TIDMSVS
RNS Number : 2714E
Savills PLC
10 March 2022
10 March 2022
Savills plc
("Savills" or "the Group")
PRELIMINARY RESULTS FOR THE FULL YEARED 31 DECEMBER 2021
RECORD REVENUE AND PROFITS RESULTING FROM EXTRAORDINARILY STRONG
TRADING RECOVERY.
Savills plc, the international real estate advisor, today
announces its preliminary results for the year ended 31 December
2021.
Key financial highlights
-- Group revenue up 23% to GBP2.15bn (2020: GBP1.74bn)
-- Underlying* profit before tax up 107% to GBP200.3m (2020: GBP96.6m)
-- Reported profit before tax up 120% to GBP183.1m (2020: GBP83.2m)
-- Reported basic earnings per share ('EPS') up 114% to 104.9p (2020: 49.0p)
-- Aggregate dividend of 55.4p to be paid in May 2022, includes
a one-time special dividend of 27.05p
-- Net cash** GBP340.7m (2020: GBP177.7m)
* Underlying profit before tax ('underlying profit') is
calculated on a consistently reported basis in accordance with Note
3 to this Preliminary Statement.
** Net cash reflects cash and cash equivalents net of borrowings
and overdrafts in the notional pooling arrangement (see Note
8).
Key operating highlights
-- 2020's strategy of maintaining full operating strength and
high levels of client service positioned the Group well for the
progressive recovery in 2021.
-- Transactional Advisory revenues up 34% in recovering markets;
Commercial Transaction revenue increased 35% overall with strong
growth in the UK and Asia Pacific. Residential Transaction revenue
up 31%.
-- Less transactional businesses, in aggregate 58% of Group
revenue, continue to perform well with revenue up 17%.
-- Property and Facilities Management revenue up 9%, Consultancy
revenue up 24%.
-- Savills Investment Management revenue up, driven by base
management fees growth of 30%. Assets under Management ('AUM') up
22% at EUR25.8bn.
-- The Group entered a significant strategic partnership between
Savills Investment Management and Samsung Life Insurance ('SLI') to
accelerate the future growth of the Savills Investment Management
business.
-- Continued investment in people, technology leadership and
innovation in sustainability including the launch of Savills Earth
consultancy services.
Commenting on the results, Mark Ridley, Group Chief Executive,
said:
"Savills delivered a record performance in 2021 reflecting the
significant recovery in both residential and commercial
transactional markets supported by growth in our less transactional
Investment Management, Property Management and Consultancy
businesses.
The war in Ukraine has shocked the world and, in response,
Savills is providing support both through international charities
and via our Polish operation, focussing particularly on Ukrainian
refugees. Our thoughts are with everyone affected in the region and
we can only hope for a peaceful resolution as quickly as
possible.
At this stage it is too early to predict the economic, including
longer term inflationary, impact of the Ukrainian crisis on the
world's real estate markets. Subject to this key uncertainty, we
would anticipate real estate transaction volumes and discretionary
spend to normalise in the year ahead, alongside the continued
recovery of global markets as they emerge from pandemic-related
disruptions.
The Group has started 2022 in line with our expectations and the
strength of our balance sheet supports our growth strategy to
pursue further complementary acquisitions and significant
recruitment across our global business."
The analyst presentation will be held at 9.30am today by
webinar. For joining instructions please contact
nrichards@savills.com. A recording of the presentation will be
available from noon at www.ir.savills.com .
For further information, contact:
Savills 020 7409 8934
Mark Ridley, Group Chief Executive
Simon Shaw, Group Chief Financial
Officer
Tulchan Communications 020 7353 4200
Mark Burgess
Elizabeth Snow
Chairman's statement
The Group experienced an extraordinarily strong trading recovery
in 2021, resulting in record revenue and profits.
Results
The Group's revenue increased by 23% to GBP2.15bn (2020:
GBP1.74bn), with strong trading in the last quarter of the year led
by the UK and Asia Pacific regions. Both Continental Europe and the
Middle East ('CEME') and North American regions recovered to
reverse 2020's losses delivering better than expected profits for
2021. With more than half of the revenue growth from the
Transaction Advisory business, and reduced levels of discretionary
expenditure, underlying profit for the year substantially increased
by 107% to GBP200.3m (2020: GBP96.6m), reflecting a margin of 9.3%
(2020: 5.6%). The Group's reported profit before tax increased by
120% to GBP183.1m (2020: GBP83.2m).
Overview
Savills delivered a record revenue and profit performance in
2021, reflecting both the robustness and geographic diversity of
our business and the strategy of maintaining staffing levels
throughout the course of the pandemic. Overall, our Transaction
Advisory revenue increased 34%, our less transactional businesses
of Consultancy and Property Management grew revenue by 24% and 9%
respectively. The UK Residential Transaction Advisory business
delivered a record performance with a revenue increase of 38%.
Despite the backdrop of pandemic-related uncertainty in 2021,
the UK performed exceptionally well across all business lines.
There were notably strong performances from the Transactional
Business lines, albeit Commercial office leasing volumes remained
below historic averages in the majority of markets. Savills
strengths in both logistics and retail warehousing, both of which
enjoyed significant volume increases year-on-year, also contributed
to our overall outperformance. The UK prime residential market
continued to perform extremely strongly and volumes in the Prime
Central London market clearly began to improve through the last
quarter of the year.
In Asia Pacific, the business as a whole had a good finish to
the year. Hong Kong sales activity and market share were strong and
Australia, Singapore and Japan also enjoyed strong trading activity
in the final quarter. In both CEME and North America the increase
in transaction volumes resulted in profits in both regions for the
year. Commercial Transaction revenues increased 27% and 28%
year-on-year in CEME and North America respectively.
Savills Investment Management outperformed expectations, as a
result of new fund launches and strong investment performance from
the majority of our products, together with the benefit of the
acquisition of DRC Capital LLC ('DRC') from the end of May in
attractive markets for real estate debt investment. Capital raising
and deployment were robust following the cautious approach adopted
across the markets during the pandemic. A number of new funds
successfully launched during the year and Assets Under Management
('AUM') increased 22% to EUR25.8bn (2020: EUR21.1bn).
The increase in transaction volumes, alongside substantially
lower levels of discretionary expenditure (travel, entertainment
and marketing events all remained severely curtailed), resulted in
an increase to the Group underlying profit margin to 9.3% (2020:
5.6%).
The impact of the above factors on the Group underlying profit
margin delivered an increase in reported profit before tax of 120%
to GBP183.1m, representing an 8.5% reported pre-tax profit margin
(2020: 4.8%).
Currency movements in the year decreased revenue by GBP49.8m,
underlying profit by GBP4.1m and reported profit before taxation by
GBP3.2m.
Impact of COVID-19 and war in Ukraine
The real estate sector has shown resilience in the face of the
pandemic. Global real estate investment volumes substantially
recovered during the year, with volumes 59% higher than 2020.
Office investment remains below pre-pandemic levels, however
volumes in the highly sought-after industrial sector were up 61% on
2019 levels. Residential became the largest sector for investment
globally during 2021, with investors attracted to its secure,
income generating qualities.
Globally, office leasing volumes have been the slowest
transactional segment to recover as Corporate Occupiers assess both
return to work strategies for their staff and, increasingly, the
Environmental, Social and Governance ('ESG') impact of their
leasehold estates.
The UK housing market performed strongly in 2021, delivering
double digit house price growth and the highest level of
transactional activity since 2007. The prime housing markets
performed particularly strongly with activity levels remaining
buoyant even after the end of an extended stamp duty holiday,
despite reduced levels of publicly marketed stock during the second
half of the year. Prime transactions were more heavily weighted to
the markets beyond London, as buyers continued to reassess their
housing needs in the search for space.
In the Asia-Pacific region, investors were resilient in the face
of varied pandemic-related restrictions and geopolitical concerns
in 2021 with an estimated 30% rise in volumes compared with 2020.
In many countries which experienced significant lockdowns, real
estate markets appear to have learned how to manage on a "business
as usual" basis.
In Europe, there was also a strong rebound in European
commercial and residential investment volumes in 2021 despite the
ongoing pandemic-related disruptions. European investment volumes
reached an apex during the final quarter of 2021, marking a 25%
jump in volumes on the past 5-year average.
In North America, corporate office leasing markets improved
during the period, which became increasingly apparent in the last
quarter of 2021. The tech and life science sector continues to lead
demand as the five prominent American tech giants expanded in key
talent hubs with buildings that will incentivise in-office employee
collaboration and satisfaction, even as hybrid work policies
remained largely in force. Demand for industrial space also
continued at a record pace and average vacancy has reduced to 4.5%
across the US.
It is too early to predict the impact of the crisis in Ukraine
on the world's real estate markets. Savills derives immaterial
revenues (<0.1%) from clients of Russian origin and we have
suspended our long- standing franchise relationship with an agency
in Moscow. The Group does not have operations in Ukraine.
Sustainability in real estate
Decarbonising the real estate sector is an urgent and pressing
need; a challenge that COP26 highlighted. Consequently, ESG
considerations are increasingly defining both investor and occupier
decisions. In Europe, ESG is already actively shaping the assets
and geographies in demand, a trend set to spread globally over
coming periods. Throughout the period, Savills engaged our in-house
sustainability expertise to audit the Group's footprint and
recommend the strategy for progressing to net Zero. The 2021 Annual
Report contains the Group's first report under the Task Force on
Climate-Related Financial Disclosures ('TCFD') framework. In
summary, we have achieved significant reductions in Scope 1 and 2
CO2 emissions since 2016, which represented 6,738 tonnes CO2e in
2021. We are committing to Science-Based Targets to deliver our
goals, consistent with a no greater than 1.5degC temperature
increase, of achieving Scope 1 and 2 net zero by 2030 and net zero
in our value chain (i.e. Scope 3, including assets under the
Group's control) by 2040.
Business development
Savills strategy is to be a leading multi-sector property
advisor in the key markets in which we operate. Our global strategy
is delivered locally by our experts on the ground with flexibility
to adapt quickly to changes in circumstances and opportunities.
They are supported by our global cross-border investment,
residential and occupier services specialists. Over the last few
years we have acquired a number of complementary businesses and
added teams and individual hires to our strong core business.
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 the year,
Savills Investment Management completed the accelerated acquisition
of the outstanding 75% of DRC Capital (a related party), the
specialist European Real Estate Debt Investment Manager.
In December 2021, the Group entered a significant strategic
partnership between Savills Investment Management and Samsung Life
Insurance ('SLI') to accelerate the future growth of the Savills
Investment Management business. The Group sold an initial 25% stake
in the Savills Investment Management business to SLI for
consideration of GBP71.7m (of which GBP63.7m was received on
completion). SLI, in turn, is committed to investing in excess of
US$1bn into Savills Investment Management products over the initial
five year term of the relationship.
Earlier in the year, the Group acquired T3 Advisors, a leading
Real Estate advisor in the Life Science and Technology sectors in
North America. In Q4 we enhanced our Asia Pacific project
management and real estate consulting capabilities through the
acquisition of 60% of the Merx Group of companies headquartered in
Singapore. The Group also further strengthened our market leading
position in Spain by acquiring a largely retail property management
business.
Since the end of the year, the Group has also entered into a
business venture with leading Berlin-based real estate agent Thomas
Zabel as part of our expansion strategy in the European residential
market.
In addition to the acquisitive growth in our business, we
continue to undertake organic growth initiatives across the
platform, with significant recruitment across all our regions, with
particular focus on North America, Greater China and CEME.
Focus on technology
Technology continues to be an important focus for the Group, and
we benefit from the investments we have made both internally and
externally, through Grosvenor Hill Ventures (our technology
investment subsidiary).
Across the Group data-led insight continues to help us solve
many of the most complex real estate challenges our clients face.
While markets around the world are at different phases of data
transparency, our regional centres of excellence closely aligned to
client facing teams help match real estate understanding with data
expertise.
In the summer our award-winning Knowledge Cubed platform
underwent a significant upgrade with the launch of a host of new
"apps" to help corporate occupiers manage their real estate
interests. In the UK auction market, we have continued to take
market share by utilising our bespoke live-stream auctioning
platform, and off this success have further expanded our commercial
auction offering.
As employees return to offices across the world, there is an
increasing focus on tenant experience with landlord clients and
their customers increasingly looking to deploy technology that
reduces day-to-day points of friction. We've observed an evolution
from the pre-pandemic objective of "community building"
particularly within the multi-tenant office environment to
platforms that genuinely improve the occupational experience. Post
year-end we completed the acquisition of one such platform
"Cureoscity" which is currently being rolled out to our UK Property
Management clients to enhance tenant security and experience.
Our technology-enabled flexible office brokerage Workthere
capitalised on the increased demand for flexible workspace across
the globe. It delivered a very strong end to the year and has a
good pipeline for 2022, with particularly strong performances from
the UK, US, Netherlands and France.
During the year we led a funding round into Income Analytics
through Grosvenor Hill Ventures, alongside 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.
Board
As previously announced, in January 2021 Philip Lee and Richard
Orders joined the Board as Non-Executive Directors. Rupert Robson
retired from the Board at the Annual General Meeting in May 2021
and Tim Freshwater retired from the Board on 31 December 2021. I
thank them both for their enormous contribution to the Board over
the years and Tim in particular for his valuable counsel latterly
as Senior Independent Director.
Dividends
A final ordinary dividend of 12.75p is recommended by the Board
(2020: 17.0p), alongside a supplemental interim dividend of 15.6p
(2020: nil). In addition, in view of the Group's very strong
recovery and cash generation since the lockdowns of 2020, the Board
is also proposing a one-time special dividend of 27.05p being
similar to the 2019 final ordinary and supplementary dividends
which were cancelled as COVID-19 took hold in March 2020.
The aggregate dividend of 55.4p will, subject to Shareholder
approval for the recommended final dividend at the AGM on 11 May
2022, be paid on 17 May 2022 to Shareholders on the register at 8
April 2022. The total paid and recommended ordinary, supplemental
and special dividend for the 2021 financial year comprises an
aggregate distribution of 61.4p (2020: 17.0p).
People
The strength of our recovery is an absolute testament to the
commitment of our entire global workforce and I would like to
express my thanks to all our staff worldwide for their hard work,
their flexible approach during challenging times and relentless
commitment to client service.
Summary and Outlook
Savills delivered a record performance in 2021 despite the
backdrop of pandemic-related uncertainty in the year. This was a
result of our strategy to maintain full operating strength and high
levels of client service through the pandemic, enabling the Group
to successfully service clients into the progressive recovery of
many markets in which we operate. Our balance sheet remains strong
and we continue to focus on developing our global businesses
through the coming periods through acquisitions and organic
growth.
The war in Ukraine has shocked the world and, in response,
Savills is providing support both through international charities
and via our Polish operation, focussing particularly on Ukrainian
refugees. Our thoughts are with everyone affected in the region and
we can only hope for resolution as quickly as possible.
Looking forward, at this stage it is too early to predict the
economic, including longer term inflationary, impact of the
Ukrainian crisis on the world's real estate markets. Subject to
this key uncertainty, we would anticipate real estate transaction
volumes to normalise in the year ahead, alongside the continued
recovery of global markets as they emerge from pandemic-related
disruptions. In addition, inflationary pressures in many markets
will result in costs increasing at the highest rate for many years
and we anticipate that discretionary costs will progressively
normalise.
The Group has started the new year in line with our
expectations.
Nicholas Ferguson CBE
Chairman
Review of operations
Savills geographic and business diversity were key to achieving
the year's result. Our performance analysed by region was as
follows:
Underlying profit/(loss)
Revenue GBPm GBPm
-------------------------- ----------------------------
2021 2020 % growth 2021 2020 % growth
-------------- ------- ------- -------- -------- ------- ---------
UK 925.6 710.7 30 129.5 78.8 64
Asia Pacific 626.5 575.7 9 59.2 42.3 40
CEME 301.2 240.7 25 15.4 (2.2) n/a
North America 293.7 213.4 38 15.1 (8.4) n/a
Unallocated - - n/a (18.9) (13.9) n/a
-------------- ------- ------- -------- -------- ------- ---------
Total 2,147.0 1,740.5 23 200.3 96.6 107
-------------- ------- ------- -------- -------- ------- ---------
On a constant currency basis Group revenue increased by 26% to
GBP2,196.8m, underlying profit increased 112% to GBP204.4m and
reported profit before tax increased by 124% to GBP186.3m. Our Asia
Pacific business represented 29% of Group revenue (2020: 33%) and
our overseas businesses as a whole represented 57% of Group revenue
(2020: 59%). Our performance by service line is set out below:
Underlying profit/(loss)
Revenue GBPm GBPm
-------------------------- ----------------------------
2021 2020 % growth 2021 2020 % growth
------------------------ ------- ------- -------- -------- ------- ---------
Transaction Advisory 892.9 667.2 34 97.6 19.4 403
Property and Facilities
Management 745.6 681.9 9 49.1 44.8 10
Consultancy 396.7 320.6 24 47.0 31.5 49
Investment Management 111.8 70.8 58 25.5 14.8 72
Unallocated - - n/a (18.9) (13.9) n/a
------------------------ ------- ------- -------- -------- ------- ---------
Total 2,147.0 1,740.5 23 200.3 96.6 107
------------------------ ------- ------- -------- -------- ------- ---------
Overall, our Commercial and Residential Transaction Advisory
business revenues together represented 42% of Group revenue (2020:
38%). Of this, the Residential Transaction Advisory business
represented 11% of Group revenue (2020: 10%). Our Property and
Facilities Management businesses continued to perform well, growing
year-on-year and representing 35% of Group revenue (2020: 39%). Our
Consultancy businesses represented 18% of revenue (2019: 19%). The
Investment Management business had a strong performance, with
revenue increasing by 58%. It represented 5% of Group revenue
(2020: 4%).
Transaction Advisory
Overall, our Transaction Advisory revenues increased by 34% (38%
on constant currency basis) to GBP892.9m (2020: GBP667.2m).
Globally our Commercial Capital Transaction business revenue
increased by 44% and our Leasing and Occupier focused transactional
revenues grew by 30%. Our Global Residential business revenue
increased by 31%.
Underlying profits grew 403% to GBP97.6m (2020: GBP19.4m), with
an increased underlying profit margin of 10.9% (2020: 2.9%), as a
result of the upturn in activity across most of our key
markets.
Asia Pacific Commercial
Revenue from the Asia Pacific Commercial Transactional business
increased by 47% to GBP153.0m (2020: GBP103.9m), an increase of 51%
in constant currency, and exceeding 2019 revenues by 10%.
Investment markets recovered in the majority of our key markets,
notably Hong Kong, Australia, Singapore and Japan as investors
started to deploy capital after the slow-down in 2020. The
exceptions were in Mainland China and South Korea where demand
remained somewhat subdued. In China, both continued
pandemic-related restrictions and the impact of recoverability of
the bonds issued by certain major developers, affected investor
sentiment. In South Korea by contrast, 2021 represented a reversion
to more normal levels of activity after an unusually strong
performance in 2020.
Leasing activity in the region also improved, notably in
Australia and Singapore, as corporates which had delayed making
longer term lease decisions during 2020, began to commit to new
leases.
Overall the Asia Pacific Commercial Transactional business
resulted in an underlying profit of GBP20.6m, more than six times
higher than the previous year (2020: GBP3.3m) with a margin of
13.5% (2020: 3.2%).
UK Commercial
UK Commercial Transactional revenue grew by 44% to GBP115.2m
(2020: GBP79.8m), reflecting improvement in both the investment and
leasing sectors.
Our capital markets revenues increased by 53%, representing a
combination of market share gains and overall market recovery; UK
commercial property investment volumes in 2021 were approximately
GBP65bn, being 38% higher than the same period in 2020. Retail
warehousing and industrial sectors experienced the strongest
recovery, sectors in which Savills enjoys strong market positions.
Our leasing revenues grew by 36% on 2020 (13% growth on 2019), with
growth across our sector specialisms including Retail.
Improved revenue allied to significantly reduced discretionary
costs in comparison with normal market conditions, combined to
improve Underlying profit by 126% to GBP21.5m (2020: GBP9.5m 2019:
GBP12.3m) representing a significant increase in margin to 18.7%
(2020: 11.9%).
North America
Revenue from the North America Transactional business increased
by 28% to GBP263.6m (2020: GBP205.2m), an improvement of 36% in
constant currency.
Being mainly a transactional business focused primarily on
occupiers, the business recovered as anticipated from the impact of
Covid in 2020. The overwhelming majority of North American revenue
relates to occupier leasing transactions and improved by 27% to
GBP240.6m (2020: GBP190.1m). This compares favourably with the
overall leasing volume in the US market, which increased 20% over
2020.
Capital markets revenues improved by 52% to GBP23.0m (2020:
GBP15.1m).
In addition, during the period discretionary expenditures such
as travel and entertainment were suppressed, helping to deliver a
recovery to underlying profit of GBP10.3m (2020: loss of
GBP7.5m)
Continental Europe and the Middle East
In CEME, transaction fee income increased by 27% to GBP124.4m
(2020: GBP98.2m); an improvement of 30% in constant currency. Our
Investment revenues grew year-on-year by 25%, with significant
recovery across the region, most notably in Ireland and Spain,
whilst investment volumes in EMEA (excluding UK) reached EUR261bn
in 2021, 4% above the previous five year average. Leasing revenues
also recovered in 2021, with all three of our principal sectors up
year-on-year (office by 18%, industrial by 41% and retail by
14%).
Our three largest contributors in this segment are Ireland,
Germany and Spain. Ireland recovered significantly, having fallen
by 65% in 2020, reaching 88% of the 2019 pre-pandemic level. The
majority of this improvement derived from capital transactions
where Savills is clear market leader. Revenues in Germany were down
2%, but up 1% on a constant currency basis, with reductions in
Investment and Office leasing offset by growth in Industrial
transactions. On a constant currency basis, revenues in Germany
were 3% higher than in 2019, having been one of the few global
locations to have achieved revenue growth in 2020. The 12% increase
in revenues in Spain was also principally due to improved
investment markets. In general transactional activity, particularly
in respect of investment, progressively recovered across the rest
of CEME region which collectively delivered revenues of
approximately 98% of 2019 pre-pandemic levels.
As a result underlying profit increased to GBP1.4m (2020:
GBP12.3m loss, 2019: GBP5.4m profit).
UK Residential
UK Residential Transactional revenue grew by 38% to GBP210.7m
(GBP153.2m), with significant improvement in second hand agency
revenues (up 48% year-on-year), supported by robust performances in
both new homes and our Private Rented Sector (PRS) capital markets
teams.
The UK housing market performed strongly in 2021 delivering
double digit house price growth and the highest level of
transactional activity since 2007. The prime housing markets
performed particularly strongly with activity levels remaining
buoyant despite the end of the extended stamp duty holiday,
although there were reduced levels of available stock by the end of
the year. Prime transactions were more heavily weighted to the
regional markets outside London, as buyers continued to reassess
their housing needs in the search for space. The prime central
London market continued to be predominantly driven by UK resident
buyers and activity was resilient; indeed sales in the GBP5m+
market exceeded GBP5.5bn for the first time since 2014. Overall
Savills saw transaction levels increase by 45% on 2020, with
exchanges of 7,412 in 2021 (2020: 5,128). The strong housing market
underpinned sales of new homes which, in turn, fed strong demand
for consented and strategic development land.
Revenue in the New Homes business increased by 13% in 2021. The
Regional business outperformed 2020 with revenue increasing by 27%
and London revenues remained stable. The Regional teams recorded
3,208 (70%) of the total reservations; a 24% improvement on 2020.
In the London new homes market sales activity outside the central
zone enjoyed similarly robust market conditions as the UK
generally. However, in the more central prime locations, which are
more dependent upon international buyers, activity continued to be
relatively subdued as a result of international travel restrictions
during much of the year.
Underlying profit increased by 69% to GBP38.9m (2020: GBP23.0m)
reflecting a pre-tax margin of 18.5% (2020: 15.0%).
Asia Pacific Residential
Revenue from the Asia Pacific Residential Transaction business
decreased by 3% to GBP26.0m (2020: GBP26.9m), a fall of 1% in
constant currency. Whilst there was revenue growth in many of our
markets including Mainland China and Australia, and an increased
contribution from our joint venture in Singapore (Huttons), this
was more than offset by reductions in activity in Hong Kong, where
fewer prime transactions with mainland buyers took place during the
period.
Underlying profits grew by GBP1.5m to GBP4.9m (2020: GBP3.4m)
supported by the higher profit contribution from Huttons, our
residential joint venture agency in Singapore, and the benefit of
cost reductions across the region.
Property and Facilities Management
Our Property and Facilities Management businesses continued to
perform well, with revenues growing by 9% to GBP745.6m (2020:
GBP681.9m); 12% in constant currency. Savills total area under
management increased by 4% to 2.45bn sq. ft. (2020: 2.35bn sq.
ft.). Underlying profit increased by 10% to GBP49.1m (2020:
GBP44.8m), 13% in constant currency.
Asia Pacific
In our Asia Pacific Property Management segment, revenues were
GBP356.7m, a decline of 3% year-on-year (2020: GBP368.3m); a 1%
increase in constant currency. There was 10% revenue reduction in
facilities management (40% of the total revenue in this segment) as
a result of certain contracts not being renewed in Hong Kong and
South Korea, which was partially offset by a 2% increase in
property management (which accounts for the other 60% of revenue in
this segment). In Singapore, our investment in 2020 resulted in
trading ahead of our expectations in 2021.
Underlying profits in 2021 were affected by the removal of
2020's COVID-19 employment subsidies comprising a net year-on-year
reduction of approximately GBP5m. The trail effect of 2020
subsidies meant that the underlying profit margin for the region
continued to be the top end of the normalised margin range of 7.2%
(2020: 7.5%) for this service line. In absolute terms, profit
declined by only GBP1.9m (GBP0.7m on a constant currency basis) to
GBP25.8m.
UK
The UK Property Management business grew revenues by 23% to
GBP300.6m (2020: GBP245.0m) reflecting significant contracts won in
2021 and the full year effect of contracts won in 2020. The
Residential Property Management Lettings team, which is also
included in this segment, had a successful year, with revenues
increasing by 10%, primarily as a result of the number of managed
and tenanted properties increasing by 11% and 9% respectively.
The higher revenues, along with a continued drive to improve
efficiencies, increased underlying profit by 28% to GBP22.0m (2020:
GBP17.2m).
Continental Europe and the Middle East
In the CEME Property Management business revenues were up by
GBP19.7m (29%) to GBP88.3m (2020: GBP68.6m); 33% on a constant
currency basis. During August 2020 we acquired a German property
management business, OMEGA Immobilien Management GmbH and OMEGA
Immobilien Service GmbH ('Omega'), which contributed GBP11.5m of
revenue to this segment in 2021 (2020: GBP3.6m). There was also
revenue growth in the Middle East, following expansion in Egypt and
an increase in ownership of the business in Saudi Arabia
(previously a joint venture interest). Elsewhere, contract wins in
Ireland, Spain and the Netherlands, and the full year effect of
2020 wins in France all contributed to the growth in this
segment.
The Building and Project Consultancy platform, which is included
in this segment at this early stage of its development, continued
to expand with recently created teams in Italy, France, Poland and
Sweden supplementing the significant growth in the Middle East.
As a result of the above factors underlying profit increased to
GBP1.3m (2020: underlying loss of GBP0.1m).
Consultancy
As clients across the Globe sought advice through the pandemic
and in preparation for recovery, global Consultancy revenue
increased by 24% to GBP396.7 (2020: GBP320.6m); 25% on a constant
currency basis. Underlying profit increased by 49% to GBP47.0m
(2020: GBP31.5m); 52% on a constant currency basis.
UK
The UK Consultancy businesses, comprising a broad range of
advisory activities, increased revenue by 19% to GBP244.0m (2020:
GBP205.8m). Our Housing teams saw significant revenue growth
through the impact of Government legislation on the sector and
increased post lockdown access to housing stock for survey work,
which had been delayed from 2020. The remaining principal
Consultancy services (Building Consultancy, Planning, Development
and Valuations) all registered increased revenue through the
progressive recovery in general activity and increased focus on ESG
in all aspects of Real Estate. This element of our advisory
service, which is addressed by a suite of services branded "Savills
Earth" now comprises c. 120 professionals and is becoming a
significant driver of Real Estate decisions across all sectors.
Underlying profit increased by 41% to GBP33.1m (2020:
GBP23.5m).
Asia Pacific
In the Asia Pacific Consultancy segment, revenues increased by
18% to GBP81.3m (2020: GBP69.1m); 19% on a constant currency basis.
Three of our largest businesses in the region (China, Hong Kong and
Singapore) experienced increased market demand, whilst in Australia
where we currently offer the broadest suite of services in the
region, pandemic restrictions were significant throughout the
period and revenues increased by 2%, with growth in Valuations
being offset by reductions in Project Management due to
COVID-19-related contract delay and/or cancellations.
Cost increases and the impact of an internal re-organisation
between segments in China, restricted profitability overall with
underlying profit increasing by 2% (6% on a constant currency
basis) to GBP6.6m (2020: GBP6.5m).
Continental Europe and the Middle East
Revenues increased by 10% to GBP41.3m (2020: GBP37.5m), 14% on a
constant currency basis.
In Spain, which represents approximately 25% of CEME
Consultancy, revenue increased by 14%, whilst in Germany, lower
volumes of transactional related valuation work led to a 21%
decline in revenue year-on-year. All other countries collectively
registered good growth in revenue.
Underlying profits grew by 4% on a reported basis to GBP2.5m
(2020: GBP2.4m); 13% in constant currency.
North America
As part of our strategy to diversify our income streams by
building up our Consultancy practices, in March 2020 we announced
the acquisition of Macro Consultants LLC, a national project
management consultancy business, and in June 2021 we acquired T3
Advisors, a workplace solutions advisory firm specialising in the
life science and technology sectors.
As a result of a strong performance of these two acquisitions,
the North America Consultancy revenues were GBP30.1m (2020:
GBP8.2m) with an underlying profit of GBP4.8m (2020: underlying
loss of GBP0.9m).
Investment Management
Our Investment Management business achieved revenue growth of
58% to GBP111.8m (2020: GBP70.8m); 60% in constant currency. Base
Management fees (representing 70% of revenue) increased by 30% year
on year including the benefit of the acquisition of the remaining
partnership interests in Real Estate Debt investor, DRC Capital LLP
(May 2021). These were supplemented by a 12% increase in
transaction fees and a supernormal increase of over 90% in
performance fees.
During the year we announced the strategic relationship with
Samsung Life Insurance of South Korea ('SLI), The transaction
completed on 31 December 2021 involving the sale of 25% of Savills
Investment Management to SLI and the latter's commitment to invest
at least $1bn, predominantly seed capital, into funds managed by
Savills Investment Management through the initial 5 year term of
the agreement.
Assets under management at 31 December 2021 increased by 14% to
GBP21.7bn (2020: GBP19.0bn) and GBP2.5bn of capital was raised
during the year (2020: GBP1.7bn).
Underlying profit, which was enhanced by the supernormal level
of performance fee income increasing profit margin to 22.8%, grew
72% to GBP25.5m (2020: GBP14.8m); 75% in constant currency.
Financial review
Profit margin
Underlying profit margin increased to 9.3% (2020: 5.6%),
reflecting the significantly higher levels of transactional
activity and the abnormally low levels of discretionary expenditure
in respect of travel, entertaining and marketing events in
particular.
Reported pre-tax profit margin increased to 8.5% (2020:
4.8%).
Taxation
The tax charge for the year increased to GBP36.4m (2020:
GBP15.2m), representing an effective tax rate on reported profit
before tax of 19.9% (2020: 18.3%). The Group's effective reported
tax rate is marginally higher than the UK effective rate of tax of
19% as a result of profits in higher tax jurisdictions and
non-deductible transaction-related costs.
The underlying effective tax rate increased to 18.7% (2020:
18.5%).
Transaction-related costs
During the year the Group recognised a total of GBP17.0m in
transaction-related costs (2020: GBP5.0m). This increase reflects a
higher volume of business development activity year-on-year. These
costs primarily relate to future consideration payments, associated
with acquisitions, which are subject to a future service condition
(2021: GBP13.9m, 2020: GBP4.0m). The largest individual components
of this charge in 2021 relate to the acquisition of DRC Capital LLP
and the acquisition of Macro Consultants LLC in 2020.
These charges have been excluded from the calculation of
underlying profit in line with Group policy.
Earnings per share
Basic earnings per share increased 114% to 104.9p (2020: 49.0p),
reflecting a 116% increase in reported profit after tax. Adjusted
on a consistent basis for exceptional restructuring,
transaction-related costs, profits and losses on disposals, certain
share-based payment adjustments, amortisation and impairment of
intangible assets arising from business combinations, impairments
of goodwill and exceptional fair value gains and losses, underlying
basic earnings per share increased 105% to 116.5p (2020:
56.8p).
Fully diluted earnings per share increased by 108% to 99.8p
(2020: 47.9p). The underlying fully diluted earnings per share
increased 100% to 110.9p (2020: 55.5p).
Cash resources, borrowings and liquidity
Cash and cash equivalents, net of overdrafts in notional pooling
arrangements, at year end increased 45% to GBP491.2m (2020:
GBP338.3m). This increase reflected: strong trading results, the
higher cash outflows associated with corporate acquisition activity
and the reinstatement of dividend payments in the year, together
with the cash proceeds received from the sale of the Group's 25%
interest in Savills Investment Management.
Gross borrowings at year end decreased to GBP150.5m (2020:
GBP160.6m). These principally comprise GBP150.0m (2020: GBP150.0m)
of 7, 10 and 12 year fixed rate notes which were issued in June
2018, in 2020 borrowings also included GBP11.4m drawn under a
revolving credit facility in North America. The Group's UK
revolving credit facility ('RCF') was undrawn at the end of the
year (2020: undrawn), with a total of GBP422.2m (2020: GBP397.2m)
of undrawn borrowing facilities available to the Group. At the year
end, cash and cash equivalents net of gross borrowings was
GBP340.7m (2020: GBP177.7m).
Cash is typically retained in a number of subsidiaries in order
to meet the requirements of commercial contracts or capital
adequacy. In addition, cash in certain territories is retained to
meet future growth requirements.
The Group's net inflow of cash is typically greater in the
second half of the year. This is as a result of seasonality in
trading and the major cash outflows associated with dividends,
profit related remuneration payments and related payroll taxes in
the first half. The Group cash inflow for the year from operating
activities was GBP302.7m (2020: GBP241.4m).
With a large proportion of the Group's revenue typically being
transactional in nature, the Board's strategy is to maintain low
levels of gearing, but retain sufficient credit facilities to
enable it to meet cash requirements during the year and finance the
majority of business development opportunities as they arise.
Capital and Shareholders' interests
During the year 1.1m (2020: 8,504) new ordinary shares were
issued on the exercise of options by participants of the Group's
SAYE schemes. The total number of ordinary shares in issue (before
the impact of shares held by the Savills plc 1992 Employee Benefit
Trust and the Savills "Rabbi" Trust) at 31 December 2021 was 144.2m
(2020: 143.1m)
Savills Pension Scheme
The funding level of the defined benefit Savills Pension Scheme
in the UK, which is closed to future service-based accrual,
improved substantially during the year primarily as a result of the
increase in the yield on AA-rated corporate bonds. The plan was in
a surplus position of GBP17.4m at the year-end (2020: GBP2.6m
liability).
Net assets
Net assets as at 31 December 2021 were GBP753.4m (2020:
GBP581.6m). This movement reflects the Group's trading performance
alongside the actuarial gain on the defined benefit pension plans
and proceeds from the sale of the Group's 25% interest in the
Savills Investment Management group to Samsung Life in December
2021.
Foreign currency
The Group operates internationally and is exposed to foreign
exchange risks. As both revenue and costs in each location are
generally denominated in the same currency, transaction related
risks are relatively low and generally associated with intra Group
activities. Consequently, the overriding foreign currency risk
relates to the translation of overseas profits and losses into
sterling on consolidation. The Group does not actively seek to
hedge risks arising from foreign currency translations due to their
non-cash nature.
The net impact of foreign exchange rate movements during the
year represented a GBP49.8m decrease in revenue and a GBP4.1m
decrease in underlying profit.
Principal risks and uncertainties
The Directors have carried out a robust assessment of the
principal risks facing the Company - including those that would
threaten its business model, future performance, solvency or
liquidity. Further detail on these principal risks will be provided
in the Group's Annual Report and Accounts 2021, which will be
available on publication at www.ir.savills.com on 4 April 2022. The
identified principal risks are summarised below:
-- Business conditions, general economy and geopolitical issues
-- Achieving the right market positioning in response to the needs of our clients
-- Recruitment and retention of high-calibre staff
-- Reputational and brand risk
-- Legal risk
-- Failure or significant interruption to IT systems causing disruption to client service
-- Operational resilience/Business continuity
-- Business conduct
-- Changes in the regulatory environment/regulatory breaches
-- Acquisition/integration risk
-- Environment and sustainability
Savills plc
Consolidated income statement
for the year ended 31 December 2021
2020
2021 restated*
Note GBPm GBPm
------------------------------------------ ----- ---------- -----------
Revenue 2 2,147.0 1,740.5
------------------------------------------ ----- ---------- -----------
Less:
Employee benefits expense (1,413.1) (1,153.7)
Depreciation (63.4) (64.3)
Amortisation of intangible assets (14.2) (9.6)
Impairment of intangible assets arising
from business combinations and goodwill (5.2) -
Other operating expenses (465.2) (419.1)
Impairment losses on financial assets (4.0) (8.7)
Other net gains 2.0 0.7
Share of post-tax profit from joint
ventures and associates 12.6 10.2
------------------------------------------ -----
Operating profit 196.5 96.0
------------------------------------------ ----- ---------- -----------
Finance income 1.9 3.4
Finance costs (15.3) (16.2)
------------------------------------------ ----- ---------- -----------
(13.4) (12.8)
Profit before income tax 183.1 83.2
------------------------------------------ ----- ---------- -----------
Income tax expense 4 (36.4) (15.2)
Profit for the year 146.7 68.0
------------------------------------------ ----- ---------- -----------
Attributable to:
Owners of the parent 146.2 67.6
Non-controlling interests 0.5 0.4
------------------------------------------ ----- ---------- -----------
146.7 68.0
------------------------------------------ ----- ---------- -----------
Earnings per share
Basic earnings per share 6(a) 104.9p 49.0p
Diluted earnings per share 6(a) 99.8p 47.9p
------------------------------------------ ----- ---------- -----------
* See Note 1(b) for details on the prior year restatement.
Supplementary income statement information
Reconciliation to underlying profit
before income tax
Profit before income tax 183.1 83.2
- restructuring and transaction-related
costs 17.3 6.5
- other underlying adjustments (0.1) 6.9
--------------------------------------------------- ------ -----
2 and
Underlying profit before income tax 3 200.3 96.6
------------------------------------------ ------- ------ -----
Savills plc
Consolidated statement of comprehensive income
for the year ended 31 December 2021
2021 2020
GBPm GBPm
--------------------------------------------------- ------- ------
Profit for the year 146.7 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 21.3 6.5
Changes in fair value of equity investments
at FVOCI (4.4) (6.9)
Tax on other items that will not be reclassified (4.3) (1.2)
--------------------------------------------------- ------- ------
Total items that will not be reclassified
to profit or loss 12.6 (1.6)
Items that may be reclassified subsequently
to profit or loss:
Currency translation differences (8.9) 1.8
Tax on items that may be reclassified (1.1) (0.3)
--------------------------------------------------- ------- ------
Total items that may be reclassified subsequently
to profit or loss (10.0) 1.5
Other comprehensive income/(loss) for the
year 2.6 (0.1)
--------------------------------------------------- ------- ------
Total comprehensive income for the year 149.3 67.9
--------------------------------------------------- ------- ------
Total comprehensive income attributable to:
Owners of the parent 148.8 67.5
Non-controlling interests 0.5 0.4
--------------------------------------------------- ------- ------
149.3 67.9
--------------------------------------------------- ------- ------
Savills plc
Consolidated statement of financial position
at 31 December 2021
2020
2021 restated*
Note GBPm GBPm
---------------------------------------------- ----- -------- -----------
Assets: Non-current assets
Property, plant and equipment 66.3 64.9
Right of use assets 232.6 252.8
Goodwill 411.3 379.4
Intangible assets 72.6 49.8
Investments in joint ventures and associates 32.8 51.8
Deferred income tax assets 36.1 42.8
Financial assets at fair value through other
comprehensive income ('FVOCI') 30.4 27.4
Retirement benefit surplus 18.1 -
Contract assets 3.4 1.4
Trade and other receivables 41.2 31.8
944.8 902.1
---------------------------------------------- ----- -------- -----------
Assets: Current assets
Contract assets 9.3 8.0
Trade and other receivables 602.6 496.6
Income tax receivable 0.9 1.9
Derivative financial instruments 0.1 0.4
Cash and cash equivalents** 689.7 547.4
1,302.6 1,054.3
---------------------------------------------- ----- -------- -----------
Liabilities: Current liabilities
Borrowings 11 2.1 12.2
Overdrafts in notional pooling arrangement** 198.5 209.1
Lease liabilities 48.0 45.2
Derivative financial instruments 0.9 0.3
Contract liabilities 14.5 10.8
Trade and other payables 738.5 604.9
Income tax liabilities 15.9 10.2
Employee benefit obligations 16.9 19.2
Provisions 9.2 8.3
1,044.5 920.2
---------------------------------------------- ----- -------- -----------
Net current assets 258.1 134.1
Total assets less current liabilities 1,202.9 1,036.2
Liabilities: Non-current liabilities
Borrowings 11 148.4 148.4
Lease liabilities 237.0 259.0
Derivative financial instruments 2.6 0.6
Other payables 20.0 10.5
Retirement and employee benefit obligations 20.3 14.9
Provisions 20.0 15.6
Deferred income tax liabilities 1.2 5.6
449.5 454.6
---------------------------------------------- ----- -------- -----------
Net assets 753.4 581.6
---------------------------------------------- ----- -------- -----------
Equity:
Share capital 3.6 3.6
Share premium 104.4 97.2
Other reserves 76.2 90.0
Retained earnings 540.0 390.1
Equity attributable to owners of the parent 724.2 580.9
Non-controlling interests 10 29.2 0.7
---------------------------------------------- -----
Total equity 753.4 581.6
---------------------------------------------- ----- -------- -----------
* See Note 1(b) for details on the prior period restatement.
** Included within cash and cash equivalents are cash balances
of GBP201.5m (2020: GBP242.0m) that are operated within a notional
cash pooling arrangement together with overdraft balances of
GBP198.5m (2020: GBP209.1m) presented above in current liabilities.
See Note 8 for further details.
Savills plc
Consolidated statement of changes in equity
for the year ended 31 December 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
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Profit for the year - - - 146.2 146.2 0.5 146.7
Other comprehensive income/(loss):
Re-measurement of defined
benefit pension scheme and
employee benefit obligations - - - 21.3 21.3 - 21.3
Changes in fair value of
financial assets at FVOCI - - (4.4) - (4.4) - (4.4)
Tax on items taken to other
comprehensive income/(loss) - - - (5.4) (5.4) - (5.4)
Currency translation differences - - (8.9) - (8.9) - (8.9)
-----------------------------------
Total comprehensive (loss)/income
for the year - - (13.3) 162.1 148.8 0.5 149.3
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Employee share option scheme:
- Value of services provided - - - 23.7 23.7 - 23.7
- Tax on employee share option
schemes - - - 4.7 4.7 - 4.7
Issue of share capital - 7.2 - - 7.2 - 7.2
Tax on other items taken
to reserves - - - 0.6 0.6 - 0.6
Purchase of treasury shares - - - (49.0) (49.0) - (49.0)
Disposal of financial assets
at FVOCI - - (0.3) 0.2 (0.1) - (0.1)
Dividends - - - (31.9) (31.9) (0.4) (32.3)
Transaction with non-controlling
interest - - - 39.3 39.3 28.2 67.5
Transfer between reserves - - (0.2) 0.2 - - -
Additions through business
combinations - - - - - 0.2 0.2
Balance at 31 December 2021 3.6 104.4 76.2 540.0 724.2 29.2 753.4
----------------------------------- --------- --------- ---------- ---------- ------- ---------------- --------
Attributable to owners of the parent
----------------------------------------------------
Share Share Other Retained Non-controlling Total
capital premium reserves earnings Total interests equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Balance at 1 January
2020 3.6 97.2 95.5 306.2 502.5 0.7 503.2
--------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Profit for the year - - - 67.6 67.6 0.4 68.0
Other comprehensive
income/(loss):
Re-measurement of defined
benefit pension scheme
and employee benefit
obligations - - - 6.5 6.5 - 6.5
Changes in fair value
of financial assets
at FVOCI, net of tax - - (6.9) - (6.9) - (6.9)
Tax on items taken to
other comprehensive
income/(loss) - - - (1.5) (1.5) - (1.5)
Currency translation
differences - - 1.8 - 1.8 - 1.8
--------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Total comprehensive
(loss)/income for the
year - - (5.1) 72.6 67.5 0.4 67.9
--------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Employee share option
scheme:
- Value of services
provided - - - 19.8 19.8 - 19.8
Purchase of treasury
shares - - - (8.3) (8.3) - (8.3)
Disposal of financial
assets at FVOCI - - (0.4) (0.2) (0.6) - (0.6)
Dividends - - - - - (0.4) (0.4)
Balance at 31 December
2020 3.6 97.2 90.0 390.1 580.9 0.7 581.6
--------------------------- --------- --------- ---------- ---------- ------ ---------------- --------
Savills plc
Consolidated statement of cash flows
for the year ended 31 December 2021
2020
2021 restated*
Note GBPm GBPm
--------------------------------------------------- ----- ------- -----------
Cash flows from operating activities
Cash generated from operations 7 348.3 282.6
Interest received 1.8 3.4
Interest paid (14.0) (15.0)
Income tax paid (33.4) (29.6)
Net cash generated from operating activities 302.7 241.4
--------------------------------------------------- ----- ------- -----------
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment 1.0 0.1
Proceeds from sale of equity investments 1.7 1.9
Proceeds from sale of interests in joint ventures 0.7 0.7
Dividends received from joint ventures 6.6 5.7
Dividends received from associates 6.0 5.1
Repayment of loans by joint ventures 0.1 -
Repayment of loans by associates - 0.1
Loans to joint ventures (0.6) (1.4)
Loans to other parties (7.4) (5.5)
Acquisition of subsidiaries, net of cash and
overdrafts acquired (40.5) (11.2)
Deferred consideration paid in relation prior
year acquisitions (5.9) (8.1)
Purchase of property, plant and equipment (18.6) (12.8)
Purchase of intangible assets (5.9) (5.3)
Purchase of equity investments (9.8) (5.0)
Purchase of investment in joint ventures (0.4) -
Purchase of investment in associates (0.3) (0.5)
Net cash used in investing activities (73.3) (36.2)
--------------------------------------------------- ----- ------- -----------
Cash flows from financing activities
Proceeds from issue of share capital 7.2 -
Proceeds from transaction with non-controlling 63.7 -
interest
Transaction costs incurred on transactions (0.9) -
with non-controlling interest
Proceeds from borrowings 26.9 46.1
Repayments of borrowings (38.2) (67.3)
Financing fees paid (0.5) -
Principal elements of lease payments (47.2) (47.7)
Purchase of treasury shares (49.0) (8.3)
Dividends paid (32.3) (0.4)
Net cash used in financing activities (70.3) (77.6)
--------------------------------------------------- ----- ------- -----------
Net increase in cash, cash equivalents and
bank overdrafts 159.1 127.6
Cash, cash equivalents and bank overdrafts
at beginning of year 338.2 209.8
Effect of exchange rate fluctuations on cash
and cash equivalents held (7.3) 0.8
--------------------------------------------------- ----- ------- -----------
Cash, cash equivalents and bank overdrafts
at end of year 490.0 338.2
--------------------------------------------------- ----- ------- -----------
* See Note 1(b) for details on the prior period restatement.
NOTES
1(a). Basis of preparation
The results for the year ended 31 December 2021 have been
extracted from the audited financial statements. The financial
statements have been prepared in accordance with UK adopted
international accounting standards.
The financial statements are prepared on a going concern basis
and under the historical cost convention as modified by the
revaluation of loans receivable, equity investments and derivative
financial instruments held at fair value.
The financial information in this statement does not constitute
statutory accounts within the meaning of s434 of the Companies Act
2006. The statutory accounts for the year ended 31 December 2021,
on which the auditors have given an unqualified audit report, have
not yet been filed with the Registrar of Companies.
The preparation of financial statements in conformity with IFRS
requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Although these estimates are
based on management's best knowledge of the amount, event or
actions, actual results ultimately may differ from those
estimates.
1(b). Prior year restatement
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 8 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 31
December 2021 in accordance with IAS 32. The prior period
comparative has 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:
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.
Presentation of deferred consideration linked to continuing
employment within the Statement of Cash Flows
In accordance with the requirements of IAS 7: "Statement of Cash
Flows", the Group's policy is to classify payments of
deferred/contingent consideration in relation to historic business
acquisitions that are linked to continuing employment within cash
flows used in operating activities and all other payments of
deferred/contingent considerations under IFRS 3: "Business
Combinations" are classified as cash used in investing activities.
Following a review prompted by an enquiry carried out by the
Financial Reporting Council ('FRC') on the Group's 2020 Annual
Report & Accounts, it was noted that certain cash flows
relating to employment linked deferred consideration payments were
incorrectly classified as an investing activity as opposed to an
operating activity in the Group's consolidated Statement of Cash
Flows. This has been corrected in this Annual Report and Accounts,
with prior year comparatives for the period ended 31 December 2020
represented accordingly in accordance with IAS 8.
The scope of the review performed by the FRC was to consider the
Group's compliance with UK reporting requirements. Due to their
inherent limitations these reviews are not intended to provide
assurance that corporate accounts are correct in all material
aspects. The FRC's review does not benefit from a detailed
knowledge of the business or an understanding of the underlying
transactions entered into. The FRC's letters are written on the
basis that the FRC accepts no liability for reliance on them by the
Company or any third party.
The table below shows the impact of the prior year restatement
on the Group's Statement of Cash Flows and Note 7 - Cash Generated
From Operations:
31 December 31 December
2020 2020
reported Restatement restated
GBPm GBPm GBPm
----------------------------------------- ------------ ------------ ------------
Statement of cash flows
Cash generated from operations 289.8 (7.2) 282.6
Net cash generated from operating
activities 248.6 (7.2) 241.4
Deferred consideration paid in relation
to prior year acquisitions (15.3) 7.2 (8.1)
Net cash (used in)/generated from
investing activities (43.4) 7.2 (36.2)
Note 7 - Cash Generated From Operations
Increase in trade and other payables
and contract liabilities 18.6 (7.2) 11.4
Cash generated from operations 289.8 (7.2) 282.6
This prior year restatement does not have an impact on reported
profit, earnings per share, assets, liabilities or the overall net
cash flows disclosed by the Group and relates solely to
classification within the Statement of Cash Flows.
Presentation of share of post-tax profit from joint ventures and
associates within the Income Statement
Following a review of the Group's share of post-tax profit from
joint ventures and associates and the presentation of this in the
Group's Income Statement, management have determined that the
Group's joint ventures and associates are an integral part of the
business and the share of post-tax profit from joint ventures and
associates should have been included within operating profit,
consistent with IASB's view in IAS 1.BC56. This position has been
corrected in the current year and prior period comparatives have
been restated in accordance with IAS 8.
The table below shows the impact of the prior year restatement
on Group's Income Statement:
31 December 31 December
2020 2020
reported Restatement restated
GBPm GBPm GBPm
------------------ ------------ ------------ ------------
Income statement
Operating profit 85.8 10.2 96.0
------------------ ------------ ------------ ------------
This prior year restatement does not have an impact on reported
profit after tax, earnings per share, the Statement of Financial
Position or the Statement of Cash Flows.
2. Segment analysis
Property
and Facilities Investment
Transaction Manage- Manage-
Advisory Consultancy ment ment Unalloc-ated Total
Year ended to 31 December
2021 GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Revenue
United Kingdom - commercial 115.2 193.6 256.4 55.1 - 620.3
United Kingdom - residential 210.7 50.4 44.2 - - 305.3
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Total United Kingdom 325.9 244.0 300.6 55.1 - 925.6
CEME 124.4 41.3 88.3 47.2 - 301.2
Asia Pacific - commercial 153.0 81.3 356.7 9.5 - 600.5
Asia Pacific - residential 26.0 - - - - 26.0
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Total Asia Pacific 179.0 81.3 356.7 9.5 - 626.5
North America 263.6 30.1 - - - 293.7
-------------------------------
Revenue 892.9 396.7 745.6 111.8 - 2,147.0
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Underlying profit/(loss)
before tax
United Kingdom - commercial 21.5 24.6 17.9 14.0 (18.9) 59.1
United Kingdom - residential 38.9 8.5 4.1 - - 51.5
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Total United Kingdom 60.4 33.1 22.0 14.0 (18.9) 110.6
CEME 1.4 2.5 1.3 10.2 - 15.4
Asia Pacific - commercial 20.6 6.6 25.8 1.3 - 54.3
Asia Pacific - residential 4.9 - - - - 4.9
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Total Asia Pacific 25.5 6.6 25.8 1.3 - 59.2
North America 10.3 4.8 - - - 15.1
-------------------------------
Underlying profit/(loss)
before tax 97.6 47.0 49.1 25.5 (18.9) 200.3
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Property
and Facilities Investment
Transaction Manage- Manage-
Advisory Consultancy ment ment Unalloc-ated Total
Year ended to 31 December
2020 GBPm GBPm GBPm GBPm GBPm GBPm
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Revenue
United Kingdom - commercial 79.8 164.1 204.9 26.9 - 475.7
United Kingdom - residential 153.2 41.7 40.1 - - 235.0
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Total United Kingdom 233.0 205.8 245.0 26.9 - 710.7
CEME 98.2 37.5 68.6 36.4 - 240.7
Asia Pacific - commercial 103.9 69.1 368.3 7.5 - 548.8
Asia Pacific - residential 26.9 - - - - 26.9
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Total Asia Pacific 130.8 69.1 368.3 7.5 - 575.7
North America 205.2 8.2 - - - 213.4
-------------------------------
Revenue 667.2 320.6 681.9 70.8 - 1,740.5
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Underlying profit/(loss)
before tax
United Kingdom - commercial 9.5 17.6 13.8 5.6 (13.9) 32.6
United Kingdom - residential 23.0 5.9 3.4 - - 32.3
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Total United Kingdom 32.5 23.5 17.2 5.6 (13.9) 64.9
CEME (12.3) 2.4 (0.1) 7.8 - (2.2)
Asia Pacific - commercial 3.3 6.5 27.7 1.4 - 38.9
Asia Pacific - residential 3.4 - - - - 3.4
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Total Asia Pacific 6.7 6.5 27.7 1.4 - 42.3
North America (7.5) (0.9) - - - (8.4)
-------------------------------
Underlying profit/(loss)
before tax 19.4 31.5 44.8 14.8 (13.9) 96.6
------------------------------- ------------ ------------ ---------------- ----------- ------------- --------
Operating segments reflect internal management reporting to the
Group's chief operating decision maker, defined as the Group
Executive Board ('GEB'). The GEB primarily manages the business
based on the geographic location in which the Group operates.
The operating segments are identified as the following regions:
the UK, CEME, Asia Pacific and North America. The Savills
Investment Management business is also considered a separate
operating segment. The reportable operating segments derive their
revenue primarily from property-related services. Within the UK and
Asia Pacific, both commercial and residential services are
provided. Other segments are largely commercial-based.
The GEB also reviews the business with reference to the nature
of the services in each region. Therefore, the Group has presented
its segment analysis below in a matrix with the primary operating
segments based on regions in which the Group operates.
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, significant
transaction-related costs, amortisation and impairment of
intangible assets arising from business combinations, impairment of
goodwill and other items that are considered non-operational and
material (fair value gain on associates/joint ventures and fair
value loss on a transaction-related call option in the current
year, GMP equalisation charge in the prior year).
A reconciliation of underlying profit before tax to reported
profit before tax is provided in Note 3.
3. Underlying profit before tax
The Directors believe that the consistent presentation of
underlying profit before tax provides additional useful information
to Shareholders on the underlying trends and comparable performance
of the Group over time by excluding significant non-operational
costs/income from the GAAP measures. This 'underlying' measure is
also used by the Group for internal performance analysis and
incentive compensation arrangements for employees.
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 non-GAAP measures may be materially
higher or lower than GAAP measures and should not be regarded as a
complete picture of the Group's financial performance.
2021 2020
GBPm GBPm
=========================================================== ====== =====
Reported profit before tax 183.1 83.2
Adjustments:
Amortisation of intangible assets arising from business
combinations 8.1 4.9
Impairment of goodwill and intangible assets arising
from business combinations 5.2 -
Share-based payment adjustment (10.8) 1.2
(Profit)/loss on disposal of joint ventures and associates (0.4) 0.1
Restructuring costs 0.3 1.5
Transaction-related costs 17.0 5.0
Fair value gain on step acquisitions of subsidiaries
previously classified as associates/joint ventures (4.0) -
Fair value loss on transaction-related call option 1.8 -
GMP equalisation charge - 0.7
=========================================================== ====== =====
Underlying profit before tax 200.3 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: "Share based payments"
charge in relation to outstanding bonus-related share awards and
the estimated value of the current year bonus pool to be awarded in
deferred shares. This adjustment is made to align the underlying
staff cost in the year with the revenue recognised in the same
period.
Impairment of goodwill in the year relates to the Indonesia and
Sweden cash generating units. Impairment on intangible assets
arising from business combinations relate to property management
contracts in South Korea and Japanese investment management
contracts relating to closed funds.
Profit on disposal recognised primarily in relation to the
disposal of holdings in joint ventures in China. In the prior year,
loss on disposal was recognised in relation to disposal of a
portion of the Group's holding in a joint venture in China, which
is now treated as an FVOCI equity investment, and a part disposal
of an associate in Singapore.
Restructuring costs includes costs of integration activities in
relation to significant business acquisitions. Charges in the
current and prior year primarily relate to the ongoing cost of
deferred shares, with a five year vesting period, issued in
relation to the restructuring upon acquisition of Aguirre Newman in
2017.
Transaction-related costs primarily relate to provisions for
future payments in relation to business acquisitions, which are
expensed through the income statement to reflect the requirement
for the recipients to remain engaged actively in the business at
the payment date (2021: GBP13.9m charge, 2020: GBP4.0m charge). The
largest individual components of this charge in 2021 relate to the
acquisition of DRC Capital LLP and the acquisition of Macro
Consultants LLC in 2020. These costs are employee benefits
expenses. In addition, transaction-related costs include a GBP1.4m
charge relating to prepaid amounts issued as part of business
acquisitions that are linked to continued active engagement in the
business (2020: GBP2.5m), GBP0.6m of unwinding of interest on
deferred consideration and non-current future payments in relation
to business acquisitions that are linked to employment (2020:
GBP0.3m) and GBP1.1m of professional fees incurred on transactions
(2020: GBP0.7m). Of these items, prepaid amounts that are linked to
active engagement in the business are recorded as employee benefits
expenses in the income statement, unwinding of interest is recorded
as a finance cost in the income statement and all other
charges/(credits) are recorded within other operating expenses. In
the prior year, transaction-related costs also included a GBP1.8m
credit relating to the re-measurement of contingent deferred
consideration payments and a GBP0.7m credit in relation to a
working capital adjustment on the Cluttons Middle East acquisition
in 2018.
In the current year, a fair value gain was recognised on the
re-measurement of the Group's holding in its associate, DRC, and a
joint venture in Indonesia, prior to the Group's acquisition of the
remaining equity interest in these businesses (refer to Note 9 for
further details on the acquisition of DRC and the Indonesian
business). In addition, a fair value loss was recognised on the
fair value measurement of the Samsung Life call option, which gives
Samsung Life the right to purchase up to an additional 10%
shareholding in the Savills Investment Management group subject to
the quantum of capital it has invested in SIM products during the
initial 5 year term.
Guaranteed Minimum Pension ('GMP') equalisation charge in the
prior year reflects the past service cost on the UK defined benefit
pension scheme, which is the estimated cost of equalising GMPs for
historic transfers-out of the scheme; this follows a High Court
ruling issued on 20 November 2020.
4. Income tax expense
The income tax expense has been calculated on the basis of the
underlying rate in each jurisdiction adjusted for any disallowable
charges.
2021 2020
GBPm GBPm
-------------------- ------ ------
United Kingdom
- Current tax 21.7 13.3
- Deferred tax (6.8) (4.4)
Foreign tax
- Current tax 23.8 13.2
- Deferred tax (2.3) (6.9)
-------------------- ------ ------
Income tax expense 36.4 15.2
-------------------- ------ ------
5. Dividends
2021 2020
GBPm GBPm
--------------------------------------------- ----- -----
Amounts recognised as distribution to equity
holders in the year:
In respect of the previous year
Ordinary final dividend of 17.0p per share
(2019: GBPnil) 23.6 -
In respect of the current year
Interim dividend of 6.0p per share (2020:
GBPnil) 8.3 -
--------------------------------------------- ----- -----
31.9 -
--------------------------------------------- ----- -----
The Group paid GBP0.4m (2020: GBP0.4m) of dividends to
non-controlling interests.
The Board recommends a final dividend of 12.75p (net) per
ordinary share (amounting to GBP18.4m), alongside the supplemental
interim dividend of 15.6p per ordinary share (amounting to
GBP22.5m) and a special dividend of 27.05p (amounting to GBP39.0m),
to be paid on 17 May 2022 to Shareholders on the register at 8
April 2022. These financial statements do not reflect this dividend
payable.
The total paid and recommended ordinary, supplemental and
special dividend for the 2021 financial year comprises an aggregate
distribution of 61.4p per ordinary share (2020: 17.0p per ordinary
share).
6(a). Basic and diluted earnings per share
2021 2021 2021 2020 2020 2020
Earnings Shares EPS Earnings Shares EPS
Year to 31 December GBPm million pence GBPm million pence
-------------------------------------- --------- -------- ------ --------- -------- ------
Basic earnings per share 146.2 139.4 104.9 67.6 138.0 49.0
Effect of additional shares issuable
under option - 7.1 (5.1) - 3.1 (1.1)
--------------------------------------
Diluted earnings per share 146.2 146.5 99.8 67.6 141.1 47.9
-------------------------------------- --------- -------- ------ --------- -------- ------
6(b). Underlying basic and diluted earnings per share
2021 2021 2021 2020 2020 2020
Earnings Shares EPS Earnings Shares EPS
Year to 31 December GBPm million pence GBPm million pence
-------------------------------------------- --------- -------- ------ --------- -------- ------
Basic earnings per share 146.2 139.4 104.9 67.6 138.0 49.0
- Amortisation of intangible assets
arising from business combinations
after tax 6.5 - 4.7 3.3 - 2.4
- Impairment of goodwill and intangible
assets arising from business combinations
after tax 5.4 - 3.9 - - -
- Share-based payment adjustment
after tax (9.0) - (6.5) 1.1 - 0.8
- (Profit)/net loss on disposal
of joint ventures and associates
after tax (0.4) - (0.3) 0.1 - 0.1
- Restructuring costs after tax 0.4 - 0.3 1.5 - 1.1
- Transaction-related costs after
tax 15.5 - 11.1 4.1 - 3.0
- Fair value gain on step acquisition
of subsidiaries previously classified
as joint ventures/associates after
tax (4.0) - (2.9) - - -
- Fair value loss on transaction-related
call option 1.8 - 1.3 - - -
- GMP equalisation charge after
tax - - - 0.6 - 0.4
Underlying basic earnings per
share 162.4 139.4 116.5 78.3 138.0 56.8
-------------------------------------------- --------- -------- ------ --------- -------- ------
Effect of additional shares issuable
under option - 7.1 (5.6) - 3.1 (1.3)
--------------------------------------------
Underlying diluted earnings per
share 162.4 146.5 110.9 78.3 141.1 55.5
-------------------------------------------- --------- -------- ------ --------- -------- ------
7. Cash generated from operations
2020
2021 restated*
GBPm GBPm
------------------------------------------------------ ------- -----------
Profit for the year 146.7 68.0
Adjustments for:
Income tax (Note 4) 36.4 15.2
Depreciation 63.4 64.3
Amortisation of intangible assets 14.2 9.6
Impairment of goodwill and intangible assets arising
from business combinations 5.2 -
Fair value gain on joint ventures and associates (4.0) -
Fair value loss on derivative financial instrument 1.8 -
Loss on disposal of property, plant and equipment
and intangible assets 0.9 0.8
(Gain)/loss on disposal of joint ventures and
associates (0.4) 0.1
Net finance cost 13.4 12.8
Share of post-tax profit from joint ventures and
associates (12.6) (10.2)
Increase in employee and retirement obligations 6.7 3.4
Exchange movements and fair value movements on
financial instruments in operating activities (2.5) 2.4
Increase in provisions 5.4 0.5
Charge for share-based compensation 23.7 19.8
Operating cash flows before movements in working
capital 298.3 186.7
------------------------------------------------------ ------- -----------
(Increase)/decrease in trade and other receivables
and contract assets (90.1) 84.5
Increase in trade and other payables and contract
liabilities 140.1 11.4
------------------------------------------------------ ------- -----------
Cash generated from operations 348.3 282.6
------------------------------------------------------ ------- -----------
* See Note 1(b) for details on the prior period restatement.
Foreign exchange movements resulted in a GBP0.3m increase in
current and non-current trade and other receivables (2020: GBP0.3m
decrease) and a GBP5.9m increase in current and non-current trade
and other payables (2020: GBP2.3m decrease).
8. 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 31 December 2021, the notional cash
pooling arrangement included cash balances of GBP201.5m presented
in cash and cash equivalents (December 2020: GBP242.0m) and
overdrafts of GBP198.5m (31 December 2020: GBP209.1m) presented in
current liabilities. This represents as at 31 December 2021 surplus
pooled credit cash balances of GBP3.0m (31 December 2020: surplus
pooled credit cash GBP32.9m).
For the purpose of the Statement of Cash Flows, cash and cash
equivalents net of overdrafts comprise the following:
31 December 31 December
2021 2020
GBPm GBPm
-------------------------------------------- ------------ ------------
Cash and cash equivalents 689.7 547.4
Overdrafts in notional pooling arrangement (198.5) (209.1)
Bank overdrafts (1.2) (0.1)
-------------------------------------------- ------------ ------------
490.0 338.2
-------------------------------------------- ------------ ------------
9. Acquisition of subsidiaries
The fair values of the assets acquired and liabilities assumed
as part of the Group's acquisitions in the year are provisional and
will be finalised within 12 months of the acquisition date. These
are summarised below:
Provisional fair value to
the Group
-------------------------------
DRC T3 Other Total
GBPm GBPm GBPm GBPm
------------------------- ----------------------------- ------ ------ ------ -------
Property, plant and
Non-current assets: equipment 0.2 - 0.1 0.3
Right-of-use asset - 0.6 0.1 0.7
Intangible assets 27.3 5.2 0.1 32.6
Deferred income tax
assets - - 0.2 0.2
Contract assets 2.0 - - 2.0
Trade and other receivables - 0.1 - 0.1
Current assets: Trade and other receivables 0.6 2.7 5.0 8.3
Contract assets 0.1 - - 0.1
Cash and cash equivalents 2.8 0.1 3.0 5.9
Current liabilities: Borrowings - - (1.6) (1.6)
Lease liabilities - - (0.1) (0.1)
Trade and other payables (5.3) (1.2) (9.4) (15.9)
Non-current liabilities: Lease liabilities - (0.5) (0.1) (0.6)
Other payables - (0.2) - (0.2)
Employee benefit obligations - - (0.4) (0.4)
Deferred tax liabilities (6.4) - - (6.4)
------------------------------------------------------- ------ ------ ------ -------
Net assets/(liabilities) 21.3 6.8 (3.1) 25.0
Non-controlling interest
share of net assets - - (0.2) (0.2)
-------------------------------------------------------- ------ ------ ------ -------
Net assets/(liabilities)
acquired 21.3 6.8 (3.3) 24.8
-------------------------------------------------------- ------ ------ ------ -------
Goodwill 27.8 5.8 7.0 40.6
-------------------------------------------------------- ------ ------ ------ -------
Purchase consideration 49.1 12.6 3.7 65.4
-------------------------------------------------------- ------ ------ ------ -------
Consideration satisfied by:
Cash paid 31.3 12.6 1.3 45.2
Fair value of associate/joint venture
holding, prior to acquisition 17.8 - 2.0 19.8
Deferred consideration - - 0.4 0.4
-------------------------------------------------------- ------ ------ ------ -------
49.1 12.6 3.7 65.4
------------------------------------------------------- ------ ------ ------ -------
DRC Capital LLP ('DRC')
On 28 September 2018, the Group acquired a 25% equity interest
in DRC, a commercial real estate debt investment manager. This
transaction included a call option to acquire the remaining 75%
equity interest 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
GBP49.1m, GBP17.8m 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 GBP0.5m have been expensed as
incurred to the income statement and classified within other
operating expenses.
Goodwill of GBP27.8m has been determined. 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. Intangible assets recognised on acquisition include
GBP17.7m of investment management contracts, GBP6.7m of customer
relationships and GBP2.9m in relation to the brand.
The acquired business contributed revenue of GBP16.6m and profit
of GBP7.6m to the Group for the period from 28 May 2021 to 31
December 2021. Had the acquisition been made at the beginning of
the financial year, revenue would have been GBP23.3m and profit
would have been GBP11.9m. 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
GBP2.8m 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.
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
GBP12.6m, 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 June 2024 up until June 2028. The
maximum value of these payments total GBP8.7m 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 GBP0.6m have been expensed as
incurred to the income statement and classified within other
operating expenses.
Goodwill of GBP5.8m has been determined. Goodwill is
attributable to the experience and expertise of key staff members
and is deductible for tax purposes over a 15 year period.
Intangible assets recognised on acquisition include GBP5.2m of
customer relationships.
The acquired business contributed revenue of GBP12.6m and profit
of GBP0.9m to the Group for the period from 11 June 2021 to 31
December 2021. Had the acquisition been made at the beginning of
the financial year, revenue would have been GBP17.0m and profit
would have been GBP1.8m.
The fair value of trade and other receivables is GBP2.7m, all of
which relates to trade receivables. The gross contractual amount
for trade receivables is GBP2.7m, all of which is expected to be
collectible.
Other acquisitions
During the year, the Group acquired the remaining 51% of
Cluttons Saudi Arabia Company Limited (previous 49% ownership
equity accounted for as a joint venture) and the remaining 49%
economic interest in the Savills Indonesia business (previous 51%
economic ownership equity accounted for as a joint venture). In
addition, the Group acquired 60% of Merx Holdings (SG) Pte Ltd
('Merx Group'), a project management consulting firm operating in
Asia.
Cash consideration for these transactions amounted to GBP1.3m.
The remainder of the acquisition consideration relates to deferred
consideration of GBP0.4m, payable within one year of the reporting
date, and GBP2.0m relates to the fair value of the initial
investment in both Saudi Arabia and Indonesia (previously equity
accounted for as joint ventures).
Goodwill of GBP7.0m has been provisionally determined. Goodwill
is attributable to the experience and expertise of key staff and
strong industry reputation and is not expected to be deductible for
tax purposes.
10. Transactions with non-controlling interests
Under IFRS 10, transactions with non-controlling interests must
be accounted for as equity transactions. During the year, the Group
undertook the following transactions with non-controlling
interests:
Effective holding Total effective
(disposed)/acquired holding at
31 December
2021
------------------------ -------------------- ---------------
Savills IM Holdings Ltd (25%) 75%
------------------------ -------------------- ---------------
Part disposal of interests in subsidiaries
In December 2021, the Group disposed of 25% of the shares in
Savills IM Holdings Ltd ('Savills IM Group') to Samsung Life
Company Ltd for consideration of GBP71.7m, of which GBP63.7m was
received in cash on completion. This takes the Group's shareholding
to 75%. The carrying amount of the Savills IM group net assets on
the date of disposal was GBP112.7m. The Group recognised an
increase in non-controlling interest of GBP28.2m. The amount
recognised as a profit to retained earnings in respect of this
transaction was GBP39.3m, which is net of transaction-related costs
of GBP4.2m.
2021
GBPm
--------------------------------------------------------------- ------
Carrying amount of non-controlling interests disposed of (28.2)
Consideration paid by non-controlling interest holder 71.7
Transaction-related costs (4.2)
Excess of consideration received recognised in parent's equity 39.3
--------------------------------------------------------------- ------
11. Borrowings
Movements in borrowings are analysed as follows:
GBPm
----------------------------------------------- -------
Opening amount as at 1 January 2021 160.6
Additional borrowings, net of transaction
costs paid 26.4
Repayments of borrowings (including overdraft
movement) (38.3)
Additions through business combinations
(Note 9) 1.6
Amortisation of transaction costs 0.5
Foreign exchange movement (0.3)
Closing amount as at 31 December 2021 150.5
------------------------------------------------- -------
2021 2020
GBPm GBPm
--------------------------------------------- ------ ------
Current
Bank overdrafts 1.2 0.1
Unsecured bank loans due within one year or
on demand 0.9 12.1
2.1 12.2
Non-current
Loan notes 150.0 150.0
Transaction costs (issuance of loan notes
and RCF arrangement fees) (1.6) (1.6)
148.4 148.4
--------------------------------------------- ------ ------
150.5 160.6
--------------------------------------------- ------ ------
The Group holds a GBP360.0m multi-currency revolving credit
facility ('RCF'), which includes a GBP90.0m accordion facility. In
June 2021 the Group extended the maturity date of the RCF by a
further year to June 2025. As at 31 December 2021 none (2020: none)
of the RCF was drawn. The unsecured bank loans reflect a GBP0.7m
working capital loan in Thailand, which is repayable on demand and
denominated in Thailand baht (2020: GBP0.7m) and a GBP0.2m working
capital loan in Indonesia, which is repayable on demand and
denominated in Indonesian Rupiah (2020: none). The prior year
unsecured bank loans also included a GBP11.4m utilisation of a
revolving credit facility in North America for working capital
purposes, which was repayable within one year and denominated in US
dollars (2021: none).
The Group holds GBP150.0m of long term debt through the issuance
of 7, 10 and 12 year fixed rate private note placements in the US
institutional market, which were issued in June 2018.
The Group has the following undrawn borrowing facilities:
2021 2020
GBPm GBPm
---------------------------------------- ------ ------
Floating rate
- expiring within 1 year or on demand 61.2 36.1
- expiring between 1 and 5 years 361.0 361.1
----------------------------------------- ------ ------
422.2 397.2
---------------------------------------- ------ ------
12. Related party transactions
As at 31 December 2021, there were GBP0.2m of loans receivable
from joint ventures and GBP1.5m of loans receivable from associates
(2020: GBP4.1m loans receivable from joint ventures and GBP0.7m of
loans receivable from associates).
Refer to Note 9 for information with respect to full acquisition
of joint ventures and associates in the year.
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.
13. Annual report and accounts
Copies of the Annual Report and Accounts for the year ended 31
December 2021 will be circulated to shareholders on 4 April 2022
and will also be available from the investor relations section of
the Company website at www.ir.savills.com or from:
Savills plc, 33 Margaret Street, London, W1G 0JD
Telephone: 020 7499 8644
Directors' responsibilities in respect of the financial
statements
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
-- the Strategic Report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face. We consider the annual report and
financial statements, taken as a whole, are fair, balanced and
understandable and provide the information necessary for
shareholders to assess the Company's position and performance,
business model and strategy.
The contents of this announcement, including the responsibility
statement above, have been extracted from the annual report and
accounts for the year ended 31 December 2021, which will be
available on publication at www.ir.savills.com. Accordingly, this
responsibility statement makes reference to the financial
statements of the Company and the Group and the relevant narrative
appearing in that annual report and accounts rather than the
contents of this announcement.
On behalf of the Board
Mark Ridley
Group Chief Executive
Chris Lee
Group Legal Director and Company Secretary
10 March 2022
Forward-looking statements
The financial information contained in this announcement has not
been audited. Certain statements made in this announcement are
forward-looking statements and are therefore subject to risks,
assumptions and uncertainties that could cause actual results to
differ materially from those expressed or implied because they
relate to future events. These forward-looking statements include,
but are not limited to, statements relating to the Company's
expectations.
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FR FFFLLVEIAIIF
(END) Dow Jones Newswires
March 10, 2022 02:00 ET (07:00 GMT)
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