TIDMSVS
RNS Number : 2880V
Savills PLC
06 August 2020
6 August 2020
Savills plc
("Savills" or "the Group")
RESULTS FOR THE HALF YEARED 30 JUNE 2020
Savills plc, the international real estate advisor, today
announces its unaudited results for the six months ended 30 June
2020.
Key Financial Information
-- Group revenue down GBP55.6m (7% as reported and in constant
currency*) to GBP791.4m (H1 2019: GBP847.0m)
-- Group underlying profit** before tax down GBP25.2m (66% as
reported and in constant currency) to GBP13.2m (H1 2019:
GBP38.4m)
-- Group profit before tax down 69% to GBP7.7m (H1 2019:
GBP24.7m)
-- Underlying basic earnings per share 7.0p (H1 2019: 20.9p)
-- Basic earnings per share 3.9p (H1 2019: 12.8p)
-- Net cash GBP9.4m (H1 2019: Net debt GBP139.0m)
* Revenue and underlying profit for the period are translated at
the prior period 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 and Note 7 to the Interim Financial Statements.
Trading performance
-- Less transactional businesses, including Consultancy and
Property and Facilities Management, (65% of Group revenue) helped
mitigate the significant impact of Covid-19, particularly in Q2 on
global leasing and investment market volumes.
-- Property and Facilities Management revenue up 4%, Consultancy
revenue up 1%.
-- Commercial Transaction revenue reduced 23% overall with Asia
Pacific and North America particularly affected.
-- UK Residential revenue down 8%, reflecting significant
reductions in transactional activity during lockdown, partially
mitigated by a strong recovery in June.
-- Savills Investment Management revenue down 6% as a result of
lower performance fee income. Base management fees up 9%, with
period end AUM up 11% at EUR20.4bn.
Commenting on the results, Mark Ridley, Group Chief Executive of
Savills plc, said:
"In the context of the significant impact of Covid-19 on global
markets in the second quarter, Savills resilient interim results
highlight the diversity and strength of our Global business. During
this period, our less transactional businesses have provided a
solid platform for the Group and our transactional business teams
have partially mitigated the effect of significantly lower levels
of trading activity by winning increased market share. Much of this
is due to our strategy of remaining open for business throughout,
retaining the strength of our teams and focussing resolutely on
addressing both the pandemic-related, and longer term, needs of our
clients.
"Looking forward, as a consequence of Covid-19 the economic
environment remains highly uncertain, chiefly in respect of
expected recovery trajectories across the world and the occurrence
of second wave outbreaks causing further lockdowns. In addition, it
is unclear how significantly the longer term economic impact of
Covid-19 will weigh on corporate and investor sentiment. That said,
the wider context for real estate investment is largely positive
with the expectation of low interest rates for longer and
continued, or enhanced, investor demand for income reflected in
increased allocations to Real Asset backed strategies.
"In recent weeks we have seen signs of recovery in residential
markets and a number of commercial transaction markets around the
world. Clearly, our performance in the second half of 2020 will be
highly dependent upon the extent to which such signs become a
sustained recovery for the markets in which we operate.
"In view of the lack of certainty over the impact of Covid-19
over the coming months, the 2019 final dividend was cancelled and
the Board is not declaring an interim dividend. We remain focused
on long term shareholder returns, and will look to restart
distributions as soon as is prudently appropriate.
"Savills is a resilient, globally diversified business with a
strong balance sheet. We are confident in the Group's ability to
withstand all modelled scenarios for the year and to continue both
to execute our growth strategies and deliver a resilient
performance in 2020."
For further information, contact:
Savills 020 7409 8030
Mark Ridley, Group Chief Executive
Simon Shaw, Group Chief Financial
Officer
Tulchan Communications 020 7353 4200
David Allchurch
Elizabeth Snow
The analyst presentation will be held at 9.30am today by webinar
. For joining instructions please contact nrichards@savills.com. A
recording of the presentation will be available from noon at
www.ir.savills.com .
Covid-19 impact on Real Estate Markets
As disclosed in the Group's trading update on 25 June 2020,
Covid-19 has had a significant impact on investor and occupier
activity as the pandemic spread across the world. The impact of
lockdowns and the inability to travel or conduct viewings
significantly reduced the volume of transactional activity which
could be conducted in the first half of 2020.
In Asia Pacific, real estate investment activity contracted by
40% year-on-year. As domestic lockdowns are lifted, and demand
gradually improves, regional growth momentum is expected to turn
positive in the second half of 2020 and we have seen greater levels
of activity return as areas such as Mainland China returned to
business.
After a dynamic start to the year, investment activity in Europe
reduced significantly in Q2 by 48%, disrupted by extensive lockdown
measures. In the UK, transactional activity was similarly affected
declining 56% in Q2.
In the US, overall demand for office space fell substantially in
the second quarter. The market volume of leasing activity for H1
2020 declined by 31% compared to the same period in 2019. Market
conditions are becoming increasingly tenant-favourable across the
country, however occupiers in major metropolis markets such as New
York and the major West Coast cities remain reluctant to
contemplate significant new lease activity during the current phase
of the pandemic.
Covid-19 impact on our business
Our primary concern
Our primary concern has been the well-being of our staff,
clients and suppliers both in respect of our own businesses and, as
a substantial Property and Asset Manager, in respect of the
occupiers and users of the portfolio under our management. Such
activities and advice have become ever more important as we have
overcome the specific issues enabling a return to work. Today, 90%
of our offices around the world are open and either working on a
rota system or fully staffed.
Measures we have taken to manage through the pandemic
Similar to our approach during the Global Financial Crisis in
2008/9 ('GFC'), in an environment where the outlook is constantly
changing, for reasons outside our control, and thus where
traditional near term forecasting is extremely compromised, we have
focused on liquidity and cash management and have evaluated our
actions against a live Covid-19 liquidity model.
Overarching this, we have adopted the same principle as in the
GFC, which is to maintain our staffing levels to ensure that we can
continue to provide comprehensive, high quality, timely real estate
advice in circumstances where clients have needed it more than
ever. This is only possible because of our conservative financing
structure and is designed both to minimise the impact on staff and
to position the Group to outperform in the recovery phases as they
emerge across the regions in which we operate.
Examples of specific actions taken include:
-- Senior management salary cuts for 2020 of 20% across the Group;
-- Reductions in discretionary expenditure;
-- Reductions and deferment of capital expenditure (save in
respect of long term data and digitisation projects);
-- Cancellation of the 2019 Final Dividend
-- Limited acceptance of Government Support Schemes, aimed at
those business lines expressly prevented from operating during
lockdown, principally our UK Residential Transaction business; the
majority of staff have now returned from furlough; and
-- Maximisation of cash flows including a no cost deferral of UK
VAT payments totalling GBP45.7m.
Business development during the period
A challenging market environment generally creates business
development opportunities and the first half of 2020 has been no
exception. Our financial strength relative to our industry as a
whole has provided some strategic recruitment and acquisition
opportunities in areas of particular focus for the Group. In March
we announced the acquisition of Macro Consultants LLC, a US based
project management business, which strengthens our global network
in this important consulting business line.
In July, post-period end, we agreed the acquisition of OMEGA
Immobilien Management GmbH and OMEGA Immobilien Service GmbH, which
provides us with a platform to grow our Property Management
business in the important German market. The transaction is
expected to complete, subject to Bundeskartellamt review, by early
Q4 2020.
In addition we have remained active in targeted recruitment
across our key service lines with a particular focus on Continental
Europe and the Middle East, North America and the Asia Pacific
Investment Management Business.
Impact on our results
Covid-19 has had a significant impact on the world's real estate
markets. As a global business Savills has had to navigate market
disruption from its early onset in the Asia Pacific region through
its progressive spread across the world. The impact of lockdowns,
including the prohibition on site viewings, has significantly
reduced the volume of transactional activity which could be
conducted.
In the six months to 30 June 2020 Savills delivered revenue of
GBP791.4m, a decrease of 7% (same decline in constant currency) (H1
2019: GBP847.0m). Underlying profit was GBP13.2m, 66% lower than
the first half of 2019 (H1 2019: GBP38.4m) (same decline in
constant currency). The Group's underlying profit margin was 1.7%
(H1 2019: 4.5%). This reflects the resilient performance of our
less transactional businesses during a period of significant
uncertainty and the expected fall in transactional activity
throughout the world as a result of the Covid-19 pandemic. It also
reflects our strategy of maintaining the bench-strength of our
teams to advise clients despite their impaired ability to
transact.
It is highly encouraging that Savills has traded profitably in
the first half of 2020, albeit at a materially reduced level
year-on-year, and the various measures taken across the Group
resulted in a significant improvement in the Group's liquidity
position with net cash of GBP9.4m at period end (H1 2019: net debt
GBP139.0m).
Statutory profit before tax, including deferred consideration
provisions and acquisition and restructuring costs was GBP7.7m (H1
2019: GBP24.7m).
Business review
The following table sets out Group revenue and underlying profit
by operating segment:
Revenue H1 2020 H1 2019 Change
GBPm GBPm
------------------------------------ -------- -------- -------
Transaction Advisory 278.5 346.3 (20%)
Consultancy 144.6 142.5 1%
Property and Facilities Management 337.8 325.7 4%
Investment Management 30.5 32.5 (6%)
Unallocated/Central - - n/a
------------------------------------ -------- -------- -------
Group revenue 791.4 847.0 (7%)
------------------------------------ -------- -------- -------
Underlying profit H1 2020 H1 2019 Change
GBPm GBPm
Transaction Advisory (14.7) 9.9 n/a
Consultancy 10.2 11.5 (11%)
Property and Facilities Management 17.7 16.2 9%
Investment Management 4.3 5.6 (23%)
Unallocated cost (4.3) (4.8) 10%
Group underlying profit 13.2 38.4 (66%)
------------------------------------ -------- -------- -------
The following table sets out Group revenue and underlying profit
by geographical area:
Revenue H1 2020 H1 2019 Change
GBPm GBPm
-------------------------- -------- -------- -------
UK 298.8 303.6 (2%)
Asia Pacific 279.7 298.4 (6%)
Europe & the Middle East 107.4 113.3 (5%)
North America 105.5 131.7 (20%)
Unallocated/Central - - n/a
Group revenue 791.4 847.0 (7%)
-------------------------- -------- -------- -------
Underlying profit H1 2020 H1 2019 Change
GBPm GBPm
UK 15.0 22.2 (32%)
Asia Pacific 11.8 15.5 (24%)
Europe & the Middle East (4.4) (1.2) (267%)
North America (4.9) 6.7 n/a
Unallocated cost (4.3) (4.8) 10%
Group underlying profit 13.2 38.4 (66%)
-------------------------- -------- -------- -------
Transaction Advisory
Revenue H1 2020 H1 2019 Change
GBPm GBPm
-------------------------- -------- -------- -------
UK 83.8 88.7 (6%)
Asia Pacific 54.8 82.9 (34%)
Europe & the Middle East 38.1 43.0 (11%)
North America 101.8 131.7 (23%)
Total 278.5 346.3 (20%)
-------------------------- -------- -------- -------
Our Transaction Advisory revenues decreased on H1 2019 by 20%
(same in constant currency), reflecting the impact of Covid-19 on
transaction market volumes as lockdowns spread across the world. In
most markets, our transaction teams outperformed the market with
increased share of the available transaction activity. An
underlying loss of GBP14.7m was recognised during the period,
versus a GBP9.9m profit in H1 2019. This reflected both the decline
in transaction activity and our strategy of maintaining our bench
strength to support clients during a period in which their ability
to transact was severely affected.
UK Commercial
UK Commercial Transaction fee income performed robustly
decreasing by 2% to GBP30.9m (H1 2019: GBP31.4m). This reflected a
very strong Q1, pre-lockdown, when market volumes, supported by the
General Election result in December 2019, rose by 33% compared with
the same period in 2019. In Q2 volumes declined significantly by
56% on Q2 2019. Investment transaction volumes for the UK as a
whole were GBP19.7bn in H1 2020, 8% down on the same period in
2019. Our national Investment Transaction business (excluding
Central London) saw revenue decline by only 2% year-on-year.
Central London office investment volumes were also substantially
down, showing a 42% year-on-year decline. Against this backdrop,
Savills increased its market share acting on 37% of the capital
value transacted in London during the period. In the retail sector
market investment volumes fell by approximately 46% off an already
low 2019 base; however our teams saw revenue decline by only 4% as
they continued to advise on strategic options and re-financing
transactions.
Our leasing and occupier facing businesses were more
significantly affected through lockdown as particularly office
tenants sought short term renewals rather than committing to
significant new transactions.
Improvements in Development and Rural transactions mitigated the
Covid-19 effect on the underlying profit of the UK Commercial
Transaction which declined to GBP0.9m (H1 2019: GBP1.3m).
UK Residential
UK Residential Transaction market conditions were challenging
with market trading volumes at the lowest level since the Global
Financial Crisis. Savills UK residential revenue declined 8% to
GBP52.9m (H1 2019: GBP57.3m). In the second hand agency business,
revenues declined by 16% as we were largely prevented by lockdown
from transacting during the key Spring sales season. The strong
surge in activity in June, once viewings were again permitted, led
to a record number of transactions going under offer, which should
be reflected in revenue in the coming periods. This recovery was
primarily in the Country market as buyers sought outside amenity
space. However, we have also seen a significant recovery in
activity in the core London market during the same period together
with improved activity from international buyers in Prime Central
London. Savills overall transaction volumes exchanged were down 8%
in London and 27% in the regional markets. The average value of
London residential property sold by Savills in the period was down
11% to GBP1.9m (H1 2019: GBP2.1m) reflecting the effect of an
increased proportion of transactions in the Core London market
(values GBP0.5m-GBP1.5m). The average transaction value outside
London grew marginally to GBP1.2m (H1 2019: GBP1.17m).
Revenue from sales of new homes was 17% down on H1 2019. New
homes reservations for H1 2020 were also down 16% on H1 2019
reflecting both overall market trends and the inability of overseas
buyers to travel during lockdown. A similar improvement in activity
has been seen since the beginning of June.
Our Private Rented Sector (PRS) transactional business, the UK
market leader in this increasingly sought after sector, delivered
an outstanding performance increasing revenue by 87% period on
period and executing a number of significant transactions.
As a result of the above factors, underlying profits in the UK
residential transaction business decreased by 54% to GBP1.6m (H1
2019: GBP3.5m).
Asia Pacific Commercial
Commercial Transaction fee income in Asia Pacific decreased by
39% (41% in constant currency) to GBP41.5m (H1 2019: GBP68.2m).
This reflected the early onset of Covid-19 in Greater China
including Hong Kong, and Singapore together with lockdown
requirements in Australia and Japan. The decline in volumes in
these markets was partially mitigated by strong growth through the
recovery period in South Korea, Vietnam and Taipei. During the
latter part of Q2 there has been clear evidence of a recovery in
activity, post-lockdown, in Mainland China.
Overall the Asia Pacific commercial transaction business
resulted in an underlying loss for the period of GBP4.4m (H1 2019:
GBP4.2m profit).
Asia Pacific Residential
Residential Transaction fee income in Asia Pacific decreased by
9.5% to GBP13.3m (H1 2019: GBP14.7m) (12% in constant currency).
There were significant reductions in activity in Australia and
Singapore, which were partially mitigated by growth in Mainland
China and Thailand.
Underlying profits in the region, improved by the trading
performance in China and the rationalisation of the Australian
business in 2019, increased by 14% to GBP1.6m (H1 2019:
GBP1.4m).
Europe & the Middle East
In Europe and the Middle East, transaction fee income decreased
by 11% to GBP38.1m (H1 2019: GBP43.0m) (same in constant currency)
with strong performances in Germany, the Netherlands and Belgium
mitigating the effect of reductions in activity elsewhere. Southern
Europe was significantly affected by the pandemic, however by the
end of the period there were signs of improving activity levels.
These factors, together with the run-off of business development
costs in the region, contributed to the underlying loss of GBP9.8m
(H1 2019: GBP7.2m loss) for the first half of the year.
North America
Being overwhelmingly a transactional business focused on
occupiers, the North American business has been materially affected
by the Covid-19 pandemic, with revenue down by 23% (24% in constant
currency) to GBP101.8m (H1 2019: GBP131.7m). The year started
robustly; however the US, being the last major region to go into
lockdown, has to date struggled to return to normal activity
levels. This is particularly significant in the major metropolis
markets such as New York and San Francisco. The effect of this can
be seen in the market volume of US leasing transactions, which
declined by 31% during H1 2020. Two positive exceptions have been
the logistics market and our work for the US Government under the
US General Services Administration contract, both of which showed
growth during the period.
As a result of the Covid-19 related reduction in revenue, the
North American business posted an underlying loss of GBP4.6m for
the period (H1 2019: GBP6.7m underlying profit).
Consultancy
Revenue H1 2020 H1 2019 Change
GBPm GBPm
-------------------------- -------- -------- -------
UK 92.2 93.4 (1%)
Asia Pacific 32.4 32.7 (1%)
Europe & the Middle East 16.3 16.4 (1%)
North America 3.7 - n/a
Total 144.6 142.5 1%
-------------------------- -------- -------- -------
Consultancy fee income showed considerable resilience during the
period, with most regions showing stable revenues. The 1% increase
in revenue (same in constant currency) to GBP144.6m (H1 2019:
GBP142.5m) included the consolidation of the initial period of
ownership of Macro Consultants LLC, the US project management
consultancy acquired in March 2020.
In the UK, strong performances in Housing, Building and Project
Consultancy, Rural and Development Consultancy largely outweighed
slight reductions in Financial Services, Lease Consultancy and
Planning Consultancy.
In Asia Pacific, revenue growth in Australia, Singapore, Japan
and South Korea largely offset slight reductions in Greater China
due to a reduced volume of valuation and research consultancy
during lockdowns.
In the Europe and Middle East business, strong performances in
Germany, the Netherlands, Sweden and Poland, largely mitigated the
effect of reductions in activity elsewhere in the region.
As part of our strategy to diversify our income streams in North
America by building our Consultancy practices, in March we
announced the acquisition of Macro Consultants LLC, a high quality
National project management consultancy. It has performed in line
with our expectations, subject to the effect of project delays
during lockdown.
Underlying profit of the Consultancy business decreased by 11%
to GBP10.2m (H1 2019: GBP11.5m).
Property and Facilities Management
Revenue H1 2020 H1 2019 Change
GBPm GBPm
-------------------------- -------- -------- -------
Asia Pacific 190.0 180.0 6%
UK 110.1 107.6 2%
Europe & the Middle East 37.7 38.1 (1%)
Total 337.8 325.7 4%
-------------------------- -------- -------- -------
Our Property and Facilities Management business increased global
revenues by 4% (3% in constant currency) to GBP337.8m (H1 2019:
GBP325.7m). Savills total area under management increased 10% since
H1 2019 to 2.33bn sq.ft, inclusive of the Group's effective share
of square footage managed in joint ventures (H1 2019: 2.12bn sq
ft).
In general, across the globe Covid-19 has necessitated
significant amounts of additional work by Property Managers, and
the provision of specific advice and return to work processes to
clients during and after lockdowns. In an environment where rent
collection remains problematic, particularly in certain sectors
such as retail and hospitality, this too required extra resource.
In many cases, the additional work has not been reflected in
surcharges to clients, who have themselves been adversely affected
by temporarily lower rental income streams.
In Asia, strong growth in Hong Kong, Japan, Singapore and
Vietnam mitigated the effect of reduced revenues in China,
Australia and South Korea during the period. Cost savings,
particularly the moderation of wage inflation in Hong Kong,
contributed to margin improvement in the region overall.
In the UK, growth in Commercial Property and Facilities
Management revenue was partially reduced by a decline of 7% in
Residential Property Management revenues driven by fewer lettings
transactions during lockdown.
Underlying profit for the Property and Facilities Management
business increased by 9% to GBP17.7m (H1 2019: GBP16.2m).
Investment Management
Revenue from Investment Management decreased by 6% to GBP30.5m
(H1 2019: GBP32.5m). Base management fees represented approximately
82% (HY 2019: 75%) of Investment Management gross revenues and grew
by 9% during the period. This growth helped mitigate the 78%
reduction in performance fee income during the period which
declined from 10% in H1 2019, which benefited from certain one-time
performance fees, to 2% of total revenue. 85% of funds (by AUM)
continued to exceed their benchmark returns on a five year rolling
basis, and this track record contributed to resilient capital
raising activity, albeit reduced in the context of Covid-19 which
made for challenging market conditions.
Assets under management increased by 11% to EUR20.4bn (H1 2019:
EUR18.3bn).
As a result of the effect of reduced performance fees, partially
mitigated by cost savings, underlying profit for Investment
Management decreased by 23% to GBP4.3m (H1 2019: GBP5.6m).
Unallocated/central revenue and cost
The unallocated cost segment represents other costs, expenses
and net interest not directly allocated to the operating activities
of the Group's business segments. The H1 decrease in unallocated
net costs of 10% to GBP4.3m (H1 2019: GBP4.8m) reflects a decrease
in the central performance related bonus provision.
Acquisition and restructuring costs
During the period the Group incurred an aggregate restructuring
charge of GBP1.0m (H1 2019: GBP4.3m) and acquisition related costs
of GBP1.8m (H1 2019: GBP7.1m). The restructuring charge relates
principally to the ongoing cost of deferred shares issued in
relation to the restructuring upon acquisition of Aguirre Newman at
the end of 2017. Acquisition costs in the period primarily
represents provisions for future consideration payments which are
contingent on the continuity of recipients' employment at the time
of payment. The majority of the charge relates to the most recent
acquisitions in the UK and the US.
Earnings and financial position
The Group's underlying profit margin in the period was 1.7% (H1
2019: 4.5%). This was as a result of revenues being more heavily
weighted towards non-transactional business lines which carry lower
margin, with transactional activity significantly lower due to the
impact of Covid-19 throughout the Group. In addition, the strategy
of retaining transaction advisory staff during this period is also
reflected in the short term diminution in margin. Basic earnings
per share for the six months to 30 June 2020 decreased by 70% to
3.9p (H1 2019: 12.8p). Underlying earnings per share decreased 67%
to 7.0p (H1 2019: 20.9p).
The impact of foreign exchange movements on the translation of
underlying profits from our overseas businesses resulted in an
increase in underlying profit of GBP0.3m.
At 30 June 2020, net cash was GBP9.4m (30 June 2019: GBP139.0m
net debt). At 30 June 2020, the Group had cash balances of
GBP235.6m (30 June 2019: GBP161.2m) less borrowings of GBP226.2m
(30 June 2019: GBP300.2m), with GBP334.3m of credit facilities
remaining available for utilisation (30 June 2019: GBP252.5m). The
Group benefited from the deferral, at no cost, of VAT/Sales Tax
liabilities totalling GBP61.2m. Adjusting, for that deferral, the
Group's like for like net debt position improved by just under
GBP90m compared with the position at 30 June 2019.
Principal risks and uncertainties
The key risks and uncertainties relating to the Group's
operations remain largely consistent with those disclosed in the
Group's Annual Report and Accounts 2019. These are listed below,
please refer to pages 27 to 30 thereof or to our investors' page on
www.savills.com.
-- Covid-19
-- Business conditions, general economy and geopolitical issues
-- Achieving the right market positioning in response to the needs of our clients
-- Recruitment and retention of high-calibre staff
-- Reputational and brand risk
-- Legal risk
-- Failure or significant interruption to IT systems causing disruption to client service
-- Operational resilience/Business Continuity
-- Business conduct
-- Changes in the regulatory environment/regulatory breaches
-- Acquisition/integration risk
Since the Group's Annual Report and Accounts 2019 were released,
the impact of Covid-19 on global markets and activity has
intensified. Despite this, we remain confident in the Group's
capability to withstand all modelled scenarios for the next 18
months and our mitigating actions for this risk remain the
same.
Summary and outlook
In the context of the significant impact of Covid-19 on global
markets in the second quarter, Savills resilient interim results
highlight the diversity and strength of our Global business. During
this period, our less transactional businesses have provided a
solid platform for the Group and our transactional business teams
have partially mitigated the effect of significantly lower levels
of trading activity by winning increased market share. Much of this
is due to our strategy of remaining open for business throughout,
retaining the strength of our teams and focussing resolutely on
addressing both the pandemic-related, and longer term, needs of our
clients.
Looking forward, as a consequence of Covid-19 the economic
environment remains highly uncertain, chiefly in respect of
expected recovery trajectories across the world and the occurrence
of second wave outbreaks causing further lockdowns. In addition, it
is unclear how significantly the longer term economic impact of
Covid-19 will weigh on corporate and investor sentiment. That said,
the wider context for real estate investment is largely positive
with the expectation of low interest rates for longer and
continued, or enhanced, investor demand for income reflected in
increased allocations to Real Asset backed strategies.
In recent weeks we have seen signs of recovery in residential
markets and a number of commercial transaction markets around the
world. Clearly, our performance in the second half of 2020 will be
highly dependent upon the extent to which such signs become a
sustained recovery for the markets in which we operate.
In view of the lack of certainty over the impact of Covid-19
over the coming months, the 2019 final dividend was cancelled and
the Board is not declaring an interim dividend. We remain focused
on long term shareholder returns, and will look to restart
distributions as soon as is prudently appropriate.
Savills is a resilient, globally diversified business with a
strong balance sheet. We are confident in the Group's ability to
withstand all modelled scenarios for the year and to continue both
to execute our growth strategies and deliver a resilient
performance in 2020.
Mark Ridley Nicholas Ferguson CBE
Group Chief Executive Chairman
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that this condensed consolidated interim
financial statements have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and that the interim
management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during the
first six months and their impact on the condensed consolidated
interim financial statements and a description of the principal
risks and uncertainties for the remaining six months of the financial
year; and
-- material related party transactions in the first six months of
the financial year and any material changes in the related party
transactions described in the last Annual Report.
The Directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The Directors of Savills plc are listed in the Company's Report
and Accounts for the year ended 31 December 2019. A list of current
Directors is maintained on the Savills plc website:
www.savills.com.
By order of the Board
J Mark Ridley, Group Chief Executive
Simon Shaw, Group Chief Financial Officer
5 August 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. Undue reliance should not be placed on
such statements, which are based on current expectations and are
subject to a number of risks and uncertainties that could cause
actual results to differ materially from any expected future
results in forward-looking statements.
The Company accepts no obligation to publicly revise or update
these forward-looking statements or adjust them to future events or
developments, whether as a result of new information, future events
or otherwise, except to the extent legally required.
Independent review report to Savills plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Savills Plc's condensed consolidated interim
financial statements (the "interim financial statements") in the
results for the half year of Savills Plc for the 6 month period
ended 30 June 2020. Based on our review, nothing has come to our
attention that causes us to believe that the interim financial
statements are not prepared, in all material respects, in
accordance with International Accounting Standard 34, 'Interim
Financial Reporting', as adopted by the European Union and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the condensed interim consolidated statement of financial position as at 30 June 2020;
-- the condensed interim consolidated income statement and
condensed interim consolidated statement of comprehensive income
for the period then ended;
-- the condensed interim consolidated statement of cash flows for the period then ended;
-- the condensed interim consolidated statement of changes in
equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the results for the
half year have been prepared in accordance with International
Accounting Standard 34, 'Interim Financial Reporting', as adopted
by the European Union and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
As disclosed in note 2 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the Group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The results for the half year, including the interim financial
statements, is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the results
for the half year in accordance with the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the results for the half year based on our
review. This report, including the conclusion, has been prepared
for and only for the company for the purpose of complying with the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
We have read the other information contained in the results for
the half year and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
5 August 2020
London
Savills plc
Condensed interim consolidated income statement
for the period ended 30 June 2020
Six months Six months Year ended
to 30 June to 30 June 31 December
2020 2019 2019
(unaudited) (unaudited) (audited)
Note GBPm GBPm GBPm
------------------------------------------ ------ ------------ ------------ -------------
Revenue 6 791.4 847.0 1,930.0
------------------------------------------ ------ ------------ ------------ -------------
Less:
Employee benefits expense (514.1) (545.3) (1,240.5)
Depreciation (31.8) (30.3) (60.6)
Amortisation of intangible assets
and impairment of goodwill (4.6) (4.8) (10.4)
Other operating expenses (231.8) (241.0) (505.1)
Other operating income 0.1 0.2 0.5
Other gains - 0.3 1.7
Operating profit 9.2 26.1 115.6
------------------------------------------ ------ ------------ ------------ -------------
Finance income 1.6 3.0 6.5
Finance costs (8.1) (9.1) (18.3)
------------------------------------------ ------ ------------ ------------ -------------
(6.5) (6.1) (11.8)
Share of post-tax profit from
joint ventures and associates 5.0 4.7 11.8
------------------------------------------ ------ ------------ ------------ -------------
Profit before income tax 7.7 24.7 115.6
Income tax expense 8 (2.2) (7.1) (32.0)
Profit for the period 5.5 17.6 83.6
------------------------------------------ ------ ------------ ------------ -------------
Attributable to:
Owners of the parent 5.4 17.5 82.9
Non-controlling interests 0.1 0.1 0.7
------------------------------------------ ------ ------------ ------------ -------------
5.5 17.6 83.6
Earnings per share
Basic earnings per share 10(a) 3.9p 12.8p 60.6p
Diluted earnings per share 10(a) 3.8p 12.5p 58.8p
Supplementary income statement information
Reconciliation to underlying profit before
income tax
Profit before income tax 7.7 24.7 115.6
- restructuring and acquisition-related
costs 7 2.8 11.4 25.2
- other underlying adjustments 7 2.7 2.3 2.6
------------------------------------------ ------ ------------ ------------ -------------
Underlying profit before income
tax 7 13.2 38.4 143.4
------------------------------------------ ------ ------------ ------------ -------------
Underlying earnings per share
Basic earnings per share 10(b) 7.0p 20.9p 78.0p
Diluted earnings per share 10(b) 6.8p 20.4p 75.7p
------------------------------------------ ------ ------------ ------------ -------------
Notes 1 to 21 are an integral part of these condensed interim
financial statements.
Savills plc
Condensed interim consolidated statement of comprehensive
income
for the period ended 30 June 2020
Six months Six months Year ended
to 30 June to 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
GBPm GBPm GBPm
--------------------------------------------- ------------------ ------------------ ----------------
Profit for the period 5.5 17.6 83.6
Other comprehensive income/(loss)
Items that will not be reclassified
to profit or loss:
Remeasurement of defined benefit pension
scheme and employee benefit obligations (1.4) (12.6) (23.2)
Changes in fair value of equity investments
at FVOCI (7.4) (0.8) (0.3)
Tax on items that will not be reclassified 0.3 2.4 4.4
--------------------------------------------- ------------------ ------------------ ----------------
Total items that will not be reclassified
to profit or loss (8.5) (11.0) (19.1)
Items that may be reclassified subsequently
to profit or loss:
Currency translation differences 32.9 0.4 (21.0)
Tax on items that may be reclassified (1.2) 0.7 3.8
--------------------------------------------- ------------------ ------------------ ----------------
Total items that may be reclassified
subsequently to profit or loss 31.7 1.1 (17.2)
Other comprehensive income/(loss) for
the period, net of tax 23.2 (9.9) (36.3)
--------------------------------------------- ------------------ ------------------ ----------------
Total comprehensive income for the period 28.7 7.7 47.3
--------------------------------------------- ------------------ ------------------ ----------------
Total comprehensive income attributable
to:
Owners of the parent 28.6 7.7 46.6
Non-controlling interests 0.1 - 0.7
--------------------------------------------- ------------------ ------------------ ----------------
28.7 7.7 47.3
--------------------------------------------- ------------------ ------------------ ----------------
Notes 1 to 21 are an integral part of these condensed interim
financial statements.
Savills plc
Condensed interim consolidated statement of financial
position
at 30 June 2020
30 June 31 December
2019 2019
30 June
2020 (unaudited) (unaudited) (audited)
Note GBPm GBPm GBPm
-------------------------------------- ----- ------------------ ------------- ------------
Assets: Non-current assets
Property, plant and equipment 68.6 71.4 68.9
Right of use assets 232.5 238.3 226.2
Goodwill 13 394.8 385.7 374.2
Intangible assets 51.3 47.0 44.5
Investments in joint ventures
and associates 55.1 51.7 51.4
Deferred income tax assets 40.5 31.5 32.7
Financial assets at fair value
through other comprehensive
income ('FVOCI') 14 25.0 31.3 32.6
Contract assets 1.5 1.2 1.6
Other receivables 35.1 28.2 27.3
904.4 886.3 859.4
-------------------------------------- ----- ------------------ ------------- ------------
Assets: Current assets
Contract assets 7.6 7.8 7.5
Trade and other receivables 427.2 480.9 568.9
Income tax receivable 4.0 5.9 3.6
Derivative financial instruments 0.1 0.1 0.2
Cash and cash equivalents 235.6 161.2 209.9
674.5 655.9 790.1
-------------------------------------- ----- ------------------ ------------- ------------
Liabilities: Current liabilities
Borrowings 17 78.0 152.1 33.4
Lease liabilities 47.5 45.9 45.3
Derivative financial instruments 0.2 0.1 0.1
Contract liabilities 9.2 8.5 10.8
Trade and other payables 430.0 402.6 589.9
Income tax liabilities 11.8 7.8 17.2
Employee benefit obligations 15 23.2 18.9 16.2
Provisions 10.2 7.0 10.7
610.1 642.9 723.6
-------------------------------------- ----- ------------------ ------------- ------------
Net current assets 64.4 13.0 66.5
Total assets less current
liabilities 968.8 899.3 925.9
Liabilities: Non-current liabilities
Borrowings 17 148.2 148.1 148.0
Lease liabilities 228.6 234.2 221.8
Other payables 15.0 22.4 17.7
Retirement and employee benefit
obligations 15 21.5 15.1 20.5
Provisions 14.0 13.1 12.6
Deferred income tax liabilities 4.9 4.9 2.1
432.2 437.8 422.7
-------------------------------------- ----- ------------------ ------------- ------------
Net assets 536.6 461.5 503.2
-------------------------------------- ----- ------------------ ------------- ------------
Equity
Share capital 3.6 3.6 3.6
Share premium 97.2 96.8 97.2
Other reserves 121.0 117.3 95.5
Retained earnings 314.0 243.3 306.2
Equity attributable to owners of
the parent 535.8 461.0 502.5
Non-controlling interests 0.8 0.5 0.7
----------------------------------- ------ ------ ------
Total equity 536.6 461.5 503.2
----------------------------------- ------ ------ ------
Notes 1 to 21 are an integral part of these condensed interim
financial statements.
Savills plc
Condensed interim consolidated statement of changes in
equity
for the period ended 30 June 2020
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
2020 3.6 97.2 95.5 306.2 502.5 0.7 503.2
(audited)
-------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Profit for the period - - - 5.4 5.4 0.1 5.5
Other comprehensive
(loss)/income:
Changes in fair value
of equity investments
at FVOCI - - (7.4) - (7.4) - (7.4)
Remeasurement of defined
benefit pension scheme
obligation / retirement
benefits - - - (1.4) (1.4) - (1.4)
Tax on items directly
taken to reserves - - - (0.9) (0.9) - (0.9)
Currency translation
differences - - 32.9 - 32.9 - 32.9
--------------------------
Total comprehensive
income for the period - - 25.5 3.1 28.6 0.1 28.7
-------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Employee share option
scheme:
- Value of services
provided - - - 11.2 11.2 - 11.2
Purchase of treasury
shares - - - (6.5) (6.5) - (6.5)
Balance at 30 June
2020 (unaudited) 3.6 97.2 121.0 314.0 535.8 0.8 536.6
-------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
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
(audited)
---------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Change in accounting
policy (IFRS 16 adoption) - - - (9.3) (9.3) - (9.3)
---------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Balance at 1 January
2019 3.6 96.6 117.6 277.2 495.0 0.7 495.7
(restated)
---------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Profit for the period - - - 17.5 17.5 0.1 17.6
Other comprehensive
(loss)/income:
Changes in fair value
of equity investments
at FVOCI - - (0.8) - (0.8) - (0.8)
Remeasurement of defined
benefit pension scheme
obligation / retirement
benefits - - - (12.6) (12.6) - (12.6)
Tax on items directly
taken to reserves - - - 3.1 3.1 - 3.1
Currency translation
differences - - 0.5 - 0.5 (0.1) 0.4
---------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Total comprehensive
(loss) / income for
the period - - (0.3) 8.0 7.7 - 7.7
---------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Employee share option
scheme:
- Value of services
provided - - - 9.0 9.0 - 9.0
Purchase of treasury
shares - - - (14.0) (14.0) - (14.0)
Shares issued - 0.2 - - 0.2 - 0.2
Dividends - - - (36.4) (36.4) - (36.4)
Transactions with
non-controlling interests - - - (0.5) (0.5) (0.2) (0.7)
Balance at 30 June
2019 (unaudited) 3.6 96.8 117.3 243.3 461.0 0.5 461.5
---------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
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
(audited)
---------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Change in accounting
policy (IFRS 16 adoption) - - - (9.3) (9.3) - (9.3)
---------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Balance at 1 January
2019 3.6 96.6 117.6 277.2 495.0 0.7 495.7
(restated)
---------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Profit for the year - - - 82.9 82.9 0.7 83.6
Other comprehensive
income/(loss):
Remeasurement of defined
benefit pension schemes
and employment benefit
obligations - - - (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
(loss)/ 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 (audited) 3.6 97.2 95.5 306.2 502.5 0.7 503.2
---------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Notes 1 to 21 are an integral part of these condensed interim
financial statements.
Savills plc
Condensed interim consolidated statement of cash flows
for the period ended 30 June 2020
Six months Six months Year ended
to 30 June to 30 June 31 December
2020 (unaudited) 2019* (unaudited) 2019 (audited)
Note GBPm GBPm GBPm
---------------------------------------------- ----- ------------------ ------------------- ----------------
Cash flows from operating activities
Cash generated from/(used in) operations 11 35.7 (102.7) 132.6
Interest received 1.5 3.0 6.4
Interest paid (7.5) (8.7) (17.8)
Income tax paid (13.6) (13.5) (25.8)
Net cash generated from/(used in) operating
activities 16.1 (121.9) 95.4
---------------------------------------------- ----- ------------------ ------------------- ----------------
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment 0.1 0.3 0.2
Proceeds from sale of equity investments 1.5 - 4.5
Proceeds from sale of interests in joint
ventures, associates and other investments 0.6 0.5 2.1
Dividends received from joint ventures
and associates 3.2 2.4 10.5
Loans to joint ventures and associates (0.3) - (1.1)
Loans to other parties - - (6.1)
Acquisition of subsidiaries, net of cash
acquired (9.3) (1.5) (1.5)
Deferred consideration paid in relation
to current and prior year acquisitions (6.4) (2.7) (5.0)
Purchase of property, plant and equipment (5.5) (11.9) (16.2)
Purchase of intangible assets (2.9) (3.6) (7.3)
Purchase of investment in joint ventures,
associates and equity investments (0.5) (0.9) (8.4)
Net cash used in investing activities (19.5) (17.4) (28.3)
---------------------------------------------- ----- ------------------ ------------------- ----------------
Cash flows from financing activities
Proceeds from issue of share capital - 0.2 0.6
Proceeds from borrowings 76.6 158.3 158.1
Repayments of borrowings (32.5) (9.0) (125.2)
Financing fees paid - - (1.8)
Principal elements of lease payments (22.6) (22.4) (45.0)
Purchase of treasury shares (6.5) (14.0) (14.1)
Purchase of non-controlling interests - (0.9) (0.1)
Dividends paid - (36.4) (43.3)
Net cash received from / (used in) financing
activities 15.0 75.8 (70.8)
---------------------------------------------- ----- ------------------ ------------------- ----------------
Net increase / (decrease) in cash, cash
equivalents and bank overdrafts 11.6 (63.5) (3.7)
Cash, cash equivalents and bank overdrafts
at beginning of period 209.8 223.9 223.9
Effect of exchange rate fluctuations on
cash held 14.1 0.1 (10.4)
Cash, cash equivalents and bank overdrafts
at end of period 235.5 160.5 209.8
---------------------------------------------- ----- ------------------ ------------------- ----------------
Notes 1 to 21 are an integral part of these condensed interim
financial statements.
* H1 2019 cash flow statement has been restated to reflect
employment-linked deferred consideration payments within cash
generated from operations, previously shown as cash used in
investing activities. This reflects the requirement for recipients
to remain engaged actively in the business at the payment date and
is consistent with the change in presentation at the 2019 year
end.
NOTES
1. General information
The Company is a public limited company incorporated and
domiciled in England and Wales. The address of its registered
office is 33 Margaret Street, London W1G 0JD.
This condensed consolidated interim financial information was
approved for issue by the Board of Directors on 5 August 2020.
This condensed consolidated interim financial information does
not comprise statutory financial statements within the meaning of
section 434 of the Companies Act 2006. Statutory financial
statements for the year ended 31 December 2019 were approved by the
Board of Directors on 11 March 2020 and delivered to the Registrar
of Companies. The auditors' report on these accounts was
unqualified, did not contain an emphasis of matter paragraph and
did not contain a statement under section 498 of the Companies Act
2006.
This condensed consolidated interim financial information has
been reviewed, not audited.
2. Basis of preparation
This condensed consolidated interim financial information for
the half-year ended 30 June 2020 has been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct
Authority and with IAS 34, 'Interim financial reporting' as adopted
by the European Union. The condensed consolidated interim financial
information should be read in conjunction with the annual financial
statements for the year ended 31 December 2019, which have been
prepared in accordance with IFRSs as adopted by the European
Union.
Going concern
Management has performed a detailed going concern assessment
that reflects the significant uncertainty arising from the Covid-19
pandemic. This assessment tests the Group's liquidity and banking
covenant compliance up until the end of 2021. The assessment
includes detailed downside scenario analysis, considering the
current impact of Covid-19 and replicating market recovery trends
from the Global Financial Crisis from 2008/2009.
The assessment concluded that the Group has sufficient headroom
for liquidity and covenant compliance purposes in respect of its
current borrowing facilities (see Note 17 for information on the
current level of undrawn facilities) over this period.
As a result, the Directors consider that the Group has adequate
resources in place for at least 12 months from the date of these
results and have therefore adopted the going concern basis of
accounting in preparing the interim financial information.
3. Accounting policies
Except as described below, the accounting policies applied are
consistent with those of the annual financial statements for the
year ended 31 December 2019, as described in those financial
statements.
- During the period, in which certain aspects of our business
were prevented from trading due to lock down restrictions (e.g. UK
residential sales), the Group received furlough, and similar
government granted wage cost subsidies totalling a net GBP7.0m
worldwide. This equates to 1.4% of the Group's employee benefit
cost during the period.
The Group recognises this government subsidy income when there
is reasonable assurance that the financial assistance will be
received and, where applicable, when the Group is able to
demonstrate its ability to comply with any conditions of the
support scheme. The income is recognised in the income statement
over the period necessary to match the income with the related cost
and is deducted against the related expense in the income
statement. The majority of financial assistance received by the
Group is in relation to employee costs and is included as income
within the employee benefits expense line.
- Taxes on income in the interim periods are accrued using the
tax rate that would be applicable to expected total annual profit
or loss.
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 2020 that are not relevant or considered to
have a significant impact on the Group and its financial statements
include the following:
Amendments to IFRS 3 Definition of a business in business
combinations
Amendments to IAS 1 Definition of material
Amendments to IFRS 9 and Interest rate benchmark reform impact
IAS 39
Amendments to IFRS 16 Covid-19 related rent concessions
Amendments to IFRS 9 and Insurance contracts
IFRS 4
------------------------- --------------------------------------
There are no other standards that are not yet effective and that
would be expected to have a material impact on the entity in the
current or future reporting periods and on foreseeable future
transactions.
Use of non-GAAP measures
The Group believes that the consistent presentation of
underlying profit before tax, underlying effective tax rate,
underlying basic earnings per share and underlying diluted earnings
per share provides additional useful information to shareholders on
the underlying trends and comparable performance of the Group over
time. The 'underlying' measures are also used by Savills for
internal performance analysis and incentive compensation
arrangements for employees. All the adjustments made to the GAAP
measures are considered exceptional and/or non-operational in
nature. These terms are not defined terms under IFRS and may
therefore not be comparable with similarly-titled profit measures
reported by other companies. They are not intended to be a
substitute for, or superior to, GAAP measures.
The term 'underlying' refers to the relevant measure of profit,
earnings or taxation being reported excluding the impact (pre and
post-tax where applicable) of the following items:
-- amortisation of acquired intangible assets (excluding software);
-- the difference between IFRS 2, 'Share-based Payment' ('IFRS
2'), charges related to outstanding bonus-related deferred share
awards and the estimated value of the current year bonus pool
expected to be allocated to deferred share awards (refer to Note 7
for further explanation);
-- items that are considered exceptional by size or nature
including restructuring costs, impairments of goodwill, intangible
assets and investments and profits or losses arising on disposals
of subsidiaries and other investments; and
-- significant acquisition costs related to business combinations.
The underlying effective tax rate represents the underlying
income tax expense expressed as a percentage of underlying profit
before tax. The underlying income tax expense is the income tax
expense excluding the tax effect of the adjustments made to arrive
at underlying profit before tax and other tax effects related to
these adjustments.
Underlying basic earnings per share and underlying diluted
earnings per share both utilise the underlying profit after tax
measure instead of GAAP earnings. The weighted average number of
shares remain the same as the GAAP measure.
A reconciliation between GAAP and underlying measures are set
out in Note 7 (underlying profit before tax) and Note 10(b)
(underlying basic earnings per share and underlying diluted
earnings per share).
The Group also refers to revenue and underlying profit on a
constant currency basis which are both non-GAAP measures. Constant
currency results are calculated by translating the current year
revenue and underlying profit using the prior year exchange rates.
This measure allows the Group to assess the results of the current
year compared to the prior year, excluding the impact of foreign
currency movements.
4. Estimates
The preparation of interim financial statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expense. Actual
results may differ from these estimates.
In preparing these condensed interim financial statements, the
significant judgements made by management in applying the Group's
accounting policies and the key sources of estimation uncertainty
were the same as those that applied to the consolidated financial
statements for the year ended 31 December 2019, with the exception
of changes in estimates that are required in determining the
provision for income taxes and updates to assumptions utilised as
part of the goodwill impairment review (see Note 13 for the outcome
of this review). In addition, refer to Note 16 for information on
the updated expected credit loss provision in relation to trade
receivables.
5. Financial risk management
Financial risk factors
The Group's activities expose it to a variety of financial risks
including foreign exchange risk, interest rate risk, credit risk
and liquidity risk. The condensed interim financial statements do
not include all financial risk management information and
disclosures as required in the annual financial statements; they
should be read in conjunction with the Group's annual financial
statements as at 31 December 2019. There have been no changes in
any risk management policies since the year end.
Fair value estimation
The table below analyses financial instruments carried at fair
value, by valuation method. The different levels have been defined
as follows:
- Quoted prices (unadjusted) in active markets for identical
assets and liabilities (Level 1).
- Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (Level
2).
- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (Level
3).
The following table presents the Group's assets and liabilities
that are measured at fair value at 30 June 2020:
GBPm Level 1 Level 2 Level 3 Total
---------------------------------- -------- -------- -------- ------
2020
Assets
Financial assets held at
FVOCI
- Listed 0.9 - - 0.9
- Unlisted - 5.7 18.4 24.1
Derivative financial instruments - 0.1 - 0.1
---------------------------------- -------- -------- -------- ------
Total assets 0.9 5.8 18.4 25.1
---------------------------------- -------- -------- -------- ------
Liabilities
Derivative financial instruments - 0.2 - 0.2
---------------------------------- -------- -------- -------- ------
Total liabilities - 0.2 - 0.2
---------------------------------- -------- -------- -------- ------
The following table presents the Group's assets and liabilities
that are measured at fair value at 31 December 2019:
GBPm Level 1 Level 2 Level 3 Total
---------------------------------- -------- -------- -------- ------
2019
Assets
Financial assets held at
FVOCI
- Listed 0.8 - - 0.8
- Unlisted - 6.9 24.9 31.8
Derivative financial instruments - 0.2 - 0.2
Total assets 0.8 7.1 24.9 32.8
---------------------------------- -------- -------- -------- ------
Liabilities
Derivative financial instruments - 0.1 - 0.1
---------------------------------- -------- -------- -------- ------
Total liabilities - 0.1 - 0.1
---------------------------------- -------- -------- -------- ------
There were no transfers between levels of the fair value
hierarchy in the period.
There were no changes in valuation techniques during the
period.
The fair value of all other financial assets and liabilities
approximate their carrying amount.
Valuation techniques
Level 1 instruments are those whose fair values are based on
quoted market prices.
Level 2 instruments include investment funds, the fair value of
these funds are based on underlying asset values determined by the
Fund Manager's audited annual financial statements. The fair value
of derivative financial instruments is based on the market value of
similar instruments with similar maturities.
If one or more of the significant inputs is not based on
observable market data, the instrument is included in Level 3.
Unlisted equity securities where cost has been determined as the
best approximation of fair value are included in Level 3. Cost is
considered the best approximation of fair value in these instances
either due to insufficient more recent information being available
and/or there being a wide range of possible fair value measurements
due to the nature of the investments and cost is considered the
best estimate of fair value within the range.
6. Segment analysis
Property Invest-
Six months to 30 June Trans-action and Facilities ment
2020 Advisory Consult-ancy Manage-ment Manage-ment Other Total
(unaudited) GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------- ------------- ---------------- ------------- ------ ------
Revenue
United Kingdom
- commercial 30.9 74.0 93.3 12.7 - 210.9
- residential 52.9 18.2 16.8 - - 87.9
-------------------------- ------------- ------------- ---------------- ------------- ------ ------
Total United Kingdom 83.8 92.2 110.1 12.7 - 298.8
Europe & the Middle East 38.1 16.3 37.7 15.3 - 107.4
Asia Pacific
- commercial 41.5 32.4 190.0 2.5 - 266.4
- residential 13.3 - - - - 13.3
-------------------------- ------------- ------------- ---------------- ------------- ------ ------
Total Asia Pacific 54.8 32.4 190.0 2.5 - 279.7
North America 101.8 3.7 - - - 105.5
--------------------------
Total revenue 278.5 144.6 337.8 30.5 - 791.4
-------------------------- ------------- ------------- ---------------- ------------- ------ ------
Underlying profit/(loss)
before tax
United Kingdom
- commercial 0.9 5.0 4.7 1.3 (4.3) 7.6
- residential 1.6 1.1 0.4 - - 3.1
-------------------------- ------------- ------------- ---------------- ------------- ------ ------
Total United Kingdom 2.5 6.1 5.1 1.3 (4.3) 10.7
Europe & the Middle East (9.8) 2.4 0.2 2.8 - (4.4)
Asia Pacific
- commercial (4.4) 2.0 12.4 0.2 - 10.2
- residential 1.6 - - - - 1.6
-------------------------- ------------- ------------- ---------------- ------------- ------ ------
Total Asia Pacific (2.8) 2.0 12.4 0.2 - 11.8
North America (4.6) (0.3) - - - (4.9)
--------------------------
Underlying profit/(loss)
before tax (14.7) 10.2 17.7 4.3 (4.3) 13.2
-------------------------- ------------- ------------- ---------------- ------------- ------ ------
Property Invest-
Six months to 30 June Trans-action and Facilities ment
2019 Advisory Consult-ancy Manage-ment Manage-ment Other Total
(unaudited) GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------- ------------- ---------------- ------------- ------ ------
Revenue
United Kingdom
- commercial 31.4 73.3 89.5 13.9 - 208.1
- residential 57.3 20.1 18.1 - 95.5
-------------------------- ------------- ------------- ---------------- ------------- ------ ------
Total United Kingdom 88.7 93.4 107.6 13.9 - 303.6
Europe & the Middle East 43.0 16.4 38.1 15.8 - 113.3
Asia Pacific
- commercial 68.2 32.7 180.0 2.8 - 283.7
- residential 14.7 - - - - 14.7
-------------------------- ------------- ------------- ---------------- ------------- ------ ------
Total Asia Pacific 82.9 32.7 180.0 2.8 - 298.4
North America 131.7 - - - - 131.7
--------------------------
Total revenue 346.3 142.5 325.7 32.5 - 847.0
-------------------------- ------------- ------------- ---------------- ------------- ------ ------
Underlying profit/(loss)
before tax
United Kingdom
- commercial 1.3 6.2 5.6 2.2 (4.8) 10.5
- residential 3.5 2.2 1.2 - - 6.9
-------------------------- ------------- ------------- ---------------- ------------- ------ ------
Total United Kingdom 4.8 8.4 6.8 2.2 (4.8) 17.4
Europe & the Middle East (7.2) 2.1 0.8 3.1 - (1.2)
Asia Pacific
- commercial 4.2 1.0 8.6 0.3 - 14.1
- residential 1.4 - - - - 1.4
-------------------------- ------------- ------------- ---------------- ------------- ------ ------
Total Asia Pacific 5.6 1.0 8.6 0.3 - 15.5
North America 6.7 - - - - 6.7
--------------------------
Underlying profit/(loss)
before tax 9.9 11.5 16.2 5.6 (4.8) 38.4
-------------------------- ------------- ------------- ---------------- ------------- ------ ------
Property
Year ended to 31 December Trans-action and Facilities Invest-ment
2019 Advisory Consult-ancy Manage-ment Manage-ment Other Total
(audited) 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
---------------------------
Total 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
--------------------------- ------------- ------------- ---------------- ------------- ------- --------
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 revenue, 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 7.
7. 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.
Six months Six months Year ended
to 30 June to 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
GBPm GBPm GBPm
--------------------------------------- ------------------ ------------------ ----------------
Reported profit before tax 7.7 24.7 115.6
Adjustments:
- Amortisation of acquired intangible
assets (excluding software) 2.3 3.7 6.9
- Share-based payment adjustment 0.4 (1.1) (2.6)
- Profit on disposal of subsidiaries
and joint ventures - (0.3) (1.7)
- Restructuring costs 1.0 4.3 11.5
- Acquisition-related costs 1.8 7.1 13.7
Underlying profit before tax 13.2 38.4 143.4
--------------------------------------- ------------------ ------------------ ----------------
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.
The profit on disposal in the period ended 30 June 2019 related
to the disposal of the Group's interest in a Chinese joint
venture.
Restructuring costs includes costs of integration activities in
relation to significant business acquisitions. Costs in the period
ended 30 June 2020 relate primarily to the ongoing cost of deferred
shares issued in relation to the restructuring upon acquisition of
Aguirre Newman in 2017. Costs in the period ended 30 June 2019
relate primarily to the rebranding of the North America business to
Savills.
Acquisition related costs includes a net GBP2.3m charge for
future consideration payments which are contingent on the
continuity of recipients' employment in the future (30 June 2019:
GBP6.9m). For the period ended 30 June 2020, a large portion of the
charge related to recent acquisitions in the UK and US. For the
period ended 30 June 2019, a significant portion of the charge
related to the Aguirre Newman acquisition in 2017. In the current
year, acquisition related costs also consist of a GBP0.8m credit in
relation to the Cluttons Middle East acquisition in 2018.
8. Income tax expense
The income tax expense has been calculated on the basis of the
statutory rates in each jurisdiction adjusted for any disallowable
charges.
Six months Six months Year ended
to 30 June to 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
GBPm GBPm GBPm
-------------------- ------------------ ------------------ ----------------
UK
- Current tax 2.0 3.5 12.8
- Deferred tax (2.0) (2.1) (3.3)
Foreign tax
- Current tax 6.6 6.1 22.8
- Deferred tax (4.4) (0.4) (0.3)
-------------------- ------------------ ------------------ ----------------
Income tax expense 2.2 7.1 32.0
-------------------- ------------------ ------------------ ----------------
The forecast Group effective tax rate is 28.6% (30 June 2019:
28.7% and 31 December 2019: 27.7%), which is higher (30 June 2019
and 31 December 2019: higher) than the UK standard effective annual
rate of corporation tax of 19% (30 June 2019 and 31 December 2019:
19%). This reflects permanent disallowable expenses, including
acquisition costs. The Group underlying effective tax rate was
27.1% (30 June 2019: 25.3% and 31 December 2019: 25.1%).
9. Dividends
Six months Six months Year ended
to 30 June to 30 June 31 December
2020 (unaudited) 2019 (unaudited) 2019 (audited)
GBPm GBPm GBPm
------------------------------------- ------------------- ------------------ ----------------
Amounts recognised as distribution
to equity holders in the period:
Ordinary final dividend of GBPnil
per share (2018: 10.8p) - 14.9 14.8
Supplemental interim dividend of
GBPnil per share (2018: 15.6p) - 21.5 21.3
Interim dividend of 4.95p per share - - 6.7
------------------------------------- ------------------- ------------------ ----------------
- 36.4 42.8
--------------------------------------------------------- ------------------ ----------------
On 1 April 2020, the proposed ordinary final dividend and
supplemental interim dividend for 2019 were withdrawn in order to
retain sufficient cash reserves to mitigate the effect of the
uncertainty over the impact of COVID-19. The decision on any
shareholder distributions for the year has been postponed until the
trajectory of Global recovery and the Group's outcome for 2020 have
become clearer.
10(a). Basic and diluted earnings per share
2020 2020 2020 2019 2019 2019
Earnings Shares EPS Earnings Shares EPS
Six months to 30 June
(unaudited) GBPm million pence GBPm million pence
------------------------------- --------- -------- ------ --------- -------- ------
Basic earnings per share 5.4 138.3 3.9 17.5 136.3 12.8
Effect of additional
shares issuable under
option - 2.6 (0.1) - 3.7 (0.3)
-------------------------------
Diluted earnings per
share 5.4 140.9 3.8 17.5 140.0 12.5
------------------------------- --------- -------- ------ --------- -------- ------
2019 2019 2019
Earnings Shares EPS
Year to 31 December (audited) GBPm million pence
------------------------------- --------- -------- ------ --------- -------- ------
Basic earnings per share 82.9 136.7 60.6
Effect of additional
shares issuable under
option - 4.2 (1.8)
------------------------------- --------- -------- ------ --------- -------- ------
Diluted earnings per
share 82.9 140.9 58.8
------------------------------- --------- -------- ------ --------- -------- ------
10(b). Underlying basic and diluted earnings per share
2020 2020 2020 2019 2019 2019
Earnings Shares EPS Earnings Shares EPS
Six months to 30 June
(unaudited) GBPm million pence GBPm million pence
--------------------------------- --------- -------- ------ --------- -------- ------
Basic earnings per share 5.4 138.3 3.9 17.5 136.3 12.8
- Amortisation of acquired
intangible assets (excluding
software) after tax 1.5 - 1.1 2.7 - 2.0
- Share-based payment
adjustment after tax 0.4 - 0.3 (1.3) - (1.0)
- Restructuring costs
after tax 0.8 - 0.6 3.2 - 2.3
- Profit on disposal of
subsidiary and equity
investments after tax - - - (0.2) - (0.1)
- Acquisition-related
costs after tax 1.5 - 1.1 6.7 - 4.9
Underlying basic earnings
per share 9.6 138.3 7.0 28.6 136.3 20.9
--------------------------------- --------- -------- ------ --------- -------- ------
Effect of additional shares
issuable under option - 2.6 (0.2) - 3.7 (0.5)
---------------------------------
Underlying diluted earnings
per share 9.6 140.9 6.8 28.6 140.0 20.4
--------------------------------- --------- -------- ------ --------- -------- ------
2019 2019 2019
Earnings Shares EPS
Year to 31 December (audited) GBPm million pence
--------------------------------- --------- -------- ------ --------- -------- ------
Basic earnings per share 82.9 136.7 60.6
- Amortisation of acquired
intangible assets (excluding
software) after tax 5.1 - 3.7
- Share-based payment
adjustment after tax (2.2) - (1.6)
- Profit on disposal of
available-for-sale investments
after tax (1.2) - (0.9)
- Restructuring costs
after tax 9.3 - 6.8
- Acquisition-related
costs after tax 12.8 - 9.4
Underlying basic earnings
per share 106.7 136.7 78.0
--------------------------------- --------- -------- ------ --------- -------- ------
Effect of additional shares
issuable under option - 4.2 (2.3)
--------------------------------- --------- --------
Underlying diluted earnings
per share 106.7 140.9 75.7
--------------------------------- --------- -------- ------ --------- -------- ------
11. Cash generated from/(used in) operations
Six months Six months Year ended
to 30 June to 30 June 31 December
2020 (unaudited) 2019* (unaudited) 2019 (audited)
GBPm GBPm GBPm
-------------------------------------------- ------------------ ------------------- ----------------
Profit for the period 5.5 17.6 83.6
Adjustments for:
Income tax (Note 8) 2.2 7.1 32.0
Depreciation 31.8 30.3 60.6
Amortisation of intangible assets 4.6 4.8 10.4
Loss on disposal of property, plant
and equipment and intangible assets - - 1.4
Profit on disposal of subsidiaries,
joint ventures and equity investments - (0.3) (1.7)
Net finance cost 6.5 6.1 11.8
Share of post-tax profit from joint
ventures and associates (5.0) (4.7) (11.8)
Increase/(decrease) in employee and
retirement obligations 4.8 (3.1) (9.5)
Exchange movements on operating activities 0.7 (0.1) (0.2)
Increase in provisions 0.6 0.1 3.4
Charge for share-based compensation 11.2 9.0 17.8
Operating cash flows before movements
in working capital 62.9 66.8 197.8
-------------------------------------------- ------------------ ------------------- ----------------
Decrease/(increase) in trade and
other receivables and contract assets 157.0 41.6 (50.7)
Decrease in trade and other payables
and contract liabilities (184.2) (211.1) (14.5)
-------------------------------------------- ------------------ ------------------- ----------------
Cash generated from/(used in) operations 35.7 (102.7) 132.6
-------------------------------------------- ------------------ ------------------- ----------------
* H1 2019 has been restated to reflect employment-linked
deferred consideration payments within cash generated from
operations, previously shown as cash used in investing activities.
This reflects the requirement for recipients to remain engaged
actively in the business at the payment date and is consistent with
the change in presentation at the 2019 year end.
12. Acquisition of subsidiaries
Macro Consultants LLC ('Macro')
On 1 March 2020 the Group acquired 100% of the equity interest
in Macro Consultants LLC, complementing our existing services while
accelerating the expansion of Savills advisory and management
service platform in the United States.
Total acquisition consideration is provisionally determined at
GBP10.8m, GBP9.3m of which was settled on completion and the
remainder relating to the discounted value of deferred payments of
GBP1.5m. The deferred payments are payable in 6 separate
instalments between September 2021 and September 2027.
In addition to the above, an earn-out is payable on an annual
basis between 2021 until 2027 and is measured against revenue and
income targets. The maximum earn-out payment under the agreement
totals GBP23.3m and is deemed to be linked to continued active
engagement with the business. As required by IFRS 3 (revised), the
expected value of these payments will be expensed to the income
statement over the relevant period of engagement.
Acquisition-related costs of GBP0.2m have been expensed as
incurred to the income statement.
The fair value exercise is in progress and goodwill of GBP2.9m
has been provisionally determined. Goodwill is attributable to the
experience and expertise of key staff and strong industry
reputation and is expected to be deductible for tax purposes over a
period of 15 years.
The acquired business contributed revenue of GBP3.7m and a loss
of GBP0.3m to the Group for the period from 1 March 2020 to 30 June
2020. Had the acquisition been made at the beginning of the
financial year, revenue would have been GBP5.8m and the loss would
have been GBP0.7m.
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
GBPm
-------------------------------------------------- --------------
Property, plant and equipment 0.1
Right of use asset 1.3
Intangible assets 7.8
Lease liability (1.3)
Net assets acquired 7.9
Goodwill 2.9
-------------------------------------------------- --------------
Purchase consideration 10.8
-------------------------------------------------- --------------
Consideration satisfied by:
Net cash paid 9.3
Discounted value of deferred consideration owing
at reporting date 1.5
10.8
-------------------------------------------------- --------------
13. Goodwill
The goodwill on a select number of cash-generating units has
been tested for impairment, with value-in-use calculations updated
with the most recent forecasted cash flow projections and discount
rate assumptions. At this stage, no impairments have been
identified by management however, dependent upon the future
economic impact of COVID-19, there is potential for change in the
key assumptions that may give rise to an impairment in some of the
models. These assumptions will remain under review as the impact of
Covid-19 on the real estate market and wider economy develops over
the coming months.
14. Financial assets at FVOCI
As a result of Covid-19 related challenges to the planning
markets in particular, the Group revalued its investment in Vucity
Ltd, reducing the carrying value by GBP7.2m. This change in fair
value has been recognised through other comprehensive income.
15. Retirement and employee benefit obligations
Defined benefit plans
The Group operates two defined benefit plans.
The Pension Plan of Savills (the 'UK Plan') is a UK-based plan
which provided final salary pension benefits to some employees, but
was closed with regard to future service-based benefit accrual with
effect from 31 March 2010. From 1 April 2010, pension benefits for
former members of the UK Plan are provided through the Group's
defined contribution Personal Pension Plan.
The Savills Fund Management GMBH Plan (the 'SFM Plan') is a
Germany-based plan which provides final salary benefits to 11
active employees and 104 former employees. The plan is closed to
future service-based benefit accrual.
Significant actuarial pension assumptions are detailed in the
Group's Annual Report and Accounts 2019 and are the same as at 31
December 2019 except for the following:
UK Plan SFM Plan
-------------------------------------- --------------------------------------
Year ended Year ended
Six months Six months 31 Six months Six months 31
to 30 June to 30 December to 30 June to 30 December
2020 June 2019 2019 2020 June 2019 2019
----------------------------------- ------------ ----------- ----------- ------------ ----------- -----------
Expected rate of salary increases 3.25% 3.25% 3.25% 2.50% 2.50% 2.50%
Projection of social security
contribution ceiling - - - 2.25% 2.25% 2.25%
Discount rate 1.50% 2.30% 2.00% 1.55% 1.42% 1.39%
Inflation assumption 3.10% 3.40% 3.20% 1.75% 1.75% 1.75%
Rate of increase to pensions
in payment
- accrued before 6 April
1997 3.00% 3.00% 3.00% - - -
- accrued after 5 April 1997 3.00% 3.20% 3.10% - - -
- accrued after 5 April 2005 2.20% 2.30% 2.30% - - -
- pension promise before
1 January 1986 - - - 2.25% 2.25% 2.25%
- pension promise after 1
January 1986 - - - 1.75% 1.75% 1.75%
Rate of increase to pensions
in deferment
- accrued before 6 April
2001 5.00% 5.00% 5.00% - - -
- accrued after 5 April 2001 2.30% 2.40% 2.20% - - -
- accrued after 5 April 2009 2.30% 2.40% 2.20% - - -
----------------------------------- ------------ ----------- ----------- ------------ ----------- -----------
The amounts recognised in the statement of financial position
are as follows:
30 June 30 June 31 December
2020 2019 2019
UK Plan GBPm GBPm GBPm
--------------------------------------- -------- -------- ------------
Present value of funded obligations 339.4 299.0 309.9
Fair value of plan assets (328.8) (295.9) (300.5)
--------------------------------------- -------- -------- ------------
Liability recognised in the statement
of financial position (included
in retirement and employee benefit
obligations) 10.6 3.1 9.4
--------------------------------------- -------- -------- ------------
30 June 30 June 31 December
2020 2019 2019
SFM Plan GBPm GBPm GBPm
--------------------------------------- -------- -------- ------------
Present value of funded obligations 15.2 15.5 14.6
Fair value of plan assets (14.1) (14.7) (13.8)
--------------------------------------- -------- -------- ------------
Liability recognised in the statement
of financial position (included
in retirement and employee benefit
obligations) 1.1 0.8 0.8
--------------------------------------- -------- -------- ------------
The amount recognised within the income statement in relation to
the UK Plan for the period ended 30 June 2020 is a net interest
cost of GBP0.1m (30 June 2019: GBPnil, 31 December 2019: net
interest income of GBP0.2m).
The amount recognised within the income statement in relation to
the SFM Plan for the period ended 30 June 2020 is a current service
cost of GBPnil (30 June 2019: GBPnil, 31 December 2019:
GBPnil).
Included in retirement and employee benefit obligations is
GBP33.0m relating to holiday pay and long service leave (30 June
2019: GBP30.9m, 31 December 2019: GBP26.5m).
16. Trade receivables - Loss allowance
The Group has no significant concentrations of credit risk. The
trade receivables balance is spread across a large number of
different customers and geographic regions.
Local management have assessed the expected credit losses for
trade receivables as a result of the global financial uncertainty
arising from Covid-19 and the expected loss rates have been
reviewed based on their judgement as to the impact of the pandemic
on their trade receivables portfolio. Overall, the expected loss
rate on trade receivables has increased to 8.5% (31 December 2019:
5.5%) due to updates to the loss provisioning rates and more
balances being greater than 180 days past due. This is to be
expected given current economic conditions however local management
continue to closely monitor cash collections and regularly engage
with all clients.
A summary of trade receivables and the loss provision as at 30
June 2020 and 31 December 2019 has been provided below:
More than More than More than
30 days 90 days 180 days
30 June 2020 Current past due past due past due Total
-------------------------- -------- ---------- ---------- ---------- -------
Gross carrying amount
(GBPm) 167.4 82.5 36.3 46.6 332.8
Loss allowance provision
(GBPm) (28.2)
-------
Net trade receivables
(GBPm) 304.6
-------
Expected loss rate 8.5%
-------------------------- -------- ---------- ---------- ---------- -------
More than More than More than
30 days 90 days 180 days Total
31 December 2019 Current past due past due past due GBPm
-------------------------- -------- ---------- ---------- ---------- -------
Gross carrying amount
(GBPm) 309.9 89.8 27.3 36.0 463.0
Loss allowance provision
(GBPm) (25.6)
-------
Net trade receivables
(GBPm) 437.4
-------
Expected loss rate 5.5%
-------------------------- -------- ---------- ---------- ---------- -------
17. Borrowings
Movements in borrowings are analysed as follows:
GBPm
----------------------------------------------- -------
Opening amount as at 1 January 2020 181.4
Additional borrowings 76.6
Repayments of borrowings (including overdraft
movement) (32.5)
Amortisation of transaction costs 0.2
Foreign exchange movement 0.5
Closing amount as at 30 June 2020 226.2
------------------------------------------------- -------
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
---------------------- -------- -------- ------------
Current
Bank overdrafts 0.1 0.7 0.1
Unsecured bank loans 77.9 151.4 33.3
Non-current
Loan notes 150.0 150.0 150.0
Transaction costs (1.8) (2.0) (2.0)
Finance leases - 0.1 -
226.2 300.2 181.4
---------------------- -------- -------- ------------
The Group has the following undrawn borrowing facilities:
30 June 30 June 31 December
2020 2019 2019
GBPm GBPm GBPm
----------------------------------- -------- -------- ------------
Floating rate
- expiring within one year or on
demand 35.7 35.9 45.3
- expiring between 1 and 5 years 298.6 216.6 328.0
----------------------------------- -------- -------- ------------
334.3 252.5 373.3
----------------------------------- -------- -------- ------------
The Group holds a GBP360m multi-currency revolving credit
facility ('RCF'), which includes a GBP90m accordion facility,
expiring in June 2024. As at 30 June 2020 GBP62.0m (30 June 2019:
GBP143.5m, 31 December 2019: GBP32.5m) of the RCF was drawn. The
remaining unsecured bank loans reflect a GBP15.0m utilisation of a
revolving credit facility in North America for working capital
purposes, which is repayable within one year and denominated in US
dollars (30 June 2019: GBP7.9m, 31 December 2019: GBPnil) and a
GBP0.9m working capital loan in Thailand, which is repayable on
demand and denominated in Thailand baht (30 June 2019: GBPnil, 31
December 2019: GBP0.8m).
The Group holds GBP150.0m of long term debt through the issuance
of 7, 10 and 12 year fixed rate private note placements in the US
institutional market, which were issued in June 2018.
18. Related party transactions
As at 30 June 2020, there were GBP3.5m of loans outstanding to
joint ventures and GBP0.8m of loans outstanding to associates (30
June 2019: GBP2.4m of loans outstanding to joint ventures and no
loans outstanding to associates, 31 December 2019: GBP2.8m loans
outstanding to joint ventures and GBP0.6m of loans outstanding to
associates).
There were no other material related party transactions during
the period. 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.
19. 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.
20. Seasonality
Traditionally, a significant percentage of revenue is seasonal
which has historically caused revenue, profits and cash flow from
operating activities to be lower in the first half and higher in
the second half of each year. The concentration of revenue and cash
flow in the fourth quarter is due to an industry-wide focus on
completing transactions toward the calendar year end. At this
stage, due to the uncertainty created by the Covid-19 pandemic, it
is unclear how significantly the longer term economic impact of
Covid-19 will weigh on corporate and investor sentiment and thus
the impact on the traditional seasonality trends.
21. Events after the balance sheet date
OMEGA Immobilien Management GmbH and OMEGA Immobilien Service
GmbH
In July 2020, the Group announced it will acquire OMEGA
Immobilien Management GmbH and OMEGA Immobilien Service GmbH, a
property and facilities management business in Germany. The
acquisition will provide the Group with a platform to grow the
property management business in this important market and is
expected to complete in Q4 2020, following receipt of clearance
from the German competition authorities.
SHAREHOLDER INFORMATION
Like many other listed public companies, Savills no longer
issues a hard copy of the Interim Statement to shareholders.
This announcement together with the attached financial
statements and notes may be downloaded from the investor relations
section of the Company website at www.savills.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR KZGGRNKGGGZM
(END) Dow Jones Newswires
August 06, 2020 02:00 ET (06:00 GMT)
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