Savills plc Results for the six months ended 30 June 2019 8 August - - PowerPoint PPT Presentation

Savills plc

Results for the six months ended 30 June 2019 8 August 2019

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 & Market Update

2

Financial Review

3

Management Progress

3

Introduction, Highlights and Market Update

4

Highlights

5

Group Revenue £847.0m +16.4% (cc +14.3%) Group UPBT £38.4m

• 9.4% (cc -12.3%)
• Significant growth from less transactional

businesses with revenue up 20%, profit up 26%

• Commercial Transaction revenue growth

driven by strong North American performance (up 31%) mitigating effect of reduced activity in Transactional markets in UK and Hong Kong

• UK Residential Transactional revenue down

1.5% against a market backdrop of considerably lower sales volumes; UK Residential Lettings up 26%

• Property and Facilities Management revenue

up 27%, Consultancy revenue up 5%

• Savills Investment Management revenue up

20% as a result of fund performance and increased activity in Continental Europe. Period end AuM up 13% to €18.3bn

Group UEPS 20.9p (2018 H1: 23.4p) Net Debt £139.0m (2018 H1: £94.6m) Dividend 4.95p +3.1%

cc = constant currency

Performance Overview Drivers

Savills Diversified Business Model

6

Defensive, Scale Businesses Revenue by Business Cyclical, High-Margin Businesses Property Management – 39% Consultancy – 16% Investment Management – 4% Commercial Transactions – 32% Residential Transactions – 9%

• Recurring revenue streams with less

exposure to transaction environment

• Strong Property Management business
• 2.12bn ft2 under management
• €18.3bn AUM
• High-return, but cyclical earnings
• 79:21 split Commercial vs. Residential
• 63:37 Commercial split Tenant rep/leasing
• vs. Capital markets

41%

(2018-H1: 43%)

59%

(2018-H1: 57%)

Combination of cyclical and less cyclical service lines

Broad Geographic Spread

7

Over 31,000 employees in 700 offices in more than 60 countries

580

Employees

6,323

Employees

133

Offices

1,726

Employees

43

Offices

29,985

Employees

63

Offices

Revenue £131.7m

(16% of Total)

811

Employees

32

Offices

*Staff numbers – Weighted average to 30th June 2019

Revenue £303.6m

(36% of Total)

Revenue £113.3m

(13% of Total)

Revenue £298.4m

(35% of Total)

Over 39,000* employees in 70 countries

227

Employees

8

Offices

UK

Market Dynamics

Macro themes

• Sluggish GDP growth of 0.3% in the last 3 months with

uncertainty increasing

• Sterling devaluation continues (-4.65% v $ this year) as risk of no

deal Brexit increases

• Structural change continues in the Retail markets with high

numbers of CVA’s Market statistics

• UK Commercial property investment volumes down 32% year on

year (43% in Central London, the weakest first half since 2009)

• Office take up outside London experienced a record first half

across top 10 regional cities (3.19m sq. ft), with London office markets resilient

• Logistics take up in H1 19 stands at 15.4 million sq. ft, 28%

above long term average

• UK Housing transactions volumes down 4.5% in H1 but

mainstream national prices increase 1.2% (-4.4% in London)

Revenue £303.6m Growth 8% YOY

Revenue £298.4m Growth 19% YOY

100 200 300 400 500 600 700 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 £billions

Asia Pacific Investment Volumes

Q1 Q2 Q3 Q4 9

Market Dynamics

Macro themes

• Caution increasing in a number of key markets,

particularly Hong Kong and China with trade tensions, political unrest and slower GDP growth (6.3% H1 China)

• Commercial confidence is increasing in Australia following

the General Election

• GDP growth is increasing in Japan, with continued political

stability

• Cooling measures have had an impact on the residential

market in Singapore, with market slowdowns in Australia and Shanghai Market statistics

• Hong Kong office investment volumes down 34% in H1
• ver the previous year, with Retail volumes down 52%
• Overall investment volumes across China increased by

17% over H1, but outbound capital flows remained subdued

• Overall Leasing volumes reduced by c.20%, but with

rental growth in a number of core markets

• Total investment activity across Asia Pacific in Q2 was up

1.3% - Offices, 11.5% - Industrial and down 18.5% - Retail

Asia Pacific

Source: Real Capital Analytics Source: Savills

North America

Revenue £131.7m Growth 31% YOY

Market Dynamics

Macro themes

• Real GDP growth of 2.1% for Q2 (3.5% Q2 2018)
• Slowing domestic growth and recent interest rate cut, seen as

an insurance measure to maintain economic momentum

• Unemployment rate reduced to 3.6% (3.9% Q2 2018) with a

slowdown in corporate earnings beginning to emerge Market statistics

• Office Leasing volumes remain strong in Q2, with 65 million
• sq. ft taken up, 8.4% up on Q1
• Activity focused on New York, Los Angeles and Washington,

but with increases in other top tier markets

• Take up growth fueled by growth sectors including

Technology, Financial Services and Co-Working, with overall US availability down 60 bps, a 3.9% increase year on year

• Commercial office investment volumes up 15.2% across

major metros with particular emphasis on New York and San Francisco

Market Dynamics

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

$0 $50 $100 $150 $200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

US Commercial Investment Volumes – Major Metros

Q1 Q2 Q3 Q4

$bn

Total volume (sq ft; million) Source: Savills, Includes New Leases and Renewals

50 100 150 200 250 300 350

2014 2015 2016 2017 2018 H1 2019

US Annual Commercial Office Leasing Volume

Europe & Middle East

Revenue £113.3m Growth 17% YOY

Market Dynamics

Macro themes

• GDP growth slowing substantially in Germany and Italy, also

affecting France and the Netherlands

• Continued regional political and global economic uncertainty

affecting UAE

• Investor demand strong, but polarised towards less risky assets

and volumes affected by lack of liquidity Market statistics

• European Investment volumes down 15% YOY in H1 2019
• Major country investment down in largest markets, but sharply up

in Spain (53%), Sweden (71%) and Italy (46%)

• Paris eclipses London as the most popular destination for Cross

Border Investment in H1 (€6.5 bn, London: €5.6 bn)

• Office Leasing volumes up 3%, but with significant increases in

Madrid (+25%) and Brussels (+20%)

• Middle East: Stable office market dynamics and increased

activity in Saudi Arabia. Over supply an issue in some markets

Savills Investment Management

Percentage AUM outperforming respective benchmarks figures to Q1 2019

65% 86% 89% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Target Actual Actual Last 5 yrs Last 3 yrs

Market Dynamics

• Brexit and European geopolitical concerns impacting
• n investment activity and equity raising
• Concerns around general pricing across all asset

classes – late cycle

• Increasing level of regulatory and risk compliance
• Trend to consolidation of small investment managers
• Managers fees continue to be under the spotlight
• Overall equity raised by Managers in H1 significantly

lower than H1 18 in European markets

• Weight of money targeting the sector remains above

average for real estate given the need for income

Revenue £32.5m Growth 20% YOY

5 10 15 20 25 30 35 40 45 20 40 60 80 100 120 140 Capital Raised (USD bn) Number of funds

Historical Fundraising

Number of funds Aggregate Capital Raised USD bn

Financial Review

13

Summary Underlying Result

14

6 months ended 30 June (£m) 2019 2018 % chg Revenue 847.0 727.8 +16.4% Underlying PBT 38.4 42.4 (9.4)% Underlying PBT margin 4.5% 5.8% (1.3)% pts Underlying basic earnings per share 20.9p 23.4p (10.7)% Dividend per share 4.95p 4.80p +3.1% Net debt 139.0 94.6 +46.9% Net assets 461.5 432.3 +6.8%

Revenue and underlying PBT by business

15

311.3 263.7 125.8 27.0 346.3 335.5 132.7 32.5

50 100 150 200 250 300 350 400

2018 2019

+27% +5% +20%

Revenue

19.7 12.8 10.8 2.9 9.9 16.2 11.5 5.6

5 10 15 20 25 +27% +6% +93% Transaction Advisory Property Management Consultancy Investment Management

UPBT

+11% (50)%

Margin

6.3% 2.9% 4.9% 4.8% 8.6% 8.7% 10.7% 17.2% £m

The figures in these charts exclude costs of £4.8m in 2019-H1 (2018-H1 £3.8m) not allocated to the operating activities of the group’s business segments

Combined revenue and UPBT growth of 20% and 26% respectively

Revenue and underlying PBT by region

16

280.5 250.4 100.3 96.6 303.6 298.4 131.7 113.3

50 100 150 200 250 300 350

2018 2019

Revenue

UK Asia Pacific North America

UPBT

+8% CEME 23.7 18.6 0.6 3.3 22.2 15.5 6.7 (1.2)

• 5

5 10 15 20 25 (6)% +19% +31% +17% (17)% n/a +1,017%

£m

Margin

8.4% 7.3% 7.4% 5.2% 0.6% 5.1% 3.4% (1.1)%

The figures in these charts exclude costs of £4.8m in 2019-H1 (2018-H1 £3.8m) not allocated to the operating activities of the group’s business segments

£38.4m £6.0m £2.0m £172.7m £6.0m £15.2m £14.0m £36.4m £13.5m £1.5m

Net debt b/f UPBT Non-cash items Working capital Acquisition spend - current & deferred Capex Investment cash flows EBT Dividends Tax Other Net debt c/f

Cashflow Performance

17

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

Cash used in operations1 of £128.3m (2018 H1: £77.2m)

Net cash Net debt

£73.9m £139.0m

£(50.0)m £50.0m

• £100.0m

£(100.0)m

At 30 June 2019 – Net debt of £139.0m (net cash outflow in H1 of £212.9m) At 30 June 2018 – Net debt of £94.6m (net cash outflow in H1 of £193.2m)

£(150.0)m £150.0m

£730m £34m £28m £51m £12m £398m £107m £215m £151m

Net cash at 30 Jun 2013 Underlying profit before tax Non-cash items Working capital Acquisitions and capex Investment cash flows EBT Dividends Tax Other Net debt at 30 Jun 2019

Net cash/(debt) reconciliation – 6 years to June 2019

18

£3m £(139)m

UPBT 2013 H2 £ 49.2m 2014 £100.5m 2015 £121.4m 2016 £135.8m 2017 £140.5m 2018 £143.7m 2019 H1 £38.4m Total £729.5m

£25m £75m £20m £84m £59m £21m £8m £8m £11m £8m £56m £23m

• £20m

£40m £60m £80m £100m £120m £140m £160m

2013 2014 2015 2016 2017 2018 2019

H1 H2

Profile of Acquisitions/Capex Investment

Commercial Transaction Advisory

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2019 Revenue £274.3m (+17%) 2019 UPBT £5.0m (-53%)

Asia Pacific: Investment growth in Japan, China and Singapore, decline in Hong Kong and Australia. UK: slow down in UK Capital Transactions due to lower stock availability and Brexit related uncertainty. CEME: significant growth costs, particularly in Germany and Sweden, good pipeline for H2. North America: strong Occupier Leasing revenues; reduction in Capital Markets losses, continued investment in platform.

68.2 31.4 43.0 131.7

• 20

40 60 80 100 120 140 Asia Pacific UK CEME North America Growth

+14% (7)% +4% +31% 4.2 1.3 (7.2) 6.7

(8) (6) (4) (2)

• 2

4 6 8 Asia Pacific UK CEME North America Growth

(26)% (54)% n/a 1,017%

Residential Transaction Advisory

20

2019 Revenue £72.0m (-5%) 2019 UPBT £4.9m (-46%)

UK: second-hand sales down marginally due to lower average values, however number of exchanges ahead of last

• year. Significant market outperformance against UK market volume declines.

UK: reduced volume of Development sales. Reservations remain robust. Asia Pacific: Hong Kong remains resilient but slow down in Australia, China and Singapore.

57.3 14.7

10 20 30 40 50 60 70 UK Asia Pacific Growth

(2)% (17)% 3.5 1.4

• 0.5

1.0 1.5 2.0 2.5 3.0 3.5 4.0 UK Asia Pacific Growth

(44)% (48)%

Property Management

21

2019 Revenue £335.5m (+27%) 2019 UPBT £16.2m (+27%)

Asia Pacific: good revenue growth; mobilisation costs on new Hong Kong FM contracts restricts profit growth in period. UK: strong organic growth including Residential Lettings (up 26%) boosted by the addition of the Broadgate Estates contracts (14% revenue growth) acquired during 2018-H2. Europe: organic revenue growth in Ireland and France supported by the Cluttons acquisition in the Middle East (7% of the revenue growth).

189.8 107.6 38.1

• 20

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

+28% +28% +23% 8.6 6.8 0.8

• 1

2 3 4 5 6 7 8 9 10 Asia Pacific UK CEME Growth

+6% +39% n/a

Consultancy

22

2019 Revenue £132.7m (+5%) 2019 UPBT £11.5m (+6%)

UK: strong performances in Building, Projects and Planning offset reduced activity in Housing, Lease and Leisure consultancy. Asia Pacific: revenue growth in China, Japan & South Korea offset by reductions in Singapore/Australia and recruitment costs. Europe: organic growth of 18% (Germany/France/Spain) boosted by first time contribution of Middle East.

93.4 22.9 16.4

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

0% +11% +36% 8.4 1.0 2.1

1 2 3 4 5 6 7 8 9 UK Asia Pacific CEME Growth

(1)% (41)% +250%

Investment Management

23

2019 Revenue £32.5m (+20%) 2019 UPBT £5.6m (+93%)

Revenue: growth from increased activity in UK/Europe (incl performance fees). Asia revenue impacted by dissolution of Japan I (end of term) pre-launch of Japan II. Assets under management: increased by 13% to €18.3bn (H1 2018: €16.2bn). Performance: 85% of AUM consistently beating benchmarks over rolling 5 years; supports capital raising.

13.9 15.8 2.8

• 2

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

2.2 3.1 0.3

• 0.5

1.0 1.5 2.0 2.5 3.0 3.5 UK CEME Asia Pacific Growth

+31% +22% +138% +83% (20)% (25)%

Management Progress

24

25

Key Priorities

Continued growth of our Less Transactional Businesses Maintenance of Transactional bench strength and targeted recruitment for sector coverage Continued diversification of service lines eg Project Management/Consultancy Drive integration and performance of recent acquisitions and team lifts Maintain strong fund performance in Investment Management Flexible response to market conditions and opportunities alongside prudent cost management

26

Summary & Outlook

A resilient H1 despite some market challenges Corporate occupiers remain active, “Lower for Longer” interest rates and security of income underwrites continued attractiveness of real estate investment Near term macro level uncertainties restraining transaction volumes in some markets Continued growth in less transactional service lines & developing markets The Board’s expectations for the full year currently remain unchanged

Appendices

27

Period ended 30 June (£m) 2019 2018 Reported profit before tax 24.7 26.7 Acquired intangible assets amortisation 3.7 2.6 Share-based payment adjustment (1.1) (0.3) Profit on disposal of available for sale investment / joint venture (0.3) (0.1) Restructuring costs 4.3 2.8 Acquisition - related costs 7.1 10.7 Underlying profit before tax 38.4 42.4

28

Underlying PBT Reconciliation

29

280.5 250.4 100.3 96.6 303.6 289.9 124.6 114.1 50 100 150 200 250 300 350

2018 2019 Revenue

Asia Pacific UK United States

UPBT

727.8 832.2 200 400 600 800 1,000 Total 42.4 37.2

• 5

10 15 20 25 30 35 40 45 +8% +14% (12)% Group margin of 4.5% (2018: 5.8%)

Revenue / UPBT total includes unallocated net costs, primarily central overheads of £4.8m in 2019-H1 and £3.8m in 2018-H1.

CEME 23.7 18.6 0.6 3.3 22.2 14.7 6.3 (1.2)

• 5

5 10 15 20 25 (6)% +16% +24% +18% (21)% +950% n/a

Revenue and underlying PBT by region: Constant currency equivalent

Six months ended June (£m) 2019 Actual 2018 Actual FX gain / (loss) Constant currency 2019 Actual Constant currency growth Revenue 847.0 727.8 14.8 832.2 14% Underlying costs (808.6) (685.4) (13.6) (795.0) (16)% Underlying PBT 38.4 42.4 1.2 37.2 (12)%

30

FX Effect on Underlying Results

UK Prime Yield

Source: Savills

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% City offices West end offices M25 offices Regional offices Standard shops Shopping centres Industrial Distribution %

Jun-18 Jun-19

UK Commercial property – average annual rental growth

• 20
• 15
• 10
• 5

5 10 15

Aug 00 Dec 00 Apr 01 Aug 01 Dec 01 Apr 02 Aug 02 Dec 02 Apr 03 Aug 03 Dec 03 Apr 04 Aug 04 Dec 04 Apr 05 Aug 05 Dec 05 Apr 06 Aug 06 Dec 06 Apr 07 Aug 07 Dec 07 Apr 08 Aug 08 Dec 08 Apr 09 Aug 09 Dec 09 Apr 10 Aug 10 Dec 10 Apr 11 Aug 11 Dec 11 Apr 12 Aug 12 Dec 12 Apr 13 Aug 13 Dec 13 Apr 14 Aug 14 Dec 14 Apr 15 Aug 15 Dec 15 Apr 16 Aug 16 Dec 16 Apr 17 Aug 17 Dec 17 Apr 18 Aug 18 Dec 18 Apr 19

Annual % change

UK Retail UK Offices UK Industrial

Source: MSCI, Savills

European (excl UK) Investment turnover

Source: Real Capital Analytics, Savills

50 100 150 200 250 300 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 €bn Q4 Q3 Q2 Q1

European (incl UK) Investment turnover

Source: Real Capital Analytics, Savills

50 100 150 200 250 300 350 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 €bn Q4 Q3 Q2 Q1

Global commercial and institutional residential investment turnover

Source: Real Capital Analytics, Savills

$- $200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 H1

Billions Americas APAC EMEA

China’s debt rose to over 300% of GDP in Q1/2019. Household debt, government debt and financial sector debt jumped to 54%, 51% and 43% of GDP respectively China will maintain a prudent monetary policy in the year's second half, while continually reducing the actual financing costs of enterprises.

Source: The People’s Bank of China, Savills Research & Consultancy

Mainland China New Loan Growth, 2007 – 2019F

2019 figure is forecasted by Bank of China

0.0 0.5 1.0 1.5 2.0 2.5 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019F US$ trillion

Global Property Sales* in China vs All Others, Q1/2007 – Q2 2019

The global property sales volume fell by 11.3% in Q2/2019, while sales in China dropped slightly by 1.6%. Most China transactions are accounted for by land deals. Cross-border investors have turned their attention to China, as reflected by the increase in the cross-border net acquisitions volume in 2019 H1.

Source: Real Capital Analytics * Includes all property types

• 100

200 300 400 500 600 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 US$ Billions China US Rest of World

Regional Grade ‘A’ Office Yields, Q2/2018 vs Q2/2019

Grade A Office yields are relatively low and stable with some signs of softening in Hong Kong and Singapore.

Source: Savills Research & Consultancy

0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Beijing Shanghai Hong Kong Taipei Tokyo Seoul Singapore Kuala Lumpur Q22018 Q22019

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