savills plc results for 6 months ending 30 june...
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Savills plc
Results for 6 months
ending 30 June 2020
6 August 2020
Mark Ridley & Simon Shaw
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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
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.
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Results
1 Introduction, Highlights & Business Development 2 Financial Review 3 Summary & Outlook
3
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Introduction,
Highlights & Business
Development
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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
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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
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7Staff 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-
opening 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
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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
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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
0
500
1,000
1,500
2,000
2,500
3,000Residential Sales -£1m+
Country London
Revenue: £298.8m | Growth: -2% YOY | Employees: 6,496 | Offices: 133
0
10
20
30
40
50
60
70
80
£ b
illio
n
Q1 Q2Q3 Q4
Source: Property Data, Savills
UK Commercial Investment Volumes 2000-2020
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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
0
20
40
60
80
100
120
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
£b
ns
Asia Pacific Commercial Investment Volumes
Q4
Q3
Q2
Q1
-
5
10
15
20
25
30
£b
ns
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
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$0
$40
$80
$120
$160
$200
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
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
0
50
100
150
200
250
300
350
2014 2015 2016 2017 2018 2019 H1 2020
US Annual Commercial Office Leasing Volume
To
tal vo
lum
e (
sq
ft;
mil
lio
n)
Source: Savills, Includes New Leases and Renewals
Revenue: £105.5m | Growth: -20% YOY | Employees: 853 | Offices: 35
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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
0
50
100
150
200
250
300
350
2013 2014 2015 2016 2017 2018 2019 2020
Bill
ion
Eu
ros
European Investment Volumes
Q4
Q3
Q2
Q1
5-yearH1 average
Revenue: £107.4m | Growth: -5% YOY | Employees: 2,099 | Offices: 44
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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
EU
R 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 outperforming respective benchmarks to Q1 2020
65%
Last
3 yrs
79%
Last
5 yrs
90%
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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
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Financial Review
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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%
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Revenue and underlying PBT by business
17
346.3325.7
142.5
32.5
278.5
337.8
144.6
30.5
0
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
0
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
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Revenue and underlying PBT by region
18
303.6 298.4
131.7113.3
298.8279.7
105.5 107.4
0
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
0
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
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£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 Workingcapital
Acquisitions Capex Investmentcash flows
Purchase ofEBT shares
Tax Dividends Other Net cash c/f
Cashflow performance
191 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
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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
41.530.9
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
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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
0
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%
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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)%
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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
0
10
20
30
40
50
60
70
80
90
100
UK Asia Pacific CEME North America
Growth (1)% (1)% (1)%
6.1
2.02.4
-0.3-1
0
1
2
3
4
5
6
7
UK Asia Pacific CEME North America
Growth (27)% +100% +14%n/a n/a
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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)%
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Summary & Outlook
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26
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
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Q&A