Liquid error: wrong number of arguments (2 for 1) LSL Property Services PRELIMINARY ANNOUNCEMENT | Marsh & Parsons Sales and Lettings Estate Agents London

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LSL Property Services PRELIMINARY ANNOUNCEMENT

Thu 12 Mar 2015

TIDMLSL

RNS Number : 2223H

LSL Property Services

12 March 2015

For immediate release 12 March 2015 LSL Property Services plc ("LSL" or "the Group")

PRELIMINARY ANNOUNCEMENT

LSL Property Services plc, a leading provider of residential property services incorporating both estate agency

and surveying businesses, announces preliminary results for the year ended 31(st) December 2014.

2014 2013 % change ---------------------------------------------------- ------ ------ --------- Group revenue GBPm 287.5

258.6 11 Group Underlying Operating Profit(1) GBPm 42.0 37.1 13 Group Underlying Operating Margin % 14.6

14.3 ---------------------------------------------------- ------ ------ --------- Profit before tax GBPm 31.9 17.1 87 Underlying

profit before tax(1) GBPm 39.8 33.9 17 Basic Earnings Per Share- pence 24.5 13.6 80 Adjusted Basic Earnings

Per Share - pence(2) 30.5 25.3 21 Net Bank Debt at 31(st) December GBPm(3) 34.7 26.3 Final proposed

ordinary dividend per share - pence 8.3 7.2 Full year ordinary dividend per share - pence 12.3 10.5 17 Special

dividend per share - pence 16.5 - - ---------------------------------------------------- ------ ------ --------- -- Underlying

operating profit of GBP42.0m is a record result for the Group -- Excellent progress in the Estate Agency Division

-- Strong market growth in the first half followed by slowing activity in the second half -- Major contracts secured

in the Surveying Division and on-going investment in capacity management

-- Excellent value creation from investment in Zoopla - Total value created of GBP42.2m (as at IPO), GBP19.8m

exceptional profit, special dividend of 16.5p per share and retention of 51% of original shareholding valued at

GBP21.3m as at 31(st) December 2014

-- Exceptional charge of GBP24.6m related to PI provisions relating to the 2004 to 2008 high risk lending period.

Balance sheet provision of GBP38.7m (2013: GBP25.9m)

-- Strong operational cash flow, balance sheet and dividend growth -- Acquisition of Hawes & Co and 10 lettings

books during 2014 and the acquisition of Thomas Morris and six lettings books since the start of 2015

1 Underlying Operating Profit and underlying profit before tax is before exceptional gains and exceptional costs,

contingent consideration, amortisation of intangible assets and share-based payments

2 Refer to Note 3 for the calculation 3 Refer to Note 7 for the calculation Commenting on today's announcement,

Simon Embley, Chairman, said:

"I am very pleased to report that 2014 was a record year for the Group with underlying Operating Profit higher

than LSL achieved in the property market peak of 2007. The year saw the orderly transition of senior

management with Ian Crabb's first full year as Group CEO and Adrian Gill assuming responsibility for the Estate

Agency Division. The year also saw the achievement of our profitability per branch target that we set in 2011

whilst Marsh & Parsons expanded its branch footprint in a difficult market. The Surveying division secured new

contracts on improved margins.

I was also delighted that our investment in Zoopla delivered an exceptional return to shareholders.

The Group has a robust balance sheet with relatively low levels of gearing and is extremely cash generative at

the operational level. The business is well positioned to capitalise on the changing market conditions to increase

shareholder value."

For further information, please contact:

Ian Crabb, Group Chief Executive Officer

Andrew Burchall, Interim Group Finance Director

LSL Property Services plc 0207 382 0360

Richard Darby, Sophie McNulty

Buchanan 0207 466 5000

Notes to Editors:

LSL is a leading provider of residential property services to its key customer groups. Services to consumers

include: residential sales, lettings, surveying, conveyancing and advice on mortgages and non investment

insurance products. Services to mortgage lenders include: valuations and panel management services, asset

management and property management services. For further information and a copy of the full annual report,

please visit LSL's website: www.lslps.co.uk

Chairman's Statement

Introduction

I am pleased to report that against a rapidly changing market backdrop the Group has continued to make good

progress, reporting Group Underlying Operating Profit of GBP42.0m (2013: GBP37.1m) for the year. This Group

Underlying Operating Profit is higher than LSL achieved in the property market peak of 2007. Group Revenue

increased by 11% whilst Group Underlying Operating Profit increased by 13% compared to 2013. On a statutory

basis, operating profit was GBP33.9m (2013: GBP19.6m), an increase of 73%. The first half of the year saw

Group Underlying Operating Profit growth of 31% against the same period in 2013 with the second half showing a

more muted performance against strong comparatives.

The Estate Agency Division, in particular, has delivered a strong performance. Residential Sales income

increased by 15%, Financial Services income grew by 22% and Lettings income increased largely organically by

12%. In line with our stated strategy, we saw profitability per owned branch increase by 44% to GBP46k

achieving our medium term target for profit per branch set in 2011. We acquired Hawes & Co within LSLi and

added a further ten small lettings acquisitions across our Estate Agency businesses. The Surveying Division

delivered a solid performance during 2014 with a number of efficiency initiatives significantly improving

profitability in the second half of the year.

The UK residential property services market in 2014 was very much a story of two halves. The year started very

strongly continuing the trend we saw in the second half of 2013 with house purchase approvals, as measured by

the Bank of England, up 35% year on year in the first quarter of 2014 and by 19% in the first half for the year.

Year on year growth then moderated in the second quarter before contracting by 16% in the final quarter of the

year. April also saw the implementation of changes to mortgage application processing by lenders following the

Mortgage Market Review (MMR). These changes impacted the market from the second quarter onwards.

Changes to stamp duty introduced at the start of December 2014 also had an impact, particularly in prime Central

London, but overall there was a general slowing of activity as consumer sentiment weakened in the second half

of the year.

The business remains extremely cash generative at the operational level and has a strong balance sheet. I am

delighted to report an increase in our proposed final dividend of 15% to 8.3 pence per share (2013: 7.2 pence).

This will result in the total dividend for the year, excluding the special dividend of 16.5 pence relating to our

disposal of Zoopla shares, increasing by 17% to 12.3 pence per share (2013: 10.5 pence), recognising our

confidence in the future earnings prospects of the business.

Financial Results

Group revenue increased by 11% to GBP287.5m (2013: GBP258.6m) and Group Underlying Operating Profit

increased by 13% to GBP42.0m (2013: GBP37.1m) with the Group Underlying Operating Margin improving to

14.6% (2013: 14.3%).

The Estate Agency Division increased operating profit by 16% to GBP33.9m (2013: GBP29.1m). This

performance was delivered in a market where house purchase approvals for the whole year increased by 5% to

769,000(1) (2013: 736,000). This moderate full year growth masked a changing market during the year with

volume growth of 19% in first half of the year followed by a 7% contraction in the second half of 2014 against the

prior year. Sequentially, the market in the first half of the year was 1% down on the second half of 2013 whilst the

second half in 2014 was 6% lower than the first half. There was strong revenue growth in Residential Sales

income, Financial Services and Lettings income. Marsh & Parsons continued its expansion strategy with four new

branch openings and made good progress in a prime Central London market where market conditions were

challenging in the second half of the year. In line with previous trends, repossession volumes fell by a further

27% to 21,000(2) in the year (2013: 28,900) which impacted revenue and profit in our asset management

activities.

The Surveying Division faced a broadly flat market for mortgage approval transactions. Total mortgage approvals

were 1,280,000 (2013: 1,286,000), including a 2% decrease in remortgages to 385,000 (2013: 393,000). Although

the number of jobs completed reduced by 6% to 372,000, the revenue per job increased resulting in a 3%

increase in total revenue to GBP62.2m. During the year, we were delighted to secure multi-year valuation

services contracts with Barclays Bank PLC and Lloyds Banking Group. Subsequent to the year end, we secured a

multi-year contract as lead valuer, this time with the mortgage division of Santander UK. These non-exclusive

contracts are all on contract terms reflecting improved conditions in the mortgage valuation market.

Towards the end of the year, the Surveying Division concluded a project to improve operational performance and

productivity whilst improving working practices, which includes the consolidation of all administrative functions at

its Kettering location. The associated one off costs of this exercise of GBP0.7m will be recovered in savings

during the first half of 2015. The one off costs are included as an exceptional item in 2014. Operating profit was

marginally ahead at GBP13.3m (2013: GBP13.1m) with operating margin of 21.4% (2013: 21.7%).

1 Source: Bank of England for "House Purchase Approvals" 2014

2 Source: Council of Mortgage Lenders arrears and repossessions data relating to properties taken into

possession by first-charge mortgage lenders for 2014.

As previously announced in December 2014, we have needed to further increase our PI provisions relating to the

2004 to 2008 high risk lending period. The announcement indicated a range of between GBP20.0m and

GBP25.0m and following further work, we have provided an additional reserve of GBP24.6m which is included in

2014 as an exceptional item. Whilst the cause is a historic market issue relating to historic periods, it remains

disappointing. The additional provision reflects a number of factors. Although we have seen the reduction in the

rate of notification that we had expected during the year, and assumed in setting the previous level of provision, a

greater proportion of the notifications are deteriorating into claims. Claims are also hardening with the more

difficult and complex claims now being progressed. This is resulting in an increase in the average cost per claim,

particularly in respect of legal costs reflecting the complexity of the arguments. The additional provision

represents the Group's current best estimate of likely claims costs but the process of resolving open claims and

estimating future claims is on-going. The review was conducted with the overall aim of ensuring a high degree of

confidence that the total PI provision will be adequate to cover the remaining risk relating to the 2004 to 2008

high lending period. The provision required is highly sensitive to the run rates of new claims and the costs per

claim for both new and existing claims. Claims experience since the high risk lending period has significantly

improved as a result of both structural changes in the market place and the overhaul of internal procedures.

Profit before tax, amortisation, share based payments, contingent consideration and exceptional costs increased

by 17% to GBP39.8m (2013: GBP33.9m). Net exceptional operating costs of GBP6.2m (2013: GBP13.0m)

included PI costs of GBP24.6m (2013: GBP12.0m) noted above. Exceptional operating income includes a

GBP19.8m exceptional profit on the part disposal of the Group's investment in Zoopla. There was also a

non-cash credit of GBP0.4m (2013: GBP2.8m charge) relating to employment related contingent consideration in

acquisitions and amortisation of intangible assets during the year was GBP0.6m (2013: GBP0.4m). Profit before

tax increased to GBP31.9m (2013: GBP17.1m) and profit after tax was GBP25.2m (2013: GBP14.0m). On an

adjusted basis, earnings per share increased by 21% to 30.5 pence (2013: 25.3 pence). Unadjusted undiluted

basic earnings per share were 24.5 pence (2013: 13.6 pence).

Cash generated from operations was GBP25.7m (2013: GBP26.9m). Operating cash flow included PI cash

settlements of GBP13.3m (2013: GBP14.4m). Capital expenditure increased to GBP9.2m (2013: GBP7.9m)

including investment in new IT systems, including a common platform for our Financial Services businesses and

the development of enhanced lettings systems in Marsh & Parsons, Your Move and Reeds Rains.

Net Bank Debt at 31(st) December 2014 was GBP34.7m compared to GBP26.3m at 31(st) December 2013 after

investing GBP9.7m in acquisitions, financial assets, joint ventures and the settlement of deferred consideration

(2013: GBP5.4m) and the purchase of LSL shares by LSL's Employee Benefit Trust. Net Bank Debt increased in

the year primarily because of the increase in PI cash settlement costs. The Group has a GBP100m committed

bank facility until August 2017.

Net assets decreased by GBP16.2m to GBP83.1m at 31(st) December 2014 (2013: GBP99.3m), as a result of

the special dividend paid following the realisation of the investment in Zoopla on its initial public offering (IPO).

Dividend

As a result of the growth in underlying Group profitability and the Board's positive view of future prospects for the

business, an increase in the final dividend of 15% to 8.3 pence per share (2013: 7.2 pence) will be proposed to

Shareholders at the forthcoming AGM, increasing the total dividend for 2014, excluding the one off special

dividend related to Zoopla of 16.5 pence, by 17% to 12.3 pence per share (2013: 10.5 pence per share). The

proposed dividend payment is at the upper end of our previously stated policy of applying a dividend payout ratio

of between 30% to 40% of Group Underlying Operating Profit after interest and tax and reflects our confidence in

the future.

The ex dividend date for the final dividend is 26(th) March 2015 with a record date of 27(th) March 2015 and a

payment date of 7(th) May 2015. Shareholders have the opportunity to elect to reinvest their cash dividend and

purchase existing shares in LSL through a dividend reinvestment plan.

Divisional performance

Estate Agency Division

2014 has been another year of excellent progress combined with major investment in the Estate Agency Division.

Profit per owned branch, excluding Marsh & Parsons, increased by 44% to GBP46,000 (2013: GBP32,000)

compared to the medium term target of GBP30,000 to GBP50,000 which the Board set in 2011 when profit per

owned branch was GBP5,000. The Board has accordingly reviewed the target for branch profitability and has

increased the target to GBP80,000 to GBP100,000 per owned branch in the medium term on the expectation of

longer term stability in the UK residential property sector. All key income streams in the Estate Agency Division

other than our countercyclical Asset Management business have grown strongly and operating margin increased

to 15.0% (2013: 14.7%).

Residential Sales exchange income, excluding Marsh & Parsons, increased by 20% to GBP76.8m (2013:

GBP64.1m) driven mainly by improved mix and good progress increasing the average Estate Agency fee. The

rate of income growth varied during the year in line with the fluctuations in the market. Our Lettings business has

continued to perform well with Lettings income, excluding Marsh & Parsons, increasing by 10% to GBP43.3m

(2013: GBP39.2m). We continue to invest in our Financial Services, Lettings and conveyancing activities as well

as looking for ways to improve back office efficiency.

Marsh & Parsons made good progress in the volatile prime Central London market where stock levels remained

challenging all year driving increased price expectations in the first half of the year which then ameliorated in the

second half. Total revenue increased by 9% to GBP32.5m (2013: GBP29.9m) with Residential Sales broadly flat

but with excellent Lettings growth of 18%. Operating profit was GBP6.5m (2013: GBP6.7m), impacted by the

investment in opening four new branches and of putting in place infrastructure to support the on-going branch

opening programme.

Financial Services income delivered through our Estate Agency Division branches and Financial Services

intermediary networks increased by 22% during 2014 to GBP43.7m (2013: GBP35.8m). Activity levels are

growing ahead of the market reflecting the breadth and depth of the Group's Financial Services offerings. The

Group arranged total mortgage lending completions of GBP11.6bn in 2014 (2013: GBP7.6bn).

Asset Management delivered another solid result in a countercyclical market. Revenue declined by 18% to

GBP11.7m (2013: GBP14.3m) in a market where repossession volumes reduced by 27% to 21,000 (2013:

28,900). Repossessions have now fallen for five years running by a total of 57%. The business is continuing to

target new property management contracts.

Surveying Division

The underlying profit performance was maintained during the year as a result of contract wins and efficiency

improvements offset by a decline in volumes. After a strong first half of the year, our Surveying Division's

volumes declined in the second half of year resulting in a 6% reduction in our volumes year on year. Total

mortgage approvals remained broadly flat year on year at 1.280m (2013: 1.286m).

The operating profit margin in the second half year was 24.5% (2013: 24.1%) and was achieved through

improved efficiency and tight cost control. The operating profit of GBP7.6m (2013: GBP7.7m) in the second half

of the year represented a 33% increase on the first half of the year. As reported last year, the Surveying Division

reduced its focus on developing surveying services for private buyers to focus on higher margin valuation

services for corporate clients. As a result the full year revenue from surveying services for private buyers reduced

by 18% to GBP4.0m (2013: GBP4.9m).

Despite incurring the costs of recruiting graduates into the new surveyor training scheme, operating profit levels

were maintained. Full year operating margin was maintained at 21.4% against a 2013 comparative of 21.7%.

Developments

During 2014, we have continued to invest in the business with the acquisition in March 2014 of Hawes & Co

which is a South West London based agent with six branches offering Residential Sales and Lettings services.

We have also purchased a further 10 small lettings books during 2014 for a total consideration of GBP1.8m. We

will continue to look to acquire attractive businesses. Subsequent to the year end, we acquired Thomas Morris a

multi award winning estate agency and lettings business with seven branches in Cambridgeshire, Bedfordshire

and Hertfordshire together with a further six lettings books. In the Surveying business our graduate surveyor

recruitment and training programme continues to be a success. In 2013 and 2014 we hired 43 and 60 new

graduates respectively with the expectation that the graduates would take 12 months to train. The 2013 intake

became productive midway through 2014.

During the year, Marsh & Parsons opened four branches in Shepherd's Bush, Camden, East Sheen and

Richmond which are performing in line with management's expectations. The business remains committed to an

opening programme of new branches which will result in doubling the number of branches which were acquired

with the business in 2011 over the next four to five years.

We were extremely pleased to announce in our interim statement that the IPO of Zoopla was successful and

represented significant value creation for the Group. The cost of the investment was GBP1.9m and this had

increased to a value of GBP44.1m on IPO. We took the decision to sell 48.9% of our shareholding in Zoopla at

IPO. As a result, we have generated an GBP19.8m exceptional profit on disposal while still retaining a 2.6%

shareholding which has been revalued in the balance sheet at GBP21.3m. In addition, we received a total

dividend of GBP1.1m from Zoopla during the year (2013: GBP0.5m).

Board and Corporate Governance

In January 2014, we appointed Bill Shannon as an independent Non Executive Director and Chairman of the

Remuneration Committee, and on the same date Mark Pain stepped down from the Board as an independent

Non Executive Director. Bill has significant PLC board experience in strategy, operations, finance and

governance in consumer, financial services, residential and commercial property sectors. We would like to thank

Mark for his significant contribution to LSL. Bill was subsequently appointed Non Executive Deputy Chairman and

Senior Independent Director on 1(st) January 2015.

On 24(th) November 2014, as part of an orderly transition in the management of our Estate Agency business,

Adrian Gill was appointed as Executive Director, Estate Agency and he took over from David Newnes on 1(st)

January 2015 following a transition period. Adrian has considerable experience in the sector, having spent over

10 years as an Executive Director at Connells Limited, the national estate agency business of the Skipton

Building Society and two years as an independent Non Executive Director of LSL. David Newnes retired from the

Board on 31(st) December 2014 and we would like to thank David for his substantial contribution to the

development of LSL over a long and distinguished career with the Group. In December 2014, David Newnes, in

recognition of over 35 years' service to the estate agency industry, received the 'Outstanding Contribution to

Estate Agency Award' at the prestigious Sunday Times Estate Agency of the Year Awards.

After many years of excellent service to the Group, Roger Matthews retired as Chairman on 31(st) December

2014. I would personally like to add my thanks to those of the Board for the guidance and support that Roger has

provided since he joined the Board as Chairman on the IPO of the Group in 2006.

During the latter part of 2014, Roger Mathews as Chairman, consulted with a number of our major Shareholders

regarding the future composition of the Board, including my change of role and Bill Shannon's new

responsibilities. Whilst as Chairman, I am not independent on appointment, Shareholders, the Nominations

Committee and the Board supported my change of role as it facilitates an orderly succession and reflects the

Board's desire to retain my knowledge and expertise of the residential property market, maintain contacts with

key stakeholders and benefit from my record of delivering shareholder value.

Steve Cooke, the Group Finance Director, left the Board on 19(th) December 2014. Andrew Burchall was

appointed as Interim Group Finance Director on 5(th) January 2015 and the search is on-going for a permanent

Group Finance Director.

The Board remains committed to high levels of corporate governance. In respect of 2014, the Board has again

conducted an annual review of its effectiveness and that of its Committees, taking into account the balance of

skills, experience, independence and knowledge of our businesses and we concluded that the Board and its

Committees are effective and are able to discharge their respective duties and responsibilities appropriately.

In September 2014, the FRC updated the UK Corporate Governance Code (the Code) and whilst this Report

includes disclosures that reflect the 2012 edition of the Code, we have looking forward, ensured that for 2015 we

are operating in accordance with the 2014 edition of the Code. This includes the implementation of our

Remuneration Policy, further details of which are set out in the Directors' Remuneration Report.

The Board has during the year also reviewed its composition, which at the date of this Report includes three

independent Non Executive Directors and two Executive Directors. We have also commenced a process to

appoint an additional independent Non Executive director to the Board. Further, the Board continues to recognise

the benefits of diversity in the boardroom, including gender and racial diversity. The current Board composition

includes one female Director, Helen Buck, who is an independent Non Executive Director. Whilst we remain of

the view that the setting of targets for the number of female directors on the Board is not necessary, and that we

will continue to appoint on merit, I will continue to ensure that our searches for new directors take into account

diversity, including gender and race.

LSL remains committed to promoting diversity throughout the Group and in 2014 we continued to build on the

diversity reviews conducted during the previous years. Further details of the study and its conclusions are set out

in our Corporate Social Responsibility Report.

As Chairman, with the responsibility for leadership of the Board, I personally review its effectiveness on all

aspects of its role and encourage feedback.

People

The Group expanded significantly during 2013 through investment to build capacity and through a number of

small bolt-on acquisitions in both lettings books and residential sales businesses. During 2014, headcount

reduced towards the end of the year in light of the softening in the market. In total, the number of Group

employees decreased to 5,222 (2013: 5,299).

Our success is ultimately dependent on the customer service provided by colleagues in all parts of the business.

We have had a successful year in 2014 and I would like to thank all of our employees for their hard work and

commitment which has contributed to this result and wish them well in their careers with LSL.

Current trading and outlook

The forthcoming year is expected to see uncertain market conditions in the first half with the potential for

improved market conditions during the second half of the year. Year on year market comparatives in the first

quarter are expected to be adverse in part due to the lower opening pipeline of activity following the weaker last

quarter of 2014. Whilst we are seeing improvements in February, the second quarter is expected to be impacted

by the upcoming general election.

Against this uncertain market backdrop, the Group remains committed to driving profitable organic growth across

the business. In light of the changed market conditions, a review of headcount and other costs by business has

been completed and the necessary actions are being taken. We will continue to evaluate selective acquisitions

and will capitalise fully on the investments made in 2014 to optimise profitability.

The Group has started the year in line with management's expectations and through a series of internally

generated initiatives and an expectation of a stronger market in the second half, the business is well placed to

deliver a solid performance in 2015.

The Group has a robust balance sheet with relatively low levels of gearing and is extremely cash generative at

the operational level. The business is well positioned to capitalise on the changing market conditions to increase

Shareholder value.

Simon Embley

Chairman

12(th) March 2015

Business Review - Estate Agency Division

The Estate Agency Division delivered excellent profit growth

2014 2013 % Financial GBPm GBPm change ------------------------------------ ------- ------- ------- Residential Sales

exchange income 92.1 80.0 15 Lettings income 58.5 52.2 12 Asset Management income 11.7 14.3 (18) Financial

Services income 43.7 35.8 22 Other income(1) 19.3 15.9 21 Total income 225.3 198.2 14 Operating expenditure

(191.4) (169.1) 13 Operating profit(5) 33.9 29.1 16 ------------------------------------ ------- ------- ------- KPIs

------------------------------------ ------- ------- ------- Exchange units 29,704 27,512 8 Exchange units(2) 29,111 27,352 6

Operating margin (%) 15.0% 14.7% Fees per unit 3,101 2,908 7 Fee per unit(2) 2,968 2,877 3

------------------------------------ ------- ------- ------- House purchases (000s)(3) 769 736 5 Repossessions(4) 21,000

28,900 (27) ------------------------------------ ------- ------- ------- 1 'Other income' includes franchising income,

conveyancing services, EPCs, Home Reports, utilities and other products and services to clients of the branch

network.

2 Exchange units and fee per exchange are on a like-for-like basis (excluding branch openings and closures)

3 Source Bank of England f por "House Purchase Approvals" 2014

4 Source Council of Mortgage Lenders arrears and repossessions data relating to properties taken into

possession by first-charge mortgage lenders for 2014.

5 Operating Profit is before exceptional items, contingent consideration, amortisation of intangible assets and

share-based payments

Estate Agency Division Performance

The UK residential property services market in 2014 was very much a story of two halves. The year started very

strongly continuing the trend seen in the second half of 2013 with house purchase approvals up 35% year on year

in the first quarter of 2014 and by 19% in the first half for the year. Year on year growth then moderated in the

second and third quarters before contracting by 16% in the final quarter of the year. April also saw the

implementation of changes to mortgage application processing by lenders following the MMR. These changes

impacted the market from the second quarter onwards. Changes to stamp duty introduced at the start of

December 2014 also had an impact, particularly in prime Central London, but there was a general slowing of

activity as consumer sentiment weakened in the second half of the year.

Allowing for this seasonal volatility, the total market, as measured by mortgage approvals for house purchases,

for the full year increased by a modest 4.5% to 769,000 (2013: 736,000)(3) which compares to historic normalised

levels of 1.2m approvals per annum. Allowing for the lag between mortgage approval and completion, it is

estimated that the number of mortgage completions in the year, which is the key driver for LSL's Residential

Sales income, increased by 11% to 677,000 (2013: 609,000).

LSL has a balanced Estate Agency model and over the last seven years has significantly built its exposure to

non-cyclical income and countercyclical streams such as Lettings and Asset Management income. These income

streams have grown at a compound annual rate of 15% over the period, increasing from GBP40.4m in 2010 to

GBP70.2m in 2014. Given expectations for the housing transaction volumes in the UK residential property market

in 2015, the Group expects to continue to target these income streams through an active programme of organic

growth and acquiring lettings books across the UK portfolio. The Estate Agency Division delivered an excellent

performance in 2014 with total income growing by 14% to GBP225.3m (2013: GBP198.2m). The benefit of

operational gearing can be seen as 18% of the increase in revenue fell through to operating profit even after

investment to support future growth. Operating profit increased by 16% to GBP33.9m (2013: GBP29.1m). The

business therefore improved its operating profit margin to 15.0% (2013: 14.7%). As the market in 2015 tightens,

particularly in the first half, the Group will be looking at further ways to improve efficiency.

3 Bank of England for "House Purchase Approvals", "Remortgage approvals" and "Total Mortgage Approvals"

2014

Investment in the Estate Agency Division during 2014 included the recruitment of additional employees into

Lettings and Financial Services which will allow the Estate Agency Division to capitalise on market opportunities

in 2015. In addition, Marsh & Parsons opened four new branches which will allow it to grow in new geographies

within the prime Central London market place. Estate Agency Division Branches

Your Move, Reeds Rains and the LSLi brands all continued to perform well during the year. Residential Sales

income increased by 15% to GBP92.1m (2013: GBP80.0m) due mainly to an improvement in volume and the

average fee which increased by 7% to GBP3,101 (2013: GBP2,908) driven partly by improved mix. Excluding the

impact of Marsh & Parsons, the average fee increased by 10% to GBP2,654 (2013: GBP2,407).

Marsh & Parsons

Marsh & Parsons delivered a solid performance in a challenging prime Central London market. Although there

was significant house price appreciation in prime Central London in the first half of 2014, these conditions

significantly ameliorated in the second half of the year. There continues to be a scarcity of stock for both

residential sales exchanges and lettings in prime Central London markets. This has created pressure on volume

growth although commission percentages have been maintained and the average fee per exchange has

increased by 11% in the year. Against this backdrop, Marsh & Parsons revenue increased by 8.7% to GBP32.5m

(2013: GBP29.9m) with Lettings growth of 18% which is a strong result. Operating profit was GBP6.5m (2013:

GBP6.7m).

Operating profit reduced marginally year on year because of an increase in the cost base driven by further

investment in new branch openings to give the business greater coverage of the prime Central London market

and the capacity to further expand going forward. During 2014, four new branches were opened in Shepherd's

Bush, Camden, East Sheen and Richmond which are performing in line with the Board's expectations. The Group

is targeting further new branch openings in 2015.

Financial Services

Total Financial Services income delivered through the intermediary networks of First Complete and Pink Home

Loans, the Estate Agency Division's branches and Linear Financial Solutions increased substantially by 22%

during 2014 to GBP43.7m (2013: GBP35.8m). Revenue has continued to grow consistently since 2010 as a result

of significant organic growth including the successful roll out of Financial Services to all Estate Agency branches

and the acquisition of new intermediary networks. In total the Group arranged mortgage lending completions of

GBP11.6bn during 2014 (2013: GBP7.6bn) giving the Group an important position as a mortgage distributor for

lender clients as well as a growing revenue and profit stream.

CounterCyclical Income

LSL continues to focus on growing Lettings income across all of its businesses through organic growth and

through selective acquisitions of lettings books. LSL's on-going focus on growing Lettings income reflects the

recurring nature of the revenue stream along with attractive economics. LSL is continuing to invest in acquiring

lettings businesses and has recruited additional Lettings consultants during the year. Total Lettings income grew

by 12% year on year, an improvement on the growth rate of 9% in the prior year. Growth was also consistent

throughout the year with 12% growth sustained in both the first half and the second half of the year.

With the improvements in the economy and continued low interest rates, repossession volumes again fell. The

rate of market contraction increased to 27% from 15% in 2013 with the total number of repossessions now down

to 21,000 in 2014 (2013: 28,900)(4) . The market has now declined for each of the last five years and is now well

below half of the total of 48,900 in 2009. During this period LSL's market share in Asset Management has

increased. However, the acceleration in the decline in the size of the market in 2014 as well as continued fee

pressure has resulted in an 18% reduction (2013: 8% reduction) in revenue to GBP11.7m (2013: GBP14.3m).

Despite this contraction, the Asset Management business is well positioned to capitalise on an increase in

repossession volumes which may occur if and when interest rates start to rise.

In order to offset the decline in repossession volumes, the Asset Management business has further developed its

corporate property management offering.

The Group now benefits from total counter-cyclical income from Lettings and Asset Management of GBP70.2m

compared to GBP66.5m in 2013, which represents 31% of the Estate Agency Division's revenue and 24% of

Group revenue.

4 Source: Council of Mortgage Lenders arrears and repossessions data relating to properties taken into

possession by first-charge mortgage lenders for 2014

Developments

After many years with LSL, most recently as an Executive Director, David Newnes retired at the end of 2014. He

was succeeded by Adrian Gill, who was, until November, a Non Executive Director of the Group. Adrian has

considerable experience in the residential property sector, having spent over 10 years as Executive Director at

Connells Limited, the national estate agency business of the Skipton Building Society. Over the next few months,

Adrian as Executive Director, Estate Agency will be reviewing and updating the Group's strategy for the Estate

Agency Division.

As well as investing in headcount in 2014 to increase Lettings and Financial Services capacity, LSL also

continued a programme of investment in new front end systems in Your Move, Reeds Rains and the LSLi brands

which was started in 2013. LSL provides excellent service to its customers and this has been underpinned by high

quality systems. In 2013 the Group began a project to design and implement next generation front end lettings

systems. This was successfully rolled out during 2014 and further upgrades are planned into 2015 to enhance the

functionality and capabilities of the applications.

In addition LSL is in the process of rolling out a new common IT platform across our Financial Services

intermediary networks, trading as Pink Home Loans and First Complete, which will improve customer service and

support the ongoing provision of appropriate financial outcomes to consumers and increase operational

efficiency.

The MMR was implemented on 26(th) April 2014. The FCA's aim for the MMR was to deliver a 'sustainable

market for all participants that is flexible for consumers'. In 2014, LSL has made substantial investment and took

significant steps to prepare for the new requirements including the selection of and investment in new software

and training of the employed and network employees as required. The implementation has gone well and the

market has settled in to the new lending criteria regime.

At the start of 2015, the online property portal market saw the launch of 'OnTheMarket.com', the portal of Agents

Mutual. LSL has not joined OnTheMarket.com and continues to use both Rightmove and Zoopla and their

associated portals as LSL believes that this approach offers the best service to the Estate Agency customers.

During 2014, the Group has continued to make selective acquisitions and has added to the Estate Agency

Division in the South East through the acquisitions of Hawes & Co and ten lettings books.

In 2015 LSL will continue with the same strategy focusing on driving organic growth in Residential Sales, Lettings

and Financial Services and rolling out new branches in Marsh & Parsons. The Group will also continue to

evaluate selective estate agency acquisitions. Subsequent to the year end, LSL acquired Thomas Morris a multi

award winning estate agency and lettings business with seven branches in Cambridgeshire, Bedfordshire and

Hertfordshire together with a further six lettings books.

Regulation - Financial Services

First Complete and Pink Home Loans (the trading name of Advance Mortgage Funding) are both directly

authorised by the FCA in relation to the sale of mortgage, pure protection and general insurance products. Your

Move, Reeds Rains Financial Services, Reeds Rains and Embrace Mortgage Services along with the LSLi

subsidiaries are all appointed representatives of First Complete, while Linear Financial Solutions is an appointed

representative of Advance Mortgage Funding for mortgage and insurance business and also an appointed

representative of Openwork for investment business.

As a result of Linear Financial Solutions' appointment by Openwork, LSL has a small indirect shareholding of

Openwork.

Regulation - Residential Sales and Lettings

The LSL Estate Agency Division's branches adhere to the Codes of Practice issued by industry professional and

regulatory bodies, The Property Ombudsman (TPO) and/or the Association of Residential Lettings Agents

(ARLA). Further, in June 2014, Your Move's Lettings Director became the President of ARLA.

This is in addition to observing compliance with relevant legislation, such as the Consumer Protection

Regulations, guidance material published by relevant regulators, including the Competition and Markets Authority

(CMA) (and its predecessor the Office of Fair Trading (OFT)), the National Trading Standards Agency/Trading

Standards Institute (TSI), HMRC and codes published by other relevant bodies, including the Advertising

Standards Authority (ASA). LSL from time to time also enters into direct dialogue with the regulators and

consumer groups, such as Which. During 2014, the CMA, TSI, HMRC and FCA took over responsibilities from

the OFT in relation to Residential Sales and Lettings regulation (including Anti-Money Laundering) and Consumer

Credit.

Branch numbers

Breakdown of Estate Agency branches as at 31(st) December 2014.

Owned Franchised Totals ---------------- ----- ---------- ------ Your Move 218 72 290 Reeds Rains 124 45 169 LSLi 52

6 58 Marsh & Parsons 22 - 22 Total 416 123 539 ---------------- ----- ---------- ------ The above branch numbers

include four virtual branches

Surveying Division

Strong second half performance

2014 2013 % Financial GBPm GBPm Change ------------------------------------------ ------ ------ ------- Revenue 62.2

60.4 3 Operating expenditure (48.9) (47.3) 3 Operating Profit(1) 13.3 13.1 2 ------------------------------------------ ------

------ ------- KPIs ------------------------------------------ ------ ------ ------- Profit margin (%) 21.4 21.7 Jobs Performed

(000s) 372 396 (6) Revenue from private surveys (GBPm) 4.0 4.9 (18) Income per job (GBP) 167 153 9 PI

provision (Balance Sheet) provision at 31(st) December (GBPm) 36.7 25.9 Number of qualified surveyors at

31(st) December 361 386 (6) Mortgage approvals (000's)(5) 1,280 1,286 -

------ ------- 1 Operating Profit is before exceptional items, amortisation of intangible assets and share-based

payments

Surveying Division Performance Total mortgage approvals remained broadly flat year on year at 1.280m (2013:

1.286m) with growth in the first half followed by a 10% decrease in total mortgage approvals in the second half

compared to the same period last year. This slowdown in the second half can be attributed to consumer

sentiment and the impact of the MMR.

Surveying turnover was GBP62.2m (2013: GBP60.4m) an increase of 3% on last year and the total number of

jobs performed was 372,000 (2013: 396,000). The reduction in volumes was driven by the slowdown of the

mortgage market in the second half of the year, with volumes down by nearly 10% year on year. Additionally the

decision of a major lender client to improve commercial terms but transfer some of their valuations to another

provider of valuation services also impacted on the second half.

Despite a 1% reduction in the Surveying Division's turnover to GBP31.0m (2013: GBP32.0m) in the second half

versus the first half of the year, the operating profit margin in the second half year was 24.5% (2013: 24.1%)

through improved efficiency and tight cost control. The operating profit of GBP7.6m (2013: GBP7.7m) also

represented a 33% increase on the first half of the year. As reported last year, the Surveying Division reduced the

focus on developing surveying services for private buyers to focus on higher margin surveying for corporate

clients. As a result the full year revenue from surveying services for private buyers reduced by 18% to GBP4.0m

(2013: GBP4.9m).

As reported in 2013 in response to the surveying market's capacity constraints, the Group launched a new

graduate recruitment and training programme. This represents a major investment for the business. In 2014 a

further 60 graduates were hired in addition to 43 hired during 2013. The benefits of this investment commenced

in the second half of the year and will be further realised in 2015. The constrained capacity in the first half of

2014 resulted in an improvement in the pricing environment and the benefits were realised in the longer term

contracts renewed in the year and the major new contract won.

Operating profit was GBP13.3m (2013: GBP13.1m) and the operating profit margin was 21.4% (2013: 21.7%).

These figures are stated after deducting the cost of investment in the graduate programme. Adjusting for this

cost, on a like-for-like basis, operating profit increased to GBP15.4m (2013: GBP13.6m), an increase of 13.2%

and the operating margin was 24.8% (2013: 22.5%).

5 Bank of England for "Total Mortgage Approvals" 2014

Surveying Division Developments

The major initiative in the Surveying Division of investing in a new graduate recruitment and training programme

to increase capacity has continued in 2014. Whilst the overall market conditions worsened in the second half of

2014, some geographically concentrated capacity constraints remain, particularly in London and the South East.

The graduate programme has enabled LSL to respond to this challenge by moving surveyors around the country.

In the final quarter of the year the Surveying Division concluded a project to optimise operational performance

and productivity whilst improving its working practices; this included the consolidation of all administrative

exercise will be recovered in savings during the first half of 2015.

The Surveying Division serves key lender clients through both exclusive contracts and through panel

management arrangements. LSL is continuing to invest in the business in order to maintain high service levels

for all clients. The Surveying Division had a number of contracts up for renewal in 2014 and all of the major

contracts were successfully renewed with improved pricing. There will be fewer renewals and new opportunities in

2015 but the Surveying Division will vigorously pursue those available. The uncertain economic conditions,

including any impact of the general election, may impact the overall housing market and consequently surveying

volumes, nevertheless the renewal of existing major contracts in 2014 secures a significant proportion of

expected revenues.

PI Costs

As previously announced on 19(th) December 2014, LSL has needed to further increase the PI provisions relating

to the 2004 to 2008 high risk lending period. The announcement indicated a range of between GBP20.0m and

GBP25.0m and following further work, including a case by case independent review by specialist external legal

counsel, LSL has provided an additional reserve of GBP24.6m which is included in 2014 as an exceptional item.

Whilst the cause is an historic market issue relating to historic periods, it remains disappointing. The additional

provision reflects a number of factors. Although LSL has seen the reduction in the rate of notifications that had

been expected during the year, and assumed in setting the previous level of provision, a greater proportion of the

notifications are deteriorating into claims. Claims are also hardening with the more difficult and complex claims

now being progressed. This is resulting in an increase in the average cost per claim, particularly in respect of

legal costs reflecting the complexity of the arguments. The additional provision represents the Group's current

best estimate of likely claims costs but the process of resolving open claims and estimating future claims is

on-going. The review was conducted with the overall aim of ensuring a high degree of confidence that the total PI

provision will be adequate to cover the remaining risk relating to the 2004 to 2008 high lending period. The

provision required is highly sensitive to the run rates of new claims and the costs per claim for both new and

existing claims. Claims experience since the high risk lending period is substantially improved as a result of both

structural changes in the market place and the overhaul of internal procedures.

Financial Review

The key drivers of the financial performance of LSL in 2014 are summarised below:

Income statement

Revenue

Revenue increased by 11.2% to GBP287.5m in the year ended 31(st) December 2014 (2013: GBP258.6m).

Operating Expenses Excluding Exceptional Costs, Amortisation and Share Based Payment

Operating expenses increased by 10.5% to GBP249.3m (2013: GBP225.6m). This was mainly in the Estate

Agency Division and included investment to support revenue growth in 2014 on the back of ten months of market

growth seen in 2013. The average number of full time equivalent employees during the year was 4,760 (2013:

4,327).

Underlying Operating Profit

Group Underlying Operating Profit (before exceptional gains and exceptional costs, contingent consideration,

amortisation of intangible assets and share-based payments) increased by 13.2% to GBP42.0m (2013:

GBP37.1m) with the Underlying Operating Profit Margin of 14.6% (2013: 14.3%). On a statutory basis, the Group

operating profit increased by 72.7% to GBP33.9m (2013: GBP19.6m) with the Operating Profit Margin of 11.8%

(2013: 7.6%).

Exceptional Items

Total net exceptional costs in 2014 were GBP6.2m (2013: GBP13.0m). The main exceptional costs in 2014 were

comprised of PI Costs of GBP24.6m (for further details see Provision for PI claims and notifications below). The

total exceptional cost also includes acquisition related costs (GBP0.4m) and restructuring, redundancy and other

associated branch closure costs including onerous lease provisions (GBP1.1m). These exceptional costs were

partly offset by a small gain on the disposal of freehold properties and on the sale of part of LSL's investment in

Zoopla on its IPO totalling GBP19.8m. In 2013 exceptional costs comprised of PI Costs of GBP12.0m,

acquisitions related costs of GBP0.2m and redundancy and other associated branch closure costs of GBP0.9m.

These costs were offset by a gain on the sale of freehold properties totalling GBP0.1m. Provision for PI claims

and notifications Since early in 2012, the Group has experienced a high level of claims relating to the 2004 to

2008 period, which was a period of relatively high risk lending characterised by higher house prices, high

loan-to-value ratios and considerable levels of buy-to-let and sub-prime lending. As a result the provision for PI

Costs was increased by GBP17.3m in June 2012 and again by GBP12.0m in November 2013. Following a further

deterioration in claims experience in 2014, the provision for PI Costs was increased by GBP24.6 million in 2014.

Contingent consideration

Certain contingent consideration arrangements have been accounted for as remuneration as the arrangements

potentially involve the vendors forfeiting amounts otherwise due if continued services are not provided. These

amounts are shown separately on the face of the Income Statement.

Contingent consideration relating to the 2011 acquisition of Marsh & Parsons has been treated as an expense of

GBP2.3m (2013: GBP0.4m) in 2014. Further, LSLi has acquired a number of subsidiaries whereby the contingent

consideration is also considered to be remuneration under IFRS 3. A credit of GBP2.7m (2013: GBP2.4m

expense) was recorded in 2014 reflecting revisions to future earn out assumptions.

Net Financial Costs

Net financial costs (excluding exceptional finance costs) amounted to GBP2.2m (2013: GBP3.1m). The finance

costs related principally to interest and fees on the revolving credit facility, however, GBP0.1m (2013: GBP0.7m)

of the costs relates to the unwinding of discounts on provisions.

Taxation

The UK standard corporation tax rate has reduced from 28% as at 1(st) January 2011 to 21% from 1(st) April

2014 with a further reduction to 20% occurring on 1(st) April 2015. The effective rate of corporation tax for the

year was 21.1% (2013: 21.4%) excluding prior year adjustments. The effective tax rate for 2014 and 2013 was

impacted by non-taxable income for joint ventures and dividends, the impact of a rate change on the deferred tax

liability, contingent consideration recognised as an expense and the impact of temporary differences on certain

non-qualifying properties no longer being recognised. Excluding these impacts the effective tax rate is 22.0%

(2013: 24.0%). Income tax charged directly to other comprehensive income was GBP2.7m (2013: GBP4.4m); this

is comprised of a credit of GBP4.1m and a charge of GBP1.4m and relates to the revaluation of financial assets.

Income tax credited directly to the share based payment reserve is GBPnil (2013: GBPnil).

Adjusted Basic Earnings Per Share

The Basic Earnings Per Share was 24.5 pence (2013: 13.6 pence). The Adjusted Basic Earnings Per Share (as

calculated in Note 10 to the Financial Statements) is 30.5 pence (2013: 25.3 pence). The Directors consider that

the adjustments made to exclude the after tax effect of exceptional items, contingent acquisition consideration

treated as remuneration, and amortisation of acquisition intangibles provides a better and more consistent

indicator of the Group's underlying performance.

Balance Sheet

Capital Expenditure

Total capital expenditure in the year amounted to GBP8.5m (2013: GBP7.1m) and an additional GBP0.7m (2013:

GBP0.7m) has been spent internally on developing new software which has been treated as an intangible asset.

Bank Facilities

LSL refinanced its bank facility in 2013 with a GBP100.0m revolving credit facility in place until August 2017

(2013: GBP100.0m). During the period under review, the Group complied with all of the financial covenants

contained within the facility.

Net Bank Debt

As at 31(st) December 2014 Net Bank Debt was GBP34.7m (2013: GBP26.3m) and Shareholders' funds

amounted to GBP83.1m (2013: GBP99.3m) giving balance sheet gearing of 41.8% (2013: 26.5%). The increase

in Net Bank Debt arose as a result of the acquisitions and further investment in joint ventures and financial assets

for various new acquisitions by the Estate Agency Divisions and payment of PI claims of GBP13.3m (2013:

GBP14.4m). Net Bank Debt represented 11.2% of the Group's market capitalisation at 31(st) December 2014,

and 74.0% of the Group's adjusted EBITDA for the year (2013: 5.8% and 64.0% respectively).

Cash Flow

The Group generated GBP42.0m (2013: GBP42.4m) of operating cash flow which is before capital expenditure

including software of GBP9.2m (2013: GBP7.9m) and before PI claims paid out of GBP13.3m (2013: GBP14.4m)

and exceptional costs of GBP1.5m (2013: GBP1.1m). The marginal decrease was due to improved Group

Underlying Operating Profit offset by investment in working capital. During the year the Group sold a number of

freehold properties receiving net proceeds of GBP0.1m (2013: GBP1.4m) and generating an exceptional profit of

GBPnil (2013: GBP0.1m).

Zoopla IPO

On 18(th) June 2014, Zoopla underwent an IPO and as part of this, LSL sold 48.9% of its stake in Zoopla for

GBP20.8m, net of associated costs and GBP16.8m net of tax. The total gain on the sale of the shares was

GBP19.8m net of associated costs.

Zoopla's share price at 31(st) December 2014 was GBP1.965 per share. The fair value of the Group's remaining

2.60% stake in Zoopla is calculated to be GBP21.3m at 31(st) December 2014.

Net Assets

The Group's net assets as at 31(st) December 2014 were GBP83.1m (2013: GBP99.3m). The Group's investment

in Zoopla had largely been revalued ahead of its realisation on IPO. Accordingly, the exceptional gain in the year

had already been largely reflected in group net assets and the GBP16.8m special dividend paid during the year

therefore reduces net assets compared with December 2013.

Treasury and Risk Management

LSL has an active debt management policy. During the first half of 2014, the Group had interest rate swaps in

place which fixes the interest on borrowings up to GBP25.0m at an average LIBOR rate of 2.93%, which provided

a degree of predictability on finance costs. The interest rate swaps expired and were not renewed. LSL continues

to review debt management policy and will consider additional hedging in due course. LSL does not hold or issue

derivatives or other financial instruments for trading purposes.

Post Balance Sheet Events

Subsequent to the year end, LSL acquired Thomas Morris a multi award winning estate agency and lettings

business with seven branches in Cambridgeshire, Bedfordshire and Hertfordshire for an initial consideration of

GBP4.0m, and six small lettings book acquisitions for a total initial consideration of GBP1.8m. In addition, via

LSLi, LSL acquired the remaining shares in JNP for a consideration of GBP54k and following the transaction, LSL

holds 100% of the shares in JNP.

Management is in the process of allocating the purchase price in accordance with IFRS 3. As a result the initial

accounting for the acquisition is currently incomplete, so a fair value table of the identifiable assets and liabilities

has not been presented.

International Financial Reporting Standards (IFRS)

The Financial Statements have been prepared under IFRS as adopted by the European Union.

Principal Risks and Uncertainties

During 2014, in line with FRC guidance, LSL's risk management and internal controls framework included:

a. ownership of the risk management and internal controls framework by the Board, supported by the Company

Secretary, Head of Risk and Internal Audit and Group Finance;

b. a network of Risk Owners in each of LSL's businesses with specific responsibilities relating to risk management

and internal controls;

c. the documentation and monitoring of risks are recorded and managed through standardised risk registers which

undergo regular reviews and scrutiny by local boards and the Head of Risk and Internal Audit;

d. the Board regularly identifies, reviews and evaluates the principal risks which may impact the Group as part of

the planning and reporting cycle to ensure that such risks are identified, monitored and mitigated; and

e. reporting by the Chairman of the Audit Committee to the Board on any matters which have arisen from the

Audit Committee's review of the way in which the risk management and internal control framework has been

applied together with any breakdowns in, or exceptions to, these procedures.

In line with 2014 edition of the Code and the FRC's 'Guidance on Risk Management, Internal Control and Related

Financial and Business Report', which integrates and replaces the FRC's previous guidance ('Internal Control:

Revised Guidance for Directors on the Combined Code' and 'Going Concern and Liquidity Risk Guidance for

Directors of UK Companies') which was published in September 2014, LSL has adopted a Group-wide risk

appetite statement and framework. The new framework will be applied during 2015, and LSL will report on its

progress in the 2015 Report.

Listed below are the risks which the Board has identified at the date of this Report as being therefore the principal

risks and uncertainties faced by LSL at the date of this Report, together with details of key management and

mitigation initiatives, which are subject to regular review.

LSL also faces other risks which, although important and subject to regular review, have been assessed as less

significant and are not listed below. This may include some risks which are not currently known to the Group or

that LSL currently deems as immaterial, or were included in previous Annual Report and Accounts and through

changes in external factors and careful management, are no longer deemed to be material to the Group as a

whole.

However, these risks may individually or cumulatively also have a material adverse effect together with other risk

factors which are beyond the direct control of LSL, and may have a material adverse impact on LSL's business,

results of operations and/or financial condition. The risk management framework and procedures in place can

only provide reasonable but not absolute assurance that the principal risks and uncertainties are managed to an

acceptable level.

Further information relating to how LSL managed these risks and uncertainties during 2014 is set out in the Audit

Committee Report (Internal Controls) of the Annual Report & Accounts 2014.

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