12% unsecured loan notes (12% LN)
The 12% LN with a face value of £6,146,000 (fair value of £8,660,000) were issued as part satisfaction of the consideration for acquisition of Marsh &
Parsons in November 2011. These loan notes carry a coupon of 12% which is compounded every year on 1st January and rolled up to redemption.
These loan notes are redeemable at par value plus rolled up interest at any time after 31st March 2016 at the option of the loan note holder. However,
if that option is not exercised by the loan note holder they are redeemable on 31st March 2020.
Deferred consideration
The total deferred consideration is as below:
2012 2011
£’000 £’000
Acquisition of Barnwoods shares 190 190
Deferred consideration relating to Marsh & Parsons acquisition 450 334
Templeton LPA deferred consideration 300 200
940 724
During 2010 the Group acquired shares in Barnwoods for a total consideration of £328,000 of which £138,000 was paid in 2010 and the remaining
£190,000 is payable in March 2013 and has been included under deferred consideration at the year-end. No interest is payable on the deferred
consideration.
Deferred consideration of £450,000 relates to the Marsh & Parsons acquisition in November 2011. This is payable at any time between 31st March
2016 and 31st March 2020 at the option of Marsh & Parsons management shareholders of Marsh & Parsons.
Deferred consideration of £300,000 is payable on acquisition of Templeton LPA. This is payable in January 2013 and no interest is payable on this.
Contingent consideration
Due to changes in accounting standards effective from 2010 it is more likely that contingent consideration on future acquisitions will be recognised
in the profit and loss instead of being recorded in full at acquisition. Further details are disclosed in note 2,7 and 27 to these Financial Statements.
£6,220,000 (2011: £1,149,000) of contingent consideration is payable to third parties in relation to the acquisition of certain subsidiaries in 2007
and 2012. This is payable between three and five years after the acquisition dates depending on the profitability of those subsidiaries in the relevant
years. In 2012, the contingent consideration has been recalculated based on the latest management’s expectation using a discount rate of 7%
(2011: 7%).
£1,868,000 (2011: £66,000) of contingent consideration relates to the ‘Growth Shares’ issued to the management of Marsh & Parsons subsequent
Financial Statements
to acquisition as an incentive to grow the Marsh & Parsons business. Holders of Growth Shares will have the option to require LSL to buy their Growth
Shares at any time between 31st March 2016 and 1st April 2020, at their discretion, at a price determined by a multiple of EBITDA in the previous
financial year. The payment of the consideration is contingent on the holder of the Growth Shares being continuously employed by the relevant
company and consequently the expected value of the Growth Shares is charged to the income statement over the earn-out period.
Derivatives carried at fair value –interest rate swap
During 2009 the Group entered into three interest rate swaps to hedge its interest rate risks (see note 29). These are carried at fair value.
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