Group to deliver a further increase in profits in 2025. The Board remain positive about the Group's short and medium-term prospects and fully supports the programme of investment across each of its businesses to take advantage of the value accretive growth opportunities ahead.

For further information, please contact:

Notes:

1          Stated on basis of continuing operations unless otherwise stated. Following the conversion of the entire owned estate agency network to franchises in H1 2023, the previously owned network was classified as a discontinued operation and is presented as such in the Financial Statements. Refer to note 6 to the Financial Statements

2          Group (and Divisional) Underlying Operating Profit is stated before exceptional items, contingent consideration assets & liabilities, amortisation of intangible assets and share-based payments. Refer to note 5 to the Financial Statements for reconciliation of Group and Divisional Underlying Operating Profit to statutory operating profit/(loss) for continuing, discontinued and total operations

3          Mortgage lending excluding product transfers - New mortgage lending by purpose of loan, UK Finance (Bank of England) - Table MM23 (30 January 2025)

4          Number of residential property transaction completions with value £40,000 or above, HMRC (31 January 2025)

5          Following the conversion of the entire owned estate agency network to franchises in H1 2023, the previously owned network was classified as a discontinued operation and is presented as such in the Financial Statements. Refer to note 6 to the Financial Statements

6          Refer to note 12 to the Financial Statements for the calculation 

7          Refer to note 34 to the Financial Statements

8          Refer to note 9 to the Financial Statements

9          Approvals for lending secured on dwellings, Bank of England - Table A5.4 (30 January 2025)

Notes on LSL

LSL is one of the largest providers of services to mortgage intermediaries and estate agent franchisees.

Over 2,700 advisers representing over 11% of the total purchase and remortgage market.

Its 62 estate agency franchisees operate in 310 territories.

LSL is also one of the UK's largest providers of surveying and valuation services, supplying five out of the six largest lenders in the UK.

For further information please visit LSL's website: lslps.co.uk 

LEI: 213800T4VM5VR3C7S706

GROUP CHIEF EXECUTIVE'S REVIEW

We have made positive progress through 2024, delivering a substantial increase in profits, with our full year results being just ahead of market expectations, while continuing to reshape the Group to deliver attractive, long-term returns in line with our prudent risk appetite.

Each of our principal markets improved against the difficult conditions experienced in 2023, although they remained muted with headwinds persisting and activity levels below long-term averages. Against this background, I am pleased to report that each of our principal businesses increased or retained their strong market shares and advanced key strategic initiatives that will help support future growth.

We have seen a clear step-up in the regulatory focus across many financial services sectors, including some of the markets in which we operate. As a Group, we have always taken regulatory compliance extremely seriously and over the last three years have added over 20 in additional headcount across our regulatory and compliance functions.  Furthermore, in 2024 we recruited a new Group Chief Risk Officer and put in place an experienced Financial Services Division board, including three independent non-executive directors to provide further governance and regulatory oversight for this Division. The Group will continue to monitor regulatory developments and is committed to taking the steps needed to deliver against emerging requirements.

Subsequent to the year end, we have made further enhancements to our overall governance model, appointing two of the Group's Non-Executive Directors as chairs of the Surveying & Valuation and Estate Agency Franchising Divisions. Darrell Evans will chair our Surveying Division and Michael Stoop our Estate Agency Division. The Financial Services Division already had in place an independent chair, John Lowe.

We retain a very strong balance sheet and are well placed to take advantage of any further market improvements while developing a broader set of products and services designed to deliver more consistent returns in all market conditions. Management continue to focus on maximising the operational potential in each of our businesses and on ensuring that this potential is fairly reflected in the wider perceptions of our Group.

We are fortunate to have the support of highly committed colleagues and I would like to place on record my appreciation for their support and hard work throughout 2024.

Review of 2024 performance

The Group's performance benefited from a recovery in demand and further contract wins in our Surveying & Valuation business, as well as the structural benefit afforded by the transformation programme undertaken in 2023, transitioning to a franchise operating model in our Estate Agency Franchising Division and focusing our activities on business-to-business services in Financial Services. All three Divisions have maintained or improved market share.

We have made a number of targeted investments during 2024, both organic and inorganic. Our organic investments will develop new revenue opportunities, notably in Surveying & Valuation, while taking pro-active steps to reshape and focus our Financial Services Division on its core business of providing services to smaller mortgage-led adviser businesses. This continues in 2025. Our inorganic investments have focused on supporting bolt-on acquisitions by our franchisees within our Estate Agency Franchising Division, creating increased scale for our lettings business, and completing the purchase of the TenetLime mortgage network in Financial Services. 

Group Revenue increased 20% to £173.2m (2023: £144.4m) above prior year in a total lending market that was broadly flat and housing market that increased by 8%.

Group Underlying Operating Profit¹ recovered strongly to £27.7m (2023: £10.3m), with a year-on-year increase in each Division. Group Underlying Operating margin of 16% was its highest point in over 15 years, reflecting the return to high utilisation in Surveying and the benefits of the franchising model in Estate Agency for the whole period. On a statutory basis, Group Operating Profit was £21.9m (2023: £3.7m).

Surveying & Valuation Division

Our Surveying & Valuation business has performed very well in recent years, receiving increased allocations from existing customers and winning new contracts. This continued in 2024, with notable developments including the commencement of our renewed, long-term, exclusive deal with Lloyds Banking Group and the renewal of other contracts with major lenders.

These contract wins reinforced our leading market position and helped drive a significant increase in activity as the market recovered, resulting in an increase of more than three-fold in Underlying Operating Profit¹ to £22.5m (2023: £6.7m). Underlying operating margin also recovered strongly to 23.0% (2023: 9.4%), reflecting the efficient use of surveyor time. Average jobs per surveyor was 1,040, very substantially ahead of 2023 (782), when we decided to retain excess capacity in anticipation of a market recovery and in line with the strong utilisation achieved in 2021 and 2022. On a statutory basis, Operating Profit was £22.1m (2023: £3.4m).

Surveying & Valuation Revenue increased by 36% to £97.8m. During 2024, we continued our work to develop new revenue streams, for example from the provision of automated valuation and data services to lenders, and increasing the number of valuation and surveying jobs undertaken for the end customer. As mortgage lenders increasingly make use of data and automated valuation services, we see further opportunities to provide more services to the end customer.

Throughout 2024, and in particular in the second half of the year, we invested significantly to develop these emerging revenue streams. This investment included around £1m to support our data and valuation work, including adding senior headcount in our data and valuation modelling teams, whilst increasing our consumer and marketing spend by £0.5m. This spend helped support an increase of 87% in our direct-to-consumer revenue, which reached £6.8m. This represents a 500% increase in 4 years since 2020, when it stood at £1.1m.

Financial Services Division

We have reinforced the leading position of our PRIMIS network in the provision of services to independent mortgage brokers, aided by the completion in February 2024 of the purchase of the TenetLime network. At the end of the year, PRIMIS members totalled 2,282 advisers who sell mortgage and protection (2023: 2,068) and 421 advisers selling only protection and general insurance products (2023: 558), bringing the total number of advisers to 2,736 (2023: 2,661).

We were pleased with the contribution made by TenetLime advisers, with the integration being completed on schedule and with both financial performance and adviser retention in line with expectations. This was despite the challenges that resulted from the placing into administration of TenetLime's seller, Tenet Group Limited, which had contracted with us to provide transitional support services as part of the terms of the transaction. As a result of this administration, we had to take on additional work earlier than expected and incurred additional costs to date of £0.5m as a result, which have been treated as an exceptional cost. We expect to recover these, and any future amounts, in 2025 from the deferred consideration balance of £3.3m.

The change in the split between mortgage and protection only advisers reflects the work we have undertaken to develop a clear focus for our future target market, as well as an assessment of the relative risks of providing services in these segments. We incurred exceptional costs of £1.9m associated with the exit of a large protection only firm.

Total UK new mortgage lending increased slightly, by 7% to £242bn. LSL advisers total mortgage lending grew by 12% to £46.7bn, reflecting an increase in market share in all key segments. We increased our share of the purchase and remortgage and of the product transfer markets, with a record share of purchase and remortgage² (11.8%, up from 10.6%) and of product transfers (6.9%, up from 6.1%). After adjusting for disposals, protection revenue remained broadly flat.

The year also saw significant further steps taken to drive forward our strategy focused on the mortgage-led adviser market. We welcomed a number of senior appointments to the Divisional management team, including experienced industry leaders as Managing Director and Chief Distribution Officer, and in the early part of 2025 will supplement the team further with the appointment of a Chief Operating Officer. We have also completed the absorption of our DLPS and Mortgage Gym technology businesses to focus on supporting the growth of our Network business. Against this background, we were pleased to report an increase in Underlying Operating Profit¹ to £8.7m (2023: £7.4m). On a statutory basis, Operating Profit was £4.7m (2023: £5.0m).

In December, we also announced a major programme of investment to enhance the technology solutions provided to PRIMIS advisers to improve efficiency and sales performance and underpin our leading market position. We expect to spend around £3m by way of revenue and capital expenditure in 2025 to support this programme.

Estate Agency Franchising Division

With the completion of the conversion of our Estate Agency business to a franchise model during 2023, we are now focused on further enhancing our franchising expertise to bring on new partners and develop our services for franchisees.

The Group supported franchisees in the acquisition of three lettings books in 2024, providing total loan funding of £0.7m and adding c.700 properties to the portfolio which now stands at over 37,000. These deals will deliver returns in excess of the Group's cost of capital. We see scope for further similar support in the future.

During 2024 the Estate Agency Franchising Division has invested in strengthening leadership capability with key senior appointments within propositions and operations, with these roles funded from its cost reduction programme.

The strength of our new operating model in Estate Agency Franchising was demonstrated by the strong financial performance achieved in 2024. Divisional revenue was up 29% to £27.0m, with Underlying Operating Profit¹ of £7.6m, an increase of 77% over the prior year (2023: £4.3m), achieved at an underlying operating margin of over 28% (2023: 21%). We are significantly ahead of the plans we set in 2023 for reducing costs and increasing margin. On a statutory basis, Operating Profit was £6.5m (2023: £3.0m).

Pivotal Growth joint venture

Pivotal Growth, our joint venture with Pollen Street Capital (PSC), established to execute a buy-and-build strategy in the mortgage and protection intermediary markets, was launched in 2021. Our joint aim is to build the business together with a view to an exit event over a three-to-six-year period after launch.

After a slow start, Pivotal has gained substantial momentum and has now acquired 17 businesses, including eight acquisitions made in 2024. With over 500 advisers, Pivotal is now one of the UK's largest mortgage and protection brokers.

We have invested just over £20m in Pivotal since 2021 via equity and loan notes, and we continue to closely monitor Pivotal's performance to maximise returns for Shareholders. Pivotal remains on track to deliver returns ahead of the Group's cost of capital.

Dividend

The improvement in performance in 2024 underpins the Board's confidence in the underlying fundamentals and prospects of the Group's businesses. Therefore, the Board has declared a final dividend of 7.4 pence per share (2023: 7.4 pence), making a total dividend of 11.4 pence per share (2023: 11.4 pence). The Group's dividend policy continues to be a pay-out of 30% of Group Underlying Operating Profit after finance and normalised tax charges³.

The ex-dividend date for the final dividend is 8 May 2025, with a record date of 9 May 2025 and a payment date of 27 June 2025. Shareholders can elect to reinvest their cash dividend and purchase additional shares in LSL through a dividend reinvestment plan. The election date is 23 May 2025.

Share buyback

The Board's approach to capital allocation remains unchanged. We will continue to deploy share buybacks in a measured way and there are no plans to allocate cash reserved for the buyback into other Group activities. To date, £1.3m of the share buyback programme announced on 25 April 2024 has been deployed. The current buyback programme has been extended to the date of the 2025 AGM.

Change of auditor

As highlighted in the 2024 Interim results announced in September 2024, an audit tender exercise had been concluded in advance of the Group's current auditor's (Ernst & Young LLP (EY)) tenure reaching its maximum term limit. This resulted in a recommendation from the Audit & Risk Committee, which has now been endorsed by the Board, that Grant Thornton UK LLP be appointed as the Group's auditor for the year ending 31 December 2025.

Accordingly, it is our expectation that, following the completion of the audit of the Group's 2024 financial statements, EY will resign as auditor of the Company creating a casual vacancy. In accordance with the Companies Act 2006, Grant Thornton UK LLP will be appointed by the Directors to fill that casual vacancy and to audit the financial statements of the Group for the year ending 31 December 2025 and subsequent financial periods. EY will not therefore stand for reappointment at the 2025 Annual General Meeting (AGM), and a resolution to ratify Grant Thornton's appointment will be put to Shareholders for approval instead.

Appointment of Group Chief Executive Officer Designate

As announced on 30 January 2025, Adam Castleton, previously Group CFO, has been appointed as CEO Designate, following my notification to the Board of my intention to retire from my Executive role and the LSL Board.

Adam will formally take up the CEO position on 1 May 2025, following a transition and handover period. The Nominations Committee has agreed a process to identify and appoint a new CFO, and will make a further announcement in due course. In addition, and subject to FCA approval, I am pleased that I will remain with LSL as a non‐executive director of our Financial Services business and that I will also continue as LSL's nominated director for Pivotal Growth.

Living Responsibly and ESG

In 2021 we established our 'Living Responsibly' programme focused on creating a positive impact across the communities we serve. In 2024 we introduced paid volunteering days, which resulted in our colleagues collectively contributing 534 days to support various causes.

By listening and taking action, we further strengthened this commitment through apprenticeships, improved colleague benefits and learning and development opportunities. This was reflected in our most recent colleague engagement survey with a record high participation rate of 84%.

Addressing the impact we have on the environment remains central to Living Responsibly, and during 2024 we have taken steps to better understand this and our pathway to Net Zero 2040.

Reflecting on our progress affords us the time to look forward and plan the next steps for Living Responsibly; at the start of 2025 we welcomed in new colleagues from across the Group, who will ensure our Living Responsibly programme continues to have a positive impact and aligns with the needs of all our stakeholders.

Current trading and outlook

We have made a positive start to the year with trading in line with expectations. Our end markets have been operating broadly in line with our assumptions.

We continue to expect the Group to deliver a further increase in profits in 2025. The Board remain positive about the Group's short and medium-term prospects and fully supports the programme of investment across each of its businesses to take advantage of the value accretive growth opportunities ahead.

David Stewart

Group Chief Executive Officer

25 March 2025

Notes:

1          Group (and Divisional) Underlying Operating Profit is before exceptional items, contingent consideration assets & liabilities, amortisation of intangible assets and share-based payments. Refer to note 5 to the Financial Statements for reconciliation of Group and Divisional Underlying Operating Profit to statutory operating profit/(loss) for continuing, discontinued and total operations

2          Mortgage lending excluding product transfers - New mortgage lending by purpose of loan, UK Finance (Bank of England) - Table MM23 (30 January 2025)

3          Refer to note 12 to the Financial Statements for the calculation of Group Underlying Operating Profit after finance and normalised tax charges 

Notes:

1          Refer to note 4 to the Financial Statements

2          Following the conversion of the entire owned estate agency network to franchises in 2023, the previously owned network was classified as a discontinued operation and is presented as such in the Financial Statements. Refer to note 6 to the Financial Statements

3          Group (and Divisional) Underlying Operating Profit is before exceptional items, contingent consideration assets & liabilities, amortisation of intangible assets and share-based payments. Refer to note 5 to the Financial Statements for reconciliation of Group and Divisional Underlying Operating Profit to statutory operating profit/(loss) for continuing, discontinued and total operations

FINANCIAL & DIVISIONAL REVIEWS

Group Income Statement Review¹

Group Revenue increased 20% to £173.2m (2023: £144.4m). After adjusting for disposals in 2023 and for the purchase of TenetLime in H1 2024, revenue was 23%² above prior year in a total lending market that was broadly flat and housing market that increased by 7%. The increase was primarily in the Surveying & Valuation Division with a 36% increase compared to prior year, driven by 2023 contract enhancements and a 21% increase in total BoE mortgage approvals, and a 29% increase in Estate Agency Franchising due to 12 months' trading in 2024 compared to only eight months in 2023 of the wholly franchise model. After adjusting for businesses disposed of during 2023, Financial Services Division revenue was up 3%², with total Divisional revenue of £48.4m (2023: £47.0m).

Group Underlying Operating Profit³ recovered strongly to £27.7m (2023: £10.3m), with a year-on-year increase in each Division. Group Underlying Operating margin of 16% was the highest margin for over 15 years, particularly reflecting high utilisation in Surveying & Valuation and the benefits of the franchising model in Estate Agency Franchising for the whole period. Group Underlying Operating Profit from total operations was £27.3m (2023: £9.3m⁴).

Group Operating Profit increased to £21.9m (2023: £3.7m), resulting from the improved trading performance in the period, offset by £2.4m net exceptional costs in 2024 (2023: £4.4m).

Adjusted operating expenditure⁵, comprises employee costs, Other operating costs, and Depreciation and totalled £146.0m in 2024, 9% higher than prior year (2023: £133.5m), with the movement comprising the net effect of the following factors:

-      Reduction of c.£7m due to disposed businesses during H1 2023.

-       After adjusting for disposed businesses, costs were £1.0m higher in Financial Services in line with revenue.

-      Increased variable costs in Surveying & Valuation arising from 36% increase in revenues.

-      The increased costs in Estate Agency Franchising reflect a full year of franchise operations compared to the prior part year of operations.

-      Central costs of £11.0m (2023: £7.7m) with the increase primarily due to strategic investment, Board changes and additional audit fees incurred in 2024 in respect of the prior period reflecting the accounting treatment for the Group transformation in 2023.

This is broadly in line with expectations in comparison to the historical operating expenditure levels of c.£280m⁴, and the targeted annualised total operations cost reduction of c.£140m following the restructuring of the Group in 2023.

Other gains

Total other operating gains were £0.5m (2023: losses of £0.2m). This primarily included both a part sale of shares held in an unlisted investment in H2 2024 (£0.1m) and the movement in the fair value of the remaining holding, having been reassessed at 31 December 2024 as £0.4m (31 December 2023: £nil).

Share of losses from joint venture

Our equity share of Pivotal Growth results improved to broadly break-even (2024: £6k loss, 2023: £0.4m loss), reflecting increased trading EBITDA, before acquisition transaction fees, which more than doubled in comparison to the prior period reflecting the benefit from ongoing acquisitions.

Share-based payments

The share-based payment charge of £0.9m in 2024 (2023: credit of £0.2m) comprises, a charge in the period of £3.1m for LTIP, SAYE and BAYE schemes granted in 2021 to 2024, offset by a credit of £2.2m reflecting lapses and leavers. The prior year included a similar charge of £3.0m, offset by higher lapse and leaver adjustments largely as result of the significant restructuring across the Group in 2023.

Amortisation of intangible assets⁶

Amortisation charge of £3.0m (2023: £2.3m), relates to amortisation of intangible software investment, franchise agreements and relationship assets. The year-on-year movement comprises mainly of amortisation for the newly established franchise intangibles and acquired TenetLime intangible assets offset by a reduction in both lettings books and certain software intangibles as they have been fully amortised.

Exceptional items⁷

The exceptional gain of £1.7m in 2024 (2023: £9.3m) relates primarily to the increase in contingent consideration receivable on the disposal of RSC (£1.7m). The gain on disposal in 2023 related to the disposal of the Embrace and First2Protect businesses to Pivotal Growth.

Exceptional costs of £4.1m in the period (2023: £13.8m), are primarily due to the charge relating to the decrease in contingent consideration receivable on the disposal of Group First and Embrace Financial Services (£1.5m), Financial Services protection related appointed representative costs (£1.9m) and costs incurred as a result of the administration of TenetLime's seller, Tenet Group Limited (£0.5m). The prior year costs of £13.8m related to restructuring activity and corporate transaction costs of £5.8m, the reduction in deferred consideration receivable for businesses sold to Pivotal in H1 2023 (£4.1m), the net loss on disposals of Group First, RSC and Marsh & Parsons of £1.7m, and intangible asset impairment (£2.2m).

Contingent consideration credit to the income statement of £0.4m (2023: charge of £0.03m), relates to the reduction of the contingent consideration liability for TenetLime, based on advisers retained.

Finance income remained in line with prior year at £2.9m (2023: £2.8m) mainly from increased interest received of £1.8m on funds held on deposit (2023: £1.5m) offset by the reduction in the unwind of discounting on contingent consideration receivable balances of £0.7m (2023: £1.0m).

Finance costs of £1.7m (2023: £1.7m) are related principally to the unwinding of discount on lease liabilities of £0.5m (2023: £0.5m), commitment and non-utilisation fees on the revolving credit facility of £0.6m (2023: £0.7m), unwinding of discount on contingent consideration payable of £0.1m (2023: £nil), fair value adjustment to loans receivable of £0.3m (2023: £0.3m) and £0.2m for the unwinding of discount on dilapidations provisions (2023: £0.1m).

Profit before tax

Profit before tax was £23.0m (2023: £4.9m). The year-on-year movement is primarily due to the materially higher Group Underlying Operating Profit in 2024, offset by net exceptional costs in 2024 of £2.4m (2023: £4.4m).

Taxation

The tax charge of £5.2m (2023: credit of £3.2m) represents an effective tax rate of 22.8% (2023: 65.2%), which is slightly lower than the headline UK tax rate of 25.0% primarily because of a prior year adjustment of £0.2m for overpayment relief claims.  Deferred tax assets and liabilities are measured at 25.0% (2023: 25.0%), the tax rate that came into effect from 1 April 2023.

Discontinued operations¹ loss of £0.4m (net of tax) in relation to an increase in the restructuring and administrative costs associated with the previously owned Estate Agency branch network (2023: loss of £46.1m). The prior period reflects the discontinued operations in Estate Agency Franchising which included exceptional restructuring costs of £16.5m and write down of associated disposed goodwill (£38.1m), offset in part by the exceptional gain on recognition of intangible franchise agreements of £10.7m.

Earnings per share⁸

Business Reviews

Surveying & Valuation Division

Surveying revenue increased significantly to £92.5m, an increase of 36% on 2023 (£67.8m), reflecting both the 26% increase in jobs performed and the 8% increase in income per job on the comparative period. The increase in jobs performed resulted in the market share of valuations instructions increasing to c.38% in 2024 (2023: c.37%). Growth in D2C in recent years has continued in the period, with 2024 revenue of £6.8m representing a 87% increase on 2023.

Surveying Underlying Operating Profit³ increased materially to £20.2m (2023: £5.4m), benefiting from the strong revenue growth and the surveyor capacity retention and self-help cost measures taken in 2023.

The Group's asset management business was transferred from Estate Agency Franchising to Surveying & Valuation following changes in management responsibilities from 1 January 2024. Management deemed the Group's asset management operations, including the class of customer for its services, are more closely aligned to the Surveying & Valuation Division.

Asset Management revenues grew by 31% to £5.3m in the year, reflecting the moderately more active market. However, the market still remains below long-run trend levels. The profit³ for the year was £2.3m (2023: £1.3m).

Total Surveying & Valuation Division revenue of £97.8m in the year was an increase of £26.0m compared to 2023 (£71.9m). Underlying Operating Profit³ increased materially to £22.5m (2023: £6.7m) reflecting the benefit of the revenue increases in both the e.surv and asset management businesses. On a statutory basis, operating profit was £22.1m (2023: £3.4m).

Financial Services Division

Our Financial Services Division is reported in two business lines: our core Financial Services Network business comprising PRIMIS and TMA mortgage club, and our share of profit after tax of Pivotal Growth.

Total revenue was £48.4m (2023: £51.7m). After adjusting for businesses disposed of during H1 2023, revenue was up 3%². We increased our share of the purchase and remortgage and of the product transfer markets, with a record share of the purchase and remortgage (11.8% up from 10.6%) and the product transfer markets (6.9% up from 6.1%). After adjusting for disposals, Network protection revenue was 4% lower than 2023.

Network Underlying Operating Profit³ was £8.7m (2023: £7.4m), which was marginally ahead of 2023 on an organic basis, in what was a flat market, whilst also absorbing the cost of an extended governance framework and restructuring costs.

Our share of losses after tax in our joint venture Pivotal Growth was £0.0m (2023: loss of £0.4m).  The trading EBITDA of Pivotal (before transactional acquisition costs) was materially ahead of last year.

Exceptional costs of £2.4m were recognised primarily relating to the exit of a large protection only firm (£1.9m) and costs associated with the administration of the sellers of TenetLime (£0.5m).

Total Financial Services Division Underlying Operating Profit³ was £8.7m (2023: £7.0m, £7.4m after adjusting for disposed businesses). On a statutory basis, operating profit was £4.7m (2023: £5.0m).

The Financial Services Network business has a regulatory capital requirement which represents 2.5% of its regulated revenues. The regulatory capital requirement was £6.4m at 31 December 2024 (31 December 2023: £6.1m), with a surplus of £27.6m (31 December 2023: £24.7m).

Estate Agency Franchising Division

Estate Agency Franchising business revenue was £27.0m (2023: £20.9m), with the increase primarily reflecting the wholesale franchising of the Division only part way through H1 2023.

The Division continued to support the growth of its franchisees, including the provision of loans to facilitate lettings acquisitions, adding c.700 properties to the franchisee portfolios during 2024. The average lettings income per managed property was up c.+2% with total number of properties in line with the prior year.

The Estate Agency Franchise business delivered a robust residential sales performance, with the total number of exchange units 10% above 2024 in a market which was 8% ahead.

Underlying Operating Profit^1,3 of £7.6m was delivered in 2024 (2023: £4.3m) at a 28% operating margin (2023: 20%). On a statutory basis, operating profit was £6.5m (2023: £3.0m).

Group Balance Sheet Review

Goodwill - 31 December 2024: £16.9m (31 December 2023: £16.9m)

The carrying value of Goodwill relates to previous acquisitions in the Surveying & Valuation Division of £9.9m and Financial Services Division of £7.0m.

Other intangible assets⁶ - 31 December 2024: £29.9m (31 December 2023: £21.5m)

Intangible relationship assets of £9.3m were recognised during the period upon the purchase of TenetLime, with further additional investments in Financial Services and Surveying of £2.1m. Total amortisation of £3.0m was charged in the year (2023: £2.3m). The carrying value of all franchise agreements was £10.9m at 31 December 2024 (31 December 2023: £11.7m), the acquired relationship assets was £8.5m (2023: £nil) and software assets of £3.6m (2023: £2.8m). Brand intangibles of £6.9m remained unchanged during the year.

Property, plant and equipment (PPE) and right-of-use assets (RoU assets) - 31 December 2024: £6.4m (31 December 2023: £6.9m)

Capital expenditure on owned PPE in the year amounted to £0.9m (2023: £0.7m), primarily reflecting ongoing IT investment across all divisions. Total depreciation of £1.2m was charged in the year (2023: £1.7m).

Financial assets (total current and non-current) - 31 December 2024: £6.5m (31 December 2023: £5.5m)

Contingent consideration receivable

31 December 2024: £5.8m (31 December 2023: £5.1m)

During H1 2023 the Group disposed of Group First, RSC and Embrace B2C brokerage businesses to Pivotal Growth, with contingent consideration receivable in the first half of 2025 based on 7x 2024 EBITDA performance. As at 31 December 2024, this asset is recorded at £5.7m (31 December 2023: £4.8m).

The Group also has contingent consideration receivable in relation to disposed lettings books, which are due to be fully repaid by November 2025. As at 31 December 2024, this asset is recorded at £0.1m (31 December 2023: £0.3m).

Equity instruments in unlisted companies

31 December 2024: £0.8m (31 December 2023: £0.4m)

There was no change in the fair value of units held in The Openwork Partnership LLP of £0.4m at 31 December 2024 (31 December 2023: £0.4m). The fair value has been reassessed as £0.4m at 31 December 2024, with our valuation based on an estimated strike price which has been calculated using the strike price from most recently executed trading windows.

The fair value of shares held in Twenty7tec Group Limited was reassessed at 31 December 2024 as £0.4m (31 December 2023: £nil). Part of the interest held in Twenty7tec was sold in H2 2024 for consideration of £0.1m. Twenty7tec is a provider of technology to mortgage advisers and lenders.

Loans to joint venture - 31 December 2024: £7.6m (31 December 2023: £nil)

In December 2024, the Group provided funding of £7.6m to its joint venture Pivotal Growth in the form of 10% unsecured loan notes. The loan notes are redeemable in H1 2025 and no repayments were made in 2024.

Investment in joint venture - 31 December 2024: £11.6m (31 December 2023: £9.4m)

Our 46.5% share of the Pivotal Growth joint venture is accounted for using the equity method with the change in value resulting from our equity investment in Pivotal Growth during the period (£2.2m), and our share of profit after tax for the period (£6k loss).

Investment in subleases (total current and non-current) - 31 December 2024: £0.8m (31 December 2023: £3.3m)

This reflects the situation whereby the Group is an intermediate lessor, following the Estate Agency conversion to a wholly franchised model. As part of the franchising transition, some of the leases held by the Group in respect of the previously owned network have been transferred to the franchisees, resulting in a reduction in both the investment in sublease balance by £1.5m and a similar reduction in IFRS 16 lease financial liabilities. The balancing movement reflects payments made by franchisees during the period.

Loans to franchisees and appointed representatives (Network firms) - 31 December 2024: £1.8m (31 December 2023: £2.1m)

Various sized working capital loan facility agreements are in place with several franchisees of the Estate Agency Franchising Division which have availability over a range of periods from 31 December 2024 to 31 December 2025, are repayable in full within 24 months from the respective period end and bear fixed rate interest at 8.5%. At 31 December 2024, £1.4m in principal loan amounts were drawn down (31 December 2023: £0.8m).

Loans to FS appointed representatives are granted in certain circumstances to support brokers upon joining the PRIMIS network and were £0.5m as at 31 December 2024 (31 December 2023: £1.3m).

Financial liabilities (total current and non-current) - 31 December 2024: £9.1m (31 December 2023: £8.4m)

Contingent consideration liabilities - 31 December 2024: £3.3m (31 December 2023: £0.07m)

Contingent consideration liabilities relate solely to the cost of acquiring the intangible relationship assets in TenetLime in February 2024, with the consideration of £3.3m payable in H1 2025 adjusted at 31 December 2024 for the latest update of retained advisers and discounting.

IFRS 16 lease financial liabilities - 31 December 2024: £5.8m (31 December 2023: £8.3m)

The movement in the period reflects payment of lease liabilities of £3.4m and disposals on assignment to franchisees of £1.5m, offset by new lease additions of £1.9m and unwinding of discounting of £0.5m.

Provision for liabilities (total current and non-current) - 31 December 2024: £10.2m (31 December 2023: £11.6m)

PI claim provisions of £2.3m (31 December 2023: £3.2m) include the Surveying & Valuation PI provision of £1.9m (31 December 2023: £2.3m) and the Financial Services PI provision of £0.4m (31 December 2023: £0.9m). The Group has recognised an asset of £0.3m against received claims in other debtors at 31 December 2024 (31 December 2023: £0.6m).

Dilapidations and restructuring provisions relating to the Estate Agency Franchising Division following the wholesale franchising in 2023, totalled £6.0m at 31 December 2024 (31 December 2023: £7.8m).  The movement in the year relates mainly to a release of £1.5m in the dilapidations provisions and £1.3m of payments made relating to the restructuring provision.

A claims indemnity included in the sale agreement of LMS remains unchanged at £0.6m at the period end (31 December 2023: £0.6m). A provision of £1.2m has been recognised during the period relating to one of the Group's former protection only appointed representatives (2023: £nil).

Group Statement of Cash flows - 31 December 2024: Net Cash¹⁰ £32.4m (31 December 2023: Net Cash £35.0m)

Operating cashflows before movements in working capital were £30.3m (2023: £14.9m) reflecting the higher underlying operating profits generated in 2024. The business is highly cash generative and ordinarily achieves a cash flow conversion rate¹⁰ of 75% to 100%. The ratio in 2024 was 114% reflecting the materially higher Underlying Operating Profit, with a ratio of (2)% achieved in 2023.

Movements in working capital during the period were an inflow of £2.7m (2023: outflow of £11.0m). The higher outflow in 2023 reflected the significant change in structure in the Group during that year, especially in Estate Agency Franchising. The operating cycle of working capital continues to settle following the completion of significant restructuring and transformation programmes during 2023.

The movements in the year also included:

·      the initial consideration of £5.7m for the purchase of TenetLime assets

·    a total of £9.8m investment into our joint venture Pivotal Growth (£2.2m equity/£7.6m loan notes, 2023: £4.7m equity)

·      capital expenditure on PPE and intangibles of £3.0m (2023: £2.9m)

·    exceptional costs paid in relation to divisional restructure and transformation programmes first executed in 2023 of £3.1m (2023: £10.4m)

·    payment of the 2023 final and 2024 interim dividends of £11.8m (2023: £11.7m) and the repurchase of shares under the share buyback programme of £0.8m (2023: £nil)

·      corporation tax paid in 2024 of £1.8m as the Group returns to more normalised taxable profits (2023: £nil)

Bank facilities

In January 2025, LSL agreed an amendment and restatement of our banking facility, with an unchanged £60m committed revolving credit facility, and a maturity date of January 2030, which replaced the previous £60m facility due to mature in May 2026. The terms of the facility have remained materially the same as the previous facility. The facility is provided by the same syndicate members as before, namely Barclays Bank UK plc, NatWest Bank plc and Santander UK plc.

In arranging the banking facility, the Board took the opportunity to review the Group's borrowing requirements, considering our strong cash position, our strategy and the Group's capital allocation policy. To provide further flexibility to support growth, the facility retains a £30m accordion, to be requested by LSL at any time, subject to bank approval.

International Accounting Standards (IAS)

The Financial Statements for the period ended 31 December 2024 have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and UK-adopted IAS.

1          Based on continuing operations unless otherwise stated. Following the conversion of the entire owned Estate Agency network to franchisees in 2023, this was classified as a discontinued operation and is now presented as such in the Financial Statements. Refer to note 6 to the Financial Statements

2          Revenue: £170.5m in FY 2024 with statutory revenue of £173.2m less £2.7m revenue due to acquisitions in 2024, as compared to £138.3m in FY 2023 with statutory revenue of £144.4m less £6.1m revenue from businesses disposed in 2023. FS Revenue of £48.4m in FY 2024, as compared to £47.0m in FY 2023 with statutory revenue of £51.7m less £4.7m revenue from businesses disposed in 2023

3          Group (and Divisional) Underlying Operating Profit is before exceptional items, contingent consideration assets & liabilities, amortisation of intangible assets and share-based payments. Refer to note 5 to the Financial Statements for reconciliation of Group and Divisional Underlying Operating Profit to statutory operating profit/(loss) for continuing, discontinued and total operations

4          Stated on total operations basis

5          Refer to note 34 to the Financial Statements

6          Refer to note 2 and 17 to the Financial Statements

7          Refer to note 9 to the Financial Statements

8          Refer to note 12 to the Financial Statements

9          Mortgage lending excluding product transfers - new mortgage lending by purpose of loan, UK (BOE) - Table MM23 (February 2025)

10        Refer to note 34 to the Financial Statements

Principal risks and uncertainties

Our principal risks and uncertainties, that the Board has assessed as being the most significant risks that may adversely affect our business strategy, financial position or future performance, are set out in the Group's Annual Report and Accounts. 

In summary, these are linked to the impact on the Group of:

1.    The cyclicality of the UK housing market and fluctuations in the lending market.

2.    Exposure to competitive pressures from market participants.

3.    Execution of strategic initiatives and associated capital allocations.

4.    Claims arising from systemic lapses in the delivery of professional services.

5.    Significant falls in business volume.

6.    Information security.

7.    Regulatory compliance and responding to regulatory changes.

8.    Environmental, social and governance matters.

9.    Colleague resources, talent and expertise.

10.  Credit risk.

Group Income Statement

for the year ended 31 December 2024

Group Statement of Comprehensive Income

for the year ended 31 December 2024

Group Balance Sheet                                                                                                             

as at 31 December 2024

Group Statement of Cash Flows

for the year ended 31 December 2024