TIDMSVS
RNS Number : 6233H
Savills PLC
05 August 2021
5 August 2021
Savills plc
('Savills' or 'the Group')
STRONG RESULTS FOR THE HALF YEARED 30 JUNE 2021 REFLECT
PROGRESSIVE RECOVERY IN GLOBAL REAL ESTATE MARKETS
Savills plc, the international real estate advisor, today
announces its unaudited results for the six months ended 30 June
2021.
Key Financial Information
-- Group revenue GBP932.6m, up GBP141.2m (18% as reported and
21% in constant currency*) (H1 2020: GBP791.4m)
-- Group underlying profit** before tax GBP66.1m, up GBP52.9m
(H1 2020: GBP13.2m)
-- Group profit before tax GBP63.8m, up GBP56.1m (H1 2020:
GBP7.7m)
-- Underlying basic earnings per share 35.8p (H1 2020: 7.0p)
-- Basic earnings per share 34.6p (H1 2020: 3.9p)
-- Interim dividend of 6.0p (H1 2020: 0.0p)
-- Net cash GBP106.7m*** (H1 2020: Net cash GBP9.4m)
* Revenue and underlying profit for the period are translated at
the prior period exchange rates to provide a constant currency
comparative (see Note 9).
** Underlying profit before tax ('underlying profit') is
calculated on a consistently reported basis in accordance with Note
3 and Note 8 to the Interim Financial Statements.
*** Net cash reflects cash and cash equivalents net of
borrowings and overdrafts in the notional pooling arrangement (see
Note 14).
Trading performance - Key highlights
-- Transactional Advisory revenues up 30% in recovering
markets.
-- Less transactional businesses, in aggregate 61% of Group
revenue, continue to perform well with revenue up 11%.
-- Property and Facilities Management revenue up 6%, Consultancy
revenue up 20%.
-- Commercial Transaction revenue increased 15% overall with
strong growth in the UK and Asia Pacific.
-- Record UK Residential Transaction Advisory performance with
revenue up 97%, a continuation of the exceptional recovery
experienced from H2 2020.
-- Savills Investment Management revenue up 25%. Base management
fees up 20%, with period end Assets under Management ('AUM') up 16%
at EUR23.7bn.
Commenting on the results, Mark Ridley, Group Chief Executive of
Savills plc, said:
"I am delighted that our strategy of maintaining full operating
strength and high levels of client service through the pandemic has
proven successful through the progressive recovery of many markets
in which we operate. We have a strong balance sheet and are focused
on continuing to develop our global businesses through the recovery
period, maintaining a first class service to our clients and
safeguarding our staff.
"Our Transactional businesses have benefited from improving
sentiment in most markets, although travel restrictions still
represent an obstacle to cross-border capital deployment. In
particular, our Residential Transaction business delivered an
exceptionally strong performance in the first half albeit we expect
activity to return to more normal levels, particularly in the UK,
during the second half of the year compared with a strong
comparative period in H2 2020.
"Our Consultancy business has performed well and our Less
Transactional service lines as a whole provide a strong platform
for the Group, in which we continue to invest.
"In summary, the combination of strong trading in the less
transactional service lines, improving transactional markets
(including the completion of previously delayed transactions)
alongside continued cost management, has resulted in a record first
half performance for the Group. Looking ahead, we expect some
discretionary cost to start to normalise and certain of our markets
to moderate in the second half of the year and, while pandemic
risks continue including the current lock downs in a number of
Asian markets, we are confident in the Group's ability both to
benefit from progressive recovery in transactional markets and to
continue to execute our growth strategies. Assuming no new material
disruption the Board expects the performance for the year as a
whole to be meaningfully ahead of its previous expectations."
For further information, contact:
Savills 020 7409 8030
Mark Ridley, Group Chief Executive
Simon Shaw, Group Chief Financial
Officer
Tulchan Communications 020 7353 4200
Mark Burgess
Elizabeth Snow
The analyst presentation will be held at 9.30am today by webinar
. A recording of the presentation will be available from noon at
www.ir.savills.com .
Overview
The Group traded better than anticipated and substantially ahead
of the prior year equivalent period. Residential markets,
particularly in the UK, have continued strongly, and the Commercial
Transaction business benefited both from improving sentiment in
many markets and from the completion of transactions which were
postponed or delayed during the lockdowns of Q4 2020. Our Less
Transactional businesses performed well and continue to present
attractive investment opportunities for the Group.
In the six months to 30 June 2021, Savills delivered revenue of
GBP932.6m, an increase of 18% (21% in constant currency) (H1 2020:
GBP791.4m). Underlying profit was GBP66.1m, 401% higher than the
first half of 2020 (H1 2020: GBP13.2m) (412% increase in constant
currency). The Group's underlying profit margin was 7.1% (H1 2020:
1.7%). This reflects both an increase in transactional revenues in
the period, as many of the markets in which the Group operates
began to recover, and the benefit of abnormally low levels of
marketing, travel and entertainment/events related expenses, which
we expect to normalise over time.
This record first half performance has contributed to the
Group's continued strong liquidity position with net cash of
GBP106.7m at period end (H1 2020: GBP9.4m).
Reported profit before tax, including deferred consideration
provisions and transaction-related and restructuring costs was
GBP63.8m (H1 2020: GBP7.7m).
The COVID-19 impact
In 2020, COVID-19 had a significant impact on investor and
occupier activity as the pandemic spread across the world. H1 2021
saw commercial markets showing varying speeds of recovery from the
pandemic, reflecting different local lockdown restrictions, rates
of vaccination and international travel restrictions. Investor
focus worldwide continues to be on logistics, residential and life
sciences in particular, with improving sentiment towards other
commercial sectors.
Residential markets, particularly in the UK, have continued
strongly as the pandemic has catalysed the drive for space in most
markets worldwide. This is particularly evident in the
disproportionately strong market for houses, which continued to
experience extraordinary levels of activity through H1 2021 in many
markets.
In the Asia-Pacific region, commercial investment transaction
volumes grew by 8% year-on-year in H1 2021. The recent wave of
infections caused by the Delta variant and associated lockdown
measures has somewhat tempered the positive market momentum which
had begun to take hold during the second quarter.
In Europe, H1 2021 investment volumes declined by 15% against
the same period in 2020. There has clearly been a focus on core
investment locations of which the UK and Germany are key, but
different approaches to, and speed of, vaccination programmes by
various countries have had an impact on the trajectory of recovery
in individual markets and sectors.
In the US, office market recovery has been uneven but the
vaccination programme has induced increasingly positive momentum in
many States. Corporates are both reoccupying existing space which
had previously been scheduled for sub lease and are considering
upgrading the quality of space in market conditions which are
highly conducive to that strategy. H1 office demand though remains
well below pre-pandemic levels (down 42% vs H1 2019), although
leasing volumes in key markets such as New York, Los Angeles, and
Chicago, improved through Q2.
Business development during the period
During the pandemic, the Group has continued to focus on
strategic development of the business, which has been enabled by
the Group's strong balance sheet. In the first half of this year,
Savills Investment Management completed the accelerated acquisition
of the outstanding 75% of DRC Capital (a related party), the
specialist Debt Investment Manager.
The Group also recently announced a significant strategic
partnership between Savills Investment Management and Samsung Life
Insurance ('SLI') to accelerate the future growth of the Savills
Investment Management ('SIM') business. Under this agreement
Savills will sell an initial 25% stake in SIM to SLI, which, in
turn, is committing to invest at least US$1bn into SIM products
over the initial five year term of the relationship. Subject to
regulatory approvals and customary pre-closing conditions, this
transaction is expected to complete in Q4 2021.
The Group acquired T3 Advisors, a leading Real Estate advisor in
the Life Science and Technology sectors in North America, as well
as further strengthening our market leading position in Spain by
acquiring a property management business from Knight Frank.
In addition to the acquisitive growth in our business, we
continue to undertake significant organic growth initiatives across
the platform, with significant team hires and development across
all our regions, with particular focus on North America, Greater
China and Continental Europe and the Middle East ('CEME').
Technology continues to be an important focus for the Group, and
we continue to benefit from the investment we have made both
internally and externally, through Grosvenor Hill Ventures, across
the globe and from our own digital transformation programmes.
During the period we led a funding round into Income Analytics
jointly with MSCI. This exciting business is a data technology firm
which provides investors with proprietary global rental default
risk measures on commercial real estate income at tenant, asset,
fund and portfolio levels. This platform is being adopted across
our business as it clearly has broad utility across numerous
advisory, leasing, property management and investment service
lines.
Business review
The following table sets out Group revenue and underlying profit
by operating segment:
Revenue H1 2021 H1 2020 Change
GBPm GBPm
------------------------------------ -------- -------- -------
Transaction Advisory 362.0 278.5 30%
Consultancy 173.4 144.6 20%
Property and Facilities Management 359.0 337.8 6%
Investment Management 38.2 30.5 25%
Unallocated/Central - - n/a
------------------------------------ -------- -------- -------
Group revenue 932.6 791.4 18%
------------------------------------ -------- -------- -------
Underlying profit H1 2021 H1 2020 Change
GBPm GBPm
Transaction Advisory 29.1 (14.7) n/a
Consultancy 18.8 10.2 84%
Property and Facilities Management 19.2 17.7 8%
Investment Management 7.1 4.3 65%
Unallocated cost (8.1) (4.3) (88%)
Group underlying profit 66.1 13.2 401%
------------------------------------ -------- -------- -------
The following table sets out Group revenue and underlying profit
by geographical area:
Revenue H1 2021 H1 2020 Change
GBPm GBPm
--------------------- -------- -------- -------
UK 417.4 298.8 40%
Asia Pacific 287.2 279.7 3%
CEME 114.0 107.4 6%
North America 114.0 105.5 8%
Unallocated/Central - - n/a
Group revenue 932.6 791.4 18%
--------------------- -------- -------- -------
Underlying profit H1 2021 H1 2020 Change
GBPm GBPm
UK 53.1 15.0 254%
Asia Pacific 24.0 11.8 103%
CEME (4.1) (4.4) 7%
North America 1.2 (4.9) n/a
Unallocated cost (8.1) (4.3) (88%)
Group underlying profit 66.1 13.2 401%
------------------------- -------- -------- -------
Transaction Advisory
Revenue H1 2021 H1 2020 Change
GBPm GBPm
--------------- -------- -------- -------
UK 142.7 83.8 70%
Asia Pacific 74.3 54.8 36%
CEME 39.9 38.1 5%
North America 105.1 101.8 3%
Total 362.0 278.5 30%
--------------- -------- -------- -------
Our Transaction Advisory revenues increased by 30% over H1 2020
(34% in constant currency), substantially driven by high volumes of
activity in Residential markets. The Commercial Transaction
business benefited from both improving sentiment in many markets
and the completion of transactions which were postponed or delayed
during the lockdowns of Q4 2020. As a consequence the Transaction
Advisory business delivered a strong return to underlying profit of
GBP29.1m (H1 2020: GBP14.7m loss).
UK Commercial
UK Commercial Transaction fee income increased 25% to GBP38.5m
(H1 2020: GBP30.9m), with significant growth outside the capital.
With travel restrictions in place and return to work guidance not
issued until July, Central London investment and leasing activity
was more muted in the first half, although demand is beginning to
re-emerge.
Commercial property investment totalled GBP25.3bn in the first
six months of 2021, a 19% rise on the same period in 2020. All
commercial property sectors apart from Leisure have seen
year-on-year improvements in investment activity, with the largest
rises being in the retail and logistics sectors. In the office
occupational market, the rate of recovery in leasing activity is
defined by corporate "return to the office" strategies, with
central London recovering more slowly than the key regional
cities.
Increased revenue and continued low levels of discretionary
spend resulted in an underlying profit margin of 13.5% (H1 2020:
2.9%) representing an underlying profit of GBP5.2m (H1 2020:
GBP0.9m).
UK Residential
Our UK Residential Transaction business experienced a record
first half performance, with revenue up 97% to GBP104.2m (H1 2020:
GBP52.9m). Both second-hand and new home sales were up
significantly.
In the second hand agency business, revenues increased by 155%,
reflecting both the weak comparative period in which lockdown all
but eliminated the key 2020 Spring sales season, and continuation
of the abnormally high level of post lockdown activity which
commenced in H2 2020. Savills overall transaction volumes exchanged
were up 131% in London and 204% in the regional markets. The
average value of London and regional residential property sold by
Savills in the period was stable at GBP1.9m (H1 2020: GBP1.9m) and
GBP1.2m (H1 2020: GBP1.2m) respectively.
Revenue in the New Homes business was up 37% on H1 2020,
reflecting the overall market trend. National new homes exchanges
for H1 2021 were 55% up on H1 2020 (London up 17%, the regions up
79%). The London new homes business continues to be affected by the
relative scarcity of international buyers in the capital due to
travel restrictions, whilst the regional business has thrived
during the market conditions experienced over the first half of
2021.
Our Private Rented Sector ('PRS') transactional business
delivered a robust performance, although revenues were down 27% on
H1 2020, a period which benefited from some individually
significant transactions. H1 2021 performance was 37% higher than
the H1 2019 equivalent.
As a result of the performance noted above, underlying profits
in the UK residential transaction business increased substantially
to GBP20.5m (H1 2020: GBP1.6m).
Asia Pacific Commercial
Commercial Transaction fee income in Asia Pacific increased by
46% (50% in constant currency) to GBP60.5m (H1 2020: GBP41.5m).
Despite the emergence of localised COVID-19 related restrictions
during the period, the Group experienced significant improvements
in transactional activity in Japan, Australia, Singapore and
Mainland China. These strong performances offset marginal revenue
declines in Hong Kong and Vietnam, the latter particularly
associated with the impact of the pandemic.
Overall the Asia Pacific commercial transaction business
resulted in an underlying profit for the period of GBP7.4m (H1
2020: GBP4.4m loss).
Asia Pacific Residential
Residential Transaction fee income in Asia Pacific increased by
4% to GBP13.8m (H1 2020: GBP13.3m) (8% in constant currency). This
was driven by significant revenue growth in Mainland China. In Hong
Kong, the impact of travel restrictions reduced revenue from
international residential sales, which was partially offset by
growth in domestic transactions.
Underlying profits in the region, improved by the trading
performance in China and the benefit of cost savings in Hong Kong,
increased by 131% to GBP3.7m (H1 2020: GBP1.6m).
CEME
In CEME, there was a modest recovery across the region with
transaction fee income up 5% to GBP39.9m (H1 2020: GBP38.1m) (6% in
constant currency). Growth in Ireland, France, Sweden and the
Middle East offset period on period reductions in the Netherlands
and Germany, each of which had strong comparatives in H1 2020 as a
result of individually significant transactions during that period.
Overall, the CEME business posted an underlying loss of GBP8.5m (H1
2020: GBP9.8m loss) for the first half of the year, reflecting the
modest growth in revenues and continued investment in new teams and
technology.
North America
In North America, where the Group is substantially dependent
upon leasing activity by corporate occupiers, the business
delivered a resilient performance with revenue up 3% (13% in
constant currency) to GBP105.1m (H1 2020: GBP101.8m). Given the
strong national vaccination programme, improving activity levels
indicate that corporates are beginning to give serious
consideration to their longer term real estate needs, which should
be a precursor to improved transaction levels. We continue to
anticipate progressive recovery through H2 2021.
The North American business recovered to deliver an underlying
profit of GBP0.8m for the period (H1 2020: GBP4.6m underlying
loss).
Consultancy
Revenue H1 2021 H1 2020 Change
GBPm GBPm
--------------- -------- -------- -------
UK 109.9 92.2 19%
Asia Pacific 36.2 32.4 12%
CEME 18.4 16.3 13%
North America 8.9 3.7 141%
Total 173.4 144.6 20%
--------------- -------- -------- -------
The Consultancy business delivered a strong performance during
the period, with all regions showing significant revenue growth.
The 20% increase in revenue (21% in constant currency) to GBP173.4m
(H1 2020: GBP144.6m) included a full period of ownership of Macro
Consultants LLC ('Macro'), the US project management consultancy
acquired in March 2020.
In the UK, there were strong performances in Development,
Housing, Project Management and Building Consultancy. Underlying
profit margin improved to a 10 year high of 12.8% from 6.6% in H1
2020.
In Asia Pacific, revenue growth in Valuations and Research, most
notably in Mainland China, Hong Kong, Singapore and Australia,
offset lower project management revenues due to pandemic-related
delays in project completions and new project starts. On a constant
currency basis, underlying profit increased 5% on the prior
period.
In the CEME business, strong performances in the Middle East,
France, Italy and Ireland contributed to the 13% growth in revenue.
On a constant currency basis, underlying profit remained flat
reflecting investment in new teams in Spain and the Middle
East.
Significant growth in North America Consultancy revenue
reflected a full period of revenue from Macro, which was acquired
in March 2020 and the resumption of building and fit out projects
as pandemic restrictions lifted. In addition, the Group has
undertaken further investment in Consultancy services with
acquisitions and recruitment in life sciences (the acquisition of
T3 Advisors in June 2021) and workplace solutions.
Underlying profit of the Consultancy business increased by 84%
to GBP18.8m (H1 2020: GBP10.2m).
Property and Facilities Management
Revenue H1 2021 H1 2020 Change
GBPm GBPm
-------------- -------- -------- -------
Asia Pacific 173.7 190.0 (9%)
UK 145.2 110.1 32%
CEME 40.1 37.7 6%
Total 359.0 337.8 6%
-------------- -------- -------- -------
Our Property and Facilities Management business increased global
revenues by 6% (10% in constant currency) to GBP359.0m (H1 2020:
GBP337.8m). Savills total area under management increased 3% since
H1 2020 to 2.40bn sq ft, inclusive of the Group's effective share
of square footage managed in joint ventures (H1 2020: 2.33bn sq
ft).
In Asia Pacific, revenues were down 9% (3% in constant currency)
reflecting the termination of some significant, albeit low margin,
facilities management contracts in Hong Kong and South Korea. This
was partially mitigated by growth elsewhere in the region, in
particular in Mainland China and Australia. Decline in revenue and
the wind down of pandemic-related employment support schemes
resulted in a 16% decrease (11% in constant currency) in underlying
profit to GBP10.4m (H1 2020: GBP12.4m).
In the UK, Commercial Property and Facilities Management
benefited from the former Intu shopping centre management
contracts, which were won in H2 2020. These contracts contributed
significantly to the 32% increase in Commercial Property and
Facilities Management revenue. UK Residential Property and
Facilities Management revenue reflected an increase in residential
lettings income of 9%, despite a slower recovery in student and
corporate lettings.
In CEME, fee income was up 6% (7% in constant currency)
reflecting the Omega acquisition in Germany in H2 2020 and further
contract wins in France and the Middle East. The business however
recognised an underlying loss of GBP0.6m (H1 2020: GBP0.2m
underlying profit), which reflects growth and new business costs in
Spain and France.
Underlying profit for the Property and Facilities Management
business increased by 8% to GBP19.2m (H1 2020: GBP17.7m).
Investment Management
Revenue from Investment Management increased by 25% to GBP38.2m
(H1 2020: GBP30.5m). Base management fees represented approximately
78% (HY 2020: 82%) of Investment Management gross revenues and grew
by 20% during the period. Transaction fees declined during the
period as the pandemic affected time to transact in many markets.
The effect of this was mitigated by both performance fees and one
month of full consolidation of DRC Capital (acquired at the end of
May 2021).
75% of funds (by AUM) continued to exceed their benchmark
returns on a five year rolling basis, and this track record
contributed to resilient capital raising activity, albeit at lower
overall levels, reflecting continued challenging capital raising
conditions.
AUM increased by 16% to EUR23.7bn (H1 2020: EUR20.4bn).
Underlying profit for Investment Management increased by 65% to
GBP7.1m (H1 2020: GBP4.3m), representing an 18.6% underlying profit
margin (H1 2020: 14.1%).
Unallocated/central revenue and cost
The unallocated cost segment represents other costs, expenses
and net interest not directly allocated to the operating activities
of the Group's business segments. The H1 increase in unallocated
net costs of 88% to GBP8.1m (H1 2020: GBP4.3m) primarily reflects
increases to the profit-related bonus provision.
Transaction-related and restructuring costs
During the period the Group incurred an aggregate restructuring
charge of GBP0.1m (H1 2020: GBP1.0m) and transaction-related costs
of GBP5.6m (H1 2020: GBP1.8m). The restructuring charge reflects
the IFRS 2: "Share-based Payment" charge of deferred shares issued
in relation to the restructuring upon acquisition of Aguirre Newman
at the end of 2017. Transaction-related costs in the period
primarily represent provisions for future consideration payments
which are contingent on the continuity of recipients' employment at
the time of payment and professional advisory fees in relation to
significant transactions in the period. The majority of the charge
relates to the most recent acquisitions in the US, CEME and the
Investment Management business (see Note 8).
Earnings and financial position
The Group's underlying profit margin in the period was 7.1% (H1
2020: 1.7%). This reflects both the recovery of the transaction
advisory businesses in the period and the continuation of lower
than normal levels of expenditure on travel, entertainment and
marketing throughout the Group.
Basic earnings per share for the six months to 30 June 2021
substantially increased to 34.6p (H1 2020: 3.9p). Underlying basic
earnings per share increased to 35.8p (H1 2020: 7.0p).
The impact of foreign exchange movements on the translation of
results from our overseas businesses resulted in a decrease in
revenue of GBP25.4m and a GBP1.5m decrease in underlying profit and
a GBP1.1m decrease in reported profit before tax.
For internal cash management purposes, the Group maintains a
notional cash pooling arrangement whereby credit cash balances
(cash) and debit cash balances (overdrafts) for the participating
bank accounts are notionally offset. These balances have been
grossed up and presented separately on the statement of financial
position for each period presented (refer to Notes 4 and 19). The
change in presentation does not have an impact on net assets, net
current assets or cash and cash equivalents net of borrowings
reported by the Group.
At 30 June 2021, net cash was GBP106.7m (30 June 2020: GBP9.4m
net cash). Including the gross effect of the notional cash pooling
balances, at 30 June 2021 the Group had cash balances of GBP481.5m
(30 June 2020: GBP391.2m), less overdraft balances within the
notional cash pooling arrangement of GBP187.7m (30 June 2020:
GBP155.6m) and borrowings of GBP187.1m (30 June 2020: GBP226.2m),
with GBP373.1m of credit facilities remaining available for
utilisation (30 June 2020: GBP334.3m). In H1 2020, the Group had
benefited from the deferral, at no cost, of VAT/Sales Tax
liabilities totalling GBP61.2m. By 30 June 2021, approximately
GBP30.0m of that deferral had been paid.
The funding level of the defined benefit Savills Pension Scheme
in the UK, which is closed to future service based accrual,
improved during the period as a result of a higher discount rate
reducing the value of the fund's liabilities. The plan was in a
surplus position of GBP4.5m at 30 June 2021 (HY 2020: GBP10.6m
liability).
Interim Dividend
In view of the overall performance of the Group and the
continued strength of the Less Transactional businesses, which
support the ordinary distribution, the Board has declared an
interim dividend of 6.0p (H1 2020: 0.0p; H1 2019: 4.95p). The
dividend will be payable on 6 October 2021 to shareholders on the
register at 3 September 2021.
Principal risks and uncertainties
The key risks and uncertainties relating to the Group's
operations for the next six months were considered to remain
largely consistent with those disclosed in the Group's Annual
Report and Accounts 2020. These are listed below, please refer to
pages 33 to 38 thereof or to our investors' page on
www.savills.com.
-- Business conditions, general economy and geopolitical issues
-- Achieving the right market positioning in response to the needs of our clients
-- Recruitment and retention of high-calibre staff
-- Reputational and brand risk
-- Legal risk
-- Failure or significant interruption to IT systems causing disruption to client service
-- Operational resilience/Business Continuity (including pandemics)
-- Business conduct
-- Changes in the regulatory environment/regulatory breaches
-- Acquisition/integration risk
-- Environment and sustainability
Summary and outlook
We are delighted that our strategy of maintaining full operating
strength and high levels of client service through the pandemic has
proven successful through the progressive recovery of many markets
in which we operate. We have a strong balance sheet and are focused
on continuing to develop our global businesses through the recovery
period, maintaining a first class service to our clients and
safeguarding our staff.
Our Transactional businesses have benefited from improving
sentiment in most markets, although travel restrictions still
represent an obstacle to cross-border capital deployment. In
particular, our Residential Transaction business delivered an
exceptionally strong performance in the first half albeit we expect
activity to return to more normal levels, particularly in the UK,
during the second half of the year compared with a strong
comparative period in H2 2020.
Our Consultancy business has performed well and our Less
Transactional service lines as a whole provide a strong platform
for the Group, in which we continue to invest.
In summary, the combination of strong trading in the less
transactional service lines, improving transactional markets
(including the completion of previously delayed transactions)
alongside continued cost management, has resulted in a record first
half performance for the Group. Looking ahead, we expect some
discretionary cost to start to normalise and certain of our markets
to moderate in the second half of the year and, while pandemic
risks continue including the current lock downs in a number of
Asian markets, we are confident in the Group's ability both to
benefit from progressive recovery in transactional markets and to
continue to execute our growth strategies. Assuming no new material
disruption the Board expects the performance for the year as a
whole to be meaningfully ahead of its previous expectations.
Mark Ridley Nicholas Ferguson CBE
Group Chief Executive Chairman
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that this condensed consolidated interim
financial statements have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as contained in UK-adopted international accounting
standards and that the interim management report includes a fair
review of the information required by DTR 4.2.7R and DTR 4.2.8R,
namely:
-- an indication of important events that have occurred during the first
six months and their impact on the condensed consolidated interim financial
statements and a description of the principal risks and uncertainties
for the remaining six months of the financial year; and
-- material related party transactions in the first six months of the
financial year and any material changes in the related party transactions
described in the last Annual Report.
The Directors are responsible for the maintenance and integrity
of the Company's website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
The Directors of Savills plc are listed in the Company's Report
and Accounts for the year ended 31 December 2020. A list of current
Directors is maintained on the Savills plc website:
www.savills.com.
By order of the Board
J Mark Ridley, Group Chief Executive
Simon Shaw, Group Chief Financial Officer
4 August 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. 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
Our conclusion
We have been engaged by Savills Plc to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2021 which comprises the condensed interim
consolidated income statement, the condensed interim consolidated
statement of comprehensive income, the condensed interim
consolidated statement of financial position, the condensed interim
consolidated statement of changes in equity, the condensed interim
consolidated statement of cash flows and the related explanatory
notes 1 to 22.
We have read the other information contained in the half yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2021 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK and Ireland) "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board. 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.
As disclosed in note 2, the annual financial statements of the
group will be prepared in accordance with UK adopted IFRSs. The
condensed consolidated interim set of financial statements included
in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Responsibilities of the directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, is based on procedures that are less extensive than
audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK and Ireland) "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the
Auditing Practices Board. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
4 August 2021
Savills plc
Condensed interim consolidated income statement
for the period ended 30 June 2021
Six months Six months Year ended
to 30 June to 30 June 31 December
2021 2020 2020
(unaudited) (unaudited) (audited)
Note GBPm GBPm GBPm
------------------------------------------ ------ ------------ ------------------ -------------
Revenue 7 932.6 791.4 1,740.5
------------------------------------------ ------ ------------ ------------------ -------------
Less:
Employee benefits expense (621.0) (514.1) (1,153.7)
Depreciation (32.0) (31.8) (64.3)
Amortisation of intangible assets (5.0) (4.6) (9.6)
Other operating expenses (211.7) (226.1) (419.1)
Impairment losses on financial
assets (0.3) (5.7) (8.7)
Other gains / income 3.5 0.1 0.8
Other losses / expenses - - (0.1)
Operating profit 66.1 9.2 85.8
------------------------------------------ ------ ------------ ------------------ -------------
Finance income 0.8 1.6 3.4
Finance costs (7.7) (8.1) (16.2)
------------------------------------------ ------ ------------ ------------------ -------------
(6.9) (6.5) (12.8)
Share of post-tax profit from
joint ventures and associates 4.6 5.0 10.2
------------------------------------------ ------ ------------ ------------------ -------------
Profit before income tax 63.8 7.7 83.2
Income tax expense 10 (15.4) (2.2) (15.2)
Profit for the period 48.4 5.5 68.0
------------------------------------------ ------ ------------ ------------------ -------------
Attributable to:
Owners of the parent 48.2 5.4 67.6
Non-controlling interests 0.2 0.1 0.4
------------------------------------------ ------ ------------ ------------------ -------------
48.4 5.5 68.0
------------------------------------------ ------ ------------ ------------------ -------------
Earnings per share
Basic earnings per share 12(a) 34.6p 3.9p 49.0p
Diluted earnings per share 12(a) 33.7p 3.8p 47.9p
Supplementary income statement information
Reconciliation to underlying profit before income
tax
Profit before income tax 63.8 7.7 83.2
- restructuring and transaction-related
costs 8 5.7 2.8 6.5
- other underlying adjustments 8 (3.4) 2.7 6.9
------------------------------------------ ------ ------------ ------------------ -------------
Underlying profit before income
tax 8 66.1 13.2 96.6
------------------------------------------ ------ ------------ ------------------ -------------
Notes 1 to 22 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 2021
Six months Six months Year ended
to 30 June to 30 June 31 December
2021 (unaudited) 2020 (unaudited) 2020 (audited)
GBPm GBPm GBPm
-------------------------------------------------- ------------------ ------------------ ----------------
Profit for the period 48.4 5.5 68.0
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 8.2 (1.4) 6.5
Changes in fair value of financial assets
at FVOCI, net of tax (0.1) (7.4) (6.9)
Tax on other items that will not be reclassified (1.7) 0.3 (1.2)
-------------------------------------------------- ------------------ ------------------ ----------------
Total items that will not be reclassified
to profit or loss 6.4 (8.5) (1.6)
Items that may be reclassified subsequently
to profit or loss:
Currency translation differences (12.6) 32.9 1.8
Tax on items that may be reclassified 2.4 (1.2) (0.3)
-------------------------------------------------- ------------------ ------------------ ----------------
Total items that may be reclassified
subsequently to profit or loss (10.2) 31.7 1.5
Other comprehensive (loss)/income for
the period, net of tax (3.8) 23.2 (0.1)
-------------------------------------------------- ------------------ ------------------ ----------------
Total comprehensive income for the period 44.6 28.7 67.9
-------------------------------------------------- ------------------ ------------------ ----------------
Total comprehensive income attributable
to:
Owners of the parent 44.4 28.6 67.5
Non-controlling interests 0.2 0.1 0.4
-------------------------------------------------- ------------------ ------------------ ----------------
44.6 28.7 67.9
-------------------------------------------------- ------------------ ------------------ ----------------
Notes 1 to 22 are an integral part of these condensed interim
financial statements.
Savills plc
Condensed interim consolidated statement of financial
position
at 30 June 2021
30 June 31 December
2020 2020
30 June restated* restated*
2021 (unaudited) (unaudited) (audited)
Note GBPm GBPm GBPm
--------------------------------------- ----- ------------------ ------------- ------------
Assets: Non-current assets
Property, plant and equipment 64.0 68.6 64.9
Right of use assets 229.4 232.5 252.8
Goodwill 15 434.5 394.8 379.4
Intangible assets 46.2 51.3 49.8
Investments in joint ventures
and associates 15 34.0 55.1 51.8
Deferred income tax assets 44.3 40.5 42.8
Financial assets at fair value
through other comprehensive
income ('FVOCI') 6 32.5 25.0 27.4
Retirement benefit asset 16 4.5 - -
Contract related assets 3.2 1.5 1.4
Trade and other receivables 33.4 35.1 31.8
926.0 904.4 902.1
--------------------------------------- ----- ------------------ ------------- ------------
Assets: Current assets
Contract related assets 8.8 7.6 8.0
Trade and other receivables 443.5 427.2 496.6
Income tax receivable 3.7 4.0 1.9
Derivative financial instruments 6 0.2 0.1 0.4
Cash and cash equivalents** 19 481.5 391.2 547.4
937.7 830.1 1,054.3
--------------------------------------- ----- ------------------ ------------- ------------
Liabilities: Current liabilities
Borrowings 18 39.0 78.0 12.2
Overdrafts in notional pooling
arrangement** 19 187.7 155.6 209.1
Lease liabilities 44.7 47.5 45.2
Derivative financial instruments 6 0.6 0.2 0.3
Contract liabilities 15.1 9.2 10.8
Trade and other payables 486.4 430.0 604.9
Income tax liabilities 15.0 11.8 10.2
Employee benefit obligations 16 21.6 23.2 19.2
Provisions 11.1 10.2 8.3
--------------------------------------- ----- ------------------ ------------- ------------
821.2 765.7 920.2
--------------------------------------- ----- ------------------ ------------- ------------
Net current assets 116.5 64.4 134.1
--------------------------------------- ----- ------------------ ------------- ------------
Total assets less current liabilities 1,042.5 968.8 1,036.2
--------------------------------------- ----- ------------------ ------------- ------------
Liabilities: Non-current liabilities
Borrowings 18 148.1 148.2 148.4
Lease liabilities 237.6 228.6 259.0
Derivative financial instruments 0.6 - 0.6
Other payables 13.8 15.0 10.5
Retirement and employee benefit
obligations 16 13.5 21.5 14.9
Provisions 18.1 14.0 15.6
Deferred income tax liabilities 5.5 4.9 5.6
437.2 432.2 454.6
--------------------------------------- ----- ------------------ ------------- ------------
Net assets 605.3 536.6 581.6
--------------------------------------- ----- ------------------ ------------- ------------
Equity:
Share capital 3.6 3.6 3.6
Share premium 97.3 97.2 97.2
Other reserves 76.9 121.0 90.0
Retained earnings 426.8 314.0 390.1
Equity attributable to owners of the
parent 604.6 535.8 580.9
Non-controlling interests 0.7 0.8 0.7
--------------------------------------- ------ ------ ------
Total equity 605.3 536.6 581.6
--------------------------------------- ------ ------ ------
Notes 1 to 22 are an integral part of these condensed interim
financial statements.
* See Note 4 for details on the prior period restatement.
** Included within cash and cash equivalents are cash balances
of GBP193.3m (30 June 2020: GBP156.6m, 31 December 2020: GBP242.0m)
that are operated within a notional cash pooling arrangement
together with overdraft balances of GBP187.7m (30 June 2020:
GBP155.6m, 31 December 2020: GBP209.1m) presented above in current
liabilities. See Note 19 for further details.
Savills plc
Condensed interim consolidated statement of changes in
equity
for the period ended 30 June 2021
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
2021 3.6 97.2 90.0 390.1 580.9 0.7 581.6
(audited)
-------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Profit for the period - - - 48.2 48.2 0.2 48.4
Other comprehensive
(loss)/income:
Changes in fair value
of financial assets
at FVOCI - - (0.1) - (0.1) - (0.1)
Re-measurement of
defined benefit pension
scheme and employee
benefit obligations - - - 8.2 8.2 - 8.2
Tax on other items
directly taken to
other comprehensive
income - - - 0.7 0.7 - 0.7
Currency translation
differences - - (12.6) - (12.6) - (12.6)
--------------------------
Total comprehensive
(loss)/income for
the period - - (12.7) 57.1 44.4 0.2 44.6
-------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Employee share option
scheme:
- Value of services
provided - - - 11.1 11.1 - 11.1
Purchase of treasury
shares - - - (8.3) (8.3) - (8.3)
Shares issued - 0.1 - - 0.1 - 0.1
Disposal of financial
assets at FVOCI - - (0.2) 0.2 - - -
Transfer between equity
accounts - - (0.2) 0.2 - - -
Dividends (Note11) - - - (23.6) (23.6) (0.2) (23.8)
Balance at 30 June
2021 (unaudited) 3.6 97.3 76.9 426.8 604.6 0.7 605.3
-------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Attributable to owners of the parent
----------------------------------------------------
Share Share Other Retained Non-controlling Total
capital premium reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Balance at 1 January
2020 3.6 97.2 95.5 306.2 502.5 0.7 503.2
(audited)
-------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Profit for the period - - - 5.4 5.4 0.1 5.5
Other comprehensive
(loss)/income:
Changes in fair value
of financial assets
at FVOCI, net of tax - - (7.4) - (7.4) - (7.4)
Re-measurement of
defined benefit pension
scheme and employee
benefit obligations - - - (1.4) (1.4) - (1.4)
Tax on other items
directly taken to
other comprehensive
income - - - (0.9) (0.9) - (0.9)
Currency translation
differences - - 32.9 - 32.9 - 32.9
--------------------------
Total comprehensive
income for the period - - 25.5 3.1 28.6 0.1 28.7
-------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Employee share option
scheme:
- Value of services
provided - - - 11.2 11.2 - 11.2
Purchase of treasury
shares - - - (6.5) (6.5) - (6.5)
Balance at 30 June
2020 (unaudited) 3.6 97.2 121.0 314.0 535.8 0.8 536.6
-------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Attributable to owners of the parent
----------------------------------------------------
Share Share Other Retained Non-controlling Total
capital premium reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Balance at 1 January
2020 3.6 97.2 95.5 306.2 502.5 0.7 503.2
(audited)
-------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
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
other comprehensive
income - - - (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 (audited) 3.6 97.2 90.0 390.1 580.9 0.7 581.6
-------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Notes 1 to 22 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 2021
Year ended
31 December
2020
Six months Six months
to 30 June to 30 June
2021 (unaudited) 2020 (unaudited) (audited)
Note GBPm GBPm GBPm
--------------------------------------------------- ----- ------------------ ------------------ -------------
Cash flows from operating activities
Cash generated from operations 13 63.3 35.7 289.8
Interest received 0.7 1.5 3.4
Interest paid (7.1) (7.5) (15.0)
Income tax paid (13.7) (13.6) (29.6)
Net cash generated from operating activities 43.2 16.1 248.6
--------------------------------------------------- ----- ------------------ ------------------ -------------
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment 0.6 0.1 0.1
Proceeds from sale of equity investments 0.3 1.5 1.9
Proceeds from sale of interests in joint
ventures, associates and other investments - 0.6 0.7
Dividends received from joint ventures
and associates 6.1 3.2 10.8
Repayment of loans by joint ventures and
associates - - 0.1
Loans to joint ventures and associates (1.0) (0.3) (1.4)
Loans to other parties - - (5.5)
Acquisition of subsidiaries, net of cash
acquired (40.9) (9.3) (11.2)
Deferred consideration paid in relation
to prior year acquisitions (4.1) (6.4) (15.3)
Purchase of property, plant and equipment (7.9) (5.5) (12.8)
Purchase of intangible assets (2.1) (2.9) (5.3)
Purchase of investment in joint ventures,
associates and equity investments (5.8) (0.5) (5.5)
Net cash used in investing activities (54.8) (19.5) (43.4)
--------------------------------------------------- ----- ------------------ ------------------ -------------
Cash flows from financing activities
Issue of shares 0.1 - -
Proceeds from borrowings 26.9 76.6 46.1
Repayments of borrowings (0.1) (32.5) (67.3)
Payment of debt arrangement fees (0.4) - -
Principal elements of lease payments (21.8) (22.6) (47.7)
Purchase of treasury shares (8.3) (6.5) (8.3)
Dividends paid (23.8) - (0.4)
Net cash (used in)/received from financing
activities (27.4) 15.0 (77.6)
--------------------------------------------------- ----- ------------------ ------------------ -------------
Net (decrease)/increase in cash, cash equivalents
and bank overdrafts (39.0) 11.6 127.6
Cash, cash equivalents and bank overdrafts
at beginning of period 338.2 209.8 209.8
Effect of exchange rate fluctuations on
cash held (5.6) 14.1 0.8
Cash, cash equivalents and bank overdrafts
at end of period 19 293.6 235.5 338.2
--------------------------------------------------- ----- ------------------ ------------------ -------------
Notes 1 to 22 are an integral part of these condensed interim
financial statements.
NOTES
1. General information
Savills plc ('the Company') is a public limited company
incorporated and domiciled in England, United Kingdom. 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 4 August 2021.
This condensed consolidated interim financial information does
not comprise statutory financial statements within the meaning of
section 434 of the Companies Act 2006. The financial information
presented for the year ended 31 December 2020 is derived from the
statutory accounts for that year. Statutory financial statements
for the year ended 31 December 2020 were approved by the Board of
Directors on 10 March 2021 and delivered to the Registrar of
Companies. The auditor's report on these accounts was unqualified,
did not contain an emphasis of matter paragraph and did not contain
a statement under section 498(2) or (3) of the Companies Act
2006.
This condensed consolidated interim financial information has
been reviewed, not audited.
2. Basis of preparation
The annual financial statements of Savills plc will be prepared
in accordance with UK-adopted international accounting standards
('UK-adopted IFRSs'). This condensed consolidated interim financial
report for the half-year reporting period ended 30 June 2021 has
been prepared in accordance with the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority and in
accordance with IAS 34 'Interim Financial Reporting' as contained
in UK-adopted international accounting standards.
The interim report does not include all the notes of the type
normally included in an annual financial report. Accordingly, this
report is to be read in conjunction with the annual financial
statements for the year ended 31 December 2020, which has 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.
Going concern
Management has performed a detailed going concern assessment to
test the Group's liquidity and banking covenant compliance up until
the end of 2022 based on latest financial forecasts. These
forecasts are taking into account the Group's performance over the
period and positive prospects (see 'Summary and outlook' section
for more information) as well as the principal risks and
uncertainties facing the business (see 'Principal risks and
uncertainties' section). In addition, sensitivity analysis has been
performed to assess liquidity availability and covenant compliance
over the period until December 2022, looking at the level of
decline in the base case forecast that could be withstood before
the leverage ratio covenant would be breached. The results of this
sensitivity analysis showed that the Group has sufficient headroom
to withstand the impact of a severe global economic downturn. Based
on the Group's net cash position of GBP106.7m at the period end,
the operating cash flow generated over the period and the level of
undrawn facilities available (see Note 18 for information on the
current level of undrawn facilities), alongside the assessment
noted above, the Directors consider that the Group has adequate
resources in place until at least the end of 2022 and have
therefore adopted the going concern basis of accounting in
preparing the interim financial information.
3. Accounting policies
Except as described below, the accounting policies applied and
methods of computation used are consistent with those of the annual
financial statements for the year ended 31 December 2020, 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.
Adoption of standards, amendments and interpretations to
standards
Standards, amendments and interpretations adopted for use in the
United Kingdom and mandatorily effective for the first time for the
financial year beginning 1 January 2021 that are not relevant or
considered to have a significant impact on the Group and its
financial statements include the following:
Amendments to IFRS 9, IAS 39, IFRS 7 Interest rate benchmark reform
, IFRS 4 and IFRS 16 impact - Phase 2
Amendments to IFRS 16 Covid-19 related rent concessions
Amendments to IFRS 4 Extension of the temporary exemption
from applying IFRS 9
------------------------------------- -------------------------------------
There are no other standards that are not yet effective that
would be expected to have a material impact on the entity in the
current or future reporting periods and on foreseeable future
transactions.
Use of non-GAAP measures
The Group believes that the consistent presentation of
underlying profit before tax, underlying effective tax rate,
underlying basic earnings per share and underlying diluted earnings
per share provides additional useful information to shareholders on
the underlying trends and comparable performance of the Group over
time. The 'underlying' measures are also used by Savills for
internal performance analysis and incentive compensation
arrangements for employees. All the adjustments made to the GAAP
measures are considered exceptional and/or non-operational in
nature. These terms are not defined terms under IFRS and may
therefore not be comparable with similarly-titled profit measures
reported by other companies. They are not intended to be a
substitute for, or superior to, GAAP measures.
The term 'underlying' refers to the relevant measure of profit,
earnings or taxation being reported excluding the impact (pre and
post-tax where applicable) of the following items:
-- amortisation of acquired intangible assets (excluding software);
-- the difference between IFRS 2, 'Share-based Payment' ('IFRS
2'), charges related to outstanding bonus-related deferred share
awards and the estimated value of the current year bonus pool
expected to be allocated to deferred share awards (refer to Note 8
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 transaction costs related to business combinations and disposals.
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.
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.
A reconciliation between GAAP and underlying measures are set
out in Note 8 (underlying profit before tax), Note 9 (constant
currency) and Note 12(b) (underlying basic earnings per share and
underlying diluted earnings per share).
4. Prior period restatement
Notional cash pooling arrangement
For internal cash management purposes, the Group maintains a
notional cash pooling arrangement with Barclays Bank PLC, whereby
credit cash balances (cash) and debit cash balances (overdrafts)
for the participating bank accounts are notionally offset. There is
no overdraft cost or charge associated with any pooled overdraft
that is offset by pooled cash balances. Refer to Note 19 for
further details.
While the Group has legal right of offset of these balances in
the arrangement, it was determined that the cash pooling
arrangement did not meet the requirements for offsetting in
accordance with IAS 32: "Financial Instruments: Presentation" for
each period presented and the pooled cash and pooled overdraft
balances within the notional pooling arrangement cannot be
presented net in the statement of financial position. Accordingly,
the presentation has been amended to show these balances on a gross
basis separately on the statement of financial position as at 30
June 2021 in accordance with IAS 32. The prior period comparatives
have been restated in accordance with IAS 8: "Accounting Policies,
Changes in Accounting Estimates and Errors" to meet the
presentation requirements of IAS 32. The change in presentation
increases cash and cash equivalents within current assets and
increases current liabilities with the overdraft balances in the
notional pooling arrangement but does not have an impact on the
reported net assets, net current assets, profit for the period, the
statement of cash flows or cash and cash equivalents net of
overdrafts disclosed by the Group.
The table below shows the impact of the prior period restatement
on the primary financial statements:
30 June 30 June
2020 reported Restatement 2020 restated
GBPm GBPm GBPm
-------------------------------------------- --------------- ------------ ---------------
Statement of financial position
Cash and cash equivalents 235.6 155.6 391.2
Assets: Current Assets 674.5 155.6 830.1
Overdrafts in notional pooling arrangement - 155.6 155.6
Liabilities: Current Liabilities 610.1 155.6 765.7
-------------------------------------------- --------------- ------------ ---------------
31 December 31 December
2020 2020
reported Restatement restated
GBPm GBPm GBPm
-------------------------------------------- ------------ ------------ ------------
Statement of financial position
Cash and cash equivalents 338.3 209.1 547.4
Assets: Current Assets 845.2 209.1 1,054.3
Overdrafts in notional pooling arrangement - 209.1 209.1
Liabilities: Current Liabilities 711.1 209.1 920.2
-------------------------------------------- ------------ ------------ ------------
As at 1 January 2020, the value of cash and cash equivalents and
overdrafts in the notional pooling arrangement that were offset
totalled GBP160.8m. Accordingly, the adjustment resulted in an
increase in cash and cash equivalents from GBP209.9m to GBP370.7m
and the separate presentation of overdrafts within the notional
pooling arrangement of GBP160.8m. The adjustment therefore
increases the total current assets from GBP790.1m to GBP950.9m and
total current liabilities from GBP723.6m to GBP884.4m as at 1
January 2020.
Control of management companies
Following a review of the control over certain management
companies in the CEME division in H2 2020, management have
determined that the Group does not have control over these entities
as defined by IFRS 10. These entities have not been consolidated in
the 31 December 2020 financial statements, nor in the current
period interim financial statements. The impact on the prior period
comparative interim financial statements at 30 June 2020 is not
material and no restatement has been made.
5. 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 2020, with the exception
of changes in estimates that are required in determining the
provision for income taxes. In addition, refer to Note 17 for
information on the updated expected credit loss provision in
relation to trade receivables.
6. 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 2020. 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 2021:
GBPm Level 1 Level 2 Level 3 Total
---------------------------------- -------- -------- -------- ------
2021
Assets
Financial assets held at
FVOCI
- Listed 1.1 - - 1.1
- Unlisted - 12.0 19.4 31.4
Derivative financial instruments - 0.2 - 0.2
---------------------------------- -------- -------- -------- ------
Total assets 1.1 12.2 19.4 32.7
---------------------------------- -------- -------- -------- ------
Liabilities
Derivative financial instruments - 0.6 0.6 1.2
---------------------------------- -------- -------- -------- ------
Total liabilities - 0.6 0.6 1.2
---------------------------------- -------- -------- -------- ------
The following table presents the Group's assets and liabilities
that are measured at fair value at 31 December 2020:
GBPm Level 1 Level 2 Level 3 Total
---------------------------------- -------- -------- -------- ------
2020
Assets
Financial assets held at
FVOCI
- Listed 1.5 - - 1.5
- Unlisted - 7.2 18.7 25.9
Derivative financial instruments - 0.4 - 0.4
Total assets 1.5 7.6 18.7 27.8
---------------------------------- -------- -------- -------- ------
Liabilities
Derivative financial instruments - 0.3 0.6 0.9
---------------------------------- -------- -------- -------- ------
Total liabilities - 0.3 0.6 0.9
---------------------------------- -------- -------- -------- ------
The following table presents the Group's assets and liabilities
that are measured at fair value at 30 June 2020:
GBPm Level 1 Level 2 Level 3 Total
---------------------------------- -------- -------- -------- ------
2020
Assets
Financial assets held at
FVOCI
- Listed 0.9 - - 0.9
- Unlisted - 5.7 18.4 24.1
Derivative financial instruments - 0.1 - 0.1
Total assets 0.9 5.8 18.4 25.1
---------------------------------- -------- -------- -------- ------
Liabilities
Derivative financial instruments - 0.2 - 0.2
---------------------------------- -------- -------- -------- ------
Total liabilities - 0.2 - 0.2
---------------------------------- -------- -------- -------- ------
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
Level 1 instruments are those whose fair values are based on
quoted market prices.
Level 2
The fair value of Level 2 unlisted financial assets at FVOCI is
determined using valuation techniques using observable market data,
where available, and rely as little as possible on entity
estimates. The fair value of investment funds is based on
underlying asset values determined by the Fund Manager's audited
annual financial statements. These instruments are included in
Level 2.
The fair value of derivative financial instruments relating to
forward foreign exchange contracts and interest rate caps are
determined by using valuation techniques using observable market
data. The fair value of derivative financial instruments is based
on the market value of similar instruments with similar maturities.
These instruments are included in Level 2.
Level 3
If one or more of the significant inputs is not based on
observable market data, the instrument is included in Level 3.
Unlisted equity securities included in Level 3 fall under two
categories. The first, where cost has been determined as the best
approximation of fair value. Cost is considered the best
approximation of fair value in these instances either due to
insufficient more recent information being available and/or there
being a wide range of possible fair value measurements due to the
nature of the investments and cost is considered the best estimate
of fair value within the range. The second, where management have
determined the fair value of the unlisted equity security based
upon the latest trading performance of the investments, cash flow
forecasts of the investments and applying these to a discounted
cash flow valuation and/or considering evidence from recent
fundraising initiatives undertaken.
The derivative financial liability classified as Level 3 relates
to a put option, the fair value of which is derived from
management's best estimate of the average EBITDA forecast of the
relevant business.
The following table presents changes in Level 3 items for the
period ended 30 June 2021:
Derivative Unlisted equity
financial instruments securities
GBPm GBPm
-------------------------------- ----------------------- ----------------
Opening balance 1 January 2021 0.6 18.7
Additions - 0.7
Closing balance 30 June 2021 0.6 19.4
-------------------------------- ----------------------- ----------------
7. Segment analysis
Property
Six months to Transaction and Facilities Investment
30 June 2021 Advisory Consultancy Management Management Unallocated Total
(unaudited) GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------ ------------ ---------------- ------------ ------------ ------
Revenue
United Kingdom
- commercial 38.5 85.6 127.0 19.6 - 270.7
- residential 104.2 24.3 18.2 - - 146.7
-------------------------- ------------ ------------ ---------------- ------------ ------------ ------
Total United Kingdom 142.7 109.9 145.2 19.6 - 417.4
CEME 39.9 18.4 40.1 15.6 - 114.0
Asia Pacific
- commercial 60.5 36.2 173.7 3.0 - 273.4
- residential 13.8 - - - - 13.8
-------------------------- ------------ ------------ ---------------- ------------ ------------ ------
Total Asia Pacific 74.3 36.2 173.7 3.0 - 287.2
North America 105.1 8.9 - - - 114.0
--------------------------
Total revenue 362.0 173.4 359.0 38.2 - 932.6
-------------------------- ------------ ------------ ---------------- ------------ ------------ ------
Underlying profit/(loss)
before tax
United Kingdom
- commercial 5.2 10.2 8.5 3.9 (8.1) 19.7
- residential 20.5 3.9 0.9 - - 25.3
-------------------------- ------------ ------------ ---------------- ------------ ------------ ------
Total United Kingdom 25.7 14.1 9.4 3.9 (8.1) 45.0
CEME (8.5) 2.3 (0.6) 2.7 - (4.1)
Asia Pacific
- commercial 7.4 1.9 10.4 0.6 - 20.3
- residential 3.7 - - - - 3.7
-------------------------- ------------ ------------ ---------------- ------------ ------------ ------
Total Asia Pacific 11.1 1.9 10.4 0.6 - 24.0
North America 0.8 0.5 - (0.1) - 1.2
--------------------------
Underlying profit/(loss)
before tax 29.1 18.8 19.2 7.1 (8.1) 66.1
-------------------------- ------------ ------------ ---------------- ------------ ------------ ------
Property
Six months to 30 Transaction and Facilities Investment
June 2020 Advisory Consultancy Management Management Unallocated Total
(unaudited) GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------ ------------ ---------------- ------------ ------------ ------
Revenue
United Kingdom
- commercial 30.9 74.0 93.3 12.7 - 210.9
- residential 52.9 18.2 16.8 - - 87.9
-------------------------- ------------ ------------ ---------------- ------------ ------------ ------
Total United Kingdom 83.8 92.2 110.1 12.7 - 298.8
CEME 38.1 16.3 37.7 15.3 - 107.4
Asia Pacific
- commercial 41.5 32.4 190.0 2.5 - 266.4
- residential 13.3 - - - - 13.3
-------------------------- ------------ ------------ ---------------- ------------ ------------ ------
Total Asia Pacific 54.8 32.4 190.0 2.5 - 279.7
North America 101.8 3.7 - - - 105.5
--------------------------
Total revenue 278.5 144.6 337.8 30.5 - 791.4
-------------------------- ------------ ------------ ---------------- ------------ ------------ ------
Underlying profit/(loss)
before tax
United Kingdom
- commercial 0.9 5.0 4.7 1.3 (4.3) 7.6
- residential 1.6 1.1 0.4 - - 3.1
-------------------------- ------------ ------------ ---------------- ------------ ------------ ------
Total United Kingdom 2.5 6.1 5.1 1.3 (4.3) 10.7
CEME (9.8) 2.4 0.2 2.8 - (4.4)
Asia Pacific
- commercial (4.4) 2.0 12.4 0.2 - 10.2
- residential 1.6 - - - - 1.6
-------------------------- ------------ ------------ ---------------- ------------ ------------ ------
Total Asia Pacific (2.8) 2.0 12.4 0.2 - 11.8
North America (4.6) (0.3) - - - (4.9)
--------------------------
Underlying profit/(loss)
before tax (14.7) 10.2 17.7 4.3 (4.3) 13.2
-------------------------- ------------ ------------ ---------------- ------------ ------------ ------
Property
Year ended 31 December Transaction and Facilities Investment
2020 Advisory Consultancy Management Management Unallocated Total
(audited) GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------ ------------ ---------------- ------------ ------------ --------
Revenue
United Kingdom
- commercial 79.8 164.1 204.9 26.9 - 475.7
- residential 153.2 41.7 40.1 - - 235.0
-------------------------- ------------ ------------ ---------------- ------------ ------------ --------
Total United Kingdom 233.0 205.8 245.0 26.9 - 710.7
CEME 98.2 37.5 68.6 36.4 - 240.7
Asia Pacific
- commercial 103.9 69.1 368.3 7.5 - 548.8
- 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
--------------------------
Total 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
- residential 23.0 5.9 3.4 - - 32.3
-------------------------- ------------ ------------ ---------------- ------------ ------------ --------
Total United Kingdom 32.5 23.5 17.2 5.6 (13.9) 64.9
CEME (12.3) 2.4 (0.1) 7.8 - (2.2)
Asia Pacific
- commercial 3.3 6.5 27.7 1.4 - 38.9
- 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
-------------------------- ------------ ------------ ---------------- ------------ ------------ --------
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, transaction-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 reported
profit before tax is provided in Note 8.
8. Underlying profit before tax
The Directors seek to present a measure of underlying
performance which is not impacted by exceptional items or items
considered non-operational in nature. This measure is described as
'underlying' and is used by management to assess and monitor
performance.
Six months Six months Year ended
to 30 June to 30 June 31 December
2021 (unaudited) 2020 (unaudited) 2020 (audited)
GBPm GBPm GBPm
--------------------------------------- ------------------ ------------------ ----------------
Reported profit before tax 63.8 7.7 83.2
Adjustments:
- Amortisation of acquired intangible
assets (excluding software) 2.7 2.3 4.9
- Share-based payment adjustment (2.8) 0.4 1.2
- Loss on disposal of joint ventures
and associates - - 0.1
- Restructuring costs 0.1 1.0 1.5
- Transaction-related costs 5.6 1.8 5.0
- Other exceptional items (3.3) - 0.7
Underlying profit before tax 66.1 13.2 96.6
--------------------------------------- ------------------ ------------------ ----------------
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 align the underlying staff cost in
the year with the revenue recognised in the same period.
Restructuring costs includes costs of integration activities in
relation to significant business acquisitions. Costs in the period
ended 30 June 2021 and period ended 30 June 2020 relate primarily
to the IFRS 2: "Share-based Payment" charge for deferred shares
issued in relation to the restructuring upon acquisition of Aguirre
Newman in 2017.
Transaction-related costs includes a net GBP3.6m charge for
future consideration payments which are contingent on the
continuity of recipients' employment in the future (30 June 2020:
GBP2.3m). For the period ended 30 June 2021, a significant portion
of the charge related to recent acquisitions in the US (Macro
acquisition in 2020 and T3 acquisition in 2021), CEME (Omega
acquisition in 2020 and Aguirre Newman acquisition in 2017) and
Savills IM business (DRC acquisition in 2021). For the period ended
30 June 2020, a large portion of the charge related to recent
acquisitions in the UK and US. In the current period,
transaction-related costs also consist of GBP1.6m of professional
advisory transaction fees (30 June 2020: GBP0.1m) and GBP0.4m of
interest in relation to discounted deferred consideration (30 June
2020: GBP0.2m). In the prior period, transaction-related costs also
included a GBP0.8m credit in relation to the Cluttons Middle East
acquisition in 2018.
Other exceptional items reflects the fair value gain recognised
on the re-measurement of the Group's holding in its associate, DRC,
prior to the Group's acquisition of the remaining equity interest
in this business (refer to Note 15 for further details on the
acquisition of DRC). In the year ended 31 December 2020, other
exceptional items reflects the past service cost on the UK defined
benefit scheme, which is the estimated cost of equalising GMPs for
historic transfers-out of the scheme; this followed a High Court
ruling issued on 20 November 2020.
9. Constant Currency
The Group generates revenues and profits in various territories
and currencies because of its international footprint. Those
results are translated on consolidation at the foreign exchange
rates prevailing at the time. These exchange rates vary from period
to period, so the Group presents some of its results on a constant
currency basis. This means that the current period results are
retranslated using the prior period exchange rates. This eliminates
the effect of exchange from the period on period comparison of
results.
The constant currency effect on revenue, reported profit and
underlying profit is summarised below:
Six months
to 30 June
Six months Constant 2021 at
to 30 June Currency Constant
2021 effect Currency
GBPm GBPm GBPm
------------------------------ ------------ ---------- ------------
Revenue 932.6 (25.4) 958.0
Profit before tax 63.8 (1.1) 64.9
Underlying profit before tax 66.1 (1.5) 67.6
------------------------------ ------------ ---------- ------------
The constant currency effect on the Group's segmental results
for the current period is presented below:
Six months to
30 June 2021 - Property
Constant Currency Transaction and Facilities Investment
Effect Advisory Consultancy Management Management Unallocated Total
(unaudited) GBPm GBPm GBPm GBPm GBPm GBPm
-------------------------- ------------ ------------ ---------------- ------------ ------------ -------
Revenue
United Kingdom
- commercial - - - - - -
- residential - - - - - -
-------------------------- ------------ ------------ ---------------- ------------ ------------ -------
Total United Kingdom - - - - - -
Europe & the Middle
East (0.4) (0.3) (0.4) - - (1.1)
Asia Pacific
- commercial (1.8) (0.2) (11.2) (0.3) - (13.5)
- residential (0.5) - - - - (0.5)
-------------------------- ------------ ------------ ---------------- ------------ ------------ -------
Total Asia Pacific (2.3) (0.2) (11.2) (0.3) - (14.0)
North America (9.5) (0.8) - - - (10.3)
--------------------------
Total revenue (12.2) (1.3) (11.6) (0.3) - (25.4)
-------------------------- ------------ ------------ ---------------- ------------ ------------ -------
Underlying profit/(loss)
before tax
United Kingdom
- commercial - - - - - -
- residential - - - - - -
-------------------------- ------------ ------------ ---------------- ------------ ------------ -------
Total United Kingdom - - - - - -
Europe & the Middle
East - (0.1) (0.1) - - (0.2)
Asia Pacific
- commercial (0.3) (0.2) (0.7) - - (1.2)
- residential - - - - - -
-------------------------- ------------ ------------ ---------------- ------------ ------------ -------
Total Asia Pacific (0.3) (0.2) (0.7) - - (1.2)
North America (0.1) - - - - (0.1)
--------------------------
Underlying profit/(loss)
before tax (0.4) (0.3) (0.8) - - (1.5)
-------------------------- ------------ ------------ ---------------- ------------ ------------ -------
10. Income tax expense
The income tax expense has been calculated on the basis of the
statutory rates in each jurisdiction adjusted for any disallowable
charges.
Six months Six months Year ended
to 30 June to 30 June 31 December
2021 (unaudited) 2020 (unaudited) 2020 (audited)
GBPm GBPm GBPm
-------------------- ------------------ ------------------ ----------------
UK
- Current tax 11.6 2.0 13.3
- Deferred tax (3.2) (2.0) (4.4)
Foreign tax
- Current tax 7.8 6.6 13.2
- Deferred tax (0.8) (4.4) (6.9)
-------------------- ------------------ ------------------ ----------------
Income tax expense 15.4 2.2 15.2
-------------------- ------------------ ------------------ ----------------
The forecast Group effective tax rate is 24.1% (30 June 2020:
28.6% and 31 December 2020 reported effective tax rate: 18.3%),
which is higher (30 June 2020: higher, 31 December 2020: lower)
than the UK standard effective annual rate of corporation tax of
19% (30 June 2020 and 31 December 2020: 19%). This reflects
permanent disallowable expenses, including transaction-related
costs and the effect of the annual rate adjustment to the full year
forecast rate. The Group underlying effective tax rate was 24.4%
(30 June 2020: 27.1% and 31 December 2020: 18.5%).
11. Dividends
Six months Six months Year ended
to 30 June to 30 June 31 December
2021 (unaudited) 2020 (unaudited) 2020 (audited)
GBPm GBPm GBPm
---------------------------------------- ------------------ ------------------ ----------------
Amounts recognised as distribution to
equity holders in the period:
In respect of previous period
Ordinary final dividend of 17.0p per
share (2019: GBPnil) 23.6 - -
Supplemental interim dividend of GBPnil
per share (2019: GBPnil) - - -
In respect of current period
Interim dividend of GBPnil per share
(2020: GBPnil) - - -
---------------------------------------- ------------------ ------------------ ----------------
23.6 - -
---------------------------------------- ------------------ ------------------ ----------------
Proposed interim dividend for the six
months ended 30 June 2021 GBP8.4m
---------------------------------------- ------------------
The Board has declared an interim dividend for the six months
ended 30 June 2021 of 6.0p per ordinary share (30 June 2020:
GBPnil) to be paid on 6 October 2021 to shareholders on the
register on 3 September 2021. The interim dividend has not been
recognised in these interim financial statements. It will be
recognised in equity in the year to 31 December 2021.
12(a). Basic and diluted earnings per share
2021 2021 2021 2020 2020 2020
Earnings Shares EPS Earnings Shares EPS
Six months to 30 June (unaudited) GBPm million pence GBPm million pence
----------------------------------- --------- -------- ------ --------- -------- ------
Basic earnings per share 48.2 139.3 34.6 5.4 138.3 3.9
Effect of additional shares
issuable under option - 3.7 (0.9) - 2.6 (0.1)
-----------------------------------
Diluted earnings per share 48.2 143.0 33.7 5.4 140.9 3.8
----------------------------------- --------- -------- ------ --------- -------- ------
2020 2020 2020
Earnings Shares EPS
Year to 31 December (audited) GBPm million pence
----------------------------------- --------- -------- ------ --------- -------- ------
Basic earnings per share 67.6 138.0 49.0
Effect of additional shares
issuable under option - 3.1 (1.1)
----------------------------------- --------- -------- ------ --------- -------- ------
Diluted earnings per share 67.6 141.1 47.9
----------------------------------- --------- -------- ------ --------- -------- ------
12(b). Underlying basic and diluted earnings per share
2021 2021 2021 2020 2020 2020
Earnings Shares EPS Earnings Shares EPS
Six months to 30 June (unaudited) GBPm million pence GBPm million pence
----------------------------------- --------- -------- ------ --------- -------- ------
Basic earnings per share 48.2 139.3 34.6 5.4 138.3 3.9
- Amortisation of acquired
intangible assets (excluding
software) after tax 1.7 - 1.2 1.5 - 1.1
- Share-based payment adjustment
after tax (2.0) - (1.4) 0.4 - 0.3
- Restructuring costs after
tax 0.1 - 0.1 0.8 - 0.6
- Transaction-related costs
after tax 5.2 - 3.7 1.5 - 1.1
- Other exceptional items
after tax (3.3) - (2.4) - - -
Underlying basic earnings
per share 49.9 139.3 35.8 9.6 138.3 7.0
----------------------------------- --------- -------- ------ --------- -------- ------
Effect of additional shares
issuable under option - 3.7 (0.9) - 2.6 (0.2)
-----------------------------------
Underlying diluted earnings
per share 49.9 143.0 34.9 9.6 140.9 6.8
----------------------------------- --------- -------- ------ --------- -------- ------
2020 2020 2020
Earnings Shares EPS
Year to 31 December (audited) GBPm Million pence
----------------------------------- --------- -------- ------ --------- -------- ------
Basic earnings per share 67.6 138.0 49.0
- Amortisation of acquired
intangible assets (excluding
software) after tax 3.3 - 2.4
- Share-based payment adjustment
after tax 1.1 - 0.8
- Loss on disposal of joint
ventures and associates
after tax 0.1 - 0.1
- Restructuring costs after
tax 1.5 - 1.1
- Transaction-related costs
after tax 4.1 - 3.0
- Other exceptional items
after tax 0.6 - 0.4
Underlying basic earnings
per share 78.3 138.0 56.8
----------------------------------- --------- -------- ------ --------- -------- ------
Effect of additional shares
issuable under option - 3.1 (1.3)
----------------------------------- --------- --------
Underlying diluted earnings
per share 78.3 141.1 55.5
----------------------------------- --------- -------- ------ --------- -------- ------
13. Cash generated from operations
Six months Six months Year ended
to 30 June to 30 June 31 December
2021 (unaudited) 2020 (unaudited) 2020 (audited)
GBPm GBPm GBPm
-------------------------------------------- ------------------ ------------------ ----------------
Profit for the period 48.4 5.5 68.0
Adjustments for:
Income tax (Note 10) 15.4 2.2 15.2
Depreciation 32.0 31.8 64.3
Amortisation of intangible assets 5.0 4.6 9.6
(Gain)/loss on disposal of property,
plant and equipment and intangible assets (0.3) - 0.8
Fair value gain on associate (Note 15) (3.3) - -
Loss on disposal of joint ventures and
associates - - 0.1
Net finance cost 6.9 6.5 12.8
Share of post-tax profit from joint
ventures and associates (4.6) (5.0) (10.2)
Increase in employee and retirement
obligations 5.5 4.8 3.4
Exchange movement and fair value movements
on financial instruments in operating
activities (1.0) 0.7 2.4
Increase in provisions 5.4 0.6 0.5
Charge for share-based compensation 11.1 11.2 19.8
Operating cash flows before movements
in working capital 120.5 62.9 186.7
-------------------------------------------- ------------------ ------------------ ----------------
Decrease in trade and other receivables
and contract related assets 47.6 157.0 84.5
(Decrease)/increase in trade and other
payables and contract liabilities (104.8) (184.2) 18.6
-------------------------------------------- ------------------ ------------------ ----------------
Cash generated from operations 63.3 35.7 289.8
-------------------------------------------- ------------------ ------------------ ----------------
Foreign exchange movements resulted in a GBP6.5m increase in
current and non-current trade and other receivables (30 June 2020:
GBP23.6m increase and 31 December 2020: GBP0.3m decrease) and a
GBP7.4m increase in current and non-current trade and other
payables (30 June 2020: GBP25.3m increase and 31 December 2020:
GBP2.3m decrease).
14. Analysis of cash net of debt
Non-cash
movements Movements
recognised through
Six months to 30 Cash in income Other non- business Exchange At 30
June 2021 At 1 January flows statement cash movements combinations movements June
(unaudited) GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ------------- ------- ------------ ---------------- -------------- ----------- --------
Cash and cash
equivalents,
net of overdrafts
in notional pooling
arrangement 338.3 (41.8) - - 2.9 (5.6) 293.8
Bank overdrafts (0.1) (0.1) - - - - (0.2)
----------------------- ------------- ------- ------------ ---------------- -------------- ----------- --------
338.2 (41.9) - - 2.9 (5.6) 293.6
Bank loans (12.1) (26.8) - - - 0.1 (38.8)
Loan notes (150.0) - - - - - (150.0)
Transaction costs 1.6 0.4 (0.1) - - - 1.9
Cash and cash
equivalents
net of borrowings 177.7 (68.3) (0.1) - 2.9 (5.5) 106.7
----------------------- ------------- ------- ------------ ---------------- -------------- ----------- --------
Lease liabilities (304.2) 26.3 (4.4) (4.4) - 4.4 (282.3)
-----------------------
Cash and cash
equivalents
net of debt (126.5) (42.0) (4.5) (4.4) 2.9 (1.1) (175.6)
----------------------- ------------- ------- ------------ ---------------- -------------- ----------- --------
Cash subject to restrictions in Asia Pacific amounts to GBP28.7m
(30 June 2020: GBP27.2m and 31 December 2020: GBP41.1m) which is
cash pledged to banks in relation to property management contracts
and cash remittance restrictions in certain countries. These
amounts are consolidated.
15. Acquisition of subsidiaries
DRC Capital LLP ('DRC')
On 28 September 2018, the Group acquired a 25% interest in DRC,
a commercial real estate debt investment advisor. This transaction
included a call option to acquire the remaining 75% of the business
on the 28 September 2021. The call option date was accelerated and
exercised on 28 May 2021.
Total acquisition consideration is provisionally determined at
GBP49.6m, GBP18.3m of which relates to the fair value of the
initial 25% investment (equity accounted as an associate) and
GBP31.3m was settled on completion.
In addition to the above, an earn-out is payable in September
2024 and is measured against income targets. The maximum earn-out
payment under the agreement caps the total consideration for DRC at
GBP80.0m. The earn-out consideration 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.
Transaction-related costs of GBP0.2m have been expensed as
incurred to the income statement.
The fair value exercise is in progress and goodwill of GBP49.2m
has been provisionally recognised. Goodwill is attributable to the
experience and expertise of the team and the strong industry
reputation. It is not expected to be deductible for tax
purposes.
The acquired business contributed revenue of GBP4.8m and profit
of GBP1.5m to the Group for the period from 28 May 2021 to 30 June
2021. Had the acquisition been made at the beginning of the
financial year, revenue would have been GBP11.6m and profit would
have been GBP5.3m. Prior to acquisition, the Group recognised its
share of profits from DRC as an associate of GBP1.1m in the income
statement and also recognised a fair value gain of GBP3.3m within
Other gains / income in the income statement in relation to the
carrying value of its investment in DRC, prior to DRC becoming a
wholly owned subsidiary of the Group.
Due to the timing of the acquisition, the fair values of the
assets acquired and liabilities assumed are provisional and will be
finalised within 12 months of the acquisition date. These are
summarised below:
Provisional
fair value
to the Group
GBPm
-------------------------------------------------------- --------------
Non-current assets: Property, plant and equipment 0.3
Contract related assets 1.9
Current assets: Contract related assets 0.1
Trade and other receivables 0.6
Cash and cash equivalents 2.8
-------------------------------------------------------- --------------
Total assets 5.7
Current liabilities: Trade and other payables (4.1)
Contract liabilities (1.2)
Net assets acquired 0.4
Goodwill 49.2
-------------------------------------------------------- --------------
Purchase consideration 49.6
-------------------------------------------------------- --------------
Consideration satisfied by:
Cash paid 31.3
Fair value of existing 25% associate investment 18.3
49.6
-------------------------------------------------------- --------------
The fair value of trade and other receivables is GBP0.6m, all of
which relates to trade receivables. The gross contractual amount
for trade receivables is GBP0.7m, of which GBP0.1m is expected to
be uncollectible.
T3 Advisors ('T3')
On 11 June 2021, the Group acquired 100% of the equity interest
in T3, a real estate advisor and consultant for life sciences and
technology sectors in the US.
Total acquisition consideration is provisionally determined at
GBP12.4m, all of which was settled on completion.
In addition to the above, further fixed payments, retention
bonuses and earn-out payments (contingent on revenue and operating
margin targets) are payable in each year up until June 2028. The
maximum value of these payments total GBP8.6m and are 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.
Transaction-related costs of GBP0.4m have been expensed as
incurred to the income statement.
The fair value exercise is in progress and goodwill of GBP11.6m
has been provisionally recognised. Goodwill is attributable to the
experience and expertise of key staff members and is deductible for
tax purposes over a 15 year period.
The acquired business contributed revenue of GBP1.3m and profit
of GBP0.3m to the Group for the period from 11 June 2021 to 30 June
2021. Had the acquisition been made at the beginning of the
financial year, revenue would have been GBP4.3m and profit would
have been GBP0.6m.
Due to the timing of the acquisition, the fair values of the
assets acquired and liabilities assumed are provisional and will be
finalised within 12 months of the acquisition date. These are
summarised below:
Provisional
fair value
to the Group
GBPm
----------------------------------------------- --------------
Non-current assets: Other non-current assets 0.1
Current assets: Trade and other receivables 1.6
----------------------------------------------- --------------
Total assets 1.7
Current liabilities: Trade and other payables (0.9)
Net assets acquired 0.8
Goodwill 11.6
----------------------------------------------- --------------
Purchase consideration 12.4
----------------------------------------------- --------------
Consideration satisfied by:
Cash paid 12.4
12.4
----------------------------------------------- --------------
The fair value of trade and other receivables is GBP1.6m, all of
which relates to trade receivables. The gross contractual amount
for trade receivables is GBP1.6m, all of which is expected to be
collectible.
Update to provisional fair value of prior period acquisition
There are no changes to the provisional fair values in respect
of acquisitions reported in the Group's 2020 Annual Report.
16. 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 9 active
employees and 106 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 2020 and are the same as at 31
December 2020 except for the following:
UK Plan SFM Plan
------------------------------------ ------------------------------------
Year Year
Six months ended Six months ended
Six months to 30 31 Six months to 30 31
to 30 June December to 30 June December
June 2021 2020 2020 June 2021 2020 2020
------------------------------- ----------- ----------- ---------- ----------- ----------- ----------
Expected rate of salary
increases 3.25% 3.25% 3.25% 2.50% 2.50% 2.50%
Projection of social security
contribution ceiling - - - 2.25% 2.25% 2.25%
Discount rate 1.90% 1.50% 1.40% 1.45% 1.55% 1.07%
Inflation assumption 3.10% 3.10% 2.80% 1.75% 1.75% 1.75%
Rate of increase to pensions
in payment
- accrued before 6 April
1997 3.00% 3.00% 3.00% - - -
- accrued after 5 April
1997 3.00% 3.00% 2.70% - - -
- accrued after 5 April
2005 2.10% 2.20% 2.00% - - -
- pension promise before
1 January 1986 - - - 2.25% 2.25% 2.25%
- pension promise after
1 January 1986 - - - 1.75% 1.75% 1.75%
Rate of increase to pensions
in deferment
- accrued before 6 April
2001 5.00% 5.00% 5.00% - - -
- accrued after 5 April
2001 2.30% 2.30% 2.10% - - -
- accrued after 5 April
2009 2.30% 2.30% 2.10% - - -
------------------------------- ----------- ----------- ---------- ----------- ----------- ----------
The amounts recognised in the statement of financial position
are as follows:
31 December
30 June 2021 30 June 2020 2020
UK Plan GBPm GBPm GBPm
------------------------------------------------- ------------- ------------- ------------
Present value of funded obligations 305.4 339.4 333.0
Fair value of plan assets (309.9) (328.8) (330.4)
------------------------------------------------- ------------- ------------- ------------
(Surplus) / liability recognised in
the statement of financial position
(included in retirement benefit asset
/ retirement and employee benefit obligations) (4.5) 10.6 2.6
------------------------------------------------- ------------- ------------- ------------
31 December
30 June 2021 30 June 2020 2020
SFM Plan GBPm GBPm GBPm
------------------------------------------------ ------------- ------------- ------------
Present value of funded obligations 14.5 15.2 16.3
Fair value of plan assets (14.4) (14.1) (14.6)
------------------------------------------------ ------------- ------------- ------------
Liability recognised in the statement
of financial position (included in retirement
and employee benefit obligations) 0.1 1.1 1.7
------------------------------------------------ ------------- ------------- ------------
The amount recognised within the income statement in relation to
the UK Plan for the period ended 30 June 2021 is a net interest
cost of GBPnil (30 June 2020: net interest cost of GBP0.1m, 31
December 2020: net interest cost of GBP0.2m and past service cost
of GBP0.7m).
The amount recognised within the income statement in relation to
the SFM Plan for the period ended 30 June 2021 is a current service
cost of GBPnil (30 June 2020: GBPnil, 31 December 2020:
GBPnil).
Included in retirement and employee benefit obligations is
GBP35.0m relating to holiday pay and long service leave (30 June
2020: GBP33.0m, 31 December 2020: GBP29.8m).
17. Trade receivables - Loss allowance
The Group has no significant concentrations of credit risk. The
trade receivables balance is spread across a large number of
different customers and geographic regions.
Local management have assessed the expected credit losses for
trade receivables as a result of the ongoing uncertainty arising
from COVID-19 and the expected loss rates have been reviewed based
on their judgement as to the ongoing impact of the pandemic on
their trade receivables portfolio. Overall, the expected loss rate
on trade receivables has increased to 8.1% (31 December 2020: 7.7%)
primarily due to more balances being greater than 90 days past due.
This is to be expected given current economic conditions and
uncertainty arising due to the pandemic however local management
continue to closely monitor cash collections and regularly engage
with all clients.
A summary of trade receivables and the loss provision has been
provided below:
More than More than More than
30 days 90 days 180 days
30 June 2021 Current past due past due past due Total
-------------------------- -------- ---------- ---------- ---------- -------
Gross carrying amount
(GBPm) 226.8 54.3 25.8 38.1 345.0
Loss allowance provision
(GBPm) (28.0)
-------
Net trade receivables
(GBPm) 317.0
-------
Expected loss rate 8.1%
-------------------------- -------- ---------- ---------- ---------- -------
More than More than More than
30 days 90 days 180 days
30 June 2020 Current past due past due past due Total
-------------------------- -------- ---------- ---------- ---------- -------
Gross carrying amount
(GBPm) 167.4 82.5 36.3 46.6 332.8
Loss allowance provision
(GBPm) (28.2)
-------
Net trade receivables
(GBPm) 304.6
-------
Expected loss rate 8.5%
-------------------------- -------- ---------- ---------- ---------- -------
More than More than More than
30 days 90 days 180 days
31 December 2020 Current past due past due past due Total
-------------------------- -------- ---------- ---------- ---------- -------
Gross carrying amount
(GBPm) 275.6 55.6 22.4 35.3 388.9
Loss allowance provision
(GBPm) (29.9)
-------
Net trade receivables
(GBPm) 359.0
-------
Expected loss rate 7.7%
-------------------------- -------- ---------- ---------- ---------- -------
18. Borrowings
Movements in borrowings are analysed as follows:
GBPm
----------------------------------------------- ------
Opening amount as at 1 January 2021 160.6
Additional borrowings (net of transaction
costs) 26.6
Repayments of borrowings (including overdraft
movement) (0.1)
Amortisation of transaction costs 0.2
Foreign exchange movement (0.2)
Closing amount as at 30 June 2021 187.1
------------------------------------------------- ------
30 June 30 June 31 December
2021 2020 2020
GBPm GBPm GBPm
---------------------- -------- -------- ------------
Current
Bank overdrafts 0.2 0.1 0.1
Unsecured bank loans 38.8 77.9 12.1
Non-current
Loan notes 150.0 150.0 150.0
Transaction costs (1.9) (1.8) (1.6)
187.1 226.2 160.6
---------------------- -------- -------- ------------
The Group has the following undrawn borrowing facilities:
30 June 30 June 31 December
2021 2020 2020
GBPm GBPm GBPm
------------------------------------------ -------- -------- ------------
Floating rate
- expiring within one year or on demand 36.1 35.7 36.1
- expiring between 1 and 5 years 337.0 298.6 361.1
------------------------------------------ -------- -------- ------------
373.1 334.3 397.2
------------------------------------------ -------- -------- ------------
The Group holds a GBP360m multi-currency revolving credit
facility ('RCF'), which includes a GBP90m accordion facility. In
June 2021 the Group extended the maturity date of the RCF by a
further year to June 2025. As at 30 June 2021 GBP24.0m (30 June
2020: GBP62.0m, 31 December 2020: none) of the RCF was drawn. The
remaining unsecured bank loans reflect a GBP14.1m utilisation of a
revolving credit facility in North America for working capital
purposes, which is repayable within one year and denominated in US
dollars (30 June 2020: GBP15.0m, 31 December 2020: GBP11.4m) and a
GBP0.7m working capital loan in Thailand, which is repayable on
demand and denominated in Thailand baht (30 June 2020: GBP0.9m, 31
December 2020: GBP0.7m).
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.
19. Notional pooling arrangement
For internal cash management purposes, the Group maintains a
notional cash pooling arrangement with Barclays Bank PLC, whereby
credit and debit cash balances for the participating bank accounts
are notionally offset. There is no overdraft cost or charge
associated with any pooled overdraft that is fully offset by pooled
credit cash balances. As at 30 June 2021, the notional cash pooling
arrangement included cash balances of GBP193.3m presented in cash
and cash equivalents (30 June 2020: GBP156.6m, 31 December 2020:
GBP242.0m) and overdrafts of GBP187.7m (30 June 2020: GBP155.6m, 31
December 2020: GBP209.1m) presented in current liabilities. This
represents as at 30 June 2021 surplus pooled credit cash balances
of GBP5.6m (30 June 2020: surplus pooled credit cash of GBP1.0m, 31
December 2020: surplus credit pooled cash GBP32.9m).
For the purpose of the statement of cash flows, cash and cash
equivalents net of overdrafts comprise the following:
31 December
30 June 2021 30 June 2020 2020
GBPm GBPm GBPm
-------------------------------------------
Cash and cash equivalents 481.5 391.2 547.4
Overdrafts in notional pooling arrangement (187.7) (155.6) (209.1)
Bank overdrafts (see Note 18) (0.2) (0.1) (0.1)
-------------------------------------------
293.6 235.5 338.2
20. Related party transactions
As at 30 June 2021, there were GBP2.9m of loans outstanding to
joint ventures and GBP0.7m of loans outstanding to associates (30
June 2020: GBP3.5m of loans outstanding to joint ventures and
GBP0.8m of loans outstanding to associates, 31 December 2020:
GBP4.1m loans outstanding to joint ventures and GBP0.7m of loans
outstanding to associates).
On 28 May 2021, the Group acquired the remaining 75% share in
DRC Capital (a related party), refer to Note 15 for more
information.
There were no other material related party transactions during
the period. All related party transactions take place on an
arm's-length basis under the same terms as those available to other
customers in the ordinary course of business.
21. 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 can be estimated reliably and settlement is
probable.
22. Seasonality
Traditionally, a significant percentage of revenue is seasonal
which has historically caused revenue, profits and cash flow from
operating activities to be lower in the first half and higher in
the second half of each year. The concentration of revenue and cash
flow in the fourth quarter is due to an industry-wide focus on
completing transactions toward the calendar year end.
In the current year, UK residential markets, following the
continuation of the stamp duty holiday, have performed strongly in
the first half and a tempering of residential transaction levels in
some markets is anticipated in the second half of the year.
Commercial investment markets are showing varying speeds of
recovery across the Globe and, subject to further pandemic
outbreaks, we expect this trend to continue through the year,
although cross-border activity will depend upon how soon travel and
quarantine restrictions can be eased. The seasonality of results in
the current year therefore may not necessarily follow that of
previous years, prior to the pandemic.
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.
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