Annual Report and
Accounts 2022
Directors’ Report and Financial Review (including Business Review)
Contents
Overview, Strategic Report and Directors’ Report
Overview
01 2022 Highlights
02 2023 Outlook
03 About LSL and Our Markets
06 Chair’s Statement
08 Group Chief Executive Officer’s Review
Strategic Report
12 Purpose, Strategy, Culture, Values and Business Model
13 Financial and Divisional Reviews:
13 – Financial Review
15 – Financial Services Division
17 – Surveying & Valuation Division
18 – Estate Agency Division
20 – Balance Sheet Review
21 Our Stakeholder Engagement Arrangements – including s172
Companies Act 2006 Statement
25 Principal Risks and Uncertainties
30 Environment, Social and Governance (ESG) Report
44 The Board
46 The Executive Committee
Directors’ Report (including Corporate Governance Reports
and Committee Reports)
48 Statement of Directors’ Responsibilities in Relation to the
Financial Statements
49 Report of the Directors
54 Corporate Governance Report including Nominations
Committee Report
67 Audit & Risk Committee Report
73 Directors’ Remuneration Report including Remuneration
Committee Report
Financial Statements
102 Independent Auditor’s Report to the Members of LSL
Property Services plc
113 Group Income Statement
114 Group Statement of Comprehensive Income
115 Group Balance Sheet
116 Group Statement of Cash Flows
117 Group Statement of Changes in Equity
118 Notes to the Group Financial Statements
163 Parent Company Balance Sheet
164 Parent Company Statement of Cash Flows
165 Parent Company Statement of Changes in Equity
166 Notes to the Parent Company Financial Statements
Other Information
178 Definitions
183 Shareholder Information (including forward looking
statements information)
For further information about our Group, please visit our
website: lslps.co.uk.
Forward looking statements
This Report may contain forward looking statements with
respect to certain plans and current goals and expectations
relating to the future financial condition, business performance
and results of LSL. Further information about forward looking
statements can be found in the Shareholder Information section
on page 183.
Annual Report and Accounts 2022
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
01
2022 2021 Var
Group Revenue (£m) 321.7 326.8 (2)%
Group Underlying Operating Profit
1
(£m) 36.9 49.3 (25)%
Group Underlying Operating margin (%) 11% 15% (370)bps
Exceptional gains (£m) 0.7 31.1 (98)%
Exceptional costs (£m) (88.9) (2.0) nm
Group operating (loss)/profit (£m) (56.7) 72.6 (178)%
(Loss)/Profit before tax (£m) (59.1) 69.9 (185)%
Basic Earnings per Share
2
(pence) (62.3) 59.6 (205)%
Adjusted Basic Earnings per Share
2
(pence) 28.4 37.7 (25)%
Net Cash
3
at 31 December (£m) 40.1 48.5 (17)%
Final proposed dividend (pence) 7.4 7.4 –
Full year dividend (pence) 11.4 11.4 –
nm: not meaningful
Notes:
1
Group Underlying Operating Profit is before exceptional items, contingent consideration, amortisation
of intangible assets and share-based payments (as set out in note 5 to the Financial Statements).
2
Refer to note 11 to the Financial Statements for the calculation.
3
Refer to note 35 to the Financial Statements for the calculation.
2022 Highlights
Group Underlying
Operating Profit
£36.9m
(2021: £49.3m)
(25%)
Net Cash
£40.1m
(2021: £48.5m)
(17%)
Group Revenue
£321.7m
(2021: £326.8m)
(2%)
Financial
Services
£13.3m
30%
Surveying &
ValuaƟon
£20.4m
46%
Estate
Agency
£10.5m
24%
Divisional Underlying Operating Profit
Before central costs
In 2022, the Group traded well in challenging market conditions, whilst making substantial progress in the
execution of our strategy to grow and to become a B2B financial services provider
02
2023 Outlook
• We expect market conditions to remain challenging during H1 but to improve in H2 and thereafter, supported by a strong remortgage market,
and further improvements in consumer confidence and transaction levels assisted by recent reductions in mortgage rates.
• Trading in our Financial Services Network and Estate Agency businesses is in line with expectations, with signs of increasing momentum.
• In Surveying & Valuation, valuations in more specialist areas such as equity release and buy-to-let have recovered less quickly after the rise in
interest rates and market disruption which followed the 2022 mini-budget, with these sectors still trending significantly below 2022.
• We will manage costs pro-actively as market conditions evolve.
• Planned investment for the longer term will continue, underpinning confidence for the future.
• LSL remains very well-placed to benefit as market conditions improve.
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
03
About LSL and Our Markets
About LSL
Unless stated otherwise, information in this section of the Report is as at 31 December 2022.
We are one of the largest providers of services to mortgage intermediaries and valuation services to the UK’s biggest mortgage lenders. We also
operate a network of owned and franchised estate agency branches.
We have three Divisions:
• Financial Services.
• Surveying & Valuation.
• Estate Agency.
Financial
Services
Surveying &
Valuation
Estate
Agency
One of the UK’s
largest mortgage and
insurance networks
One of the UK’s
largest surveying and
valuation businesses
Some of the UK’s
largest estate
agency brands
Financial Services
One of the UK’s largest mortgage and insurance networks
Together, the PRIMIS Network and The Mortgage Alliance (TMA) made up one of the UK’s largest mortgage and insurance networks. PRIMIS,
with 993 firms and 2,867 financial advisers, is a multi-award winner, winning Best Network, 300+ Appointed Representatives at the 2022
Mortgage Strategy Awards. Furthermore over 700 firms used TMA in 2022.
Pivotal Growth
Following the 2022 year end, we have sold our D2C broker businesses to Pivotal Growth, our buy and build joint venture with Pollen Street
Capital. Since its creation in 2021, Pivotal Growth has acquired eight businesses, comprising of around 330 advisers including the Group First,
RSC, Embrace Financial Services and F2P businesses sold by us to Pivotal Growth in 2023.
Surveying & Valuation
Our Surveying & Valuation Division includes e.surv, one of the UK’s largest surveying and valuation businesses, and Walker Fraser Steele
Chartered Surveyors, which services the Scottish market. e.surv is one of the UK’s biggest employers of Royal Institution of Chartered Surveyors
(RICS) registered surveyors, with 512 (FTE) surveyors, and counts seven of the UK’s ten largest lenders amongst its clients. It was named Best
Surveying Firm at the 2022 Mortgage Finance Gazette Awards and Best Surveyor at the 2022 Equity Release Awards with Mortgage Solutions.
Since 1 April 2023, the Division also includes our asset management business, LSL Corporate Client Department and Templeton LPA, which were
previously included in the Estate Agency Division.
Estate Agency
We own two of the UK’s largest estate agency brands, Your Move and Reeds Rains, as well as a network of smaller brands operating under the
LSLi umbrella in the South East. Together, as at 12 April 2023, we own 182 estate agency branches and we have 127 franchised branches. During
2022, the Division also included Marsh & Parsons, a London estate agency business which was sold in January 2023.
We also have other specialist businesses within our Estate Agency Division:
- LSL Land & New Homes provides a complete range of services for house builders and residential property investors.
- Homefast Property Services provides conveyancing panel management and support services to customers of our Estate Agency branches.
04
About LSL and Our Markets
Our Markets
Demand for our products and services is driven primarily by the UK mortgage market in the Financial Services and Surveying & Valuation
Divisions, and by the UK housing market in the Estate Agency Division. There is some correlation between the UK housing and mortgage
markets, although remortgages, product transfers and insurance are significant parts of the mortgage market and are often not correlated with
the housing market.
Mortgage Market
Both demand for mortgages and advice from financial advisers remained strong in 2022
2
:
• Total gross mortgage lending
1
in 2022 was £314bn, 2% higher than the prior year (2021: £308bn) with a shift towards refinancing, and
purchase mortgages accounted for only 61% of total lending (2021: 69%).
• The proportion of mortgage lending placed through financial advisers
2
increased to 81% in 2022 (2021: 77%).
• Total mortgage approvals for house purchases
3
were down 19% to 755,000 in 2022, with demand softening in H2 due to affordability issues.
• Remortgage (and other)
3
approvals were up 12% on 2021, while remortgage and other lending was 27% ahead as consumers sought security
in an uncertain market.
Housing Market
2022 was a smaller housing market after one of the strongest years on record for the UK residential property market in 2021, which was
materially impacted by the Government scheme waiving stamp duty:
• UK housing transactions
4
in 2022 were 1,260,000, down 15% year-on-year (2021: 1,480,000).
• Transactions
4
were down 28% in H1 2022 and 2% up year-on-year in H2 2022.
• At the end of 2022, average house prices in England and Wales
5
were 8% higher than the same period last year.
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
05
Sources:
1
New mortgage lending by purpose of loan, UK (Bank of England) – Table MM23 (3 March 2023).
2
New residential lending sold direct and via intermediaries (excluding product transfers), UK Finance – Table RL8 (16 February 2023).
3
Approvals for lending secured on dwellings, Bank of England – Table A5.4 (1 March 2023).
4
Number of residential property transaction completions with value £40,000 or above, HMRC (21 February 2023).
5
House price index, England and Wales, LSL Acadata (December 2023).
20222021202020192018
755
781
789
801
934
20222021202020192018
314
269
269
246
308
20222021202020192018
701
754
761
588
627
20222021202020192018
1,562
1,456
1,535
1,549
1,389
Total Mortgage Approvals for House Purchase
’000s
Total Gross Mortgage Lending
£bn
Remortgage (and other) Volumes
’000s
Total Mortgage Approvals
’000s
06
Chair's Statement
I’m pleased to present our Annual Report and
Accounts for 2022. In this Report you will find
an in-depth review of the Group’s financial
performance together with details of the
progress we have made taking forward our
strategy. I’m delighted to say we can report
positive developments on both fronts.
Market background
There is no question that this is a challenging
time for the UK economy and in particular for
many of the markets in which we operate.
This is particularly true in the aftermath of
the Government’s October mini-budget and
the attendant uncertainty that followed. One
outcome from the rapid rise in mortgage
and interest rates being that in Q4 2022 we
experienced a short term reduction of up to
50% in activity rates across the Group, with
Surveying & Valuation being impacted in
particular.
Financial highlights
Our performance was very resilient given
these market conditions, with each of our
three Divisions trading well and gaining
market share. This strong trading contributed
to a full year Group Underlying Operating
Profit of £36.9m and helped build an end of
year Net Cash balance of £40.1m, which was
boosted further by the disposal of Marsh
& Parsons in February 2023. This strong
position indicates the cash-generative nature
of our business and will allow us to continue
to invest with confidence in our growth
strategy.
On a statutory basis, Group operating loss
was £56.7m which reflects an exceptional
impairment charge of £87.2m for goodwill
and other intangible assets.
Significant strategic progress made to
simplify the Group and focus on B2B
services
In 2021 we launched our joint venture with
Pollen Street Capital, Pivotal Growth, to buy
and build a leading national mortgage broker
business. Since its inception, Pivotal Growth
has acquired eight businesses, including
in January 2023, our new build broker
businesses, RSC and Group First and in April
2023, Embrace Financial Services and F2P,
our other two D2C broker businesses. These
disposals are in line with our strategy to
simplify the Group and focus on developing
further our leading Financial Services
Network business. We also believe that
Pivotal Growth is better placed to increase
the value of the acquired businesses as they
support Pivotal Growth’s strategy to become
a leading player in the new build and D2C
sectors.
We also disposed of Marsh & Parsons in
January 2023, a leading high end London
estate agent which has since its acquisition
in 2011, operated autonomously from other
parts of our Estate Agency Division.
Dividend
As at the date of this Report we have also
built up significant Net Cash balances and we
have successfully restated and extended our
banking facility, which is now for £60m and
will expire in May 2026. With these in place,
we have considered paying a dividend in line
with the Group’s existing policy to pay out
30% of Group Underlying Operating Profit
after finance and normalised tax charges.
This policy is designed to provide clarity to
shareholders and ensure that the Group
retains a strong balance sheet for all market
conditions.
Despite economic conditions having an
impact on current earnings, due to the
significant progress made in executing our
strategy, the Board believes that LSL is in
good shape to trade profitably and is very
well-placed to benefit as market conditions
improve.
In light of this and in view of the Board’s
confidence about the future prospects of the
Group, the Board is recommending a final
dividend of 7.4 pence. This, if approved, will
deliver a total dividend of 11.4 pence per
share, unchanged from the previous year.
The ex-dividend date is 27 April 2023 with a
record date of 28 April 2023 and a payment
date of 2 June 2023. Shareholders can elect
to reinvest their cash dividend and purchase
additional shares in LSL through a dividend
reinvestment plan. The election date is
11 May 2023.
Governance
The Board remains committed to strong
corporate governance and in particular
making sure we monitor and challenge our
strategy, performance, risks and approach
to managing our colleagues. You can read
more about our corporate governance
arrangements in the Corporate Governance
Report in this Report (page 54).
Subsidiary governance is also an important
part of our strategy to grow our Financial
Services business. To ensure we have the
right governance arrangements to support
growth and to respond to the introduction
of new regulations, we have invested in
the management bench strength of our
Financial Services Management Team and
strengthened our risk and compliance
arrangements with the appointment of an
independent Non Executive Chair to the
PRIMIS Risk and Compliance Committee. John
Lowe has been appointed into this role as he
has significant experience in retail financial
services businesses.
Whilst we committed last year to undertake
an externally facilitated evaluation in 2022,
we agreed to defer this exercise to allow
my successor to join the Board before the
exercise was undertaken. Instead, Gaby
Appleton, Senior Independent Director,
has once again led the evaluation process
which has included an evaluation of my
performance as Chair. Details of the exercise
and recommendations are contained in the
Corporate Governance Report in this Report
(page 54).
Board changes
During the year, Sonya Ghobrial joined as
an independent Non Executive Director and
we have benefitted from her experience,
in particular in relation to ESG and investor
relations matters. We also announced in June
2022 that Helen Buck, Executive Director –
Estate Agency would retire from the Board
in 2023. Helen has been on the Board since
2011 when she joined as an independent
Non Executive Director. She moved into the
role of Executive Director – Estate Agency in
2017 and in both of her roles she has made
a significant contribution to the Board. On
behalf of the Board, I wish to thank Helen for
her contribution, especially her leadership
in resizing our Estate Agency Division, and
during the pandemic.
Following Helen’s decision to retire, we
commenced a search to appoint a new
Managing Director for the Estate Agency
Division. Earlier this month, we announced
the appointment of Paul Hardy into this
role. This is an internal promotion, and while
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
07
Paul will not be an Executive Director he
has joined the Executive Committee and is a
PDMR.
With my Board membership reaching nine
years in January 2023, the Nominations
Committee, led by Gaby Appleton, undertook
an exercise to identify a new Chair. I did not
participate in this process, and we announced
on 3 April 2023 the appointment of David
Barral as Chair Designate. David has joined
the Board, the Nominations Committee and
the Remuneration Committee. He will take
over the roles of Chair of the Board and the
Nominations Committee with effect from the
close of the 2023 AGM, which is when I will
retire from these roles. For further details
relating to our succession planning process,
including how we have sought to ensure our
search supports diversity, see the Corporate
Governance Report in this Report (page 54).
Nominations Committee
During 2022, I chaired the Nominations
Committee, which met six times during the
year. Our work included recommending
to the Board the adoption of our Diversity
Policy, which covers the Board, its
Committees and the Senior Management
Team and includes targets which align to
the FCA’s rules. All aspects of diversity are
important to the Board, including gender,
ethnicity, disability, social and cognitive.
ESG
Since launching our Living Responsibly
strategy and programme in 2021, we have
continued to progress our ESG priorities
through this programme and we are also
publishing our second Living Responsibly
Report. This includes the significant work of
our colleague forums: Inclusion and Diversity,
and Communities; and our Environmental
Working Group, which have helped us to
deliver on our social and environmental
priorities. Our ESG and Living Responsibly
Report provide progress updates under each
of our five priorities:
a. promoting inclusion and diversity on our
Board and in our workforce;
b. engaging, supporting and investing in our
colleagues;
c. supporting colleague priorities and
connecting with our local communities;
d. minimising our environmental footprint;
and
e. ensuring excellent governance.
Our priorities align with our purpose,
culture and values which are detailed at
the beginning of the Strategic Report in
this Report (page 12). During 2023 we will
continue to progress our priorities, especially
to improve our data on colleague diversity
to help us understand our colleague make-
up. We are also seeking to understand
the experiences of our colleagues’ career
progression through the Group so that we
can improve diversity at senior levels within
the workforce as a whole. We will also focus
on improving the diversity of our workforce
especially in areas and regions where we are
under-represented when compared with the
regional census data.
Colleagues
We are very much a people business, and
the Board places a high priority on keeping
in touch with our colleagues. In addition to
the colleague forums that play an active role
in our Living Responsibly programme, we
work closely with our Employee Engagement
Forum, for example we consulted the forum
ahead of making a cost of living payment
of £500 to all colleagues earning less than
£30,000.
Our people play a key part in our success and
never more so than during difficult economic
periods. On behalf of all the Board, I’d like
to thank them for all their hard work and
commitment.
Looking ahead
This is my last year as Chair, and although
there are no doubt challenges ahead, I am
clear that LSL is very well-positioned. We
have a clear strategy, against which we have
made substantial progress, and each of our
core businesses are trading well. Our strong
Net Cash position allows us to invest with
confidence throughout the economic cycle
and to take advantage of the significant
growth opportunities we have identified.
Importantly, I have been fortunate to work
with a talented and committed Board and
Management Team and I look forward to
seeing LSL go from strength to strength in the
future.
Bill Shannon
Chair
12 April 2023
08
Group Chief Executive Officer's Review
I am pleased to confirm that LSL remains in
good shape and is well-positioned to grow
once market conditions improve.
Although the mortgage and housing markets
have been adversely impacted by economic
and political uncertainty, the Group has
continued to trade well and backed by a
strong balance sheet, we expect to remain
resilient throughout 2023 in what are
anticipated to be difficult, but steadily
improving, market conditions.
Furthermore, we have made very substantial
progress in executing our Financial Services-
led growth strategy, significantly reducing
our exposure to housing market cycles. With
a strong balance sheet, including Net Cash
balances of £40.1m at the year end and a
business model that remains highly cash-
generative, LSL is well-placed to benefit as
soon as market conditions normalise.
Group Revenue was broadly in line with 2021
at £321.7m. This included record revenue
of £81.7m in Financial Services, and a very
strong H1 2022 performance in Surveying &
Valuation, which was subsequently impacted
by the significant and unexpected market
disruption resulting from economic and
political uncertainty in Q4 2022.
Group Underlying Operating Profit was down
25% compared to 2021 at £36.9m, which is
mostly attributable to reduced volumes in
Surveying & Valuation during Q4 2022 and
the impact of a slowdown in the residential
sales market in Estate Agency. On a statutory
basis, the Group operating loss was £56.7m,
after the Board reduced the carrying value of
goodwill by £87.2m. This is a non-cash item
reflecting the impact of more conservative
mid-term housing assumptions, higher
discount rates and the disposal of non-core
businesses, including Marsh & Parsons.
In 2021, the Group reported a statutory
operating profit of £72.6m, which was
boosted by a £29.4m gain on the disposal of
interests in joint ventures, which was also
part of our strategy to exit from non-core
businesses.
In Financial Services, the Underlying
Operating Profit of our Network business
was £15.5m, ahead of the record result in
2021 (£14.4m). Although member firms
were naturally cautious about adviser
numbers in H2, there was also modest
further year-on-year growth in the number
of advisers, bringing the year end total to
2,86 7. In addition, more than 700 other firms
submitted business through LSL’s mortgage
club, further boosting our market share.
The Financial Services Division as a whole
secured an 11% increase in overall lending,
well ahead of the whole market which had
only modest growth of 1.9%. This resulted in
a substantial market share improvement to
10.4%
1
from 9.6% in 2021.
Underlying Operating Profit for the Financial
Services Division as a whole reduced by
£1.5m, as the Group’s D2C advice businesses
were impacted by lower levels of activity in
the new build market in particular, and the
house purchase market in general. Our D2C
financial services businesses were transferred
during the early part of 2023 to our joint
venture with Pollen Street Capital, Pivotal
Growth, in line with LSL’s strategy to focus
its activities on B2B services. We believe
Pivotal Growth, in which the Group has a 48%
equity share, is better placed to take these
businesses forward for the benefit of our
shareholders.
Surveying & Valuation traded very strongly
through to the end of Q3 2022, capitalising
on recent contract wins and increased
allocations as well as further growth of
73% in D2C and data revenues. Its excellent
performance was interrupted by the market-
wide hiatus in mortgage activity in October
and November, as lenders remained cautious
whilst the political and economic impact of
the events that followed September’s mini-
budget became clearer. This is estimated
to have directly reduced H2 Underlying
Operating Profit in the Surveying & Valuation
Division by at least £5m.
Nevertheless, the Surveying & Valuation
Division still reported Underlying Operating
Profit of £20.4m, down £3.2m on 2021, but
still £4.1m or 25% higher than the pre-
COVID-19 performance of £16.3m reported
in 2019. Despite the market pressure, the
Underlying Operating Profit margin remained
resilient at 22%. Income per job increased
slightly to £175, £2 up on 2021.
Estate Agency revenues were down 5%
on 2021, when performance was boosted
substantially by the extension of the stamp
duty holiday. H2 2022 improved materially
year-on-year on the back of the pipeline built
up in H1. Lettings revenue was resilient and
increased by 4%, on a like-for-like basis, over
the prior year.
Estate Agency retained the residential
sales market share gains made in its core
catchment areas in 2021, and as a result
slightly increased its national market share
2
to 1.30% (2021: 1.28%). Conversion of its
exchange pipeline remained slow throughout
the year, impacting H1 performance in
particular. H2 2022 saw fewer new properties
coming to market and fewer sales agreed
but the strong pipeline built in H1 secured an
operating profit double the size of H2 2021.
Unsurprisingly, given increased economic
and housing market uncertainty, there was
a trend towards more fall-throughs, largely
affecting more recently agreed sales, both of
which will impact performance in Q1 2023.
Lettings revenue was resilient, increasing
by 4%, on a like-for-like basis, over 2021.
The impact of slow exchange speeds,
reduced house purchase activity and a solid
lettings performance combined to produce
Underlying Operating Profit for the Estate
Agency Division of £10.5m, £7.9m below the
performance in 2021 which had benefitted
significantly from the extension of the
stamp duty holiday to 30 June 2021. The
performance during H2 was 4% ahead of
H2 2021.
Strategic priorities and developments
The Group has made substantial progress
with the strategy we set out in 2020 to
reduce our exposure to housing market
cycles, simplify the business and focus
investment on high growth areas, notably our
Financial Services Network business.
In January 2023, we announced the disposal
of our London estate agency business, Marsh
& Parsons, to Dexters for a consideration of
£29m. Marsh & Parsons, which contributed
£1.5m to 2022 Underlying Operating
Profit, has a relatively low volume, high
fee business model when compared to the
rest of the Estate Agency Division, and was
particularly exposed to London housing
market cycles giving rise to a relatively
volatile earnings profile. Other steps to
simplify the Group include the disposal of our
small property management business PRSim
and the consolidation of asset management
operations within Surveying & Valuation.
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
09
Throughout 2022 we maintained our level
of investment in Mortgage Gym and DLPS,
the technology businesses acquired in April
2021 to support our Financial Services growth
plans. Work continued to adapt and develop
the technology with a view to deployment
across our Financial Services Network, with
the first stage of this work to be completed
during 2023. This technology investment
helps our Network members become more
efficient as well as generating additional
income for them and the Group. In 2023,
we will complete our work to refocus these
businesses, which will be absorbed into the
Financial Services Network reflecting what is
now their predominant business focus.
Our Financial Services-led growth plans are
centred on the B2B service offered to our
Network members where we believe there
are significant opportunities to grow further
by expanding the number of advisers and the
product range they distribute. The Network
business offers a highly scalable, low cost
platform through which strong margins can
be sustained in different market conditions
and is consistent with our vision of LSL as a
B2B service provider.
We previously concluded that it would
be better to pursue the considerable
opportunities in the D2C mortgage broking
market under a different ownership structure
to that of the Group, so that significant
capital could be deployed and entrepreneurs
incentivised appropriately through
different economic cycles. This led to the
announcement in 2021 of our Pivotal Growth
buy and build joint venture with Pollen Street
Capital.
Pivotal Growth has now acquired eight
businesses, comprising around 330 advisers,
including the Group First and RSC, Embrace
Financial Services and F2P D2C businesses
transferred from LSL. The consideration
for RSC, Group First and Embrace Financial
Services will be based on their financial
performance in 2024. The consideration for
F2P is payable at completion.
I believe this is an exciting move for both
Pivotal and LSL, providing increased scale
for Pivotal and the right environment for
these businesses to grow further. It has also
helped simplify the LSL Group considerably,
substantially reducing our cost base and
exposure to housing market cycles whilst also
reducing management stretch to enable us to
focus on the substantial opportunity to grow
the remaining Financial Services Network,
Surveying & Valuation and Estate Agency
businesses.
In Surveying & Valuation we have continued
to diversify our revenue streams. In May
2022, we launched a consumer-facing
website to support the growth of our
enhanced D2C proposition, where we
achieved a 60% increase in revenue year-
on-year. Providing data services to lenders
has strengthened our relationships and
helped secure contract wins and increased
allocations of valuation instructions, whilst
we have established a strong position in the
equity release valuation segment, a sector we
expect to grow significantly over the medium
term. Equity release instructions accounted
for approximately 16% of revenue in 2022
(2021: 12%).
Strong balance sheet
Our cash generation in the year resulted
in a Net Cash balance of £40.1m. This was
boosted further in January 2023 following
the disposal of Marsh & Parsons for a
consideration of £29m. Our strong balance
sheet and continuing strong cash generation
enables us to invest with confidence
throughout the economic cycle, including
restructuring the Group to deliver our
ambitious growth strategy. In 2023, we
will continue to invest in capability and
technology, support Pivotal Growth in its
acquisition of D2C brokerages, and consider
potential acquisition targets to build our
Financial Services Network business. The
Board will continue to actively review
its capital allocation policy to ensure we
maintain an efficient balance sheet.
To provide further flexibility to our balance
sheet, during February 2023 we agreed an
amended and restated banking facility with
a maturity date of May 2026, arranged on
materially the same terms, replacing the
previous £90m with a £60m revolving credit
facility with major mainstream UK lenders,
available on request at any time.
Dividend
The Board has considered the proposed
dividend in light of the Group’s policy to pay
out 30% of Group Underlying Operating
Profit after finance and normalised tax
charges, such that dividend cover is held at
approximately three times earnings over the
business cycle. This policy was designed to
provide clarity to shareholders and ensure
the Group retained a strong balance sheet for
all market conditions.
Although economic conditions have affected
current earnings, we have made significant
progress in executing our strategic shift to
develop a business that is less exposed to the
housing market cycle.
As part of that shift and the associated
rationalisation of certain businesses such
as the recent sale of Marsh & Parsons, we
have built significant Net Cash balances,
which at 31 December 2022 and prior to
the disposal of Marsh & Parsons, stood at
£40.1m. In light of this exceptionally strong
cash position and the Board’s confidence in
the future prospects of the Group, the Board
recommends a final dividend of 7.4 pence. If
approved, this would give a total dividend of
11.4 pence per share, unchanged from last
year.
The ex-dividend date is 27 April 2023 with a
record date of 28 April 2023 and a payment
date of 2 June 2023. Shareholders can elect
to reinvest their cash dividend and purchase
additional shares in LSL through a dividend
reinvestment plan. The election date is
11 May 2023.
The Board continues to keep its capital
allocation policy and balance sheet structure
under close review to ensure it is fit for
purpose for our evolving business model and
will seek to update shareholders on this as
appropriate.
Living Responsibly
The Board believes that success is measured
by more than just profits and our Living
Responsibly programme is at the centre of
our sustainability strategy. Put simply, our
objective is to have a positive effect on the
communities in which we operate, whether
that is measured by the impact we have
on the environment, the opportunities we
provide to colleagues, the way we serve our
10
Group Chief Executive Officer's Review
customers or the work we undertake in our
communities.
In our ESG and our Living Responsibly
Reports, we set out some of the steps we
have taken to limit our environmental impact,
help ensure LSL is a supportive and inclusive
workplace and provide support to good
causes.
It is vital that our Living Responsibly
programme has real substance and is
reflected in everything we do. We are helped
to achieve this by a number of independent
colleague forums and working groups which
provide additional insight in key areas.
Further information on these, including the
establishment in 2023 of LSL Voices is also
set out in our Living Responsibly Report. I
am grateful to the very many colleagues who
have willingly given their time and energy to
support this work.
I am equally grateful for the hard work and
commitment of all our staff during what has
been a hugely challenging period and which
has helped ensure LSL is well-positioned to
thrive in all market conditions, and would like
to take this opportunity to thank them for
their effort and support.
Looking ahead
We have made significant progress in
reshaping the Group in line with our
strategy and each of our core businesses are
performing well. After a strong start to 2022
which saw us build substantial pipelines in
Estate Agency and Financial Services, market
conditions deteriorated as a result of political
instability and sharply rising interest rates
and although we expect to see a steady
improvement in activity over the course of
the year, it is clear that conditions will remain
challenging throughout 2023.
However, LSL remains well-positioned for
future growth. Independent mortgage
brokers typically perform well in challenging
markets, being agile and close to their client’s
needs, and this will help ensure our Financial
Services Network businesses will remain
resilient. In addition, although some areas
of the valuation market remain depressed
following the market uncertainty which
followed the 2022 mini-budget, our Surveying
& Valuation business remains very well-
placed for medium term growth, helped by
recent contract wins and good progress made
in developing new income streams.
We have made substantial progress in
restructuring and refocusing the Group’s
activities and will continue this work in
2023. Our very strong balance sheet allows
us to continue to invest for the future
with confidence, and I am excited about
the Group’s potential and look forward to
reporting growth in 2024 and beyond.
David Stewart
Group Chief Executive Officer
12 April 2023
Notes:
1
Mortgage lending excluding product transfers – New mortgage lending by purpose of loan, UK (Bank of
England) – Table MM23.
2
Number of residential property transaction completions with value £40,000 or above, HMRC.
11
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Other Information
Financial Statements
Strategic Report
Overview
Strategic Report
Overview
In this section:
12 Purpose, Strategy, Culture, Values and Business
Model
13 F inancial and Divisional Reviews:
13 – Financial Review
15 – Financial Services Division
17 – Surveying & Valuation Division
18 – Estate Agency Division
20 – Balance Sheet Review
21 Our Stakeholder Engagement Arrangements –
including s172 Companies Act 2006 Statement
25 Principal Risks and Uncertainties
30 Environment, Social and Governance (ESG) Report
44 The Board
46 The Executive Committee
12
Purpose, Strategy, Culture, Values and
Business Model
The Board has established our purpose,
culture, values and strategy. Our purpose
statement, culture and values are aligned to
our strategy, provide an anchor point for risk
management and articulate what joins our
group of companies together.
Our purpose
To provide first class services to mortgage and
insurance advisers, estate agents, lenders and
their customers, to create long term benefits
for external stakeholders and our people.
Our strategy
Financial Services is at the heart of our
strategy.
During 2023, we will continue to develop
our Surveying & Valuation and Estate
Agency Divisions’ business models, including
leveraging their capabilities to grow the
Financial Services Division.
Our strategic objectives are to:
• Reduce our exposure to housing market
volatility.
• Generate more resilient and reliable
revenues, plus a more flexible cost base.
• Focus on and invest in growth markets.
• Invest in acquisitions and partnerships,
where it supports our strategy, plus digital,
data and technology.
• Leverage cross-Group opportunities.
• Focus on our Living Responsibly strategy
and our ESG programme.
• Retain, develop and attract talented
people.
For details of the steps we have taken to
deliver our strategy during 2022, see the
Group CEO Review and the Business Reviews.
Our culture
We describe our desired culture as:
Having the right people: who accept
accountability for their actions.
Doing the right things: which deliver
customer expectations.
In the right way: being open, challenging of
themselves and supporting others.
Our values
Our values, which underpin our culture, are:
• People focused.
• Market leaders.
• Honesty.
• Delivering on promises.
• Teamwork.
• Innovation.
Our business model (as at the date of this Report)
Through a number
of key resources...
...we provide a range
of first class products
and services...
...to our customers...
Key
Financial Services
Group
Estate Agency
Surveying & Valuation
Talented and
committed
people
Leading
technology
Group
infrastructure
Group
capital
Services
to mortgage
intermediaries
Valuation
and surveys
Estate agency
services
Mortgage and
insurance
intermediaries
Lenders
Retail customers
Retail customers
Shareholders Colleagues Customers Suppliers
...for the benefit of
all our stakeholders...
Franchisees
13
Financial and Divisional Reviews
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
Financial Review
Group summary (P&L)
Group Revenue of £321.7m was 2% below
the record revenue last year (2021: £326.8m),
with Financial Services Division revenue up
4%, Surveying & Valuation revenue down 1%
and Estate Agency revenue down 5%.
In the Financial Services Division, Financial
Services Network revenue increased by
9% which was a positive performance in
a broadly flat mortgage market. Financial
Services Other revenue was in line with prior
year as our D2C businesses were impacted
by slower residential activity, offset by
remortgage activity. Surveying & Valuation
revenue was impacted in the aftermath of
the UK mini-budget, illustrated by October
YTD revenue running at 9% ahead of prior
year whilst 1% back for the full year. Estate
Agency revenue was back 5% in a market with
purchase activity 15% lower.
Group Underlying Operating Profit was
£36.9m compared to the record results
posted last year (2021: £49.3m) and in line
with 2019, the most recent comparable
market. The Group Underlying Operating
Profit of £22.7m in H2 was 3% above last
year (2021: £22.0m), despite the adverse
market impact on the Q4 Surveying &
Valuation revenue, as the Group returned to
a more normalised profit profile with 62%
of operating profit delivered in H2, in line
with the pre-COVID-19 levels. During H2 the
residential exchange pipeline converted as
expected however front end activity was
materially lower, impacted by the UK mini-
budget, resulting in the closing pipeline being
below expectations.
Our strategic focus is on the Financial
Services Network where Underlying
Operating Profit increased by 8%. Financial
Services Other posted a loss, impacted by
lower activity in the purchase and new build
markets, and included continued technology
investment. Estate Agency Underlying
Operating Profit was down against prior
year due mainly to the impact of the smaller
purchase transaction market. Unallocated
central costs of £7.3m reduced by 3%.
On a statutory basis, Group operating loss
was £56.7m (2021: profit £72.6m). The
2022 results include a £87.2m non-cash
impairment charge for goodwill and other
intangibles following the annual impairment
review, as detailed later in this Financial
Review, and 2021 results included the
exceptional gain on sale of our holdings in
two joint venture businesses sold during the
year.
Operating expenditure
Total adjusted operating expenses
1
increased
by 2% to £285.7m (2021: £280.2m) with costs
managed carefully, mitigating the impact
of the inflationary cost environment - with
H2 2022 costs 5% below H1. Our emoluments
increased by 2% in 2022, with annual pay
and NI increases, and a cost of living award
for lower-paid staff, mitigated by headcount
reductions in H2 2022 in response to market
conditions. Property and related costs
increased by 12% reflecting energy price
inflation which drove utilities costs up by
£1.6m and prior year business rates relief.
Other material costs, including IT, were
largely protected by previously negotiated
fixed-price long term contracts.
Other operating income
Total other operating income was £1.3m
(2021: £0.9m). Of this, rental income was
£0.7m (2021: £0.9m), reducing year-on-year
following the disposal during 2021 of several
freehold properties previously leased out.
The fair value of units held in The Openwork
Partnership LLP was reassessed to £0.7m
and is recognised in other operating income.
In 2021, there was a gain on sale of £1.1m
generated from the disposal of the freehold
properties.
(Loss)/income from joint ventures and
associates
Losses from joint ventures and associates of
£0.5m (2021: profit £0.7m) primarily relate to
our equity share of Pivotal Growth which is
still in a growth phase. The prior year income
comprised our share of LMS and TM Group
profits prior to the disposal of our shares in
these investments and our share of set up
costs of Pivotal Growth.
Share-based payments
The share-based payment charge of £2.0m
(2021: £1.9m) consists of a charge in the
period of £3.1m, offset by lapses and
adjustments for leavers and options exercised
in the period. The prior year included a lower
charge of £2.6m, offset by lower lapse and
leaver adjustments.
Amortisation of intangible assets
The amortisation charge for 2022 was £4.1m
(2021: £4.5m). The year-on-year decrease was
as a result of some lettings book acquisitions
and intangible software investments
becoming fully amortised during 2021.
Exceptional items
The exceptional gain of £0.7m (2021: £31.1m)
relates to a release in the PI Costs provision,
as we continue to make progress with settling
historic PI claims where actual settlement
costs have been lower than expected. The
prior year exceptional gain included the gains
on disposals of the Group’s joint venture
holdings in LMS and TM Group.
Exceptional costs of £88.9m (2021: £2.0m),
related principally to the outcome of the
annual impairment review, which led to
non-cash goodwill and other intangibles
impairment of £87.2m (2021: £nil) in a
number of subsidiaries
2
: Your Move and
Reeds Rains (£42.0m), Marsh & Parsons
(£27.7m), DLPS (£1.1m), Group First (£10.3m)
and RSC (£6.1m).
The non-cash goodwill impairments result
from the deterioration in the near term
outlook for cash flows due to market
conditions and the significant increase in
discount rates since the previous review,
impacting Your Move and Reeds Rains, and
DLPS, and the strategic decision to sell Marsh
& Parsons, Group First and RSC. The disposals
of Marsh & Parsons, Group First and RSC
were announced in January 2023.
Further exceptional costs of £1.7m
(2021: £nil) were recognised as a result of
12 branch closures, as part of a restructuring
programme in the Estate Agency Division.
Contingent consideration
The credit to the income statement in 2022
of £0.7m (2021: credit £0.7m), relates to the
reduction of the contingent consideration
liability for RSC and DLPS, based on revisions
to profit forecasts.
Net finance costs
Net finance costs amounted to £2.4m
(2021: £2.7m) and related principally to
unwinding the IFRS 16 lease liability of £1.4m
(2021: £1.5m) and commitment and non-
utilisation fees on the revolving credit facility
of £1.0m (2021: £1.0m). Finance income
increased to £0.1m (2021: £nil) resulting from
increased interest received on funds held on
deposit.
14
Financial and Divisional Reviews
Loss before tax
Loss before tax was £59.1m (2021: profit
before tax of £69.9m). The year-on-
year movement is due to the non-cash
impairments to goodwill and other
intangibles during 2022, the lower Group
Underlying Operating Profit, and the prior
year exceptional gain of £29.4m on the sale
of the investments in the LMS and TM Group
joint ventures.
Taxation
The tax charge of £4.9m (2021: £8.0m)
represents an effective tax rate of (8.3)%,
which is higher than the headline UK tax rate
of 19% largely as a result of the inclusion
within the loss before tax of exceptional
impairments to subsidiaries, which are not
deductible for corporation tax purposes.
Deferred tax assets and liabilities are
measured at 25% (2021: 25%), the tax rate
effective from 1 April 2023.
Earnings per share
Basic Earnings per Share was (62.3) pence
(2021: 59.6 pence), with diluted earnings per
share of (62.3) pence (2021: 59.2 pence). The
Adjusted Basic Earnings per Share was 28.1
pence (2021: 37.7 pence), a decrease of 25%,
with adjusted diluted earnings per share of
28.3 pence (2021: 37.4 pence).
Notes:
1
Total adjusted operating expenses include
employee costs, depreciation and other
operating costs as shown in Group Income
Statement.
2
Refer to note 16 to the Financial Statements.
15
Financial and Divisional Reviews
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
Financial Services Division
FY
Financial Summary 2022 2021 Var
P&L (£m)
Financial Services Network Gross revenue 316.6 295.9 7%
Financial Services Network 41.6 38.3 9%
Financial Services Other 40.0 40.2 (0)%
Total Net Revenue 81.7 78.5 4%
Financial Services Network 15.5 14.4 8%
Financial Services Other (2.3) 0.4 nm
Underlying Operating Profit
1
13.3 14.8 (10)%
Financial Services Network margin 37.3% 37.5% (20)bps
Underlying Operating margin
1
16.2% 18.8% (260)bps
Operating (loss)/profit (6.8) 10.0 (168)%
KPIs
LSL mortgage completion lending
2
(£bn) 45.6 41.1 11%
Total advisers 2,867 2,858 0%
Gross revenue per average adviser
3
(£’000s) 93.9 90.1 4%
Notes:
1
Divisional Underlying Operating Profit and Divisional Underlying Operating margin are stated on the same basis as Group (as set out in note 5 to the Financial
Statements).
2
LSL mortgage completions lending quoted includes product transfers.
3
Gross revenue per adviser is calculated as Financial Services Network gross revenue (excluding TMA mortgage club) per active adviser.
4
Financial Services is managed as one segment and for presentational purposes its results have been split between Network and Other.
16
Financial and Divisional Reviews
Highlights
• Record Financial Services Network
Underlying Operating Profit of £15.5m
(2021: £14.4m) up 8%.
• Record total lending of £45.6bn, up 11%
(2021: £41.1bn).
• Further increase in share of UK
purchase and remortgage market to
10.4%
1
(2021: 9.6%), reflecting strength
of Network mortgage advisers in
remortgages, a segment we expect to
increase further in importance in 2023.
• Gross revenue per adviser up 4%.
• Total LSL advisers increased to 2,867
(2021: 2,858).
• Total Financial Services Division
Underlying Operating Profit was £13.3m
(2021: £14.8m) reflecting further
investment in technology and impact of a
lower purchase market on D2C brokerages
subsequently sold to Pivotal Growth.
Financial overview
Total revenue reported was up 4% to £81.7m
(2021: £78.5m). Core Financial Services
Network revenue grew by 9% year-on-year
benefitting from higher adviser numbers and
strong renewal volumes. Financial Services
Other revenue was in line with last year due
to stronger H2 (£1m ahead of 2021) in line
with increased market activity. Financial
Services Division Underlying Operating Profit
1
was £13.3m (2021: £14.8m). On a statutory
basis, operating loss was £6.8m (2021: profit
£10.0m).
The Division’s revenue mix by product
continues to highlight the significance of
our insurance business and its success in
arranging insurance products both on a
standalone basis and when needed at the
time of a mortgage being arranged. In 2022,
there remained a broadly equal split between
mortgage related and insurance related
revenue. The split of revenue by product
type in 2022 was £36.5m for mortgage fees
(2021: £33.7m), £34.2m for protection and
insurance fees (2021: £35.2m) and £10.9m in
other fees (2021: £9.6m).
Financial Services Network business
Gross purchase and remortgage completion
lending increased by 11% to £32.7bn
(2021: £29.5bn) representing an increased
share of the lending market excluding
product transfers to 10.4% (2021: 9.6%).
Including product transfers, total gross
mortgage lending was £45.6bn in 2022
(2021: £41.1bn). Gross revenues generated
by the Financial Services Network business
(including the TMA mortgage club) increased
by 7% to £316.6m (2021: £295.9m).
Gross revenue per average adviser in 2022
was £93.9k (2021: £90.1k). Whilst AR firms
in the network have been understandably
cautious about growing adviser numbers
in the midst of the economic and political
uncertainty, and as a result the Financial
Services Network business saw modest
growth in adviser numbers, this indicates that
through the turnover of advisers, there is a
net improvement in the most productive.
Financial Services Network business focused
heavily on helping member firms look
after the mortgage needs of their existing
customers during 2022, particularly during
periods of rapidly changing interest rates.
This deliberate focus helped member firms
grow their revenue through increased
volumes of remortgage and product
switches, despite the decline in the housing
market.
Underlying Operating Profit increased 8%
to £15.5m (2021: £14.4m) with Underlying
Operating margin decreasing marginally to
37% (2021: 38%) as we continue to invest
in our businesses and some cost categories
returned to levels more in line with
pre-COVID-19 periods, for example broker
events and marketing support.
Financial Services Other
Financial Services Other generated an
Underlying Operating Loss of £2.3m
(2021: profit £0.4m), which is stated after
our continued investment in the businesses
that make it up, including costs of the
TPFG contract and the Pivotal Growth joint
venture.
As well as continued investment in the
Mortgage Gym platform, we continued to
invest in the Financial Services Network
business technology platform (Toolbox), to
deliver benefits to firms and their advisers
and create further efficiencies and improved
functionality. Financial Services Other D2C
businesses were impacted by lower activity
levels in the new purchase market but took
advantage of the increased refinancing
activity which peaked in H2 and was
impacted in part by the UK mini-budget.
The Pivotal Growth joint venture was
established in April 2021, with a net loss
in 2022 of £0.5m after acquisition costs
and overheads. The slower than expected
momentum in acquisitions means it is still
in the investment phase, and we expect a
positive contribution in 2023.
Notes:
1
Mortgage lending excluding product transfers
— New mortgage lending by purpose of loan, UK
(Bank of England) – Table MM23.
2
Gross revenue per adviser is calculated as
Financial Services Network gross revenue
(excluding the TMA mortgage club) per active
adviser.
17
Financial and Divisional Reviews
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
FY
Financial Summary 2022 2021 Var
P&L (£m)
Total revenue 93.2 93.7 (1)%
Underlying Operating Profit
1
20.4 23.6 (14)%
Underlying Operating margin
1
21.9% 25.2% (330)bps
Operating profit 20.8 24.7 (16)%
KPIs
Jobs performed (000’s) 532 541 (2)%
Jobs per average surveyor 1,065 1,079 (1)%
Revenue from private surveys and data services (£m) 3.8 2.2 73%
Income per job (£) 175 173 1%
Operational surveyors employed (FTE
2
) 512 489 5%
Notes:
1
Divisional Underlying Operating Profit and Divisional Underlying Operating margin are stated on the same basis as Group (as set out in note 5 to the Financial
Statements).
2
Full Time Equivalent (FTE).
Highlights
• Surveying & Valuation Division once again
performed strongly.
• Despite the sudden and unexpected
market disruption, Underlying Operating
margin
1
remained resilient at 22%
(2021: 25%), and well ahead of the
pre-COVID-19 period (2019: 19%).
• Underlying Operating Profit of £20.4m
(2021: £23.6m), despite an estimated £5m
profit impact from Q4 market disruption.
• D2C and data services income increased by
73% to £3.8m.
• Jobs performed was broadly in line with
FY21 at 532k despite market disruption.
Summary
The Surveying & Valuation Division’s
Underlying Operating Profit reduced by 14%
compared to 2021, materially impacted by
the disruption to mortgage lending in Q4
2022 as a result of political and economic
uncertainty. Revenue growth for the first
three quarters of FY22, immediately prior to
the Government’s mini-budget was 9% year-
on-year against broadly flat lending market
growth of 2%.
Surveyor capacity utilisation remains above
historic levels, with the slight reduction
compared to the prior year resulting from
the market slowdown in Q4 with record
levels of capacity utilisation to that point.
Jobs per average surveyor reduced slightly
in the period to 1,065 (2021: 1,079) due
mainly to the H2 graduate intake which
is expected to drive a benefit in 2023 as
these surveyors become fully operational.
Underlying Operating margin reduced to
22% (2021: 25%), largely as a result of a 4%
increase in operating costs linked to strategic
headcount investment and inflationary cost
pressures.
We estimate that we increased market
share in 2022, while maintaining operational
resilience and providing high-quality service.
We were named Best Surveying Firm at the
2022 Mortgage Finance Gazette Awards and
Best Surveyor at the 2022 Equity Release
Awards with Mortgage Solutions. During the
12 months to 31 December 2022, one key
supplier contract was renewed in addition to
one renewal at the end of December 2021,
increasing valuation instruction allocations.
We also achieved increases in allocations
from some existing lender clients. Almost two
thirds of our total annual volume is currently
secured for at least 18 months. Significant
further progress was made with our strategic
objective of developing income from private
surveys and data, which increased by 73% to
£3.8m.
Financial overview
Revenue reduced by 1% to £93.2m (2021:
£93.7m), impacted by a material market
slowdown in Q4. Surveying & Valuation
Division revenue YTD October was 9%
above the same period in 2021. Underlying
Operating Profit reduced by 14% to £20.4m
(2021: £23.6m). On a statutory basis,
operating profit was £20.8m (2021: £24.7m).
Income per job increased by 1% to £175
(2021: £173), with the higher volume of
jobs performed reflecting the improved
capacity management with similar levels of
operational surveyors. During 2022, 72% of
the Division’s jobs derived from its top five
lender clients. This is broadly consistent with
the concentration of mortgage lending in the
UK, where it is estimated that the six largest
lenders collectively account for around 70%
of the market. The total number of jobs
performed during the period was 532,000,
which was 2% lower than in 2021.
At 31 December 2022, the total provision
for PI Costs was £2.3m (31 December
2021: £3.9m). The Group continued to make
positive progress in addressing historic PI
claims and the number of new valuation
claims provided for in the year remained very
low.
The number of operational surveyors
employed at 31 December 2022 was 512,
which was an increase on 31 December
2021 at 489. Our graduate and trainee
mentoring programmes continue to provide
new productive surveyors, to alleviate any
capacity constraints in the market.
Surveying & Valuation Division
18
Financial and Divisional Reviews
FY
Financial Summary 2022 2021 Var
P&L (£m)
Residential sales exchange income 63.5 71.7 (11)%
Lettings income 63.3 62.0 2%
Other income
1
20.1 20.8 (3)%
Total revenue 146.8 154.6 (5)%
Underlying Operating Profit
2
10.5 18.4 (43)%
Underlying Operating margin
2
7.2% 11.9% (470)bps
Operating (loss)/profit (61.8) 46.5 (233)%
KPIs
Exchange units 16,306 18,845 (13)%
Managed properties 23,881 24,372 (2)%
Owned branches 214 225 (19)%
Franchised branches 127 128 (1)%
Total Estate Agency branches
3
341 353 (12)%
Notes:
1
‘Other income’ includes franchise, conveyancing services, Asset Management, EPCs, Home Reports, utilities and other products and services to clients of the
branch network.
2
Divisional Underlying Operating Profit and Divisional Underlying Operating margin are stated on the same basis as Group (as set out in note 5 to the Financial
Statements).
3
Estate Agency branch numbers are quoted including Marsh & Parsons (disposed 26 January 2023).
Highlights
• Estate Agency national market share
1
increased to 1.30% (2021: 1.28%).
• Estate Agency Underlying Operating Profit
of £10.5m (2021: £18.4m) in a reduced
purchase market.
• Underlying Operating Profit in H2 of
£11.5m materially ahead of prior year
(H2 2021: £5.9m).
Summary
As a result of the marginal increase in
national market share, the residential sales
income reduction was 12% compared to
the prior year in a market that was 15%
lower, with the higher pipeline entering the
year also supporting the performance. H2
exchanges were in line with our previous
expectations after the delays to pipeline
conversion experienced in H1.
However, market activity slowed further in
H2, driven by affordability issues. As a result,
the residential sales pipeline entering 2023
of £15.3m has reduced materially from the
record high in June of £26.7m and is 26%
lower than the pipeline on 31 December
2021 (£20.7m). Lettings income increased 2%
compared to the prior year and represented
43% (2021: 40%) of total Estate Agency
Division income, due to an improved average
rent in a market where the supply of new
stock remained limited.
Financial overview
Revenue for the year of £146.8m was 5%
behind prior year (2021: £154.6m), with
residential sales income 12% below what
was a year of unusually high activity due to
the temporary reductions of stamp duty.
Underlying Operating Profit was £10.5m,
reflecting the lower residential market
activity and inflationary costs pressures
within the branch network, specifically
higher energy costs and business rates now
at pre-COVID-19 levels, with no rates relief
in 2022. On a statutory basis, operating loss
was £61.8m (2021: profit £46.5m) due to
exceptional goodwill impairment charges of
£71.4m in the period and gains from the sale
of joint ventures during 2021 of £29.4m.
Residential sales
Residential sales exchange income decreased
by 12% to £63.5m (2021: £71.7m). The Estate
Agency Division consolidated the market
share gains made during 2021, broadly
maintaining the share of instructions in the
locations we trade, and with marginal growth
of our market share of housing transactions
on a national level. The residential sales
pipeline (including Marsh & Parsons)
decreased to £15.3m at 31 December 2022
(31 December 2021: £20.7m).
Conversion of the residential exchange
pipeline remained slow throughout the year,
impacting H1 2022 performance in particular.
H2 2022 saw fewer new properties coming
to market and lower levels of sales agreed.
There was also a trend towards an increase in
the number of fall-throughs, largely affecting
more recently agreed sales, both of which will
impact performance in Q1 2023.
Lettings
In the lettings market there has been a very
limited supply of new instructions. Our
focus has therefore been on reletting and
retaining our managed property portfolio.
The total number of managed properties at
31 December 2022 was 23,881, slightly below
the 24,372 at the same date in 2021. Stronger
average rental prices resulted in like-for-
Estate Agency Division
19
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
like lettings income up 4% year-on-year at
£63.3m.
Other income
Other income was down 4% to £20.1m
(2021: £20.8m) reflecting the impact of the
lower exchange volumes on conveyancing
and financial services income directly linked
to exchange volumes. Asset management
was 17% ahead of 2021. However, market
repossession volumes remain low, albeit
ahead of the exceptionally low market
in 2021 which was severely impacted by
COVID-19.
Notes:
1
Number of residential property transaction
completions with value £40,000 or above, HMRC
(24 January 2023).
20
Financial and Divisional Reviews
Goodwill
The carrying value of goodwill is £56.5m
1
(31 December 2021: £160.9m) reflecting the
non-cash impairment of £87.0m in Your Move
and Reeds Rains, Marsh & Parsons, Group
First, RSC, and DLPS at 31 December 2022.
During December 2022 the Group made the
strategic decision to sell both Group First and
RSC to its joint venture Pivotal Growth and
separately made the decision to sell Marsh
& Parsons to Dexters. This resulted in the
reclassification of these businesses as held for
sale, with a reduction of £17.3m in goodwill.
The sales of all three businesses were
announced in January 2023.
Other intangible assets and property, plant
and equipment
Total capital expenditure in the year
amounted to £4.9m (2021: £6.9m), primarily
reflecting the continued investment in
technology in the year, including £2.0m
(2021: £2.2m) for further development of
the Toolbox platform and other technologies
in the Financial Services Division. The
higher prior year expenditure also reflected
investment by the Estate Agency Division
in third party property software, IT
infrastructure investment, and an element
of spend deferred from 2020, when cash
conservation measures had been taken.
Financial assets and investments in joint
ventures and associates
Financial assets
Financial assets of £1.0m at 31 December
2022 (2021: £5.7m) comprise investments in
equity instruments in unlisted companies.
The carrying value of the Group’s investment
in Yopa at 31 December 2022 has been
assessed as £nil (2021: £4.5m), with the
reduction recognised through the Statement
of Comprehensive Income. In determining
the carrying value the Group considered both
the historic and current trading performance
of Yopa, which continued to be loss making
and the general market share decline of
hybrid estate agencies. In January 2023, the
Group agreed to sell its shares in Yopa for £nil
consideration based on third party valuations
provided to the existing shareholders.
The carrying value of the Group’s investment
in VEM at 31 December 2022 has been
assessed as £0.2m (2021: £0.7m). Our
valuation is based on a four year weighted
EBITDA multiple applied to actual and forecast
profits, with the reduction recognised
through the Statement of Comprehensive
Income. In March 2023, the Group agreed to
sell its shares in VEM for £0.2m consideration.
During the period the fair value of units
held in The Openwork Partnership LLP was
reassessed to £0.7m (31 December 2021: £nil),
with the gain recognised in other operating
income.
Joint ventures
In April 2021 the Group established the
Pivotal Growth joint venture and holds a
47.8% interest at 31 December 2022. The
joint venture is accounted for using the equity
method and is held on the balance sheet at
£5.1m at 31 December 2022 (31 December
2021: £1.6m), representing the Group’s equity
investment in Pivotal Growth during the
period, less our share of losses after tax for
the period.
During 2021, we disposed of our entire
holding in both non-core businesses LMS
(May 2021) and TM Group (July 2021) for total
proceeds of £41.3m.
Bank facilities/Liquidity
In February 2023, LSL agreed an amendment
and restatement of our banking facility, with a
£60m committed revolving credit facility, and
a maturity date of May 2026, which replaced
the previous £90m facility due to mature
in May 2024. The terms of the facility have
remained materially the same as the previous
facility. The facility is provided by the same
syndicate members as before, namely
Barclays Bank UK plc, NatWest Bank plc and
Santander UK plc.
In arranging the banking facility, the Board
took the opportunity to review the Group’s
borrowing requirements, considering our
strong cash position and the Group’s aim
of reducing its reliance on the housing
market. We therefore reduced the size of the
committed facility and the costs associated
with it. To provide further flexibility to
support growth, the facility retains a £30m
accordion, to be requested by LSL at any time,
subject to bank approval.
At 31 December 2022, Net Cash was £40.1m
(31 December 2021: Net Cash £48.5m). The
net decrease in cash and cash equivalents of
£8.4m in 2022 included further investment in
Pivotal Growth (£4.0m), capital expenditure
of £4.9m (2021: £6.9m), a share buy back
programme (£4.0m), the loan of £5.0m to
the EBT for the acquisition of LSL shares to
satisfy employee share schemes, payment
of the 2021 final and 2022 interim dividends
of £11.8m (2021: £4.2m dividends paid) and
reduced corporation tax payments of £6.1m
(2021: £8.5m). Provisions also decreased by
£0.8m (2021: decrease of £3.2m), due to the
positive progress in addressing historic PI
claims.
The Group generated adjusted cash from
operations
2
of £28.8m (2021: £37.7m).
After adjusting for tax payment deferrals
agreed with HMRC relating to 2020, the
cash flow conversion
3
rate was 78%. The
2021 conversion of 106% was supported by
significantly higher Estate Agency revenues,
with high immediate cash drop-through.
The Financial Services Network business
has a regulatory capital requirement
associated with its regulated revenues.
The regulatory capital requirement was
£5.9m at 31 December 2022 (31 December
2021: £4.9m), with a surplus of £24.9m
(31 December 2021: £14.2m).
Contingent consideration liabilities
Contingent consideration liabilities at
31 December 2022 were £2.3m (31 December
2021: £3.0m). Contingent consideration
liabilities relate primarily to the cost of
acquiring the remaining shares in RSC. The
year-on-year reduction reflects an update to
forecasts in both RSC and Direct Life Quote
Holdings Limited, and a small part-settlement
of the latter. Ahead of the disposal of RSC
in January 2023, we settled the contingent
consideration of £2.3m.
Treasury and Risk Management
We have an active debt management policy.
The Group does not hold or issue derivatives
or other financial instruments for trading
purposes. Further details on the Group’s
financial commitments, as well as the Group’s
treasury and risk management policies, are
set out in note 32 to the Financial Statements.
International Accounting Standards (IAS)
The Financial Statements have been prepared
in accordance with UK adopted IAS.
Notes:
1
Refer to note 16 to the Financial Statements.
2
Adjusted cash flow from operations is defined
as cash generated from operations, less the
repayment of lease liabilities, plus the utilisation
of PI provisions.
3
Adjusted cash flow conversion defined as
cash generated from operations (pre-PI Costs
and post-lease liabilities) divided by Group
Underlying Operating Profit.
Balance Sheet Review
21
Our Stakeholder Engagement Arrangements
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
This section of the Report describes how we engage with our stakeholders and how the Board and its Committees consider stakeholder views
in their decision making. It also includes examples of how stakeholders have been engaged with or taken into consideration during the Board’s
decision making in 2022.
The Management Team regularly reviews arrangements with our stakeholders, to ensure that we are operating in line with best practice. This
includes identifying any stakeholder impacts when presenting proposals to the Board for approval.
Each year the Board also reviews the Group’s stakeholder engagement arrangements. As part of the 2022 review, the Board considered guidance
published by the Investment Association and The Chartered Governance Institute, in addition to the GC100 guidance on director’s duties under
section 172 of the Companies Act 2006.
Our stakeholders
The following are the Group’s key stakeholders:
1. Shareholders.
2. Colleagues.
3. Customers.
4. Suppliers.
While we regularly consider other stakeholders such as regulators, professional bodies, landlords of our leased premises and our banking facility
providers, this section of the Report focuses on our arrangements with the above listed key stakeholders.
Additional information on our stakeholder engagement is included in the ESG Report (page 30) and the Corporate Governance Report (page 54).
Stakeholder engagement arrangements and report on 2022 activities
1. Shareholders
We place a great deal of importance on our communications with shareholders and seek to establish constructive relationships with current and
potential investors. We will obtain investor feedback from time to time, to ensure we understand their views.
Institutional shareholders
We maintain a dialogue with institutional shareholders through regular meetings with them, attended by the Group CEO and Group CFO.
These meetings typically discuss Group strategy, performance and governance matters and obtain investor feedback. In addition, we arrange
presentations for shareholders and analysts, including after the publication of the interim and full year results.
The Code requires chairs of company boards to seek regular engagement with major shareholders, in order to understand their views on
governance and performance against strategy. In line with this, all major shareholders are offered the opportunity to attend meetings with all the
Non Executive Directors, including the Chair and the Senior Independent Director, as they require. From time to time, the Chair of the Board or of
a Committee will meet with shareholders, to discuss specific issues such as remuneration policy or Board appointments.
Throughout each year, we ensure that all Directors understand the views of significant shareholders, including providing feedback received from
the corporate advisers and Executive Directors and the distribution of analysts’ reports to the Board.
During 2022, we have engaged with our shareholders as part of our review of the Directors’ Remuneration Policy (Policy), which is detailed in the
Directors’ Remuneration Report (page 73) and which will be presented to shareholders for approval at the 2023 AGM. As part of the exercise,
Darrell Evans (Chair of the Remuneration Committee) wrote to our significant shareholders to seek their feedback on the proposed changes
to our Policy and, as appropriate, changes to the implementation of the Policy. Darrell and the Group HR Director also took part in follow-up
correspondence and calls with the shareholders who responded to the consultation. Additionally, we consulted with shareholder representative
groups and proxy advisers on the draft Policy and took their feedback into account. Further detail on the Policy is included in the Directors’
Remuneration Report in this Report (page 73).
If any shareholder, shareholder representative groups or proxy advisers wish to discuss any issues or concerns with any Non Executive Directors,
they can be contacted through the Company Secretary’s office (see the Shareholder Information section of this Report for contact details
(page 183)).
Individual shareholders
We consider the AGM to be our main forum for communication with individual shareholders and all of our Directors will be available at the 2023
AGM to meet with shareholders.
In addition, we engage with our shareholders in the following ways:
• Publication of information on our website (lslps.co.uk). This includes all regulatory news announcements as well as copies of presentations,
financial reports and shareholder notices.
• Holding a general meeting when required.
• Responding to email enquiries.
• Feedback received via our corporate brokers, Numis and Zeus.
22
Our Stakeholder Engagement Arrangements
By utilising a range of shareholder engagement options, we believe we are treating our shareholders fairly. For example, while we wrote to
significant shareholders as part of the Policy review, smaller shareholders have the option of emailing us or attending and voting at the AGM to
register their feedback on the proposed Policy.
2. Colleagues
We engage with our colleagues through:
a. Employee surveys. In 2022, we ran our annual colleague survey, to establish colleague views of working at LSL and identify areas for
improvement. The annual survey received a 61% response rate (2,506 responses), compared with 2021’s response rate of 76% (3,119
responses). The results are shared in detail with the Executive Committee, the Living Responsibly Steering Committee and the Board. See ESG
Report (page 30) for details about the annual survey including key findings and actions arising from the survey.
b. Our Employee Engagement Forum, Inclusion and Diversity Forum and Communities Forum report regularly to the Group CEO and the Living
Responsibly Steering Committee on their activities. There is onward reporting to the Board and its Committees. There are also Divisional
employee forums which report to Divisional Management Teams. For further details on the Inclusion and Diversity Forum and Communities
Forum, see the ESG Report (page 30) and the Living Responsibly Report.
c. Darrell Evans, is the designated Non Executive Director for workforce engagement (see below) meets regularly with the Employee
Engagement Forum and contributes to Board discussions ensuring consideration is given to colleagues.
d. Emails to colleagues from the Group CEO and Divisional Managing Directors, on matters such as business performance. Each Division also
runs local colleague conferences, as well as hosting intranet sites and message boards, keeping our colleagues up to date on company
information. The Group CEO issues email updates to all colleagues with Group updates.
e. The operation of all colleague share schemes, such as the BAYE/SIP and SAYE. The BAYE plan/SIP allows colleagues to save up to £150 per
month and buy shares in LSL in a tax efficient manner (as approved by HM Revenue & Customs (HMRC)). Furthermore, for every five shares
that colleagues purchase through the plan, the Company awards one matching share. Colleagues who participate in this plan also benefit
from dividends which are reinvested into the plan, to further align colleague and shareholders’ interests. The SAYE enables colleagues to save
monthly with the opportunity to buy LSL shares at the end of the saving period.
f. During 2022, a second free share award was given to all colleagues across the Group, which was worth up to £500. This has enabled
colleagues to share in our positive financial performance in 2021. It also ensures the alignment of colleague interests to our shareholders and
we hope it will incentivise colleagues to remain with the Group.
Workforce engagement in 2022
During 2022, Darrell Evans met with the Employee Engagement Forum to discuss the Policy review (for further details see below). During this
meeting, Darrell listened to colleague concerns about the cost of living challenges faced by colleagues and he raised their feedback with the
Board. This feedback was included in the Remuneration Committee’s considerations, ahead of it approving a £500 cost of living payment for
colleagues earning less than £30,000 (full time). Further detail is set out in the Directors’ Remuneration Report (page 73).
At the meeting, Darrell had a Q&A session with the forum and received an update on a review of the composition of the Employee Engagement
Forum. The purpose of the review was to ensure that the forum better reflects the workforce it represents. Following the review, membership of
the forum was increased from 20 to 40 (which equates to c1% of the total Group workforce). The recruitment of new members was targeted at
formerly under-represented groups, specifically lower grades and those aged under 30 and over 60, colleagues from ethnic minority backgrounds,
and to ensure balance of participation from each Division.
3. Customers
All Group businesses seek regular feedback from customers, which informs our decision making and, in particular, the improvement and
development of our services. For example, in developing our Toolbox and Mortgage Gym technology in our Financial Services Division, we have
sought and taken into account PRIMIS member feedback.
Customer feedback is obtained through a number of methods, such as relationship management meetings, formal questionnaires, mystery
shopping exercises and consumer focus groups.
Each of our Divisions also monitors KPIs and management information relating to its customer service, including complaints information and data
tracking adherence to agreed service levels for corporate clients. We also have client relationship management arrangements.
In addition, as part of regular and special business presentations from each Division during the year, the Board receives reports on customer
feedback, including consumer surveys and feedback from our key lender clients.
4. Suppliers
Across the Group, we manage our key suppliers through supplier management protocols, which include reviews of contractual performance and
other KPIs. As part of Management’s reporting, including special business presentations, the Board also receives information on key supplier
engagements. As part of our Living Responsibly programme, we are also developing a supplier code of practice, which we are continuing to
progress during 2023.
23
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
See also below our Director Duties Statement for examples of how shareholders, employees and customers were considered in the Board’s
decision making during 2022. The ESG Report (page 30) also describes how our businesses communicate with customers and suppliers.
Directors’ Duties Statement (s172 Companies Act 2006 Statement and Provision 5 of the Code)
Section 172 of the Companies Act 2006 sets out certain matters company directors must consider when performing their duty to promote the
success of the company. These matters include taking into account the interests of stakeholders and the impact of decisions in the long term.
To support the Board in carrying out its duties under s172, Management are required to identify the stakeholder groups impacted by any
proposals submitted to the Board for approval and explain what those potential impacts are.
The three examples below demonstrate how the Directors have considered stakeholders in principal decisions made during the year.
S172 Duty to promote the success
of the company for the benefit of its
members as a whole, and in doing so
have regard (amongst other matters)
to:
Example 1 – Disposal of D2C and
non-core assets
Example 2 – Change the Race Ratio Example 3 – Remuneration Policy
(triennial review)
The Board, as part of its strategy
review, chose to focus on the
progression of the Group’s Financial
Services-led growth strategy.
It has also sought to simplify the
Group and focus on B2B activities.
This has resulted in the disposal of
D2C broker businesses, RSC and
Group First and the sale of London
estate agency, Marsh & Parsons.
The Board considered developments
to LSL’s sustainability strategy and
programme, which is detailed in our
ESG Report (page 30) and our Living
Responsibly Report.
During 2022 this included LSL
becoming a signatory to the CBI’s
Change the Race Ratio (Ratio), to
support our diversity and inclusion
initiatives.
Ahead of signing up to the Ratio,
Management sought the Board’s
approval and in making its decision,
the Board considered the following
stakeholders:
a. Colleagues.
b. Shareholders.
c. Customers.
The Remuneration Committee
undertook the triennial review of
the Directors’ Remuneration Policy
(Policy). The proposed new Policy
will be presented to the 2023 AGM
for approval. Further detail on the
proposed changes to the Policy are in
the Directors’ Remuneration Report
(page 73).
a. Likely consequence of any
decision in the long term.
The two D2C broker businesses have
been sold to Pivotal Growth, which is
our joint venture with Pollen Street
Capital. Pivotal Growth’s strategy
is to buy and build a D2C broker
business and we believe that Pivotal
Growth is better placed to grow these
businesses for the benefit of the
businesses and our shareholders.
Marsh & Parsons had, since its
acquisition in 2011, operated largely
autonomously from the Group’s
Estate Agency Division and was
therefore not core to our Group.
Retaining, developing and attracting
diverse talent supports the long
term success of the Company, by
supporting succession planning at all
levels as we develop our colleague
talent pool.
The Committee considered that the
proposed Policy aligns the Directors’
interests to the long term interests
of LSL.
24
Our Stakeholder Engagement Arrangements
b. The interests of our colleagues. Colleagues employed in these
businesses are no longer part of the
Group and where they benefitted
from Group benefits (such as options
under employee share schemes) we
have put in place arrangements to
protect their benefits.
The proposal to sign up to the Ratio
was discussed at length by the
Inclusion and Diversity Forum and
its feedback was included in the
proposal to the Board.
The Board also considered colleagues
in its decision making by noting
that committing to the charter and
accessing the resources provided
to the signatories will support LSL
in its ability to promote inclusion
and diversity across the workforce,
which will have a positive impact
on colleagues and their working
environment by delivering an
inclusive culture which fosters
diverse talent.
Darrell Evans, independent Non
Executive Director, Chair of the
Remuneration Committee and the
designated workforce engagement
Non Executive Director, met with
the Group’s Employee Engagement
Forum to seek views on the Policy.
At this meeting, the forum members
received a presentation on the Policy
changes. The forum’s feedback
was shared with the Remuneration
Committee when it met to consider
the Policy.
c. The need to foster the company’s
business relationships with
customers.
In developing our strategy for
simplification, we have sought to
ensure there is no adverse impact
on our customers arising from any
disposals.
We believe that a workforce which is
representative of the communities it
services will also deliver benefits to
our customers.
In Surveying & Valuation, key lender
clients have also shared their ESG
priorities with us and we consider
that the Ratio aligns with their
priorities in the area.
d. The need to foster the company’s
business relationships with
suppliers.
We also sought to ensure there is
no adverse impact on our suppliers
arising from any disposals and, where
possible, we have sought to engage
with our suppliers.
We hope that as a result of signing
the Ratio, this will encourage and
promote greater diversity in our
suppliers/supply chain.
e. The impact of the company’s
operations on the community and
environment.
As a result of the disposals, we will
no longer be providing services out
of locations where the disposed
businesses operated. However, the
impact on the local communities
is mitigated as the businesses are
expected to continue to operate out
of those locations.
Signing the Ratio supports the
fostering of racial diversity in the
Group, which contributes positively
to wider society.
We also believe that signing up to
the Ratio helps us better understand
our impact on our communities and
the working environment that we are
fostering.
The proposed change to the Policy
removed the requirement for at least
30% of LTIP awards to be based on
TSR and provided flexibility to select
financial and non-financial metrics,
which may include for example ESG
metrics. For further details relating
to the Policy, see the Directors’
Remuneration Report (page 73).
f. The desirability of the company
maintaining a high standard of
business conduct.
By signing the Ratio we are
committing to adopting high
standards in our employment and
wider practices.
In developing our Policy, the
Remuneration Committee takes
advice from Korn Ferry to ensure that
our Policy reflects best practice.
g. The need to act fairly between
members of the company.
We believe the disposal and Group
simplification strategy delivers value
to all shareholders, especially as it
reduces our exposure to housing
market cycles and focuses our
investment on high growth areas,
notably our Financial Services
Networks.
In making its decision to adopt the
Ratio, the Board considered how it
aligns with the interests of all our
shareholders. We believe that by
supporting and fostering diverse
talent we will recruit, retain and
develop talented employees which
will help us to generate value for the
Group and our shareholders.
The Remuneration Committee
consulted with significant
shareholders as part of the Policy
review and considered the feedback
received in its deliberations.
Smaller shareholders have the option
of emailing us or attending and voting
at the AGM to register their feedback
on the proposed Policy.
The Remuneration Committee has,
in developing the Policy, ensured
alignment of the interests of the
Directors to those of all of our
shareholders.
25
Principal Risks and Uncertainties
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
Our risk framework:
• Risk management routines support us in delivering our financial performance and our strategy. Our purpose, values and culture supports our
risk management framework by setting the standards and behaviours we expect from colleagues.
• The Audit & Risk Committee regularly reviews our principal risks and uncertainties and receives reports relating to our risk management
systems and controls. It also considers emerging risks and the outputs of our stress testing routines.
• Each of our three Divisions has risk management arrangements, systems and controls which feed into the Group’s overall arrangements.
Divisional Chief Risk Officers and local governance forums oversee Divisional risk management frameworks, which involve the use of risk
metrics, policies, procedures, risk treatment plans and tracking of emergent issues. The frameworks focus on risk management practices for
key areas such as change management, client servicing, cyber threats and regulatory compliance.
• The Group scrutinises and challenges Divisional risk management activities through a regular Internal Audit cycle and through risk-based
governance forums, attended by senior Group and Divisional representatives.
• The Group has adopted a ‘three lines of defence’ approach to risk management, which seeks to ensure that we promptly identify and manage
risks through our oversight routines. The first line of defence sits with operational/functional management teams who own and manage the
risks. Further oversight functions include Divisional Risk and Governance teams (second line), the Group Finance team (second line) and the
Group’s Internal Audit team (third line). These structures enable us to layer our oversight activities to reinforce their overall effectiveness. The
relevant control functions escalate issues to the Executive Directors, the Audit & Risk Committee or the Board where appropriate.
• As we focus on delivering our strategic objectives, we continued our work to improve the Group’s risk management arrangements including
developing the Group risk framework. This is an evolutionary process, involving ongoing strengthening of oversight routines and regularly
considering further investment in resources.
2022 themes
• During 2022 we faced challenging economic and political conditions, including rising inflation, the impact of the mini-budget and rising interest
rates. Globally, businesses have felt the impact of the war in Ukraine including the effects of rising energy costs and the impact on consumers
of the cost of living crisis. The combined impact has been felt by all of our businesses across our three Divisions.
• At the heart of our Group strategy is the growth of our Financial Services Network business which has, in line with the rest of our Group,
been impacted by the economic and political conditions referred to above. In addition, the Division is also addressing FCA reforms relating to
the AR regime and the implementation of the new consumer duty requirements, which are being monitored as part of our strategic project
programme.
• We manage the identification, ownership and delivery of key strategic initiatives through a programme of high priority projects, each driven by
a member of the Executive Committee. The Group CEO and Group CFO oversee each project, with the Board receiving regular reports on the
progress of individual projects as well as overall progress.
• The Group has continued to support the growth of Pivotal Growth, the buy and build joint venture with Pollen Street Capital, including the sale
of its D2C brokerage businesses (Group First, RSC, Embrace Financial Services and F2P) to Pivotal Growth in Q1 2023 (for further details see
note 34 to the Financial Statements).
• We have continued to focus on developing core technology platforms, new data driven product opportunities and Divisional restructuring plans
across the Group, to simplify the Group, drive growth and improve profitability.
• Each Division operate risk management arrangements which also promote environments supporting sustainable growth. During the year, we
strengthened Divisional risk-governance arrangements, including appointing new senior risk-related roles (further details are provided in the
Audit & Risk Committee Report on page 67).
Our risk profile:
• We consider that all our principal risks and uncertainties are currently within our risk tolerances. As detailed in our Matters Reserved for the
Board Policy, the setting of risk appetite is a matter for the Board and is considered by the Audit & Risk Committee in its risk reviews.
• The overall trend of our aggregated risks is increasing, as a result of worsening economic conditions in housing and labour markets (arising due
to high inflation and high interest rates), more sophisticated IT security threats and the introduction of new regulations.
• We have removed COVID-19 from our list of principal risks and uncertainties, due to the effects of vaccinations, lower infection levels and
business practices adapting to a resilient hybrid or remote working model.
• Other significant risk areas also exist, which are not listed in our principal risks and uncertainties summary below, such as financial control,
liquidity and fraud risks.
• Further detail on our principal risks and uncertainties, including gross risk trends and risk management themes, are provided in the following
table.
26
Principal Risks and Uncertainties
Nature of principal risk and uncertainty Mitigating actions
Gross trend
(pre-mitigating actions)
EXTERNAL:
1. UK housing market
The cyclicality of the UK housing market exposes the
Group to volatility in housing transaction volumes.
Recent adverse macroeconomic conditions have
affected the housing cycle. Also, the relevance of our
strategic focus in other distinct markets which are
impacted differently, such as those for mortgage and
protection products.
• We are driving growth in our Financial Services Network through
separate strategies for the mortgage and insurance markets, thereby
reducing the Group’s exposure to a cyclical housing market.
• The Surveying & Valuation strategy includes diversification into D2C
channels and data service offerings to lenders, which are not tied to
housing market transaction volumes.
• We stress test market scenarios, have opportunities to flex our
scalable cost base and have a UK-wide spread, to reduce cyclicality
and avoid over-exposure to local market factors.
Increasing
2. Market disruption
We may be exposed to competitive pressures from
market participants, including new entrants, disruptor
business models and disintermediation threats.
This could include the impact of direct sales mediums,
tech-driven market entrants and digital service
alternatives.
• We monitor disruptor activity within each of our markets and
where appropriate respond by adapting our businesses to remain
competitive.
• We have developed digital opportunities, new technology platforms,
alternative product offerings, and ways of working to improve
efficiency and the customer experience.
• We are delivering investment and restructuring opportunities,
including expanding our joint venture activities (Pivotal Growth).
Stable
INTERNAL:
3. Execution of growth strategy
We need to effectively execute strategic initiatives, to
deliver required levels of Group growth.
Colleague experience, skills and expertise, technology
choices and governance routines are all important
for supporting our decision making and strategic
delivery. The risk is increasing because of the impact
challenging market conditions are having on people
and financial resources.
• We are implementing key high priority strategic projects driven by
Executive Committee members, with governance routines involving
oversight from the Group CEO, Group CFO and the Board.
• The Group CSO and Group COO support strategy development and
implementation.
• We are restructuring our Divisions and developing new target
operating models across the Group which, together with the making
of new senior appointments, will support the delivery of our strategy.
• We have governance routines within each Division to support new
technology and product initiatives, with due diligence, modelling and
the integration of acquisitions and investments.
Increasing
4. Professional services
We may receive claims arising from systemic lapses in
the delivery of professional services across LSL.
Relevant risk factors include lending practices,
mortgage product types/mix, economic conditions
and the adequacy and availability of insurance to
cover potential claims.
• Our Divisional and Group values and cultures seek to promote
appropriate colleague conduct and positive customer outcomes.
• We limit our exposure to products with higher risk features and
complexities. For example, our Financial Services Network businesses
do not have responsibility for the supervision of investment advice
and the mortgage valuation activities in Surveying & Valuation are
linked to mainstream and not sub-prime lending.
• We have adopted a ‘three lines of defence’ approach to oversight
routines, which includes quality assurance, Internal Audit and
complaints/claims handling functions.
• We have governance routines to ensure we identify and put in place
appropriate insurance arrangements.
Stable
27
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
5. Client contracts
Significant falls in business volumes could arise from
the loss or withdrawal of key B2B clients, brokers
and/or franchisees.
It is vital to maintain service delivery levels and
relationships with key B2B clients, brokers and/or
franchisees.
• Our Divisional and Group values and cultures seek to promote the
importance of delivering good customer service and experiences.
• We benchmark our product and service propositions, to ensure we
are delivering the best value versus market-leading standards.
• We conduct corporate client due diligence exercises, including risk
profiling of product portfolios for both prospective and current
clients.
• Dedicated relationship managers closely monitor service levels,
operating dependencies and compliance with contractual terms.
Stable
6. Business infrastructure (including technology)
We may fail to maintain robust systems and
technology to promote our competitiveness and client
servicing.
This includes during the consolidation of IT platforms
across brands or multiple change management
initiatives, as well as maintaining resilient ‘BAU’ IT
systems.
• Our Data and Information Security Committee (which reports to the
Group CEO) sets minimum Group policy standards for information
security and IT matters, including coverage of continuity and
recovery routines, capacity constraints, third party dependencies and
insurance arrangements.
• We have appointed a new chief technology officer in the Financial
Services Division.
• We monitor IT service delivery to clients and business associates,
which include ARs and franchises.
Stable
7. Information security (including data protection and cyber threats)
We could suffer a major loss of data resulting in
business interruption, reputational damage, and/or
regulatory exposure.
Risks are increased by international cybercrime
threats and supplier dependencies for both systems
provision and data management.
• We have dedicated Divisional information security specialists and
Data Protection Officers, within a Group governance framework
involving base policy standards and Group arranged cyber insurance.
• The Data and Information Security Committee coordinates our efforts
across the Group on minimum standards.
• We provide Group IT resource and colleague training and awareness
programmes.
• We conduct routine deep dives on technical areas, followed by
Group-wide expertise sharing.
• System security is supported by penetration testing, intrusion
scanning, secure back-up routines, encryption of key data and a
robust access control framework.
Increasing
8. Regulatory compliance
Financial sanctions or reputational damage could
result from non-compliance with laws and regulations.
Our regulatory landscape includes FCA rules
and consumer protection laws. Recent areas
of regulatory focus include tenant safety and
welfare, environmental standards, consumer duty
requirements and compliance with the new AR
regime.
• Our Divisional and Group values and cultures prioritise fairness,
transparency, health and safety awareness and monitoring regulatory
reforms.
• Our client’s financial wellbeing is at the heart of our Financial Services
business model.
• The Group CEO has communicated a zero-tolerance policy for any
significant weaknesses leading to regulatory breaches.
• The Group risk arrangements are supported by investment in
specialist oversight roles (for example, conduct risk expertise and the
appointment of a new Financial Services independent non executive
director onto the Financial Services Network boards).
• We exercise oversight across all ‘three lines of defence’, and initiate
change management projects with external consultative input as
necessary.
Increasing
28
Principal Risks and Uncertainties
9. Environmental, social and governance (ESG)
Failure to identify and deliver on our ESG
commitments could affect our productivity,
reputation, and/or market value.
Our recent focus areas include recruitment and
management practices to promote diversity and
inclusion, environmental initiatives and Group
governance arrangements.
Due to the nature of our operations and business
model, we expect the impact of climate-related
risks to be relatively low. Over the medium to the
longer term we expect greater physical impacts and
transition risks associated with regulatory changes
which could each result in the risk increasing. Our risk
is being monitored for any change.
• The Group CEO sponsors our Living Responsibly strategy and
programme which includes priorities which are led by members of the
Executive Committee.
• Our Living Responsibly priorities include diversity targets (for our
Board, its Committees and the Senior Management Team), wider
workforce targets, community projects, customer service initiatives,
energy saving schemes and a net zero carbon objective by 2040 (see
ESG Report – page 30 and our Living Responsibly Report).
• We engage with colleagues via the Group’s colleague forums,
Divisional working groups, colleague surveys and through training
initiatives.
Increasing
10. Employee resources, talent and expertise
Failure to attract, develop and retain talented
colleagues may affect our ability to deliver our
strategic priorities (including strategic projects).
The risks are heightened by ongoing labour supply
shortages in the UK.
• We have governance routines, policies and initiatives, overseen by
the Remuneration and Nominations Committees, to recruit and retain
talent in key strategic roles.
• We have undertaken restructuring within the Divisions including
the appointment into new senior roles (such as a new independent
non executive director and chief technology officer within Financial
Services).
• We have technology-based initiatives to harness new sales mediums.
• We use colleague surveys, our colleague engagement forums,
culture audits and welfare initiatives as ways to identify and address
colleague pressures.
Increasing
2023 plans
• Our plans for 2023 include further Group-led definition of Divisional risk treatment, risk acceptance and risk escalation routines.
• Management Teams across all three Divisions are encouraged to devote more time to their risk management agenda as part of their Divisional
governance cycles. We will also continue to invest in important softer routines, such as colleague ‘speaking-up’ initiatives, to maintain an
honest and open risk management culture.
• We will continue to progress our Living Responsibly strategy and programmes, which includes managing ESG-related risks, promoting diversity
and inclusivity, and encouraging community and environmental (for example TCFD) initiatives.
• Our Internal Audit plans will increase their focus on assessing the effectiveness of emergent regulations and second line oversight routines.
• We will also strengthen our horizon-scanning routines, reassess our risk management resourcing and evaluate the effectiveness of linkages
between relevant Group and Divisional risk framework structures.
Our viability
The Directors have assessed the Group’s prospects and financial viability, taking into account its current and expected financial position, existing
banking facilities, actions available to Management and the potential impact of its principal risks and uncertainties.
Assessment of prospects
This section of the Report describes how the Directors have considered and reported on the Group’s prospects. Our business model and strategy
are central to understanding our prospects and are detailed earlier in this Report (page 12).
Our purpose is to provide first class services to mortgage and insurance advisers, estate agents, lenders and their customers, to create long term
benefits for external stakeholders and our people.
The Board assesses the Group’s prospects throughout the year and particularly during the strategic, three year and budget processes. This
includes an annual review of our ongoing plans which is led by the Group CEO and Group CFO and involves input from Executive Committee
members who represent our Divisions and Group/head office functions.
The Directors participate in the annual planning processes. Part of the Board’s role is to consider whether our plans take appropriate account of
the changing environment, including macroeconomic, political and geopolitical, regulatory, technological and climate-related matters.
29
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
This process results in the Board adopting strategic objectives and detailed financial forecasts over a three year period, which we refer to as the
three year plan. The Board adopted the latest updates to the three year plan in December 2022. In making its decision, the Board considered our
current position and our prospects of operating over the three year period ending 31 December 2025, and reaffirmed our strategy.
Assessment of viability
The strategic plan reflects the Directors’ best estimate of the Group’s prospects in accordance with provision 31 of the Code. We have assessed
LSL’s viability over a longer period than the 12 months required by the going concern provision of the Code.
For the purposes of assessing the Group’s viability, we determined that a three year period ending on 31 December 2025 was appropriate, as
it was consistent with the Board’s strategic planning cycle. Our assessment took into account the Group’s current position and prospects, the
Board’s risk management arrangements and the Group’s principal risks and uncertainties.
To make this assessment, we considered several severe but plausible scenarios that stress test our business performance. The scenarios modelled
are based on input from a functional group of senior managers, including representatives from the Divisional finance teams. The Group’s base
forecast and scenarios assume all three Divisions continue to operate.
The viability scenario modelled reflected the following risks:
• a severe downturn in our markets in which housing market transactions decrease by an average of 25% versus 2022, similar to the level seen
during the last recession in 2008, caused by either, or a combination of, economic (such as high inflation and interest rates and reduced
availability of debt funding), political and other uncertainties;
• the loss of a major contract (top five lender, which has not occurred for over five years) and a PI risk event in the Surveying & Valuation Division
reflecting a significant increase in valuation claims; and
• a material one-off regulatory fine over £1m following a data breach, assuming any insurance recovery would not occur within the planning
window.
Detailed assumptions were modelled by month across the three year period. The models included both the individual and the aggregate impact
of the risks above, and measured the downside impact on revenue and the actions we would take to retain cash reserves and maintain our
operations, such as suspending capital expenditure, which is within our control. We have also considered climate-related impact, but our current
assessment is that this would not be material enough to impact our viability during the planning window.
We also modelled further scenarios to reflect the business disposals completed during Q1 2023. The results did not alter the conclusions reached
by the Directors and the Board. Further detail on the businesses disposed can be find in note 34 to the Financial Statements.
We also made assumptions about the stability and potential growth of the Group’s recurring income and counter-cyclical businesses, notably
mortgage and insurance renewals, lettings and asset management which account for c79% of Group Revenue, and the extent to which we could
quickly ramp up some activities, such as remote valuations, in extreme market conditions. The modelling and assumptions took account of our
broad range of services across the UK, which gives us some protection from the impact of stress scenarios.
The stress testing indicated that the Group would be able to withstand the financial and operational impact of each scenario and therefore
continue to operate and meet its liabilities, as they fall due, over the three year period ending 31 December 2025. Under all the modelled
scenarios, the Group had sufficient liquidity throughout the going concern period and to the end of the planning period in December 2025.
Funding for the Group has been further strengthened with the restatement and amendment of the Group’s banking facility of £60m, which was
completed in February 2023 for a period up to May 2026, replacing the previous £90m facility.
We also modelled significantly more severe reverse stress scenarios, to assess the level to which market conditions would have to deteriorate
before we would reach our banking covenant ratio of 2.75x Net Debt: adjusted EBITDA (with a ratio of 3.00x allowable for two consecutive test
periods once during the renewal period). Excluding any action we would take to retain cash reserves and maintain our operations, the modelling
indicated that UK housing market transaction activity would have to fall to a level 7% below the financial crisis of 2008 in the first year of
assessment with no material recovery, which is equivalent to a 37% fall in comparison to 2022, of which we consider the likelihood to be remote.
Directors’ viability statement
Based on their assessment of the Group’s prospects and viability, 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, and that the likelihood of extreme scenarios which would
lead to a breach of covenant is remote.
The Directors also confirm that in making this statement they carried out an assessment of the principal and emerging risks and uncertainties
facing the Group, including those that would threaten its business model, future performance, solvency or liquidity.
The Board also considered it appropriate to prepare the Financial Statements on the going concern basis, as explained in the Basis of Accounting
paragraph in the Principal Accounting Policies section, within the Financial Statements of this Report.
During 2022, the Audit & Risk Committee oversaw the process by which the Directors reviewed and discussed Management’s assessment in
proposing this viability statement.
30
Environmental, Social and Governance (ESG) Report
Non-Financial Information Statement
This section of the Strategic Report constitutes LSL’s Non-Financial Information Statement and is produced to comply with Sections 414CA and
414CB of the Companies Act 2006.
Reporting Requirement Relevant Policy/Code Section within Annual Report
Environmental Matters • Living Responsibly Report
• Environmental Policy
• ESG Report page 30
• Report of the Directors page 49
Colleagues • Combined Ethics Policy
• Health and Safety Policy
• Living Responsibly Report
• ESG Report page 30
• Stakeholder Engagement Arrangements
page 21
• Report of the Directors page 49
Human Rights • Anti-Slavery and Human Trafficking Policy
contained within the Combined Ethics
Policy
• Living Responsibly Report
• ESG Report page 30
Social Matters • Combined Ethics Policy
• Living Responsibly Report
• ESG Report page 30
• Stakeholder Engagement Arrangements
page 21
• Corporate Governance page 54
Anti-Bribery and Corruption • Anti-Bribery and Corruption Policy and
Whistleblowing Policy contained within
the Combined Ethics Policy
• ESG Report page 30
• Corporate Governance Report page 54
Principal Risks • Principal Risks and Uncertainties page 25
Business Model • Purpose, Strategy, Culture, Values and
Business Model page 12
Non-Financial Key Performance Indicators • Financial and Divisional Reviews page 13
Summaries of the policies referred to above are available at lslps.co.uk
In 2021 we launched our Living Responsibly strategy and published our first standalone Living Responsibly Report, outlining our organisational
approach and demonstrating our commitment to being a responsible and sustainable business. This section of the Report summarises our Living
Responsibly work in 2022 and includes ESG information required to be included in this Report. For further details on our wider approach to being
a responsible and sustainable business, please see our separate Living Responsibly Report (available at lslps.co.uk).
Our approach
The Board approves our Living Responsibly strategy annually and the Board receives biannual updates on the progress of our programme. Our
Group CEO, David Stewart, is the executive sponsor of our Living Responsibly programme, and overall responsibility now sits with our Group HR
Director, Debra Gardner, having moved in 2022 from our Group CSO, who oversaw the programme’s launch. Our values and culture – having the
right people, doing the right thing in the right way – underpin our approach to Living Responsibly including ESG.
We have established a Living Responsibly Steering Committee, which reports into David and sets our sustainability strategy, considering input
from our three Divisions and from our head office/Group functions.
We also engage with stakeholders on ESG related matters. Further information on this is set out in the Stakeholder Engagement section of this
Report (page 21), which includes examples of how the Board considered stakeholder views in its decision making in 2022.
Our colleague forums and Environmental Working Group are core to our internal stakeholder engagement, enabling us to align and refine
colleague and organisational priorities. Each forum and the Environmental Working Group has its own Executive Committee sponsor.
31
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
The diagram below illustrates how these groups work together to guide our approach:
Information about our ESG related risks are included in the Principal Risks and Uncertainties section of this Report (page 25).
The table below illustrates our overall approach and five current priorities, together with their Executive Committee leadership under the Living
Responsibly programme at the date of this Report:
Living Responsibly
The right people
Doing the right things
In the right way
1. Increasing the
diversity of our
Board and workforce
2. Building an
inclusive culture
where colleagues
are supported to
thrive
3. SupporƟng
colleagues to
connect with our
communiƟes
4. Minimising our
environmental
footprint
5. Ensuring excellent
governance through
increasing Board
diversity and
maintaining
excellent governance
across the Group
Colleagues: Jon Round,
Group Financial ServicesП
Board: Sapna B.
FitzGerald, General
Counsel and
Company Secretary
Debra Gardner,
Group HR
DirectorР
Sapna B. FitzGerald,
General Counsel
and Company
Secretary
David Akinluyi,
Group Chief
OperaƟng
Officer
Sapna B. FitzGerald,
General Counsel
and Company
Secretary
Notes:
1
During 2022 the Executive Committee sponsor for workforce diversity was Helen Buck and Jon Round took over from 1 April 2023.
2
John McConnell was Group HR Director during 2022 and the Executive Committee member responsible for progressing engaging, supporting and investing in
our colleagues.
Progress against each of our five Living Responsibly priorities is set out below.
People
Our people are central to our Living Responsibly programme, and our impact on and investment in the society and communities we operate in.
We seek to employ the right people: this is a mix of people who reflect the communities and customers we serve.
32
Environmental, Social and Governance (ESG) Report
We look to do the right things: people are our barometer for this. We want to invest in and effectively support our colleagues, as well as getting
behind the priorities they identify.
Increasing the diversity of our Board and workforce
2022 review
Our Inclusion, Diversity and Equality (ID&E) vision:
Welcoming people of all backgrounds and identities, through inclusive working cultures and practices.
Our ID&E goal:
To have a workforce that reflects the communities in which we operate, and to provide a platform that supports progression, promotes health
and wellbeing, and creates a positive impact.
In the Annual Report and Accounts 2021 we shared our ID&E pillars – Creating Awareness, Continually Improving our Practices and Promoting
Opportunity. Some highlights of our activity within these categories are shown below:
Improving our
employees’
understanding and
interacƟons
Developing our
infrastructure for
inclusive, diverse and
equal working
pracƟces
Giving our
employees equal
opportunity of access
and development
CreaƟng
Awareness
ConƟnually
Improving Our
PracƟces
PromoƟng
Opportunity
Creating awareness of ID&E themes through: Continually improving our practices through: Promoting opportunity through:
• Group-wide Inclusion Matters and
Unconscious Bias training.
• Passport to Recruit training for hiring
managers (83% completion, representing
447 hiring managers).
• Our Inclusion and Diversity Forum, which
has gone from strength to strength, meets
regularly and inputs on key actions and
decisions. It is now established as a source
of expertise and is involved in regular
consultation exercises as we develop our
policies and arrangements.
• Recruiting and training 15 Disability
Champions across the Group, in
partnership with Disability Rights UK
1
.
• Recruiting and training mental health
first aiders in our Surveying & Valuation
Division.
• Reviewing our family friendly policies
including improving our parental leave
offering, introducing a baby loss policy,
a fertility policy, menopause policy
and a pregnancy toolkit (accessible
anonymously).
• Laying the foundations for better diversity
data capture, which we plan to build into
our Group HR system in 2023.
• Designing and launching a Disability
Passport where colleagues can transfer
reasonable adjustments as they move roles
within the organisation.
• Signing up to the CBI’s Change the Race
Ratio
2
which will provide us with a
peer group who are seeking the same
improvements in their organisations.
• In November 2022 achieving Disability
Confident employer status
3
, signalling
to current and potential employees our
commitment to development for all.
• Working with RNIB
4
to consider the
accessibility of our roles to those with sight
loss.
• Selecting recruitment partners who are
committed to promoting inclusion and
diversity and demonstrate this by signing
up to the Government’s Standard Voluntary
Code of Conduct for Executive Search
Firms
5
or equivalent standards.
• Building our applicant tracking system to
include diversity information, to support
better analysis of candidates applying for
roles and more targeted action to diversify
our workforce.
Notes:
1
disabilityrightsuk.org
2
changetheraceratio.com
3
gov.uk/government/collections/disability-confident-campaign
4
rnib.org.uk/living-with-sight-loss/equality-and-employment/employers/make-your-workplace-safer-for-employees-with-sight-loss/
5
gov.uk/government/publications/standard-voluntary-code-of-conduct-executive-search-firms/the-standard-voluntary-code-of-conduct-for-executive-search-
firms
33
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
Further details on our activities in these areas can also be found in our Living Responsibly Report.
During 2022, we worked towards the diversity targets which we adopted in our Diversity Policy and we worked towards setting workforce targets.
We have included some initial targets in the table below, and will work to refine these during 2023 and beyond:
Category Gender Ethnicity
Board a. at least 40% are women; and
b. at least one woman in the role of Chair,
Group CEO, Group CFO, or Senior
Independent Director.
At least one Director from a minority ethnic
background.
Executive Committee At least 33% are women. At least 11% are from a minority ethnic
background.
Senior Management Team At least 33% are women. At least 11% are from a minority ethnic
background.
Workforce No target set as the current gender
composition of our workforce is considered
to be balanced. Please see below.
• At least 7% are from a minority ethnic
background.
• 16% of new hires are from a minority
ethnic background.
During 2022, we have been building our capacity to capture diversity data within our Group HR system. This involved asking colleagues to
anonymously provide diversity information as part of our annual survey, to support our understanding of the make-up of our workforce. We used
the same approach to capture data in 2021, and both years’ data is shown in the table below. Data showing our ethnic diversity following the
disposal of the Group businesses completed since the year end is set out in the Living Responsibly Report.
31 December 2022 31 December 2021
White
Non-white/
Ethnic minority White
Non-white/
Ethnic minority
Directors
1
100% 0% 100% 0%
Executive Committee
1
78% 22% 78% 22%
Senior Management Team
2
90% 10% 90% 10%
All employees
3
94% 6% 95% 5%
Notes:
1
‘Directors’ includes both Executive Directors and Non Executive Directors. The Corporate Governance Report includes gender and diversity data in relation to
our Board and Executive Committee.
2 ‘
Senior Management Team’ includes the Executive Directors, and the Executive Committee and their direct reports, excluding PAs and administrators and
excludes any changes made after this date.
3
‘All employees’ includes Directors and members of Senior Management Team.
The data above shows that we have during 2022 begun to make progress in improving the ethnic diversity of our workforce, and that we still have
more to do to improve both the diversity of our workforce and data collection to fully understand it.
In 2022, we used the 2021 census data which was published late in the year, to benchmark the composition of our workforce. The census revealed
that 16% of the UK population identify as non-white or ethnic minority, when weighted for the regions we operate in. In 2022, we increased
the proportion of non-white and ethnic minority employees by 1%. In addition to this, 14% of our new recruits identified as non-white or ethnic
minority. Although we do not have data to compare this to from the previous year, this shows that our recruitment arrangements across the
Group are attracting and recruiting ethnic minority individuals close to the census data target. We have committed to work with the CBI via its
Change the Race Ratio which we signed up to at the start of 2023, and we intend to adopt more detailed colleague diversity targets, in line with
our commitment to increase our diversity overall.
34
Environmental, Social and Governance (ESG) Report
31 December 2022 31 December 2021
Female Male Female Male
Directors
1
33% 3 67% 6 25% 2 75% 6
Executive Committee
1
22% 2 78% 7 22% 2 78% 7
Senior Management Team
2
28% 16 72% 41 30% 16 70% 38
All employees
3
53% 2,364 47% 2,088 53% 2,444 47% 2,173
Notes:
1
‘Directors’ includes both Executive Directors and Non Executive Directors. The Corporate Governance Report includes gender and diversity data in relation to
our Board and Executive Committee.
2
‘Senior Management Team’ includes the Executive Directors, and the Executive Committee and their direct reports, excluding PAs and administrators and
excludes any changes made after this date.
3
‘All employees’ includes both Directors and Senior Management Team.
Data showing our gender diversity following the disposal of the Group businesses completed since the year end is set out in the Living Responsibly
Report. Over time we would like to improve the gender balance within our leadership teams in line with the gender balance we have within our
workforce, which is more balanced. We have not yet met our interim targets to have 33% of the Senior Management Team female or 11% of the
Senior Management Team from a non-white or ethnic minority background and we will continue to work on this through 2023. Further colleague
data is shown in the table below.
31 December
2022
31 December
2021
31 December
2020
31 December
2019
31 December
2018
Total employees 4,452 4,617 4,335 4,772 5,463
Total voluntary employee turnover (%) 30.5 28.1 17.4 26.7 27.0
Male (%) 47% 47% 49% 47% 47%
Female (%) 53% 53% 51% 53% 53%
As part of our annual colleague survey, we asked colleagues to provide us with information on their gender identity, which may differ from legal
sex, and enabled individuals to identify as non-binary or other gender identity. As an employer we also hold information on employees’ legal sex,
as required by relevant laws and regulations, as this dataset is complete it has been chosen for disclosure in this Report. This will be kept under
review as we improve our colleague data collection methodology. We have used colleague gender identity to undertake internal analysis of the
colleague survey to inform our wider diversity and inclusion strategy.
During 2022, Internal Audit reviewed our ID&E priorities and activities, as part of its annual programme of audits. The audit identified a number of
successes, as well as noting that our Board and Senior Management Team composition is not in accordance with the diversity targets adopted by
the Board and set out in our Diversity Policy. For further explanation on this, see the Corporate Governance Report on page 54.
2023 priorities
As we look to 2023, our priorities are to:
• Build on the success of 2022 and focus on trust and capability around diversity data sharing across the Group.
• Use data to understand the experiences of female, non-white and ethnic minority colleagues’ career progression through the Group, with the
objective of ensuring that we align the proportions at senior levels with the workforce as a whole.
• Further increase the diversity of the workforce, especially in areas and regions where we are under-represented when compared with the
regional census data.
Building an inclusive culture where colleagues are supported to thrive
2022 review
This work is centred on engaging, supporting and investing in our colleagues, and hinges on our ability to listen to them and identify their needs
and interests. The annual survey and our colleague forums are central to guiding this work.
Our people programme includes three Group-wide colleague engagement forums:
1. Communities Forum
2. Inclusion and Diversity Forum
3. Employee Engagement Forum
Further information on the Employee Engagement Forum can be found below and in the Stakeholder Engagement Report (page 21). The
Communities and Inclusion and Diversity forums meet approximately monthly online and seek to meet in person where this is possible. In 2022
they had two face-to-face conference days (May and November).
35
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
The Communities and Inclusion and Diversity forums were established in 2021 and during 2022 they have continued to be supported by Executive
Committee members: Helen Buck (Inclusion and Diversity) and Sapna B. FitzGerald (Communities). From 1 April 2023, the Inclusion and Diversity
Forum is supported by Jon Round.
The membership of both forums was refreshed in 2022, including the appointment of new chairs. The forum chairs are financially compensated
for their roles and report directly to David Stewart, providing him with regular updates on their work and member views.
Examples of 2022 forum initiatives are included in our Living Responsibly Report.
Oversight of colleague matters, including ensuring equal opportunities are promoted in the Group, rests with the Group HR Director and is
supported by the Employee Engagement Forum. The Employee Engagement Forum met monthly (remotely) during 2022 and twice in person with
Darrell Evans, our designated Non Executive Director for workforce engagement in attendance. The Remuneration Committee and the Board took
into account feedback from this forum when it made the decision to award a one-off cost of living payment to lower-earning employees at the
end of 2022. This award was in addition to the £500 share award made to all colleagues earlier in the year.
In 2021 we committed to progressing signing up to a charter to support our work on diversity which was initially proposed by the Nominations
Committee following the publication of the second Parker review in 2020. During 2021 the Inclusion and Diversity Forum was asked to assist with
identifying which charter would suit us best. With their support we are delighted to have become a signatory of the CBI’s Change the Race Ratio in
2023 and we are looking forward to working with the CBI to increase our diversity and improve our workforce engagement.
Colleague feedback
The Board receives colleague feedback via the Group’s opinion surveys, which we undertake across our businesses. The colleague opinions
captured are then presented to the Executive Committee and the Board, as part of a regular review of colleague matters. Key performance
indicators such as labour turnover and responses to key survey questions are also monitored, to measure morale and review culture.
The colleague opinion survey – ‘Have your say’ – also provides the Executive Committee and the Board with insight into what factors concern and
motivate the Group’s employees and contribute to action plans and focus actions across the Group. The survey process is regularly evaluated and
developed, to maximise the validity and reliability of the data captured.
The 2022 survey covered all aspects of our working environments. This included culture, training, careers, performance and communications,
together with questions on the effectiveness of Group companies’ management and leadership. The response to the survey was positive, with
2,506 (2021: 3,119) employees taking part, a 61% response rate across the Group (2021: 76%). Market factors, personal earnings and experiences
can affect scores and participation rates, so the timing of the annual survey is under review.
S&V
HO
FS
EA
EA
S&V
FS
HO
Few complaints,
not moƟvated
MoƟvated, few
complaints
Not moƟvated,
and complaints
MoƟvated, but
complaints
Few complaints,
not moƟvated
MoƟvated, few
complaints
Not moƟvated,
and complaints
MoƟvated, but
complaints
Staff Survey 2012/2021 vs 2022
2012/2021 2022
PosiƟvity around MOTIVATING FACTORS
FS = Financial Services EA = Estate AgencyS&V = Surveying & ValuaƟon HO = Head Office
PosiƟvity around HYGIENE FACTORS
PosiƟvity around MOTIVATING FACTORS
PosiƟvity around HYGIENE FACTORS
• Analysis of previous surveys and 2022 data show a marked improvement overall across the Group: all colleagues completing the survey are
shown to be motivated, although Estate Agency Division dropped into the ‘motivated but complaints’ quadrant, indicating mild dissatisfaction
against some measured questions.
• Sentiment from the survey in the Estate Agency Division centred on hybrid working and the cost of living. This survey was undertaken before
the one-off cost of living payment was announced for lower-paid colleagues and we believe that the results would have been more positive had
the survey been undertaken after the announcement, because the feedback we received post-announcement was positive.
• Head office/Group functions, who have more flexibility in their working environments due to the nature of their roles, scored highest. The
Financial Services Division also saw a big shift in motivation. The Surveying & Valuation Division shifted positively in all areas.
36
Environmental, Social and Governance (ESG) Report
• The responses in the 2022 survey were positive overall suggesting an increase in colleague engagement across the Group. Business areas are
looking at the items stated as needing most improvement and the intention is to communicate with colleagues more regularly around ‘you said,
we did’.
We have also analysed survey responses using the diversity characteristics that have been shared with us. In some instances, this has highlighted
different experiences for groups of colleagues.
Our Inclusion and Diversity Forum has been working through 2022 to launch colleague resource/affinity groups across the Group. These are
referred to as LSL Voices and the initial launch will include five groups during 2023. We will be working closely with LSL Voices through the
Inclusion and Diversity Forum, to look at how we can improve our working environment and culture for the benefit of all.
Colleague training and policies
David Stewart has overall responsibility for colleague matters, with Debra Gardner responsible for our employment policies and practices. Our
Internal Audit team undertakes colleague awareness audits of our policies, and the Board receives regular Group HR reporting, which includes
indicators such as staff turnover. Policies audited in 2022 included 21 as part of the audit of our ID&E work and six used to inform a Governance
and Culture review project. The reviews reported that colleague awareness of policies was low. Group HR has committed to reviewing these
procedures and communicating the work to colleagues to raise awareness of the business’s commitments to colleague welfare. In addition to this,
plans are in place to launch an LSL corporate induction programme in 2023 which will include policy signposting, with particular attention given to
the Disciplinary Policy, Employee Voice Policy, Grievance Policy and Stress and Mental Wellbeing Policy.
In addition to our suite of Group and Divisional colleague policies, the table below highlights some specific policies which support us in our Living
Responsibly programme. Some are new and have been developed as a direct result of feedback from our colleague forums. The table below also
highlights how the policies linked to our Living Responsibly priorities.
Living Responsibly
priority Policy Scope Published/last reviewed
1, 2 1. Family friendly Supporting colleagues with their work life balance. September 2020
1, 2 2. Equality and diversity in the workplace Ensuring fair treatment for all colleagues. September 2020
1, 2 3. Pregnancy loss Outlines the support available for colleagues who suffer
the loss of their unborn child.
March 2022
1, 2 4. Fertility Outlines the support available for colleagues
undergoing fertility treatment.
October 2022
1, 2 5. Menopause Supporting colleagues to access appropriate support
when going through the menopause.
March 2022
1, 2 6. Stress and mental wellbeing Outlines the actions the organisation is taking to
promote a healthy work environment and the support
available for colleagues.
January 2022
4 7. Environmental Outlines the organisational approach and individuals’
roles in improving the sustainability of the Group and
minimising our environmental footprint.
April 2021
5 8. Data Information Security Framework Includes policies relating to colleague data protection
and information security arrangements.
May 2022
3, 5 9. Combined ethics Outlines the Group’s approach to anti-bribery and
corruption, anti-slavery and human trafficking, conflicts
and personal interest, tax evasion, whistleblowing and
fraud.
May 2021
In relation to the Group’s Information Security Framework (Policy 8), all colleagues undertake an annual update of their information security
training to ensure ongoing compliance with laws and regulations. For further details of internal controls, see the Audit & Risk Committee Report
on page 67.
With respect to our recruitment arrangements, we aim to appoint the best candidates based on suitability for the job and to treat all colleagues
and applicants fairly, regardless of any characteristic or background, and to ensure that no individuals suffer harassment or intimidation. To
support this work, in 2021 we signed up to the Recruitment and Employment Confederation’s Good Recruitment Charter
1
, which involved a gap
analysis to identify areas of improvement in our approach. During 2022 we have been addressing the improvements which were identified and
further improvements are planned for completion in 2023.
Details of our training arrangements, including our 2022 expenditure, can be found in the Living Responsibly Report.
1
rec.uk.com/employers/grc
37
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
Colleague health, safety and welfare
Adam Castleton, Group CFO, is responsible for Group health and safety arrangements. A Health and Safety Policy is in place to ensure the
wellbeing and safety of colleagues, visitors, members of the public and contractors. The Board receives biannual reports on health and safety
matters and the Health and Safety Policy is reviewed annually and submitted for Board approval. We have procedures in place to comply with all
relevant laws and regulations.
We are committed to doing everything reasonably practicable to maintain a safe working environment, through processes which are designed to
identify and manage hazards and accident reporting procedures to prevent colleague injuries. Details of reported hazards and accidents form part
of the monthly health and safety reporting to Adam Castleton. Training supports health and safety awareness through the Induction Module for
new colleagues and a Health and Safety Module issued annually to all colleagues. Additionally, all colleagues have a duty to do everything possible
to prevent injury to themselves and to others, and to exercise responsibility.
Our Internal Audit team undertakes subsidiary company audits, including reviewing Health and Safety Policy documentation, certification
to ensure compliance with statutory requirements, colleague engagement, record keeping on hazards and accidents. Follow-up actions are
identified and implemented. Internal Audit also submit its reports to the Audit & Risk Committee for consideration.
Following the launch in 2020 of various mental wellbeing initiatives, including the expansion of an Employee Assistance Programme (EAP) and
the 2021 app launch, in 2022 e.surv piloted mental health first aiders across the business. We will review their impact during 2023 with a view to
rolling out the scheme across the Group.
2023 priorities
• Continue to work with our colleague forums and the new LSL Voices networks to improve our culture and practices.
• Review our external survey provider to ensure best practice data collection and alignment with external benchmarks.
• Review the impact of mental health champions in e.surv and consider their roll out across the Group.
Supporting colleagues to connect with our communities
2022 review
Our businesses are firmly rooted in our local communities. We have a long history of investing in community initiatives and our Board recognises
that good community relations are fundamental to our sustained success. Through our communities programme, we support our businesses and
their investment in their local communities. We are sensitive to local communities’ cultural, social and economic needs and are committed to
acting responsibly wherever we operate.
We believe that working in partnership with our communities consistently is the most effective way to achieve objectives and lasting change.
Our Communities Forum drives our Group-level priorities around community engagement, which complement Divisional and other colleague
initiatives.
During 2022, we:
• Launched a Colleague Community Day across our Financial Services Division. This gave individuals and teams time off work to support a
local initiative. This was a pilot scheme and we are considering rolling the initiative out across our other Divisions and our head office/Group
locations.
• Piloted a matched funding initiative across the Group, inviting colleagues who are fundraising to seek matched funding for the causes that
matter to them. In total, the Group matched £7,170 of colleague fundraising.
• Ran four Group-wide community focused initiatives – Litter Picking Week (March), Act of Kindness Week (June), Food Bank Week (September)
and Goodwill Month (December). This was the second year for all of these initiatives and the same four are in planning for 2023, with the Litter
Picking Week completed in March.
The initiatives are promoted to all colleagues, including Directors who have also participated in some of the community initiatives during 2022
and you can read more about the success of our community initiatives in our Living Responsibly Report.
2023 priorities
• Continue the delivery of our four annual Group-wide community focused initiatives and build on their success in 2022.
• Continue to roll out matched funding and colleague volunteering initiatives across the Group.
Place
As part of our commitment to working in the right way, we focus on caring for the physical environment we work in and ensuring excellent
governance.
38
Environmental, Social and Governance (ESG) Report
Minimising our environmental footprint
Working in the right way includes minimising our impact on the planet and the environment. Whilst the emissions from our operations are
relatively low, we recognise the importance of considering our environmental impact more holistically. Our business relies on the housing sector,
which is one of the top four carbon contributors
1
.
2
In our 2021 Living Responsibly Report, we set out our commitments to reduce our emissions in line with the internationally agreed target to keep
the global temperature rise to 1.5⁰C above pre-industrial levels. Our Climate Transition Plan (CTP) includes targets against a 2019/20 baseline. The
CTP and our headline progress against targets are illustrated in the table below:
Emissions from direct operations
Scope 1
Emissions from operations that are owned or controlled by the
organisation.
Scope 2
Emissions from the generation of purchased electricity, steam,
heating or cooling consumed by the company.
Target:
To reduce Scope 1 emissions by 63% by
2034/5, in line with a 1.5⁰C trajectory.
2022 progress Target:
Reduce Scope 2 emissions to zero and
maintain for the foreseeable future.
2022 progress
Achieved: Emissions
reduction in line with
1.5⁰C trajectory.
Not yet achieved:
Emissions
24 tCO2e.
Gas
• From mid-2022, we will procure 100%
gas from renewable sources only.
Not yet achieved:
One location
outstanding to
procure renewable
gas.
Electricity
From 2021, we began procuring the majority of
our electricity from renewable sources. During
2022, we progressed to procuring 100% of
our electricity from renewable sources for our
managed locations.
Company vehicles
• We will transition 57% leased petrol and
diesel vehicles to hybrid and electric
(EVs) in a phased approach, by 2025.
On track to achieve:
45% vehicles have
transitioned, with a
further 26% on order.
• We are actively engaging with our
landlords across various site types to
determine the correct EV charging
solutions for sites.
Charging points
installed at FS head
office with discussions
ongoing at other
premises.
• We are planning consultations with Car
Allowance Scheme users, with a view
to implementing a plan to incentivise
a transition away from internal
combustion vehicle engines.
Car allowance scheme
data has been
collated and is to be
reviewed by EWG
and HR.
Indirect emissions
Scope 3
All indirect emissions that occur in the value chain, including
upstream and downstream emissions.
2022 Progress
During 2022, we committed to quantifying our Scope 3 emissions. In doing
this, we have identified which categories of emissions apply to our business,
and have begun to collate and analyse the data. We will complete this
process in 2023 and submit the data to SBTi* for verification.
Notes:
* sciencebasedtargets.org
1
ons.gov.uk/economy/environmentalaccounts/bulletins/ukenvironmentalaccounts/2022
39
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
Further analysis of our emissions against the 1.5⁰C trajectory is included in the Living Responsibly Report.
Greenhouse gas emissions trends
Whilst 2019/20 is our benchmark for our CTP, our five year emissions trends are included in the table below:
(tCO2e) 2021/22 2020/21 2019/20 2018/19 2017/18
Combustion of fuel and operation of facilities (Scope 1) 1,998 2,125 2,517 3,420 3,705
Electricity, heat, steam and cooling purchased for our own use (Scope 2) 24 39 1,139 1,535 2,625
Total Scope 1 and 2 2,022 2,165 3,656 4,955 6,330
tCO2e per FTE employee 0.50 0.52 0.94 1.17 1.27
tCO2e per £m revenue 6 7 14 16 20
Group-wide environmental commitment
Our commitment to the environment goes beyond our emissions. During 2022, each Division has sought to address the climate crisis through its
own sphere of influence. In addition to Group-wide progress with reducing our environmental impact, the Divisions have also made progress and
further details are included in our Living Responsibly Report with a summary of some of our initiatives set out in the table below:
Financial Services Surveying & Valuation Estate Agency
• EV charging points installed in head office
locations. Discussions ongoing in three
further locations.
• Office assessments undertaken across
locations to identify energy efficiency
opportunities.
• All offices have stopped purchasing plastic
cups, with a number of offices using up
existing supplies.
• Environmental focus within monthly
newsletter for all FS colleagues.
• PRIMIS has joined the Mortgage Climate
Action Group.
• Launched our Green Watch Newsletter and
issued 12 editions to all of our corporate
clients and interested colleagues. This has
been well received.
• Delivered sustainability presentations to
key lender clients and all e.surv colleagues.
• Achieved EcoVadis
1
bronze award –
EcoVadis is an independent rating agency
that assesses environmental performance
and corporate social responsibility.
• Launched 12 Green Commitments
and a champion forum to support
implementation of these commitments.
• Committed to achieving ISO 14001
2
in
2023.
• Delivered sustainability and climate
change training module to all e.surv
colleagues.
• Installed smart meters and water meters,
to support reduction of water and energy
use.
• Installed LED light bulbs in our branches,
to reduce energy use.
• Worked with landlord clients to improve
the EPC ratings of their rental properties
through the use of EPC+.
• Engaged with landlords at our multi-
tenanted offices and encouraged the
installation of EV charging points and
recycled waste arrangements.
• All branches and offices now have
recycling and general waste facilities and
will continue to improve levels of recycling
in 2023.
Notes:
1
ecovadis.com
2
imsm.com/gb/iso-14001
Task Force on Climate-Related Financial Disclosures (TCFD)
We welcome the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) and we are using the framework to support
the ongoing integration of our Living Responsibly programme which includes our ESG work across the Group. However, as we try and align our
approach to the TCFD requirements, including the updated TCFD additional guidance (Implementing the Recommendations of the Task Force
on Climate-Related Financial Disclosures (2021 TCFD Annex)), which was released in October 2021, there are some recommendations where we
are not fully compliant as at the date of this Report. These items will require more time for us to fully consider and implement arrangements to
ensure compliance.
Within this Report, in line with Listing Rules requirements (LR 9.8.6R(8)), we have included disclosures which are partially consistent with six of the
11 TCFD recommendations and these disclosures are summarised in the table below. The table below also summarises the steps that we will be
taking in 2023 to improve our consistency with the TCFD recommendations.
We will be working to implement the remaining five TCFD recommendations over the course of 2023 and intend to apply these more fully in our
TCFD , which will be reported in our Annual Report and Accounts 2023. Our plans to address the areas of non-compliance are summarised out in
the 2023 priorities entries in the table below.
40
Environmental, Social and Governance (ESG) Report
TCFD recommended disclosures
Governance
Board level oversight of climate-related risks and opportunities
• The Board, with support from the Audit & Risk Committee, has oversight of
climate-related risks and opportunities through its sponsorship of our ESG
programme.
• The Living Responsibly Steering Committee reports into and is chaired by the Group
CEO. The committee receives reports from the Environmental Working Group
(EWG).
• A proportion of the Executive Directors’ annual bonus in 2023 will be related to
ESG performance and in particular our progress on climate-related metrics.
Management responsibility for climate-related risks and opportunities
• David Stewart (Group CEO) is the sponsor for our Living Responsibly programme
which includes climate-related priorities. He has established a Steering Committee
which reports into him and the programme is overseen by Debra Gardner (Group
HR Director).
• Debra Gardner is responsible for leading our Living Responsibly strategy and
coordinates the reporting of ESG matters including reporting by the EWG on
climate-related issues. Divisional risk leads are part of the EWG.
2022 Achievements
• Sonya Ghobrial, independent Non Executive
Director joined the Board in 2022. Sonya has
expertise in ESG matters and she provided
feedback on our programme and strategy. Sonya
also attended the Forums Day in November 2022.
2023 Priorities – steps to improve consistency
• Review the frequency of Board information
on climate-related matters including through
reporting from the EWG.
• Ensure climate-related risks and opportunities are
reviewed in setting Group strategy.
• Develop the process by which Management
identifies, monitors, and assesses climate-related
issues.
• Review how the Board oversees and monitors
climate-related targets.
Strategy
• As reported in our Annual Report and Accounts 2021, we initiated an analysis of
our climate-related risks and opportunities across the Divisions, informing the work
of the EWG. In 2022, we intended to embed climate-related risk assessment more
fully in our strategic planning process, building on the work from 2021. This work
was not completed in 2022 and will be progressed during 2023.
Climate-related risks and opportunities the organisation has identified over the
short, medium, and long term
• To date, the Group has not identified any material climate-related risks or
opportunities that impact the Group’s business model, strategy or viability.
However, we acknowledge that this may change and develop over time.
• Further, to date, climate-related issues have not had a material impact on the
Group’s financial planning process. In the short to medium term, the impact of
climate-related risks is expected to be relatively low, due to the nature of our
business model. Over the medium to longer term we expect physical risks, such
as severe weather (including flooding, increases in temperature and rising sea
levels), as well as transition risks such as policy and regulation changes will also
materialise.
• Climate-related opportunities for the Group include the financial benefit of a shift
in customer preferences to favour environmentally friendly products and helping
people to understand the environmental performance of their properties.
• The most significant opportunities in the medium to longer term will arise from
improvements in our operational resilience, which we expect to see as a result of
the climate change transition and adaptation measures being implemented. We
will continue to develop our response to climate-related issues and seek to operate
our businesses in a manner that meets the expectations of our stakeholders.
Impact of climate-related risks and opportunities on the organisation’s businesses,
strategy, and financial planning
• The Group’s CTP was first published in our 2021 Living Responsibly Report and
is included in our Annual Report and Accounts 2022. We are committed to being
net zero by 2040 and in 2023 will begin the process of validating data and targets
through the SBTi.
2022 Achievements
• Action plans created to respond to risk
assessments within each of the Divisions, as well
as Group/head office, to address climate exposure.
2023 Priorities – steps to improve consistency
• Continue to develop our risk assessment
methodology to consider short, medium and long-
term climate-related risks as well as opportunities
that could have a material financial impact on the
Group in the future.
• Consider the impact that the identified climate-
related risks and opportunities may have on
business strategy and financial planning.
• Model scenarios to assess the resilience of the
business strategy, taking into consideration
different climate-related scenarios (including a 2
o
C
or lower scenario).
41
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
Risk management
• In line with the TCFD recommendations, in 2021 we assessed our climate-related
risks, covering both physical risks (ie physical impacts of climate change, such as
severe weather, flooding events, increase in temperature and sea level rise) and
transition risks (ie risks relating to the transition to a lower-carbon economy in
order to avoid the worst physical impacts of climate change, such as policy and
regulation changes).
• Further details on our views of our climate-related risks, see above (Strategy).
2022 Achievements
• Climate-related risks identified at an
organisational and Divisional level through
assessment in 2021. These have been used to
set targets and actions through 2022, and each
Division is beginning to explore climate-related
opportunities.
2023 Priorities – steps to improve consistency
• Further embed climate-related risk into the
Group-wide risk management arrangements
(including the framework development planned
for 2023), focusing on identification and
assessment (including materiality of impact),
aggregation and reporting.
• Further develop processes for any material
climate-related risks identified, including
management and prioritisation.
Metrics and targets
Metrics used by the organisation to assess climate-related risks and opportunities in
line with its strategy and risk management process, and, Disclose Scope 1, Scope 2
and, if appropriate, Scope 3 greenhouse gas (GHG) emissions and the related risks.
• The Group primarily impacts the environment through its use of energy in its
leased properties and vehicles and is taking action to reduce impact in this area.
• GHG Scope 1 and 2 emissions in line with the Streamlined Energy and Carbon
Reporting (SECR) regulations and in line with GHG Protocol and are detailed on
page 38.
• Scope 3 GHG emissions have been reviewed during the year and we intend to
complete their quantification in H1 2023.
• We have set targets to reduce emissions on our pathway to net zero. The Group’s
approach is detailed above.
• During the 2021/22 reporting period, the Group emitted a total of 2,022 tCO2e
from fuel combustion and operation of facilities (Scope 1 direct), and electricity
purchased for the Group’s own use (Scope 2 indirect). This is equal to 6 tCO2e per
£m of revenue or 0.50 tCO2e per FTE employee.
• Executive remuneration will continue to include ESG metrics within non-financial
measures. In 2023 these will focus on delivery of targets set by the Board, including
emissions and diversity improvements.
• We have reported on our greenhouse gas emissions since 2013 and we have
consistently reduced our carbon footprint each year. Since 2017, our absolute
emissions have decreased by 68%. This has principally been due to the Group’s
commitment to reducing its carbon footprint and progress on objectives within our
environmental policy, as described in later sections of this Report.
2022 Achievements
• Set targets and tracked progress across a broad
range of areas.
• Work undertaken to identify Scope 3 emissions
across the Group.
2023 Priorities – steps to improve consistency
• Further review environmental metrics and develop
Divisional targets to better demonstrate progress
and enable different rates of progress to our net
zero commitment.
• As part of improvements in risk management,
determine key metrics used by the business to
measure and manage climate-related risks and
opportunities.
• Complete work on Scope 3 emissions and register
with SBTi to work towards verification of data.
42
Environmental, Social and Governance (ESG) Report
• We monitor and report our Scope 1 and 2 emissions (with work on Scope 3
assessment ongoing) through our Environmental Working Group, which reports
to our Living Responsibly Steering Comittee and to the Board through the Group
CEO. Alongside our work to quantify our Scope 3 emissions, we are looking to
software solutions to help us manage and report our emissions more regularly.
Our operational Scope 1 and 2 targets are aligned to the Paris climate agreement.
That is, with measures to limit global temperature rise to 1.50C above pre-industrial
levels. This requires us to halve our operational greenhouse gas emissions by 2030
and achieve net zero by 2050.
• The Group quantifies and reports on its organisational greenhouse gas emissions
according to Defra’s Environmental Reporting Guidelines and has utilised the
2022 UK Government GHG Conversion Factors for Company Reporting, in order
to calculate CO2 equivalent emissions from corresponding activity data. We
also utilised data required for compliance with SECR and the Energy Savings
Opportunities Scheme (ESOS).
• The emission sources included in this Report fall within the consolidated Financial
Statements. We do not have responsibility for any emission sources that are not
included within the consolidated Financial Statements. We have not, to date,
calculated our fugitive refrigerants from air conditioning equipment, as these are
de minimis.
• Greenhouse gas 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 2020/21 as a proxy.
Targets used by the organisation to manage climate-related risks and
opportunities and performance against targets
• We are committed to becoming a net zero carbon business in our direct operations
by 2040 and we have a target to reduce our Scope 1 operational carbon emissions
by a total of 63% by 2035, aligned with a 1.50C scenario. As we did not complete our
Scope 3 emissions assessment in 2022, we have not yet engaged with SBTi, but as
outlined above, we intend to do this in 2023. Management has not fully determined
the financial impact of becoming a net zero business by 2040 and therefore the
financial impact is not fully incorporated into the Financial Statements.
• Progress for emissions reduction targets is measured against 2019/2020 emissions
data.
Environmental policy
We have an environmental policy, which addresses waste management, including recycling, energy and resource consumption and encouraging
the issuing of low and zero emissions fleet vehicles. The policy is made available to all colleagues on our Group HR self-service platform and is
reviewed annually.
Energy Savings Opportunities Scheme (ESOS)
We continue to progress our delivery of the 2019 ESOS audit and our performance against our objectives is summarised below:
a. Energy from renewable sources for 99% (2021: 99%) of our managed locations. We are procuring 100% green gas and 99% renewable
electricity at our directly managed locations.
b. The transition from diesel and petrol vehicles is ongoing and during 2022 numbers reduced to 341 vehicles (2021: 498); hybrid vehicles
increased to 244 (2021: 175) and electric vehicles (EVs) to 37 (2021: 23).
c. Recycling facilities are provided at all locations, with 49% of waste recycled during 2022 (2021:41%).
d. Confidential waste is securely managed through our accredited partner. 69 tonnes (2021: 53) were collected during 2022, saving the equivalent
of 1,172 trees (2021: 1,032).
e. The improvement in electrical efficiencies is ongoing, including the provision of LED lighting, installed at 68% (2021: 44%) of locations.
f. The installation of energy efficient systems continues, as existing facilities reach end of life.
g. Smart meters have been installed at 95% (2021: 77%) of our sites.
h. Water meters have been installed at 97% (2021: 85%) of our sites.
43
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
We continue to engage with our landlords, and at multi-tenanted sites seek to influence change on environmental matters around green energy,
recycling and provision of EV charging points.
Ensuring excellent governance
Our commitment to excellent governance arrangements across the Group is core to working in the right way. Our commitment to Board diversity
is part of this. In 2021 we adopted the Parker review recommendations which were implemented by the FCA, including adopting a target of 40%
women on the Board and at least one Director from an ethnic minority background. These targets are included in the Diversity Policy which was
adopted by the Board during 2022.
2022 review
Our governance arrangements are sponsored and led by Sapna B. FitzGerald, General Counsel and Company Secretary. For details, see the
Corporate Governance Report (page 54). In 2022 we adopted our Diversity Policy including our diversity targets. See the Corporate Governance
Report for further details (page 54).
The Directors’ Remuneration Report (page 73) contains details of how we have incorporated ESG matters into our Executive Director
remuneration arrangements. The Purpose, Strategy, Culture, Values and Business Model section (page 12) of this Report contains details of our
purpose, values and culture and how they are aligned to our strategy.
As outlined earlier, the Board oversees our Living Responsibly programme and strategy and reviews these regularly. Details on our internal
controls and risk management arrangements are contained in the Principal Risks and Uncertainties section (page 25).
All of our businesses are committed to conducting business in a socially responsible way. We seek to comply with appropriate ethical standards
and to be honest and fair in our relationships with customers and suppliers. We are in the final stages of developing our comprehensive supplier
code of conduct and we hope to launch this during 2023. To support this, we are undertaking a wider review of procurement across the Group,
which is being supported by an external procurement adviser with oversight from the Group Finance team.
Modern Slavery and Human Rights
We have arrangements which seek to prevent modern slavery and human trafficking occurring within our businesses or any of our supply chains.
During 2022, we continued with our arrangements to ensure compliance with the Modern Slavery Act 2015, including publishing our Modern
Slavery Statement for the financial year ending 2021, which was published in June 2022
1
. We also have an Anti-Slavery and Human Trafficking
Policy, which in combination with our whistleblowing arrangements provides information and guidance to colleagues on how to recognise and
deal with anti-slavery and human trafficking issues.
Bribery Act 2010
We have adopted a risk-based approach to ensuring compliance with the Bribery Act 2010. We seek to identify and review anti-bribery and
corruption risks in the development of our policies and procedures, which are reviewed periodically. The Anti-Bribery and Corruption Policy sets
out information and guidance for colleagues on how to recognise and deal with bribery and corruption issues.
Payment practices reporting
Your Move, Reeds Rains and e.surv annually submit their payment practices reports, which are available on the Government’s website for report
submissions
2
.
Tax evasion
In 2022, the Board received an annual review of our Tax Evasion Policy as part of the Combined Ethics Policy review. We also reviewed our tax
strategy in 2022, which is available on our website
3
.
Notes:
1
lslps.co.uk/modern-slavery
2
check-payment-practices.service.gov.uk
3
lslps.co.uk/investor-relations/corporate-governance/tax-strategy
44
The Board
This section of the Report includes information on the Directors (including Helen Buck who retired on 31 March 2023 and David Barral who was
appointed on 3 April 2023) and the Company Secretary.
Executive Directors
Helen Buck, Executive Director – Estate Agency
Helen was appointed as Executive Director – Estate Agency on 2 February 2017. She has overall responsibility for the
performance, strategy and development of LSL’s Estate Agency Division. Prior to this role Helen had, since December 2011,
served as an independent Non Executive Director and was a member of LSL’s Nominations and Remuneration Committees.
Helen was previously Chief Operating Officer at Palmer & Harvey and was part of the Sainsbury’s management team from
2005 to 2015, including five years as a member of the Operating Board. Helen has extensive expertise in strategy, marketing,
commercial and operations. Before joining Sainsbury’s, Helen held senior positions at Marks & Spencer, Woolworths and
Safeway, and was a senior manager at McKinsey & Co. In June 2022, LSL announced that Helen had decided to retire. Helen
retired from the Board on 31 March 2023.
Adam Castleton, Group Chief Financial Officer
Adam was appointed Group Chief Financial Officer on 2 November 2015. He has broad 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 several market-leading companies including O2 UK, eBay and The Walt
Disney Company. Adam has over 30 years’ experience in finance, having started his career with Price Waterhouse, where
he qualified as a Chartered Accountant in 1989.
David Stewart, Group Chief Executive Officer
David was appointed Group Chief Executive Officer on 1 May 2020 and has primary responsibility for LSL’s performance,
strategy and development. Prior to this David was a Non Executive Director, having joined the Board on 1 May 2015. He
was also Chair of the Audit & Risk Committee and a member of the Remuneration and Nominations Committees. David has
significant experience in finance, strategy, operations, risk and compliance, with particular expertise in financial services.
He was Chief Executive of Coventry Building Society from 2006 to 2014, having earlier served as Finance Director and
Operations Director. Prior to joining the Coventry, David spent ten years at DBS Management plc, holding several board
positions including Group Chief Executive and Group Finance Director. David qualified as a Chartered Accountant with Peat
Marwick (KPMG) and is a graduate of Warwick University.
Non Executive Directors
Gaby Appleton, Senior Independent Director
Gaby joined LSL as an independent Non Executive Director on 1 September 2019 and was appointed Senior Independent
Director on 30 June 2021. She is also a member of our Nominations, Remuneration and Audit & Risk Committees. Gaby
has significant experience in strategy, technology, operations and sales and marketing, particularly in the professional
information solutions sector. This includes her current appointment as Chief Digital Product Officer at Reed Exhibitions
(a RELX Group plc company). Gaby has previously held several executive strategic digital and marketing roles including
Global Director of Strategy and Director of Research Strategy at Elsevier in Amsterdam. Before joining Elsevier, Gaby held
operating positions at Sainsbury’s Supermarkets Ltd, within the Procter & Gamble group of companies, and was a senior
manager at McKinsey & Co. Gaby holds a BA from the University of Cambridge.
David Barral, Independent Non Executive Director (Chair Designate)
David was appointed as an independent Non Executive Director and a member of the Remuneration and Nominations
Committees on 3 April 2023. David will stand for election at the 2023 AGM and, if elected, he will be appointed Chair of the
Board and the Nominations Committee with effect from the end of the AGM.
David brings a wealth of experience to LSL, following a 40-year executive and non executive career in financial services.
He offers a combination of strategic leadership, transformation and operations experience, with a strong focus on value
creation, customers, people, and risk and governance. He is currently Non Executive Chairman of Curtis Banks Group Plc
and is a former CEO of Aviva UK and Ireland Life, Aviva’s largest business unit, achieving profit of £1bn.
David’s previous non executive roles include Chair of Embark Group, Chair of Rowanmoor Group, Senior Independent
Director of LV Group, Non Executive Director of LV General Insurance, Non Executive Director of The Pension Superfund,
Independent Customer Champion at Quilter and Chair of Virgin Wines. He has also previously chaired the ABI Retirement
and Savings Committee and was a member of the Financial Services Authority Retail Distribution Review.
45
Other Information
Financial Statements
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Strategic Report Strategic Report
Overview
Simon Embley, Non Executive Director
Simon was Non Executive Chair of LSL from 1 January 2015 until 28 April 2021, when he stepped down following his
appointment as Chief Executive of Pivotal Growth Limited, the joint venture between LSL and Pollen Street Capital. Simon
has remained on the Board so the Group can continue to benefit from his knowledge and experience, and this position
is kept under review. Simon was Deputy Chair from 2014 to 2015 and Group Chief Executive Officer until 2014, a role
which he held at the time of the management buyout of e.surv and Your Move from Aviva (formerly Norwich Union Life)
in 2004. Simon was responsible for the strategic direction of these companies prior to the management buyout and he
subsequently led the turnaround of the initial Group. Simon’s other directorships include a small estate management
company, Eveclo Holdings Limited (an IT business) and Road to Health (a healthcare provider). He is also Non Executive
Chair at Global Property Ventures, a market-leading insurance-based tenant deposit company.
Darrell Evans, Independent Non Executive Director
Darrell was appointed as an independent Non Executive Director on 28 February 2019 and as Chair of the Remuneration
Committee with effect from 28 April 2021. He is also a member of our Nominations and Audit & Risk Committees and is
our designated Non Executive Director for workforce engagement. He has significant experience in financial services and
is currently Chief Commercial Officer at the Co-Operative Bank plc. Darrell spent the first part of his career at Royal Bank
of Scotland plc, where he was Managing Director, Mortgages, Loans and Retail Telephony in the retail banking division,
responsible for all aspects of the Group’s mortgage proposition. Prior to that he was Product Director for the RBS retail
bank. Darrell has also held senior executive roles at Direct Line Insurance Group plc, Virgin Money plc and The Consulting
Consortium, where he was CEO.
Sonya Ghobrial, Independent Non Executive Director
S on ya w as a pp o in te d as a n in de p en de nt N o n E xe cu ti ve D ir e c to r on 4 M ar c h 202 2. S h e is a ls o a m em be r of L SL’s Rem un e ra ti on
Committee, Nominations Committee and the Audit & Risk Committee. Sonya has significant experience in banking, finance,
strategy, investor relations, governance and ESG, which she has gained from her roles in the consumer sector. This includes
her current appointment as Head of Investor Relations at GSK Consumer Healthcare. Sonya was previously Head of Investor
Relations at Heineken and prior to her current role had provided investor relations and consultancy services as Clear Giraffe
IR. Sonya’s previous experience also includes senior roles with investment banks, including Barclays Capital, Goldman Sachs
and Morgan Stanley. She qualified as an accountant with KPMG and holds a BAcc (Hons) in Accountancy and Economics.
James Mack, Independent Non Executive Director
James was appointed as an independent Non Executive Director and as Chair of LSL’s Audit & Risk Committee on
27 September 2021. He also serves on our Nominations and Remuneration Committees. James has significant experience
in audit, risk and financial services, particularly in retail financial services. This includes his current appointment as Chief
Financial Officer at Barclays Bank UK plc. James was previously Chief Financial Officer at Aldermore plc and acting Chief
Financial Officer at the Co-operative Bank. His previous experience also includes senior roles in finance and internal audit
at Skipton Building Society. James qualified as an accountant with KPMG and holds a BA from the University of Nottingham.
James is deemed to have recent and relevant financial experience to Chair the Audit & Risk Committee.
Bill Shannon, Non Executive Director, Chair of the Board
Bill was appointed as Chair of the Board with effect from 28 April 2021, having been first appointed as a Non Executive
Director on 7 January 2014. He also chairs the Nominations Committee and is a member of the Remuneration Committee.
Bill was deemed to be independent prior to his appointment as Chair of the Board. Bill has significant PLC board experience
in strategy, operations, finance and governance, in the consumer, financial services, residential and commercial property
sectors. He is also currently a Council Member at the University of Southampton and Independent Non Executive Chair of
Ashtead Technology Holdings plc, which is AIM Listed. He was previously at Whitbread Group plc from 1974 and between
1994 and 2004, he was a Divisional Managing Director. He has also served as Non Executive Chair of Johnson Service Group
plc, Aegon UK plc and St Modwen Property PLC, and as a Non Executive Director of Rank Group plc, Barratt Developments
plc and Matalan plc. Bill completed nine years on the Board in January 2023 and the Board has approved a 12-month
extension to his term, to facilitate the Chair succession planning process. On 20 February 2023 we announced Bill’s
intention to retire at the 2023 AGM.
Company Secretary
Sapna B. FitzGerald, General Counsel and Company Secretary
Sapna qualified as a solicitor in 1998 and has been General Counsel and Company Secretary at LSL since 2004. Prior to the
management buyout of Your Move and e.surv, Sapna was a member of Aviva Life Legal Services and had, since 2001, been
part of the team that supported Your Move and e.surv Chartered Surveyors.
46
The Executive Committee
The Executive Committee at the date of this Report is:
David Stewart
Group Chief Executive Officer
Executive Director
Adam Castleton
Group Chief Financial Officer
Executive Director
Andy Deeks
Group Chief Strategy Officer
PDMR
David Akinluyi
Group Chief Operating Officer
PDMR
Jon Round
Group Financial Services Director
PDMR
Steve Goodall
Managing Director
Surveying & Valuation
PDMR
Paul Hardy
Managing Director
Estate Agency
PDMR
Debra Gardner
Group HR Director
Sapna B. FitzGerald
General Counsel and
Company Secretary
The Strategic Report is approved by and signed on behalf of the Board of Directors
David Stewart
Group Chief Executive Officer
12 April 2023
Adam Castleton
Group Chief Financial Officer
12 April 2023
Directors’ Report (including Corporate
Governance and Committee Reports)
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
47
In this section
48 Statement of Directors’ Responsibilities in
Relation to the Financial Statements
49 Report of the Directors
54 Corporate Governance Report including
Nominations Committee Report
67 Audit & Risk Committee Report
73 Directors’ Remuneration Report including
Remuneration Committee Report
Statement of Directors’
Responsibilities in Relation to
the Financial Statements
48
The Directors are responsible for preparing the Annual Report and the Financial Statements of the Group and the Company in accordance with
applicable UK law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors have elected to prepare
the Group and the Company Financial Statements in accordance with UK adopted International Accounting Standards (IAS). Under company law the
Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group
and the Company and of the profit or loss of the Group and the Company for that period.
Under the FCA’s Disclosure Guidance and Transparency Rules, the Financial Statements are required to be prepared in accordance with UK adopted
IAS.
In preparing each of the Group and the Company Financial Statements the Directors are required to:
a. select suitable accounting policies in accordance with IAS 8 Accounting Policies, Change in Accounting Estimates and Errors and then apply them
consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c. present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
d. provide additional disclosures when compliance with the specific requirements in IAS is insufficient to enable users to understand the impact of
particular transactions, other events and conditions on the Group and/or Company’s financial position and financial performance;
e. in respect of the Group Financial Statements, state whether UK adopted IAS have been followed, subject to any material departures disclosed
and explained in the Financial Statements;
f. in respect of the Company Financial Statements, state whether UK adopted IAS have been followed, subject to any material departures disclosed
and explained in the Financial Statements; and
g. prepare the Financial Statements on the going concern basis unless it is appropriate to presume that the Group and/or Company will not continue
in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s and Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company, and enable them to ensure that
the Group and the Company Financial Statements comply with UK adopted IAS. They are also responsible for safeguarding the assets of the Group
and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing the Strategic Report, Report of the Directors, Directors’
Remuneration Report and Corporate Governance Report that comply with that law and those regulations. The Directors are responsible for the
maintenance and integrity of the corporate and financial information included on the Company’s website.
Directors’ responsibility statement (DTR 4.1)
Each of the Directors who were members of the Board during 2022 (including Helen Buck) confirm that, to the best of their knowledge:
• that the consolidated Financial Statements, prepared in accordance with UK adopted International Accounting Standards, give a true and fair
view of the assets, liabilities, financial position and profit of the Parent Company and undertakings included in the consolidation taken as a whole;
• that the Annual Report, including the Strategic Report, includes a fair review of the development and performance of the business and the
position of the Company and undertakings included in the consolidation taken as a whole, together with a description of the principal risks and
uncertainties that they face; and
• that they consider the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the Company’s position, performance, business model and strategy.
Report of the Directors
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
49
Business review and development
The Strategic Report on pages 12 to 46 (including the Chair’s Statement, the Group Chief Executive’s Report and the Financial and Divisional Reviews)
sets out a review of the Group’s business, including details of our performance, developments and strategy during 2022.
Annual general meeting
Our AGM will be held at 210 Euston Road, London, NW1 2DA on 25 May 2023, starting at 1.15pm (doors will open at 1pm). 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 vote at the AGM.
Financial results
The Strategic Report and Financial Statements set out our financial results for 2022.
Dividend
The Board has considered the proposed dividend in light of the Group’s policy to pay out 30% of Group Underlying Operating Profit after finance and
normalised tax charges, such that dividend cover is held at approximately three times earnings over the business cycle. This policy was designed to
provide clarity to shareholders and ensure the Group retained a strong balance sheet for all market conditions.
Although economic conditions have affected current earnings, we have made significant progress in executing our strategic shift to develop a
business that is less exposed to the housing market cycle.
As part of that shift and the associated rationalisation of certain businesses such as the recent sale of Marsh & Parsons, we have built significant Net
Cash balances, which at 31 December 2022 and prior to the disposal of Marsh & Parsons stood at £40.1m. In light of this exceptionally strong cash
position and the Board's confidence in the future prospects of the Group, the Board recommends a final dividend of 7.4 pence. If approved, this will
give a total dividend of 11.4 pence per share, unchanged from last year.
The ex-dividend date is 27 April 2023 with a record date of 28 April 2023 and a payment date of 2 June 2023. Shareholders can elect to reinvest their
cash dividend and purchase additional shares in LSL through a dividend reinvestment plan via signalshares.com. The election date is 11 May 2023.
The Board continues to keep its capital allocation policy and balance sheet structure under close review to ensure it is fit for purpose for our evolving
business model and will seek to update shareholders on this as appropriate.
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
Financial and Divisional Reviews section (page 13) of the Strategic Report. The financial position of the Group, its cash flows, liquidity position and
policy for treasury and risk management are described in the Financial Review section of the Strategic Report (page 12). Details of the Group’s
borrowing facilities are set out in note 24 to the Financial Statements. Note 32 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 can
be found in the Principal Risks and Uncertainties section of the Strategic Report on page 25.
As explained in note 32 to the Financial Statements, the Group meets its day to day working capital requirements through cash generated from
operations, as well as utilising its revolving credit facility. The Group currently has a £60m facility (December 2021: £90m), which was amended and
restated in February 2023. The facility is committed until May 2026. As at 31 December 2022 the Group had available £90m of undrawn borrowing
out of an available £90m (which was the facility size as at that date), in respect of which all conditions precedent had been met. The Group’s
forecasts, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the terms of
its renewed £60m facility during the going concern period. This modelling demonstrated sufficient liquidity and sufficient headroom on the required
covenants, details of which can be seen in the Principal Risks and Uncertainties section on page 25 of this report.
The Directors have considered the future profitability of the Group, including the impact of disposals since the year end, and the Board approved
cash flow forecasts for the going concern period, which is considered to be the period until 30 April 2024. Further consideration was given to banking
covenants, liquidity of investments and joint ventures and the Group’s ability to refinance where necessary. The Directors also assessed the key
judgements, assumptions and estimates underpinning the review. The base case is modelled after post-year end business disposals and reflects
ongoing challenging market conditions and the Directors’ expectations of the current economic climate.
In reaching its conclusion on the going concern assessment, the Board considered the findings of the work performed to support the Group’s
long term viability statement. As noted in the Viability Statement, which is included in the Principal Risks and Uncertainties section of this Report
(page 29), this included assessing forecasts of severe but plausible downside scenarios related to our principal risks, notably the extent to which a
severe downturn in the UK housing market, close to the level seen during the financial crisis in 2008, would affect the Group’s base forecasts.
The Directors can confirm that in the base case, and the downside scenarios, the Group had adequate liquidity and covenant headroom during the
going concern period.
Report of the Directors
50
The Directors also modelled a reverse stress test to assess the level to which market conditions would have to deteriorate before we would reach
our key banking covenant ratio of 2.75x Net Debt: adjusted EBITDA (with a ratio of 3.00x allowable for two consecutive test periods once during the
renewal period). This showed that, excluding any action we would take to retain cash reserves and maintain our operations, the UK housing market
transaction activity would have to fall to a level 7% below the financial crisis of 2008 during the going concern period which is equivalent to a 37% fall
in comparison to 2022, which the Directors consider to be remote.
As part of this assessment, the Group has also considered the FRC Thematic Review: Viability and Going Concern (most recent guidance released
September 2021) which has encouraged companies to assess the level of disclosure of qualitative and quantitative detail in scenario modelling, to
consider disclosure relating to the Group’s resilience to identified risks, and in respect of the viability assessment, the length of the viability period.
After making enquiries, the Directors who were members of the Board during 2022, concluded that the Group has adequate resources to continue in
operational existence for the going concern period. Accordingly, they continue to adopt the going concern basis in preparing this Report.
Financial instruments
The Strategic Report sets out our strategies and objectives relating to treasury and risk management. Details of the financial instruments are set out
in note 32 to the Financial Statements.
Employee, suppliers, customers and other stakeholders
Please see the Stakeholder Engagement Arrangements section (page 21), which contains our disclosures pursuant to the Companies Act 2006. This is
in addition to the details of our stakeholder considerations, which can also be found in the ESG Report (page 30).
The Greenhouse Gas Emissions (Directors’ Reports) Regulations 2013 and Part 7 of the Companies Act 2006 (Strategic Report and
Directors’ Reports) Regulations 2013
The disclosures required are included in the ESG Report on page 30.
Directors
Details of the Directors who served during 2022 are in the Corporate Governance Report (page 54) and The Board (page 44) sections.
Re-election and election
Our policy, as set out in the Nominations Committee’s terms of reference, is to have annual re-elections of our Directors. As a result, all the Directors
except for Bill Shannon are standing for election/re-election. Helen Buck retired on 31 March 2023.
Bill Shannon completed nine years on the Board in January 2023 and on 20 February 2023 LSL announced Bill’s intention to retire at the end of the
AGM and not stand for re-election. We commenced an exercise to appoint a new Non Executive Chair and announced the appointment of David
Barral as Chair Designate on 4 April 2023. David will stand for election at the 2023 AGM, and if elected will take over as Chair of the Board at the end
of the AGM.
Our articles provide that the Board may appoint a Director, who will then retire from office at the next AGM and seek election. Shareholders may by
ordinary resolution elect or re-elect any individual as a Director.
The 2022 annual evaluation of the Board and its Committees also specifically evaluated each Directors’ performance and the Board confirmed that it
values the experience and commitment demonstrated by each person who was a Director during 2022.
Directors’ interests
The interests of the Directors who are on the Board at the date of this Report are contained within the Directors’ Remuneration Report (page 73).
During the period between 31 December 2022 and the date of this Report, there were no changes in the Directors’ interests, other than the
purchases of shares by David Stewart (272 shares) and Adam Castleton (274 shares) as participants of LSL’s SIP/BAYE scheme (these shares were
purchased by the Trust at the prevailing market rate). Helen Buck also purchased 204 shares as a participant of LSL's SIP/BAYE scheme prior to retiring
from the Board on 31 March 2023.
During 2022, the Board maintained its arrangements for managing and recording conflicts, in line with its policy. This includes observing 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 and letters of appointment
Details of the Executive Directors’ service agreements and the Non Executive Directors’ letters of appointment (including any extensions to
appointments) are set out in the Directors’ Remuneration Report (page 73). The contracts and letters of appointment are available for inspection at
the Registered Office during normal business hours and at each AGM.
51
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Directors’ qualifying third party indemnity provisions
We 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. We have put in place Directors’ and Officers’ liability insurance and indemnities
to cover for this liability.
Compensation for loss of office – change of control
There are no agreements between LSL and its Directors or employees providing for compensation for loss of office or employment (whether through
resignation, purported redundancy or otherwise) that occurs because of a takeover bid.
Auditor
Ernst & Young LLP, the Group’s external auditor, has advised of its willingness to continue in office and a resolution to re-appoint it to this role and the
authority for its remuneration to be determined by the Directors will be proposed at the 2023 AGM.
Details of LSL’s policy to safeguard the external auditor’s independence and objectivity are included in the Audit & Risk Committee Report, together
with details of how the Audit & Risk Committee undertakes this assessment.
On 17 March 2023 we announced a change to the Audit Partner arrangement due to the unanticipated absence of the Senior Statutory Auditor
responsible for signing this Report. This resulted in a delay to the announcement of our preliminary results from 22 March 2023 to 13 April 2023.
Share capital
Our 0.2 pence ordinary shares are listed on the London Stock Exchange and are the only class of shares in issue. At 31 December 2022, our issued
share capital comprised 105,158,950 shares (2021: 105,158,950). The authorised share capital is 500,000,000 shares. Details of our share capital are
also set out in note 27 to the Financial Statements.
During 2022 we undertook a share buy back programme which began on 21 April 2022 and continued until 30 September 2022. During this period,
1,176,439 ordinary shares were acquired which are now held in treasury. These treasury shares are not entitled to dividends and have no voting rights
at LSL’s general meetings. The issued share capital at the date of this Report is 105,158,950 shares and the total number of voting rights (excluding
treasury shares) is therefore 103,982,511.
We have authority under section 701 of the Companies Act 2006 to make market purchases of our ordinary shares on such terms and in such manner
that the Directors determine. The maximum shares we can buy back is capped at 10% of our issued ordinary share capital, being 10,515,895 ordinary
shares. This authority will expire at the conclusion of the 2023 AGM and we are seeking a renewal of this authority. Please see the Notice of Meeting
for further details.
Rights and obligations attached to shares
Each issued share has the same rights attached to it. The rights of each shareholder include:
a. the right to vote at general meetings;
b. to appoint a proxy or proxies;
c. to receive dividends; and
d. to receive circulars from LSL.
We will seek shareholder approval for the renewal of authority for the Directors to allot unissued shares and for the power to disapply statutory
pre-emption rights at the 2023 AGM. We obtained shareholder approval to disapply pre-emption rights at the 2022 AGM.
Full details of the deadline for exercising voting rights in respect of the resolutions to be considered at the 2023 AGM are set out in the Notice of
Meeting.
On a show of hands at a general meeting, 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 they hold. The Notice of Meeting which
is published with this Report specifies deadlines for appointing a proxy in relation to resolutions to be passed at the AGM. Where the Chair 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 our website after the meeting (lslps.co.uk).
There are no restrictions on the transfer of ordinary shares in LSL other than:
a. certain restrictions which may from time to time apply under applicable laws and regulations (for example, insider trading laws and market
requirements relating to closed periods); and
b. pursuant to the Listing Rules of the FCA/UKLA and our Share Dealing Policy, whereby certain employees require approval to deal in LSL’s
securities.
Our articles of association may only be amended by way of a special resolution at a general meeting of our shareholders.
Report of the Directors
52
Employee share schemes
We have two employee benefit trusts. The first was established in 2006, prior to our flotation on the London Stock Exchange. We appointed Apex
Financial Services (Trust Company) Limited (formerly Capita Trustees Limited) (ESOT Trustees) to operate the LSL Property Services plc Employee
Share Scheme (ESOT). The ESOT is able to acquire and hold shares to satisfy options or awards granted under any discretionary share option scheme,
long term incentive arrangement or Save As You Earn (SAYE) plan operated by us. Details of the shares acquired by the Trust are set out in note 14 to
the Financial Statements. The ESOT Trustees have waived the right to any dividend payment in respect of each share held by them (including future
payments).
We also operate the LSL Property Services plc Employee Share Incentive Plan (BAYE or SIP) for our colleagues, which was established in 2007 and is
administered by Link Market Services (Trustees) Limited (formerly Capita IRG Trustees Limited) (Link). Link is the trustee of the LSL Property Services
Employee SIP Trust (Trust), in which shares are held on behalf of participants in the BAYE. The shares held in the Trust have dividend and voting rights
in line with the rules of the BAYE. At 31 December 2022, the Trust held 1.01% (2021: 0.89%) of the issued share capital 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, valuation 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
those income streams.
The Group is party to a number of banking agreements, which are terminable by the bank upon a change of control of the Group and all outstanding
amounts become immediately due.
Events after the reporting period
On 13 January 2023, the Group announced the sale of Group First and RSC to Pivotal Growth, the Group’s joint venture with Pollen Street Capital.
The consideration payable will be 7x the combined Group First and RSC EBITDA in the calendar year 2024, subject to working capital adjustments,
capped at a maximum of £20m.
On 26 January 2023, the Group announced the sale of Marsh & Parsons (Holdings) Limited and its subsidiary Marsh & Parsons to a subsidiary of
Dexters London Limited for consideration of £29m payable on completion, subject to working capital adjustments.
On 11 April 2023, the Group announced the disposal of two further subsidiaries, Embrace Financial Services and F2P to Pivotal Growth.
The Group received consideration of £7.8m for F2P and will receive consideration of 7x 2024 EBITDA in the calendar year 2024 for Embrace Financial
Services, subject to working capital adjustments, capped at a maximum of £10m.
The accounting for these disposals will be included in the 2023 interim Financial Statements.
In February 2023, the Group agreed a restatement and amendment to its banking facility which runs to May 2026 with a new limit of £60m. This
replaced the previous RCF which had a maturity date of May 2024 and credit limit of £90m.
On 30 March 2023 the Group sold its 15.37% shareholding in VEM to Connells for consideration of £0.2m, at 31 December 2022 the Group held its
investment in VEM at a fair value of £0.2m.
53
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Substantial shareholdings
At 31 December 2022 and as at 12 April 2023, the shareholders set out below have notified LSL of their interest under DTR 5:
31 December 2022 12 April 2023
Institution
Nature of
shareholding
Number of
ordinary shares
% of ordinary shares
(excluding treasury
shares*)
Number of
ordinary
shares
% of ordinary shares
(excluding treasury
shares*)
FMR LLC Beneficial 9,901,380 9.52 9,901,380 9.52
Kinney Asset Management, LLC Beneficial 8,509,210 8.18 8,509,210 8.18
Setanta Asset Management Limited Beneficial 6,288,162 6.05 6,288,162 6.05
SMF UK Management LLP Beneficial 5,523,218 5.31 5,523,218 5.31
Liontrust Asset Management plc Beneficial 5,485,475 5.28 5,485,475 5.28
Harris L.P Beneficial 5,220,081 5.02 5,220,081 5.02
Brandes Investment Partners L.P Beneficial 5,172,615 4.97 5,172,615 4.97
FIL Limited Beneficial 5,161,887 4.96 5,161,887 4.96
Franklin Templeton Institutional, LLC Beneficial 3,211,900 3.09 3,211,900 3.09
Individual shareholders (excluding Directors):
David Newnes Beneficial 3,479,910 3.35 3,479,910 3.35
*Treasury shares are not entitled to dividends and have no voting rights at the Company's general meetings.
Political donations
LSL does not make any monetary contributions to political campaigns, political organisations, lobbyists or lobbying organisations or other tax-exempt
groups. LSL Group companies are members of trade associations which may be involved in political activities. LSL does consider that its membership
of these bodies amounts to LSL companies being engaged in or contributing to political activities.
Directors’ responsibility statement
Each of the individuals who were Directors of the Board during 2022 (this includes Helen Buck) confirm, to the best of their knowledge:
a. That the consolidated Financial Statements, prepared in accordance with UK adopted International Accounting Standards, give a true and fair
view of the assets, liabilities, financial position and profit of the Parent Company and undertakings included in the consolidation taken as a whole.
b. That this Report, including the Strategic Report, includes a fair review of the development and performance of the business and the position of
the Company and undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties
that they face.
c. That they consider this Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to
assess the Company’s position, performance, business model and strategy.
Disclosure of information to the auditor
Having made enquiries of fellow Directors and of the external auditor, each of the individuals who were Directors of the Board in 2022 confirm that:
a. 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 auditor is unaware.
b. 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 auditor is aware of that information.
The Report of the Directors has been approved by and is signed on behalf of the Board of Directors
Sapna B. FitzGerald
Company Secretary
12 April 2023
Corporate Governance Report
including Nominations Committee Report
54
This section of the Report details our corporate governance arrangements. LSL has a premium listing on the London Stock Exchange. As a result, we
are subject to the UK Corporate Governance Code (Code) together with the Financial Conduct Authority’s (FCA) requirements. A copy of the Code can
be obtained from frc.org.uk.
Compliance with the Code in 2022
Our Board is committed to operating in accordance with the Code. At 31 December 2022, we complied with the Code in all respects.
Application of the Code
This section of the Report explains the main aspects of LSL’s governance arrangements and details how we apply the principles and comply with
the provisions in the Code. Other sections of this Report also contain details relating to the measures we have put in place to comply with the Code
including:
• Principle C: the Principal Risks and Uncertainties section details LSL’s framework of prudent and effective controls which enable risks to be assessed
and managed.
• Principle E: this section of the Report together with the Stakeholder Engagement and ESG sections detail how LSL seeks to take into account
the views of its workforce and ensures that its workforce policies and practices are consistent with the Group’s values and support its long term
sustainable success.
• Principles F and H: the role of the Chair and the Non Executive Directors is central to our compliance with the Code. The Chair leads the Board,
providing oversight of its arrangements and promoting a culture of openness and debate. The Non Executive Directors provide constructive
challenge, strategic guidance, offer specialist advice and hold Management to account. Details of arrangements can be found in this section of the
Report and the Director biographies can be found in The Board section of this Report (page 44).
2022 activities:
In our Annual Report and Accounts 2021, we identified the following as areas of non-compliance, which we have addressed during 2022:
Provision 2022 activity
Provision 11: At least half the board, excluding the chair, should be non
executive directors whom the board considers to be independent.
On 4 March 2022, we appointed Sonya Ghobrial as an independent Non
Executive Director. With effect from that date, the Board’s composition
has complied with the Code.
Provision 23: The annual report should describe the work of the
nomination committee, including the policy on diversity and inclusion,
its objectives and linkage to company strategy, how it has been
implemented and progress on achieving the objectives.
Following the publication of the FCA’s final rules in relation to diversity
policies, in April 2022 the Board adopted a diversity policy which covers
the Board and the Senior Management Team, including the Executive
Committee. See also Board Diversity and Inclusion below (page 63).
2023 compliance
Provision 19 states that: The chair should not remain in post beyond nine years from the date of their first appointment to the board. To facilitate
effective succession planning and the development of a diverse board, this period can be extended for a limited time, particularly in those cases where
the chair was an existing non executive director on appointment. A clear explanation should be provided.
In January 2023, Bill Shannon’s term on the Board exceeded nine years and on 20 February 2023 we announced Bill’s intention to retire at the 2023
AGM. To support the succession process, the Board resolved to extend Bill’s term to expire at the end of December 2023. Notwithstanding this
extension, Bill announced his intention to retire from the Board at the end of 2023 AGM and on 4 April 2023 we announced the appointment of David
Barral as Chair Designate.
Board roles and responsibilities
The Board is responsible for establishing the Group’s purpose, its overall management and for decisions on the strategy. It also monitors financial
performance and under the Group’s Matters Reserved for the Board (MRB) policy it is also responsible for formulating the Group’s risk appetite
framework (see the Principal Risks and Uncertainties section for more information on our risk arrangements, including plans for development of
these arrangements during 2023) (page 25).
Set out below is a diagram which explains how our purpose, culture, values, strategy and business model link together with each other and how they
interact with our Living Responsibly programme and deliver long term value for our stakeholders.
55
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Whistleblowing
The ESG Report on page 30 explains how the Board oversees the Group’s whistleblowing and speak up arrangements, including how the Board has
received assurance on the effectiveness of these arrangements in 2022.
The Board’s Committees
The Board has four Committees, and the terms of reference for the Nominations, Remuneration and Audit & Risk Committees are available on our
website (lslps.co.uk). The Nominations, Remuneration and Audit & Risk Committees have meetings scheduled as part of the annual planning process.
Additional meetings will be organised during the year as required. The Disclosure Committee only meets when required and as directed by the Board.
See below for details of the number of meetings for the Board and each of the Committees in 2022.
Our purpose:
To provide first class services to mortgage
and insurance advisers, estate agents,
lenders and their customers, to create
long term benefits for external
stakeholders and our people.
Strategy:
Financial Services is at the heart of
our strategy and we will conƟnue to
grow our Surveying & ValuaƟon and
Estate Agency Divisions, including a
specific focus on leveraging their
capabiliƟes to grow the Financial
Services Division.
Business model:
We leverage our technology,
infrastructure, capital and
people to provide first class
products and services to
mortgage and insurance
intermediaries, franchisees,
lenders and consumers for the
benefit of our shareholders,
colleagues, customers and
suppliers.
Culture and values:
The right people:
who accept accountability
for their acƟons.
Doing the right things:
which deliver customer
expectaƟons.
In the right way: being
open, challenging of
themselves and supporƟng
others.
Long term value for our
stakeholders:
Long term benefits for our
external stakeholders, our
people and our surroundings.
Our commitment to
Living Responsibly:
Increase the diversity of our
Board and workforce.
Build an inclusive culture
where colleagues are
supported to develop and
thrive.
Support colleagues to
connect with our
communiƟes.
Minimise our environmental
footprint.
Ensuring excellent
governance.
Our business model and
strategy generate value
for our stakeholders
Culture aligned to
purpose values and
strategy
Become a more
sustainable
business
Purpose drives our business model and
shapes our strategic decisions
Corporate Governance Report including Nominations Committee Report
56
Committee Members Roles and responsibilities
Nominations Bill Shannon (Chair)
Gaby Appleton
Darrell Evans
James Mack
Sonya Ghobrial
From 3 April 2023, David Barral is also a
member. He will Chair the Committee from
the close of the 2023 AGM and Bill will retire
from the Committee.
• Lead the process for appointments to the Board and its
Committees.
• Oversee succession plans for the Directors and members
of the Senior Management Team (including the Executive
Committee).
• Approve the Diversity Policy and targets, and monitor the
Group’s compliance with the policy and targets.
Remuneration Darrell Evans (Chair)
Bill Shannon
Gaby Appleton
James Mack
Sonya Ghobrial
David Barral joined the Committee on
3 April 2023. Bill will retire from the
Committee at the close of the 2023 AGM.
• Determine the policy for Executive Director remuneration
and set the remuneration for the Executive Directors,
the Chair and members of the Senior Management Team
(including the Executive Committee), together referred to as
the RemCo Population.
• Review workforce remuneration and related policies and
alignment of incentives and rewards with culture, when
setting Executive remuneration policy.
See the Directors’ Remuneration Report for further details on
how the Committee has discharged its roles and responsibilities
in 2022 (page 73).
Audit & Risk James Mack (Chair)
Gaby Appleton
Darrell Evans
Sonya Ghobrial
• Oversight of audit, risk and internal control arrangements.
See the Audit & Risk Committee Report (page 67) and the
Principal Risks and Uncertainties section (page 25) for further
details, including details of our internal controls and risk
management arrangements.
Disclosure Bill Shannon
Gaby Appleton
David Stewart
Adam Castleton
David Barral will replace Bill on the
Committee from the close of the 2023 AGM.
• Ensuring compliance with UK Market Abuse Regulation (UK
MAR) arrangements.
Executive Committee
We have an Executive Committee, which is headed by David Stewart. At the date of this Report the team comprises:
Name Role Other information
David Stewart Group Chief Executive Officer (CEO) Executive Director
Adam Castleton Group Chief Financial Officer (CFO) Executive Director
Jon Round Group Director of Financial Services PDMR
Steve Goodall Managing Director – Surveying & Valuation PDMR
Paul Hardy
1
Managing Director – Estate Agency PDMR
Andy Deeks Group Chief Strategy Officer (CSO) PDMR
David Akinluyi Group Chief Operating Officer (COO) PDMR
Sapna B. FitzGerald General Counsel and Company Secretary
Debra Gardner
2
Group Human Resources Director
Notes:
1
Paul was appointed into the role of Managing Director – Estate Agency in March 2023. During 2022, Helen Buck was the Executive Director – Estate Agency.
2
Debra was appointed into the role of Group HR Director in January 2023. During 2022, John McConnell was the Group’s HR Director.
57
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Executive Committee diversity
At the date of this Report, the Executive Committee includes two women and two persons of colour. For further details relating to the diversity of our
colleagues, including the Senior Management Team, see the ESG Report (page 30).
Board composition
The Directors at 31 December 2022 are shown in the table below. Biographical details of each person who was a member of the Board in 2022 and is
a member of the Board at the date of this Report are contained in The Board section of this Report (page 44) (this includes David Barral, who joined
the Board as Chair Designate on 3 April 2023).
The details include information relating to any other directorships. The Board does not consider that any of the Directors’ other appointments
interfere with their appointment by LSL.
Name Role Additional role
David Stewart Executive Director Group Chief Executive Officer (CEO)
Adam Castleton Executive Director Group Chief Financial Officer (CFO)
Helen Buck
1
Executive Director Executive Director – Estate Agency
Bill Shannon
2
Non Executive Director Chair
Gaby Appleton Independent Non Executive Director Senior Independent Director (SID)
Darrell Evans Independent Non Executive Director Chair of the Remuneration Committee and NED for workforce
engagement
James Mack Independent Non Executive Director Chair of the Audit & Risk Committee
Sonya Ghobrial Independent Non Executive Director
Simon Embley Non Executive Director
Notes:
1
Helen retired from the Board and the Executive Committee on 31 March 2023.
2
Bill Shannon was considered to be independent prior to his appointment as a Director. In January 2023 Bill’s term reached nine years and the Board agreed to
extend his term to the end of 2023. On 20 February 2023 we announced Bill’s intention to retire which will occur at the end of the 2023 AGM. David Barral, who
joined the Board as Chair Designate on 3 April 2023, will take over as Chair from the end of the 2023 AGM. David is considered to be independent.
Board diversity
At 31 December 2022, the Board included six male and three female Directors and it did not include any person of colour. In relation to the Board’s
senior roles, this includes three males (Chair, CEO and CFO) and one female (SID). The Board composition does not meet the Group’ diversity target,
which is detailed in our Diversity Policy. See Board Diversity and Inclusion below for further details.
At the date of this Report, the Board includes seven male and two female Directors and does not include any person of colour. Following the 2023
AGM, the number of male Directors will change to six (following the retirement of Bill Shannon).
Board skills and experience
During 2022 and at the date of this Report, the Board includes skills and experience in the following areas:
a. Strategy.
b. Technology and digital services.
c. Operations.
d. Governance.
e. ESG.
f. Investor relations.
g. Risk and compliance.
h. Sales and marketing.
i. Finance.
j. Retail including financial services and consumer services.
k. Residential and commercial property.
l. Entrepreneurship.
m. Employment and human resources.
n. Banking.
o. Treasury.
p. Financial controls.
Corporate Governance Report including Nominations Committee Report
58
q. Audit.
r. Professional information solutions.
Independent Non Executive Directors
At 31 December 2022, all of the Directors identified as independent met the criteria set out in provision 10 of the Code.
As stated above, Bill’s current three year term expired on 6 January 2023 and his appointment was extended to the end of 2023 to allow the Board to
implement succession arrangements. Bill will retire at the close of the 2023 AGM.
Director elections/re-elections
All Directors will retire at the AGM and, except for Helen Buck and Bill Shannon, they will stand for election/re-election. Helen Buck left the Group on
31 March 2023 and Bill Shannon will retire from the Board at the close of the AGM. Further details relating to the Directors’ election will be included
in the Notice of Meeting.
Director appointment arrangements
Each Executive Director has a service contract, and each Non Executive Director (including the Chair) has a letter of appointment. These documents
are available for inspection at our registered office and at our York office (location of Company secretariat team) during normal business hours and at
each AGM. Further details relating to the Directors’ appointments are contained in the Directors’ Remuneration Report.
Key Board roles
There is clear division of responsibilities between the key roles on the Board, details of which are set out on our website (lslps.co.uk) and are
summarised below.
Role Responsibilities summary
Chair • Leadership of the Board, including setting its agenda and overseeing its decision making processes
and arrangements.
• Shaping the culture, style and tone of discussions and promoting openness and debate.
• Leading regular Non Executive Director only meetings, to support the Board’s discussions.
• Overseeing our stakeholder engagement arrangements.
• Supporting the Group CEO and other Directors, including ensuring appropriate training and
induction arrangements are in place.
• Leading our annual Board and Committee evaluation exercise.
Group Chief Executive Officer • Running the business, using delegated powers set by the Board.
• Proposing and delivering Group strategy.
• Overseeing Group culture and sustainability priorities (ie Living Responsibly/ESG).
• Supporting the Board’s decision making by providing appropriate information.
Senior Independent Director • Acting as a sounding board for the Chair.
• Leading the evaluation of the Chair.
• Providing an alternative point of contact for Directors and stakeholders (including shareholders).
59
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Board and committee meetings in 2022
Each year, we put in place a schedule of meetings for the Board and our Committees, which are supplemented by additional meetings as required.
The Directors meet in person and virtually and the table below summarises the meetings for 2022 and each Director’s attendance. Where a Director
is not a member of a Committee, their attendance or non-attendance is not reported. We also schedule meetings for the Non Executive Directors to
meet without the Executive Directors. The Audit & Risk Committee also meets the auditor without the Executive Directors.
2022 Board
Member
Attendance at Board
meetings (including
strategy meetings)
(total 17 held in the year)
Attendance at Audit
& Risk Committee
meetings
(total 3 held in the year)
Attendance at
Remuneration
Committee meetings
(total 5 held in the year)
Attendance at
Nominations Committee
meetings
(total 6 held in the year)
Attendance at Disclosure
Committee Meetings
(total 2 held in the year)
Gaby Appleton 16
1
3 4
1
5
1
0
Helen Buck 17
Adam Castleton 17 2
Simon Embley 16
2
Darrell Evans 13
3
2
3
5
3
5
3
Sonya Ghobrial 13
4
2
4
3
4
5
4
James Mack 16
2
3 5 6
Bill Shannon 17 5 6 0
David Stewart 17 2
Notes:
1
Gaby missed one Board meeting, one Remuneration Committee meeting and one Nominations Committee meeting. She received the papers prior to each
meeting and was able to provide feedback for the other Directors to consider at the meeting.
2
Simon and James each missed one Board meeting. They received the papers prior to each meeting and were able to provide feedback for the other Directors to
consider at the meeting.
3
Darrell missed four Board meetings, one Audit & Risk Committee and one Nominations Committee meeting. He received the papers prior to each meeting and
was able to provide feedback for the other Directors to consider at the meeting.
4
Sonya was appointed to the Board on 4 March 2022 and the table records the meetings she attending following her appointment.
Board meeting and decision making arrangements
At the start of each year, we put in place a planner with a schedule of matters for discussion, which includes special business as well as standing items.
The Board also has a MRB policy, which identifies matters that require Board approval and matters that are delegated to the Group CEO and Group
CFO for approval. It also includes a list of matters which the Board will receive for information.
During 2022 the MRB policy was reviewed in detail, to identify ways to improve Board reporting and decision making. The review considered
governance best practices, including guidance published by the Chartered Governance Institute.
As a result of this review, the Board agreed to review policies identified in the MRB policy on a triennial basis, unless there is an event (including a
change in law) which requires the policy to be amended and submitted for approval in the interim.
For each scheduled meeting the Directors receive regular reports that may include the following:
a. Group CEO’s Report – strategy and key project updates, commentary on the Group’s performance and Living Responsibly KPIs.
b. Group CFO’s Report – Group financial performance review and risks.
c. Divisions Report – each managing director provides a report on their businesses which covers financial performance, risk, operational matters
and KPIs.
d. Group CSO Report – strategy updates.
e. Group COO Report – operational matters, including resilience and strategic projects tracking.
f. Group HR Director’s Report – colleague matters and KPIs including staff turnover data and whistleblowing reporting.
g. Governance Report – legal and Matters Reserved for the Board policy reporting (being either information which is required to be given to the
Board or proposals requiring Board approval).
h. Shareholder Report – report detailing changes to our investor register.
i. Board Planner – record of meetings conducted during the year together with agenda items scheduled for future meetings. At the end of each
meeting the Board discusses and agrees items for inclusion in the agenda for the next meeting(s).
The Board will also receive special business presentations, which could relate to a particular business area or initiative.
Reporting arrangements have also been reviewed and improved during the year. For scheduled meetings, each member of the Executive Committee
submits a report which focuses on key matters and risks relevant to them. In months with no scheduled meetings, we decided to stop the creation of
reports by Executive Committee members and instead the Directors are invited to a virtual meeting with the Group CEO and Group CFO, to receive
updates on Group performance and strategic projects. This has reduced the volume of Board reporting and ensures that Board sessions are focused
Corporate Governance Report including Nominations Committee Report
60
on material matters and strategy. The quality of Board reporting is also covered by the annual evaluation exercise, as we seek to continuously improve
our reporting and decision making arrangements.
The Directors, the Board and the Committees are all supported by the Company Secretary (Sapna B. FitzGerald), who is responsible for ensuring
adherence to governance requirements and policies. This includes managing meeting arrangements and supporting Director induction and training.
See also our s172 Statement, which is included in the Stakeholder Engagement section of this Report (page 21).
Board decisions in 2022
Set out below is a summary of some of the Board’s key decisions during 2022, together with how any relate to our strategy and our key stakeholders:
Key topic Link to strategy Relevant stakeholder(s)
Strategy: The Board has reviewed Group and Divisional projects
to identify projects to be prioritised because they support the
delivery of the Group’s strategy.
Focus on strategic priorities: The Board is
focused on ensuring the Group delivers its key
strategic initiatives and the objective of the
prioritisation exercise was to ensure that Group
and Divisional resources are focused on strategic
matters.
• Colleagues
• Customers
• Suppliers
• Shareholders
Pivotal Growth: The Board has supported our investment in the
joint venture with Pollen Street Capital.
Focus on D2C Financial Services through
Pivotal Growth: Pivotal Growth has completed a
number of transactions pursuant to its strategy
to buy and build a leading national mortgage
broker.
This included the disposal of our D2C broker
businesses to Pivotal Growth which also
supported our simplification strategy (see
below) and focus on delivering B2B services.
• Shareholders
• Colleagues
• Customers
Group simplification: The Board approved the disposal of
assets which are not core to the Group’s strategy.
These disposals are in line with our strategy to simplify the
Group, and to focus on developing our B2B businesses.
The disposals also reduce our exposure to housing market
cycles.
Focus on B2B services and dispose of non-core
assets: A number of disposals were completed
in 2023 and are reported as post-balance sheet
events.
The disposal of Marsh & Parsons provided the
Group with capital and balance sheet flexibility
to take advantage of opportunities to support
investment in our strategy and reduce our
exposure to housing market cycles which are
more volatile in London.
The divestments of the D2C broker businesses
and PRSim (our private rented sector property
management business), has simplified the Group
structure.
• Colleagues
• Shareholders
• Customers
• Suppliers
Capital allocation and the Group’s banking facility: During the
year, the Board approved the amendment and restatement of
the Group’s £60m revolving credit facility, which took place in
February 2023. The facility now expires in 2026.
Capital to support strategy: The revised
facility provides the Group with capital and
balance sheet flexibility, to take advantage
of opportunities to support and invest in our
strategy.
• Shareholders
Share buy back: During the year, taking into account
shareholder feedback, the Board approved a share buy back
programme.
Shareholder value: The programme which was
paused due to a lack of share liquidity, delivered
a return to shareholders and was undertaken
following shareholder feedback.
• Shareholders
61
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Key topic Link to strategy Relevant stakeholder(s)
Review of Group costs: The Board considered reviews to
identify cost reductions and also review target operating
models.
Group simplification: This included a review
of procurement arrangements, to identify
synergies across the Group.
It also included the commencement of a review
of the Group’s operating model, to identify
further opportunities for cost reduction.
• Colleagues
• Shareholders
• Suppliers
ESG: The Board considered the development of the Group’s
sustainability programme, including our purpose, values and
culture and ensuring the alignment to our strategy.
Development of our sustainability strategy:
Focus on the development of our Living
Responsibly strategy.
• Shareholders
• Colleagues
• Customers
Governance matters (not directly linked to strategy)
Development of stakeholder communication arrangements. The Board has sought to improve its
communications with stakeholders, especially
investors and colleagues.
• Shareholders
• Colleagues
Review of governance arrangements. There has been focus during the year on making
continuous improvements to Board reporting
and decision making arrangements.
• Shareholders
• Colleagues
• Customers
• Suppliers
Directors’ conflicts of interest
We have arrangements to manage any conflict of interest that may arise in relation to a Director. We maintain a register of Directors’ interests
and ensure that where a conflict is declared, the Director is either excluded from discussions or obtains the Board’s approval to participate.
Notwithstanding this, no Director is permitted to participate in any decision relating to their appointment, including their remuneration.
Director induction and training
Induction plans are tailored for each Director when they join. During 2022, James Mack completed the induction we put in place in 2021 and Sonya
Ghobrial began her induction, which will be completed in 2023. An induction plan is being put in place for David Barral, which will be delivered during
2023.
The induction plans include the supply of previous meeting papers, and meetings with: members of the Board and the Executive Committee, our
corporate brokers and our internal and external auditors. For existing Directors, training is arranged as required.
Board and committee evaluation
Each year the Directors review the Board and the Committees. Gaby Appleton led the process for 2022, supported by the Company Secretary. Whilst
the intention had been to engage an external provider to support the process in 2022, the Directors decided that it would be beneficial to defer an
externally facilitated evaluation, taking into account the changes which are occurring during the year. This will allow everyone to settle into their new
roles ahead of the exercise. This year therefore followed the format of previous years, using a questionnaire covering the following areas.
a. Composition, succession and evaluation.
b. Leadership and division of responsibilities.
c. Meeting processes.
d. Evaluation processes.
e. ESG and corporate sustainability (including purpose, values and culture).
f. Additional comments.
The questionnaire was supplemented by one-to-one calls between each Director and Gaby. The responses were then anonymised, consolidated and
shared with the Board ahead of a scheduled discussion.
2022 evaluation outcomes
The 2022 evaluation concluded that each Director, the Board and its Committees had all been effective in discharging their responsibilities. Noting
their desire for continual improvement, the Directors agreed to progress the following in 2023:
a. Continue the Board’s succession planning with a focus on improving its diversity of skills, gender, ethnicity, experience, social background and in
relation to the NEDs, seek to have a mix of portfolio NEDs and NEDs with executive roles.
Corporate Governance Report including Nominations Committee Report
62
b. Continue to improve Board reporting, meeting arrangements and communication of Board expectations to the Divisional Management Teams to
support continued Board effectiveness.
c. Consider use of an externally facilitated evaluation in the next few years.
The evaluation exercise also considered the Board’s composition. This formed a useful part of the Board’s succession planning review, as it provided
an opportunity to review skills, assess composition and agree plans for filling any gaps in skills and diversity. Further details relating to succession
planning, diversity and recruitment are set out below, within the Nominations Committee Report.
Actions in response to the 2021 evaluation exercise:
As part of the Board’s year end review, the Directors also reviewed the completion of actions identified during the previous year and confirmed that
the actions were either completed or deferred for completion in 2023.
These included:
Agreed action Progress report
a. Continuing to prioritise succession planning. This included recruiting an
additional Non Executive Director in 2022 and, through that recruitment, taking
steps to improve the Board’s diversity (especially gender, ethnicity, expertise and
sector).
Completed – we appointed Sonya in March 2022 and on 4
April 2023 we announced the appointment of David Barral as
Chair Designate.
b. Ensuring that each Committee provides sufficiently detailed reports on their
discussions to the Board, so that all Directors are briefed on the Committees’
work.
Completed – at each Board meeting following a Committee
meeting, the relevant Committee Chair provides a verbal
report. Helen Buck, who did not regularly attend the Audit &
Risk Committee, also received copies of the minutes and had
access to the Committee’s papers.
c. Undertaking an externally facilitated evaluation in respect of 2022 and consider
including feedback from our brokers and our auditor.
Deferred – the Board decided to defer this as it did not wish
to undertake this ahead of a new Chair joining the Board.
d. Making continual improvements to our Board reporting and evaluation
arrangements, including KPIs, management information and Board papers; and
ensuring that Board meeting time is prioritised to the most important issues.
The Board will consider alternating the focus within meetings between special
projects updates and divisional deep dives.
Completed – reporting continued to evolve during 2022.
e. Further develop the Group’s ESG strategy and Living Responsibly programme. Completed – we published our first Living Responsibly
Report in 2022 and progressed our sustainability priorities.
Nominations Committee Report
During 2022, the Nominations Committee was chaired by Bill Shannon and its other members were Gaby Appleton, Darrell Evans, James Mack and
Sonya Ghobrial (from March 2022). David Barral joined the Committee on 3 April 2023 and he will take on the role of Chair at the close of the 2023
AGM, at which point Bill will retire from the Committee.
2022 highlights
The Nominations Committee met six times in 2022 and its discussions and decisions included:
a. Extensions of Non Executive terms, with Gaby Appleton and Darrell Evan’s terms both extended by three years. The Committee also implemented
succession planning arrangements for the role of the Chair and to support this, the Board resolved to extend Bill Shannon’s term to 31 December
2023.
b. Retirement of Helen Buck from the Board in 2023 and consideration of her replacement. This included agreeing that her replacement would not
be an Executive Director appointment. This is consistent with the Managing Directors of the other two Divisions not being Executive Directors,
although they are all PDMRs.
c. Review of the Executive and Senior Management Teams (including the Executive Committee). This included consideration of the Divisional
leadership teams and also the appointments of individuals into senior management roles across the Group.
d. Review of Board composition, including a review of Non Executive Director skills, experience, expertise, diversity and recruitment.
e. The Group’s diversity and inclusion projects and consideration of the FCA consultation on the diversity of listed company boards, committees and
senior management teams. The Committee also adopted the Diversity Policy. See below for further details.
63
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Non Executive Director recruitment
During 2021 and into 2022, we worked with Nurole ahead of appointing Sonya Ghobrial as an independent Non Executive Director. The appointment
was reported in the Annual Report and Accounts 2021. Sonya’s appointment on 4 March 2022 improved our gender diversity and she also brings
highly relevant experience, which adds to the continuing development of the Group’s strategy. In particular, her experience in ESG matters is
supporting us in the development and communication of our Living Responsibly strategy.
During 2022, following a tender process, we selected and appointed Heidrick & Struggles to assist with the recruitment of a Non Executive Chair to
succeed Bill Shannon. In carrying out our search we sought to ensure that the Nominations Committee was presented with a diverse longlist, from
which it could make its selection. Heidrick & Struggles presented the Nominations Committee with a longlist from which Board members selected a
shortlist of appointable candidates for interview following which David Barral was appointed as Chair Designate.
Heidrick & Struggles are signatories to the Government’s Standard Voluntary Code of Conduct for Executive Search Firms. In all of our Director
searches, we are clear that the Board is committed to improving its diversity (including gender, ethnicity and expertise) and this was a very important
consideration for the Board and the Nominations Committee in 2022.
Neither Nurole nor Heidrick & Struggles has any connection to the Group, other than the provision of these services.
Board diversity and inclusion
The Nominations Committee and the Board received presentations on the Group’s initiatives to promote diversity and inclusion and details of these
initiatives in relation to colleagues are included in the ESG Report (page 30).
In relation to the diversity of the Board, its Committees and our Senior Management Team (including the Executive Committee), following publication
by the FCA of the final rules in April 2022, in May 2022 following the recommendation of the Nominations Committee, the Board adopted its first
diversity policy. A copy of the policy is available at lslps.co.uk.
The Diversity Policy sets out LSL’s approach to diversity and inclusion in relation to the Board, its Committees and the Senior Management Team. It
sits alongside other Group employment policies, which also seek to promote diversity and inclusion across the Group.
Summary of the Diversity Policy:
Importance of
diversity
The Board recognises the benefits of diversity. Through its recruitment, appointment and succession planning arrangements,
LSL seeks to promote diversity including professional skills, experience, social backgrounds, gender and ethnicity, in addition
to individual cognitive and personal strengths.
In relation to the Board, LSL believes that diversity has a positive effect on decision making and benefits shareholders
and other stakeholders. The Directors recognise that the Board and Committees set the tone for diversity and inclusion
throughout the Group and that by actively reviewing, monitoring and engaging with discussions of diversity and inclusion, the
Board is best able to drive a positive impact to the advantage of all stakeholders.
While the policy includes targets in relation to gender and ethnicity, LSL recognises that other types of diversity exist,
including sexual orientation, disability, neurodiversity and socio-economic background.
Role of the
Nominations
Committee
The Committee leads the process for appointments to the Board and its Committees, and ensures that plans are in place for
orderly succession to both the Board and Senior Management positions. In discharging its duties, the Committee oversees the
development of a diverse pipeline for succession.
Role of the
Remuneration
Committee
The Committee is responsible for the remuneration policy relating to the Chair, the Executive Directors and Senior
Management (including the Company Secretary). The Remuneration Committee also reviews workforce remuneration and
related policies and the alignment of incentives and rewards with culture and the promotion of diversity and inclusion in the
LSL Group.
Annual evaluation As part of the annual evaluation exercise, the Directors consider the Board and each Committee’s composition, diversity and
how effectively the members work together to achieve LSL’s objectives.
Diversity targets The Board has adopted measurable objectives for diversity of the Board and the Senior Management, which align with the
FCA’s final rules (see below).
Annual reporting LSL will report annually in the Corporate Governance Report on whether it has met its targets and if not, the reasons for not
meeting the targets. The reporting will also include details of the processes used in relation to appointments to the Board, its
Committees and Senior Managers and their succession plans, and it will detail any changes to the Board that have occurred
between the year end and the date that the annual report and accounts are approved by the Board. Finally, the reporting will
include an explanation of LSL’s approach to collecting data used for the purposes of making the disclosures required by the
Listing Rules.
Policy review The policy is subject to an annual review by the Nominations Committee on behalf of the Board.
Corporate Governance Report including Nominations Committee Report
64
Diversity targets (effective April 2022):
1 January 2023 reporting
Board
Gender:
a. At least 40% women Target not met: 33%
b. At least one woman in the role of Chair, Group CEO, Group CFO or SID Target met: 100%
(Gaby Appleton is the SID)
Ethnic diversity: at least one Director who is from a minority ethnic background Target not met: None
Senior Management Team
Gender diversity: by 1 January 2023 at least 33% are women and at least 33% are men Female target not met: 28% female
Male target met: 72% male
Ethnic diversity: by 1 January 2023 at least 11% are from a minority ethnic background Target not met: 10%
The targets will be reviewed during 2023 and may be adjusted by the Board on the recommendation of the Nominations Committee.
We have not yet met our targets relating to Board or Senior Management level diversity. This has been due to limited movement at these levels within
2022.
In relation to our recruitment activities, the Nominations Committee is focused on ensuring the inclusion of women and individuals of colour in Board
and Senior Management (including Executive Committee) searches. We have reviewed our engagement with recruitment partners for senior roles
and ensure that they have signed up to the Voluntary Code of Conduct for Executive Search Firms.* As part of this we have briefed recruitment/
search partners on the importance of diversity and inclusion and are also working to ensure the longlists they provide meet their commitments in
the code. During 2023 we will further develop our approach to engaging recruitment/search partners and ensure clarity of communication of these
priorities for prospective applicants.
In April 2022, the FCA published its final rules on diversity reporting. The data set out below related to the Board and Executive Committee as at the
date of this Report (2021: 4 March 2022):
Table 1 reporting on sex/gender representation
Gender
Number of Board
members % of Board
Number of senior
positions on the
Board
1
Number in
Executive
Committee
% of Executive
Committee
Men 7
(2021: 6)
78
(2021: 66)
3
(2021: 3)
7
(2021: 7)
78
(2021: 78)
Women 2
(2021: 3)
22
(2021: 34)
1
(2021: 1)
2
(2021: 2)
22
(2021: 22)
Other categories – – – – –
Not specified/prefer not to say – – – – –
Table 2 reporting on ethnicity representation
Ethnicity
Number of Board
members % of Board
Number of senior
positions on the
Board
1
Number in
Executive
Committee
% of Executive
Committee
White British or other White (including minority white groups) 9
(2021: 9)
100
(2021: 100)
4
(2021: 4)
7
(2021: 7)
78
(2021: 78)
Mixed/Multiple Ethnic Groups – – – – –
Asian/Asian British – – – 1
(2021: 1)
11
(2021: 11)
Black/African/Caribbean/Black British – – – 1
(2021: 1)
11
(2021: 11)
Other Ethnic group, including Arab – – – – –
Not specified/prefer not to say – – – – –
Note:
1
Senior positions refers to the roles of Chair, Group CEO, Group CFO, or Senior Independent Director.
* gov.uk/government/publications/standard-voluntary-code-of-conduct-executive-search-firms/the-standard-voluntary-code-of-conduct-for-executive-search-
firms
65
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
As stated above, in relation to our recruitment activities, the Nominations Committee is focused on ensuring the inclusion of women and individuals
of colour in Board and Senior Management (including Executive Committee) searches. We have ensured that any recruitment or search agencies we
have engaged are given explicit instructions about the importance of identifying and putting forward female and ethnic candidates.
Whilst we believe that all appointments should be on merit, we recognise the imbalance that exists and the role that we can play in improving
diversity and inclusion. We also recognise the benefits that diversity has on decision making and on the Group’s performance and this is supported by
our Diversity Policy.
Further details relating to diversity matters are included in the ESG Report (page 30), including our reporting on gender pay and gender and ethnic
diversity in our Senior Management Team and the wider workforce. Diversity data included in the ESG Report which relates to our wider workforce
is derived from figures representative of responses to the diversity question in our employee survey. Colleague diversity data is contained in the ESG
Report (page 30).
The Living Responsibly Report, which is published at the same time as this Report and is available on our website (lslps.co.uk), also contains further
details of our diversity and inclusion initiatives.
Culture
The Board is mindful that it has the ultimate responsibility for our culture. The right culture provides the foundation to drive purpose and the delivery
of strategy, and therefore plays a key role in our long term success.
The Board has a range of mechanisms for monitoring our culture. These include:
a. Monitoring employee engagement, as part of the Board engagement programme:
i. Results of the annual employee survey and regular pulse surveys are reported to the Board each year.
ii. The updated Speak Up Policy has been approved by the Board in 2022.
iii. Bill Shannon attended and presented at the Group’s 2021 Senior Management Conference.
iv. Darrell Evans (designated Non Executive Director for Workforce Engagement) attends biannual meetings with the Employee Engagement
Forum each year.
v. Group HR arrangements have been introduced in 2022 to enhance colleague engagement and communications.
b. Receiving an annual presentation on the Group’s culture by the Group HR Team. During 2022 this resulted in a review of colleague working
arrangements.
c. Receiving regularly reporting on our colleague diversity, equality and inclusion projects.
d. Conducting an annual deep dive on our people strategy, including metrics on colleague attrition, talent and succession for Senior Managers,
presented by the Group HR Director.
e. Monitoring Senior Managers’ leadership capability, development and succession through the Nominations Committee.
f. Overseeing progress against Senior Managers’ non-financial measures, which form part of the annual bonus plan.
g. Regular updates on and annual reviews of our core Group compliance policies.
Share Dealing Code and Disclosure Committee
The Board may delegate responsibilities to a Disclosure Committee, which supports our compliance with the disclosure and control of inside
information obligations as required by UK MAR. Notwithstanding this, the Board remains responsible for our compliance with all regulatory disclosure
obligations and the Disclosure Committee refers matters to the Board as it sees fit. The Disclosure Committee met twice during 2022, once ahead of
the announcement of the interim results statement in August 2022 and then ahead of the November 2022 trading update.
We also have a Share Dealing Policy and Share Dealing Code, to ensure compliance with UK MAR. The Share Dealing Policy and Share Dealing Code
apply to our Directors, our PDMRs (all listed above) and other relevant employees of LSL.
Subsidiary governance
Day to day management of the Group’s subsidiary companies is delegated to the respective Divisional management committees and to the boards
of the subsidiary companies. During the year we undertook a review of subsidiary governance including a review of our subsidiary boards and have
revised and re-issued our guidance to subsidiary directors. We also delivered training to our subsidiary directors during 2022. We are also working
on the delivery of online remote training for Group directors and revisions to our Group subsidiary governance guidance following the Internal Audit
review (see below).
During 2022 the Internal Audit team conducted an audit of subsidiary governance arrangements. The report includes recommendations which are
being considered by the Divisions and the Group’s Company secretariat.
Corporate Governance Report including Nominations Committee Report
66
Colleague matters
Gender pay reporting
We published our gender pay reports for all Group companies with more than 250 employees in April 2022 and further reporting will be published in
2023. The 2022 report is available to view at gender-pay-gap.service.gov.uk.
Other pay reporting
We are continuing to monitor the Government’s reviews in relation to ethnic pay reporting and looking at what steps would need to be taken to
ensure compliance with any proposed future reporting. We have also signed up to the CBI’s Change the Race Ratio charter, see the ESG Report for
further details.
Whistleblowing, fraud and anti-bribery arrangements
The Board oversees our whistleblowing arrangements and the Audit & Risk Committee receives reports on fraud and anti-bribery matters, including
those reported through the Group’s whistleblowing procedures. The Audit & Risk Committee also receives reports on any matters which relate to our
internal controls and risk management arrangements, including those relating to any incidents of fraud or bribery. Further details are included in the
Audit & Risk Committee Report (page 67) and the Principal Risks and Uncertainties (page 25) sections of this Report.
The ESG Report (page 30) includes details of our whistleblowing arrangements, alongside other colleague policies included within the governance
workstream of our ESG programme.
The Corporate Governance Report is approved by and signed on behalf of the Board of Directors
Sapna B. FitzGerald
Company Secretary
12 April 2023
Audit & Risk Committee Report
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
67
Dear Shareholder
As Chair of this Committee, I am pleased to present our report for the year ended 31 December 2022.
This proved to be a challenging year due to market conditions and against this backdrop we have sought to continue to improve our internal
controls and risk management arrangements and to ensure that, as a Committee, we focused our discussions on managing key risks and
identifying emerging risks.
In this section of the Report, we detail how the Committee discharged its roles and responsibilities during 2022, provide highlights from the
year and set out our priorities for 2023. The 2023 priorities include developing our Group risk framework and completing an external audit
tender, to appoint a new auditor ahead of 2026.
I will be available at the 2023 AGM, along with my fellow Directors, to answer shareholders’ questions relating to the Audit & Risk Committee
and how we discharged our roles and responsibilities during 2022.
James Mack
Chair of the Audit & Risk Committee
12 April 2023
Audit & Risk Committee Report
68
Audit & Risk Committee
The Audit & Risk Committee discharges governance responsibilities in respect of audit, risk and internal controls and reports to the Board on the
results of its work. Details of the Committee’s roles and responsibilities are set out in its terms of reference, which are available at lslps.co.uk.
The Committee
All of the Committee’s members are independent Non Executive Directors. During 2022, James Mack chaired the Committee. The Committee
determined that James has relevant and recent financial experience to Chair the Committee. The Committee also noted that Darrell Evans, who is a
member of the Committee, also has recent financial experience which is relevant to the Committee.
In addition to the three scheduled meetings each year, the Committee will meet as required. The Committee also ensures that it meets regularly with
both the external and internal auditors, independently of the Executive Directors.
Details of the Committee members’ attendance at its meetings in 2022 are set out in the Corporate Governance Report (page 54).
2022 highlights
The Committee met three times in 2022 and its key activities included the following:
a. Providing assurance to the Board on whether this Report, taken as a whole, is fair, balanced and understandable.
b. Reviewing papers supporting significant judgements made within the Financial Statements of this Report, such as goodwill and revenue
recognition.
c. Considering the effectiveness of the wider control environment and underlying financial reporting systems.
d. Assessing the measures taken to ensure the Group maintained sufficient liquidity within its capital structure, together with the stress tests and
financial modelling assumptions used to conclude on the Group’s Going Concern Statement and Viability Statement (see page 49 and pages 28
and 29 of Principal Risks and Uncertainties).
e. Approving the annual Internal Audit plan and considering the results of an extensive range of related thematic assurance reviews. Focus areas
continued to include health and safety topics, sales conduct themes, second line effectiveness, strategy execution and the resilience of core
business systems.
f. Assessing the effectiveness of the Internal Audit function through internal feedback and an external quality assurance exercise on an Internal
Audit report relating to a Financial Services business.
g. Reviewing Divisional risk presentations, including views on key risks, risk management frameworks and consideration of Group matters not fully
captured at Divisional level.
h. Monitoring the strengthening of risk-related roles across the Group, including progress with appointments to roles within the Financial Services
Division, such as the new chief technology officer and the independent non executive director appointment as chair of the PRIMIS Network
Compliance & Risk Committee (subject to FCA approval), who will also attend the PRIMIS Business Reviews with the Executive Directors.
i. Reviewing Divisional risk appetite themes, emergent areas and escalation routines, including ensuring a cautious approach is adopted for any
weaknesses in health and safety or sales conduct arrangements.
j. Reviewing governance routines supporting our information and data security and technology infrastructure, including Divisional attestations and
monitoring of compliance with minimum policy standards, driven by the Group’s Data and Information Security Committee.
k. Monitoring the appointment of the new audit partner following the rotation of the previous partner and considering the effectiveness of external
audit processes and plans for tendering for audit services.
l. On behalf of the Board, reviewing the effectiveness of the Group’s whistleblowing arrangements, with support from Group HR. This includes
reporting on a colleague speak up exercise, which was run by the Group HR team during 2022 and involved colleagues from across the Group.
69
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Committee work in 2022
During 2022, we focused on a range of issues and accounting judgements relating to the Financial Statements. We also received reports from and
monitored the external and internal audit teams, as well as reviewing the Group’s risk management and internal control systems and procedures.
The table below summarises our activities in the year.
Area Key responsibilities Activities during 2022
Financial
reporting
• Provide assurance to the Board on whether the
Annual Report and Accounts, taken as a whole,
is fair, balanced and understandable.
• Review significant judgements and
assumptions made within the Financial
Statements, including valuation of goodwill and
appropriateness of revenue recognition.
• Ensure clarity of disclosures and compliance
with the Listing Rules and other regulatory
requirements.
• Provide assurance to support the long term
Viability Statement and the procedures for
evaluating the Going Concern assessment.
• Ensure the integrity of formal announcements
relating to the Group’s financial performance,
including the half year and full year Financial
Statements.
• Examined the integrity of the full year and half year Financial
Statements and recommended their approval to the Board.
• Assessed the appropriateness of key accounting policies and
practices, judgements, estimates and compliance with accounting
standards and tax requirements, including recent developments. In
particular, considered the appropriateness of revenue recognition,
including lapse provisions, and the carrying value of goodwill.
• Reviewed significant issues in relation to the Financial Statements as
outlined in note 2.
• Reviewed Management’s calculations and assumptions applied in
the annual goodwill impairment test. This resulted in impairment of
£87.2m at 31 December 2022 (see note 16).
• Considered the findings of financial audits completed by Internal
Audit, as part of its assurance plan.
• Considered whether a reasonably possible change to assumptions
in the impairment test would result in a material impairment and
therefore require sensitivity disclosure in the Financial Statements
(see note 16).
• Reviewed Management’s application of revenue recognition policies
and continued monitoring of compliance with financial reporting
and accounting controls linked to revenue recognition. There were
no changes to the Group’s revenue recognition practices during the
year.
• Reviewed Management’s estimates of the lapse provisions and
considered the risk that revenue is recognised in the wrong period,
either due to cut-off errors, management bias and/or estimation
uncertainty.
• Reviewed the Viability Statement and Going Concern Statement and
assessments and their supporting material and advised the Board
that the Group is able to continue in operation and meet its liabilities
as they fall due for at least the next 12 months.
• Assessed the Group’s capital structure and capital allocation policy
including the dividend policy.
• As part of the Annual Report review, considered that the Annual
Report and Accounts, taken as a whole, is fair, balanced and
understandable.
• Reviewed the Group's ESG disclosures including TCFD.
• Received Management reports on an exchange with the FCA relating
to the Group’s TCFD disclosures following the FCA thematic reviews
relating to 2021 reporting.
Audit & Risk Committee Report
70
Area Key responsibilities Activities during 2022
Risk management • Review the effectiveness of the Group’s
risk management framework, governance
arrangements and procedures.
• Advise the Board on current and emerging
risks.
• Completed the annual review and recommendation of the Audit &
Risk Committee’s terms of reference, Group reporting on Divisional
risk framework policies and related Group and Divisional governance
structures.
• Reviewed the operation of our ‘three lines of defence’ risk
management structure.
• Regularly reviewed the Group’s principal risks and uncertainties,
including underlying Divisional risk routines and emerging risk
areas. This included discussions relating to the steps Management
are taking in relation to the continued development of the Group’s
risk framework and risk appetite, and consideration of Group and
Divisional risk roles.
• Focused on the effectiveness of Divisional routines to define,
identify and respond to areas outside risk tolerance, including their
interaction with Group standards and appetite.
• Promoted a culture which is designed to ensure regulatory
compliance, stakeholder safety and ‘speaking-up’ on any concerns.
Internal control • Review the internal control environment, to
ensure that processes are effectively designed
to reduce risk and the likelihood of material
error or fraud.
• Consider the operation and effectiveness of
the Group’s internal control systems, covering
financial, operational and compliance controls.
• Discussed the continued development of the Group’s risk
management framework and governance committee structures – see
above.
• Considered outputs from the Divisional ‘three lines of defence’
oversight and compliance routines.
• Reviewed control environment assessments prepared by Group
Finance and the Divisional Managing Directors, supported by their
risk teams.
• Evaluated control benchmarks and compliance performance versus
defined policy and procedural standards.
• Monitored the effectiveness of internal and external auditing
processes and themes arising from their outputs.
• Carried out external quality assurance on an Internal Audit
engagement, as part of routines to benchmark the effectiveness of
the Internal Audit team.
71
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Area Key responsibilities Activities during 2022
External audit • Make recommendations to the Board on the
appointment, reappointment, and removal of
the external auditor.
• Assess the independence, objectivity and
effectiveness of the external auditor.
• Approve the external auditor’s fees.
• Agree the scope of the audit with the Group’s
external auditor.
• Review the external auditor’s findings and its
key focus areas.
• Ensured Ernst & Young has adequate processes to maintain
independence. Jenn Hazlehurst took over as audit partner in 2022
ahead of the 31 December 2022 audit, as a result of the audit partner
rotation rules. Following our announcement on 17 March 2023,
Jenn Hazlehurst was replaced by David Wilson as the audit partner
following an unanticipated absence which meant that Jenn was
unable to complete the audit.
• Started planning for an external audit tender exercise (see below).
• Completed the annual review and recommendation of the Auditor
Independence Policy.
• Reviewed the materiality and effectiveness of planning, including
relevant risk-based focus areas and the changing profile of profit
contributions across relevant entities.
• Evaluated the audit findings, including resolution of any issues and
feedback on the quality of interactions with relevant Divisional senior
management.
• Considered fee levels. The only fees incurred in respect of non-audit
services was in relation to the interim review (see note 10).
• Reviewed the effectiveness of the external audit process, taking
into consideration applicable UK professional and regulatory
requirements, independence considerations and feedback from
Divisional senior management.
• Considered the external auditor’s effectiveness and independence,
with the conclusions supporting the recommendation to reappoint
Ernst & Young as external auditor at the 2023 AGM.
• Ernst & Young’s audit tenure began in 2004, although LSL did not
list until 2006. LSL and Ernst & Young have concluded that Ernst &
Young’s 20-year term cannot exceed 2026 (being 20 years from our
listing on the LSE). This means that their last year for audit services
can’t exceed 2025 which will be reported in 2026.
• A new external auditor will be appointed prior to the commencement
of the FY25 audit. The last audit tender took place in 2016.
Internal Audit • Assess the scope of the Internal Audit plan, the
effectiveness of its delivery and any resourcing
implications.
• Ensure the Internal Audit function has open
lines of communication and access to records.
• Review themes arising from Internal Audit
outputs, including resolution of issues and
emergent areas.
• Approved the audit plan and supporting papers, including the wider
three year assurance cycle and Internal Audit charter which covers
our Internal Audit team.
• Reviewed an external quality assurance output and internal
benchmarking exercise, supporting the effective operation of the
function during the year.
• Tracked the completion of agreed Internal Audit actions.
• Reported themes and resultant Group-level recommendations to
each Committee meeting.
Other key matters • Evaluate the Committee’s effectiveness.
• Monitor fraud-related suspicions.
• Confirmed the Committee is effective, as part of the annual Board
and Committee evaluation process. This included confirming that the
skills and expertise of our members are appropriate and specifically
that James (Chair) has recent and necessary financial experience, in
addition to Darrell (member).
• Tracked fraud-related suspicions across the Group and logged
investigations, conclusions and remedies.
Audit & Risk Committee Report
72
Priorities for 2023
Our continued focus areas for 2023 include the following:
a. Monitoring emerging areas affecting the Group’s risk profile, including changes in the regulatory environment and clearly defining our risk
appetite. This includes monitoring arrangements for the implementation of the FCA’s new consumer duty principle.
b. Promoting ownership and alignment of robust risk management routines across all of our businesses and lines of defence.
c. Developing escalation and attestation routines from underlying committee structures on risk and control matters.
d. Ensuring robust and resilient cyber security controls. This will involve feedback from the technology assurance routines driven by relevant
governance forums and oversight functions.
e. Reviewing Internal Audit engagements covering the effectiveness of financial controls, regulatory change management, technology risk and
second line oversight routines.
New focus areas include:
a. Developing the Group risk framework and risk appetites, including a review of risk management roles.
b. Continuing to plan for the appointment of a new external auditor ahead of 2026, including conducting the audit tender exercise.
c. Monitoring risks associated with delivery of the high priority projects and any related Group restructuring/simplification.
d. Strengthening the Financial Services risk management arrangements, reflecting the importance of the Division to our strategy and the significant
regulatory changes which are impacting this part of our business.
e. Reviewing our participation in the Pivotal Growth joint venture, reflecting its part in the Group’s growth strategy.
The Audit & Risk Committee Report is approved by and signed on behalf of the Board
James Mack
Chair of the Audit & Risk Committee
12 April 2023
Directors’ Remuneration Report including
Remuneration Committee Report
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
73
Annual Statement
Dear Shareholders
As Remuneration Committee Chair I am pleased to present the Directors’ Remuneration Report for 2022.
This Directors’ Remuneration Report is divided into the following sections:
• Annual Statement: summarising remuneration for 2022, explaining major decisions made during the year and the operation of the
Directors’ Remuneration Policy (Policy) for 2023;
• Directors’ Remuneration Policy: setting out the proposed Policy being presented for shareholder approval at the 2023 AGM; and
• Annual Report on Remuneration: setting out details of the remuneration earned by Directors in 2022 and how the Policy will be
implemented during 2023.
The Policy is subject to a binding vote every three years, or sooner if the Policy changes. The Policy was last submitted and approved by 97.1%
of shareholders voting at the 2020 AGM and, accordingly, it is being submitted for its triennial binding shareholder vote at the forthcoming
2023 AGM.
The Annual Statement and the Annual Report on Remuneration are subject to a combined shareholder advisory vote, which we will present
for approval at the 2023 AGM. For further details, see the Notice of Meeting.
Summary of LSL’s performance in the year and incentive payments to Executive Directors
LSL has traded well in what have been challenging market conditions, whilst at the same time making good progress in the execution of our
strategy. The mortgage and housing markets have been adversely impacted by economic and political uncertainty and this is reflected in the
underlying remuneration outcomes for the year.
Bonus
The Executive Directors’ bonus scheme in 2022 was based 70% on Underlying Operating Profit and 30% on individually agreed non-financial
measures, with the maximum bonus opportunity set at 100% of basic salary. The bonus targets set for each of the Executive Directors at the
start of 2022 were stretching and reflected the housing market outlook at the time. As the financial results fell well short of the targets set,
the Executive Directors have not been awarded any bonus in respect of this element for 2022. The Committee noted that for the individual
non-financial measures there was a more positive performance, with a number of objectives being delivered. After due consideration and
noting the very decisive shortfall in the financial performance and notwithstanding the exceptional performance in the circumstances, it was
agreed by the Committee to exercise discretion and not award any bonus for this element either.
2020 LTIP
The 2020 LTIP award was granted later than normal in 2020, initially because of a possible all-share combination with Countrywide plc and
latterly as a result of the uncertain trading conditions in early 2020 due to the COVID-19 pandemic. The LTIP was awarded to Executive
Directors in November 2020, and the Committee decided to scale back the grant from 125% of salary to 104% of salary, to reflect the relative
fall in LSL’s share price during 2020. The Committee also carefully considered the appropriate performance metrics to apply to the awards,
and because of the difficultly in forecasting the medium to long term trading conditions at the time, chose to adjust the weighting of the
performance metrics to be 50% based on EPS and 50% on relative TSR, against the FTSE Small Cap.
The EPS performance period ended on 31 December 2022 and the targets have been partially achieved resulting in 47.2% of this element
vesting. However due to the delay in granting the 2020 LTIP awards, the TSR performance period for the award was set as the three year
period from grant ending 8 November 2023. The final vesting outcome of the LTIP award is therefore not yet fully known. LSL’s TSR
performance in the final three months of 2022 forecasts a partial vesting of this element of 25.3%, which will be tested following the end of
the performance period in November 2023 and disclosed in next year’s Annual Report and Accounts. Based on the final EPS outcome and the
forecast TSR outcome the overall forecast level of vesting of the 2020 LTIP award is 36.3% of maximum.
The Committee considered the appropriateness of the forecast vesting outcome, taking into account business performance, the share price
at grant of £2.10, the scale back of award levels at grant, the share price performance over the period and the share price level at the date of
this Report of £2.46. Taking these factors into consideration, the Committee considers the current formulaic forecast incentive outcome for
the 2020 LTIP award to reflect the business performance over the three year period and is comfortable that there are no ‘windfall gains’ that
require a scale back of the vesting level. This will be reviewed again in November 2023, prior to vesting, to ensure this continues to remain the
case.
In determining whether the incentive outcomes for FY22 were appropriate and if the Policy had operated as intended, the Committee also
considered workforce remuneration and outcomes, the relativities between employees and Executive Directors, including the Group CEO pay
ratio, and the wider stakeholder experience. The Committee also considered whether there were any relevant ESG matters that we needed to
Directors’ Remuneration Report including Remuneration Committee Report
74
take account of when reviewing the remuneration outcomes and concluded that there were no such factors that needed to be considered.
Further details of performance against the targets for the annual bonus and LTIP awards are set out in the Annual Report on Remuneration
(page 89).
Key decisions taken by the Committee during 2022
Triennial Policy Review
The Committee thoroughly reviewed the Policy during 2022. This was supported by our external remuneration advisors, Korn Ferry and
involved engaging with major shareholders, the proxy voting agencies and our colleagues via our Employee Engagement Forum.
The Committee’s review concluded that the current Policy is working effectively, supports our business strategy and creates a good link
between performance and reward. Furthermore, the Policy is in line with investor expectations and the requirements of the Code. As a result,
the Committee is only proposing one minor amendment to the Policy which provides greater flexibility, if needed, in operating the Policy over
the next three year cycle. The proposed change removes the requirement for at least 30% of LTIP awards to be based on TSR and provides
sufficient flexibility to select financial and non-financial metrics, which may include for example strategic or ESG metrics. There is no intention
at this time to change our current approach of setting TSR and EPS targets for the vesting of our LTIP awards but this change to the Policy
provides us with flexibility if needed. The new Policy is detailed in full on page 76 and will be submitted for shareholder approval at the 2023
AGM. I would like to thank investors for their feedback as part of our engagement on our new Policy.
Colleague pay
The Committee is keen to continue to understand the workforce’s views of remuneration and I was pleased to attend meetings with our
Employee Engagement Forum during the year, in my roles as both the designated Non Executive Director for workforce engagement and
Remuneration Committee Chair. The Committee has been mindful of the cost of living challenges faced by colleagues and we were pleased
to recommend for approval by the Board a cost of living award of £500 for all colleagues who are earning less than £30,000 per annum (on a
full time basis) before the end of the year. This award has benefitted over 2,000 colleagues and has been very well received. The award was in
addition to the higher average pay review award that was made to lower-paid colleagues during 2022.
Further, early in 2022 the Committee approved our second free share award to all colleagues across the Group, which was worth up to
£500 per employee. This award has enabled colleagues to share in our positive financial performance in 2021. It also aligns colleague and
shareholder interests, and we hope it will encourage colleagues to remain with the Group.
Executive Director changes
As announced in June 2022 Helen Buck, Executive Director – Estate Agency retired from the business on 31 March 2023, which is in line
with her nine month notice period. During her notice period, Helen continued to receive her normal basic salary, car allowance and benefit
entitlements as detailed in full in the Annual Report on Remuneration section of this Report (page 88). In line with the other Executive
Directors, Helen did not receive any bonus award for 2022. Furthermore, as Helen has left the business this year, she did not receive an annual
pay increase, annual bonus or an LTIP award in 2023.
As Helen was retiring from the business the Committee awarded Helen good leaver status on her unvested LTIP awards. These awards have
been pro-rated to the extent that Helen was employed during the three year vesting period and will vest at the normal date and be subject to
the achievement of relevant performance conditions, as detailed at the time of grant and assessed by the Committee at the time of vesting.
Helen’s awards will be subject to both post-vesting holding periods and post-employment holding periods, in line with the Policy.
75
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Implementation of the Policy for 2023
The Executive Directors (excluding Helen Buck) will receive salary increases of 3%, rounded to the nearest £250. This increase is below the
average pay award for the wider workforce of 5% of salary, with colleagues in the lowest pay grades receiving the highest increases, to help
address cost of living challenges. In line with the Executive Director awards, the Non Executive Directors and Chair of the Board will also
receive fee increases of 3%, rounded to the nearest £250.
The annual bonus will be subject to the same performance conditions as last year, namely 70% based on Underlying Operating Profit and
30% based on non-financial measures. The non-financial measures will continue to include ESG targets which focus on delivering corporate
sustainability targets including emission targets and improving gender and other diversity disparities in key colleague groups. The Committee
considers the weighting to non-financial measures for Executive Directors remain appropriate, as it emphasises the importance of key
strategic objectives as a driver of further profitability and growth.
In relation to the LTIP awards for 2023, the Committee has approved the granting of awards at the normal award level of 125% of salary
to the Executive Directors. The 2023 LTIP awards will continue to be based 50% on EPS and 50% on TSR, in line with the 2022 grants. TSR
performance will continue to be measured relative to the FTSE Small Cap index (excluding investments trusts) and the EPS targets have been
set to ensure they are as stretching as previous years, taking into account both the business and market outlook. Details of these targets can
be found in the latter section of this Report (page 92).
The Committee has also discussed the possibility of granting a further LTIP award, of up to 75% of salary, to the Executive Directors later in
the year, if substantial strategic projects are delivered that would provide the potential to add significant value to the Group. This additional
award would increase the total 2023 LTIP award for Executive Directors to no more than 200% of salary, in line with the exceptional award
limit included in the Policy. Any further award would only be made following consultation with our largest shareholders, to outline fully the
rationale for making these awards. Vesting of any additional award would also be based on the achievement of exceptionally stretching
financial targets to further incentivise the Executive Directors to maximise the growth opportunities presented by these strategic changes and
to increase alignment of interests with those of shareholders.
Conclusion
The Committee believes that the remuneration arrangements for the Executive Directors and Senior Management Team are aligned to our
strategic goals and incorporate the Group’s key performance indicators. We have also reviewed the implementation of the Policy for 2022,
to ensure it is aligned with our purpose, culture and values. We are comfortable that the remuneration outcomes for 2022 are aligned to
performance, and the exercise of discretion to reduce the bonus payout to zero is appropriate. Furthermore, the Committee is satisfied that
that the new Policy will continue to promote our long term success and that it incentivises the delivery of strong and sustainable financial
results, with the creation of shareholder value. Accordingly, the Committee seeks shareholders support for the resolutions to approve the
Policy and remuneration arrangements at the 2023 AGM. If shareholders have any questions or observations, then I will be pleased to hear
from you directly ahead of the 2023 AGM.
I can also be contacted via the Company Secretary’s office (please see details on page 183).
Darrell Evans
Chair of the Remuneration Committee
12 April 2023
Directors’ Remuneration Report including Remuneration Committee Report
76
Directors’ Remuneration Policy
Introduction
This part of the Directors’ Remuneration Report sets out the Policy for the Directors and has been prepared in accordance with The Large and
Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 and the Companies (Miscellaneous Reporting)
Regulations 2018 (Regulations).
The current Policy was approved by shareholders at our AGM on 30 June 2020 and is effective until the new Policy (see below) is approved by
shareholders at the 2023 AGM. The current Policy can be found in the 2019 Directors’ Remuneration Report and is available on our website
(lslps.co.uk).
Consideration of Code Provision 40
In determining the Policy and its operation in 2022 and identifying required amendments to the Policy to be effective from 1 January 2023 onwards,
we considered the following six factors which are referred to in the Code:
• Clarity – the Policy is well understood by our Senior Management Team and has been clearly explained to our shareholders through direct
engagement and our annual remuneration reporting. Engaging on all people-related matters, including remuneration, is a key responsibility
for our Group HR Director and Darrell, the designated workforce engagement Non Executive Director. This engagement is conducted via
meetings with our Employee Engagement Forum and our colleague surveys, the results of which are presented to the Board.
• Simplicity – our focus is to ensure that our Policy and practices are simple and straightforward and that the objectives and deliverables are
clear. We only operate two incentive plans, an annual bonus and a long term incentive scheme (LTIP). Targets are based on business KPIs and
measure performance against them, tracking and rewarding progress toward achieving our strategies and longer term sustainable growth.
• R i s k – the Policy is designed to ensure that reputational, behavioral and other risks are managed and will not be rewarded via (i) a balanced
use of fixed and variable pay, with both short and long term incentive plans, which employ a blend of financial, non-financial and shareholder
return targets, (ii) the significant role played by equity in the incentive plans (together with executive shareholding guidelines in service and
the post-service policy) and (iii) the inclusion of malus/clawback provisions.
• Predictability – our incentive plans are subject to individual caps, with share plans also subject to market standard dilution limits. The scenario
charts on page 83 illustrate how the rewards potentially receivable by the Executive Directors vary based on performance delivered and share
price growth. The Committee also has the discretion to adjust any vesting outcomes if they are not considered appropriate.
• Proportionality – there is a clear link between individual awards, delivery of strategy and our long term performance. In addition, the
significant role played by incentive or ‘at-risk’ pay, together with the structure of the Executive Directors’ service contracts, ensures that poor
performance is not rewarded.
• Alignment to culture – the incentive schemes drive behaviours consistent with our purpose, values and strategy (including the Group’s ESG
and corporate sustainability strategies), by using metrics in both the annual bonus and the LTIP that underpin the delivery of our strategies.
Colleague personal success is directly linked to the success of our clients and businesses, through the short and long term incentive plans and
targets which we operate.
Overall business performance, ESG matters and workforce pay, including the Group CEO pay ratio, are taken into account when determining
remuneration for the year.
Policy overview
When setting the Executive Directors’ and Senior Managers’ remuneration, the Remuneration Committee seeks to ensure that all individuals are
provided with appropriate profit based incentives and an element of pay relating to non-financial performance measures. The aim is to enhance
performance and ensure that individuals are fairly and responsibly rewarded for their contributions to the Group’s success.
Our policy is to provide remuneration packages which attract, motivate and retain Executive Directors of the calibre necessary to maintain and
improve the Group’s profitability, to reward them for long term sustainable performance and growth and to enhance shareholder value. In doing
this, we aim to provide a market competitive (but not excessive) package of pay and benefits. Our general remuneration policy is to set basic salaries
around mid-market levels and to set performance pay levels by applying stretching goals that accord with our general policy of making bonuses
self-financing wherever possible. Remuneration packages will also reflect individual responsibilities and contain incentives to deliver our strategic
objectives.
Decision making process for determination, review and implementation of the Policy
The Committee reviews the Policy and its operation to ensure it continues to support and reward the Executive Directors for achieving the
business strategy, both operationally and over the longer term. It reviews the structure and quantum of rewards and takes into account the Code,
market practice, shareholder views and the views of institutional investors and investor representative bodies. The Committee also considers the
remuneration arrangements, policies and practices for the workforce as a whole which it reviews as part of its annual agenda.
77
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
The Committee reviews the Policy annually, to ensure that changes are not required before the triennial shareholder vote. When the Committee
determines that changes are required it will formulate proposals and consult with shareholders. Shareholder feedback is then taken into
consideration in finalising any changes.
The Policy’s operation is considered annually for the year ahead, including metrics for incentives, weightings and targets. The Committee reviews
the Policy’s operation for the prior year and considers whether, in light of the strategy, changes are required for the coming year. Targets for the
annual bonus and LTIP awards are also reviewed to determine whether they remain appropriate or need to be recalibrated. Shareholder views will
be sought depending on the changes proposed.
Consideration of shareholder views
Each year the Committee considers shareholder feedback received in relation to our Annual Report and Accounts, including the Directors’
Remuneration Report. This feedback, plus any additional feedback received during any meetings or consultations with shareholders during the
year is also considered as part of our review of the Policy and its annual implementation review. In addition, the Committee engages directly with
significant shareholders and their representative bodies in respect of any proposed changes to the Policy and, as appropriate, changes to the
implementation of the Policy. Details of votes cast for and against the resolution to approve the previous year’s Directors’ Remuneration Report and
any matters discussed with shareholders during the year are set out in the Annual Report on Remuneration (page 99).
During the year, the Committee engaged with shareholders to explain the proposed changes to the Policy and gather their feedback. Overall those
shareholders who provided feedback were supportive of our Policy proposals. As a result of feedback we adjusted our approach to providing
flexibility in the selection of LTIP metrics to ensure that the Policy specifies that no more than 30% of the LTIP can be based on non-financial metrics.
For further details of the way in which we communicate with shareholders, please see the Shareholder Relations section of the Corporate
Governance Report (page 54) and the Stakeholder Engagement section of this Report (page 21).
Wider workforce considerations
As part of its remit under the Code the Committee considers the remuneration arrangements for the wider workforce and related policies, to
ensure the incentives and rewards align with culture, and take these into account when setting the Policy and in determining the remuneration for
the Executive Directors and Senior Managers to ensure consistency of approach throughout the Group. The Non Executive Director designated
for workforce engagement (Darrell Evans) also regularly meets with the Employee Engagement Forum to discuss a range of topics including
remuneration issues and shares feedback with the Committee and the Board, ensuring that colleague views are taken into consideration in decision
making.
Annual bonus, annual bonus share investment and long term incentive awards align the interests of Senior Managers with shareholders.
The Committee also considers average base salary increases awarded for colleagues and pay structures throughout the business. The remuneration
policy for all employees is determined in line with best practice and aims to ensure that we are able to attract and retain the best people.
This principle is followed in developing the Policy.
During 2022, employees’ views on the Policy were obtained from the Employee Engagement Forum. Furthermore, the Group HR Director attends
all Committee meetings by invitation to provide perspective on Group HR policies and practices, including from a colleague perspective. The Annual
Report on Remuneration details the engagement undertaken to explain the alignment of the Policy to the wider Group remuneration policy.
Proposed changes to Policy
There is only one change to the Policy which is in respect of the selection of metrics for LTIP awards. The amendment removes the requirement for
at least 30% of LTIP awards to be based on TSR and provides that non-financial metrics may account for up to 30% of the LTIP award.
Directors’ Remuneration Report including Remuneration Committee Report
78
Policy detail by remuneration element
Element of
remuneration
arrangements
How this component supports LSL
strategies
Operation Maximum Performance metrics
and period
Basic salary • Reflects the value of the
individual and their role.
• Reflects skills and experience
over time.
• Provides an appropriate level
of basic fixed income, avoiding
excessive risk arising from over
reliance on variable income.
• Reviewed annually, normally effective
1 January.
• Periodic comparison to companies
with similar characteristics and sector
comparators.
• There is no prescribed
maximum annual basic
salary increase.
• The Remuneration
Committee is guided
by the general increase
for employees but may
decide to award a lower
increase for Executive
Directors or higher
increase 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 basic salary
levels are set out in
the Annual Report on
Remuneration.
• Not applicable.
79
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Element of
remuneration
arrangements
How this component supports LSL
strategies
Operation Maximum Performance metrics
and period
Annual bonus • Incentivises annual delivery of
financial and strategic goals.
• Maximum bonus only payable
for achieving demanding
targets.
• Targets reviewed annually.
• Bonus level is determined by the
Remuneration Committee after the end of
the financial year, subject to performance
against targets set at the start of the
financial year.
• The Remuneration Committee has the
discretion to adjust or override formulaic
outcomes for annual bonus payment, if the
Committee considers it does not reflect
the Group’s underlying performance,
taking into account amongst other things,
the quality of earnings that underlie the
pay and vesting outcomes, which may put
at risk future cash flows, as well as investor
experience and the employee reward
outcome.
• The Group CEO is required to purchase
and hold shares equivalent to 33% of any
bonus earned, net of tax, for a period of
two years. The other Executive Directors
are required to purchase and hold shares
equivalent to 25% of any bonus earned
net of tax, for a period of two years,
which will in normal circumstances
continue post-cessation of employment.
For all Executive Directors on cessation
of employment, these shares will not
be forfeited for any reason. However
clawback and the holding period will
continue to apply.
• Not pensionable.
• Bonus awards are subject to clawback
and malus for six years from payment, in
circumstances of: material misstatement
of financial results, corporate failure,
failure of risk management, reputational
damage, error, inaccurate or misleading
information in determining a performance
condition or any other matter determining
the vesting of an award, breach of relevant
regulations, an act or omission during the
vesting period to the significant detriment
of customers, or an act or omission
leading to gross misconduct. Recovery
can be made through scaling back existing
awards, reducing future awards, including
under the LTIP, and requesting repayment
as a cash sum.
• Maximum opportunity:
100% of basic salary
with the ability to
increase to 125% of
basic salary*.
*Maximum opportunity
will not be increased
above 100% of basic
salary without significant
shareholder consultation.
• Performance period
of one year.
• Performance
metrics:
– a maximum of 30%
of the award will be
determined by non-
financial measures
and a minimum of
70% by financial
measures; and
– not more than 20%
of the total bonus
will pay out at
threshold.
Directors’ Remuneration Report including Remuneration Committee Report
80
Element of
remuneration
arrangements
How this component supports LSL
strategies
Operation Maximum Performance metrics
and period
LTIP awards
(approved by
shareholders
at the 2017
AGM)
• Aligned to Group key
performance indicators
that drive the strategies and
performance of the businesses.
• Awards of nil-cost or conditional shares
are made annually, with vesting dependent
on achieving performance conditions over
three years.
• The Remuneration Committee reviews
the quantum of awards annually and
monitors the continuing suitability of the
performance measures.
• The Committee has the discretion to
adjust and override formulaic outcomes
of LTIP vesting, if it considers that it
does not reflect the Group’s underlying
performance, taking into account amongst
other things the quality of earnings that
underlie the vesting outcomes, which may
put at risk future cash flows, as well as the
investor experience and the employee
reward outcome.
• The Committee has discretion to provide
for dividend equivalents in shares to
accrue from the date of award to the
vesting date or, if applicable, to the end of
any post-vesting holding period.
• LTIP awards are subject to clawback
and malus for six years from vesting, in
circumstances of: material misstatement
of financial results, corporate failure,
failure of risk management, reputational
damage, error, inaccurate or misleading
information in determining a performance
condition or any other matter determining
the vesting of an award, breach of relevant
regulations, act or omission during the
vesting period to the significant detriment
of customers, or an act or omission
leading to gross misconduct. Recovery
can be made through scaling back existing
awards, reducing future awards, including
under the annual bonus and requesting
repayment as a cash sum.
• Normal maximum
limit of 125% of basic
salary, with grants
of up to 200% of
basic salary being
made in exceptional
circumstances.
• Performance period:
normally three
years.
• A two year
post-vesting holding
period applies
and in normal
circumstances
continues to apply
post-cessation of
employment.
• Up to 30% of
the award may
be determined
by non-financial
measures such as
strategic measures
or ESG. The
remaining value
of the award will
be determined by
financial measures,
for example but not
limited to EPS and
TSR.
• 25% vests at
threshold for all
parts of the LTIP.
81
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Element of
remuneration
arrangements
How this component supports LSL
strategies
Operation Maximum Performance metrics
and period
All-employee
share schemes:
SAYE, SIP/BAYE
and CSOP
• Encourages long term
shareholding in LSL.
• Invitations from the Remuneration
Committee under the approved SAYE, SIP/
BAYE and CSOP.
• As per HMRC limits. None.
Executive share
ownership
guidelines
• Aligns Executive Directors and
shareholders.
• The Group CEO is required to build
and maintain a minimum shareholding
equivalent to 200% of basic salary over
a period of five years from the later of
approval of the 2020 Policy and the date of
appointment.
• The other Executive Directors are
required to build and maintain a minimum
shareholding equivalent to 150% of basic
salary over a period of five years from the
later of approval of the 2020 Policy and the
date of appointment.
• All Executive Directors are expected
to retain all vested long term incentive
awards (subject to any sales necessary to
meet tax liability on vesting or exercise)
and shares purchased from annual bonus
under the Policy, until the guideline is met.
• A post-employment shareholding policy
applies as follows, with the Committee
retaining the discretion to amend the
Policy in exceptional circumstances:
– Directors to hold the lower of shares with
a value equivalent to 150% of salary (200%
for the Group CEO) and actual shares held
on cessation for two years.
3
– The two year holding period for annual
bonus shares continues post-employment.
– The two year post-vesting holding
period for LTIP awards continues post-
employment.
• Minimum of 200% of
basic salary for Group
CEO and 150% of basic
salary for the other
Executive Directors – no
maximum.
None.
Directors’ Remuneration Report including Remuneration Committee Report
82
Element of
remuneration
arrangements
How this component supports LSL
strategies
Operation Maximum Performance metrics
and period
Benefits • Provides insured benefits
to support the Executive
Directors and their families
during periods of ill health,
or in the event of accident or
death.
• Car allowance facilitates travel.
• Includes car allowance, life assurance and
private medical insurance. Other benefits
may be provided where appropriate.
• Any reasonable business related expenses
(including tax thereon) can be reimbursed
if determined to be a taxable benefit.
• At cost. None.
Pension • Provides modest retirement
benefits.
• Opportunity for Executive
Directors to contribute to their
own retirement plan.
• Defined contribution.
• HMRC approved arrangement.
• Directors receive
employer pension
contributions in line
with the contribution
for the majority of the
workforce at the time of
appointment.
• Existing Directors are
offered a pension in
accordance with auto
enrolment minimums.
None.
Chair and Non
Executive
Directors
• To provide fees reflecting
the time commitments and
responsibilities of each role,
in line with those provided by
similarly sized companies.
• Cash fee paid monthly.
• Fees are normally reviewed annually.
• Any reasonable business related expenses
can be reimbursed (including tax thereon if
determined to be a taxable benefit).
• There is no prescribed
maximum annual fee
increase, although
there is a total fee cap
of £750,000, which
is contained in LSL’s
articles of association.
• Fees are determined
and reviewed taking into
account experience,
time commitment,
responsibility and scope
of role, as well as the
general increase for
employees and market
data for similar roles
in other companies
of a similar size and
complexity. Current
fees are set out in
the Annual Report on
Remuneration.
None.
Notes to the remuneration policy:
1. Authority is given to LSL to honour any commitments entered into with current or former Executive Directors (such as the payment of last
year’s annual bonus or the vesting/exercise of share awards granted in the past) that have been disclosed in this and previous Directors’
Remuneration Reports. Details of any payments to former Directors will be set out in the Annual Report on Remuneration as they arise.
2. Performance metrics for incentives, weightings and targets are considered annually for the year ahead. The Committee considers whether
changes are required to the application of the Policy for the year ahead taking into account strategy and market practice. Targets for the annual
bonus and LTIP are also reviewed and consideration is given as to whether these remain appropriate or need to be recalibrated. The specific
performance targets seek to be stretching to incentivise and reward improved performance.
3. The post-employment shareholding policy which requires the Executive Directors to retain a shareholding post-employment will apply to shares
acquired from LTIP awards granted from 2019 onwards (ie those that vest from 2022 onwards) and bonus awards invested in shares in respect
of performance in 2022 onwards (ie any bonus award payable from 2023 onwards).
83
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Reward scenarios (illustration of application of the Policy for 2023)
The chart below shows how the composition of the remuneration packages for each of the Executive Directors varies at different levels of
performance under the Policy detailed above, both as a percentage of total remuneration opportunity and as a total value.
The graph also indicates the maximum remuneration under a scenario of 50% share price appreciation over the three year performance period of
the LTIP award:
0
250
500
750
1,000
1,250
1,500
1,750
2,000
Group Chief Executive Officer Group Chief Financial Officer
£496
£1,035
£1,574
£1,873
£341
£705
£1,068
£1,270
£’000
Maximum
with 50%
share price
appreciation
MaximumTargetBelow targetMaximum
with 50%
share price
appreciation
MaximumTargetBelow target
100% 48%
23%
29%
32%
30%
38%
27%
26%
48%
100% 48%
23%
29%
32%
30%
38%
27%
25%
48%
LTIP
Bonus
Fixed pay
Notes to the reward scenarios:
1. The ‘below target’ performance scenario comprises the fixed elements of remuneration only, including:
a. basic salary as applicable from 1 January 2023;
b. pension as per the Policy; and
c. benefits as reported for the previous financial year.
2. The target level of bonus is assumed to be 50% of the maximum bonus opportunity (100% of basic salary), and the on-target level of LTIP
vesting is assumed to be 50% of the face value, assuming a normal grant level (125% of basic salary). These values are included in addition to
the components of fixed remuneration.
3. The maximum remuneration assumes full bonus pay-out (100% of basic salary) and the full face value of the LTIP (125% of basic salary), in
addition to fixed components of remuneration.
4. No share price growth has been factored into the calculations in the below target, target and maximum calculations.
5. 50% share price growth over the three year performance period of the LTIP award has been used for the ‘maximum with 50% share price
appreciation’ scenario.
6. The assumptions noted for on-target performance in the graph above are provided for illustration purposes only.
7. Helen Buck, Executive Director – Estate Agency retired from the business on 31 March 2023 and has been included in the scenario graphs
for her period of employment in 2023. As Helen is not be eligible to participate in the 2023 bonus or LTIP scheme her annual basic salary and
benefits have been shown only, which has been pro-rated accordingly.
Approach to recruitment and promotions
The remuneration package on appointment for a new Executive Director is set in accordance with the Policy at the time and will take into account
the individual’s skills and experience of the individual, the market rate for such a candidate and the importance of securing that individual.
Directors’ Remuneration Report including Remuneration Committee Report
84
Basic salary will be at the level 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 skills, expertise and performance have been proven and sustained. The annual
bonus potential will be limited to 100% of basic salary (with the ability to increase to 125% of basic salary only when the policy limit is increased
following significant shareholder consultation). Grants under the LTIP will be limited to 125% of basic salary or 200% of basic salary in exceptional
circumstances. Depending on the timing of the appointment, the Committee may deem it appropriate to set different annual bonus performance
metrics to the existing Executive Directors for the first performance year after appointment. Further, in exceptional circumstances the Committee
may offer additional cash and/or share-based elements to replace deferred or incentive pay forfeited by an individual leaving a previous employer.
It will seek to ensure, where possible, that these awards are consistent with any awards forfeited in terms of delivery mechanism, vesting periods,
expected value and performance conditions.
For an internal candidate 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. Any other ongoing remuneration obligations existing prior to appointment may continue, provided they are put to
shareholders for approval at the earliest opportunity.
For both external and internal appointments, the Committee may agree that the Group will meet certain relocation and/or incidental expenses as
appropriate.
In exceptional circumstances, the Committee may also agree, on the recruitment of a new Executive Director, a notice period in excess of nine
months with the intention to reduce this to nine months over a specified period.
Service contracts for Executive Directors
The service contracts for the two Executive Directors in place at the date of this Report are not fixed term and are terminable by either LSL or the
Executive Director as detailed below:
Director Commencement of service contract Notice period (from Executive Director and LSL)
David Stewart
Group Chief Executive Officer
1 May 2020 Nine months
Adam Castleton
Group Chief Financial Officer
2 November 2015 Nine months
Copies of Director Service Agreements are available for inspection at the Company Secretary’s office (see Shareholder Information at page 183 for
details).
At the Committee’s recommendation and at the Board’s discretion, an Executive Director’s service contract can be terminated early by payment of
basic salary and benefits in lieu of the required notice period. The main contractual terms surrounding termination are summarised below:
Provision Detailed terms
Notice period Nine 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.
The Committee may pay reasonable outplacement and legal fees where appropriate, and may pay any statutory entitlements or settle or
compromise claims or potential claims in connection with a termination of employment, where considered in the Group’s best interests.
Subject to the performance conditions being met, an annual bonus may be payable with respect to the period of the financial year served, although
it will be pro-rated for time, based on performance and paid at the normal payment date.
Any share-based entitlements granted to an Executive Director under our share plans will be determined based on the relevant share plan rules.
However, in certain prescribed circumstances under the LTIP scheme rules, a good leaver status may be applied. These circumstances include 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 Committee.
LTIP awards for good leavers will, except in exceptional circumstances:
• vest at the original vesting date;
• be determined by testing the performance conditions at the usual time;
• be pro-rated for the proportion of the vesting period that has elapsed; and
• be subject to the two year post-vesting holding period, where applicable.
Awards to Executive Directors who are not good leavers lapse immediately on cessation.
85
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Subject to Board approval and any conditions stipulated by the Board, Executive Directors may accept appropriate outside commercial non
executive director appointments, provided that the aggregate commitment is compatible with their duties as an Executive Director.
Non Executive Directors
Our policy is to appoint Non Executive Directors with a breadth of qualifications, skills and experience relevant to the Group’s businesses and
strategy. The Board makes appointments based on the Nominations Committee recommendation. For further details on the Nominations
Committee’s roles and responsibilities, and how it discharges its duties, see the Corporate Governance Report (page 54).
Non Executive Directors, including the Chair, have letters of appointment which set out their roles and responsibilities. The Non Executive Directors,
including the Chair, are not eligible to participate in incentive arrangements or receive pension provision. The following table shows details of the
terms of appointment of our Non Executive Directors.
Director Date original term commenced Date current term commenced Expiry date of current term
Gaby Appleton
Independent Non Executive Director
and Senior Independent Director
1 September 2019 1 September 2022 31 August 2025
David Barral
1
Non Executive Chair Designate
3 April 2023 - 2 April 2026
Simon Embley
Non Executive Director
1 January 2015 1 January 2021 31 December 2023
Darrell Evans
Independent Non Executive Director
and Chair of the Remuneration
Committee
28 February 2019 28 February 2022 27 February 2025
James Mack
Independent Non Executive Director
and Chair of the Audit & Risk Committee
27 September 2021 - 26 September 2024
Bill Shannon
2
Non Executive Chair and Chair of the
Nominations Committee
7 January 2014 7 January 2023 31 December 2023
Sonya Ghobrial
Independent Non Executive Director
4 March 2022 - 3 March 2025
Notes:
1. David Barral will stand for election at the 2023 AGM and if elected, will take over the role of Chair of the Board and Nominations Committee from the close of
the AGM, following Bill Shannon’s retirement.
2. Bill completed nine years on the Board in January 2023 and his term was extended to end of December 2023. Bill intends to retire at the close of the 2023
AGM, for further details please see the Corporate Governance Report section of this Report.
Copies of Director Service Agreements are available for inspection at the Company Secretary’s office (see Shareholder Information at page 183 for
details).
Directors’ Remuneration Report including Remuneration Committee Report
86
Annual Report on Remuneration
Implementation of the Policy for the year ending 31 December 2023
This section of the Directors’ Remuneration Report sets out how the Policy will be implemented for 2023.
Basic salary
2023 basic salary increases for the Executive Directors are 3%, rounded to the nearest £250. This increase is in line with the average pay award for
senior management roles and less than the average for middle management roles and more junior roles within our Group, who will receive more
substantial increases. Helen Buck did not receive a salary increase for 2023 as she retired in March 2023. The basic salary levels at 1 January 2023
for the Executive Directors are set out below:
Director Role 2023
(£)
% increase from 1 January
2023
2022
(£)
Helen Buck Executive Director – Estate Agency 320,000 Nil 320,000
Adam Castleton Group Chief Financial Officer 323,250
3%
313,750
David Stewart Group Chief Executive Officer 478,750 464,750
Annual bonus for 2023
We will operate an annual bonus plan for Executive Directors during 2023 that is broadly similar to that operated in 2022, as detailed in the table
below. The Group CEO and Group CFO’s bonus opportunity will be 100% of salary.
Performance measure Weighting (% of maximum)
Group Underlying Operating Profit 70%
Non-financial measures 30%
The Group Underlying Operating Profit measure requires performance to be significantly better than budget for the full pay-out of this element of
the bonus.
The non-financial measures for the 2023 bonus scheme include objectives based on each Executive Directors’ delivery of key strategic initiatives
for the Group and our Divisions. Whilst we don’t disclose the 2023 measures in this Report because we consider the measures to be commercially
sensitive, we will ensure full disclosure of these measures are included in the Directors’ Remuneration Report to be included in the Annual Report
and Accounts 2023.
In relation to the 2023 measures, the Committee is satisfied that the objectives are challenging and demanding, reflecting the Group’s ongoing
business expectations and have a clear link to our strategy. These non-financial measures also include specific objectives relating to ESG which
position the business as an employer and organisation which places genuine value on sustainability and ethics as well as profit. We are doing this
by focusing on delivering corporate sustainability targets including emission targets, and improving gender and other diversity disparities. The
Committee has also reviewed these non-financial measures carefully to ensure alignment with our purpose, culture and values.
As detailed in the Policy, the Executive Directors are required to purchase shares with a proportion of their net of tax bonus received and to hold
these shares for a minimum of two years.
Long Term Incentive Plan (LTIP) 2023 awards
We will operate an LTIP for Executive Directors during 2023 that is broadly similar to that operated in 2022, as detailed in the table below. The
Committee intends to grant an award of 125% of basic salary to each of the Executive Directors, in line with the Policy. Helen Buck will not receive
an LTIP award for 2023 due to her retirement on 31 March 2023.
Performance measure Percentage of award subject to
condition
Performance period Threshold performance level
(25% vesting)
Maximum performance level
(100% vesting)
Adjusted basic EPS growth 50%
3 years ending
31 December 2025
25.4 pence 33.0 pence
TSR (relative to FTSE
Small Cap, excluding
investment trusts)
50% Median
(50
th
percentile)
Upper quartile
(75
th
percentile)
The TSR and adjusted EPS performance conditions were selected on the basis that they reward the delivery of long term returns to our shareholders
and the Group’s financial growth, and they are consistent with our objective of delivering superior levels of long term value to our shareholders.
As set out in the Chair’s Annual Statement (page 06), an additional LTIP award of up to 75% of salary may be granted in 2023 if substantial strategic
projects are delivered during the year. Prior to any additional award being granted the Committee will consult with our largest shareholders, to
outline fully the rationale for making the award and detail the performance conditions and targets applying to the proposed award.
87
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Benefits
Taxable benefits for the Executive Directors will continue to include a car allowance, life assurance and private medical insurance.
Pension
All Executive Directors are paid an employer pension contribution in line with or below that received by the majority of our wider workforce.
• Adam chooses to participate in our auto enrolment pension scheme and receives 3% of banded earnings as a pension contribution from the
Company.
• Helen elected not to join the pension scheme and received no additional compensation in lieu of this.
• David receives 3% of banded earnings in lieu of any employer pension contributions.
Non Executive Directors
In 2023, fees for the Non Executive Directors were increased by 3%, rounded to the nearest £250, in line with Executive Directors and below the
average pay review awarded to our wider workforce. The 3% increase was applied to the Chair of the Board and each of the Non Executive Director
fees (including the fees linked to additional responsibilities).
Role 2023 (£) 2022 (£)
Chair of the Board 155,000 150,500
Independent Non Executive Director 50,500 49,000
Senior Independent Director 8,500 8,250
Chair of the Remuneration Committee 9,000 8,750
Chair of the Audit & Risk Committee 9,000 8,750
Designated Non Executive Director for workforce engagement 2,000 2,000
Directors’ Remuneration Report including Remuneration Committee Report
88
Directors’ remuneration payable in 2022 – audited information
Directors’ remuneration
The remuneration of the Directors for 2022 was as follows:
Notes Year
Basic salary
or fees
£
Benefits
6
£
Pension
contributions
7
£
Sub total –
fixed pay
£
Annual
bonus
8
£
Share
awards
9
£
Other
10
£
Sub total –
variable pay
11
£
Grand total
£
Chair
Bill Shannon 1 2022 150,500 – – 150,500 – – – – 150,500
2021 123,919 – – 123,919 – – – – 123,919
Executive Directors
Helen Buck 2 2022 320,000 16,139 – 336,139 0 108,403 1,361 109,765 445,904
2021 313,750 16,030 – 329,780 259,158 524,229 510 783,897 1,113,677
Adam Castleton 2022 313,750 16,424 1,321 331,495 0 131,957 1,474 133,431 464,926
2021 307,500 16,288 1,319 325,107 259,530 514,054 551 774,135 1,099,242
David Stewart 2022 464,750 16,424 1,149 482,322 0 195,540 932 196,472 678,794
2021 455,750 16,288 1,149 473,187 386,020 0 212 386,232 859,418
Non Executive Directors
Gaby Appleton 2022 57,250 – – 57,250 – – – – 57,250
2021 50,375 – – 50,375 – – – – 50,375
Simon Embley 2022 49,000 – – 49,000 – – – – 49,000
3 2021 77,169 – – 77,169 – – – – 77,169
Darrell Evans 2022 59,750 – – 59,750 – – – – 59,750
2021 53,675 – – 53,675 – – – – 53,675
Sonya Ghobrial 4 2022 40,509 – – 40,509 – – – – 40,509
2021 – – – – – – – – –
James Mack 2022 57,750 – – 57,750 – – – – 57,750
5 2021 14,744 – – 14,744 – – – – 14,744
Total 2022 1,513,259 48,987 2,469 1,564,715 0 435,900 3,767 439,667 2,004,382
2021 1,396,882 48,606 2,468 1,447,956 904,708 1,038,283 1,273 1,944,264 3,392,219
Notes to Directors’ remuneration table:
1. Bill Shannon was appointed to the role of Chair of the Board on 28 April 2021 having previously held the position of Deputy Chair and Senior
Independent Director. Bill’s remuneration for his time as independent Non Executive Director is included in the 2021 figures provided in the
Chair section of the table.
2. Helen has been granted good leaver status on her retirement therefore her LTIP value for 2022 is a pro-rata amount to 31 March 2023.
3. Simon Embley stood down as Chair of the Board on 28 April 2021 and he remained as a Non Executive Director from that date. Remuneration
for his time as Chair of the Board is included in the 2021 figures provided in the Non Executive Director’s section of the table.
4. Sonya Ghobrial was appointed to the Board as an independent Non Executive Director on 4 March 2022.
5. James Mack was appointed to the Board as an independent Non Executive Director and Chair of the Audit & Risk Committee on 27 September
2021.
6. Benefits comprise private medical cover and company car or car allowance.
7. David Stewart receives 3% of banded earnings in lieu of pension. Adam Castleton is part of the auto enrolment pension scheme and receives 3%
of banded earnings as an employer contribution.
8. Our performance in 2022 resulted in no bonuses being paid to Executive Directors.
9. The share awards information includes a forecast level of vesting for the 2020 LTIP awards. The LTIP awards were granted later than usual
in 2020 and will therefore not vest until 9 November 2023. The performance period for the EPS element ended on 31 December 2022 and
was assessed accordingly. The performance period for the TSR element is the three years to 8 November 2023, and a final assessment of this
element will be made at that time. Therefore, the calculations above are based on the actual EPS performance, and forecast TRS performance
up until 31 December 2022. The value of these awards is based on our closing share price over the last three months of the financial year to 31
December 2022 (243.1 pence). £14,543, £17,696 and £26,222 of this amount is attributable to share price appreciation for Helen Buck, Adam
Castleton and David Stewart respectively. As these awards have yet to vest the final award value will differ from those stated above and will
be restated in the 2023 Directors’ Remuneration Report to reflect the final vesting percentage and actual share price at vesting. The 2019
LTIP value has been restated based on our closing share price at the time of vesting (378 pence). £170,583 and £167,271 of this amount is
attributable to share price appreciation for Helen and Adam respectively.
89
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
10. A correction has been made to include an ‘other’ column which includes the value of matching shares, dividend shares and a free share award
received through the SIP for 2021.
11. A correction has been made to the Sub total – variable pay section for 2021 to correct a casting error made in the Annual Report and Accounts
2021.
Annual bonus payments 2022 – audited information
The maximum bonus achievable by the Executive Directors was 100% of salary, 70% of which was determined by achievement of financial measures
and 30% by achievement of non-financial measures.
Financial measures
The table below summarises the financial bonus targets which were set at the beginning of the year, and performance for 2022:
Financial
performance
measures
Group Underlying Operating Profit Estate Agency Underlying Operating Profit Bonus payable
in relation
to financial
measures, as %
of basic salary
Director Weighting Threshold
1
Maximum Achievement Weighting Threshold Maximum Achievement
Helen Buck 35% £47.0m £53.144m
£36.9m
35% £11.815m £15.290m £9.2m 70%
Adam
Castleton
70% £47.0 m £53.144m
Specific to Helen only
70%
David
Stewart
70% £47.0 m £53.144m 70%
Note to financial measures table:
1. The level of payment for threshold performance is 18% of salary for each of the Executive Directors.
The 2022 Group and Estate Agency Underlying Operating Profit bonus range (threshold and maximum figures detailed in the table above) which were
set at the start of 2022, were significantly higher than previous years and reflective of the housing market at the time. As the financial results fell well
short of the targets set, the Executive Directors have not been awarded any bonus in respect of the financial performance element of bonus.
Non-financial measures/strategic goals
Detailed below is a summary of the non-financial measures which were in place for Executive Directors in respect of their 2022 annual bonus and the
outcome.
The Committee noted that for the individual non-financial measures there was a more positive performance with a number of objectives being
delivered. After due consideration and noting the very decisive shortfall in the financial performance and notwithstanding the exceptional
performance in the circumstances, it was agreed by the Committee to exercise discretion and not award any bonus for this element either.
Directors’ Remuneration Report including Remuneration Committee Report
90
Helen Buck – Executive non-financial measures
Objective and factors used to determine overall outcome Weighting Outcome
A. Estate Agency Operating Model
Key strategic projects delivered or in place to help to further simplify the Group structure to allow us to
focus on maximising our core opportunities.
25% Partial
Achievement
B. Unlock Marsh & Parsons Potential
Robust analysis on alternative options for Marsh & Parsons, including sale of the business.
25% Achieved
C. Estate Agency Cost Base to Support Performance
Robust understanding of the costs in Estate Agency, identification of opportunities and associated risks,
robust controls in place and Board confidence that costs are being managed appropriately.
25% Partial
Achievement
D. Cross Business Opportunities
Identification of how Estate Agency can support cross business opportunities and ensure Inclusion and
Diversity Forum delivers value across the Group.
15% Partial
Achievement
E. Risk Management
Effective process to identify and manage Estate Agency risks.
10% Partial
Achievement
Adam Castleton – Executive non-financial measures
Objective and factors used to determine overall outcome Weighting Outcome
A. Shareholder Value, Stakeholder Perception and New Investors
Measured through share price performance relative to peers, new investor percentage and proxy agency
feedback.
20% Not Achieved
B. Strategic Execution
Execution of strategic objectives across LSL’s three business segments and progress against long term CAGR
profit growth target.
30% Achieved
C. Financial Execution/Deployment of Resources
Savings delivered in 2022 through strategic cost projects, feedback from Board on quality and transparency
of cost reporting and robust processes to strategically manage costs with redeployment of resources to
faster growing areas or new opportunities.
20% Partial
Achievement
D. Risk Management
Implementation of an effective process to identify and manage Group risks.
20% Partial
Achievement
E. ESG
Measured through colleague opinion surveys, gender and ethnic diversity at all levels in the Group,
meeting corporate sustainability targets defined by the Board and colleague participation in community
initiatives.
10% Achieved
91
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
David Stewart – Executive non-financial measures
Objective and factors used to determine overall outcome Weighting Outcome
A. Shareholder Value, Stakeholder Perception and New Investors
Measured through share price performance relative to peers, new investor percentage and proxy agency
feedback.
20% Not Achieved
B. Execution of Estate Agency Strategy
Key strategic projects delivered or in place to help to further simplify the Group structure to allow us to
focus on maximising our core opportunities, including the sale of Marsh & Parsons.
25% Achieved
C. Execution of Financial Services Strategy
Delivery of the Financial Services growth strategy and simplification of the Group to focus on the
development of its leading Financial Services Network business. Includes the sales of new build mortgage
and protection brokerage firms to Pivotal Growth.
25% Achieved
D. Risk Management
No material risk incidents from external bodies and measurement of risk through feedback from Board,
Audit & Risk Committee Chair and results of Internal Audit reports.
10% Partial
Achievement
(no major incidents,
however further
progress required to
improve Divisional
approach to risk)
E. Organisational Design
Quality of key strategic resource brought into business, level of Senior Management attrition and
development of robust succession plans.
10% Partial
Achievement
F. ESG
Measured through colleague opinion survey, gender and ethnic diversity at all levels in the Group, meeting
corporate sustainability targets defined by the Board and colleague participation in community initiatives.
10% Achieved
As the Committee exercised discretion to reduce the outcome under the non-financial measures to nil, there is no bonus payable to Executive
Directors for 2022.
Directors’ Remuneration Report including Remuneration Committee Report
92
LTIP award vesting
The LTIP awards granted in 2020 will vest in November 2023. The performance period for the EPS element is the three financial years to 31 December
2022 and the performance period for the TSR element is the three years to 8 November 2023. As the performance period for the TSR element of the
award has not yet been completed the final outcome for the 2020 award cannot be determined. The Committee has however provided a forecast
outcome for TSR based on performance to 31 December 2022 and the final outcome under the EPS element. Based on these outcomes, the level
of forecast vesting for this award is currently 36.3% of maximum. Details of the performance measures, targets and performance from which this
vesting level is calculated are set out in the table below.
Performance measure
Percentage of award
subject to condition Performance period
Threshold
performance level
(25% vesting)
Maximum
performance level
(100% vesting) Actual performance
Percentage vesting
(forecast)
Adjusted basic EPS
growth
50% 3 years ending
31 December 2022
25.6 pence 35.1 pence or more 28.4 pence 47.2%
TSR (performance
against peers)
2
50%
3 years ending
8 November 2023
Median
(50
th
percentile)
Upper quartile
(75
th
percentile)
50.1
th
percentile
1
25.3%
Total 36.3%
Notes:
1. Forecast performance based on performance to 31 December 2022 using a three month average.
2. TSR performance is measured against the companies constituting the FTSE Small Cap Index (excluding investment trusts and LSL) at the start of the
TSR performance period.
Details of the LTIP awards granted in 2020 and the expected value of the forecast vesting are shown in the table below.
Executive Director Date of grant Date of vesting
Number of shares
under award
Forecast vesting
%
Forecast number
of shares vesting
Forecast total
vesting £
2
Helen Buck
1
9 November 2020 8 November 2023 122,980 36.3 44,592 108,403
Adam Castleton 9 November 2020 8 November 2023 149,700
36.3
54,281
131,957
David Stewart 9 November 2020 8 November 2023 221,833
36.3
80,436
195,540
Notes to 2020 LTIP awards:
1. Helen Buck has been awarded good leaver status on her outstanding share awards, the number of shares awarded has therefore been pro-rated to
reflect her time worked in the three year vesting period based on a cessation date of 31 March 2023.
2. The expected value of vesting has been calculated using LSL’s average share price over the three months to 31 December 2022 (243.1 pence).
Share awards granted during 2022
Details of LTIP (nil cost option) awards granted in 2022 are as follows:
Executive Director Date of grant Date of vesting
Share price at
grant date
Number of shares
under award
Face value of
award as % of
salary
Face value of
award £ at grant
date
Helen Buck 29 March 2022 29 March 2025 369 pence 108,401 125 400,000
Adam Castleton 29 March 2022 29 March 2025 369 pence
106,283
125
392,188
David Stewart 29 March 2022 29 March 2025 369 pence
157,435
125
580,938
The LTIP awards detailed above are subject to a two year post-vesting holding period that also applies to the period post-cessation of employment.
93
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
The performance measures associated with the 2022 LTIP grant are as follows:
Performance measure
Percentage of award subject to
condition Performance period
Threshold performance level
(25% vesting)
Maximum performance level
(100% vesting)
Adjusted basic EPS in 2024 50%
3 years ending
31 December 2024
46.9 pence 52.8 pence
TSR (performance against FTSE Small Cap
excluding investment trusts)
50% Median
(50
th
percentile)
Upper quartile
(75
th
percentile)
External appointments
None of the Executive Directors hold non executive directorships of any other companies, other than to represent the Group’s investment interests in
other companies.
Payments to past Directors
No payments have been made to past Directors.
Payments for loss of office
In June 2022 Helen Buck announced her plans to retire. Helen Buck remained an employee until the end of her notice period on 31 March 2023 and
was in receipt of basic salary, car allowance and benefits until this date. Helen was granted good leaver status and therefore her 2021 and 2022 LTIP
awards will vest at the normal time subject to performance and with pro-rating to take account of her retirement date. She is not eligible for an
annual bonus in respect of 2023.
Directors’ Remuneration Report including Remuneration Committee Report
94
Outstanding share awards
Options granted to Executive Directors and to Simon Embley (when he was Group CEO) to acquire shares are as follows:
Director
Award
type Date of grant
Share price
on grant
Exercise
price
As at 1
January
2022
Awards
granted
during year
Awards
lapsed
during year
Awards
exercised
during year
As at 31
December
2022 Exercise period
Helen Buck
Executive Director –
Estate Agency
LTIP 29 March 2019 255.00p Nil 151,470 – 12,785 138,685 0 29 March 2022 to
29 March 2029
SAYE 1 June 2019 227.00p 265.00p 2,037 – – 2,037 0 1 June 2022 to
30 November 2022
LTIP 9 November 2020 210.50p Nil 152,665 – – – 152,665 9 November 2023 to
9 November 2030
LTIP 5 May 2021 408.50p Nil 96,006 – – – 96,006 5 May 2024 to
5 May 2031
SAYE 28 May 2021 468.00p 327.00p 2,388 – – – 2,388 1 July 2024 to
31 December 2024
LTIP 29 March 2022 369.00p Nil 0 108,401 – – 108,401 29 March 2025 to
28 March 2032
Adam Castleton
Group Chief Financial
Officer
LTIP 29 March 2018 219.50p Nil 15,349 – – 15,349 0 29 March 2021 to
29 March 2028
LTIP 29 March 2019 255.00p Nil 148,529 – 12,536 135,993 0 29 March 2022 to
29 March 2029
LTIP 9 November 2020 210.50p Nil 149,700 – – – 149,700 9 November 2023 to
9 November 2030
LTIP 5 May 2021 408.50p Nil 94,094 – – – 94,094 5 May 2024 to
5 May 2031
SAYE 28 May 2021 468.00p 327.00p 3,302 – – – 3,302 1 July 2024 to
31 December 2024
LTIP 29 March 2022 369.00p Nil 0 106,283 – – 106,283 29 March 2025 to
28 March 2032
Simon Embley
Non Executive Director
LTIP 2 April 2012 275.00p Nil 58,333 – – 58,333 0 2 April 2015 to
2 April 2022
David Stewart
Group Chief Executive
Officer
LTIP 9 November 2020 210.5p Nil 221,833 – – – 221,833 9 November 2023 to
9 November 2030
LTIP 5 May 2021 408.50p Nil 139,458 – – – 139,458 5 May 2024 to
5 May 2031
SAYE 28 May 2021 468.00p 327.00p 3,302 – – – 3,302 1 July 2024 to
31 December 2024
LTIP 29 March 2022 369.00p Nil 0 157,435 – – 157,435 29 March 2025 to
28 March 2032
Notes to outstanding share awards:
1. All of the above are scheme interests. Details of LTIP awards granted in 2022 are presented in a separate paragraph, while details of previous outstanding
awards are presented in the previous year’s Directors’ Remuneration Report and are included in note 14 to the Financial Statements.
2. The aggregate gains made by Helen Buck, Adam Castleton and Simon Embley on the exercise of awards during the year was £475,871, £506,996 and £243,249
respectively. The LTIP awards exercised by Helen Buck and Adam Castleton are subject to a two year holding period and have therefore been held and are
included in their shareholding as detailed in the Directors’ Interests in Shares table below.
3. The share mid-market price ranged from 194.5 pence to 429.5 pence and averaged 330.0 pence during 2022. The share price on 30 December 2022 was 252.5
pence, compared to 429.5 pence on 4 January 2022.
4. Simon Embley’s LTIP award has been pro-rated to reflect his change of role from Group CEO to Non Executive Chair on 1 January 2015.
5. The LTIP awards granted to the Executive Directors in 2018, 2019, 2020, 2021 and 2022 are subject to the two year post-vesting holding period. This will
continue to apply post-cessation of employment.
95
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Directors’ interests in shares
The interests of the Directors who served on the Board during the year, including their connected persons, are set out in the table below:
Shareholdings
(number of shares)
Share awards
(number of shares)
Total
(number of
shares for
shareholding)
Shareholding
guideline
1
Executive
Director
shareholding
2
Director
31 December
2022
31 December
2021
Unvested (and
subject to
performance
conditions)
Vested but
unexercised
number of
shares
31 December
2022
(% of basic
salary)
(% of basic
salary)
Gaby Appleton
Non Executive Director – – – – – – N/A
Helen Buck
Executive Director – Estate Agency 104,213 21,121 359,460 – 104,213 150% 82.2%
Adam Castleton
Group Chief Financial Officer 94,086 6,468 353,379 – 94,086 150% 75.7%
Simon Embley
Non Executive Director 6,835,624 6,777,291 – – 6,835,624 – N/A
Darrell Evans
Non Executive Director – – – – – – N/A
James Mack
Non Executive Director – – – – – – N/A
Sonya Ghobrial
Non Executive Director 0 N/A – – – – –
Bill Shannon
Chair of the Board 25,329 25,329 – – 25,329 – N/A
David Stewart
Group Chief Executive Officer 25,714 280 522,028 – 25,714 200% 14.0%
Notes to Directors’ interest in shares:
1. We recognise that due to the minimal vesting of LTIP awards in recent years, there have been limited opportunities for Executive Directors to accumulate shares.
The Executive Directors’ shareholdings are expected to increase during 2023 following the vesting of the 2020 LTIP. We are keen to increase share ownership
amongst the Executive Directors and the Policy supports this through the requirement to purchase shares with a proportion of bonus and through the retention
of all vested LTIP awards. In addition, David Stewart has also made a voluntary purchase of shares during 2022 to increase his shareholding and this is included in
the table above.
2. The shareholdings are calculated based on shares owned and vested but unexercised awards, net of tax, as at 31 December 2022. Shareholding guideline
calculations are based on the share price at 30 December 2022 of 252.5 pence and the Executive Director’s basic salary at 31 December 2022. The unvested
share awards have not been pro-rated for Helen Buck to reflect her shareholding position as at 31 December 2022.
All of the interests detailed above are beneficial. Apart from the interests disclosed above, no Directors held interests 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 31 December 2022 and the date of this Report, other than the purchases of
shares by Adam (274 shares) and David (272 shares) as participants of LSL’s SIP/BAYE scheme (in January, February, March and April 2023). These
shares were purchased by the Trust at the prevailing market rate. Helen also purchased 204 shares as a participant of LSL's SIP/BAYE scheme prior to
retiring from the Board on 31 March 2023.
No Director has, or has had, any direct or indirect interest in any transaction, contract or arrangement (excluding service agreements), which is or
was unusual in its nature or conditions, or significant to the Group’s business, during the current or immediately preceding financial year.
Directors’ Remuneration Report including Remuneration Committee Report
96
Performance graph and table
The following graph shows the value, up to 31 December 2022, 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 31 December 2012. 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.
Group CEO’s total remuneration
The total remuneration figures for the role of Group CEO during each of the last ten financial years are shown in the table below. The total
remuneration figure includes the annual bonus based on that year’s performance and share awards based on three year performance periods
ending in or just after the relevant year. The annual bonus pay-out and share vesting level as a percentage of the maximum opportunity are also
shown for each of these years.
Simon
Embley
(to 9
September
2013)
Ian Crabb
(from 9 September 2013 to 1 May 2020)
David Stewart (from 1 May 2020)
2013 2013 2014 2015 2016 2017 2018 2019 2020 2020 2021 2022
Total
remuneration
£500,862
1
£119,522
1
£571,500 £852,869 £499,000 £835,120 £774,629 £760,679 £161,214
2
£310,932 £859,418 £678,794
Annual bonus
91.70% N/A 54% 93.30% 16% 97% 79.80% 61.70% 0% 0% 84.70% 0%
LTIP vesting 0% N/A N/A 66.81% 0% 0% 0% 0% N/A N/A N/A 36.3%
Notes to Group CEO’s total remuneration:
1. The total remuneration disclosed for 2013 is Simon Embley’s total remuneration as CEO up to 9 September 2013, when he changed role to Deputy Chair, and Ian
Crabb’s total remuneration from 9 September 2013, when he was appointed CEO, to 31 December 2013.
2. The total remuneration disclosed for 2020 is Ian Crabb’s total remuneration as Group CEO up to 30 April 2020, when he ceased to be CEO, and for David Stewart
from 1 May 2020, when he was appointed Group CEO.
97
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Percentage change in Directors’ remuneration
In line with the requirements of the Revised Shareholders Rights Directive (2018 Regulations), the table below shows the annual percentage change in salary/fees,
benefits and bonus for each of the Directors in 2022, compared to the average for our wider workforce over the last four financial years.
Director
2022 vs 2021
2021 vs 2020 2020 vs 2019
9
% change in
salary/fees
% change
in taxable
benefits
(excluding
pension)
% change
in bonus
(includes
commission)
% change in
salary/fees
% change
in taxable
benefits
(excluding
pension)
% change
in bonus
(includes
commission)
% change in
salary/fees
% change
in taxable
benefits
(excluding
pension)
% change
in bonus
(includes
commission)
Chair
Bill Shannon
1
21.5 N/A N/A N/A N/A N/A N/A N/A N/A
Executive Directors
2
Helen Buck 2.0 0.7 -100.0 1.5 -0.6 N/A 0.0 -1.2 -100.0
Adam Castleton 2.0 0.8 -100.0 1.5 -0.8 N/A 0.0 -1.7 -100.0
David Stewart 2.0 0.8 -100.0 N/A N/A N/A N/A N/A N/A
Non Executive Director
Gaby Appleton
3
13.6 N/A N/A 14.5 N/A N/A N/A N/A N/A
Simon Embley
4
-36.5 N/A N/A N/A N/A N/A -13.2 N/A N/A
Darrell Evans
5
11.3 N/A N/A 16.7 N/A N/A N/A N/A N/A
Sonya Ghobrial
6
N/A N/A N/A N/A N/A N/A N/A N/A N/A
James Mack
7
N/A N/A N/A N/A N/A N/A N/A N/A N/A
All employees
Median of LSL workforce
8
5.0 186.2 19 1.9 -71.8 -7.0 2.1 67.8 5.2
Notes to percentage change in Directors’ remuneration for the period 2022 vs 2021:
1. Bill Shannon was appointed as Non Executive Chair of the Board during 2021 and his fee was increased accordingly.
2. The Executive Directors were not awarded any bonus in 2022, as detailed in the Annual Bonus section of this Report (page 89).
3. Gaby Appleton became Senior Independent Director during 2021 and her fee was increased accordingly.
4. Simon Embley stood down as Chair of the Board in 2021 and became a Non Executive Director, his fee was decreased accordingly.
5. Darrell Evans became Chair of the Remuneration Committee during 2021 and his fee was increased accordingly.
6. Sonya Ghobrial was appointed to the Board during 2022 and therefore a change from the prior year has not been provided.
7. James Mack was appointed to the Board during 2021 and became Chair of the Audit & Risk Committee in September 2022 and therefore a change from the prior
year has not been provided.
8. The median full time equivalent pay of all employees in the LSL Group and still in employment as at 31 December has been provided as an appropriate
comparator. The total number of employees in this Group as at 31 December 2022 was 4,446. This excludes employees who joined the business during
December but received their first pay in January 2023. Increases in average basic salaries amongst the wider workforce was higher than the Executive Directors,
with those employees in lower-paid roles receiving annual pay review increases. The relatively high percentage change figure for employee benefits reflects an
increase in the median from a relatively low absolute number in 2021 and an increase in employees selecting a flexible benefit as part of the reward package.
The median FTE total pay of the workforce increased by 5.0% (from £32,362 to £33,995) on the prior year, as detailed in the figures in the CEO pay ratio figures
below and corresponding figures in the 2021 Annual Report.
9. For notes of changes in previous years, please refer to previous Annual Report and Accounts.
Directors’ Remuneration Report including Remuneration Committee Report
98
Group CEO to employee pay ratio
The table below discloses the ratio between the Group CEO’s remuneration and our wider workforce since 2018.
Financial Year Method 25
th
percentile
pay ratio
Median pay
ratio
75
th
percentile
pay ratio
2018 Option A 40.5 : 1 27.9 : 1 16.2 : 1
2019 Option A 38.1 : 1 26.1 : 1 14.9 : 1
2020 Option A 23.4 : 1 15.8 : 1 9.1 : 1
2021 Option A 40.3 : 1 26.5 : 1 15.4 : 1
2022 Option A 29.3 : 1 20.0 : 1 11.6 : 1
The 2022 employee data used to calculate the ratios is set out in the table below:
25
th
percentile Median 75
th
percentile
Total pay and benefits of employees £23,140 £33,995 £58,486
Basic salary of employees £19,539 £24,000 £38,000
Notes to percentage change in Group CEO to employee pay ratio:
We have chosen option A (which compares our full time equivalent total remuneration for all UK employees against the Group CEO) as the most
appropriate methodology to report the ratios, in line with the recommendation from the UK Government’s Department for Business, Energy and
Industrial Strategy, and a number of shareholder representative and proxy voting bodies.
The ratio above includes all UK-based employees who were employed in any part of the Group as at 31 December 2022. The employee
remuneration data includes the full time equivalent data in respect of basic pay, bonus, commission, taxable benefits, share-based remuneration
and pension benefits, so as to provide a comparable figure to the Group CEO single figure total remuneration.
In calculating the bonus and commission elements for employees, we have used the bonus and commission paid to employees during 2022. In some
instances, employees receive bonus or commission payments in arrears. However, due to a number of these elements (for example year end annual
bonuses) not being finalised at the time of writing, this Report was written with these elements not being reapportioned to the relevant financial
year. In line with the legislation, we disclose this variation in methodology. However, we consider that this approach provides a broadly similar
outcome to the result if 2021 year end bonuses had been included.
As at 31 December 2022, we employed over 4,400 people in a wide variety of roles. The reward policies and practices for employees follow those
set for the Executive Directors, as detailed on page 86 of this Report. The Committee also has responsibility for setting the remuneration of Senior
Managers and reviews and monitors the Group’s wider remuneration policies and practices.
The Committee notes the decrease in the ratio from 2021 and attributes this to awarding higher base pay increases and one-off cost of living
awards to colleagues in lower-paid roles and no bonus being payable to the Group CEO in respect of 2022 following the exercise of the Committee’s
discretion.
99
Other Information
Financial Statements
Strategic Report
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Overview
Relative importance of spend on pay
The following table shows our actual spend on pay for all employees, relative to dividends paid and profit earned:
2022 (£m) 2021 (£m) Change (%)
Staff costs
1
206.6 202.2 2%
Dividends (excluding any special dividend) 11.7 12.0 -1%
Profit after tax
2
-63.9 61.9 -179%
Adjusted profit after tax
2
29.2 39.1 -25%
Notes:
1. See note 14 to the Financial Statements for calculation of staff costs.
2. The percentage change in profit after tax and adjusted profit after tax has been shown as this is considered an important financial KPI used to monitor our
performance. See note 11 to the Financial Statements for the calculation.
Statement of shareholder voting
The Directors’ Annual Statement and Report on Remuneration for 2021 was presented to shareholders at the 2022 AGM on 27 May 2022. The
Policy was presented to shareholders at the 2020 AGM on 30 June 2020. The voting outcomes were as follows:
Annual Statement and Annual
Report on Remuneration
Directorsˊ Remuneration Policy
Votes cast in favour 99.63% 97.14%
Votes cast against 0.37% 2.86%
Total votes withheld 5,331 2,000
Remuneration Committee
Role and membership
Details of the Committee’s composition and responsibilities are set out in the Corporate Governance Report on page 54 of this Report. During 2022,
the Committee was chaired by Darrell and its other members were Bill Shannon, Gaby Appleton, James Mack and Sonya Ghobrial. David Barral
joined the Committee on 3 April 2023 and Bill will retire from the Committee at the close of the 2023 AGM.
The Committee’s terms of reference are available from the Company Secretary or from our website (lslps.co.uk).
The work of the Remuneration Committee
The Remuneration Committee met five times in 2022. One meeting was a combined Remuneration Committee and Nominations Committee
meeting which met to consider Helen Buck’s retirement from the Board.
Set out below is a summary of the topics discussed by the Committee during the year:
1. 2022 AGM: the Committee discussed feedback arising from the Annual Report and Accounts 2021 and shareholder voting at the 2022 AGM.
2. Executive Director Remuneration: the Committee discussed shareholder, proxy advisers and colleague feedback on Executive Director
remuneration including the triennial Policy review. The Policy review included a meeting scheduled specifically to consider the Policy.
3. Approvals in respect of: 2021 bonus payments; 2022 remuneration matters (pay review, bonus, LTIP awards and NFMs (setting and during year
reviews)); and 2023 remuneration matters (pay review; bonus and Executive Director NFMs).
4. Workforce remuneration including pay improvements for our lowest paid colleagues and the £500 cost of living award.
5. Annual terms of reference review and Committee evaluation.
6. LTIP TSR peer group review.
7. Benchmarking of Executive and Senior Management remuneration.
8. Remuneration treatment for members of the Senior Management Team who were retiring.
Set out below are those areas of the Committee’s work that it is required to report under the Code and reporting regulations and which are not
covered elsewhere in this Report.
Directors’ Remuneration Report including Remuneration Committee Report
100
Engagement with stakeholders
During 2022, the Committee consulted with the Employee Engagement Forum and with shareholders in relation to the Policy review, which is
detailed in the Stakeholder Engagement section at page 21.
The Committee also considered shareholder feedback received in relation to our Annual Report and Accounts and this is taken into account as part
of the Policy review and in the implementation of the Policy.
As set out in the Stakeholder Engagement arrangements and the Corporate Governance Report sections of this Report, we have a number of
different channels for engaging with our workforce. This includes engagement by the Non Executive Director designated for workforce engagement,
Darrell Evans, who also is Chair of the Committee and this provides a route for the Committee to engage with the wider workforce on remuneration
matters.
Remuneration Committee advisers
The Committee received independent professional advice during the year from Korn Ferry on matters relating to Executive Director and Senior
Management remuneration. No other services are provided to the Group by Korn Ferry.
Korn Ferry was selected and appointed by the Committee and provided advice to us in relation to the assessment of TSR performance for the
LTIP, benchmarking of the senior roles, treatment of share awards for leavers and the disclosures required in this report. Additionally, Korn Ferry
attended the September 2022 Committee meeting to provide a market update and advice in relation to the review of the Policy. Its fees for 2022,
which are based on an hourly rate, were £29,391 (excluding VAT) (2021: £27,085). Korn Ferry is a signatory to the Remuneration Consultants’ Code
of Conduct and has confirmed to us that it adheres in all respects to the terms of this code. We consider its advice to be independent and objective.
The Directors’ Remuneration Report is approved by and signed on behalf of the Board of Directors
Darrell Evans
Chair of the Remuneration Committee
12 April 2023
Other Information
Financial Statements
Strategic Report
Overview
101
Financial Statements
In this section
102 Independent Auditor’s Report to the Members of
LSL Property Services plc
113 Group Income Statement
114 Group Statement of Comprehensive Income
115 Group Balance Sheet
116 Group Statement of Cash Flows
117 Group Statement of Changes in Equity
118 Notes to the Group Financial Statements
163 Parent Company Balance Sheet
164 Parent Company Statement of Cash Flows
165 Parent Company Statement of Changes in Equity
166 Notes to the Parent Company Financial
Statements
102
102
Independent Auditor’s Report
for the year ended 31 December 2022
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF LSL PROPERTY SERVICES PLC
Opinion
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 31 December 2022 and of the group’s loss for the year then ended;
• the group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
• the parent company financial statements have been properly prepared in accordance with UK adopted international accounting standards as
applied in accordance with section 408 of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of LSL Property Services plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31
December 2022 which comprise:
Group Parent company
Group Income Statement for the year ended 31 December 2022 Parent Company Balance sheet as at 31 December 2022
Group Statement of Comprehensive Income for the year ended
31 December 2022
Parent Company Statement of Cash Flows for the year ended
31 December 2022
Group Balance Sheet as at 31 December 2022 Parent Company Statement of Changes in Equity for the year ended
31 December 2022
Group Statement of Cash Flows for the year ended 31 December
2022
Related notes 1 to 19 to the financial statements including a summary
of significant accounting policies
Group Statement of Changes in Equity for the year ended
31 December 2022
Related notes 1 to 36 to the financial statements, including a
summary of significant accounting policies
The financial reporting framework that has been applied in their preparation is applicable law and UK adopted international accounting standards and
as regards the parent company financial statements, as applied in accordance with section 408 of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the group and parent in accordance with the ethical requirements that are relevant to our audit of the financial statements
in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we remain independent
of the group and the parent company in conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the directors’ assessment of the group and parent company’s ability to continue to adopt the
going concern basis of accounting included the following procedures:
103
103
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
How we evaluated management’s assessment
• We evaluated management’s assessment process to determine whether it was appropriate in the context of our own risk assessment on going
concern.
• We verified the mathematical accuracy of management’s going concern model and covenant calculations for the period to 30 April 2024;
• We assessed the appropriateness of the duration of the going concern assessment period to 30 April 2024 and considered the existence of any
significant events or conditions beyond this period based on our procedures on the group’s cash flow forecasts and from knowledge arising from
other areas of the audit;
• We challenged the appropriateness of the key assumptions in management’s forecasts including revenue growth, by comparing these to industry
benchmarks and through consideration of historical forecasting accuracy;
• We obtained management’s downside forecasts which included a severe reduction in performance levels similar to the 2008 financial crisis as well
as material cash outflows;
• We assessed the plausibility of management’s downside scenarios by corroborating the key assumptions to third party data, for example in relation
to the reduction in house prices during the 2008 financial crisis, and searching for contradictory evidence in relation to the appropriateness of
management’s key assumptions. Further we considered whether there could be any material impact of climate change in the going concern period;
• We performed the assessment with consideration to the various disposals which have taken place since the year end, and future projects which
may occur, to verify that the assessment reflected the expected structure of the group going forward;
• We performed reverse stress testing in order to identify and understand what factors would lead to the group utilising all available liquidity or
breaching the financial covenants attached to the group’s facility during the going concern period;
• We considered the quantum and timing of mitigating factors available to management, the extent to which these are included in management’s
forecasts and the extent to which these are within management’s control;
• We examined the new agreement for the Revolving Credit Facility (‘RCF’) following the refinancing which took place in February 2023 and reviewed
the nature of the facility, repayment terms, covenants and attached conditions. We assessed its continued availability to the group through the
going concern period and checked the completeness of management’s covenant assessment;
• We considered whether there were any indicators of other sources of finance not considered by management in the going concern assessment;
and
• We reviewed the disclosures made relating to going concern included in the Annual Report & Accounts in order to assess the appropriateness of
the disclosures and conformity with reporting standards.
Our key observations
• The directors’ assessment forecasts that the group will maintain sufficient liquidity throughout the going concern assessment period in the base
case scenario and will not breach banking covenants. Under management’s severe but plausible scenario, which includes a significant reduction
in performance throughout the going concern period, liquidity remains and there is no breach of covenants. We have not identified any climate-
related risks that would materially impact the group’s forecasts to 30 April 2024;
• Controllable mitigating actions available to management over the going concern assessment period include reductions to non-declared dividend
payments;
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group and parent company’s ability to continue as a going concern for the period from the date the
financial statements are authorised for issue through to 30 April 2024.
In relation to the group and parent company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing material to
add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the group or parent company’s ability
to continue as a going concern.
104
104
Independent Auditor’s Report continued.
for the year ended 31 December 2022
Overview of our audit approach
Audit scope • We performed an audit of the complete financial information of 9 components and audit procedures on specific
balances for a further 6 components.
• The components where we performed full or specific audit procedures accounted for 96% of profit before tax
excluding goodwill impairment (‘adjusted profit before tax’), 95% of revenue and 98% of total assets.
Key audit matters • Risk of inappropriate recognition of revenue around the year end (including valuation of the lapse provision)
• Risk of inappropriate valuation of goodwill in relation to You Move / Reeds Rains and LSLi
Materiality • Overall group materiality of £1.4m which represents 5% of adjusted profit before tax.
An overview of the scope of the parent company and group audits
Due to unforeseen circumstances it became necessary for David Wilson to take over as Senior Statutory Auditor during the execution phase of the
audit, having been the engagement quality control reviewer (EQCR) until that point. The EQCR role was replaced with a suitably experienced partner.
David Wilson and the new EQCR performed appropriate review of the direction and supervision of the audit to date to satisfy themselves, inter alia,
that appropriate planning and component involvement had been performed.
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each company
(or ‘component’) 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, the potential
impact of climate change and other factors such as recent Internal audit results when assessing the level of work to be performed at each company.
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 30 reporting components of the Group, we selected 15 components covering entities within the UK and
Guernsey, which represent the principal business units within the Group.
Of the 15 components selected, we performed an audit of the complete financial information of 9 components (“full scope components”) which
were selected based on their size or risk characteristics. For the remaining 6 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.
Specified procedures were performed at 2 trading components in the estate agency segment. These procedures related to trade receivables. This
covered 1% of the group’s total assets.
Our coverage by full, specific, specified and group procedures is illustrated below and calculated on an absolute basis. The summary is by adjusted
profit before tax, revenue and total assets. Overall, our full and specific procedures accounted for 96% (2021: 98%) of the Group’s adjusted profit
before tax, 95% (2021: 95%) of the Group’s revenue and 98% (2021: 96%) of the Group’s total assets.
The audit scope of the specific scope 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.
Of the remaining 15 components that together represent 4% of the Group’s adjusted profit before tax, none are individually greater than 1% of the
Group’s adjusted profit before tax on an absolute basis. For these components, we performed other procedures, including analytical review, review
of internal audit reports, review of minutes of board meetings, testing of consolidation journals and review of entity level controls to respond to any
potential risks of material misstatement to the Group financial statements.
105
105
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
The charts below illustrate the coverage obtained from the work performed by our audit teams.
Adjusted profit before tax
11% Specific
scope components
85% Full scope
components
4% Other
procedures
Revenue
10% Specific
scope components
85% Full scope
components
5% Other
procedures
Total assets
3% Specific
scope components
95% Full scope
components
2% Other
procedures
Changes from the prior year
The number of specific scope components increased compared to the prior year as a result of the increasing relative contribution to the group from
financial services components.
Involvement with component teams
In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each of the components
by us, as the primary audit engagement team, or by component auditors from other EY global network firms operating under our instruction. Of the
9 full scope components, audit procedures were performed on 6 of these directly by the primary audit team and 3 by the component audit team. For
the 6 specific scope components, where the work was performed by component auditors, we determined the appropriate level of involvement to
enable us to determine that sufficient audit evidence had been obtained as a basis for our opinion on the Group as a whole.
The component team is also based in the UK. The primary team interacted regularly with the component teams, where appropriate, during various
stages of the audit, reviewed relevant working papers and were responsible for the scope and direction of the audit process. At critical periods of the
audit, we increased the use of online collaboration tools to facilitate team meetings, information sharing and the evaluation, review and oversight
of the component team. We utilised fully the interactive capability of EY Canvas, our global audit workflow tool, to review remotely the relevant
underlying work performed and retained component working papers in key risk areas on the group audit file. This, together with the additional
procedures performed at Group level, gave us appropriate evidence for our opinion on the Group financial statements.
Climate change
Stakeholders are increasingly interested in how climate change will impact LSL Property Services plc. Given the nature of the business in a non-
carbon intensive industry, management does not consider there to be a material impact from climate change. The Group has determined that
the most significant future impacts from climate change on its operations will be from physical risks, such as severe weather events impacting
office-based locations, as well as transition risks such as policy and regulation changes. However, with a predominantly leased property footprint,
group management concludes there is little risk of significant business disruption and no significant financial impact from climate change. These
are explained on pages 39 to 42 in the required Task Force for Climate related Financial Disclosures and on page 88 in the principal risks and
uncertainties. They have also explained their climate commitments on pages 38 to 42. All of these disclosures form part of the “Other information,”
rather than the audited financial statements. Our procedures on these unaudited disclosures therefore consisted solely of considering whether they
106
106
Independent Auditor’s Report continued.
for the year ended 31 December 2022
are materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or otherwise appear to be materially
misstated, in line with our responsibilities on “Other information”.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any consequential material
impact on its financial statements.
The group has explained in note 2 how they have reflected the impact of climate change in their financial statements. The group did not identify
any climate risk that would materially impact the carrying values of the group’s assets or have any other impact on the financial statements. The
group has explained how the impact of climate change aligns with their commitment to the aspirations of the Paris Agreement to achieve net zero
emissions by 2050. These disclosures also explain where governmental and societal responses to climate change risks are still developing, and where
the degree of certainty of these changes means that they cannot be taken into account when determining asset and liability valuations under the
requirements of UK adopted international accounting standards.
Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating management’s assessment of the
impact of climate risk, physical and transition, and their climate commitments. As part of this evaluation, we performed our own risk assessment to
determine the risks of material misstatement in the financial statements from climate change which needed to be considered in our audit.
We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and viability and associated disclosures.
Where considerations of climate change were relevant to our assessment of going concern, these are described above.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to impact a key audit
matter.
107
107
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion
thereon, and we do not provide a separate opinion on these matters.
Risk Our response to the risk
Key observations communicated to the
Audit & Risk Committee
Risk of inappropriate recognition of revenue
around the year end (including valuation of
the lapse provision)
Refer to the Audit & Risk Committee Report
(page 67); Accounting policies (page 118);
and Note 3 of the Group Financial Statements
(page 126)
The group has reported revenues of £321.7m
(2021: £326.8m).
The group has recognised a lapse provision of
£5.2m (2021: £4.9m).
The risk was one of the most significant
assessed risks of material misstatement due
to the potential for bias or error in the timing
of transactions. There is also judgement in
the value of commission income that will be
clawed back.
We identified the following specific risk
of fraud and error in respect of improper
revenue recognition given the nature of the
group’s services:
• Inappropriate cut-off of revenue at period
end; and
• Inappropriate measurement of the
reduction to revenue recorded for expected
clawback of commissions on lapsed
insurance policies.
There is no change in risk profile in the
current year.
At each full and specific scope audit component
with material revenue streams:
• We performed walkthroughs of each significant
stream of revenue and confirmed the existence
of key controls around the recognition of
revenue and measurement of the lapse
provision;
• We performed cut-off testing for the period
before and after the year end with reference
to underlying contracts and evidence of
management’s assessment of the point of
revenue recognition. This included assessment
of the appropriateness of the cut-off model
applied by management in the Financial Services
division; and
• We performed transactional testing and data
analysis procedures to assess the recognition of
revenue around the year end. Where items did
not follow the expected transaction flow, we
investigated outliers and corroborated to third
party evidence where appropriate.
For the lapse provision:
• We tested the underlying calculations for
arithmetical accuracy and consistency across
the group; and
• We verified the appropriateness of the lapse
rate applied to the lapse provision model
and where relevant, tested a sample of
historical lapses to third party evidence.
We performed full and specific scope audit
procedures over this risk area in the 13 in-scope
locations which have revenue. This covered
95% of the group’s revenue. We also performed
other procedures in the locations which covered
the remaining 5% of the group’s revenue. This
consisted of analytical procedures over material
movements in the Income Statement and Balance
Sheet.
We have not identified any material
misstatements in the revenue recognised in
the year.
Whilst the methodology and assumptions
applied in calculating the lapse provision are
not fully consistent across the group, this
has not led to any material differences. The
provision was reflective of the key terms of
the contracts with customers.
108
108
Independent Auditor’s Report continued.
for the year ended 31 December 2022
Risk Our response to the risk
Key observations communicated to the
Audit & Risk Committee
Risk of inappropriate valuation of goodwill
in relation to Your Move / Reeds Rains and
LSLi
Refer to the Audit & Risk Committee Report
(page 67); Accounting policies (page 118); and
Note 16 of the Group Financial Statements
(page 139)
The carrying value of goodwill on the Group
Balance Sheet is £56.5m (2021: £160.9m). Of
this amount £16.8m relates to the Your Move
/ Reeds Rains cash-generating unit (‘CGU’)
and £22.5m relates to the LSLi CGU.
The valuation of goodwill for these two
cash generating units (‘CGUs’) was one
of the most significant assessed risks of
material misstatement due to the high level
of estimation uncertainty inherent in the
impairment review, particularly in assessing
the future performance of these CGUs and
the appropriate discount rate to apply in
calculating the ‘value in use’ of the CGUs.
As in prior year the risk has been allocated to
the entities which have a lower percentage of
headroom in 2022, being Your Move / Reeds
Rains and LSLi.
The risk was also allocated to Marsh &
Parsons in prior year. However, following the
classification of this CGU as held for sale, the
estimation uncertainty in the impairment
review was reduced and therefore this CGU is
no longer impacted by the significant risk.
The significant risk was newly assigned to
the LSLi CGU in current year due to the low
percentage headroom in relation to that CGU.
We challenged management’s assumptions
used in its assessment of the recoverability of
the carrying value of goodwill. We did this by
focusing on the appropriateness of the CGU
identification and the methodology applied to
estimate the value in use, discount rates and
forecast cash flows. Specifically:
• We evaluated whether the CGUs identified are
the lowest level at which management monitors
goodwill consistent with the requirements of
IAS 36 Impairment of assets;
• We assessed the methodology applied in
the value in use calculations as compared to
the requirements of IAS 36 and tested the
mathematical accuracy of management’s
model;
• We assessed the appropriateness of
management’s forecasts in light of the historical
accuracy of management’s forecasts and
current economic conditions;
• We challenged management on the group
overlay adjustments made to the Board-
approved forecasts which had been used in the
model;
• We obtained an understanding of, and assessed
the basis for, key underlying assumptions in the
three-year forecasts which form the basis of the
value in use calculations;
• We engaged our valuation specialists to assess
the appropriateness of the discount rate applied
within the model, the compliance of the model
with IAS 36 and the appropriateness of the long-
term growth rate;
• We assessed the sensitivity of key assumptions
to reasonably possible changes to stress test the
model and determined the appropriateness of
related disclosures;
• We considered whether there is any material
risk from climate change to the recoverability of
each CGU; and
• We assessed the trigger for the impairment in
the current year and whether the timing of the
impairment was appropriate.
Whilst this is an area of significant estimation
uncertainty, we have concluded that the
carrying value of goodwill is reasonably
stated.
We concluded a disclosure is required for
both CGUs as reasonably possible changes
in assumptions could lead to a materially
different conclusion with regards to the
recoverability of goodwill. Management has
made this disclosure in the Annual Report and
Accounts.
109
109
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
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 £1.4 million (2021: £2.1 million), which is 5% (2021: 5%) of adjusted profit before tax. We believe
that adjusted profit before tax provides us with the most relevant performance measure to the stakeholders of the group because it excludes the
distorting effect of large unusual adjustments.
We determined materiality for the Parent Company to be £1.0 million (2021: £1.5 million), which is 1% (2021: 1%) of equity.
Starting basis
• Total Profit before tax of £59.1m
• Totals £28.1m (adjusted profit before tax)
• Materiality of £1.4m (5% of adjusted profit before tax)
• Goodwill impairment of £87.2m
Adjustments
Materiality
During the course of our audit, we reassessed initial materiality with the only change in the final materiality from our original assessment at
planning being to reflect the actual reported performance of the group in the year. This resulted in a materiality of £1.4m compared with our initial
assessment at the planning stage of £1.7m.
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% (2021: 50%) of our planning materiality, namely £0.7m (2021: £1.1m). We have set performance materiality at this percentage
reflecting our prior year audit experience of the group.
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 £0.1m to £0.5m (2021: £0.1m to £0.7m).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit & Risk Committee that we would report to them all uncorrected audit differences in excess of £0.1m (2021: £0.1m), 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.
Other information
The other information comprises the information included in the annual report set out on pages 177 to 183, other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we
do not express any form of assurance conclusion thereon.
110
110
Independent Auditor’s Report continued.
for the year ended 31 December 2022
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in
the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other
information, we are required to report that fact.
We have nothing to report in this regard.
Opinions 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.
In our opinion, based on the work undertaken in the course of the audit:
• 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; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we
have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us 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
Corporate Governance Statement
We have reviewed the directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement
relating to the group and company’s compliance with the provisions of the UK Corporate Governance Code specified for our review by the Listing
Rules.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement
is materially consistent with the financial statements or our knowledge obtained during the audit:
• Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties
identified set out on page 49;
• Directors’ explanation as to its assessment of the company’s prospects, the period this assessment covers and why the period is appropriate set out
on page 28;
• Director’s statement on whether it has a reasonable expectation that the group will be able to continue in operation and meets its liabilities set out
on page 49;
• Directors’ statement on fair, balanced and understandable set out on page 53;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 53;
• The section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on page 69;
and;
• The section describing the work of the Audit & Risk committee set out on page 67.
111
111
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 53, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and parent company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend
to liquidate the group or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or
through collusion. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the company and
management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that the most significant
are those that relate to the reporting framework (UK adopted international accounting standards, Companies Act 2006, and the UK Corporate
Governance Code 2018) and the relevant tax compliance regulations in the UK.
• We considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which
may be fundamental to the Group’s ability to operate. These include compliance with FCA regulations, the Estate Agents Act 1979, and the Data
Protection Act.
• We understood how LSL Property Services plc is complying with those frameworks by making enquiries of management, internal audit, those
responsible for legal and compliance procedures and the Company Secretary. We corroborated our enquiries through our review of board minutes
and papers provided to the Audit & Risk Committee and attendance at all meetings of the Audit & Risk Committee.
• We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur by meeting with
management from various components of the group to understand where it considered there was a susceptibility to fraud. We also considered
performance targets and their propensity to influence efforts made by management to manage earnings. We considered the programmes and
controls that the group has established to address risks identified, or that otherwise prevent, deter and detect fraud; and how senior management
monitors those programmes and controls. Where the risk was considered to be higher, we performed audit procedures to address each identified
fraud risk or other risk of material misstatement. These procedures included those on revenue recognition detailed above and the testing of
manual journals and were designed to provide reasonable assurance that the financial statements were free from material fraud and error.
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures
involved journal entry testing, with a focus on manual consolidation journals and journals indicating large or unusual transactions based on our
understanding of the group; enquiries of legal counsel, management and internal audit; and testing as described above. In addition, we completed
procedures to conclude on the compliance of the disclosures in the Annual Report and Accounts with the requirements of the relevant accounting
standards, UK legislation and the UK Corporate Governance Code 2018.
• At a component level, our full and specific scope component audit team’s procedures included inquiries of component management, journal entry
testing and focused testing, including in respect of the key audit matter of revenue recognition.
• Where we identified potential non-compliance with laws and regulations at a group level through review of Audit & Risk Committee papers, we
communicated this to relevant components who developed an appropriate audit response.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at https://
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
112
112
Independent Auditor’s Report continued.
for the year ended 31 December 2022
Other matters we are required to address
• Following the recommendation from the Audit & Risk Committee, we were appointed by the company on 27 May 2022 to audit the financial
statements for the year ending 31 December 2022 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments is 22 years, covering the years ending 31
December 2001 to 31 December 2022. LSL Property Services plc listed on the London Stock Exchange in 2006.
• The audit opinion is consistent with the additional report to the Audit & Risk Committee.
Use of our report
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.
David Wilson (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
13 April 2023
113
113
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Group Income Statement
for the year ended 31 December 2022
Note
2022
£'000
2021
£'000
Continuing operations:
Revenue 3 321,738 326,832
Employee costs 14 (206,569 ) (202,269 )
Depreciation on property, plant and equipment and right-of-use assets 17 (11,629 ) (12,500 )
Other operating costs (67,500 ) (65,410 )
Other operating income 3 1,334 937
Gain on disposal of property, plant and equipment and right-of-use assets 9 8 1,061
Share of post-tax (loss)/profit from joint ventures and associates 19 (494 ) 668
Share-based payments 14 (1,977 ) (1,916 )
Amortisation of intangible assets 16 (4,112 ) (4,534 )
Exceptional gains 8 694 31,050
Exceptional costs 8 (88,898 ) (2,045 )
Contingent consideration 24 696 710
Group operating (loss)/profit 5 (56,709 ) 72,584
Finance income 6 80 14
Finance cost 7 (2,497 ) (2,709 )
Net finance costs (2,417 ) (2,695 )
(Loss)/profit before tax (59,126 ) 69,889
Taxation charge 15 (4,891 ) (7,985 )
(Loss)/profit for the year (64,017 ) 61,904
Attributable to:
Owners of the parent (63,924 ) 61,941
Non-controlling interest (93 ) (37 )
Earnings per share (expressed in pence per share):
Basic 11 (62.3 ) 59.6
Diluted 11 (62.3 ) 59.2
The notes on pages 118 to 162 form part of these Financial Statements.
114
114
Group Statement of Comprehensive Income
for the year ended 31 December 2022
Note
2022
£'000
2021
£'000
(Loss)/profit for the year (64,017 ) 61,904
Items not to be reclassified to profit and loss in subsequent periods:
Revaluation of financial assets not recycled through the income statement 18 (5,096 ) (1,557 )
Tax on revaluation 130 (132 )
(4,966 ) (1,689 )
Total other comprehensive loss for the year, net of tax (4,966 ) (1,689 )
Total comprehensive (loss)/income for the year, net of tax (68,983 ) 60,215
Attributable to:
Owners of the parent (68,890 ) 60,252
Non-controlling interest (93 ) (37 )
The notes on pages 118 to 162 form part of these Financial Statements.
115
115
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Group Balance Sheet
as at 31 December 2022
Group Balance Sheet
as at 31 December 2022 Company No. 05114014
Note
2022
£'000
2021
£'000
Non-current assets
Goodwill 16 56,530 160,865
Other intangible assets 16 15,747 29,604
Property, plant and equipment and right-of-use assets 17 15,570 37,070
Financial assets 18 1,045 5,748
Investments in joint ventures and associates 19 5,068 1,610
Contract assets 20 431 733
Total non-current assets 94,391 235,630
Current assets
Trade and other receivables 21 26,608 33,829
Contract assets 20 348 424
Current tax assets 3,063 1,142
Cash and cash equivalents 22 36,755 48,464
Assets held for sale 30 56,437 –
Total current assets 123,211 83,859
Total assets 217,602 319,489
Current liabilities
Financial liabilities 24 (6,949 ) (8,523 )
Trade and other payables 23 (47,030 ) (64,206 )
Provisions for liabilities 25 (660 ) (775 )
(54,639 ) (73,504 )
Liabilities held for sale 30 (21,930 ) –
Total current liabilities (76,569 ) (73,504 )
Non-current liabilities
Financial liabilities 24 (6,277 ) (22,602 )
Deferred tax liability 15 (2,008 ) (2,073 )
Provisions for liabilities 25 (1,695 ) (3,191 )
Total non-current liabilities (9,980 ) (27,866 )
Total liabilities (86,549 ) (101,370 )
Net assets 131,053 218,119
Equity
Share capital 27 210 210
Share premium account 28 5,629 5,629
Share-based payment reserve 28 5,331 5,263
Shares held by employee benefit trust 2,28 (5,457 ) (3,063 )
Treasury shares 28 (3,983 ) –
Fair value reserve 28 (20,239 ) (15,273 )
Retained earnings 149,134 224,832
Total equity attributable to owners of the parent 130,625 217,598
Non-controlling interest 428 521
Total equity 131,053 218,119
The notes on pages 118 to 162 form part of these Financial Statements.
The Financial Statements were approved by and signed on behalf of the Board by:
David Stewart
Group Chief Executive Officer
12 April 2023
Adam Castleton
Group Chief Financial Officer
12 April 2023
116
116
Group Statement of Cash Flows
for the year ended 31 December 2022
Notes
2022
£’000
2021
£’000
(Loss)/profit before tax (59,126 ) 69,889
Adjustments for:
Exceptional operating items 88,204 (29,005 )
Contingent consideration (696 ) (710 )
Depreciation of tangible assets 17 11,629 12,500
Amortisation of intangible assets 16 4,112 4,534
Share-based payments 14 1,977 1,916
Profit on disposal of property, plant and equipment and right-of-use assets 9 (8 ) (1,061 )
Loss/(profit) from joint ventures 19 494 (668 )
Recognition of investments at fair value through the income statement 18 (678 ) –
Decrease in contract assets 20 378 471
Finance income 6 (80 ) (14 )
Finance costs 7 2,497 2,709
Operating cash flows before movements in working capital 48,703 60,561
Movements in working capital
Increase in trade and other receivables (1,491 ) (3,911 )
Decrease in trade and other payables (11,243 ) (8,919 )
Decrease in provisions (799 ) (3,213 )
(13,533 ) (16,043 )
Cash generated from operations 35,170 44,518
Interest paid (2,342 ) (2,554 )
Income taxes paid (6,109 ) (8,528 )
Exceptional costs paid (384 ) (2,045 )
Net cash generated from operating activities 26,335 31,391
Cash flows used in investing activities
Acquisitions of subsidiaries and other businesses, net of cash acquired – (730 )
Payment of contingent consideration (76 ) (2,462 )
Investment in joint venture 19 (3,952 ) (2,477 )
Investment in financial assets 18 – (14 )
Dividend received from joint venture 19 – 1,178
Cash received on sale of joint venture 19 – 41,349
Receipt of lease income 26 68 20
Purchase of property, plant and equipment and intangible assets 16,17 (4,907 ) (6,902 )
Proceeds from sale of property, plant and equipment 17 1,304 431
Net cash (expended)/generated on investing activities (7,563 ) 30,393
Cash flows used in financing activities
Repayment of loans 13 – (13,000 )
Payment of deferred consideration – (122 )
Purchase of LSL shares by the employee benefit trust (5,026 ) –
Repurchase of treasury shares (3,983 ) –
Proceeds from exercise of share options 825 1,447
Payment of lease liabilities 13 (7,170 ) (8,922 )
Dividends paid 12 (11,773 ) (4,166 )
Net cash expended in financing activities (27,127 ) (24,763 )
Net (decrease)/increase in cash and cash equivalents (8,355 ) 37,021
Cash and cash equivalents at the end of the year 40,109 48,464
Closing cash and cash equivalents includes £3.4m (2021: £nil) presented in assets held for sale on the Group Balance Sheet (see note 30).
The notes on pages 118 to 162 form part of these Financial Statements.
117
117
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Group Statement of Changes in Equity
for the year ended 31 December 2022
Share
capital
£’000
Share
premium
account
£’000
Share-
based
payment
reserve
£’000
Shares
held
by EBT
£’000
Treasury
shares
£’000
Fair value
reserve
£’000
Retained
earnings
£’000
Equity
attributable
to owners
of the
parent
£’000
Non-
controlling
interest
£’000
Total
equity
£’000
At 1 January 2022 210 5,629 5,263 (3,063 ) – (15,273 ) 224,832 217,598 521 218,119
Loss for the year – – – – – – (63,924 ) (63,924 ) (93 ) (64,017 )
Revaluation of financial assets – – – – – (5,096 ) – (5,096 ) – (5,096 )
Tax on revaluations – – – – – 130 – 130 – 130
Total comprehensive loss for
the year – – – – – (4,966 ) (63,924 ) (68,890 ) (93 ) (68,983 )
Shares repurchased into treasury – – – – (3,983 ) – – (3,983 ) – (3,983 )
Shares repurchased into EBT – – – (5,026 ) – – – (5,026 ) – (5,026 )
Exercise of options – – (1,806 ) 2,632 – – (1 ) 825 – 825
Dividend paid – – – – – – (11,773 ) (11,773 ) – (11,773 )
Share-based payments – – 1,977 – – – – 1,977 – 1,977
Tax on share-based payments – – (103 ) – – – – (103 ) – (103 )
At 31 December 2022 210 5,629 5,331 (5,457 ) (3,983 ) (20,239 ) 149,134 130,625 428 131,053
During the year ended 31 December 2022, the Trust acquired 1,351,000 LSL shares. During the period, 890,146 share options were exercised relating
to LSL’s various share option schemes resulting in the shares being sold by the Trust. LSL received £0.8 m on exercise of these options.
The notes on pages 118 to 162 form part of these Financial Statements.
for the year ended 31 December 2021
Share
capital
£’000
Share
premium
account
£’000
Share-
based
payment
reserve
£’000
Shares
held
by EBT
£’000
Fair value
reserve
£’000
Retained
earnings
£’000
Equity
attributable
to owners of
the parent
£’000
Non-
controlling
interest
£’000
Total
equity
£’000
At 1 January 2021 210 5,629 3,942 (5,012 ) (13,584 ) 166,569 157,754 – 157,754
Profit for the year –
Revaluation of financial assets – – – – (1,557 ) – (1,557 ) – (1,557 )
Tax on revaluations – – – – (132 ) – (132 ) – (132 )
Total comprehensive income for
the year – – – – (1,689 ) 61,941 60,252 (37 ) 60,215
Acquisition of subsidiary – – – – – – – 558 558
Exercise of options – – (990 ) 1,949 – 488 1,447 – 1,447
Dividend paid – – – – – (4,166 ) (4,166 ) – (4,166 )
Share-based payments – – 1,916 – – – 1,916 – 1,916
Tax on share-based payments – – 395 – – – 395 – 395
At 31 December 2021 210 5,629 5,263 (3,063 ) (15,273 ) 224,832 217,598 521 218,119
During the year ended 31 December 2021, the Trust acquired nil LSL shares. During the period, 555,824 share options were exercised relating to LSL’s
various share option schemes resulting in the shares being sold by the Trust. LSL received £1.4 m on exercise of these options.
The notes on pages 118 to 162 form part of these Financial Statements.
118
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
119
120
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
121
122
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
123
124
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
125
126
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
127
128
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
129
130
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
131
Adjusted basic and diluted EPS
Adjusted profit
after tax
£’000
Weighted
average number
of shares
2022
Per share
amount
pence
Adjusted profit
after tax
£’000
Weighted
average number
of shares
2021
Per share
amount
pence
Adjusted Basic EPS 29,170 102,659,027 28.4 39,138 103,912,148 37.7
Effect of dilutive share options 1,275,216 688,806
Adjusted diluted EPS 29,170 103,934,243 28.1 39,138 104,600,954 37.4
132
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
133
134
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
135
136
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
137
138
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
139
140
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
141
142
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
143
144
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
145
146
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
147
148
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
149
150
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
151
152
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
153
154
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
155
156
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
157
158
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
159
160
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
161
162
Notes to the Group Financial Statements continued.
for the year ended 31 December 2022
163
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Parent Company Balance Sheet
as at 31 December 2022 Company No. 05114014
Note
2022
£’000
2021
(Restated)*
£’000
Non-current assets
Other intangible assets 3 79 79
Property, plant and equipment 4 1,945 8
Investment in subsidiaries 5 116,666 179,718
Financial assets 6 115 4,610
Investment in joint ventures and associates 7 5,068 2,477
Trade and other receivables 8 18,079 21,336
Deferred tax asset 11 1,019 578
142,971 208,806
Current assets
Trade and other receivables 8 20,376 15,102
20,376 15,102
Assets held for sale 18 28,850 –
49,226 15,102
Total assets 192,197 223,908
Current liabilities
Trade and other payables 9 (85,536) (71,754)
Financial liabilities 10 (4,826) (5,024)
(90,362) (76,778)
Non-current liabilities
Financial liabilities 10 (31) (317)
Total liabilities (90,393) (77,095)
Net assets 101,804 146,813
Equity
Share capital 12 210 210
Share premium account 13 5,629 5,629
Share-based payment reserve 13 5,331 5,263
Shares held by employee benefit trust 13 (5,457) (3,063)
Treasury shares 13 (3,983) –
Fair value reserve 13 (20,190) (15,695)
Retained earnings 13 120,264 154,469
Total equity 101,804 146,813
* The 2021 balance sheet has been restated to reclassify intercompany receivables from current to non-current. See note 1 for further details.
As permitted by Section 408 (3) of the Companies Act 2006, no profit and loss account of the Company is presented. The loss after tax for the
financial year of the Company was £22.4m (2021: £41.0m profit after tax). The notes on pages 166 to 176 form part of these Financial Statements.
The Financial Statements were approved by and signed on behalf of the Board by:
David Stewart Adam Castleton
Group Chief Executive Officer Group Chief Financial Officer
12 April 2023 12 April 2023
164
Parent Company Statement of Cash Flows
for the year ended 31 December 2022
Note
2022
£’000
2021
£’000
Parent operating loss/(profit) before tax (22,975) 42,641
Adjustments for:
Exceptional items (45) (23,021)
Impairment of investments 5 34,652 –
Impairment of receivables 8, 18 5,684 –
Depreciation of tangible assets 4 1,175 4
Share-based payments 1,527 1,102
Loss from joint ventures 7 1,361 –
Finance income (80) (14)
Finance costs 1,261 1,098
Dividend income (27,000) (29,000)
Operating cash flows before movements in working capital (4,440) (7,190)
Movements in working capital
(Increase) /decrease in trade and other receivables (6,430) 18,213
Increase/(decrease) in trade and other payables 13,465 (41,537)
7,035 (23,324)
Cash generated from operations 2,595 (30,514)
Interest paid (1,181) (1,098)
Income taxes paid (1,271) (8,249)
Net cash generated from operating activities 143 (39,861)
Cash flows used in investing activities
Investment in financial assets 6 – (14)
Investment in joint ventures (3,952) (2,477)
Proceeds from sale of joint venture – 41,349
Acquisition of subsidiary – (1,800)
Dividends received from subsidiaries 27,000 29,000
Purchases of property, plant and equipment (3,112) (51)
Net cash generated on investing activities 19,936 66,007
Cash flows used in financing activities
(Repayment) /drawdown of loans – (13,000)
Repayment of overdraft (122) (8,980)
Purchase of LSL shares by the employee benefit trust (5,026) –
Repurchase of treasury shares (3,983) –
Proceeds from exercise of share options 825 –
Payment of lease liabilities – –
Dividends paid to equity holders of the parent (11,773) (4,166)
Net cash (expended) in financing activities (20,079) (26,146)
Net increase/(decrease) in cash and cash equivalents – –
Cash and cash equivalents at the end of the year – –
The notes on pages 166 to 176 form part of these Financial Statements.
165
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Parent Company Statement of Changes in Equity
for the year ended 31 December 2022
Issued
capital
£’000
Share
premium
£’000
Share-
based
payment
reserve
£’000
Shares
held
by EBT
£’000
Treasury
shares
£’000
Fair value
reserve
£’000
Retained
earnings
£’000
Total
£’000
As at 1 January 2022 210 5,629 5,263 (3,063) – (15,695) 154,469 146,813
Other comprehensive income for the year – – – – – – – –
Profit for the year – – – – – – (22,431) (22,431)
Revaluation of financial assets – – – – – (4,495) – (4,495)
Total comprehensive income for the year – – – – – (4,495) (22,431) (26,926)
Shares repurchased into treasury – – – – (3,983) – – (3,983)
Shares repurchased into EBT – – – (5,026) – – – (5,026)
Exercise of options – – (1,806) 2,632 – – (1) 825
Share-based payment transactions – – 1,977 – – – – 1,977
Tax on share-based payments – – (103) – – – – (103)
Dividends paid – – – – – – (11,773) (11,773)
As at 31 December 2022 210 5,629 5,331 (5,457) (3,983) (20,190) 120,264 101,804
During the year ended 31 December 2022, the Trust acquired 1,351,000 LSL shares. During the period, 890,146 share options were exercised relating
to LSL’s various share option schemes resulting in the shares being sold by the Trust. LSL received £0.8m on exercise of these options.
The notes on pages 166 to 176 form part of these Financial Statements.
Issued
capital
£’000
Share
premium
£’000
Share-
based
payment
reserve
£’000
Shares
held
by EBT
£’000
Fair value
reserve
£’000
Retained
earnings
£’000
Total
£’000
As at 1 January 2021 210 5,629 3,942 (5,012) (13,695) 117,119 108,193
Other comprehensive income for the year – – – – – – –
Profit for the year – – – – – 41,028 41,028
Revaluation of financial assets – – – – (2,000) – (2,000)
Total comprehensive income for the year – – – – (2,000) 41,028 39,028
Exercise of options – – (990) 1,949 – 488 1,447
Share-based payment transactions – – 1,916 – – – 1,916
Tax on share-based payments – – 395 – – – 395
Dividends paid – – – – – (4,166) (4,166)
As at 31 December 2021 210 5,629 5,263 (3,063) (15,695) 154,469 146,813
During the year ended 31 December 2021, the Trust acquired nil LSL shares. During the period, 555,824 share options were exercised relating to LSL’s
various share option schemes resulting in the shares being sold by the Trust. LSL received £1.4m on exercise of these options.
The notes on pages 166 to 176 form part of these Financial Statements.
166
Notes to the Parent Company Financial Statements
for the year ended 31 December 2022
1. Accounting policies
Basis of preparation
The Company Financial Statements have been prepared in accordance with UK adopted IAS. The Company Financial Statements have been prepared
on a going concern basis and on a historical cost basis, except for, certain debt and financial assets and liabilities 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
31 December 2022. The Company’s Financial Statements are presented in pounds sterling and all values are rounded to the nearest thousand pounds
(£’000) except when otherwise indicated.
In preparing the Parent Company Financial Statements management has considered the impact of climate change, taking into account the relevant
disclosures in the Strategic Report. The impact of climate-related risks on the Group Financial Statements have been disclosed in the Group basis of
preparation note. The extent to which the Group climate-related risks affect the Parent Company accounts is focused on how medium to long term
risks may impact our future revenue profile, which could further impact the carrying value of investments. The potential impact of climate-related
risks on the Parent Company’s impairment assessment is considered sufficiently remote at this point in time and therefore no sensitivity analysis has
been performed.
Summary of significant accounting policies
The accounting policies adopted in the preparation of the Company Financial Statements are consistent with those followed in the preparation of the
Company Annual Financial Statements for the year ended 31 December 2021.
Judgements and estimates
The preparation of financial information in conformity with UK adopted IAS, requires the Management Team 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 ongoing 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.
• Judgements
There are no areas of judgement that have a significant effect on the amounts recognised in the Financial Statements of the Company.
• Estimates
The key assumption affected by future uncertainty that has significant risks of causing material adjustment to the carrying value of assets and
liabilities within the next financial year is:
Valuation of financial assets
The Company owns non-controlling interests in a number of unlisted entities. The Company uses valuation techniques to measure fair value of
financial assets, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. The fair value of equity financial
assets that are not traded in the open market are valued using the best information available in the circumstances, including cash flow forecasts and
financial statements, to arrive at the fair value. Where appropriate a range of potential outcomes is considered in reaching a conclusion. Further
details of the methodology used are disclosed in note 18 to the Group Financial Statements.
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;
167
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
1. Accounting policies (continued)
• 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.
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
The fair value of employee share option plans and share award scheme, which are all equity-settled, is calculated at the grant date using the Black
Scholes model. The resulting cost is charged to the Company income statement over the vesting period. The value of the charge is adjusted to reflect
expected and actual levels of vesting.
Treasury shares
Where the Company repurchases shares from existing shareholders, they are held as treasury shares and are presented 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. Treasury
shares are ignored for the purposes of calculating the Group’s earnings per share.
Shares held by EBT
The Group has an employee share scheme (ESOT) for the granting of LSL shares to Executive Directors and selected senior employees and an
employee share incentive plan (Trust). Shares in LSL held by the ESOT and the Trust 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 Trust are charged to the income statement. Dividends
earned on shares held in the ESOT and the Trust have been waived.
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 and associates
An associate is an entity over which the Company has significant influence. Significant influence is the power to participate in the financial and
operating policy decisions of the investee, but is not control or joint control over those policies.
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint
venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities
require the unanimous consent of the parties sharing control.
168
Notes to the Parent Company Financial Statements continued.
for the year ended 31 December 2022
1. Accounting policies (continued)
Investments in joint ventures and associates 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.
Impairment of non-financial assets
The Company 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 Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable
amount is the higher of its fair value less costs to sell (FVLCTS) and value-in-use (VIU). 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 an asset’s VIU, 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 Company estimates the asset’s recoverable amount.
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. Property, plant and equipment is depreciated
on a straight-line basis to its residual value over its anticipated useful economic life:
Office equipment, fixtures and fittings – over three to seven years
Computer equipment – over three to four years
Leasehold improvements – 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 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 assets’ residual values, useful lives and methods of depreciation are
reviewed at each financial year end, and adjusted prospectively, if appropriate.
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 the income statement, 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. All regular way purchases and sales of financial assets are recognised on
the trade date, being the date that the Company 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.
The subsequent measurement of financial assets depends on their classification.
The Company’s accounting policy for each category of financial instruments is as follows:
Financial assets designated at fair value through OCI (equity instruments)
Upon initial recognition, the Company can elect to classify irrevocably its equity investments as equity instruments designated at fair value through
OCI when they meet the definition of equity under IFRS 9 Financial Instruments and are not held for trading. The classification is determined on an
instrument-by-instrument basis. Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other
income in the statement of profit or loss when the right of payment has been established, except when the Company benefits from such proceeds as
a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through
OCI are not subject to impairment assessment.
The Company’s accounting policy for each category of financial instruments is as follows:
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.
169
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
1. Accounting policies (continued)
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. The expected credit loss model under IFRS 9 is applied to trade and other receivables.
Intercompany receivables
Intercompany receivables are classified as current where the balance is expected to be repaid in the next 12 months. The Company recognises a loss
allowance based on the lifetime expected credit loss for intercompany receivables at each reporting date.
Restatement of December 2021 Parent Company Balance Sheet
Following a review of the Company’s historic practice and future plans not to call on all intercompany loans in the short term, £21.3m of current
intercompany receivables at 31 December 2021 have been classified to non-current in line with IAS 1. This reclassification has no impact on net
assets, result for the year or cash flows. The impact on the 31 December 2020 balance sheet would be to reclassify £17.1m of current intercompany
receivables to non-current intercompany receivables.
2. Cash flow from financing activities
At 1 January
2022
£’000
Cash flow
£’000
Acquisitions
£’000
Foreign
exchange
£’000
Unwind of
discount
£’000
At 31 December
2022
£’000
Short term liabilities 4,948 (122) – – – 4,826
Long term liabilities – – – – – –
4,948 (122) – – – 4,826
Short term liabilities
At 31 December 2022 short term liabilities were made up of the bank overdraft of £4.8m (2021: £4.9m) and unsecured loan notes £nil (2021: £nil)
(see note 10).
Long term liabilities
At 31 December 2022 the long term liabilities were made up of the bank loan of £nil (2021: £nil) (see note 10).
3. Intangible assets
Software
£’000
Total
£’000
Cost
At 1 January 2022 79 79
Additions – –
As at 31 December 2022 79 79
Amortisation
At 1 January 2022 – –
Amortisation – –
As at 31 December 2022 – –
Net book value
As at 31 December 2022 79 79
As at 31 December 2021 79 79
170
Notes to the Parent Company Financial Statements continued.
for the year ended 31 December 2022
4. Property, plant and equipment
Land and
buildings
£’000
Leasehold
improvements
£’000
Fixtures, fittings
and computer
equipment
£’000
Total
£’000
Cost
At 1 January 2021 90 74 120 284
Additions – – – –
At 31 December 2021 90 74 120 284
Additions – – 3,112 3,112
At 31 December 2022 90 74 3,232 3,396
Depreciation
At 1 January 2021 90 67 115 272
Charge for the year – – 4 4
At 31 December 2021 90 67 119 276
Charge for the year – – 1,175 1,175
At 31 December 2022 90 67 1,294 1,451
Net book value
At 31 December 2022 – 7 1,938 1,945
At 31 December 2021 – 7 1 8
Owned assets – 7 1,938 1,945
Right-of-use assets – – – –
– 7 1,938 1,945
5. Investment in subsidiaries
Details of the subsidiaries held directly and indirectly by the Company are shown in note 36 to the Group Financial Statements.
2022
£’000
2021
£’000
At 1 January 179,718 187,192
Additions – 2,379
Adjustments for share-based payment 450 847
Impairment in cost of investments (34,652) (10,700)
Reclassified as held for sale (note 18) (28,850) –
At 31 December 116,666 179,718
In 2022 there was an increase of £0.5m (2021: increase of £0.8m) on investment in subsidiaries for share-based payments, 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 £9.0m.
In 2022 the Company recognised a total impairment of £34.7m (2021: £10.7m) to investments in subsidiaries, disaggregated as follows: Albany £3.0m
(2021: £10.7m), DLPS £2.0m, Marsh & Parsons (Holdings) Limited £17.0m and Reeds Rains £12.7m. The impairments are a result of the Group’s
assessment of recoverability of each of the investments.
The charge was calculated based on the recoverable amounts of each of the investments, the recoverable amounts are based on the higher of
investments value-in-use (VIU) or fair value less cost to sell (FVCLTS), investments in subsidiaries held for sale (as per note 30 to the Group Financial
Statements) have been written down to their FVLCTS. The fair value of Marsh & Parsons (Holdings) Limited has been determined using the arm’s
length sales price, which is the equivalent of the consideration received/receivable less transaction costs. This is a level 3 measurement per the fair
value hierarchy and is based on unobservable inputs. Where the recoverable amount has been assessed based on a VIU calculation, a discount rate of
14.2% (2021: 12.2%) and terminal growth rate of 2.0% (2021: 4.0%) has been applied.
The carrying value of investments which have been impaired during the year at 31 December 2022 are as follows, Albany £4.6m, DLPS £0.4m, Marsh
& Parsons (Holdings) Limited £28.9m and Reeds Rains £16.4m.
171
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
5. Investment in subsidiaries (continued)
Sensitivity to change in assumptions
Sensitivity analysis has been performed for those investments which have recorded an impairment charge during the period, to assess the extent
to which reasonably possible changes in key assumptions would impact the impairment charge. Sensitivity analysis has only been performed for
investments where the recoverable amount has been calculated by applying the VIU methodology, being Albany, DLPS and Reeds Rains. If the post-
tax discount rate was to increase by 1.0% the impairment charge would increase to £3.3m in Albany, £2.1m in DLPS and £14.2m in Reeds Rains.
Similarly, if the terminal growth rate was to reduce by 0.5% this would result in an increase in the impairment charge in Albany and Reeds Rains to
£3.2m and £13.3m respectively, however the charge in DLPS would remain the same. A reduction of 10% in the future cash flow forecasts used to
calculate the VIU would increase the impairment charge to £3.5m in Albany, £2.1m in DLPS and £14.6m in Reeds Rains.
6. Financial assets
2022
£’000
2021
£’000
Investment in equity instruments – at fair value
Unquoted shares at fair value 115 4,610
115 4,610
At 1 January 4,610 8,846
Additions – 14
Disposals – (2,250)
Revaluation (4,495) (2,000)
At 31 December 115 4,610
Investment in equity instruments
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 technique (see note 32 to the Group Financial Statements).
Yopa Property Limited
The carrying value of the Group’s investment in Yopa at 31 December 2022 has been assessed as £nil (2021: £4.5m). In determining the carrying
value the Group considered both the historic and current trading performance of Yopa, which continued to be loss making and the general market
share decline of hybrid estate agencies. In January 2023, the Group agreed to sell its shares in Yopa for £nil consideration based on third party
valuations provided to the existing shareholders.
7. Investment in joint ventures and associates
2022
£’000
2021
£’000
At cost
At 1 January 2,477 7,235
Equity investment in Pivotal Growth 3,952 2,477
Disposal of LMS and TMG – (7,235)
Equity accounted loss (1,361) –
At 31 December 5,068 2,477
Claims indemnity provision and contingency
In May 2021, the Company sold its 49.6% interest in LMS. Included in the sale agreement of LMS was a claims indemnity of £2.0m, for which the
Company has provided £0.6m, which it considers to be the most likely outcome. Further cases exist and are considered possible, not probable,
therefore no further provision has been made for these cases in the financial statements. Should these claims succeed the estimated further cost
would be £1.4m.
Pivotal Growth
A further £4.0m equity investment in Pivotal was made throughout 2022.
172
Notes to the Parent Company Financial Statements continued.
for the year ended 31 December 2022
8. Trade and other receivables
2022
£’000
2021
(Restated)
£’000
Non-current
Amounts owed by Group undertakings 18,079 21,336
18,079 21,336
Current
Group relief receivable 15,100 13,829
Prepayments 2,392 793
Other taxes and social security 151 117
Amounts owed by Group undertakings 2,733 363
20,376 15,102
The expected credit loss relating to intercompany receivables is £5.7m at 31 December 2022 (31 December 2021: £0.0m) and non-current
intercompany receivables are presented net of this provision. No allowance for expected credit losses is deemed necessary in respect of current
intercompany receivables.
9. Trade and other payables
2022
£’000
2021
£’000
Trade payables 525 327
Accruals 1,968 3,299
Amounts owed to Group undertakings 83,043 68,128
85,536 71,754
10. Financial liabilities
2022
£’000
2021
£’000
Current liabilities
Contingent consideration – 76
IFRS 16 lessee financial liabilities – –
Bank overdraft 4,826 4,948
4,826 5,024
Non-current liabilities
Contingent consideration 31 317
Bank loans – RCF – –
31 317
Bank loans – RCF and overdraft
The Company’s bank loan totals £nil (2021: £nil) and the Company’s overdraft totals £4.8m (2021: £4.9m).
In accordance with the terms at 31 December 2022, the utilisation of the RCF may vary each month as long as this does not exceed the maximum
£90.0m facility (2021: £90.0m). The Group’s overdraft is also secured on the same facility, and the combined overdraft and RCF cannot exceed
£90.0m (2021: £90.0m). The banking facility is repayable when funds permit on or by May 2024.
In February 2023, LSL amended and restated the RCF facility, the renewed facility now runs to May 2026 with a new limit of £60.0m. The interest
rate applicable to the facility signed in February 2023 is SONIA plus a margin rate, the margin rate is linked to the leverage ratio of the Group and is
reviewed at six-monthly intervals.
The bank loan totalling £nil (2021: £nil) is secured via cross guarantees issued from the following businesses: LSL Property Services plc, your-move.
co.uk Limited, Reeds Rains Limited, e.surv Limited, Lending Solutions Holdings Limited, First Complete Limited, New Daffodil Limited, St Trinity
Limited, LSL Corporate Client Services Limited, Advance Mortgage Funding Limited, LSLi Limited, Davis Tate Limited, Lauristons Limited, David Frosts
Estate Agents Limited, ICIEA Limited, GFEA Limited, JNP Estate Agents Limited, Vitalhandy Enterprises Limited, Personal Touch Financial Services
Limited, Personal Touch Administration Services Limited and Embrace Financial Services Limited.
173
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
11. Deferred tax
2022
£’000
2021
£’000
Deferred tax asset
Deferred tax asset at 1 January 578 122
Deferred tax credit/(charge) in profit and loss account for the year 338 180
Deferred tax credit/(charge) to other comprehensive income 103 276
Deferred tax asset at 31 December 1,019 578
At December 2022, a deferred tax asset is recognised in relation to share-based payments of £0.9m (2021: £0.6m) and accelerated capital allowances
of £0.1m (2021: £nil). No deferred tax liability is recognised in respect of equity financial assets.
12. Called up share capital
2022 2021
Shares £’000 Shares £’000
Authorised:
Ordinary shares of 0.2 pence each 500,000,000 1,000 500,000,000 1,000
Issued and fully paid:
At 1 January 105,158,950 210 105,158,950 210
Issued in the year – – – –
At 31 December 105,158,950 210 105,158,950 210
13. Reserves
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 14 to the Group Financial Statements for
details of the LTIP, JSOP, CSOP, SIP/BAYE and the SAYE schemes. The effect of share-based payment transactions on the Company’s profit for the
period was a charge of £1.5m (2021: charge of £1.1m).
Shares held by EBT
Shares held by EBT 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 31 December 2022 the Trust held 1,063,097 (2021: 1,042,276) LSL shares at an average cost of £3.72
(2021: £2.95). The market value of the LSL shares at 31 December 2022 was £4.1m (2021: £3.1m). The nominal value of each share is 0.2 pence.
Treasury shares
Treasury shares represent the cost of LSL shares purchased in the market as a result of a share buy back scheme which commenced in April 2022 and
ceased in September 2022. At 31 December 2022, LSL had repurchased 1,179,439 (2021: nil) LSL shares at an average cost of £3.38 (2021: £nil). The
market value of the LSL shares at 31 December 2022 was £4.1m (2021: £nil). The nominal value of each share is 0.2 pence.
Fair value reserve
The fair value reserve is used to record the changes in fair value of equity financial assets.
14. Company 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 £22.4m (2021: profit of £41.0m).
Remuneration paid to Directors of the Company is disclosed in note 14 to the Group Financial Statements.
The Company paid £0.5m (2021: £0.4m) 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 10 to the Group Financial Statements.
174
Notes to the Parent Company Financial Statements continued.
for the year ended 31 December 2022
15. Pensions costs and commitments
Total contributions to the defined contribution schemes in the year were £186,986 (2021: £53,778). The amount outstanding in respect of pensions
as at 31 December 2022 was £nil (2021: £nil).
The Parent Company headcount at 31 December 2022 was nil (2021: nil). This is due to employment contracts being drawn up within the subsidiaries
and not within the Parent Company itself.
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
Wholly owned subsidiaries
2022 – – 35,866 82,521
2021 – – 35,528 67,584
Sales to related
parties
£’000
Purchases from
related parties
£’000
Amounts owed by
related parties
£’000
Amounts owed to
related parties
£’000
Non–wholly owned subsidiaries
2022 – – 46 522
2021 – – – 544
17. Financial instruments – risk management
The Company’s principal financial instruments comprise of cash and cash equivalents with access to a £90m loan facility. The Company’s loan facility
was amended and restated during February 2023 with a new credit limit of £60m. 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. The Company may, from time to time and as necessary, enter into
interest rate swaps for risk management purposes but did not hold any such swaps during either the current or prior year.
The Company is exposed through its operations to the following financial risks:
• 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. The policy for each of the
above risks is described in more detail below.
Interest rate risk
The Company’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 at variable interest rates based on the Bank of England base rate plus a margin and this policy is
managed centrally. The subsidiaries are not permitted to borrow from external sources directly without approval from the Group Finance team.
The Group has not drawn down on its RCF facility during the year to 31 December and therefore has incurred no interest, the amount shown in
interest expense relates to the amortisation of the facility fees.
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.
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 (for example 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.
175
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
17. Financial instruments – risk management (continued)
At 31 December 2022, the Group had available £90.0m of undrawn committed borrowing facilities in respect of which all conditions precedent had
been met (2021: £90.0m).
The table below summarises the maturity profile of the Company’s financial liabilities at 31 December 2022 based on contractual undiscounted
payments:
Year ended 31 December 2022
On demand
£’000
Less than
3 months
£’000
3 to 12 months
£’000
1 to 5 years
£’000
> 5 years
£’000
Total
£’000
Interest-bearing loans and borrowings
(including overdraft) 4,826 – – – – 4,826
Trade and other payables – 85,536 – – – 85,536
4,826 85,536 – – – 90,362
Year ended 31 December 2021
On demand
£’000
Less than
3 months
£’000
3 to 12 months
£’000
1 to 5 years
£’000
> 5 years
£’000
Total
£’000
Interest-bearing loans and borrowings
(including overdraft) 4,948 – – – – 4,948
Trade and other payables – 71,754 – – – 71,754
4,948 71,754 – – – 76,702
The liquidity risk of the Company entity is managed centrally by the Group Treasury function. The Company’s cash requirement is monitored closely.
The Company has a RCF 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 (ie 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.
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 interest rate profile of the financial assets and liabilities of the Company as at 31 December 2022 are as follows:
Within 1 year
£’000
1-2 years
£’000
2-3 years
£’000
3-4 years
£’000
Total
£’000
Floating rate
Cash and cash equivalents (4,826) – – – (4,826)
The interest rate profile of the financial assets and liabilities of the Company as at 31 December 2021 are as follows:
Within 1 year
£’000
1-2 years
£’000
2-3 years
£’000
3-4 years
£’000
Total
£’000
Floating rate
Cash and cash equivalents (4,948) – – – (4,948)
176
Notes to the Parent Company Financial Statements continued.
for the year ended 31 December 2022
17. Financial instruments – risk management (continued)
Fair values of financial assets and financial liabilities
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. There are no material differences between the book value and fair value for any of
the Company’s financial instruments.
Fair value hierarchy
The Company 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 Company’s assets and liabilities.
2022 £’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Assets measured at fair value
Financial assets 115 – – 115
2021
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Assets measured at fair value
Financial assets 4,610 – – 4,610
The fair value of equity financial assets that are not traded in the open market of £0.1m (2021: £4.6m) are using level 3 techniques in accordance
with the fair value hierarchy and the Management Team use all relevant and up to date information (including cash flow forecasts and financial
statements) to arrive at their judgement. Where appropriate a range of potential outcomes is considered in reaching a conclusion.
18. Assets held for sale
Amounts classified as held for sale include the Company’s investment in, and intercompany receivable from Marsh & Parsons (Holdings) Limited. The
composition of assets held for sale on the balance sheet is set out below:
Total
£’000
Assets held for sale
Investments 28,850
Amount owed by group undertakings –
At 31 December 2022 28,850
As disclosed in note 5 the Company’s investment in Marsh & Parsons (Holdings) Limited was impaired by £17.0m at 31 December 2022. The
intercompany receivable due from Marsh & Parsons (Holdings) Limited of £1.3m (2021: £1.3m) is not considered to be recoverable and therefore an
expected credit loss has been created for the full amount, the amount owed by Group undertakings presented above is shown net of this amount.
19. Events after the reporting period
On 26 January 2023, the Group announced the sale of Marsh & Parsons (Holdings) Limited and its subsidiary Marsh & Parsons Limited, together
“Marsh & Parsons”, to a subsidiary of Dexters London Limited for a consideration of £29m payable on completion, subject to working capital
adjustments.
In February 2023, the Group amended and restated its banking facility which runs to May 2026 with a new limit of £60m; this replaced the previous
RCF which had a maturity date of May 2024 and credit limit of £90m.
In April 2023, the Group invested an additional £0.2m into Pivotal Growth to continue to support its buy and build growth strategy.
177
Other information
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
In this section
178 Definitions
183 Shareholder Information (including forward
looking statements information)
178
Definitions
“Adjusted Basic Earnings per Share” or “Adjusted Basic EPS” is defined at note 11 to the Financial Statements.
“Adjusted EBITDA” is Group Underlying Operating Profit (note 5 to the Financial Statements) plus depreciation on property, plant and equipment.
“AGM” annual general meeting.
“Advance Mortgage Funding” Advance Mortgage Funding Limited.
“Albany” Albany Insurance Company (Guernsey) Limited.
“AR” appointed representative.
“Asset Management” refers to LSL’s repossessions, asset management and property management services for multi-property landlords.
“Audit & Risk Committee” LSL’s Audit & Risk 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 11 to the Financial Statements.
“Board”/“Board of Directors” the board of Directors of LSL.
“BAYE” Buy As You Earn (also referred to as SIP).
“BDS” BDS Mortgage Group Limited.
“B2B” business to business.
“CAGR” compound average growth rate.
“Chair Designate” refers to David Barral.
“Committee(s)” refers to LSL’s Nominations Committee, the Audit & Risk Committee, the Remuneration Committee and the Disclosure Committee.
“Company” and “Parent Company” refers to LSL Property Services plc.
“CBI” Confederation of British Industry.
“Corporate Governance Report” the Corporate Governance and Nominations Committee Report contained within this Report.
“Code” UK Code of Corporate Governance published by the Financial Reporting Council (FRC) (July 2018 edition).
“Company Secretary” Sapna B. FitzGerald.
“CEO” Chief Executive Officer, David Stewart.
“CFO” Chief Financial Officer, Adam Castleton.
“COO” Chief Operating Officer, David Akinluyi.
“COVID-19” coronavirus.
“CSO” Chief Strategy Officer, Andy Deeks.
“CSOP” Company Share Ownership Plan.
“CTO” Chief Technology Officer.
“CTP” climate transition plan.
“Data and Information Security Committee” or “DISC” LSL’s Data and Information Security Committee.
“Davis Tate” trading name of Davis Tate Ltd.
“DEFRA” Department for Environment, Food & Rural Affairs.
“Director” an Executive Director or Non Executive Director of LSL.
“Division(s)” refers to each of our Financial Services, Surveying & Valuation and Estate Agency divisions.
“DLPS” or “Direct Life and Pension Services” or “Direct Life and Pensions” Direct Life and Pension Services Limited.
179
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
“DPO” Data Protection Officer.
“D2C” direct to consumer.
“EBITA” earning, before interest, taxes, and amortisation.
“EBITDA” earnings, before interest, taxes, depreciation and amortisation.
“Elsevier” Elsevier Limited.
“Embrace Financial Services” or “EFS” Embrace Financial Services Limited.
“EPS” earnings per share.
“EPC” energy performance certificate.
“Ernst & Young” Ernst & Young LLP.
“ESG” Environmental, Social and Governance.
“ESOS” Energy Savings Opportunity Scheme.
“ESOT” LSL’s employee share scheme.
“ESOT Trustees” Apex Financial Services (Trust Company) Limited.
“Estate Agency Division” or “Estate Agency” this refers to Residential Sales, Lettings and Asset Management businesses.
“e.surv” or “e.surv Chartered Surveyors” trading names of e.surv Limited.
“EWG” LSL’s Environmental Working Group.
“Executive Committee” Executive Committee of the Group, which includes the Executive Directors.
“Executive Director(s)” David Stewart, Adam Castleton and Helen Buck (up to 31 March 2023).
“EU” European Union.
“FCA” Financial Conduct Authority.
“Financial Services Division” or “Financial Services” or “FS” refers to LSL’s financial services division (including mortgage, non-investment insurance
brokerage services and the operation of LSL’s intermediary networks).
“Financial Services Networks” or “Networks” refers to the PRIMIS Network and TMA mortgage club.
“Financial Services Other” refers to Pivotal Growth, New Homes businesses, D2C and technology businesses (Mortgage Gym and DLPS).
“First2Protect” First2Protect Limited.
“First Complete” First Complete Limited.
“Financial Statements” financial statements contained in this Report.
“FRC” Financial Reporting Council.
“FTE” full time equivalent.
“Global Property Ventures” refers to Global Property Ventures Limited.
“Group” LSL Property Services plc and its subsidiaries.
“Group First” Group First Ltd, holding company of Mortgages First Ltd and Insurance First Brokers Ltd.
“Group Revenue” total revenue for the LSL Group.
“Group Underlying Operating margin” Group Underlying Operating Profit divided by Group Revenue.
“Goodfellows” trading name of GFEA Limited.
“Hawes” or “Hawes & Co” trading name of Hawes & Co Limited.
“HMRC” His Majesty’s Revenue and Customs.
180
Definitions
“Homefast Property Services” Homefast Property Services Limited.
“Home Report” a report which includes a single survey, energy report and property questionnaire and which must accompany all residential property
marketing in Scotland.
“IAS” International Accounting Standards.
“IBNR” Incurred But Not Reported.
“ID&E” Inclusion, Diversity and Equality.
“IFRS” International Financial Reporting Standards.
“Insurance First Brokers” Insurance First Brokers Ltd.
“Intercounty” trading name of ICIEA Limited.
“IS” information security.
“JNP” trading name of JNP Estate Agents Limited.
“JSOP” joint share ownership plan.
“Korn Ferry” trading name of Korn Ferry Hay Group Limited.
“KPI” key performance indicators.
“Land & New Homes” LSL Land & New Homes Ltd.
“Lauristons” trading name of Lauristons Limited.
“LMS” LMS Direct Conveyancing Limited and Cybele Solutions Holdings Limited.
“Linear” and “Linear Financial Solutions” are trading names of Linear Mortgage Network Limited.
“Living Responsibly Report” report published on our website setting out our Living Responsibly strategy and programme.
“LSE” London Stock Exchange.
“LSLi” LSLi Limited and its subsidiary companies (during 2022 these included JNP, Intercounty, David Frost Estate Agents Limited, Goodfellows, Davis
Tate, Lauristons, 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.
“LTIP” Long Term Incentive Plan.
“Management” refers to the Group’s management teams.
“MAR” the UK Market Abuse Regulation.
“Marsh & Parsons” trading name of Marsh & Parsons Limited.
“Mortgages First” Mortgages First Ltd.
“Mortgage Gym” Mortgage Gym Solutions Ltd.
“Net Bank Debt” see note 35 to the Financial Statements.
“Net Cash” see note 35 to the Financial Statements
“New Build” refers to RSC New Homes Limited and the Group First companies.
“NFM” non-financial measures.
“NI” national insurance.
“Non Executive Director” refers, during 2022, to Gaby Appleton, Darrell Evans, Bill Shannon, Simon Embley and Sonya Ghobrial. Since 3 April 2023 it
also includes David Barral.
181
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
“Notice of Meeting” the circular made available to shareholders setting out details of the AGM.
“Numis” Numis Securities Limited.
“OCI” refers to other comprehensive income.
“Palmer and Harvey” trading name of Palmer & Harvey McLane Limited.
“PDMRs” Persons Discharging Managerial Responsibility as defined in Article 3(1) (25) of UK MAR.
“Personal Touch Financial Services” or “PTFS” Personal Touch Financial Services Limited.
“Personal Touch Administration Services” or “PTAS” Personal Touch Administration Services Limited.
“Pivotal Growth” Pivotal Growth Limited.
“PI” professional indemnity.
“PI Costs” costs relating to ongoing and expected future PI claims relating to Surveying & Valuation business.
“Pollen Street Capital” or “PSC” Pollen Street Capital Limited.
“PRIMIS Network” or “PRIMIS” a trading name of Advance Mortgage Funding Limited, First Complete Limited, and Personal Touch Financial Services
Limited.
“PRSim” refers to our private rented sector property management business which was divested in the first quarter of 2023.
“RCF” Revolving Credit Facility.
“Reeds Rains” trading name of Reeds Rains Limited.
“Registered Office” Newcastle House, Albany Court, Newcastle Business Park, Newcastle upon Tyne, NE4 7YB.
“RELX” RELX Group plc.
“Report” LSL’s Annual Report and Accounts 2022.
“RICS” Royal Institution of Chartered Surveyors.
“Road to Health” RoadtoHealth Group Ltd.
“RNIB” Royal National Insitute for the Blind.
“RSC New Homes” or “RSC” RSC New Homes Limited.
“Sainsbury’s” Sainsbury’s Supermarkets Limited.
“SAYE” Save As You Earn.
“SBTi” Science Based Targets.
“SECR” Streamlined Energy and Carbon Reporting.
“Senior Management Team” or “Senior Managers” includes three Executive Directors, and the Executive Committee and their direct reports,
excluding PAs and administrators.
“SIP” Share Incentive Plan (also referred to as BAYE).
“Surveying & Valuation” refers to e.surv Limited (including where it trades as Walker Fraser Steel).
“Templeton” trading name of Templeton LPA Limited.
“TCFD” Task Force on Climate-Related Financial Disclosures.
“The Property Franchise Group” or “TPFG” The Property Franchise Group plc.
“Thomas Morris” trading name of Thomas Morris Limited.
“The Mortgage Alliance” or “TMA” are trading names of Advance Mortgage Funding Limited’s mortgage club.
“TM Group” TM Group Limited.
182
“Toolbox” PRIMIS’s end-to-end customer services platform.
“Treasury Shares” shares held in treasury with no dividend rights and no voting rights at LSL’s general meetings.
“Trust” LSL’s SIP trust.
“Trustees” Link Market Services (Trustees) Limited.
“TSR” Total Shareholder Return.
“UKLA” UK Listing Authority.
“Underlying Operating margin” operating profit before exceptional costs, contingent consideration, amortisation and share-based payments shown
as a percentage of turnover.
“Underlying Operating Profit/Loss” before exceptional costs, contingent consideration, amortisation of intangible assets and share-based payments.
“VEM” or “Vibrant Energy Matters” Vibrant Energy Matters Limited.
“Walker Fraser Steele” a trading name of e.surv Limited.
“YOPA” YOPA Property Limited.
“YTD” year to date.
“Your Move” trading name of your-move.co.uk Limited.
“Zeus” Zeus Capital Limited.
Definitions
183
Other Information
Financial Statements
Strategic Report
Overview
Directors’ Report (including Corporate
Governance Reports and Committee Reports)
Shareholder Information
(including forward looking statements information)
Company details
LSL Property Services plc
Registered in England (company number 5114014)
LEI Number 213800T4VM5VR3C7S706
Registered office
Newcastle House, Albany Court, Newcastle Business Park, Newcastle upon Tyne, NE4 7YB
Telephone: 0191 233 4600
Email: investorrelations@lslps.co.uk
Website: lslps.co.uk
Company Secretary’s office
Howard House, 3 St Mary’s Court, Blossom Street, York, YO24 1AH
Email: investorrelations@lslps.co.uk
Share listing
LSL Property Services plc 0.2 pence ordinary shares are listed on the London Stock Exchange under ISIN GB00BIG5HX72
Registrar
Link Group, 10
th
Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL
Telephone: 0371 664 0300
Calls are charged at the standard geographic rate and will vary by provider. Calls outside the UK will be charged at the applicable international rate. Link Group
is open between 09:00 -17:30, Monday to Friday excluding public holidays in England and Wales.
Website: linkgroup.eu
Email: shareholderenquiries@linkgroup.co.uk
If you move, please do not forget to let the registrar know your new address.
Independent Auditors:
Ernst & Young LLP
1 More London Place
London
SE1 2AF
United Kingdom
Brokers:
Numis Securities Limited
Zeus Capital Limited
Calendar of events
Preliminary results released 13 April 2023
AGM proxy form deadline 23 May 2023
AGM 25 May 2023 at 3.15 pm
The AGM will be held at 210 Euston Road, London, NW1 2DA. The Notice of Meeting details the proposed resolutions.
In accordance with our articles of association, we publish shareholder information, including notice of AGMs and the Annual Report and Accounts on our
website (lslps.co.uk). Reducing the number of communications sent by post not only results in cost savings to us, it also reduces the impact that unnecessary
printing and distribution of reports has on the environment.
Our articles of association enable all communications between us and our shareholders to be made in electronic form (as permitted by the Companies Act
2006). Documents will be supplied via our 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 (lslps.co.uk).
If a shareholder wishes to continue to receive hard copy documents, they should contact Link Group (details above).
Forward looking statements
This Report may contain certain statements that are forward looking statements. They appear in a number of places throughout this Report and include
statements regarding LSL’s intentions, beliefs or current expectations and those of its officers, directors and employees concerning, amongst other things, LSL’s
results of operations, financial condition, liquidity, prospects, growth, strategies and the business it operates. By their nature, these statements involve risks
and uncertainty since future events and circumstances can cause results and developments to differ materially from those anticipated. The forward looking
statements reflect knowledge and information available at the date of preparation of this update and, unless otherwise required by applicable law, LSL
undertakes no obligation to update or revise these forward looking statements. Nothing in this update should be construed as a profit forecast. LSL and its
Directors accept no liability to third parties in respect of this update save as would arise under English law. Information about the management of the principal
risks and uncertainties facing LSL is set out within the Strategic Report on pages 25 to 29.
Any forward looking statements in this Report speak only at the date of this Report and LSL undertakes no obligation to update publicly or review any
forward looking statement to reflect new information or events, circumstances or developments after the date of this Report.
184
Notes
LSL Property Services plc
lslps.co.uk
Registered in England
(Company number 5114014)
Registered office:
Email: investorrelations@lslps.co.uk
LSL Property Services plc Annual Report and Accounts 2022