Savills plc Results for the year ended 31 December 2018 14 March - - PowerPoint PPT Presentation

Savills plc

Results for the year ended 31 December 2018

14 March 2019

Disclaimer: Forward-looking statements

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These slides contain certain forward-looking statements including the Group’s financial condition, results of

• perations 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 other 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

Key Priorities & Summary & Outlook

3

Introduction, Highlights & Business Development

4

Highlights

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Performance Overview Drivers Group Revenue £1,761.4m +10.1% (cc 11.4%) Group UPBT £143.7m +2.3% (cc 3.2%)

• Transaction advisory revenues up 9% despite

challenging market conditions

• Strong growth in less transactional services -

Property Management revenue up 14%, Consultancy revenue up 8%

• Growth of 35% from Europe and Middle East,

both organic growth and acquisition, including Aguirre Newman (Spain) and Cluttons (Middle East)

• North America delivered significant growth

with revenue up 18% and underlying profit up 64%

• SIM raised £2.4bn in new funds, with AUM up

12% to £16.4bn

Group UEPS 77.8p +2.6% Net Cash £73.9m (2017: £98.6m) Dividend 31.2p +3.3%

cc = constant currency

Savills Business Today

• Top 5 Global Real Estate Adviser
• Strong market share in key International markets
• Balance of transactional/less transactional service lines
• Leading multi-sector expertise
• Brand strength and business heritage
• Unique culture
• Employer of choice and strong talent retention
• Conservative financial structure
• Provide strong returns to shareholders

…. An entrepreneurial spirit and ambition for continued growth

‘Global Real Estate Adviser of the Year’ – EG Awards 2018 ‘Deal of the Year’, ‘Residential Team of the Year’ – RICS Hong Kong Awards 2018 ‘The Times Graduate Employer of Choice for Property’ – 12th year ‘No.1 Real Estate Superbrand’ – Superbrands 2018

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Management Changes: Succession Delivered in 2018

UK Group CEO UK & EMEA – James Sparrow Managing Director UK – Richard Rees North America: CEO – Mitch Rudin COO – Matthew Morgan CFO – Gerald Prager Europe & Middle East CEO Middle East – Steve Morgan CEO Sweden – Niklas Sammuelson CEO Spain – Jaime Pascual-Sanchiz Asia Pacific CEO Korea – Crystal Lee CEO Singapore – Marcus Loo India CEO – Anurag Mathur

Group CEO – Mark Ridley

Strengthening the bench

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Ten Year Revenues

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• 200

400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 £m Transactional "Less-Transactional"

Total Revenue £1,761.4m Total Revenue £560.7m 46% 47% 47% 46% 48% 38% 38% 40% 35% 54% 53% 54% 52% 54% 60% 62% 62% 60% 65% 40% 46% 46% Percentage of Revenue Property Management – 33% Consultancy – 17% Investment Management – 4% Percentage of Revenue Commercial Transactions – 36% Residential Transactions – 10%

Broad Geographic Spread

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580

Employees

Revenue £264.5m

(15% of Total)

*Staff numbers – weighted average for 2018

Revenue £662.4m

(38% of Total)

Revenue £247.0m

(14% of Total)

Revenue £587.5m

(33% of Total)

Over 36,000* employees in 71 countries

788 Employees 31 Offices 5,955 Employees 135 Offices 1,752 Employees 52 Offices 28,486 Employees 67 Offices

UK

Market Dynamics

Macro themes

• GDP growth of 1.4% but uncertainty stalling activity in

some sectors

• Comparative risk and pricing (including sterling

devaluation) attractive to non-domestic investors Market statistics

• Commercial property investment volumes down (-5.3%),

but London remains the World’s no.1 destination for cross border investment

• All property commercial prime yields eased 25 bps, whilst

UK office take up reached its second highest level ever, with national average vacancy rates of 8.7%

• Logistics - take up rose by 45% year on year with new

records being set in many markets including the North West, Yorkshire and the East Midlands

• UK housing transaction volumes, down -2.5% but UK

house prices up 0.5%, whilst PCL down 4.1%

Business Development Focus: Growth of Property Management & Consultancy, strengthening selective transactional teams

Property Management

• Acq Broadgate Estates, 3rd party portfolio (21m sq. ft)

Consultancy

• Acq Porta Planning LLP
• Acq CMS (place making)
• Opened new Newcastle office

Residential Sales & Lettings

• Acq J P Case (Manchester)
• Acq Martel Maides (Guernsey)
• Acq The Currell Group (East London)

Transactional

• New Edinburgh Office Leasing Team
• New Debt Advisory Team
• Strengthened National Retail Leasing

Revenue £662.4m Growth 6% YOY

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Revenue £587.5m Growth 4% YOY

Market Dynamics

Macro themes

• A generally positive year ended on a more cautious note,

with the US / China Trade War the biggest threat

• Slowing economy in China and greater capital controls.

Market statistics

• Commercial property investment up 1.3% - a record year

and China remained the largest market, despite slowest growth since 2014

• Strong yield compression across the markets (avg -1.5%)

with continued demand for prime

• Total investment activity down slightly on 2018, with

mixed volumes, eg Tokyo (-10%), HK (+32%), Seoul (+58%)

• Strong rental growth in office markets, HK (7.8% pa),

Tokyo (4.9% pa) & Singapore (9.5%) whilst China saw ‘grade A’ supply decrease by 47% in first tier cities

Business Development Focus: Continued organic growth across the region with selected office openings in China and India

Hong Kong

• Strengthened Property Management & Capital Markets

businesses China

• New offices in Wuhan, Changsha and Hainan, focusing on

Property Management, Commercial Leasing & Retail

• Strengthened Leasing teams in Guangzhou, Chengdu &

Hangzhou Australia

• Significant national team lifts in Logistics (NSW & Vic),

Office Leasing & Sales (NSW) & Property Management South East Asia

• Acquired Valuations teams in Singapore & Thailand

India

• Opened 3 new offices in New Delhi, Mumbai & Bangalore,

with 2 more planned in 2019

• Service lines established, covering Tenant Rep, Capital

Markets, Project Management, Valuations, Leasing & Residential Sales

Asia Pacific

North America

Revenue £264.5m Growth 18% YOY

Market Dynamics

Macro themes

• Real GDP growth of 2.9% but rising interest rates,

economic protectionism, and political uncertainty create headwinds

• Unemployment rate ended the year near post-war low of

3.9%, strong corporate growth Market statistics

• Commercial office investment above historical averages

(+13.5%) yet well below 2007 peak (-66%)

• Leasing volume up (+14.0%) across overall US office

market, with particular strength in New York, San Francisco & Washington DC

• Office rents continue to rise (+2.9%) in top-tier markets,

however, leasing concessions rising

• Average vacancy rates reduced to 9.5% but robust

development pipeline being delivered in many primary markets

Business Development Focus: Organic growth of occupier focused business with diversification on sector & services

Central Management

• New team with 6 key appointments and rebranding to

Savills – H1 2019 Tenant Representation

• Growth of business in Minneapolis, LA, Dallas, Toronto &

Columbus Logistics

• Growth of National Logistics capability

Project Management & Consultancy

• Growth of Workplace & Project Management nationally

Capital Markets

• Integration of recently acquired New York Capital Markets

business Technology

• Continued investment in award winning technology (eg

Knowledge Cubed)

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Europe & Middle East

Revenue £247.0m Growth 35% YOY

Market Dynamics

Macro themes

• Investor demand strong, but challenges of liquidity and

pricing

• Slowing economic growth in core Europe particularly

Germany & Italy

• Increased political & economic uncertainty in UAE

Market statistics

• European investment volumes down -7.5%, primarily due

to lack of liquidity

• Major country investment down -15%, but Poland +16%,

Ireland +35%, Portugal +80% as investors seek smaller markets

• Office leasing volumes down 2% as availability tightens

(average European vacancy rate 5.7%)

• Prime CBD office rents in Europe grew 3.4% on average,

secondary 5.5% on average

• UAE capital and rental values remain under downward

pressure

Business Development Focus: Continued growth in core European markets and integration of Middle East business

Spain & Portugal

• Integration of Aguirre Newman business, office HQ

relocation in Madrid and expansion of Resi business France

• Strengthened Office Leasing in Paris & Lyon

Sweden

• New CEO & new Capital Markets team in Stockholm

Italy

• New High Street Retail Agency team

Poland

• Strengthened Logistics business in Leasing & Capital

Markets Netherlands

• New office opening in Utrecht

Middle East

• Integration of Cluttons multi-sector business across 5 Gulf

Countries

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Savills Investment Management (SIM)

Revenue £66.7m Growth 0% YOY

Business Development Focus: Growth of AUM and launch of products focused on UK, Europe & Asia Pacific markets

• AUM increased by 12% to £16.4bn (£14.6bn in 2017)
• Transacted over £3.8bn (£2.8bn acquisitions and

£1bn disposals)

• Continued strong Investment performance
• Acquired 25% of DRC, leading specialist Debt Fund

Manager

• Raised £2.4bn of new equity across 22 products
• Successful disposition Japan I; significant
• utperformance; Japan II strong first close
• Integrated Zaphir Asset Management and grew AUM

in Spain

• Search for new Global CEO of SIM approaching

conclusion

Market Dynamics

• Brexit & European Geo-Political concerns impacted
• n equity raising and investment activity
• Concerns around general pricing across all asset

classes – late cycle

• Increasing level of regulatory compliance
• Continued consolidation of smaller investment

managers

• Weight of capital targeting property sector remains

well above average

• Brexit worries reduce activity in final quarter of 2018

particularly for Retail funds

• Real Estate debt and alternatives increasingly

attractive asset classes

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Financial Review

15

Summary Underlying Result

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Year ended 31 December (£m) 2018 2017 % chg Revenue 1,761.4 1,600.0 +10.1% Underlying PBT 143.7 140.5 +2.3% Underlying PBT margin 8.2% 8.8% (0.6)% pts Underlying basic earnings per share 77.8p 75.8p 2.6% Dividend per share 31.2p 30.2p 3.3% Net cash 73.9 98.6 (25.1)% Net assets 505.0 441.7 14.3%

Dividends

17

Year ended 31 December 2018 2017 % chg Interim ordinary (“Less Transactional”) 4.80p 4.65p 3.2% Final ordinary (“Less Transactional”) 10.80p 10.45p 3.3% Supplemental (“Transactional”) 15.60p 15.10p 3.3% Total distribution (per share) 31.20p 30.20p 3.3% Total distribution (£m) 42.7 41.2 3.6%

Revenue and Underlying PBT by Region

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626.0 565.7 224.8 182.4 662.4 587.5 264.5 247.0

• 100

200 300 400 500 600 700

2017 2018

Revenue

UK Asia Pacific North America

UPBT

+6% E&ME

76.5 55.6 7.8 11.2 76.8 54.9 12.8 12.9

10 20 30 40 50 60 70 80 90 0% +4% +18% +35% (1)% +15% +64% £m

Margin

12.2% 11.6% 9.8% 9.3% 3.5% 4.8% 6.1% 5.2%

The figures in these charts exclude revenues of £0.0m (2017: £1.1m) and other net costs of £13.7m (2017: £10.6m) not allocated to the operating activities of the group’s business segments

Revenue and Underlying PBT by Service Line

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746.2 513.1 273.1 66.5 813.5 586.8 294.4 66.7

100 200 300 400 500 600 700 800 900

2017 2018

+14% +8% 0%

Revenue

81.5 25.3 31.0 13.3 81.1 32.2 33.1 11.0

10 20 30 40 50 60 70 80 90 +27% +7% (17)% Transaction Advisory Property Management Consultancy Investment Management

UPBT

+9% 0%

Margin

10.9% 10.0% 4.9% 5.5% 11.4% 11.2% 20.0% 16.5%

£m

The figures in these charts exclude revenues of £0.0m (2017: £1.1m) and other net costs of £13.7m (2017: £10.6m) not allocated to the operating activities of the group’s business segments

Combined revenue and UPBT growth of 11% and 10% respectively

Cashflow Performance

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98.6 73.9

143.7 16.4 23.9 5.6 9.8 12.3 87.0 22.6 25.1 41.6 1.1 34.4

50 100 150 200 250 300

Net cash at 31- Dec-2017 UPBT Non-cash itemsWorking capital Cash flows from investments Acquisition spend - current & deferred Capex Purchase of EBT shares Proceeds from issue of shares Dividends paid Interest Tax Foreign exchange Net cash at 31- Dec-2018

£m

Cash generation from operations of £147.8m (2017:£145.1m)

Acquisition spend £87.0m (2017: £117.1m)

Commercial Transaction Advisory

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2018 Revenue £636.1m (+11%) 2018 UPBT £55.2m (-2%)

Asia Pacific Growth in Hong Kong and South Korea offset by a slow down in Investment transactions in Mainland China, Australia and Japan UK investment market volumes down, particularly the retail sector, impacting revenues in our Investment and Central London & International teams Europe & Middle East positive impact of Aguirre Newman and Cluttons Middle East acquisitions. Investment growth in Ireland, Germany and the Czech Republic and leasing revenue growth in Sweden North America significant growth in Occupier Service business – Washington DC, Southern California, New York, Atlanta and Denver

160.1 98.4 113.1 264.5

• 50

100 150 200 250 300 Asia Pacific UK E&ME North America Growth

(5)% (3)% +45% +18% 21.2 15.7 5.5 12.8

• 5

10 15 20 25 Asia Pacific UK E&ME North America Growth

(21)% (9)% +22% +64% £m £m

Residential Transaction Advisory

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2018 Revenue £177.4m (+2%) 2018 UPBT £25.9m (+3%)

Asia Pacific strong growth in Hong Kong high-end Residential sales and good performances elsewhere offsetting weaker markets such as Australia UK revenue broadly flat in second-hand sales; London marginally up; Regions marginally down. New development revenues up slightly, reflecting higher average unit values, and higher volumes UK significant Residential Capital Markets revenue growth

45.9 131.5

20 40 60 80 100 120 140 Asia Pacific UK Growth

+4% +2% 8.3 17.6

• 2

4 6 8 10 12 14 16 18 20 Asia Pacific UK Growth

+30% (6)% £m £m

Property Management

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2018 Revenue £586.8m (+14%) 2018 UPBT £32.2m (+27%)

Asia Pacific revenue growth in Hong Kong property and facilities management, new contracts in Hong Kong, Macau, Mainland China and Vietnam UK strong underlying revenue growth in Residential Lettings and Commercial Property Management. Positive impact of Broadgate Estates management portfolio acquired during the year Europe & Middle East revenue growth as a result of acquisitions, supported by organic growth in the Czech Republic, France and Sweden. Break-even achieved (2017: £1.8m loss)

327.0 190.9 68.9

• 50

100 150 200 250 300 350 Asia Pacific UK E&ME Growth

+9% +15% +48% 19.2 13.0

• 5

10 15 20 25 Asia Pacific UK E&ME Growth

+25% +11% n/a £m £m

Consultancy

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2018 Revenue £294.4m (+8%) 2018 UPBT £33.1m (+7%)

UK strong performances in Planning, Development, Building & Project Consultancy, Hotels Leisure and Trading and Housing & Healthcare Asia Pacific Constant currency revenue up 2% with growth in much of the region offset by reduced Valuations activity in Australia and Hong Kong Europe & Middle East acquisitions in Spain and the Middle East, supported by organic growth (10% overall) driven by Germany

215.9 45.1 33.4

50 100 150 200 250 UK Asia Pacific E&ME Growth

+5% (1)% +48% 25.8 4.3 3.0

• 5

10 15 20 25 30 UK Asia Pacific E&ME Growth

+8% (16)% +50% £m £m

Investment Management

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2018 Revenue £66.7m (2017: £66.5m) 2018 UPBT £11.0m (-17%)

As anticipated, revenue/profit affected by the decrease in disposal activity from the liquidating SEB German Open Ended Funds vs 2017 Transactions of circa £3.8bn (2017: £4.8bn) executed, including £1.0bn disposals and £2.8bn acquisitions. AUM increased to £16.4bn (2017: £14.6bn) Acquisition of 25% stake in debt investment management business DRC Capital LLP, with option to buy the remaining 75% in 2021 Strong Fund performance (82% of funds exceeding 5 yr benchmarks)

25.7 31.6 9.4

• 5

10 15 20 25 30 35 UK E&ME Asia Pacific Growth

4.7 4.4 1.9

• 0.5

1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 UK E&ME Asia Pacific Growth

(10)% +4% (32)% (6)% +47% +6% £m £m

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Technology Investment- “Internal”

UK/Europe Real estate data analytics UK Digitisation of valuation process US CRM system Global “Knowledge³” Occupier service analytics (CoreNet and FT awards for innovation) Progressive harmonisation of Savills ERP system Globally (Dynamics AX)

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1 Ordinary and preference shares 2 Ordinary shares and redeemable preference shares

Company Business Total Investment Cost Realised to date Net Investment Percentage Ownership Notes “Digital Hybrid” Residential Agent (UK) £16.0m £3.6m £12.4m 21.3%1 Grown to become 8th largest UK Estate Agent, clear no.2 to PurpleBricks amongst all hybrids. Digitally enabled Tenant Rep for co-working / serviced offices (Global) £1.0m N/A £1.0m 100% Autonomous start up within Savills. Launched in 8 countries. 2018 revenue > £1.2m 100% growth in yr 2. AI approach to real estate valuation (UK) N/A N/A N/A 5% Stake taken in consideration for use

• f Savills data and market know how

to prove models. The “Smart-City” digital platform (UK) £6m N/A £6m 33%2 Largest most accurate City model in

• existence. Licensed by 18/32 London
• Boroughs. Interest from Global Cities.

Tenant focused residential block management tool (Singapore) £250k N/A £250k 19.7% Currently in use in 54 Condos (c. 26,000 tenants).

Portfolio

Key Priorities & Summary & Outlook

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Key Priorities

Asia Pacific: further growth in key Asian markets, balanced between Transactional & Consultancy Services North America: diversification of services & sector coverage including Project Management, Workplace Consultancy, Logistics & Retail Europe & Middle East: continued investment in stronger core European markets, with emphasis on Property Management & Consultancy Services UK: Maintain core strength & National multi-service expertise Savills Investment Management: continue the development of SIM across Europe & Asia Pac and, longer term, in the US General monitoring of market conditions and careful cost control

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Summary & Outlook

A robust 2018 despite market challenges Solid start to 2019 Heightened uncertainty (market & geopolitical risk) likely to temper strong transaction volumes in some markets Continued growth in less transactional service lines The Board’s expectations for 2019 currently remain unchanged

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