Savills plc Annual Report & Accounts 2020 Savills plc | Annual Report and Accounts 2020 Our vision To be the property partner of choice for private, institutional and corporate clients seeking to acquire, manage, lease, develop or realise the value of prime residential and commercial property in the world’s key locations. Culture and values Savills has a strong and well embedded culture, founded on an entrepreneurial approach and underpinned by our values and operational standards. We recognise our responsibility as a global corporate citizen and we are committed to doing the right thing in the right way. OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 01 Our values Pride in Take an Help our people Always act everything entrepreneurial fulfil their true with integrity we do approach to potential business Group highlights Revenue Breadth of service Statutory profit Statutory earnings (non-transactional) after tax per share £1,741m 62% £68.0m 49.0p (2019: £1,913m*) (2019: 57%) (2019: £83.6m) (2019: 60.6p) Underlying profit** Operating cash Underlying profit Property under generation margin** management (sq. ft.) £96.6m £248.6m 5.6% 2.3bn (2019: £143.4m) (2019: £95.4m) (2019: 7.5%*) (2019: 2.3bn) Underlying earnings Assets under Statutory pre-tax Geographical per share** management profit margin spread (% non-UK) 56.8p €21.1bn 4.8% 59% (2019: 78.0p) (2019: €20.8bn) (2019: 6.0%) (2019: 62%) * See Note 2.29 for details on the prior year restatement of revenue. ** Underlying profit is calculated by adjusting reported pre-tax profit for profit/loss on disposals, share-based payment adjustments, amortisation of acquired intangible assets (excluding software), significant restructuring costs, acquisition- related costs and other items that are considered exceptional by size or nature. Refer to Note 2.3 to the financial statements for further explanation of underlying profit measures. Overview Strategic Report Governance Financial Statements 01 Group highlights 04 Chairman’s statement 62 Corporate Governance 122 Independent Auditors’ 02 Savills at a glance 08 Our business explained Statement Report 10 Market insights 62 Chairman’s introduction 132 Consolidated income statement 16 Key Performance 64 Board of Directors Indicators 68 Group Executive Board 133 Consolidated statement of comprehensive 18 Chief Executive’s review 72 Corporate Governance income 26 Chief Financial Officer’s 83 Audit, Risk and Internal Consolidated and review Control 134 Company statements of 30 Principal and emerging 84 Audit Committee financial position risks and uncertainties Report Consolidated statement facing the business 135 92 Directors’ Remuneration of changes in equity 39 Viability statement Report 136 Company statement of 40 Stakeholder 117 Directors’ Report changes in equity engagement with s.172 Statement of Directors’ 121 137 Consolidated and 45 Responsible business responsibilities Company statements of 61 Non-financial in respect of the cash flows information statement financial statements 138 Notes to the financial 2020 See more online at statements https://ir.savills.com 215 Shareholder information 02 Savills plc | Annual Report and Accounts 2020 Savills at a glance Offices and associates 600+ Staff Savills is a c.39,000 global real estate services provider listed on the London Stock Exchange. OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 03 Our services Savills is a global real estate services provider listed on the London Stock Exchange. We have an international network of over 600 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. Transaction Investment Property and Consultancy Advisory Management Facilities Provision of a Management The Transaction Investment wide range of Advisory business management Management professional property stream comprises of commercial of commercial, services including commercial, and residential residential, leisure and valuation, project residential, leisure and property portfolios agricultural property management and agricultural leasing, for institutional, for owners. Provision housing consultancy, tenant representation corporate or private of a comprehensive environmental and investment investors, on a range of services to consultancy, landlord advice on purchases pooled or segregated occupiers of property, and tenant, rating, and sales. account basis. ranging from strategic development, advice through planning, strategic See pages 21 – 23 See page 25 project management projects, corporate to all services relating services and research. to a property. See pages 24 – 25 See pages 23 – 24 Locations North United Europe and the Asia Pacific America Kingdom Middle East 12% 41% 14% 33% of revenue of revenue of revenue of revenue Revenue Revenue Revenue Revenue £213.4m £710.7m £240.7m £575.7m (2019: £293.0m) (2019: £727.5m) (2019: £265.8m*) (2019: £627.1m) Offices Offices Offices Offices 36 129 48 58 (2019: 35) (2019: 134) (2019: 46) (2019: 58) Employees Employees Employees Employees 833 6,939 2,135 29,160 (2019: 825) (2019: 6,388) (2019: 2,032) (2019: 29,912) * See Note 2.29 for details on the prior year restatement of revenue. 04 Savills plc | Annual Report and Accounts 2020 Chairman’s statement Savills performed well in very challenging conditions, by maximising cash flow and focusing on assisting our clients around the globe. Underlying profit £96.6m (2019: £143.4m) Underlying profit margin 5.6% (2019: 7.5%) OVERVIEW STRATEGIC REPORT GOVERNANCE FINANCIAL STATEMENTS 05 Results Our UK Residential business The impact of the Against the backdrop of had an extraordinary year; aforementioned factors on the significantly reduced leasing having lost the spring selling Group underlying profit margin and capital transaction volumes season in the first lockdown, were partially offset by lower in all major real estate markets, its recovery was strong and acquisition-related charges the Group’s revenue declined by sustained as buyers sought and restructuring costs and 9% to £1.74bn (2019: £1.91bn*) greater space and amenities. decreased amortisation of with reductions in Transaction Revenues grew by 10% year- intangible assets acquired on Advisory revenues mitigated on-year driven in large part business combinations. The by both share gains in our by the strength of regional statutory pre-tax profit margin major markets and a resilient country markets. In Asia declined to 4.8% (2019: 6.0%). revenue performance from our Pacific, the pandemic closed a number of key markets early COVID-19 impact less Transactional service lines. and response Underlying profit for the year in the year and subsequent Savills has shown considerable declined by 33% to £96.6m actions saw recovery stutter resilience in a year in which the (2019: £143.4m). The Group’s in a number of markets before sector faced many challenges, statutory profit before tax improving towards the year end. particularly to our transactional decreased by 28% to £83.2m Commercial and Residential advisory businesses worldwide. (2019: £115.6m). Transaction Advisory revenues both declined by 25% year-on- The cycle of lockdowns and Overview year in the Asia Pacific region. other measures, such as travel Savills delivered a resilient In both Continental Europe and restrictions, from Q1 2020 had revenue and profit performance the Middle East (‘CEME’) and a significant global impact on in 2020 in the face of North America the decline in the ability and preparedness of challenging market conditions. transaction volumes resulted both investors and occupiers The relative stability of our in losses for the year. In CEME, of real estate to transact. As a less Transactional businesses, Commercial Transaction consequence, in major markets, particularly Property revenues declined by 23% both investment and leasing Management, helped to offset year-on-year. In North America, volumes contracted markedly the impact of material COVID-19 where we are almost wholly compared with 2019 and related declines in transaction focused on corporate occupier previous periods. transactions, we delivered a volumes across the world. The Group was quick to adopt resilient performance (revenue Currency movements had a a number of operational and decline of 30%) against a marginal effect on the Group, financial initiatives to minimise market decline in transaction decreasing revenue by £4.3m the impact of the pandemic volumes of c. 40%. and increasing underlying profit on the business as a whole. and statutory profit before Savills Investment Management Savills strategy was to minimise taxation by £0.1m. had a stronger year than discretionary expenditure while Overall, our Transaction originally anticipated after maintaining our staffing levels Advisory revenue declined by a “supernormal” year of to ensure seamless service to 19%, our Consultancy business performance fees in 2019. A clients around the world. In revenue declined by 5% and our number of important product addition the Board suspended Property Management revenue launches and significant capital distributions to Shareholders grew by 2%. The UK Commercial deployed increased Assets pending greater visibility of Transaction Advisory business Under Management (‘AUM’) future market recovery. The delivered a resilient performance to £19.0bn (2019: £17.7bn). consequence, particularly of retaining our staff, has been with a