Interim Results

LSL Property Services plc

Interim Results For the six months ended 30 june 2016

LSL Property Services plc (LSL or the Group), a leading provider of residential property services incorporating Estate Agency and Surveying businesses, announces its interim results for the six months ended 30 June 2016.

(1) Operating Profit is before exceptional gains and costs, contingent consideration, amortisation of intangible assets and share based payments

Strong first half Group financial performance in a changing market

o Estate Agency up 9% and Surveying up 5%

o Estate Agency up 10%, Surveying up 7%

Current trading and outlook

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

"The Group has delivered a strong first half performance in a changing market. I am particularly pleased with the profit growth in both Estate Agency and Surveying.

Whilst we expect Residential Sales volumes to remain suppressed in the second half, trends in other parts of our business are expected to be more resilient. Our Lettings business continues to perform well, now representing 29% of total Estate Agency income. Mortgage cost and availability remain positive for the UK housing market with increasing distribution of products through intermediary channels which will support our growing Financial Services business.

Whilst these are uncertain times in the residential housing market, the Group has strong fundamentals with a robust balance sheet and relatively low levels of gearing. The business will adapt quickly as it has in the past and is well positioned to navigate the current market conditions. I remain confident that LSL will continue to deliver long term value to our shareholders."

For further information, please contact:

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 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, please visit LSL's website:

www.lslps.co.uk

Group Chief Executive's Review

Introduction

The Group has delivered a strong first half financial performance in a changing market with revenue and profit up in both Divisions. Group revenue was up 8% to £151.4m with Estate Agency up 9% and Surveying up 5%. Group operating profit(1) was up 10% to £11.3m with Estate Agency up 10% and Surveying up 7%.

The UK residential housing market place demonstrated two clear trends in the first half. Underlying housing transaction(2) volumes were ahead 16.5% in the first quarter of the year compared to the same period in 2015 as increases in stamp duty effective from 1 April 2016 accelerated market activity. Market activity(2) slowed in the second quarter being 1.5% ahead of the comparative period in 2015 as completions slowed ahead of the EU referendum. The Estate Agency Division performance reflected these trends.

Financial Results

Group revenue was up 8% at £151.4m (2015: £140.2m). Group operating profit(1) was up 10% to £11.3m (2015: £10.3m) and Group operating profit margin(1) was slightly up at 7.5% (2015: 7.4%).

The Estate Agency Division revenues were up 9% at £118.9m (2015: £109.1m) reflecting double digit growth in both Lettings income and Financial Services income. Estate Agency Division operating profit(1) increased by 10% to £6.9m (2015: £6.3m). Surveying Division revenues were up 5% at £32.5m (2015: £31.1m). Operating profits(1) in the Surveying Division increased by 7% to £8.1m (2015: £7.6m).

Group operating profit after contingent consideration, exceptional costs, amortisation and share based payments was up 18% to £8.9m (2015: £7.5m) reflecting the increase in operating profit(1) and the net effect of a lower charge to contingent consideration this year compared to last year, partly offset by an increase in amortisation of intangible assets following the higher level of lettings book acquisitions in the last 12 months.

Net finance costs were £0.5m (2015: £1.3m). The effective tax rate for the period was 23.1% (2015: 22.3%). Group profit after tax was £6.4m (2015: £4.8m). Earnings per share were 6.3p (2015: 4.7p) and adjusted earnings per share were 8.6p (2015: 7.2p).

Cash generated by operations was £7.2m (2015: cash used £0.3m). Operating cash flow included Professional Indemnity (PI) cash settlements of £3.8m (2015: £7.6m). Capital expenditure, including intangibles, was £3.6m (2015: £3.1m), including two new Marsh & Parsons branches opened during the period, in Tooting and Tufnell Park.

The fair value of the Group's 2.7% stake in Zoopla was calculated to be £30.1m at 30 June 2016. In July 2016 the Group disposed of one million shares for gross proceeds of £3.0m which has been used to reduce net bank debt. Following this disposal, the Group retains a 2.5% stake in Zoopla.

Net assets at 30 June 2016 were £108.4m (2015: £88.1m) with the increase year on year driven by the acquisition of Group First Limited and lettings books. Net bank debt at 30 June 2016 was £61.7m compared to £53.0m at 30 June 2015. Compared to 31 December 2015, net bank debt has increased by £21.8m driven by investments in acquisitions and the normal seasonality of the Estate Agency Division cash flows, continuing PI cash payments, and the payment of dividends, taxes and bonuses. In May 2016, the Group's existing revolving credit facility of £100m was extended on more favourable terms for LSL until May 2020.

The Board remains confident in the underlying fundamentals and prospects of the business and has declared an interim dividend payment amounting to 4.0p pence per share (2015: 4.0 pence). The ex-dividend date for the interim dividend is 11 August 2016, with a record date of 12 August 2016 and a payment date of 6 September 2016. Shareholders have the opportunity to elect to reinvest their cash dividend and purchase existing shares in LSL through a dividend reinvestment plan.

Estate Agency Division

Residential Sales income increased by 1% to £42.5m (2015: £42.0m) with average fees per unit up 1%. Exchange volumes were flat year on year reflecting an acceleration of completions ahead of the Stamp Duty changes on 1 April 2016, with a slowdown in Q2 following the strong Q1 and the run up to the EU referendum and continuing in the period afterwards.

The Group's Lettings income grew strongly again by 11% to £34.0m (2015: £30.6m) with organic growth of 5%. LSL acquired nine lettings books in the period for £4.1m (2015: £3.9m). These acquired lettings books are performing in line with expectations. The Lettings business continued to perform well across all brands in the first half and is expected to remain more resilient against residential housing market fluctuations.

Marsh & Parsons total revenues were up 11% to £17.1m (2015: £15.4m). Marsh & Parsons operating profit(1) increased by 47% to £2.2m (2015: £1.5m) with increased operating margins of 12.9% (2015: 9.4%). Residential Sales were up 10% and Lettings performed strongly again up 13%. Two new Marsh & Parsons branches opened during the period, in Tooting and Tufnell Park.

Financial Services revenue increased by 29% to £29.5m (2015: £22.8m) and in total the Group arranged mortgage lending of £8.3bn during the first half (2015: £6.0bn).

Organic performance remains strong across our Financial Services products including mortgage and re-mortgage products, protection products and general insurance products. We continue to improve penetration in our own Estate Agency networks and our Intermediary networks continues to benefit from the trend towards intermediary distribution of lender products.

In February 2016 the Group acquired a 65% interest in Group First Limited which provides mortgage and protection brokerage services to purchasers of new homes through its subsidiaries, Mortgages First Limited and Insurance First Brokers Limited. This business has performed in line with our expectations in the period since acquisition.

Asset Management outperformed the market(3) for repossessions with a fall in revenue of 19% in the period to £3.5m (2015: £4.3m).

Surveying Division

The Surveying Division traded well in the first half with revenue up 5% and operating profit(1) up 7%. Revenue per job was up 8% to £203 (2015: £188) reflecting a favourable mix across lenders and the types of jobs performed. Surveyor headcount was optimised to meet business requirements with 335 qualified surveyors employed at the end of the period (2015: 367). Profit margin increased to 24.9% (2015: 24.4%). A technology refresh during the second half will deliver further enhancements.

At 30 June 2016, the total provision for PI Costs was £26.2m (2015: £31.9m). In 2016 the Group continued to make positive progress in addressing these historic claims and the reduction in the rate of notifications and claims from the high risk lending period of 2004 to 2008 has been in line with LSL's expectations during the year and those assumed in setting the PI costs provision.

Strategy

LSL remains focused on the strategy communicated in March 2015. The focus in Estate Agency is to drive operating profit per branch to between £80k to £100k in the medium term, by growing recurring income streams and Financial Services income; making selective acquisitions; and investing in the Marsh & Parsons new branch roll-out.

The focus in Surveying is to optimise contract performance from B2B customers, to achieve further improvement in efficiency and capacity utilisation and to use technology to drive further customer enhancements and quality improvements.

In the current uncertain market conditions, LSL will also focus on maintaining a robust balance sheet and will continue to use a highly selective and disciplined approach to all investment activity.

LSL is taking selective cost measures where necessary to adapt the Group's cost base to the more uncertain market conditions. In the second half, a cost saving programme across the Group and the technological refresh in Surveying will result in between £2m to £3m of exceptional costs in H2 2016.

Outlook

The Group has a balanced business portfolio including Asset Management and the Letting and Financial Services businesses which are both proving more resilient to residential housing market fluctuations and we will continue to benefit from the increasing proportion of our business represented by these revenue streams.

Mortgage costs and availability remain positive with continued share of lending taken by the intermediary market.

In Surveying, we will continue to use technology to drive further customer enhancements, quality improvements and improvement in efficiency and capacity utilisation. We will continue to optimise contract performance and revenue generation from B2B customers.

Whilst it is difficult to accurately predict housing market transactions and consumer confidence for the remainder of calendar 2016, as reported in the Group's recent pre-interim results trading update, LSL does not expect market conditions to improve sufficiently to meet previous financial expectations for the full year.

The Group has strong fundamentals, with a robust balance sheet. The business is well positioned to adapt to a changing market as it has in the past and to successfully navigate through a more difficult market environment. The Board remains confident that LSL will continue to deliver long term value to our shareholders.

Ian Crabb

Group Chief Executive

2 August 2016

(1) Operating Profit is before exceptional gains and costs, contingent consideration, amortisation of intangible assets and share based payments

(2) Source: Bank of England for "House Purchase Approvals" January-May 2015/2016

(3) H1 market performance estimated. Per Q1 CML market statistics there was a 30% decline in the repossession market compared to the same period in 2015

Principal risks and uncertainties

The key risks and uncertainties relating to the Group's operations remain consistent with those disclosed in the Group's Annual Report and Accounts 2015 on pages 22 to 25. The Annual Report and Accounts 2015 can be accessed on the Group's website: www.lslps.co.uk. Having reconsidered these principal risks and uncertainties which are summarised below, the Board continues to consider them appropriate.

· Housing market

· New UK housing market entrants

· Acquisitions and growth initiatives

· Professional services

· Client contracts

· Information technology infrastructure

· Information security

· Regulatory and legal

· Employees

The recent Group Risk Appetite Assessment exercise includes an evaluation of continually evolving aspects of risk management. Recent examples include the capture of anticipated post-Brexit impacts on the residential housing market and articulation of established 'conduct risk' routines used to support delivery of appropriate customer outcomes. The Board has concluded that such aspects are included in the principal risk and uncertainties noted above. Therefore the principal risks and uncertainties of the Group remain the same as those included within the Annual Report and Accounts 2015.

Forward-Looking Statements

This statement may contain forward-looking statements with respect to certain plans, goals and expectations relating to the future financial condition, business performance and results of LSL. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances that are beyond the control of LSL, and they may cause the actual results or performance of LSL to be materially different from the results or performance implied by such statements. Any forward-looking statements will be by reference to the date of this statement only and must not be regarded as guarantees of future performance. Further, nothing in this statement should be construed as a profit forecast. Some of the factors which may affect LSL's actual future financial conditions, business performance and results are contained within the Group's Annual Report and Accounts 2015 on pages 22 to 25 and in this Statement, together with information on the management of the principal risks and uncertainties faced by LSL.

Definitions

Definitions for words and expressions referred to and included in this statement which are not expressly defined within, can be found in LSL's Annual Report and Accounts 2015 (a copy of which is available on LSL's website at: www.lslps.co.uk). All references to 'note(s)' in this statement, are unless expressly stated otherwise, references to the 'Notes to the Interim Condensed Group Financial Statements' included in this statement.

Responsibility statement of the Directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

· The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

· The interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

By order of the Board

Ian Crabb

Director

Interim Group Income Statement

for the six months ended 30th June 2016

Interim Group Statement of Comprehensive Income

for the six months ended 30th June 2016

Interim Group Balance Sheet

as at 30th June 2016

Interim Group Cash Flow Statement

for the six months ended 30th June 2016

Interim Group Statement of changes in equity

for the six months ended 30th June 2016

Unaudited six months ended 30th June 2016

During the six month period to 30th June 2016 a total of 150,082 share options were exercised relating to LSL's various share option schemes resulting in the shares being sold by the Trust. LSL received £216,000 on exercise of these options.

Unaudited six months ended 30th June 2015

During the six month period to 30th June 2015 a total of 450,928 share options were exercised relating to LSL's various share option schemes resulting in the shares being sold by the Trust. LSL received £1,116,000 on exercise of these options.

Audited year ended 31st December 2015

During the year ended 31st December 2015, the Trust did not acquire any LSL shares. During the period 551,446 share options were exercised relating to LSL's various share option schemes resulting in the Shares being sold by the Trust. LSL received £1,314,000 on exercise of these options.

Notes to the Interim Condensed Group Financial Statements

The interim condensed group financial statements for the period ended 30th June 2016 were approved by the LSL Board on 1st August 2016. The interim financial statements are not the statutory accounts. The financial information for the year ended 31st December 2015 is extracted from the audited statutory accounts for the year ended 31st December 2015, which have been filed with the Registrar of Companies. The auditor's report was unqualified and did not contain an emphasis of matter paragraph, and did not make a statement under section 498 (2) or (3) of the Companies Act 2006.

1 Basis of preparation

The interim condensed consolidated group financial statements for the period ended 30th June 2016 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and IAS 34 Interim Financial Reporting (as adopted by the EU). The interim condensed consolidated group financial statements have been prepared on a going concern basis.

The interim condensed consolidated group financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31st December 2015 which are included in LSL's Annual Report and Accounts 2015.

With the exception of the transaction detailed in Note 10, there have been no other significant related party transactions in the period to 30 June 2016.

Significant accounting policies

The accounting policies adopted in the preparation of the interim condensed consolidated group financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31st December 2015.

Judgements and estimates

The preparation of financial information in conformity with IFRS as adopted by European Union requires management to make judgements, estimates and assumptions that affect the application of policies and reporting amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next six months are largely the same as those as at 31st December 2015. These assumptions are discussed in detail in the Group's Annual Report and Accounts 2015. The assumptions discussed are as follows:

· Valuation in acquisitions

· Impairment of intangible assets

· Assessment of the useful life of an intangible asset

· Professional indemnity (PI) claims

· Contingent consideration

· Valuation of financial assets

1. Basis of preparation (continued)

Significant accounting policies (continued)

New standards and interpretations

There are no accounting standards or interpretations that have become effective in the current reporting period which have had a material effect on the net assets, results and disclosures of the Group. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. 

Going concern

The Group meets its day to day working capital requirements through a revolving credit facility. The Group currently has a £100m credit facility which was extended in May 2016 and will now expire in May 2020. As shown in Note 10, the Group had available £45m of undrawn committed borrowing facilities in respect of which all conditions precedent had been met. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group is expected to operate within the terms of its current facilities and that therefore it is appropriate to use the going concern basis of preparation for this financial information.

2. Seasonality of operations

Due to the seasonal nature of the residential housing market, turnover and operating profits are normally higher in the second half of the year.

3. Revenue

Six months ended Year Ended

4. Segment analysis of revenue and operating profit

For management purposes, the Group is organised into business units based on their products and services and has two reportable operating segments as follows:

· The Estate Agency and Related Services segment provides services related to the sale and letting of residential properties. It operates a network of high street branches. As part of this process, the Estate Agency Division also provides marketing and arranges conveyancing services. In addition, it provides repossession asset management services to a range of lenders. It also arranges mortgages for a number of lenders and arranges protection and general insurance policies for a panel of insurance companies via the estate agency branches, Pink Homes Loans, First Complete and Linear Mortgage Network. The financial services segment included within the Estate Agency Division includes two mortgage and insurance distribution networks providing products and services for sale via financial intermediaries. The results of this financial services segment, does not meet the quantitative criteria for separate reporting under IFRS and has therefore been aggregated with those of Estate Agency and Related Services.

· The Surveying and Valuation Services segment provides a valuations and professional survey service of residential properties to various lenders and individual customers.

Each segment has various products and services and the revenue from these products and services are disclosed in the LSL's Annual Report and Accounts 2015 within the Business Review section of the Strategic Report.

The Management Team monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the Group Financial Statements. Head office costs, Group financing (including finance costs and finance incomes) and income taxes are managed on a Group basis and are not allocated to operating segments.

4. Segment analysis of revenue and operating profit (continued)

Operating segments

The following tables presents revenue and profit information regarding the Group's operating segments for the six months ended 30th June 2016, for the six months ended 30th June 2015 and for the year ended 31st December 2015.

Six months ended 30th June 2016

In the period ended 30th June 2016, there is no revenue from one customer that accounts for 10% or more of the Group's total revenue (2015 - none).

All of the joint venture interests of the Group are recorded in the Estate Agency and Related Services segment. Unallocated net liabilities comprise plant and equipment (£9,000), other assets (£1,020,000), accruals (£923,000), financial liabilities (£8,553,000), deferred and current tax liabilities (£10,021,000), overdraft (£6,690,000) and revolving credit facility overdraft (£55,000,000).

4. Segment analysis of revenue and operating profit (continued)

Operating segments

Six months ended 30th June 2015

In the period ended 30th June 2015, there is no revenue from one customer that accounts for 10% or more of the Group's total revenue (2014 - none).

All of the joint venture interests of the Group are recorded in the Estate Agency and Related Services segment. Unallocated net liabilities comprise certain property, plant and equipment (£14,000), cash and bank balances (£998,000), other assets (£962,000), accruals (£1,874,000), financial liabilities (£54,000,000) and deferred and current tax liabilities (£9,803,000).

4. Segment analysis of revenue and operating profit (continued)

Operating segments

Year ended 31st December 2015

In the period ended 31st December 2015, there is no revenue from one customer that accounts for 10% or more of the Group's total revenue (2014 - none).

Unallocated net liabilities comprise plant and equipment (£9,000), other assets (£857,000), cash (£5,603,000), accruals (£1,554,000), financial liabilities (£15,548,000), deferred and current tax liabilities (£9,452,000), revolving credit facility (£45,500,000).

5. Earnings per share (EPS)

Basic EPS amounts are calculated by dividing net profit for the period attributable to ordinary equity holders of the parent by the weighted average number of Ordinary Shares outstanding during the period.

Diluted EPS amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Six months ended 30th June

Adjusted basic and diluted EPS

The Directors consider that the adjusted earnings shown below give a better and more consistent indication of the Group's underlying performance:

5. EPS (continued)

Six months ended 30th June

Year ended 31st December 2015

(1) This represents adjusted profit after tax attributable to equity holders of the parent. Tax has been adjusted to exclude the prior year tax adjustments, and the tax impact of exceptional items, amortisation and share-based payments. The effective tax rate used is 20.00% (30th June 2015: 20.25%; 31st December 2015: 20.25%).

6. Exceptional items and contingent consideration

Contingent consideration on acquisitions

The credit for deferred and contingent consideration on the acquisition of Marsh & Parsons (in 2011) amounted to £142,000 (31st December 2015: credit of £3,002,000 and 30th June 2015: expense of £602,000). The contingent consideration credit recognised in the period relates to other acquisitions, a credit of £268,000 in LMS, and a charge of £45,000 in LSLi (31st December 2015: a charge of £2,136,000 in LMS and a credit of £611,000 in LSLi and 30th June 2015: charge of £1,431,000 in LMS and a charge of £109,000 in LSLi).

7. Dividends paid and proposed

Dividends per share

A final dividend in respect of the year ended 31st December 2015, of 8.6 pence per share (December 2014: 8.3 pence per share), amounting to £8.8m was paid in the period ended 30th June 2016.

An interim dividend has been announced amounting to 4.0 pence per share (June 2015: 4.0 pence).

Interim dividends are recognised when paid.

8. Taxation

The major components of income tax charge in the interim Group income statements are:

Income tax charged directly to other comprehensive income is £469,000 (31st December 2015: £527,000 and 30th June 2015: £1,771,000) and relates to the revaluation of financial assets. Income tax credited directly to the share based payment reserve is £96,000 (30th June 2015: £nil and 31st December 2015: £ nil).

Effective from 1st April 2017, the main rate of corporation tax will decrease to 19% and is expected to decrease to 17% effective from 1st April 2020. A reduction to 18% from 1st April 2020 has already been substantially enacted in legislation and accordingly this is the rate at which deferred tax has been provided.

9. Financial assets

9. Financial assets (continued)

The financial assets include unlisted equity instruments which are carried at fair value. Fair value is judgemental given the assumptions required and have been valued using a level 3 valuation techniques (see note 14). Financial assets also include shares in Zoopla which are listed on the London Stock Exchange and again are carried at fair value. These shares are valued using a level 1 valuation technique.

Zoopla

Zoopla's share price at 30th June 2016 was £2.66 per share. The Directors consider the best estimate of the fair value of LSL's investment in Zoopla to be the share price which values the Group's stake in Zoopla at £30,095,000. Subsequent to 30th June 2016, LSL sold 1,040,000 shares in Zoopla for net proceeds of £2,972,000.

Other investments

The carrying value of the Group's investment in Vibrant Energy Matter (VEM) at 30th June 2016 has been assessed as £912,000 (31st December 2015: £912,000).

The carrying value of the Group's investment in GPEA Limited (GPEA) at 30th June 2016 has been assessed as £862,000 (31st December 2015: £862,000).

10. Financial liabilities

Contingent consideration -

10. Financial liabilities (continued)

The 12% unsecured loan notes were issued as part satisfaction of the consideration for the acquisition of Marsh & Parsons in 2011. £1.7m of these loan notes was redeemed in February 2016. A variation to the 2011 loan notes was agreed on the retirement of Peter Rollings in March 2016. The total principal amount of the 2011 Loan Note will be paid but at a reduced rate of interest of 2%. The first instalment has been paid in July 2016, and a final payment of £2m is due in March 2018, subject to certain conditions being satisfied.

£1,746,000 (31st December 2015: £1,518,000 and 30th June 2015: £5,103,000) of contingent consideration relates to the Growth Shares acquired by the management of Marsh & Parsons subsequent to acquisition as an incentive to grow the Marsh & Parsons business. Holders of Growth Shares have the option to require LSL to buy their Growth Shares at any time between 31st March 2016 and 1st April 2020, at their discretion, at a price determined by a multiple of EBITDA in the previous financial year. The payment of the consideration is contingent on the holder of the Growth Shares being continuously employed by the relevant company and consequently the expected value of the Growth Shares is charged to the income statement over the earn-out period.

£5,002,000 (31st December 2015: £4,790,000 and 30th June 2015: £8,963,000) of contingent consideration relates to payments to third parties in relation to the acquisition of LSLi and certain of its subsidiaries between 2007 and 2016. This is typically payable between three and five years after the acquisition dates depending on the profitability of those subsidiaries in the relevant years. In 2016, the contingent consideration has been recalculated based on the Directors' latest expectation using a discount rate of 6.5% (31st December 2015 and 30th June 2015: 6.5%).

£530,000 (31st December 2015: £3,093,000 and 30th June 2015: £2,388,000) of contingent consideration relates to payments to third parties in relation to the acquisition of LMS in September 2014. This was paid in July 2016. 

The table below shows the allocation of the contingent consideration balance and income charge between the various categories:

11. Provisions for liabilities

Six months ended 30th June: