REG - Savills PLC - Half-year Report <Origin Href="QuoteRef">SVS.L</Origin> - Part 2
10/08/2017 07:06
- Part 2: For the preceding part double click ID:nRSJ5820Na
Remeasurement of defined benefit pension scheme obligation - - - - (35.2) (35.2) - (35.2)
Fair value loss on available-for-sale investments - - - (0.6) - (0.6) - (0.6)
Tax on items directly taken to reserves - - - - 6.5 6.5 - 6.5
Currency translation differences - - - 52.4 - 52.4 0.2 52.6
Total comprehensive income for the year - - - 51.8 38.2 90.0 1.0 91.0
Transactions with owners:
Employee share option scheme:
- Value of services provided - - - - 13.4 13.4 - 13.4
Purchase of treasury shares - - - - (23.2) (23.2) - (23.2)
Shares issued 0.1 - (11.6) 11.6 - 0.1 - 0.1
Dividends - - - - (35.4) (35.4) (0.9) (36.3)
Transfer between reserves - - - 1.4 (1.4) - - -
Transactions with non-controlling interests - - - - (3.6) (3.6) 0.6 (3.0)
Balance at 31 December 2016(audited) 3.5 91.1 11.3 103.9 195.8 405.6 1.4 407.0
Notes 1 to 18 are an integral part of these condensed interim financial
statements.
Savills plc
Condensed interim consolidated statement of cash flows
for the period ended 30 June 2017
Six months to 30 June 2017 (unaudited) Six months to 30 June 2016 (unaudited) Year ended 31 December 2016 (audited)
Note £m £m £m
Cash flows from operating activities
Cash (used in)/generated from operations 11 (35.3) (55.7) 117.8
Interest received 1.2 0.8 1.6
Interest paid (0.7) (0.9) (1.3)
Income tax paid (13.7) (8.0) (24.8)
Net cash (used in)/generated from operating activities (48.5) (63.8) 93.3
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 0.3 0.1 0.2
Proceeds from sale of available-for-sale investments 1.5 1.5 5.1
Proceeds from sale of interests in joint ventures and associates - 1.1 2.0
Dividends received from joint ventures and associates 4.6 2.9 7.5
Repayment of loans by joint ventures - 1.2 1.2
Loans issued to joint ventures (0.1) - -
Acquisition of subsidiaries, net of cash acquired (9.3) (3.5) (4.4)
Deferred consideration paid in relation to prior year acquisitions (60.2) (7.9) (6.8)
Purchase of property, plant and equipment (9.4) (6.0) (12.8)
Purchase of intangible assets (5.0) (2.8) (4.7)
Purchase of investment in joint ventures, associates and available-for-sale investments (4.6) (11.9) (12.6)
Net cash used in investing activities (82.2) (25.3) (25.3)
Cash flows from financing activities
Proceeds from issue of share capital - - 0.1
Proceeds from borrowings 181.2 113.0 144.6
Repayments of borrowings (40.8) (12.5) (141.2)
Purchase of own shares for Employee Benefit Trusts (17.2) (15.3) (23.2)
Purchase of non-controlling interests - - (3.3)
Proceeds from disposal of non-controlling interests - - 0.3
Dividends paid (33.2) (29.4) (36.3)
Net cash received from/(used in) financing activities 90.0 55.8 (59.0)
Net (decrease)/increase in cash, cash equivalents and bank overdrafts (40.7) (33.3) 9.0
Cash, cash equivalents and bank overdrafts at beginning of period 223.4 182.2 182.2
Effect of exchange rate fluctuations on cash held (5.4) 17.6 32.2
Cash, cash equivalents and bank overdrafts at end of period 177.3 166.5 223.4
Notes 1 to 18 are an integral part of these condensed interim financial
statements.
NOTES
1. General information
The Company is a public limited company incorporated and domiciled in England
and Wales. The address of its registered office is 33 Margaret Street, London
W1G 0JD.
This condensed consolidated interim financial information was approved for
issue by the Board of Directors on 9 August 2017.
This condensed consolidated interim financial information does not comprise
statutory financial statements within the meaning of section 434 of the
Companies Act 2006. Statutory financial statements for the year ended 31
December 2016 were approved by the Board of Directors on 21 March 2017 and
delivered to the Registrar of Companies. The auditors' report on these
accounts was unqualified, did not contain an emphasis of matter paragraph and
did not contain a statement under section 498 of the Companies Act 2006.
This condensed consolidated interim financial information has been reviewed,
not audited.
2. Basis of preparation
This condensed consolidated interim financial information for the half-year
ended 30 June 2017 has been prepared in accordance with the Disclosure and
Transparency Rules of the Financial Conduct Authority and with IAS 34,
'Interim financial reporting' as adopted by the European Union. The condensed
consolidated interim financial information should be read in conjunction with
the annual financial statements for the year ended 31 December 2016, which
have been prepared in accordance with IFRSs as adopted by the European Union.
Going concern
The Group's forecasts and projections, taking account of reasonably possible
changes in trading performance, show that the Group should be able to operate
within the level of its agreed facilities. Having reassessed the principal
risks, the Directors considered it appropriate to adopt the going concern
basis of accounting in preparing the interim financial information.
3. Accounting policies
Except as described below, the accounting policies applied are consistent with
those of the annual financial statements for the year ended 31 December 2016,
as described in those financial statements.
Taxes on income in the interim periods are accrued using the tax rate that
would be applicable to expected total annual profit or loss.
Standards, amendments and interpretations endorsed by the EU and mandatorily
effective for the first time for the financial year beginning 1 January 2017
are not relevant to the Group.
IFRS 15, 'Revenue from contracts with customers' ('IFRS 15'), including
amendments, is effective for accounting periods beginning on or after 1
January 2018. An initial assessment of the impact of IFRS 15 on the Group has
been undertaken. At present, the Directors anticipate that there may be some
refinement in the timing of recognition of investment management performance
fees and the amortisation period for contract costs however the impact of this
refinement is not expected to be material. The impact of IFRS 15 will be
concluded and quantified in the 2017 annual report disclosures.
Use of non-GAAP measures
The Group believes that the consistent presentation of underlying profit
before tax, underlying effective tax rate, underlying basic earnings per share
and underlying diluted earnings per share provides additional useful
information to shareholders on the underlying trends and comparable
performance of the Group over time. The 'underlying' measures are also used by
Savills for internal performance analysis and incentive compensation
arrangements for employees. All the adjustments made to the GAAP measures are
considered exceptional and/or non-operational in nature. These terms are not
defined terms under IFRS and may therefore not be comparable with
similarly-titled profit measures reported by other companies. They are not
intended to be a substitute for, or superior to, GAAP measures.
The term 'underlying' refers to the relevant measure of profit, earnings or
taxation being reported excluding the impact (pre and post-tax where
applicable) of the following items:
· amortisation of acquired intangible assets (excluding software);
· the difference between IFRS 2, 'Share-based Payment' ('IFRS 2'), charges
related to outstanding bonus-related deferred share awards and the estimated
value of the current year bonus pool expected to be allocated to deferred
share awards (refer to Note 7 for further explanation);
· items that are considered exceptional by size or nature including
restructuring costs, impairments of goodwill, intangible assets and
investments and profits or losses arising on disposals of subsidiaries and
other investments; and
· significant acquisition costs related to business combinations.
The underlying effective tax rate represents the underlying income tax expense
expressed as a percentage of underlying profit before tax. The underlying
income tax expense is the income tax expense excluding the tax effect of the
adjustments made to arrive at underlying profit before tax and other tax
effects related to these adjustments.
Underlying basic earnings per share and underlying diluted earnings per share
both utilise the underlying profit after tax measure instead of GAAP earnings.
The weighted average number of shares remain the same as the GAAP measure.
A reconciliation between GAAP and underlying measures are set out in Note 7
(underlying profit before tax) and Note 10b) (underlying basic earnings per
share and underlying diluted earnings per share).
The Group also refers to revenue and underlying profit on a constant currency
basis which are both non-GAAP measures. Constant currency results are
calculated by translating the current year revenue and underlying profit using
the prior year exchange rates. This measure allows the Group to assess the
results of the current year compared to the prior year, excluding the impact
of foreign currency movements.
4. Estimates
The preparation of interim financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets and liabilities, income
and expense. Actual results may differ from these estimates.
In preparing these condensed interim financial statements, the significant
judgements made by management in applying the Group's accounting policies and
the key sources of estimation uncertainty were the same as those that applied
to the consolidated financial statements for the year ended 31 December 2016,
with the exception of changes in estimates that are required in determining
the provision for income taxes.
5. Financial risk management
Financial risk factors
The Group's activities expose it to a variety of financial risks including
foreign exchange risk, interest rate risk, credit risk and liquidity risk. The
condensed interim financial statements do not include all financial risk
management information and disclosures as required in the annual financial
statements; they should be read in conjunction with the Group's annual
financial statements as at 31 December 2016. There have been no changes in any
risk management policies since the year end.
Fair value estimation
The table below analyses financial instruments carried at fair value, by
valuation method. The different levels have been defined as follows:
- Quoted prices (unadjusted) in active markets for identical assets and
liabilities (Level 1).
- Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices) (Level 2).
- Inputs for the asset or liability that are not based on observable market
data (that is, unobservable inputs) (Level 3).
The following table presents the Group's assets and liabilities that are
measured at fair value at 30 June 2017:
£m Level 1 Level 2 Level 3 Total
2017
Assets
Available-for-sale investments
- Unlisted - 24.4 - 24.4
Derivative financial instruments - 0.1 - 0.1
Total assets - 24.5 - 24.5
Liabilities
Derivative financial instruments - 0.1 - 0.1
Total liabilities - 0.1 - 0.1
The following table presents the Group's assets and liabilities that are
measured at fair value at 31 December 2016:
£m Level 1 Level 2 Level 3 Total
2016
Assets
Available-for-sale investments
- Unlisted - 20.8 - 20.8
Derivative financial instruments - 0.3 - 0.3
Total assets - 21.1 - 21.1
Liabilities
Derivative financial instruments - 0.3 - 0.3
Total liabilities - 0.3 - 0.3
There were no transfers between levels of the fair value hierarchy in the
period.
There were no changes in valuation techniques during the period.
The fair value of all other financial assets and liabilities approximate their
carrying amount.
Valuation techniques
Level 1 instruments are those whose fair values are based on quoted market
prices. The Group has no Level 1 instruments.
Level 2 instruments include investment funds, the fair value of these funds
are based on underlying asset values determined by the Fund Manager's audited
annual financial statements. The fair value of other unlisted investments also
included as level 2 are based on price earnings models.
If one or more of the significant inputs is not based on observable market
data, the instrument is included in Level 3. The Group has no Level 3
instruments.
6. Segment analysis
Six months to 30 June 2017 Trans-action Advisory Property and Facilities Manage-ment Consult-ancy Invest-ment Manage-ment Other Total
(unaudited) £m £m £m £m £m £m
Revenue
United Kingdom
- commercial 39.4 62.9 71.0 12.0 1.1 186.4
- residential 55.0 13.3 20.6 - - 88.9
Total United Kingdom 94.4 76.2 91.6 12.0 1.1 275.3
Continental Europe 26.4 20.0 7.3 18.3 - 72.0
Asia Pacific
- commercial 67.6 150.4 22.1 3.3 - 243.4
- residential 20.1 - - - - 20.1
Total Asia Pacific 87.7 150.4 22.1 3.3 - 263.5
North America 103.6 - - - - 103.6
Total revenue 312.1 246.6 121.0 33.6 1.1 714.4
Underlying profit/(loss) before tax
United Kingdom
- commercial 4.5 4.2 5.2 2.4 (3.5) 12.8
- residential 5.4 0.8 2.8 - - 9.0
Total United Kingdom 9.9 5.0 8.0 2.4 (3.5) 21.8
Continental Europe (0.9) (1.0) (0.4) 3.8 - 1.5
Asia Pacific
- commercial 9.7 6.2 2.6 0.4 - 18.9
- residential 2.9 - - - - 2.9
Total Asia Pacific 12.6 6.2 2.6 0.4 - 21.8
North America 3.0 - - - - 3.0
Underlying profit/(loss) before tax 24.6 10.2 10.2 6.6 (3.5) 48.1
Six months to 30 June 2016 Trans-action Advisory Property and Facilities Manage-ment Consult-ancy Invest-ment Manage-ment Other Total
(unaudited) £m £m £m £m £m £m
Revenue
United Kingdom
- commercial 32.1 61.1 61.0 11.7 - 165.9
- residential 57.2 12.6 20.1 - - 89.9
Total United Kingdom 89.3 73.7 81.1 11.7 - 255.8
Continental Europe 22.4 17.3 7.6 15.8 - 63.1
Asia Pacific
- commercial 48.7 128.0 16.4 - - 193.1
- residential 16.3 - - - - 16.3
Total Asia Pacific 65.0 128.0 16.4 - - 209.4
North America 94.4 - - - - 94.4
Total revenue 271.1 219.0 105.1 27.5 - 622.7
Underlying profit/(loss) before tax
United Kingdom
- commercial 2.7 4.2 4.6 2.6 (2.8) 11.3
- residential 7.4 0.7 2.6 - - 10.7
Total United Kingdom 10.1 4.9 7.2 2.6 (2.8) 22.0
Continental Europe (1.2) (1.0) 0.8 1.3 - (0.1)
Asia Pacific
- commercial 3.6 6.3 0.2 - - 10.1
- residential 3.0 - - - - 3.0
Total Asia Pacific 6.6 6.3 0.2 - - 13.1
North America 7.8 - - - - 7.8
Underlying profit/(loss) before tax 23.3 10.2 8.2 3.9 (2.8) 42.8
Year ended to 31 December 2016 Trans-action Advisory Property and Facilities Manage-ment Consult-ancy Invest-ment Manage-ment Other Total
(audited) £m £m £m £m £m £m
Revenue
United Kingdom
- commercial 86.0 130.4 145.3 25.9 - 387.6
- residential 124.4 28.5 37.8 - - 190.7
Total United Kingdom 210.4 158.9 183.1 25.9 - 578.3
Continental Europe 71.5 40.1 19.3 39.7 - 170.6
Asia Pacific
- commercial 129.7 273.8 37.9 6.4 - 447.8
- residential 38.1 - - - - 38.1
Total Asia Pacific 167.8 273.8 37.9 6.4 - 485.9
North America 211.1 - - - - 211.1
Total revenue 660.8 472.8 240.3 72.0 - 1,445.9
Underlying profit/(loss) before tax
United Kingdom
- commercial 14.7 8.7 16.3 6.4 (11.3) 34.8
- residential 17.5 2.6 5.9 - - 26.0
Total United Kingdom 32.2 11.3 22.2 6.4 (11.3) 60.8
Continental Europe 5.0 (2.2) 1.3 9.4 - 13.5
Asia Pacific
- commercial 20.6 14.5 2.4 1.8 - 39.3
- residential 3.3 - - - - 3.3
Total Asia Pacific 23.9 14.5 2.4 1.8 - 42.6
North America 18.9 - - - - 18.9
Underlying profit/(loss) before tax 80.0 23.6 25.9 17.6 (11.3) 135.8
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 revenue, 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 7.
7. Underlying profit before tax
The Directors seek to present a measure of underlying performance which is not
impacted by exceptional items or items considered non-operational in nature.
This measure is described as 'underlying' and is used by management to assess
and monitor performance.
Six months to 30 June 2017 (unaudited) Six months to 30 June 2016 (unaudited) Year ended 31 December 2016 (audited)
£m £m £m
Reported profit before tax 32.4 25.5 99.8
Adjustments:
- Amortisation of acquired intangible assets (excluding software) 1.9 2.1 4.0
- Impairment of available-for-sale investment - 0.4 -
- Share-based payment adjustment (0.4) (1.4) (2.4)
- Net profit on disposal of available-for-sale investments, joint ventures and associates (0.9) (0.5) (0.1)
- Restructuring costs 1.8 1.7 5.8
- Acquisition-related costs 13.3 15.0 28.7
Underlying profit before tax 48.1 42.8 135.8
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.
Acquisition-related costs include £8.4m of provisions for payments in relation
to the acquisition of Studley, Inc. which are expensed through the income
statement in line with IFRS 3 (revised), 'Business Combinations' ('IFRS 3'),
to reflect the requirement for the recipients to remain actively engaged in
the business at the payment date. Acquisition-related costs also include £1.4m
for payments in relation to Savills Investment Management's acquisition of
Merchant Capital (Japan) in May 2014 and £3.5m of provisions for future
payments relating to acquisitions in the UK (primarily Smiths Gore and GBR
Phoenix Beard), North America and Continental Europe.
Restructuring costs includes costs of integration activities in relation to
significant business acquisitions (primarily Smiths Gore in the UK and Savills
Investment Management's acquisition of SEB).
8. 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.
Six months to 30 June 2017 (unaudited) Six months to 30 June 2016 (unaudited) Year ended 31 December 2016 (audited)
£m £m £m
UK
- Current tax 5.7 3.8 14.1
- Deferred tax (1.6) (0.4) (3.3)
Foreign tax
- Current tax 9.1 3.7 16.1
- Deferred tax (3.0) 2.0 5.2
Income tax expense 10.2 9.1 32.1
The forecast Group effective tax rate is 31.5% (30 June 2016: 35.7% and 31
December 2016: 32.1%), which is higher (30 June 2016 and 31 December 2016:
higher) than the UK standard effective annual rate of corporation tax of
19.25% (30 June 2016 and 31 December 2016: 20.0%). This reflects permanent
disallowable expenses, including acquisition costs. The Group underlying
effective tax rate was 26.6% (30 June 2016: 29.0% and 31 December 2016:
26.1%).
9. Dividends
Six months to 30 June 2017 (unaudited) Six months to 30 June 2016 (unaudited) Year ended 31 December 2016 (audited)
£m £m £m
Amounts recognised as distribution to equity holders in the year:
Ordinary final dividend of 10.1p per share (2016: 8.0p) 13.5 10.7 10.7
Supplemental interim dividend of 14.5p per share (2016: 14.0p) 19.5 18.7 18.7
Interim dividend of 4.4p per share - - 6.0
33.0 29.4 35.4
Proposed interim dividend for the six months ended 30 June 2017 £6.3m
The Board has declared an interim dividend for the six months ended 30 June
2017 of 4.65p per ordinary share (30 June 2016: 4.4p) to be paid on 4 October
2017 to shareholders on the register on 8 September 2017. The interim dividend
has not been recognised in these interim financial statements. It will be
recognised in equity in the year to 31 December 2017.
10(a). Basic and diluted earnings per share
2017 2017 2017 2016 2016 2016
Earnings Shares EPS Earnings Shares EPS
Six months to 30 June (unaudited) £m million pence £m million pence
Basic earnings per share 21.9 136.2 16.1 16.0 137.4 11.6
Effect of additional shares issuable under option - 3.1 (0.4) - 2.9 (0.2)
Diluted earnings per share 21.9 139.3 15.7 16.0 140.3 11.4
2016 2016 2016
Earnings Shares EPS
Year to 31 December (audited) £m million pence
Basic earnings per share 66.9 137.2 48.8
Effect of additional shares issuable under option - 3.0 (1.1)
Diluted earnings per share 66.9 140.2 47.7
10(b). Underlying basic and diluted earnings per share
2017 2017 2017 2016 2016 2016
Earnings Shares EPS Earnings Shares EPS
Six months to 30 June (unaudited) £m million pence £m million pence
Basic earnings per share 21.9 136.2 16.1 16.0 137.4 11.6
- Amortisation of acquired intangible assets (excluding software) after tax 1.1 - 0.8 1.2 - 0.9
- Impairment of available-for-sale investment after tax - - - 0.4 - 0.3
- Share-based payment adjustment after tax (0.3) - (0.2) (1.1) - (0.8)
- Restructuring costs after tax 1.6 - 1.1 1.5 - 1.1
- Profit on disposal of available-for-sale investments, joint ventures and associates after tax (0.8) - (0.6) (0.5) - (0.4)
- Acquisition-related costs after tax 12.5 - 9.2 14.6 - 10.6
- Forecast annual tax rate adjustment (1.0) - (0.7) (2.1) - (1.5)
Underlying basic earnings per share 35.0 136.2 25.7 30.0 137.4 21.8
Effect of additional shares issuable under option - 3.1 (0.6) - 2.9 (0.4)
Underlying diluted earnings per share 35.0 139.3 25.1 30.0 140.3 21.4
2016 2016 2016
Earnings Shares EPS
Year to 31 December (audited) £m million pence
Basic earnings per share 66.9 137.2 48.8
- Amortisation of acquired intangible assets (excluding software) after tax 2.2 - 1.6
- Share-based payment adjustment after tax (1.8) - (1.3)
- Restructuring costs after tax 4.7 - 3.4
- Acquisition-related costs after tax 27.5 - 20.0
Underlying basic earnings per share 99.5 137.2 72.5
Effect of additional shares issuable under option - 3.0 (1.5)
Underlying diluted earnings per share 99.5 140.2 71.0
11. Cash (used in)/generated from operations
Six months to 30 June 2017 (unaudited) Six months to 30 June 2016 (unaudited) Year ended 31 December 2016 (audited)
£m £m £m
Profit for the period 22.2 16.4 67.7
Adjustments for:
Income tax (Note 8) 10.2 9.1 32.1
Depreciation 6.9 6.2 12.7
Amortisation of intangible assets 3.1 3.5 6.9
Net profit on disposal of available-for-sale investments, joint ventures and associates (0.9) (0.5) (0.1)
Net finance cost 0.4 0.4 0.8
Share of post-tax profit from joint ventures and associates (3.1) (2.9) (7.9)
Decrease in employee and retirement obligations (3.1) (3.2) (6.3)
Exchange movements on operating activities 0.3 1.9 2.4
Decrease in provisions (0.4) (1.7) (3.0)
Impairment of available-for-sale investment included within other operating expenses - 0.4 -
Charge for share-based compensation 7.9 4.4 13.4
Operating cash flows before movements in working capital 43.5 34.0 118.7
(Increase)/decrease in work in progress (1.5) 1.1 0.3
Decrease/(increase) in trade and other receivables 47.8 57.4 (17.1)
(Decrease)/increase in trade and other payables (125.1) (148.2) 15.9
Cash (used in)/generated from operations (35.3) (55.7) 117.8
12. Acquisition of subsidiaries
Cresa Partners Orange County, LP
On 7 February 2017 the Group acquired 100% of the equity interest in Cresa
Partners Orange County, LP, expanding the Group's commercial real estate
presence in the region.
Total acquisition consideration is provisionally determined at £9.6m, £4.7m of
which was settled on completion and the remainder relating to the discounted
value of deferred consideration of up to £4.9m (payable in February 2020 and
2021), subject to achievement of certain income targets.
A further £4.7m is payable to certain key staff and is subject to them
remaining actively engaged in the business over a period of up to 6 years;
£3.2m was paid during Q1 2017 and the remainder is payable in September 2018.
As required by IFRS 3 (revised) these payments are expensed to the income
statement over the relevant period of active engagement.
Goodwill of £9.2m 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.
UK acquisitions
During the year, the Group acquired 100% of the equity of Granville
Residential Letting Ltd and Montagu Evans Channel Islands Ltd, the former a
residential lettings business based in the South East and the latter a
commercial real estate service provider in Guernsey, expanding the Savills
brand across the Channel Islands.
Cash consideration for these transactions amounted to £1.4m. The remainder of
the provisionally determined acquisition consideration relates to deferred
consideration of £0.3m.
A further £0.7m is payable to certain key staff and is subject to service
conditions, £0.5m is payable in January 2020 and £0.2m is payable in January
2021. As required by IFRS 3 (revised) these payments are expensed to the
income statement over the relevant period of employment.
Transaction costs of £0.1m were also expensed as incurred to the income
statement.
Goodwill of £1.1m has been provisionally determined. Goodwill is attributable
to the experience and expertise of key staff and is not expected to be
deductible for tax purposes.
The acquired UK businesses contributed revenue of £0.6m and underlying
operating profits of £0.1m to the Group for the period from acquisition to 30
June 2017. Had the acquisitions been made at the beginning of the financial
year, revenue would have been £0.7m and underlying operating profits would
have been £0.2m.
13. Retirement and employee benefit obligations
Defined benefit plans
The Group operates two defined benefit plans.
The Pension Plan of Savills (the 'UK Plan') is a UK-based plan which provided
final salary pension benefits to some employees, but was closed with regard to
future service-based benefit accrual with effect from 31 March 2010. From 1
April 2010, pension benefits for former members of the UK Plan are provided
through the Group's defined contribution Personal Pension Plan.
The Savills Fund Management GMBH Plan (the 'SFM Plan') is a Germany-based plan
which provides final salary benefits to 19 active employees and 95 former
employees. The plan is closed to future service-based benefit accrual.
Significant actuarial pension assumptions are detailed in the Group's Annual
Report and Accounts 2016 and are the same as at 31 December 2016 except for
the following:
UK Plan SFM Plan
Six months to 30 June 2017 Six months to 30 June 2016 Year ended 31December 2016 Six months to 30 June 2017 Six months to 30 June 2016 Year ended 31 December 2016
Expected rate of salary increases 3.25% 3.85% 3.25% 2.50% 2.50% 2.50%
Projection of social security contribution ceiling - - - 2.25% 2.25% 2.25%
Discount rate 2.60% 2.80% 2.70% 2.12% 1.70% 1.84%
Inflation assumption 3.40% 3.00% 3.50% 1.75% 1.75% 1.75%
Rate of increase to pensions in payment
- accrued before 6 April 1997 3.00% 3.00% 3.00% - - -
- accrued after 5 April 1997 3.30% 3.00% 3.40% - - -
- accrued after 5 April 2005 2.30% 2.20% 2.30% - - -
- pension promise before 1 January 1986 - - - 2.25% 2.25% 2.25%
- pension promise after 1 January 1986 - - - 1.75% 1.75% 1.75%
Rate of increase to pensions in deferment
- accrued before 6 April 2001 5.00% 5.00% 5.00% - - -
- accrued after 5 April 2001 2.30% 1.90% 2.40% - - -
- accrued after 5 April 2009 2.30% 1.90% 2.40% - - -
The amounts recognised in the statement of financial position are as follows:
UK Plan 30 June 2017£m 30 June 2016£m 31 December 2016£m
Present value of funded obligations 299.9 272.1 298.4
Fair value of plan assets (267.7) (233.9) (257.6)
Liability recognised in the statement of financial position (included in retirement and employee benefit obligations) 32.2
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