Savills plc Results for the six months ended 30 June 2018 9 August 2018
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
Results 1 Introduction, Highlights & Business Development 2 Financial Review 3 Management Focus 4 Summary and Outlook 3
Highlights Group Revenue Group UPBT 727.8m +1.9% (cc 4.8%) 42.4m -11.9% (cc -9.6%) Strong Continental European performance Robust performance from UK Residential business Group UEPS 23.4p -8.9% Net (Debt) / Cash (94.6)m (2017 H1: 1.4m) Dividend 4.80p +3.2% cc = constant currency Commercial Transaction advisory revenues flat Property Management revenue up 7%, Consultancy revenue up 4% Continued investment in Middle East, PM business and (post period) Real Estate Debt Investment Management 4
Savills Diversified Business Model Defensive, Scale Businesses Revenue by Business Cyclical, High-Margin Businesses Property Management 36% Consultancy 17% Commercial Transactions 33% Residential Transactions 10% Investment Management 4% Recurring revenue streams with less exposure to transaction environment 1.89bn ft 2 under management Strong Property Management business 57% (2017-H1: 56%) 43% (2017-H1: 44%) High-return, but cyclical earnings 76:24 split Commercial vs. Residential 62:38 Commercial split Tenant rep/leasing vs. Capital markets 16.2bn AUM Combination of cyclical and less cyclical service lines 5
Broad Geographic Spread Over 36,000* employees and over 600 offices in more than 60 countries Over 31,000 employees in 700 offices in more than 60 countries 5,780 Employees 126 Offices 1,625 Employees 44 Offices 794 Employees 31 Offices 187 Employees 7 Offices 27,711 Employees 66 Offices 580 Revenue 100.3m Employees (14% of Total) Revenue 280.5m (39% of Total) Revenue 96.6m (13% of Total) Revenue 250.4m (34% of Total) *Staff numbers As at 30 th June 2018 6
Savills UK & Europe 5 year Snapshot Revenues (2013 to 2017) 748m Focus on building Continental European Platform through bolt-on and selective acquisition 518m 583m 645m 683m Enhanced transactional teams and crossborder liaison network (team lift/recruitment) Diversification of service lines into Less Transactional businesses (eg Project Mgmt) Building of Property Management business to sustainable profitability (scale) Extend network into CEE (Prague) and Middle East (Cluttons) 2013 2014 2015 2016 2017 7
Broadgate Estates Case Study Established 32 years ago and became premier Property Management business in UK Specialist in Office, Retail and Residential sectors 21 million sq. ft under management with International client base 28 iconic properties, primarily in London 166 London based staff Global positioning and track record 8
Middle East Case Study Acquisition of Cluttons Middle East, Established 40 years ago Leading Consultancy business in the region with 190 employees Cairo Bahrain Full service offer including Valuation, Property Management, Sales & Leasing 66% of revenues less-transactional Saudi Arabia Abu Dhabi Sharjah Dubai Oman Strong ME activities with expansion opportunities Global linkage East and West, through cross border activity through Savills network 9
Financial Review 10
Summary Underlying Result 6 months ended 30 June ( m) 2018 2017 % chg Revenue 727.8 714.4 +1.9% Underlying PBT 42.4 48.1 (11.9)% Underlying PBT margin 5.8% 6.7% (0.9)% pts Underlying basic earnings per share 23.4p 25.7p (8.9)% Dividend per share 4.80p 4.65p 3.2% Net (debt) / cash (94.6) 1.4 n/a Net assets 432.3 382.8 12.9% 11
Revenue and underlying PBT by business Revenue m 350 300 250 200 150 Transaction Advisory 312.1 0% 311.3 Property Management 246.6 +7% 263.7 Consultancy 121.0 +4% 125.8 Investment Management 2017 2018 100 50 33.6 (20)% 27.0 UPBT 0 30 25 20 15 10 5 0 (20)% 24.6 19.7 +25% +6% 12.8 10.2 10.2 10.8 (56)% 6.6 2.9 The figures in these charts exclude revenues of 1.1m in 2017-H1 and other net costs of 3.8m in 2018-H1 (2017- H1 3.5m) not allocated to the operating activities of the group s business segments Margin 7.9% 6.3% 4.1% 4.9% 8.4% 8.6% 19.6% 10.7% 12
Revenue and underlying PBT by region UK Asia Pacific North America Continental Europe Revenue m 300 250 200 150 100 +2% 274.2 280.5 263.5 (5)% 250.4 2017 2018 (3)% +34% 103.6 100.3 96.6 72.0 50 UPBT 0 30 (6)% 25 25.3 (15)% 23.7 21.8 20 18.6 15 10 (80)% +120% 5 3.0 3.3 0.6 1.5 0 Margin 9.2% 8.4% 8.3% 7.4% 2.9% 0.6% 2.1% 3.4% The figures in these charts exclude revenues of 1.1m in 2017-H1 and other net costs of 3.8m in 2018-H1 (2017- H1 3.5m) not allocated to the operating activities of the group s business segments 13
Cashflow performance m Cash used in operations of 77m 150 100 42 1 118 At 30 June 2018 - Net debt of 94.6m (net cash outflow in H1 of 194m) At 30 June 2017 - Net cash of 1.4m (net cash outflow in H1 of 187m) 50 99 Net cash Net debt - (50) (100) 53 9 10 17 35 18 5 (95) (150) Net debt b/f UPBT Non-cash items Working capital Acquisition spend - current & deferred Capex Cash flow from investments EBT Dividends Tax Foreign exchange Net debt c/f 14
Capital Structure On 20 June 2018 the Group issued 150m of fixed rate Senior Notes via Private Placement to US investors 7 year, 10 year and 12 year notes issued Weighted average duration of 10.2 years and weighted average interest rate of 3.18% Proceeds used to pay down existing RCF debt, replacing short term variable rate borrowings with long term fixed rate debt Significant levels of bank facility headroom for strategic growth and working capital requirements Borrowings and Headroom at 30 June, 2017 vs 2018 m 293.7m Overdrafts 253.0m RCF PP 178.3m 96.4m 30 June 2017 30 June 2018 30 June 2017 30 June 2018 Borrowings Headroom Note borrowings exclude finance leases 15
Commercial Transaction Advisory 2018 Revenue 235.4m (-1%) 2018 UPBT 10.7m (-34%) 120 6 5.7 100.3 100 5 80 60 40 59.7 33.9 41.5 4 3 2 2.8 1.6 20 1 0.6 - Asia Pacific UK Europe North America - Asia Pacific UK Europe North America Growth (12)% (14)% +57% (3)% Growth (41)% (38)% n/a (80)% Asia Pacific continued strength in Hong Kong and Korea, timing of transactions in Australia, Japan and China, with robust pipeline going into the second half. UK subdued volumes against strong comparative, due to lower stock availability and weakness of retail sector. Europe impact of recent acquisitions including Aguirre Newman and organic growth in Ireland, Germany, the Netherlands and Sweden. North America growth in revenues of 5% in constant currency, continued investment in New York capital markets and occupier services platform. 16
Residential Transaction Advisory 2018 Revenue 75.9m (+1%) 2018 UPBT 9.0m (+8%) 70 7 6.3 58.2 60 6 50 5 40 4 30 3 2.7 20 17.7 2 10 1 0 - UK Asia Pacific UK Asia Pacific Growth +6% (12)% Growth +17% (7)% UK new development sales up 17%; strength in regional development. UK second-hand sales down marginally due to fewer exchanges, however average values ahead of last year. Asia Pacific Hong Kong and China remain resilient but slow down in Australia. 17
Property Management 2018 Revenue 263.7m (+7%) 2018 UPBT 12.8m (+25%) 160 140 120 100 80 60 40 20-148.8 84.0 30.9 Asia Pacific UK Europe 9 8 7 6 5 4 3 2 1 - (1) 8.1 4.9 (0.2) Asia Pacific UK Europe Growth (1)% +10% +55% Growth +31% (2)% +80% Asia Pacific Continued focus on profitability and contract wins. UK revenue growth offset by platform investment costs (regulatory/client service centre) in advance of future growth (eg Broadgate Estates). Europe revenue growth from Aguirre Newman and Larry Smith acquisitions, organic revenues up 9%. 18
Consultancy 2018 Revenue 125.8m (+4%) 2018 UPBT 10.8m (+6%) 100 90 80 70 60 50 40 30 20 10 0 93.0 20.7 12.1 UK Asia Pacific Europe 9 8 7 6 5 4 3 2 1 0 8.5 1.7 0.6 UK Asia Pacific Europe Growth +2% (6)% +66% Growth +6% (35)% n/a UK strong performances in housing and development teams. Asia Pacific strong performance in Singapore. Slight decline in valuation revenues in other markets. Europe Organic revenue growth of 12% plus positive impact of Aguirre Newman acquisition. 19
Investment Management 2018 Revenue 27.0m (-20%) 2018 UPBT 2.9m (-56%) 14 1.4 1.3 12.1 1.2 12 11.4 1.2 10 1.0 8 0.8 6 4 3.5 0.6 0.4 0.4 2 0.2 - UK Europe Asia Pacific - UK Europe Asia Pacific Growth (5)% (34)% +6% Growth (50)% (66)% n/a Revenues reduced as anticipated (reduction in SEB liquidating assets vs 2017). Assets under management increased by 1% to 16.2bn (H1 2017: 16.0bn) with 0.7bn capital raised. Launched Japan II, SIM s largest first fund close. In July announced investment in DRC Capital LLP, a leading European Real Estate Debt Fund Manager. 20
Management Progress 21
Management Focus Integrate new acquisitions in the UK and Middle East Continued growth of US business and profit improvement Build Property Management, Consultancy and Investment Management businesses Pursue Continental Europe/Middle East growth strategies 22
Summary and Outlook Resilient first half performance Outlook for less transactional revenue remaining healthy Continued uncertainty (markets, geo-political risks and rising interest rates), affecting transaction volumes The Board s expectation for 2018 remains unchanged. 23
Connecting people and property since 1855