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REG - Savills PLC - Half-year Report

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RNS Number : 6235V  Savills PLC  11 August 2022

11 August 2022

Savills plc

('Savills' or 'the Group')

 

RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2022

STRONG PERFORMANCE COMFORTABLY AHEAD OF PRE-PANDEMIC LEVELS

 

Savills plc, the international real estate advisor, today announces its
unaudited results for the six months ended 30 June 2022.

 

Key Financial Information

 

· Group revenue £1,037.4m, up 11% (9% in constant currency*) (H1 2021:
£932.6m)

· Group underlying profit** before tax £59.2m (H1 2021: £66.1m)

· Group profit before tax £50.4m (H1 2021: £63.3m)

· Underlying basic earnings per share** 32.4p (H1 2021: 35.8p)

· Basic earnings per share 26.8p (H1 2021: 34.2p)

· Interim dividend of 6.6p (H1 2021: 6.0p)

· Net cash***  £149.0m (H1 2021: Net cash £106.7m)

 

* Revenue and underlying profit for the period are translated at the prior
period exchange rates to provide a constant currency comparative.

** Underlying profit before tax ('underlying profit') and underlying basic
earnings per share ('underlying EPS') are calculated on a consistently
reported basis in accordance with Note 3, Note 8 and Note 11(b) to the Interim
Financial Statements.

*** Net cash reflects cash and cash equivalents net of borrowings and
overdrafts in the notional pooling arrangement (see Note 13 and 18).

 

 

Trading performance - Key highlights

 

· Transaction Advisory revenues up 14%

· Commercial Transaction revenue increased 26% overall with growth across all
regions

· Residential Transaction Advisory revenue down 11%; UK residential markets
performed well albeit with anticipated reduction in activity levels

· Less transactional businesses, performed well in aggregate with revenue up
9%

· Property and Facilities Management revenue up 8%, Consultancy revenue up 6%

· Savills Investment Management revenue significantly ahead with Assets under
Management ('AUM') up 9% to €26.5bn (£22.8bn)

 

Commenting on the results, Mark Ridley, Group Chief Executive of Savills plc,
said:

 

"2022 has presented a number of heightened macro-economic, geopolitical, and,
in some locations, continued Covid-related risks to investors, corporates and
to many people's personal lives. I am delighted with the responses of our
people and our clients to doing business in challenging circumstances and
specifically in respect of their support for Ukraine.

 

"Despite staff cost inflation and the anticipated increase in discretionary
costs, we have performed well so far this year, in line with the Board's
expectations. With our strong balance sheet, we are continuing to undertake a
variety of business development activities across the Group to enhance our
service to clients worldwide.

 

"With inflation driving interest rates up globally, a new experience for many
market participants, real estate markets began to adjust in the second
quarter. We expect that process to continue through the second half of the
year. However, there remains significant investor interest in the secure
income characteristics of real estate and occupiers are progressively
focussing on improving the sustainability characteristics of their portfolios
as well as creating environments in which staff can thrive.

 

"At this stage it is too early to predict with any accuracy the potential
impact of the political and economic environment on real estate transaction
volumes globally, although clearly the risk is towards a short term reduction
in activity as markets adjust to, inter alia, rising debt
cost. Notwithstanding this risk, given our performance to date and having
previously taken a cautious view of likely transactional performance in 2022,
at this stage the Board's expectations for the year as a whole remain
unchanged."

 

 

For further information, contact:

 

 Savills                                    020 7409 8030
 Mark Ridley, Group Chief Executive
 Simon Shaw, Group Chief Financial Officer

 Tulchan Communications                     020 7353 4200
 Mark Burgess

 Elizabeth Snow

 

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/) .

 

 

 

Overview

 

The Group has traded well so far in 2022 against a backdrop of geopolitical,
economic, practical (supply chain) and, in some cases, Covid-related
challenges.

 

In the six months to 30 June 2022, Savills delivered revenue of £1,037.4m, an
increase of 11% (9% in constant currency) on the comparable period (H1 2021:
£932.6m). Underlying profit was £59.2m, 10% lower than the first half of
2021 (H1 2021: £66.1m) (11% lower in constant currency) in line with our
expectations. The Group's underlying profit margin was 5.7% (H1 2021: 7.1%).
This reflects staff cost inflation and the anticipated progressive return to
higher levels of marketing, travel and entertainment/events related
expenditure compared with abnormally low levels in 2021.

 

Strong underlying growth compared with the Group's pre-pandemic performance is
illustrated by the fact that H1 2022 revenue and underlying profit were 22%
and 54% respectively ahead of the equivalent performance for H1 2019 (H1 2019
revenue: £847.0m, H1 2019 underlying profit: £38.4m and H1 2019 underlying
profit margin: 4.5%).

 

The Group continues to maintain a strong liquidity position with net cash of
£149.0m at period end (H1 2021: £106.7m).

 

Reported profit before tax, including employment-linked deferred consideration
provisions and transaction-related and restructuring costs was £50.4m (H1
2021: £63.3m).

 

 

Market conditions

 

Q1 2022 started strongly in virtually all "non-Covid affected" markets. The
war in Ukraine, inflation and the rising interest rate cycle began to affect
transaction markets in Q2, initially in the smaller lot sizes, both capital
and lease transactions, as investors and corporates started to factor
inflation and rising debt cost into their decisions. As is customary, this has
manifested itself in significant bid/offer spreads in the market across most
real estate sub sectors.

 

The transaction volume of commercial properties in Asia Pacific fell by 30%
year-on-year in H1 2022. The Omicron variant has undermined the ongoing
recovery of the regional economy, with lockdown restrictions across the
region, which were especially severe in the major cities in China. It is
expected that economic growth in the region will gather momentum in H2 2022,
as lockdown restrictions ease.

 

In Europe, the investment market had a strong start to the year but volumes in
Q2 declined on the same period last year given the geopolitical and economic
backdrop. This has been particularly marked in Germany.

 

The US is seeing both pockets of strength and some headwinds across the
commercial real estate markets. Most pandemic-related concerns have subsided
with all business and economic restrictions lifted. The office market recovery
remains slow, but there is positive momentum and ample opportunity for
occupiers given current dynamics. H1 2022 office leasing volumes were 35%
higher than that seen at H1 2021, with a stronger performance in Q1 versus Q2,
again as a result of growing economic concern for the remainder of the year.

 

Residential markets, particularly in the UK, have remained relatively buoyant
in the first half of 2022 despite increasing economic headwinds. Activity in
the prime housing markets remained particularly robust, despite constrained
levels of publicly available stock. However, price growth has begun to
moderate in response to the rising cost of debt in particular.

 

 

 

Business development during the period

 

The Group has continued to focus on the strategic development of the business,
enabled by the Group's strong balance sheet. In the first half of this year,
we completed the acquisition of several businesses and continue to undertake
significant organic growth initiatives across the platform. In May, the Group
acquired workplace specialist BrickByte in Germany, enhancing Savills ability
to respond to increasing client demand for workplace consulting in this
market. In Indonesia, the Group acquired a full service property business to
bolster our service offering in the region (see Note 14).

 

Technology continues to be an important focus for the Group, and we continue
to benefit from the investment we have made both internally and externally,
through Grosvenor Hill Ventures, across the globe and from our own digital
transformation programmes. In February, we completed the acquisition of
UK-based workplace experience platform Cureoscity (see Note 14). This provides
a digital platform which connects and enhances smart building capabilities and
access control with modules that improve occupier experience and engagement.
Since this acquisition, the platform is being rolled out across our property
management portfolio.

 

Through Grosvenor Hill Ventures, our technology investment subsidiary, we have
continued to support our portfolio business and we also participated in the
Series A funding round of ThirdFort, a platform which improves the customer
experience by digitising many aspects of the core compliance tasks for the
industry.

 

 

Business review

 

The following table sets out Group revenue and underlying profit by operating
segment:

 

 Revenue                             H1 2022  H1 2021  Change

£m
£m
 Transaction Advisory                413.2    362.0    14%
 Consultancy                         184.3    173.4    6%
 Property and Facilities Management  386.1    359.0    8%
 Investment Management               53.8     38.2     41%
 Group revenue                       1,037.4  932.6    11%

 

 Underlying profit                   H1 2022  H1 2021  Change

£m
£m
 Transaction Advisory                22.7     29.1     (22%)
 Consultancy                         14.6     18.8     (22%)
 Property and Facilities Management  18.6     19.2     (3%)
 Investment Management               10.3     7.1      45%
 Unallocated cost                    (7.0)    (8.1)    n/a
 Group underlying profit             59.2     66.1     (10%)

 

The following table sets out Group revenue and underlying profit by
geographical area:

 

 Revenue        H1 2022  H1 2021  Change

£m
£m
 UK             439.2    417.4    5%
 Asia Pacific   311.7    287.2    9%
 CEME           138.1    114.0    21%
 North America  148.4    114.0    30%
 Group revenue  1,037.4  932.6    11%

 

 Underlying profit        H1 2022  H1 2021  Change

£m
£m
 UK                       48.1     53.1     (9%)
 Asia Pacific             18.0     24.0     (25%)
 CEME                     (1.7)    (4.1)    n/a
 North America            1.8      1.2      50%
 Unallocated cost         (7.0)    (8.1)    n/a
 Group underlying profit  59.2     66.1     (10%)

 

Revenue growth of 11% was driven by a combination of normal growth (9%) in the
less transactional service lines, a 26% improvement in commercial transaction
revenues and the anticipated reduction in activity in residential markets.

 

As anticipated, this shift in revenue from residential to commercial
transactions affected UK profits period-on-period. More generally, profits
were impacted globally by significant growth in staff costs after two years of
effective stasis. Furthermore, as anticipated, other expense lines including
marketing, events, travel and entertainment increased by between 50% and 115%
period-on-period as these activities, which were extremely limited in H1 2021,
had largely normalised by H1 2022, albeit in some cases at lower than
pre-Covid levels.

 

 

Transaction Advisory

 

 Revenue        H1 2022  H1 2021  Change

£m
£m
 UK             151.4    142.7    6%
 Asia Pacific   80.4     74.3     8%
 CEME           49.1     39.9     23%
 North America  132.3    105.1    26%
 Total          413.2    362.0    14%

 

Our Transaction Advisory revenues increased by 14% over H1 2021 (12% in
constant currency), with strong revenue growth in North America and CEME.
Underlying profit decreased to £22.7m as a result of both the mix of revenues
and the inflationary cost increases referenced above (H1 2021: £29.1m).

 

UK Commercial

UK Commercial Transaction fee income increased 44% to £55.6m (H1 2021:
£38.5m), with significant growth in both investment and leasing activity.

 

The first six months of 2022 saw an initial strong recovery in commercial
property investment activity, followed by the beginnings of a slowdown as
geo-political and economic events affected investor confidence. Occupational
market trends were more resilient, with office leasing volumes in both central
London and the key regional cities increasing over the comparable period,
albeit activity was still focused on larger lot sizes with good sustainability
characteristics.

 

Logistics markets remained strong with a record level of take-up through the
first half of 2022.

 

Increased revenue resulted in an improved underlying profit margin of 17.8%
(H1 2021: 13.5%)  and underlying profit of £9.9m (H1 2021: £5.2m).

 

UK Residential

In line with our expectations, after the abnormally positive market conditions
of 2021, revenue from Savills UK residential business declined by 8% to
£95.8m (H1 2021: £104.2m), which was a resilient performance against the
backdrop of much reduced stock availability and rising interest rates.

 

In the second hand agency business, Savills overall transaction volumes
exchanged were down 22% in London and 39% in the regional markets following a
record performance in H1 2021. The average value of London and regional
residential property sold by Savills in the period was higher at £2.2m (H1
2021: £1.9m) and £1.4m (H1 2021: £1.2m) respectively.

 

Revenue from the sale of New Homes improved 7% on H1 2021. This reflected
significant growth in the average lot size transacted as a result of increased
exposure to London transactions largely offsetting a reduction in activity in
markets outside the capital.

 

Finally, our Operational Capital Markets business, which advises on the
Private Rented Sector ('PRS'), Student and other institutional residential
markets, delivered 38% revenue growth period-on-period as a consequence of
some individually large transactions in this sector of high investment demand.

 

Underlying profits in the UK residential transaction business decreased to
£13.6m (H1 2021: £20.5m).

 

Asia Pacific Commercial

Commercial Transaction fee income in Asia Pacific increased by 18% (same in
constant currency) to £71.2m (H1 2021: £60.5m). Strong performances in
Japan, Singapore, South Korea and Vietnam more than offset significantly
reduced revenue in mainland China, which was largely due to continued
Covid-related restrictions there for much of the period. Indeed, collectively
mainland China and Hong Kong represented 28% of the Asia Pacific region's
commercial transaction revenue during the period, which contrasts
significantly with our position a decade ago when they represented in excess
of 65%.

 

Overall the Asia Pacific commercial transaction business delivered a stable
underlying profit for the period of £7.4m (H1 2021: £7.4m).

 

Asia Pacific Residential

Residential Transaction fee income in Asia Pacific decreased by 33% to £9.2m
(H1 2021: £13.8m) (-37% in constant currency). This was driven in particular
by COVID-related travel restrictions affecting the high value markets in Hong
Kong and mainland China for much of the period.

 

The reduction in revenues decreased underlying profit to a break-even position
for the first half of the year (H1 2021: £3.7m profit).

 

CEME

In CEME, transactional advisory revenue improved 23% to £49.1m (H1 2021:
£39.9m) with a particularly strong first quarter. The war in Ukraine, supply
chain disruption (including energy) and the consequent inflation and rising
interest rates began to dampen investor and occupier sentiment in Q2
particularly in the key German markets where revenue declined significantly
period-on-period. This was offset by growth in Spain, Netherlands, Sweden,
France and Czech Republic. Overall, cost inflation and the impact of reduced
trading activity in Germany together with recruitment costs across the region
led to a marginal increase in underlying loss for the period of £8.8m (H1
2021: £8.5m loss)

 

North America

In North America, where the Group is substantially dependent upon leasing
activity by corporate occupiers, revenue improved significantly over the prior
comparative period, with growth of 26% to £132.3m (H1 2021: £105.1m). This
was driven by strong performances in the Northeast and Southern markets of the
United States, particularly the three principal Texan markets.

 

The North American business delivered underlying profit of £0.6m which was
marginally below the prior period (H1 2021: £0.8m underlying profit),
reflecting inflationary pressures on employment costs and a return to more
normal levels of expenditure on travel, marketing and other discretionary
spend.

 

 

Consultancy

 

 Revenue        H1 2022  H1 2021  Change

£m
£m
 UK             109.6    109.9    n/a
 Asia Pacific   39.5     36.2     9%
 CEME           19.1     18.4     4%
 North America  16.1     8.9      81%
 Total          184.3    173.4    6%

 

The Consultancy business delivered robust growth in the period. The 6%
increase in revenue (5% in constant currency) to £184.3m (H1 2021: £173.4m)
included a full period of ownership of T3 Advisors ('T3'), a leading US real
estate advisor and consultant to the life sciences and technology sectors,
acquired in June 2021.

 

In the UK, revenue was broadly in line with the prior period with growth in
the Building and Project Consultancy, Housing and Planning divisions offset by
a decline in Development Consultancy revenue. During the period, the Group
acquired the trade and assets of Cureoscity, an expanding technology platform
to support the interactions between landlord, occupier and building manager in
commercial real estate. This, together with staff cost inflation resulted in a
lower profit contribution from the UK period-on-period.

 

The Asia Pacific business delivered revenue growth of 9% (6% on a constant
currency basis), driven by project management consultancy growth in South
Korea and Singapore, benefitting from the acquisition of Merx Holdings (SG)
Pte Ltd at the end of 2021. This offset declines in consultancy activity in
Hong Kong and Japan.

 

Underlying profit for the region declined period-on-period reflecting further
investment in the platform in China, Hong Kong and the regional project
management team.

 

In the CEME business a stable revenue performance comprised growth in Ireland,
Italy, Czech Republic and the Middle East, principally in valuation business,
offset by reductions in other areas. Underlying profit remained stable after
accounting for staff cost inflation generally and specific expansion costs in
Germany.

 

The significant growth in North America Consultancy revenue reflected a full
period of ownership of Savills T3, which was acquired mid-June 2021, and a
strong growth performance from Savills Macro, our project management business
in the region.

 

Underlying profit of the Consultancy business decreased by 22% to £14.6m (H1
2021: £18.8m), reflecting inflationary staff cost pressures, further
investment in the platform across the Asia Pacific region and the impact of
development stage operating losses of the Cureoscity platform in the UK.

 

 

Property and Facilities Management

 

 Revenue       H1 2022  H1 2021  Change

£m
£m
 Asia Pacific  188.4    173.7    8%
 UK            149.6    145.2    3%
 CEME          48.1     40.1     20%
 Total         386.1    359.0    8%

 

Our Property and Facilities Management business increased global revenues by
8% (5% in constant currency) to £386.1m (H1 2021: £359.0m). Savills total
area under management increased 1% to 2.42bn sq ft (H1 2021: 2.40bn sq ft).

 

In Asia Pacific, revenues increased by 8% (3% in constant currency), driven by
Hong Kong, mainland China, Vietnam and Singapore. However, the absence of
Employment Support subsidies, which had benefited H1 2021, together with staff
cost inflation meant that underlying profit declined by approximately 10%
period on period.

 

UK Property and Facilities Management revenues grew 3%. This comprised 2%
commercial and rural management growth and 9% residential management growth
(primarily lettings). Underlying profit reduced by 7% period-on-period
reflecting inflationary pressure on salaries and expansion of the treasury and
client accounting team.

 

The CEME business delivered strong revenue growth of 20% (23% in constant
currency) driven by Germany, Ireland, Spain and the Middle East. This growth
ensured that the business returned to an underlying profit, from the
underlying loss position of H1 2021, despite the continued investment in
scaling the German business.

 

Overall, underlying profit for the Property and Facilities Management business
decreased by 3% to £18.6m (H1 2021: £19.2m).

 

 

Investment Management

 

Revenue from Investment Management increased by 41% to £53.8m (H1 2021:
£38.2m), including a full period of revenue from DRC Savills Investment
Management (acquired at the end of May 2021). Base management fees represented
approximately 77% (HY 2021: 78%) of Investment Management gross revenues.

 

The impact of geopolitical and economic events has clearly affected investor
sentiment and price transparency in a number of real estate sectors. However,
78% of SIM funds (by AUM) continued to exceed their benchmark returns on a
five year rolling basis.

 

AUM increased by 9% to €26.5bn (H1 2021: €24.3bn) as a result of organic
growth across the business (H1 2022: £22.8bn, H1 2021: £20.9bn). The
relationship with Samsung Life progressed well during the period, with
investment commitments confirmed for three recently launched fund products and
one new strategy to be launched imminently. Deployment of some of these
commitments is expected through H2 2022.

 

The full period effect of DRC Savills Investment Management together with
relatively strong performance fee income drove an increase of 45% in
underlying profit to £10.3m (H1 2021: £7.1m), which represented a 19.1%
underlying profit margin (H1 2021: 18.6%).

 

 

Unallocated/central revenue and cost

 

The unallocated cost segment represents other costs, expenses and net interest
not directly allocated to the operating activities of the Group's business
segments. The H1 decrease in unallocated net costs of 14% to £7.0m (H1 2021:
£8.1m) primarily reflects decreases in the profit-related bonus provision.

 

 

Transaction-related and restructuring costs

 

During the period the Group incurred an aggregate restructuring charge of
£0.1m (H1 2021: £0.1m) and transaction-related costs of £5.9m (H1 2021:
£5.6m). The restructuring charge reflects the IFRS 2: "Share-based Payment"
charge of deferred shares with a 5 year vesting period, issued in relation to
the restructuring upon acquisition of Aguirre Newman at the end of 2017.
Transaction-related costs in the period primarily represent provisions for
future consideration payments which are contingent on the continuity of
recipients' employment at the time of payment together with professional
advisory fees in relation to significant transactions in the period. The
majority of the charge relates to the most recent acquisitions in the
Investment Management, US and CEME businesses (see Note 8).

 

 

Earnings and financial position

 

The Group's underlying profit margin in the period was 5.7% (H1 2021: 7.1%).
This reflects a return to higher levels of marketing, travel and
entertainment/events related expenses, with such expenditure at abnormally low
levels in 2021 due to the impact of Covid, alongside the impact of higher
staff cost inflation than for some years.

 

Basic earnings per share for the six months to 30 June 2022 decreased to
26.8p (H1 2021: 34.2p). Underlying basic earnings per share decreased to 32.4p
(H1 2021: 35.8p).

 

Cash and cash equivalents, net of overdrafts in notional pooling arrangements
and bank overdrafts (see note 18), at the period end stood at £303.2m (30
June 2021: £293.6m, 31 December 2021: £490.0m). The Group typically has a
net outflow of cash in the first 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 of the year.

 

The Group had borrowings at 30 June 2022 of £156.8m (30 June 2021: £187.1m,
31 December 2021: £150.5m). These principally comprise £150.0m (30 June 2021
and 31 December 2021: £150.0m) of 7, 10 and 12 year fixed rate notes
(carrying a weighted average interest rate of 3.19%) which were issued in June
2018. At 30 June 2021, borrowings also included £14.1m drawn under a
revolving credit facility in North America (30 June 2021 and 31 December 2021:
none). At 30 June 2022, £5.0m of the Group's UK revolving credit facility
('RCF') was drawn (30 June 2021: £24.0m, 31 December 2021: none), with a
total of £420.0m of undrawn borrowing facilities available to the Group (30
June 2021: £373.1m, 31 December 2021: £422.2m).

 

Cash and cash equivalents net of borrowings and overdrafts in notional pooling
arrangements was £149.0m (30 June 2021: £106.7m, 31 December 2021:
£340.7m).

 

The funding level of the defined benefit Savills Pension Scheme in the UK,
which is closed to future service based accrual, improved during the period
primarily as a result of a higher discount rate reducing the value of the
Scheme's liabilities. The Scheme was in a surplus position of £33.3m at 30
June 2022 (30 June 2021: £4.5m surplus, 31 December 2021: £17.4m surplus).

 

 
Impact of foreign exchange

 

The Group generates revenues and profits in various territories and currencies
because of its international footprint. Those results are translated on
consolidation at the foreign exchange rates prevailing at the time. These
exchange rates vary from period to period, so the Group presents some of its
results on a constant currency basis. This means that the current period
results are retranslated using the prior period exchange rates. This
eliminates the effect of exchange from the period-on-period comparison of
results.

 

The constant currency effect on revenue, profit and underlying profit is
summarised below:

                               Six months to 30 June 2022  Constant currency effect  Six months to 30 June 2022 at constant currency
                               £m                          £m                        £m
 Revenue                       1,037.4                     16.4                      1,021.0
 Profit before tax             50.4                        0.1                       50.3
 Underlying profit before tax  59.2                        0.2                       59.0

 

 

Interim Dividend

 

In view of the overall performance of the Group the Board has declared an
interim dividend of 6.6p (H1 2021: 6.0p). The dividend, which is designed to
provide sustainable real income growth and be supported by the less
transactional business earnings, will be payable on 5 October 2022 to
shareholders on the register at 2 September 2022.

 

 

Principal and emerging risks

 

The key principal and emerging risks relating to the Group's operations for
the next six months were considered to remain consistent with those disclosed
in the Group's Annual Report and Accounts 2021. These are listed below,
please refer to pages 31 to 38 thereof or to our investors' page on
www.savills.com (http://www.savills.com) .

 

·      Business conditions, general economy and geopolitical issues

·      Achieving the right market positioning in response to the needs
of our clients

·      Recruitment and retention of high-calibre staff

·      Reputational and brand risk

·      Legal risk

·      Failure or significant interruption to IT systems causing
disruption to client service

·      Operational resilience/Business Continuity (including pandemics)

·      Business conduct

·      Changes in the regulatory environment/regulatory breaches

·      Acquisition/integration risk

·      Environment and sustainability

 

 

Summary and outlook

 

2022 has presented a number of heightened macro-economic, geopolitical, and,
in some locations, continued Covid-related risks to investors, corporates and
to many people's personal lives. I am delighted with the responses of our
people and our clients to doing business in challenging circumstances and
specifically in respect of their support for Ukraine.

 

We have performed well so far this year, in line with the Board's
expectations, and, with our strong balance sheet, we are continuing to
undertake a variety of business development activities across the Group to
enhance our service to clients worldwide.

 

With inflation driving interest rates up globally, a new experience for many
market participants, real estate markets began to adjust in the second
quarter. We expect that process to continue through the second half of the
year. However, there remains significant investor interest in the secure
income characteristics of real estate and occupiers are progressively
focussing on improving the sustainability characteristics of their portfolios
as well as creating environments in which staff can thrive.

 

At this stage it is too early to predict with any accuracy the potential
impact of the political and economic environment on real estate transaction
volumes globally, although clearly the risk is towards a short term reduction
in activity as markets adjust to, inter alia, rising debt cost.
Notwithstanding this risk, given our performance to date and having previously
taken a cautious view of likely transactional performance in 2022, at this
stage the Board's expectations for the year as a whole remain unchanged.

 

 

 

 

Mark Ridley
 

Group Chief Executive
 

 

 

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

The Directors confirm that this condensed consolidated interim financial
statements have been prepared in accordance with International Accounting
Standard 34, 'Interim Financial Reporting', as contained in UK-adopted
international accounting standards and that the interim management report
includes a fair review of the information required by DTR 4.2.7R and DTR
4.2.8R, namely:

 

 ●    an indication of important events that have occurred during the first six
      months and their impact on the condensed consolidated interim financial
      statements and a description of the principal risks and uncertainties for the
      remaining six months of the financial year; and

 ●    material related party transactions in the first six months of the financial
      year and any material changes in the related party transactions described in
      the last Annual Report.

 

The Directors are responsible for the maintenance and integrity of the
Company's website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in other
jurisdictions.

 

The Directors of Savills plc are listed in the Company's Report and Accounts
for the year ended 31 December 2021. A list of current Directors is maintained
on the Savills plc website: www.savills.com.

 

By order of the Board

 

 

 

 

Mark Ridley, Group Chief Executive

Simon Shaw, Group Chief Financial Officer

10 August 2022

 

 

Forward-Looking Statements

 

The financial information contained in this announcement has not been audited.
Certain statements made in this announcement are forward-looking statements.
Undue reliance should not be placed on such statements, which are based on
current expectations and are subject to a number of risks and uncertainties
that could cause actual results to differ materially from any expected future
results in forward-looking statements.

 

The Company accepts no obligation to publicly revise or update these
forward-looking statements or adjust them to future events or developments,
whether as a result of new information, future events or otherwise, except to
the extent legally required.

 

 

Independent review report to Savills plc

 

Conclusion

We have been engaged by Savills Plc to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2022 which comprises the condensed interim consolidated income statement,
the condensed interim consolidated statement of comprehensive income, the
condensed interim consolidated statement of financial position, the condensed
interim consolidated statement of changes in equity, the condensed interim
consolidated statement of cash flows and the related explanatory notes 1 to
21.

 

We have read the other information contained in the half yearly financial
report and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set of
financial statements.

 

Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2022 is not prepared, in all
material respects, in accordance with UK adopted International Accounting
Standard 34 and the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.

 

Basis for Conclusion

We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" issued by the Financial Reporting
Council. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with
International Standards on Auditing (UK) and consequently does not enable us
to obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.

 

As disclosed in note 2, the annual financial statements of the group are
prepared in accordance with UK adopted international accounting standards. The
condensed consolidated interim set of financial statements included in this
half-yearly financial report has been prepared in accordance with UK adopted
International Accounting Standard 34, "Interim Financial Reporting".

 

Conclusions Relating to Going Concern

Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.

 

This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.

 

Responsibilities of the directors

The directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.

 

In preparing the half-yearly financial report, the directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.

 

Auditor's Responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.

 

Use of our report

This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our work, for this report, or for the conclusions we
have formed.

 

 

 

Ernst & Young LLP

London

10 August 2022

 

Savills plc

Condensed interim consolidated income statement

for the period ended 30 June 2022

 

 

                                                                                                                              Six months to 30 June 2021  Year ended

                                                                                                 Six months to 30 June 2022   restated*                   31 December 2021
                                                                                                 (unaudited)                         (unaudited)          (audited)
                                                                         Note                    £m                           £m                          £m

 Revenue                                                                 7                       1,037.4                      932.6                       2,147.0
 Less:
 Employee benefits expense                                                                       (688.2)                      (621.0)                     (1,413.1)
 Depreciation                                                                                    (32.0)                       (32.0)                      (63.4)
 Amortisation of intangible assets                                                               (8.0)                        (5.0)                       (14.2)
 Impairment of intangible assets arising from business combinations and                          -                            -                           (5.2)
 goodwill
 Other operating expenses                                                                        (260.6)                      (211.7)                     (465.2)
 Net impairment reversals/(losses) of financial assets                                           2.4                          (0.3)                       (4.0)
 Other net gains                                                                                 0.1                          3.0                         2.0
 Share of post-tax profit from joint ventures and associates                                     4.7                          4.6                         12.6
 Operating profit                                                                                55.8                         70.2                        196.5

 Finance income                                                                                  2.3                          0.8                         1.9
 Finance costs                                                                                   (7.7)                        (7.7)                       (15.3)
 Net finance cost                                                                                (5.4)                        (6.9)                       (13.4)

 Profit before income tax                                                                        50.4                         63.3                        183.1

 Income tax expense                                                      9                       (12.7)                       (15.4)                      (36.4)

 Profit for the period                                                                           37.7                         47.9                        146.7

 Attributable to:
 Owners of the parent                                                                            37.0                         47.7                        146.2
 Non-controlling interests                                                                       0.7                          0.2                         0.5
                                                                                                 37.7                         47.9                        146.7

 Earnings per share
 Basic earnings per share                                                11(a)                   26.8p                        34.2p                       104.9p
 Diluted earnings per share                                              11(a)                   25.2p                        33.4p                       99.8p

 * See Notes 4 and 14 for details on the prior period restatement.

 Supplementary income statement information

 Reconciliation to underlying profit before income tax
 Profit before income tax                                                                        50.4                         63.3                        183.1
  - restructuring and transaction-related costs                          8                       6.0                          5.7                         17.3
  - other underlying adjustments                                         8                       2.8                          (2.9)                       (0.1)
 Underlying profit before income tax                                     8                       59.2                         66.1                        200.3

Notes 1 to 22 are an integral part of these condensed interim financial
statements.

 

 

 

Savills plc

Condensed interim consolidated statement of comprehensive income

for the period ended 30 June 2022

 

                                                                      Six months to 30 June 2022 (unaudited)  Six months to 30 June 2021  Year ended 31 December 2021 (audited)

                                                                                                              restated* (unaudited)
                                                                      £m                                      £m                          £m
 Profit for the period                                                37.7                                    47.9                        146.7

 Other comprehensive income/(loss)
 Items that will not be reclassified to profit or loss:
 Re-measurement of defined benefit pension scheme obligations         17.4                                    8.2                         21.3
 Changes in fair value of equity investments at FVOCI                 (5.2)                                   (0.1)                       (4.4)
 Tax on other items that will not be reclassified                     (3.9)                                   (1.7)                       (5.3)
 Total items that will not be reclassified to profit or loss          8.3                                     6.4                         11.6

 Items that may be reclassified subsequently to profit or loss:
 Currency translation differences                                     37.7                                    (12.6)                      (8.9)
 Tax on items that may be reclassified                                0.4                                     2.4                         (0.1)
 Total items that may be reclassified subsequently to profit or loss  38.1                                    (10.2)                      (9.0)

 Other comprehensive income/(loss) for the period                     46.4                                    (3.8)                       2.6

 Total comprehensive income for the period                            84.1                                    44.1                        149.3

 Total comprehensive income attributable to:
 Owners of the parent                                                 83.0                                    43.9                        148.8
 Non-controlling interests                                            1.1                                     0.2                         0.5
                                                                      84.1                                    44.1                        149.3

 

* See Note 14 for details on the prior period restatement.

 

Notes 1 to 22 are an integral part of these condensed interim financial
statements.

 

 

 

Savills plc

Condensed interim consolidated statement of financial position

at 30 June 2022

                                                                                    30 June 2022 (unaudited)  30 June 2021 restated**  31 December 2021

                                                                                                              (unaudited)              (audited)
                                                                              Note  £m                        £m                       £m
 Assets: Non-current assets
 Property, plant and equipment                                                      68.9                      64.0                     66.3
 Right of use assets                                                                235.7                     230.0                    232.6
 Goodwill                                                                           436.3                     407.3                    411.3
 Intangible assets                                                                  69.5                      78.7                     72.6
 Investments in joint ventures and associates                                       35.8                      34.0                     32.8
 Deferred income tax assets                                                         37.4                      44.3                     36.1
 Financial assets at fair value through other comprehensive income ('FVOCI')  6     28.3                      32.5                     30.4
 Retirement benefit surplus                                                   15    36.0                      4.5                      18.1
 Contract related assets                                                            3.0                       3.2                      3.4
 Trade and other receivables                                                        53.0                      33.4                     41.2
                                                                                    1,003.9                   931.9                    944.8
 Assets: Current assets
 Contract assets                                                                    12.0                      12.4                     9.3
 Trade and other receivables                                                        533.0                     444.6                    602.6
 Income tax receivable                                                              6.0                       3.7                      0.9
 Derivative financial instruments                                             6     -                         0.2                      0.1
 Cash and cash equivalents*                                                   18    474.7                     481.4                    689.7
                                                                                    1,025.7                   942.3                    1,302.6
 Liabilities: Current liabilities
 Borrowings                                                                   17    8.4                       39.0                     2.1
 Overdrafts in notional pooling arrangement*                                  18    168.9                     187.7                    198.5
 Lease liabilities                                                                  51.9                      44.7                     48.0
 Derivative financial instruments                                             6     1.0                       0.6                      0.9
 Contract liabilities                                                               24.9                      18.7                     14.5
 Trade and other payables                                                           536.2                     486.7                    738.5
 Income tax liabilities                                                             16.0                      15.0                     15.9
 Employee benefit obligations                                                 15    25.8                      21.6                     16.9
 Provisions                                                                         6.7                       11.1                     9.2
                                                                                    839.8                     825.1                    1,044.5
 Net current assets                                                                 185.9                     117.2                    258.1
 Total assets less current liabilities                                              1,189.8                   1,049.1                  1,202.9
 Liabilities: Non-current liabilities
 Borrowings                                                                   17    148.4                     148.1                    148.4
 Lease liabilities                                                                  239.3                     238.1                    237.0
 Derivative financial instruments                                             6     2.5                       0.6                      2.6
 Other payables                                                                     17.5                      14.0                     20.0
 Retirement and employee benefit obligations                                  15    23.0                      13.5                     20.3
 Provisions                                                                         20.9                      18.1                     20.0
 Deferred income tax liabilities                                                    2.2                       11.9                     1.2
                                                                                    453.8                     444.3                    449.5
 Net assets                                                                         736.0                     604.8                    753.4

 

 Equity:
 Share capital                                      3.6    3.6    3.6
 Share premium                                      104.8  97.3   104.4
 Other reserves                                     107.7  76.9   76.2
 Retained earnings                                  489.6  426.3  540.0
 Equity attributable to owners of the parent        705.7  604.1  724.2
 Non-controlling interests                          30.3   0.7    29.2
 Total equity                                       736.0  604.8  753.4

 

Notes 1 to 22 are an integral part of these condensed interim financial
statements.

 

* Included within cash and cash equivalents are cash balances of £169.3m (30
June 2021: £193.3m, 31 December 2021: £201.5m) that are operated within a
notional cash pooling arrangement together with overdraft balances of £168.9m
(30 June 2021: £187.7m, 31 December 2021: £198.5m) presented above in
current liabilities. See Note 18 for further details.

 

** See Notes 4 and 14 for details on the prior period restatement.

Savills plc

Condensed interim consolidated statement of changes in equity

for the period ended 30 June 2022

                                                                        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

 (audited)
 Profit for the period                                                  -                   -              -               37.0               37.0      0.7                        37.7
 Other comprehensive income/(loss):
 Re-measurement of defined benefit pension scheme and employee benefit  -                   -              -               17.4               17.4      -                          17.4
 obligations
 Changes in fair value of financial assets at FVOCI                     -                   -              (5.2)           -                  (5.2)     -                          (5.2)
 Currency translation differences                                       -                   -              37.3            -                  37.3      0.4                        37.7
 Tax on other items directly taken to other comprehensive income        -                   -              -               (3.5)              (3.5)     -                          (3.5)
 Total comprehensive income for the period                              -                   -              32.1            50.9               83.0      1.1                        84.1
 Employee share option scheme:
 - Value of services provided                                           -                   -              -               15.1               15.1      -                          15.1
 - Tax on employee share option schemes                                 -                   -              -               (2.1)              (2.1)     -                          (2.1)
 Purchase of treasury shares                                            -                   -              -               (37.6)             (37.6)    -                          (37.6)
 Shares issued                                                          -                   0.4            -               -                  0.4       -                          0.4
 Tax on other items taken to reserves                                   -                   -              -               (0.1)              (0.1)     -                          (0.1)
 Disposal of financial assets at FVOCI                                  -                   -              (0.2)           -                  (0.2)     -                          (0.2)
 Transfer between equity accounts                                       -                   -              (0.4)           -                  (0.4)     0.4                        -
 Dividends (Note 10)                                                    -                   -              -               (76.6)             (76.6)    (0.4)                      (77.0)
 Balance at 30 June 2022 (unaudited)                                    3.6                 104.8          107.7           489.6              705.7     30.3                       736.0

 

                                                                        Attributable to owners of the parent
                                                                        Share capital  Share premium  Other reserves  Retained earnings  Total       Non-controlling interests  Total equity

                                                                                                                      restated*          restated*                              restated*
                                                                        £m             £m             £m              £m                 £m          £m                         £m
 Balance at 1 January 2021                                              3.6            97.2           90.0            390.1              580.9       0.7                        581.6

 (audited)
 Profit for the period                                                  -              -              -               47.7               47.7        0.2                        47.9
 Other comprehensive (loss)/income:
 Changes in fair value of financial assets at FVOCI                     -              -              (0.1)           -                  (0.1)       -                          (0.1)
 Re-measurement of defined benefit pension scheme and employee benefit  -              -              -               8.2                8.2         -                          8.2
 obligations
 Tax on other items directly taken to other comprehensive income        -              -              -               0.7                0.7         -                          0.7
 Currency translation differences                                       -              -              (12.6)          -                  (12.6)      -                          (12.6)
 Total comprehensive (loss)/income for the period                       -              -              (12.7)          56.6               43.9        0.2                        44.1
 Employee share option scheme:
 - Value of services provided                                           -              -              -               11.1               11.1        -                          11.1
 Purchase of treasury shares                                            -              -              -               (8.3)              (8.3)       -                          (8.3)
 Shares issued                                                          -              0.1            -               -                  0.1         -                          0.1
 Disposal of financial assets at FVOCI                                  -              -              (0.2)           0.2                -           -                          -
 Transfer between equity accounts                                       -              -              (0.2)           0.2                -           -                          -
 Dividends (Note 10)                                                    -              -              -               (23.6)             (23.6)      (0.2)                      (23.8)
 Balance at 30 June 2021 (unaudited)                                    3.6            97.3           76.9            426.3              604.1       0.7                        604.8

* See Note 14 for details on the prior period restatement.

 

                                                                        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 2021                                              3.6                 97.2           90.0            390.1              580.9     0.7                        581.6

 (audited)
 Profit for the year                                                    -                   -              -               146.2              146.2     0.5                        146.7
 Other comprehensive income/(loss):
 Re-measurement of defined benefit pension scheme and employee benefit  -                   -              -               21.3               21.3      -                          21.3
 obligations
 Changes in fair value of financial assets at FVOCI                     -                   -              (4.4)           -                  (4.4)     -                          (4.4)
 Tax on items directly taken to other comprehensive income/(loss)       -                   -              -               (5.4)              (5.4)     -                          (5.4)
 Currency translation differences                                       -                   -              (8.9)           -                  (8.9)     -                          (8.9)
 Total comprehensive (loss)/income for the year                         -                   -              (13.3)          162.1              148.8     0.5                        149.3
 Employee share option scheme:
 - Value of services provided                                           -                   -              -               23.7               23.7      -                          23.7
 - Tax on employee share option schemes                                 -                   -              -               4.7                4.7       -                          4.7
 Issue of share capital                                                 -                   7.2            -               -                  7.2       -                          7.2
 Tax on other items taken to reserves                                   -                   -              -               0.6                0.6       -                          0.6
 Purchase of treasury shares                                            -                   -              -               (49.0)             (49.0)    -                          (49.0)
 Disposal of financial assets at FVOCI                                  -                   -              (0.3)           0.2                (0.1)     -                          (0.1)
 Dividends                                                              -                   -              -               (31.9)             (31.9)    (0.4)                      (32.3)
 Transactions with non-controlling interest                             -                   -              -               39.3               39.3      28.2                       67.5
 Transfer between reserves                                              -                   -              (0.2)           0.2                -         -                          -
 Additions through business combinations                                -                   -              -               -                  -         0.2                        0.2
 Balance at 31 December 2021 (audited)                                  3.6                 104.4          76.2            540.0              724.2     29.2                       753.4

 

Notes 1 to 22 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 2022

 

                                                                                Six months to 30 June 2022 (unaudited)  Six months to 30 June 2021 (unaudited)  Year ended 31 December 2021

                                                                                                                                                                (audited)
                                                                          Note  £m                                      £m                                      £m
 Cash flows from operating activities
 Cash (used in)/generated from operations                                 12    (34.7)                                  63.3                                    348.3
 Interest received                                                              2.3                                     0.7                                     1.8
 Interest paid                                                                  (7.4)                                   (7.1)                                   (14.0)
 Income tax paid                                                                (22.1)                                  (13.7)                                  (33.4)
 Net cash (used in)/generated from operating activities                         (61.9)                                  43.2                                    302.7
 Cash flows from investing activities
 Proceeds from sale of property, plant and equipment                            0.1                                     0.6                                     1.0
 Proceeds from sale of equity investments                                       0.7                                     0.3                                     1.7
 Proceeds from sale of interests in joint ventures                              0.1                                     -                                       0.7
 Dividends received from joint ventures                                         2.3                                     1.5                                     6.6
 Dividends received from associates                                             2.3                                     4.6                                     6.0
 Repayment of loans by joint ventures                                           -                                       -                                       0.1
 Loans to joint ventures                                                        -                                       (0.8)                                   (0.6)
 Loans to other parties                                                         (0.5)                                   (0.2)                                   (7.4)
 Acquisition of subsidiaries, net of cash and overdrafts acquired               (2.8)                                   (41.0)                                  (40.5)
 Deferred consideration paid in relation to prior year acquisitions             (1.5)                                   (4.1)                                   (5.9)
 Purchase of property, plant and equipment                                      (7.7)                                   (7.9)                                   (18.6)
 Purchase of intangible assets                                                  (3.9)                                   (2.1)                                   (5.9)
 Purchase of equity investments                                                 (4.3)                                   (5.8)                                   (9.8)
 Purchase of investment in joint ventures                                       (0.1)                                   -                                       (0.4)
 Purchase of investment in associates                                           -                                       -                                       (0.3)
 Net cash used in investing activities                                          (15.3)                                  (54.9)                                  (73.3)
 Cash flows from financing activities
 Proceeds from issues of share capital                                          0.4                                     0.1                                     7.2
 Proceeds from transaction with non-controlling interest                        7.9                                     -                                       63.7
 Transaction costs incurred on transaction with non-controlling interest        (0.2)                                   -                                       (0.9)
 Proceeds from borrowings                                                       9.1                                     26.9                                    26.9
 Repayments of borrowings                                                       (4.3)                                   (0.1)                                   (38.2)
 Financing fees paid                                                            (0.4)                                   (0.4)                                   (0.5)
 Principal elements of lease payments                                           (24.3)                                  (21.8)                                  (47.2)
 Purchase of treasury shares                                                    (37.6)                                  (8.3)                                   (49.0)
 Dividends paid                                                                 (77.0)                                  (23.8)                                  (32.3)
 Net cash used in financing activities                                          (126.4)                                 (27.4)                                  (70.3)
 Net (decrease)/increase in cash, cash equivalents and bank overdrafts          (203.6)                                 (39.1)                                  159.1
 Cash, cash equivalents and bank overdrafts at beginning of period              490.0                                   338.2                                   338.2
 Effect of exchange rate fluctuations on cash held                              16.8                                    (5.5)                                   (7.3)
 Cash, cash equivalents and bank overdrafts at end of period              18    303.2                                   293.6                                   490.0

 

Notes 1 to 22 are an integral part of these condensed interim financial
statements.

 

 

NOTES

1. General information

 

Savills plc ('the Company') is a public limited company incorporated and
domiciled in England, United Kingdom. The address of its registered office is
33 Margaret Street, London W1G 0JD. Savills plc and its subsidiaries (together
the 'Group') is a global real estate services group. The Group operates
through a network of offices in the UK, Europe, Asia Pacific, North America,
Africa and the Middle East.

 

This condensed consolidated interim financial report was approved for issue by
the Board of Directors on 10 August 2022.

 

This condensed consolidated interim financial report does not comprise
statutory financial statements within the meaning of section 434 of the
Companies Act 2006. The financial information presented for the year ended 31
December 2021 is derived from the statutory accounts for that year. Statutory
financial statements for the year ended 31 December 2021 were approved by the
Board of Directors on 11 March 2022 and delivered to the Registrar of
Companies.  The auditor's report on these accounts was unqualified, did not
contain an emphasis of matter paragraph and did not contain a statement under
section 498(2) or (3) of the Companies Act 2006.

 

This condensed consolidated interim financial report has been reviewed, not
audited.

 

 

2. Basis of preparation

 

The annual financial statements of Savills plc will be prepared in accordance
with UK-adopted international accounting standards ('UK-adopted IFRSs' or
'IFRS'). This condensed consolidated interim financial report for the
half-year reporting period ended 30 June 2022 has been prepared in accordance
with the Disclosure Guidance and Transparency Rules of the Financial Conduct
Authority and in accordance with IAS 34 'Interim Financial Reporting' as
contained in UK-adopted IFRSs.

 

The interim report does not include all the notes of the type normally
included in an annual financial report. Accordingly, this report is to be read
in conjunction with the annual financial statements for the year ended 31
December 2021, which has been prepared in accordance with UK-adopted IFRSs.

 

Consistent with our approach to preparing the annual financial statements for
the year ended 31 December 2021, management has considered the impact of
climate change in preparing the interim financial report for half-year
reporting at 30 June 2022. Consistent with the 2021 year end, we concluded
that climate change did not have a material impact on the financial reporting
judgements and estimates and is not expected to have a significant impact on
the Group's going concern.

 

Going concern

Management has performed a detailed going concern assessment to test the
Group's liquidity and banking covenant compliance up until the end of 2023
based on latest financial forecasts. These forecasts are taking into account
the Group's performance over the period and positive prospects (see 'Summary
and outlook' section for more information) as well as the principal risks and
uncertainties facing the business (see 'Principal risks and uncertainties'
section). In addition, sensitivity analysis has been performed to assess
liquidity availability and covenant compliance over the period until December
2023, looking at the level of decline in the base case forecast that could be
withstood before the leverage ratio covenant would be breached. The results of
this sensitivity analysis showed that the Group has sufficient headroom to
withstand the impact of a severe global economic downturn. Based on the
Group's net cash position of £149.0m at the period end and the level of
undrawn facilities available (see Note 17 for information on the current level
of undrawn facilities), alongside the assessment noted above, the Directors
consider that the Group has adequate resources in place until at least the end
of 2023 and have therefore adopted the going concern basis of accounting in
preparing the interim financial report.

 

 

3. Accounting policies

 

Except as described below, the accounting policies applied and methods of
computation used are consistent with those of the annual financial statements
for the year ended 31 December 2021, 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.

 

Adoption of standards, amendments and interpretations to standards

Standards, amendments and interpretations adopted for use in the United
Kingdom and mandatorily effective for the first time for the financial year
beginning 1 January 2022 that are not relevant or considered to have a
significant impact on the Group and its financial statements include the
following:

 

 Amendments to IAS 37: Provisions, Contingent Liabilities and Contingent Assets  Onerous contracts - Cost of fulfilling a contract
 Amendments to IFRS 3: Business Combinations                                     Reference to the Conceptual Framework
 Amendments to IFRS 1: First-time Adoption of International Financial Reporting  Subsidiary as a first-time adopter
 Standards
 Amendments to IFRS 9: Financial Instruments                                     Fees in the '10 per cent' test for derecognition of financial liabilities
 Amendments to IAS 41: Agriculture                                               Taxation in fair value measurements
 Amendments to IAS 16: Property, Plant and Equipment                             Proceeds before intended use

 

There are no standards, amendments and interpretations to standards that are
not yet effective that would be expected to have a material impact on the
entity in the current or future reporting periods and on foreseeable future
transactions.

 

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 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. In particular, underlying profit before tax may be materially
higher or lower than reported profit before tax as a result of the
adjustments. Notably, if there have been significant impairments,
restructuring costs excluded and significant recent business acquisitions the
underlying profit before tax will be higher than reported profit before tax.

 

The term 'underlying' refers to the relevant measure of profit, earnings or
taxation being reported mainly excluding the impact (pre and post-tax where
applicable) of the following items:

 

·      the difference between IFRS 2 charges related to outstanding
bonus-related deferred share awards and the estimated value of the current
period bonus pool expected to be allocated to deferred share awards;

 

·      amortisation of intangible assets arising from business
combinations (this excludes software or other pre-existing intangible assets
of the acquiree);

 

·      items that are considered significant in size and non-operational
in nature including restructuring costs associated with business acquisitions,
impairments of goodwill and intangible assets arising from business
combinations and profits or losses arising on disposals of subsidiaries and
other investments; and

 

·      significant transaction-related costs associated with business
combinations.

 

The majority of adjustments made to the GAAP measures to arrive at
"underlying" measures relate to charges arising as a result of business
combinations. The nature of the Group's business and the businesses that the
Group acquires (being "asset light" people businesses) requires the Group to
structure business acquisitions such that often payment of deferred
consideration is linked to recipients' continuing and active engagement in the
business at the date of the deferred payment, with these payments required to
be expensed to the income statement under IFRS 3. For internal performance
analysis and incentive compensation arrangements, these charges are considered
part of the initial cost of acquiring a business, instead of an ongoing
operational cost, and are therefore excluded from the Group's "underlying"
measures. The same rationale is applied to the exclusion of amortisation of
intangible assets arising from business combinations (excluding software or
other pre-existing intangible assets of the acquiree), any impairments of
goodwill and the aforementioned intangible assets, significant
transaction-related costs associated with business combinations and
significant restructuring costs that are related to the acquisition of a
business. These items are not considered to reflect the business's trading
performance and so are adjusted to ensure consistency between periods.

 

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
period 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 period. 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
period bonus pool to be awarded in deferred shares. This adjustment is made to
align the underlying staff cost in the period with the revenue recognised in
the same period, providing additional information on the Group's performance
over time with respect to profitability.

 

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.

 

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 period revenue and underlying profit
using the prior period exchange rates. This measure allows the Group to assess
the results of the current period compared to the prior period, excluding the
impact of foreign currency movements.

 

A reconciliation between GAAP and underlying measures are set out in Note 8
(underlying profit before tax) and Note 11(b) (underlying basic earnings per
share and underlying diluted earnings per share).

 

 

4. Prior period restatement

 

Presentation of share of post-tax profit from joint ventures and associates
within the Income Statement

Following a review of the Group's share of post-tax profit from joint ventures
and associates and the presentation of this in the Group's Income Statement in
H2 2021, management determined that the Group's joint ventures and associates
are an integral part of the business and the share of post-tax profit from
joint ventures and associates should be included within operating profit,
consistent with IASB's view in IAS 1.BC56. This position was reflected in the
Group's 2021 Report and Accounts and has been reflected in the current
period's Interim Statement. The prior interim period comparative has been
restated in accordance with IAS 8.

 

The table below shows the impact of the prior period restatement on the
Group's Income Statement:

 

                   30 June 2021 reported  Restatement  Acquisition accounting restatement  30 June 2021 restated

                   £m                     £m           (Note 14)                           £m

                                                       £m
 Income Statement
 Operating profit  66.1                   4.6          (0.5)                               70.2

 

This prior period restatement does not have an impact on reported comparative
interim profit after tax, earnings per share, the Statement of Financial
Position or the Statement of Cash Flows.

 

Presentation of deferred consideration linked to continuing employment within
the Statement of Cash Flows

In the Annual Report and Accounts for year ended 31 December 2021, the cash
flow impact of deferred consideration was corrected to reflect the nature of
the cash flow from investing to operating activities for the year ended 31
December 2021 and the comparative for 31 December 2020 was restated.
Management have performed an exercise to confirm that the impact of this
re-classification of cash flows from investing activities to operating
activities for the comparative period ending 30 June 2021 is immaterial and
have accordingly not restated the comparative period.

 

Gross recognition of deferred and accrued income

During the period, it was identified that certain contract assets in one
business of the Group had been incorrectly presented net against contract
liabilities. Accordingly, the presentation has been amended to show these
balances on a gross basis separately on the Group's Statement of Financial
Position as at 30 June 2022 in accordance with IAS 32. The prior interim
period comparatives have been restated in accordance with IAS 8. The impact on
the prior year comparative as at 31 December 2021 was not material.

 

The table below shows the impact of the prior period restatement on the
Group's Statement of Financial Position:

 

                                   30 June 2021 reported  Restatement  Acquisition accounting restatement  30 June 2021 restated

                                   £m                     £m           (Note 14)                           £m

                                                                       £m
 Statement of Financial Position

 Contract assets                   8.8                    3.6          -                                   12.4
 Assets: Current assets            937.7                  3.6          1.0                                 942.3

 Contract liabilities              15.1                   3.6          -                                   18.7
 Liabilities: Current liabilities  821.2                  3.6          0.3                                 825.1

 

This prior period restatement does not have an impact on net current assets,
net assets, profit after tax, earnings per share, the Income Statement or the
Statement of Cash Flows.

 

 

5. 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 2021.
Refer to Note 16 for information on the expected credit loss provision in
relation to trade receivables and Note 6 for information on fair value
estimates.

 

 

6. 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 2021. 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 2022:

 

 £m                                        Level 1  Level 2  Level 3      Total
 2022
 Assets
 Financial assets held at FVOCI
  - Listed                                 1.0      -        -            1.0
  - Unlisted                               -        17.1     10.2         27.3
 Trade and other receivables held at FVPL  -        -        16.9         16.9
 Total assets                              1.0      17.1     27.1         45.2

 Liabilities
 Derivative financial instruments          -        1.0      2.5          3.5
 Total liabilities                         -        1.0      2.5          3.5

The following table presents the Group's assets and liabilities that are
measured at fair value at 31 December 2021:

 

 £m                                        Level 1  Level 2  Level 3    Total
 2021
 Assets
 Financial assets held at FVOCI
  - Listed                                 1.5      -        -          1.5
  - Unlisted                               -        14.0     14.9       28.9
 Trade and other receivables held at FVPL  -        -        15.8       15.8
 Derivative financial instruments          -        0.1      -          0.1
 Total assets                              1.5      14.1     30.7       46.3

 Liabilities
 Contingent deferred consideration         -        -        1.4        1.4
 Derivative financial instruments          -        0.9      2.6        3.5
 Total liabilities                         -        0.9      4.0        4.9

 

The following table presents the Group's assets and liabilities that are
measured at fair value at 30 June 2021:

 

 £m                                        Level 1  Level 2  Level 3      Total
 2021
 Assets
 Financial assets held at FVOCI
  - Listed                                 1.1      -        -            1.1
  - Unlisted                               -        12.0     19.4         31.4
 Trade and other receivables held at FVPL  -        -        10.3         10.3
 Derivative financial instruments          -        0.2      -            0.2
 Total assets                              1.1      12.2     29.7         43.0

 Liabilities
 Contingent deferred consideration         -        -        1.4          1.4
 Derivative financial instruments          -        0.6      0.6          1.2
 Total liabilities                         -        0.6      2.0          2.6

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, with the exception of the Group's long term fixed rate
private note placements detailed in Note 17.

 

Valuation techniques

 

Level 1

Level 1 instruments are those whose fair values are based on quoted market
prices.

 

Level 2

The fair value of Level 2 unlisted financial assets at FVOCI is determined
using valuation techniques using observable market data where available and
rely as little as possible on entity estimates. The fair value of investment
funds is based on underlying asset values determined by the Fund Manager's
quarterly financial statements. These instruments are included in Level 2.

 

The fair value of derivative financial instruments relating to forward foreign
exchange contracts and interest rate caps are determined by using valuation
techniques using observable market data. The fair value of derivative
financial instruments is based on the market value of similar instruments with
similar maturities. These instruments are included in Level 2.

 

Level 3

If one or more of the significant inputs is not based on observable market
data, the instrument is included in Level 3.

 

Unlisted equity securities included in Level 3 fall under two categories. The
first, where cost has been determined as the best approximation of fair value.
Cost is considered the best approximation of fair value in these instances
either due to insufficient more recent information being available and/or
there being a wide range of possible fair value measurements due to the nature
of the investments and cost is considered the best estimate of fair value
within the range. The second, where management have determined the fair value
of the unlisted equity security based upon the latest trading performance of
the investments, cash flow forecasts of the investments and applying these to
a discounted cash flow valuation and/or considering evidence from recent
fundraising initiatives undertaken.

 

Trade and other receivables classified as Level 3 relates to loans held at
FVPL. Management have determined the fair value of these loans based upon the
latest trading performance of the equity investments, cash flow forecasts of
the investments and applying these to a discounted cash flow valuation.

 

The derivative financial liabilities classified as Level 3 relates to put and
call options, the fair value of which is derived from management's best
estimate of the average EBITDA forecast of the relevant businesses.

 

Deferred consideration held at fair value relates to contingent deferred
consideration. The fair value of contingent deferred consideration classified
as Level 3 is derived from management's best estimate of future revenue /
profits of the relevant acquired business, in accordance with the
contractually agreed earn-out targets.

 

The following table presents changes in Level 3 items for the period ended 30
June 2022:

 

                                 Contingent deferred consideration  Derivative financial instruments  Unlisted equity securities  Trade and other receivables

                                 £m                                 £m                                £m                          £m
 Opening balance 1 January 2022  (1.4)                              (2.6)                             14.9                        15.8
 Additions                       -                                  -                                 0.9                         -
 Disposals                       -                                  -                                 (0.2)                       -
 Transfer                        -                                  -                                 (0.2)                       0.2
 Exchange movement               (0.2)                              0.1                               (0.1)                       0.9
 Re-measurements                 1.6                                -                                 (5.1)                       -
 Closing balance 30 June 2022    -                                  (2.5)                             10.2                        16.9

The re-measurement of unlisted equity securities in the period of £5.1m
reflects changing market conditions coupled with variation in instrument
terms.

 

7. Segment analysis

 Six months to 30 June 2022           Transaction Advisory  Consultancy  Property and Facilities Management  Investment Management  Unallocated  Total
  (unaudited)                         £m                    £m           £m                                  £m                     £m           £m
 Revenue
 United Kingdom
 - commercial                         55.6                  87.6         129.7                               28.6                   -            301.5
 - residential                        95.8                  22.0         19.9                                -                      -            137.7
 Total United Kingdom                 151.4                 109.6        149.6                               28.6                   -            439.2
 CEME                                 49.1                  19.1         48.1                                21.8                   -            138.1
 Asia Pacific
 - commercial                         71.2                  39.5         188.4                               3.4                    -            302.5
 - residential                        9.2                   -            -                                   -                      -            9.2
 Total Asia Pacific                   80.4                  39.5         188.4                               3.4                    -            311.7
 North America                        132.3                 16.1         -                                   -                      -            148.4
 Total revenue                        413.2                 184.3        386.1                               53.8                   -            1,037.4
 Underlying profit/(loss) before tax
 United Kingdom
 - commercial                         9.9                   7.7          8.0                                 5.7                    (7.0)        24.3
 - residential                        13.6                  2.5          0.7                                 -                      -            16.8
 Total United Kingdom                 23.5                  10.2         8.7                                 5.7                    (7.0)        41.1
 CEME                                 (8.8)                 2.3          0.5                                 4.3                    -            (1.7)
 Asia Pacific
 - commercial                         7.4                   0.9          9.4                                 0.3                    -            18.0
 - residential                        -                     -            -                                   -                      -            -
 Total Asia Pacific                   7.4                   0.9          9.4                                 0.3                    -            18.0
 North America                        0.6                   1.2          -                                   -                      -            1.8
 Underlying profit/(loss) before tax  22.7                  14.6         18.6                                10.3                   (7.0)        59.2

 

 

 Six months to 30 June 2021           Transaction Advisory  Consultancy  Property and Facilities Management  Investment Management  Unallocated  Total
  (unaudited)                         £m                    £m           £m                                  £m                     £m           £m
 Revenue
 United Kingdom
 - commercial                         38.5                  85.6         127.0                               19.6                   -            270.7
 - residential                        104.2                 24.3         18.2                                -                      -            146.7
 Total United Kingdom                 142.7                 109.9        145.2                               19.6                   -            417.4
 CEME                                 39.9                  18.4         40.1                                15.6                   -            114.0
 Asia Pacific
 - commercial                         60.5                  36.2         173.7                               3.0                    -            273.4
 - residential                        13.8                  -            -                                   -                      -            13.8
 Total Asia Pacific                   74.3                  36.2         173.7                               3.0                    -            287.2
 North America                        105.1                 8.9          -                                   -                      -            114.0
 Total revenue                        362.0                 173.4        359.0                               38.2                   -            932.6
 Underlying profit/(loss) before tax
 United Kingdom
 - commercial                         5.2                   10.2         8.5                                 3.9                    (8.1)        19.7
 - residential                        20.5                  3.9          0.9                                 -                      -            25.3
 Total United Kingdom                 25.7                  14.1         9.4                                 3.9                    (8.1)        45.0
 CEME                                 (8.5)                 2.3          (0.6)                               2.7                    -            (4.1)
 Asia Pacific
 - commercial                         7.4                   1.9          10.4                                0.6                    -            20.3
 - residential                        3.7                   -            -                                   -                      -            3.7
 Total Asia Pacific                   11.1                  1.9          10.4                                0.6                    -            24.0
 North America                        0.8                   0.5          -                                   (0.1)                  -            1.2
 Underlying profit/(loss) before tax  29.1                  18.8         19.2                                7.1                    (8.1)        66.1

 

 

 Year ended 31 December 2021          Transaction Advisory  Consultancy  Property and Facilities Management  Investment Management  Unallocated  Total
  (audited)                           £m                    £m           £m                                  £m                     £m           £m
 Revenue
 United Kingdom
 - commercial                         115.2                 193.6        256.4                               55.1                   -            620.3
 - residential                        210.7                 50.4         44.2                                -                      -            305.3
 Total United Kingdom                 325.9                 244.0        300.6                               55.1                   -            925.6
 CEME                                 124.4                 41.3         88.3                                47.2                   -            301.2
 Asia Pacific
 - commercial                         153.0                 81.3         356.7                               9.5                    -            600.5
 - residential                        26.0                  -            -                                   -                      -            26.0
 Total Asia Pacific                   179.0                 81.3         356.7                               9.5                    -            626.5
 North America                        263.6                 30.1         -                                   -                      -            293.7
 Total revenue                        892.9                 396.7        745.6                               111.8                  -            2,147.0
 Underlying profit/(loss) before tax
 United Kingdom
 - commercial                         21.5                  24.6         17.9                                14.0                   (18.9)       59.1
 - residential                        38.9                  8.5          4.1                                 -                      -            51.5
 Total United Kingdom                 60.4                  33.1         22.0                                14.0                   (18.9)       110.6
 CEME                                 1.4                   2.5          1.3                                 10.2                   -            15.4
 Asia Pacific
 - commercial                         20.6                  6.6          25.8                                1.3                    -            54.3
 - residential                        4.9                   -            -                                   -                      -            4.9
 Total Asia Pacific                   25.5                  6.6          25.8                                1.3                    -            59.2
 North America                        10.3                  4.8          -                                   -                      -            15.1
 Underlying profit/(loss) before tax  97.6                  47.0         49.1                                25.5                   (18.9)       200.3

 

Operating segments reflect internal management reporting to the Group's chief
operating decision maker, defined as the Group Executive Board ('GEB'). The
GEB primarily manages the business based on the geographic location in which
the Group operates, 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 above
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.

 

A reconciliation of underlying profit before tax to reported profit before tax
is provided in Note 8.

 

The Unallocated segment includes costs and other expenses at holding company
and subsidiary levels, which are not directly attributable to the operating
activities of the Group's business segments.

 

 

8. Underlying profit before tax

 

                                                                               Six months to 30 June 2022 (unaudited)  Six months to 30 June 2021  Year ended 31 December 2021 (audited)

                                                                                                                       restated* (unaudited)
                                                                               £m                                      £m                          £m
 Reported profit before tax                                                    50.4                                    63.3                        183.1
 Adjustments:
 - Amortisation of acquired intangible assets arising from business            5.1                                     2.7                         8.1
 acquisitions
 - Impairment of goodwill and intangible assets arising from business          -                                       -                           5.2
 combinations
 - Share-based payment adjustment                                              (2.3)                                   (2.8)                       (10.8)
 - Profit on disposal of joint venture                                         -                                       -                           (0.4)
 - Restructuring costs                                                         0.1                                     0.1                         0.3
 - Transaction-related costs                                                   5.9                                     5.6                         17.0
 - Fair value gain on step acquisitions of subsidiaries previously classified  -                                       (2.8)                       (4.0)
 as associates/joint ventures
 - Fair value loss on transaction-related call option                          -                                       -                           1.8
 Underlying profit before tax                                                  59.2                                    66.1                        200.3

 

*Reported profit before tax and the fair value gain on step acquisitions of
subsidiaries previously classified as associates/joint ventures were restated
by £0.5m (previously reported at £3.3m). See Note 14 for details on the
prior period restatement.

 

For the year ended 31 December 2021, impairment of goodwill relates to the
Indonesia and Sweden cash generating units. Impairment on intangible assets
arising from business combinations relate to property management contracts in
South Korea and Japanese investment management contracts relating to closed
funds.

 

For the year ended 31 December 2021, profit on disposal recognised primarily
in relation to the disposal of holdings in joint ventures in China.

 

Restructuring costs includes costs of integration activities in relation to
significant business acquisitions. Restructuring costs in the period ended 30
June 2022, the period ended 30 June 2021 and the year ended 31 December 2021
relate primarily 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 net £6.9m charge for future
consideration payments which are contingent on the continuity of recipients'
employment in the future (30 June 2021: £3.6m, 31 December 2021: £13.9m).
For the period ended 30 June 2022, a significant portion of the charge related
to the acquisition of DRC Capital LLP ('DRC') in 2021. For the period ended 30
June 2021, a significant portion of the charge related to acquisitions in the
US (Macro Consultants LLC ('Macro') in 2020 and T3 in 2021), CEME (OMEGA
Immobilien Management GmbH and OMEGA Immobilien Service GmbH ('Omega') in 2020
and Aguirre Newman in 2017) and Savills IM business (DRC in 2021). For the
year ended 31 December 2021, the largest individual components of this charge
related to the acquisition of DRC and the acquisition of Macro in 2020. In the
current period, transaction-related costs also consist of £0.2m of
professional advisory transaction fees (30 June 2021: £1.6m, 31 December
2021: £1.1m) and £0.2m of interest on deferred consideration and non-current
future payments in relation to business acquisitions that are linked to
employment (30 June 2021: £0.4m, 31 December 2021: £0.6m). In the current
period, transaction-related costs included a £0.2m (31 December 2021: £1.4m)
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
current period, transaction-related costs also consist of a £1.6m credit (30
June 2021 and 31 December 2021: £nil) for fair value changes to contingent
deferred consideration. Refer to Note 6 for fair value estimations.

 

For the period ended 30 June 2021, a fair value gain was recognised on the
re-measurement of the Group's holding in its associate, DRC, prior to the
Group's acquisition of the remaining equity interest in this business. For the
year ended 31 December 2021, a fair value gain was recognised on the
re-measurement of the Group's holding in its associate, DRC, and a joint
venture in Indonesia, prior to the Group's acquisition of the remaining equity
interest in these businesses. In addition, a fair value loss was recognised on
the fair value measurement of the Samsung Life call option, which gives
Samsung Life the right to purchase up to an additional 10% shareholding in the
Savills Investment Management group subject to the quantum of capital it has
invested in Savills IM products during the initial 5 year term.

 

 

9. Income tax expense

 

The income tax expense has been calculated on the basis of the statutory rates
in each jurisdiction adjusted for any disallowable charges.

                     Six months to 30 June 2022 (unaudited)  Six months to 30 June 2021 (unaudited)  Year ended 31 December 2021 (audited)
                     £m                                      £m                                      £m
 UK
 - Current tax       8.9                                     11.6                                    21.7
 - Deferred tax      (3.3)                                   (3.2)                                   (6.8)
 Foreign tax
 - Current tax       8.6                                     7.8                                     23.8
 - Deferred tax      (1.5)                                   (0.8)                                   (2.3)
 Income tax expense  12.7                                    15.4                                    36.4

 

* Reported profit before tax was restated by £0.5m. See Note 14 for details
on the prior period restatement.

 

The forecast Group effective tax rate is 25.2% (30 June 2021: 24.3%* and 31
December 2021 reported effective tax rate: 19.9%), which is higher (30 June
2021: higher, 31 December 2021: higher) than the UK standard effective annual
rate of corporation tax of 19% (30 June 2021 and 31 December 2021: 19%). This
reflects permanent disallowable expenses, including transaction-related costs
and the effect of the annual rate adjustment to the full year forecast rate.
The Group underlying effective tax rate was 23.3% (30 June 2021: 24.4% and 31
December 2021: 18.7%).

 

 

10. Dividends

 

                                                                      Six months to 30 June 2022 (unaudited)  Six months to 30 June 2021 (unaudited)  Year ended 31 December 2021 (audited)
                                                                      £m                                      £m                                      £m
 Amounts recognised as distribution to equity holders in the period:
 In respect of previous period
 Ordinary final dividend of 12.75p per share (2020: 17.0p)            17.6                                    23.6                                    23.6
 Supplemental interim dividend of 15.6p per share (2020: £nil)        21.6                                    -                                       -
 Special dividend of 27.05p per share (2020: £nil)                    37.4                                    -                                       -
 In respect of current period
 Interim dividend of £nil per share (2021: 6.0p)                      -                                       -                                       8.3
                                                                      76.6                                    23.6                                    31.9

 Proposed interim dividend for the six months ended 30 June 2022      £9.1m

 

The Board has declared an interim dividend for the six months ended 30 June
2022 of 6.6p per ordinary share (30 June 2021: 6.0p) to be paid on 5 October
2022 to shareholders on the register on 2 September 2022. The interim dividend
has not been recognised in these interim financial statements. It will be
recognised in equity in the year to 31 December 2022.

 

 

11(a). Basic and diluted earnings per share

 

                                                    2022      2022     2022   2021                2021     2021
                                                    Earnings  Shares   EPS    Earnings restated*  Shares   EPS

                                                                                                           restated*
 Six months to 30 June (unaudited)                  £m        million  Pence  £m                  million  pence
 Basic earnings per share                           37.0      138.3    26.8   47.7                139.3    34.2
 Effect of additional shares issuable under option  -         8.5      (1.6)  -                   3.7      (0.8)
 Diluted earnings per share                         37.0      146.8    25.2   47.7                143.0    33.4

                                                                              2021                2021     2021
                                                                              Earnings            Shares   EPS
 Year to 31 December (audited)                                                £m                  million  Pence
 Basic earnings per share                                                     146.2               139.4    104.9
 Effect of additional shares issuable under option                            -                   7.1      (5.1)
 Diluted earnings per share                                                   146.2               146.5    99.8

 

* Reported profit before tax was restated by £0.5m. See Note 14 for details
on the prior period restatement.

 

11(b). Underlying basic and diluted earnings per share

 

                                                                                 2022      2022     2022   2021       2021     2021
                                                                                 Earnings  Shares   EPS    Earnings*  Shares   EPS*
 Six months to 30 June (unaudited)                                               £m        million  pence  £m         million  Pence
 Basic earnings per share                                                        37.0      138.3    26.8   47.7       139.3    34.2
 - Amortisation of intangible assets arising from business combinations after    3.9       -        2.8    1.7        -        1.2
 tax
 - Share-based payment adjustment after tax                                      (2.0)     -        (1.4)  (2.0)      -        (1.4)
 - Restructuring costs after tax                                                 0.1       -        0.1    0.1        -        0.1
 - Transaction-related costs after tax                                           5.7       -        4.1    5.2        -        3.7
 - Fair value gain on step acquisition of subsidiary previously classified as    -         -        -      (2.8)      -        (2.0)
 associate after tax
 Underlying basic earnings per share                                             44.7      138.3    32.4   49.9       139.3    35.8
 Effect of additional shares issuable under option                               -         8.5      (2.0)  -          3.7      (0.9)
 Underlying diluted earnings per share                                           44.7      146.8    30.4   49.9       143.0    34.9

 *Reported profit before tax and the fair value gain on step acquisitions of
 subsidiaries previously classified as associates/joint ventures were restated
 by £0.5m. See Note 14 for details on the prior period restatement.

                                                                                                           2021       2021     2021
                                                                                                           Earnings   Shares   EPS
 Year to 31 December (audited)                                                                             £m         Million  Pence
 Basic earnings per share                                                                                  146.2      139.4    104.9
 - Amortisation of intangible assets arising from business combinations after                              6.5        -        4.7
 tax
 - Impairment of goodwill and intangible assets arising from business                                      5.4        -        3.9
 combinations after tax
 - Share-based payment adjustment after tax                                                                (9.0)      -        (6.5)
 - Profit on disposal of joint venture after tax                                                           (0.4)      -        (0.3)
 - Restructuring costs after tax                                                                           0.4        -        0.3
 - Transaction-related costs after tax                                                                     15.5       -        11.1
 - Fair value gain on step acquisition of subsidiaries previously classified as                            (4.0)      -        (2.9)
 joint ventures/associates after tax
 - Fair value loss on transaction-related call option after tax                                            1.8        -        1.3
 Underlying basic earnings per share                                                                       162.4      139.4    116.5
 Effect of additional shares issuable under option                                                         -          7.1      (5.6)
 Underlying diluted earnings per share                                                                     162.4      146.5    110.9

 

Refer to Note 8 for the gross amounts of the above adjustments and a
reconciliation between reported profit before tax and underlying profit before
tax, alongside further details on each of the adjustments.

 

 

12. Cash generated from operations

                                                                                 Six months to 30 June 2022 (unaudited)  Six months to 30 June 2021  Year ended 31 December 2021 (audited)

                                                                                                                         restated* (unaudited)
                                                                                  £m                                      £m                          £m
 Profit for the period                                                           37.7                                    47.9                        146.7
 Adjustments for:
 Income tax (Note 9)                                                             12.7                                    15.4                        36.4
 Depreciation                                                                    32.0                                    32.0                        63.4
 Amortisation of intangible assets                                               8.0                                     5.0                         14.2
 Impairment of goodwill and intangible assets arising from                       -                                       -                           5.2

 business combinations
 Fair value gain on joint ventures and associates                                -                                       (2.8)                       (4.0)
 Fair value loss on derivative financial instrument                              -                                       -                           1.8
 Loss/(gain) on disposal of property, plant and equipment and intangible assets  0.1                                     (0.3)                       0.9
 Gain on disposal of joint ventures                                              -                                       -                           (0.4)
 Net finance cost                                                                5.4                                     6.9                         13.4
 Share of post-tax profit from joint ventures and associates                     (4.7)                                   (4.6)                       (12.6)
 Increase in employee and retirement obligations                                 9.2                                     5.5                         6.7
 Exchange movement and fair value movements on financial instruments in          (1.0)                                   (1.0)                       (2.5)
 operating activities
 (Decrease)/increase in provisions                                               (2.0)                                   5.4                         5.4
 Charge for share-based compensation                                             15.1                                    11.1                        23.7
 Operating cash flows before movements in working capital                        112.5                                   120.5                       298.3
 Decrease/(increase) in trade and other receivables and contract assets          82.1                                    44.0                        (90.1)
 (Decrease)/increase in trade and other payables and contract liabilities        (229.3)                                 (101.2)                     140.1
 Cash (used in)/generated from operations                                        (34.7)                                  63.3                        348.3

 

*Reported profit before tax and the fair value gain on step acquisitions of
subsidiaries previously classified as associates/joint ventures were restated
by £0.5m. See Note 14 for further details. Furthermore, movements in trade
and other receivables and contracts assets and trade and other payables and
contract liabilities have been restated following the grossing up of contract
assets and contract liabilities. See Note 4 for further details on this prior
year restatement.

 

Foreign exchange movements resulted in a £34.8m increase in current and
non-current trade and other receivables (30 June 2021: £6.5m decrease and 31
December 2021: £0.3m decrease) and a £37.2m increase in current and
non-current trade and other payables (30 June 2021: £7.4m decrease and 31
December 2021: £5.9m decrease).

 

 

13. Analysis of liabilities arising from financing activities and cash net of
debt

 

 Six months to 30 June 2022                                                    At 1 January  Cash flows  Non-cash movements recognised in income statement   Other non- cash movements  Movements through business combinations  Exchange movements  At 30 June
  (unaudited)                                                                  £m            £m          £m                                                  £m                         £m                                       £m                  £m
 Bank loans                                                                    (0.9)         (4.8)       -                                                   -                          -                                        (0.2)               (5.9)
 Loan notes                                                                    (150.0)       -           -                                                   -                          -                                        -                   (150.0)
 Transaction costs                                                             1.6           0.4         (0.3)                                               -                          -                                        -                   1.7
 Lease liabilities*                                                            (285.0)       28.8        (4.5)                                               (17.6)                     -                                        (12.9)              (291.2)
 Liabilities arising from financing activities                                 (434.3)       24.4        (4.8)                                               (17.6)                     -                                        (13.1)              (445.4)
 Cash and cash equivalents, net of overdrafts in notional pooling arrangement  491.2         (202.8)     -                                                   -                          0.6                                      16.8                305.8
 Bank overdrafts                                                               (1.2)         (1.4)       -                                                   -                          -                                        -                   (2.6)
 Cash, cash equivalents and bank overdrafts presented in the Cash Flow         490.0         (204.2)     -                                                   -                          0.6                                      16.8                303.2
 Statement

 Cash and cash equivalents net of debt                                         55.7          (179.8)     (4.8)                                               (17.6)                     0.6                                      3.7                 (142.2)

 Add back lease liabilities                                                    285.0         (28.8)      4.5                                                 17.6                       -                                        12.9                291.2
 Cash and cash equivalents net of borrowings                                   340.7         (208.6)     (0.3)                                               -                          0.6                                      16.6                149.0
                                                                               At 1 January  Cash flows                                                      Other non- cash movements  Movements through business combinations  Exchange movements  At 30 June

                                                                                                         Non-cash movements recognised in income statement

 Six months to 30 June 2021
  (unaudited)                                                                  £m            £m          £m                                                  £m                         £m                                       £m                  £m
 Bank loans                                                                    (12.1)        (26.8)      -                                                   -                          -                                        0.1                 (38.8)
 Loan notes                                                                    (150.0)       -           -                                                   -                          -                                        -                   (150.0)
 Transaction costs                                                             1.6           0.4         (0.1)                                               -                          -                                        -                   1.9
 Lease liabilities*                                                            (304.2)       26.3        (4.4)                                               (4.4)                      -                                        4.4                 (282.3)
 Liabilities arising from financing activities                                 (464.7)       (0.1)       (4.5)                                               (4.4)                      -                                        4.4                 (469.2)
 Cash and cash equivalents, net of overdrafts in notional pooling arrangement  338.3         (41.8)      -                                                   -                          2.9                                      (5.6)               293.8
 Bank overdrafts                                                               (0.1)         (0.1)       -                                                   -                          -                                        -                   (0.2)
 Cash, cash equivalents and bank overdrafts presented in the Cash Flow         338.2         (41.9)      -                                                   -                          2.9                                      (5.6)               293.6
 Statement

 Cash and cash equivalents net of debt                                         (126.5)       (42.0)      (4.5)                                               (4.4)                      2.9                                      (1.1)               (175.6)

 Add back lease liabilities                                                    304.2         (26.3)      4.4                                                 4.4                        -                                        (4.4)               282.3
 Cash and cash equivalents net of borrowings                                   177.7         (68.3)      (0.1)                                               -                          2.9                                      (5.5)               106.7

 

 Year to 31 December 2021                                                      At 1 January  Cash flows  Non-cash movements recognised in income statement  Other non- cash movements  Movements through business combinations and disposals  Exchange movements  At 31 December
  (audited)                                                                    £m            £m          £m                                                 £m                         £m                                                     £m                  £m
 Bank loans                                                                    (12.1)        11.3        -                                                  -                          (0.4)                                                  0.3                 (0.9)
 Loan notes                                                                    (150.0)       -           -                                                  -                          -                                                      -                   (150.0)
 Transaction costs                                                             1.6           0.5         (0.5)                                              -                          -                                                      -                   1.6
 Lease liabilities*                                                            (304.2)       56.1        (8.9)                                              (30.4)                     (0.7)                                                  3.1                 (285.0)
 Liabilities arising from financing activities                                 (464.7)       67.9        (9.4)                                              (30.4)                     (1.1)                                                  3.4                 (434.3)
 Cash and cash equivalents, net of overdrafts in notional pooling arrangement  338.3         154.3       -                                                  -                          5.9                                                    (7.3)               491.2
 Bank overdrafts                                                               (0.1)         0.1         -                                                  -                          (1.2)                                                  -                   (1.2)
 Cash, cash equivalents and bank overdrafts presented in the Cash Flow         338.2         154.4       -                                                  -                          4.7                                                    (7.3)               490.0
 Statement

 Cash and cash equivalents net of debt                                         (126.5)       222.3       (9.4)                                              (30.4)                     3.6                                                    (3.9)               55.7

 Add back lease liabilities                                                    304.2         (56.1)      8.9                                                30.4                       0.7                                                    (3.1)               285.0
 Cash and cash equivalents net of borrowings                                   177.7         166.2       0.5                                                -                          4.3                                                    (7.0)               340.7

 

* The part of the lease payment that represents cash payments for the
principal portion of the lease liability is presented as a cash flow resulting
from financing activities (period to 30 June 2022: £24.3m, period to 30 June
2021: £21.9m, year to 31 December 2021: £47.2m). The part of the lease
payment that represents interest portion of the lease liability is presented
as an operating cash flow, consistent with the presentation of the Group's
loan and bank interest payments (period to 30 June 2022: £4.5m, period to 30
June 2021: £4.4m, year to 31 December 2021: £8.9m).

 

Non-cash movements recognised in the income statement represent amortisation
of transaction costs and unwinding of discount on lease liabilities. Other
non-cash movements to lease liabilities represent new leases and disposal of
leases.

 

Cash subject to restrictions in Asia Pacific amounts to £21.9m (30 June 2021:
£28.7m and 31 December 2021: £43.2m) which is cash pledged to banks in
relation to property management contracts and cash remittance restrictions in
certain countries. These amounts are consolidated within the Group's cash and
cash equivalents.

 

 

14. Acquisition of subsidiaries

 

On 1 June 2022, the Group acquired 100% of the equity interest in BrickByte
GmbH, a workplace services and consulting start up in Germany to further
enhance our existing offering and complementary areas of client service in
Germany.  In addition, on 22 April 2022 the Group acquired 60% of the equity
interest in PT CB Advisory, 70% of the equity interest in PT Cakrawala Baswara
Cemerlang and 60% of the equity interest in PT Cakrawala Baswara Indonesia, a
full service property business in Indonesia, complementing our existing
services and supporting further Indonesia expansion. On 2 February 2022, the
Group also acquired the trade and assets of Cureoscity Limited, a UK web-based
management portal to enhance our property management business.

 

Cash consideration for these transactions amounted to £3.4m. The remainder of
the acquisition consideration relates to deferred consideration of £0.2m,
payable within one year of the reporting date, and £0.3m of loan novation.

 

Goodwill of £3.2m 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.

 

Acquisition-related costs of £0.1m have been expensed as incurred to the
income statement and classified within other operating expenses.

 

The acquired businesses contributed revenue of £0.2m and a loss of £0.6m to
the Group for the period from acquisition to 30 June 2022. Had the
acquisitions been made at the beginning of the financial year, revenue would
have been £1.1m and the loss would have been £0.6m. The impact on the
Group's overall revenue and profits is not material.

 

Due to the timing of the acquisitions, the fair values of the assets acquired
and liabilities assumed are provisional and will be finalised within 12 months
of the acquisition date. These are summarised below:

 

                                                                               Provisional fair value to the Group
                                                                               £m
 Non-current assets: Property, plant and equipment                             0.1
                                 Intangible                                    0.3
 assets
 Current assets: Trade and other receivables                                   0.3
                          Cash and cash equivalents                            0.6
 Total assets                                                                  1.3
 Current liabilities: Trade and other payables                                 (0.4)
                              Current tax payable                              (0.1)
 Non-current liabilities: Employment benefit provision                         (0.1)
 Net assets acquired                                                           0.7
 Goodwill                                                                      3.2
 Purchase consideration                                                        3.9

 Consideration satisfied by:
 Cash paid                                                                     3.4
 Deferred consideration < 1 year                                               0.2
 Loan novation                                                                 0.3
                                                                               3.9

 

Update to provisional fair value of prior period acquisition

During the period, provisional fair values relating to the acquisition of the
remaining 51% of Cluttons Saudi Arabia Company Limited (previous 49% ownership
equity accounted for as a joint venture) were finalised, with a £0.4m
increase to goodwill. This adjustment is considered a measurement period
adjustment in accordance with IFRS 3 and as a result goodwill increased by
£0.4m, with a corresponding decrease in trade receivables.

 

Update to provisional fair value of prior period acquisition at 31 December
2021

On 28 May 2021 the Group acquired the remaining 75% interest in DRC Capital
LLP ('DRC'), a commercial real estate debt investment manager. On 11 June
2021, the Group acquired 100% of the equity interest in T3 Advisors ('T3'), a
real estate advisor and consultant for life sciences and technology sectors in
the US. Provisional fair values relating to the acquisitions as at 30 June
2021 were finalised at 31 December 2021, with adjustments recognised as at 31
December 2021. This adjustment is considered a measurement period adjustment
in accordance with IFRS 3 and as a result the prior period comparatives have
been restated.

 

The material changes to the Statement of Financial Position as at 30 June 2022
were an increase of £32.5m to the value of intangible assets, an increase to
deferred tax liabilities of £6.4m, a decrease to goodwill of £27.2m and an
increase to net current assets of £0.7m. In addition, the Group's profit
after tax decreased £0.5m resulting in a restatement to the Income Statement
and Statement of Comprehensive Income, this reflects an update to the fair
value gain recognised in relation to the step acquisition of DRC, which was
previously classified as an associate.

 

 

15. 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 6 active employees and 108 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 2021 and as follows:

                                                     UK Plan                                                                 SFM Plan
                                                     Six months to 30 June 2022  Six months to 30 June 2021  Year ended 31   Six                        Six months to 30 June 2021  Year ended 31

                                                                                                             December 2021    months to 30 June 2022                                December 2021
 Expected rate of salary increases                   3.25%                       3.25%                       3.25%           2.50%                      2.50%                       2.50%
 Projection of social security contribution ceiling  -                           -                           -               2.25%                      2.25%                       2.25%
 Discount rate                                       3.80%                       1.90%                       2.00%           3.36%                      1.45%                       1.35%
 Inflation assumption                                3.00%                       3.10%                       3.20%           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                        2.90%                       3.00%                       3.10%           -                          -                           -
 - accrued after 5 April 2005                        2.00%                       2.10%                       2.20%           -                          -                           -
 - 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%                       2.30%                       2.50%           -                          -                           -
 - accrued after 5 April 2009                        2.30%                       2.30%                       2.50%           -                          -                           -

 

The amounts recognised in the statement of financial position are as follows:

 

  UK Plan                                                                30 June 2022  30 June 2021  31 December 2021

                                                                         £m            £m            £m
 Present value of funded obligations                                     205.3         305.4         301.7
 Fair value of plan assets                                               (238.6)       (309.9)       (319.1)
 Surplus recognised in the statement of financial position (included in  (33.3)        (4.5)         (17.4)
 retirement benefit surplus)

 

  SFM Plan                                                                     30 June 2022  30 June 2021  31 December 2021

                                                                               £m            £m            £m
 Present value of funded obligations                                           10.0          14.5          13.5
 Fair value of plan assets                                                     (12.7)        (14.4)        (14.2)
 (Surplus)/liability recognised in the statement of financial position         (2.7)         0.1           (0.7)
 (included in retirement and employee benefit obligations/retirement benefit
 surplus)

 

The amount recognised within the income statement in relation to the UK Plan
for the period ended 30 June 2022 is a net interest income of £0.2m (30 June
2021: net interest cost of £nil, 31 December 2021: net interest cost of
£nil).

 

The amount recognised within the income statement in relation to the SFM Plan
for the period ended 30 June 2022 is a current service cost of £nil (30 June
2021: £nil, 31 December 2021: £nil).

 

Included in retirement and employee benefit obligations is £48.8m relating to
holiday pay and long service leave (30 June 2021: £35.0m, 31 December 2021:
£37.2m).

 

 

16. Trade receivables - Loss allowance

The Group has no significant concentrations of credit risk. The trade
receivables balance is spread across a large number of different customers and
geographic regions.

 

Local management have assessed the expected credit losses for trade
receivables in the current geopolitical and economic environment and the
expected loss rates have been reviewed based on their judgement as to the
impact on their trade receivables portfolio. Overall, the expected loss rate
on trade receivables has increased to 6.6% (31 December 2021: 6.4%) primarily
due to a higher proportion of balances being greater than 90 days past due.

 

A summary of trade receivables and the loss provision has been provided below:

 

 30 June 2022                    Current  More than 30 days past due  More than 60 days past due  More than 90 days past due  More than 180 days past due  Total
 Expected loss rate              0.2%     0.5%                        1.2%                        6.7%                        47.5%                        6.6%
 Gross carrying amount (£m)      260.3    41.3                        25.9                        34.3                        50.5                         412.3
 Loss allowance provision (£m)   (0.5)    (0.2)                       (0.3)                       (2.3)                       (24.0)                       (27.3)

 

 

 30 June 2021                    Current  More than 30 days past due  More than 60 days past due  More than 90 days past due  More than 180 days past due  Total
 Expected loss rate              0.9%     1.4%                        2.2%                        14.3%                       56.2%                        8.1%
 Gross carrying amount (£m)      226.8    35.8                        18.5                        25.8                        38.1                         345.0
 Loss allowance provision (£m)   (2.0)    (0.5)                       (0.4)                       (3.7)                       (21.4)                       (28.0)

 

 

 31 December 2021                Current  More than 30 days past due  More than 60 days past due  More than 90 days past due  More than 180 days past due  Total
 Expected loss rate              0.6%     3.5%                        2.3%                        11.6%                       60.2%                        6.4%
 Gross carrying amount (£m)      349.2    42.5                        21.5                        24.2                        38.7                         476.1
 Loss allowance provision (£m)   (2.2)    (1.5)                       (0.5)                       (2.8)                       (23.3)                       (30.3)

 

 

17. Borrowings

 

Movements in borrowings are analysed as follows:

                                                                             6 months ended 30 June 2022  6 months ended 30 June 2021  12 months ended 31 December 2021
                                                                             £m                           £m                           £m
 Opening amount as at 1 January                                              150.5                        160.6                        160.6
 Additional borrowings, net of transaction costs paid (including additional  10.1                         26.6                         26.4
 overdraft)
 Repayments of borrowings (including overdraft repayment)                    (4.3)                        (0.1)                        (38.3)
 Addition through business combination                                       -                            -                            1.6
 Amortisation of transaction costs                                           0.3                          0.2                          0.5
 Foreign exchange movement                                                   0.2                          (0.2)                        (0.3)
 Closing amount                                                              156.8                        187.1                        150.5

 

                       30 June 2022  30 June 2021  31 December 2021
                       £m            £m            £m
 Current
 Bank overdrafts       2.6           0.2           1.2
 Unsecured bank loans  5.8           38.8          0.9
 Non-current
 Unsecured bank loans  0.1           -             -
 Loan notes            150.0         150.0         150.0
 Transaction costs     (1.7)         (1.9)         (1.6)
                       156.8         187.1         150.5

 

The Group has the following undrawn borrowing facilities:

 

                                                      30 June 2022  30 June 2021  31 December 2021
                                                      £m            £m            £m
 Floating rate - expiring within 1 year or on demand  64.0          36.1          61.2
 Floating rate - expiring between 1 and 5 years       356.0         337.0         361.0
                                                      420.0         373.1         422.2

 

The Group holds a £360m multi-currency revolving credit facility ('RCF'),
which includes a £90m accordion facility. In June 2022 the Group extended the
maturity date of the RCF by a further year to June 2026. As at 30 June 2022
£5.0m (30 June 2021: £24.0m, 31 December 2021: none) of the RCF was drawn.
The remaining unsecured bank loans reflects a £0.8m working capital loan in
Thailand, which is repayable on demand and denominated in Thailand baht (30
June 2021: £0.7m, 31 December 2021: £0.7m) and £0.1m of bank loans in
Singapore, repayable in November 2024 and April 2025 and denominated in
Singapore dollars (30 June 2021: none, 31 December 2021: none). The balance as
at 31 December 2021 also included a £0.2m working capital loan in Indonesia,
which is repayable on demand and denominated in Indonesian Rupiah. The balance
as at 30 June 2021 also included £14.1m utilisation of a revolving credit
facility in North America for working capital purposes (31 December 2021:
none).

 

The Group holds £150.0m of long term debt through the issuance of 7, 10 and
12 year fixed rate private note placements in the US institutional market,
which were issued in June 2018.

 

The carrying amounts of borrowings are approximate to their fair value, with
the exception of the Group's long-term fixed rate private note placements. The
fair value of these loan notes as at 30 June 2022 is £139.1m (31 December
2021: £155.6m), the difference between the fair value and the book value is
not recognised in the reported results for the period. The fair value has been
calculated based upon a discounted cash flow valuation utilising observable
market rates of borrowing that are comparable to the remaining length of the
loan notes. The valuation technique falls within Level 2 of the fair value
hierarchy in IFRS 13.

 

 

18. Notional pooling arrangement

 

For internal cash management purposes, the Group maintains a notional cash
pooling arrangement with Barclays Bank PLC, whereby credit cash balances
(cash) and debit cash balances (overdrafts) for the participating bank
accounts are notionally offset. There is no overdraft cost or charge
associated with any pooled overdraft that is fully offset by pooled credit
cash balances. As at 30 June 2022, the notional cash pooling arrangement
included cash balances of £169.3m presented in cash and cash equivalents (30
June 2021: £193.3m, 31 December 2021: £201.5m) and overdrafts of £168.9m
(30 June 2021: £187.7m, 31 December 2021: £198.5m) presented in current
liabilities. This represents as at 30 June 2022 surplus pooled credit cash
balances of £0.4m (30 June 2021: surplus pooled credit cash balances of
£5.6m, 31 December 2021: surplus pooled credit cash balances of £3.0m).

 

For the purpose of the statement of cash flows, cash and cash equivalents net
of overdrafts comprise the following:

 

                                             30 June 2022  30 June 2021  31 December 2021
                                             £m            £m            £m
 Cash and cash equivalents                   474.7         481.5         689.7
 Overdrafts in notional pooling arrangement  (168.9)       (187.7)       (198.5)
 Bank overdrafts (see Note 17)               (2.6)         (0.2)         (1.2)
                                             303.2         293.6         490.0

 

 

19. Related party transactions

 

As at 30 June 2022, there were £0.2m of loans outstanding to joint ventures
and £1.4m of loans outstanding to associates (30 June 2021: £2.9m of loans
outstanding to joint ventures and £0.7m of loans outstanding to associates,
31 December 2021: £0.2m of loans outstanding to joint ventures and £1.5m of
loans outstanding to 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.

 

 

20. Contingent liabilities

 

The Group is involved in a number of disputes in the ordinary course of
business. Provision is made in the financial statements for all claims where
costs can be estimated reliably and settlement is probable.

 

 

21. Events after the balance sheet date

 

There have been no 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.

 

 

22. Seasonality

 

Traditionally, a significant percentage of revenue is seasonal which has
historically caused revenue, profits and cash flow from operating activities
to be lower in the first half and higher in the second half of each year. The
concentration of revenue and cash flow in the fourth quarter is due to an
industry-wide focus on completing transactions toward the calendar year end.

 

 

SHAREHOLDER INFORMATION

Like many other listed public companies, Savills no longer issues a hard copy
of the Interim Statement to shareholders.

 

This announcement together with the attached financial statements and notes
may be downloaded from the investor relations section of the Company website
at www.savills.com (http://www.savills.com) .

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
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.

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