TIDMSVS
RNS Number : 8440F
Savills PLC
12 March 2020
12 March 2020
Savills plc
('Savills' or 'the Group')
PRELIMINARY RESULTS FOR THE FULL YEARED 31 DECEMBER 2019
Savills plc, the international real estate advisor, today
announces another resilient performance with increased revenues and
stable profits.
Key financial highlights
-- Group revenue up 10% to GBP1.93bn (2018: GBP1.76bn), driven
by a strong performance (+16%) in our Less Transactional business
lines (57% of 2019 revenue)
-- Underlying* profit before tax maintained at GBP143.4m (2018:
GBP143.7m), despite a GBP3.5m reduction in profit from the
implementation of IFRS 16
-- Statutory profit before tax increased 6% to GBP115.6m (2018: GBP109.4m)
-- Underlying basic earnings per share ('EPS') in line at 78.0p (2018: 77.8p)
-- Statutory basic EPS increased 8% to 60.6p (2018: 56.2p)
-- Final ordinary and supplementary interim dividends up 3% to
total 32.0p per share (2018: 31.2p)
* Underlying profit before tax ('underlying profit') is
calculated on a consistently reported basis in accordance with Note
4 to this Preliminary Statement.
Key operating highlights
-- Resilient performance reflects geographic diversity and
strength of Less Transactional service lines
-- Our Transaction Advisory revenue grew by 2%, led by North
America, Europe and the Middle East
-- Further strong growth from our Less Transactional services
(+16%) with Property and Facilities Management revenue up 17% and
Consultancy revenue up 15%
-- UK profits increased by 7% to GBP81.9m, led by Property Management and Consultancy
-- Savills UK Residential grew revenues by 6%, outperforming the decline in UK market volumes
-- Continued growth in North America driven by the
occupier-focused business with revenue up 11% and underlying profit
up 35% to GBP17.3m.
-- Savills Investment Management reported a record year with
revenue up 19%, profits up 65% to GBP18.1m and AUM up 8% to
GBP17.7bn. GBP3.1bn new inflows up 29% on 2018 (GBP2.4bn)
Commenting on the results, Mark Ridley, Group Chief Executive,
said:
I am very pleased that Savills delivered a good performance in
2019 in some challenging market conditions. This reflects the
strength and resilience of our global, diversified business as we
continued to grow our Less Transactional service lines and
outperform in many of our transactional markets."
"We continue to focus on growing our Less Transactional
businesses, increasing our share of the global transactional
markets and enhancing the resilience of the business. While we
continue to monitor the impact of global uncertainties on investor
and occupier demand for real estate, we have made a good start to
2020 with the first two months outperforming the same period last
year on all measures. As a result of the dynamic situation in
respect of COVID-19 it is difficult accurately to predict its
impact on our business for 2020 as a whole, although we do expect a
greater weighting of activity to the second half of the year."
For further information, contact:
Savills 020 7409 8934
Mark Ridley, Group Chief Executive
Simon Shaw, Group Chief Financial
Officer
Tulchan Communications 020 7353 4200
David Allchurch
Elizabeth Snow
Will Palfreyman
There will be an analyst presentation today at 9.30am at
Savills, 15 Finsbury Circus, London, EC2M 7EB. A recording of the
presentation will be available from noon at www.ir.savills.com
.
Chairman's statement
Savills delivered a resilient performance in the face of some
challenging market conditions, reflecting our geographic diversity
and the breadth of our Less Transactional service lines.
Results
Against the backdrop of much reduced transaction volumes in both
the UK and Hong Kong, the Group's revenue growth of 10% to
GBP1.93bn (2018: GBP1.76bn) was driven by a strong performance in
our Less Transactional business lines. Underlying profit for the
year maintained at GBP143.4m (2018: GBP143.7m) as a result of this
change in business mix and the first time charge under IFRS 16
which increased Savills property costs by GBP3.5m. The Group's
statutory profit before tax increased by 6% to GBP115.6m (2018:
GBP109.4m).
Overview
Savills delivered revenue growth and a resilient underlying
profit in 2019 in the face of challenging market conditions. Growth
in our Less Transactional businesses and in North America helped to
offset the impact of declines in transaction volumes in Asia
Pacific and the UK. Currency movements had a positive impact on the
Group, increasing revenue by GBP20.7m, underlying profit by GBP1.4m
and statutory profit before tax by GBP1.9m.
Our Transaction Advisory revenue grew by 2%, our Consultancy
business revenue by 15% and our Property Management revenue by 17%.
The UK Commercial Transaction Advisory business delivered a
resilient performance outperforming the rest of the market which
declined by 17% year-on-year as a result of the political
uncertainty until the end of the year.
Our UK Residential business continued to perform well in
challenging conditions for much of the year which saw the UK market
volume of transactions with values greater than GBP1.0m declining
by 2% year-on-year. Against this backdrop and buoyed by the clear
General Election result in December, Savills UK Residential
business performed well, growing revenue by 6% year-on-year. In
Asia Pacific, a sharp decline in investor confidence in Hong Kong
and growth costs in Australia negatively affected both the
Commercial and Residential transaction businesses, the impact of
which was partially mitigated by stronger performances in Japan,
Singapore and the Regional Hospitality advisory group. In the US,
we delivered significant growth in the Occupier Service business
(including tenant representation brokerage); however the
profitability of the US operation continues to be affected by the
cost of investment in the business, including further development
of the support services platform.
Savills Investment Management delivered a record year with both
new product launches and significant capital deployed increasing
its Assets Under Management ('AUM') to GBP17.7bn (2018: GBP16.4bn).
This, together with the benefit of performance fees on certain
products, led to a 65% increase in underlying profits.
The reduction in transaction volumes in Asia Pacific and growth
in our lower margin but stable Property Management business,
together with the first time impact of IFRS 16 and the cost of our
business development activities in a number of markets, resulted in
a reduction to the Group underlying profit margin to 7.4% (2018:
8.2%).
The impact of the aforementioned factors on the Group underlying
profit margin were offset by lower acquisition-related charges,
higher profits on disposal of investments and the absence of the
one-off charge in 2018 in relation to the impact of equalising
Guaranteed Minimum Pension ('GMP') on the UK defined benefit
pension plan. The statutory pre-tax profit margin declined slightly
to 6.0% (2018: 6.2%).
Business development
Savills strategy is to be a leading multi-sector property
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 global cross-border investment,
residential and occupier services 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.
In the UK, the business focused on the successful integration of
acquisitions made in the prior year, including Currell Group
(residential brokerage in East London) and the Broadgate Estates
third party property management portfolio, into the wider business.
During the year, the business acquired KKS, a London based
workplace consultancy and design studio which enhances our service
offering, particularly to corporate occupiers.
Development in Europe & the Middle East focused on
integrating and developing the Middle East operation, which was
acquired through the acquisition of Cluttons Middle East in 2018.
Team recruitment in the Middle East, along with Sweden, Germany and
France enhanced our strength in those regions across key business
lines.
In Asia Pacific, having expanded significantly in 2018, we
moderated our hiring in the region, focusing on Australia and
Singapore. Savills India opened for business in October 2018 and
undertook significant expansion during the year now employing over
300 professionals in six offices (Bangalore, Mumbai, Delhi NCR,
Hyderabad, Pune and Chennai).
In North America, we continued to expand our occupier-focused
business lines through both recruitment and investment in
technology and central services such as marketing and research. In
March 2019, the business was re-branded to "Savills".
Technology continues to be a focal area across the real estate
industry. Over the last twelve months we have witnessed some of the
excitement surrounding "Proptech" being replaced by a more
pragmatic approach to assessing which new technologies and tools
genuinely address industry challenges and help drive efficiencies.
It is also worth noting that across the world, countries are at
varying stages in this evolution, and one of our key focuses has
been to foster internal forums for identifying and sharing
promising innovative opportunities across the Savills network.
We have continued to invest in our own technology platforms in
order both to deliver innovative solutions to our clients through
data analysis and insight and to drive internal efficiencies in how
we deliver those services. Improving efficiency in our Valuation
teams has been a particular area of focus locally across the Group,
and we continue to roll out our award winning Knowledge Cubed
platform, developed in the United States and deployed to occupier
clients across the globe.
We have continued to grow workthere.com, Savills innovative
response to the changing requirements of occupiers seeking serviced
office/co-working space in global cities, which has now launched in
nine countries and grew revenue threefold in 2019. Finally, we have
continued to invest in our company-wide ERP platform, with a number
of our larger markets going live during the year.
Board
Charles McVeigh, who served on the Board from 2000, and Liz
Hewitt, who joined the Board in 2014 retired at the conclusion of
the Company's AGM in May 2019. Following Liz Hewitt's retirement,
Stacey Cartwright succeeded Liz as Chairman of the Audit Committee.
I would like to thank both Charlie and Liz for their considerable
contributions to Board and its Committees during their terms.
In October 2019, the Board announced the appointment of Dana
Roffman as an additional independent Non-Executive Director.
Dividends
An initial interim dividend of 4.95p per share (2018: 4.8p)
amounting to GBP6.7m was paid on 2 October 2019, and a final
ordinary dividend of 12.05p (2018: 10.8p) is recommended, making
the ordinary dividend 17.0p for the year (2018: 15.6p). In
addition, a supplemental interim dividend of 15.0p (2018: 15.6p) is
declared, based upon the underlying performance of our Transaction
Advisory business. Taken together, the ordinary and supplemental
interim dividends comprise an aggregate distribution for the year
of 32.0p per share, representing an increase of 2.6% on the 2018
aggregate dividend of 31.2p. The final ordinary dividend of 12.05p
per ordinary share will, subject to shareholders' approval at the
AGM on 6 May 2020, be paid alongside the supplemental interim
dividend of 15.0p per share on 12 May 2020 to shareholders on the
register at 14 April 2020.
People
I would like to express my thanks to all our staff worldwide for
their hard work, commitment and continued focus on client service,
which enable the Group to deliver these results.
Summary and Outlook
Savills delivered a good performance in 2019 in some challenging
market conditions. This reflects the strength and resilience of our
global, diversified business as we continued to grow our Less
Transactional service lines and outperform in many of our
transactional markets.
In Asia, particularly China, it is clear that COVID-19 is having
a significant impact on transactional activity and may have a
similar effect elsewhere, depending to an extent on the length and
severity of each outbreak. Our focus is on the welfare of our staff
and clients and we have instituted protective measures in locations
potentially affected by this virus.
The situation is dynamic and due to the uncertainty, it is
difficult accurately to predict the full impact of this issue on
our business for 2020 as a whole. However, given the nature of the
real estate market, we would anticipate that any near term slowdown
caused by sentiment and specific measures taken to combat COVID-19
would generally result in a temporary delay in activity rather than
an absolute loss of business.
We remain focused on growing our Less Transactional businesses,
increasing our share of the global transactional markets and
enhancing the resilience of the business to challenging market
conditions. While we continue to monitor the impact of global
uncertainties on investor and occupier demand for real estate, we
have made a good start to 2020 with the first two months
outperforming the same period last year on all measures. As a
result of the dynamic situation in respect of COVID-19, we do
expect a greater weighting of activity to the second half of the
year.
Nicholas Ferguson CBE
Chairman
Review of operations
Savills geographic and business diversity were key to achieving
the year's result. Continued growth in our Less Transactional
businesses and strong market shares in many of our most important
transactional markets contributed to a robust performance for the
Group in 2019.
Our performance analysed by region was as follows:
Underlying profit/(loss)
Revenue GBPm GBPm
-------------------------- ----------------------------
2019 2018 % growth 2019 2018 % growth
------------------------- ------- ------- -------- -------- ------- ---------
UK 727.5 662.4 10 81.9 76.8 7
Asia Pacific 627.1 587.5 7 42.6 54.9 (22)
Europe & the Middle East 282.4 247.0 14 15.8 12.9 22
North America 293.0 264.5 11 17.3 12.8 35
Unallocated - - n/a (14.2) (13.7) n/a
------------------------- ------- ------- -------- -------- ------- ---------
Total 1,930.0 1,761.4 10 143.4 143.7 -
------------------------- ------- ------- -------- -------- ------- ---------
On a constant currency* basis Group revenue grew by 8% to
GBP1,909.3m, underlying profit decreased 1% to GBP142.0m and
statutory profit before tax increased by 4% to GBP113.7m. Our Asia
Pacific business represented 32% of Group revenue (2018: 33%) and
our overseas businesses as a whole represented 62% of Group revenue
(2018: 62%). Our performance by service line is set out below:
Underlying profit/(loss)
Revenue GBPm GBPm
-------------------------- ----------------------------
2019 2018 % growth 2019 2018 % growth
------------------------ ------- ------- -------- -------- ------- ---------
Transaction Advisory 828.2 813.5 2 69.8 81.1 (14)
Property and Facilities
Management 684.5 586.8 17 35.2 32.2 9
Consultancy 338.1 294.4 15 34.5 33.1 4
Investment Management 79.2 66.7 19 18.1 11.0 65
Unallocated - - n/a (14.2) (13.7) n/a
------------------------ ------- ------- -------- -------- ------- ---------
Total 1,930.0 1,761.4 10 143.4 143.7 -
------------------------ ------- ------- -------- -------- ------- ---------
Overall, our Commercial and Residential Transaction Advisory
business revenues together represented 43% of Group revenue (2018:
46%). Of this, the Residential Transaction Advisory business
represented 9% of Group revenue
(2018: 10%). Our Property and Facilities Management businesses
continued to perform well, growing overall revenue by 17% and
represented 35% of Group revenue (2018: 33%). Our Consultancy
businesses represented 18% of revenue (2018: 17%) reflecting a
year-on year increase of 15%. The Investment Management business
reported a record year as a result of new product launches,
performance fees and significant capital deployed increasing
revenue by 19% which represents 4% of Group revenue (2018: 4%).
Transaction Advisory
Overall, our Transaction Advisory revenues grew 2% (stable in
constant currency) to GBP828.2m (2018: GBP813.5m). Globally, our
Commercial Capital Transaction business revenue declined by 8% and
our Leasing and Occupier focused transactional revenues grew by
10%. Our Global Residential business revenue decreased by 1%.
Underlying profits decreased 14% to GBP69.8m (2018: GBP81.1m),
with a reduced underlying profit margin of 8.4% (2018: 10.0%), as a
result of the relative mix of activity across the globe and the lag
effect of business development costs.
Asia Pacific Commercial
Revenue of the Asia Pacific Commercial Transaction business
decreased by 13% to GBP138.6m (2018: GBP160.1m), a 15% decrease in
constant currency. This was a result of a significant decrease in
investment activity in Hong Kong where market volumes declined by
42% following the introduction of US/Sino trade tariffs and ongoing
political uncertainty. The effect of this was partially offset by
substantial improvements in Japan and our APAC Hospitality Group.
Elsewhere, revenue growth in Mainland China was 9%, whilst
decreases were seen in Australia (down 11%), and South Korea (down
26%).
The challenging market conditions in Hong Kong and the effect of
business development costs in Australia are reflected in a 42%
decrease in underlying profit to GBP12.4m (2018: GBP21.2m). This
represented a 44% decrease in constant currency.
UK Commercial
Revenue from UK commercial transactions decreased 4% to GBP94.2m
(2018: GBP98.4m) as the continuing lack of clarity around the UK's
exit from the EU and political uncertainty in advance of the
General Election affected sentiment in the commercial property
investment markets, where volumes declined 17% year-on-year.
All segments of the UK commercial property market saw
year-on-year falls in investment activity, with the most notable
decline being in the central London office market which was down
34%. Investment in offices nationally declined by 26% and retail by
10%, while industrial investment activity saw the second largest
year-on-year fall of 14%.
Recognising that the UK property market represents good value
relative to other major international locations, investor sentiment
improved substantially following the clear General Election result
and drove a strong finish to the year, in which our business
significantly outperformed the market restricting the overall
annual decline in revenue to 4%.
Transaction volumes in most UK leasing markets also declined in
2019, following a strong year of take-up in 2018. Occupier take-up
in the national logistics market was 34.2m sq ft. Although this was
9% lower than 2018, it was still the fourth strongest year of the
last decade. In the office markets, take-up in central London fell
by 15% year-on-year and in the top six cities outside London by
10%. Savills outperformed the market with a decline of 4% in
leasing revenues.
The retail sector continued to face challenges for both
landlords and tenants in 2019. However, 2019 saw the largest number
of initial openings of new sites by international brands in the UK
and a stronger year for new shop openings on retail warehouse
parks.
Overall reduced market activity led to a 22% decrease in
underlying profit to GBP12.3m (2018: GBP15.7m), with underlying
profit margin falling to 13.1% (2018: 16.0%).
North America
In March the North American business rebranded to "Savills" and
continued to grow through the year. Our North American business,
which primarily serves corporate occupiers, increased revenues by
11% to GBP293.0m (2018: GBP264.5m) reflecting improved performances
across the network. In constant currency this equated to a
year-on-year increase of 6%.
North American underlying profit increased by 35% to GBP17.3m
(2018: GBP12.8m), a 29% increase in constant currency, with the
underlying profit margin improving to 5.9% (2018: 4.8%). After the
continued costs of investment in the business including significant
investment in management and our central office platform, this
represented an improvement towards desired levels of profitability.
As expected, the capital markets team in New York significantly
reduced operating losses during the period.
Europe & the Middle East
In Europe & the Middle East, Commercial Transaction fee
income grew by 13% (14% in constant currency) to GBP127.5m (2018:
GBP113.1m). Strong results from investment teams in France, Benelux
and Ireland offset revenue reductions in Germany, Italy and
Portugal. Office Leasing performed well across the region growing
28% year-on-year driven primarily by strong performances in France
and Germany.
As a result of certain restructuring and recruitment costs in
Sweden, France and Germany, the Europe & Middle East
transactional business reported underlying profit of GBP5.4m (2018:
GBP5.5m) and an underlying profit margin of 4.2% (2018: 4.9%).
UK Residential
Our UK Residential business outperformed a weak UK market, where
the volume of transactions valued above GBP1m declined by
approximately 2% in 2019, with revenue increasing 6% to GBP139.1m
(2018: GBP131.5m). Significant growth in our Core London business
(average transaction value GBP1.1m), which doubled its market share
in most locations, drove this performance through much of the year.
In addition, we experienced a notable increase in transactions,
much of it being the release of pent up buyer demand in the Prime
and Super Prime London markets following the clear General Election
result.
Properties exchanged rose 14% overall in Prime Central London
and Savills overall transaction volumes exchanged were up 31% in
London and 7% in the regional markets. This reflected the
increasing importance of Core London to our business which is also
demonstrated by the 21% reduction in the average value of London
residential property sold by Savills to GBP2.1m (2018: GBP2.7m).
The average transaction value outside London decreased marginally
to GBP1.13m (2018: GBP1.14m).
In the New Homes business, revenue increased by 4%, which
represented a robust performance in the prevailing market
conditions with the number of reservations increasing by 16%.
Average transaction values declined 1% whilst the number of
exchanges decreased by 10%.
Overall, the UK Residential Transaction Advisory business showed
resilience in challenging markets, recording a 1% increase in
underlying profits to GBP17.8m (2018: GBP17.6m). The shift in mix
in favour of the Core London market reduced the underlying profit
margin to 12.8% (2018: 13.4%).
Asia Pacific Residential
Overall, Asia Pacific Residential revenues decreased 22% to
GBP35.8m (2018: GBP45.9m) which represented a 23% decrease in
constant currency. A significant decline was seen in Hong Kong as
investor confidence was impacted by economic and political
uncertainty, as a result revenue declined by 37% year-on-year.
Elsewhere in the region, Mainland China revenues were stable during
the period with a slight decline in Shanghai largely offset by an
increase in Beijing. The business in Singapore also experienced a
decline in revenue and profits as a result of the government
cooling measures implemented in 2018. Revenue in Australia declined
substantially due to weak market conditions and as a result the
business was restructured to mitigate the effect on profits.
The net effect of all these factors resulted in a 45% decrease
in underlying profit to GBP4.6m (2018: GBP8.3m).
Property and Facilities Management
Our Property and Facilities Management businesses continued to
perform well, growing revenue by 17% (15% in constant currency) to
GBP684.5m (2018: GBP586.8m). Savills total area under management
increased by 14% to 2.30bn sq. ft. (2018: 2.02bn sq. ft.).
Underlying profit increased by 9% to GBP35.2m (2018: GBP32.2m), 8%
in constant currency.
Asia Pacific
The Asia Pacific region grew revenue by 14% (11% in constant
currency) to GBP372.5m (2018: GBP327.0m). The Property and
Facilities Management business is a significant strength in the
region, representing 59% of Savills Asia Pacific revenue (2018:
56%) and complementing our Transaction Advisory businesses. The
total square footage under management in the region was up 13% to
approximately 1.71bn sq. ft. (2018: approximately 1.51bn sq. ft.).
The effect of a strong performance in Greater China (incl. Hong
Kong) included the revenue benefit in the initial periods of some
significant facilities management contracts in Hong Kong/Macau with
little short term effect on profits. Elsewhere, increased pass
through costs in Singapore and significant expansion of our
business in Vietnam was offset by the Australian business which saw
a reduction in revenue alongside restructuring and recruitment
costs in the period.
The underlying profit of the Asia Pacific Property Management
business remained constant at GBP19.2m (2018: GBP19.2m).
UK
Our UK Property Management teams, comprising Commercial,
Residential and Lettings, grew revenue by 21% to GBP231.1m (2018:
GBP190.9m). This includes the full year effect of the 2018
acquisitions of the Broadgate Estates' third party property
management portfolio and the Currell Group.
The business was awarded a number of significant contracts
during the year including some lower margin Facilities Management
programmes in the managed estate. The effect of these wins and
investment in the platform resulted in a flat underlying profit
margin of 6.8% (2018: 6.8%) and underlying profit growth of 22% to
GBP15.8m (2018: GBP13.0m).
Europe & the Middle East
In Europe & the Middle East, revenue grew by 17% (19% in
constant currency) to GBP80.9m (2018: GBP68.9m), including the full
year effect of the 2018 acquisition of Cluttons Middle East. Some
significant mandate wins in the Middle East drove the overall
growth in revenue, but initial on-boarding and investment in the
Spanish platform suppressed the margin during the period. By year
end the total area under management had increased by 15% to 151.3m
sq. ft. (2018: 131.9m sq. ft.).
Collectively, the region achieved a small increase in underlying
profits to GBP0.2m (2018: GBP0.0m).
Consultancy
Global Consultancy revenue increased by 15% to GBP338.1m (2018:
GBP294.4m) and underlying profit grew by 4% to GBP34.5m (2018:
GBP33.1m). Currency movements had a negligible impact on results in
the Consultancy business.
UK
UK Consultancy revenue increased by 6% to GBP229.9m (2018:
GBP215.9m), with strong performances in the Housing, Building
Consultancy and Private Rented Sector (PRS) service lines. This
growth was partially offset by a decline in Development and Rural,
where a slow down in development advisory activity impacted revenue
and underlying profits. Overall, underlying profit from the UK
Consultancy business increased by 5% to GBP27.0m (2018: GBP25.8m),
with underlying profit margin declining marginally to 11.7% (2018:
11.9%).
Asia Pacific
Revenue in the Asia Pacific Consultancy business increased by
54% to GBP69.6m (2018: GBP45.1m), with minimal currency impact
following a strong revenue performance in China alongside steady
growth in the majority of the region. Profit growth was limited by
the costs of recent team recruitment in China, Singapore and
Australia with underlying profit increasing 7% to GBP4.6m (2018:
GBP4.3m), 6% on constant currency basis.
Europe & the Middle East
Our Europe & Middle East Consultancy business, which
principally comprises valuation and underwriting advisory services,
increased revenue by 16% (17% in constant currency) to GBP38.6m
(2018: GBP33.4m) including the full year effect of the 2018
acquisition of Cluttons Middle East. Our Consultancy practices grew
across the majority of the region, but restructuring and
recruitment costs suppressed the margin to 7.5% (2018: 9.0%)
particularly in the Netherlands, Spain and Portugal. As a
consequence, underlying profit fell slightly to GBP2.9m (2018:
GBP3.0m).
Investment Management
Revenue from Investment Management increased by 19% to GBP79.2m
(2018: GBP66.7m). Net base management fees represented
approximately 66% (2018: 64%) of Investment Management revenues and
grew by 22% during the period. In an environment of fewer
transactions (GBP3.1bn in 2019 vs GBP3.8bn in 2018),
transaction-related fees declined by 1%, however the business
benefitted from performance fees on certain products and 85% of
funds (by AUM) exceeding their benchmark returns on a five year
rolling basis. This track record supported a record year for new
capital inflows of GBP3.1bn (2018: GBP2.4bn) despite more
challenging market conditions.
Assets under management increased by 8% to GBP17.7bn (2018:
GBP16.54bn).
Underlying profits for Investment Management increased by 65% to
GBP18.1m (2018: GBP11.0m).
Financial review
Underlying profit margin
Underlying profit margin decreased to 7.4% (2018: 8.2%),
reflecting business mix and the cost of business development in a
number of regions. In terms of revenue, the reduction in activity
in some higher margin capital transaction markets was mitigated by
growth in the lower margin leasing activity and, in particular, by
growth in the Property Management business globally.
Taxation
The tax charge for the year decreased slightly to GBP32.0m
(2018: GBP32.2m), reflecting an effective tax rate on statutory
profit before tax of 27.7% (2018: 29.4%). In both years, the
Group's effective reported tax rate is higher than the UK effective
rate of tax of 19% (2018: 19%), reflecting the effect of higher
foreign rates of tax and permanently disallowed charges, including
non-deductible acquisition costs.
The underlying effective tax rate reduced slightly to 25.1%
(2018: 25.7%).
Restructuring and acquisition-related costs
During the year the Group recognised a total of GBP25.2m in
restructuring and acquisition-related costs (2018: GBP29.1m). These
comprised an aggregate restructuring charge of GBP11.5m (2018:
GBP8.4m). These related principally to costs incurred in rebranding
the North American business to Savills in line with the original
integration plan, and the final reorganisation within the ex SEB
German Investment Management business in line with the transfer of
the remaining open ended fund assets (primarily liquid assets) to
the fund custodian.
The reduction in acquisition-related costs in 2019 to GBP13.7m
(2018: GBP20.7m) reflected a reduction in corporate acquisition
activity year-on-year. These costs related to future consideration
payments, associated with past acquisitions, which are subject to a
future service condition. The largest components of this charge
relate to the acquisitions of Aguirre Newman in 2017 and Currell
Group in 2018.
These charges have been excluded from the calculation of
underlying profit in line with Group policy.
Earnings per share
Basic earnings per share increased 8% to 60.6p (2018: 56.2p),
reflecting an 8% increase in statutory profit after tax.
Adjusted on a consistent basis for exceptional pension charges,
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
marginally to 78.0p (2018: 77.8p).
Fully diluted earnings per share increased by 8% to 58.8p (2018:
54.6p). The underlying fully diluted earnings per share increased
slightly to 75.7p (2018: 75.6p).
The first-time implementation of IFRS 16 (Leases) reduced
earnings per share by 2.6p year-on year.
Cash resources, borrowings and liquidity
Gross cash and cash equivalents at year end decreased 6% to
GBP209.9m (2018: GBP223.9m). This decrease primarily reflected the
GBP10.3m of losses in the year on translation of cash balances held
in non-sterling currencies (2018: GBP9.8m of translation
gains).
Gross borrowings at year end increased to GBP181.4m (2018:
GBP150.0m). These principally comprise GBP150.0m (2018: GBP150.0m)
of 7, 10 and 12 year fixed rate notes which were issued in June
2018, along with GBP32.5m (2018: GBPnil) drawn under the Group's
Revolving Credit Facility ('RCF'). In June 2019 the Group amended
and extended its existing GBP360m RCF to include a GBP90m accordion
facility and extend the expiry date from December 2020 to June
2024. At the year end, net cash was GBP28.5m (2018: GBP73.9m).
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.
The Group's net inflow of cash is typically 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 GBP95.4m (2018: GBP104.3m).
With a large proportion of the Group's revenue being
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.
Capital and shareholders' interests
During the year 0.1m shares (2018: 0.2m) were issued to
participants under the Performance Share Plan and 0.1m (2018: 0.8m)
new shares were issued to participants on exercise of options under
the Group's SAYE Schemes. The total number of ordinary shares in
issue at 31 December 2019 was 143.1m (2018: 142.9m).
Savills Pension Scheme
The funding level of the defined benefit Savills Pension Scheme
in the UK, which is closed to future service-based accrual, fell
during the year primarily as a result of a decrease in the yield on
AA-rated corporate bonds, increasing the value of the liabilities,
offset by the impact of contributions made by the Group. The plan
was in a liability position of GBP9.4m at the year-end (2018:
GBP2.8m surplus).
During the prior year the Group incurred an additional
exceptional charge of GBP3.1m in respect of the equalisation of the
Guaranteed Minimum Pension ('GMP') on the UK defined benefit
pension plan.
Net assets
Net assets as at 31 December 2019 were GBP503.2m (2018:
GBP505.0m). This movement reflects the Group's trading performance
which has been more than offset by the effects of foreign currency
translation of foreign subsidiaries along with the actuarial loss
on the UK defined benefit pension plan.
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. The net impact of foreign exchange rate movements
represented a GBP20.7m increase in revenue (2018: GBP20.7m
decrease) and an increase of GBP1.4m in underlying profit (2018:
GBP1.3m decrease).
Savills plc
Consolidated income statement
for the year ended 31 December 2019
2019 2018
Note GBPm GBPm
----------------------------------------- ----- ---------- ----------
Revenue 3 1,930.0 1,761.4
----------------------------------------- ----- ---------- ----------
Less:
Employee benefits expense (1,240.5) (1,165.0)
Depreciation (60.6) (14.9)
Amortisation of intangible assets and
impairment of goodwill and intangible
assets (10.4) (10.6)
Other operating expenses (505.1) (473.3)
Other operating income 0.5 0.1
Other gains 1.7 2.9
----------------------------------------- -----
Operating profit 115.6 100.6
----------------------------------------- ----- ---------- ----------
Finance income 6.5 4.4
Finance costs (18.3) (6.7)
----------------------------------------- ----- ---------- ----------
(11.8) (2.3)
Share of post-tax profit from joint ventures
and associates 11.8 11.1
------------------------------------------------ ---------- ----------
Profit before income tax 115.6 109.4
Income tax expense 5 (32.0) (32.2)
Profit for the year 83.6 77.2
----------------------------------------- ----- ---------- ----------
Attributable to:
Owners of the parent 82.9 76.7
Non-controlling interests 0.7 0.5
----------------------------------------- ----- ---------- ----------
83.6 77.2
----------------------------------------- ----- ---------- ----------
Earnings per share
Basic earnings per share 7(a) 60.6p 56.2p
Diluted earnings per share 7(a) 58.8p 54.6p
Supplementary income statement information
Reconciliation to underlying profit
before tax
Profit before tax 115.6 109.4
Restructuring and acquisition-related
costs 25.2 29.1
Other underlying adjustments 2.6 5.2
--------------------------------------- ----- ------ ------
Underlying profit before income tax 143.4 143.7
--------------------------------------- ----- ------ ------
Underlying earnings per share
Basic earnings per share 7(b) 78.0p 77.8p
Diluted earnings per share 7(b) 75.7p 75.6p
* Depreciation, Other Operating Expenses and Finance costs in
2019 have been impacted by the adoption of IFRS 16. As a result of
the adoption in 2019, Depreciation has increased by GBP44.2m,
Finance costs have increased by GBP9.3m, and other operating
expenses have reduced by GBP50.0m in comparison to the 2019 results
if prepared on the same lease accounting policy used in 2018.
Comparative results have not been restated as a result of the
modified retrospective transition approach used. See Note 2 for
more information.
Savills plc
Consolidated statement of comprehensive income
for the year ended 31 December 2019
2019 2018
GBPm GBPm
--------------------------------------------------- ------- ------
Profit for the year 83.6 77.2
Other comprehensive (loss)/income
Items that will not be reclassified to profit
or loss:
Re-measurement of defined benefit pension
scheme obligation (23.2) 15.7
Changes in fair value of financial assets
at FVOCI (0.3) (0.1)
Tax on items that will not be reclassified 4.4 (2.8)
--------------------------------------------------- ------- ------
Total items that will not be reclassified
to profit or loss (19.1) 12.8
Items that may be reclassified subsequently
to profit or loss:
Fair value gain on available-for-sale investments - -
Currency translation differences (21.0) 19.3
Tax on items that may be reclassified 3.8 (0.3)
--------------------------------------------------- ------- ------
Total items that may be reclassified subsequently
to profit or loss (17.2) 19.0
Other comprehensive (loss)/income for the
year, net of tax (36.3) 31.8
--------------------------------------------------- ------- ------
Total comprehensive income for the year 47.3 109.0
--------------------------------------------------- ------- ------
Total comprehensive income attributable to:
Owners of the parent 46.6 108.5
Non-controlling interests 0.7 0.5
--------------------------------------------------- ------- ------
47.3 109.0
--------------------------------------------------- ------- ------
Savills plc
Consolidated statement of financial position
at 31 December 2019
2019 2018
Note GBPm GBPm
------------------------------------------------- ----- ------- -----------
Assets: Non-current assets
Property, plant and equipment 68.9 71.5
Right of use assets 226.2 -
Goodwill 9 374.2 383.8
Intangible assets 44.5 48.7
Investments in joint ventures and associates 51.4 48.3
Deferred income tax assets 32.7 29.7
Financial assets at fair value through
other comprehensive income 32.6 31.2
Retirement benefit surplus - 2.8
Contract assets 1.6 1.3
Other receivables 27.3 19.1
859.4 636.4
------------------------------------------------- ----- ------- -----------
Assets: Current assets
Contract assets 7.5 7.8
Trade and other receivables 568.9 528.3
Current income tax receivable 3.6 2.7
Derivative financial instruments 0.2 0.1
Cash and cash equivalents 209.9 223.9
790.1 762.8
------------------------------------------------- ----- ------- -----------
Liabilities: Current liabilities
Borrowings 10 33.4 0.4
Lease liability 45.3 -
Derivative financial instruments 0.1 0.1
Contract liabilities 10.8 11.1
Trade and other payables 589.9 629.1
Current income tax liabilities 17.2 11.0
Employee benefit obligations 16.2 15.8
Provisions for other liabilities and
charges 10.7 8.4
723.6 675.9
------------------------------------------------- ----- ------- -----------
Net current assets/(liabilities) 66.5 86.9
Total assets less current liabilities 925.9 723.3
Liabilities: Non-current liabilities
Borrowings 10 148.0 149.6
Lease liability 221.8 -
Trade and other payables 17.7 38.2
Retirement and employee benefit obligations 20.5 11.7
Provisions for other liabilities and
charges 12.6 12.8
Deferred income tax liabilities 2.1 6.0
422.7 218.3
------------------------------------------------- ----- ------- -----------
Net assets 503.2 505.0
------------------------------------------------- ----- ------- -----------
Equity
Share capital 3.6 3.6
Share premium 97.2 96.6
Other reserves 95.5 117.6
Retained earnings 306.2 286.5
Equity attributable to owners of the
parent 502.5 504.3
Non-controlling interests 0.7 0.7
------------------------------------------------- -----
Total equity 503.2 505.0
------------------------------------------------- ----- ------- -----------
Savills plc
Consolidated statement of changes in equity
for the year ended 31 December 2019
Attributable to owners of the parent
----------------------------------- ----------------------------------------------------- --------------------------
Share Share Other Retained Non-controlling Total
capital premium reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Balance at 1 January 2019 3.6 96.6 117.6 286.5 504.3 0.7 505.0
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Change in accounting policy
(IFRS 16 adoption) - - - (9.3) (9.3) - (9.3)
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Balance at 1 January 2019
(restated) 3.6 96.6 117.6 277.2 495.0 0.7 495.7
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Profit for the year - - - 82.9 82.9 0.7 83.6
Other comprehensive income/(loss):
Re-measurement of defined
benefit pension scheme obligation
/ retirement benefit surplus - - - (23.2) (23.2) - (23.2)
Changes in fair value of financial
assets at FVOCI - - (0.3) - (0.3) - (0.3)
Tax on items directly taken
to reserves - - - 8.2 8.2 - 8.2
Currency translation differences - - (21.0) - (21.0) - (21.0)
-----------------------------------
Total comprehensive income
for the year - - (21.3) 67.9 46.6 0.7 47.3
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Employee share option scheme:
- Value of services provided - - - 17.8 17.8 - 17.8
Purchase of treasury shares - - - (14.1) (14.1) - (14.1)
Shares issued - 0.6 - - 0.6 - 0.6
Dividends - - - (42.8) (42.8) (0.5) (43.3)
Disposal of financial assets
at FVOCI - - (0.8) 0.8 - - -
Transactions with non-controlling
interests - - - (0.6) (0.6) (0.2) (0.8)
Balance at 31 December 2019 3.6 97.2 95.5 306.2 502.5 0.7 503.2
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Attributable to owners of the parent
----------------------------------- ----------------------------------------------------- --------------------------
Share Share Other Retained Non-controlling Total
capital premium reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Balance at 1 January 2018 3.5 91.1 98.4 247.2 440.2 1.5 441.7
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Profit for the year - - - 76.7 76.7 0.5 77.2
Other comprehensive income/(loss):
Re-measurement of defined
benefit pension scheme obligation
/ retirement benefit surplus - - - 15.7 15.7 - 15.7
Changes in fair value of financial
assets at FVOCI - - (0.1) - (0.1) - (0.1)
Tax on items directly taken
to reserves - - 0.1 (3.2) (3.1) - (3.1)
Currency translation differences - - 19.3 - 19.3 - 19.3
-----------------------------------
Total comprehensive income
for the year - - 19.3 89.2 108.5 0.5 109.0
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Employee share option scheme:
- Value of services provided - - - 18.2 18.2 - 18.2
Purchase of treasury shares - - - (25.1) (25.1) - (25.1)
Shares issued 0.1 5.5 - - 5.6 - 5.6
Dividends - - - (41.4) (41.4) (0.2) (41.6)
Disposal of financial assets
at FVOCI - - (0.5) 0.6 0.1 - 0.1
Transfer between reserves - - 0.4 (0.4) - - -
Transactions with non-controlling
interests (Note 10) - - - (1.8) (1.8) (1.2) (3.0)
Movement related to business
combinations (Note 9) - - - - - 0.1 0.1
Balance at 31 December 2018 3.6 96.6 117.6 286.5 504.3 0.7 505.0
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Savills plc
Consolidated statement of cash flows
for the year ended 31 December 2019
2019 2018*
Note GBPm GBPm
---------------------------------------------------- ----- -------- --------
Cash flows from operating activities
Cash generated from operations 8 132.6 139.8
Interest received 6.4 4.0
Interest paid (17.8) (5.1)
Income tax paid (25.8) (34.4)
Net cash generated from operating activities 95.4 104.3
---------------------------------------------------- ----- -------- --------
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment 0.2 0.2
Proceeds from sale of equity investments 4.5 12.3
Proceeds from sale of interests in joint
ventures associates and other investments 2.1 1.5
Dividends received from joint ventures and
associates 10.5 11.2
Loans to joint ventures (1.1) (1.1)
Loans to other parties (6.1) -
Disposal of subsidiaries, net of cash disposed - 0.4
Acquisition of subsidiaries, net of net cash
acquired 9 (1.5) (35.5)
Deferred consideration paid in relation to
current and prior year acquisitions (5.0) (16.0)
Purchase of property, plant and equipment (16.2) (16.9)
Purchase of intangible assets (7.3) (5.9)
Purchase of investment in joint ventures,
associates and equity investments (8.4) (25.3)
Net cash used in investing activities (28.3) (75.1)
---------------------------------------------------- ----- -------- --------
Cash flows from financing activities
Proceeds from issue of share capital 0.6 5.6
Proceeds from borrowings 158.1 305.0
Repayments of borrowings (125.2) (261.6)
Financing fees paid (1.8) -
Principal elements of lease payments (45.0) -
Purchase of treasury shares (14.1) (25.1)
Purchase of non-controlling interests (0.1) (2.6)
Dividends paid 6 (43.3) (41.6)
Net cash (used) in/received from financing
activities (70.8) (20.3)
---------------------------------------------------- ----- -------- --------
Net (decrease)/ increase in cash, cash equivalents
and bank overdrafts (3.7) 8.9
Cash, cash equivalents and bank overdrafts
at beginning of year 223.9 205.2
Effect of exchange rate fluctuations on cash
held (10.3) 9.8
---------------------------------------------------- ----- -------- --------
Cash, cash equivalents and bank overdrafts
at end of year 209.9 223.9
---------------------------------------------------- ----- -------- --------
*2018 Cash generated from operations has been re-presented to
reflect GBP8.0m of employment-linked deferred consideration
payments previously shown as cash used in investing activities, now
shown in cash generated from operations to reflect the requirement
for recipients to remain engaged actively in the business at the
payment date in accordance with IAS 7.
NOTES
1. Basis of preparation
The results for the year ended 31 December 2019 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 statements have been prepared on a going concern
basis.
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 2019,
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. Adoption of standards, amendments and interpretations to
standards
Standards, amendments and interpretations endorsed by the EU and
mandatorily effective for the first time for the financial year
beginning 1 January 2019 are as follows:
IFRS 16, 'Leases', replaces IAS 17 that relates to the
classification, measurement and recognition of leases with the
objective of ensuring that lessees and lessors provide relevant
information that represents those transactions. The standard is
effective for the group from 1 January 2019.
The Group applies the simplified transition approach and will
not restate comparative amounts for the year prior to first
adoption. Right-of-use assets have been measured on transition
either as if the new rules had always been applied or at the amount
of the lease liability on adoption (adjusted for any prepaid or
accrued lease expenses and onerous lease provisions where
applicable).
The Group's activities as a lessor are not material and hence
there is no significant impact on the financial statements with
respect to sub-leasing activities.
On adoption of IFRS 16, the group recognised lease liabilities
in relation to leases which had previously been classified as
'operating leases' under the principles of IAS 17 Leases. These
liabilities were measured at the present value of the remaining
lease payments, discounted using the lessee's incremental borrowing
rate as of 1 January 2019. The weighted average lessee's
incremental borrowing rate applied to the lease liabilities on 1
January 2019 was 3.36%.
For leases previously classified as finance leases, the group
recognised the carrying amount of the lease asset and lease
liability immediately before transition as the carrying amount of
the right of use asset and the lease liability at the date of
initial application. The measurement principles of IFRS 16 are only
applied after that date.
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
-- applying a single discount rate to a portfolio of leases with
reasonably similar characteristics for example leases of similar
assets, in the same geographic area with consistent length of lease
term
-- relying on previous assessments on whether leases are onerous
as an alternative to performing an impairment review
-- accounting for operating leases with a remaining lease term
of less than 12 months as at 1 January 2019 as short-term
leases
-- excluding initial direct costs for the measurement of the
right-of-use asset at the date of initial application, and
-- using hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
The Group has also elected not to reassess whether a contract
is, or contains a lease at the date of initial application.
Instead, for contracts entered into before the transition date the
group relied on its assessment made applying IAS 17 and IFRIC 4
Determining whether an Arrangement contains a Lease.
The table below reconciles the measurement of lease liabilities
upon transition with reference to operating lease commitments
disclosed at 31 December 2018.
GBPm
--------------------------------------------------------- -------
Operating lease commitments disclosed as at 31 December
2018 354.0
--------------------------------------------------------- -------
(Less): short-term leases recognised on a straight-line
basis as expense (5.4)
Add: adjustments as a result of a different treatment
of extension and termination options 0.9
(Less): adjustments for leases committed but not yet
commenced (5.2)
Discounted using the lessee's incremental borrowing
rate at the date of initial application (46.6)
--------------------------------------------------------- -------
Lease liability recognised as at 1 January 2019 297.7
--------------------------------------------------------- -------
Of which are:
Current lease liabilities 45.2
Non-current lease liabilities 252.5
297.7
--------------------------------------------------------- -------
The associated right-of-use assets for certain property leases
were measured on a retrospective basis as if the new rules had
always been applied. Other right-of use assets were measured at the
amount equal to the lease liability, adjusted by the amount of any
prepaid or accrued lease payments relating to that lease recognised
in the balance sheet as at 31 December 2018.
The recognised right-of-use assets relate to the following types
of assets:
31 December 1 January
2019 2019
GBPm GBPm
Leasehold properties 221.8 253.0
Equipment and motor vehicles 4.4 4.3
------------------------------ ------------ ----------
Total right-of-use assets 226.2 257.3
------------------------------ ------------ ----------
The change in accounting policy affected the following items in
the balance sheet on 1 January 2019:
1 January Application 1 January
2019 - pre of IFRS 2019 -
IFRS 16 16 Restated
GBPm GBPm GBPm
Right of use assets - 257.3 257.3
Trade and other receivables 528.3 4.5 532.8
Trade and other payables 629.1 (10.8) 618.3
Lease liabilities (current) - 45.2 45.2
Provisions (current) 8.4 (0.6) 7.8
Trade and other payables (non-current) 38.2 (14.7) 23.5
Lease liabilities (non-current) - 252.5 252.5
Provisions (non-current) 12.8 (0.5) 12.3
Retained Earnings 286.5 (9.3) 277.2
---------------------------------------- ------------ ------------ ----------
Earnings per share decreased by 2.6p per share for the year
ended 31 December 2019 as a result of the adoption of IFRS 16.
3. Segment analysis
Property
Transaction and Facilities Investment
Advisory Consultancy Management Management Other Total
Year ended to 31 December
2019 GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Revenue
United Kingdom
- commercial 94.2 180.3 190.1 33.2 - 497.8
- residential 139.1 49.6 41.0 - - 229.7
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total United Kingdom 233.3 229.9 231.1 33.2 - 727.5
Europe & the Middle East 127.5 38.6 80.9 35.4 - 282.4
Asia Pacific
- commercial 138.6 69.6 372.5 10.6 - 591.3
- residential 35.8 - - - - 35.8
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total Asia Pacific 174.4 69.6 372.5 10.6 - 627.1
North America 293.0 - - - - 293.0
----------------------------
Revenue 828.2 338.1 684.5 79.2 - 1,930.0
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Underlying profit/(loss)
before tax
United Kingdom
- commercial 12.3 19.4 12.1 9.0 (14.2) 38.6
- residential 17.8 7.6 3.7 - - 29.1
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total United Kingdom 30.1 27.0 15.8 9.0 (14.2) 67.7
Europe & the Middle East 5.4 2.9 0.2 7.3 - 15.8
Asia Pacific
- commercial 12.4 4.6 19.2 1.8 - 38.0
- residential 4.6 - - - - 4.6
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total Asia Pacific 17.0 4.6 19.2 1.8 - 42.6
North America 17.3 - - - - 17.3
----------------------------
Underlying profit/(loss)
before tax 69.8 34.5 35.2 18.1 (14.2) 143.4
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Property
Transaction and Facilities Investment
Advisory Consultancy Management Management Other Total
Year ended to 31 December
2018 GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Revenue
United Kingdom
- commercial 98.4 171.5 157.1 25.7 - 452.7
- residential 131.5 44.4 33.8 - - 209.7
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total United Kingdom 229.9 215.9 190.9 25.7 - 662.4
Europe & the Middle East 113.1 33.4 68.9 31.6 - 247.0
Asia Pacific
- commercial 160.1 45.1 327.0 9.4 - 541.6
- residential 45.9 - - - - 45.9
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total Asia Pacific 206.0 45.1 327.0 9.4 - 587.5
North America 264.5 - - - - 264.5
----------------------------
Revenue 813.5 294.4 586.8 66.7 - 1,761.4
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Underlying profit/(loss)
before tax
United Kingdom
- commercial 15.7 19.0 10.2 4.7 (13.7) 35.9
- residential 17.6 6.8 2.8 - - 27.2
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total United Kingdom 33.3 25.8 13.0 4.7 (13.7) 63.1
Europe & the Middle East 5.5 3.0 - 4.4 - 12.9
Asia Pacific
- commercial 21.2 4.3 19.2 1.9 - 46.6
- residential 8.3 - - - - 8.3
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
Total Asia Pacific 29.5 4.3 19.2 1.9 - 54.9
North America 12.8 - - - - 12.8
----------------------------
Underlying profit/(loss)
before tax 81.1 33.1 32.2 11.0 (13.7) 143.7
---------------------------- ------------ ------------ ---------------- ------------ ------- --------
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 statutory profit before tax 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 statutory
profit before tax is provided in Note 4.
4. 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.
2019 2018
GBPm GBPm
======================================================== ===== =====
Statutory profit before tax 115.6 109.4
Adjustments:
Amortisation of acquired intangible assets (excluding
software) 6.9 6.6
Impairment of goodwill and acquired intangible assets
(excluding software) - 0.3
Share-based payment adjustment (2.6) (1.9)
Profit on disposal of subsidiary and equity investments (1.7) (2.9)
Restructuring costs 11.5 8.4
Acquisition-related costs 13.7 20.7
GMP equalisation charge - 3.1
======================================================== ===== =====
Underlying profit before tax 143.4 143.7
-------------------------------------------------------- ----- -----
In the prior year, a GBP0.3m impairment charge was recognised
relating to acquired investment management contracts.
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 to align the underlying staff cost in the year
with the revenue recognised in the same period.
Profit on disposal includes profits recognised in relation to
the proceeds received in relation to legacy real estate funds in
North America and a joint venture in China (Beijing Jiaming Savills
Property Management Company Ltd). In the prior year, profit on
disposal included profits recognised in relation to the disposals
of subsidiaries (100% of Savills Asset Management Pte Ltd and 80.5%
of FPD Property Services (India) Private Ltd, which is now treated
as an equity investment held at FVOCI) and the part disposal of a
joint venture (Beijing Financial Street Savills Property Management
Company Ltd) in Asia Pacific
Restructuring costs includes costs of integration activities in
relation to significant business acquisitions. Charges in the year
primarily relate to costs incurred in rebranding the North American
business to Savills in line with the original integration plan and
the final reorganisation within the German Investment Management
business associated with the SEB acquisition of 2015. In the prior
year, costs related to the integration of Aguirre Newman in Spain
and Cluttons Middle East.
Acquisition-related costs include GBP12.4m (2018: GBP14.2m) of
provisions for future payments in relation to business
acquisitions, which are expensed through the income statement to
reflect the requirement for the recipients to remain engaged
actively in the business at the payment date. These relate to
acquisitions in the UK (GBP5.0m - primarily Currell Group), North
America (GBP2.9m) and Europe & the Middle East (GBP4.5m -
primarily Aguirre Newman). In the prior year, these costs related
to acquisitions in the UK (GBP3.6m - primarily GBR and Smiths
Gore), North America (GBP2.6m) and Europe & the Middle East
(GBP8.0m - primarily Aguirre Newman). In addition,
acquisition-related costs includes GBP0.5m of unwinding of interest
on deferred consideration payments (2018: GBP1.0m) and GBP0.8m of
transaction costs (2018: GBP3.3m). The prior year also included
GBP2.2m for payments in relation to Savills Investment Management's
acquisition of Merchant Capital (Japan) in May 2014.
The 2018 Guaranteed Minimum Pension ('GMP') equalisation charge
reflects the past service cost on the UK defined benefit pension
scheme, which is the estimated cost of equalising GMPs for the
impact between males and females.
5. 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.
2019 2018
GBPm GBPm
-------------------- ------ ------
United Kingdom
- Current tax 12.8 12.4
- Deferred tax (3.3) (0.5)
Foreign tax
- Current tax 22.8 20.0
- Deferred tax (0.3) 0.3
-------------------- ------ ------
Income tax expense 32.0 32.2
-------------------- ------ ------
6. Dividends
2019 2018
GBPm GBPm
---------------------------------------------- ----- -----
Amounts recognised as distribution to equity
holders in the year:
In respect of the previous year
Ordinary final dividend of 10.8p per share
(2017: 10.45p) 14.8 14.3
Supplemental interim dividend of 15.6p per
share (2017: 15.1p) 21.3 20.6
In respect of the current year
Interim dividend of 4.95p per share (2018:
4.8p) 6.7 6.5
---------------------------------------------- ----- -----
42.8 41.4
---------------------------------------------- ----- -----
In addition, the Group paid GBP0.5m (2018: GBP0.2m) of dividends
to non-controlling interests.
The Board recommends a final dividend of 12.05p (net) per
ordinary share (amounting to GBP16.5m) is paid, alongside the
supplemental interim dividend of 15.0p per ordinary share
(amounting to GBP20.5m), to be paid on 12 May 2020 to shareholders
on the register at 14 April 2020. These financial statements do not
reflect this dividend payable.
The total paid and recommended ordinary and supplemental
dividends for the 2019 financial year comprises an aggregate
distribution of 32.0p per ordinary share (2018: 31.2p per ordinary
share).
7(a). Basic and diluted earnings per share
2019 2019 2019 2018 2018 2018
Earnings Shares EPS Earnings Shares EPS
Year to 31 December GBPm million pence GBPm million pence
-------------------------------------- --------- -------- ------ --------- -------- ------
Basic earnings per share 82.9 136.7 60.6 76.7 136.4 56.2
Effect of additional shares issuable
under option - 4.2 (1.8) - 4.0 (1.6)
--------------------------------------
Diluted earnings per share 82.9 140.9 58.8 76.7 140.4 54.6
-------------------------------------- --------- -------- ------ --------- -------- ------
7(b). Underlying basic and diluted earnings per share
2019 2019 2019 2018 2018 2018
Earnings Shares EPS Earnings Shares EPS
Year to 31 December GBPm million pence GBPm million pence
----------------------------------------- --------- -------- ------ --------- -------- ------
Basic earnings per share 82.9 136.7 60.6 76.7 136.4 56.2
- Amortisation of acquired intangible
assets (excluding software) after
tax 5.1 - 3.7 4.7 - 3.4
- Impairment of goodwill and acquired
intangible assets (excluding software)
after tax - - - 0.3 - 0.2
- Share-based payment adjustment
after tax (2.2) - (1.6) (1.7) - (1.2)
- Profit on disposal of subsidiaries,
joint ventures and equity investments
after tax (1.2) - (0.9) (2.9) - (2.1)
- Restructuring costs after tax 9.3 - 6.8 6.9 - 5.1
- Acquisition related costs after
tax 12.8 - 9.4 19.7 - 14.4
- GMP equalisation charge after
tax - - - 2.5 - 1.8
Underlying basic earnings per
share 106.7 136.7 78.0 106.2 136.4 77.8
----------------------------------------- --------- -------- ------ --------- -------- ------
Effect of additional shares issuable
under option - 4.2 (2.3) - 4.0 (2.2)
-----------------------------------------
Underlying diluted earnings per
share 106.7 140.9 75.7 106.2 140.4 75.6
----------------------------------------- --------- -------- ------ --------- -------- ------
8. Cash generated from operations
2019 2018*
GBPm GBPm
---------------------------------------------------- ------- -------
Profit for the year 83.6 77.2
Adjustments for:
Income tax (Note 5) 32.0 32.2
Depreciation 60.6 14.9
Amortisation of intangible assets 10.4 10.3
Impairment of intangible assets and goodwill - 0.3
Loss on disposal of property, plant and equipment
and intangible assets 1.4 0.8
Profit on disposal of subsidiaries, joint ventures
and equity investments (1.7) (2.9)
Net finance cost 11.8 2.3
Share of post-tax profit from joint ventures
and associates (11.8) (11.1)
Decrease in employee and retirement obligations (9.5) (7.0)
Exchange movements and unrealised gains/losses
on financial instruments in operating activities (0.2) (0.6)
Increase/(Decrease) in provisions 3.4 (3.2)
Charge for share-based compensation 17.8 18.2
Operating cash flows before movements in working
capital 197.8 131.4
---------------------------------------------------- ------- -------
Increase in trade and other receivables and
contract assets (50.7) (36.7)
(Decrease)/Increase in trade and other payables
and contract liabilities (14.5) 45.1
---------------------------------------------------- ------- -------
Cash generated from operations 132.6 139.8
---------------------------------------------------- ------- -------
*2018 Cash generated from operations has been re-presented to
reflect GBP8.0m of employment-linked deferred consideration
payments previously shown as cash used in investing activities, now
shown in cash generated from operations to reflect the requirement
for recipients to remain actively engaged in the business at the
payment date in accordance with IAS 7.
Foreign exchange movements resulted in a GBP13.2m decrease in
current and non-current trade and other receivables and contract
assets (2018: GBP10.9m increase) and a GBP15.5m decrease in current
and non-current trade and other payables and contract liabilities
(2018: GBP12.3m increase).
9. Acquisition of subsidiaries
On 3 June 2019, the Group acquired the trade and assets of KKS
Strategy LLP, a London-based workplace consultancy and design
studio. Total acquisition consideration is provisionally determined
at GBP1.5m, all of which was settled on completion. A further
GBP1.6m is payable over instalments in June 2020, 2021 and 2022 and
is deemed to be linked to continued active engagement within the
business. As required by IFRS 3 (revised), these payments will be
expensed to the income statement over the relevant period of
engagement.
The fair value exercise is in progress and goodwill of GBP1.5m
has been provisionally determined being equal to the cash
consideration paid upon completion. No other assets were identified
as part of the fair value exercise undertaken.
2018 Acquisitions
In the year ended 31 December 2018 the Group acquired Cluttons
Middle East and the Currell Group along with the third party
property management portfolio of Broadgate Estates Limited. There
were no updates to the provisional fair values in respect of these
acquisitions as reported in the Group's 2018 Annual Report.
10. Borrowings
Movements in borrowings are analysed as follows:
GBPm
----------------------------------------------- --------
Opening amount as at 1 January 2019 150.0
Additional borrowings 158.1
Repayments of borrowings (including overdraft
movement) (125.2)
Non-cash movement (1.5)
Closing amount as at 31 December 2019 181.4
------------------------------------------------- --------
2019 2018
GBPm GBPm
----------------------------------------- ------ ------
Current
Bank overdrafts 0.1 -
Unsecured bank loans 33.3 0.4
33.4 0.4
Non-current
Loan notes 150.0 150.0
Transaction costs (RCF arrangement fees
and issuance of loan notes) (2.0) (0.5)
Finance leases - 0.1
------------------------------------------ ------ ------
148.0 149.6
----------------------------------------- ------ ------
181.4 150.0
----------------------------------------- ------ ------
In June 2019 the Group amended and extended its existing GBP360m
multi-currency revolving credit facility ('RCF') to include a
GBP90m accordion facility and extend the expiry date from December
2020 to June 2024. As at 31 December 2019 GBP32.5m (2018: GBPnil)
of the RCF was drawn.
In June 2018, the Group raised GBP150.0m of long term debt
through the issuance of 7, 10 and 12 year fixed rate private note
placements into the US institutional market.
The remaining unsecured bank loans due within one year or on
demand reflects a GBP0.8m working capital loan in Thailand, which
is payable on demand, denominated in Thailand baht and has an
effective interest rate of 4.55%.
The Group has the following undrawn borrowing facilities:
2019 2018
GBPm GBPm
----------------------------------- ------ ------
Floating rate
- expiring within one year or on
demand 45.3 32.1
- expiring between 1 and 5 years 328.0 360.1
------------------------------------ ------ ------
373.3 392.2
----------------------------------- ------ ------
11. Related party transactions
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. In the year the Group received
income of GBP0.2m (2018: GBPnil) from an associate.
As at 31 December 2019, loans outstanding to joint ventures
amounted to GBP2.8m (2018: GBP2.3m), in addition a GBP0.6m loan was
advanced to associates in the year (2018: GBPnil).
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.
Directors' responsibility statement
The Savills Report and Accounts for year end 31 December 2019
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 European Union, give a true
and fair view of the assets, liabilities, financial position and
profit of the Group; and
-- the Directors' 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.
In the case of each Director in office at the date the
Directors' Report is approved:
-- so far as the Director is aware, there is no relevant audit
information of which the Group's auditors are unaware; and
-- they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any relevant
audit information and to establish that the Group's auditors are
aware of that information.
On behalf of the Board
Mark Ridley
Group Chief Executive
Chris Lee
Group Legal Director and Company Secretary
12 March 2020
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 2019 will be circulated to shareholders on 30 March 2020
and will also be available from the investor relations section of
the Company website at www.ir.savills.com or from:
Savills plc, 33 Margaret Street, London, W1G 0JD
Telephone: 020 7499 8644
END
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END
FR FLFLTVFILLII
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