RNS Number : 5820N
Savills PLC
10 August 2017
 

10 August 2017

Savills plc

("Savills" or "the Group")

 

RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2017

 

Savills plc, the international real estate advisor, today announces its unaudited results for the six months ended 30 June 2017.

 

Key Financial Information

 

· Group revenue up 15% (7% in constant currency*) to £714.4m (H1 2016: £622.7m)

· Group underlying profit** before tax up 12% (5% in constant currency) to £48.1m (H1 2016: £42.8m)

· Group profit before tax up 27% to £32.4m (H1 2016: £25.5m)

· Underlying basic earnings per share up 18% to 25.7p (H1 2016: 21.8p)

· Basic earnings per share up 39% to 16.1p (H1 2016: 11.6p)

· Interim dividend increased 6% to 4.65p per share (H1 2016: 4.4p)

 

* 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 to the Interim Financial Statements.

 

Highlights

 

· Transaction Advisory revenue up 15%, reflecting strong performances in Asia, Europe and  the UK Commercial market offsetting a slight decline in UK Residential revenue. 

· Property Management revenue up 13%, Consultancy revenue up 15%.

· Continued expansion in Europe and North America, through bolt-on acquisitions and recruitment.

· Savills Investment Management revenue up 22%.

 

Commenting on the results, Jeremy Helsby, Group Chief Executive of Savills plc, said:

 

"Savills has delivered a great first half performance across the Group driven, in particular, by strong growth in Asia and a resilient performance in the UK.

 

In line with our overall growth strategy, we have continued to build on the Savills Studley platform in the US, particularly our Capital Markets business, with recruitment and incremental acquisition activity across the country. In addition, we have continued to invest in our Asian platform and, since the period end, in Europe we have announced the acquisitions of Larry Smith and Aguirre Newman, further strengthening our positions in Italy and Spain respectively.

 

Continued growth in our less transactional businesses, significant overseas earnings and strong market shares in many of our most important transactional locations position the Group to withstand short term reductions in local activity and to capitalise on the opportunities which we expect to emerge.

 

In an environment of ongoing political and economic uncertainty, we continue to anticipate that our performance for the full year will be in line with the Board's expectations."

 

 

For further information, contact:

 

Savills

020 7409 8934

Jeremy Helsby, Group Chief Executive

 

Simon Shaw, Group Chief Financial Officer

 

 

 

Tulchan Communications

020 7353 4200

Peter Hewer and Jessica Reid

 

 

 

Business review

The following table sets out Group revenue and underlying profit by operating segment:

 

Revenue

H1 2017
£m

H1 2016
£m

Change

Transaction Advisory

312.1

271.1

15%

Property and Facilities Management

246.6

219.0

13%

Consultancy

121.0

105.1

15%

Investment Management

33.6

27.5

22%

Unallocated/Central

1.1

-

n/a

Group revenue

714.4

622.7

15%

 

Underlying profit

H1 2017
£m

H1 2016
£m

Change

Transaction Advisory

24.6

23.3

6%

Property and Facilities Management

10.2

10.2

n/a

Consultancy

10.2

8.2

24%

Investment Management

6.6

3.9

69%

Unallocated cost

(3.5)

(2.8)

(25%)

Group underlying profit

48.1

42.8

12%

 

The following table sets out Group revenue and underlying profit by geographical area:

 

Revenue

H1 2017
£m

H1 2016
£m

Change

UK

274.2

255.8

7%

Asia Pacific

263.5

209.4

26%

Continental Europe

72.0

63.1

14%

North America

103.6

94.4

10%

Unallocated/Central

1.1

-

n/a

Group revenue

714.4

622.7

15%

 

Underlying profit

H1 2017
£m

H1 2016
£m

Change

UK

25.3

24.8

2%

Asia Pacific

21.8

13.1

66%

Continental Europe

1.5

(0.1)

n/a

North America

3.0

7.8

(62%)

Unallocated cost

(3.5)

(2.8)

(25%)

Group underlying profit

48.1

42.8

12%

 

 

Overview

The benefits of the Group's diverse geographical spread and service lines had a positive impact on overall performance in the six months to 30 June 2017. In the UK, the breadth of our service lines and a strong Consultancy performance more than offset the impact of reduced transactional volumes in our residential business. In Asia Pacific, we saw significant growth in our transactional markets, notably in Hong Kong, Japan and Australia. In both Continental Europe and North America revenue grew in line with our expectations. These performances, together with an improved profit from Savills Investment Management, benefiting from the disposal of assets within the liquidating German Open Ended Funds, combined to underpin a strong first half performance for the Group.

 

The Group's results for the six months to 30 June 2017 comprise revenue growth of 15% (7% in constant currency) to £714.4m (H1 2016: £622.7m). Underlying profit was £48.1m, 12% (5% in constant currency) higher than the first half of 2016 (H1 2016: £42.8m). Currency had a positive impact on reported Group performance increasing revenue by £47.2m and underlying profit by £3.1m. Statutory profit before tax, including deferred consideration provisions and acquisition and restructuring costs was £32.4m, 27% higher than the first half of 2016 (H1 2016: £25.5m).

 

During the period we continued to execute our business development plans with incremental acquisitions and team hires for the Savills Studley platform in the US, including the acquisition of Cresa Partners Orange County (California). In addition, we recruited a significant Capital Markets team in New York, the costs of which affected US profits in the period. In the UK, we acquired a commercial real estate service provider in Guernsey, expanding the Savills brand across the Channel Islands, and a residential lettings business in Buckinghamshire. In Europe we expanded our platform, by investing in a new start-up in the Czech Republic and the recruitment of industrial teams in Amsterdam and Warsaw.

 

The Group's underlying profit margin was affected by expenditure on a number of these activities, falling slightly to 6.7% (H1 2016: 6.9%).

 

Current factors affecting Real Estate Markets

Increasing levels of global insecurity have driven a steady shift towards income-producing assets all over the world. Nowhere is this more true than in the London office market, where the first half of 2017 saw nearly £9.0bn of transactions, a record 78% of which were to non-domestic investors. Many of these investors, while they accept that occupational risk has increased due to Brexit, still see the UK as comparatively secure in a global context. Weaker sterling has also renewed overseas investor interest in UK real estate, particularly from the Asia Pacific region. It should be noted that additional controls over the export of capital from China are likely to reduce current levels of international real estate investment from that region.

 

In Europe, economic prospects appear favourable for real estate. In the US, a degree of uncertainty continues to prevail with corporate occupiers tending to defer, or at least take longer to execute, significant office leasing transactions.

 

Transaction Advisory

 

Revenue

H1 2017
£m

H1 2016
£m

Change

UK

94.4

89.3

6%

Asia Pacific

87.7

65.0

35%

Continental Europe

26.4

22.4

18%

North America

103.6

94.4

10%

Total

312.1

271.1

15%

 

Savills Transaction Advisory businesses performed well during the period with revenue increasing in most of our markets. Overall, the underlying profits of our Transaction Advisory business increased by 6% to £24.6m during the period (H1 2016: £23.3m), driven primarily by a strong performance in Asia Pacific, which offset the continued investment in North America as we seek to grow our Capital Markets offering.

 

UK Commercial

UK Commercial Transaction fee income was up 23% to £39.4m (H1 2016: £32.1m), despite additional uncertainty caused by the unexpected General Election. UK commercial property investment volumes rose 1% in the first half of 2017, reaching £27.2bn, helped by some very high value transactions in central London. Across the UK investors continue to be attracted by the underlying strength of the commercial property market, with overseas buyers additionally benefiting from sterling devaluation.

 

Underlying profits for the UK Commercial Transaction business increased by 67% to £4.5m (H1 2016: £2.7m).

           

UK Residential

UK Residential Transaction fee income decreased by 4% to £55.0m (H1 2016: £57.2m). Overall, volumes in the UK Prime Residential market were lower in the period in comparison with the higher volume traded in advance of April 2016's increase in Stamp Duty. This was somewhat offset by stronger activity in May and June compared to the comparable period, which was relatively muted in the run up to the EU referendum in 2016. In the second hand sales market, Savills overall transaction volumes were down by 3% in London and 6% in the country market. The average value of London residential property sold by Savills in the period was £2.7m (H1 2016: £2.5m), and £1.1m (H1 2016: £1.0m) in the country.

 

Sales of new development stock declined by 6% over H1 2016, alongside a fall in the average unit value of 4% to £0.75m.

 

Increased levels of political and economic uncertainty created by the General Election and the ongoing negotiations to leave the EU make it difficult to predict market volumes for the rest of the year.  

 

Decreased revenues in new development sales, alongside additional costs of new office openings since H1 2016, resulted in the UK residential transaction business' underlying profits declining by 27% to £5.4m (H1 2016: £7.4m).

 

Asia Pacific Commercial

Commercial Transaction fee income in Asia Pacific increased by 39% (23% in constant currency) to £67.6m (H1 2016: £48.7m). This growth was driven primarily by Australia, Hong Kong and Japan. In Hong Kong, our share of the market for significant transactions drove a 75% increase in transactional revenue (55% in constant currency), with the business benefiting from a number of large investment transactions.

 

Overall, underlying profits from the Asia Pacific commercial transaction business grew by 169% to £9.7m (139% in constant currency) (H1 2016: £3.6m).

 

Asia Pacific Residential

Residential Transaction fee income in Asia Pacific increased by 23% to £20.1m (H1 2016: £16.3m) (10% in constant currency). Revenue was driven principally by sales growth of 84% in Hong Kong (63% in constant currency). The Hong Kong residential market saw strong activity at the beginning of 2017 in both the primary and secondary markets where the volume of transactions were up 70% compared with the same period in 2016. In May 2017, the Hong Kong government implemented further cooling measures which are likely to have an impact on volumes in the second half of the year.

 

Underlying profits in the region decreased slightly by 3% to £2.9m (H1 2016: £3.0m), impacted by a slight slowdown in transactional volumes in mainland China and increased cost allocation to the segment in Australia.

 

Continental Europe

In Continental Europe, transaction fee income increased by 18% to £26.4m (H1 2016: £22.4m) (7% in constant currency). France and Germany delivered strong revenue growth alongside increased revenues in the Netherlands and Spain. In Ireland, revenue decreased over H1 2016 on lower volumes traded in the period. Revenue growth in the Continental European Transactional business reduced the first half loss to £0.9m (H1 2016: £1.2m loss), although losses continue to be impacted by the cost of expansion including new start-ups in Czech Republic and Luxembourg, alongside a new National Investment team based in Berlin.

 

North America

Our North American revenue increased by 10% (3% decrease in constant currency) to £103.6m (H1 2016: £94.4m). Reductions in leasing activity in Chicago, Washington DC, New York and Capital Markets activity in New York were offset in part by stronger performances in California and the Corporate Services Group. In a number of cities leasing activity continues to be somewhat subdued due to ongoing uncertainty over the new government administration.

 

Headcount has increased by approximately 13% compared to H1 2016, through the Orange County (California) acquisition in February and a number of team hires. The cost of new offices (Seattle, Memphis and North Carolina) and the recruitment of a sizeable Capital Markets  team  in New York, had a short term impact on underlying profits, which decreased by 62% to £3.0m (H1 2016: £7.8m), during this period of significant business development.

 

Property and Facilities Management

 

Revenue

H1 2017
£m

H1 2016
£m

Change

Asia Pacific

150.4

128.0

18%

UK

76.2

73.7

3%

Continental Europe

20.0

17.3

16%

Total

246.6

219.0

13%

 

Our Property and Facilities Management business increased global revenues by 13% (4% in constant currency) to £246.6m (H1 2016: £219.0m). Savills total area under management decreased by 5% to 1.86bn sq.ft (H1 2016: 1.95bn sq.ft), primarily due to developers taking the management of halted development sites in-house in Asia Pacific. All three regions experienced steady growth in revenues.

 

In Asia Pacific, there was revenue growth throughout the region with notable performances in Hong Kong and mainland China. In the UK, following completion of the integration of the business of Smiths Gore, approximately £10.0m of revenue and £1.0m of underlying profit, which had hitherto been recognised in the rural property management business, was reallocated to business segments other than Property and Facilities Management. This masked strong underlying growth in both UK Commercial and Residential Management (including Lettings growth of 6%). In Continental Europe, revenue increased by 16% (6% in constant currency) with growth in Ireland and the Netherlands.

 

As a result of the above factors, underlying profit for the Property and Facilities Management business remained flat at £10.2m (H1 2016: £10.2m).

 

Consultancy

 

Revenue

H1 2017
£m

H1 2016
£m

Change

UK

91.6

81.1

13%

Asia Pacific

22.1

16.4

35%

Continental Europe

7.3

7.6

(4%)

Total

121.0

105.1

15%

 

Consultancy fee income increased in the period by 15% (12% in constant currency) to £121.0m (H1 2016: £105.1m).

 

In the UK, there were strong performances in building and project consultancy and hotels and leisure. Asia Pacific revenues grew 35% (20% in constant currency) with growth throughout the region, in particular the valuation businesses in Australia, China and Hong Kong. In Continental Europe, revenue decreased by 4% (12% decrease in constant currency) with lower revenues in Germany and the Netherlands more than offsetting growth in Spain, France and Ireland.

 

Underlying profit increased in the Consultancy business by 24% to £10.2m (H1 2016: £8.2m).

 

Investment Management

Revenue from Investment Management increased by 22% (15% in constant currency) to £33.6m (H1 2016: £27.5m), reflecting the disposal of assets within the liquidating German Open Ended Funds under the SEB brand. As a result, assets under management decreased by 6% to €16.0bn (H1 2016: €17.1bn). New capital inflows into funds and mandates were marginally ahead of the comparable period at €0.8bn. In addition, the disposal of further assets within the German Open Ended Funds drove significantly higher transaction volumes of approximately €3.0bn during the period (H1 2016: approximately €1.0bn).

 

Underlying profits for Investment Management increased by 69% (62% in constant currency) to £6.6m (H1 2016: £3.9m).

 

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. These are stated net of revenue earned centrally during the period. The H1 increase in unallocated net costs of 25% to £3.5m (H1 2016: £2.8m) reflects the receipt of dividends and distributions from certain trade investments of the Group in H1 2016 which were not repeated in H1 2017.

 

Acquisition and restructuring costs

During the period the Group incurred an aggregate restructuring charge of £1.8m (H1 2016: £1.7m) and acquisition related costs of £13.3m (H1 2016: £15.0m). The restructuring charge relates principally to the integration of Smiths Gore (2015 acquisition) into the Savills UK business. Current period acquisition related costs reflect the charge for future consideration payments principally associated with the acquisition of Studley in the US (2014) together with other smaller more recent acquisitions across the Group. These relate primarily to the provision for consideration payments which are conditional on the continuity of recipients' employment in the future, and in certain instances the achievement of profit or revenue targets.

 

Earnings, financial strength and dividends

The Group's underlying profit margin in the period was 6.7% (H1 2016: 6.9%). Basic earnings per share for the six months to 30 June 2017 increased by 39% to 16.1p (H1 2016: 11.6p), reflecting business growth, lower provisions for deferred consideration on the acquisition of Studley in May 2014 and a lower effective tax rate of 31.5% (H1 2016: 35.7%). Underlying earnings per share were up 18% to 25.7p (H1 2016: 21.8p).

 

The impact of foreign exchange movements on the translation of profits from our overseas businesses resulted in an increase in underlying profit of £3.1m.

 

At 30 June 2017, net cash was £1.4m (30 June 2016: £34.7m net cash). This decrease related primarily to payment of the final instalment of deferred consideration for Studley of $67.4m, which was paid at the end of May 2017. At 30 June 2017 the Group had cash balances of £179.7m (30 June 2016: £166.9m) less borrowings of £178.3m (30 June 2016: £132.2m), with £96.4m of credit facilities remaining available for utilisation (30 June 2016: £139.8m).

 

The Board has declared an interim dividend of 4.65p per share (2016: 4.4p). The increase of 6% is supported by the growth in our non-transactional business profits. The performance of the Group's Transaction Advisory businesses will be taken into account in the consideration of any proposed final ordinary and supplemental interim dividends alongside the results for the full year.

 

The interim dividend of 4.65p per share will be payable on 4 October 2017 to shareholders on the register on 8 September 2017.

 

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 2016. Please refer to pages 25 to 29 thereof or to our investors' page on www.savills.com. In addition, specific risks which might affect the outlook for the second half are disclosed in the Summary and outlook statement below.

 

Summary and outlook

Savills has delivered a great first half performance across the Group, driven, in particular, by strong growth in Asia and a resilient performance in the UK.

 

In line with our overall growth strategy, we have continued to build on the Savills Studley platform in the US, particularly our Capital Markets business, with recruitment and incremental acquisition activity across the country. In addition, we have continued to invest in our Asian platform and, since the period end, in Europe we have announced the acquisitions of Larry Smith and Aguirre Newman, further strengthening our positions in Italy and Spain respectively.

 

Continued growth in our less transactional businesses, significant overseas earnings and strong market shares in many of our most important transactional locations position the Group to withstand short term reductions in local activity and to capitalise on the opportunities which we expect to emerge.

 

In an environment of ongoing political and economic uncertainty, we continue to anticipate that our performance for the full year will be in line with the Board's expectations

 

 

 

Jeremy Helsby                                                             Nicholas Ferguson CBE

Group Chief Executive                                                  Chairman

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

The Directors confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and gives a true and fair view of the assets, liabilities, financial position and profit as required by DTR 4.2.4 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 information 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 2016. A list of current Directors is maintained on the Savills plc website: www.savills.com.

 

By order of the Board

 

Jeremy Helsby, Group Chief Executive

Simon Shaw, Group Chief Financial Officer

9 August 2017

 

 

Forward-Looking Statements

 

The financial information contained in this announcement has not been audited. Certain statements made in this announcement are forward-looking statements. 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 2017. 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 2017;

·      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

9 August 2017

London

 

 

Savills plc

Condensed interim consolidated income statement

for the period ended 30 June 2017

 

 

 

Six months to 30 June 2017

Six months to 30 June 2016

Year ended

31 December 2016

 

 

(unaudited)

(unaudited)

(audited)

 

Note

£m

£m

£m

 

 

 

 

 

Revenue

6

714.4

622.7

1,445.9

Less:

 

 

 

 

Employee benefits expense

 

(470.2)

(414.7)

(953.5)

Depreciation

 

(6.9)

(6.2)

(12.7)

Amortisation of intangible assets

 

(3.1)

(3.5)

(6.9)

Other operating expenses

 

(205.9)

(177.7)

(382.7)

Other operating income

 

0.5

1.9

2.5

Profit on disposal of joint ventures, associates and available-for-sale investments

 

0.9

0.5

0.5

Loss on disposal of available-for-sale investments

 

-

-

(0.4)

Operating profit

 

29.7

23.0

92.7

 

 

 

 

 

Finance income

 

1.2

1.0

1.6

Finance costs

 

(1.6)

(1.4)

(2.4)

 

 

(0.4)

(0.4)

(0.8)

 

 

 

 

 

Share of post-tax profit from joint ventures and associates

 

3.1

2.9

7.9

Profit before income tax

 

32.4

25.5

99.8

 

 

 

 

 

Comprising:

 

 

 

 

 - underlying profit before tax

6,7

48.1

42.8

135.8

 - restructuring and acquisition-related costs

7

(15.1)

(16.7)

(34.5)

 - other underlying adjustments

7

(0.6)

(0.6)

(1.5)

 

 

32.4

25.5

99.8

 

 

 

 

 

Income tax expense

8

(10.2)

(9.1)

(32.1)

 

 

 

 

 

Profit for the period

 

22.2

16.4

67.7

 

 

 

 

 

Attributable to:

 

 

 

 

Owners of the parent

 

21.9

16.0

66.9

Non-controlling interests

 

0.3

0.4

0.8

 

 

22.2

16.4

67.7

 

 

 

 

 

Earnings per share

 

 

 

 

Basic earnings per share

10(a)

16.1p

11.6p

48.8p

Diluted earnings per share

10(a)

15.7p

11.4p

47.7p

 

 

 

 

 

Underlying earnings per share

 

 

 

 

Basic earnings per share

10(b)

25.7p

21.8p

72.5p

Diluted earnings per share

10(b)

25.1p

21.4p

71.0p

 

 

 

 

 

 

Notes 1 to 18 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 2017

 

 

Six months to 30 June 2017 (unaudited)

Six months to 30 June 2016 (unaudited)

Year ended 31 December 2016 (audited)

 

£m

£m

£m

Profit for the period

22.2

16.4

67.7

 

 

 

 

Other comprehensive (loss)/income

 

 

 

Items that will not be reclassified to profit or loss:

 

 

 

Remeasurement of defined benefit pension scheme obligation

3.9

(30.0)

(35.2)

Tax on items that will not be reclassified

(0.5)

6.1

7.2

Total items that will not be reclassified to profit or loss

3.4

(23.9)

(28.0)

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

Fair value loss on available-for-sale investments

-

(1.1)

(0.6)

Fair value (gain)/loss on available-for-sale investment released to income statement

(0.5)

0.1

-

Currency translation differences

(8.0)

31.8

52.6

Tax on items that may be reclassified

1.2

(1.4)

(0.7)

Total items that may be reclassified subsequently to profit or loss

(7.3)

29.4

51.3

 

 

 

 

Other comprehensive (loss)/ income for the period, net of tax

(3.9)

5.5

23.3

 

 

 

 

Total comprehensive income for the period

18.3

21.9

91.0

 

 

 

 

Total comprehensive income attributable to:

 

 

 

Owners of the parent

18.0

21.4

90.0

Non-controlling interests

0.3

0.5

1.0

 

18.3

21.9

91.0

 

Notes 1 to 18 are an integral part of these condensed interim financial statements.

 

 

Savills plc

Condensed interim consolidated statement of financial position

at 30 June 2017

 

 

30 June 2017 (unaudited)

30 June 2016 (unaudited)

31 December 2016 (audited)

 

Note

£m

£m

£m

Assets: Non-current assets

 

 

 

 

Property, plant and equipment

 

61.5

58.7

59.7

Goodwill

 

312.1

291.1

309.8

Intangible assets

 

30.7

25.9

29.2

Investments in joint ventures and associates

 

26.3

27.8

28.9

Deferred income tax assets

 

37.3

35.4

36.5

Available-for-sale investments

 

24.4

22.9

20.8

Retirement benefits

13

1.0

-

-

Derivative financial instruments

 

0.1

0.1

0.1

Non-current receivables

 

16.9

9.3

9.6

 

 

510.3

471.2

494.6

Assets: Current assets

 

 

 

Work in progress

 

6.8

4.6

5.3

Trade and other receivables

 

364.4

335.0

419.4

Current income tax receivable

 

5.1

5.5

4.3

Derivative financial instruments

 

-

-

0.2

Cash and cash equivalents

 

179.7

166.9

223.6

 

 

556.0

512.0

652.8

Liabilities: Current liabilities

 

 

 

 

Borrowings

14

178.3

132.2

35.8

Derivative financial instruments

 

0.1

0.2

0.3

Trade and other payables

 

365.7

357.1

550.2

Current income tax liabilities

 

16.0

14.1

17.5

Employee benefit obligations

13

12.4

10.4

9.2

Provisions for other liabilities and charges

 

9.2

8.8

10.2

 

 

581.7

522.8

623.2

Net current (liabilities)/assets

 

(25.7)

(10.8)

29.6

Total assets less current liabilities

 

484.6

460.4

524.2

Liabilities: Non-current liabilities

 

 

 

 

Trade and other payables

 

38.7

44.0

44.9

Retirement and employee benefit obligations

13

47.8

52.4

57.0

Provisions for other liabilities and charges

 

12.4

14.2

11.7

Deferred income tax liabilities

 

2.9

3.1

3.6

 

 

101.8

113.7

117.2

Net assets

 

382.8

346.7

407.0

Equity: Capital and reserves attributable to owners of the parent

 

Share capital

 

3.5

3.5

3.5

Share premium

 

91.1

91.1

91.1

Shares to be issued

 

-

11.3

11.3

Other reserves

 

106.7

82.9

103.9

Retained earnings

 

180.0

156.7

195.8

 

 

381.3

345.5

405.6

Non-controlling interests

 

1.5

1.2

1.4

Total equity

 

382.8

346.7

407.0

Notes 1 to 18 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 2017

 

Attributable to owners of the parent

 

 

 

Share capital

Share premium

Shares to be issued

Other reserves

Retained earnings

Total

Non-controlling interests

Total equity

 

£m

£m

£m

£m

£m

£m

£m

£m

Balance at 1 January 2017

(audited)

3.5

91.1

11.3

103.9

195.8

405.6

1.4

407.0

Profit for the period

-

-

-

-

21.9

21.9

0.3

22.2

Other comprehensive (loss)/income:

 

 

 

 

 

 

 

 

Fair value gain on available-for-sale investment released to income statement

-

-

-

(0.5)

-

(0.5)

-

(0.5)

Remeasurement of defined benefit pension scheme obligation / retirement benefits

-

-

-

-

3.9

3.9

-

3.9

Tax on items directly taken to reserves

-

-

-

-

0.7

0.7

-

0.7

Currency translation differences

-

-

-

(8.0)

-

(8.0)

-

(8.0)

Total comprehensive (loss)/income for the period

-

-

-

(8.5)

26.5

18.0

0.3

18.3

Transactions with owners:

 

 

 

 

 

 

 

 

Employee share option scheme:

 

 

 

 

 

 

 

 

- Value of services provided

-

-

-

-

7.9

7.9

-

7.9

Purchase of treasury shares

-

-

-

-

(17.2)

(17.2)

-

(17.2)

Shares issued

-

-

(11.3)

11.3

-

-

-

-

Dividends

-

-

-

-

(33.0)

(33.0)

(0.2)

(33.2)

Balance at 30 June 2017 (unaudited)

3.5

91.1

-

106.7

180.0

381.3

1.5

382.8

 

 

 

Attributable to owners of the parent

 

 

 

Share capital

Share premium

Shares to be issued

Other reserves

Retained earnings

Total

Non-controlling interests

Total equity

 

£m

£m

£m

£m

£m

£m

£m

£m

Balance at 1 January 2016

(audited)

3.4

91.1

22.9

39.1

207.8

364.3

0.7

365.0

Profit for the period

-

-

-

-

16.0

16.0

0.4

16.4

Other comprehensive income/(loss):

 

 

 

 

 

 

 

 

Fair value loss on available-for-sale investments

-

-

-

(1.1)

-

(1.1)

-

(1.1)

Fair value loss on available-for-sale investment released to income statement

-

-

-

0.1

-

0.1

-

0.1

Remeasurement of defined benefit pension scheme obligation

-

-

-

-

(30.0)

(30.0)

-

(30.0)

Tax on items directly taken to reserves

-

-

-

-

4.7

4.7

-

4.7

Currency translation differences

-

-

-

31.7

-

31.7

0.1

31.8

Total comprehensive income/(loss) for the period

-

-

-

30.7

(9.3)

21.4

0.5

21.9

Transactions with owners:

 

 

 

 

 

 

 

 

Employee share option scheme:

 

 

 

 

 

 

 

 

- Value of services provided

-

-

-

-

4.4

4.4

-

4.4

Purchase of treasury shares

-

-

-

-

(15.3)

(15.3)

-

(15.3)

Transfer between reserves

-

-

-

1.5

(1.5)

-

-

-

Shares issued

0.1

-

(11.6)

11.6

-

0.1

-

0.1

Dividends

-

-

-

-

(29.4)

(29.4)

-

(29.4)

Balance at 30 June 2016 (unaudited)

3.5

91.1

11.3

82.9

156.7

345.5

1.2

346.7

 

 

 

 

Attributable to owners of the parent

 

 

Share capital

Share premium

Shares to be issued

Other reserves

Retained earnings

Total

Non-controlling interests

Total equity

 

£m

£m

£m

£m

£m

£m

£m

£m

Balance at 1 January 2016

(audited)

3.4

91.1

22.9

39.1

207.8

364.3

0.7

365.0

Profit for the year

-

-

-

-

66.9

66.9

0.8

67.7

Other comprehensive income/(loss):

 

 

 

 

 

 

 

 

Remeasurement of defined benefit pension scheme obligation

-

-

-

-

(35.2)

(35.2)

-

(35.2)

Fair value loss on available-for-sale investments

-

-

-

(0.6)

-

(0.6)

-

(0.6)

Tax on items directly taken to reserves

-

-

-

-

6.5

6.5

-

6.5

Currency translation differences

-

-

-

52.4

-

52.4

0.2

52.6

Total comprehensive income for the year

-

-

-

51.8

38.2

90.0

1.0

91.0

Transactions with owners:

 

 

 

 

 

 

 

 

Employee share option scheme:

 

 

 

 

 

 

 

 

- Value of services provided

-

-

-

-

13.4

13.4

-

13.4

Purchase of treasury shares

-

-

-

-

(23.2)

(23.2)

-

(23.2)

Shares issued

0.1

-

(11.6)

11.6

-

0.1

-

0.1

Dividends

-

-

-

-

(35.4)

(35.4)

(0.9)

(36.3)

Transfer between reserves

-

-

-

1.4

(1.4)

-

-

-

Transactions with non-controlling interests

-

-

-

-

(3.6)

(3.6)

0.6

(3.0)

Balance at 31 December 2016

(audited)

3.5

91.1

11.3

103.9

195.8

405.6

1.4

407.0

 

Notes 1 to 18 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 2017

 

 

Six months to 30 June 2017 (unaudited)

Six months to 30 June 2016 (unaudited)

Year ended 31 December 2016 (audited)

 

Note

£m

£m

£m

Cash flows from operating activities

 

 

 

 

Cash (used in)/generated from operations

11

(35.3)

(55.7)

117.8

Interest received

 

1.2

0.8

1.6

Interest paid

 

(0.7)

(0.9)

(1.3)

Income tax paid

 

(13.7)

(8.0)

(24.8)

Net cash (used in)/generated from operating activities

 

(48.5)

(63.8)

93.3

Cash flows from investing activities

 

 

 

 

Proceeds from sale of property, plant and equipment

 

0.3

0.1

0.2

Proceeds from sale of available-for-sale investments

 

1.5

1.5

5.1

Proceeds from sale of interests in joint ventures and associates

 

-

1.1

2.0

Dividends received from joint ventures and associates

 

4.6

2.9

7.5

Repayment of loans by joint ventures

 

-

1.2

1.2

Loans issued to joint ventures

 

(0.1)

-

-

Acquisition of subsidiaries, net of cash acquired

 

(9.3)

(3.5)

(4.4)

Deferred consideration paid in relation to prior year acquisitions

 

(60.2)

(7.9)

(6.8)

Purchase of property, plant and equipment

 

(9.4)

(6.0)

(12.8)

Purchase of intangible assets

 

(5.0)

(2.8)

(4.7)

Purchase of investment in joint ventures, associates and available-for-sale investments

 

(4.6)

(11.9)

(12.6)

Net cash used in investing activities

 

(82.2)

(25.3)

(25.3)

Cash flows from financing activities

 

 

 

 

Proceeds from issue of share capital

 

-

-

0.1

Proceeds from borrowings

 

181.2

113.0

144.6

Repayments of borrowings

 

(40.8)

(12.5)

(141.2)

Purchase of own shares for Employee Benefit Trusts

 

(17.2)

(15.3)

(23.2)

Purchase of non-controlling interests

 

-

-

(3.3)

Proceeds from disposal of non-controlling interests

 

-

-

0.3

Dividends paid

 

(33.2)

(29.4)

(36.3)

Net cash received from/(used in) financing activities

 

90.0

55.8

(59.0)

Net (decrease)/increase in cash, cash equivalents and bank overdrafts

 

(40.7)

(33.3)

9.0

Cash, cash equivalents and bank overdrafts at beginning of period

 

223.4

182.2

182.2

Effect of exchange rate fluctuations on cash held

 

(5.4)

17.6

32.2

Cash, cash equivalents and bank overdrafts at end of period

 

177.3

166.5

223.4

 

Notes 1 to 18 are an integral part of these condensed interim financial statements.

 

 

 

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 9 August 2017.

 

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 2016 were approved by the Board of Directors on 21 March 2017 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 2017 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 2016, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

Going concern

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its agreed facilities. Having reassessed the principal risks, the Directors considered it appropriate to adopt 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 2016, as described in those financial statements.

 

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss.

 

Standards, amendments and interpretations endorsed by the EU and mandatorily effective for the first time for the financial year beginning 1 January 2017 are not relevant to the Group.

 

IFRS 15, 'Revenue from contracts with customers' ('IFRS 15'), including amendments, is effective for accounting periods beginning on or after 1 January 2018. An initial assessment of the impact of IFRS 15 on the Group has been undertaken. At present, the Directors anticipate that there may be some refinement in the timing of recognition of investment management performance fees and the amortisation period for contract costs however the impact of this refinement is not expected to be material. The impact of IFRS 15 will be concluded and quantified in the 2017 annual report disclosures.

 

 

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 10b) (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 2016, with the exception of changes in estimates that are required in determining the provision for income taxes.

 

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 2016. 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 2017:

 

£m

Level 1

Level 2

Level 3

 

Total

2017

 

 

 

 

 

Assets

 

 

 

 

 

Available-for-sale investments

 

 

 

 

 

 - Unlisted

-

24.4

-

 

24.4

Derivative financial instruments

-

0.1

-

 

0.1

Total assets

-

24.5

-

 

24.5

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Derivative financial instruments

-

0.1

-

 

0.1

Total liabilities

-

0.1

-

 

0.1

 

 

 

 

 

 

The following table presents the Group's assets and liabilities that are measured at fair value at 31 December 2016:

 

£m

Level 1

Level 2

Level 3

 

Total

2016

 

 

 

 

 

Assets

 

 

 

 

 

Available-for-sale investments

 

 

 

 

 

 - Unlisted

-

20.8

-

 

20.8

Derivative financial instruments

-

0.3

-

 

0.3

Total assets

-

21.1

-

 

21.1

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Derivative financial instruments

-

0.3

-

 

0.3

Total liabilities

-

0.3

-

 

0.3

 

 

 

 

 

 

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. The Group has no Level 1 instruments.

 

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 other unlisted investments also included as level 2 are based on price earnings models.

 

If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. The Group has no Level 3 instruments.

 

6. Segment analysis

 

Six months to 30 June 2017

Trans-action Advisory

Property and Facilities Manage-ment

Consult-ancy

Invest-

ment Manage-ment

Other

Total

 (unaudited)

£m

£m

£m

£m

£m

£m

Revenue

 

 

 

 

 

 

United Kingdom

 

 

 

 

 

 

- commercial

39.4

62.9

71.0

12.0

1.1

186.4

- residential

55.0

13.3

20.6

-

-

88.9

Total United Kingdom

94.4

76.2

91.6

12.0

1.1

275.3

Continental Europe

26.4

20.0

7.3

18.3

-

72.0

Asia Pacific

 

 

 

 

 

 

- commercial

67.6

150.4

22.1

3.3

-

243.4

- residential

20.1

-

-

-

-

20.1

Total Asia Pacific

87.7

150.4

22.1

3.3

-

263.5

North America

103.6

-

-

-

-

103.6

Total revenue

312.1

246.6

121.0

33.6

1.1

714.4

Underlying profit/(loss) before tax

 

 

 

 

 

 

United Kingdom

 

 

 

 

 

 

- commercial

4.5

4.2

5.2

2.4

(3.5)

12.8

- residential

5.4

0.8

2.8

-

-

9.0

Total United Kingdom

9.9

5.0

8.0

2.4

(3.5)

21.8

Continental Europe

(0.9)

(1.0)

(0.4)

3.8

-

1.5

Asia Pacific

 

 

 

 

 

 

- commercial

9.7

6.2

2.6

0.4

-

18.9

- residential

2.9

-

-

-

-

2.9

Total Asia Pacific

12.6

6.2

2.6

0.4

-

21.8

North America

3.0

-

-

-

-

3.0

Underlying profit/(loss) before tax

24.6

10.2

10.2

6.6

(3.5)

48.1

 

 

Six months to 30 June 2016

Trans-action Advisory

Property and Facilities Manage-ment

Consult-ancy

Invest-

ment Manage-ment

Other

Total

 (unaudited)

£m

£m

£m

£m

£m

£m

Revenue

 

 

 

 

 

 

United Kingdom

 

 

 

 

 

 

 - commercial

32.1

61.1

61.0

11.7

-

165.9

 - residential

57.2

12.6

20.1

-

-

89.9

Total United Kingdom

89.3

73.7

81.1

11.7

-

255.8

Continental Europe

22.4

17.3

7.6

15.8

-

63.1

Asia Pacific

 

 

 

 

 

 

 - commercial

48.7

128.0

16.4

-

-

193.1

 - residential

16.3

-

-

-

-

16.3

Total Asia Pacific

65.0

128.0

16.4

-

-

209.4

North America

94.4

-

-

-

-

94.4

Total revenue

271.1

219.0

105.1

27.5

-

622.7

Underlying profit/(loss) before tax

 

 

 

 

 

 

United Kingdom

 

 

 

 

 

 

 - commercial

2.7

4.2

4.6

2.6

(2.8)

11.3

 - residential

7.4

0.7

2.6

-

-

10.7

Total United Kingdom

10.1

4.9

7.2

2.6

(2.8)

22.0

Continental Europe

(1.2)

(1.0)

0.8

1.3

-

(0.1)

Asia Pacific

 

 

 

 

 

 

 - commercial

3.6

6.3

0.2

-

-

10.1

 - residential

3.0

-

-

-

-

3.0

Total Asia Pacific

6.6

6.3

0.2

-

-

13.1

North America

7.8

-

-

-

-

7.8

Underlying profit/(loss) before tax

23.3

10.2

8.2

3.9

(2.8)

42.8

 

 

Year ended to 31 December 2016

Trans-action Advisory

Property and Facilities Manage-ment

Consult-ancy

Invest-ment Manage-ment

Other

Total

 (audited)

£m

£m

£m

£m

£m

£m

Revenue

 

 

 

United Kingdom

 

 

 

 - commercial

86.0

130.4

145.3

25.9

-

387.6

 - residential

124.4

28.5

37.8

-

-

190.7

Total United Kingdom

210.4

158.9

183.1

25.9

-

578.3

Continental Europe

71.5

40.1

19.3

39.7

-

170.6

Asia Pacific

 

 

 

 

 

 

 - commercial

129.7

273.8

37.9

6.4

-

447.8

 - residential

38.1

-

-

-

-

38.1

Total Asia Pacific

167.8

273.8

37.9

6.4

-

485.9

North America

211.1

-

-

-

-

211.1

Total revenue

660.8

472.8

240.3

72.0

-

1,445.9

Underlying profit/(loss) before tax

 

 

 

 

 

 

United Kingdom

 

 

 

 

 

 

 - commercial

14.7

8.7

16.3

6.4

(11.3)

34.8

 - residential

17.5

2.6

5.9

-

-

26.0

Total United Kingdom

32.2

11.3

22.2

6.4

(11.3)

60.8

Continental Europe

5.0

(2.2)

1.3

9.4

-

13.5

Asia Pacific

 

 

 

 

 

 

 - commercial

20.6

14.5

2.4

1.8

-

39.3

 - residential

3.3

-

-

-

-

3.3

Total Asia Pacific

23.9

14.5

2.4

1.8

-

42.6

North America

18.9

-

-

-

-

18.9

Underlying profit/(loss) before tax

80.0

23.6

25.9

17.6

(11.3)

135.8

 

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 to 30 June 2017 (unaudited)

Six months to 30 June 2016 (unaudited)

Year ended 31 December 2016 (audited)

 

£m

£m

£m

Reported profit before tax

32.4

25.5

99.8

Adjustments:

 

 

 

- Amortisation of acquired intangible assets (excluding software)

1.9

2.1

4.0

- Impairment of available-for-sale investment

-

0.4

-

- Share-based payment adjustment

(0.4)

(1.4)

(2.4)

- Net profit on disposal of available-for-sale investments, joint ventures and associates

(0.9)

(0.5)

(0.1)

- Restructuring costs

1.8

1.7

5.8

- Acquisition-related costs

13.3

15.0

28.7

Underlying profit before tax

48.1

42.8

135.8

 

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.

 

Acquisition-related costs include £8.4m of provisions for payments in relation to the acquisition of Studley, Inc. which are expensed through the income statement in line with IFRS 3 (revised), 'Business Combinations' ('IFRS 3'), to reflect the requirement for the recipients to remain actively engaged in the business at the payment date. Acquisition-related costs also include £1.4m for payments in relation to Savills Investment Management's acquisition of Merchant Capital (Japan) in May 2014 and £3.5m of provisions for future payments relating to acquisitions in the UK (primarily Smiths Gore and GBR Phoenix Beard), North America and Continental Europe.

 

Restructuring costs includes costs of integration activities in relation to significant business acquisitions (primarily Smiths Gore in the UK and Savills Investment Management's acquisition of SEB).

 

 

8. 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.

 

 

Six months to 30 June 2017 (unaudited)

Six months to 30 June 2016 (unaudited)

Year ended 31 December 2016 (audited)

 

£m

£m

£m

UK

 

 

 

- Current tax

5.7

3.8

14.1

- Deferred tax

(1.6)

(0.4)

(3.3)

Foreign tax

 

 

 

- Current tax

9.1

3.7

16.1

- Deferred tax

(3.0)

2.0

5.2

Income tax expense

10.2

9.1

32.1

 

The forecast Group effective tax rate is 31.5% (30 June 2016: 35.7% and 31 December 2016: 32.1%), which is higher (30 June 2016 and 31 December 2016: higher) than the UK standard effective annual rate of corporation tax of 19.25% (30 June 2016 and 31 December 2016: 20.0%). This reflects permanent disallowable expenses, including acquisition costs. The Group underlying effective tax rate was 26.6% (30 June 2016: 29.0% and 31 December 2016: 26.1%).

 

 

9. Dividends

 

 

Six months to 30 June 2017 (unaudited)

Six months to 30 June 2016 (unaudited)

Year ended 31 December 2016 (audited)

 

£m

£m

£m

Amounts recognised as distribution to equity holders in the year:

 

 

 

Ordinary final dividend of 10.1p per share (2016: 8.0p)

13.5

10.7

10.7

Supplemental interim dividend of 14.5p per share (2016: 14.0p)

19.5

18.7

18.7

Interim dividend of 4.4p per share

-

-

6.0

 

33.0

29.4

35.4

 

 

 

 

Proposed interim dividend for the six months ended 30 June 2017

 

 

£6.3m

 

The Board has declared an interim dividend for the six months ended 30 June 2017 of 4.65p per ordinary share (30 June 2016: 4.4p) to be paid on 4 October 2017 to shareholders on the register on 8 September 2017. The interim dividend has not been recognised in these interim financial statements. It will be recognised in equity in the year to 31 December 2017.

 

 

10(a). Basic and diluted earnings per share

 

 

2017

2017

2017

2016

2016

2016

 

Earnings

Shares

EPS

Earnings

Shares

EPS

Six months to 30 June (unaudited)

£m

million

pence

£m

million

pence

Basic earnings per share

21.9

136.2

16.1

16.0

137.4

11.6

Effect of additional shares issuable under option

-

3.1

(0.4)

-

2.9

(0.2)

Diluted earnings per share

21.9

139.3

15.7

16.0

140.3

11.4

 

 

 

 

 

 

 

 

 

 

 

2016

2016

2016

 

 

 

 

Earnings

Shares

EPS

Year to 31 December (audited)

 

 

 

£m

million

pence

Basic earnings per share

 

 

 

66.9

137.2

48.8

Effect of additional shares issuable under option

 

 

 

-

3.0

(1.1)

Diluted earnings per share

 

 

 

66.9

140.2

47.7

 

10(b). Underlying basic and diluted earnings per share

 

 

2017

2017

2017

2016

2016

2016

 

Earnings

Shares

EPS

Earnings

Shares

EPS

Six months to 30 June (unaudited)

£m

million

pence

£m

million

pence

Basic earnings per share

21.9

136.2

16.1

16.0

137.4

11.6

- Amortisation of acquired intangible assets (excluding software) after tax

1.1

-

0.8

1.2

-

0.9

- Impairment of available-for-sale investment after tax

-

-

-

0.4

-

0.3

- Share-based payment adjustment after tax

(0.3)

-

(0.2)

(1.1)

-

(0.8)

- Restructuring costs after tax

1.6

-

1.1

1.5

-

1.1

- Profit on disposal of available-for-sale investments, joint ventures and associates after tax

(0.8)

-

(0.6)

(0.5)

-

(0.4)

- Acquisition-related costs after tax

12.5

-

9.2

14.6

-

10.6

- Forecast annual tax rate adjustment

(1.0)

-

(0.7)

(2.1)

-

(1.5)

Underlying basic earnings per share

35.0

136.2

25.7

30.0

137.4

21.8

Effect of additional shares issuable under option

-

3.1

(0.6)

-

2.9

(0.4)

Underlying diluted earnings per share

35.0

139.3

25.1

30.0

140.3

21.4

 

 

 

 

 

 

 

 

 

 

 

2016

2016

2016

 

 

 

 

Earnings

Shares

EPS

Year to 31 December (audited)

 

 

 

£m

million

pence

Basic earnings per share

 

 

 

66.9

137.2

48.8

- Amortisation of acquired intangible assets (excluding software) after tax

 

 

 

2.2

-

1.6

- Share-based payment adjustment after tax

 

 

 

(1.8)

-

(1.3)

- Restructuring costs after tax

 

 

 

4.7

-

3.4

- Acquisition-related costs after tax

 

 

 

27.5

-

20.0

Underlying basic earnings per share

 

 

 

99.5

137.2

72.5

Effect of additional shares issuable under option

 

 

 

-

3.0

(1.5)

Underlying diluted earnings per share

 

 

 

99.5

140.2

71.0

 

 

11. Cash (used in)/generated from operations

 

 

Six months to 30 June 2017 (unaudited)

Six months to 30 June 2016 (unaudited)

Year ended 31 December 2016 (audited)

 

 £m

 £m

 £m

Profit for the period

22.2

16.4

67.7

Adjustments for:

 

 

 

Income tax (Note 8)

10.2

9.1

32.1

Depreciation

6.9

6.2

12.7

Amortisation of intangible assets

3.1

3.5

6.9

Net profit on disposal of available-for-sale investments, joint ventures and associates

(0.9)

(0.5)

(0.1)

Net finance cost

0.4

0.4

0.8

Share of post-tax profit from joint ventures and associates

(3.1)

(2.9)

(7.9)

Decrease in employee and retirement obligations

(3.1)

(3.2)

(6.3)

Exchange movements on operating activities

0.3

1.9

2.4

Decrease in provisions

(0.4)

(1.7)

(3.0)

Impairment of available-for-sale investment included within other operating expenses

-

0.4

-

Charge for share-based compensation

7.9

4.4

13.4

Operating cash flows before movements in working capital

43.5

34.0

118.7

(Increase)/decrease in work in progress

(1.5)

1.1

0.3

Decrease/(increase) in trade and other receivables

47.8

57.4

(17.1)

(Decrease)/increase in trade and other payables

(125.1)

(148.2)

15.9

Cash (used in)/generated from operations

(35.3)

(55.7)

117.8

 

 

12. Acquisition of subsidiaries

 

Cresa Partners Orange County, LP

On 7 February 2017 the Group acquired 100% of the equity interest in Cresa Partners Orange County, LP, expanding the Group's commercial real estate presence in the region.

 

Total acquisition consideration is provisionally determined at £9.6m, £4.7m of which was settled on completion and the remainder relating to the discounted value of deferred consideration of up to £4.9m (payable in February 2020 and 2021), subject to achievement of certain income targets.

 

A further £4.7m is payable to certain key staff and is subject to them remaining actively engaged in the business over a period of up to 6 years; £3.2m was paid during Q1 2017 and the remainder is payable in September 2018. As required by IFRS 3 (revised) these payments are expensed to the income statement over the relevant period of active engagement. 

 

Goodwill of £9.2m has been provisionally determined. Goodwill is attributable to the experience and expertise of key staff and strong industry reputation and is not expected to be deductible for tax purposes.

 

 

UK acquisitions

During the year, the Group acquired 100% of the equity of Granville Residential Letting Ltd and Montagu Evans Channel Islands Ltd, the former a residential lettings business based in the South East and the latter a commercial real estate service provider in Guernsey, expanding the Savills brand across the Channel Islands. 

 

Cash consideration for these transactions amounted to £1.4m. The remainder of the provisionally determined acquisition consideration relates to deferred consideration of £0.3m.

 

A further £0.7m is payable to certain key staff and is subject to service conditions, £0.5m is payable in January 2020 and £0.2m is payable in January 2021. As required by IFRS 3 (revised) these payments are expensed to the income statement over the relevant period of employment. 

 

Transaction costs of £0.1m were also expensed as incurred to the income statement.

 

Goodwill of £1.1m 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 UK businesses contributed revenue of £0.6m and underlying operating profits of £0.1m to the Group for the period from acquisition to 30 June 2017. Had the acquisitions been made at the beginning of the financial year, revenue would have been £0.7m and underlying operating profits  would have been £0.2m. 

 

 

13. 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 19 active employees and 95 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 2016 and are the same as at 31 December 2016 except for the following:

 

 

UK Plan

SFM Plan

 

Six months to 30 June 2017

Six months to 30 June 2016

Year ended 31

December 2016

Six months to 30 June 2017

Six months to 30 June 2016

Year ended 31 December 2016

Expected rate of salary increases

3.25%

3.85%

3.25%

2.50%

2.50%

2.50%

Projection of social security contribution ceiling

-

-

-

2.25%

2.25%

2.25%

Discount rate

2.60%

2.80%

2.70%

2.12%

1.70%

1.84%

Inflation assumption

3.40%

3.00%

3.50%

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

3.30%

3.00%

3.40%

-

-

-

- accrued after 5 April 2005

2.30%

2.20%

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%

1.90%

2.40%

-

-

-

- accrued after 5 April 2009

2.30%

1.90%

2.40%

-

-

-

 

 

The amounts recognised in the statement of financial position are as follows:

 

 UK Plan

30 June 2017

£m

30 June 2016

£m

31 December 2016

£m

Present value of funded obligations

299.9

272.1

298.4

Fair value of plan assets

(267.7)

(233.9)

(257.6)

Liability recognised in the statement of financial position (included in retirement and employee benefit obligations)

32.2

38.2

40.8

 

 

 SFM Plan

30 June 2017

£m

30 June 2016

£m

31 December 2016

£m

Present value of funded obligations

13.8

14.4

14.4

Fair value of plan assets

(14.8)

(13.9)

(14.0)

(Asset)/liability recognised in the statement of financial position (included in retirement benefits non-current asset / retirement and employee benefit obligations)

(1.0)

0.5

0.4

 

The amount recognised within the income statement in relation to the UK Plan for the period ended 30 June 2017 is a net interest cost of £0.5m (30 June 2016: £0.2m, 31 December 2016: £0.4m).

 

The amount recognised within the income statement in relation to the SFM Plan for the period ended 30 June 2017 is a current service cost of £0.1m (30 June 2016: £0.1m, 31 December 2016: £0.2m).

 

Included in retirement and employee benefit obligations is £28.0m relating to holiday pay and long service leave (30 June 2016: £24.1m, 31 December 2016: £25.0m).

 

 

14. Borrowings

Movements in borrowings are analysed as follows:

 

 

 

£m

Opening amount as at 1 January 2017

 

 

35.8

Additional borrowings (including overdraft)

 

 

183.4

Repayments of borrowings

 

 

(40.8)

Exchange movements

 

 

(0.1)

Closing amount as at 30 June 2017

 

 

178.3

 

 

30 June 2017

30 June 2016

31 December 2016

Current

£m

£m

£m

Bank overdrafts

2.4

0.4

0.2

Unsecured bank loans due within one year or on demand

175.9

131.8

35.6

 

178.3

132.2

35.8

 

The Group has the following undrawn borrowing facilities:

 

 

30 June 2017

30 June 2016

31 December 2016

 

£m

£m

£m

Floating rate

 

 

 

 - expiring within one year or on demand

21.4

20.6

23.2

 - expiring between 1 and 5 years

75.0

119.2

216.0

 

96.4

139.8

239.2

 

The Group maintains a £250.0m revolving credit facility ('RCF'), which expires on 15 December 2020 and can be increased by an additional £50.0m Accordion facility. As at 30 June 2017 £175.0m (30 June 2016: £131.5m) of the £250.0m RCF was drawn.

 

 

15. Related party transactions

 

As at 30 June 2017, there were no loans outstanding to associates and £0.1m of loans outstanding to joint ventures (30 June 2016: £nil, 31 December 2016: £nil).

 

There were no 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.

 

 

16. 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.

 

 

17. Seasonality

 

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.

 

 

18. Events after the balance sheet date

Larry Smith Srl

On 1 July 2017, the Group acquired 100% of the equity interest in Larry Smith Srl, a shopping centre and out of town management and leasing business based in Italy, for consideration of €8.0m of which €5.6m was paid on completion. The remainder of the consideration is payable on the second anniversary (€1.6m) and third anniversary (€0.8m) of completion. Further deferred consideration is linked to revenue and margin targets, which is currently estimated to be €0.3m. Combined with Savills existing capital markets and valuation business in Italy, the acquisition enhances Savills service offering in Italy.

 

An exercise to determine total acquisition consideration and the fair value of the assets acquired and liabilities assumed is underway for this acquisition.

 

Aguirre Newman S.A.

On 28 July 2017, the Group announced it will acquire 100% of the equity interest in Aguirre Newman S.A., a leading Spanish real estate advisor, for total consideration of up to €67.0m, of which €42.0m will be paid on completion. The remainder of the consideration will be payable in equal instalments over five years from completion. The acquisition is scheduled to complete by the end of November 2017, following the satisfaction of regulatory and closing conditions. The acquisition will complement and significantly expand the Group's presence in the Spanish real estate market. 

 

 

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 company news service from the London Stock Exchange
 
END
 
 
IR ZMGGRVLMGNZM