Business Review
Directors’ Report and Business Review
Contingent Consideration Adjusted Basic Earnings Per Share Zoopla
The revised version of IFRS 3 Business The Adjusted Basic Earnings Per Share (as In April 2012, the Group acquired a further
Combinations which is in place for acquisitions calculated in note 10) is 23.8p (2011: 21.0p). 1.38% of Zoopla for £0.9m. In August 2012,
which occurred post 1st January 2010, has The Directors consider this provides a better Zoopla merged with Digital Property Group
tightened the criteria linking contingent and more consistent indicator of the Group’s (DPG), owner of Findaproperty.com and
consideration to service. In acquisitions in underlying performance. Primelocation.com. As part of the merger, any
2011 and 2012, contingent consideration warrants held in Zoopla were exercised so that
arrangements have been accounted for as
remuneration as the arrangements involved
Balance Sheet the Group owned 4.81% of the post-merger
entity. At 31st December 2012, the Board
the vendors forfeiting amounts otherwise due capital Expenditure reviewed the fair value of Zoopla and assessed
if services were not provided. Total capital expenditure in the year amounted the fair value to be £6.03 per share, in line
The acquisition of Marsh & Parsons in to £5.7m (2011: £3.2m). Most of the increase with the price paid in April 2012. This valued
November 2011 has resulted in an exceptional in capital expenditure was due to expenditure the Zoopla group at £245m, with the Group’s
expense of £1.8m (2011: £0.1m) in 2012. by Marsh & Parsons which was acquired share being £11.8m. This resulted in a £10.7m
Assuming the level of profits and new branch in November 2011. The majority of this valuation uplift being recorded through the fair
openings remain on forecast, this charge is expenditure was associated with new value reserve.
expected to continue at this level until 31st branch openings.
net Assets
December 2015. The acquisitions of Davis
Financial Structure The Net assets as at 31st December 2012 were
Tate and Lauristons in 2012 resulted in an
As at 31st December 2012 Net Bank Debt was £76.1m (2011: £72.4m).
exceptional expense of £2.3m (2011: £nil),
£26.6m (2011: £35.7m). LSL has a £75.0m
but the impact of these acquisitions on future treasury and Risk Management
revolving credit facility in place until March
years will be far smaller unless there are LSL has an active debt management policy
2014 (2011: £75.0m). Net Bank Debt decrease
significant changes in the forecast profitability and due to the cash generative nature of the
followed the payment of £3.7m for various
of these acquisitions. business, the Group’s Net Bank Debt position at
new acquisitions by the Estate Agency Division,
net Financial costs £0.9m to increase the Group’s stake in Zoopla, 31st December 2012 is £26.6m (2011: £35.7m).
Net financial costs (excluding exceptional £2.2m repayment of other loans and an The Group has an interest rate swap in place
finance costs) amounted to £2.9m (2011: increase in dividend paid in the year of £0.3m. which fixes the interest on borrowings up to
£1.8m). The finance costs related principally £25.0m at an average LIBOR rate of 2.93%,
The revolving credit facility expires in
to interest and fees on the revolving credit which provides a degree of predictability
March 2014 and the Directors have initiated
facility, however, £0.8m (2011: £0.4m) of the on finance costs. LSL does not hold or issue
discussions with a number of lenders to
costs relates to the unwinding of discounts derivatives or other financial instruments for
refinance the facility. The refinance request has
on provisions. trading purposes.
been received positively by all lenders and the
Directors do not believe that there will be any international Financial
taxation
issues in extending the facility on similar terms Reporting Standards (iFRS)
The effective rate of corporation tax for the
to those currently received by the Group and The Financial Statements have been prepared
year was 19.0% (2011: 26.3%) excluding prior
will look to finalise negotiations in the first under IFRS as adopted by the European Union.
year adjustments. The effective tax rate for
half of 2013. LSL commenced reporting under IFRS from 1st
2012 and 2011 was impacted by non-taxable
income for joint ventures and the impact of January 2005.
cash Flow
a rate change on the deferred tax liability, The Group produced £26.9m (2011: £21.1m) of
contingent consideration recognised as operating cash flow after capital expenditure
an expense and the impact of temporary of £5.7m (2011: £3.2m). Cash flow was higher
differences on certain non-qualifying compared to the previous year due to the
properties no longer being recognised. increase in Group Underlying Operating Profit.
Excluding these impacts the effective tax During the year the Group sold a number of
rate is 28.6% (2011: 31.7%). freehold properties which were acquired as
part of the HEAL acquisition. Net proceeds of
£6.2m (2011: £nil) were received generating an
exceptional profit of £1.4m.
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