TIDMSVS
RNS Number : 1404A
Savills PLC
22 March 2017
22 March 2017
Savills plc
('Savills' or 'the Group')
PRELIMINARY RESULTS FOR THE FULL YEARED 31 DECEMBER 2016
Savills plc, the international real estate advisor, today
announces record results as the Group benefits from market share
growth in key markets and its broad spread of services across the
globe.
Key financial highlights
- Group revenue up 13% to GBP1,445.9m (GBP1,355.3m in constant currency*, 2015: GBP1,283.5m)
- Underlying profit** up 12% to GBP135.8m (GBP126.8m in constant currency*, 2015: GBP121.4m)
- Group profit before tax up 1% to GBP99.8m (2015: GBP98.6m)
- Underlying profit margin stable at 9.4% (2015: 9.5%)
- Underlying basic EPS up 15% to 72.5p (2015: 63.2p)
- Total dividends for the year up 12% to 29.0p per share (2015: 26.0p)
- Total ordinary dividend up 21% to 14.5p and supplementary dividend up 3.6% to 14.5p
* Revenue and underlying profit for the year are translated at
the prior year exchange rates to provide a constant currency
comparative.
** Underlying profit before tax ('underlying profit') is
calculated on a consistently reported basis in accordance with Note
3 to this Preliminary Statement.
Key operating highlights
The strength of our key commercial market positions, growth in
Investment Management and the resilience of our residential
businesses led to an improved performance for Savills in 2016.
- Transaction Advisory revenues up 7% driven by market share
gains in Asia Pacific, particularly China, and strong growth in
Continental European markets
- 52% growth in profits in Continental Europe following improved
market conditions, improved Investment Management performance and
the benefit of business development activity in recent years
- Further consistent growth from less transactional services -
Property Management revenue up 21%; Consultancy revenue up 4%
- Savills Investment Management revenues and profits up over 60%
in first full year of ownership of the former SEB Asset Management
business
- Continued acquisitions of complementary businesses and teams
across all regions to enhance service offering to clients
Commenting on the results, Jeremy Helsby, Group Chief Executive,
said:
"Overall, Savills delivered another record performance in 2016
despite the geopolitical distractions in some of our markets. We
benefited from the scale of our operations across the globe, which
have grown substantially over recent years, as well as a highly
resilient performance in the UK.
Our less transactional businesses, particularly Property
Management and Investment Management grew strongly while our global
Transaction Advisory business produced a solid performance despite
variable conditions in many markets.
We entered 2017 with a continuation of global macro-economic
concerns, rising bond yields, uncertainty over the impact of Brexit
negotiations in the UK and Continental Europe and a new
administration in the US.
Savills is a strong and diverse global firm and we continue to
look at opportunities to develop our business. We have started the
year well and our expectations for the full year remain
unchanged."
For further information, contact:
Savills 020 7409 8934
Jeremy Helsby, Group Chief Executive
Simon Shaw, Group Chief Financial Officer
Tulchan Communications 020 7353 4200
Peter Hewer and Jessica Reid
There will be an analyst presentation today at 9.30am at
Savills, 15 Finsbury Circus, London, EC2M 7EB.
A short video interview explaining our results, together with
the results presentation is available on www.savills.com from
9.00am GMT.
Chairman's statement
Market share growth in key markets and the resilience afforded
by the breadth of our operations, resulted in record revenue and
profits in 2016.
Results
The Group's underlying profit for the year increased by 12% to
GBP135.8m (2015: GBP121.4m), on revenue which improved by 13% to
GBP1,445.9m (2015: GBP1,283.5m). The Group's statutory profit
before tax increased by 1% to GBP99.8m (2015: GBP98.6m).
Overview
2016 was a year of significant geopolitical changes in many
parts of the world. In addition, while investors globally have
continued to increase their allocation to real estate in the search
for secure income in a low interest rate environment, they have
experienced a number of head winds including material rises in
property taxes in a number of markets. Under these circumstances it
was understandable that Savills saw an increase in the volatility
of transactional activity in many of our markets. Furthermore,
sterling's weakness against most major currencies boosted overseas
investor interest in the UK. 2016 again demonstrated the importance
of Savills strengths in the prime markets of many of the world's
key cities, where we increased our share of market activity.
Savills Investment Management substantially increased revenue and
profits both organically and through the performance of the former
SEB Asset Management AG ('SEB'), which was acquired in August 2015.
Finally, currency movements had a meaningfully positive effect on
the Group contributing approximately GBP9.0m in underlying profit
on translation.
Our Transaction Advisory revenue grew by 7%, our Consultancy
business revenue by 4% and our Property Management revenue by 21%,
including the full year effect of the 2015 acquisition of Smiths
Gore and the 2016 acquisition of GBR Phoenix Beard, both in the UK.
Against the uncertain backdrop to world markets Savills commercial
transaction business grew revenue by over 8% with strong
performances in many markets including significant growth in
Continental Europe. Our Residential businesses withstood changeable
conditions and the imposition of tax increases in a number of the
world's prime markets, with revenue growth of 3%. Finally, Savills
Investment Management Assets Under Management ('AUM') reduced to
EUR16.2bn (2015: EUR17.1bn) as a result of the distribution of
sales proceeds to fund holders in advance of the anticipated
liquidation of certain SEB mutual funds. Savills Investment
Management revenue grew by over 60% year-on-year.
The Group's underlying profit margin was stable at 9.4% (2015:
9.5%) with the increased weighting of Investment Management and
improved profitability in the UK Residential Transaction business
and Continental Europe largely offsetting a reduction in margins in
the US and in Property Management, which both included significant
levels of expenditure on business development.
Business development
Savills strategy is to be a leading advisor in the key markets
in which we operate. Our global strategy is delivered locally by
our experts on the ground with flexibility to adapt quickly to
changes in circumstances and opportunities. They are supported by
our regional and cross-border investment and occupier service
specialists. Over the last few years we have acquired a number
of complementary businesses and added teams and individual hires
to our strong core business.
During 2016, we continued to build our US presence with a number
of team hires and the acquisition of a commercial brokerage
business in North Carolina. In Asia Pacific, we made some
significant hires in Australia and Mainland China in particular. In
Continental Europe, we benefited from uncertainties facing some of
our peer group to attract a number of seasoned professionals and
teams across our network. In the UK, the acquisition of GBR Phoenix
Beard substantially increased our presence in the Midlands and
enhanced our property management and transactional capabilities
there and in London. In addition, the acquisition of Chainbow
Limited, a London-based residential block management company
further enhanced our ability to serve the growing Private Rental
Sector ('PRS') market.
Technology has become a focal area in the real estate industry
over the last few years and we constantly review emerging
opportunities to improve or grow through its application in our
business. Having maintained a watching brief for some time, in June
2016, we made our first external investment in this arena with the
acquisition of a minority stake in YOPA, a new digital hybrid
residential estate agency focused on the mass market in the UK.
Board
On 11 May, I became Chairman on the retirement of Peter Smith,
and Tim Freshwater became Senior Independent Director on the
retirement of Martin Angle. Under their watch Savills business
showed commendable growth and I would like to thank both Peter and
Martin for their enormous contributions to the business.
Dividends
An initial interim dividend of 4.4p per share (2015: 4.0p)
amounting to GBP5.9m was paid on 5 October 2016, and a final
ordinary dividend of 10.1p (2015: 8.0p) is recommended, making the
ordinary dividend 14.5p for the year (2015: 12.0p). This increase
reflects the continued growth of Savills less transactional
profits, which underpin the ordinary dividend.
In addition, a supplemental interim dividend of 14.5p (2015:
14.0p) was declared, based upon the underlying performance of our
Transaction Advisory business. Taken together, the ordinary and
supplemental dividends comprise an aggregate distribution for the
year of 29.0p per share, representing an increase of 12% on the
2015 aggregate dividend of 26.0p. The final ordinary dividend of
10.1p per ordinary share will, subject to shareholders' approval at
the Annual General Meeting on 9 May 2017, be paid alongside the
supplemental interim dividend of 14.5p per share on 15 May 2017 to
shareholders on the register at 18 April 2017.
People
I would like to express my thanks to all our staff worldwide for
their hard work, commitment and continued focus on client service,
enabling the Group to deliver this record performance in 2016.
Outlook
We have made a solid start to 2017 with a pipeline of business
carried over from last year in many markets, although the impact of
global macro-economic and political concerns on real estate markets
worldwide is uncertain. At this stage, we expect some improvement
in the US as corporate occupiers become acclimatised to the new
administration, but we retain a more cautious view in relation to
the effect of the Brexit negotiation period, particularly on
sentiment in the UK residential and commercial markets. However,
the strength of our international operations and our strong balance
sheet, position us well to take advantage of variable market
conditions. Accordingly, the Board's expectations for the year as a
whole remain unchanged.
Nicholas Ferguson CBE
Chairman
Review of operations
The strength of our key commercial market positions and the
resilience of our residential businesses drove an improved
performance for Savills in 2016.
As anticipated, we experienced quieter market conditions in
certain markets worldwide including the UK, Japan and a number of
US cities, but saw improved trading in Continental Europe,
Investment Management in both Europe and Asia, and a number of
markets in the Asia Pacific region.
Savills geographic and business diversity were key to achieving
the year's result. Our performance analysed by region was as
follows:
Underlying profit/(loss)
Revenue GBPm GBPm
-------------------------- ----------------------------
2016 2015 % growth 2016 2015 % growth
------------------- ------- ------- -------- -------- ------- ---------
UK 578.3 560.1 3 72.1 71.7 1
Asia Pacific 485.9 401.1 21 42.6 34.2 25
Continental Europe 170.6 129.8 31 13.5 8.9 52
North America 211.1 192.5 10 18.9 18.8 1
Unallocated cost n/a n/a n/a (11.3) (12.2) 7
------------------- ------- ------- -------- -------- ------- ---------
Total 1,445.9 1,283.5 13 135.8 121.4 12
------------------- ------- ------- -------- -------- ------- ---------
On a constant currency basis Group revenue grew by 6% to
GBP1,355.3m and underlying profit grew by 4% to GBP126.8m. Our Asia
Pacific business represented 34% of Group revenue (2015: 31%) and
our overseas businesses as a whole represented 60% of Group revenue
(2015: 56%). Our performance by service line is set out below:
Underlying profit/(loss)
Revenue GBPm GBPm
-------------------------- ----------------------------
2016 2015 % growth 2016 2015 % growth
------------------------ ------- ------- -------- -------- ------- ---------
Transaction Advisory 660.8 618.0 7 80.0 76.9 4
Property and Facilities
Management 472.8 390.7 21 23.6 21.1 12
Consultancy 240.3 230.3 4 25.9 24.7 5
Investment Management 72.0 44.5 62 17.6 10.9 61
Unallocated cost n/a n/a n/a (11.3) (12.2) 7
------------------------ ------- ------- -------- -------- ------- ---------
Total 1,445.9 1,283.5 13 135.8 121.4 12
------------------------ ------- ------- -------- -------- ------- ---------
Overall, our Commercial and Residential Transaction Advisory
business revenues together represented 46% of Group revenue (2015:
48%). Of this, the Residential Transaction Advisory business
represented 11% of Group revenue (2015: 12%). Our Property and
Facilities Management businesses continued to perform well, growing
overall revenue by 21% and represented 33% of Group revenue (2015:
30%). Our Consultancy businesses represented 16% of revenue (2015:
18%) where improved international performances were
counter-balanced by a reduction in particular in development
advisory work in the UK. The Investment Management business, in the
first full year of our ownership of SEB Asset Management, achieved
substantial growth in revenue and profit, to represent 5% of
revenue (2015: 3.5%).
Transaction Advisory
2016 clearly demonstrated both the importance of having a
breadth of transactional business around the world, and having
resilience in the UK derived from our strong market position in all
main real estate transactional markets/sectors. This enabled us
largely to withstand the effect of the significant reductions in UK
market activity associated with Brexit and derive our growth from
the performance of our international transaction teams across the
rest of the globe. Of particular note was the resurgence in our
Continental European business and a very strong performance in
China. The Savills Residential business also proved highly
resilient in changeable markets. This, together with the effect of
sterling weakness, resulted in the increase in revenue and profit
delivered by our Transaction Advisory business as a whole. Revenue
grew by 7% to GBP660.8m (2015: GBP618.0m) and underlying profit
increased by 4% to GBP80.0m (2015: GBP76.9m).
The effect of lower commercial transactional volumes in the UK
market and business development costs in the US slightly reduced
the underlying profit margin of the Transaction Advisory business
as a whole to 12.1% (2015: 12.4%).
UK Residential
Revenue in our UK Residential business declined by 3% to
GBP124.4m (2015: GBP127.9m). In the second hand estate agency
business, a very strong first quarter, as buyers rushed to beat the
increased Stamp Duty on second homes, was followed by low trading
volumes in advance of the Brexit Referendum at the end of June.
Then a relatively quiet, but encouraging summer gave rise to a
strong autumn selling season albeit with a slowing of transactions
in December. Our strength in the top end of the market, benefiting
from the weaker sterling, and share gains in the "Core" London
market (prices in the range GBP0.75m - GBP1.5m) helped to protect
the volume of our exchanges in London, which declined by 5% against
larger declines in the volume of market activity overall. Outside
London, we experienced a 7% increase in exchanges year-on-year. Our
average selling price in London increased slightly to GBP2.9m
(2015: GBP2.8m) primarily as a result of the weighting effect of an
increase in sales of properties over GBP20m year-on-year.
Meanwhile, outside London our average selling price remained
unchanged at GBP1.1m.
Revenue from sales of new developments continued to increase
during the year, ending up 7% on 2015 buoyed by continued strong
interest in high quality developments in both the London and
Country markets and good levels of stock availability. In our other
residential transaction businesses, there was a reduction in traded
volumes of UK farms and estates as the potential impact of Brexit
weighed on expectations of agricultural subsidies. In addition, our
Institutional residential transactions team saw a 30% decrease in
activity compared with the record 2015 performance, largely due to
lack of suitable sites for PRS investors.
During the year we opened new residential offices in Maida Vale
and Primrose Hill, focusing on the Core London market.
Overall, the UK Residential Transaction Advisory business showed
significant resilience recording a 2% decrease in underlying
profits to GBP17.5m (2015: GBP17.8m).
Asia Pacific Residential
The Residential Transaction Advisory business in Asia is focused
primarily on new development, secondary sales and leasing of prime
properties in selected markets. It excludes mixed use developments,
which are accounted for within the Commercial Transaction Advisory
business. Overall, the Asia Pacific Residential business recorded a
25% increase in revenue to GBP38.1m (2015: GBP30.5m), up 13% in
constant currency. Growth was principally driven by the performance
of our operations in Mainland China, Vietnam and Hong Kong which,
together with improved profits in Singapore, outweighed flat
activity in Australia and Taiwan and continued weakness in the mid
market segment in Singapore. In Australia the effect of some
non-recurring reorganisation costs took the business there into
loss for 2016.
The net effect of all these factors resulted in a 6% increase in
underlying profit to GBP3.3m (2015: GBP3.1m), in line with prior
year in constant currency.
Asia Pacific Commercial
The Asia Pacific Commercial business performed strongly in 2016,
driven by improved revenue and profits in Mainland China, Australia
and Singapore, which largely offset the impact of market volume
related declines in Korea and Japan. In Mainland China the
significant recruitment activity of our Investment sales team over
the previous 18 months resulted in substantial revenue growth of
over 50% from transactions concluded mainly in Southern China. In
Australia the twin effects of historical recruitment and
restructuring under new leadership resulted in a significant
increase in transactional revenue through increased market share,
particularly in Sydney, despite overall market trading volumes
declining by over 15% year-on-year. In Singapore, the recruitment
of a leading tenant representation team in 2015 and improved
investment activity, helped to double our commercial transaction
revenues year-on-year. Our investment market share in Hong Kong
remained strong at over 50%. In Japan, our transactional revenues
declined by 12% (29% in constant currency) against a backdrop of a
37% fall in overall market volumes.
Reported revenue rose by 16% to GBP129.7m (2015: GBP111.9m)
which represented a 4% increase in constant currency.
The positive effect of sterling weakness offset business
development and service expansion costs in the region, leading the
Asia Pacific Commercial Transaction Advisory business to record a
26% increase in underlying profit to GBP20.6m (2015: GBP16.3m).
This represented a 12% increase in constant currency.
UK Commercial
Revenue from UK commercial transactions decreased 13% to
GBP86.0m (2015: GBP98.8m), reflecting a much stronger performance
in the second half of the year. Overall this was a resilient
performance in the context of a significant reduction in the volume
of investment transactions in the UK market, which declined 28%
year-on-year. The weakness of sterling after the Brexit Referendum
began to catalyse international investor interest over the summer,
although there being little distress among owners, there was a
significant mismatch between demand and supply of stock. Since
then, a large majority of the stock traded, particularly in central
London has been acquired by overseas investors, particularly from
Asia Pacific and the Middle East. These dynamics strongly favoured
Savills, with our direct representation in both those markets and
across the regional markets of the UK, consequently we picked up
significant market share to lead the ranking of UK commercial
acquisition advisers for 2016. In addition the leasing markets were
generally characterised by lower levels of occupier demand as
corporates took stock of the effect of the Brexit Referendum, the
potential impacts of the Brexit negotiation, limited supply and
rising rents.
The Central London leasing market saw a 21% reduction in take up
of City offices year-on-year as occupiers elected to extend current
leases pending greater certainty. The vacancy rate in the City rose
to 5.7% against a backdrop of average rental increases of between
8% and 11% on the year. Take-up in the West End of London was down
9% on the total for 2015 at 3.9m sq ft, with new supply taking the
vacancy rate up to 3.7% from below 3% a year earlier and average
prime rents increased by circa 3%.
With less exposure to financial services tenants, our regional
office businesses saw more resilient levels of take up over the
year with overall take up circa 8% lower than 2015. The retail and
logistics sectors, of which the latter showed record take up in
2016, provided greater resilience to our regional transactional
businesses during the year.
Against the back drop of substantially declining market volumes
the strength of Savills position in the domestic market and our
international reach ensured that the underlying profit of the UK
Commercial Transaction Advisory business only decreased by 13% to
GBP14.7m (2015: GBP16.9m) with the margin stable at 17.1% (2015:
17.1%).
North America
During the year, we continued to build on our North American
tenant representation platform, Savills Studley, through both
recruitment and bolt-on acquisition. Our North American revenue
grew by 10% to GBP211.1m (2015: GBP192.5m). In constant currency
this equated to a year-on-year decline of 3% as corporate occupiers
tended to hold off substantial or complex space decisions in
advance of the US Presidential Election. The pipeline of activity
for 2017 shows a number of sizeable transactions deferred from 2016
which are expected to close in the current year.
We continued to grow our occupier services platform with the
North American business contributing significantly to our global
occupier services business, referring significant client projects
to many parts of the Savills Asia Pacific, UK and European
network.
In addition to occupier services, a number of cities such as,
New York, Chicago, and Washington enjoyed strong performances
during the year and offset the continued reduction in oil
industry-related activity in our Texas offices.
Our North American business posted a 1% increase in underlying
profit for the year to GBP18.9m (2015: GBP18.8m), an 11% decline in
constant currency, primarily due to recruitment and business
development costs incurred during the year.
Continental Europe
The Continental European Commercial Transaction Advisory
business saw revenue increase by 27% to GBP71.5m (2015: GBP56.4m).
In constant currency the increase was 14%. As the strength of
transaction markets in Ireland over the last three years
dissipated, Germany, France and the Netherlands all saw substantial
increases in revenue from both investment and leasing/tenant
representation. Newer teams in Italy and Poland also contributed
significant performances.
During the year we continued to build on our Continental
European platform with recruitment into investment, leasing and
tenant representation services in Italy, the Netherlands, Poland
and Belgium.
Despite these additional costs, the Continental European
Transaction Advisory business recorded an increase in underlying
profit of 25% to GBP5.0m (2015: GBP4.0m), up 3% in constant
currency.
Property and Facilities Management
Our Property and Facilities Management businesses continued to
perform well, growing revenue by 21% (13% in constant currency) to
GBP472.8m (2015: GBP390.7m). Underlying profit increased by 12% to
GBP23.6m (2015: GBP21.1m), up 5% in constant currency.
Asia Pacific
The Asia Pacific region grew revenue by 20% (8% in constant
currency) to GBP273.8m (2015: GBP227.7m). The Property and
Facilities Management business is a significant strength in the
region, representing 57% of Savills Asia Pacific revenue and
complementing our Transaction Advisory businesses in the region.
The total square footage under management in the region was down
20% to approximately 1.4bn sq ft (2015: approximately 1.8bn sq ft),
primarily due to developers taking the management of stalled
development sites in-house. Revenue growth in Hong Kong, Japan and
Korea offset marginal declines in Australia, Singapore, Thailand
and Vietnam. In Hong Kong, which represented approximately 55% of
Asia Pacific Property and Facilities Management revenue, the
business grew revenue by 8% in local currency. Overall the
underlying profit of the Asia Pacific Property Management business
grew 15% (4% in constant currency) to GBP14.5m (2015:
GBP12.6m).
UK
Overall, our UK Property Management teams, comprising
Commercial, Residential and Rural, grew revenue by 19% to GBP158.9m
(9% excluding acquisitions) (2015: GBP133.9m) as a result of the
full year effect of the acquisition of Smiths Gore in May 2015 and
the acquisition of GBR Phoenix Beard in August 2016, a leading firm
in the Midlands. In addition, the Property Management business won
some significant new contracts across the country. The Residential
management business and the UK Commercial business together grew
area under management by 32% to approximately 289m sq ft (2015:
218m sq ft). Our Residential Property Management businesses,
including Lettings, increased revenue by 6%. The effect of
expansion in our Rural and Energy Projects business and the costs
of integrating the two acquisitions temporarily affected underlying
profit, which grew 4% to GBP11.3m (2015: GBP10.9m).
Continental Europe
In Continental Europe revenue grew by 38% (23% in constant
currency) to GBP40.1m (2015: GBP29.1m) with growth particularly in
France, the Netherlands, Spain and Sweden. By the year end the
total area under management had increased by 16% to 55.2m sq ft.
Improvements in profitability in most locations were largely offset
by expansion costs of Project Management in France and the
Netherlands and business development costs in France and Poland.
The net effect of these factors was a marginal improvement in the
underlying loss for the year to GBP2.2m (2015: loss GBP2.4m).
Consultancy
Global Consultancy revenue increased by 4% to GBP240.3m (2015:
GBP230.3m), 2% in constant currency and underlying profit grew by
5% to GBP25.9m (2015: GBP24.7m), 3% in constant currency.
UK
Consultancy revenue in the UK was broadly flat at GBP183.1m
(2015: GBP182.8m). Strong performances in Hospitality and Leisure,
Building and Project Consultancy, Planning and Professional and
Finance Services were offset by reduced activity in Development,
Rural and Energy Consultancy, each of which were affected by the
uncertainty before and after the Brexit Referendum. Overall
underlying profit from the UK Consultancy business increased by 2%
to GBP22.2m (2015: GBP21.8m).
Asia Pacific
Revenue in the Asia Pacific Consultancy business increased by
22% to GBP37.9m (2015: GBP31.0m), 11% in constant currency.
Singapore and Australia both grew valuation consultancy revenue
significantly as a result of team recruitment in late 2015, with
Vietnam, Korea and Taiwan contributing further growth. In Mainland
China and Hong Kong, consultancy revenues were stable year-on-year.
Underlying profit increased by 9% to GBP2.4m (2015: GBP2.2m) as the
cost of recruitment increased and additional professional indemnity
costs were incurred in Australia.
Continental Europe
Our Continental European Consultancy business, which principally
comprises valuation and underwriting advisory services, saw revenue
increase by 17% (5% in constant currency) to GBP19.3m (2015:
GBP16.5m). There were stronger performances in Germany, France,
Spain, Poland and the Netherlands in particular. Profitability was
improved in all locations as the effect of uncovered recruitment
costs from last year diminished. This led to an increase in
underlying profit for the year of 86% (46% in constant currency) to
GBP1.3m (2015: GBP0.7m).
Investment Management
2016 was a record year for Savills Investment Management which
increased revenue by 62% (51% in constant currency) to GBP72.0m
(2015: GBP44.5m). Assets Under Management ('AUM') decreased to
EUR16.2bn (2015: EUR17.1bn), as the effect of liquidation
distributions to unit holders in the former SEB German Open Ended
Funds outweighed the EUR1.7bn of new capital raised in the year.
During the year, transactions of approximately EUR5.1bn were
executed on behalf of fund investors, equally divided between
acquisitions and disposals. The SEB Asset Management business which
was acquired in August 2015 was renamed Savills Fund Management
during the year and substantially integrated with our existing
business, but largely remained focused on the orderly dissolution
of four German Open Ended Funds, which were in regulatory
controlled wind down at the time of the acquisition. These funds
achieved a larger volume of disposals of European, Asian and US
assets during the year than we originally anticipated. This in turn
contributed to the 61% improvement in underlying profit to GBP17.6m
(2015: GBP10.9m), 47% in constant currency.
Summary
Overall in 2016, Savills delivered a record performance across
the Group despite the geopolitical distractions in some of our
markets. Growth in our overseas and Investment Management
businesses together with a highly resilient performance in the UK
were key to this result.
Our non-transactional operations and in particular our
Investment Management business grew strongly while our global
Transaction Advisory business produced a solid performance in
variable conditions in many markets.
Financial review
Underlying profit margin
Underlying profit margin was stable at 9.4% (2015: 9.5%) with
marginal reductions in the UK and North America, the latter due
primarily to the effect of recruitment costs in advance of the
delivery of revenue. These were largely offset by improvement in
Continental Europe and Asia Pacific.
Taxation
The tax charge for the year reduced to GBP32.1m (2015: GBP33.7m)
reflecting an effective tax rate on reported profits of 32.2%
(2015: 34.2%). The improvement on the 2015 reported effective rate
reflects a prior year tax credit adjustment. In both years, the
Group's effective reported tax rate is higher than the UK effective
rate of tax of 20.0% (2015: 20.25%), reflecting the geographic mix
of profits and the effect of non-deductible acquisition costs. Of
these, the most significant is the charge for employment-linked
deferred consideration in respect of the 2014 acquisition of
Studley Inc.
The underlying effective tax rate at 26.1% (2015: 28.3%), was
lower, primarily because of the prior year tax credit
adjustment.
Restructuring and acquisition-related costs
During the year the Group recognised a total of GBP34.5m in
restructuring and acquisition-related costs (2015: GBP24.9m). These
comprised an aggregate restructuring charge of GBP5.8m primarily in
relation to the integration of the Smiths Gore and SEB acquisitions
(2015: GBP1.6m) and acquisition-related costs of GBP28.7m (2015:
GBP23.3m). These costs consist of GBP1.5m (2015: GBP2.8m) of
transaction related costs and GBP3.9m in respect of Savills
Investment Management's 2014 acquisition of Merchant Capital
(Japan). In addition, there was a GBP23.3m (2015: GBP20.5m) charge
for future consideration payments which are contingent on the
continuity of recipients' employment in the future. This charge
primarily relates to the 2014 acquisition of Studley.
These charges have been excluded from the calculation of
underlying profit in line with Group policy.
Earnings per share
As a result of the restructuring and acquisition costs referred
to above, basic earnings per share increased 4% to 48.8p (2015:
47.0p). Adjusted on a consistent basis for restructuring,
acquisition-related costs, impairment charges, profits and losses
on disposals, certain share-based payment adjustments and
amortisation of acquired intangible assets (excluding software),
underlying basic earnings per share increased by 15% to 72.5p
(2015: 63.2p).
Fully diluted earnings per share increased by 3% to 47.7p (2015:
46.4p). The underlying fully diluted earnings per share increased
by 14% to 71.0p (2015: 62.3p).
Cash resources, borrowings and liquidity
Year end gross cash and cash equivalents increased 23% to
GBP223.6m (2015: GBP182.4m). This principally reflected improved
profits during the period and currency gains on cash balances held
in non sterling currencies.
Gross borrowings at year end increased to GBP35.8m (2015:
GBP31.4m). These principally include GBP34.0m drawn under the
Group's multi-currency revolving credit facility ('RCF').
Cash is typically retained in a number of subsidiaries in order
to meet the requirements of commercial contracts or capital
adequacy. In addition, cash in certain territories is retained to
meet future growth requirements where to remit it would result in
the Group suffering withholding taxes.
The Group's net inflow of cash is greater in the second half of
the year. This is as a result of seasonality in trading and the
major cash outflows associated with dividends, profit related
remuneration payments and related payroll taxes in the first half.
The Group cash inflow for the year from operating activities was
GBP93.3m (2015: GBP122.0m). As much of the Group's revenue is
transactional in nature, the Board's strategy is to maintain low
levels of gearing, but retain sufficient credit facilities to
enable it to meet cash requirements during the year and finance the
majority of business development opportunities as they arise. The
Group has a RCF of GBP250m, with an accordion facility of a further
GBP50m, which expires on 15 December 2020.
Capital and shareholders' interests
During the year no new shares (2015: 0.7m) were issued to
participants under the Performance Share Plan. 1.9m (2015: 1.9m)
new shares were issued in the second of three instalments of
deferred consideration for the acquisition of Studley. 1.9m shares
remain to be issued on 30 May 2017. In accordance with IFRS, all
EPS measures for the year include the dilutive effect of this
future obligation. The total number of ordinary shares in issue at
31 December 2016 was 139.8m (2015: 137.9m).
Savills Pension Scheme
The funding level of the Savills Pension Scheme, which is closed
to future service-based accrual, deteriorated during the year as a
result of a reduction in long-term interest rates on the rate at
which liabilities are discounted. The plan deficit at the year end
amounted to GBP40.8m (2015: GBP15.8m).
Net assets
Net assets as at 31 December 2016 were GBP407.0m (2015:
GBP365.0m). This movement reflected increased tangible assets,
receivables and cash balances derived from the Group's trading
performance, the effect of acquisitions and the impact of sterling
weakness against all major currencies.
Foreign currency
The Group operates internationally and is exposed to foreign
exchange risks. As both revenue and costs in each location are
generally denominated in the same currency, transaction related
risks are relatively low and generally associated with intra group
activities. Consequently, the overriding foreign currency risk
relates to the translation of overseas profits and losses into
sterling on consolidation. The Group does not actively seek to
hedge risks arising from foreign currency translations due to their
non-cash nature. In a period when sterling weakened against all
major currencies, the net impact of foreign exchange rate movements
was material representing a GBP90.6m increase in revenue (2015:
GBP12.5m increase) and an increase of GBP9.0m in underlying profit
(2015: GBP1.3m increase).
Savills plc
Consolidated income statement
for the year ended 31 December 2016
2016 2015
Note GBPm GBPm
------------------------------------------ ----- -------- --------
Revenue 2 1,445.9 1,283.5
------------------------------------------ ----- -------- --------
Less:
Employee benefits expense (953.5) (858.1)
Depreciation (12.7) (11.2)
Amortisation of intangible assets (6.9) (5.7)
Other operating expenses (382.7) (321.3)
Other operating income 2.5 1.1
Profit on disposal of joint ventures
and associates 0.5 2.9
Loss on disposal of available-for sale
investments (0.4) -
------------------------------------------ -----
Operating profit 92.7 91.2
------------------------------------------ ----- -------- --------
Finance income 1.6 1.8
Finance costs (2.4) (1.3)
------------------------------------------ ----- -------- --------
(0.8) 0.5
Share of post-tax profit from joint ventures
and associates 7.9 6.9
------------------------------------------------- -------- --------
Profit before income tax 99.8 98.6
Comprising:
- underlying profit before tax 2, 3 135.8 121.4
- restructuring and acquisition-related
costs 3 (34.5) (24.9)
- other underlying adjustments 3 (1.5) 2.1
========================================== ===== ======== ========
99.8 98.6
========================================== ===== ======== ========
Income tax expense 4 (32.1) (33.7)
Profit for the year 67.7 64.9
------------------------------------------ ----- -------- --------
Attributable to:
Owners of the parent 66.9 64.3
Non-controlling interests 0.8 0.6
------------------------------------------ ----- -------- --------
67.7 64.9
------------------------------------------ ----- -------- --------
Earnings per share
Basic earnings per share 6(a) 48.8p 47.0p
Diluted earnings per share 6(a) 47.7p 46.4p
Underlying earnings per share
Basic earnings per share 6(b) 72.5p 63.2p
Diluted earnings per share 6(b) 71.0p 62.3p
Savills plc
Consolidated statement of comprehensive income
for the year ended 31 December 2016
2016 2015
GBPm GBPm
--------------------------------------------------- ------- ------
Profit for the year 67.7 64.9
Other comprehensive (loss)/income
Items that will not be reclassified to profit
or loss:
Remeasurement of defined benefit pension scheme
obligation (35.2) (3.5)
Tax on items that will not be reclassified 7.2 0.7
--------------------------------------------------- ------- ------
Total items that will not be reclassified
to profit or loss (28.0) (2.8)
Items that may be reclassified subsequently
to profit or loss:
Fair value (loss)/gain on available-for-sale
investments (0.6) 0.4
Currency translation differences 52.6 4.2
Tax on items that may be reclassified (0.7) 2.5
--------------------------------------------------- ------- ------
Total items that may be reclassified subsequently
to profit or loss 51.3 7.1
Other comprehensive income for the year, net
of tax 23.3 4.3
--------------------------------------------------- ------- ------
Total comprehensive income for the year 91.0 69.2
--------------------------------------------------- ------- ------
Total comprehensive income attributable to:
Owners of the parent 90.0 68.6
Non-controlling interests 1.0 0.6
--------------------------------------------------- ------- ------
91.0 69.2
--------------------------------------------------- ------- ------
Savills plc
Consolidated statement of financial position
at 31 December 2016
2016 2015
Note GBPm GBPm
----------------------------------------------- ----- ------ ------
Assets: Non-current assets
Property, plant and equipment 59.7 57.0
Goodwill 309.8 269.9
Intangible assets 29.2 25.4
Investments in joint ventures and associates 28.9 26.7
Deferred income tax assets 36.5 33.4
Available-for-sale investments 20.8 13.2
Retirement benefits - 1.3
Derivative financial instruments 0.1 -
Non-current receivables 9.6 4.6
494.6 431.5
----------------------------------------------- ----- ------ ------
Assets: Current assets
Work in progress 5.3 5.7
Trade and other receivables 419.4 374.2
Current income tax receivable 4.3 1.2
Derivative financial instruments 0.2 0.1
Cash and cash equivalents 223.6 182.4
652.8 563.6
----------------------------------------------- ----- ------ ------
Liabilities: Current liabilities
Borrowings 10 35.8 31.4
Derivative financial instruments 0.3 0.2
Trade and other payables 550.2 455.7
Current income tax liabilities 17.5 12.0
Employee benefit obligations 9.2 7.3
Provisions for other liabilities and
charges 10.2 8.8
623.2 515.4
----------------------------------------------- ----- ------ ------
Net current assets 29.6 48.2
Total assets less current liabilities 524.2 479.7
Liabilities: Non-current liabilities
Trade and other payables 44.9 69.0
Retirement and employee benefit obligations 57.0 27.3
Provisions for other liabilities and
charges 11.7 15.7
Deferred income tax liabilities 3.6 2.7
117.2 114.7
----------------------------------------------- ----- ------ ------
Net assets 407.0 365.0
----------------------------------------------- ----- ------ ------
Equity: Capital and reserves attributable to owners of the
parent
Share capital 3.5 3.4
Share premium 91.1 91.1
Shares to be issued 11.3 22.9
Other reserves 103.9 39.1
Retained earnings 195.8 207.8
405.6 364.3
Non-controlling interests 1.4 0.7
----------------------------------------------- -----
Total equity 407.0 365.0
----------------------------------------------- ----- ------ ------
Savills plc
Consolidated statement of changes in equity for the year ended
31 December 2016
Attributable to owners of the parent
------------------------- --------------------------------------------------------------- --------------------------
Shares
Share Share to be Other Retained Non-controlling Total
capital premium issued reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- --------- --------- -------- ---------- ---------- ------- ---------------- --------
Balance at 1 January
2016 3.4 91.1 22.9 39.1 207.8 364.3 0.7 365.0
------------------------- --------- --------- -------- ---------- ---------- ------- ---------------- --------
Profit for the year - - - - 66.9 66.9 0.8 67.7
Other comprehensive
income/(loss):
Remeasurement of
defined
benefit pension scheme
obligation - - - - (35.2) (35.2) - (35.2)
Fair value loss on
available-for-sale
investments - - - (0.6) - (0.6) - (0.6)
Tax on items directly
taken to reserves - - - - 6.5 6.5 - 6.5
Currency translation
differences - - - 52.4 - 52.4 0.2 52.6
-------------------------
Total comprehensive
income
for the year - - - 51.8 38.2 90.0 1.0 91.0
------------------------- --------- --------- -------- ---------- ---------- ------- ---------------- --------
Transactions with
owners:
Employee share option
scheme:
- Value of services
provided - - - - 13.4 13.4 - 13.4
Purchase of treasury
shares - - - - (23.2) (23.2) - (23.2)
Shares issued 0.1 - (11.6) 11.6 - 0.1 - 0.1
Dividends - - - - (35.4) (35.4) (0.9) (36.3)
Transfer between
reserves - - - 1.4 (1.4) - - -
Transactions with
non-controlling
interests - - - - (3.6) (3.6) 0.6 (3.0)
------------------------- --------- --------- -------- ---------- ---------- ------- ---------------- --------
Balance at 31 December
2016 3.5 91.1 11.3 103.9 195.8 405.6 1.4 407.0
------------------------- --------- --------- -------- ---------- ---------- ------- ---------------- --------
Attributable to owners of the parent
------------------------- --------------------------------------------------------------- --------------------------
Shares
Share Share to be Other Retained Non-controlling Total
capital premium issued reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- --------- --------- -------- ---------- ---------- ------- ---------------- --------
Balance at 1 January
2015 3.4 90.1 34.9 22.5 178.6 329.5 0.8 330.3
------------------------- --------- --------- -------- ---------- ---------- ------- ---------------- --------
Profit for the year - - - - 64.3 64.3 0.6 64.9
Other comprehensive
income/(loss):
Remeasurement of
defined
benefit pension scheme
obligation - - - - (3.5) (3.5) - (3.5)
Fair value gain on
available-for-sale
investments - - - 0.4 - 0.4 - 0.4
Tax on items directly
taken to reserves - - - - 3.2 3.2 - 3.2
Currency translation
differences - - - 4.2 - 4.2 - 4.2
-------------------------
Total comprehensive
income
for the year - - - 4.6 64.0 68.6 0.6 69.2
------------------------- --------- --------- -------- ---------- ---------- ------- ---------------- --------
Transactions with
owners:
Employee share option
scheme:
- Value of services
provided - - - - 11.1 11.1 - 11.1
Purchase of treasury
shares - - - - (14.9) (14.9) - (14.9)
Shares issued - 1.0 (12.0) 12.0 - 1.0 - 1.0
Dividends - - - - (30.3) (30.3) (0.4) (30.7)
Transactions with
non-controlling
interests - - - - (0.7) (0.7) (0.3) (1.0)
------------------------- --------- --------- -------- ---------- ---------- ------- ---------------- --------
Balance at 31 December
2015 3.4 91.1 22.9 39.1 207.8 364.3 0.7 365.0
------------------------- --------- --------- -------- ---------- ---------- ------- ---------------- --------
Savills plc
Consolidated statement of cash flows
for the year ended 31 December 2016
2016 2015
Note GBPm GBPm
---------------------------------------------------- ----- -------- --------
Cash flows from operating activities
Cash generated from operations 7 117.8 140.5
Interest received 1.6 2.0
Interest paid (1.3) (0.6)
Income tax paid (24.8) (19.9)
Net cash generated from operating activities 93.3 122.0
---------------------------------------------------- ----- -------- --------
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment 0.2 0.2
Proceeds from sale of available-for-sale
investments 5.1 -
Proceeds from sale of interests in joint
ventures and associates 2.0 5.3
Dividends received from joint ventures and
associates 7.5 4.8
Repayment of loans by joint ventures 1.2 -
Acquisition of subsidiaries, net of net borrowings
acquired 9 (4.4) (24.4)
Deferred consideration paid in relation to
current and prior year acquisitions (6.8) (40.3)
Purchase of property, plant and equipment (12.8) (20.0)
Purchase of intangible assets (4.7) (1.7)
Purchase of investment in joint ventures,
associates and available-for-sale investments (12.6) (6.0)
Net cash used in investing activities (25.3) (82.1)
---------------------------------------------------- ----- -------- --------
Cash flows from financing activities
Proceeds from issue of share capital 0.1 1.0
Proceeds from borrowings 144.6 139.3
Repayments of borrowings (141.2) (112.0)
Purchase of own shares for Employee Benefit
Trust (23.2) (14.9)
Purchase of non-controlling interests 8 (3.3) (1.0)
Proceeds from disposal of non-controlling
interests 8 0.3 -
Dividends paid 5 (36.3) (30.7)
Net cash used in financing activities (59.0) (18.3)
---------------------------------------------------- ----- -------- --------
Net increase in cash, cash equivalents and
bank overdrafts 9.0 21.6
Cash, cash equivalents and bank overdrafts
at beginning of year 182.2 158.1
Effect of exchange rate fluctuations on cash
held 32.2 2.5
---------------------------------------------------- ----- -------- --------
Cash, cash equivalents and bank overdrafts
at end of year 223.4 182.2
---------------------------------------------------- ----- -------- --------
NOTES
1. Basis of preparation
The results for the year ended 31 December 2016 have been
extracted from the audited financial statements. The financial
statements have been prepared in accordance with International
Financial Reporting Standards (IFRSs) and IFRIC interpretations as
adopted by the European Union and with those parts of the Companies
Act 2006 applicable to companies reporting under IFRS.
The financial information in this statement does not constitute
statutory accounts within the meaning of s434 of the Companies Act
2006. The statutory accounts for the year ended 31 December 2016,
on which the auditors have given an unqualified audit report, have
not yet been filed with the Registrar of Companies.
The preparation of financial statements in conformity with IFRS
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual results ultimately may differ from those
estimates.
2. Segment analysis
Property
Transaction and Facilities Investment
Advisory Consultancy Management Management Other Total
Year ended to 31 December
2016 GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Revenue
United Kingdom
- commercial 86.0 145.3 130.4 25.9 - 387.6
- residential 124.4 37.8 28.5 - - 190.7
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total United Kingdom 210.4 183.1 158.9 25.9 - 578.3
Continental Europe 71.5 19.3 40.1 39.7 - 170.6
Asia Pacific
- commercial 129.7 37.9 273.8 6.4 - 447.8
- residential 38.1 - - - - 38.1
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total Asia Pacific 167.8 37.9 273.8 6.4 - 485.9
North America 211.1 - - - - 211.1
----------------------------
Revenue 660.8 240.3 472.8 72.0 - 1,445.9
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Underlying profit/(loss)
before tax
United Kingdom
- commercial 14.7 16.3 8.7 6.4 (11.3) 34.8
- residential 17.5 5.9 2.6 - - 26.0
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total United Kingdom 32.2 22.2 11.3 6.4 (11.3) 60.8
Continental Europe 5.0 1.3 (2.2) 9.4 - 13.5
Asia Pacific
- commercial 20.6 2.4 14.5 1.8 - 39.3
- residential 3.3 - - - - 3.3
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total Asia Pacific 23.9 2.4 14.5 1.8 - 42.6
North America 18.9 - - - - 18.9
----------------------------
Underlying profit/(loss)
before tax 80.0 25.9 23.6 17.6 (11.3) 135.8
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Property
Transaction and Facilities Investment
Advisory Consultancy Management Management Other Total
Year ended to 31 December
2015 GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Revenue
United Kingdom
- commercial 98.8 138.3 107.1 16.7 - 360.9
- residential 127.9 44.5 26.8 - - 199.2
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total United Kingdom 226.7 182.8 133.9 16.7 - 560.1
Continental Europe 56.4 16.5 29.1 27.8 - 129.8
Asia Pacific
- commercial 111.9 31.0 227.7 - - 370.6
- residential 30.5 - - - - 30.5
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total Asia Pacific 142.4 31.0 227.7 - - 401.1
North America 192.5 - - - - 192.5
----------------------------
Revenue 618.0 230.3 390.7 44.5 - 1,283.5
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Underlying profit/(loss)
before tax
United Kingdom
- commercial 16.9 15.4 9.2 4.3 (12.2) 33.6
- residential 17.8 6.4 1.7 - 25.9
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total United Kingdom 34.7 21.8 10.9 4.3 (12.2) 59.5
Continental Europe 4.0 0.7 (2.4) 6.6 - 8.9
Asia Pacific
- commercial 16.3 2.2 12.6 - - 31.1
- residential 3.1 - - - - 3.1
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total Asia Pacific 19.4 2.2 12.6 - - 34.2
North America 18.8 - - - - 18.8
----------------------------
Underlying profit/(loss)
before tax 76.9 24.7 21.1 10.9 (12.2) 121.4
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Operating segments reflect internal management reporting to the
Group's chief operating decision maker, defined as the Group
Executive Board (GEB). The GEB assesses the performance of
operating segments based on a measure of underlying profit before
tax which adjusts reported pre-tax profit by profit/(loss) on
disposals, share-based payment adjustment, significant
restructuring costs, acquisition-related costs, amortisation of
acquired intangible assets (excluding software) and
impairments.
The Other segment includes costs and other expenses at holding
company and subsidiary levels, which are not directly attributable
to the operating activities of the Group's business segments.
A reconciliation of underlying profit before tax to reported
profit before tax is provided in Note 3.
3. Underlying profit before tax
The Directors seek to present a measure of underlying
performance which is not impacted by exceptional items or items
considered non-operational in nature. This measure is described as
'underlying' and is used by management to assess and monitor
performance.
2016 2015
GBPm GBPm
========================================================== ===== =====
Reported profit before tax 99.8 98.6
Adjustments:
Amortisation of acquired intangible assets (excluding
software) 4.0 3.6
Share-based payment adjustment (2.4) (2.8)
Net profit on disposal of available-for-sale investments,
joint ventures and associates (0.1) (2.9)
Restructuring costs 5.8 1.6
Acquisition-related costs 28.7 23.3
========================================================== ===== =====
Underlying profit before tax 135.8 121.4
---------------------------------------------------------- ----- -----
The adjustment for share-based payments relates to the impact of
the accounting standard for share-based compensation. The annual
bonus is paid in a mixture of cash and deferred shares and the
proportions can vary from one year to another. Under IFRS the
deferred share element is amortised to the income statement over
the vesting period whilst the cash element is expensed in the year.
The adjustment above addresses this by adding to or deducting from
profit the difference between the IFRS 2 charge in relation to
outstanding bonus-related share awards and the estimated value of
the current year bonus pool to be awarded in deferred shares. This
adjustment is made in order to better match the underlying staff
cost in the year with the revenue recognised in the same
period.
Net profit on disposal includes GBP0.5m recognised in relation
to the disposal of the Group's joint venture interest in Savills
Solar Ltd and a loss on disposal of GBP0.4m in relation to the
disposal of the Group's available-for-sale investment, Cordea
Savills Italian Opportunities Fund 2.
Acquisition-related costs include GBP18.4m of provisions for the
future payments in relation to the acquisition of Studley, Inc.
which are expensed through the income statement to reflect the
requirement for the recipients to remain actively engaged in the
business at the payment date. Acquisition-related costs also
include GBP3.9m for payments in relation to Savills Investment
Management's acquisition of Merchant Capital (Japan) in May 2014,
and GBP1.5m of transaction related costs and GBP4.9m of provisions
for future payments relating to acquisitions in the United Kingdom
(primarily GBR Phoenix Beard and Smiths Gore), North America and
Continental Europe.
Restructuring costs includes costs of integration activities in
relation to significant business acquisitions (primarily Smiths
Gore in the United Kingdom and Savills Investment Management's
acquisition of SEB).
4. Income tax expense
The income tax expense has been calculated on the basis of the
underlying rate in each jurisdiction adjusted for any disallowable
charges.
2016 2015
GBPm GBPm
-------------------- ------ ------
United Kingdom
- Current tax 14.1 13.2
- Deferred tax (3.3) (1.4)
Foreign tax
- Current tax 16.1 14.7
- Deferred tax 5.2 7.2
-------------------- ------ ------
Income tax expense 32.1 33.7
-------------------- ------ ------
5. Dividends
2016 2015
GBPm GBPm
------------------------------------------------- ----- -----
Amounts recognised as distribution to equity
holders in the year:
Ordinary final dividend for 2015 of 8.0p per
share (2014: 7.25p) 10.7 9.4
Supplemental interim dividend for 2015 of 14.0p
per share (2014: 12.0p) 18.8 15.6
Interim dividend of 4.4p per share (2015: 4.0p) 5.9 5.3
------------------------------------------------- ----- -----
35.4 30.3
------------------------------------------------- ----- -----
In addition, the Group paid GBP0.9m (2015: GBP0.4m) of dividends
to non-controlling interests.
The Board recommends a final dividend of 10.1p (net) per
ordinary share (amounting to GBP13.5m) is paid, alongside the
supplemental interim dividend of 14.5p per ordinary share
(amounting to GBP19.5m), to be paid on 15 May 2017 to shareholders
on the register at 18 April 2017. These financial statements do not
reflect this dividend payable.
The total paid and recommended ordinary and supplemental
dividends for the 2016 financial year comprises an aggregate
distribution of 29.0p per ordinary share (2015: 26.0p per ordinary
share).
6(a). Basic and diluted earnings per share
2016 2016 2016 2015 2015 2015
Earnings Shares EPS Earnings Shares EPS
Year to 31 December GBPm million pence GBPm million pence
-------------------------------------- --------- -------- ------ --------- -------- ------
Basic earnings per share 66.9 137.2 48.8 64.3 136.8 47.0
Effect of additional shares issuable
under option - 3.0 (1.1) - 1.9 (0.6)
--------------------------------------
Diluted earnings per share 66.9 140.2 47.7 64.3 138.7 46.4
-------------------------------------- --------- -------- ------ --------- -------- ------
6(b). Underlying basic and diluted earnings per share
2016 2016 2016 2015 2015 2015
Earnings Shares EPS Earnings Shares EPS
Year to 31 December GBPm million pence GBPm million Pence
------------------------------------------------ --------- -------- ------ --------- -------- ------
Basic earnings per share 66.9 137.2 48.8 64.3 136.8 47.0
- Amortisation of acquired intangible
assets (excluding software) after
tax 2.2 - 1.6 2.0 - 1.5
- Share-based payment adjustment
after tax (1.8) - (1.3) (2.2) - (1.6)
- Net profit on disposal of available-for-sale
investments joint ventures and
associates after tax - - - (1.9) - (1.4)
- Restructuring costs after tax 4.7 - 3.4 1.5 - 1.1
- Acquisition related costs after
tax 27.5 - 20.0 22.7 - 16.6
Underlying basic earnings per
share 99.5 137.2 72.5 86.4 136.8 63.2
------------------------------------------------ --------- -------- ------ --------- -------- ------
Effect of additional shares issuable
under option - 3.0 (1.5) - 1.9 (0.9)
------------------------------------------------
Underlying diluted earnings per
share 99.5 140.2 71.0 86.4 138.7 62.3
------------------------------------------------ --------- -------- ------ --------- -------- ------
7. Cash generated from operations
2016 2015
GBPm GBPm
-------------------------------------------------- ------- -------
Profit for the year 67.7 64.9
Adjustments for:
Income tax (Note 4) 32.1 33.7
Depreciation 12.7 1.2
Amortisation of intangible assets 6.9 5.7
Net profit on disposal of available-for-sale
investments, joint ventures and associates (0.1) (2.9)
Net finance cost/(income) 0.8 (0.5)
Share of post-tax profit from joint ventures
and associates (7.9) (6.9)
Decrease in employee and retirement obligations (6.3) (5.5)
Exchange movements on operating activities 2.4 (0.8)
Decrease in provisions (3.0) (2.8)
Charge for share-based compensation 13.4 11.1
Operating cash flows before movements in working
capital 118.7 107.2
-------------------------------------------------- ------- -------
Decrease/(increase) in work in progress 0.3 (0.9)
Increase in trade and other receivables (17.1) (47.3)
Increase in trade and other payables 15.9 81.5
-------------------------------------------------- ------- -------
Cash generated from operations 117.8 140.5
-------------------------------------------------- ------- -------
8. Transactions with non-controlling interests
During the year, the Group undertook the following transactions
with non-controlling interests:
(a) Acquisitions of additional interest in subsidiaries
Under IFRS 10, transactions with non-controlling interests must
be accounted for as equity transactions, therefore no goodwill has
been recognised. Acquisition costs related to these transactions
were not significant.
In August 2016, the Group acquired the remaining 45% of the
shares in Savills Property Management Pte Ltd (Singapore), for
consideration of GBP2.8m. This takes the Group's shareholding to
100%. The carrying amount of the subsidiary's net assets on the
date of acquisition was GBP0.4m. The Group recognised a decrease in
non-controlling interest of GBP0.2m. The amount charged to retained
earnings in respect of the transaction was GBP2.6m.
In September 2016, the Group acquired the remaining 2% of the
shares in Savills (Vietnam) Ltd for consideration of GBP0.5m. This
takes the Group's shareholding to 100%. The carrying amount of the
subsidiary's net assets on the date of acquisition was GBP1.3m. The
Group recognised a decrease in non-controlling interest of GBPnil.
The amount charged to retained earnings in respect of the
transaction was GBP0.5m.
(b) Disposal of interests in subsidiaries
In September 2016, the Group disposed of 15% of the shares in
Savills Investment Management SGR S.p.A for cash consideration of
GBP0.3m. The carrying amount of the subsidiary's net assets on the
date of disposal was GBP3.6m. The Group recognised an increase in
non-controlling interest of GBP0.5m. The amount charged to retained
earnings in respect of this transaction was GBP0.2m.
(c) Other transactions with non-controlling interests
The Group acquired the remaining 0.72% of the shares in Savills
(Aust) Holdings Pty Ltd taking the Group's shareholding to 100%,
GBP0.3m has been charged to retained earnings with a corresponding
increase in non-controlling interest to reflect the 100%
shareholding.
2016
GBPm
===================================================================== ======
Net carrying amount of non-controlling interests acquired/(disposed) (0.3)
Net consideration (paid)/received to/from non-controlling
interests (3.0)
===================================================================== ======
Net excess of consideration (paid)/received recognised
in parent's equity (3.3)
--------------------------------------------------------------------- ------
Other transactions with non-controlling interests (0.3)
--------------------------------------------------------------------- ------
Total charge to parent's equity in relation to transactions
with non-controlling interests in the year (3.6)
--------------------------------------------------------------------- ------
9. Acquisition of subsidiaries
The fair values of the assets acquired and liabilities assumed
are provisional and will be finalised within 12 months of the
acquisition date. These are summarised below:
Provisional fair value
to the Group
----------------------------
GBR Phoenix
Beard Other Total
GBPm GBPm GBPm
------------------------------------------------------- ------------ ------ ------
Property, plant and equipment 0.1 - 0.1
Intangible assets 3.2 0.4 3.6
Current assets: Trade and other receivables 1.2 - 1.2
Cash and cash equivalents 0.4 - 0.4
------------------------------------------------------- ------------ ------ ------
Total assets 4.9 0.4 5.3
Current liabilities: Trade and other
payables 2.2 0.1 2.3
Current income tax liability 0.1 - 0.1
Borrowings 0.7 - 0.7
Deferred income tax liabilities 0.6 - 0.6
------------------------------------------------------- ------------ ------ ------
Net assets acquired 1.3 0.3 1.6
Goodwill 2.5 1.9 4.4
Purchase consideration 3.8 2.2 6.0
------------------------------------------------------- ------------ ------ ------
Consideration satisfied by:
Net cash paid 3.8 0.3 4.1
Deferred consideration owing at reporting
date - 1.9 1.9
3.8 2.2 6.0
------------------------------------------------------- ------------ ------ ------
(a) GBR Phoenix Beard Holdings Limited ('GBR Phoenix Beard')
On 12 August 2016 the Group acquired 100% of GBR Phoenix Beard,
a leading West Midlands property agent with offices in Birmingham,
London and Leeds. The business provides commercial management and
consultancy services and will strengthen the Group's presence in
the Midlands region and contribute to the growth of the UK
consultancy business.
Total acquisition consideration is provisionally determined at
GBP3.8m and was settled in cash on completion.
The selling shareholders will also receive GBP1.0m payable in
instalments by the fifth anniversary of completion, subject to
remaining actively engaged in the business at the payment date.
Additionally, earn-out consideration of up to GBP5.2m is also
payable in instalments by the fourth anniversary of completion and
is subject to achievement of certain income targets, as well as
remaining actively engaged with the business at the payment date.
Further to this, GBP0.2m was paid to key employees on completion
with a further GBP0.3m payable on the third anniversary of
completion. As required by IFRS 3 (revised) these payments are
charged to the income statement over the relevant period of active
engagement (2016: GBP1.1m).
Transaction costs of GBP0.3m were also expensed as incurred to
the income statement.
Goodwill of GBP2.5m and intangible assets of GBP3.2m relating to
existing management contracts have been provisionally determined.
Goodwill is attributed to the experience, reputation and expertise
of the fee earners and is not expected to be deductible for tax
purposes.
The acquired business contributed revenue of GBP4.6m and
underlying operating profit of GBP0.3m to the Group for the period
from acquisition to 31 December 2016. Had the acquisition been made
at the beginning of the financial year, revenue would have been
GBP14.8m and underlying operating profit would have been
GBP0.9m.
The fair value of current trade and other receivables is GBP1.2m
and includes trade receivables with a fair value of GBP0.8m. The
gross contractual amount for trade receivables is GBP0.9m, of which
GBP0.1m is expected to be uncollectible.
(b) Other acquisitions
During the year, the Group also acquired the trade and assets of
Cresa Partners Charlotte, Inc., a US based commercial brokerage
firm in the North Carolina region and the trade and assets of
Chainbow Ltd, a residential management business based in London
specialising in both management and consultancy services to the
block management and private rented sector.
Cash consideration for these transactions amounted to GBP0.3m.
The remainder of the acquisition consideration relates to the
discounted value of deferred consideration of up to GBP1.9m,
subject to achievement of certain income targets.
A further GBP4.2m is payable to certain key staff and is subject
to service conditions, GBP2.8m was paid at closing and GBP1.4m is
payable in June 2017. As required by IFRS 3 (revised) these
payments are expensed to the income statement over the relevant
period of employment.
Transaction costs of GBP0.2m were also expensed as incurred to
the income statement.
Goodwill of GBP1.9m and intangible assets of GBP0.4m relating to
management and customer contracts have been provisionally
determined. Goodwill is attributable to the experience and
expertise of key staff and strong industry reputation and is not
expected to be deductible for tax purposes.
The acquired businesses contributed revenue of GBP1.8m and
underlying operating losses of GBP0.2m to the Group for the period
from acquisition to 31 December 2016. Had the acquisitions been
made at the beginning of the financial year, revenue would have
been GBP2.9m and underlying operating losses would have been
GBP0.5m.
10. Borrowings
2016 2015
Current GBPm GBPm
------------------------------------------ ----- -----
Bank overdrafts 0.2 0.2
Unsecured bank loans due within one year
or on demand 35.6 31.2
------------------------------------------- ----- -----
35.8 31.4
------------------------------------------ ----- -----
The Group maintains a GBP250.0m revolving credit facility
('RCF'), which expires on 15 December 2020 and can be increased by
an additional GBP50.0m Accordion facility. As at 31 December 2016
GBP34.0m (2015: GBP30.0m) of the GBP250.0m RCF was drawn.
The Group has the following undrawn borrowing facilities:
2016 2015
GBPm GBPm
----------------------------------- ------ ------
Floating rate
- expiring within one year or on
demand 23.2 19.8
- expiring between 1 and 5 years 216.0 220.0
------------------------------------ ------ ------
239.2 239.8
----------------------------------- ------ ------
11. Related party transactions
There were no significant related party transactions during the
year. All related party transactions take place on an arm's-length
basis under the same terms as those available to other customers in
the ordinary course of business.
As at 31 December 2016, loans outstanding to joint ventures
amounted to GBPnil (2015: GBP1.2m).
12. Contingent liabilities
In common with comparable professional services businesses, the
Group is involved in a number of disputes in the ordinary course of
business. Provision is made in the financial statements for all
claims where costs are likely to be incurred and represents the
cost of defending and concluding claims. The Group carries
professional indemnity insurance and no separate disclosure is made
of the cost of claims covered by insurance as to do so could
seriously prejudice the position of the Group.
13. Events after the balance sheet date
Cresa Partners Orange County, LP
On 7 February 2017, the Group acquired 100% of the equity
interest in Cresa Partners Orange County, LP, for total
consideration of US$19.0m.
An exercise to determine total acquisition consideration and the
fair value of the assets acquired and liabilities assumed is
underway.
Directors' responsibility statement
The Savills Report and Accounts for year end 31 December 2016
contains a responsibility statement in the following form:
Each of the Directors confirm that, to the best of their
knowledge:
-- the Group financial statements, which have been prepared in
accordance with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and profit of
the Group; and
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
Group, together with a description of the principal risks and
uncertainties that is faces.
For the purposes of Section 418 of the Companies Act 2006, each
of the Directors as at the date of the approval of the Annual
Report and Accounts confirms that:
-- so far as the Director is aware, there is no relevant audit
information of which the External Auditors are unaware; and
-- the Director has taken all the steps that he/she ought to
have taken as a Director in order to make himself/herself aware of
any relevant audit information and to establish that the External
Auditors are aware of that information.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the Annual Report and Accounts.
On behalf of the Board
Jeremy Helsby
Group Chief Executive
Chris Lee
Group Legal Director and Company Secretary
22 March 2017
Forward-looking statements
The financial information contained in this announcement has not
been audited. Certain statements made in this announcement are
forward-looking statements and are therefore subject to risks,
assumptions and uncertainties that could cause actual results to
differ materially from those expressed or implied because they
relate to future events. These forward-looking statements include,
but are not limited to, statements relating to the Company's
expectations.
Copies of the Annual Report and Accounts for the year ended 31
December 2016 will be circulated to shareholders on 3 April 2017
and will also be available from the investor relations section of
the Company website at www.savills.com or from:
Savills plc, 33 Margaret Street, London, W1G 0JD
Telephone: 020 7499 8644
In addition, with prior notice, copies in alternative formats
i.e. large print, audio tape, braille are available if required
from:
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99
6DA
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFEDVVILFID
(END) Dow Jones Newswires
March 22, 2017 03:00 ET (07:00 GMT)
Savills (LSE:SVS)
Historical Stock Chart
From Apr 2024 to May 2024
Savills (LSE:SVS)
Historical Stock Chart
From May 2023 to May 2024