LSL Property Services plc Annual Report 2015

FY2015 Annual Report · LSL Property Services plc

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www.lslps.co.uk
Registered in England
(Company Number 5114014)
Registered Office:
Newcastle House
Albany Court
Newcastle Business Park
Newcastle upon Tyne
NE4 7YB
Tel: 020 3215 1015
Fax: 020 7920 9443
Email: enquiries@lslps.co.uk

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LSL Property Services plc

Annual Report and Accounts Year ended 31st December 2015

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Annual Report and Accounts 2015

LSL Property Services plc, a leading
provider of residential property
services to its key customer groups
incorporating both estate agency and
surveying businesses.

Forward Looking Statements
This Report may contain forward looking statements with respect
to certain plans and current goals and expectations relating to the
future fi nancial condition, business performance and results of
LSL. By their nature, all forward looking statements involve risk and
uncertainty because they relate to future events and circumstances
that are beyond the control of LSL including, amongst other things,
UK domestic and global economic and business conditions, market
related risks such as fl uctuations in interest rates, infl ation, defl ation,
the impact of competition, changes in customer preferences, delays
in implementing proposals, the timing, impact and other uncertainties
of future acquisitions or other combinations within relevant industries,
the policies and actions of regulatory authorities, the impact of tax
or other legislation and other regulations in the UK. As a result LSL’s
actual future condition, business performance and results may diff er
materially from the plans, goals and expectations expressed or
implied in these forward looking statements. Nothing in this Report
should be construed as a profi t forecast. Information about the
management of the Principal Risks and Uncertainties facing LSL is
set out within the Strategic Report on pages 22 to 25.

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Contents

Overview, Strategic Report and Directors’ Report

Overview
1 Highlights 2015
2
LSL Today
4 Milestones
5 Chairman’s Statement
8

Group Chief Executive’s Review

Strategic Report

12 Strategy
13 Business Model
14 Markets
16 Business Review – Estate Agency Division
19 Business Review – Surveying Division
20 Financial Review
22 Principal Risks and Uncertainties
26 Corporate Social Responsibility
34 The Board

Directors’ Report (including Corporate
Governance Reports)
Statement of Directors’ Responsibilities in Relation to
the Group Financial Statements
Report of the Directors
Corporate Governance Report
Audit Committee Report
Directors’ Remuneration Report

38
43
49
55

Financial Statements
74

Independent Auditor’s Report to the Members of LSL
Property Services plc
82 Group Income Statement
83 Group Statement of Comprehensive Income
84 Group Balance Sheet
85 Group Statement of Cash Flows
87 Group Statement of Changes in Equity
88 Notes to the Group Financial Statements
133 Statement of Directors’ Responsibilities in Relation
to the Parent Company Financial Statements

134 Parent Company Balance Sheet
137 Notes to the Parent Company Financial Statements

Other Information
150 Defi nitions
154 Shareholder Information

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Highlights 2015
A record result for the Group

Group

£300.6m

Group Revenue
Up 5% (2014: £287.5m)

£42.9m

Group Underlying Operating Profi t
Up 2% (2014: £42.0m)

14.3%

Group Underlying Operating Margin
(2014: 14.6%)

£38.6m

Profi t Before Tax
Up 21% (2014: £31.9m)

31.5p

Adjusted Basic Earnings Per Share
Up 3% (2014: 30.5p)

12.6p

Full Year Ordinary
Dividend Per Share
Up 2% (2014: 12.3p (excluding
16.5 pence Special Dividend relating
to Zoopla share disposal))

Estate Agency and Related Services

Surveying and Valuation Services

£31.3m

Operating Profi t
Down 8% (2014: £33.9m)

£18.1m

Operating Profi t
Up 36% (2014: £13.3m)

Group revenue £m

Group Underlying Operating Profi t1 £m

Group Underlying Operating Margin %

Profi t before tax £m

Basic Earnings Per Share – pence

Adjusted Basic Earnings Per Share – pence2

Net Bank Debt3 at 31st December £m

Final proposed ordinary dividend per share – pence

Full year ordinary dividend per share (excluding special dividend) – pence

Special dividend per share – pence

2015

2014 % Change

300.6

287.5

42.9

14.3

38.6

30.1

31.5

39.9

8.6

12.6

42.0

14.6

31.9

24.5

30.5

34.7

8.3

12.3

16.5

Notes:
1 Underlying Operating Profi t is before exceptional gains and exceptional costs, contingent consideration, amortisation of intangible assets and share-based payments
2 Refer to Note 10 for the calculation
3 Refer to Note 30 for the calculation

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LSL Today
LSL has established leading positions in its market segments

LSL is a leading provider of residential property services to its key customer groups. Services to consumers include: residential sales,
lettings, surveying, conveyancing and advice on mortgages and non-investment insurance products. Services to mortgage lenders
include: valuations and panel management services, asset management and property management services.

Estate Agency Division – Estate Agency and Related Services

Residential Sales and Lettings
LSL is the second largest estate agency network in the UK1. It has strong established
high street brands including Your Move, the most recognised estate agency brand in the
UK2, and Marsh & Parsons which brings exposure to the Central London property market.
Branch services include Residential Sales, Lettings and Financial Services and a successful
franchise model operates in 114 branches across Your Move, Reeds Rains and Davis Tate.
All brands are members of The Property Ombudsman (TPO) Redress Scheme, which
operates a residential sales and lettings code of practice approved by the Trading Standards
Institute (TSI) under its Consumer Codes Approval Scheme (CCAS).

Asset Management
LSL’s asset management companies are
market leaders in the sale of residential
properties on behalf of corporate clients.
In 2015 they managed 2,954 repossessions
utilising a network of up to 1,652 estate
agency branches nationwide.

Your Move
The largest single branded UK estate agency
with 282 branches operating throughout the
UK and the most visited UK estate agency
website3 with over 10 million visits in 20154.
www.your-move.co.uk was relaunched in 2015
with a responsive design and personalised
features for customers. The new platform will
be available to all LSL brands in 2016.

www.your-move.co.uk

Reeds Rains
A predominantly northern based network
of 167 branches and the highest brand
awareness of any estate agent brand in
the North East, the North West and Yorkshire2.

www.reedsrains.co.uk

Marsh & Parsons
Leading London premium brand estate agency operating
in the prime Central, North West, West and South West
London property markets out of 24 branches.

www.marshandparsons.co.uk

LSLi
LSLi is the holding company and fi nancial services
provider for nine estate agency brands with an
expanding network of 65 branches. The brands in the
LSLi network are based predominantly in and around
Greater London and the Home Counties.

www.lsli.co.uk

LSL Corporate Client Department
LSL CCD operates a repossessions asset
management business and a property
management business for multi-property
landlords and is a leading property
specialist, providing services to national
and global institutions.

www.lsl-ccd.co.uk

St Trinity Asset
Management
The Group’s second asset management
business was created in 2010 and
specialises in repossession property sales
as well as off ering a range of other services
including part exchanged property sales,
bulk property disposal, auction sales,
property relocations and conveyancing.

www.sttrinityassetmanagement.co.uk

Templeton LPA
Law of Property Act fi xed charge receiver
joined the Group in 2010.

www.templetonlpa.co.uk

Financial Services

LSL’s Financial Services teams specialise in
the brokerage of mortgage and protection
products through a range of brands.

LSL’s combined appointed representative
network is the second largest in the UK5 and
across the various brands, the Group now
has 635 appointed representative fi rms and
1,509 advisors. The total value of mortgage
completions arranged in 2015 was £14.5bn
up 25% from 2014.

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Estate Agency Division – Estate Agency and Related Services

Information included in this section of the Report is provided as at 31st December 2015.

Surveying Division – Surveying and Valuation Services

First Complete
Directly authorised by the
FCA, operating a mortgage
brokerage business and
mortgage intermediary
network. First Complete acts as principal
for most of the estate agency businesses
within LSL’s Estate Agency Division, enabling
their employed fi nancial consultants to off er
Financial Services to customers of the branch
networks.

www.fi rstcomplete.co.uk

e.surv Chartered Surveyors
e.surv Chartered Surveyors is one of the country’s largest providers
of residential valuation services, completing one valuation every four
minutes and is one of the largest employers of surveyors in the UK6.

In addition to mortgage valuation services, e.surv provides a range of products and services to a
customer base that includes lenders, intermediaries, social housing entities, estate agents, and
private homeowners. Key products include the RICS Homebuyer Report, the RICS Condition
Report, and the RICS Building Survey, together with the Home Report in Scotland. e.surv also
provides a number of corporate services, including underwriting and lending policy advice.

www.esurv.co.uk

Pink Home Loans
Directly authorised by the FCA, operating a
mortgage network, providing products and
services to fi nancial intermediaries since
1990, joining the LSL Group in 2010.

Walker Fraser Steele
One of the longest established Chartered Surveyor brands
in Scotland, Walker Fraser Steele was founded in Glasgow in
1884 and joined forces with e.surv Chartered Surveyors in 2013. The deal substantially
expanded the geographic coverage of the business and under the Walker Fraser Steele brand,
it now provides surveying and valuation services from locations across Scotland for both local
and national clients.

www.think-pink.co.uk

www.walkerfrasersteele.co.uk

The Mortgage Alliance
The Mortgage Alliance
(which also trades as
TMA) is a trading style for
a mortgage club which
distributes mortgages and fi nancial services
products to directly authorised mortgage
intermediaries.

www.themortgagealliance.com

Also, Your Move and Reeds Rains are
appointed representatives of First Complete and
provide fi nancial services, through employed
fi nancial consultants based in their Estate
Agency branches and call centres; Embrace
Mortgage Services which is a trading name of
LSLi does the same across the LSLi group of
companies; and Linear Financial Solutions,
an appointed representative of Pink Home
Loans and Openwork, provides those products
through a network of fi nancial consultants
based remotely and in the branches of estate
agents. First2Protect is a specialist business
arranging household insurance for customers
of LSL’s Estate Agency Division and third party
introducers.

www.your-move.co.uk/mortgages
www.reedsrains.co.uk/mortgages
www.embracemortgageservices.co.uk
www.linearfs.com
www.fi rst2protect.co.uk

LSL AR 2015_Sect1-3.indd 5

Notes:
1 The LSL Estate Agency Network is made up of wholly owned and franchised branches. The market position is

based on LSL’s own calculations and assessment of branch numbers using publicly available data.

2 Source: ResearchBods Brand Awareness Study August 2015

3 Source: Hitwise December 2015

4 Source: Google Analytics

5 Source: Which Network – Network Performance Figures for 2015 showing the combined numbers for First

Complete and Pink.

6 The market position is based on LSL’s own calculations and assessment using publicly available data.

For further information on all LSL brands please visit www.lslps.co.uk

Marsh & Parsons branch, Upper Tooting Road

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2012

Commencement of renewed Barclays Bank
plc contract for valuation services.

Acquisition of Davis Tate.

Acquisition of Lauristons.

LSL increased its shareholding in Zoopla
which merged with DMGT property portal
businesses during 2012.

Milestones

2011

Investment in Legal Marketing Services and
LMS Direct Conveyancing.

Acquisition of Marsh & Parsons and entry
into the prime Central London residential
property market.

Launch of PropertyCare+.

2013

Acquisition of Lawlors Property Services.

Completed 5 lettings book acquisitions.

Acquisition of Walker Fraser Steele.

2014

Commencement of a new contract with
Lloyds Banking Group for valuation
services.

Commencement of renewed contract with
Barclays Bank PLC for valuation services.

Zoopla IPO and special dividend of 16.5
pence per share paid to Shareholders.

Acquisition of Hawes & Co.

Completed 10 lettings book acquisitions.

2015

Acquisition of Thomas Morris.

Completed 30 lettings book
acquisitions.

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Chairman’s Statement

Introduction
In my first year as Chairman, I am
pleased to report the continued progress
of the Group with record financial results
posted in 2015. Group Underlying
Operating Profit1 of £42.9m (2014: £42.0m)
was higher than LSL achieved in the
property market peak of 2007. Group
revenue grew by 4.6% to £300.6m (2014:
£287.5m) and profit before tax grew by
20.8% to £38.6m (2014: £31.9m).

Performance
After a slower first half in the Estate Agency
Division, reflecting the overall market,
we continued to execute on our strategy,
delivering a strong second half. As a result,
in 2015 we delivered full year growth of 12%
in the counter-cyclical Lettings business,
Financial Services revenue growth of 16%
and revenue growth in Marsh & Parsons
of 9% against a challenging prime Central
London market.

The Surveying Division delivered an
excellent performance with 3% revenue

Simon Embley
Chairman

Lauristons branch, Kennington

growth and double digit profit growth, as
we saw a full year impact of 2014 mid-year
contract renewals and wins, as well as the
Q4 2014 operational performance and
productivity project.

date of 29th March 2016 and a payment
date of 6th May 2016. Shareholders have the
opportunity to elect to reinvest their cash
dividend and purchase existing shares in
LSL through a dividend reinvestment plan.

share). The proposed dividend
payment is at the upper end
of our previously stated
policy of applying a dividend
payout ratio of between
30% to 40% of Group
Underlying Operating Profit
after interest and tax and
reflects our confidence in
the future.

The ex dividend date for
the final dividend is 24th
March 2016 with a record

Board Update
On 1st January 2015, I was appointed as
Chairman and Bill Shannon was appointed
Deputy Chairman in addition to his role
as Senior Independent Director. Further,
during the year we appointed David Stewart
and Kumsal Bayazit Besson to the Board
as Non Executive Directors and members
of the Nominations, Remuneration and
Audit Committees in May and September
respectively and Adam Castleton as Group
Chief Financial Officer in November.

David Stewart has significant experience in
strategy, operations, sales and marketing,
finance and governance, particularly in the
financial services sector. This includes his
current appointments as a Non Executive
Director on the boards of M&S Bank and
Unum Limited.

Kumsal Bayazit Besson has significant
experience in strategy, technology,
operations and sales and marketing,
particularly in the professional information

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Chairman’s Statement

£300.6m

Group Revenue
Up 4.6% – 2014: £287.5m

£42.9m

Group Underlying Operating Profit
Up 2% – 2014: £42.0m

31.5p

Adjusted Basic Earnings Per Share
Up 3.3% – 2014: 30.5p

12.6p

Full Year Dividend Per Share
Up 2.4% – 2014: 12.3p

Full Year 2015 Operating Profit

37%

£42.9m

63%

n Estate Agency
n Surveying

solutions sector. This includes her current
appointment as Regional President, Europe
at Reed Exhibitions which is part of RELX
Group plc.

Adam Castleton joined LSL from French
Connection Group PLC. He previously held
leadership roles at a number of market
leading companies, including O2 UK, eBay
and The Walt Disney Company. Adam has
over 24 years’ experience in finance, having
started his career with Price Waterhouse
where he qualified as a Chartered
Accountant in 1989.

In December 2015, we announced
that Mark Morris, who has been a Non
Executive Director and member of the
Nominations, Remuneration and Audit
Committees since November 2006, will
retire from the Board and its Committees
and that David Stewart, will, subject to
his election at the 2016 AGM, take on the
role of Chairman of the Audit Committee
with effect from the AGM, in addition to
his existing appointments as a member
of the Remuneration and Nominations
Committees.

Corporate Governance
The Board remains committed to high
levels of corporate governance and during
2015, LSL has complied in all respects
with the UK Corporate Governance Code
(September 2014 edition) save that due to
my previous roles on the Board, I did not
satisfy the independence requirement prior
to my appointment as Chairman. Further
details relating to my appointment are
contained in the Corporate Governance
Report.

In respect of 2015, the Board has again
conducted an annual review of its
effectiveness and that of its Committees,
taking into account the balance of skills,
experience, independence and knowledge
of our businesses. Following this exercise,
we concluded that the Board and its
Committees are effective and are able
to discharge their respective duties and
responsibilities appropriately.

The Board has during the year also
reviewed its composition, which at the date
of this Report includes five independent
Non Executive Directors (due to reduce to
four independent Non Executive Directors
at the 2016 AGM) and three Executive

Directors and myself as Chairman. Further,
the Board continues to recognise the
benefits of diversity in the boardroom,
including gender and racial diversity. The
current Board composition includes two
female Directors, Helen Buck and Kumsal
Bayazit Besson, who are both independent
Non Executive Directors.

Whilst we remain of the view that the
setting of targets for the number of female
directors on the Board is not necessary and
that we will continue to appoint on merit, I
will continue to ensure that our searches for
new directors take into account diversity,
including gender and race.

LSL remains committed to promoting
diversity throughout the Group and in
2015 we continued to build on the diversity
reviews conducted during the previous
years. During 2015, we have commenced
a range of employee training initiatives,
including courses relating to gender bias
training and assertiveness training. Further
details of LSL’s studies and its conclusions
are set out in our Corporate Social
Responsibility Report.

As Chairman, with the responsibility
for leadership of the Board, I review its
effectiveness on all aspects of its role and
encourage feedback.

Our market position
LSL holds a market leading position in its
core Estate Agency business comprising
12 Estate Agency brands, including Your
Move, which is the largest UK single
brand estate agent with 282 branches
nationwide and has the UK’s most visited
estate agency website2. The businesses are
organised to deliver integrated Residential
Sales, Lettings and Financial Services from
a single operating structure.

We continue to invest in our brands and in
January 2016 we launched a national media
campaign to further invest in our Your Move
Estate Agency brand. This demonstrates
our commitment to supporting and
protecting our valuable brands and has
started well. We also invested in 2015 to
drive future growth by increasing branch
headcount to support our successful
Lettings and Financial Services businesses
and also in our growing Land and New
Homes businesses.

LSL AR 2015_Sect1-3.indd 8

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Number of Acquisitions

2013

2014

2015

n Estate Agency
n Lettings Books
n Surveying

We operate in a highly competitive
residential property market, which is
characterised by on-going new entrants.
We continue to develop and evolve our
offering to ensure our competitiveness in
this marketplace.

Ultimately the success of our business
model has always been underpinned by our
strong brands and excellence in delivery
by our knowledgeable local colleagues.
In 2016 we will continue to invest in
technology to widen the digital offering to

our customers whilst improving our internal
efficiency at the same time.

We continue to selectively acquire
businesses. To drive growth in the counter-
cyclical Lettings business, we acquired
30 lettings books in 2015 (2014: 10), with
internal disciplines in place to ensure
successful integration into the Group.
It is also pleasing to note the strong
performance of Thomas Morris, a multi
award winning seven branch estate agency
which we acquired during the first quarter
of 2015.

Post our 2015 year-end, we acquired a
65% interest in Group First Limited (GFL) in
February 2016 which provides mortgage
and protection brokerage services to the
purchasers of new homes. This is a value
enhancing opportunity which further
strengthens LSL’s relationships with its key
housebuilder clients.

In Financial Services, the Group arranged
total mortgage lending of £14.5bn (2014:
£11.6bn), representing 6.6% of the overall
market3. Measured by the number of
appointed representatives, LSL’s overall
network is the second largest in the UK4.
We continue to hold a leadership position in
Surveying, maintaining strong relationships
with many of the major lenders.

Ian Crabb, Group Chief Executive Officer and Simon Embley, Chairman

LSL AR 2015_Sect1-3.indd 9

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Our people
The number of Group employees at 31st
December 2015 was 5,181 (2014: 5,222) and
our success is ultimately dependent on the
customer service provided by our staff in all
parts of our business across the entire UK.
I would like to thank all of our staff for their
continued hard work and commitment which
they have demonstrated throughout 2015.

Current trading and outlook
We have started the year positively across
the Group.

In the Estate Agency Division, trading is in
line with expectations and there are good
activity levels with quality buyers and good
availability of mortgages. Whilst there
remains a shortage of stock, our sales
conversion remains strong and we are
maintaining our market share. The January
2016 launch of the Your Move national
media campaign has started well.

In our Surveying Division, trading is in line
with expectations and the technology
refresh is progressing well.

The forthcoming year is expected to see a
flat housing market in terms of transactions,
with continuing house price inflation outside
prime Central London.

Underpinned by a series of strategic
initiatives, the business is well placed to
deliver a solid performance in 2016. We
are positive regarding the outlook for 2016,
committed to driving profitable organic
growth across the business, and will
continue to evaluate selective acquisitions.

The Group has a robust balance sheet
with relatively low levels of gearing and
is very cash generative at an operational
level. The business is therefore well placed
to capitalise on the market conditions to
increase Shareholder value.

Simon Embley
Chairman
3rd March 2016

Notes:
1 Underlying Operating Profit is before exceptional

gains and exceptional costs, contingent
consideration, amortisation of intangible assets and
share-based payments.

2 Source: Hitwise December 2015.

3 Source: Council of Mortgage Lenders, Press Release

21st January 2016.

4 Source: Which Network? “Network Performance

Figures For The Whole of 2015”.

24/03/2016 15:29

Group Chief Executive’s Review

2015 Overview
I am pleased to report that after the
slower first half we continued to execute
our strategy and worked tirelessly
across the whole business to deliver a
strong second half performance and
what was ultimately a full year operating
profit result higher than the property
market peak of 2007.

We delivered on our financial
commitments made at the time of the
2015 interim results announced in
August 2015 and I would like to take this
opportunity to thank all my colleagues
across our business for delivering a
record breaking result.

Group revenue increased by 4.6% to
£300.6m (2014: £287.5m) with strong
second half growth of 8.7%. Group
Underlying Operating Profit increased by
2% to a record £42.9m (2014: £42.0m),
with double digit profit growth in the
second half in both the Estate Agency
and Surveying Divisions.

Reeds Rains branch, Heaton Moor

The Market in 2015
The UK residential property services market
in 2015 was a story of two halves.

As we reported at the 2015 interim results,
the first quarter of 2015 faced very strong
comparatives relative to the first quarter of
2014, which was a period characterised by
strong growth ahead of the implementation
of the Mortgage Market Review. The
second quarter of 2015 was impacted by
uncertainty around the General Election.
As a result, in the first half of 2015 house
purchase approvals were down by 3.3%
year-on-year1.

In the second half of 2015, there was a
modest recovery in the market following
the General Election and the comparatives
were against a slowing market in 2014.
Over the full year therefore house purchase
approvals increased by 4.7%.

Total Mortgage Approvals1 increased by
8.4% in 2015. This reflected a flat first
half with accelerating market sentiment
and volume growth in the second half in
both approvals for house purchases

which are typically three months

before completion and also in
remortgage approvals.

The prime Central London
market in 2015 was
impacted by a range of
factors including the
December 2014 Stamp

Duty changes. There was little market
recovery in prime Central London post the
General Election.

Average house prices2 in England and
Wales grew 6.6% to £292,000 annually
as stock shortages continued to have an
impact. Excluding London and the South
East, the average increase was 4.7%.

Residential property values in Greater
London increased by 5.6%. Prime Central
London (5 prime boroughs) fell by 8.7%
impacted by a range of factors including the
impact of the December 2014 Stamp Duty
changes. Outside the top five prime Central
London boroughs, London experienced an
11% increase in year-on-year house prices.

The proportion of mortgage lending in
the market placed through intermediaries
continued to increase during the year3.

Following market declines in the
repossessions market in the past few
years, market volumes again declined in
2015, reducing by 51% to 10,2004 total
repossessions as interest rates remained low.

Strategy
We remain committed to the strategy we
communicated in March 2015. The key
components of our strategy are:

Estate Agency
• Drive operating profit per branch to

between £80,000 and £100,000 in the
medium term

Ian Crabb
Group Chief Executive
Officer

• Expand the number of Marsh & Parsons

branches to a total of 36 by 2019,
particularly outside prime Central London

LSL AR 2015_Sect1-3.indd 10

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We delivered organic Lettings growth of
5% and in addition, in line with our strategy
substantially increased the rate of Lettings
book acquisitions, acquiring 30 Lettings
books in 2015 for a total consideration of
£9.6m5. This is a significant increase against
2014 when we acquired 10 Lettings books
for a total consideration of £1.8m.

We have maintained consistent investment
criteria for Lettings book acquisitions
throughout the year and we have not
changed our investment criteria as we
have increased the rate of investment. The
Lettings books have been successfully
integrated into our networks.

Financial Services
Total Financial Services income grew
strongly again with 16% year-on-year
growth in 2015. We have also delivered over
16% compound growth since 2011 as we
have rolled out our model across the Estate
Agency business and delivered growth from
our intermediary networks.

Post our 2015 year-end, we acquired a
65% interest in GFL in February 2016,
which provides mortgage and protection
brokerage services to the purchasers
of new homes through its subsidiaries,
Mortgages First Limited and Insurance
First Brokers Limited. This investment
supports LSL’s strategy to grow long-term
profitability in the provision of residential
property services in the UK, by identifying
value enhancing opportunities. Further, the
investment strengthens LSL’s relationships
with its key housebuilder clients.

Selective Estate Agency acquisitions
We remain committed to our strategy of
evaluating selective acquisition of Estate
Agency businesses.

• Grow recurring and counter-cyclical

income streams

• Selective acquisitions of both Estate

Agency businesses and Lettings books

Surveying
• Optimise contract performance and

revenue generation from B2B customers

• Achieve further improvement in efficiency

and capacity utilisation

• Use technology to drive further
improvements in profitability

LSL performance in 2015

Estate Agency Division
Total Estate Agency income of £236.5m
(2014: £225.3m) increased by 5%. This
increase resulted from the consistent
execution of our strategy in 2015.

We continue to adapt our approach to
maintain competitiveness. We launched
the Your Move national media campaign
in January 2016, moving the focus of
our advertising spend away from more
traditional local media. The campaign “it
pays to be with Your Move”, underlines the
customer value from using an estate agent
with Your Move’s reach and size.

In 2016, we will continue to focus on further
improving the digital communication with
our customers and to improve the customer
experience.

Residential Sales exchange income
Residential Sales exchange income grew
1% during the year. Whilst in the first half
income fell by 5% reflecting the market
conditions, the second half performance
was strong with 7% growth, reflecting
market stabilisation post the General
Election and the investments we made
in Estate Agency in the first half. Total
exchange units were broadly flat in 2015
with an increase in fees per unit largely on
the back of house price inflation.

Recurring Lettings income
We remain committed to our strategy
of increasing recurring Lettings income.
In 2015 we delivered growth in Lettings
income of 12%. Lettings Income increased
as a proportion of the Estate Agency
business and represented 28% of total
Estate Agency Division income in 2015
(2014: 26%).

In February 2015 we acquired Thomas
Morris, a multi award-winning Estate
Agency and Lettings business with seven
branches in Cambridgeshire, Bedfordshire
and Hertfordshire. We are pleased with the
performance of the business in 2015 and
also note that since acquisition, Thomas
Morris has increased its Financial Services
income, an example of how we can add
value to our acquisitions.

Marsh & Parsons
Given the overall challenging prime Central
London market, I am pleased to report
that Marsh & Parsons’ revenue grew 9% in
2015 to £35.3m (2014: £32.5m) and profit
increased by 6% to £6.9m (2014: £6.5m).

This growth was a result of strong Lettings
performance of 10%, growth in Land and
New Homes and resilience in Residential
Sales, with good results from the new
offices opened previously in the outer prime
Central London locations.

We continued with our branch expansion
strategy in 2015, opening two branches
during the year in the outer prime Central
London locations of Shoreditch and Queens
Park. We have continued with our strategy
in 2016 and since the year-end have opened
a branch in Tooting. We are pleased with
the performance of these new branches.

Our ambition remains to expand to 36
branches by 2019. Outer prime Central
London has not been as negatively
impacted as prime Central London and
Marsh & Parsons is looking to expand its
new office footprint in outer prime Central
London locations.

Estate Agency profit per branch
(Your Move, Reeds Rains and LSLi)
LSL successfully increased operating profit
per branch from £4,600 in 2011 to £45,600
in 2014. Our medium term strategy is to
drive operating profit per owned branch
to between £80,000 and £100,000 on the
expectation of longer term stability in the
UK residential property sector. Our Lettings
growth and Financial Services growth
across the network continues to underpin
this strategy.

We invested in 2015 to drive future growth
by increasing branch headcount to support
our successful Lettings and Financial
Services businesses and also in our
growing Land and New Homes business.

LSL AR 2015_Sect1-3.indd 11

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Group Chief Executive’s Review

We increased our headcount in these
growing businesses by over 100 colleagues
during the year. This investment will support
further growth and has resulted in a short-
term fall in branch profitability by 7% in 2015.

Estate Agency operating margin was 13.2%
(2014: 15%) reflecting these investments in
the business and also the market decline
in repossessions, impacting LSL’s Asset
Management business.

Surveying Division
During 2015 we continued to focus on
optimising the profitability of our Surveying
business.

The 2014 contract renewals and wins
as well as the project undertaken in Q4
2014 to optimise operational performance
and productivity have delivered full year
benefits in 2015. With further optimisation
of capacity management in 2015, profit
margins have therefore improved in the
year to 28.3% (2014: 21.4%). A technology
refresh is also in progress to deliver further
enhancements.

Income per job increased by 17% to £196
(2014: £167) and we performed 327,267
total jobs in 2015 (2014: 371,717) as we

optimised the mix of our business. We will
further support our graduate programme
which continues to be successful.

Our customers
Our continued focus on providing the
best service to our customers has been
recognised in 2015 with numerous industry
awards including:

• e.surv: What Mortgage? Awards 2015;

Best Survey Provider-Winner

• e.surv: Equity Release Awards 2015; Best

Valuer-Winner

• First Complete: Money Marketing Awards

2015; Best Mortgage Network-Winner

• Pink Home Loans: Financial Adviser
Service Awards 2015; 5 star award

• Linear Financial Solutions: Mortgage
Strategy Awards 2015; Best Broker for
General Insurance-Winner

• Marsh & Parsons: Estate Agency of the
Year Awards 2015, sponsored by The
Times and Sunday Times; Best Marketing-
Gold award, Best Medium Lettings
Agency, London-Gold Award. The
Negotiator Awards 2015; London Agency
of the Year-Gold Award

Balance Sheet
The Group has a strong balance sheet with
closing Net Bank Debt at 31st December
2015 of £39.9m (2014: £34.7m) reflecting
the acquisitions made during the year
and a gearing level at 0.83 times adjusted
EBITDA (2014: 0.74 times)6. The Group has
a committed revolving credit facility until
August 2017.

At 31st December 2015, we held a 2.7%
shareholding in Zoopla, valued at £27.1m.

In December 2014 we announced the need
to further increase our PI Costs provision
due to the historic market issues relating to
the 2004 to 2008 high risk lending period
and an additional reserve of £24.6m was
provided and included as an exceptional
item in 2014. In 2015 we continued to make
positive progress in addressing these
historic claims and the reduction in the rate
of notifications and claims from the high
risk lending period has been in line with our
expectations during the year, and those
assumed in setting the provision.

Outlook
We have started 2016 in line with our
expectations across the Group and are
well placed to deliver a solid performance
during the year. We continue to consistently
execute on our strategy and are well placed
to deliver increased Shareholder value.

I look forward to working with all my
colleagues to deliver another successful
year in 2016.

Ian Crabb
Group Chief Executive Officer
3rd March 2016

Notes:
1 Source: Bank of England for “House Purchase

Approvals” and “Total Mortgage Approvals” 2015.

2 Source: December 2015 LSL Property Services/

ACADATA HPI.

3 CML, new mortgages sold by intermediaries

4 Source: Council of Mortgage Lenders arrears and

repossessions data relating to properties taken into
possession by first-charge mortgage lenders for 2015.

5 Total consideration of up to £9.6m when taking into

account potential contingent consideration.

6 Adjusted EBITDA is Group Underlying Profit as

previously defined plus depreciation on property plant
and equipment.

LSL AR 2015_Sect1-3.indd 12

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Strategic Report

In this section
12 Strategy
13 Business Model
14 Markets
16 Business Review – Estate Agency Division
19 Business Review – Surveying Division
20 Financial Review
22 Principal Risks and Uncertainties
26 Corporate Social Responsibility
34 The Board

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Marsh & Parsons branch, Queen’s Park

LSL AR 2015_Sect1-3.indd 13

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Strategy

LSL is committed to delivering long-term shareholder value by
building market leading positions in the residential property
services market through organic growth, selective acquisitions
and the delivery of high quality service and appropriate outcomes
for customers

Full Year 2015 Average FTE

16%

4,677

84%

n Estate Agency
n Surveying

Estate Agency Branches

LSL remain committed to the strategy
to grow long-term profitability in
the provision of residential property
services in the UK, by identifying value
enhancing opportunities. The key
components of LSL’s strategy are:

Estate Agency and Related Services:
• Drive operating profit per branch to

between £80,000 and £100,000 in the
medium term

• Expand the number of Marsh & Parsons

branches to a total of 36 by 2019,
particularly outside prime Central London

• Grow recurring and counter-cyclical

income streams

• Selective acquisitions of both Estate

Agency businesses and Lettings books

Surveying and Valuation Service:
• Optimise contract performance and
revenue generation from business to
business customers

167

• Achieve further improvement in efficiency

and capacity utilisation

• Use technology to drive further
improvements in profitability

282

538

n Your Move
n Reeds Rains
n LSLi
n Marsh & Parsons

Estate Agency and Related Services
Residential Sales and Lettings
• Drive operating profit per branch.

• Provide a service proposition that recognises
customer needs and maximises income
across the value chain.

• Drive organic growth through increasing

Residential Sales transaction volumes and
investing further in Lettings services.

• Grow LSL’s share of the Central London
Residential Sales and Lettings markets
by supporting Marsh & Parsons’ growth
plans.

• Grow recurring and counter-cyclical

income streams.

• Selective acquisitions of residential sales

business and lettings books.

Asset Management
• Grow market share by providing innovative
solutions and strong service delivery to a
broader selection of clients.

Mortgage and Protection Services
• Build broker networks for the provision of
mortgage and protection products and
realise synergies and cost savings to make
the networks more efficient.

• Use the networks to strengthen

relationships with key lender clients and
to provide high quality service and good
financial outcomes for consumers.

Surveying and Valuation Services
• Optimise contract performance and
revenue generation from business to
business customers.

• Achieve further improvement in efficiency

and capacity utilisation.

• Drive market share through continued

development of excellent service delivery
and strong relationships with lenders in
order to remain their partner of choice.

• Increase capacity through the training of
new graduates as well as recruitment of
qualified surveyors.

• Continue to leverage LSL’s size of

operation and continue to build the
Group’s technology solutions to drive
operational efficiencies.

Acquisitions
• The Group will continue to consider

selective value enhancing acquisitions
across the residential property services
value chain in order to enhance market
positions and to grow scale.

• There will continue to be a particular focus

on Estate Agency acquisitions to build
market share in Residential Sales and
Lettings services.

LSL AR 2015_Sect1-3.indd 14

24/03/2016 15:29

Business Model

Customers

Market
Leading
Positions

LSL’s Assets

Strong
revenue
and profit
margins

Investment

Cashflow

n Estate Agency and Related Services
n Surveying and Valuation Services

Dividends

11 Estate Agency Brands

3 Asset Management Brands

Branch Network

Call Centres

Lender Relationships

Esurv Brand

LSL’s business model is how LSL puts its strategy into action. The execution of the strategy results in market
leading positions in the Group’s business segments which produces a virtuous circle of strong revenues,
profitability and cash flow which allows significant reinvestment in the business in order to further enhance
LSL’s market positions while also paying out a significant proportion of earnings as a dividend to Shareholders.

• LSL has market leading positions in residential property

surveying, mortgage valuations, asset management, residential
sales and lettings, which are highly fragmented markets.

• LSL serves retail customers in its Estate Agency businesses,

such as house sellers and buyers, landlords and tenants.

• LSL serves business customers in its Surveying and Asset

Management businesses, such as Banks and Building
societies, and benefits from long-term relationships and
contracts.

the residential property market due to its market positions in Lettings
and Asset Management.

• The model benefits from scale advantages which include superior
productivity in the Surveying business as a result of shortened drive
times and the ability to focus LSL’s agency branches on customer
service by building hubs and call centres to provide instructions to
the branches and to handle certain administrative tasks centrally.

• The business has low capital requirements and is highly cash

generative.

• The growth and reputation of LSL is dependent on providing

exceptional service and appropriate outcomes for customers.

• The business model has demonstrated resilience to changes in

• LSL allocates the strong cash generation between paying dividends
to Shareholders, reinvesting in the business to drive future organic
growth and in making selective, value adding acquisitions.

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Markets
LSL operates across the residential property services value chain

Market Transaction Data

Total Mortgage Approvals
for House Purchase1
‘000s

3
9
5

0
1
6

6
3
7

9
6
7

6
0
8

2011 2012 2013 2014 2015

In 2015 Total Mortgage Approvals increased by 8.4% to 1.388m (2014: 1.280m)1
including House Purchase Approvals of 806,000 (2014: 769,000)1. Remortgage
volumes of 450,000 were up by 16.7% compared to 2014 (2014: 385,000)1. Total
mortgage approvals were ahead at 1.388m (2014: 1.280m)1. These refl ect a fl at
fi rst half with accelerating market sentiment and volume growth in the second half
in both approvals for house purchases which are typically three months before
completion and also in remortgage approvals.

Remortgage Volumes1
‘000s

Full Year 2015 Revenue

7
8
3

0
4
3

3
9
3

5
8
3

0
5
4

2011 2012 2013 2014 2015

Total Mortgage Approvals1
‘000s

7
2
2
,
1

1
5
1
,
1

6
8
2
,
1

0
8
2
.
1

8
8
3
,
1

2011 2012 2013 2014 2015

Repossesion Volumes2
‘000s

21%

£300.6m

0
0
8
,
5
3

0
0
9
,
3
3

0
0
9
,
8
2

0
0
0
,
1
2

0
0
2
,
0
1

2011 2012 2013 2014 2015

79%

Notes:
1 Source: Bank of England for “House Purchase Approvals”,

“Remortgage approvals” and “Total Mortgage Approvals” 2014

n Estate Agency
n Surveying

2 Source: Council of Mortgage Lenders arrears and

repossessions data relating properties taken into possession
by ﬁ rst-charge mortgage lenders for 2014.

LSL AR 2015_Sect1-3.indd 16

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LSL’s Markets

LSL’s market can be categorised into two principal segments

Estate Agency and Related Services; and

Surveying and Valuation Services.

Estate Agency and Related Services

78.7%

of Group revenue in 2015 (2014: 78.4%)

The Estate Agency and Related Services
segment (the Estate Agency Division)
includes Residential Sales and Lettings
and the related markets of Asset
Management (including repossessions
asset management services for lenders
and property management for multi-
property landlords) and Financial Services
– predominantly mortgage and protection
brokerage with revenue earned directly by
the Estate Agency brands and through the
operation of intermediary networks.

Residential Sales and Lettings

52.7%

of Group revenue in 2015 (2014: 52.4%)

Estate Agency services for residential
property sales.

Comprehensive Lettings service for
residential landlords and tenants.

The UK residential property services
market in 2015 was a story of two halves.
The first quarter of 2015 faced very strong
comparatives relative to the first quarter of
2014, which was a period characterised by
strong growth ahead of the implementation
of the Mortgage Market Review. The
second quarter of 2015 was impacted by
uncertainty around the General Election.
As a result, in the first half of 2015 house
purchase approvals were down by 3.3%
year-on-year1.

LSL AR 2015_Sect1-3.indd 17

Mortgage and Protection

16.8%

of Group revenue in 2015 (2014: 15.2%)

Broking services for mortgages.

Broking services for protection products.

Other Income

6.6%

of Group revenue in 2015 (2014: 6.7%)
This includes franchising income,
conveyancing services, EPCs, Home
Reports, utilities and other products and
services to clients of the Estate Agency
branch network.

Surveying and Valuation Services

21.3%

of Group revenue in 2015 (2014: 21.6%)

The Surveying and Valuation Services
segment (the Surveying Division) includes
valuation services for lenders for residential
mortgage purposes, surveying services for
private house purchasers, and the provision
of Home Reports and professional services
in Scotland.

Total Mortgage Approvals1 increased by
8.4% in 2015. This reflected a flat first half
with accelerating market sentiment and
volume growth in the second half in both
approvals for house purchases which are
typically three months before completion
and also in remortgage approvals.

The prime Central London market in
2015 was impacted by a range of factors
including the December 2014 Stamp Duty
changes. There was little market recovery
in prime Central London post the General
Election.

Average house prices2 in England and
Wales grew 6.6% to £292,000 annually
as stock shortages continued to have an
impact. Excluding London and the South
East, the average increase was 4.7%.

Residential property values in Greater
London increased by 5.6%. Prime Central
London (5 prime boroughs) fell by 8.7%
impacted by a range of factors including
the impact of the December 2014 Stamp
Duty changes. Outside the top five prime
Central London boroughs, London
experienced an 11% increase in year-on-
year house prices.

The proportion of mortgage lending in
the market placed through intermediaries
continued to increase during the year.

Following market declines in the
repossessions market in the past few
years, market volumes again declined in
2015, reducing by 51% to 10,2003
total repossessions as interest rates
remained low.

Asset Management

2.6%

of Group revenue in 2015 (2014: 4.1%)

Repossessions asset management
services for lenders. Property management
services for multi-property landlords.

Notes:
1 Source: Bank of England for “House Purchase

Approvals” and “Total Mortgage Approvals” 2015

2 Source: December 2015 LSL Property Services/

Repossession volumes fell by 51%
to 10,200 in 2015 (2014: 21,000)2 in a
shrinking market.

ACADATA HPI

3 Source: Council of Mortgage Lenders arrears and

repossessions data relating to properties taken into
possession by first-charge mortgage lenders for 2015

24/03/2016 15:29

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Business Review
Estate Agency Division

+1%Exchange Income

2014: +15%

+12%Lettings Income

2014: +12%

+16%Financial Services Income

2014: +22%

+4%Fee per exchange unit

2014: +3%

13.2%Operating Margin

2014: 15%

Financial
Residential Sales exchange income
Lettings income
Asset Management income
Financial Services income
Other income1

Total income
Operating expenditure
Operating profi t2

KPIs
Exchange units
Exchange units3
Operating margin (%)
Fees per unit (£)
Fee per unit3 (£)

Mortgage approvals for house purchases (‘000s)4
Total Mortgage approvals (‘000s)4
UK Housing Transactions (‘000s)5
Repossessions6

2015
£m
92.9
92.9
65.4
65.4
7.8
7.8
50.5
50.5
19.9
19.9

236.5
236.5
(205.2)
(205.2)
31.3
31.3

2015

29,311
28,251
13.2
3,170
3,087

806
1,388
1,231
10,200

2014
£m

92.1
92.1
92.1
58.5
58.5
58.5
11.7
11.7
11.7
43.7
43.7
43.7
19.3
19.3
19.3

225.3
225.3
225.3
(191.4)
(191.4)
(191.4)
33.9
33.9
33.9

2014

29,704
29,111
15
3,101
2,968

769
1,280
1,219
21,000

%
change

1
1
1
12
12
12
(34)
(34)
(34)
16
16
16
3
3
3

5
5
5
7
7
7
(8)
(8)
(8)

%
change

(1)
(3)

2
4

5
8
1
(51)

Notes:
1 ‘Other income’ includes franchising income, conveyancing services, EPCs, Home Reports, utilities and other products and

services to clients of the branch network.

2 Operating profi t is before exceptional items, contingent consideration, amortisation of intangible assets and share-based payments.
3 Exchange units and fee per exchange are on a like-for-like basis (excluding branch openings and closures).
4 Source: Bank of England, “Mortgage approvals for house purchases” and “Total mortgage approvals” 2015
5 Source: HMRC Stats, “Monthly property transactions completed in the UK with value of £40,000 or above”.
6 Source: Council of Mortgage Lenders arrears and repossessions data relating to properties taken into possession by fi rst-charge

mortgage lenders for 2015.

7 Source: Council of Mortgage Lenders, Press Release 21st January 2016.

Estate Agency Performance

Estate Agency Division Performance
Year-on-year income growth in the Estate
Agency Division was 5%. All key income
streams other than the counter-cyclical
Asset Management business showed
positive growth.

Residential Sales exchange income grew
1% during the year. Whilst in the fi rst half
income fell by 5% refl ecting the market,
the second half performance was stronger
with 7% growth, refl ecting the market
stabilisation post General Election and the
investments in the Estate Agency business
made by LSL in the fi rst half. Exchange units
were broadly fl at in 2015, with an increase in
fees per unit, largely on the back of house
price infl ation.

Lettings income
Lettings income grew consistently
throughout the year, as we put more
dedicated Lettings staff into Estate Agency

branches. Organic Lettings growth for the
year was 5%. Combined with the Lettings
acquisitions, overall growth was strong, at
12% for the full year. This followed growth
of 12% in 2014 and refl ects our continued
focus on this recurring revenue stream.

Financial Services income
Total Financial Services Income delivered
through the Estate Agency Division’s
branches, the intermediary networks of First
Complete and Pink Home Loans and Linear
Financial Solutions grew strongly again with
16% year-on-year growth in 2015. We have
also achieved over 16% compound growth
since 2011 as we have rolled out the model
across the Estate Agency business.

In February 2016, the Group acquired
a 65% interest in GFL which provides
mortgage and protection brokerage
services to the purchasers of new homes
through its subsidiaries, Mortgages First
Limited and Insurance First Brokers Limited.

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2016 Strategy
During 2015, the Group has delivered on
its strategy, continuing to make selective
acquisitions and has added to the Estate
Agency Division in the South East through
the acquisitions of Thomas Morris and 30
lettings books.

LSL will continue to target the selective
acquisition of Estate Agency and Lettings
books and will focus on driving organic
growth in Residential Sales, Lettings and
Financial Services as well as rolling out new
branches in Marsh & Parsons.

Regulation – Financial Services
First Complete and Pink Home Loans
(the trading name of Advance Mortgage
Funding) are both directly authorised by
the FCA in relation to the sale of mortgage,
pure protection and general insurance
products. Your Move, Reeds Rains,
First2Protect and Embrace Mortgage
Services along with the LSLi subsidiaries
are all appointed representatives of First
Complete, while Linear Financial Solutions
is an appointed representative of Advance
Mortgage Funding for mortgage and
insurance business and also an appointed

representative of Openwork for investment
business.

Regulation –
Residential Sales and Lettings
The Estate Agency Division’s branches
adhere to the Codes of Practice issued
by industry professional and regulatory
bodies, The Property Ombudsman (TPO)
and/or the Association of Residential
Lettings Agents (ARLA). Membership of
these bodies is in addition to observing
compliance with relevant legislation, such
as the Consumer Protection Regulations,
the Consumer Rights Act, guidance material
published by relevant regulators, including
the Competition and Markets Authority
(CMA) (and its predecessor the Offi ce of
Fair Trading (OFT)), the National Trading
Standards Agency/Trading Standards
Institute (TSI), HMRC and codes published
by other relevant bodies, including the
Advertising Standards Authority (ASA). LSL
from time to time also enters into direct
dialogue with the regulators and consumer
groups, such as Which?. During 2015, LSL
on behalf of all its Estate Agency businesses
entered into a primary authority agreement
with York Trading Standards Offi ce.

Branch numbers
Breakdown of LSL’s Estate Agency branches as at 31st December 2015.

Owned Franchised

Totals

Your Move

Reeds Rains

LSLi

Marsh & Parsons

215

124

282

167

Totals
The above branch numbers include two virtual branches

424

114

538

The investment supports LSL’s strategy to
grow long-term profi tability in the provision
of residential property services in the UK, by
identifying value enhancing opportunities.
Further, the investment strengthens LSL’s
relationships with its key housebuilder
clients.

In total the Group arranged mortgage
lending completions of £14.5bn during
2015 (2014: £11.6bn), with an estimated
market share of 6.6% giving the Group an
important position as a mortgage distributor
for lender clients7.

Other income
Other income grew by 3% year-on-year
mainly due to improved conveyancing and
Land and New Homes income.

Marsh & Parsons
Marsh & Parsons delivered a strong
performance in a challenging prime Central
London market which was impacted by a
number of factors including the 2014 Stamp
Duty changes. The increase in the number
of Marsh & Parsons branches outside
prime Central London, strong exposure to
the mid-market, strong recurring Lettings
income which was up 10% and a growing
Land and New Homes development
business, all contributed to the delivery of
9% income growth and a 6% improvement
in profi t.

Asset Management
Asset Management delivered a robust
performance in a shrinking market with
revenues lower by 34% compared to
the 51% market fall in repossessions to
10,2006 in 2015. With a strong market
share, the Asset Management business is
well positioned to capitalise on any future
increase in repossession volumes. Asset
Management is developing its corporate
property management service off ering to
further enhance counter-cyclical revenues
in the Group.

The Estate Agency
Division operating margin
The Estate Agency Division operating
margin was 13.2% in 2015 (2014:
15%) which resulted from lower Asset
Management profi ts, new Estate Agency
branches opened, and headcount
investment in Financial Services, Lettings
and Land and New Homes.

LSL AR 2015_Sect1-3.indd 19

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Poster from Marsh & Parsons’ award

winning marketing campaign

LSL AR 2015_Sect1-3.indd 20

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Business Review
Surveying Division

+3%Revenue

2014: +3%

+17%Income per job

2014: +9%

28.3%Profi t Margin

2014: 21.4%

347Number of Qualifi ed Surveyors

2014: 361

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Financial
Revenue
Operating expenditure
Operating profi t1

KPIs
Profi t margin (%)
Jobs Performed (‘000s)
Revenue from private surveys (£m)
Income per job (£)
PI Costs provision (Balance Sheet) at 31st December (£)
Number of qualifi ed surveyors at 31st December (FTE)2

2015
£m
64.1
(46.0)
18.1

2015

28.3%
28.3%
327
327
2.4
2.4
196
196
29.7
29.7
347
347

2014
£m

62.2
(48.9)
13.3

2014

21.4%
21.4%
372
372
372
4.0
4.0
4.0
167
167
167
38.7
38.7
361
361
361

Total Mortgage approvals (‘000s)3
Notes:
1 Operating profi t is before exceptional items, contingent consideration, amortisation of intangible assets and

1,388
1,388
1,388

1,280
1,280
1,280

%
change

3
(6)
36

%
change

(12)
(12)
(12)
(40)
(40)
(40)
17
17
17

(4)
(4)
(4)

8
8
8

share-based payments.
2 Full Time Equivalent (FTE)
3 Source: Bank of England, “Mortgage approvals for house purchases” and “Total mortgage approvals” 2015.

Surveying Division Performance
Total mortgage approvals2 increased in the
year by 8.4% to 1.388m (2014: 1.280m) with
a fl at fi rst half followed by an increase in the
second half. This refl ected the strong prior
year growth in H1 pre the Mortgage Market
Review launch and consumer confi dence
post the General Election in 2015.

Surveying turnover was £64.1m (2014:
£62.2m), an increase of 3% on last year
and the total number of jobs performed
was 327,267 (2014: 371,717) refl ecting
management of the mix of jobs. Double
digit profi t growth was strongly infl uenced
by the full year impact of the 2014 mid-
year contract renewals and wins and the
Q4 2014 operational performance and
productivity project.

We also continued to focus on optimising
capacity management in 2015, driving an
increase in income per job to £196, an
improvement of 17% year-on-year. As a
result we delivered an increase in Operating
profi t to £18.1m (2014: £13.3m) with an
enhancement of profi t margin to 28.3%
(2014: 21.4%).

The total number of qualifi ed surveyors at
31st December 2015 was 347, a reduction
of 4% year-on-year. LSL’s on-going
graduate programme continues to be
successful and assists in alleviating the
impact of skill constraints in the market.
In 2016 LSL will continue to focus on
improving our effi ciency through optimising
capacity management supported by use of
better technology.

At 31st December 2015 the total provision
for PI Costs was £29.7m. In 2015 LSL
continued to make positive progress in
addressing these historic claims and the
reduction in the rate of notifi cations and
claims from the high risk lending period has
been in line with our expectations during
the year, and those assumed in setting the
provision.

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Financial Review
The key drivers of the financial performance of LSL in 2015 are summarised below:

£300.6m

Group Revenue
Up 4.6% – 2014: £287.5m

£42.9m

Group Underlying Operating Profit
Up 2% – 2014: £42m

£36.5m

Cash generated from operations
Up 42% – 2014: £25.7m

Income statement

Revenue
Revenue increased by 4.6% to £300.6m in
the year ended 31st December 2015 (2014:
£287.5m).

Operating Expenses
Operating expenses increased by 4.6% to
£260.7m (2014: £249.3m). The increase
was in the Estate Agency Division and
was mainly as a result of acquisitions (e.g.
Thomas Morris), new Marsh & Parsons
branches and an investment in headcount
to support growth in Lettings, Financial
Services and Land and New Homes.

The average number of full time equivalent
employees during the year was 4,677 (2014:
4,760).

Underlying Operating Profit
Group Underlying Operating Profit (before
exceptional gains and exceptional costs,
contingent consideration, amortisation of
intangible assets and share-based payments)
increased by 2% to £42.9m (2014: £42.0m)
with the Underlying Operating Margin of
14.3% (2014: 14.6%). On a statutory basis,
the Group operating profit increased by
22.2% to £41.4m (2014: £33.9m).

Exceptional Items
Total net exceptional costs in 2015 were
£0.3m (2014: £6.2m net exceptional costs).
Exceptional costs in 2015 comprised the
closure of an administration centre and the
subsequent restructuring costs incurred
which included redundancy costs.

In 2014, exceptional costs comprised of PI
Costs of £24.6m, acquisition related costs
of £0.3m and restructuring, redundancy
and other associated branch closure costs
including onerous lease provisions of £1.1m.
These exceptional costs were partly offset
by the gain on the sale of part of LSL’s
investment in Zoopla on its IPO totalling
£19.8m.

Provision for PI claims
and notifications
In December 2014, LSL announced the
need to further increase the PI Costs
provision due to the historic market issues
relating to the 2004 to 2008 high risk
lending period and an additional reserve of
£24.6m was provided and included as an
exceptional item in 2014.

At 31st December 2015, the total provision
for PI Costs was £29.7m. In 2015 the
Group continued to make positive progress
in addressing these historic claims and the
reduction in the rate of notifications and
claims from the high risk lending period
has been in line with LSL’s expectations
during the year, and those assumed in
setting the provision.

Contingent consideration
Certain contingent consideration
arrangements have been accounted for
as remuneration as the arrangements
potentially involve the vendors forfeiting
amounts otherwise due if continued
services are not provided. These amounts
are shown separately on the face of
the Income Statement. Contingent
consideration amounted to a credit of
£1.5m in 2015 (2014: £0.4m credit).

Net Financial Costs
Net financial costs (excluding exceptional
finance credit) amounted to £2.8m
(2014: £2.2m). The finance costs related
principally to interest and fees on the
revolving credit facility. Additional costs
relate to the unwinding of discounts on
provisions and contingent consideration
and interest on loan notes.

Taxation
The UK standard corporation tax rate has
reduced from 21% as at 1st January 2015
to 20% from 1st April 2015 with further
reductions to 19% from 1st April 2017 and
18`% from 1st April 2020. The effective
rate of tax for the year was 21.1% (2014:
21.2%). The effective tax rate for 2015 was
decreased as a result of reducing the rate
at which deferred tax is provided resulting
from the reduction in the headline rate
of corporation tax. Deferred tax charged
directly to other comprehensive income
is £0.5m (2014: credit of £2.7m); this is
comprised of a credit of £0.05m and a
charge of £1.0m and relates to the disposal
and revaluation of financial assets (see Note
16 to the Financial Statements). There is
also a credit arising as a result of the impact
of rate change on deferred tax of £0.5m.
Income tax credited directly to the share
based payment reserve is £nil (2014: £nil).

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In July 2015, the UK Government
announced proposals to reduce the main
rate of corporation tax to 19% from 1st April
2017, and further reduced to 18%, effective
from 1st April 2020. As of 31st December
2015 reductions to the main rate of
corporation tax to 18% had been enacted.
Accordingly, this is the rate at which
deferred tax has been provided.

Adjusted Basic Earnings per Share
The Basic Earnings per Share was 29.7
pence (2014: 24.5 pence). The Adjusted
Basic Earnings per Share (as calculated in
Note 10 to the Financial Statements) is 31.5
pence (2014: 30.5 pence). The Directors
consider that the adjustments made to
exclude the after tax effect of exceptional
items, contingent acquisition consideration
treated as remuneration, and amortisation
of acquisition intangibles provides a better
and more consistent indicator of the
Group’s underlying performance.

Balance Sheet

Capital Expenditure
Total capital expenditure in the year
amounted to £4.8m (2014: £8.6m) and an
additional £3.2m (2014: £0.7m) has been
spent internally on developing new software
which has been treated as an intangible
asset.

Bank Facilities
LSL refinanced its bank facility in 2013 with
a £100m revolving credit facility in place
until August 2017 (2014: £100m).

Further details on the Group’s financial
commitments as well as the Group’s
treasury and risk management policies
are set out in Note 29 to the Financial
Statements. During the period under
review, the Group complied with all of the
financial covenants contained within the
facility.

Net Bank Debt and Cashflow
As at 31st December 2015 Net Bank
Debt was £39.9m (2014: £34.7m) and
Shareholders’ funds amounted to £107.4m
(2014: £83.1m) giving balance sheet gearing
of 37.1% (2014: 41.8%). The increase in
Net Bank Debt arose mainly as a result of
the increased number of acquisitions. The
2015 gearing level was 0.83 times adjusted
EBITDA1 (2014: 0.74 times). The Group has

a committed revolving credit facility until
August 2017. In 2015 the Group generated
cash from operations of £36.5m (2014:
£25.7m).

Zoopla
Subsequent to the 2015 interim date,
Zoopla completed an anniversary offer
allowing LSL to subscribe for a further
619,318 shares at the £2.20 IPO price with
a 20% discount. These have been taken up
by LSL. At the same time, a further 169,350
shares were sold through the anniversary
member offer at £1.76 with proceeds of
£0.3m net of associated costs included
in other operating income. Zoopla’s share
price at 31st December 2015 was £2.40 per
share. The fair value of the Group’s 2.7%
stake in Zoopla is calculated to be £27.1m
at 31st December 2015.

Net Assets
The Group’s net assets as at 31st December
2015 were £107.4m (2014: £83.1m).

Treasury and Risk Management
LSL has an active debt management
policy. LSL does not hold or issue
derivatives or other financial instruments
for trading purposes.

Post Balance Sheet Events
Subsequent to the year end the following
transactions have been completed:

a. LSL acquired three small lettings
book acquisitions for a total initial
consideration of £1.82m.

b. On 17th February 2016, Your Move

acquired a 65% interest in GFL for an
initial consideration of £9.1m, with 50%
paid at completion and the remaining
50% to be in March 2017.

The Group is in the process of allocating
the purchase price in accordance with IFRS
3. As a result the initial accounting for the
acquisitions above are currently incomplete,
so a fair value table of the identifiable assets
and liabilities has not been presented.

International Financial
Reporting Standards (IFRS)
The Financial Statements have been
prepared under IFRS as adopted by the
European Union.

Notes:
1 Adjusted EBITDA is Group Underlying Profit as

previously defined plus depreciation on property
plant and equipment.

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Principal Risks and Uncertainties

LSL has an overall framework for management of risks and internal controls to mitigate the risks. Through this framework, the
Board, which has overall accountability and responsibility for the management of risk, on a regular basis identifies, evaluates and
manages the principal risks and uncertainties faced by LSL, areas which could adversely affect its business, operating results
and financial condition.

Development of risk appetite
During 2015, in line with the FRC’s
Guidance on ‘Risk Management, Internal
Control and Related Financial and Business
Report’ which was published in 2014 and
which integrated and replaced the FRCs
previous guidance on risk management
and internal controls, the Board has
developed LSL’s approach to risk appetite
to ensure continued compliance with the
Code and FRC guidance. The Board has
through this process expressed the types
and level of risk which it is willing to take
or accept to achieve LSL’s plans and to
support consistent, risk-informed decision
making across the Group.

The development of the risk appetite began
with the Directors defining the draft risk
appetite statements for LSL’s principal risks,
and for key decisions made by the Board.
These statements provide parameters
within which the Board typically expect
LSL’s businesses to operate, facilitating
structured consideration of the risk and
reward trade-off for the decisions made
around how the Group conducts business.

The discussions covered a wide range
of risks, which reflect the nature of LSL’s
businesses and acknowledges that
there is not a one size fits all approach
to establishing risk parameters. During
2016, LSL will continue to develop the
framework in line with emerging best
practice, including evolution of existing
objective measures defining risk appetite
elements and analysis of how individual risk
conditions interact with each other.

The Board will seek to establish clear
parameters, whilst at the same time
fostering an environment within which
innovation and entrepreneurial activities
thrive. Where there is any proposal to
shift the Group significantly closer to or
outside agreed risk parameters, this will be
discussed and subject to Board approval
before commencing any activities to ensure
that appropriate mitigation controls are put
into place.

Once finalised, LSL’s risk appetite
statements will be incorporated into our

existing Group risk processes, and used
to monitor business activities and decision
making. Whilst good progress has been
made in 2015, the continued development
of the risk appetite framework remains a
key priority for the Board in 2016.

Developing the financial
viability statement
In developing the financial viability
statement, it was determined that a three
year period should be used, consistent with
the period of the Group’s strategic plan.

The Management Team reviewed the
principal risks, and considered which of
these risks might threaten the Group’s
viability.

A number of severe but plausible scenarios
were considered and modelled in detail
with input from a cross functional group of
senior managers, including representatives
from Finance.

The main focus of the scenario modelling
related to the impact of a significant
downturn in the property market as
occurred in the 2008 to 2009 period.
Modelling included the plans LSL put in
place during that recessionary period.
The skills and many of the personnel with
experience to manage through such a
scenario remain within the business which
has helped this process and gives a degree
of confidence to manage through a similar
scenario.

Detailed assumptions for each scenario
were built up and modelled by month
across the three year period. The models
measured the downside impact on revenue
and the management action which would
be taken to retain cash reserves and
maintain the operating capacity of the
business as a result of the stress scenarios.

Assumptions were also made for the
potential growth of LSL counter-cyclical
businesses, notably asset management,
and the extent to which some activities,
such as Lettings, tend to be less affected
through the cycle. The modelling and
assumptions took account of the
broad range of services across a broad

geography which allows some protection
from the impact of stress scenarios.

The current £100m revolving credit facility
is committed until August 2017. The
Group expects to agree a new extended
facility during 2016. External professional
advice has also been sought and has
confirmed the Directors’ confidence that
the refinancing will proceed as planned.
This assumption has been included in LSL’s
financial plans and stress testing.

As set out in the Audit Committee’s Report,
the Directors reviewed and discussed the
process undertaken by the Management
Team in proposing the viability statement.

The Directors’ financial viability statement is
contained in the Directors’ Report.

Risk management and internal
controls framework
LSL’s risk management and internal
controls framework for 2015 included:

a. ownership of the risk management

and internal controls framework by the
Board, including a Risk Framework
policy, supported by the Group
Chief Financial Officer, the Company
Secretary, Head of Risk and Internal
Audit and members of the Group
Finance team;

b. a network of risk owners in each
of LSL’s businesses with specific
responsibilities relating to risk
management and internal controls;

c. the documentation and monitoring
of risks are recorded and managed
through standardised risk registers
which undergo regular reviews and
scrutiny by local boards and the Head
of Risk and Internal Audit;

d. the Board regularly identifies, reviews

and evaluates the principal risks which
may impact the Group as part of the
planning and reporting cycle to ensure
that such risks are identified, monitored
and mitigated;

e. the development and application of
LSL’s risk appetite statement and
associated framework (for further details

LSL AR 2015_Sect1-3.indd 24

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on steps taken during the year, please
see the Audit Committee Report); and

changes to specific areas of risk are also
referred to within the tabular summary.

As noted above, this robust analysis of
principal risks has also contributed to the
Group’s viability statement which is set
within the Report of the Directors. The
Directors have also considered the impact
if risks coincide, namely a combination
of non-principal risks could potentially
represent a single compound principal risk.

The Group also faces other risks which,
although important and subject to regular
review, have been assessed as less
significant and are not listed overleaf. This
may include some risks which are not
currently known to the Group or that LSL
currently deems as immaterial, or were
included in previous Annual Report and
Accounts and through changes in external

f. reporting by the Chairman of the Audit

Committee to the Board on any matters
which have arisen from the Audit
Committee’s review of the way in which
the risk management and internal control
framework has been applied together
with any breakdowns in, or exceptions
to, these procedures.

As stated above, LSL has in place a Group-
wide risk appetite statement and framework
which will continue to be developed in 2016.
This framework includes the following:

a. assessment of principal risks and their

management or mitigation;

b. assessment of prospects and viability;

c. review of effectiveness of the risk
management and internal control
systems; and

d. going concern confirmation (for LSL’s

going concern disclosure please refer to
the Report of the Directors).

During the year, the Directors carried
out a robust assessment of the principal
risks facing the Group, including those
that threaten the business model, future
performance, solvency or liquidity. The
Directors believe that the assessment
which has been completed is appropriate to
the complexity, size and circumstances of
the Group, which is a matter of judgement
of the Board and has been supported by
the Management Team.

These risks may change over time due to
changes in business models, performance,
strategy, operational processes and the
stage of development of the Group in its
business cycle as well as with changes
in the external environment. This robust
assessment is focused on the principal
risks and it differs from the review of
the effectiveness of the systems of risk
management and internal controls.

In accordance with the requirements of
the Code this Report includes descriptions
of principal risks together with a high
level explanation of how they are being
managed or mitigated. This includes clear
descriptions of the risks together with an
evaluation of the likelihood of a typical
risk event crystallising and its possible
impact. Mitigating steps and any significant

LSL AR 2015_Sect1-3.indd 25

Lauristons branch, Kennington

24/03/2016 15:30

factors and careful management, are no
longer deemed to be as material to the
Group as a whole.

However, these risks may individually or
cumulatively also have a material adverse
effect together with other risk factors
which are beyond the direct control of LSL,
and may have a material adverse impact
on LSL’s business, results of operations
and/or financial condition. The risk
management framework and procedures
in place can only provide reasonable but
not absolute assurance that the principal
risks and uncertainties are managed to an
acceptable level.

Further information relating to how LSL
managed these risks and uncertainties
during 2015 is set out in the Audit
Committee Report (Internal Controls).

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Principal Risks and Uncertainties

Risk

Strategic:

UK housing market

Description

Mitigation

Group performance is intrinsically
linked to the overall performance of
the UK housing market (including
subsets – e.g. prime Central London).

• Daily, weekly and monthly monitoring of trading and market

performance data.

• Market share, product mix and segmentation initiatives.
• Development of counter-cyclical and less cyclical income

streams.

• Investment in acquisition teams.
• Responsive cost control measures to market deterioration.
• Balanced UK-wide geographical spread.
• Monitoring of wider macro-economic developments.

New UK housing
market entrants

Traditional business models for
property services are exposed
increasingly to new business models
and technological advancements
(e.g. web-based agents and
Automated Valuation Models).

• Competitor/industry benchmarking.
• Monitoring of potential acquisitions and joint venture

opportunities.

• Service delivery enhancements and experimentation.
• Marketing initiatives.
• Staff incentive schemes.

Acquisitions and
growth initiatives

Realising appropriate targets
for acquisition and major project
initiatives, including delivery of
appraisals, due diligence and
integration/implementation
requirements.

• Defined pre and post-acquisition reporting to the Group Board.
• Structured authority levels.
• Dedicated acquisition and post-acquisition teams.
• External consultative support as necessary.
• Established integration planning methodology.
• Post-acquisition and post-implementation reviews.
• Risk and Internal Audit engagements.

Sales/distribution:

Professional services

Exposure to major PI claims arising
from any lapses in surveying and
valuation practices.

Client Contracts

The performance of the Surveying
and Asset Management businesses
is dependent on securing and
retaining key lender contracts.

• Board-level authorities for PI claims settlement payments

and governance of underlying claims handling and
accounting processes.

• Dedicated surveying risk team.
• Timely data capture of all claims and associated trends.
• Robust framework and monitoring routines to maintain

valuation accuracy.

• Utilisation of technology to monitor valuation trends and

trigger alerts.

• Risk and Internal Audit reviews.
• Experienced claims handling personnel supported by

legal experts.

• Culture promoting effective sales conduct and open lines of

communication with clients.

• Customer outcome focused forums and initiatives.
• Designated senior members of staff with responsibility for

relationship management.

• Sufficient investment in resources to ensure LSL has the

capacity to meet service level demands.

• Targeted marketing/hospitality events.
• Monitoring of compliance with lender contractual

requirements.

• Robust control framework supporting the accuracy of

surveys/valuations.

• Dedicated in-house Group Legal Services team
• Risk & Internal Audit reviews.

LSL AR 2015_Sect1-3.indd 26

24/03/2016 15:30

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Risk

Operations:

Information
technology
infrastructure

Description

Mitigation

The Group has varied operations
which require a robust IT
infrastructure. The IT environment
needs to remain adaptable to
support growth initiatives, harness
technological advancements and
counter business continuity threats,
including malicious and cyber related
attacks.

• Board level IT governance, policies and initiatives.
• Dedicated in-house IT teams.
• Maintenance of infrastructure to maintain effective service

delivery.

• On-going IT investment programme.
• Implementable business continuity and disaster recovery

solutions.

• Monitoring of compliance with relevant contractual and

regulatory requirements.

• Inter-Group IT forums.

• External consultative support as necessary.

• Risk and Internal Audit reviews.

Information security

Group operations involve the
processing of high volumes of
personal data, with potential for
unintended data loss and exposure
to increasing levels of external
cyber-crime.

• LSL Information Security and Governance Committee.
• Dedicated LSL Information Security personnel.
• Group data protection policy and training.
• Tracking of data assets/data sharing, in line with

authority levels.

• Penetration testing programme.
• Second and third-line risk-based reviews.

Regulatory and legal

Relationships with regulators and
compliance with legal and regulatory
requirements, including oversight
of standards adopted by business
partners (e.g. franchises and joint
ventures).

People:

Employees

Securing and retaining key strategic
population and ensuring the effective
management of personnel standards
across varied Group businesses.

• Top-down culture focused on fairness, transparency and

successful customer outcomes.

• Open dialogue with regulators and monitoring of emerging

developments.

• Group risk framework policy incorporating a ‘three-line of

defence’ model to track compliance with regulations.

• Group ethics policies – e.g. whistleblowing structures and

anti-fraud policy.

• Group-level forums with regulatory focus.
• Dedicated compliance teams in higher risk/regulated

functions.

• Evolution of IT systems to strengthen oversight routines.
• Responsive complaints tracking of any emerging themes.
• In-house Group Legal Services team, with external

consultative support when needed.
• Group Risk and Internal Audit reviews.

• Oversight by LSL Remuneration and Nominations Committees.
• Group remuneration policies and incentive schemes to retain

key strategic population.

• Regular benchmarking and appraisals of senior management.
• Succession planning reviews.
• Dedicated in-house recruitment team.
• Staff surveys and Group HR initiatives to improve staff morale,
relieve areas of pressure and improve operational efficiencies.

• Investment in Group-wide HR IT systems.
• Monitoring of statutory requirements and developments.
• Culture of transparency, clear Group policies and

whistleblowing procedures should staff need to confidentially
raise concerns.

LSL AR 2015_Sect1-3.indd 27

24/03/2016 15:30

Corporate Social Responsibility

The team at the start of their charity ride from Lands End to John O’Groats

The Board has overall responsibility for establishing the Group’s Corporate Social Responsibility (CSR) statement and associated
policies with the Group Chief Financial Officer, taking individual responsibility for the creation, operation and implementation of
the Group’s CSR statement and strategy.

LSL believes that it is necessary to support responsibly-grounded business decision making, to consider the broad impact of corporate
actions on people, communities, and the environment. The growing awareness of and attention to social responsibility issues has many
benefits for corporations such as LSL and by way of this statement, LSL recognises that its employees are central to the Group meeting
its CSR, Environmental and Community Investment objectives. Guidelines, progress and achievements are communicated to employees
at regular intervals through bulletins, intranet sites and notice boards as appropriate (including the Group HR online service systems).

LSL’s focus is on actions that the Group can take over and above its legal requirements to address its competitive interests of the wider
society and underpins all other internal policies that the Group adheres to. LSL actively ensures that its businesses are compliant and
proactive in respect of legislation, in accordance with its employees, customers, suppliers and other stakeholders’ interests.

LSL believes that the objective of providing goods and services needed or desired by members of society while returning a profit to
Shareholders can be – and should be – fully compatible with addressing social responsibility concerns and vice versa. For example, LSL’s
environmental policy and performance demonstrates its commitment to the reduction of energy consumption and the positive impact that
this has had both on the environment and in terms of cost reduction to the Groups businesses.

The Board recognises that it is important that Group companies operate in a responsible way. LSL’s stakeholders expect LSL to take
issues into account and LSL in turn has a duty to demonstrate to them how it is living up to this expectation. This can often mean
balancing competing demands, which are placed on LSL as a public company and as a property services group.

This section of the Report details how LSL seeks to manage these interests.

LSL’s objectives extend to its relationships with customers and suppliers, and all Group companies will seek to be honest and fair in these
relationships. Further, ethics, hospitality and conflicts policies are in place to govern these relationships. During 2016, LSL is putting in
place arrangements to ensure compliance with both the Modern Slavery Act 2015 and the payment practices reforms proposed by the
Government during 2015 for implementation in 2017.

As part of LSL’s regular risk assessment procedures, the Board takes account of the significance of environmental, social and governance
(ESG) matters to the business of the Group and in its decision making. The Board has identified and assessed the significant ESG risks
to LSL’s short and long-term value, as well as the opportunities to enhance value that may arise from an appropriate response. The
Board receives information to make this assessment and that account is taken of ESG matters in the training of Directors. The Board has
also ensured that LSL has in place effective systems for managing and mitigating significant risks, which, where relevant, incorporate
performance management systems and appropriate remuneration incentives.

LSL AR 2015_Sect1-3.indd 28

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LSL’s People
LSL recognises that its people are a valuable asset and is committed to providing a working environment in which its employees can
develop to achieve their full potential with opportunities for both professional and personal development.

By creating such an environment, LSL believes that this will enable the retention and recruitment of the right people to work at every level
throughout the Group. An essential part of this strategy is to encourage and promote effective communication with all employees which is
achieved through employee opinion surveys. This also ensures that LSL, in its decision making, takes into account its employees views.
For further details of the employee survey arrangements, see Communication (Employees) below.

LSL’s Approach
LSL’s aim is to be recognised by existing and potential future employees as a responsible employer that values its people and the
contribution they make both in the business and in the wider community. LSL recognises that its market leading positions in Estate
Agency and Surveying are achieved by the quality and service provided by the Group’s employees. LSL’s employees are its key
differentiator and it is this principle that guides the Board’s decision making on how LSL approaches the management of its people.

Communication
Employees:
LSL ensures that employees are kept informed of Group affairs via information distributed by post, e-mail, handbooks or the various intranet
sites. LSL values employee feedback and all Group employees are encouraged to discuss strategic, operational and business issues within
their teams and with their management.

In addition, the Board receives employee feedback via employee opinion surveys which operate across all parts of the Group businesses
on an annual basis. The data that is captured is presented to the Board as part of a regular review of employee matters which focuses
on understanding the issues facing our employees. KPIs such as labour turnover and responses to key questions are also monitored to
measure staff morale. Further the 2015 employee opinion survey results were once again reviewed in respect of age and gender diversity,
see below for further details.

Each year LSL engages an external consultant to assist with the annual employee surveys and this engagement allows LSL to not only
generate an accurate picture of engagement across the Group, it also allows LSL to assess the results and feedback received against
similar organisations using the benchmarking data retained by the agency. As in previous years, the 2015 survey covered all aspects of the
working environment including training, careers, performance and company communications together with questions on the effectiveness
of company management and leadership. The response from employees to the survey was very positive with 3,578 (71%) (2014: 3,337
(67%)) returns received.

The survey results provide the Board with insight into what factors concern and motivate the Group’s employees and contribute to action
plans and/or focus groups across the Group. The employee survey process is continually evaluated and developed to maximise the validity
and reliability of the data that is captured. Further, the process will be repeated again in 2016 as LSL remains committed to the continual
development and improvement of employee
engagement across the Group. On strategic
matters, LSL recognises and consults Unite.

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Customers:
In relation to its customers, all businesses
regularly seek feedback from customers.
This feedback is obtained in a range of
ways, including relationship management
meetings, formal questionnaires and
mystery shopping exercises. This feedback
is taken into account in LSL’s decision-
making processes and in particular in the
development of its services to customers.

Equal Opportunities
LSL promotes equal opportunities in
employment, recognising that equality and
diversity is a vital part in its success and
growth. The Group recruitment, training
and selection processes seek to appoint
the best candidates based on suitability
for the job and to treat all employees and

LSL AR 2015_Sect1-3.indd 29

The winner of Intercounty’s Easter competition

24/03/2016 15:30

Corporate Social Responsibility

applicants fairly regardless of race, sex,
marital status, nationality, ethnic origin,
age, disability, religious belief or sexual
orientation, and to ensure that no individuals
suff er harassment or intimidation.

Specifi c employment policies exist which
employees are required to observe and over
which the Group Chief Executive Offi cer
has overall responsibility with some policies
being submitted annually for review and
approval by the Board. Compliance with
legislation and Group policies is audited by
the Group’s Risk and Internal Audit team
with regular reporting to the Board, which
includes indicators such as staff turnover.

Age and Gender Diversity:
Since 2011, LSL has undertaken reviews
in relation to gender diversity which was
further explored in 2014 by the completion
of an age and gender analysis of its 2014
employee opinion survey which revealed

Intercounty competition to raise money for Guide Dogs

that whilst feedback from employees is
consistent regardless of gender, there are

diff erences in relation to age groups. This feedback will be taken into account in Group employee initiatives going forward. The fi ndings of
all reviews completed since 2011 are set out in LSL’s previous Annual Report and Accounts. For details of relevant gender diversity KPIs,
see below.

During 2015, LSL has remained committed to diversity and equal pay and LSL is closely monitoring the proposals relating to the
new gender pay reporting requirements, and has also participated in the Government consultation. During 2016, LSL will ensure full
compliance following the publication and commencement of the fi nal reporting requirements.

Disability:
LSL has in place policies and procedures to achieve its objective that where appropriate, upon employment reasonable adjustments will
be made to accommodate disabled persons wherever the requirements of the organisation will allow and if applications for employment
are received from suitable individuals. If existing employees become disabled every reasonable eff ort is also made to ensure that their
employment with LSL can continue on a worthwhile basis with career opportunities available to them.

Employee Key Performance Indicators
The Group uses a number of key performance indicators to measure its progress during the year, including employee turnover and the
makeup of its workforce by gender.

Total Employees at (31st December)
Total Employee turnover percentage (%)*

*Data excludes forced leavers.

Breakdown by Gender
Male
Female

2015
5,181
28.5

2014

2013
5,222 5,299
26.4

27.8

2012

2011

4,754
26.7

4,813
24.8

2015
2,285
2,896

2014
2,316
2,906

2013

2012

2011

2,318
2,981

2,052
2,702

2,065
2,748

In accordance with reporting requirements, the gender split for the Board, senior management team and Group employees for 2015 and
2014 is as follows:

Directors
Senior management team
Group employees

Female

2014
1
12
2,906

2015

2
15
2,899

Male

2014
7
55
2,316

2015

7
57
2,282

LSL AR 2015_Sect1-3.indd 30

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Employee Training:
LSL’s businesses place strong emphasis on the quality of service they provide to customers with employees (and where appropriate
consultants) undergoing appropriate training. During 2015, LSL continued its commitment to recruit, develop and invest in colleagues.
The Group’s approach is to prioritise colleague learning and development to strengthen the businesses and to ensure the Group’s
continued success. Examples of this approach to training are detailed below.

Surveying and Valuation Services:
There are now in excess of 100 graduates in the business, the majority of whom have achieved AssocRICS qualifi cations, and it is
expected that the remainder will qualify during 2016. e.surv continues to use the Mitre Training Academy to support the learning and
development of the Central Operations staff . There are now 35 members of staff who are working towards NVQ accreditation at either
Level 1, 2 or 3 in Business Administration, Customer Service, Team Leading, Management, and Business Improvement Techniques.

In addition to this training initiative undertaken with Mitre, all surveyors receive continuing professional development through a variety of
methods ranging from distance learning, regional workshops and an annual conference.

Estate Agency and Related Services:
Across the Group’s Estate Agency Division’s branches, employees adhere to the Codes of Practice issued by The Property Ombudsman
(TPO) and/or the Association of Residential Lettings Agents (ARLA). This is in addition to observing compliance with relevant legislation,
such as the Consumer Protection Regulations, guidance material published by relevant regulators, including the Competition and Markets
Authority (CMA) (and its predecessor the Offi ce of Fair Trading (OFT)), the National Trading Standards Agency/Trading Standards Institute
(TSI), HMRC and codes published by other relevant bodies, including the Advertising Standards Authority (ASA). LSL from time to time
also enters into direct dialogue with the regulators and consumer groups, such as Which?. During 2015, LSL on behalf of all its Estate
Agency businesses entered into a primary authority agreement with York Trading Standards.

During 2015 the Group continued to monitor and implement regulatory changes, including the implementation of the Consumer Rights
Act, which sought to simplify the UK’s consumer legislation and implement the EU’s Directive on Unfair Commercial Practices. As a result,
the Group has reviewed and updated all consumer terms of business to ensure compliance with the new legislation.

LSL monitors all relevant legislative changes, including reform of consumer rights and data protection legislation, and in response keeps
under review its training programmes to ensure that employees receive specially designed training courses, with the quality of service
monitored on a regular basis.

LSL’s ‘Talent Development Team’ delivered training to a total of 4,171 employees during 2015, equating to the delivery of 7,107 training
days. 2015 saw the implementation of a number of eLearning packages on ‘Learning Matters’, LSL’s online eLearning system, which
allows Group employees to complete eLearning training packages for compliance and regulatory purposes, and as a result of this system,
LSL are able to monitor and report on compliance training completion rates in real-time.

As stated above, LSL monitors all relevant legislative changes and in response keeps under review its training programmes to ensure that
Group employees receive specially designed training courses, with the quality of service monitored on a regular basis.

Throughout the year a number of new learning initiatives were implemented including the launch of the Advances Leadership Pathway –
an accredited development programme for existing and future managers, new apprenticeship programmes, career pathways and various
CPD workshops to support the development of new and tenured employees.
CPD workshops to support the development of new and tenured employees.

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D a v i s Ta t e c h a r i t y b i k e r i d e

Your Move’s team in Scotland
Your Move’s team in Scotland
Your Move’s team in Scotland
complete Tough Mudder
complete Tough Mudder

Your Move Financial Services team
complete the 3 peaks challenge

Intercounty charity ‘80s night

LSL AR 2015_Sect1-3.indd 31

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Corporate Social Responsibility

By fostering an inclusion culture, LSL are committed to diversity and equal pay, and recognise that many of its employees do not progress
at the same rate. Therefore LSL have identifi ed some of the main barriers to progression and have developed a plan to support minority
groups. This includes the implementation of new training programmes which have started with both unconscious bias and assertiveness
training.

In relation to LSL’s Financial Services business, the FCA is responsible for the conduct of fi rms authorised by the Financial Services and
Markets Act 2000 (FSMA). LSL’s Financial Services businesses include two authorised fi rms, which operate broker networks that include
other Group companies acting as their appointed representatives. Accordingly, the Financial Services companies are responsible for
the training and compliance arrangements of all Financial Services business conducted by Group companies. LSL’s Financial Services
businesses place strong emphasis on the quality of service provided to customers and as part of the compliance arrangements, all
employees involved in the Financial Services businesses receive appropriate and relevant training. In particular, all advisers complete a
specially designed training programme which is supplemented by eff ective supervision, regular monitoring and regular refresher training
sessions.

For further details on the regulations relevant to LSL’s businesses, please see page 17 of the Business Review – Estate Agency Division
included within the Strategic Report.

During 2015, the Group training expenditure was:

Division
Estate Agency and Related Services (£)
Surveying and Valuation Services (£)
Total Expenditure (£)

This includes in-house training costs of £1,557,807 (2014: £1,950,795).

Expenditure 2015
1,489,182
400,026
1,889,208

Expenditure 2014

1,294,812
937,725
2,232,537

Health, Safety and Welfare
LSL places great importance on the health, safety and welfare of its employees. Regular training is supported by policies, together with
Group standards and procedures, which aim to identify and remove any hazardous areas, reduce material risks of fi re and accidents or
injuries to employees and visitors and, in conjunction with its HR policies, manage workplace stress levels.

To this end, LSL makes every reasonable eff ort to provide safe and healthy working conditions in all offi ces and branches. Similarly, it is
the duty of all employees to exercise responsibility and to do everything to prevent injury to themselves and to others.

Separate Health and Safety policies exist which employees are required to observe and the Group Chief Financial Offi cer has overall
responsibility for this. Compliance with legislation and Group policies is audited by the Group’s Risk and Internal Audit team with regular
reporting to the Board, and includes indicators such as accident numbers.

Environmental Issues
LSL recognises that the environment has an intrinsic value, which is central to the quality of life and underpins economic development.
As part of this understanding, LSL have assessed the main areas in which it is able to eff ect the largest reductions in the Group’s overall
environmental impact.

The Group’s Environmental Policy is contained within the CSR Policy, which the Group Chief Financial Offi cer, has overall responsibility for.
Compliance with aspects of the CSR Policy is audited by the Group’s Risk and Internal Audit team with regular reporting to the Board.

Since 2010, LSL’s ‘green’ priorities have been to:

• Improve energy effi ciency and reduce energy usage

• Reduce waste and increase recycling

• Reduce transport generated CO2 emissions
Since the adoption of these ‘green’ priorities, LSL has sought to keep stakeholders informed on how LSL manages its environmental
impacts and how it is performing. Stakeholders may also provide LSL with views and opinions which can strengthen LSL’s approach to
environmental management. Within this framework, LSL companies assess and manage the environmental impact of their operations
to ensure that LSL is an active participant in the sustainable society and the LSL Board receives regular reports to enable it to monitor
progress.

The Group continues to promote environmental awareness within the Group and to encourage the use of environmentally sensitive
operating models.

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Set out in the table below are examples of the environmental initiatives that LSL focused on in 2015. This will be the last year that LSL
will report against the priorities. Going forward into 2016, LSL will select targets contained within the 2015 ESOS audit and report
against these.

Green Priorities
and Environmental
Initiatives:

Examples of Actions Continued in 2015:

Recycling

• Group companies working to specific targets in relation to the use of general waste services in and the use

of dry mixed recycling.

• Environmental waste friendly arrangements have been maintained via Biffa for the majority of activity and
also with First Mile in London. The commissioning of Biffa’s new transfer stations has seen the Estate
Agency Division increasingly utilising these facilities and recycling in excess of 80% of produced waste.
During the year Marsh & Parsons instructed First Mile and recycled 53% of produced waste. e.surv
participation has continued with the ‘Shred-Pro’ shredding and recycling programme which saved
112 trees (2014: 121 trees). In addition, esurv recycled 86% of produced waste, equating to 7.4 tonnes
(2014 comparison data not available).

• Across the Group various recycling schemes are in place with Iron Mountain, which delivered the following

benefits:

• 271 (2014: 173) cubic metre landfill reduction.

• 1,038,000 (2014: 761,457) trees saved.

• 87,386 (2014: 50,030) kilos of recycled paper produced.

Power Saving

• Continued monitoring of energy consumption and benefits of energy saving initiatives.

• Installation of Smart Meters to monitor electricity and gas consumption within some Estate Agency

Division branches now completed at the majority of sites. Marsh & Parsons have installed LED window
displays across all their branches, and just over half of their estate overall is primarily fitted with LED
or other form of low energy lighting. At other Estate Agency Division branches the installation of LED
window and wall displays continues via the annual branch refurbishment programmes.

• Encouraging the switching off of electrical equipment, such as printers and PCs overnight.

• Promotion of the installation of timer plugs and other devices.

Avoid/Limit Printing

• Continued use of the “think before you print” note on emails to customers and employees.

• Implementation of secure printing by Marsh & Parsons has resulted in a significant reduction in
unnecessary reprints, generating a saving of 21% over comparable 2014 usage and spend.

• Continued investment in electronic record keeping avoiding the need to maintain paper files.

• Promote double sided photo copying and printing where paper records are necessary.

Remote Meetings
(including training)

• LSL employees are geographically spread out across the UK and where possible, meetings are

held by telephone conference facilities to avoid the need for travel which provides both financial and
environmental benefits to the Group.

• Implementation and utilization of online training arrangements (e.g. Learning Matters) to encourage

remote training and minimise travel delivering financial and environmental benefits.

Reduce Carbon
Emissions

• Encourage company car users to select energy efficient cars, and offer a range of hybrid and efficient

dynamics diesel models on the company car list.

• See also mandatory greenhouse gas emissions reporting overleaf.

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Corporate Social Responsibility

Greenhouse Gas Emissions (GHG)
This section of the Report has been prepared in accordance with LSL’s regulatory obligation to report greenhouse gas emissions
pursuant to Section 7 of The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.

During the 2014/2015 reporting period, LSL emitted a total of 8,561 tCO2e from fuel combustion and operation of LSL’s facilities (Scope 1
direct), and electricity purchased for LSL’s own use (Scope 2 indirect). This is equal to 29 tCO2e per £m of revenue or 1.89 tCO2e per full time
equivalent employee.

The table below shows LSL’s tCO2e emissions for the period 1st October – 30th September for the years 2015, 2014 and 2013.

(tCO2e)
Combustion of fuel and operation of facilities (Scope 1)
Combustion of fuel and operation of facilities (Scope 1)
Electricity, heat, steam and cooling purchased for our own use (Scope 2)
Electricity, heat, steam and cooling purchased for our own use (Scope 2)

Total Scope 1 and 2

e per full time equivalent employee
tCO2e per full time equivalent employee
e per £m revenue
tCO2e per £m revenue

2014/ 2015
2014/ 2015
4,325
4,325
4,236
4,236

2013/ 2014
4,781
4,834

8,561
8,561

9,614

2012/ 2013

3,728
5,436

9,164

1.89
1.89
29
29

2.1
34

2
37

As can be seen above, since 2014 LSL’s absolute emissions have decreased by 11%. This reduction is principally due to the Group’s
programme of continual branch refurbishment across the Estate Agencies to improve effi ciency and modernise the fi ttings, as well as the
reduction in average FTE employees across the Group over the year and the disposal of a number of sites.

GHG reporting methodology:
The Group quantifi es and reports on its organisational greenhouse gas emissions according to Defra’s Environmental Reporting
Guidelines and has utilised the UK Government 2015 Conversion Factors for Company Reporting in order to calculate CO2 equivalent
emissions from corresponding activity data. LSL has also utilised data required for compliance with the CRC Energy Effi ciency Scheme
and the UK’s Energy Savings Opportunity Scheme (ESOS) (see below).

In order to improve monitoring and management of the Group’s climate change impact, LSL continued to commission independent
environmental consultancy, Carbon Credentials Energy Services Limited to support with emissions reporting.

GHG reporting boundaries and limitations:
The emission sources included within this Report fall within the consolidated Financial Statement. LSL does not have responsibility for any
emissions sources that are not included within the consolidated Financial Statement. LSL have not yet during 2015 calculated the Group’s
fugitive refrigerants from air-conditioning equipment as these are considered to be de minimis, however, LSL may look to quantify and
report on emissions from this source in future years.

The GHG sources that constitute LSL’s operational boundary for the 2014/2015 reporting period are:

• Scope 1: Natural gas combustion within boilers and road fuel combustion within vehicles

• Scope 2: Purchased electricity consumption for our own use

GHG reporting assumptions and estimations
In some cases, missing data has been estimated using either extrapolation of available data from the reporting period or data from
2013/2014 as a proxy.

Energy Savings Opportunities Scheme (ESOS)
During 2015, LSL undertook a number of energy audits to identify further opportunities for energy and emissions reductions and to ensure
compliance to the new ESOS Regulations 2014 and Article 8 of the EU Energy Effi ciency Direct, which came into force in the UK in July 2014.

The aim of ESOS is to aid organisations in its identifi cation of energy effi cient savings to support and increase good energy management
and it is part of the Government’s climate change initiative. The results of the audit were submitted to the Environment Agency in
December 2015 and LSL’s next audit is scheduled to take place in 2019.

The 2015 audit which was completed by a Lead ESOS Assessor, involved a review of energy consumption data and visits to selected
branches and offi ces. The recommendations arising from the audit, which were reported to the Board will during 2016, be reviewed and a
plan formulated to ensure the achievement energy effi cient savings and good energy management across the LSL Group.

In 2016, the Group is engaging with Carbon Credentials to set up a Group wide energy strategy to link the recommendations identifi ed
through ESOS with the planned refurbishment programme for the retail portfolio.

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Social and Community interests (including Human Rights and Ethical Issues)
LSL’s social, community interests (which includes the promotion of human rights and ethical issues) objective is to establish a common
and coherent approach among Group businesses and to support investment in the communities in which they operate. Group companies
are sensitive to local communities cultural, social and economic needs. LSL is committed to acting responsibly wherever it operates and
to engaging with stakeholders to manage the social, economic and environmental impact of all Group activities.

LSL’s business has a direct impact on the local communities in which it operates and the Board recognises that good relations with local
communities are fundamental to LSL’s sustained success. Working in partnership with communities over a sustained period of time is the
most effective way to achieve objectives and lasting change.

LSL supports its businesses in achieving these objectives by encouraging Group businesses to:

• make donations both to local and national charities;

• support and organise fundraising events including supporting charities and local community initiatives selected by Group companies;
and
• support employees in their personal fundraising ambitions.

Further details of some specific charitable initiatives are set out below.

LSL’s approach to the promotion of human rights and ethical issues is contained within the Group’s HR policies, which includes the
Group’s Combined Ethics Policy, which is presented to the Board for annual review and approval. While all Group employees are made
aware of the policy, the Risk and Internal Audit Team will audit awareness and compliance.

During 2015 LSL has been monitoring the introduction of the Modern Slavery Act 2015 and during 2016 LSL is putting into place
arrangements to ensure compliance with the the new requirements.

Charitable Donations
Workplace Giving:
LSL has implemented the ‘Workplace Giving’ initiative and all Group employees have been invited to participate. The initiative was
launched in October 2010 and in 2015 LSL employees raised over £14,000. Over 160 employees participate in the scheme, which
donates to a range of charities.

Working with professional fundraising organisations, Workplace Giving UK makes it possible for employees to make regular donations
via the payroll system to a charity or charities of their choice on a tax free basis. The tax free element means that the charity benefits on
receiving a higher amount. Further information can be found at: www.workplacegiving.co.uk/giving

Agents Giving (www.agentsgiving.org):
LSL’s Estate Agency Division continues to support the Agents Giving as its primary charity.

Agents Giving, which was launched originally in 2007 as “The Estate Agency Foundation” and then rebranded in 2014, has as its objectives:

• encourage and support estate agents throughout the UK to raise funds for charitable causes;

• bring together the whole industry to contribute to charitable causes throughout the UK; and

• raise funds from supporters’ activities and central fundraising events which will be distributed to established and recognised charities.

The Group HR Director, Lisa Charles-Jones is a trustee of the charity, which was chosen due to its direct connection with property and
estate agency. It brings together estate agents from all over the country with the hope that by using their collective fundraising skills,
the Agents Giving initiative makes a significant contribution to communities. Lisa’s appointment ensures that LSL is able to support the
charity’s initiatives and fundraising activities.

Surveying:
Within the Surveying Division, during 2015 a number of different charities (national and local) were supported by initiatives undertaken by
e.surv Chartered Surveyors’ employees, which included the following:

• Meningitis (www.meningitis.org)

• Children Are Butterflies (www.childrenarebutterflies.org.uk)

• Cransley Hospice, a hospice for terminally ill patients in Kettering

• Great Ormond Street Childrens Hospital (www.gosh.org)

(nominated staff charity since in 2010) (www.cransleyhospice.co.uk)

• Huntingtons Disease Association (www.hda.org.uk)

• Help for Heroes (www.helpforheroes.org.uk)

• Heartlink (www.heart-link-glenfield.org.uk)

• Stroke Association (www.stroke.org.uk)

• Teenage Cancer Trust (www.teenagecancertrust.org)

Group HR:
During the year, members of the Group HR team undertook various fundraising activities in aid of Cancer Research UK, and St Oswald’s
Hospice, in Newcastle. These included a charity gala dinner which was sponsored by key suppliers and the completion of the Walt Disney
World Marathon by the Group HR Director in Orlando. In addition, members of the Estate Agency Division completed a cycle ride from
Land’s End to John O’Groats. In total the fundraising exceeded £60,000.

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The Board

1. Kumsal Bayazit Besson
Non Executive Director
Kumsal was appointed as an independent
Non Executive Director on 1st September 2015
and is also a member of LSL’s Nominations,
Remuneration and Audit Committees.
Kumsal has significant experience in strategy,
technology, operations and sales and marketing,
particularly in the professional information
solutions sector. This includes her current
appointment as a Regional President, Europe
at Reeds Exhibitions which is part of the RELX
Group plc (formerly the Reed Elsevier Group
plc). Kumsal has previously held a number of
executive technology and digital strategic roles
including appointments as Chief Strategy Officer
for RELX Group, as the Executive Vice President
of Global Strategy and Business Development
for LexisNexis (part of RELX Group plc) and
as a consultant for Bain & Co in New York,
Johannesburg, Sydney, San Francisco and Los
Angeles. Kumsal holds an MBA from Harvard
Business School and a BA in Economics from
the University of California at Berkeley.

2. Helen Buck
Non Executive Director
Helen was appointed as an independent Non
Executive Director on 1st December 2011 and
is also a member of LSL’s Nominations and
Remuneration Committees. She is also Chief
Operating Officer at Palmer Harvey and prior
to this was a member of the operating board
of Sainsbury’s Supermarkets Ltd (Sainsbury’s)
having been appointed as Retail Director in
March 2012 and became Business Development
Director in May 2014. Helen joined Sainsbury’s
in 2005 and, after spending four years running
Brand Communications, moved to the Trading

Division as Business Unit Director, in 2009.
Before joining Sainsbury’s, Helen held a number
of senior positions at Marks & Spencer Group
plc, Woolworths and Safeway and was a senior
manager at McKinsey & Co.

3. Ian Crabb
Executive Director, Group Chief
Executive Officer
Ian was appointed Group Chief Executive Officer
on 9th September 2013 and he has primary
responsibility for the performance, strategy
and development of LSL. Previously Ian was
Executive Chairman of Learndirect, where
he worked closely with Lloyds Development
Capital on Learndirect’s growth strategy and
before that was Chief Executive of Quadriga
Worldwide, Europe’s market leader in digital IP
communication and entertainment services for
hotels, where he was responsible for expanding
the business into 50 countries. Over the seven
year period of his stewardship, which included
the 2007 sale of the company by Terra Firma,
the business consistently over-achieved against
demanding financial targets. Earlier, Ian was
a member of the Industrial Advisory Board at
Permira Advisers LLP and worked on major
transactions including the €640m buy out of
Hogg Robinson. Prior to this he was Chief
Executive of IKON Office Solutions, the document
management and office products provider for
six years, delivering significant growth both
organically and through several acquisitions.

4. Adam Castleton
Executive Director, Group
Chief Financial Officer
Adam was appointed as Group Chief Financial
Officer on 2nd November 2015. Adam has a
breadth of financial skills and experience in the

retail and services sectors. Adam joined LSL
from French Connection Group PLC where he
was the Group Finance Director. He previously
held leadership roles at a number of market
leading companies including O2 UK, eBay, and
The Walt Disney Company. Adam has over 25
years’ experience in finance, having started his
career with Price Waterhouse where he qualified
as a Chartered Accountant in 1989.

5. Simon Embley
Non Executive Director and Chairman
Simon was appointed Non Executive Chairman
on 1st January 2015, having previously held
the positions of Deputy Chairman and Group
Chief Executive Officer. He became the Group
Chief Executive Officer of LSL at the time of the
management buy-out of e.surv and Your Move
from Aviva (formerly Norwich Union Life) in
2004. Prior to the management buy-out, Simon
was responsible for the strategic direction
of these companies, and subsequent to the
management buy-out Simon has overseen and
been responsible for the turnaround of the initial
Group from a heavily loss-making business to
the successful business it is today. Simon’s
other directors are limited to a small estate
management company and Road to Health, a
healthcare provider.

6. Adrian Gill
Executive Director, Estate Agency
Adrian was appointed as the Executive Director,
responsible for Estate Agency on 24th November
2014 having served as an independent Non
Executive Director since September 2012.
Adrian has overall responsibility for the
performance, strategy and development of the
Estate Agency Division across LSL. He was

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previously an Executive Director at Connells
Limited (Connells), the national estate agency
business of the Skipton Building Society, for over
10 years. Prior to his role at Connells, Adrian
was Managing Director of Lush Retail. Adrian is
a Chartered Accountant and is currently also a
Director at Lifetime Legal Limited.

7. Mark Morris
Non Executive Director and
Chairman of the Audit Committee
Mark was appointed as an independent Non
Executive Director of LSL and Chairman of
the Audit Committee on 21st November 2006
and he served as the Senior Independent
Director from November 2006 until 31st
December 2014. He is also a member of LSL’s
Nominations and Remuneration Committees.
Mark has many years’ experience of business
management with particular focus on growing
businesses and mergers and acquisitions.
Mark is a chartered accountant and worked
for 12 years at PriceWaterhouseCoopers. Mark
is currently Senior Independent Director and
Audit Committee chairman at HomeServe plc
and works with a number of entrepreneurial
private companies. Mark previously worked at
Sytner Group as Finance Director and Managing
Director from 1995 to 2005 including the period
during which it was listed on the London Stock
Exchange. Mark will retire from the Board and its
Committees with effect from with the 2016 AGM.
8. Bill Shannon
Non Executive Director, Deputy Chairman,
Senior Independent Director, and Chairman
of the Remuneration Committee and
Nominations Committee
Bill was appointed as an independent Non
Executive Director and the Chairman of the

Remuneration Committee on 7th January 2014
and on 1st January 2015, he took on the roles
of Deputy Chairman, Senior Independent
Director and Chairman of the Nominations
Committee. He is also a member of LSL’s Audit
Committee. Bill has significant PLC board
experience in strategy, operations, finance and
governance in the consumer, financial services,
residential and commercial property sectors.
He is currently Non Executive Chairman of St
Modwen Properties plc and Non Executive
Director of Johnson Service Group plc. He
was previously at Whitbread Group plc from
1974 and between 1994 and 2004, he was
the Divisional Managing Director. He has also
served as Non Executive Chairman of Aegon
UK plc and Non Executive Director of Rank
Group plc, Barratt Developments plc, and
Matalan plc.

9. David Stewart
Non Executive Director
David was appointed as an independent
Non Executive Director on 1st May 2015 and
he is also a member of LSL’s Nominations,
Remuneration and Audit Committees. Subject
to David’s election at the AGM, David will also
take on the role of Chairman of LSL’s Audit
Committee with effect from AGM. David has
significant experience in strategy, operations,

sales and marketing, finance and governance,
particularly in the financial services sector.
David’s other appointments include being a
Non Executive Director on the boards of M&S
Bank and Unum Limited. He was previously
Chief Executive of Coventry Building Society
(July 2006 to March 2014). Before that, he
held the positions of Finance Director and
Operations Director. Prior to joining Coventry
Building Society, David served on the board of
DBS Management plc, undertaking at various
times the roles of Group Chief Executive,
Group Managing Director and Group Finance
Director during a ten year career with the
business. David, originally from Manchester,
studied economics and politics at Warwick
University and qualified as a chartered
accountant with Peat Marwick (KPMG).

10. Sapna FitzGerald
Legal Services Director and
Company Secretary
Sapna is a solicitor (qualified in 1998) and has
been in the role of Company Secretary at LSL
since 2004. Prior to the management buy-out
of Your Move and e.surv, Sapna was a member
of Aviva Life Legal Services and had since 2001
formed part of the team that supported Your
Move and e.surv Chartered Surveyors. Sapna
FitzGerald is not a Director of LSL.

The Strategic Report (including the Strategy, the Business Model, the Business Reviews, the
Financial Review, the Principal Risks and Uncertainties, the Corporate Social Responsibility
Report and the Board) is approved by and signed on behalf of the Board of Directors.

Ian Crabb
Group Chief Executive Officer
3rd March 2016

Adam Castleton
Group Chief Financial Officer
3rd March 2016

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Report of the Directors and
Corporate Governance Reports

In this section
37

Statement of Directors’ responsibilities in
relation to the Group Financial Statements

38 Report of the Directors
43 Corporate Governance Report
49 Audit Committee Report
55 Directors’ Remuneration Report

your-move.co.uk’s new website, launched March 2015

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Statement of Directors’
Responsibilities in Relation to
the Group Financial Statements

The Directors are responsible for preparing the Annual Report and the Group Financial Statements in accordance with applicable
United Kingdom law and those International Financial Reporting Standards (IFRS) as adopted by the European Union.

Under Company Law the Directors must not approve the Group Financial Statements unless they are satisfied that they present fairly
the financial position of the Group and the financial performance and cash flows of the Group for that period. In preparing the Group
Financial Statements, the Directors are required to:

• select suitable accounting policies in accordance with IAS 8 ‘Accounting Policies, Change in Accounting Estimates and Errors’

and then apply them consistently;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable

information;

• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to

understand the impact of particular transactions, other events and conditions on the Group’s financial position and financial
performance;

• state that the Group has complied with IFRSs, subject to any material departures disclosed and explained in the Financial

Statements; and

• make judgements and accounting estimates that are reasonable and prudent.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that
the Financial Statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for
safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.

The Directors are also responsible for preparing the Strategic Report, the Report of the Directors, the Directors‘ Remuneration
Report, the Audit Committee Report and the Corporate Governance Report in accordance with the Companies Act 2006 and
applicable regulations, including the requirements of the Listing Rules and the Disclosure and Transparency Rules.

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Report of the Directors

Business Review and Development
The Chairman’s Statement and the Strategic Report set out a review of the business including details of LSL’s performance,
developments (including future developments) and strategy.

Annual General Meeting
The AGM will be held at the London offices of LSL, 1 Sun Street, London EC2A 2EP on 28th April 2016 starting at 4.30pm.

The Notice of Meeting convening the AGM is in a separate circular to be sent to Shareholders with this Report. The Notice of Meeting
also includes a commentary on the business of the AGM and notes to help Shareholders to attend, speak and/or vote at the AGM.

Financial Results
The Strategic Report and Financial Statements set out the results of LSL.

Dividend
As a result of the growth in underlying Group profitability and the Board’s positive view of future prospects for the business, an increase
in the final dividend of 3.6% to 8.6 pence per share (2014: 8.3 pence per share) will be proposed to Shareholders at the 2016 AGM,
increasing the total dividend for 2015 by 2.4% to 12.6 pence per share (2014: 12.3 pence per share). The proposed dividend payment is at
the upper end of our previously stated policy of applying a dividend payout ratio of between 30% to 40% of Group Underlying Operating
Profit after interest and tax and reflects the Directors confidence in the future.

The ex dividend date for the final dividend is 24th March 2016 with a record date of 29th March 2016 and a payment date of 6th May
2016. Shareholders have the opportunity to elect to reinvest their cash dividend and purchase existing shares in LSL through a dividend
reinvestment plan.

Employees
LSL recognises that its people are a valuable asset and it is committed to providing a working environment in which employees can
develop to achieve their full potential with opportunities for both professional and personal development. By creating such an environment,
LSL believes that this will enable the retention and recruitment of the right people to work at every level throughout the Group. An essential
part of this strategy is to encourage and promote effective communication with all employees, which also ensures that LSL, in its decision
making, takes into account its employees views.

The Group has an equal opportunities policy so that all job applicants are treated fairly and without favour or prejudice throughout
selection, recruitment, training, development and promotion. Further details of how LSL engages with its employees are contained in
the Corporate Social Responsibility (CSR) statement, included in this Report. The CSR statement also summarises the Group’s policy in
relation to disabled employees.

Financial Instruments
The Strategic Report sets out LSL’s strategies and objectives relating to treasury and risk management. Details of the financial instruments
are set out in Note 29 to the Financial Statements.

The Greenhouse Gas Emissions (Directors’ Reports) Regulations 2013 and Part 7 of The Companies Act 2006
(Strategic Report and Directors’ Reports) Regulations 2013
In accordance with Part 7 of The Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013, each year LSL
reports on targets and KPIs approved by the Board within the Directors’ Report in the Annual Report and Accounts. The 2015 results
are included within the CSR statement of this Report.

Directors
The current Directors are listed with their biographies in the Board at pages 34 to 35 of this Report. On 1st January 2015 Simon Embley
became a Non Executive Director and Chairman of the Board and Bill Shannon took on the role of Deputy Chairman in addition to his
existing roles of Senior Independent Director, Chairman of the Nominations and Remuneration Committees and member of the Audit
Committee.

Further, during the year David Stewart and Kumsal Bayazit Besson joined the Board as Non Executive Directors and members of the
Nominations, Remuneration and Audit Committees, and Adam Castleton joined the Board as Group Chief Financial Officer.

David Stewart has significant experience in strategy, operations, sales and marketing, finance and governance, particularly in the financial
services sector. This includes his current appointments as a Non Executive Director on the boards of M&S Bank and Unum Limited.

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Kumsal Bayazit Besson has significant experience in strategy, technology, operations and sales and marketing, particularly in the
professional information solutions sector. This includes her current appointment as Regional President, Europe at Reeds Exhibitions which
is part of RELX Group PLC.

Adam Castleton joined LSL from French Connection Group PLC. He previously held leadership roles at a number of market leading
companies, including O2 UK, eBay, and The Walt Disney Company. Adam has over 24 years’ experience in finance, having started his
career with Price Waterhouse where he qualified as a Chartered Accountant in 1989.

Looking forward, in December 2015, LSL announced that Mark Morris, who has been a Non Executive Director and member of the
Nominations, Remuneration and Audit Committees since November 2006, will retire from the Board and its Committees and that David
Stewart, will, subject to his election at the 2016 AGM, take on the role of Chairman of the Audit Committee in addition to his appointments
as a member of the Remuneration and Nominations Committees with effect from the AGM.

Full details of the Directors service contracts, letters or appointment and interests in LSL Shares are also detailed within the Directors’
Remuneration Report.

Re-election and Election
All of the current Directors will each retire at the AGM and, being eligible (excluding Mark Morris) intend to stand for election/re-election.
LSL’s articles provide that the Board may appoint an individual to act as a Director, but anyone so appointed will retire from office at the
next AGM and seek election. Accordingly, all of the Directors (excluding Mark Morris) who were elected at the 2015 AGM will also stand for
re-election at the 2016 AGM and all Directors appointed since the 2015 AGM will stand for election.

LSL may by ordinary resolution elect or re-elect any individual as a Director. In addition, by an amendment to the Nominations
Committee’s Terms of Reference, LSL has confirmed its commitment to annual elections of its Directors. Accordingly all of the Directors
will stand for re-election at the AGM.

The biographical details for all LSL Directors are set out on pages 34 and 35 of this Report.

During the 2015 Board effectiveness review, the performance of the Directors, who are all standing for re-election, was specifically
evaluated and the Board confirmed that it values the experience and commitment to the business demonstrated by each of these
individuals.

Directors’ Interests
The interests of the current Directors in LSL are contained within the Directors’ Remuneration Report included in this Report. During
the period between 31st December 2015 and the date of this Report, there were no changes in the Directors’ interests other than the
purchases of Shares by Ian Crabb (167 shares) and Adrian Gill (167 shares) as participants of LSL’s BAYE/SIP scheme. These Shares were
purchased by the Trust at the prevailing market rate.

The Board has during the year observed and maintained arrangements for the management and recording of conflicts in line with its
policy. This includes the observance of an anti-bribery and hospitality policy to ensure compliance with section 176 of the Companies Act
2006.

Further, during the year, no Director was materially interested in any contract that is or was significant to the business of the Group or any
subsidiary undertaking.

Directors’ Service Contracts
Details of the Executive Directors’ service agreements and the current Non Executive Directors’ letters of appointment are set out in the
Director’s Remuneration Report and are available for inspection at the Registered Office during normal business hours and at each AGM.

Auditors
Ernst & Young LLP, the external auditor of the Group has advised of its willingness to continue in office and a resolution to re-appoint
them to this role and the authority for their remuneration to be determined by the Directors will be proposed at the AGM. See also the
Audit Committee Report for further details.

Details of LSL’s policy designed to safeguard the independence and objectivity of the external auditors is included in the Audit
Committee Report.

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Report of the Directors

Share Capital
LSL 0.2 pence Ordinary Shares are listed on the London Stock Exchange and are the only class of shares in issue.

Rights and Obligations Attached to Shares
Each issued share has the same rights attached to it as every other issued share: the rights of each Shareholder include the right to vote
at general meetings, to appoint a proxy or proxies, to receive dividends and to receive circulars from LSL.

Details of share capital are set out in Note 24 to the Financial Statements. There have been no changes to the share capital during
2015. A renewal of the authority for the Directors to allot unissued Ordinary Shares and a renewal of their power to dis-apply statutory
pre-emption rights will be proposed at the AGM. Full details of the deadline for exercising voting rights in respect of the resolutions to be
considered at the 2016 AGM are set out in the Notice of Meeting.

Employee Share Schemes
LSL has two employee benefit trusts. The first was established in 2006 prior to LSL’s flotation on the London Stock Exchange and LSL
appointed Capita Trustees Limited (Trustees) to operate the LSL Property Services plc Employee Share Scheme (Trust). The Trustees of
this Trust operate both the LSL Property Services plc Employee Share Incentive Plan (Buy As You Earn or BAYE) and the Save As You
Earn (SAYE) Plans. The Trust is able to acquire and to hold shares to satisfy options or awards granted under any discretionary share
option scheme or long-term incentive arrangement operated by LSL. Details of the shares acquired by the Trust are set out in Note 12 to
the Financial Statements. The Trustees have waived the right to any dividend payment in respect of each Share held by them in 2015 and
to all future payments.

The second employee benefit trust was established in November 2011 (the 2011 EBT), as part of the acquisition of Marsh & Parsons. While
the beneficiaries of the 2011 EBT are the LSL employees, the 2011 EBT acquired the Growth Shares as part of the transaction and some of
these shares were acquired by members of the current management team of Marsh & Parsons in 2012 and 2013. This was in accordance
with the previously stated objective that current and future managers at Marsh & Parsons apply for Growth Shares, as part of a package of
measures designed to incentivise the management of Marsh & Parsons. The 2011 EBT does not currently hold any LSL shares.

Viability Statement
In accordance with provision C.2.2 of the Code, the Directors confirm that they have a reasonable expectation that the Group will
continue to operate and meet its liabilities, as they fall due, for the next three years.

A period of three years has been chosen for the purpose of this viability statement, in line with the Group’s planning cycle.

The Directors’ assessment has been made with reference to the Group’s current position and prospects, the current three year strategy
and the Group’s principal risks and uncertainties and how these are managed as detailed in pages 22 to 25 of the Strategic Report.

The strategic plan has been stress tested using sensitivity analysis which reflects plausible but severe combinations of the principal risks
of the business, primarily through reducing revenues and cash flow as a result of a severe downturn in the UK property market.

Going Concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out
in the Business Review sections of the Strategic Report. The financial position of the Group, its cash flows, liquidity position and the
Group’s policy for treasury and risk management are described in the Financial Review sections of the Strategic Report. Details of the
Group’s borrowing facilities are set out in Note 21 to the Financial Statements. Note 29 to the Financial Statements describes the Group’s
objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments
and hedging activities; and its exposures to credit risk and liquidity risk. A description of the Group’s principal risks and uncertainties and
arrangements to manage these risks are detailed within the Strategic Report on pages 22 to 25.

As explained in Note 29 to the Financial Statements, the Group meets its day to day working capital requirements through a revolving
credit facility, which was renewed in June 2013 and the Group currently has a £100.0m facility which is committed for a period up to
August 2017. As stated in Note 21 to the Financial Statements as at 31st December 2015 the Group had available £60.1m of undrawn
committed borrowing facilities in respect of which all conditions precedent had been met. The Group’s forecasts and projections, taking
account of reasonably possible changes in trading performance, show that the Group should be able to operate within the terms of its
current facility.

The Directors have considered the future profitability of the Group, forecast of future cash flows, banking covenants, liquidity of
investments and joint ventures and the ability of the Group to re-finance any loans due to mature in the next 12 months (including the
Group’s facility which due to mature in August 2017) where necessary. Further the Directors considered the key judgments, assumptions
and estimates underpinning the review.

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After making enquiries, the Directors consider that the Group has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing this Report.

Disclosure of Information to Auditors
Having made enquiries of fellow Directors and of the external auditors, each of the current Directors, confirms that:

• to the best of his/her knowledge and belief, there is no information (as defined in the Companies Act 2006) relevant to the preparation of

this Report of which the external auditors are unaware; and

• he/she has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant audit information and to

establish that the external auditors are aware of that information.

Directors’ Qualifying Third Party Indemnity Provisions
LSL had qualifying third party indemnity provisions for the benefit of the Directors in force from the start of the financial period to the date
of this Report, subject to the conditions set out in the Companies Act 2006. LSL has put in place ‘Directors & Officers’ Liability’ insurance
and indemnities to cover for this liability.

Additional Information for Shareholders
The following provides the additional information required for Shareholders as a result of the implementation of the Takeovers Directive
into UK Law.

Share Capital
At 31st December 2015, LSL’s issued share capital comprised 104,158,950 0.2 pence Ordinary Shares. The authorised share capital is
500,000,000 Ordinary Shares of 0.2 pence each.

Ordinary Shares
On a show of hands at a general meeting of LSL every holder of Ordinary Shares present in person and entitled to vote shall have one
vote and on a poll, every member present in person or by proxy and entitled to vote shall have one vote for every Ordinary Share held. The
notice of the AGM which accompanies this Report specifies deadlines for appointing a proxy in relation to resolutions to be passed at a
general meeting. Where the Chairman of the AGM is appointed as proxy, such proxy votes are counted and the numbers for, against or
withheld in relation to each resolution are announced at the AGM and published on LSL’s website after the meeting (www.lslps.co.uk).
There are no restrictions on the transfer of Ordinary Shares in LSL other than:

• certain restrictions which may from time to time apply under applicable laws and regulations (for example, insider trading laws and

market requirements relating to close periods); and

• pursuant to the Listing Rules of the FCA whereby certain employees of LSL require the approval of LSL to deal in LSL’s securities.

LSL’s Articles of Association may only be amended by way of a special resolution at a general meeting of the Shareholders.

LSL has the authority under section 701 of the Companies Act 2006 to make market purchases of the Ordinary Shares of the Group on
such terms and in such manner that the Directors determine. The maximum shares to buy back is capped at 10% of the Ordinary Share
capital of the Group being 10,415,895 Ordinary Shares.

Company Share Schemes
As at 31st December 2015, the Trust held 1.6% (2014: 2.2%) of the issued share capital of LSL in trust for the benefit of employees of the
Group and their dependents. The voting rights in relation to these shares are exercised by the Trustees.

Significant Agreements – Change of Control
Subsidiaries of LSL are party to agreements which take effect, alter or terminate upon a change of control of the subsidiary company
following a takeover bid. The majority of the income derived through the provision of Surveying and Valuation Services and the Asset
Management income streams are driven by specific contracts. Any termination of such contracts on the change of control of the relevant
subsidiary company will have a significant impact on the revenue of those income streams.

The Group is party to a number of banking agreements which upon a change of control of the Group are terminable by the bank and all
outstanding amounts become immediately due and payable.

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Report of the Directors

Compensation for Loss of Offi ce – Change of Control
There are no agreements between LSL and its Directors or employees providing for compensation for loss of offi ce or employment
(whether through resignation, purported redundancy or otherwise) that occurs because of a takeover bid.

Post Balance Sheet Event
Subsequent to the year end the following transactions have been completed:

a. LSL acquired three small lettings book acquisitions for a total initial consideration of £1.82m.

b. On 17th February 2016, Your Move acquired a 65% interest in Group First Limited for an initial consideration of £9.1m, with 50% paid at

completion and the remaining 50% in March 2017.

Management is in the process of allocating the purchase price in accordance with IFRS 3. As a result the initial accounting for the
acquisition is currently incomplete, so a fair value table of the identifi able assets and liabilities has not been presented.

Directors’ Responsibility Statement
Each of the Directors confi rms that to the best of their knowledge:

• the Financial Statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair review of the assets,

liabilities, fi nancial position and results of LSL and its subsidiaries included in the consolidation taken as a whole;

• the Strategic Report (including the Strategy, the Business Model, the Business Reviews, the Financial Review, the Principal Risks and
Uncertainties, Corporate Social Responsibility Report and the Board) and the Directors’ Report (including the Corporate Governance
Reports) include a fair review of the development and performance of the business and the position of LSL and its subsidiaries included in
the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

• the Report (including the Financial Statements), taken as a whole, is fair, balanced and understandable and provides the information

necessary for Shareholders to assess LSL’s performance, business model and strategy.

Substantial Shareholding
As at 31st December 2015 and as at 2nd March 2016, the Shareholders set out below have notifi ed LSL of their interest under DTR 5:

Institution
Henderson
Brandes Investment Partners LP
First Pacifi c Advisers, LLC
The Capital Group Companies Inc
Kinney Asset Management, LLC
Setanta Asset Management Ltd
Harris L.P

Individual (excluding Directors)
David Newnes

Nature of
holding

Benefi cial
Benefi cial
Benefi cial
Benefi cial
Benefi cial
Benefi cial
Benefi cial

31st December 2015

2nd March 2016

Number of
0.2 pence
Ordinary
Shares

4,182,818
5,251,787
5,684,471
6,160,282
6,288,309
6,373,737
11,585,233

% of
issued
shares

4.01
5.04
5.46
5.92
6.04
6.12
11.12

Number of
0.2 pence
Ordinary
Shares

4,182,818
5,251,787
5,684,471
6,160,282
7,487,483
6,373,737
11,585,233

% of
issued
shares

4.01
5.04
5.46
5.92
7.19
6.12
11.12

Registered Holder

3,458,259

3.32

3,458,259

3.32

The Report of the Directors has been approved by and is signed on behalf of the Board of Directors

Sapna B FitzGerald
Company Secretary
3rd March 2016

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Corporate Governance Report

UK Corporate Governance Code (September 2014) (the Code)
The Board is committed to the highest standards of corporate governance and the Directors recognise the value and importance of
meeting the principles of good corporate governance as set out in the Code. This part of the Report describes how LSL has complied
with the Code during 2015 and the corporate governance arrangements that are in place for 2016.

During 2015, LSL complied with the provisions of the Code in all respects save only in relation to the appointment of Simon Embley as
Chairman, which took effect on 1st January 2015. The relevant provisions of the Code are:

a. A.3.1, which states that a chairman should on appointment meet the independence criteria set out in B.1.1. Further a chief executive
should not go on to be chairman of the same company. However, if by exception the board decided that a chief executive should
become chairman, the board should consult major shareholders in advance and set out its reasons to shareholders both at the time of
the appointment and in the next annual report.

b. B.1.1, which stipulates the criteria for determining ‘independence’, namely that a director is not deemed independent if he has been an
employee of the company/group within the last 5 years; has a significant shareholding; has participated in the company’s share option/
performance related pay scheme; or is a member of the pension scheme.

Prior to his appointment as Chairman, Simon Embley was an Executive Director in his roles as the Group’s Chief Executive Officer and
then Deputy Chairman. The changes in Simon’s roles reflect the Board’s continued desire to implement an orderly succession and their
wish to retain Simon’s knowledge and experience of the residential property market, maintain contacts with key stakeholders and benefit
from his track record of delivering Shareholder value. Prior to Simon Embley’s appointment as Chairman, LSL has consulted with major
Shareholders and their feedback was taken into account. Looking forward and in accordance with the provisions of the Code, whilst
Simon did not meet the independence criteria on appointment, following appointment the test of independence is not appropriate in
relation to the role of chairman.

The Board
At the date of this Report, the Board has nine members, whose details are set out below. Details of changes to the Board which took
place in 2015 and which are planned for 2016 are set out below.

Director Name

Position(s)

Helen Buck

Independent Non Executive Director – member of Nominations Committee and Remuneration
Committee

Kumsal Bayzit Besson

Independent Non Executive Director – member of Nominations Committee, Remuneration Committee
and Audit Committee

Ian Crabb

Executive Director – Group Chief Executive Officer

Adam Castleton

Executive Director – Group Chief Financial Officer

Simon Embley

Adrian Gill

Mark Morris (1)

Bill Shannon

Non Executive Director – Chairman

Executive Director – Estate Agency

Independent Non Executive Director – Chairman of the Audit Committee and a member of the
Nominations Committee and Remuneration Committee

Independent Non Executive Director – Deputy Chairman, Senior Independent Director, Chairman
of the Remuneration Committee, Chairman of the Nominations Committee and a member of Audit
Committee

David Stewart (2)

Independent Non Executive Director – member of Nominations Committee, Remuneration Committee
and Audit Committee.

Notes:
1 Mark Morris will retire at the 2016 AGM
2 David Stewart, will subject to his election at the 2016 AGM be appointed as Chairman of the Audit Committee, with effect from the 2016 AGM

During the year, the Nominations Committee and the Board considered at length a number of aspects regarding its composition and has
had to respond to a number of changes. These changes comprised the appointment of Kumsal Bayazit Besson and David Stewart as
Independent Non Executive Directors and the recruitment of Adam Castleton, as Group Chief Financial Officer.

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Corporate Governance Report

Further details on all Board changes are set out in this Corporate Governance Report and all of the Directors are listed with their
biographies in the Board at pages 34 and 35 of this Report.

There is a clear division of responsibilities between the Chairman and the Group Chief Executive Officer. The Chairman’s key
responsibilities are leadership of the Board and ensuring its effectiveness on all aspects of its role. The Chairman sets the Board’s agenda,
ensuring that adequate time is available for discussion of all agenda items, and in particular strategic issues. He also promotes a culture
of openness and debate by facilitating the effective contribution of the Non Executive Directors in particular, and ensuring constructive
relations between the Executive and Non Executive Directors.

The Group Chief Executive Officer’s key responsibility is the running of the business and his delegated powers have been set by the Board
and the Directors are satisfied that the balance of Executive and Non Executive Directors is appropriate and that no individual or group
may dominate the Board’s decisions.

Excluding the Chairman, all of the Non Executive Directors are independent of management and are determined to be independent in
accordance with B.1.1 of the Code. The current Non Executive Directors together have a range of experience which is described in more
detail overleaf in the Nominations Committee section.

As stated above, Simon Embley was not deemed to be independent prior to this appointment as Chairman. Other than an appointment to
a small estate management company and to Road to Health a healthcare provider, Simon does not hold any other directorships.

During the year the Directors continuously review and are encouraged to provide feedback on the effectiveness of the Board. Further,
they undertake an annual evaluation of the performance of the Board which includes an evaluation of the Board, its Committees and
of individual Directors (including relevant skills, experience and diversity) to ensure that the Directors remain individually and collectively
effective.

The evaluation process in 2015 involved discussions between each Director and the Chairman, meetings of the Board and discussions
between the Non Executive Directors. As in previous years the Non Executive Directors have also evaluated the Chairman’s performance,
after taking into account the views of the Executive Directors.

Whilst no significant issues requiring action arose from the 2015 evaluations, the outcomes of the exercise were reported to the Board
and showed that the Board and its Committees were discharging their responsibilities effectively. The appraisal produced a number of
recommendations to further improve effectiveness of the Board. As a result, during 2016 the Board will review its meeting arrangements,
including the provision of information to Board members, to ensure that the Board is able to focus on the development and execution of
LSL’s strategy, as well as monitoring performance and governance matters.

During 2016, the Board will continue to monitor the results of the FRC’s discussion – UK Board Succession Planning, which was
published in October 2015 and which considers key issues and identifies suggestion for good practice. This includes a review of best
practice relating to board evaluation and consideration on the role of the nominations committee in succession planning arrangements.

LSL continues to recognise the benefits of diversity (including relevant skills, experience, gender and race) and the current Board
composition includes two female Directors, Helen Buck and Kumsal Bayazit Besson, who are both independent Non Executive Directors.
Whilst the Directors remain of the view that the setting of targets for the number of female directors on the Board is not necessary and
that it will continue to appoint on merit, both the Chairman of the Board and the Chairman of the Nominations Committee ensure that all
searches (including those undertaken in 2015) continue to take into account diversity, including gender and race.

Copies of the Executive Directors’ service agreements and of the Non Executive Directors’ letters of appointment are available for
inspection at the Registered Office during normal business hours and at each AGM.

All Directors may receive independent professional advice at LSL’s expense, if necessary, for the performance of their duties. This is in
addition to the access every Director has to the Company Secretary and her team. The Company Secretary is responsible for advising the
Board on all matters of corporate governance, ensuring that all Board procedures are followed and facilitating training.

Each newly appointed Director receives an induction on a range of topics, including as appropriate, on the responsibilities of a listed
public company director and on LSL’s business. Thereafter, LSL provides the necessary resources for developing this understanding and
knowledge. Further, the Chairman regularly reviews and agrees any training and development needs with each of the Directors and any
training needs are also discussed as part of the annual evaluation exercise.

During 2015 the Board held 14 scheduled meetings (including a three year planning meeting and a strategy meeting). Each of the
Directors was able to allocate sufficient time to LSL to discharge their responsibilities effectively and the attendance of each of the
Directors at the Board meetings (as a Director or a Committee member) is set out below. During 2016 the Board is scheduled to meet 10
times (including a three year planning meeting and a strategy meeting). Additional meetings will be held as required.

During 2015 the Non Executive Directors collectively met three times without the Executive Directors being present and it is the intention
that this will be repeated in 2016. In addition, the Non Executive Directors intend to meet at least once in the year without the Chairman
being present.

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Board and Committee Attendance 2015

Director
Kumsal Bayazit Besson
Helen Buck
Adam Castleton
Ian Crabb
Simon Embley
Adrian Gill
Mark Morris
Bill Shannon
David Stewart

Board (including
3 year planning and
a strategy meeting)

Audit
Committee

Remuneration
Committee

Nominations
Committee

Notes

4
12
3
14
14
14
14
14
7

1
-
-
-
-
-
4
4
2

2
5
-
-
-
-
6
6
2

1
2
-
-
-
-
3
4
2

1
2
3
-

-
4
-
5

Notes:
1 Kumsal Bayazit Besson joined the Board and its Nominations, Remuneration and Audit Committees on 1st September 2015 and therefore her attendance is only recorded for meetings

taking place after her appointment.

2 Helen Buck was not present at two of the scheduled Board meetings, one Remuneration Committee and one Nominations Committee meeting during 2015. She received the papers and

provided her comments and queries to the Chairman of the meeting and the Group Chief Executive Officer for raising at the meetings.

3 Adam Castleton joined the Board on 2nd November 2015 and therefore his attendance is only recorded for meetings taking place after his appointment.
4 Mark Morris was not present at one of the Nominations Committee meeting during 2015. He received the papers and provided his comments and queries to the Chairman of the meeting

and the Group Chief Executive Officer for raising at the meetings.

5 David Stewart joined the Board and its Nominations, Remuneration and Audit Committees on 1st May 2015 and therefore his attendance is only recorded for meetings taking place after his

appointment.

In accordance with LSL’s Articles of Association, all of the Directors appointed since the previous AGM and circa one-third of the
remaining Directors, including any Director who has not been elected or re-elected at either of the two preceding AGMs, are required to
retire and seek election/re-election (as appropriate). Notwithstanding this, since 2012 LSL has in accordance with best practice and by an
amendment to the Nominations Committee Terms of Reference, chosen to adopt annual elections for all Directors and in accordance with
this policy, all of the Directors will stand for re-election at the forthcoming AGM.

The Board is primarily responsible for the overall management of the Group and for decisions on Group strategy, including approval
of the Group’s strategy, its annual business plans and budgets, the interim and full year financial statements and reports, any dividend
proposals, the accounting policies, any major capital projects, any investments and disposals, its succession plans and the monitoring of
financial performance against budget and forecast and the formulation of the Groups risk appetite including the identification, assessment
and monitoring of LSL’s principal risks. In accordance with best practice, LSL has adopted a policy of Matters Reserved for the Board
which is annually reviewed by the Board and any items not included within the policy (such as responsibility for implementing the Board’s
strategy and managing the business) are delegated to the Management Team(s).

There is a programme of regular reviews of performance and developing best practice in matters such as employment, health and
safety, environmental and social and community interests (including human rights and ethical issues). LSL believes that Corporate Social
Responsibility is necessary to support responsibly-grounded business decision making that considers the broad impact of corporate
actions on people, communities, and the environment. Accordingly, the Board takes account of the significance of environmental, social
and governance matters (ESG) when making decisions. Further details of LSL’s CSR objectives can be found in the CSR statement
included in this Report.

The Board has adopted principles of good boardroom practice which set out procedures on how Directors are given accurate, timely
and clear information and how they can seek and obtain information or advice necessary for them to discharge their duties and these
arrangements are reviewed annually as part of the Board’s evaluation process referred to above.

Under the Companies Act 2006, a director must avoid a situation where he/she has, or can have, a direct or indirect interest that conflicts,
or possibly may conflict, with the company’s interest. The Companies Act 2006 allows directors of public companies to authorise
conflicts and potential conflicts where appropriate and where the articles of association contain a provision to this effect, as LSL’s Articles
do. Accordingly, the Board has adopted procedures for the Directors to report any potential or actual conflict to the Board for their
authorisation where appropriate. Each Director is aware of the requirement to seek approval of the Board for any new conflict situations,
as they may arise. The process of reviewing conflicts disclosed, and authorisations given, is repeated both annually and following the
appointment of any new Director. Any conflicts or potential conflicts considered by the Board and any authorisations given are recorded in
the Board minutes and in a register of Director’s conflicts which is maintained by the Company Secretary.

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Corporate Governance Report

Board Committees
The Board has delegated specific responsibilities to three standing committees of the Board: Nominations, Remuneration and Audit. The
membership of these committees and a summary of their main duties under their Terms of Reference are set out below. The full Terms of
Reference may be viewed on LSL’s website (www.lslps.co.uk). During 2015, the Board reviewed the Terms of Reference for each of the
Committees and during 2016 will continue to review its terms of reference in response to amendments to FRC guidance and the Code.

It is also the intention that Bill Shannon as Chairman of the Nominations Committee and Remuneration Committee and Mark Morris as
Chairman of the Audit Committee will both attend the 2016 AGM to answer any questions.

Nominations Committee
Bill Shannon is the Chairman of the Nominations Committee and, as at the date of this Report the other members of the Committee are
Helen Buck, Mark Morris, Kumsal Bayazit Besson (appointed on 1st September 2015) and David Stewart (appointed on 1st May 2015).

The Committee met four times in 2015 and the Group Chief Executive Officer, Deputy Chairman, Group HR Director and Company
Secretary were invited to attend some of these meetings and assisted the Nominations Committee in its deliberations during this period.

The duties of the Nominations Committee are governed by its Terms of Reference, which was reviewed in 2015 to ensure continued
compliance with the Code and its role includes:

a. to regularly review the structure, size and composition (including skills, knowledge and experience) required of the Board and make

recommendations to the Board with regard to any changes;

b. prior to recommending any appointments, evaluate the balance of skills, experience, independence and knowledge on the Board, its
diversity, including gender and race and in light of this evaluation, prepare a description of the role and capabilities required for each
particular appointment;

c. to give full consideration to succession planning for the Directors and senior management (as specified by the Board), taking into

account the challenges and opportunities facing LSL, and what skills and expertise are therefore needed on the Board in the future.
The plans are also reviewed to ensure orderly succession for appointments to the Board and to senior management, so that LSL
maintains an appropriate balance of skills and experience within the Group and on the Board to ensure progressive refreshing of the
Board;

d. to recommend to the Board as a whole the selection and appointment of new executive and non executive directors in accordance
with the Code, ensuring that any search is conducted, and appointments made, on merit, against objective criteria, with due regard
for the benefits of diversity on the Board, including gender and race;

e. report on the nomination of all new Board appointments and undertake an annual performance evaluation to ensure that all members

of the Board have devoted sufficient time to their duties;

f. to keep under review the leadership needs of the Group at varying levels with a view to ensuring the continued ability to compete

effectively in LSL’s marketplaces;

g. to ensure that as part of the process for nominating candidates for any appointments, details are obtained and reviewed of any

interests that the candidate may have which conflict or may conflict with the interest of LSL; and

h. to ensure that prior to the appointment of the Chairman, a job description is prepared which includes an assessment of the time

commitment expected for the role.

As part of its discussions in 2015 the Nominations Committee considered the composition of the Board and the balance of skills and
experience required. These discussions included diversity, and in particular gender and race. In particular the Nominations Committee
considered and, where appropriate made recommendations to the Board on the following matters during 2015:

a. The appointment of David Stewart and Kumsal Bayazit Besson into the roles of Independent Non Executive Directors

b. The appointment of Adam Castleton as Group Chief Financial Officer

Whilst an executive search agency assisted in the recruitment of Kumsal Bayazit Besson and Adam Castleton, the Nominations
Committee did not require the services of any agency in the appointment of David Stewart nor did it consider any other candidates for
this role.

Following the changes in 2015, the LSL Board has expertise in strategy, technology, estate agency, surveying, financial services, the
residential housing sector, retail and marketing, operations, business services, entrepreneurial private and public companies, finance,
customer and employee matters, and corporate governance.

LSL is committed to promoting diversity throughout the Group. In previous years, LSL has reported on studies undertaken in relation to
gender diversity. Whilst the recommendations flowing from these studies continue to be implemented in 2015, LSL undertook an age and
gender analysis of its employee opinion survey which revealed that whilst feedback from employees is consistent regardless of gender,
there are differences in relation to age groups. This feedback will be taken into account in Group employee initiatives going forward.

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Further details of the study together with key performance indicators are set out in LSL’s CSR statements included in this Report.

Remuneration Committee
The Remuneration Committee is chaired by Bill Shannon and at the date of this Report its other members are Mark Morris, Helen Buck,
Kumsal Bayazit Besson (appointed on 1st September 2015) and David Stewart (appointed on 1st May 2015).

The Committee met three times during the year and the Group Chief Executive Officer, the Chairman, the Group HR Director and the
Company Secretary were invited to attend meetings and assist the Remuneration Committee in its deliberations during this period.

The duties of the Remuneration Committee are governed by its Terms of Reference, which were reviewed in 2015 to ensure continued
compliance with the Code. The Terms of Reference of the Remuneration Committee are available from the Company Secretary or LSL’s
website www.lslps.co.uk.

The Remuneration Committee has responsibility for determining LSL’s policy on the remuneration of Executive Directors and selected
senior managers, including pension rights and any compensation payments. It is also responsible for making recommendations for grants
of shares under the employee share schemes. The Directors’ Remuneration Report provides details of how the Committee has discharged
these duties which can be found from page 55 of this Report.

The Remuneration Committee is responsible for ensuring that the Executive Directors and selected senior managers’ remuneration is
designed to promote the long-term success of LSL and for 2016 they have again recommended performance-related elements which
are transparent, stretching and rigorously applied. In discharging its duties, the Remuneration Committee considers LSL’s peers and also
ensures that a significant proportion of the Executive Directors’ remuneration is structured so as to link rewards to corporate and individual
performance and that it is sensitive to pay and employment conditions elsewhere in the Group, especially when determining annual salary
increases.

During 2015, the Remuneration Committee’s overall purpose was to ensure that the levels of remuneration were sufficient to attract,
retain and motivate Directors of the quality required to run LSL successfully. In addition, it was responsible for reviewing and making
recommendations to the Board on any remuneration arrangements for Executive Directors departed from the Board during the year.

Details of any remuneration consultants engaged by the Remuneration Committee during the year are set out in the Directors’ Remuneration
Report.

None of the current Remuneration Committee members have and nor did the 2015 Remuneration Committee members have any personal
financial interest (other than as Shareholders), any conflicts of interest arising from cross directorships; or any day to day involvement in
running the business. The Remuneration Committee recognises and manages conflicts of interest when receiving views from the Executive
Directors or senior managers about any proposals. The Remuneration Committee makes recommendations to the Board and no Director is
permitted to participate in any discussion about their remuneration.

The Remuneration Committee may, in exercising its discretion in relation to the remuneration of Executive Directors and selected senior
managers, take into account LSL’s performance on governance (including regulatory compliance) and CSR related issues and it ensures
that the incentive schemes put in place do not raise any ESG issues by inadvertently motivating irresponsible behaviour.

Audit Committee
The Audit Committee is chaired by Mark Morris and at the date of this Report, its other members are Bill Shannon, Kumsal Bayzit Besson
(appointed on 1st September 2015) and David Stewart (appointed on 1st May 2015). At the 2016 AGM, Mark Morris will retire from the
Board and its Committee, including as Chairman of the Audit Committee. Subject to him being elected at the AGM, David Stewart will
be appointed as Chairman of the Audit Committee, and the Board and Nominations Committee have determined that David Stewart has
recent and relevant financial experience as is required by the Code.

The Committee met on four occasions in 2015. LSL’s Head of Risk and Internal Audit, the external auditors, the Chairman, the Executive
Directors (including the Group Chief Executive Officer and the Group Chief Financial Officer), the Group Financial Controller and the
Company Secretary were invited to attend these meetings to assist the Audit Committee in its deliberations during this period. The Audit
Committee met with the auditors without the Executive Directors being present twice during 2015.

Further details of the duty and responsibilities of the Audit Committee are shown from page 49 of this Report.

Shareholder Relations
LSL places a great deal of importance on communication with its stakeholders and is committed to establishing constructive relationships
with investors and potential investors in order to assist it in developing an understanding of the views of its Shareholders.

LSL maintains a dialogue with institutional Shareholders through regular meetings with such Shareholders to discuss strategy, performance
and governance matters and to obtain investor feedback. The views of the Shareholders expressed during these meetings are reported

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Corporate Governance Report

to the Board. In addition presentations will be arranged from time to time for Shareholders and analysts, including after the interim and
preliminary results.

Steps are taken to ensure that all members of the Board understand the views of major Shareholders. This is achieved in a number of ways
including feedback from the corporate advisors, Executive Directors and the distribution of analysts’ reports to the Board.

In addition each year all of the Non Executive Directors, including the Chairman, the Deputy Chairman and the Senior Independent Director,
are offered the opportunity to attend meetings with all Shareholders as they require. If any Shareholder or any Shareholder representative
groups would like to discuss any issues or concerns with the Non Executive Directors, they can be contacted through the Company
Secretary’s office (see Shareholder Information at page 154 of this Report for details).

With regard to individual Shareholders, the Board considers that the main forum for communication is at the AGM and all of the current
Directors will be available at the 2016 AGM to meet with investors.

All of LSL’s announcements are published on the LSL website (www.lslps.co.uk), together with copies of presentation material and financial
reports.

Model Code
LSL complies with a code on securities dealings in relation to its Ordinary Shares which is consistent with the Model Code published in
the Listing Rules. This code applies to the Directors and relevant employees of LSL and will be reviewed during 2016 in response to the
implementation of the Market Abuse Regulations.

Takeover Directive
The Group has addressed the matters required to be addressed by the Takeover Directive which was implemented in the UK in
accordance with statutory provisions in Part 28 of the Companies Act 2006 in the Report of the Directors. Please refer to the Report of
the Directors for further details.

The Corporate Governance Report is approved by and signed on behalf of the Board of Directors

Sapna B FitzGerald
Company Secretary
3rd March 2016

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Audit Committee Report

Dear Shareholder

I am pleased to report on the activities of the Audit Committee during the 2015 financial year. The Audit Committee, on behalf of the
Board, has ensured that the Annual Report, taken as a whole, is fair, balanced and understandable.

In this report I have detailed how the Audit Committee has discharged its responsibilities.

Members of the Audit Committee have continued to take an active role in understanding the business and the risks and challenges
it faces, particularly as the Group has been without a permanent Group Chief Financial Officer for much of the year. Progress
has been made on a number of fronts in improving the performance of the Group Finance function and development of our risk
framework, but there is further improvement to be delivered under our new Group Chief Financial Officer. Also set out within this
part of the Report are details on the processes we have in place to safeguard the independence and objectivity of our relationship
with the external auditor and the role played by the Risk and Internal Audit Team to ensure we have in place effective control and risk
management processes.

Mark Morris
Chairman of the Audit Committee
3rd March 2016

Roles and Responsibilities of the Audit Committee
During 2015, the duties of the Audit Committee included:

a. to make recommendations to the Board (for it to put to the Shareholders for their approval at a general meeting) on the appointment,
re-appointment, or removal of the external auditor and to approve the remuneration and terms of engagement of the external auditor;

b. to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into

consideration relevant UK professional and regulatory requirements;

c. to ensure that the Group’s accounting and financial policies and controls are regularly reviewed, proper, effective and adequate;

d. to monitor the integrity of LSL’s financial statements and any formal announcements relating to its performance, reviewing significant

financial reporting issues and judgements contained in them;

e. to review the effectiveness of the internal control and risk management systems (including the overall risk management framework

and its underlying financial, operational and compliance related controls);

f. to oversee the composition of the Internal Audit programme, including its linkage to Group risks, and to assess the effectiveness of

the Risk and Internal Audit function (including the appointment/removal of the Group’s Head of Risk and Internal Audit);

g. to ensure that internal and external auditing processes are properly co-ordinated and work effectively and to oversee the relationship

with the external auditor, including reviewing the scope and results of audits;

h. to review procedures for handling any internal allegations involving potential misconduct;

i. to keep under review the nature and extent of non-audit services provided by the external auditors, taking into account LSL’s Auditor

Independence Policy; and

j. to report to the Board on how it has discharged its responsibilities.

In carrying out its duties, the Audit Committee took into account the requirements of the Listing Rules (together with any requirements issued
by the FCA), the Code and the Guidance on Audit Committees issued by the FRC, together with any requirements of the Board, which are all
incorporated into the Audit Committee’s Terms of Reference by reference to them.

The Audit Committee has an established programme of work to ensure that each of its responsibilities is covered adequately during the year.

At the date of this Report, Mark Morris is Chairman of the Audit Committee, and he will retire from this role at the 2016 AGM. David Stewart,
will subject to his election at the 2016 AGM be appointed as Chairman of the Audit Committee with effect from the AGM.
The Board and Nominations Committee have determined that David Stewart has recent and relevant financial experience as is required by
the Code.

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Audit Committee Report

What the Audit Committee did in 2015:
The Audit Committee met three times in 2015, during which time the Committee:

a. reviewed the interim and year end results and preliminary announcement;

b. received and considered, as part of the review of the interim and annual financial statements, reports from the external auditor in

respect of their review of the interim results and annual financial statements, the audit plan for the year and the results of the annual
audit. These reports included the scope of the interim review and annual audit, the approach to be adopted by the external auditor
to address and conclude upon key estimates and other key audit areas, the basis on which the auditor assesses materiality, the
terms of engagement for the external auditor and an on-going assessment of the impact of future accounting developments on the
Group;

c. considered this Report, including the Financial Statements in the context of fairness, balance and understandability to ensure that
the Committee was in a position to report to the Board that the Annual Report and Accounts 2015 when taken as a whole is
fair, balanced and understandable on the basis that the description of the business agrees with the Audit Committee’s own
understanding, the risks reflect the issues that concerned the Audit Committee, appropriate weight has been given to the ‘good and
bad’ news, the discussion of performance properly reflects the ‘story’ of the year and that there is a clear and well-articulated link
between all areas of disclosure;

d. considered the effectiveness and independence of the external audit and recommended to the Board for approval by Shareholders at
the 2016 AGM, the re-appointment of Ernst & Young as external auditor. The Committee also confirmed its intention to complete an
audit services tendering exercise in 2016 ahead of the 2017 financial year;

e. considered the effectiveness of internal audit and agreed the annual Risk and Internal Audit plan, including compliance with both

internal standards and external regulatory requirements, and its linkage to Group risks; plus engagement with external consultants on
specialist areas as appropriate;

f. received and considered regular reports from the Risk and Internal Audit Team with regard to the control environment of the Group;

g. considered the review of material business risks, including reviewing internal control processes used to identify and monitor principal

risks and uncertainties. An update of the Group’s principal risks and uncertainties was presented to the Audit Committee for
discussion at each meeting and during the year the Audit Committee supported the Board in its robust assessment of LSL’s principal
risks and the development of the Group’s risk appetite framework;

h. evaluated areas for the continued development of financial control structures, including the reporting of PI claims; payment control

arrangements; strengthened the role and effectiveness of the Group’s finance functions; and the resourcing and control environment
in relation to the Group’s acquisition activities;

i. continued to develop the systems and controls in place with regard to valuations carried out by the Surveying Division, including

strengthening the effectiveness of second-line structures;

j. initiated steps to further enhance the Group’s information security arrangements;

k. reviewed the effectiveness of the Group’s whistleblowing policy, including logs of any whistleblowing-related incidents;

l. reviewed the Audit Committee’s composition and confirmed that there is sufficient expertise and resource for the Audit Committee to

fulfil its responsibilities effectively;

m. reviewed the Audit Committee’s Terms of Reference; and

n. carried out an annual review of the Audit Committee’s performance.

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Significant issues considered in relation to the Financial Statements
During the year the Audit Committee, the Management Team, the Head of Risk and Internal Audit together with the external auditor
considered and concluded on what the significant risks and issues were in relation to the Financial Statements and how these would be
addressed. Areas of particular focus during the year have been:

Significant Judgments in
Financial Reporting for 2015

Revenue recognition

Provision for PI Costs relating to
valuation services

How the Audit Committee Addressed these Judgments

The Group sells a number of different products and services and operates in multiple locations throughout the UK.
Revenue recognition is considered to be material to the Group although the nature of the revenue recognised in the
Group is not considered complex. LSL’s Risk and Internal Audit Team performed financial control audits on all key
subsidiaries in 2015 which included focus on the revenue cycle with findings reported to the Audit Committee for
discussion.

Given the materiality of the PI costs provision, the Board receives monthly updates on the status of the provision
which includes the status of existing claims and the number and nature of new claims. The Group has historically
experienced a high level of claims relating to the 2004 to 2008 high risk lending period, and continues to receive
claims relating to valuation work undertaken during this period.

During 2015, the Management Team continued to undertake a detailed review on a case-by-case basis of all
notifications and claims relating to this period. The review has also included an assessment of the claims and
notifications on a case-by-case basis by specialist external legal counsel.

The Committee also commissioned Risk and Internal Audit to complete two internal audit reviews of this work and
during the year further improvements to the reporting of claims and notifications have also been implemented.

The results of the reviews were presented to the Audit Committee and the Board during 2015.

Acquisition accounting

In 2015 the Board approved a number of acquisitions including Thomas Morris and 30 small lettings books. During
the year, the Audit Committee has, in relation to the acquisition accounting, reviewed the way in which intangibles
and goodwill are recognised, and the treatment of earn-out and other contingent consideration.

Client monies accounts with regard
to the Lettings businesses

Other Financial Statement
Matters considered by the
Committee

Going Concern

Viability Statement

The Group holds client monies within its Lettings businesses. Neither the client monies, nor the matching liabilities
to such clients are included in the Group balance sheet, as the Group is not entitled to the benefit from the use
of the amount held in these accounts. The Group does have a responsibility to ensure that the money held in the
client accounts is appropriate and if required, the Group would make good any shortfall. The client accounts are
reconciled at regular intervals (including daily exercises for the larger businesses) and the Risk and Internal Audit
Team perform regular client account audits and findings are reported to the Audit Committee.

How the Audit Committee Addressed these Judgments

The Management Team provided the Audit Committee with a paper on the ability of the Group to continue as a
going concern. This paper considered the future profitability of the Group, forecast of future cash flows, banking
covenants, liquidity of investments and joint ventures and the ability of the Group to re-finance any loans (including
the Group’s facility which is due to mature in August 2017) where necessary.

The key judgments, assumptions and estimates underpinning this review were discussed and considered.
Following the review, the Audit Committee was able to conclude that the adoption of the going concern principle
was justified for the foreseeable future.

The Management Team provided the Audit Committee with a paper on the financial viability of the Group, which was
determined over a three year period, which is consistent with the period of the Group’s strategic plan. This paper
included a review of the principal risks, and considered which of these risks might threaten the Group’s viability. It also
considered and modelled a number of severe but plausible scenarios.

The scenario modelling considered a significant downturn in the property market, plus scenarios involving conflating
smaller risks, and took into account the Group’s ability to refinance its facility, which is due to mature in August 2017.

The key judgments, assumptions and modelling underpinning the review were discussed and considered. Following
the review, the Audit Committee was able to approve the statement and recommend its adoption by the Board.

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Audit Committee Report

Treatment of exceptional items

The Audit Committee has, in line with FRC guidance, reviewed the Group’s previous accounting policy with regard
to the classification of items as exceptional.

Available for sale assets

The Group holds minority shareholdings in Zoopla, VEM and the GPEA.
The Audit Committee has considered the fair value of these holdings for the inclusion in the Group’s balance sheet.

Impairment of goodwill and
intangible assets

The Management Team annually provide the Audit Committee with a paper supporting the review of goodwill to
assess whether any impairment is required.

Based on the work performed, the Audit Committee was able to conclude that no impairment was necessary to the
goodwill or intangible assets as at 31st December 2015. Further information is provided in the Notes to the Financial
Statements.

Taxation

The Audit Committee has received reports from the Management Team on the tax provisions recorded in the
Financial Statements.

Misstatement due to fraud and
error

The Management Team submit regular reports and updates to the Audit Committee on the Group’s fraud
prevention arrangements, including details of any incidences of any actual or suspected circumstances.

LMS

The Group acquired 33.33% of LMS in 2011 and increased its holding to 49.99% in 2014 with part of the contingent
consideration for the 2014 acquisition deferred for payment in 2016, based on LMS’s performance in 2015. Accordingly,
during 2015, the Audit Committee has considered the accounting treatment of the contingent consideration.

Appointment of External Auditor
Whilst the Audit Committee has not undertaken a tendering exercise in 2015, it has conducted a review of the auditor’s
effectiveness, independence and objectivity. In making its assessment of the effectiveness of the external audit, the Audit
Committee reviewed the external audit findings and the Management Team’s responses to these findings. In addition,
discussions were held with the Risk and Internal Audit Team and Management Teams with regard to the effectiveness of
the audit process.

Taking into account the abovementioned factors, the Audit Committee, acting on behalf of the Directors, has concluded
that Ernst & Young is effective, independent and objective, and based on this conclusion, the Board will recommend to
Shareholders the reappointment of Ernst & Young as external auditor at the 2016 AGM and seek authority for the
Directors to agree the external auditor’s remuneration.

During 2014, the European Parliament and Council adopted measures which will reform the statutory audit market and
impact all UK listed companies. The new Directive (which amends the existing 2006 Directive), will be implemented into
UK law by 16th June 2016, requiring UK listed companies to change their external auditor every 10 years with effect for
financial years beginning on or after 17th June 2016.

LSL is closely monitoring the implementation of the EU Audit Directive and Regulation into the UK. Ernst & Young have acted as LSL’s
external auditors since 2004 with a tendering exercise undertaken in 2007. In accordance with the draft guidance included within the
Department of Business Innovation and Skills consultation, which was published in October 2015, Ernst & Young’s current term will
expire at the end of 2016 and LSL will be required to conduct an audit tendering exercise ahead of the 2017 audit. Ernst & Young will be
eligible to participate in this tendering exercise, although their total term will be subject to a 20 year cap. LSL will continue to monitor the
implementation of the reforms into UK law and notes the content of the feedback document published by the Department of Business
Innovation and Skills in January 2016.

The purpose of the audit tendering exercise will be to benchmark the quality and effectiveness of the services provided by
the incumbent auditor against those offered by other firms, with the aim of obtaining the best quality and most effective audit.

Auditor Independence Policy
To guard against the objectivity and independence of the external auditors being compromised, the Audit Committee has
adopted a policy under which any non-audit related services provided by the external auditors must be approved by the
Committee or be within a pre-approved category and a pre-approved fee limit (Auditor Independence Policy). The Audit
Committee is kept regularly informed of the fees paid to the auditor in all capacities.

Under the terms of the Auditor Independence Policy, which takes into account the relevant ethical guidance regarding the
provision of non-audit services by external audit firms, the following categories of fee need pre-approval from the Audit
Committee:

a. any fee for specific non-audit services which exceed £25,000;
b. any fee which has a contingent element; and
c. where the total of the fees for non-audit services in any particular year is likely to exceed the audit fee for the year.

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The Auditor Independence Policy stipulates restrictions and procedures in relation to the potential allocation of non-audit
work to the auditor. These include categories of work which may and may not be allocated to the auditor, subject to certain
provisions as to materiality, nature of and competency to perform work.

A copy of the Auditor Independence Policy is available at LSL’s website: (www.lslps.co.uk).

The split between audit and non-audit fees for 2015 appears at Note 9 to the Financial Statements. The non-audit fees
amounted to £60,000 (2014: £83,000) compared with audit fees and other assurance related services fees of £432,300
(2014: £271,000). This is in line with the provisions of the Auditor Independence Policy. The non-audit fees for the current
and prior year relate to taxation services.

Internal Controls
The Board has overall responsibility for LSL’s system of internal controls and for reviewing its effectiveness. The system of internal controls
is subject to an on-going process of change and improvement, and was originally designed in accordance with the guidance of the Turnbull
Committee on Internal Controls and it is regularly reviewed and was updated in 2015 to take into account the guidance set out in the
September 2014 FRC “Guidance on Risk Management, Internal Control and Related Financial and Business Reporting”.

The arrangements in place for 2015 sought to identify, evaluate and manage significant risks faced by LSL, including assessments of risk
appetite levels and measures to define levels of existing risk in relation to tolerable boundaries. The system aimed to manage, rather than
eliminate, the risk of failure to achieve business objectives and can provide only reasonable, and not absolute, assurance against material
misstatement or loss.

Internal control facilitates the effectiveness and efficiency of LSL’s operations, helps to ensure the reliability of internal and external reporting
and assists compliance with laws and regulations. The internal controls are also in place to safeguard both Shareholder investment and
LSL’s assets.

In order to discharge this responsibility, the Board has established the procedures necessary to apply both the Code and relevant FRC
guidance, including clear operating procedures, distinct lines of responsibility and delegated authorities. LSL’s risk management and internal
control procedures and framework has continually evolved since LSL was listed on the London Stock Exchange in 2006 and is regularly
reviewed by the Board and the Audit Committee and continues to be in place up to the date of this Report. The risk framework will continue
to evolve in 2016 in line with emerging best practice.

LSL’s risk management and internal control framework is made up of the following parts:

a. Risk assessment

b. Control environment

c. Control activities

d. Monitoring

e. Information and communication

In particular, the Group has in place internal control and risk management systems in relation to LSL’s financial reporting procedures and
the process for preparation of consolidated accounts. These systems include policies and procedures to facilitate the maintenance of
records that accurately and fairly reflect transactions, provide reasonable assurance that transactions are recorded as necessary to permit
the preparation of financial statements in accordance with IFRS or UK Generally Accepted Accounting Principles, as appropriate, and that
require reported data to be reviewed and reconciled.

Further, LSL operates a management structure with delegated authority levels and functional reporting lines and accountability. It also
operates a budgeting and financial reporting system which compares actual performance to latest forecast, budget and to the previous year
on a monthly basis. In addition, the Executive Directors receive daily information on sales activity and weekly information on key result areas.
All capital expenditure and other purchases are subject to appropriate authorisation procedures.

In addition, LSL has established a Financial Services Management Committee (FSMC) and a Financial Services Risk Committee (FSRC)
which are both Executive Committees with roles and responsibilities relating to the management of LSL’s FCA regulated Financial Services
businesses. Equivalent governance bodies also exist for other business operations, for example, the Estate Agency Management
Committee. The Audit Committee and the Board receives regular reports from the FSMC and FSRC along with updates from the Group’s
Customer Outcomes Committee, whose focus is to monitor key performance indicators in relation to LSL’s key customer groups, being
consumers and key lender clients.

During 2015 the Executive Directors have regularly identified, evaluated and managed the principal risks and uncertainties which could
adversely affect LSL’s business, operating results and financial condition. The effectiveness of the internal control system and risk
management process is also kept under review by the Audit Committee and has been reviewed by the Board during 2015 as part of an
annual review which considered the effectiveness of the risk management arrangements and internal control systems. This review covered

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Audit Committee Report

all material controls, including financial, operational and compliance controls. In addition, LSL’s Risk and Internal Audit Team regularly
submits reports to the Audit Committee and this, together with the internal controls system and risk management process in place within
LSL, allows the Board to monitor financial and operational performance and compliance with controls on a continuing basis and to identify
and respond to business risks as they arise.

During the year the Committee reviewed progress on a number of matters identified in 2014 intended to improve the control environment,
in particular the effectiveness of the Group Finance function as a second line of defence. Whilst progress has been made on a number
of fronts, because the Group has not had a permanent Chief Financial Officer for much of the year there is still work to be done. The
Committee will closely monitor progress on these outstanding matters during 2016.

The principal risks and uncertainties facing LSL together with details of key mitigation initiatives is set out in the Strategic Report on pages
22 and 25.

The Audit Committee Report is approved by and signed on behalf of the Board of Directors

Mark Morris
Chairman of the Audit Committee
3rd March 2016

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Directors’
Remuneration Report

Annual Statement

Dear Shareholder

This report sets out the remuneration policy for the Directors of LSL and discloses amounts paid to individuals who were members
of the Board over the course of the financial year ended 2015. This Directors’ Remuneration Report is divided into the following three
sections:

• Annual Statement: summarising and explaining the major decisions on, and any substantial changes to the Directors’ remuneration

in the year;

• Directors’ Remuneration Policy: setting out the basis of remuneration for the Directors that has applied since the three-year policy

was approved by shareholders at the 2014 AGM; and

• Annual Report on Remuneration: setting out the remuneration earned by the Directors in the year ended 31st December 2015 and

how the Directors’ Remuneration Policy will be implemented in 2016.

The Directors’ Remuneration Policy (referred to in this Directors’ Remuneration Report as the Policy) is subject to a binding vote every
three years (sooner if changes are made to the Policy) whereas the Annual Statement and Annual Report on Remuneration are subject
to an annual Shareholder advisory vote and will be presented to Shareholders at the 2016 AGM.

The Policy was submitted to and was approved by Shareholders at the 2014 AGM and, as no changes to the Policy have been
proposed, it is not being submitted for Shareholder approval at the 2016 AGM although changes introduced by the Code (September
2014) have been taken into account in the implementation of the Policy during 2016 (see the Annual Report on Remuneration for further
details).

Summary of LSL’s performance in the year
In 2015 LSL made good progress against a backdrop of rapidly changing market conditions and the 2015 Executive Directors’
bonus awards reflect this. The 2015 bonus scheme was made up of 80% based on LSL’s financial performance plus 20% based on
individually agreed non-financial measures. The Executive Directors’ bonus scheme is subject to a 100% of basic salary cap.

Based on LSL’s performance in 2015, eligible Executive Directors received an annual bonus equivalent to between 35% and 80% of
salary in respect of the financial performance element and between 10% and 13.3% of the available 20% of salary for performance
against individual non-financial measures.

Further, Simon Embley and Ian Crabb are expected to receive 66.81% of their 2013 LTIP awards in accordance with the challenging
performance conditions based on the Earnings Per Share (EPS) and Total Shareholder Return (TSR). The awards which are due to vest
in April 2016 are expected to deliver based on the EPS element of the targets only. Further details of incentive payments are set out in
the Annual Report on Remuneration.

Summary of key decisions in the year
The Remuneration Committee continually reviews the senior executive remuneration policy to ensure it promotes the attraction,
motivation and retention of the high quality executives who have been key to delivering LSL’s strategy in the past and who will be key to
delivering sustainable earnings growth and Shareholder return in the future. The Remuneration Committee’s most recent conclusions
are that the existing senior executive remuneration policy remains appropriate and should continue to operate for 2016. Specifically, the
Remuneration Committee felt that:

a. basic salary levels are considered to be broadly appropriate and in line with the Policy. Details of any basic salary adjustments are

set out at the start of the Annual Report on Remuneration;

b. the annual bonus continues to work well; and

c. the long-term incentive grant policy, whereby nil-cost awards are granted annually up to a maximum normal limit of 100% of

salary (200% in exceptional circumstances) with vesting based on EPC (70%) and relative TSR (30%) performance conditions and
continued service, provides a strong alignment between the senior executive team and Shareholders. The existing LTIP scheme
which was put in place in November 2006 is due to expire in November 2016. Accordingly, a replacement plan will be presented
for Shareholder approval at the 2016 AGM along with replacement SIP/BAYE, SAYE and CSOP schemes. As the proposed
scheme is similar to and based on the 2006 LTIP scheme, no changes are required to the Directors’ Remuneration Policy.

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Directors’ Remuneration Report

In addition to the above, and in relation to the Board changes which took place during 2015, the Remuneration Committee has also
dealt with the recruitment of a new Group Chief Financial Officer (Adam Castleton) in November 2015.

Further details of the remuneration packages recommended and received are described in the Annual Report on Remuneration.

In relation to the remuneration arrangements for the Executive Directors and senior managers, the Remuneration Committee ensures
that they are aligned to the LSL’s strategic goals and key performance indicators. Further, the Remuneration Committee believes
that the current remuneration policy continues to promote the long-term success of LSL and to incentivise the delivery of strong yet
sustainable financial results with the creation of Shareholder value.

Bill Shannon
Chairman of the Remuneration Committee
3rd March 2016

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Directors’ Remuneration Policy (Policy)

Introduction and Overview
The Policy was approved by shareholders at the 2014 AGM and the Directors are not recommending any amendments for 2016. A
detailed review of the Policy will be carried out in advance of the 2017 AGM, when it is intended that the new Policy will be submitted for
Shareholder approval.

The Board recognises that the Directors’ remuneration is of legitimate concern to Shareholders and is committed to following current best
practice. The Group operates within a competitive environment; performance depends on the individual contributions of the Directors and
employees and LSL believes in rewarding vision and innovation.

When setting the Executive Directors’ remuneration, the Remuneration Committee endeavours to ensure that all Executive Directors are
provided with appropriate profit related pay and an element of pay relates to non-financial performance measures to encourage enhanced
performance and that they are, in a fair and responsible manner, rewarded for their individual contributions to the success of the Group.

LSL’s policy is to provide executive remuneration packages designed to attract, motivate and retain Executive Directors of the calibre
necessary to maintain and improve the Group’s profitability and effectiveness and to reward them for enhancing Shareholder value and
return. To do this, it aims to provide a market competitive (but not excessive) package of pay and benefits. The Group’s general policy is
to set basic salaries around mid-market levels and set performance pay levels which are at the upper quartile of market practice but with
stretching goals that accord with the Group’s general policy of seeking to make bonuses self-financing wherever possible. Remuneration
packages will also reflect the Executive Director’s responsibilities and contain incentives to deliver the Group’s objectives.

As noted in the Remuneration Committee Chairman’s Letter on page 55, the Policy has not been updated from that approved by
Shareholders at the 2014 AGM, but it is included here for information;

a. the chart showing remuneration scenarios on page 61 has been updated to reflect potential 2016 remuneration levels;

b. details of external appointments of Executive Directors on page 62 has been updated to reflect current appointments; and

c. the tables summarising the terms of Directors’ service contracts have been updated to reflect changes to the composition of the

Board during 2015.

Consideration of Shareholder Views
The Remuneration Committee considers Shareholder feedback received in relation to LSL’s Annual Report and Accounts, including the
Directors’ Remuneration Report each year at a meeting following publication of the Report. This feedback, plus any additional feedback
received during any meetings from time to time, is then considered as part of the Group’s annual review of the Policy. In addition, the
Remuneration Committee will seek to engage directly with institutional Shareholders and their representative bodies should any material
changes be made to the Policy. Details of votes cast for and against the resolution to approve last year’s Directors’ Remuneration Report
and any matters discussed with Shareholders during the year are set out in the Annual Report on Remuneration. For further details of
the way in which LSL communicates with its Shareholders, please see the Shareholder Relations section of the Corporate Governance
Report.

Consideration of Employment Conditions Elsewhere in the Group
The Remuneration Committee considers the general basic salary increase for the broader UK employee population when determining the
annual salary increases for the Executive Directors. The Remuneration Committee did not consult with other employees with regard to
remuneration of the Executive Directors.

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Directors’ Remuneration Report

Summary of Remuneration Policy

Element

How component supports
corporate strategy

Basic salary

• Reflects the value of the
individual and their role.

Operation

Maximum

Performance
metrics
and period

• Reviewed annually, normally

• There is no prescribed

• Not applicable.

effective 1st January.

• Reflects skills and experience

• Takes periodic account

over time.

• Provides an appropriate level
of basic fixed income avoiding
excessive risk arising from over
reliance on variable income.

against companies with similar
characteristics and sector
comparators.

maximum annual basic salary
increase.

• The Remuneration Committee

is guided by the general
increase for the broader
employee population but
may decide to award a
lower increase for Executive
Directors or indeed exceed this
to recognise, for example, an
increase in the scale, scope or
responsibility of the role and/
or to take account of relevant
market movements.

• Current salary levels are set
out in the Annual Report on
Remuneration.

Annual
bonus

• Incentivises annual delivery of
financial and strategic goals.

• Maximum bonus only payable

for achieving demanding
targets.

• Aligned to main financial
measures of delivering
sustainable profit growth and
shareholder return.

Long-term
incentive plan
(approved by
Shareholders
in 2006, to be
renewed at
the 2016 AGM)

• Targets reviewed annually.

• Maximum: 100% of salary.

• Performance

• Bonus level is determined by
the Remuneration Committee
after the end of the relevant
financial year, subject to
performance against targets
set at the start of the year.

• Paid in cash.

• Not pensionable.

• Bonus is subject to a clawback

mechanism.

• Awards of nil-cost or

conditional shares are
made annually with vesting
dependent on the achievement
of performance conditions
over the subsequent three
years.

• The Remuneration Committee
reviews the quantum of awards
annually and monitors the
continuing suitability of the
performance measures.

• LTIP award is subject to a
clawback mechanism.

• 100% of salary or grants up to
200% of salary may be made
in exceptional circumstances.

period: one year.

• Performance

metrics: Group
Underlying
Operating Profit
(majority); and

• Non Financial
Measures
(minority).

• Performance

period: normally
three years.

• Adjusted Basic
EPS growth
targets; and/or

• Relative TSR

targets.

• 25% vests at

threshold (35% for
TSR) increasing to
100% at maximum.

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Summary of Remuneration Policy continued

Element

How component supports
corporate strategy

Operation

Maximum

Performance
metrics
and period

All-employee
sharesave
(SAYE, SIP/
BAYE
and CSOP)
(previously
approved by
Shareholders
to be
renewed
at the 2016
AGM)

Share
ownership

• Encourages long-term
shareholding in LSL.

• Invitations made by the
Committee under the
approved SAYE, SIP/BAYE
and CSOP.

• As per HMRC limits.

None.

• To provide alignment between

• Executive Directors are

• Minimum of 100% of salary

None.

Executive Directors and
shareholders.

required to build and maintain
a shareholding equivalent to
one year’s basic salary over
a period of three years from
the date the guidelines were
adopted (or from date of
appointment if later) through
the retention of vested share
awards or through open
market purchases.

Benefits

• Provides insured benefits to
support the individual and
their family during periods of ill
health, accidents or death.

• Access to car allowance to
facilitate effective travel.

• Includes car allowance, life

• At cost.

None.

assurance and private medical
insurance. Other benefits
may be provided where
appropriate.

Pension

• Provides modest retirement

• Defined contribution.

benefits.

• Opportunity for Executive

Directors to contribute to their
own retirement plan.

• HMRC approved arrangement.

None.

• New employees are offered a
pension in accordance with
auto enrolment minimums.
The Remuneration Committee
may use its discretion on the
appointment of new executive
directors to recommend a 5%
match of basic salary.

Non
Executive
Directors

• To provide fees reflecting
time commitments and
responsibilities of each role,
in line with those provided by
similarly sized companies.

• Cash fee paid on a monthly

• There is no prescribed

None.

basis.

maximum annual fee increase.

• Fees are normally reviewed

• The Remuneration Committee

from time to time.

is guided by the general
increase for the broader
employee population scale,
scope or responsibility of the
role and/or to take account of
relevant market movements.

• Current fee levels are set

out in the Annual Report on
Remuneration.

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Directors’ Remuneration Report

Notes to the Remuneration Policy Summary:
1. A description of how LSL has implemented the Policy set out in the table for 2015 and how it will operate it for 2016 is set out in the

Annual Report on Remuneration.

2. The following differences exist between LSL’s Policy for the remuneration of Executive Directors as set out in the table and its approach

to the payment of Group employees generally:

a) A lower level of maximum annual bonus (or no bonus) opportunity may apply to employees other than the Executive Directors.

b) Participation in the long-term incentive plan (LTIP) is limited to the Executive Directors and certain selected senior managers. All

employees are eligible to participate in LSL’s share save schemes: save as you earn (SAYE), self invested plan/ buy as you earn (SIP/
BAYE); and company share ownership plan (CSOPs) upon invitation.

c) Benefits that are offered to other employees generally comprise of paid holidays and voluntary benefits such as childcare vouchers, a

health cash plan, life assurance and, for more senior managers, private medical insurance.

d) LSL offers a stakeholder pension scheme with employee and employer contributions for new members calculated at a level which

is compliant with automatic enrolment minimums (increasing over time as required by legislation) and based on a band of qualifying
earnings which may vary month by month as variable pay fluctuates. The Remuneration Committee may use its discretion on the
appointment of new executive directors to recommend a 5% match of basic salary.

In general, the above listed differences arise from the development of remuneration arrangements that are market competitive for the
various categories of individuals, together with the fact that remuneration of the Executive Directors and selected senior managers
typically has a greater emphasis on performance-related pay.

3. The choice of the performance metrics applicable to the annual bonus scheme reflect the Remuneration Committee’s belief that any

incentive compensation should be appropriately challenging and tied to both the delivery of profit and non-financial measures.

4. The TSR and EPS performance conditions applicable to the LTIP were selected by the Remuneration Committee on the basis that they
reward the delivery of long-term returns to Shareholders and the Group’s financial growth, and they are consistent with LSL’s objective
of delivering superior levels of long-term value to Shareholders. The TSR performance condition is monitored on the Remuneration
Committee’s behalf by NBS whilst the Group’s EPS growth is derived from the audited financial statements.

5. The Remuneration Committee operates the LTIP in accordance with the plan rules and the Listing Rules of the FCA and the

Remuneration Committee, consistent with market practice, retains discretion over a number of areas relating to the operation and
administration of the plan.

6. While LTIP awards currently vest after three years subject to continued service and performance targets, the Remuneration Committee

will consider developments in best practice when setting future long-term incentive grant policies.

7. The employee share schemes (SAYE, SIP/BAYE and CSOP) do not include any performance conditions.

8. For the avoidance of doubt, in approving the Policy, authority was given to LSL to honour any commitments entered into with current
or former Directors (such as the payment of a pension, payment of last year’s annual bonus or the vesting/exercise of share awards
granted in the past) that have been disclosed in previous remuneration reports. Details of any payments to former Directors will be set
out in the Annual Report on Remuneration as they arise.

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Reward Scenarios (Illustration of Application of Remuneration Policy)
The charts below show how the composition of each of the remuneration packages, as applicable for each of the Executive Directors who
are currently holding offi ce and how each varies at diff erent levels of performance under the Policy set out above, as a percentage of total
remuneration opportunity and as a total value:

£1,235

32%

£875

23%

£435

27%

Fixed Pay

Bonus

LTIP

£886

£871

£625

33%

£615

33%

£306

23%

28%

33%

£301

23%

28%

33%

100%

50%

36%

100%

49%

34%

100%

49%

34%

s
0
0
0
’
£

£1,400

£1,200

£1,000

£800

£600

£400

£200

£0

Below Target

Target

Maximum

Below Target

Target

Maximum

Below Target

Target

Maximum

Group Chief Executive Offi cer

Group Chief Financial Offi cer

Executive Director

Notes to the Reward Scenarios:
1. The ‘below target’ performance scenario comprises the fi xed elements of remuneration only, including:

a) salary, applying from 1st January 2016;

b) pension, as per the Policy; and

c) estimated benefi ts.

2. The target level of bonus is taken to be 60% of the maximum bonus opportunity (100% of salary), and the on-target level of LTIP vesting
is assumed to be 50% of the face value assuming a normal grant level (100% of salary). These values are included in addition to the
components/values of minimum remuneration.

3. Maximum remuneration assumes full bonus payout (100% of salary) and the full face value of the LTIP (100% of salary), in addition to

fi xed components of remuneration.

4. No share price growth has been factored into the calculations.

Approach to Recruitment and Promotions
The remuneration package for a new Executive Director would be set in accordance with the terms of LSL’s prevailing approved
remuneration policy at the time of appointment and take into account the skills and experience of the individual, the market rate for a
candidate of that experience and the importance of securing the relevant individual.

Salary would be provided at such a level as required to attract the most appropriate candidate and may be set initially at a below mid-
market level on the basis that it may progress towards the mid-market level once expertise and performance has been proven and
sustained. The annual bonus potential would be limited to 100% of salary and grants under the LTIP would be limited to 100% of salary
or 200% of salary in exceptional circumstances. Further, in exceptional circumstances the Remuneration Committee may off er additional
cash and/or share-based elements to replace deferred or incentive pay forfeited by an individual leaving a previous employer. It would
seek to ensure, where possible, that these awards would be consistent with any awards forfeited in terms of vesting periods, expected
value and performance conditions.

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Directors’ Remuneration Report

For an internal candidate being appointed as an Executive Director, any variable pay element awarded in respect of the prior role may
be allowed to pay out according to its terms. In addition, any other on-going remuneration obligations existing prior to appointment may
continue, provided that they are put to Shareholders for approval at the earliest opportunity.

For external and internal candidate appointments, the Remuneration Committee may agree that LSL will meet certain relocation and/or
incidental expenses as appropriate.

In exceptional circumstances the Remuneration Committee may also agree, on the recruitment of a new executive director, a notice
period in excess of nine months but with the intention to reduce this to nine months over a specified period.

Service Contracts for Executive Directors
The service contracts for each of the Executive Directors in place at the date of this Report are not fixed term and are terminable by either
LSL or the Executive Director on the following bases:

Director

Ian Crabb

Adrian Gill

Adam Castleton

Commencement of Current Service Contract

Notice Period

9th September 2013

24th November 2014

2nd November 2015

9 months

At the Remuneration Committee’s recommendation and at the Board’s discretion, early termination of an Executive Director’s service
contract can be undertaken by way of payment of salary and benefits in lieu of the required notice period. A summary of the main
contractual terms surrounding termination are set out below:

Provision

Notice Period

Detailed Terms

9 months

Termination Payment

Payment in lieu of notice based on basic salary, fixed benefits and pension

Remuneration entitlements

A bonus may be payable (pro-rated where relevant) and outstanding share awards may vest
(see below)

Change of control

No Executive Director’s service contract contains additional provisions in respect of change of
control

At the Remuneration Committee’s recommendation and at the Board’s discretion early termination of a service contract can be
undertaken by way of payment of nine months’ salary and benefits. An annual bonus may be payable with respect to the period of the
financial year served although it will be pro-rated for time and paid at the normal payout date.

Any share-based entitlements granted to an Executive Director under LSL’s share plans will be determined based on the relevant plan
rules. However, in certain prescribed circumstances under the LTIP rules, such as death, injury, disability, redundancy, retirement or
cessation by reason of the employing company/business ceasing to be a member of the Group, or other circumstances at the discretion
of the Remuneration Committee, a “good leaver” status may be applied.

In exceptional circumstances for good leavers, all or part of unvested LTIP awards may vest at the date of cessation of employment. In
all other circumstances the awards will vest at the original specified vesting date, unless specifically determined by the Remuneration
Committee that the award(s) for an individual will lapse. In exercising its discretion to the extent to which and when an award shall vest the
Remuneration Committee will, under the LTIP rules, take into account:

1. the progress made towards meeting the performance conditions;

2. the extent to which it considers the performance condition would have been satisfied by the end of the vesting period;

3. the proportion of the vesting period elapsed; and

4. any other factors which it considers to be relevant.

The Board permits Executive Directors to accept appropriate outside commercial non executive director appointments provided that the
aggregate commitment is compatible with their duties as an Executive Director. The Executive Directors concerned may (subject to Board
approval) retain fees paid for these services. During 2015, other than Adrian Gill’s appointment as a non executive director of Lifetime
Legal Limited for which he receives a fee; and Adam Castleton’s directorship and 50% ownership of Porten Properties Limited, none of
the Executive Directors held any other non executive directorships of any other companies other than to represent the majority or minority
interests of the Group or to participate in representative trade bodies.

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Non Executive Directors
The Group’s policy is to appoint to the Board Non Executive Directors with a breadth of skills and experience that is relevant to the
Group’s business. Appointments are made by the Board upon the recommendations and advice from the Nominations Committee.

Non Executive Directors, including the Chairman, have letters of appointment which set out their duties and responsibilities. The Non
Executive Directors and Chairman are not eligible to participate in incentive arrangements or receive pension provision. The following table
shows details of the terms of appointment for the Non Executive Directors in place at the date of this Report:

Director

Date Original Term Commenced

Date Current Term Commenced

Kumsal Bayazit
Besson

1st September 2015

–

Helen Buck

1st December 2011

1st December 2014

Simon Embley

1st January 2015

–

Mark Morris

21st November 2006

21st November 2015

Bill Shannon

7th January 2014

David Stewart

1st May 2015

–

Expected Expiry Date of
Current Term

31st August 2018

30th November 2017

31st December 2017

28th April 2016

6th January 2017

30th April 2018

Annual Report on Remuneration

Implementation of the Remuneration Policy for the year ending 31st December 2016 (unaudited information)
This section of the Directors’ Remuneration Report sets out how the Policy will be implemented for the year ending 31st December 2016.

Basic Salary
Executive Directors’ basic salaries are reviewed annually by the Remuneration Committee taking into account the responsibilities, skills
and experience of each individual, pay and employment conditions within LSL and salary levels within listed companies of a similar size.

Basic salary levels as at 1st January 2016 and 2015 for the current Executive Directors are set out below:

Director

Role

Adam Castleton Group Chief Financial Officer

Ian Crabb

Group Chief Executive Officer

2016
(£)

290,000

400,000

Adrian Gill

Executive Director, Estate Agency

285,000

2015
(£)

290,000

370,000

280,000

Adam Castleton’s salary is from the date of his appointment as an Executive Director and has not been increased for 2016.

Ian Crabb’s basic salary was set below market at appointment to reflect his experience at that time and to enable the salary to be moved
to a market level over time. Following a detailed review of LSL’s and Ian Crabb’s performance and his increasing level of experience in the
role, the Remuneration Committee awarded an increase from £370,000 to £400,000 from 1st January 2016. The Committee now believes
the salary is within the market range for the role and size and complexity of company.

Annual Bonus Payments 2016
The Remuneration Committee will operate an annual bonus plan for Executive Directors during 2016 in line with that operated in 2015.
The maximum bonus continues to be capped at 100% of basic salary.

For 2016, the overall structure of the annual bonus will remain broadly similar to that operated in 2015, with sliding scale performance
targets based on LSL’s budgeted Group Underlying Operating Profit (after the payment of bonuses) for 80% of the potential with the
remaining 20% of the potential based on challenging non-financial performance measures.

The Committee has decided not to disclose the non-financial measures or targets (and the relative weighting of each individual target) in
advance as they contain items which LSL consider to be commercially sensitive. However, targets will be disclosed in the Annual Report
and Accounts 2016, which will be published in 2017. Further, the Remuneration Committee has confirmed that it is satisfied that individual
measures are challenging and demanding, and reflect LSL’s on-going business expectations and have a clear link to LSL’s strategy. The
financial performance element of the scheme require LSL’s performance to be significantly better than budget for full payout.

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Long-Term Incentive Plan (LTIP)
The LTIP continues to be LSL’s primary long-term incentive. The current LTIP scheme which was put into place in November 2006, is due
to expire in November 2016. Accordingly, a replacement LTIP scheme will be submitted for Shareholder approval at the 2016 AGM along
with the SIP/BAYE, SAYE and CSOP schemes. As the proposed 2016 LTIP scheme is very similar to the 2016 LTIP scheme, no changes
are proposed to the existing Directors’ Remuneration Policy (which was approved by shareholders at the 2014 AGM) to accommodate the
new plan. Awards to be granted in 2016 to the Executive Directors and selected senior management will be made over shares worth up to
100% of salary.

Awards will be subject to a range of adjusted earnings per share growth targets (70% of an award) and a TSR condition (for 30% of an
award), each applying to separate parts of an award and measured over a period of three years as follows:

1. 25% of the Adjusted Basic EPS part of the award will vest for threshold Adjusted Basic EPS growth increasing pro-rata to full vesting
for stretch Adjusted Basic EPS growth. The precise targets will be disclosed in full at the same time as announcing the grants of the
awards.

2. 35% of the TSR part of the award will vest if LSL’s TSR for the three years from date of grant is equal to the TSR of the median company

increasing pro-rata to full vesting of this part of the award for top quartile performance as measured against the constituents of the
FTSE 250 (excluding investment trusts). For any part of the TSR part of the award to vest, the Remuneration Committee must also be
satisfied that there has been an improvement in LSL’s underlying financial performance.

Benefits
Taxable benefits for the Executive Directors will continue to include a car allowance, life assurance and private medical insurance. Benefits
in kind are not pensionable and are not taken into account when determining basic salary for performance-related remuneration.

Pension
New executive directors are offered a pension in accordance with auto enrolment minimums. The Remuneration Committee may use its
discretion on appointment to recommend a 5% match of basic salary.

Non Executive Directors
The remuneration of the Non Executive Directors is a matter for the Chairman and Executive Directors whilst the remuneration of the
Chairman is a matter for the Remuneration Committee. Fees for both Non Executive Directors and the Chairman are reviewed from time
to time with regard to time commitment required and the level of fees paid by comparable companies.

A summary of fees for the current Non Executive Directors is as follows:

Director

Notes

Kumsal Bayazit Besson

Helen Buck

Simon Embley

Mark Morris

Bill Shannon

David Stewart

2016 (£)

40,000

130,000

47,000

70,000

40,000

2015 (£)

40,000

130,000

47,000

70,000

40,000

Notes to summary of fees for the Non Executive Directors:
1 Simon Embley became Non Executive Chairman on 1st January 2015.

2 Mark Morris’ fee reflects his role as both Non Executive Director and Chairman of the Audit Committee up to 28th April 2016 (being the

date of the 2016 AGM).

3 Bill Shannon’s 2015 fee reflects increased responsibilities in his roles as Deputy Chairman, Senior Independent Director and Chairman

of the Nominations Committee and the Remuneration Committee. He is also a member of the Audit Committee.

4 Subject to David Stewart’s election at the 2016 AGM, his fee will increase to £45,000 from the 28th April 2016 (being the date of the 2016

AGM) to reflect his role as both a Non Executive Director and Chairman of the Audit Committee.

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Audited Information

Directors’ Remuneration
The Remuneration of the Directors for 2015 was as follows:

Notes

Basic salary
or fees
£

Pension
Benefits10 contributions
£

Annual Gain on share
Awards12, 13
bonus11
£
£

Other14, 15
£

Total
£

Chairman
Simon Embley

Roger Matthews

Executive Directors
Adam Castleton

Steve Cooke

Ian Crabb

Simon Embley

Adrian Gill

David Newnes

Non Executive Directors
Kumsal Bayazit

Helen Buck

Adrian Gill

Mark Morris

Mark Pain

Bill Shannon

David Stewart

Total

2015
2014
2015
2014

2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014

2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014

130,000
-
-
100,000

48,333
-
-
240,000
365,000
350,000
-
150,000
280,000
27,618
-
210,000

13,333
-
40,000
40,000
-
36,953
47,000
47,000
-
3,750
70,000
45,000
26,667
-
1,020,333
1,250,321

-
-
-
-

2,784
-
-
16,597
15,000
15,000
-
15,946
16,663
1,538
-
16,032

-
-
-
-
-
-
-
-
-
-
-
-
-
-
34,447
65,113

-
-
-
-

-
-
-
12,000
18,250
17,500
-
7,500
-
-
-
10,500

-
-
-
-
-
-
-
-
-
-
-
-
-
-
18,250
47,500

-
-
-
-

-
-
-
-
345,333
189,000
-
-
126,000
-
-
101,500

-
-
-
-
-
-
-
-
-
-
-
-
-
-
571,333
290,500

101,310
-
-
-

-
-
-
-
156,546
-
-
196,932
-
-
-
110,281

-
-
-
-
-
-
-
-
-
-
-
-
-
-
257,856
307,213

-
-
-
-

100,000
-
-
5,126
-
-
-
5,126
-
-
-
5,126

231,310
-
-
100,000

151,117
-
-
273,723
900,129
571,500
-
375,504
422,663
29,156
-
453,439

13,333
-
-
-
40,000
-
40,000
-
-
-
36,953
-
47,000
-
47,000
-
-
-
3,750
-
70,000
-
45,000
-
26,667
-
-
-
- 1,902,219
15,378 1,976,025

Notes to Directors Remuneration table:
1. Simon Embley moved into the role of Non-Executive Chairman on 1st January 2015.

2. Roger Matthews retired from the Board on 31st December 2014 and no payments were made in 2015.

3. Adam Castleton was appointed as Group Chief Financial Officer on 2nd November 2015.

4. Steve Cooke departed from the Board on 19th December 2014 and no payments were made in 2015.

5. Adrian Gill was appointed to the Board as an Executive Director on 24th November 2014. £35,854 of his 2014 remuneration related to his
role as a Non Executive Director. The 2014 fee includes £1,079 paid in respect of consultancy services to the Estate Agency Division.

6. David Newnes retired from the Board on 31st December 2014. The only payment received in 2015 was an annual bonus payment of

£101,500 in respect of the 2014 year.

7. Kumsal Bayazit Besson was appointed to the Board on 1st September 2015.

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Directors’ Remuneration Report

8. Bill Shannon became Senior Independent Director and Deputy Chairman on 1st January 2015.

9. David Stewart was appointed to the Board on 1st May 2015.

10. ‘Benefits’ refers to benefits in kind, which excludes pension provision and is comprised of private medical cover and company car or

car allowance.

11. LSL’s performance in 2015 results in the Executive Directors earning an annual bonus of between 35% and 80% of their basic salary
in relation to the financial performance element of the scheme. In comparison, LSL’s performance in 2014 resulted in the Executive
Directors at the time, earning an annual bonus of 40% of their basic salary for the financial performance element of the scheme and
total bonuses were capped at 60% of basic salary. See below for further details of the 2015 bonus payments.

12. The gain on share award values for 2015 presented in the table were based on the 2013 LTIP award, which will vest in part during 2016
based on performance of the EPS for the three years ended 31st December 2015. As disclosed in the Annual Report on Remuneration,
included in the Annual Report and Accounts 2014, the gain on share award values for 2014 presented in the table were based on the
2012 LTIP award, which vested during 2015 based on performance for the three years ended 31st December 2014. These figures now
reflect the actual share price at vesting (337.6 pence).

13. The figure shown for the gain on share award values for 2015 reflects the expected level of vesting for 2013 LTIP awards, at LSL’s
average share price from 1st October 2015 to 31st December 2015 (318.11 pence). Based on EPS performance for the three-year
performance to 31st December 2015, 95.45% of this element (representing 70% of the award) will vest on 2nd April 2016 (for Simon
Embley) and 23rd September 2016 (for Ian Crabb). TSR performance will be tested over the three-year period to 1st April 2016; based
on forecast TSR performance 1st April 2016 it is expected that 0% of this element (representing 30% of the award) will vest on 2nd April
2016. These figures will be restated in the 2016 Directors’ Remuneration Report to reflect the actual share price at vesting.

14. SAYE 2011 awards became exercisable on 1st May 2014. The value shown in the table reflects the difference between the exercise

price of the SAYE option (257 pence) and LSL’s share price on the date they became exercisable (403 pence).

15. Adam Castleton was not entitled to an annual bonus under the LSL Executive Director bonus arrangements given that he only served
2 months of the 2015 financial year. However, as part of his recruitment arrangements, LSL agreed to compensate him for the annual
bonus forgone in respect of leaving his previous employer during 2015. The compensation, which is consistent with the Policy,
amounted to £100,000 and will be paid at the normal LSL annual bonus payment date.

Annual Bonus

Annual Bonus Payments 2015 – audited
Set out in the table below is a summary of the Executive Directors’ bonus scheme for 2015

Bonus Element

Targets for 2015

Performance against targets for 2015

Bonus Achieved for 2015

Group Underlying
Operating Profit up to
80% of basic salary for
Ian Crabb and 20% for
Adrian Gill

Stepped scale from threshold
of £36.8m (12.5%) of this part
is payable increasing to £41.6m
(100%) of this part is payable.

Estate Agency Underlying
Operating Profit, up to 60%
of basic salary (Adrian Gill
only)

Stepped scale from threshold
of £24.4m (12.5%) of this part is
payable increasing to £31.5m
(100%) of this part is payable.

Non financial measures up
to 20% of basic salary

Four targets aligned to the longer
term goals of the group.

A bonus of 100% of this element
(based on Underlying Operating
Profit of £42.9m was awarded to
Ian Crabb and Adrian Gill (i.e. 80%
of basic salary for Ian, and 20% for
Adrian).

Ian Crabb received a total
bonus of 93.3% of basic
salary.

Adrian Gill received a total
bonus of 45% of basic
salary.

A bonus of 25% of this element
(based of Estate Agency Underlying
Operating Profit of £26.2m was
awarded to Adrian Gill (i.e. 15% of
basic salary).

A bonus of 66.5% this element
(13.3% of salary) was awarded to Ian
Crabb, and 50% (10% of salary) was
awarded to Adrian Gill with regard to
these measures.

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The Committee has decided not to disclose the non-financial measures or targets (and the relative weighting of each individual target) in
advance as they contain items which LSL consider to be commercially sensitive. The Committee will disclose these targets in the Annual
Report and Accounts 2016 which will be published in 2017. Further, the Remuneration Committee has confirmed that it is satisfied that
individual measures are challenging and demanding, and reflect LSL’s on-going business expectations and have a clear link to LSL’s
strategy. The financial performance element of the scheme require LSL’s performance to be significantly better than budget for full payout.

2013 LTIP Awards (nil cost options)

Director

Date of grant Basis of

award (% of
salary)

Number
of shares
under award

Face value
of awards at
grant date1

Vesting at
threshold

Vesting at
maximum

Performance period

Simon
Embley

2nd April
2013

Ian
Crabb

23rd
September
2013

100%

47,685

£160,698

73,684

£352,946

25%
(EPS)

35%
(TSR)

100%

TSR: three years
from grant date

EPS: three years
to 31st December
2015

Expected
vesting % in
20152

Expected
gain on
share
awards 3

66.81%

£101,310

66.81%

£156,546

Notes to 2013 LTIP Awards
1 Based on the number of shares granted multiplied by the share price at the grant date (337 pence for awards granted on 2nd April 2013

and 479 pence for awards granted on 23rd September 2013).

2 Based on EPS performance for the three-year performance to 31st December 2015, 95.45% of this element (representing 70% of the
award) will vest on 2nd April 2016. TSR performance will be tested over the three-year period to 1st April 2016; based on forecast TSR
performance to 1st April 2016, it is expected that 0% of this element (representing 30% of the award) will vest on 2nd April 2016.

3 The expected gain on share award for the 2013 LTIP is calculated using LSL’s average share price from 1st October 2015 to 31st

December 2015 (318 pence).

4 Simon Embley’s shares awards have been pro-rated to reflect his change of role on 1st January 2015 and his ‘good leaver’ status under

the scheme rules as at the 31st December 2014.

Share Awards Granted During 2015

2015 LTIP Awards (nil cost options)

Details of LTIP awards granted in 2015 are as follows:

Executive
Director

Date of grant

Basis of award
(% of salary)

Number of
shares under
award

Face value of
awards at grant
date1

Vesting at
threshold

Vesting at
maximum

Performance
period

Adam
Castleton

1st December
2015

100%

94,771

£303,267

Ian Crabb

16th April 2015

100%

101,648

£373,048

Adrian Gill

16th April 2015

100%

76,923

£282,307

25% (EPS)

35% (TSR)

100%

TSR: three
years to 31st
December 2017

EPS: three
years to 31st
December 2017

Notes to 2015 LTIP Awards
1 Based on the number of shares granted multiplied by the share price at grant date (367 pence for grants made on 16th April 2015 and

320 pence for grants on 1st December 2015).

2 An award was made to Adam Castleton on 1st December 2015 in line with his recruitment arrangements.

For awards presented above:
1 For 70% of awards: 25% of this part of an award will vest for Adjusted Basic EPS growth of 7.5% p.a. increasing pro-rata to 100% of this
part of an award vesting for Adjusted Basic EPS growth of 17.5% p.a. for the three years ending 31st December 2017. There is no vesting
for Adjusted Basic EPS growth less than 7.5% p.a.

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Directors’ Remuneration Report

2 For 30% of awards: 35% of this part of an award will vest for a median TSR for the three years ending 31st December 2017, increasing
to 100% vesting of this part of an award for an upper quartile TSR, measured against the FTSE 250 (excluding investment trusts). For
the TSR part of an award to vest, the Remuneration Committee must also be satisfied that there has been an improvement in LSL’s
underlying financial performance.

Payments to Past Directors
David Newnes retired from the Board on 31st December 2014. In line with the Remuneration policy and his ‘good leaver’ status, a bonus
payment £101,500 was made to him on 27th March 2015 in respect of the 2014 year.

Payments for Loss of Office
No payments were made to any Directors relating to loss of office during the year ended 31st December 2015. For details of all payments
received by Directors who held office during the year, see the Directors’ Remuneration Table.

Outstanding Share Awards
Options granted to Executive and Non-executive Directors to acquire Ordinary Shares in LSL are as follows:

Director

Award
type

Date of grant

LTIP

1st December 2015

Share
price
on grant
311.25p

Exercise As at 1st Awards Awards
January granted

price

lapsed exercised

Awards Awards As at 31st
vested December
2015

2015

nil

94,771

Exercise
period

Adam
Castleton
Ian
Crabb

Simon
Embley

Adrian
Gill

LTIP

23rd September 2013

479.00p

nil

73,684

LTIP

10th April 2014

430.00p

nil

81,395

–

SAYE

1st June 2014

414.00p 416.00p

4,326

LTIP

16th April 2015

364.00p

nil

101,648

JSOP

1st June 2010

271.00p 280.00p

83,929

CSOP

11th June 2010

240.00p 240.00p

12,500

–

LTIP

2nd April 2012

275.00p

nil

83,333

– (25,000)

– (58,333) 58,333*

2nd April 2013

337.00p

nil

47,685

–

47,685

LTIP

16th April 2015

364.00p

nil

76,923

–

94,771 1st December 2018 to
1st December 2025

73,684 23rd September 2016 to
23rd September 2023

81,395

4,326

10th April 2017 to
10th April 2024

1st June 2017 to
1st December 2017

101,648

– (83,928)

83,928*

– (12,500)

12,500*

16th April 2018 to
16th April 2025

1st June 2013 to
1st June 2020
11th June 2013 to
11th June 2020
2nd April 2015 to
2nd April 2022
2nd April 2016 to
2nd April 2023

16th April 2018 to
16th April 2025

* These awards have vested and are currently within the exercise period

Notes Outstanding Share Awards

1. All of the above are scheme interests. Details of long-term incentive awards granted in 2015 are presented in a separate paragraph

while details of past awards are presented in last year’s Directors’ Remuneration Report and are included in Note 12 to the Financial
Statements.

2. The Ordinary Share mid-market price ranged from 276 pence to 403 pence and averaged 339 pence during 2015. The share price on

31st December 2015 was 285 pence compared to 298 pence on 1st January 2015.

3. Simon Embley’s shares awards have been pro-rated to reflect his change of role on 1st January 2015 and his ‘good leaver’ status under

the scheme rules as at the 31st December 2014.

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Directors’ Interests in Shares
The interests of the Directors who served on the Board during the year are set out in the table below:

Shareholdings

Share awards

Director

31st December 2015

31st December 2014

Unvested

Kumsal Bayazit Besson2
Helen Buck
Adam Castleton3
Ian Crabb4
Simon Embley
Adrian Gill5
Mark Morris
Bill Shannon
David Stewart6

-
-
-
1,089
6,069,509
179
53,972
21,274
-

Notes on Directors’ Interest in Shares

-
-
-
531
6,069,509
-
53,972
20,561
-

-
-
94,771
261,053
60,185
76,923
-
-
-

Vested but
unexercised
-
-
-
-
142,261
-
-
-
-

Total

Executive Director
Shareholding guideline1

31st December 2015

(% of basic salary)

-
1,089
6,129,694
179
53,972
21,274
-

N/A
N/A
0
0.8
N/A
0.2
N/A
N/A
N/A

1. Executive Directors are required to build and maintain a shareholding equivalent to one year’s basic salary over a period of three years

from the date the guidelines were adopted (or from date of appointment if later) through the retention of vested share awards or through
open market purchases (shareholding guidelines). Calculated based on Shares owned at 31st December 2015, share price at 31st
December 2015 of 285 pence per share and the Executive Director’s basic salary at 31st December 2015.

2. Kumsal Bayazit Besson joined the Board on 1st September 2015.

3. Adam Castleton joined the Board on 2nd November 2015.

4. Ian Crabb joined the Board on 9th September 2013 and shares have been purchased by Ian as a participant in LSL’s SIP/BAYE. The

Shares specified in the table were purchased by the Trust at the prevailing market value.

5. Adrian Gill joined the Board on 24th September 2014 and Shares have been purchased by Adrian as a participant in LSL’s SIP/BAYE

since 1st September 2015. The Shares specified in the table were purchased by the Trust at the prevailing market value.

6. David Stewart joined the Board on 1st May 2015.

All of the interests detailed above are beneficial. Apart from the interests disclosed above no Directors were interested at any time in the
year in the share capital of any other Group company.

There have been no changes in the interests of any Director between 1st January 2016 and the date of this Report other than the
purchases of Shares by Ian Crabb (167 shares) and Adrian Gill (167 shares) as participants of LSL’s BAYE/SIP scheme. These Shares were
purchased by the Trust at the prevailing market rate.

No Director has or has had any interest, direct or indirect, in any transaction, contract or arrangement (excluding service agreements),
which is or was unusual in its nature or conditions or significant to the business of the Group during the current or immediately preceding
financial year.

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Directors’ Remuneration Report

Unaudited Information

Performance Graph and Table
The following graph shows the value, by the 31st December 2015, of £100 invested in LSL compared with the value of £100 invested in both
the FTSE Small Cap (excluding investment trusts) Index and the FTSE 250 (excluding investment trusts) Index on 1st January 2009. The
FTSE 250 Index has been chosen for consistency with prior years and the FTSE Small Cap Index because LSL is a constituent of the FTSE
Small Cap Index. During the period LSL has outperformed both indices.

Total shareholder return

Source: Thomson Reuters Datastream

Value [£]

900

800

700

600

500

400

300

200

100

31 Dec 08

31 Dec 09

31 Dec 10

31 Dec 11

31 Dec 12

31 Dec 13

31 Dec 14

31 Dec 15

LSL Property Services

FTSE 250 Index [excluding investment trusts]

FTSE Small Cap Index [excluding investment trusts]

Group Chief Executive Offi cer’s Total Remuneration
The total remuneration fi gures for the role of Group Chief Executive Offi cer during each of the last seven fi nancial years are shown in the
table below. The total remuneration fi gure includes the annual bonus based on that year’s performance and share awards (excluding any
SAYE or SIP/BAYE awards in the interests of simplicity) based on three year performance periods ending in/just after the relevant year.
The annual bonus payout and share vesting level as a percentage of the maximum opportunity are also shown for each of these years.

Simon Embley (to 9th September 2013)

Ian Crabb (from 9th September 2013)

Year ending in

Total
remuneration

2009

2010

2011

2012

2013

2014

2015

£373,754

£517,716

£308,747

£525,018

£500,8621

£119,522

£571,500

£900,129

Annual bonus

100%

LTIP vesting

N/A

97.5%

N/A

9.6%

N/A

60%

55%

91.7%

N/A

54%

N/A

93.3%

66.81%

Notes to Group Chief Executive Offi cer’s Total Remuneration

1 The total remuneration disclosed for the year ended 31st December 2013 is Simon Embley’s total remuneration although he ceased being

Group Chief Executive Offi cer and became Deputy Chairman on 9th September 2013, prior to becoming Chairman on the 1st January 2015.

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Percentage Change in Group Chief Executive Officer’s Remuneration
The table below shows the percentage change in the Group Chief Executive Officer’s salary, benefits and annual bonus between the
financial year ending 31st December 2014 and 2015, compared to that of the total remuneration for all employees of the Group for each of
these elements of pay.

Salary Change

Benefits Change

Bonus Change (%)

Group Chief Executive Officer

+5.7%

All employees1

+2%

Average number of employees1

198

Nil

82.7%

33.8%

Notes on Percentage Change in Group Chief Executive Officer’s Remuneration:
1 Refers to a subset of employees outside the commission structure.

Relative Importance of Spend on Pay
The following table shows LSL’s actual spend on pay (for all employees) relative to dividends.

2015 (£m)

2014 (£m)

Change (%)

Staff costs1

Dividends (excluding any special
dividend)

Profit after tax

Adjusted profit after tax2

171.2

12.9

30.5

32.3

167.6

12.6

25.2

31.2

+2.1

+2.4

+21.1

+3.3

1 See Note 12 of the Financial Statements for calculation of staff costs.

2 See Note 10 to the Financial Statements.

Statement of Shareholder Voting
The Directors’ Remuneration Report for the financial year ending 31st December 2014 was put to Shareholders at the AGM held on 30th April
2015. The voting outcomes were as follows:

Directors’ Remuneration Report

Votes cast in favour

85,823,219

Votes cast against

17,469

Total votes cast

Abstentions

85,840,688

973,254

99.98%

0.02%

100%

–

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Directors’ Remuneration Report

Remuneration Committee

Role and Membership
Details of the Remuneration Committee’s composition and responsibilities are set out in the Corporate Governance Report at page 47 of
this Report. During 2015 the Remuneration Committee was chaired by Bill Shannon and its other members were Kumsal Bayazit Besson,
Helen Buck, David Stewart and Mark Morris. The terms of reference of the Committee are available from the Company Secretary or LSL’s
website at: www.lslps.co.uk.

Committee’s Advisers
The Remuneration Committee took independent advice from New Bridge Street (NBS) on matters relating to senior executive remuneration.
NBS was appointed by the Remuneration Committee with regard to the disclosures required in the Annual Report and Accounts. NBS
provided no other advice to LSL during the year and their fee for 2015 was £17,195 (exc VAT). NBS is considered to be independent and
objective.

The Directors’ Remuneration Report is approved by and signed on behalf of the Board of Directors

Bill Shannon
Chairman of the Remuneration Committee
3rd March 2016

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Financial Statements

In this section
74

Independent Auditor’s Report to the
Members of LSL Property Services plc

82 Group Income Statement
83 Group Statement of Comprehensive Income
84 Group Balance Sheet
85 Group Statement of Cash Flows
87 Group Statement of Changes in Equity
88
133 Statement of Directors’ Responsibilities in
Relation to the Parent Company Financial
Statements

Notes to the Group Financial Statements

134 Parent Company Balance Sheet
137 Notes to the Parent Company Financial

Statements

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Your Move branch, Barnsley

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Independent Auditor's Report

for the year ended 31st December 2015

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF LSL PROPERTY SERVICES PLC

Our opinion on the financial statements
In our opinion:

• LSL Property Services plc’s Group financial statements and parent company financial statements (the “financial statements”) give a true
and fair view of the state of the Group’s and of the parent company’s affairs as at 31st December 2015 and of the Group’s profit for the
year then ended;

• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union as

applied in accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards the Group

financial statements, Article 4 of the IAS Regulation.

What we have audited
LSL Property Services plc’s financial statements comprise:

Group

Parent company

Group income statement for the year then ended

Balance sheet as at 31st December 2015

Group statement of comprehensive income for the year then
ended

Statement of changes in equity for the year then ended

Group balance sheet as at 31st December 2015

Cash flow statement for the year then ended

Group statement of changes in equity for the year then ended

Related notes 1 to 17 to the financial statements

Group cash flow statement for the year then ended

Related notes 1 to 34 to the financial statements

The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.

Overview of our audit approach

Risks of material
misstatement

• Revenue recognition (including lapse provision)

• Recognition and measurement of professional indemnity (“PI”) liabilities for inaccurate surveys

• Accounting for acquisitions

• Client monies

Audit scope

• We performed an audit of the complete financial information of 6 components and audit procedures on

specific balances for a further 5 components out of a total of 17 components.

• The components where we performed full or specific audit procedures accounted for 95% of profit

before tax, 98% of revenue.

Materiality

• Overall group materiality of £1.70m which represents 5% of profit before tax.

Our assessment of risk of material misstatement
We identified the risks of material misstatement described below as those that had the greatest effect on our overall audit strategy, the
allocation of resources in the audit and the direction of the efforts of the audit team. In addressing these risks, we have performed the
procedures below which were designed in the context of the financial statements as a whole and, consequently, we do not express any
opinion on these individual areas.

What we concluded to the
Audit Committee
Based on our audit procedures we
concluded that revenue is appropriately
recognised in accordance with IAS 18, and
that there was no evidence of management
override.

The lapsed commission rates used to
calculate the lapse provision are based on
historical trend analysis, and sit within an
acceptable range

Risk
Revenue Recognition (including lapse
provision)

Refer to the Audit Committee Report
(page 49); Accounting policies (page 95);
and Note 3 of the Consolidated Financial
Statements (page 96)

The Group has reported revenues
of £300.60m (2014: £287.50m). We
focused primarily on the timing of revenue
recognised, as given the number of
products and services offered there are
inherent complexities surrounding the
timing of revenue recognition.

In addition the Group earns commissions
acting as an agent for the sale of financial
services policies. If these policies are
subsequently cancelled by the customer
then an element of the commission earned
has to be repaid. The Group is required
to make an estimate based on historical
experience of the amount of commission
earned that it expects to be repaid as a
result of the lapse of policies that have
been sold, which is recognised as a
reduction in revenue.

We identified two specific risks of fraud
and error in respect of improper revenue
recognition:

• Inappropriate cut off of revenue focusing
around the year end timing of revenue
recognised both through error or
management bias

• Inaccurate estimate of lapse rates which
could lead to revenue being manipulated
by understating the provision

Our response to the risk
We performed full and specific scope
audit procedures over this risk area in
8 locations, which covered 91% of the
revenue balance and 100% of the lapsed
commission provision.

• We understood the key processes used

to record revenue transactions;

• At certain locations we identified and

tested key revenue controls;

• We performed analytical procedures
including data analytics and overall
analytical review;

• We examined material journal entries that
were posted to revenue accounts around
the year end; and

• We performed detailed cut off testing of
revenue transactions either side of the
Balance Sheet date.

For the estimate of repayable commissions
we performed the following:

• We obtained management’s workings

and checked the underlying calculations
for arithmetical accuracy;

• We tested the integrity of the underlying

data used in management’s assumptions
by selecting a sample of policies that had
lapsed and vouching them to claims from
the lender and bank statements; and

• We identified that each item in our

sample had been correctly included in
the historical lapse rate calculation.

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance ReportsWhat we concluded to the
Audit Committee

Based on our procedures we believe
that the estimate for PI liabilities is in
accordance with IAS 37 and the estimate
is within an acceptable range.

Independent Auditor's Report continued.
for the year ended 31st December 2015

Risk

Our response to the risk

Recognition and measurement of
professional indemnity (“PI”) liabilities
for inaccurate surveys

Refer to the Audit Committee Report
(page 49); Accounting policies (page 93);
and Note 22 of the Consolidated Financial
Statements (page 118)

The Group has recognised a professional
indemnity provision of £29.67m (2014:
£38.72m) as at 31st December 2015.

This is an area of significant judgement
and estimation. In particular the Group
has historically experienced a high level of
claims relating to the 2004 to 2008 period,
and valuations work undertaken during
this period continues to result in claims
being made against the Group. There is a
risk that the provision for these claims is
significantly different as a result of variations
from key assumptions, in particular the
incidence of claims, the propensity for
claims to result in financial loss and the
resultant loss per claim.

We performed the following procedures
across one full and one specific scope
location providing 100% coverage
across the professional indemnity
provision. Our procedures have focused
on management’s estimation process,
including whether bias exists in determining
the professional indemnity provision.

• We recalculated and validated

management’s calculations, with
reference to source documentation;

• We compared these calculations to
expectations and investigated and
corroborated any material variances;

• We corroborated material assumptions
in relation to the incidence of claims, the
propensity for claims to result in financial
loss and the resultant loss per claim used
by management and verified that these
were appropriate;

• We interrogated the data around

the current level of claims to assess
management’s assumptions relating to
how the level of claims will change over
time;

• We traced a sample of payments to bank
statements and reviewed the post year
end settlements against management’s
estimates in order to assess
management’s accuracy in estimating
claim costs;

• We inquired with legal counsel for certain
claims and investigations to understand
the most current legal standing; and

• We reviewed the disclosures included

within the financial statements for
completeness and appropriateness of the
disclosure around the sensitivity of the
provision in line with IAS 37.

What we concluded to the
Audit Committee

Based on our audit procedures we
conclude that accounting for acquisitions
has been performed correctly in line with
IFRS 3.

Furthermore, we conclude that financial
liabilities held in relation to earn-out
arrangements are appropriate.

Risk

Our response to the risk

Accounting for acquisitions

Refer to the Audit Committee Report
(page 49); Accounting policies (page 89);
and Note 27 of the Consolidated Financial
Statements (page 120)

We have performed the following
procedures across all material acquisitions
within the Group.

• We obtained and read all material sales

and purchase agreements (SPA);

The Group is acquisitive in nature, and
acquisitions frequently include earn-out
arrangements in respect of key employees.

• We verified the appropriateness of the

allocation of the purchase price and the
recognition of intangible assets.

There is a risk that the accounting for
acquisitions, including the allocation of
the purchase price, the recognition of
intangible assets and goodwill and the
treatment of contingent consideration and
earn-out arrangements is not performed in
accordance with IFRS 3.

During the year the Group acquired
Thomas Morris Ltd as well as a number of
small lettings businesses.

• We identified within the SPA any earn-out
and contingent consideration clauses
and considered whether these had
been appropriately classified as either
consideration or remuneration;

• For acquisitions that arose in prior
periods we tested the subsequent
measurement of contingent consideration
liabilities with reference to SPA, actual
and forecast financial results; and

As at the 31st December 2015, the
Group has recognised a financial liability
of £9.89m in relation to contingent
consideration.

• Review of necessary disclosures in

the financial statements, to include the
(provisional) allocation of fair values.

Client Monies

Refer to the Audit Committee Report
(page 49); and Note 28 of the Consolidated
Financial Statements (page 122)

As at 31st December 2015 the Group holds
£93.84m (2014: £82.64m) on behalf of
Estate Agency customers. These amounts
do not belong to the Group and are held
on behalf of clients. There is a risk of loss
or misappropriation of monies held which,
if it arose, would result in a financial cost to
the Group.

We performed procedures across 4 full
scope locations and 1 specific scope
location providing 100% coverage across
the client money balance.

Based on the procedures we have
performed we conclude that client monies
are appropriately held off balance sheet
and reconcile to third party confirmations.

We performed the following procedures:

• We obtained client account

reconciliations and agreed material
reconciling items to supporting evidence;

• We agreed the amounts held in client

monies accounts to the bank letters; and

• We performed a cashbook review of the
trading accounts, with a particular focus
on the appropriateness and cut off of
transfers to and from client accounts.

The scope of our audit

Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each
entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements. We take into account
size, risk profile, the organisation of the group and effectiveness of group-wide controls, changes in the business environment and other
factors such as recent Internal audit results when assessing the level of work to be performed at each entity.

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance ReportsIndependent Auditor's Report continued.
for the year ended 31st December 2015

In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative coverage
of significant accounts in the financial statements, of the 17 reporting components of the Group, we selected 11 components covering
entities, which represent the principal business units within the Group.

Of the 11 components selected, we performed an audit of the complete financial information of 6 components (“full scope components”)
which were selected based on their size or risk characteristics. For the remaining 5 components (“specific scope components”), we
performed audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on
the significant accounts in the financial statements either because of the size of these accounts or their risk profile.

The reporting components where we performed audit procedures accounted for 95% (2014: 97%) of the Group’s Profit before tax and
98% (2014: 98%) of the Group’s Revenue. For the current year, the full scope components contributed 85% (2014: 64%) of the Group’s
Profit before tax and 91% (2014: 82%) of the Group’s Revenue. The specific scope components contributed 10% (2014: 33%) of the
Group’s Profit before tax and 7% (2014: 16%) of the Group’s Revenue. The audit scope of these components may not have included
testing of all significant accounts of the component but will have contributed to the coverage of significant accounts tested for the Group.
The Group audit risk in relation to revenue recognition was subject to audit procedures across all full scope locations and 2 specific scope
locations. The Group audit risk in relation to professional indemnity liabilities was subject to specific procedures at one full scope location
and one specific scope location. The Group audit risk in relation to acquisition accounting was subject to audit procedures at 5 full scope
locations. The Group audit risk in relation to client monies was subject to audit procedures across 4 full scope locations and one specific
scope location.

Of the remaining 6 components that together represent 5% of the Group’s Profit before tax none are individually greater than 3% of the
Group’s Profit before tax. For these components, we performed analytical review procedures to respond to any potential risks of material
misstatement to the Group financial statements.

The charts below illustrate the coverage obtained from the work performed by our audit teams.

Profit before tax

Revenue

85% Full scope
components

10% Specific
scope
components

5% Other
procedures

91% Full scope
components

7% Specific
scope
components

2% Other
procedures

Changes from the prior year
The above scope is consistent with the prior year except for the inclusion of one component as full scope this year in comparison to being
specific scope in the prior year. In addition one component has changed from full scope to specific scope. These changes in our scope are
as a result of our evaluation of the relative size and risk assessment of each location.

Involvement with component teams
All audit work performed for the purposes of the audit was undertaken by the Group audit team. All locations are audited by EY and all
reside within the United Kingdom.

Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit
and in forming our audit opinion.

Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit
procedures.

We determined materiality for the Group to be £1.70m (2014: £0.5m), which is 5% of profit before tax (2014: 5% of adjusted profit before
tax). We believe that profit before tax provides us with an appropriate basis for materiality and is the most relevant performance measure
for stakeholders. In the prior year we used an adjusted measure to exclude certain non-recurring exceptional gains; however, such material
items were not present for the current year.

Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was that
performance materiality was 50% (2014: 50%) of our planning materiality, namely £0.86m (2014: £0.30m). We have set performance
materiality at this percentage to ensure that total uncorrected and undetected audit differences in all accounts did not exceed our materiality
level of £1.70m.

Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken
based on a percentage of total performance materiality. The performance materiality set for each component is based on the relative scale
and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year,
the range of performance materiality allocated to components was £0.47m to £0.17m (2014: £0.21m to £0.08m).

Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.09m (2014: £0.03m),
which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative
grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other
relevant qualitative considerations in forming our opinion.

Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance
that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall
presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and
Accounts to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware
of any apparent material misstatements or inconsistencies we consider the implications for our report.

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 42, the directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us
to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Opinion on other matters prescribed by the Companies Act 2006
In our opinion:

• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006;

and

• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are

prepared is consistent with the financial statements.

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance ReportsIndependent Auditor's Report continued.
for the year ended 31st December 2015

Matters on which we are required to report by exception

ISAs (UK and Ireland)
reporting

We are required to report to you if, in our opinion, financial and non-financial information
in the annual report is:

• materially inconsistent with the information in the audited financial statements; or

• apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the Group acquired in the course of performing our audit; or

• otherwise misleading.

In particular, we are required to report whether we have identified any inconsistencies
between our knowledge acquired in the course of performing the audit and the
directors’ statement that they consider the annual report and accounts taken as a
whole is fair, balanced and understandable and provides the information necessary
for shareholders to assess the entity’s performance, business model and strategy;
and whether the annual report appropriately addresses those matters that we
communicated to the audit committee that we consider should have been disclosed.
We are required to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns
adequate for our audit have not been received from branches not visited by us; or

• the parent company financial statements and the part of the Directors’ Remuneration
Report to be audited are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

We are required to review:

• the directors’ statement in relation to going concern, set out on page 40 and longer-

term viability, set out on page 40 ; and

• the part of the Corporate Governance Statement relating to the company’s

compliance with the provisions of the UK Corporate Governance Code specified for
our review.

Companies Act 2006
reporting

Listing Rules review
requirements

We have no
exceptions to
report.

Statement on the Directors’ Assessment of the Principal Risks that Would Threaten the Solvency or Liquidity of the Entity

We have nothing
material to add or
to draw attention
to.

ISAs (UK and Ireland)
reporting

We are required to give a statement as to whether we have anything material to add or
to draw attention to in relation to:

• the directors’ confirmation in the annual report that they have carried out a robust

assessment of the principal risks facing the entity, including those that would threaten
its business model, future performance, solvency or liquidity;

• the disclosures in the annual report that describe those risks and explain how they are

being managed or mitigated;

• the directors’ statement in the financial statements about whether they considered it
appropriate to adopt the going concern basis of accounting in preparing them, and
their identification of any material uncertainties to the entity’s ability to continue to do
so over a period of at least twelve months from the date of approval of the financial
statements; and

• the directors’ explanation in the annual report as to how they have assessed the

prospects of the entity, over what period they have done so and why they consider
that period to be appropriate, and their statement as to whether they have a
reasonable expectation that the entity will be able to continue in operation and meet
its liabilities as they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions.

Alistair Denton (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Leeds
3rd March 2016

Notes:

1. The maintenance and integrity of the LSL Property Services plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters

and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance ReportsGroup Income Statement

for the year ended 31st December 2015

Revenue
Operating expenses:
Employee and subcontractor costs
Establishment costs
Depreciation on property, plant and equipment
Other

Other operating income
(Loss)/Gain on sale of property, plant and equipment

Note

2015
£’000

2014
£’000

300,594

287,498

(171,216)
(19,012)
(5,296)
(65,180)
(260,704)

(167,581)
(18,852)
(4,918)
(57,938)
(249,289)

1,865
(44)

2,404
13

Group’s share of profit after tax in joint ventures

1,156

1,383

Group operating profit before contingent consideration, exceptional items,
amortisation and share-based payments

42,867

42,009

Share-based payments
Amortisation of intangible assets
Exceptional gains
Exceptional cost
Contingent consideration
Group operating profit

Finance income
Finance costs
Exceptional finance credits
Net financial costs

Profit before tax
Taxation
– related to exceptional items and contingent consideration
– others

Profit for the year
Attributable to
– Owners of the parent
– Non-controlling interest

Earnings per share expressed in pence per share:
Basic
Diluted
Adjusted – basic
Adjusted – diluted

12
14
7
7
7
4

5
6
7

10
10
10
10

(871)
(1,803)
–
(258)
1,477
41,412

5
(2,817)
–
(2,812)

(1,775)
(565)
19,841
(26,035)
405
33,880

14
(2,181)
230
(1,937)

38,600

31,943

52
(8,190)
(8,138)

1,146
(7,931)
(6,785)

30,462

25,158

30,414
48

25,103
55

29.7
29.5
31.5
31.3

24.5
24.3
30.5
30.2

Group Statement of Comprehensive Income

for the year ended 31st December 2015

Profit for the year
Items to be reclassified to profit and loss in subsequent periods:
Reclassification adjustments for disposal of financial assets
Income tax effect
Revaluation of financial assets
Income tax effect
Net other comprehensive income/(loss) to be reclassified to profit and loss in
subsequent periods:

Total other comprehensive income/(loss) for the year, net of tax
Total comprehensive income for the year, net of tax
Attributable to
– Owners of the parent
– Non-controlling interest

Note

16
13
16
13

2015
£’000

30,462

(440)
53
5,130
(580)

2014
£’000

25,158

(20,568)
4,114
6,903
(1,381)

4,163

(10,932)

4,163
34,625

34,577
48

(10,932)
14,226

14,171
55

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Group Balance Sheet

for the year ended 31st December 2015

Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Financial assets
Investments in joint ventures
Total non-current assets

Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets

Current liabilities
Financial liabilities
Trade and other payables
Current tax liabilities
Provisions for liabilities
Total current liabilities

Non-current liabilities
Financial liabilities
Deferred tax liability
Provisions for liabilities
Total non-current liabilities
Total Liabilities

Net assets

Equity
Share capital
Share premium account
Share-based payment reserve
Treasury shares
Fair value reserve
Retained earnings
Equity attributable to owners of parent
Non-controlling interests
Total equity

The Financial Statements were approved by and signed on behalf of the Board by:

Ian Crabb
Group Chief Executive Officer
3rd March 2016

Adam Castleton
Group Chief Financial Officer
3rd March 2016

Note

14
14
15
16
17

18
19

21
20
13
22

21
13
22

24
25
25
25
25

Company No. 05114014

2015
£’000

2014
£’000

136,395
30,517
19,393
28,871
8,778
223,954

35,366
5,603
40,969
264,923

(15,777)
(50,102)
(2,525)
(12,100)
(80,504)

131,560
20,110
20,272
23,033
9,121
204,096

36,165
–
36,165
240,261

(4,659)
(50,336)
(373)
(16,539)
(71,907)

(52,511)
(6,927)
(17,625)
(77,063)
(157,567)

(56,420)
(6,462)
(22,372)
(85,254)
(157,161)

107,356

83,100

208
5,629
3,564
(5,988)
20,878
82,880
107,171
185
107,356

208
5,629
3,498
(7,922)
16,715
64,835
82,963
137
83,100

Group Statement of Cash Flows

for the year ended 31st December 2015

Cash generated from operating activities
Profit before tax
Adjustments to reconcile profit before tax to net cash
from operating activities
Exceptional operating items and
contingent consideration
Amortisation of intangible assets
Finance income
Finance costs
Exceptional finance (credit)
Share-based payments
Total adjustments
Group operating profit before amortisation and share-
based payments
Depreciation
Dividend income
Share of results of joint ventures

7
14
5
6
7
12

(1,219)
1,803
(5)
2,817
–
871

5,296
(835)
(1,156)

Loss/(Gain) on sale of property, plant and equipment
and financial assets

(253)

Decrease/(Increase) in trade and other receivables
(Decrease) in trade and other payables
Decrease in provisions

Cash generated from operations

Interest paid
Payment of contingent consideration relating to
remuneration

Loan refinance costs paid
Tax paid

Net cash generated from operating activities

975
(1,026)
(9,345)

(1,852)

–

(5,613)

31st December 2015

31st December 2014

Note

£’000

38,600

31,943

4,267

42,867

3,052

(9,396)
36,523

4,324
565
(14)
2,181
(230)
1,775

4,918
(1,579)
(1,383)

(48)

(449)
(4,263)
(12,075)

(1,764)

(1,426)
–
(1,339)

8,601

40,544

1,908

(16,787)
25,665

(7,465)
29,058

(4,529)
21,136

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Group Statement of Cash Flows continued.
for the year ended 31st December 2015

31st December 2015

31st December 2014

Note

£’000

Cash flows from investing activities
Cash acquired on purchase of subsidiary
undertaking
Acquisitions of subsidiaries and other businesses
Payment of contingent consideration

Investment in joint venture
Investment in financial assets

Cash received on sale of financial assets
Tax on Sale of Zoopla
Dividends received from joint venture
Dividends received from financial assets

Interest received
Purchase of property, plant and equipment and
intangible assets
Proceeds from sale of property, plant and
equipment

Net cash (expended)/ generated on investing
activities
Cash flows from financing activities
Drawdown of loans
Repayment of overdraft
Repayment of loan notes
Payment of deferred consideration
Purchase of LSL shares by the employee benefit

trust (EBT) (Treasury Shares)

Proceeds from exercise of share options
Dividends paid
Net cash used in financing activities

Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the
year
Cash and cash equivalents at the end of the year

27
27

17
16

774
(13,202)
(4,015)
–
(1,178)
297
–
1,499
549
5

14,15

(7,991)

328

11,500
(718)
(63)
–

–
1,314
(12,554)

250
(4,963)
–
(2,422)
(1,155)
20,838
(4,015)
1,302
1,579
14

(9,244)

195

(22,934)

2,379

10,000
(1,830)
63
–

(5,621)
1,690
(28,286)

(521)

5,603

–
5,603

(23,984)

(469)

469
–

Group Statement of Changes in Equity

for the year ended 31st December 2015

Year ended 31st December 2015

Share capital
£’000

At 1st January 2015
Disposal of financial assets
(net of tax)
Revaluation of financial assets
(net of tax)
Other comprehensive
income for the year
Profit for the year
Total comprehensive
income for the year
Exercise of options
Share-based payments
Dividend payment
At 31st December 2015

208

–

–
–

–
–
–
–
208

Share
premium
account
£’000

5,629

Share-based
payment
reserve
£’000

Treasury
shares
£’000

Fair value
Reserve
£’000

Retained
earnings
£’000

Total equity
£’000

Non-
controlling
interests
£’000

Total
£’000

3,498

(7,922)

16,715

64,835

82,963

137

83,100

–

–
–

–

–
–

–

–
–

(387)

4,550

4,163
–

–

(387)

4,550

–
30,414

4,163
30,414

–
–
–
–
5,629

–
(805)
871
–
3,564

–
1,934
–
–
(5,988)

4,163
–
–
–
20,878

30,414
185
–
(12,554)
82,880

34,577
1,314
871
(12,554)
107,171

–

–
48

48
–
–
–
185

(387)

4,550

4,163
30,462

34,625
1,314
871
(12,554)
107,356

During the year ended 31st December 2015, the Trust acquired no LSL Shares. During the period 551,446 share options were exercised
relating to LSL’s various share option schemes resulting in the Shares being sold by the Trust. LSL received £1,314,000 on exercise of
these options.

Year ended 31st December 2014

Share capital
£’000

At 1st January 2014
Disposal of financial assets
(net of tax)
Revaluation of financial assets
(net of tax)
Other comprehensive
income for the year
Profit for the year
Total comprehensive
income for the year
Investment in Treasury Shares
Exercise of options
Share-based payments
Dividend payment
At 31st December 2014

208

–

–
–

–
–
–
–
–
208

Share
premium
account
£’000

5,629

Share-based
payment
reserve
£’000

2,475

Treasury
shares
£’000

(4,292)

Fair value
Reserve
£’000

Retained
earnings
£’000

Total equity
£’000

Non-
controlling
interests
£’000

Total
£’000

27,647

67,567

99,234

99,316

–

–
–

–

–
–

–

–
–

(16,454)

5,522

–

(16,454)

5,522

–

(16,454)

5,522

(10,932)
–

–
25,103

(10,932)
25,103

–
55

(10,932)
25,158

–
–
–
–
–
5,629

–
–
(752)
1,775
–
3,498

–
(5,621)
1,991
–
–
(7,922)

(10,932)
–
–
–
–
16,715

25,103
–
451
–
(28,286)
64,835

14,171
(5,621)
1,690
1,775
(28,286)
82,963

55
–
–
–
–
137

14,226
(5,621)
1,690
1,775
(28,286)
83,100

During the year ended 31st December 2014, the Trust acquired 1,485,000 LSL Shares for £5,621,000. In addition, during the period
669,077 share options were exercised relating to LSL’s various share option schemes resulting in the Shares being sold by the Trust. LSL
received £1,690,000 on exercise of these options.

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Notes to the Group Financial Statements

for the year ended 31st December 2015

1. Authorisation of Financial Statements and statement of compliance with IFRSs

The Group Financial Statements of LSL and its subsidiaries for the year ended 31st December 2015 were authorised for issue by the Board
of the Directors on 3rd March 2016 and the balance sheet was signed on the Board’s behalf by Ian Crabb, Group Chief Executive Officer
and Adam Castleton, Group Chief Financial Officer. LSL is a listed company, in London, incorporated and domiciled in England and Wales
and the Group operates a network of estate agencies, surveying and valuation and other related businesses.

The Group’s Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted
by the European Union and as applied in accordance with the provisions of the Companies Act 2006.

2. Accounting policies

Basis of preparation of financial information
The Group Financial Statements have been prepared on a going concern basis and on a historical cost basis, except for available-for-sale
financial assets that have been measured at fair value.

The accounting policies which follow set out those significant policies which apply in preparing the Financial Statements for the year ended
31st December 2015. The Group’s Financial Statements are presented in Sterling and all values are rounded to the nearest thousand
pounds (£’000) except when otherwise indicated.

New standards and interpretations
There are no IFRS amendments or IFRIC interpretations effective for the first time this financial year that had a material impact on the Group.

Judgements and estimates
The preparation of financial information in conformity with IFRS as adopted by European Union requires management to make judgements,
estimates and assumptions that affect the application of policies and reporting amounts of assets and liabilities, income and expenses.
The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable
under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on going basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision
affects both current and future periods.

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed
below:

Professional indemnity (PI) claims
Significant judgement is required when provisioning for PI claims. Details of key assumptions in these areas are disclosed in Notes 7 and 22
to these Financial Statements. A sensitivity calculation which illustrates the impact of different assumptions on the required PI provision is
included in Note 22.

Valuations in acquisitions
The measurement of intangible assets other than goodwill on a business combination involves the estimation of future cashflows and other
inputs relevant to the valuation model being applied.

Impairment of intangible assets
The Group determines whether indefinite life intangible assets (including goodwill) are impaired on an annual basis and this requires an
estimation of the value in use of the cash generating units to which the intangible assets are allocated. This involves estimation of future
cashflows and choosing a suitable discount rate (see Note 14).

Assessment of the useful life of an intangible asset
The consideration of the relevant factors when determining the useful life of an intangible asset requires judgement. Similarly there is also
judgement applied when assessing that an intangible asset has an indefinite useful life.

2. Accounting policies (continued)

Contingent consideration
The Group has acquired a number of businesses over the last few years. With regard to a number of these businesses, the Group has
put and call options to purchase the remaining interest in these businesses at some point in the future. In accordance with the accounting
standards, estimates have been made with regard to the future profitability of these acquisitions and a provision for the cost of acquiring
these interests has been recognised. The provisions are disclosed in Note 21 to these Financial Statements. A sensitivity calculation which
shows the impact of changes in assumption is shown in Note 29.

Valuation of financial assets
The Group owns minority interests in a number of listed and unlisted entities. In accordance with the accounting standards, these
investments are held at fair value and significant judgment is required in assessing this. Further details of the methodology used are
disclosed in Note 16 to these Financial Statements. A sensitivity calculation which shows the impact of changes in assumption is shown in
Note 29.

Basis of consolidation

Subsidiaries:
Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be
consolidated until the date such control ceases. Control is achieved when the Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls
an investee if, and only if, the Group has:

• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)

• Exposure, or rights, to variable returns from its involvement with the investee

• The ability to use its power over the investee to affect its returns.

The Financial Statements of subsidiaries used in the preparation of the consolidated Financial Statements are prepared on the same
reporting year as the Parent Company and are based on consistent accounting policies. All intra-Group balances and transactions,
including unrealised profits arising from them, are eliminated in full.

A change in the ownership interest of a subsidiary, without loss of control, is accounted for as an equity transaction.

Non-controlling interests:
Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Parent Company; and is presented
within equity in the consolidated balance sheet, separately from equity attributable to owners of the parent. Losses within a subsidiary are
attributed to the non-controlling interest even if it results in a deficit balance.

Interest in Joint Ventures
The Group’s investments in its joint ventures are accounted for using the equity method. Under the equity method, the investment in a
joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share
of net assets of the joint venture since the acquisition date. Goodwill relating to the joint venture is included in the carrying amount of the
investment and is not tested for impairment individually.

The statement of profit or loss reflects the Group’s share of the results of operations of the joint venture. In addition, when there has
been a change recognised directly in the equity of the joint venture, the Group recognises its share of any changes, when applicable, in
the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the joint venture are
eliminated to the extent of the interest in the joint venture.

The aggregate of the Group’s share of profit or loss of a joint venture is shown on the face of the statement of profit or loss, within Group
operating profit, and represents profit or loss after tax and non-controlling interests in the subsidiaries of the joint venture. The financial
statements of the joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring
the accounting policies in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its
joint ventures. At each reporting date, the Group determines whether there is objective evidence that the investment in the joint venture is
impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the
joint venture and its carrying value, and then recognises the loss as ‘Share of profit of a joint venture’ in the statement of profit or loss.

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance ReportsNotes to the Group Financial Statements continued.
for the year ended 31st December 2015

2. Accounting policies (continued)

Upon loss of significant influence over the joint control over the joint venture, the Group measures and recognises any retained investment
at its fair value. Any difference between the carrying amount of the joint venture upon loss of significant influence or joint control and the fair
value of the retained investment and proceeds from disposal is recognised in profit or loss.

Intangible assets

Business combinations from 1st January 2010
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the
consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. The choice
of measurement of non-controlling interest, either at fair value or at the proportionate share of the acquiree’s identifiable net assets, is
determined on a transaction by transaction basis. Acquisition costs incurred are expensed and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation
in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. Any contingent
consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date.

Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in
accordance with IAS 39 either in profit or loss or in other comprehensive income. If contingent consideration is linked to a service condition
then expected payments are recognised as remuneration in the profit or loss over the earn-out period.

Where a put and call option is transacted over a non-controlling interest independently of a business combination, the present value of the
exercise price of the put and call option is recorded as a liability with a debit to equity. Subsequent movements in the assessment of the
exercise price are taken to profit and loss. If the put option lapses, the liability is derecognised with a corresponding adjustment to equity.

Goodwill is initially measured at cost being the excess of the aggregate of the acquisition-date fair value of the consideration transferred
and the amount recognised for the non-controlling interest (and where the business combination is achieved in stages, the acquisition-
date fair value of the acquirer’s previously held equity interest in the acquiree) over the net identifiable amounts of the assets acquired and
the liabilities assumed in exchange for the business combination. Assets acquired and liabilities assumed in transactions separate to the
business combinations, such as the settlement of pre-existing relationships or post-acquisition remuneration arrangements are accounted
for separately from the business combination in accordance with their nature and applicable IFRSs. Identifiable intangible assets, meeting
either the contractual-legal or separability criteria are recognised separately from goodwill.

If the aggregate of the acquisition-date fair value of the consideration transferred and the amount recognised for the non-controlling interest
(and where the business combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in
the acquiree) is lower than the fair value of the assets, liabilities and contingent liabilities and the fair value of any pre-existing interest held in
the business acquired, the difference is recognised in profit and loss.

Other intangible assets
Intangible assets other than goodwill that are acquired separately are measured at cost on initial recognition. Following the initial recognition,
intangible assets are carried at cost less accumulated amortisation and impairment losses. The useful lives of intangible assets are
assessed to be either finite or indefinite.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

2. Accounting policies (continued)

Amortisation
Amortisation is charged to the Income Statement on a straight line basis over the estimated useful lives of intangible assets (unless such
lives are indefinite) as follows:

Customer contracts:
Residential Sales customer contracts
Surveying and Valuation customer contracts
Lettings contracts
Order book:
Estate Agency pipeline
Surveying pipeline
Estate Agency register
Others:
Franchise agreements
In-house software

– three to ten years
– between three and five years
– five years

– three months
– one week
– twelve months

– ten years
– between three and five years

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication
that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial
year end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is
accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.

Brand names are not amortised as the Directors are of the opinion that they each have an indefinite useful life. This is based on the
expectation of the Directors that there is no foreseeable limit to the period over which each of the assets are expected to generate net
cash inflows to the businesses and the Directors are confident that trademark registration renewals will be filed at the appropriate time and
sufficient investment will be made in terms of marketing and communication to maintain the value inherent in the brands, without incurring
significant cost. All brands recognised have been in existence for a number of years and are not considered to be at risk of obsolescence
from technical, technological nor commercial change. Whilst operating in competitive markets they have demonstrated that they can
continue to operate in the face of such competition and that there is expected to remain an underlying market demand for the services
offered. The lives of these brands are not dependent on the useful lives of other assets of the entity.

Impairment
Intangible assets with indefinite useful lives are not amortised but tested for impairment annually either individually or at the cash generating
unit level. The useful life of such intangible assets is reviewed annually to determine whether indefinite life assessment continues to be
supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists,
or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s
recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use, and is determined
for an individual asset unless the asset does not generate cash inflows that are largely independent of those from other assets or Groups
of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down
to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses
of continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired
asset.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously
recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the assets’ or
cash generating unit’s recoverable amount.

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports
Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

2. Accounting policies (continued)

Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is provided to write off
cost less the estimated residual value of property, plant and equipment by equal annual instalments over their estimated useful economic
lives as follows:

Office equipment, fixtures and fittings
Computer equipment
Motor vehicles
Leasehold improvements
Freehold and long leasehold property

– over three to seven years
– over three to four years
– over three to four years
– over the shorter of the lease term or ten years
– over fifty years or the lease term whichever is shorter

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use
or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the income statement when the asset is derecognised. These asset’s residual values, useful
lives and methods of depreciation are reviewed at each financial year end, and adjusted prospectively, if appropriate.

Dividends
Equity dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when
paid. In the case of final dividends, this is when approved by the shareholders at the AGM.

Income taxes
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on
tax rates and laws that are enacted or substantively enacted by the balance sheet date. The Management Team periodically evaluates
positions taken in the tax returns with respect to the situations in which applicable tax regulations are subject to interpretation and
establishes provisions where appropriate.

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the financial statements, with the following exceptions:

• where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business

combination that at the time of the transaction affects neither accounting nor taxable profit or loss;

• in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary

differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the

deductible temporary differences, carried forward tax credits or tax losses can be utilised.

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the
related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax
assets are reassessed at each reporting period and are recognised to the extent that it has become probable that future taxable profits will
allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are offset, only if a legally enforceable right exists to set off current tax assets against current
tax liabilities, the deferred income taxes relate to the same taxation authority and that authority permits the Group to make a single net
payment. Income tax is charged or credited directly to other comprehensive income or equity, if it relates to items that are charged or
credited in the current or prior periods to other comprehensive income or equity respectively. Otherwise income tax is recognised in the
income statement.

2. Accounting policies (continued)

Share-based payment transactions

Equity-settled transactions
The equity share option programmes allow Group employees to acquire LSL Shares. The fair value of the options granted is recognised
as an employee expense with a corresponding increase in equity in the case of equity-settled schemes. The fair value is measured at
grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the
options granted is measured using the Black Scholes model, taking into account the terms and conditions (including market and non-
vesting conditions) upon which the options were granted. Non-market vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting
period is based on the number of options that eventually vest. No expense is recognised for awards that do not ultimately vest, except for
equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective
of whether or not the market or non-market vested condition is satisfied, provided that all other performance and/or service conditions are
satisfied.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share (further
details given in Note 10).

Treasury shares
The Group has an employee share trust (ESOT) and an employee benefit trust (Trust) for the granting of LSL Shares to Executive
Directors and selected senior employees. Shares in LSL held by the ESOT and the Trusts are treated as treasury shares and presented
in the balance sheet as a deduction from equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or
cancellation of the Group’s own equity instruments. The finance costs and administration costs relating to the ESOT and the Trusts are
charged to the income statement. Dividends earned on shares held in the ESOT and the Trusts have been waived. The Shares are ignored
for the purposes of calculating the Group’s EPS.

Leases

Group as a lessee
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases and
rentals payable are charged in the income statement on a straight line basis over the lease term.

Group as a lessor
Assets leased out under operating leases are included in property, plant and equipment and depreciated over their estimated useful lives.
Rental income, including the effect of lease incentives, is recognised on a straight line basis over the lease term.

Pensions
The Group operates a defined contribution pension scheme for employees in certain Group companies. The assets of the scheme are
invested and managed independently of the finances of the Group. The pension cost charge represents contributions payable in the year.

Provisions
A provision is recognised in the balance sheet when the Group has a present legal or constructive obligation as a result of a past event, and
it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined
by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and,
when appropriate, the risks specific to the liability.

Financial instruments
Financial assets and financial liabilities are recognised in the Group’s Balance Sheet when the Group becomes a party to the contractual
provisions of the instrument. When financial assets are recognised initially, they are measured at fair value, being the transaction price plus,
in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. Financial assets are derecognised
when the Group no longer has the rights to cash flows, the risks and rewards of ownership or control of the asset. Financial liabilities are
derecognised when the obligation under the liability is discharged, cancelled or expires. All regular way purchases and sales of financial
assets are recognised on the trade date, being the date that the Group commits to purchase or sell the asset. Regular way transactions
require delivery of assets within the timeframe generally established by regulation or convention in the market place.

2. Accounting policies (continued)

The subsequent measurement of financial assets depends on their classification.

The Group’s accounting policy for each category of financial instruments is as follows:

Available-for-sale financial assets
Available-for-sale financial assets are those non-derivative financial assets that are designated as such or are not classified as held to
maturity, loan and receivables or fair value through profit or loss. After initial recognition available-for-sale financial assets are measured at
fair value with gains or losses being recognised in other comprehensive income and as a separate component of equity until the investment
is de-recognised or until the investment is determined to be impaired at which time the cumulative gain or loss previously reported in equity
is included in the income statement. Where a reliable indicator of fair value cannot be obtained the assets are valued at cost.

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment
and amortisation) and its fair value is transferred from equity to the income statement. Reversals of impairment losses in respect of equity
instruments classified as available-for-sale are not recognised in the income statement.

Cash and short term deposits
Cash and short term deposits in the balance sheet comprise cash at bank and in hand and short term deposits with an original maturity
period of three months or less.

For the purposes of the Group cash flow statement, cash and short term deposits consist of cash and short term deposits.

Trade receivables
Trade receivables do not carry any interest and are stated at their original invoiced value as reduced by appropriate allowances for
estimated irrecoverable amounts.

Trade receivables generally have four to seven day payment terms in the estate agency business and thirty days in the surveying business.
Provision is made when there is objective evidence that the Group will not be able to recover balances in full. Balances are written off when
the probability of recovery is assessed as being remote.

In relation to trade receivables carried at amortised cost, a provision for impairment is made when there is objective evidence (such as the
probability of insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all of the amounts due
under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired
debts are de-recognised when they are assessed as uncollectable.

Trade payables
Trade payables do not carry any interest and are stated at their original invoice value.

Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less directly attributable transaction costs. After initial recognition, interest-
bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses arising
on repurchase, settlement or otherwise cancellation of liabilities are recognised respectively in finance income and finance costs.

Finance costs comprise interest payable on borrowings calculated at the effective interest rate method and recognised on an accruals
basis.

Borrowing costs are recognised as an expense when incurred.

Derivative financial instruments
The Group uses derivative financial instruments such as interest rate caps and interest rate swaps to hedge its risks associated with interest
rate fluctuations. Such derivative financial instruments are stated at fair value on the date on which a derivative contract is entered into
and are subsequently re-measured at fair value. Derivatives are carried as financial assets when the fair value is positive and as financial
liabilities when the fair value is negative. Any gains or losses arising from changes in fair value on derivatives are taken directly to the income
statement. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.

Assets carried at cost
If there is objective evidence of an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value
cannot be reliably measured, the amount of the loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

2. Accounting policies (continued)

Revenue recognition
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably
measured. Revenue is measured at the fair value of the consideration receivable, net of discounts, rebates, VAT and other sales taxes or
duty. The following criteria must also be met before revenue is recognised:

Rendering of services
Revenue from the exchange fees in the estate agency business is recognised by reference to the legal exchange date of the housing
transaction. Revenue from the supply of surveying services is recognised upon the completion of the professional survey by the surveyor.
Revenue from lettings, asset management and conveyancing fees is recognised on completion of the service being provided.

Financial services income
Revenue from mortgage procuration fees is recognised by reference to the completion date of the mortgage on the housing transaction.
Revenue from policy sales is recognised by reference to the date that the policy is accepted by the insurer.

Interest income
Revenue is recognised as interest accrues (using the effective interest method – that is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial instrument to the net carrying amount of the financial asset).

Rental income
Rental income including the effect of lease incentives from sub-let properties is recognised on a straight line basis over the lease term.

Dividends
Revenue is recognised when the Group’s right to receive the payment is established.

Exceptional items
The Group presents as exceptional items on the face of the income statement those material items of income and expense which, because
of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand
better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess better trends in
financial performance.

New standards and interpretations not applied
The following new standards, new interpretations and amendments to standards and interpretations have been issued but are not effective
for the financial year beginning 1st January 2015 and have not been early adopted:

International Accounting Standards
(IAS/IFRSs)

IFRS 9

IFRS 15

IFRS 16

Amendment to IAS 1

Financial Instruments: Classification and Measurement
This final version of IFRS 9 adds a new expected loss impairment model and
amends the classification and measurement model for financial assets by
adding a new fair value through other comprehensive income category for
certain debt instruments.
Revenue from Contracts with Customers
This Standard specifies how, and when, an IFRS reporter will recognise
revenue, as well as requiring such entities to provide users of financial
statements with more informative, relevant disclosures.
Leases
This Standard specifies how an IFRS reporter will recognise, measure, present
and disclose leases. The standard provides a single lessee accounting model,
requiring lessees to recognise assets and liabilities for all leases unless the lease
term is 12 months or less or the underlying asset has a low value.
Presentation of Financial Statements
Disclosure initiative to improve presentation and disclosure principles and
requirements in existing Standards.

Effective date

1st January 2018

1st January 2019

1st January 2016

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

2. Accounting policies (continued)

The Directors do not anticipate that the adoption of the above standards and interpretations will have a material impact on the Group’s
Financial Statements, other than additional disclosures, in the period of initial application. This is with the exception of IFRS 16, for which we
are currently evaluating the impact.

3. Revenue

The revenue and pre-tax income is attributable to the continuing activity of estate agency and related activities and the provision of
surveying and valuation services on residential property. All revenue arises in the United Kingdom.

Revenue is analysed as follows:

Revenue from services
Operating Revenue
Rental income
Dividend income
Gain on disposal of financial assets
Other operating income
Finance income
Total revenue

2015
£’000

300,594
300,594
729
835
301
1,865
5
302,464

2014
£’000

287,498
287,498
825
1,579
–
2,404
14
289,916

Dividend income was received in the year from the Group’s investments in Zoopla, VEM and GPEA. Further details of LSL’s investments are
shown in Note 16.

4. Segment analysis of revenue and operating profit

For management purposes, the Group is organised into business units based on their products and services and has two reportable
operating segments as follows:

• The Estate Agency and Related Services segment provides services related to the sale and letting of residential properties. It operates a
network of high street branches. As part of this process, the Estate Agency Division also provides marketing and arranges conveyancing
services. In addition, it provides repossession asset management services to a range of lenders. It also arranges mortgages for a
number of lenders and arranges pure protection and general insurance policies for a panel of insurance companies via the estate agency
branches, Pink Homes Loans, First Complete, Embrace Mortgage Services, First2Protect and Linear Financial Services. The financial
services segment included within the Estate Agency division includes two mortgage and insurance distribution networks providing
products and services for sale via financial intermediaries. The results of this financial services segment do not meet the quantitative
criteria for separate reporting under IFRS and has therefore been aggregated with those of Estate Agency and Related Services.

• The Surveying and Valuation Services segment provides a valuations and professional survey service of residential properties to various

lenders and individual customers.

Each segment has various products and services and the revenue from these products and services are disclosed on pages 16 to 19
under the Business Review section of the Strategic Report.

The Management Team monitors the operating results of its business units separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects,
as explained in the table below, is measured differently from operating profit or loss in the Group Financial Statements. Head office costs,
Group financing (including finance costs and finance incomes) and income taxes are managed on a Group basis and are not allocated to
operating segments.

4. Segment analysis of revenue and operating profit (continued)

Operating segments
The following table presents revenue and profit information regarding the Group’s operating segments for the financial year ended
31st December 2015 and financial year ended 31st December 2014 respectively.

Year ended 31st December 2015

Income statement information
Segmental revenue
Segmental result:
– before exceptional costs, contingent consideration, amortisation and
share-based payments
– after exceptional costs, contingent consideration, amortisation and
share-based payments
Finance income
Finance costs
Profit before tax
Taxation
Profit for the year

Balance sheet information
Segment assets – intangible
Segment assets – other
Total Segment assets
Total Segment liabilities
Net assets/(liabilities)
Other segment items
Capital expenditure including intangible assets
Depreciation
Amortisation of intangible assets
Share of results of joint venture
Professional indemnity claim provision
Onerous leases provision
Share-based payment

Estate
Agency and
Related
Services
£’000

Surveying
and Valuation
Services
£’000

Unallocated
£’000

Total
£’000

236,525

64,069

–

300,594

31,288

18,104

(6,525)

42,867

29,347

17,459

(5,394)

41,412
5
(2,817)
38,600
(8,138)
30,462

Estate
Agency and
Related
Services
£’000

155,670
82,883
238,553
(43,052)
195,501

(7,401)
(4,874)
(1,798)
1,156
–
133
(496)

Surveying
and Valuation
Services
£’000

11,242
8,659
19,901
(42,461)
(22,560)

(590)
(422)
(5)
–
(2,109)
–
(640)

Unallocated
£’000

Total
£’000

–
6,469
6,469
(72,054)
(65,585)

166,912
98,011
264,923
(157,567)
107,356

–
–
–
–
–
–
265

(7,991)
(5,296)
(1,803)
1,156
(2,109)
133
(871)

Unallocated net liabilities comprise plant and equipment (£9,000), other assets (£857,000), cash (£5,603,000), accruals (£1,554,000),
financial liabilities (£15,548,000), deferred and current tax liabilities (£9,452,000), revolving credit facility (£45,500,000).

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

4. Segment analysis of revenue and operating profit (continued)

Year ended 31st December 2014

Estate
Agency and
Related
Services
£’000

Surveying
and Valuation
Services
£’000

Unallocated
£’000

Total
£’000

225,274

62,224

–

287,498

33,892

13,331

(5,214)

42,009

52,310

(12,611)

(5,819)

33,880
14
(2,181)
230
31,943
(6,785)
25,158

Estate
Agency and
Related
Services
£’000

140,786
77,317
218,103
(47,507)
170,596

(9,063)
(4,425)
(559)
1,383
–
217
(683)

Surveying
and Valuation
Services
£’000

10,884
10,319
21,203
(52,711)
(31,508)

(181)
(493)
(6)
–
(26,126)
–
(653)

Unallocated
£’000

Total
£’000

–
955
955
(56,943)
(55,988)

–
–
–
–
–
–
(439)

151,670
88,591
240,261
(157,161)
83,100

(9,244)
(4,918)
(565)
1,383
(26,126)
217
(1,775)

Unallocated net liabilities comprise certain property, plant and equipment (£31,000), other assets (£924,000), accruals (£2,329,000),
financial liabilities (£13,060,000), deferred and current tax liabilities (£6,836,000), overdraft of (£718,000), Revolving Credit Facility
(£34,000,000).

5. Finance income

Interest receivable on funds invested

6. Finance costs

Interest on revolving credit facility and overdraft
Interest on loan notes
Unwinding of discount on professional indemnity provision
Unwinding of discount on contingent consideration

7. Exceptional items and contingent consideration

Exceptional costs:
Administration centre closure and restructuring costs including redundancy costs
Acquisition related costs
Provision for professional indemnity claims/notifications

Contingent consideration on acquisitions
Exceptional gains:
Gain on disposal of freehold properties
Gain on disposal of financial assets

Exceptional finance credits:
Movement in fair value of interest rate swap

2015
£’000

1,852
354
159
452
2,817

2014
£’000

1,764
342
75
–
2,181

2015
£’000

2014
£’000

258
–
–
258
(1,477)

–
–
–

–
(1,219)

1,092
373
24,570
26,035
(405)

(35)
(19,806)
(19,841)

(230)
5,559

Contingent consideration
The credit for consideration on the acquisition (in 2011) of Marsh & Parsons amounted to £3,002,000 (2014: expense £2,281,000). The
exceptional contingent consideration credit recognised in the year relating to other acquisitions, primarily a charge for LMS of £2,136,000
and a credit of £611,000 in LSLi (2014: credit of £2,686,000). See Notes 21 and 27 for more details.

Provision for professional indemnity (PI) claims/notifications
Since early 2012 the Group has experienced a high level of claims and notifications relating to the 2004 to 2008 period, which was a period
of relatively high risk lending characterised by higher house prices, high loan-to-value ratios and considerable levels of buy-to-let and sub-
prime lending. As a result the provision for PI Costs was increased by £17.3m in June 2012 and again by £12.0m in November 2013 and
finally by £24.6m in December 2014.

The PI Costs provision at 31st December 2015 was made up of a ‘Specific Provision’ and ‘Incurred But Not Reported’ (IBNR). The Specific
Provision was based on the Group’s review of any notifications or claims which had been made against the Group as at 31st December
2015. The main factors considered in quantifying the Specific Provision were the likelihood that a claim would be successful; an assessment
of the likely cost for each claim, including any associated legal costs, and whether any reduction in the claim is considered likely due to
contributory negligence of the lender.

The IBNR provision was based on the Directors estimates of the number of claims which would be received in the future with regard to
work completed before 31st December 2015. The Directors have then applied an average cost per case, based on historical averages, to
estimate the IBNR provision.

This provision represents our current best estimate of likely claims costs but the process of resolving open claims and estimating future
claims is on-going.

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

7. Exceptional items and contingent consideration (continued)

A number of risks and uncertainties remain, in particular the actual monthly run rate of new claims, the date at which the rate of claims will
significantly reduce, and the average cost per case both for existing open claims and for claims yet to be received. The cost of these factors
could differ materially from the Directors’ estimates, which could result in a further provision being required.

At 31st December 2015 the total provision for PI Costs was £29.7m. The Directors have considered sensitivity analysis on the key risks
and uncertainties discussed which is set out in Note 22. The Group has continued to build a provision for estimated PI Costs relating to
valuations completed since 2009, and an income statement charge has been made in these results, which has been considered as an
operating expense rather than as an exceptional cost.

Gain on disposal of financial assets
On 18th June 2014, Zoopla underwent an IPO and successfully completed a listing on the London Stock Exchange. Prior to the IPO, LSL
owned 4.91% of Zoopla. Valued at the IPO price of £2.20 per share, LSL’s investment was £44,039,000.

As part of the IPO, LSL sold 8,889,317 Zoopla shares at an average price of £2.19 per share. The total gain on sale of the shares was
£17,989,000 net of associated costs. On 3rd July 2014, the Group sold a further 926,813 shares as part of the IPO over allotment and
received proceeds of £1,978,000, £1,589,000 net of tax. In total, the Group received proceeds net of associated tax costs of £16,814,000.
A special distribution of 16.5 pence per share was declared to return this exceptional gain to Shareholders in 2014.

8. Profit before tax

Profit before tax is stated after charging/(crediting):

Auditor’s remuneration (Note 9)
Operating lease rentals:
Land and buildings
Plant and machinery
Loss/(Gain) on sale of property, plant and equipment and financial assets

9. Auditor’s remuneration

The remuneration of the auditors is further analysed as follows:

Audit of the Financial Statements

Audit of subsidiaries

Audit of the financial statements of the prior period

Total Audit

Audit related assurance services (interim results review fee)

Other assurance services

Tax compliance services

Tax advisory services

2015
£’000

517

10,669
4,806
253

2014
£’000

354

11,440
4,661
(48)

2015
£’000

234

132

415

–

5
517

2014
£’000

222

268

8
354

100

10. Earnings per share (EPS)

Basic EPS amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the Parent Company by the
weighted average number of Ordinary Shares outstanding during the year.

Diluted EPS amounts are calculated by dividing the net profit attributable to ordinary equity holders of the Parent Company by the weighted
average number of Ordinary Shares outstanding during the year plus the weighted average number of Ordinary Shares that would be
issued on the conversion of all the dilutive potential Ordinary Shares into Ordinary Shares.

Basic EPS
Effect of dilutive share options
Diluted EPS

Profit after tax
£’000

Weighted average
number of shares

2015
Per share amount
Pence

30,414 102,406,770
791,256
30,414 103,198,026

29.7

29.5

Profit after tax
£’000

Weighted average
number of shares

25,103 102,479,989
925,536
25,103 103,405,525

–

2014
Per share amount
Pence

24.5
–
24.3

There have been no other transactions involving Ordinary Shares or potential Ordinary Shares between the reporting date and the date of
completion of these Financial Statements.

The Directors consider that the adjusted earnings shown below give a better and more consistent indication of the Group’s underlying
performance:

Group operating profit before contingent consideration, exceptional items, share-based payments and
amortisation (excluding non-controlling interest):

Net finance costs (excluding exceptional and contingent consideration items)
Normalised taxation

Adjusted profit after tax1 before exceptional items, share-based payments and amortisation

2015
£’000

2014
£’000

42,819
(2,360)
(8,193)
32,266

41,954
(2,167)
(8,554)
31,233

Adjusted basic and diluted EPS

Adjusted Basic EPS
Effect of dilutive share options
Adjusted Diluted EPS

Adjusted profit
after tax1
£’000

Weighted average
number of shares

2015
Per share amount
Pence

32,266 102,406,770
791,256
32,266 103,198,026

31.5

31.3

Adjusted profit

after tax1
£’000

Weighted average
number of shares

31,233 102,479,989
925,536
31,233 103,405,525

–

2014
Per share amount
Pence

30.5
–
30.2

Note:
1 This represents adjusted profit after tax attributable to equity holders of the parent. The normalised tax rate in 2015 is 20.25% (2014: 21.5%).

11. Dividends paid and proposed

Declared and paid during the year:
Equity dividends on ordinary shares:
2013 Final: 7.2 pence per share
2014 Interim: 4.0 pence per share
2014 Special dividend: 16.5 pence per share
2014 Final: 8.3 pence per share
2015 Interim: 4.0 pence per share

Dividends on Ordinary Shares proposed (not recognised as a liability as at 31st December):
Equity dividends on Ordinary Shares:
Dividend: 8.6 pence per share (2014: 8.3 pence per share)

2015
£’000

2014
£’000

–
–
–
8,458
4,096
12,554

7,406
4,074
16,806
–
–
28,286

8,808

8,458

101

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Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

12. Directors and employees

Remuneration of Directors

Directors’ remuneration (short-term benefits)*
Contributions to money purchase pensions schemes (post-employment benefits)
Share-based payments

2015
£’000

1,626
18
226
1,870

2014
£’000

1,625
47
397
2,069

* included within this amount is accrued bonuses of £571,000 (2014: £291,000).

The number of Directors who were members of Group money purchase pension schemes during the year totalled 1 (2014:4). During the
year the Directors exercised nil (2014: nil) CSOP options, nil (2014: nil) JSOP options, and nil (2014: 10,506) SAYE options.

Employee numbers and costs
The Group employs staff in its branches and head offices. Aggregate payroll costs of these employees were:

Wages and salaries
Social security costs
Pension costs

Total employee costs

Subcontractor costs

Total employee and subcontractor costs1

Share-based payment expense (see below)

2015
£’000

150,368
15,891
2,274

168,533

2,683

171,216

871

2014
£’000

147,754
15,238
2,335

165,327

2,254

167,581

1,775

Note:
1 The total employee and subcontractor costs exclude employees redundancy costs of £258,000 (2014: £1,032,000), which have been shown under Exceptional costs (see Note 7).

The monthly FTE staff numbers (including Directors) during the year averaged 4,677 (2014: 4,760).

Estate Agency and Related Services
Surveying and Valuation Services

Share-based payments

2015

3,935
742
4,677

2014

3,923
837
4,760

Long-Term Incentive Plan
The Group operates a LTIP (an equity-settled share-based remuneration scheme) for certain employees. Under the LTIP, the options vest if
the individual remains an employee of the Group after a three year period, unless the individual has left under certain ‘good leaver’ terms in
which case the options may vest earlier and providing the performance conditions are met.

LTIP 2015 vesting conditions
30% of the options vest based on the TSR of LSL as compared to the FTSE 250 index (excluding investment trusts) over the three year
performance period:

• If the Group is in the top 25% percentile, all of these options will vest;

• If the Group is at the median 35% will vest;

• Straight line vesting between median and top 25% percentile; and

• Below the median no options vest.

102

12. Directors and employees (continued)

Share-based payments (continued)

Long-Term Incentive Plan (continued)
70% of the options are based on the adjusted EPS performance over the three financial years starting with the financial year in which the
LTIP award is granted:

• If growth is equal to or over (≥) 17.5% p.a. – 100% vest;

• If growth is 7.5% p.a. – 25% vest;

• Straight line vesting between 7.5% p.a. and 17.5% p.a.; and

• If growth is below 7.5% p.a. no options vest.

LTIP 2014 vesting conditions
30% of the options vest based on the TSR of LSL as compared to the FTSE 250 index (excluding investment trusts) over the three year
performance period:

• If the Group is in the top 25% percentile, all of these options will vest;

• If the Group is at the median 35% will vest;

• Straight line vesting between median and top 25% percentile; and

• Below the median no options vest.

70% of the options are based on the adjusted EPS performance over the three financial years starting with the financial year in which the
LTIP award is granted:

• If growth is ≥ 20% p.a. – 100% vest;

• If growth is 12.5% p.a. – 25% vest;

• Straight line vesting between 12.5% p.a. and 20% p.a.; and

• If growth is below 12.5% p.a. no options vest.

LTIP 2013 vesting conditions
30% of the options vest based on the TSR of LSL as compared to the FTSE 250 index (excluding investment trusts) over the three year
performance period:

• If the Group is in the top 25% percentile, all of these options will vest;

• If the Group is at the median 35% will vest;

• Straight line vesting between median and top 25% percentile; and

• Below the median no options vest.

70% of the options are based on the adjusted EPS performance over the three financial years starting with the financial year in which the
LTIP award is granted:

• If growth is ≥ 10% p.a. – 100% vest;

• If growth is 7% p.a. – 25% vest;

• Straight line vesting is between 7% p.a. and 10% p.a.; and

• If growth is below 7% p.a. no options vest.

103

12. Directors and employees (continued)

LTIP 2012 vesting conditions
30% of the options vest based on the TSR of LSL as compared to the FTSE 250 index (excluding investment trusts) over the three year
performance period:

• If the Group is in the top 25% percentile, all of these options will vest;

• If the Group is at the median 35% will vest;

• Straight line vesting between median and top 25% percentile; and

• Below the median no options vest.

70% of the options are based on the adjusted EPS performance over the three financial years starting with the financial year in which the
LTIP award is granted:

• If growth is ≥ 12% p.a. – 100% vest;

• If growth is 8% p.a. – 25% vest;

• Straight line vesting between 8% p.a. and 12% p.a.; and

• If growth is below 8% p.a. no options vest.

Outstanding at 1st January
Granted during the year
Exercised during the year
Lapsed during the year
Outstanding at 31st December

2015

2014

Weighted
average
exercise
price
£

–
–
–
–
–

Number

1,135,571
493,970
(115,039)
(336,044)
1,178,458

Weighted
average
exercise
price
£

–
–
–
–
–

Number

1,019,483
419,970
–
(303,882)
1,135,571

There were 64,677 options exercisable at the end of the year (2014: £nil). The weighted average remaining contractual life is 1.36 years
(2014: 1.27 years). The weighted average fair value of options granted during the year was £3.13 (2014: £3.92).

Joint Share Ownership Plan (JSOP)
Awards under the JSOP participate in increases in the value of shares in the Company above the share price at the date of grant. Awards
comprise of an interest in jointly owned shares (i.e. Ordinary Shares held in co-ownership with the Trust) and a stock appreciation right.
A key feature of the JSOP is that individuals are required to purchase their interest in the jointly owned shares and have thereby put their
personal capital at risk.

The vesting of JSOP awards granted in 2011 is conditional upon both the following criteria being met:

• LSL’s adjusted EPS performance over the three financial years starting with the financial year in which the JSOP award is granted being

10% p.a. or more; and

• LSL’s total shareholders’ return must exceed that of the FTSE 250 index (excluding investment trusts) over the three year performance

period.

104

12. Directors and employees (continued)

The EPS performance of LSL for the three years ended 31st December 2013 is such that the vesting criteria of the 2011 JSOP was not met
and as such these options did not vest in March 2014.

Outstanding at 1st January
Exercised during the year
Lapsed during the year
Outstanding at 31st December

2015

2014

Weighted
average
exercise
price
£

3.20
3.20
3.20
3.20

Number

129,464
–
–
129,464

Weighted
average
exercise
price
£

3.20
3.20
3.20
3.20

Number

829,836
–
(700,372)
129,464

There were 129,464 options exercisable at the end of the year which relate to the 2010 scheme which vested (2014: 129,464). The
weighted average remaining contractual life is nil (2014: nil). The average market value at the date of exercise was £nil (2014: £nil).

Company Stock Option Plan (CSOP)
The Group operates a CSOP (an equity-settled share-based remuneration scheme) for certain employees. Under the CSOP, the options
vest if the individual remains an employee of the Group after a three year period, unless the individual has left under certain ‘good leaver’
terms in which case the options may vest earlier.

Outstanding at 1st January
Granted during the year
Exercised during the year
Lapsed during the year
Outstanding at 31st December

2015

2014

Weighted
average
exercise
price
£

3.72
3.62
2.69
3.91
3.85

Number

1,314,246
243,407
(201,795)
(147,141)
1,208,717

Weighted
average
exercise
price
£

2.60
4.16
2.49
2.75
3.72

Number

607,594
930,839
(206,512)
(17,675)
1,314,246

There were 164,367 options exercisable at the end of the year (2014: 128,078). The average market value at the date of exercise was
£3.44 (2014: £4.32).

The weighted average fair value of options granted during the year was £1.97 (2014: £2.44). The weighted average remaining contractual
life is 1.28 years (2014: 1.75 years).

Save-As-You-Earn scheme
The Group has offered options under the SAYE scheme in each of 2011 to 2014 years. All these offers were open to all qualifying
employees and provide for an exercise price equal to the daily average market price on the date of grant. The options will vest if the
employee remains in service for the full duration of the option scheme (three years). There are no cash settlement alternatives.

Outstanding at 1st January
Granted during the year
Exercised
Lapsed during the year due to employees withdrawal
Outstanding at 31st December

2015

2014

Weighted
average
exercise
price
£

3.56
–
2.62
3.81
3.83

Number

1,017,127
–
(234,612)
(220,174)
562,341

Weighted
average
exercise
price
£

2.69
4.16
2.57
2.84
3.56

Number

1,008,008
567,052
(462,565)
(95,368)
1,017,127

The weighted average fair value of options granted during the year was £nil (2014: £2.45) and the weighted average remaining contractual
life was 0.8 years (2014: 1.6 years). The average market value at the date of exercise was £3.61 (2014: £4.00).

There were 1,374 (2014: nil) options exercisable at the end of the year.

105

12. Directors and employees (continued)

Equity-settled transactions
The assumptions used in the estimation of the fair value of equity settled options were as follows:

Option pricing model used
Weighted average share price at grant date (£)
Exercise price (£)
Expected life of options (years)
Expected volatility
Expected dividend yield
Risk free interest rate

LTIP
2015

CSOP
2015

BlackScholes BlackScholes
3.62
3.62
3 years
100%
3.3%
1.22%

3.48
–
3 years
100%
3.3%
1.20%

LTIP
2014

SAYE
2014

CSOP
2014

BlackScholes BlackScholes BlackScholes
4.16
4.16
3 years
100%
3%
1.84%

4.35
4.16
3 years
100%
3%
1.84%

4.30
–
3 years
100%
3%
1.84%

The total cost recognised for equity settled transactions is as follows:

Share-based payment charged during the year

A credit of £266,000 (2014: charge £439,000) relates to employees of the Company.

2015
£’000

871

2014
£’000

1,775

The volatility assumption, measured at the standard deviation of expected share price returns, is based on statistical analysis of historical
share price. The dividend yield assumption is based on the fact that the shares awarded are not eligible to receive dividends until the end of
the vesting period.

13. Taxation

(a) Tax on profit on ordinary activities
The major components of income tax charge in the Group income statements are:

UK corporation tax – current year

– adjustment in respect of prior years

Deferred tax:
Origination and reversal of temporary differences
Adjustment in respect of prior year
Total deferred tax (credit)/expense
Total tax charge in the income statement

2015
£’000

7,787
391
8,178

(470)
430
(40)
8,138

2014
£’000

6,460
144
6,604

98
83
181
6,785

106

13. Taxation (continued)

The UK standard corporation tax rate has reduced from 21% as at 1st January 2015 to 20% from 1st April 2015 with further reductions to
19% from 1st April 2017 and 18% from 1st April 2020. The effective rate of tax for the year was 21.1% (2014: 21.2%). The effective tax rate
for 2015 was decreased as a result of reducing the rate at which deferred tax is provided resulting from the reduction in the headline rate of
corporation tax. Deferred tax charged directly to other comprehensive income is £0.5m (2014: credit of £2.7m); this is comprised of a credit
of £0.05m and a charge of £1.0m and relates to the disposal and revaluation of financial assets (see Note 16 to the Financial Statements).
There is also a credit arising as a result of the impact of rate change on deferred tax of £0.5m. Income tax credited directly to the share-
based payment reserve is £nil (2014: £nil).

In July 2015, the UK Government announced proposals to reduce the main rate of corporation tax to 19% from 1st April 2017, and further
reduced to 18%, effective from 1st April 2020. As of 31st December 2015 reductions to the main rate of corporation tax to 18% had been
enacted. Accordingly, this is the rate at which deferred tax has been provided.

(b) Factors affecting tax charge for the year
The tax assessed in the profit and loss account is higher (2014: lower) than the standard UK corporation tax rate, because of the following
factors:

Profit on ordinary activities before tax
Tax calculated at UK standard rate of corporation tax rate of 20.25% (2014 – 21.5%)
Non-taxable income from joint ventures and dividends
Benefit of deferred tax asset and brought forward losses not previously recognised
Disallowable expenses
Impact of movement in contingent consideration credited to the Income Statement
Share-based payment relief
Impact of rate change on deferred tax
Prior period adjustments – current tax
Prior period adjustment – deferred tax
Total taxation charge

2015
£’000

38,600
7,816
(403)
(32)
381
(295)
57
(207)
391
430
8,138

2014
£’000

31,943
6,868
(641)
(249)
394
(87)
281
(8)
144
83
6,785

The major component of expenses not deductible for tax purposes within the tax reconciliation is a permanent disallowance of depreciation
on assets which do not qualify for capital allowances. This is a recurring adjustment with the tax impact of approximately £320,000 being
broadly consistent with the prior year figure. The remainder of the adjustment relates to non-recurring items of disallowable expenditure,
primarily legal and professional fees incurred in relation to capital transactions.

Unrecognised deferred tax asset relating to:
Losses

2015
£’000

3,823
3,823

2014
£’000

2,500
2,500

The deferred tax assets may be recoverable in the future and this is dependent on subsidiary companies generating taxable profits sufficient
to allow the utilisation of these amounts. These deferred tax assets cannot be offset against profits elsewhere in the Group as they relate to
losses brought forward which can only be offset against taxable profits arising from the same trade in which the losses arose. There is no
time limit for utilisation of the above tax losses and other temporary differences.

107

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

13. Taxation (continued)

(d) Deferred tax
An analysis of the movements in deferred tax is as follows:

Net deferred tax liability at 1st January

Deferred tax charge/(credit) recognised directly in other comprehensive income

Deferred tax (credit)/expense in income statement for the year (Note 13a)

Net deferred tax liability at 31st December

Analysed as:

Accelerated capital allowances
Deferred tax liability on separately identifiable intangible assets on business combinations
Deferred tax on financial assets
Deferred tax on share options
Other short-term temporary differences
Trading losses recognised

Deferred tax credit/(expense) in income statement relates to the following:

Intangible assets recognised on business combinations
Accelerated capital allowance
Deferred tax on share options
Other temporary differences

2015
£’000

6,462

505

(40)

6,927

2015
£’000

(566)
3,265
4,546
(166)
(53)
(99)
6,927

2015
£’000

295
(135)
(59)
(61)
40

2014
£’000

9,014

(2,733)

181

6,462

2014
£’000

(702)
3,583
4,105
(225)
(188)
(111)
6,462

2014
£’000

(11)
(55)
(121)
6
(181)

At the end of either year there was no unrecognised deferred tax liability for taxes that would be payable on the unremitted earnings of the
Group’s subsidiaries.

14. Intangible assets

Goodwill

Cost
At 1st January
Arising on acquisitions during the year
At 31st December

108

2015
£’000

2014
£’000

131,560
4,835
136,395

125,642
5,918
131,560

14. Intangible assets (continued)

Carrying amount of goodwill by operating unit
Estate Agency and Related Services companies
Marsh & Parsons
Your Move
Reeds Rains
LSLi
Pink Home Loans
First Complete
Templeton LPA
Others

Surveying and Valuation Services company
e.surv

2015
£’000

2014
£’000

40,307
40,613
16,330
22,290
2,604
3,998
336
348
126,826

9,569
9,569
136,395

40,307
40,191
16,047
18,160
2,604
3,998
336
348
121,991

9,569
9,569
131,560

Impairment of goodwill and other intangibles with indefinite useful lives.

The carrying amount of goodwill by operating unit is given above. The carrying amount of brand by operating unit is as follows:

Estate Agency and Related Services companies
Marsh & Parsons
Your Move
Reeds Rains
LSLi
Pink Home Loans

Surveying and Valuation Services company
e.surv

2015
£’000

2014
£’000

11,724
2,510
1,241
1,675
180
17,330

1,305
1,305
18,635

11,724
2,510
1,241
1,413
180
17,068

1,305
1,305
18,373

Goodwill acquired through business combinations and brands has been allocated for impairment testing purposes to statutory companies
or groups of statutory companies which are managed as one cash generating unit as follows:

• Estate Agency and Related Services companies

• Marsh & Parsons

• Your Move (including its share of cash flows from LSL Corporate Client Department)

• Reeds Rains

• LSLi, which includes Intercounty, Frosts, JNP, Goodfellows, Davis Tate, Lauristons, Lawlors, Hawes & Co and Thomas Morris1

• Pink Home Loans which includes BDS

• Templeton LPA

• St Trinity

• First Complete

• Surveying and Valuation Services company

• e.surv

Note:
1

The Management Team viewed these companies/operating units as part of LSLi for impairment testing purposes. These represent the lowest level within the Group at which goodwill is monitored
for internal management purposes.

109

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

14. Intangible assets (continued)

Estate Agency and Related Services companies
The recoverable amount of the Estate Agency and Related Services companies has been determined based on a value-in-use calculation
using cashflow projections based on financial budgets approved by the Board and three year plan. The discount rate applied to cashflow
projections is 9.7% (2014:10.6%) and cashflows beyond the three year plan are extrapolated using a nil growth rate (2014: nil).

Surveying and Valuation Services company
The recoverable amount of the Surveying and Valuation Services companies is also determined on a value-in-use basis using cash flow
projections based on financial budgets approved by the Board and three year plan. The discount rate applied to the cash flow projections
is 9.7% (2014:10.6%). The growth rate used to extrapolate the cash flows of the Surveying and Valuation Services company beyond the
three-year plan is nil (2014: nil).

Key assumptions used in value-in-use calculations
The calculation of value-in-use for each of the Estate Agency and Related Services and Surveying and Valuation Services companies is
most sensitive to the following assumptions:

• Discount rates

• Market share and market recovery

• Growth rate used in the budget period

Discount rates reflect management’s estimate of the post-tax Weighted Average Cost of Capital (WACC) of the Group and this is grossed
up to arrive at a pre-tax discount rate (using a tax rate of 20.25%) of 9.7%. This is the benchmark used by management to assess
operating performance and to evaluate future acquisition proposals.

Market share and market growth assumptions are important because, as well as using industry data for growth rates (as noted below)
management assess how LSL’s relative position to its competitors might change over the budget period. The Estate Agency and Surveying
markets both showed resilience in challenging markets in the first half of 2015, and showed recovery in the second half. The calculations
supporting the impairment test are a 2% p.a. improvement in the housing market in 2016 and flat thereafter.

Growth rate conservatively estimated at nil after the end of the three year plan (2014: nil). Given the housing and mortgage markets are
currently considered to be at a low point in the cycle, with transaction volumes at approximately half the long-term average, this estimate is
considered conservative.

There has been no impairment in respect of the carrying amount of goodwill or brand (an indefinite useful life asset) held on the balance
sheet.

Sensitivity to changes in assumptions
With regard to the assessment of value-in-use for each of the above companies, management believes that no reasonably possible change
in any of the above key assumptions would cause the recoverable amount to be below the carrying value.

110

14. Intangible assets (continued)

Other intangible assets

As at 31st December 2015

Cost
At 1st January 2015
Additions
Arising on acquisition
during the year
At 31st December 2015
Aggregate amortisation
and impairment
At 1st January 2015
Charge for the year
At 31st December 2015
Carrying amount
At 31st December 2015

As at 31st December 2014

Cost
At 1st January 2014
Additions
Arising on acquisition
during the year
At 31st December 2014
Aggregate amortisation
and impairment
At 1st January 2013
Charge for the year
At 31st December 2014
Carrying amount
At 31st December 2014

Brand
Names
£’000

18,564
–

262
18,826

191
–
191

Customer
Contracts
£’000

17,598
–

–
17,598

17,586
6
17,592

Insurance
Renewals
£’000

5,612
–

–
5,612

5,612
–
5,612

Lettings
Contracts
£’000

2,814
–

8,537
11,351

2,404
1,123
3,527

Order
Book
£’000

5,451
–

–
5,451

5,451
–
5,451

Other1
£’000

2,758
3, 230

181
6,169

1,443
674
2,117

Total
£’000

52,797
3,230

8,980
65,007

32,687
1,803
34,490

18,635

–

7,824

–

4,052

30,517

Brand
Names
£’000

18,287
–

277
18,564

191
–
191

Customer
Contracts
£’000

17,501
–

97
17,598

17,464
122
17,586

Insurance
Renewals
£’000

Lettings
Contracts
£’000

5,612
–

–
5,612

5,612
–
5,612

2,246
–

568
2,814

2,246
158
2,404

Order
Book
£’000

5,451
–

–
5,451

5,451
–
5,451

Other1
£’000

2,105
653

–
2,758

1,158
285
1,443

Total
£’000

51,202
653

942
52,797

32,122
565
32,687

18,373

–

410

–

1,315

20,110

Note:
1 Other relates to in-house software and Estate Agency franchise agreements.

111

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

14. Intangible assets (continued)

The brand value relates to the following:

• Your Move, a network of residential sales and lettings agencies and e.surv, a surveying and valuation company which were acquired by

the Group in 2004;

• Reeds Rains, a network of residential sales and lettings agencies which was acquired in October 2005;

• Intercounty, a network of residential sales and lettings agencies which was acquired in February 2007;

• Frosts, a network of residential sales and lettings agencies which was acquired in July 2007;

• JNP, a network of residential sales and lettings agencies which was acquired in September 2007;

• Goodfellows, a network of residential sales and lettings agencies which was acquired in May 2010;

• Pink Home Loans and BDS intermediary networks which was acquired in December 2010;

• Marsh & Parsons, a network of residential sales and lettings agencies which was acquired in November 2011;

• Davis Tate, a network of residential sales and lettings agencies which was acquired in February 2012;

• Lauristons, a network of residential sales and lettings agencies which was acquired in July 2012;

• Walker Fraser Steele, a surveying business which was acquired in June 2013;

• Lawlors, a network of residential sales and lettings agencies which was acquired in September 2013;

• Hawes & Co, a network of residential sales and lettings agencies which was acquired in March 2014; and

• Thomas Morris, a network of residential sales and lettings agencies which was acquired in February 2015.

The businesses are run as separate reporting units within the Group. There have been no fundamental changes to the manner in which the
businesses have been run since their acquisition and therefore the results of the businesses are considered to be derived from the brand
names nationally.

Freehold land and
buildings
£’000

Leasehold
improvements
£’000

Motor
vehicles
£’000

Fixtures, fittings
and computer
equipment
£’000

2,138
–
–
(246)
1,892

300
–
–
300

10,906
–
1,065
–
11,971

4,853
902
–
5,755

359
–
33
(210)
182

197
39
(129)
107

36,063
28
3,663
(113)
39,641

23,844
4,355
(68)
28,131

Total
£’000

49,466
28
4,761
(569)
53,686

29,194
5,296
(197)
34,293

1,592

6,216

11,510

19,393

15. Property, plant and equipment

As at 31st December 2015

Cost
At 1st January 2015
Acquisitions during the year
Additions
Disposals
At 31st December 2015
Depreciation and impairment
At 1st January 2015
Charge for the year
Disposals
At 31st December 2015
Carrying amount

At 31st December 2015

112

15. Property, plant and equipment (continued)

As at 31st December 2014

Cost
At 1st January 2014
Acquisitions during the year
Additions
Transfer from assets held for sale
Disposals
At 31st December 2014
Depreciation and impairment
At 1st January 2014
Charge for the year
Disposals
At 31st December 2014
Carrying amount

At 31st December 2014

Freehold land and
buildings
£’000

Leasehold
improvements
£’000

Motor
vehicles
£’000

Fixtures, fittings
and computer
equipment
£’000

1,712
180
–
246
–
2,138

300
–
–
300

8,416
–
2,490
–
–
10,906

4,137
716
–
4,853

431
–
–
–
(72)
359

201
53
(57)
197

30,647
60
6,101
–
(745)
36,063

20,338
4,149
(643)
23,844

Total
£’000

41,206
240
8,591
246
(817)
49,466

24,976
4,918
(700)
29,194

1,838

6,053

162

12,219

20,272

During the period, a freehold property with a book value totalling £246,000 (2014: £30,000) was sold for net proceeds of £163,000 (2014:
£65,000) resulting in a loss on disposal of £83,000 (2014: gain of £35,000). Assets with a book value totalling £82,000 (2014: £nil) were
sold for net proceeds of £121,000 (2014: £nil), resulting in a profit on disposal of £39,000 (2014: £nil).

16. Financial assets

Available-for-sale financial assets

Unquoted shares at fair value
Quoted shares at fair value

Opening balance
Additions
Disposals
Fair value adjustment recorded through reserves
Closing balance

2015
£’000

1,774
27,097
28,871
23,033
1,178
(470)
5,130
28,871

2014
£’000

1,686
21,347
23,033
36,574
1,155
(21,599)
6,903
23,033

The financial assets include unlisted equity instruments which are carried at fair value. Fair value is judgemental given the assumptions
required and have been valued using a level 3 valuation techniques (see Note 29). Financial assets also include shares in Zoopla which are
listed on the London Stock Exchange and again are carried at fair value. These shares are valued using a level 1 valuation technique.

Zoopla
Zoopla’s share price at 31st December 2015 was £2.40 per share. The Directors consider the best estimate of the fair value of LSL’s
investment in Zoopla to be the current share price which values the Group’s stake in Zoopla at £27,097,000. Subsequent to the 2015
interim date, Zoopla completed an anniversary offer allowing LSL to subscribe for a further 619,318 shares at the £2.20 IPO price with a
20% discount. These have been taken up by LSL.

At the same time, a further 169,350 shares were sold through the anniversary member offer at £1.76 with net proceeds of £297,000.

The carrying value of the Group’s investment in VEM at 31st December 2015 has been assessed as £912,000 (2014: £824,000), this
includes an additional 195 shares acquired in the period for £88,000.

The carrying value of the Group’s investment in GPEA at 31st December 2015 has been assessed as £862,000 (2014: £862,000).

113

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Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

17. Investments in joint ventures

Investment in joint ventures
Opening balance
Acquisitions
Equity accounted profit
Dividend received
Closing balance

2015
£’000

8,778
9,121
–
1,156
(1,499)
8,778

2014
£’000

9,121
3,239
5,801
1,383
(1,302)
9,121

The Group has a 33.33% interest in TM, a joint venture whose principal activity is to provide property searches. The principal place of
business of TM is in the United Kingdom.

In July 2011, the Group acquired a 33.33% interest in LMS for a total consideration of £671,000. The principal place of business of LMS is
the United Kingdom.

The Group also has a 49.99% interest in LMS, a joint venture whose principal activity is to provide conveyancing panel management
services.

In September 2014, the Group increased its ownership interest of LMS to 49.99% for an initial consideration of £2,422,000. The contingent
consideration element payable of £3,093,000 will vary based on the future profitability of LMS and is payable in 2016 (see Note 21). The
principal activity of LMS is to provide panel management of conveyancing services. The principal place of business of LMS is the United
Kingdom.

The share of the assets, liabilities, income and expenses of the joint ventures at 31st December and for the years then ended are as follows:

Share of the joint ventures’ balance sheets:
Non-current assets
Current assets
Current liabilities
Non-current liabilities
Share of net assets

Share of the joint ventures’ results:
Revenue
Operating expenses
Operating profit
Finance income
Profit before tax
Taxation
Profit after tax

2015
£’000

6,547
5,478
(3,247)
–
8,778

2015
£’000

29,319
(27,631)
1,688
24
1,712
(556)
1,156

2014
£’000

6,620
5,384
(2,869)
(14)
9,121

2014
£’000

26,788
(25,122)
1,666
20
1,686
(303)
1,383

Non-Current assets include £5,008,000 (2014: £5,008,000) in respect of goodwill arising on the acquisition of shares in LMS.

114

18. Trade and other receivables

Current
Trade receivables
Prepayments and accrued income

2015
£’000

2014
£’000

23,234
12,132
35,366

24,618
11,547
36,165

Trade receivables are non-interest bearing and are generally on 4-30 day terms.

As at 31st December 2015, trade receivables with a nominal value of £2,518,000 (2014: £2,184,000) were impaired and fully provided for.
Movements in the provision for impairment of receivables were as follows:

At 1st January
Charge for the year
Amounts written off
At 31st December

As at 31st December, the analysis of trade receivables that were past due but not impaired is as follows:

2015
2014

19. Cash and cash equivalents

Short-term deposits

Total
£’000

23,234
24,618

Neither past due
nor impaired
£’000

15,217
19,934

2015
£’000

2,184
583
(249)
2,518

2014
£’000

2,117
572
(505)
2,184

Past due but not impaired

0-90 days
£’000

7,686
4,173

2015
£’000

5,603

>90 days
£’000

331
511

2014
£’000

–

Cash at bank earns interest at floating rates based on daily bank overnight deposit rates. Short-term deposits are made for varying periods
of between one day and three days depending on the immediate cash requirements of the Group, and earn interest at the respective short-
term deposit rates. The fair value of cash and cash equivalents is £5,603,000 (2014: nil). At 31st December 2015, the Group had available
£54.5m of undrawn committed borrowing facilities in respect of which all conditions precedent had been met (2014: £65.3m).

20. Trade and other payables

Current

Trade payables
Other taxes and social security payable
Other payables
Accruals

Terms and conditions of the above financial liabilities:

• Trade payables are non-interest bearing and are normally settled on between 30 and 60 day terms.

• Other payables are mainly non-interest bearing and have an average term of three months.

2015
£’000

2014
£’000

7,327
11,787
725
30,263
50,102

10,268
11,078
446
28,544
50,336

115

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Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

21. Financial liabilities

Current
Overdraft
2% unsecured loan notes
12% unsecured loan notes
Deferred consideration
Contingent consideration

Non-current
Bank loans – revolving credit facility
12% unsecured loan notes
Deferred consideration
Contingent consideration

2015
£’000

–
–
10,033
2,422
3,322
15,777

45,500
–
447
6,564
52,511

2014
£’000

718
63
–
–
3,878
4,659

34,000
9,681
2,887
9,852
56,420

Bank loans – revolving credit facility and overdraft
A £100.0m loan facility which expires in August 2017 was arranged in June 2013. Loan refinance costs of £1,128,000 were incurred in
June 2013 which have been capitalised and are being amortised over the life of the loan facility.

The bank loan totalling £45.5m (2014: £34.0m) and overdraft totalling nil (2014: £0.7m) are secured via cross guarantees issued from all
of the Group’s subsidiaries excluding the following subsidiaries, Lending Solutions, Homefast, Linear (Linear Mortgage Network and Linear
Financial Services), Templeton LPA, property-careers.com, Chancellors Associates and LSLi and the LSLi subsidiaries.

The utilisation of the revolving credit facility may vary each month as long as this does not exceed the maximum £100.0m facility
(2014: £100.0m). The Group’s overdraft is also secured on the same facility but cannot exceed £5.0m and the combined overdraft and
revolving credit facility cannot exceed £100.0m (2014: £100.0m). The banking facility is repayable when funds permit on or by August 2017.

Interest and fees payable on the revolving credit facility amounted to £1.9m (2014: £1.8m). The interest rate applicable to the facility is
LIBOR plus a margin rate of 1.50% (2014: LIBOR plus 1.50%). The margin rate is linked to the leverage ratio of the Group and the margin
rate is reviewed at six monthly intervals. An additional fee is charged if the facility is more than 33% drawn with a further fee due if the facility
is more than 67% drawn.

12% unsecured loan notes
12% unsecured loan notes with a face value of £6,146,000 and a 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. The loan notes are redeemable at par value plus rolled up interest at any time after
1st January 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 1st April 2020. The amounts shown in the table above include accrued interest of £1,374,000 (2014: £1,021,000).

2% unsecured loan notes
2% unsecured loan notes with a face value of £63,000 were issued in September 2014 for the acquisition of Marsh & Parsons. These were
redeemed at par during 2015.

116

21. Financial liabilities (continued)

Deferred consideration
Deferred consideration totalling £447,000 is payable at any time between 1st January 2016 and 1st April 2020 at the option of the
management shareholders. Additionally there is £2,422,000 payable in relation to the purchase of LMS in 2014 (Note 17).

Deferred Consideration

Marsh & Parsons

LMS

Contingent consideration

Marsh & Parsons Growth Shares

LSLi contingent consideration
LMS
Other

Opening balance
Cash paid
Acquisition
Amounts recorded through income statement
Closing balance

2015
£’000

447

2,422

2,869

2015
£’000

1,518

4,790
3,093
485
9,886
13,730
(4,015)
1,178
(1,007)
9,886

2014
£’000

465

2,422

2,887

2014
£’000

4,501

7,496
957
776
13,730
12,299
(1,426)
3,262
(405)
13,730

£1,518,000 (2014: £4,501,000) of contingent consideration relates to the Growth Shares acquired by the management of Marsh & Parsons
subsequent 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 1st January 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.

£4,790,000 (2014: £7,496,000) of contingent consideration relates to payments to third parties in relation to the acquisition of LSLi and
certain of its subsidiaries between 2007 and 2015. This is payable between three and five years after the acquisition dates depending on
the profitability of those subsidiaries in the relevant years. In 2015, the contingent consideration has been recalculated using a discount rate
of 6.5% (2014: 6.5%).

£3,093,000 (2014: £957,000) of contingent consideration relates to payments to third parties in relation to the acquisition of LMS in
September 2014 (see Note 17). This is payable in 2016 and the payout will vary depending on the profitability of LMS in 2015.

The table below shows the allocation of the contingent consideration balance and income charge between the various categories:

Remuneration
Put options over non-controlling interests
Arrangement under IFRS 3
Closing balance
Contingent consideration profit and loss impact in the period relating to amounts accounted for as:
Remuneration
Put options over non-controlling interests
Arrangement under IFRS 3
Unwinding of discount on contingent consideration
Charge/(credit)

2015
£’000

3,362
3,093
3,431
9,886

(2,739)
1,799
(519)
452
(1,007)

2014
£’000

7,463
4,217
2,050
13,730

756
(1,110)
( 51)
–
(405)

117

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Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

22. Provisions for liabilities

Balance at 1st January
Amount utilised
Amount released
Unwinding of discount
Provided in financial year (including
exceptional costs)
Balance at 31st December
Current
Non-current

Professional
indemnity claim
provision
£’000

38,719
(11,156)
–
159

1,950
29,672
12,056
17,616
29,672

2015

Total
£’000

38,911
(11,162)
(133)
159

1,950
29,725
12,100
17,625
29,725

Professional
indemnity claim
provision
£’000

25,864
(13,271)
–
75

26,051
38,719
16,388
22,331
38,719

Onerous
leases
£’000

192
(6)
(133)
–

–
53
44
9
53

2014

Total
£’000

26,339
(13,337)
(217)
75

26,051
38,911
16,539
22,372
38,911

Onerous
leases
£’000

475
(66)
(217)
–

–
192
151
41
192

Professional Indemnity (PI Cost) claim provision
The PI Cost provision is to cover the costs of claims relating to valuation services for clients which are not covered by PI insurance. The PI
Cost provision includes amounts for claims already received from clients, claims yet to be received and any other amounts which may be
payable as a result of legal disputes associated with provision of valuation services.

The provision is the Directors’ best estimate of the likely outcome of such claims, taking account of the incidence of such claims and
the size of the loss that may be borne by the claimant, after taking account of actions that can be taken to mitigate losses. The PI Cost
provision will be utilised as individual claims are settled and the settlement amount may vary from the amount provided depending on
the outcome of each claim. It is not possible to estimate the timing of payment of all claims and therefore a significant proportion of the
provision has been classified as non-current.

As at 31st December 2015 the total provision for PI Costs was £29.7m. The Directors have considered the sensitivity analysis on the key
risks and uncertainties discussed above.

Cost per claim
A substantial element of the PI Cost provision relates to specific claims where disputes are on-going. These specific cases have been
separately assessed and specific provisions have been made. The average cost per claim has been used to calculate the IBNR. Should the
costs to settle and resolve these claims and future claims increase by 10%, an additional £2.5m would be required.

Rate of claim
The IBNR assumes that the rate of claim for the high risk lending period in particular reduces over time. Should the rate of reduction be
lower than anticipated and the duration extend, further costs may arise. An increase of 30% in notifications in excess of that assumed in the
IBNR calculations would increase the required provision by £0.5m.

Notifications
The company has received a number of notifications which have not deteriorated into claims or loss. Should the rate of deterioration
increase by 50%, an additional provision of £1.0m would be required.

Onerous lease provision
The provision for lease obligations relates to obligations under leases on vacant properties. The provision is expected to be fully utilised by
June 2020. The final outcome depends upon the ability of the Group to sublet or assign the lease over the related properties.

118

23. Obligations under leases

Operating leases
The Group had annual commitments in respect of non-cancellable operating leases for which no provision has been made in these
Financial Statements (other than the onerous lease provision as disclosed in Note 22). Future minimum rentals payable under these
operating leases are as follows:

No later than one year
After one year but not more than five
years
After five years

Land
and
building
£’000

7,025

16,211
9,509
32,745

Plant
and
machinery
£’000

3,530

3,358
–
6,888

2015

Total
£’000

10,555

19,569
9,509
39,633

Land
and
building
£’000

7,995

17,304
8,211
33,510

Plant
and
machinery
£’000

2,735

3,533
–
6,268

2014

Total
£’000

10,730

20,837
8,211
39,778

The Group had annual commited revenue in respect of non-cancellable operating leases for which no accrual has been made in these
Financial Statements. Future minimum rentals receivable under non-cancellable operating leases are as follows:

Not later than one year
After one year but not more than five years
After five years

24. Share capital

Authorised:
Ordinary shares of 0.2p each
Issued and fully paid:
At 1st January and 31st December

25. Reserves

2015
Land
and
buildings
£’000

307
644
376
1,327

2014
Land
and
buildings
£’000

253
472
43
768

2015

£’000

2014

£’000

500,000,000

1,000 500,000,000

1,000

104,158,950

208 104,158,950

208

Share premium
The amount subscribed for share capital in excess of nominal value less any costs attributable to the issue of new shares.

Share-based payment reserve
The share-based payment reserve is used to record the value of equity-settled share-based payment provided to the employees, as part of
their remuneration. Note 12 gives further details of these plans.

Treasury shares
Treasury shares represent the cost of LSL Shares purchased in the market and held by the Trust to satisfy future exercise of options under
the Group’s employee share options schemes. At 31st December 2015 the Trust held 1,707,671 (2014: 2,259,117) LSL Shares at an
average cost of £3.51 (2014: £3.51). The market value of the LSL Shares at 31st December 2015 was £4,867,000 (2014: £6,732,000). The
nominal value of each share is 0.2p.

Fair value reserve
The fair value reserve is used to record the changes in fair value of financial assets held for sale. Note 16 gives further details of the
movement in the current year.

119

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Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

26. Pension costs and commitments

The Group operates defined contribution pension schemes for its Executive Directors and certain employees. The assets of the schemes
are held separately from those of the Group in independently administered funds.

Total contributions to the defined contribution schemes in the year were £2,274,000 (2014: £2,335,000). There was an outstanding amount
of £306,000 in respect of pensions as at 31st December 2015 (2014: £317,000).

27. Acquisitions during the year

Year ended 31st December 2015
The Group acquired the following businesses during the year:

a. Lettings books
During the period the Group acquired thirty lettings businesses for a total consideration of £9,079,000. The identifiable net assets acquired
consist of intangible assets £7,784,000, cash and cash equivalents £426,000 and goodwill of £869,000.

The combined fair values of the identifiable assets and liabilities at the date of above acquisition have been determined as below:

Intangible Assets
Cash and cash equivalents
Total identifiable net liabilities acquired
Purchase consideration
Goodwill

Purchase consideration discharged by:
Cash
Contingent consideration

Analysis of cash flow on acquisition
Transaction costs (included in cash flows from operating activities)
Net cash acquired with the subsidiary (included in cash flows from investing activities)
Purchase consideration discharged in cash (included in cash flows from investing activities)
Net cash outflow on acquisition

Fair value
recognised on
acquisition
£’000

7,784
426
8,210
9,079
869

9,054
25
9,079

£’000

21
(426)
9,054
8,649

b. Thomas Morris
In February 2015, the Group acquired 80% of Thomas Morris, a 7 branch estate agency chain in Cambridgeshire, Bedfordshire and
Hertfordshire for an initial consideration of £4.1m. The remaining 20% is subject to put and call options which are exercisable between 2018
and 2020 dependent on profit performance. Due to the nature of the payment terms, the contingent consideration is considered to be a
capital payment for accounting purposes.

120

27. Acquisitions during the year (continued)

The fair value of the identifiable assets and liabilities of Thomas Morris as at the date of acquisition have been determined as below:

Intangible assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Current tax liabilities
Total identifiable net liabilities acquired
Purchase consideration
Goodwill
Purchase consideration discharged by:
Cash
Contingent consideration

Fair value
recognised on
acquisition
£’000

1,209
28
177
348
(202)
(224)
1,336
5,301
3,965

4,148
1,153
5,301

The goodwill of Thomas Morris comprises certain intangible assets that cannot be individually separated and reliably measured from the
acquiree due to their nature. These items include an experienced management team with a good record of delivering a quality service to
customers, the expected value of synergies and the potential to significantly grow the business. No determination has been made yet as to
what proportion, if any, of the goodwill will be tax deductible. Thomas Morris has contributed £762,000 profit before tax and £4,226,000
revenue in the period since acquisition. If it had been acquired at the beginning of the year then the consolidated revenue would have been
£782,000 higher and the consolidated profit before tax would have been £114,000 higher. An analysis of cashflow on acquisition is given in
the table below:

Transaction costs have been expensed and are included under operating expenses.

Year ended 31st December 2014
The Group acquired the following businesses during the prior year:

£’000

26
(348)
4,148
3,826

a. Hawes & Co
In March 2014, the Group acquired 65% of Hawes & Co, a 6 branch estate agency chain based in South West London for an initial
consideration of £3.2m. The remaining 35% is subject to put and call options which are exercisable between 2016 and 2019 dependent
on profit performance. Due to the nature of the payment terms, the contingent consideration is considered to be a capital payment for
accounting purposes.

121

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Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

27. Acquisitions during the year (continued)

The fair value of the identifiable assets, except for cash and cash equivalents, and liabilities of Hawes & Co as at the date of acquisition have
been determined as below:

Fair value
recognised on
acquisition
£’000

942
58
384
250
(466)
–
1,168
5,440
4,272

3,190
2,250
5,440

£’000

81
(250)
3,190
3,021

The goodwill of Hawes & Co comprises certain intangible assets that cannot be individually separated and reliably measured from the
acquiree due to their nature. These items include an experienced management team with a good record of delivering a quality service to
customers, the expected value of synergies and the potential to significantly grow the business. No determination has been made yet as to
what proportion, if any, of the goodwill will be tax deductible.

From the date of acquisition to 31st December 2014, the acquisition has contributed to £3.4m of revenue and £0.5m profit before tax of the
Group, excluding the impact of movements in the contingent consideration recorded through the profit and loss. If all of these combinations
had taken place at the beginning of the year, the consolidated revenue would have been higher by £4.3m and the consolidated profit before
tax would have been higher by £0.7m.

Transaction costs have been expensed and are included under exceptional costs (see Note 7).

28. Client monies

As at 31st December 2015, monies held by subsidiaries in separate bank accounts on behalf of clients amounted to £93,837,000 (2014:
£82,642,000). Neither this amount, nor the matching liabilities to the clients concerned are included in the Group balance sheet, as the
Group is not entitled to these amounts.

122

29. Financial instruments – risk management

The Group’s principal financial instruments comprise bank loans and other loans. The main purpose of these financial instruments is to raise
finance for the Group’s operations and to fund acquisitions. The Group has various financial assets and liabilities such as trade receivables,
cash and short-term deposits and trade payables, which arise directly from its operations.

It is the Group’s policy that trading in derivatives shall not be undertaken. Interest rate swap agreements, which expired in 2014, were held
for risk management purposes.

The Group is exposed through its operations to the following financial risks:

• cash flow interest rate risk;

• liquidity risk; and

• credit risk.

Policy for managing these risks is set up by the Board following recommendations from the Group Chief Financial Officer. Certain risks are
managed centrally, while others are managed locally following communications from the centre. The policy for each of the above risks is
described in more detail below.

Cash flow interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating
interest rates.

The majority of external Group borrowings are variable interest based and this policy is managed centrally. The subsidiaries are not
permitted to borrow from external sources directly without approval from the Group Finance team.

In 2009 the Group entered into interest rate swap agreements to fix interest rates on £25m of the Group’s bank borrowings. The interest
rate swap agreements fixed LIBOR to approximately 2.9% until April/May 2014 and had expired at 31st December 2014. At 31st December
2015 none of the Group’s revolving credit facility is at a fixed rate of interest (2014: nil%).

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings,
which is not covered by the fixed interest rate swap. With all other variables held constant, the Group’s profit before tax is affected through
the impact on floating rate borrowings as follows. There is no material impact on the Group’s equity.

2015

2014

Increase/
decrease in basis
point

Effect on profit
before tax
£’000

+100
-100
+100
-100

(455)
455
(340)
340

Liquidity risk
The Group aims to mitigate liquidity risk by managing cash generation by its operations, dividend policy and acquisition strategy.
Acquisitions are carefully selected with authorisation limits operating up to Board level and cash payback periods applied as part of the
investment appraisal process. In this way the Group aims to maintain a good credit rating to facilitate fundraising. The Group is also very
cash generative as demonstrated by the cash from operations. The Group has net current liabilities due to the operating model where
debtors are collected earlier than payments to creditors, allowing the cash to be used elsewhere in the business such as to reduce the
amount drawn down on the revolving credit facility and to make acquisitions. However, the requirement to pay creditors is managed
through future cash generation and, if required, from the revolving credit facility.

The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool and daily cash flow reporting. This includes
consideration of the maturity of both its financial investments and financial assets (e.g. accounts receivable, and other financial assets)
and projected cash flows from operations. The Group’s objective is to maintain a balance between continuity of funding and flexibility for
potential acquisitions through the use of its banking facilities.

123

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Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

29. Financial instruments – risk management (continued)

The table below summarises the maturity profile of the Group’s financial liabilities at 31st December 2015 based on contractual
undiscounted payments:

Year ended 31st December 2015

Interest bearing loans and borrowings
(including overdraft)
Trade payables
Contingent consideration
Deferred consideration

Year ended 31st December 2014

Interest bearing loans and borrowings
(including overdraft)
Trade payables
Contingent consideration
Deferred consideration

On demand
£’000

Less than
3 months
£’000

3 to 12 months
£’000

1 to 5 years
£’000

> 5 years
£’000

Total
£’000

–
–
–
–
–

On demand
£’000

718
–
–
–
718

423
7,327
57
–
7,807

Less than
3 months
£’000

489
10,268
54
–
10,811

11,327
–
5,254
2,422
19,003

46,403
–
5,188
575
52,166

–
–
–
–
–

58,153
7,327
10,499
2,997
78,976

3 to 12 months
£’000

1 to 5 years
£’000

> 5 years
£’000

Total
£’000

1,280
–
3,917
–
5,197

45,741
–
5,810
2,422
53,973

–
–
6,160
636
6,796

48,228
10,268
15,941
3,058
77,495

The liquidity risk of each Group entity is managed centrally by the Group Treasury Function. The Group’s cash requirement is monitored
closely. All surplus cash is held centrally to offset against the Group’s borrowings and reduce the interest payable. The type of cash
instrument used and its maturity date will depend on the Group’s forecast cash requirements. The Group has a revolving credit facility with
a syndicate of major banking corporations to manage longer term borrowing requirements.

Capital management
The primary objective of the Group’s capital management is to ensure that it maintains appropriate capital structure to support its business
objectives, including any regulatory requirements, and maximise shareholder value. Capital includes share capital and other equity
attributable to the equity holders of the parent.

In the medium to long-term, the Group will strive to maintain a reasonable leverage (i.e. balance between debt and equity) to help achieve
the Group’s business objectives of growth (through acquisitions and organic growth) and dividend policy. In the short term, the Group does
not have a set leverage ratio to be achieved but the Directors monitor the ratio of net debt to operating profit to ensure that the debt funding
is not excessively high. Certain loan notes issued on acquisition of Marsh & Parsons are excluded from this ratio as they are unsecured and
are not relevant to calculate the Group’s banking covenant.

The Group has a current ratio of Net Bank Debt (excluding loan notes) to EBITDA of 0.83 (2014:0.74), based on Net Bank Debt (excluding
loan notes) of £39.9m (2014: £34.7m) and operating profit before exceptional costs, amortisation and share-based payment charge of
£42.9m (2014: £42.0m). The business is cash generative with a low capital expenditure requirement. The Group remains committed to its
stated dividend policy of 30% to 40% of Group Underlying Operating Profit after interest and tax. In addition, the Group’s other main priority
is to generate cash to support its operations and to fund any strategic acquisitions.

Net Bank Debt is defined as follows:

Interest bearing loans and borrowings (including loan notes and overdraft)
Less: 2% and 12% unsecured loan notes
Less: cash and short term deposits
Less: deferred and contingent consideration
Net Bank Debt (excluding loan notes)

124

2015
£’000

68,288
(10,033)
(5,603)
(12,755)
39,897

2014
£’000

61,079
(9,744)
–
(16,617)
34,718

29. Financial instruments – risk management (continued)

Credit risk
There are no significant concentrations of credit risk within the Group. The Group is exposed to a credit risk in respect of revenue
transactions (i.e. turnover from customers). It is Group policy, implemented locally, to obtain appropriate details of new customers before
entering into contracts. The majority of the Estate Agency customers use the Group’s services as part of a house sale transaction and
consequently the debt is paid from the proceeds realised from the sale of the house by the vendor’s solicitor before the balance of funds is
transferred to the vendor. These minimise the risk of the debt not being collected.

The majority of the surveying customers and those of the asset management business are large financial institutions and as such the credit
risk is not expected to be significant. The maximum credit risk exposure relating to financial assets is represented by the carrying value as at
the balance sheet date.

Interest rate risk profile of financial assets and liabilities
Treasury policy is described in the Note above. The disclosures below exclude short term receivables and payables which are primarily of a
trading nature and expected to be settled within normal commercial terms.

The interest rate profile of the financial assets and liabilities of the Group as at 31st December 2015 are as follows:

Fixed rate
Revolving credit facility
Interest bearing loans
Floating rate
Cash and cash equivalents
Revolving credit facility

Within 1 year
£’000

1-2 years
£’000

2-3 years
£’000

3-4 Years
£’000

Total
£’000

–
(10,033)

5,603
(45,500)

–
–

–
(10,033)

5,603
(45,500)

The effective interest rate and the actual interest rate charged on the loans in 2015 are as follows:

Revolving credit facility
2% unsecured loan notes
12% unsecured loan notes

Effective rate

Actual rate

3.2%
2%
3.65%

2%
2%
12%

The effective interest rate on the revolving credit facility during the year is higher than the actual rate due to commitment fees payable on
undrawn amounts. The effective rate on 12% unsecured loan note is low due to the loan note being recorded at fair value on initial issue
in 2011.

The interest rate profile of the financial assets and liabilities of the Group as at 31st December 2014 are as follows:

Fixed rate
Revolving credit facility
Interest bearing loans
Floating rate
Cash and cash equivalents
Revolving credit facility

Within 1 year
£’000

1-2 years
£’000

2-3 years
£’000

3-4 Years
£’000

Total
£’000

–
(63)

–
(9,681)

–
(34,718)

–
–

–
(9,744)

(34,718)

125

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

29. Financial instruments – risk management (continued)

The effective interest rate and the actual interest rate charged on the loans in 2014 are as follows:

Revolving credit facility
2% unsecured loan notes
12% unsecured loan notes

Effective rate

Actual rate

4.3%
2%
3.65%

2%
2%
12%

The effective interest rate on the revolving credit facility during the year is high due to commitment fees payable on undrawn amounts earlier
in the year. The effective rate on 12% unsecured loan note is low due to the loan note being recorded at fair value on initial issue in 2011.

Fair values of financial assets and financial liabilities
Set out below is a comparison by category of carrying amounts and fair values of all of the Group’s financial instruments that are carried in
the Financial Statement:

Financial assets
Cash and cash equivalents
Available-for-sale financial assets
Financial liabilities
Interest-bearing loans and borrowings:
Floating rate borrowings
Contingent consideration
Deferred consideration
12% and 2% unsecured loan notes

2015

2014

Book Value
£’000

Fair Value
£’000

Book Value
£’000

Fair Value
£’000

5,603
28,871

–
23,033

(45,500)
(9,886)
(2,869)
(10,033)

(34,718)
(13,730)
(2,887)
(9,744)

The fair values for the majority of the financial instruments have been calculated by discounting the expected future cash flows at interest
rates prevailing for a comparable maturity period for each instrument.

Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of the financial instruments by valuation technique:

• Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

• Level 2:

other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or
indirectly; and

• Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market

data.

The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities.

2015

Assets measured at fair value
Financial assets

Liabilities measured at fair value
Contingent consideration
Deferred consideration

Liabilities for which fair values are disclosed
Interest-bearing loans and borrowings:
Floating rate borrowings
Unsecured loan notes

126

£’000

Level 1
£’000

Level 2
£’000

28,871

27,097

9,886
2,869

45,500
10,033

–
–

Level 3
£’000

1,774

9,886
2,869

–

–
–

45,500
10,033

–
–

29. Financial instruments – risk management (continued)

2014

Assets measured at fair value
Financial assets

Liabilities measured at fair value
Contingent consideration
Deferred consideration

Liabilities for which fair values are disclosed
Interest-bearing loans and borrowings:
Floating rate borrowings
12% unsecured loan notes

£’000

Level 1
£’000

Level 2
£’000

23,033

21,347

13,730
2,887

34,718
9,744

–
–

Level 3
£’000

1,686

13,730
2,887

–

–
–

34,718
9,744

–
–

At 31st December 2015 the Group stake in Zoopla has been valued at £27,097,000 based on the Zoopla share price at that date of
£2.40 per share which qualifies as a Level 1 technique.

The other investments totaling £1,774,000 are valued using Level 3 valuation techniques. The Directors reviewed the fair value of the
financial assets at 31st December 2015. The methods used to determine the fair value are disclosed in more detail in Note 16. The
underlying value of the business will be driven by the profitability of these businesses. If this was to drop by 10%, the implied valuation is
likely to also drop by around 10%, £0.2m.

The contingent consideration relates to amounts payable in the future on acquisitions. The amounts payable are based on the amounts
agreed in the contracts and based on the future profitability of each entity acquired. In valuing each provision, estimates have been made
as to when the options are likely to be exercised and the future profitability of the entity at this date. Further details of these provisions are
shown in Note 21. If the future profitability of the entities was to decline by 10%, the size of the contingent consideration would decrease by
approximately £1.2m.

Fair values of the Group’s interest-bearing borrowings and loans are determined by using discounted cash flow (DCF) methodology
using a discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The own non-performance risk as at
31st December 2015 was assessed to be insignificant.

30. Analysis of Net Bank Debt (excluding loan notes)

Interest bearing loans and borrowings
– Current
– Non-current

Less: Unsecured loan notes
Less: cash and short-term deposits
Less: deferred and contingent consideration
Net Bank Debt at the end of the year

2015
£’000

2014
£’000

15,777
52,511
68,288
(10,033)
(5,603)
(12,755)
39,897

4,659
56,420
61,079
(9,744)
–
(16,617)
34,718

During the year, the Group has drawn down £11.5m (2014: drawn down £10.0m) of the revolving credit facility. The utilisation of this
revolving credit facility may vary each month as long as this does not exceed the maximum £100.0m facility (2014: £100.0m).

127

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2015

31. Related party transactions

Transactions with LMS and its subsidiaries

Sales
Purchases

Transactions with TM and its subsidiaries

Sales
Purchases
Year-end creditor balance

32. Capital commitments

Capital expenditure contracted for but not provided

2015
£’000

70
–

2015
£’000

1,336
(40)
(2)

2015
£’000

118

2014
£’000

85
(15)

2014
£’000

1,266
(23)
(5)

2014
£’000

462

128

33. Subsidiary and joint venture companies

The Group owns directly or indirectly the following issued and fully paid ordinary and preference share capital of its subsidiary undertakings,
all of which are incorporated in Great Britain and whose operations are conducted mainly in the United Kingdom. The results for all of the
subsidiaries have been consolidated within these financial statements:

Name of subsidiary company

Holding

Lending Solutions Holdings Ltd

‘A’ Ordinary
‘B1’ Ordinary
‘B2’ Ordinary
‘C’ Ordinary
Lending Solutions Ltd
Ordinary shares
LSL Corporate Client Services Ltd* Ordinary shares

Proportion of
nominal value of
shares held

100%
100%
100%
100%
100%
100%

St Trinity Ltd*

Ordinary shares

100%

Templeton LPA Ltd

Appleton Estates & Property
Management Ltd
Bawtry Lettings and sales Ltd

‘A1’ Ordinary shares
‘B1’ Ordinary shares
Ordinary shares

100%

Ordinary shares

100%

Beldhamland Ltd

Davis Tate Ltd

EA Student Lettings Ltd

‘A’ Ordinary shares
‘B’ Ordinary shares
‘A’ Ordinary shares
‘B’ Ordinary shares
‘C’ Ordinary shares
Ordinary shares

100%

75.58%

100%

Eastside Property Developments
Ltd
Energy-Assessors.com Ltd#

Ordinary shares

100%

Ordinary shares

100%

Fourlet (York) Ltd

Ordinary shares

100%

Front Door Property Management
Ltd
David Frost Estate Agents Ltd

GFEA Ltd

Ordinary shares

100%

‘A’ Ordinary shares
‘B’ Ordinary shares
Non-cumulative
redeemable preference
shares
Ordinary shares

100%
100%
100%

100%

Guardian Property Lettings Ltd

Ordinary shares

100%

Hawes & Co Ltd

Ordinary shares

65%

Hawes & Co (Thames Ditton) Ltd

Ordinary shares

100%

Home & Student Link Ltd

‘A1’ Ordinary
‘B1’ Ordinary

100%
100%

Segment

N/A

Nature of Business

Holding company

N/A
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Service
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and
Related Services

Non trading
Asset Management

Asset Management

Non Trading

Holding Company

Non Trading

Residential Sales and
Lettings

Estate Agency and
Related Services
Estate Agency and Related
Services
Estate Agency and
Related Services
Estate Agency and Related
Services
Estate Agency and Related
Services

Residential Sales and
Lettings
Non Trading

Holding Company

Non Trading

129

Name of subsidiary company

Holding

Proportion of
nominal value of
shares held

Segment

Homefast Property Services Ltd

ICIEA Ltd

‘A’ Ordinary shares
‘B’ Ordinary shares
Ordinary shares

77.5%

100%

Inter County Lettings Ltd

Ordinary shares

100%

JNP (JNP (Estate Agents) Ltd)

Ordinary shares

100%

JNP Estate Agents (Princes
Riseborough) Ltd
JNP (Residential Lettings) Ltd

Ordinary shares

100%

Ordinary shares

100%

JNP Surveyors Ltd

Ordinary shares

100%

Kent Property Solutions Ltd

Ordinary shares

100%

Lauristons Ltd

Ordinary shares

100%

Lawlors Property Services Ltd

‘A’ Ordinary shares

75%

Lets Move Property Ltd

Ordinary shares

100%

LSL-ONE Ltd
LSLi Ltd*

‘B’ Ordinary shares
Ordinary shares

100%
100%

Marsh & Parsons Ltd

Ordinary shares

100%

Marsh & Parsons Holdings Ltd*

Marshcroft Properties Ltd

‘A’ Ordinary shares
‘B1’ Ordinary shares
‘B2’ Ordinary shares
‘C’ Ordinary shares
‘Deferred’ shares
Ordinary shares

100%
0%
0%
0%
100%
100%

New Daffodil Ltd

Ordinary shares

100%

New Let Ltd

Ordinary shares

100%

NSK Management Ltd

Ordinary shares

100%

Paul Graham Lettings &
Management Ltd

Philip Green Lettings Ltd

PHP Lettings Scotland Ltd

Ordinary shares

100%

‘A’ Ordinary shares
‘B’ Ordinary shares
‘C’ Ordinary shares
Ordinary shares

100%
100%
100%
100%

130

Estate Agency and Related
Service
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and
Related Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Service
Estate Agency and Related
Services
Estate Agency and
Related Services
Estate Agency and
Related Services
Estate Agency and Related
Services
N/A
Estate Agency and Related
Services

Estate Agency and
Related Services
Estate Agency and Related
Services

Nature of Business

Non Trading

Residential Sales, Lettings
and Holding Company
Non Trading

Non Trading

Residential Sales, Lettings
and Holding Company
Residential Sales and
Lettings
Non Trading

Non Trading
Residential Sales, Lettings,
Financial Services and
Holding Company
Residential Sales, Lettings
and Holding Company
Holding Company

Estate Agency and Related
Service
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services

Non Trading

Estate Agency and Related
Services

Non Trading

Estate Agency and Related
Services

Non Trading

Name of subsidiary company

Holding

Proportion of
nominal value of
shares held

Segment

Prestons Lettings Ltd

Reeds Rains Ltd*

Ordinary shares
‘A’ Ordinary shares
‘A’ Ordinary shares
‘B’ Ordinary shares

100%
100%
100%
100%

Estate Agency and Related
Services
Estate Agency and
Related Services

Thomas Morris Ltd

Ordinary shares

80%

To Letting Ltd

Ordinary shares

100%

Vanstons (Barnes) Ltd

Ordinary shares

100%

Vanstons Commercial Ltd

Ordinary shares

100%

Vanstons Lettings Ltd

Ordinary shares

100%

Vanstons Ltd

Ordinary shares

100%

Vitalhandy Enterprises Ltd

Warner Lettings Agency Ltd

‘A’ Ordinary shares
‘B’ Ordinary shares
‘1’ Ordinary shares

100%
100%
100%

Woollens of Wimbledon Ltd

Ordinary shares

100%

Yates Lettings Ltd

your-move.co.uk Ltd

‘A’ Ordinary shares
‘B’ Ordinary shares
Ordinary shares

100%

Zenith Properties Ltd

Advance Mortgage Funding Ltd*

BDS Mortgage Group Ltd

First Complete Ltd*

Ordinary shares
‘A’ Ordinary shares
Ordinary shares
Preference shares
Non voting non-
cumulative
Ordinary shares
Preference shares
Ordinary shares

100%
100%
100%
100%

100%

First2Protect Ltd

Ordinary shares

100%

Linear Financial Services

Ordinary shares

100%

Linear Financial Services Holdings
Limited
Linear Mortgage Network Holdings
Ltd
Linear Mortgage Network Limited

Ordinary shares

100%

Ordinary shares

98%

Ordinary shares

100%

Reeds Rains Financial Services Ltd Ordinary shares

100%

Nature of Business

Non Trading

Residential Sales, Lettings,
Financial Services and
Holding Company
Residential Sales and
Lettings
Non Trading

Non Trading

Holding Company

Non Trading

Residential Sales, Lettings,
Financial Services and
Holding Company
Non Trading

Financial Services

Estate Agency and
Related Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and
Related Services

Estate Agency and Related
Services
Estate Agency and Related
Services

Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services
Estate Agency and Related
Services

Financial Services

Non Trading

Holding Company

Financial Services

131

Name of subsidiary company

Holding

Cybele Solutions Holdings Ltd#

Cybele Solutions Ltd

TM Group (UK) Ltd#

Albany Insurance Company
(Guernsey) Ltd*
Barnwoods Ltd*

‘A’ Ordinary
‘B’ Ordinary
‘C’ Ordinary
‘A’ Ordinary shares
‘B’ Ordinary shares
‘C’ Ordinary shares
Ordinary shares
Deferred shares
Ordinary shares

Proportion of
nominal value of
shares held

49.99%
49.99%
50%
100%

Segment

N/A

33.33%

N/A

100%

Ordinary shares

100%

Chancellors Associates Ltd

Ordinary shares

100%

e.surv Ltd*

Ordinary shares

100%

Repartir Ltd

Ordinary shares

100%

* held directly by the Company

# Joint Ventures

34. Post Balance Sheet Events

Surveying and Valuation
Services
Surveying and Valuation
Services
Surveying and Valuation
Services
Surveying and Valuation
Services
Surveying and Valuation
Services

Nature of Business

Joint Venture – Holding
Company

Joint Venture –
Conveyancing panel
manager
Joint Venture – Property
Searches
Captive insurer

Non Trading

Chartered Surveyors

Non Trading

Subsequent to the year end the following transactions have been completed:

LSL acquired three small lettings book acquisitions for a total initial consideration of £1.82m.

On 17th February 2016, Your Move acquired a 65% interest in GFL for an initial consideration of £9.1m, with 50% paid at completion
and the remaining 50% to be in March 2017.

The Group is in the process of allocating the purchase price in accordance with IFRS 3. As a result the initial accounting for the acquisitions
above are currently incomplete, so a fair value table of the identifiable assets and liabilities has not been presented.

132

Statement of Directors’ Responsibilities in Relation
to the Parent Company Financial Statements

The Directors are responsible for preparing the Annual Report and the Parent Company Financial Statements (together with the Annual
Report and Accounts) in accordance with applicable United Kingdom law and those International Financial Reporting Standards (IFRS) as
adopted by the European Union.

Under company law the Directors must not approve the Company Financial Statements unless they are satisfied that they present fairly the
financial position of the Company and the financial performance and cash flows of the Company for that period. In preparing the Company
Financial Statements, the Directors are required to:

• select suitable accounting policies in accordance with IAS 8 ‘Accounting Policies, Change in Accounting Estimates and Errors’ and then

apply them consistently;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable

information;

• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the

impact of particular transactions, other events and conditions on the Company’s financial position and financial performance;

• state that the Company has complied with IFRSs, subject to any material departures disclosed and explained in the Financial Statements;

and

• make judgements and accounting estimates that are reasonable and prudent.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions
and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial
Statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

133

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance ReportsParent Company Balance Sheet

for the year ended 31st December 2015

Non-current assets
Property, plant and equipment
Investment in subsidiaries
Financial assets
Investment in joint ventures

Current assets
Trade and other receivables
Total Assets

Current Liabilities
Trade and other payables
Financial liabilities

Non-current Liabilities
Financial liabilities
Deferred tax liability

Total Liabilities
Net Assets

Equity
Share capital
Share premium account
Share-based payment reserve
LSL Shares held by the EBT (Treasury shares)
Fair value reserve
Retained Earnings
Total Equity

Note

2015
£’000

2014
£’000

3
4
5
6

8
9

9
10

11
12
12
12
12
13

9
181,133
27,097
7,233
215,472

59,518
274,990

(142,807)
(25,043)
(167,850)

(47,465)
(4,350)
(51,815)
(219,665)
55,325

208
5,629
3,564
(5,988)
19,640
32,272
55,325

31
168,999
21,343
7,233
197,606

49,895
247,501

(109,659)
(26,525)
(136,184)

(42,345)
(3,869)
(46,214)
(182,398)
65,103

208
5,629
3,498
(7,922)
15,477
48,213
65,103

As at
1 Jan 2014
£’000

28
165,163
35,102
1,432
201,725

33,485
235,210

(110,347)
(24,265)
(134,612)

(24,000)
(6,633)
(30,633)
(165,245)
69,965

208
5,629
2,475
(4,292)
26,530
39,415
69,965

The Financial Statements were approved by and signed on behalf of the Board by:

Ian Crabb
Group Chief Executive Officer
3rd March 2016

Adam Castleton
Group Chief Financial Officer
3rd March 2016

134

Parent Company Statement of Cash Flows

for the year ended 31st December 2015

Operating activities
(Loss)/Profit before tax
Non-cash adjustments to reconcile profit before tax to
net cash flows
Fair value adjustment of contingent consideration
Finance income
Finance costs
Share-based payment transaction expense
Depreciation and impairment of property, plant and
equipment
Dividend income
Working Capital Adjustments:
(Increase) in trade and other receivables
Increase in trade and other payables

Interest paid
Income tax paid

Net cash flows from operating activities

Investing activities
Investment in joint venture
Investment in financial instruments
Proceeds from sale of financial instruments
Tax on sale of financial instruments
Dividends received from joint venture
Dividends received from financial instruments
Interest received
Purchase of property, plant and equipment and
intangible assets
Net cash flows from investing activities
Financing activities
Proceeds from borrowings
Repayment of overdraft
Acquisition of LSL shares by the employee benefit
trust (EBT) (Treasury Shares)
Proceeds from exercise of share options
Dividends paid to equity holders of the parent

Notes

£’000

2015
£’000

(5,010)

£’000

2014
£’000

39,387

7
8

(847)
(9)
1,941
(266)

23
(2,776)

(9,563)
28,573

(1,941)
(4,648)

–
(1,094)
297
–
1,499
549
9

11,500
(6,998)

–
1,314
(12,554)

12,066

(6,589)
5,477

7,899
(13)
1,786
438

28
(28,882)

(16,411)
2,637

(1,786)
(2,008)

(2,422)
(1,090)
20,838
(4,015)
1,302
1,579
13

–

6,869

(3,794)
3,075

1,261

16,205

10,000
2,937

(5,621)
1,690
(28,286)

Net cash flows used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1st January
Cash and cash equivalents at 31st December

(6,738)

–
–
–

(19,280)
–
–
–

135

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Parent Company Statement of Changes in Equity

for the year ended 31st December 2015

Year ended 31st December 2015

As at 1st January 2015
Disposal of financial asset (net of tax)
Revaluation of financial asset (net of tax)
Other comprehensive income for the year
Profit for the year
Total comprehensive income for the year
Investment in Treasury Shares
Exercise of options
Share-based payment transactions
Dividends
As at 31st December 2015

Issued
capital
£’000

Share
premium
£’000

208
–
–
–
–
–
–
–
–
–
208

5,629
–
–
–
–
–
–
–
–
–
5,629

Share-
based
payment
reserve
£’000

3,498
–
–
–
–
–
–
(805)
871
–
3,564

Treasury
shares
£’000

(7,922)
–
–
–
–
–
–
1,934
–
–
(5,988)

Fair value
reserve
£’000

15,477
(387)
4,550
4,163
–
4,163
–
–
–
–
19,640

Retained
earnings
£’000

48,213
–
–
–
(3,572)
(3,572)
–
185
–
(12,554)
32,272

Total
£’000

65,103
(387)
4,550
4,163
(3,572)
591
–
1,314
871
(12,554)
55,325

As at 31st December 2015, the Company adopted IFRS and as such the opening balances as at 1st January 2014 have been restated to
reflect the change in policy from UK GAAP to IFRS.

Year ended 31st December 2014

As at 1st January 2014
Disposal of financial asset (net of tax)
Revaluation of financial asset (net of tax)
Other comprehensive income for the year
Profit for the year
Total comprehensive income for the year
Investment in Treasury Shares
Exercise of options
Share-based payment transactions
Dividends
As at 31st December 2014

Issued capital
£’000

Share
premium
£’000

Share- based
payment
reserve
£’000

208
–
–
–
–
–
–
–
–
–
208

5,629
–
–
–
–
–
–
–
–
–
5,629

2,475
–
–
–
–
–
–
(752)
1,775
–
3,498

Treasury
shares
£’000

(4,292)
–
–
–
–
–
(5,621)
1,991
–
–
(7,922)

Fair value
reserve
£’000

26,530
(16,454)
5,401
(11,053)
–
(11,053)
–
–
–
–
15,477

Retained
earnings
£’000

39,415
–
–
–
36,633
36,633
–
451
–
(28,286)
48,213

Total
£’000

69,965
(16,454)
5,401
(11,053)
36,633
25,580
(5,621)
1,690
1,775
(28,286)
65,103

As at 31st December 2015, the Company adopted IFRS and as such the opening balances as at 1st January 2014 have been restated to
reflect the change in policy from UK GAAP to IFRS.

136

Notes to the Parent Company Financial Statements

for the year ended 31st December 2015

1. Accounting policies

Basis of preparation
The Financial Statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB).

For all periods up to and including the year ended 31st December 2014, the Company prepared its financial statements in accordance with
UK generally accepted accounting principles (UK GAAP). These financial statements for the period ended 31st December 2015 are the first
the Company has prepared in accordance with IFRS. Please refer to Note 2 for information on how the Company adopted IFRS.

The Company Financial Statements have been prepared on a going concern basis and on a historical cost basis, except for, available-for-
sale financial assets that have been measured at fair value.

The accounting policies which follow set out those significant policies which apply in preparing the Financial Statements for the year ended
31st December 2015. The Company’s Financial Statements are presented in Sterling and all values are rounded to the nearest thousand
pounds (£’000) except when otherwise indicated.

Summary of significant accounting policies
The preparation of financial information in conformity with IFRS as adopted by IASB requires management to make judgements, estimates
and assumptions that affect the application of policies and reporting amounts of assets and liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates.

Contingent consideration
The Company has acquired a number of businesses over the last few years. With regard to a number of these businesses, the Company
has a put and call option to buy, or require to buy, the remaining interest in these businesses at some point in the future. In accordance with
the accounting standards, estimates have been made with regard to the future profitability of these acquisitions and a provision for the cost
of acquiring these interests has been recognised.

Valuation of financial assets
The Company owns minority interests in a number of listed and unlisted entities. In accordance with the accounting standards, these
investments are held at fair value and estimates and assumptions are required in assessing this.

Investments in subsidiaries
Investments are shown at cost less provision for impairment. The cost of an investment is measured as the aggregate of the consideration
transferred, measured at acquisition date fair value. Any contingent consideration will be recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration are recognised through profit and loss.

Investments are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that its carrying value
may be impaired.

Investments in joint ventures
Investments in joint ventures are accounted for at cost less any provision for impairment. Investments are reviewed for impairment annually
or more frequently if events or changes in circumstances indicate that its carrying value may be impaired. The cost of an investment is
measured as the aggregate of the consideration transferred, measured at acquisition date fair value. Any contingent consideration will be
recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration are recognised in profit
and loss.

137

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports1. Accounting policies (continued)

• where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business

combination that at the time of the transaction affects neither accounting nor taxable profit or loss;

• in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary

differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the

deductible temporary differences, carried forward tax credits or tax losses can be utilised.

Pensions
The Company operates a defined contribution pension scheme for employees of the Company. The assets of the scheme are invested and
managed independently of the finances of the Company. The pension cost charge represents contributions payable in the year.

Share-based payment transactions

Equity-settled transactions
The equity share option programmes allow Company employees to acquire LSL Shares. The fair value of the options granted is recognised
as an employee expense with a corresponding increase in equity in the case of equity-settled schemes. The fair value is measured at
grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the
options granted is measured using the Black Scholes model, taking into account the terms and conditions (including market and non-
vesting conditions) upon which the options were granted. Non-market vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting
period is based on the number of options that eventually vest. No expense is recognised for awards that do not ultimately vest, except for
equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective
of whether or not the market or non-market vested condition is satisfied, provided that all other performance and/or service conditions are
satisfied.

Treasury shares
The Company has an employee share trust (ESOT) for the granting of Company shares to Executive Directors and senior employees. LSL
Shares held by the ESOT are treated as treasury shares and presented in the balance sheet as a deduction from equity. Dividends earned
on LSL shares held in the ESOT have been waived.

138

Notes to the Parent Company Financial Statements continued.for the year ended 31st December 20151. Accounting policies (continued)

Financial instruments
Financial assets and financial liabilities are recognised in the Company’s Balance Sheet when the Company becomes a party to the
contractual provisions of the instrument. When financial assets are recognised initially, they are measured at fair value, being the transaction
price plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. Financial assets
are derecognised when the Company no longer has the rights to cash flows, the risks and rewards of ownership or control of the asset.
Financial liabilities are derecognised when the obligation under the liability is discharged, cancelled or expires.

The Company’s accounting policy for each category of financial instruments is as follows:

Office equipment, fixtures and fittings
Computer equipment
Leasehold improvements

–
–
–

over three to seven years
over three to four years
over the shorter of the lease term or ten years

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or
disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the income statement when the asset is derecognised. These asset’s residual values, useful
lives and methods of depreciation are reviewed at each financial year end, and adjusted prospectively, if appropriate.

2. First-time adoption of IFRS

These financial statements, for the year ended 31st December 2015, are the first the Company has prepared in accordance with IFRS. For
periods up to and including the year ended 31st December 2014, the Company prepared its financial statements in accordance with UK
generally accepted accounting principles (UK GAAP).

Accordingly, the Company has prepared financial statements that comply with IFRS applicable as at 31st December 2015, together with
the comparable period data for the year ended 31st December 2014, as described in the summary of significant accounting policies.
In preparing the financial statements, the Company’s opening statement of financial position was prepared as at 1st January 2014,
the Company’s date of transition to IFRS. This note explains the principle application made by the Company in restating its UK GAAP
financial statements, including the statement of financial position as at 1st January 2014, and the financial statements for the year ended
31st December 2014.

The fair value reserve and the related deferred tax liability have been restated in line with the conversion and adoption of IFRS. Further detail
of the restatement is outlined in the Company Statement of Changes in Equity as well as within Notes 10 and 12 of the Parent Company
financial statements.

139

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports3. Property, Plant and Equipment

As at 31st December 2015

Cost
At 1st January 2015
Additions
At 31st December 2015

Depreciation
At 1st January 2015
Charge for the year
At 31st December 2015

Carrying amount
At 31st December 2015
At 1st January 2015

As at 31st December 2014

Cost
At 1st January 2014
Additions
At 31st December 2014

Depreciation
At 1st January 2014
Charge for the year
At 31st December 2014

Carrying amount
At 31st December 2014
At 1st January 2014

Leasehold
improvements
£’000

Fixtures, fittings
and computer
equipment
£’000

74
–
74

48
17
65

9
26

105
1
106

100
6
106

–
5

Leasehold
improvements
£’000

Fixtures, fittings
and computer
equipment
£’000

55
19
74

35
13
48

26
20

93
12
105

85
15
100

5
8

Total
£’000

179
1
180

148
23
171

9
31

Total
£’000

148
31
179

120
28
148

31
28

4. Investment in subsidiaries

Details of the subsidiaries held directly and indirectly by the Company are shown in Note 33 to the Group Financial Statements.

At 1st January
Additions
Disposals
Adjustments for share-based payment
At 31st December

2015
£’000

168,999
10,998
–
1,136
181,133

2014
£’000

165,163
2,500
–
1,336
168,999

As at
1st Jan 2014
£’000

164,392
–
(4)
775
165,163

In 2015, an adjustment of £1,136,000 (2014: £1,336,000) was made on investment in subsidiaries for the share-based payment,
representing the financial effects of awards by the Company of options over its equity shares to employees of subsidiary undertakings. The
total contribution to date is £6,367,000 (2014: £5,231,000).

During the current year, the investment in Albany increased due to an increase in share capital of £10,998,000 (2014: £2,500,000).

140

Notes to the Parent Company Financial Statements continued.for the year ended 31st December 2015

5. Financial assets

At Cost

At 1st January
Additions
Disposals
Revaluation uplift
At 31st December

2015
£’000

21,343
1,094
(470)
5,130
27,097

2014
£’000

35,102
1,090
(21,599)
6,750
21,343

As at
1st Jan 2014
£’000

11,769
847
–
22,486
35,102

Zoopla’s share price at 31st December 2015 was £2.40 per share. The Directors consider the best estimate of the fair value of LSL’s
investment in Zoopla to be the current share price which values the Group’s stake in Zoopla at £27,097,000. Subsequent to the 2015
interim date, Zoopla completed an anniversary offer allowing LSL to subscribe for a further 619,318 shares at the £2.20 IPO price with a
20% discount. These have been taken up by LSL.

At the same time, a further 169,350 shares were sold through the anniversary member offer at £1.76 with net proceeds of £297,000.

6. Investment in joint ventures

At Cost

At 1st January
Additions
At 31st December

2015
£’000

7,233
–
7,233

2014
£’000

1,432
5,801
7,233

As at
1st Jan 2014
£’000

1,432
–
1,432

The Company has a 49.99% interest in LMS, a joint venture whose principal activity is to provide conveyancing panel management
services.

In September 2014, the Company increased its ownership interest in LMS to 49.99%. The initial consideration was £2,422,000 with a
deferred and contingent consideration estimated at the date of acquisition of £3,379,000.

7. Trade and other receivables

Deferred tax asset (Note 10)
Group relief receivable
Prepayments
Amounts owed by Group undertakings

8. Trade and other payables

Other taxes and social security payable
Accruals
Amounts owed to Group undertakings

2015
£’000

8
19,573
856
39,081
59,518

2015
£’000

–
1,720
141,087
142,807

2014
£’000

–
13,510
927
35,458
49,895

2014
£’000

–
1,116
108,543
109,659

As at
1st Jan 2014
£’000

142
14,112
1,088
18,143
33,485

As at
1st Jan 2014
£’000

219
3,833
106,295
110,347

141

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

9. Financial liabilities

Current
Deferred consideration
Contingent consideration
Derivative financial liability – interest rate swap
Bank overdraft
Non-current
Deferred consideration
Contingent consideration
Bank loans – revolving credit facility

2015
£’000

2014
£’000

As at
1st Jan 2014
£’000

2,422
3,093
–
19,528

447
1,518
45,500
47,465

–
–
–
26,525

2,887
5,458
34,000
42,345

446

230
23,589

–
–
24,000
24,000

Deferred consideration
Deferred consideration of £447,000 (2014: £465,000) relates to Marsh & Parsons acquisition in November 2011. This is payable at any time
between 31st March 2016 and 31st March 2020 at the option of management of Marsh & Parsons Ltd. No interest is payable on this. There
is also a deferred consideration of £2,422,000 relating to LMS acquisition from September 2014 relating to the purchase of an additional
stake in LMS.

Contingent consideration
£1,518,000 (2014: £4,501,000) of contingent consideration relates to the Growth Shares acquired by the management of Marsh & Parsons
subsequent 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 1st January 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.

£3,093,000 (2014: £957,000) of contingent consideration relates to payments to third parties in relation to the acquisition of LMS in
September 2014 (see Note 17 in the Group Financial Statements). This is payable in 2016 and the payout will vary depending on the
profitability of LMS in 2015.

The table below shows the allocation of the contingent consideration balance between the various categories:

Remuneration
Put options over non-controlling interests
Closing balance

2015
£’000

1,518
3,093
4,611

2014
£’000

4,501
957
5,458

As at
1st Jan 2014
£’000

2,220
–
2,220

Bank loans – revolving credit facility and overdraft
The Company’s bank loan totals £45.5m (2014: £34.0m) and the Company’s overdraft totals £19.5m (2014: £26.5m). The bank loan is
secured via a cross guarantee issued from all of the Group’s subsidiaries excluding the following subsidiaries, Lending Solutions, Homefast
Property Services, Linear Financial Solutions (including Linear Mortgage Network), Templeton LPA, Pink Home Loans, Barnwoods,
Chancellors Associates and LSLi and its subsidiaries.

The bank loans relate to the revolving credit facility. The utilisation of this revolving credit facility may vary each month as long as this
does not exceed the maximum £100.0m facility (2014: £100.0m). The Company’s overdraft is also secured on the same facility and the
combined overdraft and revolving credit facility cannot exceed £100.0m (2014: £100.0m). The banking facility was renewed in June 2013
for a further period until August 2017.

The interest rate applicable to the facility is LIBOR plus a margin rate of 1.50% (2014:1.50%). The margin rate is linked to the leverage ratio
of the Group and the margin rate is reviewed at six monthly intervals.

142

Notes to the Parent Company Financial Statements continued.for the year ended 31st December 2015

10. Deferred tax

Deferred tax asset
Deferred tax asset at 1st January
Deferred tax credit/(charge) in profit and loss account for the year
Deferred tax asset at 31st December

Deferred tax liability
Deferred tax liability at 1st January
Deferred tax (charge) in profit and loss account for the year
Deferred tax (charge)/credit to other comprehensive income
Deferred tax liability at 31st December

2015
£’000

–
8
8

2015
£’000

(3,869)
(24)
(457)
(4,350)

2014
£’000

142
(142)
–

2014
£’000

(6,633)
–
2,764
(3,869)

As at 31st December 2015, the Company adopted IFRS and as such the opening balances as at 1st January 2014 have been restated to
reflect the change in policy from UK GAAP to IFRS.

Deferred tax is in relation to temporary differences.

In July 2015, the UK government announced proposals to reduce the main rate of corporation tax to 19% from 1st April 2017, and further
reduced to 18%, effective from 1st April 2020. As of 31st December 2015 reductions to the main rate of corporation tax to 18% had been
enacted. Accordingly, this is the rate at which deferred tax has been provided.

11. Called up share capital

Authorised:
Ordinary Shares of 0.2p each

Issued and fully paid:
At 1st January and 31st December

12. Reserves

2015

2014

1 Jan 2014

£’000

500,000,000

1,000 500,000,000

1,000

104,158,950

208 104,158,950

208

For a description of the reserves refer to Note 25 to the Group Financial Statements.

Share premium
The amount subscribed for share capital in excess of nominal value less any costs attributable to the issue of new shares.

Share-based payment reserve
This represents the amount provided in the year in respect of share awards. The Company has operated long-term incentive plans
(including JSOP and CSOP) and a number of SAYE schemes for the employees in the Company and the Group. See Note 12 to the Group
Financial Statements for details of the LTIP, JSOP, CSOP, SIP/BAYE and the SAYE schemes.

Fair value reserve
The fair value reserve is used to record the changes in fair value of financial assets held for sale. Due to the first time adoption of IFRS within
the Parent Company financial statements during the current year, the fair value reserve has been restated for the conversion changes which
applied. Note 5 gives further details of the movement in the current year.

143

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

13. Company profit /loss for the financial year after tax

The Company has not presented its own profit and loss account as permitted by Section 408 of the Companies Act 2006. The loss after
tax for the year was £3.6m (2014: profit of £36.6m).

Remuneration paid to Directors of the Company is disclosed in Note 12 to the Group Financial Statements.

The Company paid £243,733 (2014: £124,434) to its auditors in respect of the audit of the Financial Statements of the Company.

Fees paid to the external auditors and their associates for non-audit services to the Company itself are not disclosed in the individual
accounts of the Company because Group financial statements are prepared which are required to disclose such fees on a consolidated
basis. These are disclosed in Note 9 to the Group Financial Statements.

14. Pensions costs and commitments

The Company operates defined contribution pension schemes for all its Directors and employees. The assets of the schemes are held
separately from those of the Company in independently administered funds. The Company’s contributions for ‘old’ members of the existing
defined contribution section of the scheme (those members who have always been in this scheme) throughout 2008, were a maximum
of 5% of pensionable salaries where members contribute and the cost of the death-in-service benefits. Contributions to the scheme were
suspended in April 2009 and recommenced in 2010.

The Company’s contributions for ‘new’ members of the defined contribution stakeholder scheme (those members who were part of the
Aviva scheme until the Company left the Aviva group in 2004) was 5% of pensionable salaries where members contribute, and the cost of
the death-in-service benefits. Contributions to the scheme were suspended in April 2009 and recommenced in 2010. Total contributions to
the defined contribution schemes in the year were £40,787 (2014: £70,217). There were no outstanding amounts in respect of pensions as
at 31st December 2015 (2014: £nil).

The Parent Company headcount at 31st December 2015 was nil (2014: nil). This is due to employment contracts being drawn up within the
subsidiaries and not within the Parent Company itself.

15. Capital commitments

The Company had no capital commitments as at 31st December 2015 (2014: none).

16. Related party transactions

During the year the transactions entered into by the Company are as follows:

Sales to
related
parties
£’000

Purchases from
related
parties
£’000

Amounts owed
by related
parties
£’000

Amounts owed
to related
parties
£’000

–
–
–

23,175
23,100
13,316

131,087
103,543
100,712

Sales to
related
parties
£’000

Purchases from
related
parties
£’000

Amounts owed
by related
parties
£’000

Amounts owed
to related
parties
£’000

–
–
–

15,906
12,358
4,827

10,000
5,000
5,583

Wholly owned subsidiaries
2015
2014
1st January 2014

Non-wholly owned subsidiaries
2015
2014
1st January 2014

144

Notes to the Parent Company Financial Statements continued.for the year ended 31st December 2015

17. Financial instruments – risk management

The Company’s principal financial instruments comprise bank loans and other loans. The main purpose of these financial instruments is to
raise finance for the Company’s operations and to fund acquisitions. The Company has various financial assets and liabilities such as trade
receivables, cash and short-term deposits and trade payables, which arise directly from its operations.

It is the Company’s policy that trading in derivatives shall not be undertaken, apart from interest rate swap agreements, which expired
during 2014.

The Company is exposed through its operations to the following financial risks:

• cash flow interest rate risk;

• liquidity risk; and

• credit risk.

Policy for managing these risks is set up by the Board following recommendations from the Group Finance Director. Certain risks are
managed centrally, while others are managed locally following communications from the centre. The policy for each of the above risks is
described in more detail below.

Cash flow interest rate risk
The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with
floating interest rates.

The majority of external Company borrowings are variable interest based and this policy is managed centrally. The subsidiaries are not
permitted to borrow from external sources directly without approval from the Head Office team.

In 2009 the Company entered into interest rate swap agreements to fix interest rates on £25.0m of the Company’s bank borrowings.
The interest rate swap agreements fixed LIBOR to approximately 2.9% until April/May 2014 and had expired at 31st December 2014. At
31st December 2015 none of the Company’s RCF is at a fixed rate of interest (2014: nil%).

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings,
which is not covered by the fixed interest rate swap. With all other variables held constant, the Company’s profit before tax is affected
through the impact on floating rate borrowings as follows. There is no material impact on the Company’s equity.

2015

2014

1st January 2014

Increase/decrease
in basis point

Effect on profit
before tax
£’000

+100
-100
+100
-100
+100
-100

(455)
455
(340)
340
(240)
240

Liquidity risk
The Company aims to mitigate liquidity risk by managing cash generation by its operations, dividend policy and acquisition strategy.
Acquisitions are carefully selected with authorisation limits operating up to Group Board level and cash payback periods applied as part of
the investment appraisal process. In this way the Company aims to maintain a good credit rating to facilitate fundraising. The Company is
also very cash generative as demonstrated by the cash from operations. The Company has net current liabilities due to the operating model
where debtors are collected earlier than payments to creditors, allowing the cash to be used elsewhere in the business such as to reduce
the amount drawn down on the revolving credit facility and to make acquisitions. However, the requirement to pay creditors is managed
through future cash generation and, if required, from the revolving credit facility.

The Company monitors its risk to a shortage of funds using a recurring liquidity planning tool and daily cash flow reporting. This includes
consideration of the maturity of both its financial investments and financial assets (e.g. accounts receivable, and other financial assets) and
projected cash flows from operations. The Company’s objective is to maintain a balance between continuity of funding and flexibility for
potential acquisitions through the use of its banking facilities.

145

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports
17. Financial instruments – risk management (continued)

The table below summarises the maturity profile of the Company’s financial liabilities at 31st December 2015 based on contractual
undiscounted payments:

Year ended 31st December 2015

Contingent consideration
Deferred consideration

Year ended 31st December 2014

Contingent consideration
Deferred consideration

On demand
£’000

Less than
3 months
£’000

3 to 12 months
£’000

1 to 5 years
£’000

> 5 years
£’000

–
–
–

3,093
2,422
5,515

1,536
575
2,111

On demand
£’000

–
–
–

Less than
3 months
£’000

–
–
–

3 to 12 months
£’000

1 to 5 years
£’000

–
–
–

1,415
2,422
3,837

–
–
–

> 5 years
£’000

6,160
636
6,796

Total
£’000

4,629
2,997
7,626

Total
£’000

7,575
3,058
10,633

The liquidity risk of the Company entity is managed centrally by the Group treasury function. The Company’s cash requirement is monitored
closely. All surplus cash is held centrally to offset against the Company’s borrowings and reduce the interest payable. The type of cash
instrument used and its maturity date will depend on the Company’s forecast cash requirements. The Company has a revolving credit
facility with a syndicate of major banking corporations to manage longer term borrowing requirements.

Capital management
The primary objective of the Company’s capital management is to ensure that it maintains appropriate capital structure to support its
business objectives, including any regulatory requirements, and maximise shareholder value. Capital includes share capital and other equity
attributable to the equity holders of the parent.

In the medium to long-term, the Company will strive to maintain a reasonable leverage (i.e. balance between debt and equity) to help
achieve the Company’s business objectives of growth (through acquisitions and organic growth) and dividend policy. In the short term, the
Company does not have a set leverage ratio to be achieved but the Directors monitor the ratio of net debt to operating profit to ensure that
the debt funding is not excessively high. Certain loan notes issued on acquisition of Marsh & Parsons are excluded from this ratio as they
are unsecured and are not relevant to calculate the Company’s banking covenant.

Credit risk
There are no significant concentrations of credit risk within the Company.

Interest rate risk profile of financial assets and liabilities

Treasury policy is described in the Note above. The disclosures below exclude short term receivables and payables which are primarily of a
trading nature and expected to be settled within normal commercial terms.

The interest rate profile of the financial assets and liabilities of the Group as at 31st December 2015 are as follows:

Fixed rate
Revolving credit facility
Floating rate
Revolving credit facility

Within 1 year
£’000

1-2 years
£’000

–

(65,028)

–

2-3
years
£’000

–

3-4
Years
£’000

–

Total
£’000

–

(65,028)

The effective interest rate and the actual interest rate charged on the loans in 2015 are as follows:

Revolving credit facility

146

Effective rate

Actual rate

3.2%

Notes to the Parent Company Financial Statements continued.for the year ended 31st December 2015

17. Financial instruments – risk management (continued)

The effective interest rate on the revolving credit facility during the year is higher than the actual rate due to commitment fees payable on
undrawn amounts. The effective rate on 12% unsecured loan notes is low due to the loan notes being recorded at fair value on initial issue
in 2011.

The interest rate profile of the financial assets and liabilities of the Group as at 31st December 2014 are as follows:

Fixed rate
Revolving credit facility
Floating rate
Revolving credit facility

Within 1 year
£’000

1-2 years
£’000

–

(60,525)

–

2-3
years
£’000

–

3-4
Years
£’000

–

Total
£’000

–

(60,525)

The effective interest rate and the actual interest rate charged on the loans in 2014 are as follows:

Revolving credit facility

Effective rate

Actual rate

4.3%

The interest rate profile of the financial assets and liabilities of the Group as at 1st January 2014 are as follows:

Fixed rate
Revolving credit facility
Floating rate
Revolving credit facility

Within 1 year
£’000

1-2 years
£’000

–

(47,589)

–

2-3
years
£’000

–

3-4
Years
£’000

–

Total
£’000

–

(47,589)

2015

2014

Book Value
£’000

Fair Value
£’000

Book Value
£’000

Fair Value
£’000

–
27,097

–
21,343

(65,028)
(4,611)
(2,869)

(60,525)
(5,458)
(2,887)

Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of the financial instruments by valuation technique:

• Level 1:

quoted (unadjusted) prices in active markets for identical assets or liabilities;

• Level 2:

other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or
indirectly; and

• Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market

data.

147

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports17. Financial instruments – risk management (continued)

The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities.

£’000

Level 1
£’000

Level 2
£’000

2015

Assets measured at fair value
Financial assets

Liabilities measured at fair value
Contingent consideration
Deferred consideration

Liabilities for which fair values are disclosed
Interest-bearing loans and borrowings:
Floating rate borrowings

2014

Assets measured at fair value
Financial assets

Liabilities measured at fair value
Contingent consideration
Deferred consideration

Liabilities for which fair values are disclosed
Interest-bearing loans and borrowings:
Floating rate borrowings

27,097

4,611
2,869

65,028

–
–

–

21,343

5,458
2,887

60,525

–
–

–

Level 3
£’000

–

4,611
2,869

Level 3
£’000

–

5,458
2,887

–

–
–

–

–
–

60,525

–

65,028

–

£’000

Level 1
£’000

Level 2
£’000

At 31st December 2015, our stake in Zoopla has been valued at £27,097,000 based on the Zoopla share price at that date of £2.40 per
share which qualifies as a Level 1 technique.

The contingent consideration relates to amounts payable in the future on acquisitions. The amounts payable are based on the amounts
agreed in the contracts and based on the future profitability of each entity acquired. In valuing each provision, estimates have been made
as to when the options are likely to be exercised and the future profitability of the entity at this date. Further details of these provisions
are shown in Note 21 of the Group Financial Statements. If the future profitability of the entities was to decline by 10%, the size of the
contingent consideration would decrease by approximately £0.6m.

Fair values of the Company’s interest-bearing borrowings and loans are determined by using discounted cash flow (DCF) methodology
using a discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The own non-performance risk as at
31st December 2015 was assessed to be insignificant.

148
148

Notes to the Parent Company Financial Statements continued.for the year ended 31st December 2015

Other Information
Other Information

In this section

150
154 Shareholder Information

150 Definitions
154 Shareholder Information

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Marsh & Parsons branch, Upper Tooting Road

LSL AR 2015_Sect1-2_Draft 8.indd 77

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21/03/2016 16:39

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Definitions

“2011 EBT” employee benefit trust established in November 2011 as part of the acquisition of Marsh & Parsons.

“Adjusted Basic Earnings Per Share” or “Adjusted Basic EPS” is defined at Note 10 to the Financial Statements.

“AGM” Annual General Meeting.

“Advance Mortgage Funding” trading name of Advance Mortgage Funding Limited.

“Albany” refers to Albany Insurance Company (Guernsey) Ltd.

“AMI” Association of Mortgage Intermediaries.

“ARLA” Association of Residential Lettings Agents.

“ASA” Advertising Standards Authority.

“Asset Management” refers to LSL’s repossessions asset management and property management for multi property landlords services.

“Audit Committee” LSL’s Audit Committee.

“Auditor Independence Policy” LSL policy relating to non audit services provided by the external auditor.

“Basic Earnings Per Share” or “EPS” is defined at Note 10 to the Financial Statements.

“Board” the board of Directors of LSL.

“BAYE” ‘buy as you earn’ (also referred to as SIP).

“CMA” Competition and Markets Authority.

“Committees” refers to LSL’s Nominations Committee, the Audit Committee and the Remuneration Committee.

“Company” and “Parent Company” refers to LSL Property Services plc.

“Companies Act” Companies Act 2006.

“Corporate Client Services” comprising LSL Corporate Client Services Limited, Templeton LPA Limited and St Trinity Limited providing
repossession, asset management and corporate letting services.

“Chancellors Associates” trading name of Chancellors Associates Limited.

“Chairman” Simon Embley.

“Chairman of the Audit Committee” during 2015, Mark Morris.

“CML” Council of Mortgage Lenders.

“Code” UK Code of Corporate Governance published by the Financial Reporting Council (FRC) (September 2014 edition).

“Company Secretary” Sapna B FitzGerald.

“CCAS” Consumer Codes Approval Scheme.

“Connells” Connells Limited.

“CSOP” company share ownership plan.

“CSR” corporate social responsibility.

“Davis Tate” trading name of Davis Tate Limited.

“Director” an Executive Director or Non Executive Director of LSL.

“DMGT” trading name of Daily Mail and General Trust plc.

“EBITDA” earnings, before interest, taxes, depreciation and amortisation.

“Embrace Mortgage Services” trading name of LSLi.

“EPC” energy performance certificate.

“EPS” earnings per share.

150

“Ernst & Young” Ernst & Young LLP.

“ESG” environmental, social and governance.

“ESOS” energy savings opportunity scheme.

“ESOT” LSL’s employee share trust.

“Estate Agency Division” or “Estate Agency” includes LSL’s Residential Sales, Lettings, Financial Services, LPA fixed charge receiver and
Asset Management businesses.

“Estate Agency and Related Services” refers to LSL’s Estate Agency Division.

“e.surv” or “e.surv Chartered Surveyors” trading names of e.surv Limited.

“Executive Director(s)” refers to Ian Crabb, Adam Castleton and Adrian Gill.

“FCA” Financial Conduct Authority.

“Financial Services” refers to LSL’s financial services (including mortgage, general insurance and protection brokerage and the operation
of intermediary networks).

“First Complete” trading name of First Complete Limited.

“Financial Statements” financial statements contained in this Report.

“FRC” Financial Reporting Council.

“Frosts” trading name of David Frost Estate Agents Limited.

“FSMA” Financial Services and Markets Act 2000.

“GFL” Group First Limited.

“Group” LSL Property Services plc and its subsidiaries.

“Group Chief Executive Officer” Ian Crabb.

“Group Chief Financial Officer” Adam Castleton.

“Growth Shares” the B and C classes of ordinary shares (each £0.001) in Marsh & Parsons (Holdings) Limited.

“Goodfellows” trading name of GFEA Limited.

“GPEA” trading name of Guild of Professional Estate Agents Limited.

“Hawes” or “Hawes & Co” trading name of Hawes and Co Limited.

“HEAL” or “Halifax” Halifax Estate Agencies Limited.

“HEAL Business” HEAL branches and St Trinity Asset Management (formerly HEAL Corporate Services).

“HEAL Corporate Services” the asset management business operated by HEAL.

“HMRC” Her Majesty’s Revenue and Customs.

“Homefast” Homefast Property Services Limited.

“Home of Choice” or “HoC” division within First Complete.

“Home Report” a report which includes a single survey, energy report and property questionnaire and which must accompany all
residential property marketing in Scotland.

“IBNR” incurred but not reported.

“IFRS” International Financial Reporting Standards.

“Intercounty” trading name of ICIEA Limited.

“IPO” initial public offering.

151

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance ReportsDefinitions continued.

“JNP” trading name of JNP Estate Agents Limited.

“JSOP” joint share ownership plan.

“KPI” key performance indicators.

“Lauristons” trading name of Lauristons Limited.

“Lawlors” trading name of Lawlors Property Services Limited.

“Legal Marketing Services” and “LMS” and “LMS Direct Conveyancing” are trading names of LMS Direct Conveyancing Limited and
Cybele Solutions Holdings Limited.

“Lending Solutions” Lending Solutions Holdings Limited.

“Lettings” refers to LSL’s residential property lettings and property management services.

“Lexis Nexis” part of the RELX Group plc.

“Linear” and “Linear Financial Solutions” are trading names of Linear Mortgage Network Limited.

“Lloyds Banking Group” Lloyd Bank plc group of companies.

“LPA” the Law of Property Act 1925.

“LSLi” LSLi Limited and its subsidiaries (during 2015 these included JNP, Intercounty, Frosts, Goodfellows, Davis Tate, Lauristons, Lawlors,
Hawes & Co and Thomas Morris).

“LSL”, “Group” and “Parent Company” refers to LSL Property Services plc and its subsidiaries.

“LSL Corporate Client Department” trading name of LSL Corporate Client Services Limited.

“Land and New Homes” trading style used by members of the Estate Agency Division.

“LTIP” long-term incentive plan.

“Lush Retail” Lush Retail Limited.

“Management Team” senior management teams within the Group including the Executive Directors.

“Marsh & Parsons” trading name of Marsh & Parsons Limited.

“NAEA” National Association of Estate Agents.

“NBS” or “New Bride Street” trading name of Aon Hewitt Limited.

“Net Bank Debt” see Note 29 to the Financial Statements.

“NFoPP” National Federation of Property Professionals.

“Non Executive Director” refers to Helen Buck, Kumsal Bayazit Besson, Mark Morris, Bill Shannon, David Stewart and Simon Embley.

“Notice of Meeting” the circular made available to shareholders setting out details of the AGM.

“Note” refers to Notes to the Financial Statements.

“OCI” refers to other comprehensive income.

“OFT” Office of Fair Trading.

“Openwork” trading name of Openwork Limited.

“Ordinary Shares”or “Shares” 0.2p ordinary shares in LSL.

“Palmer and Harvey” trading name of Palmer and Harvey McLane Limited.

“PI” professional indemnity.

“PI Costs” costs relating to on-going and expected future PI claims relating to Surveying and Valuation Services.

“Pink Home Loans” or “Pink” are trading names for Advance Mortgage Funding Limited (AMF) and BDS Mortgage Group Limited.

152

“RCF” revolving credit facility.

“Reeds Exhibitions” part of the RELX Group plc.

“Reeds Rains” trading name of Reeds Rains Limited.

“Reeds Rains Financial Services” trading name of Reeds Rains Financial Services Limited.

“Registered Office” Newcastle House, Albany Court, Newcastle Business Park, NE4 7YB.

“Report” LSL’s annual report and accounts 2015.

“Residential Sales” refers to LSL’s services for residential property sales.

“RICS” Royal Institution of Chartered Surveyors.

“Sainsbury’s” Sainsbury’s Supermarkets Limited.

“SAYE” save-as-you-earn.

“Senior Independent Non Executive Director” refers to Bill Shannon.

“Shareholders” shareholders of LSL.

“SIP” share incentive plan (also referred to as BAYE).

“St Trinity Asset Management” trading name of St Trinity Limited.

“Surveying Division” or “Surveying” includes LSL’s Surveying and Valuation Services businesses.

“Surveying and Valuation Services” or “Surveying Services” refers to LSL’s Surveying Division.

“Templeton” trading name of Templeton LPA Limited.

“Thomas Morris” trading name of Thomas Morris Limited.

“The Mortgage Alliance” or “TMA” are trading names of First Completes’ mortgage club.

“TM” TM Group Limited.

“TPO” The Property Ombudsman.

“Trust” or “Employee Benefit Trust” or “ESOT” LSL Property Services plc Employee Benefit Trust.

“Trustees” Capita Trustee Limited.

“TSI” Trading Standards Institute.

“TSR” total shareholder return.

“Underlying Operating Margin” operating profit before exceptional costs, contingent consideration, amortisation and share-based
payments show as a percentage of turnover.

“Underlying Operating Profit/Loss” before exceptional costs, contingent consideration, amortisation of intangible assets and share-based
payments.

“VEM” Vibrant Energy Matters Limited.

“Walker Fraser Steele” a trading name and division of e.surv.

“Your Move” trading name of your-move.co.uk Limited.

“Zoopla” trading name of Zoopla Property Group plc.

153

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance ReportsShareholder Information

Company details
LSL Property Services plc
Registered in England (Company Number 5114014)

Registered Office:
Newcastle House, Albany Court, Newcastle Business Park, Newcastle Upon Tyne, NE4 7YB

Head Office:
1 – 3 Sun Street, London, EC2A 2EP
Telephone: 0203 215 1015
Facsimile: 0207 920 9443
Email: enquiries@lslps.co.uk
Website: www.lslps.co.uk

Share listing
LSL Property Services plc 0.2p Ordinary Shares are listed on the London Stock Exchange under ISIN GB00BIG5HX72

Registrar
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham Kent
BR3 4TU

Telephone: 0871 664 0300.

Calls cost 12p per minute plus your phone company’s access charge. Calls outside the UK will be charged at the applicable international
rate. Lines are open between 9.00 am to 5.30 pm, Monday to Friday excluding public holidays in England and Wales.
Website: www.capitaassetservices.com
Email: shareholderenquiries@capita.co.uk

If you move, please do not forget to let the Registrars know your new address

Provisional calendar of events
Preliminary Results Released
AGM Proxy Form Deadline
AGM

3rd March 2016
4.30 pm 26th April 2016
4.30 pm 28th April 2016

The AGM will be held at LSL’s offices at 1-3 Sun Street, London EC2A 2EP. The Notice of Meeting details the proposed resolutions.

In accordance with its Articles of Association, LSL publishes shareholder information, including notice of AGMs and the Annual Report and
Accounts on its website, www.lslps.co.uk. Reducing the number of communications sent by post not only results in cost savings to LSL, it
also reduces the impact that unnecessary printing and distribution of reports has on the environment.

LSL’s Articles of Association enable all communications between Shareholders and LSL to be made in electronic form (as permitted by the
Companies Act 2006). Documents will be supplied via LSL’s website to Shareholders who have not requested a hard copy, or provided an
email address to which documents of information may be sent. Where a Shareholder has consented to receive information via the website,
a letter will be sent to the Shareholder on release of any information directing them to the website.

If a Shareholder wishes to continue to receive hard copy documents they should contact Capita Registrars (details above).

www.lslps.co.uk
Registered in England (Company Number 5114014)

Registered Office:
Newcastle House Albany Court
Newcastle Business Park Newcastle upon Tyne NE4 7YB
Telephone: 0203 215 1015
Facsimile: 0207 920 9443
Email: enquiries@lslps.co.uk

154

Shareholder Notes

155

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports