REG - Savills PLC - Half-year Report
10/08/2023 07:00
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RNS Number : 8562I Savills PLC 10 August 2023
10 August 2023
Savills plc
('Savills' or 'the Group')
RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2023
Savills plc, the international real estate advisor, today announces its
unaudited results for the six months ended 30 June 2023.
Key Financial Information
· Group revenue £1,011.4m, down 2.5% (4.1% in constant currency*) (H1 2022:
£1,037.4m)
· Group underlying profit** before tax £16.3m (H1 2022: £59.2m)
· Group profit before tax £6.0m (H1 2022: £50.4m)
· Underlying basic earnings per share** 9.2p (H1 2022: 32.4p)
· Basic earnings per share 3.5p (H1 2022: 26.8p)
· Interim dividend of 6.9p (H1 2022: 6.6p)
· Net cash*** £12.9m (H1 2022: Net cash £149.0m)
* Revenue and underlying profit for the period are translated at the prior
period exchange rates to provide a constant currency comparative (see
Appendices).
** 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 19).
Trading performance - Key highlights
· Transaction Advisory revenues (down 20%) supported by market share gains
· Less transactional businesses, performed well in aggregate with revenue up
9%
· Property and Facilities Management revenue up 16%, Consultancy revenue
stable
· Savills Investment Management revenue down 4%
· 1.6% margin (H1 2022: 5.7%) reflects impact of reduced market volumes and
Savills policy of maintaining bench strength to assist clients in challenging
conditions. This positions the Group to benefit from recovery in due course
Commenting on the results, Mark Ridley, Group Chief Executive of Savills plc,
said:
"During 2023, global real estate markets have faced the obvious challenges
associated with inflation and the related steep rise in interest rates.
Different regions have varied in the pace of their adjustment to current
conditions and all have experienced a material decline in trading volumes
during that adjustment process. Market participants, whether investors or
occupiers, seek greater certainty on the trajectory of interest rates over the
next 18 months, something which has become somewhat clearer in recent weeks
than for much of the period.
"Savills has weathered both the inflationary cost conditions and reduced
transaction volumes well, increasing market share and, supported by our strong
balance sheet, continuing to undertake selective business development
activities to further the Group's long term growth strategy.
"We are seeing some positive signs in markets such as the UK and continued
strength in certain Asia Pacific markets including Japan; in Continental
Europe and mainland China we now expect reduced market volumes to continue
through much of the year. In many locations we are carrying very strong
capital transaction pipelines awaiting the market conditions for launch. In
prolonged uncertain conditions, it remains challenging to predict accurately
the timing of individual market recoveries. Accordingly, our range of
expectations for the year as a whole has reduced somewhat. We do, however,
continue to anticipate a significant improvement in volumes of activity
through the balance of the year, and into 2024."
For further information, contact:
Savills 020 7409 8030
Mark Ridley, Group Chief Executive
Simon Shaw, Group Chief Financial Officer
Teneo 020 7353 4200
Jo Blackshaw
Will Palfreyman
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
During the first half of 2023, the Group has withstood much reduced trading
volumes as real estate markets progressively adjust to challenging
macro-economic conditions.
In the six months to 30 June 2023, Savills delivered revenue of £1,011.4m, a
reduction of 3% (4% in constant currency) over the comparable period (H1 2022:
£1,037.4m). Underlying profit was £16.3m, 72% lower than the first half of
2022 (H1 2022: £59.2m) (72% lower in constant currency). The Group's
underlying profit margin was 1.6% (H1 2022: 5.7%). This reflects the
anticipated losses in our transaction business, staff cost inflation and the
maintenance of our professional staff roster to service clients and benefit
from the recovery in due course.
The Group continues to maintain a strong balance sheet with net cash of
£12.9m at 30 June 2023 (H1 2022: £149.0m).
Reported profit before tax was £6.0m (H1 2022: £50.4m).
Market conditions
H1 2023 continued the downward trend in real estate trading volumes, both
capital and leasing transactions, experienced in the second half of 2022 as
investors and occupiers reacted primarily to the significant increase in debt
costs. This has been positive for the flexible business space market, with
Savills Workthere flex advisory business seeing good growth in most markets.
In the UK, capital transactions remained very constrained throughout the
period with market volumes declining c.60% year-on-year and c.46% below the
five year average. Leasing activity largely focused on grade A stock with
strong sustainability credentials.
The transaction volume of commercial properties in Asia Pacific fell by 30%
year-on-year in H1 2023. Although mainland China released lockdown
restrictions in Q1, the market has been slow to recover. Singapore remained
relatively resilient through the period, but in Hong Kong and Australia
volumes have been suppressed.
Continental Europe has experienced the most significant reductions in activity
particularly in Germany, France and the Nordic region. This is partly due to
certain valuation bases, which seek to smooth the effect of significant market
movements, thereby temporarily suspending pressure on Loan to Value ("LTV")
ratios, prolonging the mark-to-market process and stalling transaction
activity.
In the US, where Savills is primarily involved in occupier-focused activities,
the market has seen the volume of smaller lot size transactions continue
relatively well outside the main metropolis markets. There remains a trend of
movement towards the southern states of Texas and Florida away from the more
traditional markets of San Francisco and New York. However, major corporate
head office moves have often been deferred to await the emergence of greater
economic clarity.
Prime Residential (high equity component) markets, particularly in the UK and
mainland China have remained relatively buoyant in the first half of 2023
despite the increasing economic headwinds. This is in contrast to those
mainstream or residential new build markets which are more highly dependent on
mortgage finance.
Business development during the period
Savills 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 progressed our strategy of expanding our Global Prime Residential services
with the acquisition of agencies in Italy (BeLiving Srl) and Portugal
(Predibisa, Sociedade de Mediaçāo Imobiliária, Lda). The Group also
acquired Automotive Property Consultancy Holdings Limited, a specialist
property consultancy dedicated to the franchised motor retail sector in the
UK.
Technology is an important focus for the Group, and we have continued to
implement significant platform upgrades across the globe including both
operating and finance systems and service-specific digital transformation
programmes. In addition we are increasingly incorporating machine learning
capability into our volume processing activities.
Through our wholly owned technology businesses and investments we are
experimenting with the latest advances in generative design, in particular to
test feasibility at an earlier stage in the design process. VU.CITY (a
Grosvenor Hill Ventures investment) uses its SiteSolve technology combined
with highly accurate city-wide models to generate development massing options,
while BrickByte (our technology enabled workplace strategy business) applies
this technology to advise corporates on how to optimise the efficiency of
their office portfolios.
Many of our other digital businesses continue to perform well. Cureoscity, our
wholly owned platform that connects occupiers, landlords and their managing
agents has grown year-on-year. Our online auction business continues to take
market share, and despite increasingly challenging markets, has sold over
£260m of property during the period, an increase of 20% year-on-year.
Business review
The following table sets out Group revenue and underlying profit by operating
segment:
Revenue H1 2023 H1 2022 Change
£m
£m
Transaction Advisory 328.7 413.2 (20%)
Consultancy 195.5 195.7 n/a
Property and Facilities Management 435.5 374.7 16%
Investment Management 51.7 53.8 (4%)
Group revenue 1,011.4 1,037.4 (3%)
Underlying profit H1 2023 H1 2022 Change
£m
£m
Transaction Advisory (17.0) 22.7 n/a
Consultancy 7.2 16.1 (55%)
Property and Facilities Management 20.1 17.1 18%
Investment Management 7.0 10.3 (32%)
Unallocated cost (1.0) (7.0) n/a
Group underlying profit 16.3 59.2 (72%)
The following table sets out Group revenue and underlying profit by
geographical area:
Revenue H1 2023 H1 2022 Change
£m
£m
UK 409.4 439.2 (7%)
Asia Pacific 313.5 311.7 1%
Continental Europe and the Middle East ('CEME') 149.9 138.1 9%
North America 138.6 148.4 (7%)
Group revenue 1,011.4 1,037.4 (3%)
Underlying profit H1 2023 H1 2022 Change
£m
£m
UK 31.6 48.1 (34%)
Asia Pacific 1.9 18.0 (89%)
Continental Europe and the Middle East ('CEME') (12.3) (1.7) n/a
North America (3.9) 1.8 n/a
Unallocated cost (1.0) (7.0) n/a
Group underlying profit 16.3 59.2 (72%)
Revenue performance was driven by good growth (9%) in the less transactional
service lines, which largely mitigated the 20% reduction in transactional
revenues. Property Management showed significant growth in both revenue and
profits during the period. Consultancy revenues remained flat despite the
reduction in certain consultancy activities during a period of economic
uncertainty; in particular valuation, development consultancy and due
diligence services in building consultancy. All geographies/service lines were
affected by continued staff cost increases in the inflationary environment.
The rise in interest rates, coupled with the Group's strong average net cash
position and attractive fixed rate long term debt has resulted in interest
income offsetting the majority of unallocated cost in H1 2023.
Transaction Advisory
Revenue H1 2023 H1 2022 Change
£m
£m
UK 109.1 151.4 (28%)
Asia Pacific 50.2 80.4 (38%)
CEME 43.2 49.1 (12%)
North America 126.2 132.3 (5%)
Total 328.7 413.2 (20%)
Our Transaction Advisory revenues decreased by 20% compared with H1 2022 (22%
in constant currency), with leasing- related revenue generally remaining more
resilient than capital transactions. In most of our major markets Savills
revenue outperformed the market, indicating increased market share of reduced
market volumes. The transaction business sustained an underlying loss of
£17.0m (H1 2022: Underlying Profit of £22.7m) as we maintained our policy of
keeping teams intact to service clients and ensure our business is well placed
to take advantage of the opportunities we expect to arise through the
recovery.
UK Commercial
UK Commercial Transaction fee income decreased 33% to £37.5m (H1 2022:
£55.6m), with a significant reduction in both investment and leasing
activity.
Capital transactions remained very constrained throughout the period with
market volumes declining c.54% year-on-year and c.38% below the five year
average. That said, the UK was the most attractive location for overseas
investment during the period as investors sought Prime Property with the
highest sustainability credentials where rental growth supported yields.
Occupational market trends were slightly more resilient, with office leasing
volumes in both central London and the key regional cities decreasing over the
comparable period by 23%, albeit activity was still focused on larger lot
sizes with good sustainability characteristics. Against this backdrop, revenue
declines of 36% and 29% respectively in capital transactions and leasing
reflected Savills growing and resilient market shares respectively.
Logistics leasing markets performed relatively better and we benefited from an
improvement in retail transactions during the period.
Decreased revenue resulted in a reduced underlying profit margin of 6.4% (H1
2022: 17.8%) and underlying profit of £2.4m (H1 2022: £9.9m).
UK Residential
In line with our expectations, given steep rises in interest rates, revenue
from Savills UK residential business declined by 25% to £71.6m (H1 2022:
£95.8m). To put this into context, it was still Savills third strongest
revenue performance in a decade and 25% ahead of the comparable period
pre-Covid (2019).
In the second hand agency business, Savills overall transaction volumes
exchanged were down 24%. The average value of London and regional residential
property sold by Savills in the period was 4% higher in London at £2.3m (H1
2022: £2.2m) and 8% lower in the regional markets at £1.25m (H1 2022:
£1.36m).
Revenue from the sale of New Homes declined 28% on H1 2022. This reflected
reduced activity in the lower lot sizes, particularly outside London, which
are more mortgage-dependent. The effect of this was partly mitigated by
relative strength in the Prime London market which saw a 25% increase in the
average lot size transacted.
Finally, our Operational Capital Markets business, which advises on the
Private Rented Sector ('PRS'), Student and other institutional residential
markets, saw a 26% decline in revenue period-on-period as the market began to
adapt to the effect of higher interest costs on operating models.
Underlying profits in the UK residential transaction business decreased to
£4.7m (H1 2022: £13.6m).
Asia Pacific Commercial
Commercial transaction fee income in Asia Pacific decreased by 44% (same in
constant currency) to £40.2m (H1 2022: £71.2m). All markets experienced a
decline in volumes, however Singapore and Hong Kong showed the greatest
period-on-period resilience. We had anticipated that Mainland China would show
good signs of recovery once Covid restrictions were lifted in Q1 2023. This
has proved somewhat slower as a result of economic uncertainty and our
transaction revenue declined by 29% period-on-period.
Overall the Asia Pacific commercial transaction business delivered an
underlying loss of £6.2m for the period (H1 2022: £7.4m).
Asia Pacific Residential
Residential transaction fee income in Asia Pacific increased by 9% to £10m
(H1 2022: £9.2m) (8% in constant currency). Renewed activity in Mainland
China (post Covid restrictions) and improvements in Hong Kong mitigated the
impact of reduced activity elsewhere in the region.
Underlying profit improved to £1.2m for the first half of the year (H1 2022:
£0.0m).
CEME
In CEME, transactional advisory revenue declined by 12% to £43.2m (H1 2022:
£49.1m). Leasing revenues were broadly flat, partially mitigating a 21%
decline in capital transaction revenues. This compared favourably with a 59%
fall in capital transaction activity for the market as a whole, with office
and industrial sectors declining by 64% and 65% respectively. It is notable
that cross border transactions into Europe were at the lowest levels seen in
over a decade. Significant declines in revenue occurred in the principal
Northern European markets of Germany, France, Sweden, Ireland and the
Netherlands, and were partially offset by resilient performances in Spain,
Poland, Italy and the Middle East. Overall, cost inflation and the impact of
reduced trading activity led to an increase of the H1 loss to £16.2m (H1
2022: £8.8m loss).
North America
In North America, where the Group is substantially dependent upon leasing
activity by corporate occupiers, revenue reduced by 5% to £126.2m (H1 2022:
£132.3m) (9% in constant currency). This was driven by strong performances in
the New Jersey, Philadelphia and Southern California markets which largely
offset a substantial decline in revenue from the New York office market.
During the period we undertook a reorganisation of the North American business
including both cost saving initiatives (the costs of which have not been
excluded from underlying profit) and enhancing the focus on our growing Global
Occupier Solutions service. The effects of these activities are expected
progressively to improve profitability in coming periods.
Taking into account both trading, the reorganisation costs and the impact of
inflation, the North American business delivered an underlying loss of £2.9m
(H1 2022: £0.6m underlying profit).
Consultancy
Revenue H1 2023 H1 2022 Change
£m
£m
UK 112.9 109.6 3%
Asia Pacific 37.6 39.5 (5%)
CEME 32.6 30.5 7%
North America 12.4 16.1 (23%)
Total 195.5 195.7 n/a
Consultancy revenues remained flat year on year as growth was supressed by two
principal factors: first the impact of reduced global transaction volumes on
valuation services, which represent c.27% of the Group's Consultancy revenues;
and secondly the impact of macro-economic uncertainty which causes client
requirements for longer term strategic services such as development and long
term project consultancy to be deferred for a period.
In the UK, revenue was marginally ahead of the prior period with growth in the
Rural, Building and Project Consultancy and Planning services offsetting a
decline in Development Consultancy revenue. Of particular note is the positive
effect of both sustainability initiatives to upgrade existing buildings and
the increasing focus on natural capital as an asset class.
The Asia Pacific business revenue declined by 5% (5% on a constant currency
basis), as reductions in Valuations and Development Consultancy, particularly
in Mainland China and Vietnam outweighed an improved performance in Project
Management.
In the CEME business 7% revenue growth comprised growth in the Middle East,
Spain and France in particular which helped offset reductions in Germany,
Ireland and Sweden. In common with all regions, staff cost inflation remained
a significant obstacle to profitability during the period.
The North American Consultancy business posted a 23% decline in revenue,
primarily as a result of a significant reduction in activity in the
Technology/Life Sciences sector, and profitability was negatively affected by
both cost inflation in Project Management services and the deferral of some
larger assignments.
As a result of the above factors Underlying profit of the Consultancy business
decreased by 55% to £7.2m (H1 2022: £16.1m).
Property and Facilities Management
Revenue H1 2023 H1 2022 Change
£m
£m
Asia Pacific 221.8 188.4 18%
UK 167.6 149.6 12%
CEME 46.1 36.7 26%
Total 435.5 374.7 16%
Our Property and Facilities Management business increased global revenues by
16% (14% in constant currency) to £435.5m (H1 2022: £374.7m). Savills total
area under management increased 3% to 2.49bn sq ft (H1 2022: 2.42bn sq ft).
In Asia Pacific, revenues increased by 18% (14% in constant currency), driven
by Hong Kong, Korea, Vietnam and Singapore, the latter benefiting from the
full period effect of the acquisition of Absolute Maintenance Services Pte
Limited and Solute Pte Limited (together "AMS") in August 2022. The impact of
staff cost inflation restricted profit growth to 1% during the period.
UK Property and Facilities Management revenues grew 12%. This comprised 13%
commercial and rural management growth, within which Facilities Management
posted 17% growth. Our Residential Management (primarily lettings) business
grew revenue by 8%. Underlying profit increased by 29% period-on-period.
The CEME business delivered strong revenue growth of 26% (24% in constant
currency) driven by Germany, Ireland, Spain and the Netherlands. Cost
inflation restricted profitability as the business reduced H1 losses to £0.4m
(H1 2022: £1.0m loss).
Overall, underlying profit for the Property and Facilities Management business
grew by 18% to £20.1m (H1 2022: £17.1m).
Investment Management
Revenue from Investment Management decreased by 4% to £51.7m (H1 2022:
£53.8m) (5% in constant currency), reflecting lower transaction fees in line
with reduced activity in the market as a result of interest rate increases and
the lack of price clarity evidenced by market activity. Base management fees
remained stable, representing approximately 81% (HY 2022: 77%) of Investment
Management gross revenues. Lower transaction volumes reduced transaction fees
by 67%, however performance fees rose 37% (to £6.5m) compared with H1 2022.
This was primarily due to the decision to realise value for clients from a
number of long-held investments in the European large unit logistics sector
Assets Under Management ('AUM') decreased by 12% to £20.4bn (H1 2022:
£23.1bn) as a result of sale activity and valuation decreases, partially
compensated by capital raised and deployed over the preceding 12 months. The
relationship with Samsung Life progressed well during the period, with
contracted investment commitments being confirmed for a range of debt and
equity funds but, for market reasons, remaining still largely undeployed at
the end of the period.
Despite the challenging market conditions, 68% of funds (by AUM) continued to
exceed their benchmark returns on a five year rolling basis. Capital raising
in the first half of the year remained consistent with the prior period at
£1.1bn.
The market based reduction in transaction fees led to a decrease of 32% in
underlying profit to £7.0m, against a record H1 2022 result (H1 2022:
£10.3m), this represented a 14% underlying profit margin (H1 2022: 19.1%).
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 to £1.0m (H1 2022: £7.0m)
primarily reflects decreases in the profit-related bonus provision and
increases in net interest income.
Transaction-related and restructuring costs
During the period the Group incurred an aggregate restructuring charge of
£nil (H1 2022: £0.1m) and transaction-related costs of £7.1m (H1 2022:
£5.9m). 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 business (see Note 8).
Earnings and financial position
The Group's underlying profit margin in the period was 1.6% (H1 2022: 5.7%).
This reflects the anticipated net losses in our global transaction business,
staff cost inflation and the maintenance of our bench strength to service
clients.
Basic earnings per share for the six months to 30 June 2023 decreased to 3.5p
(H1 2022: 26.8p). Underlying basic earnings per share decreased to 9.2p (H1
2022: 32.4p).
Cash and cash equivalents, net of overdrafts in notional pooling arrangements
and bank overdrafts (see note 19), at the period end stood at £257.0m (30
June 2022: £303.2m, 31 December 2022: £464.3m). The Group typically has a
net outflow of cash in the first half of the year 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 2023 of £249.1m (30 June 2022: £156.8m,
31 December 2022: £159.7m). These principally comprise £150.0m (30 June 2022
and 31 December 2022: £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 2023, borrowings also included £13.1m drawn under a
revolving credit facility in North America (30 June 2022: £14.1m, 31 December
2022: £nil). At 30 June 2023, £78.0m of the Group's UK revolving credit
facility ('RCF') was drawn (30 June 2022: £5.0m, 31 December 2022: £nil),
with a total of £329.3m of borrowing facilities available to the Group (30
June 2022: £420.0m, 31 December 2022: £424.9m).
Cash and cash equivalents net of borrowings and overdrafts in notional pooling
arrangements was £12.9m (30 June 2022: £149.0m, 31 December 2022: £307.4m).
The funding level of the defined benefit Savills Pension Scheme in the UK,
which is closed to future service based accrual, decreased during the period
primarily as a result of the net effect of falling LDI asset values and
reduced future pension obligations, in line with rising gilt yields. The
Scheme was in a surplus position of £2.5m at 30 June 2023 (30 June 2022:
£33.3m surplus, 31 December 2022: £22.3m 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 2023 Constant currency effect Six months to 30 June 2023 at constant currency
£m £m £m
Revenue 1,011.4 16.4 995.0
Profit before tax 6.0 (0.3) 6.3
Underlying profit before tax 16.3 (0.2) 16.5
Interim Dividend
The Board has declared an interim ordinary dividend of 6.9p (H1 2022: 6.6p).
The dividend, which is designed to provide sustainable real income growth and
be supported by the less transactional business earnings, will be payable on 2
October 2023 to shareholders on the register at 1 September 2023.
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 2022. These are listed below,
please refer to pages 29 to 35 thereof or to our investors' page on
www.savills.com (http://www.savills.com) .
· Market conditions, macro-economic and geopolitical issues
· Achieving the right market positioning to meet the needs of our
clients
· Recruitment and retention of high-calibre staff
· Reputational and brand risk
· Legal risk
· Failure or significant interruption to IT systems causing
disruption to client service
· Operational resilience/Business continuity
· Business conduct
· Changes in the regulatory environment/ regulatory breaches
· Acquisition/integration risk
· Environment and sustainability
Board Changes
As announced in March 2023, Nicholas Ferguson will retire as Chairman and
Director on 31 December 2023. He will be succeeded as Chair, by Stacey
Cartwright, currently the Senior Independent Director since January 2021,
having joined the Board as an independent non-executive director in October
2018. A new Chair of the Audit Committee will be confirmed in due course.
Summary and outlook
During 2023, global real estate markets have faced the obvious challenges
associated with inflation and the related steep rise in interest rates.
Different regions have varied in the pace of their adjustment to current
conditions and all have experienced a material decline in trading volumes
during that adjustment process. Market participants, whether investors or
occupiers, seek greater certainty on the trajectory of interest rates over the
next 18 months, something which has become somewhat clearer in recent weeks
than for much of the period.
Savills has weathered both the inflationary cost conditions and reduced
transaction volumes well, increasing market share and, supported by our strong
balance sheet, continuing to undertake selective business development
activities to further the Group's long term growth strategy.
We are seeing some positive signs in markets such as the UK and continued
strength in certain Asia Pacific markets including Japan; in Continental
Europe and mainland China we now expect reduced market volumes to continue
through much of the year. In many locations we are carrying very strong
capital transaction pipelines awaiting the market conditions for launch. In
prolonged uncertain conditions, it remains challenging to predict accurately
the timing of individual market recoveries. Accordingly, our range of
expectations for the year as a whole has reduced somewhat. We do, however,
continue to anticipate a significant improvement in volumes of activity
through the balance of the year, and into 2024.
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 2022. 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
9 August 2023
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 the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2023 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
24.
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 2023 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" (ISRE) 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 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
9 August 2023
Savills plc
Condensed interim consolidated income statement
for the period ended 30 June 2023
Six months to 30 June 2023 Six months to 30 June 2022 Year ended
31 December 2022
(unaudited) (unaudited) (audited)
Note £m £m £m
Revenue 7 1,011.4 1,037.4 2,298.3
Less:
Employee benefits expense (674.9) (688.2) (1,509.8)
Depreciation (34.7) (32.0) (65.8)
Amortisation of intangible assets (7.9) (8.0) (16.9)
Other operating expenses (297.0) (260.6) (562.1)
(Increase)/decrease in provision for expected credit loss (0.7) 2.4 2.1
Other net gains 1.4 0.1 0.3
Share of post-tax profit from joint ventures and associates 4.8 4.7 12.1
Operating profit 2.4 55.8 158.2
Finance income 20 21.8 2.3 13.7
Finance costs 20 (18.2) (7.7) (18.0)
Net finance cost 20 3.6 (5.4) (4.3)
Profit before income tax 6.0 50.4 153.9
Income tax expense 9 (1.6) (12.7) (34.1)
Profit for the period 4.4 37.7 119.8
Attributable to:
Owners of the parent 4.8 37.0 119.4
Non-controlling interests (0.4) 0.7 0.4
4.4 37.7 119.8
Earnings per share
Basic earnings per share 11(a) 3.5p 26.8p 87.0p
Diluted earnings per share 11(a) 3.4p 25.2p 82.2p
Supplementary income statement information
Reconciliation to underlying profit before income tax
Profit before income tax 6.0 50.4 153.9
- restructuring and transaction-related costs 8 7.1 6.0 15.6
- other underlying adjustments 8 3.2 2.8 (4.9)
Underlying profit before income tax 8 16.3 59.2 164.6
Notes 1 to 24 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 2023
Six months to 30 June 2023 (unaudited) Six months to 30 June 2022 (unaudited) Year ended 31 December 2022 (audited)
£m £m £m
Profit for the period 4.4 37.7 119.8
Other comprehensive (loss)/income
Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit pension scheme and employee benefit (20.4) 17.4 6.6
obligations
Changes in fair value of equity investments at FVOCI 0.2 (5.2) (10.9)
Tax on other items that will not be reclassified 7.0 (3.9) (3.9)
Total items that will not be reclassified to profit or loss (13.2) 8.3 (8.2)
Items that may be reclassified subsequently to profit or loss:
Currency translation differences (29.3) 37.7 48.1
Tax on items that may be reclassified - 0.4 -
Total items that may be reclassified subsequently to profit or loss (29.3) 38.1 48.1
Other comprehensive (loss)/income for the period (42.5) 46.4 39.9
Total comprehensive (loss)/income for the period (38.1) 84.1 159.7
Total comprehensive (loss)/income attributable to:
Owners of the parent (36.7) 83.0 158.4
Non-controlling interests (1.4) 1.1 1.3
(38.1) 84.1 159.7
Notes 1 to 24 are an integral part of these condensed interim financial
statements.
Savills plc
Condensed interim consolidated statement of financial position
at 30 June 2023
30 June 20223 (unaudited) 30 June 2022 restated** 31 December 2022
(unaudited) (audited)
Note £m £m £m
Assets: Non-current assets
Property, plant and equipment 71.4 68.9 77.0
Right of use assets 207.4 235.7 223.8
Goodwill 440.2 436.3 449.4
Intangible assets 60.5 69.5 66.3
Investments in joint ventures and associates 36.2 35.8 37.0
Deferred income tax assets 47.1 37.4 38.6
Financial assets at fair value through other comprehensive income ('FVOCI') 6 7.5 11.3 5.7
Financial assets at fair value through profit and loss ('FVPL') 36.7 33.9 36.8
Defined benefit pension surplus 16 5.8 36.0 25.5
Contract related assets 2.2 3.0 2.4
Trade and other receivables 47.0 36.1 37.5
962.0 1,003.9 1,000.0
Assets: Current assets
Contract assets 12.9 12.0 7.4
Trade and other receivables 576.7 533.0 643.1
Income tax receivable 9.3 6.0 2.4
Derivative financial instruments 6 1.5 - 0.3
Cash and cash equivalents* 19 442.7 474.7 669.1
1,043.1 1,025.7 1,322.3
Liabilities: Current liabilities
Borrowings 18 99.9 8.4 10.6
Overdrafts in notional pooling arrangement* 19 180.7 168.9 202.0
Lease liabilities 51.8 51.9 53.2
Derivative financial instruments 6 - 1.0 1.0
Contract liabilities 17.4 24.9 14.0
Trade and other payables 459.6 536.2 744.3
Income tax liabilities 3.7 16.0 15.5
Employee benefit obligations 16 25.2 25.8 17.7
Provisions 7.8 6.7 9.2
846.1 839.8 1,067.5
Net current assets 197.0 185.9 254.8
Total assets less current liabilities 1,159.0 1,189.8 1,254.8
Liabilities: Non-current liabilities
Borrowings 18 149.2 148.4 149.1
Lease liabilities 206.2 239.3 224.4
Derivative financial instruments 6 5.2 2.5 6.7
Other payables 26.5 17.5 21.9
Employee benefit obligations 16 25.4 23.0 25.2
Provisions 14.2 20.9 20.6
Deferred income tax liabilities 1.3 2.2 1.6
428.0 453.8 449.5
Net assets 731.0 736.0 805.3
Equity:
Share capital 3.6 3.6 3.6
Share premium 104.9 104.8 104.9
Other reserves 85.6 107.7 112.8
Retained earnings 502.2 489.6 546.8
Equity attributable to owners of the parent 696.3 705.7 768.1
Non-controlling interests 34.7 30.3 37.2
Total equity 731.0 736.0 805.3
Notes 1 to 24 are an integral part of these condensed interim financial
statements.
* Included within cash and cash equivalents are cash balances of £181.9m (30
June 2022: £169.3m, 31 December 2022: £205.0m) that are operated within a
notional cash pooling arrangement together with overdraft balances of £180.7m
(30 June 2022: £168.9m, 31 December 2022: £202.0m) presented above in
current liabilities. See Note 19 for further details.
** See Note 4 for details on the prior period restatement.
Savills plc
Condensed interim consolidated statement of changes in equity
for the period ended 30 June 2023
Attributable to owners of the parent
Share capital Share premium Other reserves Retained earnings Total Non-controlling interests Total equity
£m £m £m £m £m £m £m
Balance at 1 January 2023 3.6 104.9 112.8 546.8 768.1 37.2 805.3
(audited)
Profit for the period - - - 4.8 4.8 (0.4) 4.4
Other comprehensive (loss)/income:
Re-measurement of defined benefit pension scheme and employee benefit - - - (20.4) (20.4) - (20.4)
obligations
Changes in fair value of financial assets at FVOCI - - 0.2 - 0.2 - 0.2
Currency translation differences - - (28.3) - (28.3) (1.0) (29.3)
Tax on other items directly taken to other comprehensive loss - - - 7.0 7.0 - 7.0
Total comprehensive loss for the period - - (28.1) (8.6) (36.7) (1.4) (38.1)
Employee share option scheme:
- Value of services provided - - - 15.6 15.6 0.4 16.0
- Tax on employee share option schemes - - - 0.1 0.1 - 0.1
Purchase of treasury shares - - - (11.9) (11.9) - (11.9)
Transfer between equity accounts - - 0.9 (0.6) 0.3 (0.3) -
Dividends (Note 10) - - - (39.4) (39.4) (1.0) (40.4)
Balance at 30 June 2023 (unaudited) 3.6 104.9 85.6 502.0 696.1 34.9 731.0
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
£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 year - - - 119.4 119.4 0.4 119.8
Other comprehensive income/(loss):
Remeasurement of defined benefit pension scheme and employee benefit - - - 6.1 6.1 0.5 6.6
obligations
Changes in fair value of financial assets at FVOCI - - (10.9) - (10.9) - (10.9)
Tax on items directly taken to other comprehensive income - - - (3.7) (3.7) (0.2) (3.9)
Currency translation differences - - 47.5 - 47.5 0.6 48.1
Total comprehensive income for the year - - 36.6 121.8 158.4 1.3 159.7
Employee share option scheme:
- Value of services provided - - - 29.6 29.6 0.8 30.4
- Tax on employee share option schemes - - - (2.6) (2.6) - (2.6)
Issue of share capital - 0.5 - - 0.5 - 0.5
Tax on other items taken to reserves - - - 0.3 0.3 - 0.3
Purchase of treasury shares - - - (49.0) (49.0) - (49.0)
Dividends - - - (85.5) (85.5) (0.4) (85.9)
Transfer between reserves - - 0.4 (4.0) (3.6) 3.6 -
Fair value of derivative financial instrument - - - (4.5) (4.5) - (4.5)
Transactions with non-controlling interests - - (0.4) 0.7 0.3 - 0.3
Additions through business combinations - - - - - 2.7 2.7
Balance at 31 December 2022 (audited) 3.6 104.9 112.8 546.8 768.1 37.2 805.3
Notes 1 to 24 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 2023
Six months to 30 June 2023 (unaudited) Six months to 30 June 2022 Year ended 31 December 2022
(unaudited) (audited)
Note £m £m £m
Cash flows from operating activities
Cash (used in)/generated from operations 12 (166.1) (34.7) 210.9
Interest received 21.2 2.3 13.3
Interest paid (18.0) (7.4) (16.9)
Income tax paid (22.9) (22.1) (43.3)
Net cash (used in)/generated from operating activities (185.8) (61.9) 164.0
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 3.9 0.1 0.2
Proceeds from sale of financial assets held at FVOCI and FVPL 2.1 0.7 1.6
Proceeds from sale of interests in joint ventures - 0.1 0.1
Dividends received from joint ventures 2.9 2.3 7.1
Dividends received from associates 0.9 2.3 4.2
Dividends received from other parties - - 0.2
Repayment of loans by joint ventures - - 0.1
Repayment of loans by associates 0.1 - 0.4
Repayment of loans by other parties - - 0.7
Loans to joint ventures - - (0.1)
Loans to associates (0.1) - (0.4)
Loans to other parties (1.6) (0.5) (1.7)
Acquisition of subsidiaries, net of cash and overdrafts acquired (2.6) (2.8) (14.9)
Deferred consideration paid in relation to prior year acquisitions (0.9) (1.5) (3.3)
Purchase of property, plant and equipment (8.9) (7.7) (19.8)
Purchase of intangible assets (3.1) (3.9) (7.0)
Purchase of financial assets held at FVOCI and FVPL (3.5) (4.3) (8.8)
Purchase of investment in joint ventures (0.2) (0.1) (0.4)
Purchase of investment in associates - - -
Net cash used in investing activities (11.0) (15.3) (41.8)
Cash flows from financing activities
Proceeds from issues of share capital - 0.4 0.5
Proceeds from transaction with non-controlling interest - 7.9 7.9
Transaction costs incurred on transaction with non-controlling interest - (0.2) (0.2)
Proceeds from borrowings 98.7 9.1 9.6
Repayments of borrowings (11.3) (4.3) (5.6)
Financing fees paid - (0.4) (0.4)
Principal elements of lease payments (27.5) (24.3) (51.4)
Purchase of treasury shares (11.9) (37.6) (49.0)
Dividends paid (40.4) (77.0) (85.9)
Net cash from/(used in) financing activities 7.6 (126.4) (174.5)
Net decrease in cash, cash equivalents and bank overdrafts (189.2) (203.6) (52.3)
Cash, cash equivalents and bank overdrafts at beginning of period 464.3 490.0 490.0
Effect of exchange rate fluctuations on cash held (18.1) 16.8 26.6
Cash, cash equivalents and bank overdrafts at end of period 19 257.0 303.2 464.3
Notes 1 to 23 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 9 August 2023.
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 2022 is derived from the statutory accounts for that year. Statutory
financial statements for the year ended 31 December 2022 were approved by the
Board of Directors on 15 March 2023 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 are 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 2023 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 2022, 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 2022, management has considered the impact of risks
and opportunities relating to climate change, in accordance with the TCFD
obligations, when preparing the financial report for half-year reporting at 30
June 2023. Consistent with the 2022 year end, we concluded that as sufficient
mitigation actions were in place relating to climate change risks, the risks
identified did not have a material impact on the financial reporting
judgements and estimates and are not expected to have a significant impact on
the Group's going concern. For further information on our climate related
risks and opportunities refer to our 2022 TCFD report -
https://www.savills.com/why-savills/tcfd-report-2022.pdf
(https://www.savills.com/why-savills/tcfd-report-2022.pdf) .
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 2024
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 and Emerging risks'
section). In addition, sensitivity analysis has been performed to assess
liquidity availability and covenant compliance over the period until 31
December 2024, 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 £12.9m at the period end and the level of
undrawn facilities available (see Note 18 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 2024 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 2022, 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 2023 that are not relevant or considered to have a
significant impact on the Group and its financial statements include the
following:
IFRS 17: Insurance Contracts New standard
Amendments to IFRS 17
Initial Application of IFRS 17 and IFRS 9 Comparative Information
Amendments to IAS 12 Deferred Tax related to Assets and Liabilities arising from a Single
Transaction
Amendments to IAS 8 Definition of Accounting Estimates
Amendments to IAS 1 and IFRS Practice Statement 2 Disclosure of Accounting policies
Finance (No 2) Bill 2023, that includes Pillar Two legislation, was
substantively enacted in the UK on 20 June 2023, to apply for periods
commencing 1 January 2024. Pillar Two Model Rules (Amendments to IAS 12) as
issued in May 2023, was adopted as from that date. The amendments to IAS 12
introduce a temporary mandatory relief from accounting for deferred tax that
arise from legislation implementing OECD Pillar Two. As required by the
amendments to IAS 12 the group has applied the exception to recognising and
disclosing information about deferred tax assets and liabilities related to
Pillar Two income taxes.
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 than reported profit before tax if there have been significant
impairments, restructuring costs excluded and significant recent business
acquisitions. Similarly, underlying profit before tax may be materially lower
than reported profit before tax if there have been significant profitable
disposals.
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 (see page 8). 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
Reclassification of financial assets held at FVPL
The Group's prior interim period Statement of Financial Position included
financial assets held at FVPL incorrectly classified as financial assets held
at FVOCI. Some financial assets had originally been classified as equity
instruments, with the Group making an irrevocable election for these to be
classified as FVOCI. In the prior year, the Group made further investments and
reassessed the accounting treatment for all financial assets previously
classified as FVOCI. It was determined that some of these financial assets do
not meet the definition of an equity instrument under IFRS 9: 'Financial
Instruments' and as a result should be classified as financial assets held at
FVPL with changes in fair value recognised through the income statement. The
period ending 30 June 2022 fair value gains and losses recognised in OCI and
the cumulative fair value gains and losses recognised in previous periods on
these instruments are not material to the Group.
These are correctly reflected in the Statement of Financial Position as at 30
June 2023 and 31 December 2022. The prior period comparatives as at 30 June
2022 have been restated in accordance with IAS 8 'Accounting Policies, Changes
in Accounting Estimates and Errors' to meet the presentation requirements of
IAS 1 'Presentation of Financial Statements'.
In addition, the Group's prior period Statement of Financial Position included
other financial assets appropriately held at FVPL which were included within
non-current trade receivables. As a consequence of the above correction of
prior period classification error, these financial assets have been included
in the financial asset held at FVPL line item in the Statement of Financial
Position to conform to the current period presentation, which also reflects
the nature of these instruments.
The financial assets held at FVPL, previously classified as Level 2 in the
fair value measurement hierarchy, have also been transferred to Level 3 in the
fair value measurement hierarchy.
The table below show the impact of the prior period restatement on the Group's
primary financial statements:
Statement of Financial Position
30 June 2022 30 June 2022
reported Restatement restated
£m £m £m
Assets: Non-current assets
Financial assets at fair value through other comprehensive income ('FVOCI') 28.3 (17.0) 11.3
Financial assets at fair value through profit and loss ('FVPL') - 33.9 33.9
Trade and other receivables 53.0 (16.9) 36.1
This prior period restatement does not have a material impact on the Group's
Income Statement, Statement of Cash Flows, Statement of Changes in Equity or
Statement of Comprehensive Income. The prior period restatement also does not
have an impact on the Group's net assets or net current assets.
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 2022.
Refer to Note 18 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 2022. There have been no changes in any
risk management policies since the year end.
Fair value estimation
The tables below analyse financial instruments carried at fair value, by
valuation method.
The following table presents the Group's assets and liabilities that are
measured at fair value at 30 June 2023:
£m Level 1 Level 2 Level 3 Total
2023
Assets
Financial assets at FVOCI
- Listed equity investments 0.6 - - 0.6
- Unlisted equity investments - - 6.9 6.9
Financial assets at FVPL - - 36.7 36.7
Derivative financial instruments - 1.5 - 1.5
Total assets 0.6 1.5 43.6 45.7
Liabilities
Derivative financial instruments - - 5.2 5.2
Total liabilities - - 5.2 5.2
The following table presents the Group's assets and liabilities that are
measured at fair value at 31 December 2022:
£m Level 1 Level 2 Level 3 Total
2022
Assets
Financial assets at FVOCI
- Listed equity investments 0.8 - - 0.8
- Unlisted equity investments - - 4.9 4.9
Financial assets at FVPL - - 36.8 36.8
Derivative financial instruments - 0.3 - 0.3
Total assets 0.8 0.3 41.7 42.8
Liabilities
Derivative financial instruments - 1.0 6.7 7.7
Total liabilities - 1.0 6.7 7.7
The following table presents the Group's assets and liabilities that are
measured at fair value at 30 June 2022:
£m restated* Level 1 Level 2 Level 3 Total
2022
Assets
Financial assets at FVOCI
- Listed equity investments 1.0 - - 1.0
- Unlisted equity investments - - 10.3 10.3
Financial assets at FVPL - - 33.9 33.9
Total assets 1.0 - 44.2 45.2
Liabilities
Derivative financial instruments - 1.0 2.5 3.5
Total liabilities - 1.0 2.5 3.5
* See Note 4 for details on the prior period restatement.
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 18.
Valuation techniques
Level 1
Level 1 instruments are those whose fair values are based on quoted prices
(unadjusted) in active markets for identical assets and liabilities.
Level 2
Level 2 instruments are those whose fair values are based on inputs other than
quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly. The fair value of derivative
financial instruments relating to forward foreign exchange contracts are
determined by using valuation techniques using observable market data.
Level 3
If one or more of the significant inputs is not based on observable market
data, the instrument is included in Level 3.
Financial assets held at FVOCI (unlisted equity investments) 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.
Financial assets held at FVPL included in Level 3 fall under two categories.
The first, where the fair value of investment funds is based on underlying
asset values determined by the Fund Manager's quarterly financial statements.
The second, where management have determined the fair value of convertible
loans based upon the latest trading performance of the equity investments and
cash flow forecasts of the investments and applying these to a discounted cash
flow valuation.
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 derivative financial liabilities classified as Level 3 relate 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. These
include a call option on the Savills IM Holdings Ltd group whereby under this
agreement Samsung Life has the option to increase its interest by up to 10%
over the next four years, depending upon the quantum and timing of the
provision of capital to Savills Investment Management's investment products,
the maximum being achievable if at least US$2bn of capital is committed. This
option is classed as non-current. Gains and losses are recognised in operating
profits in the income statement. Derivative financial liabilities also include
a put and call option on the remaining 40% of the AMS businesses (60% of which
was acquired by the Group during 2022). Under this agreement, after 2 years
the Group has the option to purchase and the non-controlling interest holder
has the option to request the Group to purchase an additional 20%, with the
remaining 20% after 5 years. This option is classed as non-current. The loss
upon recognition has been recognised in reserves. Subsequent gains and losses
are recognised in operating profits in the income statement.
The following table presents changes in Level 3 items for the period ended 30
June 2023:
Derivative financial instruments Unlisted equity investments Financial assets at FVPL
£m £m £m
Opening balance 1 January 2023 (6.7) 4.9 36.8
Additions - 3.5 1.6
Disposals - (1.6) (0.5)
Transfer - (0.1) 0.1
Exchange movement 0.3 (0.2) (0.4)
Re-measurements 1.2 0.4 (0.9)
Closing balance 30 June 2023 (5.2) 6.9 36.7
The re-measurement of unlisted equity securities in the period of £0.4m is
based upon evidence from recent fundraising initiatives undertaken.
7. Segment analysis
Six months to 30 June 2023 Transaction Advisory Consultancy Property and Facilities Management Investment Management Unallocated Total
(unaudited) £m £m £m £m £m £m
Revenue
United Kingdom
- commercial 37.5 93.5 146.1 19.8 - 296.9
- residential 71.6 19.4 21.5 - - 112.5
Total United Kingdom 109.1 112.9 167.6 19.8 - 409.4
CEME 43.2 32.6 46.1 28.0 - 149.9
Asia Pacific
- commercial 40.2 37.6 221.8 3.9 - 303.5
- residential 10.0 - - - - 10.0
Total Asia Pacific 50.2 37.6 221.8 3.9 - 313.5
North America 126.2 12.4 - - - 138.6
Total revenue 328.7 195.5 435.5 51.7 - 1,011.4
Underlying profit/(loss) before tax
United Kingdom
- commercial 2.4 8.6 9.7 3.5 (1.0) 23.2
- residential 4.7 1.2 1.5 - - 7.4
Total United Kingdom 7.1 9.8 11.2 3.5 (1.0) 30.6
CEME (16.2) 0.1 (0.4) 4.2 - (12.3)
Asia Pacific
- commercial (6.2) (1.7) 9.3 (0.7) - 0.7
- residential 1.2 - - - - 1.2
Total Asia Pacific (5.0) (1.7) 9.3 (0.7) - 1.9
North America (2.9) (1.0) - - - (3.9)
Underlying profit/(loss) before tax (17.0) 7.2 20.1 7.0 (1.0) 16.3
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 30.5 36.7 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 413.2 195.7 374.7 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) 3.8 (1.0) 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 16.1 17.1 10.3 (7.0) 59.2
* Revenue (£11.4m) and underlying profit (£1.5m) attributable to the project
management consultancy business in CEME has been reclassified from Property
and Facilities Management to Consultancy.
Year ended 31 December 2022 Transaction Advisory Consultancy* Property and Facilities Management* Investment Management Unallocated Total
(audited) £m £m £m £m £m £m
Revenue
United Kingdom
- commercial 118.9 202.0 278.7 53.3 - 652.9
- residential 208.3 46.4 48.7 - - 303.4
Total United Kingdom 327.2 248.4 327.4 53.3 - 956.3
CEME* 129.8 72.1 81.4 51.7 - 335.0
Asia Pacific
- commercial 145.3 87.4 404.9 7.8 - 645.4
- residential 24.3 - - - - 24.3
Total Asia Pacific 169.6 87.4 404.9 7.8 - 669.7
North America 303.5 33.8 - - - 337.3
Total revenue 930.1 441.7 813.7 112.8 - 2,298.3
Underlying profit/(loss) before tax
United Kingdom
- commercial 20.4 21.8 21.2 8.7 (16.3) 55.8
- residential 35.1 6.2 4.7 - - 46.0
Total United Kingdom 55.5 28.0 25.9 8.7 (16.3) 101.8
CEME* (2.7) 8.7 (0.5) 11.8 - 17.3
Asia Pacific
- commercial 13.4 2.9 21.0 0.7 - 38.0
- residential 3.4 - - - - 3.4
Total Asia Pacific 16.8 2.9 21.0 0.7 - 41.4
North America 2.3 1.8 - - - 4.1
Underlying profit/(loss) before tax 71.9 41.4 46.4 21.2 (16.3) 164.6
* Revenue (£27.8m) and underlying profit (£3.8m) attributable to the project
management consultancy business in CEME has been reclassified from Property
and Facilities Management to Consultancy.
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, 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 2023 (unaudited) Six months to 30 June 2022 Year ended 31 December 2022 (audited)
(unaudited)
£m £m £m
Reported profit before tax 6.0 50.4 153.9
Adjustments:
- Amortisation of acquired intangible assets arising from business 5.0 5.1 9.9
acquisitions
- Share-based payment adjustment (refer to Note 3) (0.5) (2.3) (14.7)
- Restructuring costs - 0.1 0.1
- Transaction-related costs 7.1 5.9 15.5
- Fair value (gain) on transaction-related call option (1.3) - (0.1)
Underlying profit before tax 16.3 59.2 164.6
There have been no impairments of goodwill and intangible assets arising from
business combinations recognised in the current or prior year.
Transaction-related costs includes a net £6.2m charge for future
consideration payments which are contingent on the continuity of recipients'
employment in the future (30 June 2022: £6.9m, 31 December 2022: £14.8m).
For the period ended 30 June 2023, the period ended 30 June 2022 and the year
ended 31 December 2022, a significant portion of the charge related to the
acquisition of DRC Capital LLP ('DRC') in 2021. In the current period,
transaction-related costs also consist of £0.4 professional advisory
transaction fees (30 June 2022: £0.2m, 31 December 2022: £1.4m) and £0.4m
of interest on deferred consideration and non-current future payments in
relation to business acquisitions that are linked to employment (30 June 2022:
£0.2m, 31 December 2022: £0.3m). In the current period, transaction-related
costs included a £0.1m (30 June 2022: £0.2m, 31 December 2022: £0.6m)
charge relating to prepaid amounts issued as part of business acquisitions
that are linked to continued active engagement in the business. Of these
items, prepaid amounts that are linked to active engagement in the business
are recorded as employee benefits expenses in the income statement, unwinding
of interest is recorded as a finance cost in the income statement and all
other charges/(credits) are recorded within other operating expenses. In the
period ended 30 June 2022 and the year ended 31 December 2022,
transaction-related costs also consisted of a £1.6m credit for fair value
changes to contingent deferred consideration not related to continuity of
employment. Refer to Note 6 for fair value estimations.
For the period ended 30 June 2023 and year ended 31 December 2022, a fair
value gain 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 2023 (unaudited) Six months to 30 June 2022 (unaudited) Year ended 31 December 2022 (audited)
£m £m £m
UK
- Current tax 2.4 8.9 18.7
- Deferred tax 0.5 (3.3) (1.4)
Foreign tax
- Current tax 3.0 8.6 23.1
- Deferred tax (4.3) (1.5) (6.3)
Income tax expense 1.6 12.7 34.1
The forecast Group effective tax rate is 26.7% (30 June 2022: 25.2% and 31
December 2022 reported effective tax rate: 22.2%), which is higher (30 June
2022: higher, 31 December 2022: higher) than the UK standard effective annual
rate of corporation tax of 23.5% (30 June 2022 and 31 December 2022: 19%).
This primarily reflects permanent disallowable expenses, including
transaction-related costs. The Group underlying effective tax rate is 24.5%
(30 June 2022: 23.3% and 31 December 2022: 20.5%).
A full analysis has not yet been completed on the impact of the OECD's Pillar
Two Model Rules. The Group does not generally operate in low tax jurisdictions
however, and as a result the impact is not expected to be material.
10. Dividends
Six months to 30 June 2023 (unaudited) Six months to 30 June 2022 (unaudited) Year ended 31 December 2022 (audited)
£m £m £m
Amounts recognised as distribution to equity holders in the period:
In respect of previous period
Ordinary final dividend of 13.4p per share (2021: 12.75p) 18.2 17.6 17.6
Supplemental interim dividend of 15.6p per share (2021: 15.6p) 21.2 21.6 21.6
Special dividend of £nil per share (2021: 27.05p) - 37.4 37.4
In respect of current period
Interim dividend of £nil per share (2022: 6.6p) - - 8.9
39.4 76.6 85.5
Proposed interim dividend for the six months ended 30 June 2023 £9.5m
The Board has declared an interim dividend for the six months ended 30 June
2023 of 6.9p per ordinary share (30 June 2022: 6.6p) to be paid on 2 October
2023 to shareholders on the register on 1 September 2023. The interim dividend
has not been recognised in these interim financial statements. It will be
recognised in equity in the year to 31 December 2023.
11(a). Basic and diluted earnings per share
2023 2023 2023 2022 2022 2022
Earnings Shares EPS Earnings Shares EPS
Six months to 30 June (unaudited) £m million Pence £m million pence
Basic earnings per share 4.8 136.1 3.5 37.0 138.3 26.8
Effect of additional shares issuable under option - 5.5 (0.1) - 8.5 (1.6)
Diluted earnings per share 4.8 141.6 3.4 37.0 146.8 25.2
2022 2022 2022
Earnings Shares EPS
Year to 31 December (audited) £m million Pence
Basic earnings per share 119.4 137.3 87.0
Effect of additional shares issuable under option - 7.9 (4.8)
Diluted earnings per share 119.4 145.2 82.2
11(b). Underlying basic and diluted earnings per share
2023 2023 2023 2022 2022 2022
Earnings Shares EPS Earnings Shares EPS
Six months to 30 June (unaudited) £m million pence £m million Pence
Basic earnings per share 4.8 136.1 3.5 37.0 138.3 26.8
- Amortisation of intangible assets arising from business combinations after 3.6 - 2.6 3.9 - 2.8
tax
- Share-based payment adjustment after tax (0.5) - (0.4) (2.0) - (1.4)
- Restructuring costs after tax - - - 0.1 - 0.1
- Transaction-related costs after tax 7.1 - 5.2 5.7 - 4.1
- Fair value gain on transaction-related call option after tax (1.2) - (0.9) - - -
- Effect of application of annual tax rate (1.1) - (0.8) - - -
Underlying basic earnings per share 12.7 136.1 9.2 44.7 138.3 32.4
Effect of additional shares issuable under option - 5.5 (0.2) - 8.5 (2.0)
Underlying diluted earnings per share 12.7 141.6 9.0 44.7 146.8 30.4
2022 2022 2022
Earnings Shares EPS
Year to 31 December (audited) £m Million Pence
Basic earnings per share 119.4 137.3 87.0
- Amortisation of intangible assets arising from business combinations after 7.6 - 5.5
tax
- Share-based payment adjustment after tax (11.9) - (8.7)
- Restructuring costs after tax 0.1 - 0.1
- Transaction-related costs after tax 15.3 - 11.1
- Fair value loss on transaction-related call option after tax (0.1) - (0.1)
Underlying basic earnings per share 130.4 137.3 94.9
Effect of additional shares issuable under option - 7.9 (51)
Underlying diluted earnings per share 130.4 145.2 89.8
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 2023 (unaudited) Six months to 30 June 2022 Year ended 31 December 2022 (audited)
(unaudited)
£m £m £m
Profit for the period 4.4 37.7 119.8
Adjustments for:
Income tax (Note 9) 1.6 12.7 34.1
Depreciation 34.7 32.0 65.8
Amortisation of intangible assets 7.9 8.0 16.9
Loss on disposal of property, plant and equipment and intangible assets 0.3 0.1 1.1
Impairment of property, plant and equipment - - 0.8
Net finance (income)/cost (3.6) 5.4 4.3
Share of post-tax profit from joint ventures and associates (4.8) (4.7) (12.1)
Dividends from other parties - - (0.2)
Increase in employee and retirement obligations 9.8 9.2 2.6
Exchange movement and fair value movements on financial instruments in (2.2) (1.0) 0.5
operating activities
Decrease in provisions (3.1) (2.0) (4.7)
Charge for share-based compensation 16.0 15.1 30.4
Operating cash flows before movements in working capital 61.0 112.5 259.3
Decrease/(increase) in trade and other receivables and contract assets 33.0 82.1 (7.3)
Decrease in trade and other payables and contract liabilities (260.1) (229.3) (41.1)
Cash (used in)/generated from operations (166.1) (34.7) 210.9
Foreign exchange movements resulted in a £21.5m decrease in current and
non-current trade and other receivables (30 June 2022: £34.8m increase and 31
December 2022: £37.3m increase) and a £23.7m decrease in current and
non-current trade and other payables (30 June 2022: £37.2m increase and 31
December 2022: £43.8m increase).
13. Analysis of liabilities arising from financing activities
Six months to 30 June 2023 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 30 June
(unaudited) £m £m £m £m £m £m £m
Bank loans (4.5) (90.4) - - - 0.4 (94.5)
Loan notes (153.7) 3.0 - - - - (150.7)
Transaction costs 1.4 - (0.3) - - - 1.1
Lease liabilities* (277.6) 32.0 (4.5) (16.0) 0.1 8.0 (258.0)
Liabilities arising from financing activities (434.4) (55.4) (4.8) (16.0) 0.1 8.4 (502.1)
At 1 January Cash flows Other non- cash movements Movements through business combinations and disposals Exchange movements At 30 June
Non-cash movements recognised in income statement
Six months to 30 June 2022
(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)
Year to 31 December 2022 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 (0.9) (0.3) - - (3.2) (0.1) (4.5)
Loan notes (150.0) (3.7) - - - - (153.7)
Transaction costs 1.6 0.4 (0.6) - - - 1.4
Lease liabilities* (285.0) 60.5 (9.0) (27.3) (2.7) (14.1) (277.6)
Liabilities arising from financing activities (434.3) 56.9 (9.6) (27.3) (5.9) (14.2) (434.4)
* 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 2023: £27.5m, period to 30 June 2022:
£24.3m, year to 31 December 2022: £51.4m). 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 2023: £4.5m, period to 30 June
2022: £4.5m, year to 31 December 2022: £9.0m).
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 £23.2m (30 June 2022:
£21.9m and 31 December 2022: £25.6m) 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. Goodwill
Management have determined that there has been no impairment to the CGUs
within the Group. The US and Middle East CGUs continue to be identified as the
material CGUs that are considered to be sensitive to changes in key
assumptions. Refer to the Group's Annual Report and Accounts 2022 for key
assumptions applied.
15. Acquisition of subsidiaries
On 6 January 2023, the Group acquired 100% of the equity interest in
Automotive Property Consultancy Holdings Limited, a specialist property
consultancy company dedicated to the franchised motor retail sector. In
addition, on 31 March 2023, the Group acquired 51% of the equity interest in
BeLiving SRL, a real estate company specialising in residential sales and
rentals in Italy. On 31 May 2023 the Group also acquired 100% of the equity
interest in Predibisa, Sociedade de Mediaçāo Imobiliária, Lda., a
residential and commercial real estate company based in two offices in Porto,
Portugal.
Cash consideration for these transactions amounted to £5.2m. The remainder of
the acquisition consideration relates to deferred consideration of £0.5m
payable within one year of the reporting date.
Goodwill of £3.5m 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 £0.4m have been expensed as incurred to the
income statement and classified within other operating expenses.
The acquired businesses contributed revenue of £1.2m and a profit of £0.4m
to the Group for the period from acquisition to 30 June 2023. Had the
acquisitions been made at the beginning of the financial year, revenue would
have been £2.4m and the profit would have been £0.2m. 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 0.2
Current assets: Trade and other receivables 0.6
Accrued income 0.3
Tax receivable 0.1
Cash and cash equivalents 2.6
Total assets 3.8
Current liabilities: Trade and other payables (1.5)
Current tax payable (0.1)
Net assets acquired 2.2
Goodwill 3.5
Purchase consideration 5.7
Consideration satisfied by:
Cash paid 5.2
Deferred consideration < 1 year 0.5
5.7
Update to provisional fair value of prior period acquisitions
There were no changes to the provisional fair values in respect of
acquisitions as reported in the Group's 2022 Annual Report and interim
financial report for the six months to 30 June 2022.
16. 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 2022 and as follows:
UK Plan SFM Plan
Six months to 30 June 2023 Six months to 30 June 2022 Year ended 31 Six Six months to 30 June 2022 Year ended 31
December 2022 months to 30 June 2023 December 2022
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 5.10% 3.80% 4.80% 4.02% 3.36% 4.24%
Inflation assumption 3.20% 3.00% 3.20% 2.20% 1.75% 2.20%
Rate of increase to pensions in payment
- accrued before 6 April 1997 3.00% 3.00% 3.00% - - -
- accrued after 5 April 1997 3.00% 2.90% 3.00% - - -
- accrued after 5 April 2005 2.10% 2.00% 2.00% - - -
- pension promise before 1 January 1986 - - - 2.20% 2.25% 2.20%
- pension promise after 1 January 1986 - - - 2.20% 1.75% 2.20%
Rate of increase to pensions in deferment
- accrued before 6 April 2001 5.00% 5.00% 5.00% - - -
- accrued after 5 April 2001 2.80% 2.30% 2.60% - - -
- accrued after 5 April 2009 2.50% 2.30% 2.50% - - -
The amounts recognised in the statement of financial position are as follows:
UK Plan 30 June 2023 30 June 2022 31 December 2022
£m £m £m
Present value of funded obligations (179.8) (205.3) (186.7)
Fair value of plan assets 182.3 238.6 209.0
Surplus recognised in the statement of financial position (included in 2.5 33.3 22.3
retirement benefit surplus)
SFM Plan 30 June 2023 30 June 2022 31 December 2022
£m £m £m
Present value of funded obligations (9.9) (10.0) (9.9)
Fair value of plan assets 13.2 12.7 13.1
Surplus recognised in the statement of financial position (included in 3.3 2.7 3.2
retirement benefit surplus)
The amount recognised within the income statement in relation to the UK Plan
for the period ended 30 June 2023 is a net interest income of £0.5m (30 June
2022: £0.2m, 31 December 2022: £0.4m).
Total employee benefit obligations of £49.3m relates to holiday pay and long
service leave (30 June 2022: £48.8m, 31 December 2022: £42.9m).
17. 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 5.2% (31 December 2022: 4.8%) 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 2023 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% 0.2% 1.1% 4.7% 40.9% 5.2%
Gross carrying amount (£m) 264.0 40.9 28.0 34.0 46.0 412.9
Loss allowance provision (£m) (0.5) (0.1) (0.3) (1.6) (18.8) (21.3)
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)
31 December 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% 0.2% 1.0% 4.6% 46.9% 4.8%
Gross carrying amount (£m) 346.2 49.3 30.3 30.4 46.3 502.5
Loss allowance provision (£m) (0.6) (0.1) (0.3) (1.4) (21.7) (24.1)
18. Borrowings
Movements in borrowings are analysed as follows:
6 months ended 30 June 2023 6 months ended 30 June 2022 12 months ended 31 December 2022
£m £m £m
Opening amount as at 1 January 159.7 150.5 150.5
Additional borrowings, net of transaction costs paid (including additional 100.9 10.1 10.8
overdraft)*
Repayments of borrowings (11.3) (4.3) (5.6)
Addition through business combination - - 3.2
Amortisation of transaction costs 0.3 0.3 0.6
Foreign exchange movement (0.5) 0.2 0.2
Closing amount 249.1 156.8 159.7
* Period to 30 June 2023 includes a £2.2m increase in overdraft balances
(period to 30 June 2022: £1.3m increase, year to 31 December 2022: £1.5m
increase) and £nil of transaction costs paid (period to 30 June 2022: £0.3m,
year to 31 December 2022: £0.3m) within additional borrowings.
30 June 2023 30 June 2022 31 December 2022
£m £m £m
Current
Bank overdrafts 5.0 2.6 2.8
Unsecured bank loans 94.2 5.8 4.0
Loan notes due within one year or on demand 0.7 - 3.8
Non-current
Unsecured bank loans 0.3 0.1 0.5
Loan notes 150.0 150.0 150.0
Transaction costs (1.1) (1.7) (1.4)
249.1 156.8 159.7
The Group has the following undrawn borrowing facilities:
30 June 2023 30 June 2022 31 December 2022
£m £m £m
Floating rate - expiring within 1 year or on demand 46.3 64.0 64.9
Floating rate - expiring between 1 and 5 years 282.1 356.0 360.0
Fixed rate - expiring within 1 year or on demand 0.9 - 1.1
Fixed rate - expiring between 1 and 5 years - - 0.2
329.3 420.0 426.2
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 2023
£78.0m (30 June 2022: £5.0m, 31 December 2022: none) of the RCF was drawn.
The unsecured bank loans reflect a £0.9m working capital loan in Thailand,
which is repayable on demand and denominated in Thailand baht (30 June 2022:
£0.8m, 31 December 2022: £0.9m), a £1.1m working capital loan in Indonesia,
which is repayable on demand and denominated in Indonesian Rupiah (30 June
2022: £0.2m, 31 December 2022: £0.3m) and £1.4m of loans in Singapore,
denominated in Singapore dollar (30 June 2022: £0.1m, 31 December 2022:
£3.3m). Of the loans in Singapore, £nil (30 June 2022: £nil, 31 December
2022: £2.3m) relates to property loans, £0.8m factoring facility maturing
within one year (30 June 2022: £nil, 31 December 2022: £0.6m) and a £0.5m
bridging loan (£0.3m expiring within one year and £0.2m expiring within two
years) (30 June 2022: £nil, 31 December 2022: £0.3m). The remaining £0.1m
of loans in Singapore are bank loans maturing within one year (30 June 2022:
£0.1m, 31 December 2022: £0.1m). The balance also includes £13.1m
utilisation of a revolving credit facility in North America for working
capital purposes (30 June 2022: £14.1m, 31 December 2022: £nil).
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 materially 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 2023 is £123.4m
(30 June 2022: £139.1m, 31 December 2022: £131.5m), 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.
19. 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 2023, the notional cash pooling arrangement
included cash balances of £181.9m presented in cash and cash equivalents (30
June 2022: £169.3m, 31 December 2022: £205.0m) and overdrafts of £180.7m
(30 June 2022: £168.9m, 31 December 2022: £202.0m) presented in current
liabilities. This represents as at 30 June 2023 surplus pooled credit cash
balances of £1.2m (30 June 2022: surplus pooled credit cash balances of
£0.4m, 31 December 2022: 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 2023 30 June 2022 31 December 2022
£m £m £m
Cash and cash equivalents 442.7 474.7 669.1
Overdrafts in notional pooling arrangement (180.7) (168.9) (202.0)
Bank overdrafts (see Note 18) (5.0) (2.6) (2.8)
257.0 303.2 464.3
20. Finance income and costs
Finance income and finance costs have increased in the period as a result of
global interest rate rises.
21. Related party transactions
There were no 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.
As at 30 June 2023, there were £0.1m of loans outstanding to joint ventures
(30 June 2022: £0.2m of loans outstanding to joint ventures, 31 December
2022: £0.2m of loans outstanding to joint ventures), £1.6m of loans
outstanding to associates and £0.2m of loans payable to associates (30 June
2022: £1.4m of loans outstanding to associates, 31 December 2022: £1.7m of
loans outstanding to associates).
22. 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.
23. 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.
24. 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) .
Appendices
Constant currency
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 year to year, 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 year-on-year comparison of results.
The constant currency effect on revenue, reported profit and underlying profit
is summarised below:
2023
Constant 2023 at
currency Constant
2023 effect currency
£m £m £m
Revenue 1,011.4 16.4 995.0
Profit before tax 6.0 (0.3) 6.3
Underlying profit before tax 16.3 (0.2) 16.5
The Group's segmental results for the current period are presented below in
constant currency:
Property and
Transaction Facilities Investment
Advisory Consultancy Management Management Unallocated Total
2023 at Constant Currency £m £m £m £m £m £m
Revenue
United Kingdom - commercial 37.5 93.5 146.1 19.8 - 296.9
United Kingdom - residential 71.6 19.4 21.5 - - 112.5
Total United Kingdom 109.1 112.9 167.6 19.8 - 409.4
CEME 42.6 32.1 45.4 27.2 - 147.3
Asia Pacific - commercial 40.0 37.6 214.7 3.9 - 296.2
Asia Pacific - residential 9.9 - - - - 9.9
Total Asia Pacific 49.9 37.6 214.7 3.9 - 306.1
North America 120.4 11.8 - - - 132.2
Revenue 322.0 194.4 427.7 50.9 - 995.0
Underlying profit/(loss) before tax
United Kingdom - commercial 2.4 8.6 9.7 3.5 (1.0) 23.2
United Kingdom - residential 4.7 1.2 1.5 - - 7.4
Total United Kingdom 7.1 9.8 11.2 3.5 (1.0) 30.6
CEME (16.0) 0.1 (0.4) 4.1 (12.2)
Asia Pacific - commercial (6.3) (1.8) 9.2 (0.6) - 0.5
Asia Pacific - residential 1.3 - - - - 1.3
Total Asia Pacific (5.0) (1.8) 9.2 (0.6) - 1.8
North America (2.8) (0.9) - - - (3.7)
Underlying profit/(loss) before tax (16.7) 7.2 20.0 7.0 (1.0) 16.5
The constant currency effect on the Group's segmental results for the current
period is presented below:
Property and
Transaction Facilities Investment
Advisory Consultancy Management Management Unallocated Total
2023 - Constant Currency Effect £m £m £m £m £m £m
Revenue
United Kingdom - commercial - - - - - -
United Kingdom - residential - - - - - -
Total United Kingdom - - - - - -
CEME 0.6 0.5 0.7 0.8 - 2.6
Asia Pacific - commercial 0.2 - 7.1 - - 7.3
Asia Pacific - residential 0.1 - - - - 0.1
Total Asia Pacific 0.3 - 7.1 - - 7.4
North America 5.8 0.6 - - - 6.4
Revenue 6.7 1.1 7.8 0.8 - 16.4
Underlying profit/(loss) before tax
United Kingdom - commercial - - - - - -
United Kingdom - residential - - - - - -
Total United Kingdom - - - - - -
CEME (0.2) - - 0.1 - (0.1)
Asia Pacific - commercial 0.1 0.1 0.1 (0.1) - 0.2
Asia Pacific - residential (0.1) - - - - (0.1)
Total Asia Pacific - 0.1 0.1 (0.1) - 0.1
North America (0.1) (0.1) - - - (0.2)
Underlying profit/(loss) before tax (0.3) - 0.1 - - (0.2)
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