REG - Savills PLC - Final Results <Origin Href="QuoteRef">SVS.L</Origin> - Part 2
22/03/2017 07:12
- Part 2: For the preceding part double click ID:nRSV1404Aa
does not constitute statutory
accounts within the meaning of s434 of the Companies Act 2006. The statutory
accounts for the year ended 31 December 2016, 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.
2. Segment analysis
Transaction Advisory Consultancy Property and Facilities Management Investment Management Other Total
Year ended to 31 December 2016 £m £m £m £m £m £m
Revenue
United Kingdom
- commercial 86.0 145.3 130.4 25.9 - 387.6
- residential 124.4 37.8 28.5 - - 190.7
Total United Kingdom 210.4 183.1 158.9 25.9 - 578.3
Continental Europe 71.5 19.3 40.1 39.7 - 170.6
Asia Pacific
- commercial 129.7 37.9 273.8 6.4 - 447.8
- residential 38.1 - - - - 38.1
Total Asia Pacific 167.8 37.9 273.8 6.4 - 485.9
North America 211.1 - - - - 211.1
Revenue 660.8 240.3 472.8 72.0 - 1,445.9
Underlying profit/(loss) before tax
United Kingdom
- commercial 14.7 16.3 8.7 6.4 (11.3) 34.8
- residential 17.5 5.9 2.6 - - 26.0
Total United Kingdom 32.2 22.2 11.3 6.4 (11.3) 60.8
Continental Europe 5.0 1.3 (2.2) 9.4 - 13.5
Asia Pacific
- commercial 20.6 2.4 14.5 1.8 - 39.3
- residential 3.3 - - - - 3.3
Total Asia Pacific 23.9 2.4 14.5 1.8 - 42.6
North America 18.9 - - - - 18.9
Underlying profit/(loss) before tax 80.0 25.9 23.6 17.6 (11.3) 135.8
Transaction Advisory Consultancy Property and Facilities Management Investment Management Other Total
Year ended to 31 December 2015 £m £m £m £m £m £m
Revenue
United Kingdom
- commercial 98.8 138.3 107.1 16.7 - 360.9
- residential 127.9 44.5 26.8 - - 199.2
Total United Kingdom 226.7 182.8 133.9 16.7 - 560.1
Continental Europe 56.4 16.5 29.1 27.8 - 129.8
Asia Pacific
- commercial 111.9 31.0 227.7 - - 370.6
- residential 30.5 - - - - 30.5
Total Asia Pacific 142.4 31.0 227.7 - - 401.1
North America 192.5 - - - - 192.5
Revenue 618.0 230.3 390.7 44.5 - 1,283.5
Underlying profit/(loss) before tax
United Kingdom
- commercial 16.9 15.4 9.2 4.3 (12.2) 33.6
- residential 17.8 6.4 1.7 - 25.9
Total United Kingdom 34.7 21.8 10.9 4.3 (12.2) 59.5
Continental Europe 4.0 0.7 (2.4) 6.6 - 8.9
Asia Pacific
- commercial 16.3 2.2 12.6 - - 31.1
- residential 3.1 - - - - 3.1
Total Asia Pacific 19.4 2.2 12.6 - - 34.2
North America 18.8 - - - - 18.8
Underlying profit/(loss) before tax 76.9 24.7 21.1 10.9 (12.2) 121.4
Operating segments reflect internal management reporting to the Group's chief
operating decision maker, defined as the Group Executive Board (GEB). The GEB
assesses the performance of operating segments based on a measure of
underlying profit before tax which adjusts reported pre-tax profit by
profit/(loss) on disposals, share-based payment adjustment, significant
restructuring costs, acquisition-related costs, amortisation of acquired
intangible assets (excluding software) and impairments.
The Other segment includes costs and other expenses at holding company and
subsidiary levels, which are not directly attributable to the operating
activities of the Group's business segments.
A reconciliation of underlying profit before tax to reported profit before tax
is provided in Note 3.
3. Underlying profit before tax
The Directors seek to present a measure of underlying performance which is not
impacted by exceptional items or items considered non-operational in nature.
This measure is described as 'underlying' and is used by management to assess
and monitor performance.
Reported profit before tax 99.8 98.6
Adjustments:
Amortisation of acquired intangible assets (excluding software) 4.0 3.6
Share-based payment adjustment (2.4) (2.8)
Net profit on disposal of available-for-sale investments, joint ventures and associates (0.1) (2.9)
Restructuring costs 5.8 1.6
Acquisition-related costs 28.7 23.3
Underlying profit before tax 135.8 121.4
Underlying profit before tax
135.8
121.4
The adjustment for share-based payments relates to the impact of the
accounting standard for share-based compensation. The annual bonus is paid in
a mixture of cash and deferred shares and the proportions can vary from one
year to another. Under IFRS the deferred share element is amortised to the
income statement over the vesting period whilst the cash element is expensed
in the year. The adjustment above addresses this by adding to or deducting
from profit the difference between the IFRS 2 charge in relation to
outstanding bonus-related share awards and the estimated value of the current
year bonus pool to be awarded in deferred shares. This adjustment is made in
order to better match the underlying staff cost in the year with the revenue
recognised in the same period.
Net profit on disposal includes £0.5m recognised in relation to the disposal
of the Group's joint venture interest in Savills Solar Ltd and a loss on
disposal of £0.4m in relation to the disposal of the Group's
available-for-sale investment, Cordea Savills Italian Opportunities Fund 2.
Acquisition-related costs include £18.4m of provisions for the future payments
in relation to the acquisition of Studley, Inc. which are expensed through the
income statement to reflect the requirement for the recipients to remain
actively engaged in the business at the payment date. Acquisition-related
costs also include £3.9m for payments in relation to Savills Investment
Management's acquisition of Merchant Capital (Japan) in May 2014, and £1.5m of
transaction related costs and £4.9m of provisions for future payments relating
to acquisitions in the United Kingdom (primarily GBR Phoenix Beard and Smiths
Gore), North America and Continental Europe.
Restructuring costs includes costs of integration activities in relation to
significant business acquisitions (primarily Smiths Gore in the United Kingdom
and Savills Investment Management's acquisition of SEB).
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.
2016 2015
£m £m
United Kingdom
- Current tax 14.1 13.2
- Deferred tax (3.3) (1.4)
Foreign tax
- Current tax 16.1 14.7
- Deferred tax 5.2 7.2
Income tax expense 32.1 33.7
5. Dividends
2016 2015
£m £m
Amounts recognised as distribution to equity holders in the year:
Ordinary final dividend for 2015 of 8.0p per share (2014: 7.25p) 10.7 9.4
Supplemental interim dividend for 2015 of 14.0p per share (2014: 12.0p) 18.8 15.6
Interim dividend of 4.4p per share (2015: 4.0p) 5.9 5.3
35.4 30.3
In addition, the Group paid £0.9m (2015: £0.4m) of dividends to
non-controlling interests.
The Board recommends a final dividend of 10.1p (net) per ordinary share
(amounting to £13.5m) is paid, alongside the supplemental interim dividend of
14.5p per ordinary share (amounting to £19.5m), to be paid on 15 May 2017 to
shareholders on the register at 18 April 2017. These financial statements do
not reflect this dividend payable.
The total paid and recommended ordinary and supplemental dividends for the
2016 financial year comprises an aggregate distribution of 29.0p per ordinary
share (2015: 26.0p per ordinary share).
6(a). Basic and diluted earnings per share
2016 2016 2016 2015 2015 2015
Earnings Shares EPS Earnings Shares EPS
Year to 31 December £m million pence £m million pence
Basic earnings per share 66.9 137.2 48.8 64.3 136.8 47.0
Effect of additional shares issuable under option - 3.0 (1.1) - 1.9 (0.6)
Diluted earnings per share 66.9 140.2 47.7 64.3 138.7 46.4
6(b). Underlying basic and diluted earnings per share
2016 2016 2016 2015 2015 2015
Earnings Shares EPS Earnings Shares EPS
Year to 31 December £m million pence £m million Pence
Basic earnings per share 66.9 137.2 48.8 64.3 136.8 47.0
- Amortisation of acquired intangible assets (excluding software) after tax 2.2 - 1.6 2.0 - 1.5
- Share-based payment adjustment after tax (1.8) - (1.3) (2.2) - (1.6)
- Net profit on disposal of available-for-sale investments joint ventures and associates after tax - - - (1.9) - (1.4)
- Restructuring costs after tax 4.7 - 3.4 1.5 - 1.1
- Acquisition related costs after tax 27.5 - 20.0 22.7 - 16.6
Underlying basic earnings per share 99.5 137.2 72.5 86.4 136.8 63.2
Effect of additional shares issuable under option - 3.0 (1.5) - 1.9 (0.9)
Underlying diluted earnings per share 99.5 140.2 71.0 86.4 138.7 62.3
7. Cash generated from operations
2016 2015
£m £m
Profit for the year 67.7 64.9
Adjustments for:
Income tax (Note 4) 32.1 33.7
Depreciation 12.7 1.2
Amortisation of intangible assets 6.9 5.7
Net profit on disposal of available-for-sale investments, joint ventures and associates (0.1) (2.9)
Net finance cost/(income) 0.8 (0.5)
Share of post-tax profit from joint ventures and associates (7.9) (6.9)
Decrease in employee and retirement obligations (6.3) (5.5)
Exchange movements on operating activities 2.4 (0.8)
Decrease in provisions (3.0) (2.8)
Charge for share-based compensation 13.4 11.1
Operating cash flows before movements in working capital 118.7 107.2
Decrease/(increase) in work in progress 0.3 (0.9)
Increase in trade and other receivables (17.1) (47.3)
Increase in trade and other payables 15.9 81.5
Cash generated from operations 117.8 140.5
8. Transactions with non-controlling interests
During the year, the Group undertook the following transactions with
non-controlling interests:
(a) Acquisitions of additional interest in subsidiaries
Under IFRS 10, transactions with non-controlling interests must be accounted
for as equity transactions, therefore no goodwill has been recognised.
Acquisition costs related to these transactions were not significant.
In August 2016, the Group acquired the remaining 45% of the shares in Savills
Property Management Pte Ltd (Singapore), for consideration of £2.8m. This
takes the Group's shareholding to 100%. The carrying amount of the
subsidiary's net assets on the date of acquisition was £0.4m. The Group
recognised a decrease in non-controlling interest of £0.2m. The amount charged
to retained earnings in respect of the transaction was £2.6m.
In September 2016, the Group acquired the remaining 2% of the shares in
Savills (Vietnam) Ltd for consideration of £0.5m. This takes the Group's
shareholding to 100%. The carrying amount of the subsidiary's net assets on
the date of acquisition was £1.3m. The Group recognised a decrease in
non-controlling interest of £nil. The amount charged to retained earnings in
respect of the transaction was £0.5m.
(b) Disposal of interests in subsidiaries
In September 2016, the Group disposed of 15% of the shares in Savills
Investment Management SGR S.p.A for cash consideration of £0.3m. The carrying
amount of the subsidiary's net assets on the date of disposal was £3.6m. The
Group recognised an increase in non-controlling interest of £0.5m. The amount
charged to retained earnings in respect of this transaction was £0.2m.
(c) Other transactions with non-controlling interests
The Group acquired the remaining 0.72% of the shares in Savills (Aust)
Holdings Pty Ltd taking the Group's shareholding to 100%, £0.3m has been
charged to retained earnings with a corresponding increase in non-controlling
interest to reflect the 100% shareholding.
Net carrying amount of non-controlling interests acquired/(disposed) (0.3)
Net consideration (paid)/received to/from non-controlling interests (3.0)
Net excess of consideration (paid)/received recognised in parent's equity (3.3)
Other transactions with non-controlling interests (0.3)
Total charge to parent's equity in relation to transactions with non-controlling interests in the year (3.6)
Total charge to parent's equity in relation to transactions with
non-controlling interests in the year
(3.6)
9. Acquisition of subsidiaries
The fair values of the assets acquired and liabilities assumed are provisional
and will be finalised within 12 months of the acquisition date. These are
summarised below:
Provisional fair value to the Group
GBR Phoenix Beard£m Other Total
£m £m
Property, plant and equipment 0.1 - 0.1
Intangible assets 3.2 0.4 3.6
Current assets: Trade and other receivables 1.2 - 1.2
Cash and cash equivalents 0.4 - 0.4
Total assets 4.9 0.4 5.3
Current liabilities: Trade and other payables 2.2 0.1 2.3
Current income tax liability 0.1 - 0.1
Borrowings 0.7 - 0.7
Deferred income tax liabilities 0.6 - 0.6
Net assets acquired 1.3 0.3 1.6
Goodwill 2.5 1.9 4.4
Purchase consideration 3.8 2.2 6.0
Consideration satisfied by:
Net cash paid 3.8 0.3 4.1
Deferred consideration owing at reporting date - 1.9 1.9
3.8 2.2 6.0
(a) GBR Phoenix Beard Holdings Limited ('GBR Phoenix Beard')
On 12 August 2016 the Group acquired 100% of GBR Phoenix Beard, a leading West
Midlands property agent with offices in Birmingham, London and Leeds. The
business provides commercial management and consultancy services and will
strengthen the Group's presence in the Midlands region and contribute to the
growth of the UK consultancy business.
Total acquisition consideration is provisionally determined at £3.8m and was
settled in cash on completion.
The selling shareholders will also receive £1.0m payable in instalments by the
fifth anniversary of completion, subject to remaining actively engaged in the
business at the payment date. Additionally, earn-out consideration of up to
£5.2m is also payable in instalments by the fourth anniversary of completion
and is subject to achievement of certain income targets, as well as remaining
actively engaged with the business at the payment date. Further to this, £0.2m
was paid to key employees on completion with a further £0.3m payable on the
third anniversary of completion. As required by IFRS 3 (revised) these
payments are charged to the income statement over the relevant period of
active engagement (2016: £1.1m).
Transaction costs of £0.3m were also expensed as incurred to the income
statement.
Goodwill of £2.5m and intangible assets of £3.2m relating to existing
management contracts have been provisionally determined. Goodwill is
attributed to the experience, reputation and expertise of the fee earners and
is not expected to be deductible for tax purposes.
The acquired business contributed revenue of £4.6m and underlying operating
profit of £0.3m to the Group for the period from acquisition to 31 December
2016. Had the acquisition been made at the beginning of the financial year,
revenue would have been £14.8m and underlying operating profit would have been
£0.9m.
The fair value of current trade and other receivables is £1.2m and includes
trade receivables with a fair value of £0.8m. The gross contractual amount for
trade receivables is £0.9m, of which £0.1m is expected to be uncollectible.
(b) Other acquisitions
During the year, the Group also acquired the trade and assets of Cresa
Partners Charlotte, Inc., a US based commercial brokerage firm in the North
Carolina region and the trade and assets of Chainbow Ltd, a residential
management business based in London specialising in both management and
consultancy services to the block management and private rented sector.
Cash consideration for these transactions amounted to £0.3m. The remainder of
the acquisition consideration relates to the discounted value of deferred
consideration of up to £1.9m, subject to achievement of certain income
targets.
A further £4.2m is payable to certain key staff and is subject to service
conditions, £2.8m was paid at closing and £1.4m is payable in June 2017. As
required by IFRS 3 (revised) these payments are expensed to the income
statement over the relevant period of employment.
Transaction costs of £0.2m were also expensed as incurred to the income
statement.
Goodwill of £1.9m and intangible assets of £0.4m relating to management and
customer contracts have 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.
The acquired businesses contributed revenue of £1.8m and underlying operating
losses of £0.2m to the Group for the period from acquisition to 31 December
2016. Had the acquisitions been made at the beginning of the financial year,
revenue would have been £2.9m and underlying operating losses would have been
£0.5m.
10. Borrowings
2016 2015
Current £m £m
Bank overdrafts 0.2 0.2
Unsecured bank loans due within one year or on demand 35.6 31.2
35.8 31.4
The Group maintains a £250.0m revolving credit facility ('RCF'), which expires
on 15 December 2020 and can be increased by an additional £50.0m Accordion
facility. As at 31 December 2016 £34.0m (2015: £30.0m) of the £250.0m RCF was
drawn.
The Group has the following undrawn borrowing facilities:
2016 2015
£m £m
Floating rate
- expiring within one year or on demand 23.2 19.8
- expiring between 1 and 5 years 216.0 220.0
239.2 239.8
11. Related party transactions
There were no significant related party transactions during the year. 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.
As at 31 December 2016, loans outstanding to joint ventures amounted to £nil
(2015: £1.2m).
12. Contingent liabilities
In common with comparable professional services businesses, the Group is
involved in a number of disputes in the ordinary course of business. Provision
is made in the financial statements for all claims where costs are likely to
be incurred and represents the cost of defending and concluding claims. The
Group carries professional indemnity insurance and no separate disclosure is
made of the cost of claims covered by insurance as to do so could seriously
prejudice the position of the Group.
13. Events after the balance sheet date
Cresa Partners Orange County, LP
On 7 February 2017, the Group acquired 100% of the equity interest in Cresa
Partners Orange County, LP, for total consideration of US$19.0m.
An exercise to determine total acquisition consideration and the fair value of
the assets acquired and liabilities assumed is underway.
Directors' responsibility statement
The Savills Report and Accounts for year end 31 December 2016 contains a
responsibility statement in the following form:
Each of the Directors confirm that, to the best of their knowledge:
· the Group financial statements, which have been prepared in accordance
with IFRSs as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit of the Group; and
· the Strategic Report includes a fair review of the development and
performance of the business and the position of the Group, together with a
description of the principal risks and uncertainties that is faces.
For the purposes of Section 418 of the Companies Act 2006, each of the
Directors as at the date of the approval of the Annual Report and Accounts
confirms that:
· so far as the Director is aware, there is no relevant audit information
of which the External Auditors are unaware; and
· the Director has taken all the steps that he/she ought to have taken as
a Director in order to make himself/herself aware of any relevant audit
information and to establish that the External Auditors are aware of that
information.
After making enquiries, the Directors have a reasonable expectation that the
Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis in preparing the Annual Report and Accounts.
On behalf of the Board
Jeremy Helsby
Group Chief Executive
Chris Lee
Group Legal Director and Company Secretary
22 March 2017
Forward-looking statements
The financial information contained in this announcement has not been audited.
Certain statements made in this announcement are forward-looking statements
and are therefore subject to risks, assumptions and uncertainties that could
cause actual results to differ materially from those expressed or implied
because they relate to future events. These forward-looking statements
include, but are not limited to, statements relating to the Company's
expectations.
Copies of the Annual Report and Accounts for the year ended 31 December 2016
will be circulated to shareholders on 3 April 2017 and will also be available
from the investor relations section of the Company website at www.savills.com
or from:
Savills plc, 33 Margaret Street, London, W1G 0JD
Telephone: 020 7499 8644
In addition, with prior notice, copies in alternative formats i.e. large
print, audio tape, braille are available if required from:
Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
END
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