2019 Annual Report and Accounts Savills plc Savills plc Report and Accounts 2019 Our purpose Our purpose is to assist and advise a wide range of clients to realise their diverse property goals. Our vision CONTENTS To be the property partner of choice for private, institutional and corporate clients seeking to Overview acquire, manage, lease, develop or realise the 01 Group highlights value of prime residential and commercial 02 Savills at a glance property in the world’s key locations. Strategic Report Culture and values 04 Chairman’s statement 06 Our business explained Savills has a strong and well embedded culture, 08 Market insights founded on an entrepreneurial approach and 14 Key Performance Indicators underpinned by our values and operational 16 Chief Executive's review standards. We recognise our responsibility as a 22 Chief Financial Officer’s review global corporate citizen and we are committed 24 Material existing and emerging risks and to doing the right thing in the right way. uncertainties facing the business 31 Viability statement Our values 32 Stakeholder engagement with s.172 35 Responsible business Pride in everything we do 47 Non-financial information statement 2019 Take an entrepreneurial approach to business Governance Help our people fulfil their true potential 48 Corporate Governance Statement 48 Chairman’s introduction Always act with integrity 50 Board of Directors 54 Group Executive Board Read more about these on page 35 58 Corporate Governance 68 Audit, Risk and Internal Control 69 Audit Committee report 78 Director's Remuneration report 107 Director's report 111 Statement of directors’ responsibilities in respect of the financial statements Financial statements 112 Independent auditor’s report 122 Consolidated income statement 123 Consolidated statement of comprehensive income 124 Consolidated and Company statements of financial position 125 Consolidated statement of changes in equity 126 Company statement of changes in equity 127 Consolidated and Company statements of cash flows 128 Notes to the financial statements 211 Shareholder information Savills plc Report and Accounts 2019 Overview Strategic report Governance Financial statements Group highlights £1,930m 57% £83.6m Revenue Breadth of service Statutory profit (non-transactional) after tax (2018: £1,761m) (2018: 54%) (2018: £77.2m) 60.6p £143.4m £95.4m Statutory earnings Underlying profit* Operating cash per share generation (2018: 56.2p) (2018: £143.7m) (2018: £104.3m**) 7.4% 2.3bn 78.0p Underlying profit Property under Underlying earnings margin* management (sq. ft.) per share* (2018: 8.2%) (2018: 2.0bn) (2018: 77.8p) €20.8bn 6.0% 62% Assets under Statutory pre-tax Geographical management profit margin spread (% non-UK) (2018: €18.2bn) (2018: 6.2%) (2018: 62%) * Underlying profit is calculated by adjusting reported pre-tax profit for profit/loss on disposals, share-based payment adjustments, impairments, amortisation of acquired intangible assets (excluding software), restructuring costs and acquisition-related costs. Refer to Note 2.2 to the financial statements for further explanation of underlying profit measures. ** 2018 Cash generated from operations has been re-presented – see page 127 for details. 01 Savills plc Report and Accounts 2019 Savills at a glance Savills is a global real estate services provider listed on the London Stock Exchange. We have an international network of over 650 offices and associates and circa 39,000 staff throughout the Americas, the UK, Continental Europe, Asia Pacific, Africa and the Middle East, offering a broad range of specialist advisory, management and transactional services to clients all over the world. 650 + c. 39,000 offices staff Our services Transaction Property and Consultancy Investment Advisory Facilities Management Management The Transaction Management of Provision of a wide Investment Advisory business commercial, residential, range of professional management of stream comprises leisure and agricultural property services commercial and commercial, residential, property for owners. including valuation, residential property leisure and agricultural Provision of a building and housing portfolios for leasing, tenant comprehensive consultancy, institutional, corporate representation and range of services environmental or private investors, on investment advice on to occupiers of consultancy, landlord a pooled or segregated purchases and sales. property, ranging and tenant, rating, account basis. from strategic advice development, planning, through project strategic projects, management to all corporate services services relating to and research. a property. See page 18 See page 20 See page 21 See page 21 02 Savills plc Report and Accounts 2019 Overview Strategic report Governance Financial statements Locations North United Europe & the Asia America Kingdom Middle East Pacific Revenue Revenue Revenue Revenue £293.0m £727.5m £282.4m £627.1m (2018: £264.5m) (2018: £662.4m) (2018: £247.0m) (2018: £587.5m) Offices Offices Offices Offices 35 134 46 58 (2018: 31) (2018: 135) (2018: 52) (2018: 67) Employees Employees Employees Employees 825 6,388 2,032 29,912 (2018: 788) (2018: 5,955) (2018: 1,752) (2018: 28,486) 03 Savills plc Report and Accounts 2019 Chairman’s statement “ Savills delivered revenue growth and a resilient performance in 2019 in the face of some challenging market conditions.” £143.4m £83.6m Underlying profit Statutory profit after tax (2018: £143.7m) (2018: £77.2m) Nicholas Ferguson CBE, Chairman Results Our Transaction Advisory revenue grew by Occupier Service business (including tenant 2%, our Consultancy business revenue by representation brokerage); however the Against the backdrop of much reduced 15% and our Property Management revenue profitability of the US operation continues to transaction volumes in both the UK and by 17%. The UK Commercial Transaction be affected by the cost of investment in the Hong Kong, the Group’s revenue growth Advisory business delivered a resilient business, including further development of of 10% to £1.93bn (2018: £1.76bn) was performance outperforming the rest of the the support services platform. driven by a strong performance in our Less market which declined by 17% year-on-year Transactional business lines. Underlying as a result of the political uncertainty until Savills Investment Management delivered a profit for the year maintained at £143.4m the end of the year. record year with both new product launches (2018: £143.7m) as a result of this change in and significant capital deployed increasing business mix and the first time charge under Our UK Residential business continued to its Assets Under Management (‘AUM’) to IFRS 16 which increased Savills property perform well in challenging conditions for £17.7bn (2018: £16.4bn). This, together costs by £3.5m. The Group’s statutory profit much of the year which saw the UK market with the benefit of performance fees on before tax increased by 6% to £115.6m volume of transactions with values greater certain products, led to a 65% increase in (2018: £109.4m). than £1.0m declining by 2% year-on-year. underlying profits. Against this backdrop and buoyed by the Overview clear General Election result in December The reduction in transaction volumes in Asia Savills delivered revenue growth and a Savills UK Residential business performed Pacific and growth in our lower margin but resilient underlying profit in 2019 in the face well growing revenue by 6% year-on-year. In stable Property Management business, of challenging market conditions. Growth in Asia Pacific, a sharp decline in investor together with the first time impact of IFRS 16 our Less Transactional businesses and in confidence in Hong Kong and growth costs and the cost of our business development North America helped to offset the impact in Australia negatively affected both the activities in a number of markets resulted in of declines in transaction volumes in Asia Commercial and Residential transaction a reduction to Group underlying profit Pacific and the UK. Currency movements businesses, the impact of which was partially margin to 7.4% (2018: 8.2%). had a positive impact on the Group, mitigated by stronger performances in The impact of the aforementioned factors increasing revenue by £20.7m, underlying Japan, Singapore and the Regional on the Group underlying profit margin were profit by £1.4m and statutory profit before Hospitality advisory group. In the US, offset by lower acquisition-related charges, tax by £1.9m. we delivered significant growth in the higher profits on disposal of investments 04 Savills plc Report and Accounts 2019 Overview Strategic report Governance Financial statements and the absence of the one-off charge in help drive efficiencies. It is also worth noting 6 May 2020, be paid alongside the 2018 in relation to the impact of equalising that across the world, countries are at supplemental interim dividend of 15.0p Guaranteed Minimum Pension (‘GMP’) on varying stages in this evolution, and one of per share on 12 May 2020 to Shareholders the UK defined benefit pension plan. The our key focuses has been to foster internal on the register at 14 April 2020. statutory pre-tax profit margin declined forums for identifying and sharing promising slightly to 6.0% (2018: 6.2%). innovative opportunities across the People Savills network. I would like to express my thanks to all Business development our staff worldwide for their hard work, We have continued to invest in our own Savills strategy is to be a leading multi-sector commitment and continued focus on client technology platforms in order to both deliver property advisor in the key markets in which service, which enable the Group to deliver innovative solutions to our clients through we operate. Our global strategy is delivered these results. data analysis and insight, and to drive locally by our experts on the ground with internal efficiencies in how we deliver flexibility to adapt quickly to changes in Summary and Outlook those services. Improving efficiency in our circumstances and opportunities. They are Savills delivered a good performance in valuation teams has been a particular area supported by our global cross-border 2019 in some challenging market conditions.