REG - Savills PLC - Final Results
14/03/2024 07:00
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RNS Number : 7730G Savills PLC 14 March 2024
14 March 2024
Savills plc
("Savills" or "the Group")
PRELIMINARY RESULTS FOR THE FULL YEAR ENDED 31 DECEMBER 2023
Resilient performance in challenging markets driven by
the Group's less transactional service lines
Summary results:
31-Dec-23 31-Dec-22 Change
Group revenue £2.24bn £2.30bn (3)%
Underlying profit before tax* £94.8m £164.6m (42)%
Reported profit before tax £55.4m £153.9m (64)%
Underlying basic EPS* 55.1p 94.9p (42)%
Reported basic EPS 30.0p 87.0p (66)%
Proposed final ordinary dividend 20.8p 20.0p 4%
Total dividend per share 22.8p 35.6p (36)%
Net cash** £157.3m £307.4m (49)%
(* Underlying profit before tax ('underlying profit') and underlying basic EPS
are alternative performance measures used to assess the performance of the
Group. Underlying profit is calculated on a consistently reported basis in
accordance with Note 3 to this Preliminary Statement. Underlying EPS is
calculated using underlying profit, with the weighted average number of shares
remaining the same as the GAAP measure.)
(** Net cash reflects cash and cash equivalents net of borrowings and
overdrafts in the notional pooling arrangement (see Note 8).)
Key highlights:
· Robust performance of the less transactional businesses,
representing 65% of Group revenue, which grew 7%, underpinning overall Group
performance
· Property Management and Consultancy businesses performed well
with revenues increasing 11% to £899.5m and 4% to £459.8m, respectively
· Savills Investment Management revenue decreased 6%. Assets under
management ('AUM') was stable at £22.1bn (2022: £22.1bn). $1bn commitment
from Samsung Life largely awaiting deployment
· Global Transactional Advisory revenues, in aggregate 35% of Group
revenue, decreased 17%, reflecting significantly reduced capital and leasing
market volumes globally
· Global Residential revenues declined 19% as markets normalised,
following high levels of post pandemic activity, and adapted to higher
interest rates
· Depth and breadth of team retained throughout the Group to
maintain high levels of client service
· Strong net cash position provides resilience and enables
continued business development activity
Commenting on the results, Mark Ridley, Group Chief Executive of Savills plc,
said:
"Savills resilient performance in 2023 highlights the diversity and strength
of our global business. In the context of extremely challenging real estate
markets, which saw the lowest levels of transaction volumes for a decade, our
less transactional businesses have provided a solid platform for the Group
with a resilient and growing earnings stream.
"Current economic and geopolitical conditions remain uncertain and although we
expect this to continue for some time, most markets appear to be past the
moment of peak uncertainty. There are some early signs of underlying market
improvements, which should set the course for a broader recovery during the
second half of the year and into 2025.
"Our policy of retaining our core bench strength, enabled by our strong
balance sheet, positions the Group well for the future."
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
(http://www.ir.savills.com/) .
Chair's statement
Results overview
Savills strength across its less transactional service lines continued to
provide a resilient earnings stream, underpinning Savills overall performance
in a global real estate market challenged by significantly reduced
transactional activity. The Group's revenue decreased by 3% to £2.2bn (2022:
£2.3bn), 2% down on a constant currency basis. Although not immune to market
volatility (particularly in respect of some Consultancy service lines), the
strength of our less transactional businesses underpinned Savills performance
overall, growing revenue by 7% to £1.5bn. Prime drivers of performance were
Consultancy and Property Management, which performed well, growing revenue by
4% and 11% respectively.
The Group's Transactional business experienced a 17% drop in revenue during
the year as global market conditions remained extremely subdued for longer
than anticipated at the start of 2023. This was the primary cause of the 42%
reduction in the Group's underlying profit of £94.8m (2022: £164.6m),
representing an underlying profit margin of 4.2% (2022: 7.2%).
Our Investment Management business traded in line with our expectations,
although deployment of capital was inevitably reduced given lack of price
transparency in most of its target markets. At the year end, Savills
Investment Management had significant investment 'dry powder' for both real
estate equity and debt opportunities, including Samsung Life having committed
its first $1bn to support a number of products.
As a result of the challenging market conditions during 2023, the real estate
services industry as a whole undertook a number of rounds of cost reduction
and reorganisation actions. In line with our strategy during the global
financial crisis of 2008, as well as more recently through the pandemic, and
supported by our strong financial position; Savills continued to maintain its
core bench-strength around the world, ensuring we provided the highest level
of service to our clients throughout the year and remain well positioned for
market recovery.
We did, however, review the global business for locations or service lines
where the anticipated time frames for market recovery remain protracted. This
resulted in selective restructuring of certain transactional and related
support teams and resulted in one-off costs of £13.9m being incurred.
The costs of this restructuring led Group's reported profit before tax to
decrease by 64% to £55.4m (2022: £153.9m), representing a pre-tax profit
margin of 2.5% (2022: 6.7%).
The Group continued to maintain a positive liquidity position with net cash
(cash and cash equivalents net of borrowings and overdrafts in the notional
pooling arrangements) of £157.3m at year end (2022: £307.4m).
Currency movements in the year decreased revenue by £14.4m, underlying profit
by £0.7m and reported profit before taxation by £1.1m.
Market conditions
Throughout the year, real estate markets across the globe were challenged by
significantly increased interest rates, geopolitical events and, on a more
asset-specific level, uncertainties over the future role of offices and the
valuation of existing stock in the era of sustainability. These factors,
together with certain location-specific issues, significantly reduced capital
transaction volumes in global markets to their lowest levels for a decade. In
addition, economic uncertainty led to delays in corporate occupiers committing
to new leasing activity in many markets.
The value recalibration process took time to catalyse market liquidity, with
the majority of lending banks continuing to extend existing loan terms. The
consequence of this was that global market conditions remained extremely
subdued for longer than originally anticipated at the start of 2023.
However in Q4 2023, we began to see lenders start to exercise their security
rights. This began to have a positive effect on market activity towards the
year end and should be a catalyst for improved volumes in 2024.
The rate at which individual investment markets are recalibrating varies
around the globe; however, it appears that the UK prime Commercial market has
re-priced to a point where it represents value, particularly for assets with
strong sustainability credentials, for which there is significant occupier
demand. In addition, our Prime residential business has performed well,
particularly in central London. As anticipated a year ago, residential markets
outside London were more subdued as volumes reverted to more normal levels of
activity after the abnormally large volumes transacted post-pandemic.
In Europe, investment transaction volumes reached their lowest levels since
the eurozone debt crisis. The slowing of investment activity
quarter-by-quarter was a widespread trend across all European countries and
major asset classes, with the office sector continuing to face the most
significant reduction in volume.
In the Asia Pacific region, property investment volumes overall fell by 33% in
2023. China experienced increasing debt-related difficulties amongst the major
domestic developers in addition to the macro trends affecting manufactured
supply to international markets. Other markets in the region were affected by
the sharply higher cost of borrowing, with significant volume declines in the
mature markets of Australia and South Korea. Hong Kong was one of two markets
which recorded only a single digit decline, however this was off an already
very low base with volumes still 70% below their previous peak in 2018.
In North America, the office market remained sluggish as economic uncertainty,
questions over the return to offices, particularly in the major metropolitan
markets of the East and West Coast, and slowing employment growth caused
corporates to delay major leasing decisions, pending greater clarity.
Business development
Savills has continued to focus on the strategic development of the business
and improving our service offering to clients; this has been enabled by the
Group's strong balance sheet. In the first half of the year, we progressed our
strategy of expanding our Global Prime Residential services with the
acquisition of agencies in Italy (BeLiving Srl) and Portugal (Predibisa,
Sociedade de Mediaçāo Imobiliária, Lda). The Group also acquired Automotive
Property Consultancy Holdings Limited, a specialist property consultancy
dedicated to the franchised motor retail sector in the UK.
In the second half of the year, the Group acquired Site 8 Pty Limited,
expanding our retail property management business in Australia. The UK
business recently completed the acquisition of Nash Bond Limited, a leading UK
prime retail agency and lease consultancy business, enhancing our position in
this recovering market. Finally, DRC Savills Investment Management established
the Group's first position in the US real estate debt market through a joint
venture with QCP LLC, a real estate debt manager based in Atlanta.
Supported by our strong balance sheet we continue to review opportunities to
enhance our client offering across geographies and service lines.
Focus on technology
Technology continues to be an important focus for the Group, and we are well
on the way through implementation of significant platform upgrades across the
globe including both operating and finance systems and service-specific
digital transformation programmes.
We continue to investigate and experiment with new and emerging technologies
through our innovation and data teams globally. Recently there has been an
increased focus on the opportunities presented by the latest developments in
the broad area of artificial intelligence ('AI'), or 'Machine Learning', which
we use as a driver of efficiency in many of our bespoke data and service line
platforms across the Group. One example of this is BrickByte in Germany, which
was acquired by the Group in 2022. It is a technology-enabled method of
workspace planning, driven by Machine Learning, to save time and optimise the
use of space and which has significantly increased its revenues year-on-year.
Our other digital businesses continue to perform well. Cureoscity, our
wholly-owned platform that connects occupiers, landlords and their managing
agents, continued to grow Annual Recurring Revenue ('ARR') significantly
year-on-year and has begun to expand into markets outside the UK. Our
market-leading UK on-line auction business continues to take market share, and
despite increasingly challenging markets, sold over £570m of property during
the period, an increase of 25% year-on-year.
Through our wholly owned technology businesses and investments, we are
experimenting with the latest advances in generative design particularly to
test project feasibility at an earlier stage in the design process. For
example, VU.CITY (in which the Group has an investment) uses its SiteSolve
technology combined with complete digital city models at 'planning grade'
levels of accuracy, to generate instant development options, taking into
account environmental and other extant planning constraints.
We maintain our policy of continuing to support technology initiatives across
the Group, striking the balance between locally led innovation and broader
centralised initiatives.
Board
On 1 January 2024, I became Chair on the retirement of Nicholas Ferguson.
Since he was appointed in May 2016, Savills has both delivered commendable
growth and successfully navigated the challenges of both COVID and the market
corrections of the last two years. I would like to thank him for his enormous
contribution to the business.
On 13 December 2023, John Waters was appointed as an additional Independent
Non-Executive Director and replaced me as Chair of the Savills Audit Committee
with effect from 1 January 2024. We are delighted that John has joined the
Board and look forward to benefitting from his extensive experience to support
our future growth.
Dividends
An interim dividend of 6.9p per share (2022: 6.6p), amounting to £9.4m was
paid on 2 October 2023, and a final ordinary dividend of 13.9p per share
(2022: 13.4p) is recommended, making the ordinary dividend 20.8p per share for
the year (2022: 20.0p). A supplemental interim dividend of 2.0p per share
(2022: 15.6p) is declared, taking into account the significantly reduced
underlying performance of our Global Transaction Advisory business. Taken
together, the ordinary and supplemental interim dividends comprise an
aggregate distribution for the year of 22.8p per share, representing a
decrease of 36% on the 2022 aggregate ordinary and supplemental dividend of
35.6p.
Subject to Shareholder approval of the proposed final dividend at the AGM on
15 May 2024, the aggregate final and supplementary interim dividends of 15.9p
will be paid on 23 May 2024 to Shareholders on the register at 12 April 2024.
People
On behalf of the Board, I wish to express my thanks to all our people
worldwide for their hard work, commitment, collaborative approach and
continued focus on client service, which enabled the Group to deliver results
in line with our expectations in such challenging times.
Summary and Outlook
Savills resilient performance in 2023 highlights the diversity and strength of
our global business. In the context of extremely challenging real estate
markets, which saw the lowest levels of transaction volumes for a decade, our
less transactional businesses have provided a solid platform for the Group
with a resilient and growing earnings stream.
With increased expectation of a reduction in the cost of capital being likely
during 2024, we expect re-financing driven activity and the sustainability
agenda to be positive for transaction volumes, and therefore improving price
transparency, in a number of markets. There also remain, for the near term at
least, questions over office utilisation in certain locations, perhaps most
keenly felt in the North American metropolitan markets of the eastern and
western seaboards.
Current economic and geopolitical conditions remain uncertain and although we
expect this to continue for some time, most markets appear to be past the
moment of peak uncertainty. There are some early signs of underlying market
improvements, which should set the course for a broader recovery during the
second half of the year and into 2025.
Our policy of retaining our core bench-strength, enabled by our strong balance
sheet, positions the Group well for the future.
Stacey Cartwright
Chair
Review of operations
Savills geographic and business diversity were key to achieving the year's
results. Our performance analysed by region was as follows:
Revenue £m Underlying profit/(loss) £m
2023 2022 % change 2023 2022 % change
UK 941.5 956.3 (2) 98.3 118.1 (17)
Asia Pacific 659.0 669.7 (2) 23.4 41.4 (43)
CEME 342.4 335.0 2 (9.8) 17.3 n/a
North America 295.1 337.3 (13) (8.4) 4.1 n/a
Unallocated - - n/a (8.7) (16.3) n/a
Total 2,238.0 2,298.3 (3) 94.8 164.6 (42)
On a constant currency basis Group revenue decreased by 2% to £2,252.4m,
underlying profit decreased 42% to £95.5m and reported profit before tax
decreased by 63% to £56.5m. Our Asia Pacific business represented 30% of
Group revenue (2022: 29%) and our overseas businesses as a whole represented
58% of Group revenue (2022: 58%). Our performance by service line is set out
below:
Revenue £m Underlying profit/(loss) £m
2023 2022 % change 2023 2022 % change
Transaction Advisory 772.9 930.1 (17) 4.3 71.9 (94)
Property and Facilities Management 899.5 813.9 11 48.8 46.5 5
Consultancy 459.8 441.5 4 35.6 41.3 (14)
Investment Management 105.8 112.8 (6) 14.8 21.2 (30)
Unallocated - - n/a (8.7) (16.3) n/a
Total 2,238.0 2,298.3 (3) 94.8 164.6 (42)
Overall, our Commercial and Residential Transaction Advisory business
revenue represented 35% of Group revenue (2022: 40%) and was the service
line most directly affected by the challenging market conditions during the
year. Of this, Residential Transaction Advisory represented 9% of Group
revenue (2022: 10%). Our Property and Facilities Management businesses
continued to perform well, growing year-on-year and representing 40% of Group
revenue (2022: 35%). Our Consultancy businesses increased revenue by 4% and
represented 20% of revenue (2022: 19%), albeit that the performance of some of
the service lines, such as security valuations, were affected by reduced
market volumes. Finally, Investment Management again represented 5% of Group
revenue (2022: 5%).
Unallocated costs reduced year-on-year as a result of central interest income
and the reduction in profit-related remuneration payable to the Group's senior
management.
Transaction Advisory
Overall, our Transaction Advisory revenue decreased by 17% (16% on constant
currency basis) to £772.9m (2022: £930.1m). Globally our commercial capital
transaction business revenue decreased by 30% and our leasing and
occupier-focused transactional revenues by 9%. Our Global Residential business
revenue reduced by 19% against a strong comparative in 2022.
Underlying profits fell to £4.3m (2022: £71.9m), reflecting the impact of
sharply reduced volumes transacted worldwide and the Group's policy of
retaining core bench-strength during market corrections to maintain client
service and enable the Group to benefit from future market recovery.
Asia Pacific Commercial
Revenue from the Asia Pacific Commercial Transactional business decreased by
30% to £102.1m (2022: £145.3m), a decrease of 27% in constant currency.
There were significant revenue reductions across the region as markets began
to recalibrate in the face of interest rate rises and other challenges. In
China, we did not see the broad return of transaction volumes, which was
anticipated after the end of COVID-related lockdowns in Q1 2023. Instead,
transactional revenues declined by approximately 15% in China and 6% in Hong
Kong in comparison with a low base in 2022. However, the recently recruited
logistics teams performed well and enabled the mainland Chinese transaction
business largely to mitigate the effect of the revenue fall on profits. The
other principal countries showing revenue and profit reduction year-on-year
were Australia; which was one of the last markets to begin recalibration,
Singapore, South Korea and Japan, albeit the latter came off a record
performance in 2022 and continued to trade profitably during 2023.
Overall the Asia Pacific Commercial Transactional business recorded underlying
losses of £2.9m (2022: £13.4m underlying profit).
UK Commercial
UK Commercial Transactional revenue fell by 15% to £100.6m (2022: £118.9m),
reflecting fewer transactions in investment markets and more subdued leasing
activity.
Just over £39bn of commercial property investments were traded in the UK in
2023, which is 41% lower than the previous year and 38% down on the five-year
average. All commercial property sectors experienced lower investment volumes
in 2023 than 2022, with the largest fall being in offices (-47%) and the
smallest being in retail (-12%).
While the second half of 2023 saw the Bank of England base rate stabilise,
this did not quickly feed through into a notable pick-up in commercial
property investment activity in the UK. Rather, Savills increased its share of
available market activity, for instance in prime Grade A sustainable office
transactions. Indeed, Savills advised on 11 of the 16 largest transactions to
occur in the year.
Economic uncertainty continued to delay corporate decision-making which
resulted in a reduction in take-up across all the main commercial property
sectors in most markets. One exception to this trend was the drive for
sustainability which saw take-up in the City of London office market (Grade A
with high sustainability rating) increase by 12% year-on-year. However, at a
national level, office leasing activity outside London was 12% down on 2022
and large logistics take-up was down 40% year-on-year.
As a result, despite market share gains, underlying profits fell by 31% to
£14.0m (2022: £20.4m) with a reduced margin of 13.9% (2022: 17.2%).
North America
Revenue from the North America Transactional business decreased to £266.7m
(2022: £303.5m), a 12% decrease at both prevailing and constant currency
rates.
The overwhelming majority of North American revenue relates to occupier
leasing transactions across the office sector, which were considerably
affected by the understandable tendency for corporate occupiers to delay
transactions in the face of uncertain market conditions. We saw growth in
Southern California, Washington DC, Chicago and in the US segment of the
recently launched Global Occupier Services business, which more than doubled
revenue, albeit off a low base. These partially mitigated reductions in
activity elsewhere. In the major metropolitan markets such as New York and San
Francisco, where the continuation of homeworking in the face of
return-to-work strategies, in the financial services and technology sectors
particularly, restricted demand for offices for much of the year. There were
signs of improved activity emerging in Q4 2023, which should support improved
performance in 2024. Capital markets revenues reduced by 48% to £12.4m (2022:
£23.7m) as investors came to terms with both reduced occupier demand for
metropolitan office space and the rising cost of debt.
Profits were significantly impacted by the effect of market conditions on
revenue. During the year a focused restructuring exercise was carried out to
improve profitability in the future, as well as continuing investment in
growth of the newly established Occupier Services platform.
The business recognised an overall underlying loss of £7.4m (2022: £2.3m
underlying profit).
Continental Europe and the Middle East ('CEME')
In CEME, transaction fee income decreased by 12% to £114.6m (2022: £129.8m);
10% in constant currency.
The primary market-related themes were similar to those experienced elsewhere,
however the extent of their impact alongside other more local issues,
particularly in Germany, continental Europe's largest real estate market, was
significant to the extent that our transactional business there made a
material loss. Germany is one of the slowest global markets to recalibrate and
market conditions in France were not dissimilar.
In contrast, our businesses in the Middle East, Italy, Czech Republic and
Portugal saw transactional revenue growth as a consequence of both organic
investment and recent acquisition activity. Spain and Ireland showed
considerable resilience in their transactional performances too, maintaining
strong market share. We continued to grow market share in many countries but
could not mitigate the effect of volume reductions in most markets.
Profitability was impacted primarily by the significant downturn in activity
causing losses in both the major markets of France and Germany and also in the
Netherlands and Belgium. This together with increased interest costs on CEME
net borrowings resulted in an underlying loss for the year of £20.3m (2022:
£2.7m underlying loss).
UK Residential
UK Residential Transactional revenue decreased by 18% to £171.0m (2022:
£208.3m), reflecting the decrease in market volumes with successive interest
rate rises and the consequent fall in mortgage approvals dampening demand.
Second-hand sales revenue declined by 23% with a reduction in the number of
exchanges of 23% to 4,735 (2022: 6,124). This was exacerbated by a decrease in
the average sales value by 4% to £1.61m (2022: £1.68m). In London the
average lot size transacted by Savills was down 3% to £2.23m and by 8% to
£1.27m in the regions. Volumes in both the regional UK market and central
London declined significantly, but consistent with our expectations.
Revenue from the sale of new homes reduced 24% year-on-year, reflecting a
decrease of 27% in the number of exchanges, much of which occurred in the
regional markets with London more resilient, which was also manifested by an
8% increase in average value transacted.
Underlying profit reduced by 45% to £19.4m (2022: £35.1m), reflecting the
effect of the revenue reduction year-on-year. This performance represented an
underlying profit margin of 11.4% (2022: 16.9%).
Asia Pacific Residential
Revenue from the Asia Pacific Residential Transaction business decreased by
26% to £17.9m (2022: £24.3m), a fall of 24% in constant currency.
86% of the regional revenue was generated in Greater China, where debt costs
drove falls in revenue of between 22% and 25% in mainland China and Hong Kong,
although profits from those regions only fell by £0.7m in aggregate.
Elsewhere revenues reduced by between 20% and 50%, the latter in Singapore
where market conditions, including the impact of stamp duty for non-residents,
were also reflected in a temporarily reduced share of profit from our
associate, Huttons. The effect of these reductions were partially mitigated by
small increases in profitability in our businesses in Thailand and Vietnam,
however overall underlying profits fell to £1.5m (2022: £3.4m).
Property and Facilities Management
Our Property and Facilities Management businesses continued to perform well,
with revenues growing by 11% to £899.5m (2022: £813.9m); 11% in constant
currency. Savills total area under management increased by 7% to 2.63bn sq ft
(2022: 2.47bn sq ft). Underlying profit increased by 5% to £48.8m (2022:
£46.5m), 6% in constant currency.
Asia Pacific
In Asia Pacific, Property Management revenue was £447.1m, an increase of 10%
year-on-year (2022: £404.9m); 12% increase in constant currency.
Revenue grew across the region with improved performances in Singapore, South
Korea and Vietnam. Hong Kong experienced revenue growth of 1% overall, however
much of this was in lower margin Facilities Management, which did not mitigate
the effect of a reduced contribution from a long-standing joint venture in
Macau, as the leisure industry there saw much reduced throughput-related
demand. In mainland China, revenue growth of 2% was offset by growth in staff
costs, including temporary staff filling vacancies caused in part by
migration. Meanwhile in Singapore, revenue and profitability were
significantly enhanced through a much improved performance by Absolute
Maintenance Services Pte Limited and Solute Pte Limited ('AMS'), both acquired
the previous year.
The Asia Pacific region's underlying profits increased by 6% year-on-year to
£22.2m (2022: £21.0m) reflecting a slightly reduced margin of 5.0% (2022:
5.2%).
UK
The UK Property Management business grew revenues by 9% to £355.7m (2022:
£327.4m) with square footage under management increasing by 4% (31 December
2023: 600.1m sq ft, 31 December 2022: 577.0m sq ft). During the year we
continued to diversify our Facilities Management business into new service
lines, such as car park consultancy, as well as securing significant new
mandates.
Our Residential Lettings business had another successful year with revenues
and profit increasing by 6%. This was primarily driven by the London market
which was characterised by strong tenant demand, albeit with reduced supply.
Finally, our rural management business also performed well with revenue growth
of 5% and significant profit improvement.
Overall, the UK Property Management business increased underlying profit by
17% to £30.4m (2022: £25.9m).
Continental Europe and the Middle East
CEME Property Management revenues increased by 19% to £96.7m (2022: £81.6m);
the same on a constant currency basis. Over half of this increase was in
respect of pass-through costs for outsourced services in Germany, which had no
effect on profits.
Revenues grew in all regions, reflecting significant contract wins in the
Middle East, Spain, Ireland and Poland.
Area under management at 31 December 2023 was 294.8m sq ft, up 11% on last
year (31 December 2022: 265.4m sq ft).
Profitability and margins in the CEME businesses were significantly affected
by initial scale-up costs on new contract wins, inflationary cost pressures,
reduced levels of profitable ad hoc consultancy work in the prevailing
economic environment and a higher interest cost on debt balances associated
with recent acquisitions. As a result, the CEME business recognised an
underlying loss of £3.8m (2022: £0.4m loss).
Consultancy
Global Consultancy revenue increased by 4% to £459.8m (2022: £441.5m), 5% at
constant currency rates. Much of the revenue growth derived from lower margin
service lines, whilst some of the higher margin services were materially
affected by either reduced market volumes (e.g. security valuations) or the
impact of market sentiment on client willingness to commit to longer-term
projects (e.g. Development Consultancy/Planning). In addition, the cost base
was affected by salary inflation in respect of professional consultants. These
factors were most marked during the first half of the year. Thereafter, we
experienced improved activity particularly in Q4, improving on our H1 2023
underlying profit decline of 55% to end the year with underlying profit
decreasing by only 14% to £35.6m (2022: £41.3m); 13% on a constant currency
basis.
UK
The UK Consultancy businesses, comprising a broad range of advisory
activities, increased revenue by 9% to £271.0m (2022: £248.4m).
Revenue growth came from most main service lines with the exception of
Development Consultancy, as developers delayed projects in the prevailing
economic climate. Project Management Consultancy continued to grow well with
increasing numbers of Green "retro-fit" assignments. Housing Consultancy also
performed well and, whilst Planning Consultancy revenue grew somewhat, it was
largely derived from smaller project work, rather than master planning and
major schemes, with a consequent reduction in profitability.
The above factors in addition to professional staff cost increases, resulted
in underlying profit increasing by 6% to £29.7m (2022: £28.0m).
Asia Pacific
In the Asia Pacific Consultancy segment, revenues decreased by 4% to £84.1m
(2022: £87.4m); 1% on a constant currency basis. The overwhelming majority of
revenues are earned in Australia, mainland China and Hong Kong. All of these
were affected by reductions in valuation, development and research consultancy
which linked to the impact of reduced transaction volumes on sentiment and in
particular in China, the effect of economic conditions and debt on development
activity.
Project management and green fit-out assignments in particular, improved
performance in Singapore and selective markets in South East Asia.
The above factors resulted in underlying profit decreasing by 34% to £1.9m
(2022: £2.9m), 31% in constant currency.
Continental Europe and the Middle East
Revenue increased by 6% (as reported and in constant currency) to £76.3m
(2022: £71.9m).
Revenue growth was driven primarily by the Middle East, Portugal and Italy.
Reduced revenue in Germany and Netherlands reflected substantially reduced
valuation business as a result of reduced transactional activity in those
markets. The cost base was further impacted by investment in new residential
and workplace strategy recruitment in Germany and France respectively and
increased interest costs on prior acquisitions.
Underlying profit fell by 42% to £5.0m (2022: £8.6m); 41% in constant
currency.
North America
This segment primarily comprises complex project management through Macro
Consultants LLC ('Macro'), a national project management consultancy business
and T3 Advisors, a workplace solutions advisory firm specialising in the life
sciences and technology sectors.
Revenue decreased by 16% to £28.4m (2022: £33.8m), as reported and in
constant currency. This was primarily as a result of two factors. First, in
Project Management, a major media business client put on indefinite hold a
number of significant projects for the year, for which staff had already been
allocated. Secondly, the T3 business was affected by retrenchment in the
technology sector. Both businesses significantly refocused to replace their
work in progress pipelines but suffered losses during the year, which could
only be partially mitigated by improvements in other consultancy services such
as workplace and incentives consultancy.
The impact of these factors resulted in an underlying loss of £1.0m (2022:
£1.8m underlying profit).
Investment Management
Despite the prolonged challenging macro environment, Savills Investment
Management delivered a resilient result with revenue down 6% to £105.8m
(2022: £112.8m), 7% down on a constant currency basis.
The decrease was primarily due to a 35% reduction in transaction fees in line
with the reduced activity in the overall market. Base management fees declined
marginally to £84.0m (2022: £85.7m) and represented 79% of gross revenues
(2022: 76%). The decline was consistent with expectations as several existing
products came to their natural end-of-life whilst new strategies were
initiated during the year and will take time to build scale.
AUM, including undrawn commitments, remained stable at £22.1bn (2022:
£22.1bn). Successful new product launches and new mandates, as well as
improved capital raising of £2.0bn (2022: £1.6bn) despite the difficult
market conditions were offset by disposal activity and valuation reductions
during the period. The relationship with Samsung Life continued well, with
Samsung having committed its contracted $1bn to various products, much of
which is yet to be deployed and is included in the approximately £1.7bn of
investable funds carried over to 2024. At the most recent measurement date
prior to this report, 79% of funds (by AUM) continued to exceed their
respective fund target or benchmark returns on a five-year rolling basis.
Successes during the year include significant new mandates won in Spain and
Italy and growth of the Living platform in the UK and continental Europe. DRC
Savills Investment Management expanded into new territories, launching the DRC
SIM Australia Real Estate Debt Fund and establishing its first position in the
US real estate debt market through a joint venture with QCP LLC, an Atlanta
based real estate debt manager
Underlying profits for Investment Management decreased by 30% to £14.8m
(2022: £21.2m), 31% on a constant currency basis. In addition to the fall in
revenue noted above, the year was also impacted by salary inflation in the
sector and the cost of further platform growth for new product strategies, in
advance of material revenues as capital is deployed.
Financial review
Profit margin
Underlying profit margin decreased to 4.2% (2022: 7.2%), see Note 3 for
further explanation of underlying profit measures. From a trading perspective,
this reflected the mix of business in the face of significant market-related
revenue decreases substantially reducing profits in higher margin
Transactional and Investment Management businesses, with revenue falling 17%
and 6% respectively. It also reflected Group policy to retain core
bench-strength through market downturns in order to maintain client service
and benefit from market recovery in due course.
Reported pre-tax profit margin decreased to 2.5% (2022: 6.7%).
Taxation
The tax charge for the year decreased to £15.9m (2022: £34.1m), representing
an effective tax rate on reported profit before tax of 28.7% (2022: 22.2%).
The Group's effective reported tax rate is higher than the UK effective rate
of tax of 23.5% as a result of disallowable expenses largely arising from
transaction-related costs.
The underlying effective tax rate increased to 22.3% (2022: 20.5%).
Transaction-related costs
During the year the Group recognised a total of £14.6m in transaction-related
costs (2022: £15.5m). These costs primarily represent liabilities for future
consideration payments which are contingent on the continuity of recipients'
employment at the time of payment (2023: £12.7m, 2022: £14.8m). The largest
individual component of this charge related to the acquisition during 2021 of
the 75% partnership interests in DRC Capital LLP, which the Group did not
already then own.
These charges have been excluded from the calculation of underlying profit on
a consistent basis in line with the Group's policy.
Restructuring costs
In response to the challenging market conditions, during the year, management
conducted a focussed review of the Group's businesses, where market recovery
was not anticipated to be significant in the short or medium term. As
described in the CEO's review, this resulted in non-recurring restructuring
costs of £13.9m in aggregate.
Accordingly, these charges have been excluded from the calculation of
underlying profit on a consistent basis in line with the Group's policy.
Earnings per share
Basic earnings per share decreased 66% to 30.0p (2022: 87.0p), reflecting a
67% decrease in reported profit after tax. Adjusted on a consistent basis for
significant restructuring, transaction-related costs, profits and losses on
disposals, certain share-based payment adjustments, amortisation of intangible
assets arising from business combinations, impairments of goodwill and
significant transaction-related fair value gains, underlying basic earnings
per share decreased 42% to 55.1p (2022: 94.9p).
Fully diluted earnings per share decreased by 65% to 28.8p (2022: 82.2p). The
underlying fully diluted earnings per share decreased 41% to 52.9p (2022:
89.8p).
Cash resources, borrowings and liquidity
Cash and cash equivalents, net of overdrafts in notional pooling arrangements,
at year end decreased 33% to £314.5m (2022: £467.1m). This decrease
reflected the Group's reduced profitability in the year and the related
increase in net working capital.
Gross borrowings at year end decreased to £157.2m (2022: £159.7m). These
principally comprise £150.0m (2022: £150.0m) of 7,10 and 12 year fixed rate
notes, which were issued in June 2018. The Group's £360.0m UK revolving
credit facility ('RCF') was undrawn at the end of the year (2022: undrawn),
part of a total of £422.0m (2022: £426.2m) of undrawn borrowing facilities
available to the Group. At the year end, cash and cash equivalents net of
borrowings was £157.3m (2022: £307.4m).
Cash is typically retained in a number of the Group's 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 £18.8m (2022: £164.0m). As previously
mentioned, this reduction was due to reduced profits year-on-year and the
related short-term increase in net working capital.
With a significant 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 4,322 (2022: 68,739) new ordinary shares were issued on the
exercise of options by participants of the Group's SAYE schemes and 32,549
(2022: 81,098) of new ordinary shares were issued to participants of the
Group's PSP 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 2023 was 144,389,919 (2022: 144,353,048).
Savills Pension Scheme
The funding level of the defined benefit Savills Pension Scheme in the UK,
which is closed to future service-based accrual, worsened during the year,
with lower asset returns reducing the value of the Scheme's assets and a rise
in the yield on AA-rated corporate bonds increasing the Scheme's liabilities.
The plan was in a deficit position of £0.7m at the year-end (2022: £22.3m
surplus).
Net assets
Net assets as at 31 December 2023 were £752.8m (2022: £805.3m). This
movement reflects primarily the Group's profit for the year offset by currency
translation losses, reflecting the strengthening of sterling during the year,
purchases of treasury shares, dividend payments and actuarial losses
recognised on the Group's defined benefit pension schemes.
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 £14.4m decrease in revenue and a £0.7m decrease in underlying profit.
Principal risks and uncertainties
The Directors have carried out a robust assessment of the principal risks
facing the Group - including those that would threaten its business model,
future performance, solvency, liquidity and/or pose a material reputational
risk. Further detail on these principal risks will be provided in the Group's
Annual Report and Accounts, which will be available on publication
at www.ir.savills.com (http://www.ir.savills.com) on 8 April 2024. The
identified principal risks are summarised below:
· Market conditions, macro-economic and geopolitical issues
· Achieving the right market positioning to meet 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 2023
2023 2022
Note £m £m
Revenue 2 2,238.0 2,298.3
Less:
Employee benefits expense (1,496.3) (1,509.8)
Depreciation (69.6) (65.8)
Amortisation of intangible assets (15.8) (16.9)
Impairment of goodwill 3 (3.9) -
Other operating expenses (619.5) (562.1)
(Increase)/decrease in provision for expected credit loss (1.8) 2.1
Other net gains 2.0 0.3
Share of post-tax profit from joint ventures and associates 10.2 12.1
Operating profit 43.3 158.2
Finance income 11 50.6 13.7
Finance costs 11 (38.5) (18.0)
Net finance income/(costs) 11 12.1 (4.3)
Profit before income tax 55.4 153.9
Income tax expense 4 (15.9) (34.1)
Profit for the year 39.5 119.8
Attributable to:
Owners of the parent 40.8 119.4
Non-controlling interests (1.3) 0.4
39.5 119.8
Earnings per share
Basic earnings per share 6(a) 30.0p 87.0p
Diluted earnings per share 6(a) 28.8p 82.2p
Supplementary income statement information
Reconciliation to underlying profit before income tax
Profit before income tax 55.4 153.9
- restructuring and transaction-related costs 28.5 15.6
- other underlying adjustments 10.9 (4.9)
Underlying profit before income tax 2 and 3 94.8 164.6
Savills plc
Consolidated statement of comprehensive income
for the year ended 31 December 2023
2023 2022
£m £m
Profit for the year 39.5 119.8
Other comprehensive (loss)/income
Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit pension scheme and employee benefit (24.7) 6.6
obligations
Changes in fair value of financial assets at FVOCI 0.6 (10.9)
Tax on other items that will not be reclassified 8.4 (3.9)
Total items that will not be reclassified to profit or loss (15.7) (8.2)
Items that may be reclassified subsequently to profit or loss:
Currency translation differences (27.3) 48.1
Total items that may be reclassified subsequently to profit or loss (27.3) 48.1
Other comprehensive (loss)/income for the year (43.0) 39.9
Total comprehensive (loss)/income for the year (3.5) 159.7
Total comprehensive (loss)/income attributable to:
Owners of the parent (1.4) 158.4
Non-controlling interests (2.1) 1.3
(3.5) 159.7
Savills plc
Consolidated statement of financial position
at 31 December 2023
2023 2022 restated*
Note £m £m
Assets: Non-current assets
Property, plant and equipment 68.1 77.0
Right-of-use assets 198.3 223.8
Goodwill* 443.6 449.6
Intangible assets 55.8 66.3
Investments in joint ventures and associates 38.9 37.0
Deferred income tax assets 57.2 38.6
Financial assets at fair value through other comprehensive income ('FVOCI') 5.0 5.7
Financial assets at fair value through profit and loss ('FVPL') 38.5 36.8
Defined benefit pension surplus 3.2 25.5
Contract related assets 1.8 2.4
Trade and other receivables 69.3 37.5
979.7 1,000.2
Assets: Current assets
Contract assets 12.6 7.4
Trade and other receivables 656.4 643.1
Income tax receivable 4.7 2.4
Derivative financial instruments 1.0 0.3
Cash and cash equivalents** 506.8 669.1
1,181.5 1,322.3
Liabilities: Current liabilities
Borrowings 10 7.9 10.6
Overdrafts in notional pooling arrangement** 192.3 202.0
Lease liabilities 52.9 53.2
Derivative financial instruments 2.5 1.0
Contract liabilities 11.9 14.0
Trade and other payables* 682.1 744.5
Income tax liabilities 6.9 15.5
Employee benefit obligations 18.5 17.7
Provisions 17.2 9.2
992.2 1,067.7
Net current assets 189.3 254.6
Total assets less current liabilities 1,169.0 1,254.8
Liabilities: Non-current liabilities
Borrowings 10 149.3 149.1
Lease liabilities 201.3 224.4
Derivative financial instruments 3.2 6.7
Other payables 10.4 21.9
Employee benefit obligations 26.2 25.2
Provisions 23.9 20.6
Deferred income tax liabilities 1.9 1.6
416.2 449.5
Net assets 752.8 805.3
Equity:
Share capital 3.6 3.6
Share premium 104.9 104.9
Other reserves 94.5 112.8
Retained earnings 514.9 546.8
Equity attributable to owners of the parent 717.9 768.1
Non-controlling interests 34.9 37.2
Total equity 752.8 805.3
* See Note 9 for details on the prior year restatement.
** Included within cash and cash equivalents are cash balances of £193.3m (31
December 2022: £205.0m) that are operated within a notional cash pooling
arrangement together with overdraft balances of £192.3m (31 December 2022:
£202.0m) 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 2023
Attributable to owners of the parent
Share capital Share premium Other reserves Retained earnings Total Non-controlling interests Total equity
£m £m £m £m £m £m £m
Balance at 1 January 2023 3.6 104.9 112.8 546.8 768.1 37.2 805.3
Profit for the year - - - 40.8 40.8 (1.3) 39.5
Other comprehensive income/(loss):
Remeasurement of defined benefit pension scheme and employee benefit - - - (24.6) (24.6) (0.1) (24.7)
obligations
Changes in fair value of financial assets at FVOCI - - 0.6 - 0.6 - 0.6
Tax on items taken to other comprehensive income/(loss) - - - 8.4 8.4 - 8.4
Currency translation differences - - (26.6) - (26.6) (0.7) (27.3)
Total comprehensive (loss)/income for the year - - (26.0) 24.6 (1.4) (2.1) (3.5)
Employee share option scheme:
- Value of services provided - - - 28.8 28.8 - 28.8
- Tax on employee share option schemes - - - 0.5 0.5 - 0.5
Tax on other items taken to reserves - - - (0.4) (0.4) - (0.4)
Purchase of treasury shares - - - (26.3) (26.3) - (26.3)
Dividends - - - (48.8) (48.8) (2.2) (51.0)
Transfer between reserves - - 7.7 (9.7) (2.0) 2.0 -
Fair value of derivative financial instrument - - - (0.6) (0.6) - (0.6)
Balance at 31 December 2023 3.6 104.9 94.5 514.9 717.9 34.9 752.8
Attributable to owners of the parent
Share capital Share premium Other reserves Retained earnings Total Non-controlling interests Total equity
£m £m £m £m £m £m £m
Balance at 1 January 2022 3.6 104.4 76.2 540.0 724.2 29.2 753.4
Profit for the year - - - 119.4 119.4 0.4 119.8
Other comprehensive income/(loss):
Remeasurement of defined benefit pension scheme and employee benefit - - - 6.1 6.1 0.5 6.6
obligations
Changes in fair value of financial assets at FVOCI - - (10.9) - (10.9) - (10.9)
Tax on items taken to other comprehensive income/(loss) - - - (3.7) (3.7) (0.2) (3.9)
Currency translation differences - - 47.5 - 47.5 0.6 48.1
Total comprehensive income for the year - - 36.6 121.8 158.4 1.3 159.7
Employee share option scheme:
- Value of services provided - - - 29.6 29.6 0.8 30.4
- Tax on employee share option schemes - - - (2.6) (2.6) - (2.6)
Issue of share capital - 0.5 - - 0.5 - 0.5
Tax on other items taken to reserves - - - 0.3 0.3 - 0.3
Purchase of treasury shares - - - (49.0) (49.0) - (49.0)
Dividends - - - (85.5) (85.5) (0.4) (85.9)
Transfer between reserves - - 0.4 (4.0) (3.6) 3.6 -
Fair value of derivative financial instrument - - - (4.5) (4.5) - (4.5)
Transaction with non-controlling interest - - (0.4) 0.7 0.3 - 0.3
Additions through business combinations - - - - - 2.7 2.7
Balance at 31 December 2022 3.6 104.9 112.8 546.8 768.1 37.2 805.3
Savills plc
Consolidated statement of cash flows
for the year ended 31 December 2023
2023 2022
Note £m £m
Cash flows from operating activities
Cash generated from operations 7 49.2 210.9
Interest received 40.6 13.3
Interest paid (33.3) (16.9)
Income tax paid (37.7) (43.3)
Net cash generated from operating activities 18.8 164.0
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 5.3 0.2
Proceeds from sale of financial assets held at FVOCI and FVPL 4.8 1.6
Proceeds from sale of interests in joint ventures 0.3 0.1
Dividends received from joint ventures 8.6 7.1
Dividends received from associates 1.4 4.2
Dividends received from other parties 0.2 0.2
Repayment of loans by joint ventures 0.1 0.1
Repayment of loans by associates 0.2 0.4
Repayment of loans by other parties - 0.7
Loans to joint ventures - (0.1)
Loans to associates - (0.4)
Loans to other parties (2.5) (1.7)
Acquisition of subsidiaries, net of cash and overdrafts acquired (8.7) (14.9)
Deferred consideration paid in relation prior year acquisitions (1.9) (3.3)
Sublease income 0.7 -
Purchase of property, plant and equipment (17.4) (19.8)
Purchase of intangible assets (5.5) (7.0)
Purchase of financial assets held at FVOCI and FVPL (6.7) (8.8)
Purchase of investment in joint ventures (0.5) (0.4)
Net cash used in investing activities (21.6) (41.8)
Cash flows from financing activities
Proceeds from issue of share capital - 0.5
Proceeds from transaction with non-controlling interest - 7.9
Transaction costs incurred on transactions with non-controlling interest - (0.2)
Proceeds from borrowings 105.7 9.6
Repayments of borrowings (109.9) (5.6)
Financing fees paid - (0.4)
Principal elements of lease payments (54.7) (51.4)
Purchase of treasury shares (26.3) (49.0)
Dividends paid (51.0) (85.9)
Net cash used in financing activities (136.2) (174.5)
Net decrease in cash, cash equivalents and bank overdrafts (139.0) (52.3)
Cash, cash equivalents and bank overdrafts at beginning of year 464.3 490.0
Effect of exchange rate fluctuations on cash and cash equivalents held (15.0) 26.6
Cash, cash equivalents and bank overdrafts at end of year 310.3 464.3
NOTES
1(a). Basis of preparation
The results for the year ended 31 December 2023 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 2023, 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.
Going concern
The Group has prepared its going concern assessment for the period to the end
of June 2025. As in prior years, the Board undertook a strategic business
review in the current year, taking account of the Group's current position and
prospects, the Group's strategic plan, and the Group's principal risks and the
management of those risks and the Board's risk appetite. Sensitivity analysis
was also undertaken, including financing projections, to flex the financial
forecasts under several severe downside scenarios, which involved applying
different assumptions to the underlying forecasted revenues, costs and
underlying profits both individually and in aggregate. These scenarios assess
the potential impact from several macro-economic risks, including a severe
global economic downturn analogous to that experienced during the Global
Financial Crisis in 2008/09. The results of this sensitivity analysis showed
that the Group would retain liquidity and maintain significant available
facility and covenant headroom to be able to withstand the impact of such
scenarios over the period of the financial forecast, as a result of the
resilience and diversity of the Group, underpinned by a strong balance sheet.
Based on the Group's positive net cash position of £157.3m (cash and cash
equivalents less overdrafts in notional pooling arrangements and borrowings)
and undrawn £360.0m revolving credit facility at the year end, combined with
the assessment explained above, the Directors have formed the judgement at the
time of approving the financial statements, that there is a reasonable
expectation that the Group has adequate resources to continue as a going
concern for a period of at least 12 months from the date of the approval of
the financial statements until at least June 2025. For this reason, they
continue to adopt the going concern basis of accounting in preparing the
Consolidated Financial Statements.
2. Segment analysis
Property and
Transaction Facilities Investment
Advisory Consultancy Management Management Unallocated Total
2023 £m £m £m £m £m £m
Revenue
United Kingdom - commercial 100.6 227.8 304.5 43.2 - 676.1
United Kingdom - residential 171.0 43.2 51.2 - - 265.4
Total United Kingdom 271.6 271.0 355.7 43.2 - 941.5
CEME 114.6 76.3 96.7 54.8 - 342.4
Asia Pacific - commercial 102.1 84.1 447.1 7.8 - 641.1
Asia Pacific - residential 17.9 - - - - 17.9
Total Asia Pacific 120.0 84.1 447.1 7.8 - 659.0
North America 266.7 28.4 - - - 295.1
Revenue 772.9 459.8 899.5 105.8 - 2,238.0
Underlying profit/(loss) before tax
United Kingdom - commercial 14.0 25.4 24.5 4.8 (8.7) 60.0
United Kingdom - residential 19.4 4.3 5.9 - - 29.6
Total United Kingdom 33.4 29.7 30.4 4.8 (8.7) 89.6
CEME (20.3) 5.0 (3.8) 9.3 - (9.8)
Asia Pacific - commercial (2.9) 1.9 22.2 0.7 - 21.9
Asia Pacific - residential 1.5 - - - - 1.5
Total Asia Pacific (1.4) 1.9 22.2 0.7 - 23.4
North America (7.4) (1.0) - - - (8.4)
Underlying profit/(loss) before tax 4.3 35.6 48.8 14.8 (8.7) 94.8
Property and
Transaction Facilities Investment
Advisory Consultancy Management Management Unallocated Total
2022 £m £m £m £m £m £m
Revenue
United Kingdom - commercial 118.9 202.0 278.7 53.3 - 652.9
United Kingdom - residential 208.3 46.4 48.7 - - 303.4
Total United Kingdom 327.2 248.4 327.4 53.3 - 956.3
CEME* 129.8 71.9 81.6 51.7 - 335.0
Asia Pacific - commercial 145.3 87.4 404.9 7.8 - 645.4
Asia Pacific - residential 24.3 - - - - 24.3
Total Asia Pacific 169.6 87.4 404.9 7.8 - 669.7
North America 303.5 33.8 - - - 337.3
Revenue 930.1 441.5 813.9 112.8 - 2,298.3
Underlying profit/(loss) before tax
United Kingdom - commercial 20.4 21.8 21.2 8.7 (16.3) 55.8
United Kingdom - residential 35.1 6.2 4.7 - - 46.0
Total United Kingdom 55.5 28.0 25.9 8.7 (16.3) 101.8
CEME* (2.7) 8.6 (0.4) 11.8 - 17.3
Asia Pacific - commercial 13.4 2.9 21.0 0.7 - 38.0
Asia Pacific - residential 3.4 - - - - 3.4
Total Asia Pacific 16.8 2.9 21.0 0.7 - 41.4
North America 2.3 1.8 - - - 4.1
Underlying profit/(loss) before tax 71.9 41.3 46.5 21.2 (16.3) 164.6
( )
* Revenue (£27.6m) and underlying profit (£3.7m) attributable to the project
management consultancy business in CEME has been reclassified from Property
and Facilities Management to Consultancy to ensure a consistent presentation
of this business stream with the rest of the Group.
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 locations in which
the Group operates, with the Investment Management business being managed
separately.
The operating segments are identified as the following regions: the UK,
Continental Europe and the Middle East ('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 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 a transaction-related call option in the current and 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 Group believes that the consistent presentation of underlying profit
before tax, underlying effective tax rate, underlying basic earnings per share
and underlying diluted earnings per share provides additional useful
information to Shareholders on the underlying trends and comparable
performance of the Group over time by excluding significant non-operational
costs/income from the GAAP measures. The 'underlying' measures are 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.
2023 2022
£m £m
Reported profit before tax 55.4 153.9
Adjustments:
Amortisation of intangible assets arising from business combinations 9.9 9.9
Impairment of goodwill 3.9 -
Share-based payment adjustment (see Note 2.3 for explanation) (1.1) (14.7)
Profit on disposal of joint ventures (0.4) -
Restructuring costs 13.9 0.1
Transaction-related costs 14.6 15.5
Fair value gain on transaction-related call option (1.4) (0.1)
Underlying profit before tax 94.8 164.6
The adjustment for share-based payments relates to the impact of the
accounting standard for share-based compensation. The annual bonus is paid in
a mixture of cash and deferred shares and the proportions can vary from one
year to another. Under IFRS, the deferred share element is amortised to the
income statement over the vesting period whilst the cash element is expensed
in the year. The adjustment above addresses this by adding to or deducting
from profit the difference between the IFRS 2 charge in relation to
outstanding bonus-related share awards and the estimated value of the current
year bonus pool to be awarded in deferred shares. This adjustment is made to
align the underlying staff cost in the year with the revenue recognised in the
same period, providing additional information on the Group's performance over
time with respect to profitability.
Impairment of goodwill in the year relates to the Indonesia cash generating
unit.
Profit on disposal recognised is primarily in relation to disposal of holdings
in joint ventures in China.
Restructuring costs in the current year includes the pay-out of settlement
costs and the cost of a restructuring programme, which was focused principally
on a small number of areas of the global business where management anticipates
that market recovery will take longer to emerge. In the prior year,
restructuring costs related to the ongoing IFRS 2 'Share-based Payment' charge
for deferred shares, with a five-year vesting period, issued in relation to
the restructuring upon acquisition of Aguirre Newman SA ('Aguirre Newman') in
2017.
Transaction-related costs includes a £12.7m charge for future consideration
payments which are contingent on the continuity of recipients' employment in
the future (2022: £14.8m). In the current and prior year, a significant
portion of the charge related to the acquisition of DRC Capital LLP ('DRC') in
2021. Transaction-related costs also consist of £1.5m of professional
advisory transaction fees (2022: £1.4m) and £0.3m of interest on deferred
consideration and non-current future payments in relation to business
acquisitions that are linked to employment (2022: £0.3m). In addition,
transaction-related costs included a £0.1m (2022: £0.6m) charge relating to
prepaid amounts issued as part of business acquisitions that are linked to
continued active engagement in the business. 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 consist of a £1.6m credit (2023: £nil) for
fair value changes to contingent deferred consideration not related to
continuity of employment.
In the current year, a fair value gain of £1.4m 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 five-year term (2022: fair value gain of
£0.1m).
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.
2023 2022
£m £m
United Kingdom
- Current tax 13.9 18.7
- Deferred tax (2.5) (1.5)
Foreign tax
- Current tax 13.8 23.1
- Deferred tax (9.3) (6.2)
Income tax expense 15.9 34.1
5. Dividends
2023 2022
£m £m
Amounts recognised as distribution to equity holders in the year:
In respect of the previous year
Ordinary final dividend of 13.4p per share (2021: 12.75p) 18.2 17.6
Supplemental interim dividend of 15.6p per share (2021: 15.6p) 21.2 21.6
Special dividend of £nil per share (2021: 27.05p) - 37.4
In respect of the current year
Interim dividend of 6.9p per share (2022: 6.6p) 9.4 8.9
48.8 85.5
The Group paid £2.2m (2022: £0.4m) of dividends to non-controlling
interests.
The Board recommends a final dividend of 13.9p per ordinary share (amounting
to £19.0m), alongside the supplemental interim dividend of 2.0p per ordinary
share (amounting to £2.7m), to be paid on 23 May 2024 to shareholders on the
register at 12 April 2024. These financial statements do not reflect this
dividend payable.
The total paid and recommended ordinary and supplemental dividend for the 2023
financial year comprises an aggregate distribution of 22.8p per ordinary share
(2022: 35.6p per ordinary share).
6(a). Basic and diluted earnings per share
2023 2023 2023 2022 2022 2022
Earnings Shares EPS Earnings Shares EPS
£m million pence £m million Pence
Basic earnings per share 40.8 135.9 30.0 119.4 137.3 87.0
Effect of additional shares issuable under option - 5.8 (1.2) - 7.9 (4.8)
Diluted earnings per share 40.8 141.7 28.8 119.4 145.2 82.2
6(b). Underlying basic and diluted earnings per share
2023 2023 2023 2022 2022 2022
Earnings Shares EPS Earnings Shares EPS
£m million Pence £m million Pence
Basic earnings per share 40.8 135.9 30.0 119.4 137.3 87.0
Amortisation of intangible assets arising from business combinations after tax 7.6 - 5.6 7.6 - 5.5
Impairment of goodwill after tax 4.0 - 2.9 - - -
Share-based payment adjustment after tax (0.6) - (0.4) (11.9) - (8.7)
Profit on disposal of joint ventures after tax (0.4) - (0.3) - - -
Restructuring costs after tax 10.6 - 7.8 0.1 - 0.1
Transaction-related costs after tax 14.3 - 10.5 15.3 - 11.1
Fair value gain on transaction-related call option (1.4) - (1.0) (0.1) - (0.1)
Underlying basic earnings per share 74.9 135.9 55.1 130.4 137.3 94.9
Effect of additional shares issuable under option - 5.8 (2.2) - 7.9 (5.1)
Underlying diluted earnings per share 74.9 141.7 52.9 130.4 145.2 89.8
7. Cash generated from operations
2023 2022
£m £m
Profit for the year 39.5 119.8
Adjustments for:
Income tax 15.9 34.1
Depreciation 69.6 65.8
Amortisation of intangible assets 15.8 16.9
Fair value gain on derivative financial instrument and FVPL investments (2.1) (0.1)
(Gain)/loss on disposal of property, plant and equipment, intangible assets (4.0) 1.1
and leases
Impairment of property, plant and equipment and goodwill 3.9 0.8
Net finance (income)/cost (Note 11) (12.1) 4.3
Share of post-tax profit from joint ventures and associates (10.2) (12.1)
Dividends from other parties (0.2) (0.2)
Increase in employee and retirement obligations 2.5 2.6
Exchange movement and fair value movements on financial instruments in 0.5 0.6
operating activities
Increase/(decrease) in provisions 11.2 (4.7)
Increase in insurance reimbursement asset (3.4) -
Charge for share-based compensation 28.8 30.4
Operating cash flows before movements in working capital 155.7 259.3
Increase in trade and other receivables and contract assets (45.5) (7.3)
Decrease in trade and other payables and contract liabilities (61.0) (41.1)
Cash generated from operations 49.2 210.9
Foreign exchange movements resulted in a £20.1m decrease in current and
non-current trade and other receivables (2022: £37.3m increase) and a £21.3m
decrease in current and non-current trade and other payables (2022: £43.8m
increase).
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 2023, the notional
cash pooling arrangement included cash balances of £193.3m presented in cash
and cash equivalents (December 2022: £205.0m) and overdrafts of £192.3m (31
December 2022: £202.0m) presented in current liabilities. This represents as
at 31 December 2023 surplus pooled credit cash balances of £1.0m (31 December
2022: surplus pooled credit cash £3.0m).
For the purpose of the Statement of Cash Flows, cash and cash equivalents net
of overdrafts comprise the following:
31 December 31 December
2023 2022
£m £m
Cash and cash equivalents 506.8 669.1
Overdrafts in notional pooling arrangement (192.3) (202.0)
Bank overdrafts (see Note 10) (4.2) (2.8)
310.3 464.3
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
Nash Bond Others Total
£m £m £m
Non-current assets: Property, plant and equipment 0.1 0.2 0.3
Right-of-use asset - 0.5 0.5
Intangible assets - 0.5 0.5
Trade and other receivables - 0.1 0.1
Current assets: Contract assets - 0.3 0.3
Trade and other receivables 0.5 0.7 1.2
Income tax receivable 0.1 - 0.1
Cash and cash equivalents 2.3 2.5 4.8
Current liabilities: Lease liabilities - (0.1) (0.1)
Trade and other payables (1.0) (1.5) (2.5)
Income tax liabilities - (0.1) (0.1)
Employee benefit obligations - (0.1) (0.1)
Non-current liabilities: Lease liabilities - (0.3) (0.3)
Deferred tax liabilities - (0.2) (0.2)
Net assets acquired 2.0 2.5 4.5
Goodwill (provisional) 5.0 5.4 10.4
Purchase consideration 7.0 7.9 14.9
Consideration satisfied by:
Cash paid 7.0 6.5 13.5
Deferred consideration < 1 year - 0.5 0.5
Deferred consideration > 1 year - 0.9 0.9
7.0 7.9 14.9
Nash Bond Limited ('Nash Bond')
On 27 November 2023, the Group acquired 100% of the equity interest in Nash
Bond, a retail agency and lease consultancy business based in the UK. The
acquisition enhances the strength of the Group's Central London retail
business to take advantage of the anticipated recovery in the retail market.
Total acquisition consideration has provisionally been determined at £7.0m,
all of which was settled on completion.
Acquisition-related costs of £0.5m have been expensed as incurred to the
income statement and classified within other operating expenses.
Provisional goodwill of £5.0m has been determined. Goodwill is attributable
to the experience and expertise of key staff members and is not expected to be
deductible for tax purposes.
The acquired business contributed revenue of £0.1m and profit of £0.1m to
the Group for the period from the date of acquisition to 31 December 2023. Had
the acquisition been made at the beginning of the financial year, revenue
would have been £4.7m and a profit of £0.5m would have been recognised.
The fair value of trade and other receivables is £0.5m, £0.4m of which
relates to trade receivables. The gross contractual amount for trade
receivables is £0.4m, all of which is expected to be collectible.
Other acquisitions
On 6 January 2023, the Group acquired 100% of the equity interest in
Automotive Property Consultancy Holdings Limited, a specialist property
consultancy company dedicated to the franchised motor retail sector in the
United Kingdom. On 31 March 2023, the Group acquired 51% of the equity
interest in BeLiving SRL, a real estate company specialising in residential
sales and rentals in Italy. On 31 May 2023,the Group also acquired 100% of the
equity of Predibisa, Sociedade de Mediaçāo Imobiliária, Lda., a residential
and commercial real estate company based in Porto, Portugal. In addition, on 1
August 2023, the Group acquired a 55% equity interest in Site 8 Pty Limited, a
retail property agency in Australia.
Cash consideration for these transactions amounted to £6.5m. The remainder of
the acquisition consideration relates to deferred consideration of £1.4m
payable, of which £0.5m is payable within one year of the reporting date.
Goodwill of £5.4m 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.
Acquisition-related costs of £0.6m have been expensed as incurred to the
income statement and classified within other operating expenses.
The acquired businesses contributed revenue of £5.7m and a profit of £0.4m
to the Group for the period from acquisition to 31 December 2023. Had the
acquisitions been made at the beginning of the financial year, revenue would
have been £7.7m and the profit would have been £0.5m. The impact on the
Group's overall revenue and profits is not material.
The fair value of trade and other receivables acquired is £0.7m, £0.6m of
which relates to trade receivables. The gross contractual amount for trade
receivables is £0.6m, all of which is expected to be collectible.
2022 acquisitions and prior year restatement
In the year ended 31 December 2022, the Group acquired a 60% equity interest
in Absolute Maintenance Services Pte Limited and Solute Pte Limited ('AMS'),
100% equity interest in Pitmore 1 Limited, a 60% equity interest in Simply
Affordable Homes LLP, 100% of the equity interest in BrickByte GmbH, 100% of
SRS Lease Administration LLC, a 60% equity interest in PT CB Advisory, 70% of
the equity interest in PT Cakrawala Baswara Cemerlang and a 60% equity
interest in PT Cakrawala Baswara Indonesia. The Group also acquired the trade
and assets of Cureoscity Limited, James A Baker and the trade and assets of a
property management company based in Poland.
During the current year, provisional fair values relating to the acquisition
of AMS were finalised, resulting in an increase to goodwill of £0.2m and a
corresponding increase in deferred consideration payable. This adjustment is
considered a measurement period adjustment in accordance with IFRS 3 and as a
result the prior period comparatives have been restated.
10. Borrowings
2023 2022
£m £m
Current
Bank overdrafts 4.2 2.8
Unsecured bank loans due within one year or on demand 3.0 4.0
Loan notes due within one year or on demand 0.7 3.8
7.9 10.6
Non-current
Unsecured bank loans 0.1 0.5
Loan notes 150.0 150.0
Transaction costs (issuance of loan notes and RCF arrangement fees) (0.8) (1.4)
149.3 149.1
157.2 159.7
The Group holds a £360.0m multi-currency revolving credit facility ('RCF'),
which includes an additional £90.0m accordion facility, expiring in June
2026. As at 31 December 2023, none (2022: none) of the RCF was drawn.
Non-current loan notes reflect the £150.0m of long-term debt held by the
Group 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.
Movements in borrowings are analysed as follows:
Group
2023 2022
£m £m
Opening amount as at 1 January 159.7 150.5
Additional borrowings, net of transaction costs paid (including overdraft 107.2 10.8
movement)(*)
Repayments of borrowings (109.9) (5.6)
Addition through business combination - 3.2
Amortisation of transaction costs 0.6 0.6
Foreign exchange (0.4) 0.2
Closing amount as at 31 December 157.2 159.7
(*) 2023 includes a £1.5m increase in overdraft balances within additional
borrowings. 2022 includes £1.5m increase in overdraft balances and £0.3m of
transaction costs paid within additional borrowings.
The Group has the following undrawn borrowing facilities:
Group
2023 2022
Fixed Floating Total Fixed Floating Total
£m £m £m £m £m £m
Expiring within 1 year or on demand 3.0 58.8 61.8 1.1 64.9 66.0
Expiring between 1 and 5 years 0.2 360.0 360.2 0.2 360.0 360.2
3.2 418.8 422.0 1.3 424.9 426.2
11. Finance income and costs
2023 2022
£m £m
Bank interest receivable 49.5 13.3
Net interest on defined benefit pension assets 1.1 0.4
Finance income 50.6 13.7
Bank interest payable (28.9) (8.5)
Unwinding of discounts on liabilities (0.4) (0.5)
Finance charges on lease liabilities (9.2) (9.0)
Finance costs (38.5) (18.0)
Net finance income/(cost) 12.1 (4.3)
12. Related party transactions
As at 31 December 2023, there were £0.1m of loans receivable from joint
ventures, £1.9m of loans receivable from associates and £0.2m of loans
payable to associates (2022: £0.2m of loans receivable from joint ventures
and £1.7m of loans receivable from associates).
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. Events after the balance sheet date
In February 2024, Samsung Life served notice on the call option to purchase a
further 4% in the Savills IM Holdings Limited group, which will increase their
total shareholding to 29%. This transaction is expected to complete towards
the end of March 2024, with the Group due to receive £11.3m of proceeds.
There have been no other material events that require adjustment to the
Financial Statements or are considered to have a material impact on the
understanding of the Group's current financial position.
14. Annual report and accounts
Copies of the Annual Report and Accounts for the year ended 31 December 2023
will be circulated to shareholders on 8 April 2024 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:
· that the consolidated financial statements, prepared in
accordance with UK-adopted international accounting standards give a true and
fair view of the assets, liabilities, financial position and profit of the
parent company and undertakings included in the consolidation taken as a
whole; and
· the Annual Report, including the Strategic Report, includes a
fair review of the development and performance of the business and the
position of the company and undertakings included in the consolidation taken
as a whole, together with a description of the principal risks and
uncertainties that they face.
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 2023, 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
14 March 2024
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.
END
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