Lsl Prop Regulatory News (LSL)

For Immediate Release  30th March 2020

LSL Property Services plc ("LSL" or "The Group")

COVID-19 UPDATE

LSL Property Services plc, a leading provider of residential property services incorporating estate agency, financial services and surveying and valuation businesses, issues a COVID-19 update, in light of rapidly changing market conditions.

Trading and financial position

The Group made a positive start to 2020, with Group Underlying Operating Profit1 for the first two months of the year £2.2m ahead of the same period in the prior year, in line with our expectations. Trading conditions in the Estate Agency Division were positive across the UK in January and February, with strong year on year growth in net sales.

We last updated the market on 10th March 2020 in our 2019 Preliminary Results Announcement, when we communicated that we had seen some slight softening of our lead sales indicators in Estate Agency. Since then, we have seen a further material slow-down of our lead sales indicators in Estate Agency, and following the Prime Minister's address to the UK, announcing a national lock-down with effect from the evening of 23rd March 2020, activity levels have dropped very sharply.

Our Customers and People

Since the start of the COVID-19 outbreak, we have focused on the welfare of the Group's employees, and customers, and the Group continues to apply the advice of the Government and public health authorities throughout our businesses. This will be a period of great uncertainty for our colleagues, customers and business partners, and we will continue to communicate regularly with them as the situation evolves.

LSL response

In response to the sharp drop in transaction volumes, we are taking a wide range of immediate and proactive measures to reduce operational costs, optimise the balance sheet, provide operational flexibility and protect our employees, customers and business partners. Key actions include the following:

Group wide

· Implemented business continuity plans across all our businesses, switching to remote working

· Proactive measures across our Estate Agency, Financial Services and Surveying businesses, further details below

· Rightsizing of team activity levels to market conditions, reflecting the drop in transaction volumes by business stream

· Recruitment freeze and annual pay review suspended for the Board and all staff

· Deferred all non-critical capex

· All discretionary expenditure halted, with all non-essential marketing activities cancelled

· All Group wide acquisition activity halted for the foreseeable future

· Working closely with our business partners, with the intention of finding solutions to meet their needs in this rapidly changing environment

Estate Agency

· To protect our employees, customers and suppliers, closure of all Estate Agency branches, in line with Government advice, with customer support provided remotely, and with Estate Agency branch staff working from home where required

· Cross-functional training to enhance workforce flexibility

Financial Services

· Continue to provide consistent delivery of appropriate outcomes for consumers

· Meet anticipated increased consumer demand for remortgage and protection products

Surveying

· To protect customers and staff, cessation of all physical valuations in line with Government advice

· Actively working with lender clients to move a higher proportion of valuations to non-physical (remote) valuations

Liquidity and Covenants

We have entered this period of market uncertainty in a strong financial position. The Group has a Revolving Credit Facility (RCF) in place of £100m, which is committed to May 2022. As at 29th February 2020, the Group had Net Banking Debt of £52.1m, and gearing2 of 1.2 times twelve-month rolling Group Adjusted EBITDA3 against a banking covenant of 3.25 times. The Group currently has immediately available liquidity of circa £55m, through committed facilities and cash balances.

As the situation has continued to develop, we have modelled a range of scenarios to stress test the Group's liquidity position through to the end of 2020. These show that in very significant stress scenarios, with appropriate mitigating actions, the Board is comfortable that the business has adequate banking facilities in place for the foreseeable future. We also welcome the Government's support packages for workers and businesses impacted by the current situation, which we will utilise where appropriate.

Dividend

The Group delivered a positive Group financial performance in the year ended 31st December 2019. The Group delivered 2019 Underlying Operating Profit ahead of the Board's prior expectations in 2019. Net Bank Debt at 31st December 2019 was £41.9m with a modest level of gearing2 at 1.0x Group Adjusted EBITDA3. Given this positive performance, prior to the COVID-19 outbreak, the LSL Board was previously of the view it would be appropriate to recommend a final dividend at the upper end of the range of LSL's stated dividend policy.

However, given the uncertainty of how deep and how long the impact of COVID-19 will be, alongside the other measures we are taking to preserve the Group's cash position, the LSL Board has decided not to recommend a final dividend for the year ended 31st December 2019 to Shareholders for approval at the 2020 AGM. This represents a cash saving of £7.4m in H1 2020. The LSL Board believes that this is an appropriate measure to take at this point as the Group seeks to preserve its liquidity, cash flow and financial position during this period of uncertainty.

Outlook

The rapidly developing COVID-19 situation means that we are no longer able to provide financial guidance for the year ending 31st December 2020 and beyond. Guidance will be resumed when a higher level of normality returns.

The Group enters this period of uncertainty caused by COVID-19, confident in its ability to manage through the current challenging market conditions through a combination of self-help measures, and Government support measures. The Group has remained resilient during challenging market conditions and expects this to remain the case during the current market disruption. We have a strong track-record of effective execution and a number of longstanding management team colleagues with experience of navigating through periods of challenging market conditions.

Significant management actions have already been implemented across the Group. We will continue to take all necessary actions to reduce costs and optimise the balance sheet through this period of substantial uncertainty caused by COVID-19. The Group is well capitalised, with committed bank facilities until May 2022 and supportive lenders.

We expect our Estate Agency and Surveying businesses to be the most impacted through the reduction of purchase transaction volumes, whilst our Financial Service business should be more robust. The Group identified Financial Services as a major opportunity some time ago, since which time LSL's position has strengthened consistently, and we now have a strong and resilient Financial Services business.

AGM

LSL intends to hold the 2020 AGM at its offices at 1-3 Sun Street, London, EC2A 2EP. LSL normally holds its AGM at the end of April, however due to the outbreak of COVID-19 the AGM arrangements are under review with a date to be determined. Once a date for the AGM has been set, the Notice of Meeting will be sent to Shareholders, and it will include details of all proposed resolutions.

Commenting on today's announcement, Simon Embley, Chairman, said:

"We are facing unprecedented market conditions caused by COVID-19. We are taking prompt decisive self-help actions across the Group to preserve liquidity, reduce costs and optimise the business for the short and medium term. We are well positioned to deal with the disruption caused by COVID-19, with a strong balance sheet and a capable and experienced management team across the Group.

The welfare of our colleagues is an ongoing priority for us and the LSL Board would like to take this opportunity to thank all of our colleagues for their ongoing professionalism during this challenging time.

The LSL Board believes that in taking prompt, decisive and appropriate action to respond to market conditions in combination with its strong balance sheet, the business is well positioned to emerge strongly when market conditions improve. "

For further information, please contact:

Notes:

1. Group Underlying Operating Profit is before exceptional costs, contingent consideration, amortisation of intangible assets and share-based payments

2. Gearing is defined as Net Bank Debt divided by Group Adjusted EBITDA3 (excluding the impact of IFRS 16)

3. Group Adjusted EBITDA is Group Underlying Operating Profit plus depreciation on property, plant and equipment (on a pre-IFRS 16 basis)

Notes on LSL

LSL is a leading provider of residential property services to its key customer groups. Services to consumers include: residential sales, lettings, surveying, conveyancing support, and mortgage, pure protection and general insurance brokerage services. Services to mortgage lenders include: valuations and panel management services, and asset management and property management services. For further information, please visit LSL's website: lslps.co.uk

Forward Looking Statement

This document contains certain statements that are forward-looking statements. They appear in a number of places throughout this document and include statements regarding our intentions, beliefs or current expectations and those of our officers, directors and employees concerning, amongst other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the business we operate. By their nature, these statements involve 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 document and, unless otherwise required by applicable law, LSL undertakes no obligation to update or revise these forward-looking statements. Nothing in this document should be construed as a profit forecast. LSL and its Directors accept no liability to third parties in respect of this document save as would arise under English law. This presentation contains brands that are trademarks and are registered and/or otherwise protected in accordance with applicable law.

Any forward-looking statements in this document speak only at the date of this document 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 document.