Savills plc Results for the year ended 31 December 2019 12 March - - PowerPoint PPT Presentation

Savills plc Results for the year ended 31 December 2019

12 March 2019 Mark Ridley & Simon Shaw

Disclaimer: Forward-looking statements

2

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

Highlights

5

Performance Overview Drivers Group Revenue £1,930.0m +9.6% (cc 8.4%) Group UPBT £143.4m

• 0.2% (cc -1.2%)

➢ Transaction advisory revenues up 2% with growth in North America and Europe & Middle East offset by decline in Asia Pacific ➢ Strong growth in less transactional services – Property Management revenue up 17%, Consultancy revenue up 15% ➢ Continued growth in North America with revenues up 11% and underlying profit up 35% ➢ SIM reported record year with revenues up 19%, profits up 65% and AuM up 8% to £17.7bn

Group UEPS 78.0p (2018: 77.8p) Net Cash £28.5m (2018: £73.9m) Dividend 32.0p +2.6%

cc = constant currency

‘Key Strategic Goals – A Recap’

Priorities & Focus

7 Enhance Business Balance ▪ Emphasis on growth of less transactional businesses Maintain Core Strengths ▪ Focus on growing transactional market share Accelerate Growth in Underscale Geographies ▪ Develop EMEA, North America, accelerate growth in core markets in Asia Pac Integrate Acquisitions & Leverage Organic Growth ▪ Broadgate Estates, Currells and DRC, and maximise benefits of recruitment Support Growth of SIM Under New CEO (Alex Jeffrey) ▪ Europe and Asia Pac, with new fund development

Ten Year Revenues

8

• 500

1,000 1,500 2,000 2,500 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

£m Transactional "Less-Transactional"

Total Revenue £677.0m Transactional £270.7m “Less- Transactional” £406.3m 46% 47% 47% 46% 48% 39% 38% 40% 54% 53% 54% 52% 54% 60% 61% 62% 60% 40% 46% 46% Percentage of Revenue Property Management – 35% Consultancy – 18% Investment Management – 4% Percentage of Revenue Commercial Transactions – 34% Residential Transactions – 9% 57% 43% Total Revenue £1,930.0m Transactional £828.2m “Less- Transactional” £1,101.8m

Broad Geographic Spread

9

580

Employees

Revenue £293.0m

(15% of Total)

*Staff numbers – weighted average for 2019

Revenue £727.5m

(38% of Total)

Revenue £282.4m

(15% of Total)

Revenue £627.1m

(32% of Total)

Over 39,000* employees in 71 countries

825 Employees 35 Offices 6,388 Employees 134 Offices 2,032 Employees 46 Offices 29,912 Employees 58 Offices

UK

Market Dynamics

Macro themes ▪ Sluggish GDP growth (1%) with continuing risk of Brexit affecting market confidence ▪ Weak sterling and comparative pricing maintains attraction to non domestic investors ▪ ‘Boris bounce’ post the Election, buoys confidence in December (may be tempered by Covid 19) Market statistics ▪ Commercial Investment volumes down (-17%), more so in Central London Offices (-34%), ▪ Office Leasing volumes decline, Nationally (-10%), London (-15%), strong rental growth in prime offices (London: +14-16%) ▪ Retail suffers rental falls, Investment Volumes remain extremely low (-10%) ▪ Logistics: Strong conditions continue, but take up fell (-9%) and Investment volumes reduced (-14%) ▪ UK Housing transaction volumes down (-1%), greater reduction above £1m (-2%) but volumes increase in PCL (+14%)

Business Development Focus: Integration & growth of Property Management, Consultancy, New Services in Debt Advisory & Corporate Finance

Property Management ▪ Successfully integrated Broadgate Estates, as well as expanding existing portfolio to 444m sq. ft (+16% YoY) ▪ Acq Parkes & Associates (Property Management, Guernsey) Consultancy ▪ Acq KKS (Design & Workplace Consultancy) ▪ Expanded Occupier Services Platform ▪ Opened new Brighton Office ▪ Developed Life Sciences team Residential Sales & Lettings ▪ Integrated Currells (6 offices in London) ▪ Grew PRS & Lettings in Manchester Transactional ▪ New Logistics Occupier Advisory Service ▪ Expanded Corporate Finance business ▪ Created International Prime Retail Team

Revenue £727.5m Growth 10% YOY

11

Revenue £627.1m Growth 7% YOY

Market Dynamics

Macro themes ▪ GDP growth of 4.4% across the region with improvements in Japan, Vietnam, India & China, but lower growth in Australia & Singapore ▪ Disturbances in Hong Kong in H2 resulted in GDP fall (-1.15%) ▪ Trade disputes impact markets (US / China & Japan / South Korea) Market statistics ▪ Hong Kong Commercial Investment falls significantly in H2 (-42% YoY) with Office Leasing volumes also adversely impacted (-33%) ▪ Residential Secondary Sales sharply reduced (-9.5%), price discounts in all markets ▪ China less impacted (-0.8%) with increased Cross Border activity to Shanghai and Beijing ▪ Volumes increase in Japan (+4.6%) & Singapore (+26.4%) , but declines in South Korea (-7.9%) & Australia (-0.3%) ▪ Overall regional volumes for the year fell (-5%) ▪ Grade A Office Leasing volumes fell (23% YoY)

Business Development Focus: Accelerated Organic Growth in core markets & new

• penings in India

Hong Kong ▪ Strengthened Property Management & FM with new contract wins China ▪ Opened new offices in Haikou and expanded in Changsa, focussed on Property Management, Retail & Commercial Leasing Australia & New Zealand ▪ Significant growth in Logistics (NSW & Victoria), Office Leasing (NSW) & Property Management ▪ New Head of NZ & growth of Valuation & Office Leasing South East Asia ▪ Focus on Singapore, new Capital Markets team, growth of Facilities Management & Valuation ▪ New leadership teams in Malaysia & Indonesia ▪ Vietnam – growth of Property Management India ▪ 6 new offices since 2019, headcount now 300, full service offer, including Tenant Rep, Capital Markets, Project Management, Valuation, Leasing & Residential Sales

Asia Pacific

North America

Revenue £293.0m Growth 11% YOY

Market Dynamics

Macro themes ▪ Annual GDP growth of 2.3%, but Global trade policy & Political uncertainty drag on growth (-60-80 bps) ▪ Unemployment rate at all time low (3.5%) with estimated 1.8m new jobs created ▪ Federal Bank eases rates in October to stimulate growth Market statistics ▪ Commercial Office Leasing volumes up (+3% YoY), New York recovers strongly with demand from TMT (+35%) ▪ Vacancy rates tighten in main Office markets, particularly Washington , Chicago & LA ▪ Office rents grow nationally (+5.1%) and Investment volumes increase (+2%) ▪ Liquidity remains principal constraint on Investment activity, estimate $327bn of ‘dry powder’ looking to enter the market

Business Development Focus: Continued growth of occupier focused business (Office & Logistics), with selective new office openings

Central Management ▪ Strengthened Management team & rebranded National platform in March Tenant Representation ▪ Organically grew Tenant Rep teams in 21 offices nationally Logistics ▪ Grew US & Canadian Logistics platform across 7 offices New Offices ▪ Opened new offices in Calgary, Connecticut, Detroit & Nashville Project Management & Consultancy ▪ Growth of Workplace & Project Management nationally Capital Markets ▪ Restructured the business, with focus on greater National coverage WorkThere ▪ Launched our WorkThere flexible office platform in New York & Atlanta Technology ▪ Continued investment in award winning Technology (K3) & CRM platform across all markets

Europe & Middle East

Revenue £282.4m Growth 14% YOY

Market Dynamics

Macro themes ▪ GDP growth continuing to slow in Germany, France & Italy (+0.4% – 1.2%) ▪ European budgetary constraints & Brexit overhang affects confidence ▪ Heightened political uncertainty in Gulf region Market statistics ▪ European Investment volumes enjoyed a strong year (+0.7% YoY) ▪ Significant volume increases in core European Cities, Paris (+20%), Berlin (+22%) & Madrid (+49%) ▪ Cost of debt continues to attract inward investment (Germany bond yields remain in negative territory) ▪ Office Leasing Volumes down (–4%) but vacancy rates tighten to 5.4% (6.3% 2018) ▪ Prime CBD rents in Europe increase(+6%), with strongest growth in Cologne, Berlin & Frankfurt ▪ Prime Logistics rents across Europe increase (+6%)

• n average across main markets

Business Development Focus: Maximise benefits of organic growth, together with continued integration of recent acquisitions in core markets

Spain & Portugal ▪ Continue to strengthen market position, growth in Project Management, Consultancy & Residential services, additional growth in Barcelona Sweden ▪ Significant organic growth across all business lines (15 key hires), focused on Investment & Office Leasing France ▪ New leadership team, integration & growth of Office Leasing & development of Logistics capability (Paris & Lyon) ▪ New team (Savills Ski), covering the French Alps & growth of Prime Residential in France Germany ▪ New Workplace strategy team & expansion of core Agency services in Stuttgart Middle East ▪ New Project Management capability in Dubai & extended platform across Saudi Arabia & Egypt WorkThere ▪ Continued roll out across Netherlands, Germany, Ireland, Spain & France

Savills Investment Management (SIM)

Revenue £79.2m Growth 19% YOY

Business Development Focus: Continued focus on performance, growth of AUM & launch of new products & equity raising

▪ AUM increased by 8% to £17.7bn (£16.4bn in 2018) ▪ Transacted over £3.1bn (£1.9bn acquisition & £1.2bn disposals) ▪ Continued strong performance, outperforming benchmarks in 89% of AUM over the last 5 years ▪ Raised £3.1bn of new equity (£2.4bn in 2018) ▪ Secured mandates of £842m for key Asian Sovereign Wealth Funds ▪ Successful launch of European Logistics Fund III and Japan II (€153m & $450m to date) ▪ Growth of Asia Pac platform with organic growth in Malaysia, Australia & Singapore ▪ Global CEO, Alex Jeffrey joined in October 2019, based in Singapore

Market Dynamics

▪ Greater focus on core European markets as geo- political & Brexit concerns dampen investor appetite in the UK ▪ Weight of capital targeting Real Estate remains well above average, with increased fund allocation to the sector ▪ Concerns increase on late cycle pricing, significant yield compression on prime assets ▪ Key investor focus on core, core plus sectors, weighting to Logistics increasing ▪ Greater Cross Border activity from Asia Pac region, to diversify exposure ▪ Increased demand for Real Estate debt & Alternative Asset Classes ▪ Further consolidation of smaller Investment Managers, increased level of regulatory compliance & strong focus on fee levels

ESG – Savills Strategic Commitments

15

Our Expertise Our goals and strategy aligned to United Nations Sustainable Development Goals (SDGs) Sustainable business model

▪ Attracting and retaining highly motivated quality people ▪ Excellence in client service ▪ Innovation in the client offering ▪ Contributing to society – Successfully completed our 2017-19 Emissions Reduction Plan – Committed to the UN Sustainable Development Goals (2020), focused

• n Climate Change

People

▪ Developing talent ▪ Diversity & Inclusion

Shareholders

▪ Open & Transparent Engagement ▪ Returns

Clients

▪ High quality service ▪ Ethical Business

Communities

▪ Reducing environmental impacts ▪ Community investment

OUR EXPERTISE

Over 200 Sustainability Professionals in Sustainability, pushing key Consultancy services to clients ▪ Energy procurement, metering & management ▪ Renewable energy, projects & purchasing ▪ Smart Tech, fit out & Sustainable development ▪ Technical building services – engineering ▪ ISO Audits, Organisation, Sustainable Building Certification ▪ In use buildings,– NABERS, ANZ, adopting best practice ▪ Waste reduction ▪ Health & wellbeing (well & fitwel) ▪ GRESB Strategy, development & implementation of net zero ▪ Carbon offsetting (including forestry)

‘Sustainability at Savills’

16

Savills IQ

Financial Review

Summary Underlying Result

18

Year ended 31 December (£m) 2019 2018 % chg Revenue 1,930.0 1,761.4 9.6% Underlying PBT 143.4 143.7 (0.2)% Underlying PBT margin 7.4% 8.2% (0.8)% pts Underlying basic earnings per share 78.0p 77.8p 0.3% Basic earnings per share 60.6p 56.2p 7.8% Dividend per share 32.0p 31.2p 2.6% Net cash 28.5 73.9 (61.4)%

Dividends

19

Year ended 31 December 2019 2018 % chg Interim ordinary (“Less Transactional”) 4.95p 4.80p 3.1% Final ordinary (“Less Transactional”) 12.05p 10.80p 11.6% Supplemental (“Transactional”) 15.00p 15.60p (3.8)% Total distribution (per share) 32.00p 31.20p 2.6% Total distribution (£m) 42.9 42.6 0.7%

Revenue and Underlying PBT by Region

20

662.4 587.5 264.5 247.0 727.5 627.1 293.0 282.4

• 100

200 300 400 500 600 700 800

2018 2019

Revenue

UK Asia Pacific North America

UPBT

+10% E&ME

76.8 54.9 12.8 12.9 81.9 42.6 17.3 15.8

10 20 30 40 50 60 70 80 90 +7% +7% +11% +14% (22)% +22% +35% £m

Margin

11.6% 11.3% 9.3% 6.8% 4.8% 5.9% 5.2% 5.6%

The figures in these charts exclude costs of £14.2m (2018: £13.7m) not allocated to the

• perating activities of the

group’s business segments

Revenue and Underlying PBT by Service Line

21

813.5 586.8 294.4 66.7 828.2 684.5 338.1 79.2

100 200 300 400 500 600 700 800 900

2018 2019

+17% +15% +19%

Revenue

81.1 32.2 33.1 11.0 69.8 35.2 34.5 18.1

10 20 30 40 50 60 70 80 90 +9% +4% +65% Transaction Advisory Property Management Consultancy Investment Management

UPBT

+2% (14)%

Margin

10.0% 8.4% 5.5% 5.1% 11.2% 10.2% 16.5% 22.9%

£m Combined revenue and UPBT growth of 16% and 15% respectively

The figures in these charts exclude costs of £14.2m (2018: £13.7m) not allocated to the

• perating activities of the

group’s business segments

Cashflow Performance

22

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

73.9 28.5

143.4 9.4 9.9 0.6 65.2 15.0 23.3 14.1 43.3 11.4 25.8 0.3 10.3

50 100 150 200 250

Net cash at 31-Dec-2018 UPBT Non-cash items Working capital Cash flows from investments Acquisition spend - current & deferred Capex Purchase of EBT shares Proceeds from issue of shares Dividends paid Interest Tax Other items Foreign exchange Net cash at 31-Dec-2019

£m

Cash generation from operations of £87.6m1 (2018:£139.8m)

Commercial Transaction Advisory

23

2019 Revenue £653.3m (+3%) 2019 UPBT £47.4m (-14%)

Asia Pacific: Hong Kong Investment market volumes down 42% y-o-y (political unrest and US-China tariffs). Market slow-down in Australia. Significant upturn in Japan and Regional Hotels business. UK: investment market volumes down in Investment and Central London & International teams (political risk), partially offset by growth in

• Development. Strong final month after the General Election

Europe & Middle East: revenue growth in France, Netherlands, Spain and Germany, profits impacted by investment in new teams and restructuring in Sweden and France North America; significant growth in Occupier Service business – Southern California, Palo Alto, Denver and Raleigh. Improved performance of New York Capital markets business

138.6 94.2 127.5 293.0

• 50

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

(13)% (4)% +13% +11% 12.4 12.3 5.4 17.3

• 2

4 6 8 10 12 14 16 18 20 Asia Pacific UK E&ME North America Growth

(42)% (22)% (2)% +35% £m £m

Residential Transaction Advisory

24

2019 Revenue £174.9m (-1%) 2019 UPBT £22.4m (-14%)

Asia Pacific: slow down in residential markets in Hong Kong in the second half of the year as a result of the political unrest, and in Singapore (market cooling measures). Australian business restructured in weak market conditions UK: revenues up in both new development and second-hand sales, with significant post-election boost in London UK: significant PRS related growth

35.8 139.1

20 40 60 80 100 120 140 160 Asia Pacific UK Growth

(22)% +6% 4.6 17.8

• 2

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

(45)% +1% £m £m

Property Management

25

2019 Revenue £684.5m (+17%) 2019 UPBT £35.2m (+9%)

Asia Pacific: revenue growth in Hong Kong property and facilities management, new contracts in Hong Kong and Macau. Profitability impacted by on-boarding significant Facilities Management contracts and Restructuring/Recruitment in Australia UK: strong underlying revenue growth in Residential Lettings and Commercial Property Management. Positive impact of full year effect of Broadgate Estates management portfolio and Currell acquisitions Europe & Middle East: revenue growth as a result of full year effect of Cluttons (Middle East acquisition), supported by

• rganic growth in Ireland, Spain and The Netherlands

372.5 231.1 80.9

• 50

100 150 200 250 300 350 400 Asia Pacific UK E&ME Growth

+14% +21% +17% 19.2 15.8 0.2

• 5

10 15 20 25 Asia Pacific UK E&ME Growth

0% +22% n/a £m £m

Consultancy

26

2019 Revenue £338.1m (+15%) 2019 UPBT £34.5m (+4%)

UK: strong performances in PRS advisory, Housing, Building & Project Consultancy, offset by decline in development and rural consultancy Asia Pacific: significant growth in Research consultancy in Mainland China and steady growth across the region. Profits held back by expansion costs in China, Singapore and Australia Europe & Middle East: revenue growth in Spain and the Middle East (full year effect of Cluttons acquisition), profits impacted by restructuring/recruitment (Spain/ The Netherlands/ Portugal)

229.9 69.6 38.6

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

+6% +54% +16% 27.0 4.6 2.9

• 5

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

+5% +7% (3)% £m £m

Investment Management

27

2019 Revenue £79.2m (+19%) 2019 UPBT £18.1m (+65%)

Transactions of circa £3.1bn (2018: £3.8bn) executed, including £1.2bn disposals and £1.9bn acquisitions. AUM increased to £17.7bn (2018: £16.4bn) Strong Fund performance (85% of funds exceeding 5 year benchmarks) Raised more than £3.1bn of new equity The profits include £1.4m (2018: £0.4m) from DRC; 25% stake acquired during 2018 New Global CEO hired

33.2 35.4 10.6

• 5

10 15 20 25 30 35 40 UK E&ME Asia Pacific Growth

9.0 7.3 1.8

• 1.0

2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 UK E&ME Asia Pacific Growth

+12% +29% +66% +91% +13% (5)% £m £m

28

Technology Investment- Key focal areas during 2019

UK/Europe Real estate data analytics and Insight programme US CRM and suite of Occupier focused Apps eg K³ (Global Occupier Analytics) UK Digitisation of valuation process Progressive harmonisation of Savills ERP system Globally (Dynamics AX) Small follow on investments in GHV portfolio (YOPA/VuCity)

Key Priorities & Summary & Outlook

30

Key Priorities

UK: Maximise National multi-sector expertise, with growth of additional specialist services North America: Build Consultancy, (Project Management and Workplace), expansion of Occupier Services in Offices, Logistics & Retail Asia Pac: Continued expansion of Consultancy, Property Management and ancillary services Savills Investment Management: Cautious expansion in Europe & Asia Pac, supporting new product development & equity raising Maintain financial strength to capitalise on opportunities which may arise Europe & Middle East: Focus on Germany and France, (Property Management & Logistics)

31

Summary & Outlook

A good performance despite market uncertainty in UK & Hong Kong Appetite for Real Estate remains positive (Occupiers / Investors) Strong start to 2020 across the business Continued growth in less transactional service lines & new sectors Business balance & resilience with strong balance sheet Covid 19 impact on 2020 uncertain; expect greater weighting to H2 2020

The Strength of our Assets ‘Leading people with a unique team culture’

32

UK ▪ No.1 Real Estate Superbrand 2019 ▪ The Times Graduate Employer of Choice for Property – 13th Year Europe ▪ European Broker of the Year – REFI European Awards ▪ Top in 6 categories in Spain – EuroMoney 2019 Asia Pac ▪ Hong Kong: RICS Deal of the year & Residential team of the year ▪ Greater China: Asia Pacific Property Awards – Best Real Estate Agency Team ▪ Korea: Asia Pacific Property Awards – Best Commercial Real Estate Agency Australia ▪ API Valuation Team of the Year North America ▪ Savills Knowledge Cubed wins two prestigious PropTech Awards SIM ▪ DRC – UK & European Debt Manager of the Year

Thank you

Connecting people and property since 1855