TIDMSVS
RNS Number : 8745R
Savills PLC
11 March 2021
11 March 2021
Savills plc
("Savills" or "the Group")
PRELIMINARY RESULTS FOR THE FULL YEARED 31 DECEMBER 2020
FULL YEAR PERFORMANCE REFLECTS STRENGTH OF GLOBALLY DIVERSIFIED
BUSINESS
Savills plc, the international real estate advisor, today
announces its preliminary results for the year ended 31 December
2020.
Key financial highlights
-- Group revenue down 9% to GBP1.74bn (2019: GBP1.91bn*) as
resilient revenues from less transactional services significantly
mitigated reduction in transaction volumes
-- Underlying** profit before tax GBP96.6m (2019: GBP143.4m)
-- Statutory profit before tax GBP83.2m (2019: GBP115.6m)
-- Statutory basic earnings per share ('EPS') 49.0p (2019: 60.6p)
-- Final ordinary dividend of 17.0p reflecting the resilience of
the less transactional business performance
-- Net cash GBP177.7m (2019: GBP28.5m)
* See Note 1(b) for details on the prior year restatement of revenue.
** Underlying profit before tax ('underlying profit') is
calculated on a consistently reported basis in accordance with Note
3 to this Preliminary Statement.
Key operating highlights
-- Resilient performance reflects geographic diversity (59%
non-UK revenue) and strength of less transactional service lines
(62% of Group revenue, versus 57% in 2019)
-- Less transactional services revenues down 1% as Property and
Facilities Management businesses performed well, underlying profit
up 4% to GBP91.1m
-- Savills global Transaction Advisory revenues declined by 19%
as the pandemic significantly reduced the volume of transactions
worldwide
-- Increased Commercial Transaction Advisory market share,
outperforming in many markets including North America, Asia Pacific
and UK
-- UK and Asia Pacific profits down only 4% and 1% respectively,
supported by Property Management and Consultancy
-- Savills UK Residential grew revenues by 10% as the market recovered strongly from mid-year
-- Savills Investment Management outperformed expectations
(against a record 2019 comparative boosted by strong performance
fees) with revenue down 11% and increased Assets Under Management
('AUM') to GBP19.0bn (2019: GBP17.7bn)
-- Continued investment in people, technology leadership and innovation in sustainability
Commenting on the results, Mark Ridley, Group Chief Executive,
said:
"Savills delivered a robust performance in 2020 reflecting the
strength and resilience of our global, diversified business. We
continued to grow our less transactional service lines and increase
our market share, outperforming in many of our transactional
markets despite the challenging conditions. Much of this
outperformance is due to our strategy of retaining the strength of
our teams and focussing resolutely on addressing both the
pandemic-related, and longer term, needs of our clients.
"We remain confident in the long term attraction of real estate
as an asset class and although macro-economic uncertainty resulting
from COVID-19 clearly remains, we see enhanced investor demand for
income and improvements in leasing activity as occupiers
increasingly seek to address their requirements. Savills has a
strong balance sheet and we remain focused on growing our less
transactional businesses, increasing our share of the global
transactional markets and enhancing the resilience of the business
overall. We have made a good start to 2021 and see opportunities
for business development emerging during the course of the
year."
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 .
For further information, contact:
Savills 020 7409 8934
Mark Ridley, Group Chief Executive
Simon Shaw, Group Chief Financial
Officer
Tulchan Communications 020 7353 4200
Elizabeth Snow
David Allchurch
Will Palfreyman
Chairman's statement
Savills performed well in very challenging conditions, by
maximising cash flow and focusing on assisting our clients around
the globe.
Results
Against the backdrop of significantly reduced leasing and
capital transaction volumes in all major real estate markets, the
Group's revenue declined by 9% to GBP1.74bn (2019: GBP1.91bn) with
reductions in Transaction Advisory revenues mitigated by both share
gains in our major markets and a resilient revenue performance from
our less Transactional service lines. Underlying profit for the
year declined by 33% to GBP96.6m (2019: GBP143.4m). The Group's
statutory profit before tax decreased by 28% to GBP83.2m (2019:
GBP115.6m).
Overview
Savills delivered a resilient revenue and profit performance in
2020 in the face of challenging market conditions. The relative
stability of our less Transactional businesses, particularly
Property Management, helped to offset the impact of material
COVID-19 related declines in transaction volumes across the world.
Currency movements had a marginal effect on the Group, decreasing
revenue by GBP4.3m and increasing underlying profit and statutory
profit before taxation by GBP0.1m.
Overall, our Transaction Advisory revenue declined by 19%, our
Consultancy business revenue declined by 5% and our Property
Management revenue grew by 2%. The UK Commercial Transaction
Advisory business delivered a resilient performance with a revenue
decline of 15% against a 19% decline in investment transaction
volumes for the market as a whole.
Our UK Residential business had an extraordinary year; having
lost the Spring selling season in the first lockdown, its recovery
was strong and sustained as buyers sought greater space and
amenities. Revenues grew by 10% year-on-year driven in large part
by the strength of regional country markets. In Asia Pacific, the
pandemic closed a number of key markets early in the year and
subsequent actions saw recovery stutter in a number of markets
before improving towards the year end. Commercial and Residential
Transaction advisory revenues both declined by 25% year-on-year in
the Asia Pacific region. In both Continental Europe and the Middle
East ('CEME') and North America the decline in transaction volumes
resulted in losses for the year. In CEME, Commercial Transaction
revenues declined by 23% year-on-year. In North America, where we
are almost wholly focused on corporate occupier transactions, we
delivered a resilient performance (revenue decline of 30%) against
a market decline in transaction volumes of c. 40%.
Savills Investment Management had a stronger year than
originally anticipated after a "supernormal" year of performance
fees in 2019. A number of important product launches and
significant capital deployed increased Assets Under Management
('AUM') to GBP19.0bn (2019: GBP17.7bn).
The reduction in transaction volumes globally, alongside growth
in our lower margin but stable Property Management business,
resulted in a reduction to Group underlying profit margin to 5.6%
(2019: 7.5%).
The impact of the aforementioned factors on the Group underlying
profit margin were partially offset by lower acquisition-related
charges and restructuring costs and decreased amortisation of
intangible assets acquired on business combinations. The statutory
pre-tax profit margin declined to 4.8% (2019: 6.0%).
COVID-19 impact and response
Savills has shown considerable resilience in a year in which the
sector faced many challenges, particularly to transactional
advisory businesses worldwide. The cycle of lockdowns and other
measures, such as travel restrictions, from Q1 2020 had a
significant global impact on the ability and preparedness of both
investors and occupiers of real estate to transact. As a
consequence, in major markets, both investment and leasing volumes
contracted markedly compared with 2019 and previous periods.
The Group was quick to adopt a number of operational and
financial initiatives to minimise the impact of the pandemic on the
business as a whole. Savills strategy was to minimise discretionary
expenditure while maintaining our staffing levels to ensure
seamless service to clients around the world. In addition the Board
suspended distributions to shareholders pending greater visibility
of future market recovery. The consequence, particularly of
retaining our staff, has been improved market share in most of our
markets. This both partially mitigated the impact of volume
declines in transactional markets and improved our win ratio of
tenders for less Transactional real estate services such as
Consultancy and Property Management. Additional cash management
activities, including taking the opportunity in H1, at no cost, to
defer certain predominantly VAT/sales tax payments of GBP49.2m
(repayable through 2021), ensured that the Group remained in a
robust financial position through the period and finished the year
with net cash of GBP177.7m (2019: GBP28.5m).
Business development and focus on technology
Savills strategy is to be a leading multi-sector property
advisor in the key markets in which we operate. Our global strategy
is delivered locally by our experts on the ground with flexibility
to adapt quickly to changes in circumstances and opportunities.
They are supported by our global cross-border investment,
residential and occupier services specialists. Over the last few
years we have acquired a number of complementary businesses and
added teams and individual hires to our strong core business.
Despite the pandemic, we continued to focus on strategic
development of the business enabled by the Group's strong balance
sheet. In the UK, we were awarded the property management contract
for the majority of shopping centres formerly part-owned and
managed by Intu plc, which comprised approximately 13m sq. ft. of
retail management and necessitated significant on-boarding costs as
we took on related staff and systems.
In CEME, we acquired OMEGA Immobilien Management GmbH and OMEGA
Immobilien Service GmbH ('Omega') in August 2020, which provides us
with a small but high quality Property Management business in
Germany upon which we will build over the coming years.
In North America, we acquired Macro Consultants LLC ('Macro') in
March 2020, a national Project Management specialist and part of
our strategy to broaden our less Transactional service lines in the
region.
Finally in Asia Pacific, we recruited in both Consulting
services and brokerage, most notably in the Greater Bay area of
China and in Japan. In Singapore, we merged our mass market
residential agency business into Huttons Capital Pte Ltd, our long
standing associate, in which we hold a significant minority equity
interest.
The pandemic has accelerated technology adoption in almost every
industry, and real estate is no exception. As the pandemic spread
across the globe, much of the early focus was on ensuring staff
could continue to advise clients remotely which, due to the
investment in our underlying technology platform across the Group
in recent years, was swiftly enacted.
In many sectors and geographies we quickly adapted or extended
our services. In the UK, where we are one of the largest property
auctioneers, we pivoted to offering live-streamed remote auctions
within days. This capitalised on the recent launch of our bespoke
auctioning platform and, enabled us to increase our market share by
over 50%.
"Virtual viewings" were swiftly adopted for both residential and
commercial properties, through virtual tours and individual
client-tailored and accompanied remote viewings. Our recently
upgraded public facing websites received over 35 million visitors
during the year, an increase of approximately 50% year on year.
Despite the pandemic we continued to maintain, and in some
places increase, our capital expenditure into our internal
technology initiatives particularly in respect of the digitisation
of processes and the use of data to provide commercial insight.
As a leading property manager across the world we continue to be
at the forefront of technology advice and adoption for building
management. This has become particularly relevant during the
pandemic to enable safe reopening after lockdown. The increasing
focus in recent years on sustainability, coupled with the continued
need to improve the efficiency of buildings, has driven substantial
innovation in this arena. As a consequence of this trend, we now
advise landlords on the technology fit-out and running of their
assets through our Smart Building Consultancy.
We have continued to develop our technology offering for
occupiers within our Knowledge Cubed platform that continues to be
deployed into new clients across the world. This "app based"
platform supports the management of an occupier's real estate
portfolio providing an award-wining analytics capability.
Many of these initiatives, and numerous others, continue to
capitalise on the investments in our centralised data consolidation
across real estate, client, financial and other geospatial data,
and investment into the latest platforms for its visualisation.
We continued to manage our portfolio of investments through
Grosvenor Hill Ventures, our technology-focused investment
subsidiary. Of particular note was YOPA, the digital hybrid estate
agency, which continued to take market share in the mainstream UK
residential markets, and VU.CITY whose online city collaboration
continues to attract new architects, developers and planning
clients as well as being utilised by numerous teams across our own
business.
Board
As previously announced, on 1 January 2021 Philip Lee and
Richard Orders joined the Plc Board as Non-Executive Directors.
Rupert Robson will retire from the Board at the Annual General
Meeting in May and Tim Freshwater will retire from the Board on 31
December 2021. I thank them both for their enormous contribution to
the Board over the years. Tim also stepped down as Senior
Independent Non-Executive Director on 31 December 2020, and has
been replaced in this capacity by Stacey Cartwright.
Dividends
As a result of the uncertainty caused by the pandemic, the final
dividend and supplemental interim dividend for 2019 were cancelled
and no interim ordinary dividend was declared during 2020. A final
ordinary dividend of 17.0p is recommended, reflecting the
resilience of the less Transactional business performance in 2020,
making the aggregate ordinary dividend 17.0p for the year (2019:
4.95p, interim ordinary dividend). Due to the impact of the
pandemic on the Group's transactional profits during 2020 and the
advisability of maintaining liquid resources through 2021, no
supplemental interim dividend is declared. The final ordinary
dividend of 17.0p per ordinary share will, subject to shareholders'
approval at the AGM on 12 May 2021, be paid on 18 May 2021 to
shareholders on the register at 9 April 2021.
People
Our strategy was to maintain our staff strength and continue to
ensure the future growth of the business. To that end, we
maintained both our graduate recruitment programme and the emerging
leaders programmes we run across the globe.
I would like to express my thanks to all our staff worldwide for
their hard work, their flexible approach during challenging times
and relentless focus on client service, which enabled the Group to
deliver these results.
Summary and Outlook
Savills delivered a good performance in 2020 in some of the most
challenging market conditions experienced by this sector. This
reflects the strength and resilience of our global diversified
business as we continued to grow our less Transactional service
lines and outperform in many of our transactional markets.
Whilst it remains too early to predict the direction of market
activity in the near term, global investor demand for secure
income, restricted supply and expectations of continued low
interest rates underpin the medium and long term attraction of real
estate as an asset class. The pace and efficacy of mass vaccination
programmes and consequent release from lockdowns and travel
restrictions will dictate the rate at which transactional markets
recover from here to reflect underlying demand. With the operating
environment currently restricted in most markets, and the range of
potential outcomes for 2021 being unusually broad, the Board
considers it inappropriate to resume guidance at this stage.
However, in general terms, we currently expect transactional
activity to remain broadly suppressed in the first half of 2021
with improvement commencing in some individual markets thereafter
with the potential for progressive recovery through the balance of
the year.
We remain focused on growing our less Transactional businesses,
increasing our share of the global transactional markets and
enhancing the resilience of the business overall. While we continue
to monitor the impact of global uncertainties on investor and
occupier demand for real estate, we have made a good start to 2021
and see opportunities for business development activity emerging
during the course of the year.
Nicholas Ferguson CBE
Chairman
Review of operations
The diversity of the Group, both geographically and in our
service offering and the resilience of our residential businesses
underpinned a resilient performance in 2020.
Our performance analysed by region was as follows:
Underlying profit/(loss)
Revenue GBPm GBPm
-------------------------- ----------------------------
2020 2019 % growth 2020 2019 % growth
------------------------- ------- ------- -------- -------- ------- ---------
UK 710.7 727.5 (2) 78.8 81.9 (4)
Asia Pacific 575.7 627.1 (8) 42.3 42.6 (1)
Europe & the Middle East 240.7 265.8 (9) (2.2) 15.8 n/a
North America 213.4 293.0 (27) (8.4) 17.3 n/a
Unallocated - - n/a (13.9) (14.2) n/a
------------------------- ------- ------- -------- -------- ------- ---------
Total 1,740.5 1,913.4 (9) 96.6 143.4 (33)
------------------------- ------- ------- -------- -------- ------- ---------
On a constant currency basis Group revenue declined by 9% to
GBP1,744.8m, underlying profit decreased 33% to GBP96.5m and
statutory profit before tax decreased by 28% to GBP83.1m. Our Asia
Pacific business represented 33% of Group revenue (2019: 33%) and
our overseas businesses as a whole represented 59% of Group revenue
(2019: 62%). Our performance by service line is set out below:
Underlying profit/(loss)
Revenue GBPm GBPm
-------------------------- ----------------------------
2020 2019 % growth 2020 2019 % growth
------------------------ ------- ------- -------- -------- ------- ---------
Transaction Advisory 667.2 828.2 (19) 19.4 69.8 (72)
Property and Facilities
Management 681.9 667.9 2 44.8 35.2 27
Consultancy 320.6 338.1 (5) 31.5 34.5 (9)
Investment Management 70.8 79.2 (11) 14.8 18.1 (18)
Unallocated - - n/a (13.9) (14.2) n/a
------------------------ ------- ------- -------- -------- ------- ---------
Total 1,740.5 1,913.4 (9) 96.6 143.4 (33)
------------------------ ------- ------- -------- -------- ------- ---------
Overall, our Commercial and Residential Transaction Advisory
business revenues together represented 38% of Group revenue (2019:
43%). Of this, the Residential Transaction Advisory business
represented 10% of Group revenue (2019: 9%). Our Property and
Facilities Management businesses continued to perform well, with
year-on-year revenue growth, representing 39% of Group revenue for
the year (2019: 35%). Our Consultancy businesses represented 19% of
revenue (2019: 18%) reflecting a year-on year decrease of 5%. The
Investment Management business had a solid performance, after a
record year in 2019, which included a number of one-off performance
fees, with revenue declining by 11%. It represented 4% of Group
revenue (2019: 4%).
Transaction Advisory
Overall, our Transaction Advisory revenues declined by 19% (at
both prevailing rates and in constant currency) to GBP667.2m (2019:
GBP828.2m). Globally our Commercial Capital Transaction business
revenue declined by 24% and our Leasing and Occupier focused
transactional revenues declined by 26%. Our Global Residential
business revenue increased by 3%.
Underlying profits decreased 72% to GBP19.4m (2019: GBP69.8m),
with a reduced underlying profit margin of 2.9% (2019: 8.4%), as a
result of the effect of the global pandemic on market activity
throughout the period.
Asia Pacific Commercial
Revenue from the Asia Pacific Commercial Transaction business
decreased by 25% to GBP103.9m (2019: GBP138.6m), a fall of 24% in
constant currency.
The pandemic took effect earliest in mainland China and Hong
Kong and spread to affect transaction volumes significantly, not
least through the imposition of travel restrictions which slowed
both domestic and cross-border capital flows. In both markets,
Savills increased market share despite significantly reduced
transaction volumes to finish the year as the leading commercial
investment adviser in Greater China.
Those markets which are typically most dependent upon cross
border capital were particularly affected, namely Singapore, Hong
Kong and Australia. Conversely, those countries with strong
domestic trade, namely China, South Korea and Vietnam, were better
able to withstand the impact. Indeed in South Korea and Vietnam we
experienced strong year-on-year growth in transactional revenues.
In Australia and Singapore, the combination of lockdowns, lack of
incoming cross-border activity and continued recruitment costs,
resulted in the commercial transaction businesses making a loss for
the year. Overall, leasing markets remained subdued as corporates
continued to defer significant long term decisions. In general,
having been first into the pandemic, the region was also the first
to start to see signs of recovery as lockdowns eased.
As a result of the reduction in revenues and despite a
significant level of cost reduction, the underlying profits in the
region declined by 73% to GBP3.3m (2019: GBP12.4m).
UK Commercial
Revenue from the UK Commercial Transactional business decreased
by 15% to GBP79.8m (2019: GBP94.2m) as the COVID-19 pandemic
affected both the investment and leasing markets. Despite the
arduous trading conditions our national Investment teams maintained
continuous contact with clients despite the challenge of remote
working and delivered a resilient performance in a market where
investment transaction volumes fell year-on-year. National
Logistics continued to be the growth sector and despite market
leasing volumes in the office sector declining by 50-70% in some
locations, our increased market share resulted in revenues
outperforming the market. In London, where the market volume
declines were significant, we also out-performed the market in both
the investment and leasing sectors.
As a result of the declining revenues, partially offset by
discretionary cost saving measures implemented during the year,
underlying profit before tax was down 23% to GBP9.5m (2019:
GBP12.3m).
North America
Being overwhelmingly a transactional business primarily focused
on occupiers, the North American business was materially affected
by the COVID-19 pandemic. The general theme was one of corporate
occupiers postponing longer term strategic decisions in favour of
short term roll-over transactions, with leasing market volumes
falling by 40% nationally and by between 50% and 68% in some of the
larger Metro Office markets (e.g. New York, Chicago and San
Francisco).
Against that backdrop, the Savills business saw a revenue
decline of 30% to GBP205.2m (2019: GBP293.0m), a fall of 29% in
constant currency. This relative outperformance was due to some
significant head office transactions in both the Technology and
Healthcare/Life Sciences sectors and a robust performance by our US
Government transaction teams. The regions where we most
significantly out-performed the market were Northern New Jersey,
South Florida, Houston, Atlanta and Philadelphia.
During the period we undertook a CEO succession programme and
sought to minimize discretionary expenditure. As a result of the
above factors the North American transactional business recorded an
underlying loss of GBP7.5m (2019: GBP17.3m profit) for the year as
a whole.
Europe and the Middle East
In Europe and the Middle East transaction fee income declined by
23% to GBP98.2m (2019: GBP127.5m), a fall of 24% in constant
currency. This reflected subdued investment and leasing markets as
a result of significant lockdown periods and an inability to travel
across all of our markets. Those markets which are typically
dependent upon cross-border activity suffered the worst declines in
market volume. Ireland, one of our historically strongest markets
with significant exposure to US capital, was the most affected with
revenue declining by 57% year-on-year. In Germany, Spain, the
Netherlands, Belgium and Sweden we successfully outperformed the
market volume declines, however restructuring costs (Germany and
Ireland) and recruitment in a number of locations (Sweden, Portugal
and Czech Republic) further impacted the performance of the
transactional business. The effect of all these factors was that
the business produced an underlying loss of GBP12.3m for the year
(2019: GBP5.4m underlying profit).
UK Residential
Our UK Residential Transaction business experienced an
extraordinary recovery from the end of the first lockdown through
to the year end. Revenue increased by 10% year-on-year to GBP153.2m
(2019: GBP139.1m). Our second hand agency business increased
revenue by 18% year-on-year, benefiting from the surge in activity
after the first national lock down from June onwards as people
reassessed their housing needs, coupled with the effect of lower
stamp duty rates. This was particularly the case outside of the
capital, with the number of exchanges increasing by 26%
year-on-year, and the average value of residential properties sold
by Savills increased by 11% from GBP1.13m to GBP1.26m. In London,
whilst the recovery was slower to emerge, the number of exchanges
was up 25%, with the average value of residential properties sold
by Savills decreasing by 8% from GBP2.13m to GBP1.96m, reflecting a
greater proportion of activity and market share gains in the Core
London market (values c GBP1.5m).
The new homes and prime London markets were slower to recover,
with the inability of overseas buyers to travel during and between
lockdowns, which limited the ability to transact. As a consequence,
our new homes revenues fell by 11% year-on-year. The number of
exchanges fell by 10% to 3,505 (2019: 3,905) with the average value
of properties sold by Savills increasing by 1% year-on-year.
Our PRS residential transactional business had another strong
year of market leadership advising on some of the largest
transactions ever undertaken in the UK such as the GBP4.7bn IQ
student portfolio.
The combination of higher revenues and discretionary cost
savings resulted in underlying profit increasing by 29%
year-on-year to GBP23.0m (2019: GBP17.8m).
Asia Pacific Residential
Revenue from the Asia Pacific Residential Transaction business
decreased by 25% to GBP26.9m (2019: GBP35.8m), a fall of 24% in
constant currency. There were significant reductions in activity
levels in Hong Kong, Australia, Singapore and Vietnam. However, in
mainland China which is our biggest revenue contributor in this
segment, a reasonably robust market emerged from lockdown enabling
us to maintain revenues broadly in line with the prior year.
International residential sales in Hong Kong continued to perform
well as individuals sought investment opportunities overseas.
Underlying profits of GBP3.4m were 26% lower than the prior year
(2019: GBP4.6m) reflecting a lower profit contribution from our
joint venture in Singapore, but offset by cost reductions, most
notably in Australia as a result of the cost rationalisation
program of 2019.
Property and Facilities Management
Our Property and Facilities Management businesses continued to
perform well despite the global pandemic, with revenues growing by
2% at GBP681.9m (2019: GBP667.9m). Savills total area under
management increased by 2% to 2.35bn sq. ft. (2019: 2.30bn sq.
ft.). Underlying profit increased by 27% to GBP44.8m (2019:
GBP35.2m), 28% in constant currency.
Asia Pacific
The Asia Pacific Property Management business showed stability
throughout the year with a revenue decrease of 1% to GBP368.3m
(2019: GBP372.5m), an equivalent decline in constant currency.
Revenue reductions in South Korea, China and Australia, were almost
entirely offset by higher revenues as a result of contract wins and
ad hoc fees in Hong Kong, Vietnam, Singapore and Japan, with the
latter benefitting from additional set-up fees on new
contracts.
A number of the terminating contracts, most notably in South
Korea, were in facilities management with no contribution to
margin. In addition, the effect of the pandemic and lockdown on the
retail and leisure industries in particular meant that staff cost
inflation, which has been an issue in recent years, abated
significantly in Hong Kong and mainland China. These factors,
together with cost saving measures implemented in Australia, Hong
Kong and Singapore led to a significant increase in underlying
profit to GBP27.7m (2019: GBP19.2m).
UK
The UK Property Management business was able to demonstrate the
beneficial effect of a diversified offering by growing revenues and
profits despite the prolonged periods of lockdown throughout 2020.
Revenue grew by 6% to GBP245.0m (2019: GBP231.1m) and some very
significant contracts were won during the period, which should
benefit 2021 and beyond. The Residential Property Management
Lettings team, which is also included in this segment, remained
resilient, with revenues falling by only 2% despite the challenging
market conditions impacting London lettings significantly.
The higher revenues, along with a continued drive to improve
efficiencies, enabled the underlying profit to increase by 9% to
GBP17.2m (2019: GBP15.8m).
Europe and the Middle East
In the Europe and Middle East Property Management business
revenues were up by GBP4.3m (7%) to GBP68.6m (2019: GBP64.3m),
which was 6% on a constant currency basis. At the end of August we
acquired a German property management business, OMEGA Immobilien
Management GmbH and OMEGA Immobilien Service GmbH ('Omega'), which
contributed GBP3.6m of revenue to this segment. There was also
revenue growth in the Middle East and the Netherlands, offsetting
reductions in Sweden, Ireland and France.
In addition to the Omega acquisition, there were significant
recruitment costs to enhance our capabilities in Spain, France,
Italy, the Czech Republic and the Middle East, which resulted in an
underlying loss for the year of GBP0.1m (2019: GBP0.2m profit).
Consultancy
Global Consultancy revenue decreased by 5% to GBP320.6m (2019:
GBP338.1m) and underlying profit fell by 9% to GBP31.5m (2019:
GBP34.5m). Currency movements had a negligible impact on results in
the Consultancy business.
UK
The UK Consultancy businesses mainly comprised of Valuations,
Planning, Development, Housing Services, Building and Project
Consultancy, Energy Projects and Rural. With the exception of
Rural, Housing Consultancy and Lease Consultancy, all of these
services showed resilience despite experiencing slightly reduced
activity as a result of the COVID-19 pandemic. The main
consequence, was the delay or deferral of a number of consultancy
projects into 2021. Revenues of GBP205.8m were 10% below the prior
year (2019: GBP229.9m).
Underlying profit fell by 13% to GBP23.5m (2019: GBP27.0m).
Asia Pacific
The Asia Pacific Consultancy business showed considerable
resilience during the pandemic. Revenues, which primarily comprise
Valuations, Research and Project Management, decreased by 1% to
GBP69.1m (2019: GBP69.6m), slightly ahead of the prior year on a
constant currency basis. The biggest contributors to this robust
performance were Australia, Japan, Singapore and South Korea,
predominantly as a result of increased levels of portfolio advisory
valuation and research activity which outweighed the decline in the
security valuations associated with transaction volumes. Singapore
was further buoyed as investments made in previous years started to
gain traction. The project management revenues remained resilient,
particularly in Australia.
Resilient revenues together with cost savings led to an increase
in underlying profits of 41% to GBP6.5m (2019: GBP4.6m).
Europe and the Middle East
In the Europe and Middle East business, which is primarily made
up of valuations, revenues decreased by GBP1.1m (3%) to GBP37.5m
(2019: GBP38.6m), down 4% on a constant currency basis. Reductions
in Ireland, Spain and France were partially offset by growth in
Germany, Poland and the Netherlands and the commencement of new
Consultancy services in the Czech Republic and the Middle East.
Underlying profits fell by GBP0.5m (17%) to GBP2.4m (2019:
GBP2.9m) at both prevailing exchange rates and on a constant
currency basis.
North America
As part of our strategy to diversify our income streams in North
America by building our Consultancy practices, in March 2020 we
announced the acquisition of Macro Consultants LLC, a national
project management consultancy business.
As a result of the effect of the lock downs on the construction
industry, the business experienced some hiatuses with a consequent
effect on revenue and profits. However we also won a number of
exciting new assignments both in North America and through
referrals from the US into other regions. North America Consultancy
revenues were GBP8.2m (2019: GBPnil) with an underlying loss of
GBP0.9m (2019: GBPnil).
Investment Management
Having enjoyed a supernormal year of performance fees in 2019,
we anticipated a reduction in both revenue and profit in 2020. In
the event, revenue from our Investment Management business reduced
by 11% to GBP70.8m (2019: GBP79.2m) and the business performed
ahead of our expectations with both new fund launches and strong
investment performance from the majority of our products. The
pandemic did have an impact on capital raising and deployment as
our strategy was to adopt a cautious approach to the deployment of
capital in markets where, for much of the period, there was limited
price transparency. Despite this, we raised a total of
approximately GBP1.7bn (2019: GBP3.1bn) for real estate equity, and
our associate, DRC Capital, raised over GBP1.0bn for debt
strategies. We successfully launched two new funds in the Asia
Pacific region and two in Europe.
Our AUM increased by 7% to GBP19.0bn (2019: GBP17.7bn) and base
fund management fees remained highly resilient. Our transaction fee
income declined by 23% over the period, reflecting reduced
deployment, and our performance fees declined by a similar amount;
both of these were better than anticipated at the start of the
pandemic.
As a result of the above factors, underlying profit decreased by
18% to GBP14.8m (2019: GBP18.1m).
Financial review
Underlying profit margin
Underlying profit margin decreased to 5.6% (2019: 7.5%),
reflecting the significantly lower levels of transactional activity
as a consequence of the global pandemic and the greater proportion
of lower margin, but stable revenues from our less Transactional
service lines.
Taxation
The tax charge for the year decreased to GBP15.2m (2019:
GBP32.0m), reflecting an effective tax rate on statutory profit
before tax of 18.3% (2019: 27.7%). The Group's effective reported
tax rate is marginally lower than the UK effective rate of tax of
19% reflecting lower permanent disallowable expenses and higher
non-assessable income.
The underlying effective tax rate reduced to 18.5% (2019:
25.1%).
Restructuring and acquisition-related costs
During the year the Group recognised a total of GBP6.5m in
restructuring and acquisition-related costs (2019: GBP25.2m). These
comprised an aggregate restructuring charge of GBP1.5m (2019:
GBP11.5m), which related principally to the ongoing costs of
deferred shares issued in relation to the restructuring upon
acquisition of Aguirre Newman in 2017.
The reduction in acquisition-related costs in 2020 to GBP5.0m
(2019: GBP13.7m) reflected a reduction in corporate acquisition
activity year-on-year. These costs related to future consideration
payments, associated with past acquisitions, which are subject to a
future service condition. The largest components of this charge
relate to the acquisitions of Currell Group in 2018 and Aguirre
Newman in 2017.
These charges have been excluded from the calculation of
underlying profit in line with Group policy.
Earnings per share
Basic earnings per share decreased 19% to 49.0p (2019: 60.6p),
reflecting a 19% decrease in statutory profit after tax. Adjusted
on a consistent basis for exceptional pension charges,
restructuring, acquisition-related costs, profits and losses on
disposals, certain share-based payment adjustments and amortisation
of acquired intangible assets (excluding software), underlying
basic earnings per share decreased 27% to 56.8p (2019: 78.0p).
Fully diluted earnings per share decreased by 19% to 47.9p
(2019: 58.8p). The underlying fully diluted earnings per share
decreased 27% to 55.5p (2019: 75.7p).
Cash resources, borrowings and liquidity
Gross cash and cash equivalents at year end increased 61% to
GBP338.3m (2019: GBP209.9m). This increase primarily reflected the
effect of cost savings and a positive year-on-year movement in
working capital together with the cancellation of the final
dividend for 2019 and no declaration of an interim dividend for
2020. In addition the Group took the opportunity to defer tax
(primarily sales tax) payments of GBP49.2m, at no cost during the
initial lockdown period. The majority of which is expected to be
paid by the end of 2021.
Gross borrowings at year end decreased to GBP160.6m (2019:
GBP181.4m). These principally comprise GBP150.0m (2019: GBP150.0m)
of 7, 10 and 12 year fixed rate notes which were issued in June
2018, along with GBP11.4m drawn under a revolving credit facility
in North America. The Group's UK revolving credit facility ('RCF')
was undrawn at the end of the year (2019: GBP32.5m), with GBP397.2m
(2019: GBP373.3m) of undrawn borrowing facilities in total
available to the Group. At the year end, net cash was GBP177.7m
(2019: GBP28.5m).
Cash is typically retained in a number of subsidiaries in order
to meet the requirements of commercial contracts or capital
adequacy. In addition, cash in certain territories is retained to
meet future growth requirements.
The Group's net inflow of cash is typically greater in the
second half of the year. This is as a result of seasonality in
trading and the major cash outflows associated with dividends,
profit related remuneration payments and related payroll taxes in
the first half. The Group cash inflow for the year from operating
activities was GBP248.6m (2019: GBP95.4m).
With a large proportion of the Group's revenue typically being
transactional in nature, the Board's strategy is to maintain low
levels of gearing, but retain sufficient credit facilities to
enable it to meet cash requirements during the year and finance the
majority of business development opportunities as they arise. Given
the significant pandemic-related decline in Transactional activity
in 2020, this strategy underpinned the financial stability of the
Group's balance sheet.
Capital and shareholders' interests
During the year no shares (2019: 45,176) were issued to
participants under the Performance Share Plan and 8,504 (2019:
87,938) new shares were issued to participants on exercise of
options under the Group's SAYE schemes. The total number of
ordinary shares in issue at 31 December 2020 was 143.1m (2019:
143.1m).
Savills Pension Scheme
The funding level of the defined benefit Savills Pension Scheme
in the UK, which is closed to future service-based accrual,
improved during the year primarily as a result of an increase in
asset values. The plan was in a liability position of GBP2.6m at
the year-end (2019: GBP9.4m liability).
During the prior year the Group incurred an additional
exceptional charge of GBP0.7m in respect of the equalisation of the
Guaranteed Minimum Pension ('GMP') on the UK defined benefit
pension plan.
Net assets
Net assets as at 31 December 2020 were GBP581.6m (2019:
GBP503.2m). This movement reflects the Group's trading performance
alongside the actuarial gain on the UK defined benefit pension
plan.
Foreign currency
The Group operates internationally and is exposed to foreign
exchange risks. As both revenue and costs in each location are
generally denominated in the same currency, transaction related
risks are relatively low and generally associated with intra group
activities. Consequently, the overriding foreign currency risk
relates to the translation of overseas profits and losses into
sterling on consolidation. The Group does not actively seek to
hedge risks arising from foreign currency translations due to their
non-cash nature. The net impact of foreign exchange rate movements
represented a GBP4.3m decrease in revenue (2019: GBP20.7m increase)
and a GBP0.1m increase to underlying profit (2019: GBP1.4m
increase). Refer to Note 3.2 to the financial statements for
further information on foreign exchange risk.
Savills plc
Consolidated income statement
for the year ended 31 December 2020
2019
2020 Restated*
Note GBPm GBPm
----------------------------------------- ----- ---------- -----------
Revenue 2 1,740.5 1,913.4
----------------------------------------- ----- ---------- -----------
Less:
Employee benefits expense (1,153.7) (1,240.5)
Depreciation (64.3) (60.6)
Amortisation of intangible assets (9.6) (10.4)
Other operating expenses (419.1) (482.0)
Impairment losses on financial assets (8.7) (6.5)
Other operating income 0.8 0.5
Other (losses)/gains (0.1) 1.7
----------------------------------------- -----
Operating profit 85.8 115.6
----------------------------------------- ----- ---------- -----------
Finance income 3.4 6.5
Finance costs (16.2) (18.3)
----------------------------------------- ----- ---------- -----------
(12.8) (11.8)
Share of post-tax profit from joint ventures
and associates 10.2 11.8
------------------------------------------------ ---------- -----------
Profit before income tax 83.2 115.6
Income tax expense 5 (15.2) (32.0)
Profit for the year 68.0 83.6
----------------------------------------- ----- ---------- -----------
Attributable to:
Owners of the parent 67.6 82.9
Non-controlling interests 0.4 0.7
----------------------------------------- ----- ---------- -----------
68.0 83.6
----------------------------------------- ----- ---------- -----------
Earnings per share
Basic earnings per share 7(a) 49.0p 60.6p
Diluted earnings per share 7(a) 47.9p 58.8p
Supplementary income statement information
Reconciliation to underlying profit
before income tax
Profit before income tax 83.2 115.6
- restructuring and acquisition-related
costs 6.5 25.2
- other underlying adjustments 6.9 2.6
------------------------------------------- ----- ------
Underlying profit before income tax 96.6 143.4
------------------------------------------- ----- ------
* See Note 1(b) for details on the prior year restatement of
revenue and other operating expense
Savills plc
Consolidated statement of comprehensive income
for the year ended 31 December 2020
2020 2019
GBPm GBPm
--------------------------------------------------- ------ -------
Profit for the year 68.0 83.6
Other comprehensive income/(loss)
Items that will not be reclassified to profit
or loss:
Re-measurement of defined benefit pension
scheme and employee benefit obligations 6.5 (23.2)
Changes in fair value of financial assets
at FVOCI, net of tax (6.9) (0.3)
Tax on other items that will not be reclassified (1.2) 4.4
--------------------------------------------------- ------ -------
Total items that will not be reclassified
to profit or loss (1.6) (19.1)
Items that may be reclassified subsequently
to profit or loss:
Currency translation differences 1.8 (21.0)
Tax on items that may be reclassified (0.3) 3.8
--------------------------------------------------- ------ -------
Total items that may be reclassified subsequently
to profit or loss 1.5 (17.2)
Other comprehensive loss for the year, net
of tax (0.1) (36.3)
--------------------------------------------------- ------ -------
Total comprehensive income for the year 67.9 47.3
--------------------------------------------------- ------ -------
Total comprehensive income attributable to:
Owners of the parent 67.5 46.6
Non-controlling interests 0.4 0.7
--------------------------------------------------- ------ -------
67.9 47.3
--------------------------------------------------- ------ -------
Savills plc
Consolidated statement of financial position
at 31 December 2020
2020 2019
Note GBPm GBPm
------------------------------------------------- ----- -------- -----------
Assets: Non-current assets
Property, plant and equipment 64.9 68.9
Right of use assets 252.8 226.2
Goodwill 9 379.4 374.2
Intangible assets 49.8 44.5
Investments in joint ventures and associates 51.8 51.4
Deferred income tax assets 42.8 32.7
Financial assets at fair value through
other comprehensive income ('FVOCI') 27.4 32.6
Contract related assets 1.4 1.6
Trade and other receivables 31.8 27.3
902.1 859.4
------------------------------------------------- ----- -------- -----------
Assets: Current assets
Contract related assets 8.0 7.5
Trade and other receivables 496.6 568.9
Income tax receivable 1.9 3.6
Derivative financial instruments 0.4 0.2
Cash and cash equivalents 338.3 209.9
845.2 790.1
------------------------------------------------- ----- -------- -----------
Liabilities: Current liabilities
Borrowings 10 12.2 33.4
Lease liabilities 45.2 45.3
Derivative financial instruments 0.3 0.1
Contract liabilities 10.8 10.8
Trade and other payables 604.9 589.9
Income tax liabilities 10.2 17.2
Employee benefit obligations 19.2 16.2
Provisions 8.3 10.7
711.1 723.6
------------------------------------------------- ----- -------- -----------
Net current assets 134.1 66.5
Total assets less current liabilities 1,036.2 925.9
Liabilities: Non-current liabilities
Borrowings 10 148.4 148.0
Lease liabilities 259.0 221.8
Derivative financial instruments 0.6 -
Other payables 10.5 17.7
Retirement and employee benefit obligations 14.9 20.5
Provisions 15.6 12.6
Deferred income tax liabilities 5.6 2.1
454.6 422.7
------------------------------------------------- ----- -------- -----------
Net assets 581.6 503.2
------------------------------------------------- ----- -------- -----------
Equity
Share capital 3.6 3.6
Share premium 97.2 97.2
Other reserves 90.0 95.5
Retained earnings 390.1 306.2
Equity attributable to owners of the
parent 580.9 502.5
Non-controlling interests 0.7 0.7
------------------------------------------------- -----
Total equity 581.6 503.2
------------------------------------------------- ----- -------- -----------
Savills plc
Consolidated statement of changes in equity
for the year ended 31 December 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
------------------------------------ --------- --------- ---------- ---------- ------ ---------------- --------
Profit for the year - - - 67.6 67.6 0.4 68.0
Other comprehensive income/(loss):
Re-measurement of defined
benefit pension scheme and
employee benefit obligations - - - 6.5 6.5 - 6.5
Changes in fair value of financial
assets at FVOCI, net of tax - - (6.9) - (6.9) - (6.9)
Tax on other items directly
taken to reserves - - - (1.5) (1.5) - (1.5)
Currency translation differences - - 1.8 - 1.8 - 1.8
------------------------------------
Total comprehensive income
for the year - - (5.1) 72.6 67.5 0.4 67.9
------------------------------------ --------- --------- ---------- ---------- ------ ---------------- --------
Employee share option scheme:
- Value of services provided - - - 19.8 19.8 - 19.8
Purchase of treasury shares - - - (8.3) (8.3) - (8.3)
Disposal of financial assets
at FVOCI - - (0.4) (0.2) (0.6) - (0.6)
Dividends - - - - - (0.4) (0.4)
Balance at 31 December 2020 3.6 97.2 90.0 390.1 580.9 0.7 581.6
------------------------------------ --------- --------- ---------- ---------- ------ ---------------- --------
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 96.6 117.6 277.2 495.0 0.7 495.7
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Profit for the year - - - 82.9 82.9 0.7 83.6
Other comprehensive income/(loss):
Re-measurement of defined
benefit pension scheme and
employee benefit obligations - - - (23.2) (23.2) - (23.2)
Changes in fair value of financial
assets at FVOCI, net of tax - - (0.3) - (0.3) - (0.3)
Tax on other items directly
taken to reserves - - - 8.2 8.2 - 8.2
Currency translation differences - - (21.0) - (21.0) - (21.0)
-----------------------------------
Total comprehensive income
for the year - - (21.3) 67.9 46.6 0.7 47.3
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Employee share option scheme:
- Value of services provided - - - 17.8 17.8 - 17.8
Purchase of treasury shares - - - (14.1) (14.1) - (14.1)
Shares issued - 0.6 - - 0.6 - 0.6
Dividends - - - (42.8) (42.8) (0.5) (43.3)
Disposal of financial assets
at FVOCI - - (0.8) 0.8 - - -
Transactions with non-controlling
interests - - - (0.6) (0.6) (0.2) (0.8)
Balance at 31 December 2019 3.6 97.2 95.5 306.2 502.5 0.7 503.2
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Savills plc
Consolidated statement of cash flows
for the year ended 31 December 2020
2020 2019
Note GBPm GBPm
----------------------------------------------------- ----- ------- --------
Cash flows from operating activities
Cash generated from operations 8 289.8 132.6
Interest received 3.4 6.4
Interest paid (15.0) (17.8)
Income tax paid (29.6) (25.8)
Net cash generated from operating activities 248.6 95.4
----------------------------------------------------- ----- ------- --------
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment 0.1 0.2
Proceeds from sale of equity investments 1.9 4.5
Proceeds from sale of interests in joint ventures,
associates and other investments 0.7 2.1
Dividends received from joint ventures and
associates 10.8 10.5
Repayment of loans by joint ventures and associates 0.1 -
Loans to joint ventures and associates (1.4) (1.1)
Loans to other parties (5.5) (6.1)
Acquisition of subsidiaries, net of cash acquired 9 (11.2) (1.5)
Deferred consideration paid in relation prior
year acquisitions (15.3) (5.0)
Purchase of property, plant and equipment (12.8) (16.2)
Purchase of intangible assets (5.3) (7.3)
Purchase of investment in joint ventures,
associates and equity investments (5.5) (8.4)
Net cash used in investing activities (43.4) (28.3)
----------------------------------------------------- ----- ------- --------
Cash flows from financing activities
Proceeds from issue of share capital - 0.6
Proceeds from borrowings 46.1 158.1
Repayments of borrowings (67.3) (125.2)
Financing fees paid - (1.8)
Principal elements of lease payments (47.7) (45.0)
Purchase of treasury shares (8.3) (14.1)
Purchase of non-controlling interests - (0.1)
Dividends paid 6 (0.4) (43.3)
Net cash used in financing activities (77.6) (70.8)
----------------------------------------------------- ----- ------- --------
Net increase/(decrease) in cash, cash equivalents
and bank overdrafts 127.6 (3.7)
Cash, cash equivalents and bank overdrafts
at beginning of year 209.8 223.9
Effect of exchange rate fluctuations on cash
and cash equivalents held 0.8 (10.4)
----------------------------------------------------- ----- ------- --------
Cash, cash equivalents and bank overdrafts
at end of year 338.2 209.8
----------------------------------------------------- ----- ------- --------
NOTES
1(a). Basis of preparation
The results for the year ended 31 December 2020 have been
extracted from the audited financial statements. The financial
statements have been prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 and in accordance with international financial
reporting standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union.
The financial statements have been prepared on a going concern
basis.
The financial information in this statement does not constitute
statutory accounts within the meaning of s434 of the Companies Act
2006. The statutory accounts for the year ended 31 December 2020,
on which the auditors have given an unqualified audit report, have
not yet been filed with the Registrar of Companies.
The preparation of financial statements in conformity with IFRS
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual results ultimately may differ from those
estimates.
1(b). Prior year restatement
Following a review of the control over certain management
companies in the CEME division, management have determined that the
Group does not have control over these entities as defined by IFRS
10. These entities have been removed from the consolidated Group
accounts and the prior period comparatives have been restated in
accordance with IAS 8.
The table below shows the impact of the prior year restatement
on the primary financial statements:
2019 reported Restatement 2019 restated
GBPm GBPm GBPm
------------------------- ------------- ----------- -------------
Income statement
Revenue 1,930.0 (16.6) 1,913.4
Other operating expenses (498.6) 16.6 (482.0)
------------------------- ------------- ----------- -------------
No adjustment has been made to the 2019 cash flow or statement
of financial position as the impact is not considered material.
2. Segment analysis
Property
and Facilities Investment
Transaction Manage- Manage-
Advisory Consultancy ment ment Unalloc-ated Total
Year ended to 31 December
2020 GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Revenue
United Kingdom - commercial 79.8 164.1 204.9 26.9 - 475.7
United Kingdom - residential 153.2 41.7 40.1 - - 235.0
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Total United Kingdom 233.0 205.8 245.0 26.9 - 710.7
Europe & the Middle
East 98.2 37.5 68.6 36.4 - 240.7
Asia Pacific - commercial 103.9 69.1 368.3 7.5 - 548.8
Asia Pacific - residential 26.9 - - - - 26.9
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Total Asia Pacific 130.8 69.1 368.3 7.5 - 575.7
North America 205.2 8.2 - - - 213.4
-------------------------------
Revenue 667.2 320.6 681.9 70.8 - 1,740.5
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Underlying profit/(loss)
before tax
United Kingdom - commercial 9.5 17.6 13.8 5.6 (13.9) 32.6
United Kingdom - residential 23.0 5.9 3.4 - - 32.3
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Total United Kingdom 32.5 23.5 17.2 5.6 (13.9) 64.9
Europe & the Middle
East (12.3) 2.4 (0.1) 7.8 - (2.2)
Asia Pacific - commercial 3.3 6.5 27.7 1.4 - 38.9
Asia Pacific - residential 3.4 - - - - 3.4
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Total Asia Pacific 6.7 6.5 27.7 1.4 - 42.3
North America (7.5) (0.9) - - - (8.4)
-------------------------------
Underlying profit/(loss)
before tax 19.4 31.5 44.8 14.8 (13.9) 96.6
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Property
Transaction and Facilities Investment
Advisory Consultancy Manage-ment* Manage-ment Unalloc-ated Total
Year ended to 31 December
2019 GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------------ ------------ ---------------- ------------- ------------- --------
Revenue
United Kingdom - commercial 94.2 180.3 190.1 33.2 - 497.8
United Kingdom - 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 64.3 35.4 - 265.8
Asia Pacific - commercial 138.6 69.6 372.5 10.6 - 591.3
Asia Pacific - residential 35.8 - - - - 35.8
------------------------------- ------------ ------------ ---------------- ------------- ------------- --------
Total Asia Pacific 174.4 69.6 372.5 10.6 - 627.1
North America 293.0 - - - - 293.0
-------------------------------
Revenue 828.2 338.1 667.9 79.2 - 1,913.4
------------------------------- ------------ ------------ ---------------- ------------- ------------- --------
Underlying profit/(loss)
before tax
United Kingdom - commercial 12.3 19.4 12.1 9.0 (14.2) 38.6
United Kingdom - 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
Asia Pacific - residential 4.6 - - - - 4.6
------------------------------- ------------ ------------ ---------------- ------------- ------------- --------
Total Asia Pacific 17.0 4.6 19.2 1.8 - 42.6
North America 17.3 - - - - 17.3
-------------------------------
Underlying profit/(loss)
before tax 69.8 34.5 35.2 18.1 (14.2) 143.4
------------------------------- ------------ ------------ ---------------- ------------- ------------- --------
* Property and Facilities Management 2019 revenue has been
restated, with revenue decreased by GBP16.6m in the Europe &
Middle East division. There is no change to underlying profit.
Refer to Note 1(b) for further details.
Operating segments reflect internal management reporting to the
Group's chief operating decision maker, defined as the Group
Executive Board (GEB). The GEB assesses the performance of
operating segments based on a measure of underlying profit before
tax which adjusts statutory profit before tax by profit/(loss) on
disposals, share-based payment adjustment, significant
restructuring costs, acquisition-related costs, amortisation of
acquired intangible assets (excluding software) and other items
that are considered exceptional by size or nature.
The Unallocated segment includes costs and other expenses at
holding company and subsidiary levels, which are not directly
attributable to the operating activities of the Group's business
segments.
A reconciliation of underlying profit before tax to statutory
profit before tax is provided in Note 3.
3. Underlying profit before tax
The Directors seek to present a measure of underlying
performance which is not impacted by exceptional items or items
considered non-operational in nature. This measure is described as
'underlying' and is used by management to assess and monitor
performance.
2020 2019
GBPm GBPm
=========================================================== ===== =====
Statutory profit before tax 83.2 115.6
Adjustments:
Amortisation of acquired intangible assets (excluding
software) 4.9 6.9
Share-based payment adjustment 1.2 (2.6)
Loss/(profit) on disposal of joint ventures and associates 0.1 (1.7)
Restructuring costs 1.5 11.5
Acquisition-related costs 5.0 13.7
GMP equalisation charge 0.7 -
=========================================================== ===== =====
Underlying profit before tax 96.6 143.4
----------------------------------------------------------- ----- -----
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 to align the underlying staff cost in the year
with the revenue recognised in the same period.
Loss on disposal recognised in relation to disposal of a portion
of the Group's holding in a joint venture in China, which is now
treated as an FVOCI equity investment and a part disposal of an
associate in Singapore. In the prior year, profit on disposal
included profits recognised in relation to the proceeds received in
relation to legacy real estate funds in North America and disposal
of a portion of the Group's holding in a joint venture in
China.
Restructuring costs includes costs of integration activities in
relation to significant business acquisitions. Charges in the year
primarily relate to the ongoing cost of deferred shares, with a 5
year vesting period, issued in relation to the restructuring upon
acquisition of Aguirre Newman in 2017. In the prior year, charges
related to costs incurred in rebranding the North American business
to Savills in line with the original integration plan and the final
reorganisation within the German Investment management business
associated with the SEB acquisition of 2015.
Acquisition-related costs include a net GBP4.7m (2019: GBP12.4m)
provision for future payments in relation to business acquisitions,
which are expensed through the income statement to reflect the
requirement for the recipients to remain engaged actively in the
business at the payment date. These relate to acquisitions in the
UK (GBP1.8m - primarily Currell Group), North America (GBP1.8m) and
Europe & the Middle East (GBP1.1m - primarily Aguirre Newman).
In the prior year, these costs related to acquisitions in the UK
(GBP5.0m - primarily Currell Group), North America (GBP2.9m) and
Europe & the Middle East (GBP4.5m - primarily Aguirre Newman).
In addition, acquisition-related costs includes GBP0.3m of
unwinding of interest on deferred consideration payments (2019:
GBP0.5m), GBP0.7m of transaction costs (2019: GBP0.8m) and a
GBP0.7m credit in relation to a working capital adjustment on the
Cluttons Middle East acquisition in 2018.
Guaranteed Minimum Pension ('GMP') equalisation charge in the
year reflects the past service cost on the UK defined benefit
pension scheme, which is the estimated cost of equalising GMPs for
historic transfers-out of the scheme; this follows a High Court
ruling issued on 20 November 2020.
4. Government subsidies
During the year, the Group received GBP23.4m of wage-related
subsidies from governments globally in respect of employment
support schemes due to the Covid-19 pandemic. After repayments
(principally of UK Furlough receipts) and other provisions, the net
positive impact of such receipts on the Group's operating profit in
the year was GBP11.9m.
5. Income tax expense
The income tax expense has been calculated on the basis of the
underlying rate in each jurisdiction adjusted for any disallowable
charges.
2020 2019
GBPm GBPm
-------------------- ------ ------
United Kingdom
- Current tax 13.3 12.8
- Deferred tax (4.4) (3.3)
Foreign tax
- Current tax 13.2 22.8
- Deferred tax (6.9) (0.3)
-------------------- ------ ------
Income tax expense 15.2 32.0
-------------------- ------ ------
6. Dividends
2020 2019
GBPm GBPm
---------------------------------------------- ------ -----
Amounts recognised as distribution to equity
holders in the year:
In respect of the previous year
Ordinary final dividend of GBPnil per share
(2018: 10.8p) - 14.8
Supplemental interim dividend of GBPnil per
share (2018: 15.6p) - 21.3
In respect of the current year
Interim dividend of GBPnil per share (2019:
4.95p) - 6.7
---------------------------------------------- ------ -----
- 42.8
----------------------------------------------------- -----
The Group paid GBP0.4m (2019: GBP0.5m) of dividends to
non-controlling interests.
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 Board recommends a final dividend of 17.0p (net) per
ordinary share (amounting to GBP23.8m) is paid on 18 May 2021 to
shareholders on the register at 9 April 2021. These financial
statements do not reflect this dividend payable.
The total paid and recommended ordinary dividend for the 2020
financial year comprises an aggregate distribution of 17.0p per
ordinary share (2019: 4.95p per ordinary share).
7(a). Basic and diluted earnings per share
2020 2020 2020 2019 2019 2019
Earnings Shares EPS Earnings Shares EPS
Year to 31 December GBPm million pence GBPm million pence
-------------------------------------- --------- -------- ------ --------- -------- ------
Basic earnings per share 67.6 138.0 49.0 82.9 136.7 60.6
Effect of additional shares issuable
under option - 3.1 (1.1) - 4.2 (1.8)
--------------------------------------
Diluted earnings per share 67.6 141.1 47.9 82.9 140.9 58.8
-------------------------------------- --------- -------- ------ --------- -------- ------
7(b). Underlying basic and diluted earnings per share
2020 2020 2020 2019 2019 2019
Earnings Shares EPS Earnings Shares EPS
Year to 31 December GBPm million pence GBPm million pence
--------------------------------------- --------- -------- ------ --------- -------- ------
Basic earnings per share 67.6 138.0 49.0 82.9 136.7 60.6
- Amortisation of acquired intangible
assets (excluding software) after
tax 3.3 - 2.4 5.1 - 3.7
- Share-based payment adjustment
after tax 1.1 - 0.8 (2.2) - (1.6)
- Loss/(profit) on disposal of
joint ventures and associates
after tax 0.1 - 0.1 (1.2) - (0.9)
- Restructuring costs after tax 1.5 - 1.1 9.3 - 6.8
- Acquisition-related costs after
tax 4.1 - 3.0 12.8 - 9.4
- GMP equalisation charge after
tax 0.6 - 0.4 - - -
Underlying basic earnings per
share 78.3 138.0 56.8 106.7 136.7 78.0
--------------------------------------- --------- -------- ------ --------- -------- ------
Effect of additional shares issuable
under option - 3.1 (1.3) - 4.2 (2.3)
---------------------------------------
Underlying diluted earnings per
share 78.3 141.1 55.5 106.7 140.9 75.7
--------------------------------------- --------- -------- ------ --------- -------- ------
8. Cash generated from operations
2020 2019
GBPm GBPm
---------------------------------------------------- ------- -------
Profit for the year 68.0 83.6
Adjustments for:
Income tax (Note 5) 15.2 32.0
Depreciation 64.3 60.6
Amortisation of intangible assets 9.6 10.4
Loss on disposal of property, plant and equipment
and intangible assets 0.8 1.4
Loss/(profit) on disposal of joint ventures
and associates 0.1 (1.7)
Net finance cost 12.8 11.8
Share of post-tax profit from joint ventures
and associates (10.2) (11.8)
Increase/(decrease) in employee and retirement
obligations 3.4 (9.5)
Exchange movements and fair value movements
on financial instruments in operating activities 2.4 (0.2)
Increase in provisions 0.5 3.4
Charge for share-based compensation 19.8 17.8
Operating cash flows before movements in working
capital 186.7 197.8
---------------------------------------------------- ------- -------
Decrease/(increase) in trade and other receivables
and contract assets 84.5 (50.7)
Increase/(decrease) in trade and other payables
and contract liabilities 18.6 (14.5)
---------------------------------------------------- ------- -------
Cash generated from operations 289.8 132.6
---------------------------------------------------- ------- -------
Foreign exchange movements resulted in a GBP0.3m decrease in
current and non-current trade and other receivables (2019: GBP13.0m
decrease) and a GBP2.3m decrease in current and non-current trade
and other payables (2019: GBP15.3m decrease).
9. Acquisition of subsidiaries
The fair values of the assets acquired and liabilities assumed
as part of the Group's acquisitions in the year are provisional and
will be finalised within 12 months of the acquisition date. These
are summarised below:
Provisional fair value
to the Group
---------------------------
Macro Omega Total
GBPm GBPm GBPm
-------------------------- ------------------------------- -------- -------- -------
Property, plant and equipment - 0.1 0.1
Right-of-use asset 1.3 0.5 1.8
Intangible assets 7.2 3.3 10.5
Current assets: Trade and other receivables - 0.9 0.9
Cash and cash equivalents - 2.4 2.4
Current liabilities: Trade and other payables - (1.0) (1.0)
Borrowings - (0.7) (0.7)
Lease liabilities - (0.3) (0.3)
Income tax liability - (0.3) (0.3)
Employment benefit provisions - (0.1) (0.1)
Non-current liabilities: Lease liabilities (1.3) (0.2) (1.5)
Deferred tax liabilities - (1.0) (1.0)
Net assets acquired 7.2 3.6 10.8
Goodwill 3.3 1.8 5.1
----------------------------------------------------------- -------- -------- -------
Purchase consideration 10.5 5.4 15.9
----------------------------------------------------------- -------- -------- -------
Consideration satisfied by:
Cash paid 9.3 4.3 13.6
Discounted value of deferred consideration 1.2 1.1 2.3
10.5 5.4 15.9
---------------------------------------------------------- -------- -------- -------
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 determined at GBP10.5m,
GBP9.3m of which was settled on completion and the remainder
relating to the discounted value of deferred payments of GBP1.2m.
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.
Goodwill of GBP3.3m has been 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. Intangible assets recognised on
acquisition include GBP6.7m of customer relationships and GBP0.5m
in relation to the brand.
The acquired business contributed revenue of GBP8.2m and a loss
of GBP0.9m to the Group for the period from 1 March 2020 to 31
December 2020. Had the acquisition been made at the beginning of
the financial year, revenue would have been GBP10.2m and the loss
would have been GBP1.2m.
OMEGA Immobilien Management GmbH and OMEGA Immobilien Service
GmbH ('Omega')
On 31 August 2020 the Group acquired 100% of the equity interest
in OMEGA Immobilien Management GmbH and OMEGA Immobilien Service
GmbH, property and facilities management businesses offering
services for offices, shopping centres, residential complexes and
car parks across Germany.
Total acquisition consideration is provisionally determined at
GBP5.4m, GBP4.3m of which was settled on completion and the
remainder relating to a deferred payment in 2022 totalling
GBP1.1m.
In addition to the above, an earn-out is payable in 2023 and is
based on average future EBITDA targets. The maximum earn-out
payment under the agreement totals GBP4.5m 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 GBP0.5m have been expensed as
incurred to the income statement.
The fair value exercise is in progress and goodwill of GBP1.8m
has been provisionally determined. Goodwill is attributable to the
experience and expertise of key staff and is not expected to be
deductible for tax purposes.
The acquired business contributed revenue of GBP3.6m and a
profit of GBP0.4m to the Group for the period from 31 August 2020
to 31 December 2020. Had the acquisition been made at the beginning
of the financial year, revenue would have been GBP9.9m and the
profit would have been GBP0.9m.
10. Borrowings
Movements in borrowings are analysed as follows:
GBPm
----------------------------------------------- -------
Opening amount as at 1 January 2020 181.4
Additional borrowings 46.1
Repayments of borrowings (including overdraft
movement) (67.3)
Addition through business combination
(Note 9) 0.7
Non-cash movement 0.4
Foreign exchange (0.7)
Closing amount as at 31 December 2020 160.6
------------------------------------------------- -------
2020 2019
GBPm GBPm
--------------------------------------------- ------ ------
Current
Bank overdrafts 0.1 0.1
Unsecured bank loans due within one year or
on demand 12.1 33.3
12.2 33.4
Non-current
Loan notes 150.0 150.0
Transaction costs (issuance of loan notes
and RCF arrangement fees) (1.6) (2.0)
148.4 148.0
--------------------------------------------- ------ ------
160.6 181.4
--------------------------------------------- ------ ------
The Group holds a GBP360.0m multi-currency revolving credit
facility ('RCF'), which includes a GBP90.0m accordion facility,
expiring in June 2024. As at 31 December 2020 none (2019: GBP32.5m)
of the RCF was drawn. The unsecured bank loans reflect a GBP11.4m
utilisation of a revolving credit facility in North America for
working capital purposes, which is repayable within one year and
denominated in US dollars (2019: GBPnil) and a GBP0.7m working
capital loan in Thailand, which is repayable on demand and
denominated in Thailand baht (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.
The Group has the following undrawn borrowing facilities:
2020 2019
GBPm GBPm
----------------------------------- ------ ------
Floating rate
- expiring within one year or on
demand 36.1 45.3
- expiring between 1 and 5 years 361.1 328.0
------------------------------------ ------ ------
397.2 373.3
----------------------------------- ------ ------
11. Related party transactions
All related party transactions take place on an arm's-length
basis under the same terms as those available to other customers in
the ordinary course of business. There were no transactions with
associates in the year (2019: GBP0.2m income received from an
associate).
As at 31 December 2020, loans outstanding to joint ventures
amounted to GBP4.1m (2019: GBP2.8m) and loans outstanding to
associates amounted to GBP0.7m (2019: GBP0.6m).
12. Contingent liabilities
In common with comparable professional services businesses, the
Group is involved in a number of disputes in the ordinary course of
business. Provision is made in the financial statements for all
claims where costs are likely to be incurred, in the case of claims
in relation to the provision of professional services where these
will not be met by the Group's professional indemnity insurers, and
represents the cost of defending and concluding claims.
Directors' responsibility statement
The Savills Report and Accounts for year end 31 December 2020
contains a responsibility statement in the following form:
Each of the Directors confirm that, to the best of their
knowledge:
-- the Group and parent company financial statements, which have
been prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and
in accordance with international financial reporting standards
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the European Union, give a true and fair view of the assets,
liabilities, financial position and profit of the Group and profit
of the parent company; and
-- the Directors' Report includes a fair review of the
development and performance of the business and the position of the
group and parent company, together with a description of the
principal risks and uncertainties that it faces.
In the case of each Director in office at the date the
Directors' Report is approved:
-- so far as the Director is aware, there is no relevant audit
information of which the Group and parent company's auditors are
unaware; and
-- they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any relevant
audit information and to establish that the Group and parent
company's auditors are aware of that information.
On behalf of the Board
Mark Ridley
Group Chief Executive
Chris Lee
Group Legal Director and Company Secretary
11 March 2021
Forward-looking statements
The financial information contained in this announcement has not
been audited. Certain statements made in this announcement are
forward-looking statements and are therefore subject to risks,
assumptions and uncertainties that could cause actual results to
differ materially from those expressed or implied because they
relate to future events. These forward-looking statements include,
but are not limited to, statements relating to the Company's
expectations.
Copies of the Annual Report and Accounts for the year ended 31
December 2020 will be circulated to shareholders on 6 April 2021
and will also be available from the investor relations section of
the Company website at www.ir.savills.com or from:
Savills plc, 33 Margaret Street, London, W1G 0JD
Telephone: 020 7499 8644
END
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