Results for 6 months ending 30 June 2020 6 August 2020 Mark Ridley - - PowerPoint PPT Presentation

Savills plc Results for 6 months ending 30 June 2020

6 August 2020 Mark Ridley & Simon Shaw

Disclaimer: Forward-looking statements

2

These slides contain certain forward-looking statements including the Group’s financial condition, results of operations and business, and management’s strategy, plans and objectives for the Group. These statements are not guarantees of future performance and are subject to risks, uncertainties and

• ther factors, some of which are beyond the Group’s control, are difficult to predict and could cause

actual results to differ materially from those expressed or implied or forecast in the forward-looking

• statements. These factors include, but are not limited to, the fact that the Group operates in a highly

competitive environment. All forward-looking statements in these slides are based on information known to the Group on the date hereof. The Group undertakes no obligation publically to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Results

1

Introduction, Highlights & Business Development

2

Financial Review

3

Summary & Outlook

3

Introduction, Highlights & Business Development

Highlights

5

Group Revenue £791.4m

• 6.6% (cc -7.0%)

Group UPBT £13.2m

• 65.6% (cc -66.4%)

Drivers

• Property and Facilities Management revenue up 4%,

Consultancy revenue up 1%, helping to mitigate the significant impact of Covid-19, particularly in Q2 on global leasing and investment market volumes

• Commercial Transaction revenue reduced 23% overall

with Asia Pacific and North America particularly affected

• UK Residential revenue down 8%, reflecting significant

reductions in transactional activity during lockdown, partially mitigated by a strong recovery in June

• Savills Investment Management revenue down 6% as a

result of lower performance fees. Base management fees up 9%, with period end AUM up 11% at €20.4bn

Group UEPS 7.0p (2019 H1: 20.9p) Net Cash/(Debt) £9.4m (2019 H1: -£139.0m) Dividend 0.00p (2019 H1: 4.95p)

cc = constant currency

Performance Overview

Savills Diversified Business Model

6

Defensive, Scale Businesses Revenue by Business Cyclical, High-Margin Businesses

Property Management – 43% Consultancy – 18% Investment Management – 4% Commercial Transactions – 27% Residential Transactions – 8%

• Recurring revenue streams with less

exposure to transaction environment

• Strong Property Management

business

• 2.3 billion sq. ft under management
• €20.4bn AUM within SIM
• High-return, but cyclical earnings
• 77:23 split Commercial vs. Residential
• 65:35 Commercial split Tenant

rep/leasing vs. Capital markets

35% (2019-H1: 41%) 65% (2019-H1: 59%) Revenue £512.9m Revenue £278.5m

Balance of the Global business is now weighted to 2/3rd less cyclical revenue

7 Staff numbers: weighted Average to 30 June 2020

853 Employees 35 Offices 6,496 Employees 133 Offices 2,099 Employees 44 Offices 29,613 Employees 58 Offices

Offices closed 17 March, phased re-opening from 4 May, now over 60% open, but with restrictions in place in California, Pennsylvania & Texas Offices closed 23 March, phased re-opening from 18 May (Residential), the remainder from 26 May, now 100% open Offices closed from 14 March, phased re-

• pening from 27 April,

now 100% open Offices closed from 31 January, phased re-opening from end February, now 90% open but with restrictions in place in Australia, Hong Kong, Singapore & India

Operational Status During Pandemic – Covid-19

Management Actions & Response to the Pandemic

8

Cost control:

• Senior Management salary cuts (20%)
• Reductions in discretionary expenditure
• Reduction and deferment of capital expenditure
• Cancellation of 2019 final dividend
• Limited application of Government support schemes

Continued strategic growth:

• Focus on Consultancy and Property Management
• Sector growth in Logistics, Multi-Family and Life

Sciences

• Maintained bench strength of Global workforce
• Opportunities for organic recruitment
• Maintained Graduate programme

United Kingdom: Market Dynamics

Macro themes

• Unprecedented GDP fall over first five months, (April registering -20.5%)
• Extensive Government intervention from April, tapering down from August
• PMI index falls to all time low and unemployment rises significantly (+650,000 in

Q2)

• Return to work programme for many corporates delayed until September,

prolonging impact on City Centre activity Market statistics

• UK Commercial Investment volumes down 62% in Q2 (weakest ever)
• Office take up in H1 reduced by 37% with London the most heavily

impacted market

• Logistics take up rose to a record 22.5 million sq. ft, a second quarter rise of 81%
• UK Housing Transaction Volumes down 25% in H1, (down 47% in Q2) although

strong recovery is underway particularly in the country markets

500 1,000 1,500 2,000 2,500 3,000

Residential Sales -£1m+

Country London

Revenue: £298.8m | Growth: -2% YOY | Employees: 6,496 | Offices: 133

10 20 30 40 50 60 70 80 £ billion Q1 Q2 Q3 Q4

Source: Property Data, Savills

UK Commercial Investment Volumes 2000-2020

10

Macro themes

• Asia Pacific GDP is forecast to fall by 0.2% in 2020, rebounding strongly in 2021 (7.4%)
• Downside risks include the resurgence of Covid-19 in Hong Kong, Singapore and Australia and its

continued spread in India

• Significant Government intervention across the region, including massive monetary easing,

interest rate reductions, creating a rebound on the regions stock markets Market statistics

• Asia Pacific H1 investment activity fell by -40%, with Retail -53%, Offices -41% and Industrial -9%
• Market recovery at variable speeds, with investment volumes in China increasing by 67% in Q2
• Strength maintained in Tokyo with vacancy rate of 0.4%, stronger market recovery also

experienced in Korea and Vietnam

• Given the travel restrictions, cross border investment activity fell by 43% year on year
• Sector weighting focused on logistics, multi-family in growth economies, with Singapore likely to

experience stronger demand due to China tensions

Asia Pacific: Market Dynamics

20 40 60 80 100 120 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 £bns

Asia Pacific Commercial Investment Volumes

Q4 Q3 Q2 Q1

• 5

10 15 20 25 30 £bns

Asia Pacific Commercial Investment Volume by Market

2015 2016 2017 2018 2019 1H/2020

Revenue: £279.7m | Growth: -6% YOY | Employees: 29,613 | Offices: 58

$0 $40 $80 $120 $160 $200 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

US Commercial Investment Volumes – Major Metros

Q4 Q3 Q2 Q1

$bn

North America: Market Dynamics

Macro themes

• Real GDP declined 32.9% on an annualised basis in Q2
• Unemployment increased to 14.7% in April (3.6% in April 2019), reflecting the

nationwide lockdown and business closures

• All states have entered phased reopening at this point, but many companies

continue to implement work from home/hybrid measures Market statistics

• Many organisations have put real estate decisions on hold and national Office

Leasing volumes declined 31% compared to H1 2019

• Markets most impacted include New York and San Francisco, where tenant

controlled space has swelled, but greater resilience in markets including Washington DC and Atlanta

• Commercial investment volumes fell 26% compared to H1 2019, with a sharp

decline in Q2

• Strong take up across the national Logistics markets, weak demand in Retail

sector

Source: Real Capital Analytics, Savills, Includes all Commercial Property Types

50 100 150 200 250 300 350 2014 2015 2016 2017 2018 2019 H1 2020

US Annual Commercial Office Leasing Volume

Total volume (sq ft; million)

Source: Savills, Includes New Leases and Renewals

Revenue: £105.5m | Growth: -20% YOY | Employees: 853 | Offices: 35

Europe & Middle East: Market Dynamics

Macro themes

• GDP likely to slump by 8% in 2020, the biggest fall since World War 2, with strong

rebound anticipated in 2021

• Significant regional variations, with resilience experienced in Germany, Netherlands and

the Nordics, whilst Spain, France and Italy all experienced significant GDP declines

• Concerns of second wave with restrictions re-imposed in Spain

Market statistics

• European investment volumes in H1 fell by (-2.5%), but Q2 volumes dropped by 48%
• Investment activity in Germany increased by 31.5% in H1, with Luxembourg, Portugal,

Belgium and the CEE region all recording higher H1 results

• Office leasing volumes fell by 33% during H1 2020
• Sector demand weighted towards Logistics, Prime Offices and Multi-Family, with Retail

experiencing the weakest demand with significant downward price correction

• In the Middle East, impact on oil prices (-33% yoy) and have adversely affected

markets in Dubai, with residential sales volumes reducing by -40% in Q2

• 3.5%
• 4.8%
• 3.6%
• 10.8%
• 5.7%
• 10.6%
• 7.4%
• 4.4%
• 10.6%
• 8.0%
• 6.1%
• 9.3%

2.0% 1.9% 1.5% 1.4% 1.3% 1.3% 1.1% 1.0% 1.1% 1.0% 0.9% 0.3%

• 15.0%
• 12.5%
• 10.0%
• 7.5%
• 5.0%
• 2.5%

0.0% 2.5% 5.0%

GDP Growth Forecast

2020 2020-2025 pa 50 100 150 200 250 300 350 2013 2014 2015 2016 2017 2018 2019 2020 Billion Euros

European Investment Volumes

Q4 Q3 Q2 Q1 5-year H1 average

Revenue: £107.4m | Growth: -5% YOY | Employees: 2,099 | Offices: 44

Savills Investment Management: Market Dynamics

Macro themes

• Significant weight of capital supporting values, with strong Q1 activity
• Many transactions on hold in Q2 or values re-based, with sector focus strengthening in

Multi-Family, Logistics and prime CBD offices

• All UK Retail funds gated due to valuation uncertainty
• Portfolio Asset Management stress testing processes enhanced to deal with Covid-19
• Rent collection in Q1 heavily impacted across most sectors, improving in Q2 except in

Retail and Hospitality, with significant re-structuring to monthly turnover rents Business development

• Capital raising has continued, growing total AUM to €20.4bn (11% increase over H1 2019),

with solid transaction pipeline

• Japan Value II Fund achieved a final close at over US$500m
• Continued growth of Logistics platform (€4.4bn), with significant transaction activity
• Future fund and capital raising is still on track, with strong investor demand
• Key strategic recruitment in Malaysia, Hong Kong and London, with further growth of our

Asian segregated mandate business

• Growth of debt investment, increasingly attractive at this point of cycle, with DRC capital

winning UK’s best alternative lender of the year

• 500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 2013 2014 2015 2016 2017 2018 2019 2020

EUR m

Savills IM Capital Raising

Half-year Full-year

Revenue: £30.5m | Growth: -6% YOY | Employees: 288 | Offices: 15

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Target Actual Actual

Percentage AUM

• utperforming respective

benchmarks to Q1 2020 65% Last 3 yrs 79% Last 5 yrs 90%

Service Innovation and continued focus on ESG

14

Smart Building consultancy:

• Thermal scanning
• Touch free access
• Amenity areas
• Safe desk booking
• Enhanced ventilation
• Robotic cleaning
• UV radiation

Services adapted:

• Virtual viewings (8,000 in UK alone)
• Remote auctions, (220 properties – 80%

success rate)

Sustainability consultancy:

• Energy Brokerage
• Technical Energy Consultancy
• Waste Consultancy
• Energy and

Infrastructure Development

• Carbon offsetting

Financial Review

Summary Underlying Result

16

6 months ended 30 June (£m) 2020 2019 % chg Revenue 791.4 847.0 (6.6)% Underlying PBT 13.2 38.4 (65.6)% Underlying PBT margin 1.7% 4.5% (2.8)% pts Underlying basic earnings per share 7.0p 20.9p (66.5)% Dividend per share

• 4.95p

n/a Net cash/(debt) 9.4 (139.0) n/a Net assets 536.6 461.5 +16.3%

Revenue and underlying PBT by business

17

346.3 325.7 142.5 32.5 278.5 337.8 144.6 30.5

50 100 150 200 250 300 350 400

2019 2020

+4% +1% (6)%

Revenue

9.9 16.2 11.5 5.6 (14.7) 17.7 10.2 4.3

• 20
• 15
• 10
• 5

5 10 15 20 +9% (11)% (23)% Transaction Advisory Property Management Consultancy Investment Management

UPBT

(20)% n/a

Margin

2.9% n/a 5.0% 5.2% 8.1% 7.1% 17.2% 14.1% £m

The figures in these charts exclude costs of £4.3m in 2020-H1 (2019-H1 £4.8m) not allocated to the operating activities of the group’s business segments

Combined revenue and UPBT growth of 2% and -3% respectively

Revenue and underlying PBT by region

18

303.6 298.4 131.7 113.3 298.8 279.7 105.5 107.4

50 100 150 200 250 300 350

2019 2020

Revenue

UK Asia Pacific North America

UPBT

(2)% CEME

22.2 15.5 6.7 (1.2) 15.0 11.8 (4.9) (4.4)

• 10
• 5

5 10 15 20 25 (32)% (6)% (20)% (5)% (24)% n/a n/a

£m

Margin

7.3% 5.0% 5.2% 4.2% 5.1% n/a n/a n/a

The figures in these charts exclude costs of £4.3m in 2020-H1 (2019-H1 £4.8m) not allocated to the operating activities of the group’s business segments

£28.5m £9.4m

£13.2m £27.1m £5.3m £7.1m £27.2m £16.2m £8.3m £6.5m £13.6m

• £10m

£20m £30m £40m £50m £60m £70m £80m

Net cash b/f UPBT Non-cash items Working capital Acquisitions Capex Investment cash flows Purchase of EBT shares Tax Dividends Other Net cash c/f

Cashflow performance

19

1 Cash generated from/(used in) operations include “principal elements of lease payments” which are included within financing activities in the statutory cash flow

Cash generated from/(used in) operations1 of £13.1m (2019 H1: -£125.1m)

£139.0m

Adjusting for timing of tax payments Reported net cash at 30 June £9.4m Tax payments timing benefit £(61.2)m “Normalised” net debt at 30 June £(51.8)m (At 30th June 2019 net debt was £139m)

£38.4m £6.0m £2.0m £169.5m £5.1m £15.2m £14.0m £13.5m £36.4m £5.6m

£73.9m £(139.0)m

2019-H1 comparative

Commercial Transaction Advisory

20

2020 Revenue £212.3m (-23%) 2020 UPBT -£17.9m (2019-H1 £5.0m)

Asia Pacific impacted by early onset of COVID-19 in Greater China and Singapore and lockdowns in Australia and Japan, partially offset by growth in Korea and Vietnam UK robust performance, particularly outside London, reflecting a very strong pre-lockdown performance CEME reduced activity in Southern Europe, partially offset by strong performances in Germany and the low countries North America last major region to go into lockdown resulting in a delayed return to normal activity levels, particularly in New York and San Francisco

41.5 30.9 38.1 101.8

• 20

40 60 80 100 120 Asia Pacific UK CEME North America Growth

(39)% (2)% (11)% (23)% (4.4) 0.9 (9.8) (4.6)

(12) (10) (8) (6) (4) (2)

• 2

Asia Pacific UK CEME North America Growth

n/a (31)% n/a n/a

Residential Transaction Advisory

21

2020 Revenue £66.2m (-8%) 2020 UPBT £3.2m (-35%)

UK both second-hand and new homes sales down, but signs of recovery towards the end of the period UK Private Rented Sector revenues up by 87% year-on-year Asia Pacific significant reductions in Australia and Singapore partially offset by growth in Mainland China and Thailand

52.9 13.3

10 20 30 40 50 60 UK Asia Pacific Growth

(8)% (10)% 1.6 1.6

• 0.2

0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 UK Asia Pacific Growth

(54)% +14%

Property Management

22

2020 Revenue £337.8m (+4%) 2020 UPBT £17.7m (+9%)

Asia Pacific strong growth in Hong Kong, Japan, Singapore and Vietnam mitigated the effect of reduced revenues in China, Australia and Korea. Cost savings contributed to margin improvement in the region overall UK growth in Commercial Property and Facilities Management revenue was partially reduced by a decline of 11% in Residential Property Management revenues driven by fewer residential lettings transactions during lockdown CEME revenue growth in Spain and the Middle East offset by declines in Sweden and Portugal

190.0 110.1 37.7

• 20

40 60 80 100 120 140 160 180 200 Asia Pacific UK CEME Growth

+6% +2% (1)% 12.4 5.1 0.2

• 2

4 6 8 10 12 14 Asia Pacific UK CEME Growth

+44% (25)% (75)%

Consultancy

23

2020 Revenue £144.6m (+1%) 2020 UPBT £10.2m (-11%)

UK strong performances in Housing, Building & Project Consultancy, Rural and Development outweighed reductions in Financial Services, Lease Consultancy and Planning Consultancy Asia Pacific growth in Australia, Singapore, Japan and South Korea largely offset slight reductions in Greater China due to a reduced volume of valuation and research consultancy during lockdowns CEME strong performances in Germany, the Netherlands, Sweden and Poland, largely mitigated the effect of reductions in activity elsewhere North America post-acquisition period (since March) of Macro Consultants (Project Management)

92.2 32.4 16.3 3.7

10 20 30 40 50 60 70 80 90 100 UK Asia Pacific CEME North America Growth

(1)% (1)% (1)% 6.1 2.0 2.4

• 0.3
• 1

1 2 3 4 5 6 7 UK Asia Pacific CEME North America Growth

(27)% +100% +14% n/a n/a

Investment Management

24

2020 Revenue £30.5m (-6%) 2020 UPBT £4.3m (-23%)

Revenues base management fees represented approximately 82% (HY 2019: 75%) of gross revenues and grew by 9% during the period. This growth helped mitigate the 78% reduction in performance fee income Performance 90% of funds (by AUM) continued to exceed their benchmark returns on a five year rolling basis, and this track record contributed to significant capital raising activity, albeit reduced in the context of Covid-19 which made for challenging market conditions Assets under management increased by 11% to €20.4bn (H1 2019: €18.3bn)

12.7 15.3 2.5

• 2

4 6 8 10 12 14 16 18 UK CEME Asia Pacific Growth

1.3 2.8 0.2

• 0.5

1.0 1.5 2.0 2.5 3.0 UK CEME Asia Pacific Growth

(3)% (9)% (10)% (41)% (11)% (33)%

Summary & Outlook

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A resilient performance, particularly in the UK and Asia Pac Continued growth in key Global markets and Less Transactional businesses Financial strength to withstand further headwinds 2020 outlook depends upon trajectory of potential recovery through H2

Summary & Outlook

Maintain bench strength with continued strategic recruitment Signs of recovery are emerging in a number of markets/sectors

Q&A