savills plc results for the year ended 31 december...
TRANSCRIPT
Savills plc
Results for the year ended
31 December 2019
12 March 2019
Mark Ridley & Simon Shaw
Disclaimer: Forward-looking statements
2
These slides contain certain forward-looking statements including the Group’s financial condition, results of
operations and business, and management’s strategy, plans and objectives for the Group. These statements
are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of
which are beyond the Group’s control, are difficult to predict and could cause actual results to differ materially
from those expressed or implied or forecast in the forward-looking statements. These factors include, but are
not limited to, the fact that the Group operates in a highly competitive environment. All forward-looking
statements in these slides are based on information known to the Group on the date hereof. The Group
undertakes no obligation publically to update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
Results
1 Introduction, Highlights & Business Development 2 Financial Review 3 Key Priorities &
Summary & Outlook
3
Introduction,
Highlights & Business
Development
Highlights
5
Performance Overview Drivers
Group Revenue £1,930.0m
+9.6% (cc 8.4%)
Group UPBT £143.4m
-0.2% (cc -1.2%)
➢ Transaction advisory revenues up 2% with
growth in North America and Europe &
Middle East offset by decline in Asia Pacific
➢ Strong growth in less transactional services –
Property Management revenue up 17%,
Consultancy revenue up 15%
➢ Continued growth in North America with
revenues up 11% and underlying profit up
35%
➢ SIM reported record year with revenues up
19%, profits up 65% and AuM up 8% to
£17.7bn
Group UEPS 78.0p
(2018: 77.8p)
Net Cash £28.5m
(2018: £73.9m)
Dividend 32.0p
+2.6%
cc = constant currency
‘Key Strategic
Goals – A Recap’
Priorities & Focus
7
Enhance Business Balance
▪ Emphasis on growth of less transactional businesses
Maintain Core Strengths
▪ Focus on growing transactional market share
Accelerate Growth in Underscale Geographies
▪ Develop EMEA, North America, accelerate growth in
core markets in Asia Pac
Integrate Acquisitions & Leverage Organic Growth
▪ Broadgate Estates, Currells and DRC, and maximise
benefits of recruitment
Support Growth of SIM Under New CEO (Alex Jeffrey)
▪ Europe and Asia Pac, with new fund development
Ten Year Revenues
8
-
500
1,000
1,500
2,000
2,500
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
£m
Transactional "Less-Transactional"
Total Revenue
£677.0m
Transactional
£270.7m
“Less-
Transactional”
£406.3m
46%47%
47%46%
48%
39%38%40%
54%53%
54%52%
54%60%61%62%60%
40%
46%
46%
Percentage of Revenue
Property Management – 35%
Consultancy – 18%
Investment Management – 4%
Percentage of Revenue
Commercial Transactions – 34%
Residential Transactions – 9%
57%
43%
Total Revenue
£1,930.0m
Transactional
£828.2m
“Less-
Transactional”
£1,101.8m
Broad Geographic Spread
9
580Employees
Revenue
£293.0m
(15% of Total)
*Staff numbers – weighted average for 2019
Revenue
£727.5m
(38% of Total)
Revenue
£282.4m
(15% of Total)
Revenue
£627.1m
(32% of Total)
Over 39,000* employees in 71 countries
825
Employees
35
Offices
6,388
Employees
134
Offices
2,032
Employees
46
Offices
29,912
Employees
58
Offices
UK
Market Dynamics
Macro themes
▪ Sluggish GDP growth (1%) with continuing risk of Brexit affecting market confidence
▪ Weak sterling and comparative pricing maintains attraction to non domestic investors
▪ ‘Boris bounce’ post the Election, buoys confidence in December (may be tempered by Covid 19)
Market statistics
▪ Commercial Investment volumes down (-17%), more so in Central London Offices (-34%),
▪ Office Leasing volumes decline, Nationally (-10%), London (-15%), strong rental growth in prime offices (London: +14-16%)
▪ Retail suffers rental falls, Investment Volumes remain extremely low (-10%)
▪ Logistics: Strong conditions continue, but take up fell (-9%) and Investment volumes reduced (-14%)
▪ UK Housing transaction volumes down (-1%), greater reduction above £1m (-2%) but volumes increase in PCL (+14%)
Business Development Focus:
Integration & growth of Property Management, Consultancy, New Services in Debt Advisory & Corporate Finance
Property Management
▪ Successfully integrated Broadgate Estates, as well as expanding existing portfolio to 444m sq. ft (+16% YoY)
▪ Acq Parkes & Associates (Property Management, Guernsey)
Consultancy
▪ Acq KKS (Design & Workplace Consultancy)
▪ Expanded Occupier Services Platform
▪ Opened new Brighton Office
▪ Developed Life Sciences team
Residential Sales & Lettings
▪ Integrated Currells (6 offices in London)
▪ Grew PRS & Lettings in Manchester
Transactional
▪ New Logistics Occupier Advisory Service
▪ Expanded Corporate Finance business
▪ Created International Prime Retail Team
Revenue
£727.5m
Growth
10% YOY
11
Revenue
£627.1m
Growth
7% YOY
Market Dynamics
Macro themes
▪ GDP growth of 4.4% across the region with improvements in Japan, Vietnam, India & China, but lower growth in Australia & Singapore
▪ Disturbances in Hong Kong in H2 resulted in GDP fall (-1.15%)
▪ Trade disputes impact markets (US / China & Japan / South Korea)
Market statistics
▪ Hong Kong Commercial Investment falls significantly in H2 (-42% YoY) with Office Leasing volumes also adversely impacted (-33%)
▪ Residential Secondary Sales sharply reduced
(-9.5%), price discounts in all markets
▪ China less impacted (-0.8%) with increased Cross Border activity to Shanghai and Beijing
▪ Volumes increase in Japan (+4.6%) & Singapore (+26.4%) , but declines in South Korea (-7.9%) & Australia (-0.3%)
▪ Overall regional volumes for the year fell (-5%)
▪ Grade A Office Leasing volumes fell (23% YoY)
Business Development Focus:
Accelerated Organic Growth in core markets & new openings in India
Hong Kong
▪ Strengthened Property Management & FM with new contract wins
China
▪ Opened new offices in Haikou and expanded in Changsa, focussed on Property Management, Retail & Commercial Leasing
Australia & New Zealand
▪ Significant growth in Logistics (NSW & Victoria), Office Leasing (NSW) & Property Management
▪ New Head of NZ & growth of Valuation & Office Leasing
South East Asia
▪ Focus on Singapore, new Capital Markets team, growth of Facilities Management & Valuation
▪ New leadership teams in Malaysia & Indonesia
▪ Vietnam – growth of Property Management
India
▪ 6 new offices since 2019, headcount now 300, full service offer, including Tenant Rep, Capital Markets, Project Management, Valuation, Leasing & Residential Sales
Asia Pacific
North America
Revenue
£293.0m
Growth
11% YOY
Market Dynamics
Macro themes
▪ Annual GDP growth of 2.3%, but Global trade policy & Political uncertainty drag on growth (-60-80 bps)
▪ Unemployment rate at all time low (3.5%) with estimated 1.8m new jobs created
▪ Federal Bank eases rates in October to stimulate growth
Market statistics
▪ Commercial Office Leasing volumes up (+3% YoY), New York recovers strongly with demand from TMT (+35%)
▪ Vacancy rates tighten in main Office markets, particularly Washington , Chicago & LA
▪ Office rents grow nationally (+5.1%) and Investment volumes increase (+2%)
▪ Liquidity remains principal constraint on Investment activity, estimate $327bn of ‘dry powder’ looking to enter the market
Business Development Focus:
Continued growth of occupier focused business (Office & Logistics), with selective new office openings
Central Management
▪ Strengthened Management team & rebranded National platform in March
Tenant Representation
▪ Organically grew Tenant Rep teams in 21 offices nationally
Logistics
▪ Grew US & Canadian Logistics platform across 7 offices
New Offices
▪ Opened new offices in Calgary, Connecticut, Detroit & Nashville
Project Management & Consultancy
▪ Growth of Workplace & Project Management nationally
Capital Markets
▪ Restructured the business, with focus on greater National coverage
WorkThere
▪ Launched our WorkThere flexible office platform in New York & Atlanta
Technology
▪ Continued investment in award winning Technology (K3) & CRM platform across all markets
Europe & Middle East
Revenue
£282.4m
Growth
14% YOY
Market Dynamics
Macro themes
▪ GDP growth continuing to slow in Germany, France & Italy (+0.4% – 1.2%)
▪ European budgetary constraints & Brexit overhang affects confidence
▪ Heightened political uncertainty in Gulf region
Market statistics
▪ European Investment volumes enjoyed a strong year (+0.7% YoY)
▪ Significant volume increases in core European Cities, Paris (+20%), Berlin (+22%) & Madrid (+49%)
▪ Cost of debt continues to attract inward investment (Germany bond yields remain in negative territory)
▪ Office Leasing Volumes down (–4%) but vacancy rates tighten to 5.4% (6.3% 2018)
▪ Prime CBD rents in Europe increase(+6%), with strongest growth in Cologne, Berlin & Frankfurt
▪ Prime Logistics rents across Europe increase (+6%) on average across main markets
Business Development Focus:
Maximise benefits of organic growth, together with continued integration of recent acquisitions in core markets
Spain & Portugal
▪ Continue to strengthen market position, growth in Project Management, Consultancy & Residential services, additional growth in Barcelona
Sweden
▪ Significant organic growth across all business lines (15 key hires), focused on Investment & Office Leasing
France
▪ New leadership team, integration & growth of Office Leasing & development of Logistics capability (Paris & Lyon)
▪ New team (Savills Ski), covering the French Alps & growth of Prime Residential in France
Germany
▪ New Workplace strategy team & expansion of core Agency services in Stuttgart
Middle East
▪ New Project Management capability in Dubai & extended platform across Saudi Arabia & Egypt
WorkThere
▪ Continued roll out across Netherlands, Germany, Ireland, Spain & France
Savills Investment Management (SIM)
Revenue
£79.2m
Growth
19% YOY
Business Development Focus:
Continued focus on performance, growth of AUM & launch of new products & equity raising
▪ AUM increased by 8% to £17.7bn (£16.4bn in 2018)
▪ Transacted over £3.1bn (£1.9bn acquisition & £1.2bn disposals)
▪ Continued strong performance, outperforming benchmarks in 89% of AUM over the last 5 years
▪ Raised £3.1bn of new equity (£2.4bn in 2018)
▪ Secured mandates of £842m for key Asian Sovereign Wealth Funds
▪ Successful launch of European Logistics Fund III and Japan II (€153m & $450m to date)
▪ Growth of Asia Pac platform with organic growth in Malaysia, Australia & Singapore
▪ Global CEO, Alex Jeffrey joined in October 2019, based in Singapore
Market Dynamics
▪ Greater focus on core European markets as geo-political & Brexit concerns dampen investor appetite in the UK
▪ Weight of capital targeting Real Estate remains well
above average, with increased fund allocation to
the sector
▪ Concerns increase on late cycle pricing, significant yield compression on prime assets
▪ Key investor focus on core, core plus sectors, weighting to Logistics increasing
▪ Greater Cross Border activity from Asia Pac region, to diversify exposure
▪ Increased demand for Real Estate debt & Alternative Asset Classes
▪ Further consolidation of smaller Investment Managers, increased level of regulatory compliance & strong focus on fee levels
ESG – Savills Strategic Commitments
15
Our Expertise
Our goals and strategy aligned to United Nations Sustainable Development Goals (SDGs)
Sustainable business model
▪ Attracting and retaining highly motivated
quality people
▪ Excellence in client service
▪ Innovation in the client offering
▪ Contributing to society
– Successfully completed our 2017-19
Emissions Reduction Plan
– Committed to the UN Sustainable
Development Goals (2020), focused
on Climate Change
People
▪ Developing talent
▪ Diversity & Inclusion
Shareholders
▪ Open & Transparent Engagement
▪ Returns
Clients
▪ High quality service
▪ Ethical Business
Communities
▪ Reducing environmental impacts
▪ Community investment
OUR EXPERTISE
Over 200 Sustainability Professionals in Sustainability, pushing key Consultancy services to clients
▪ Energy procurement, metering & management
▪ Renewable energy, projects & purchasing
▪ Smart Tech, fit out & Sustainable development
▪ Technical building services – engineering
▪ ISO Audits, Organisation, Sustainable Building Certification
▪ In use buildings,– NABERS, ANZ, adopting best practice
▪ Waste reduction
▪ Health & wellbeing (well & fitwel)
▪ GRESB Strategy, development & implementation of net zero
▪ Carbon offsetting (including forestry)
‘Sustainability at Savills’
16
Savills IQ
Financial Review
Summary Underlying Result
18
Year ended 31 December (£m) 2019 2018 % chg
Revenue 1,930.0 1,761.4 9.6%
Underlying PBT 143.4 143.7 (0.2)%
Underlying PBT margin 7.4% 8.2% (0.8)% pts
Underlying basic earnings per share 78.0p 77.8p 0.3%
Basic earnings per share 60.6p 56.2p 7.8%
Dividend per share 32.0p 31.2p 2.6%
Net cash 28.5 73.9 (61.4)%
Dividends
19
Year ended 31 December 2019 2018 % chg
Interim ordinary (“Less Transactional”) 4.95p 4.80p 3.1%
Final ordinary (“Less Transactional”) 12.05p 10.80p 11.6%
Supplemental (“Transactional”) 15.00p 15.60p (3.8)%
Total distribution (per share) 32.00p 31.20p 2.6%
Total distribution (£m) 42.9 42.6 0.7%
Revenue and Underlying PBT by Region
20
662.4
587.5
264.5 247.0
727.5
627.1
293.0 282.4
-
100
200
300
400
500
600
700
8002018
2019
Revenue
UK Asia Pacific North America
UPBT
+10%
E&ME
76.8
54.9
12.8 12.9
81.9
42.6
17.3 15.8
0
10
20
30
40
50
60
70
80
90+7%
+7%
+11%+14%
(22)%
+22%+35%
£m
Margin 11.6% 11.3% 9.3% 6.8% 4.8% 5.9% 5.2% 5.6%
The figures in these charts
exclude costs of £14.2m (2018:
£13.7m) not allocated to the
operating activities of the
group’s business segments
Revenue and Underlying PBT by Service Line
21
813.5
586.8
294.4
66.7
828.2
684.5
338.1
79.2
0
100
200
300
400
500
600
700
800
900
2018
2019
+17%
+15%
+19%
Revenue
81.1
32.2 33.1
11.0
69.8
35.2 34.5
18.1
0
10
20
30
40
50
60
70
80
90
+9% +4%
+65%
Transaction
Advisory
Property
Management Consultancy
Investment
Management
UPBT
+2%
(14)%
Margin 10.0% 8.4% 5.5% 5.1% 11.2% 10.2% 16.5% 22.9%
£m
Combined revenue and UPBT growth of 16% and 15% respectively
The figures in these charts
exclude costs of £14.2m (2018:
£13.7m) not allocated to the
operating activities of the
group’s business segments
Cashflow Performance
221 Cash generation from operations includes “principal elements of lease payments” which are included within financing activities in the statutory cash flow
73.9
28.5
143.49.4
9.9
0.6
65.215.0
23.314.1
43.311.4
25.8 0.310.3
0
50
100
150
200
250
Net cash at31-Dec-2018
UPBT Non-cashitems
Workingcapital
Cash flowsfrom
investments
Acquisitionspend -
current &deferred
Capex Purchase ofEBT shares
Proceeds fromissue ofshares
Dividendspaid
Interest Tax Other items Foreignexchange
Net cash at31-Dec-2019
£m
Cash generation from operations of £87.6m1
(2018:£139.8m)
Commercial Transaction Advisory
23
2019 Revenue £653.3m (+3%) 2019 UPBT £47.4m (-14%)
Asia Pacific: Hong Kong Investment market volumes down 42% y-o-y (political unrest and US-China tariffs). Market slow-down in Australia.
Significant upturn in Japan and Regional Hotels business.
UK: investment market volumes down in Investment and Central London & International teams (political risk), partially offset by growth in
Development. Strong final month after the General Election
Europe & Middle East: revenue growth in France, Netherlands, Spain and Germany, profits impacted by investment in new teams and restructuring
in Sweden and France
North America; significant growth in Occupier Service business – Southern California, Palo Alto, Denver and Raleigh. Improved performance of New
York Capital markets business
138.6
94.2
127.5
293.0
-
50
100
150
200
250
300
350
Asia Pacific UK E&ME North America
Growth (13)% (4)% +13% +11%
12.4 12.3
5.4
17.3
-
2
4
6
8
10
12
14
16
18
20
Asia Pacific UK E&ME North America
Growth (42)% (22)% (2)% +35%
£m £m
Residential Transaction Advisory
24
2019 Revenue £174.9m (-1%) 2019 UPBT £22.4m (-14%)
Asia Pacific: slow down in residential markets in Hong Kong in the second half of the year as a result of the political unrest,
and in Singapore (market cooling measures). Australian business restructured in weak market conditions
UK: revenues up in both new development and second-hand sales, with significant post-election boost in London
UK: significant PRS related growth
35.8
139.1
0
20
40
60
80
100
120
140
160
Asia Pacific UK
Growth (22)% +6%
4.6
17.8
-
2
4
6
8
10
12
14
16
18
20
Asia Pacific UK
Growth (45)% +1%
£m £m
Property Management
25
2019 Revenue £684.5m (+17%) 2019 UPBT £35.2m (+9%)
Asia Pacific: revenue growth in Hong Kong property and facilities management, new contracts in Hong Kong and Macau.
Profitability impacted by on-boarding significant Facilities Management contracts and Restructuring/Recruitment in
Australia
UK: strong underlying revenue growth in Residential Lettings and Commercial Property Management. Positive impact of
full year effect of Broadgate Estates management portfolio and Currell acquisitions
Europe & Middle East: revenue growth as a result of full year effect of Cluttons (Middle East acquisition), supported by
organic growth in Ireland, Spain and The Netherlands
372.5
231.1
80.9
-
50
100
150
200
250
300
350
400
Asia Pacific UK E&ME
Growth +14% +21% +17%
19.2
15.8
0.2-
5
10
15
20
25
Asia Pacific UK E&ME
Growth 0% +22% n/a
£m £m
Consultancy
26
2019 Revenue £338.1m (+15%) 2019 UPBT £34.5m (+4%)
UK: strong performances in PRS advisory, Housing, Building & Project Consultancy, offset by decline in development and rural
consultancy
Asia Pacific: significant growth in Research consultancy in Mainland China and steady growth across the region. Profits held
back by expansion costs in China, Singapore and Australia
Europe & Middle East: revenue growth in Spain and the Middle East (full year effect of Cluttons acquisition), profits impacted
by restructuring/recruitment (Spain/ The Netherlands/ Portugal)
229.9
69.6
38.6
0
50
100
150
200
250
UK Asia Pacific E&ME
Growth +6% +54% +16%
27.0
4.6 2.9
-
5
10
15
20
25
30
UK Asia Pacific E&ME
Growth +5% +7% (3)%
£m £m
Investment Management
27
2019 Revenue £79.2m (+19%) 2019 UPBT £18.1m (+65%)
Transactions of circa £3.1bn (2018: £3.8bn) executed, including £1.2bn disposals and £1.9bn acquisitions. AUM
increased to £17.7bn (2018: £16.4bn)
Strong Fund performance (85% of funds exceeding 5 year benchmarks)
Raised more than £3.1bn of new equity
The profits include £1.4m (2018: £0.4m) from DRC; 25% stake acquired during 2018
New Global CEO hired
33.235.4
10.6
-
5
10
15
20
25
30
35
40
UK E&ME Asia Pacific
Growth
9.0
7.3
1.8
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
UK E&ME Asia Pacific
Growth+12%+29% +66%+91%+13% (5)%
£m £m
28
Technology Investment- Key focal areas during 2019
UK/Europe Real estate data analytics and Insight programme
US CRM and suite of Occupier focused Apps eg K³ (Global Occupier Analytics)
UK Digitisation of valuation process
Progressive harmonisation of Savills ERP system Globally (Dynamics AX)
Small follow on investments in GHV portfolio (YOPA/VuCity)
Key Priorities &
Summary & Outlook
30
Key Priorities
UK: Maximise National multi-sector expertise, with growth of additional specialist services
North America: Build Consultancy, (Project Management and Workplace), expansion of Occupier
Services in Offices, Logistics & Retail
Asia Pac: Continued expansion of Consultancy, Property Management and ancillary services
Savills Investment Management: Cautious expansion in Europe & Asia Pac, supporting new
product development & equity raising
Maintain financial strength to capitalise on opportunities which may arise
Europe & Middle East: Focus on Germany and France, (Property Management & Logistics)
31
Summary & Outlook
A good performance despite market uncertainty in UK & Hong Kong
Appetite for Real Estate remains positive (Occupiers / Investors)
Strong start to 2020 across the business
Continued growth in less transactional service lines & new sectors
Business balance & resilience with strong balance sheet
Covid 19 impact on 2020 uncertain; expect greater weighting to H2 2020
The Strength of our Assets‘Leading people with a unique team culture’
32
UK
▪ No.1 Real Estate Superbrand 2019
▪ The Times Graduate Employer of Choice for Property – 13th Year
Europe
▪ European Broker of the Year – REFI European Awards
▪ Top in 6 categories in Spain – EuroMoney 2019
Asia Pac
▪ Hong Kong: RICS Deal of the year & Residential team of the year
▪ Greater China: Asia Pacific Property Awards – Best Real Estate Agency Team
▪ Korea: Asia Pacific Property Awards – Best Commercial Real Estate Agency
Australia
▪ API Valuation Team of the Year
North America
▪ Savills Knowledge Cubed wins two prestigious PropTech Awards
SIM
▪ DRC – UK & European Debt Manager of the Year
Thank you
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property since 1855