Savills plc. Results for the year ended 31 December March 2019

Transcription

1 Savills plc Results for the year ended 31 December March 2019

2 Disclaimer: Forward-looking statements 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. 2

3 Results 1 Introduction, Highlights & Business Development 2 Financial Review 3 Key Priorities & Summary & Outlook 3

4 Introduction, Highlights & Business Development 4

5 Highlights Performance Overview Group Revenue Group UPBT Group UEPS 77.8p +2.6% Net Cash Dividend 31.2p +3.3% cc = constant currency 1,761.4m +10.1% (cc 11.4%) 143.7m +2.3% (cc 3.2%) 73.9m (2017: 98.6m) Drivers 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 5

6 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 Global Real Estate Adviser of the Year EG Awards 2018 Deal of the Year, Residential Team of the Year RICS Hong Kong Awards An entrepreneurial spirit and ambition for continued growth The Times Graduate Employer of Choice for Property 12 th year No.1 Real Estate Superbrand Superbrands

7 Management Changes: Succession Delivered in 2018 Group CEO Mark Ridley UK Group CEO UK & EMEA James Sparrow Managing Director UK Richard Rees Asia Pacific CEO Korea Crystal Lee CEO Singapore Marcus Loo North America: CEO Mitch Rudin COO Matthew Morgan CFO Gerald Prager India CEO Anurag Mathur Europe & Middle East CEO Middle East Steve Morgan CEO Sweden Niklas Sammuelson CEO Spain Jaime Pascual-Sanchiz Strengthening the bench 7

8 Ten Year Revenues m 2,000 1,800 1,600 1,400 1,200 1, Total Revenue 560.7m 35% 65% 40% 60% 38% 62% 38% 62% 40% 60% 46% 54% 48% 52% 46% 54% Total Revenue 1,761.4m 47% 53% 46% 54% Percentage of Revenue Commercial Transactions 36% 46% Residential 47% Transactions 10% Percentage of Revenue Property Management 33% Consultancy 17% Investment Management 4% Transactional "Less-Transactional" 8

9 Broad Geographic Spread 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 580 Revenue 264.5m Employees (15% of Total) Revenue 662.4m (38% of Total) Revenue 247.0m (14% of Total) Revenue 587.5m (33% of Total) *Staff numbers weighted average for

10 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% Revenue 662.4m Growth 6% YOY 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 10

11 Asia Pacific 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 Revenue 587.5m Growth 4% YOY 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 11

12 North America 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 Revenue 264.5m Growth 18% YOY 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 H 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) 12

13 Europe & Middle East 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 Revenue 247.0m Growth 35% YOY 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 13

14 Savills Investment Management (SIM) Market Dynamics Brexit & European Geo-Political concerns impacted on equity raising and investment activity Business Development Focus: Growth of AUM and launch of products focused on UK, Europe & Asia Pacific markets 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 Revenue 66.7m Growth 0% YOY 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 outperformance; Japan II strong first close Integrated Zaphir Asset Management and grew AUM in Spain Search for new Global CEO of SIM approaching conclusion Real Estate debt and alternatives increasingly attractive asset classes 14

15 Financial Review 15

16 Summary Underlying Result Year ended 31 December ( m) % chg Revenue 1, , % Underlying PBT % 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 (25.1)% Net assets % 16

17 Dividends Year ended 31 December % 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) % 17

18 Revenue and Underlying PBT by Region m UK Asia Pacific North America +6% % E&ME Revenue % +35% UPBT % (1)% % % 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 Margin 12.2% 11.6% 9.8% 9.3% 3.5% 4.8% 6.1% 5.2% 18

19 Revenue and Underlying PBT by Service Line m Transaction Advisory Property Management Consultancy Investment Management Revenue % % % % UPBT % 81.1 Combined revenue and UPBT growth of 11% and 10% respectively +27% +7% (17)% 11.0 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 Margin 10.9% 10.0% 4.9% 5.5% 11.4% 11.2% 20.0% 16.5% 19

20 Cashflow Performance Cash generation from operations of 147.8m (2017: 145.1m) Acquisition spend 87.0m (2017: 117.1m) m 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 Dividends paid Interest Tax Foreign issue of shares exchange Net cash at 31- Dec

21 Commercial Transaction Advisory 2018 Revenue 636.1m (+11%) 2018 UPBT 55.2m (-2%) m m Asia Pacific UK E&ME North America - Asia Pacific UK E&ME North America Growth (5)% (3)% +45% +18% Growth (21)% (9)% +22% +64% 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 21

22 Residential Transaction Advisory 2018 Revenue 177.4m (+2%) 2018 UPBT 25.9m (+3%) m m Asia Pacific UK Asia Pacific 17.6 UK Growth +4% +2% Growth +30% (6)% 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 22

23 Property Management 2018 Revenue 586.8m (+14%) 2018 UPBT 32.2m (+27%) m m Asia Pacific UK E&ME Asia Pacific UK E&ME - Growth +9% +15% +48% Growth +25% +11% n/a 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) 23

24 Consultancy 2018 Revenue 294.4m (+8%) 2018 UPBT 33.1m (+7%) m m UK Asia Pacific E&ME - UK Asia Pacific E&ME Growth +5% (1)% +48% Growth +8% (16)% +50% 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 24

25 Investment Management 2018 Revenue 66.7m (2017: 66.5m) 2018 UPBT 11.0m (-17%) m m UK E&ME Asia Pacific UK E&ME Asia Pacific Growth +4% (10)% +47% Growth (6)% (32)% +6% 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

26 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) 26

27 Portfolio 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 Estate Agent, clear no.2 to Grown to become 8th largest UK PurpleBricks amongst all hybrids. Digitally enabled Tenant Rep for co-working / serviced offices (Global) AI approach to real estate valuation (UK) 1.0m N/A 1.0m 100% N/A N/A N/A 5% Autonomous start up within Savills. Launched in 8 countries revenue > 1.2m 100% growth in yr 2. Stake taken in consideration for use of Savills data and market know how to prove models. The Smart-City digital platform (UK) 6m N/A 6m 33% 2 existence. Licensed by 18/32 London Largest most accurate City model in 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). 1 Ordinary and preference shares 2 Ordinary shares and redeemable preference shares 27

28 Key Priorities & Summary & Outlook 28

29 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 29

30 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 30

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