Savills plc Results for the year ended 31 December 2018
14 March 2019 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
Introduction, Highlights & Key Priorities & Financial Review 1 Business Development 2 3 Summary & Outlook
3 Introduction, Highlights & Business Development
4 Highlights
Performance Overview Drivers Transaction advisory revenues up 9% despite Group Revenue £1,761.4m challenging market conditions +10.1% (cc 11.4%) Strong growth in less transactional services - Group UPBT £143.7m Property Management revenue up 14%, Consultancy revenue up 8% +2.3% (cc 3.2%) Growth of 35% from Europe and Middle East, Group UEPS 77.8p both organic growth and acquisition, including +2.6% Aguirre Newman (Spain) and Cluttons (Middle East) Net Cash £73.9m (2017: £98.6m) North America delivered significant growth with revenue up 18% and underlying profit up Dividend 31.2p 64% +3.3% SIM raised £2.4bn in new funds, with AUM up 12% to £16.4bn cc = constant currency
5 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 ‘Global Real Estate Adviser of the Year’ – ‘Deal of the Year’, ‘Residential Team of the EG Awards 2018 Year’ – RICS Hong Kong Awards 2018 . Employer of choice and strong talent retention . Conservative financial structure . Provide strong returns to shareholders
…. An entrepreneurial spirit and ambition for continued growth
‘The Times Graduate Employer of Choice ‘No.1 Real Estate Superbrand’ – for Property’ – 12th year Superbrands 2018
6 Management Changes: Succession Delivered in 2018
Group CEO – Mark Ridley
UK Asia Pacific Group CEO UK & EMEA – James Sparrow CEO Korea – Crystal Lee Managing Director UK – Richard Rees CEO Singapore – Marcus Loo
North America: India CEO – Mitch Rudin CEO – Anurag Mathur COO – Matthew Morgan CFO – Gerald Prager
Europe & Middle East CEO Middle East – Steve Morgan CEO Sweden – Niklas Sammuelson CEO Spain – Jaime Pascual-Sanchiz
Strengthening the bench
7 Ten Year Revenues
Total Revenue £m £1,761.4m
2,000 Percentage of Revenue 1,800 1,600 Commercial Transactions – 36% 1,400 46% 46% Residential47% Transactions – 10% 1,200 Total Revenue 47% £560.7m 46% 1,000 48% 800 46% 40% Percentage of Revenue 600 38% 40% 38% 35% 400 Property Management – 33%
200 65% 60% 62% 62% 60% 54% 52% 54% 53% 54% Consultancy – 17% - Investment Management – 4% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Transactional "Less-Transactional"
8 Broad Geographic Spread Over 36,000* employees in 71 countries
788 5,955 1,752 28,486 Employees Employees Employees Employees 31 135 52 67 Offices Offices Offices Offices
Revenue Revenue Revenue Revenue £264.5m580 £662.4m £247.0m £587.5m (15%Employees of Total) (38% of Total) (14% of Total) (33% of Total)
*Staff numbers – weighted average for 2018
9 UK
Business Development Focus: Market Dynamics Growth of Property Management & Consultancy, strengthening selective transactional teams Macro themes Revenue • GDP growth of 1.4% but uncertainty stalling activity in £662.4m some sectors Growth Property Management • Comparative risk and pricing (including sterling • Acq Broadgate Estates, 3rd party portfolio (21m sq. ft) devaluation) attractive to non-domestic investors 6% YOY
Consultancy Market statistics • Acq Porta Planning LLP • Commercial property investment volumes down (-5.3%), but London remains the World’s no.1 destination for cross • Acq CMS (place making) border investment • Opened new Newcastle office • All property commercial prime yields eased 25 bps, whilst UK office take up reached its second highest level ever, Residential Sales & Lettings with national average vacancy rates of 8.7% • Acq J P Case (Manchester) • Logistics - take up rose by 45% year on year with new records being set in many markets including the North • Acq Martel Maides (Guernsey) West, Yorkshire and the East Midlands • Acq The Currell Group (East London)
• UK housing transaction volumes, down -2.5% but UK house prices up 0.5%, whilst PCL down 4.1% Transactional • New Edinburgh Office Leasing Team • New Debt Advisory Team • Strengthened National Retail Leasing
10 Asia Pacific
Business Development Focus: Market Dynamics Continued organic growth across the region with Macro themes Revenue selected office openings in China and India • A generally positive year ended on a more cautious note, £587.5m with the US / China Trade War the biggest threat Growth Hong Kong 4% YOY • Strengthened Property Management & Capital Markets • Slowing economy in China and greater capital controls. businesses China
Market statistics • New offices in Wuhan, Changsha and Hainan, focusing on Property Management, Commercial Leasing & Retail • Commercial property investment up 1.3% - a record year and China remained the largest market, despite slowest • Strengthened Leasing teams in Guangzhou, Chengdu & growth since 2014 Hangzhou Australia
• Strong yield compression across the markets (avg -1.5%) • Significant national team lifts in Logistics (NSW & Vic), with continued demand for prime Office Leasing & Sales (NSW) & Property Management South East Asia
• Total investment activity down slightly on 2018, with • Acquired Valuations teams in Singapore & Thailand mixed volumes, eg Tokyo (-10%), HK (+32%), Seoul India (+58%) • Opened 3 new offices in New Delhi, Mumbai & Bangalore, with 2 more planned in 2019 • Strong rental growth in office markets, HK (7.8% pa), • Service lines established, covering Tenant Rep, Capital Tokyo (4.9% pa) & Singapore (9.5%) whilst China saw Markets, Project Management, Valuations, Leasing & ‘grade A’ supply decrease by 47% in first tier cities Residential Sales
11 North America
Business Development Focus: Market Dynamics Organic growth of occupier focused business with diversification on sector & services Macro themes Revenue • Real GDP growth of 2.9% but rising interest rates, economic protectionism, and political uncertainty create £264.5m Central Management headwinds Growth • New team with 6 key appointments and rebranding to Savills – H1 2019 18% YOY • Unemployment rate ended the year near post-war low of Tenant Representation 3.9%, strong corporate growth • Growth of business in Minneapolis, LA, Dallas, Toronto & Columbus Market statistics Logistics • Commercial office investment above historical averages • Growth of National Logistics capability (+13.5%) yet well below 2007 peak (-66%) Project Management & Consultancy • Growth of Workplace & Project Management nationally • Leasing volume up (+14.0%) across overall US office Capital Markets market, with particular strength in New York, San Francisco & Washington DC • Integration of recently acquired New York Capital Markets business Technology • Office rents continue to rise (+2.9%) in top-tier markets, however, leasing concessions rising • Continued investment in award winning technology (eg Knowledge Cubed)
• Average vacancy rates reduced to 9.5% but robust development pipeline being delivered in many primary markets
12 Europe & Middle East
Business Development Focus: Continued growth in core European markets and Market Dynamics integration of Middle East business Macro themes Revenue Spain & Portugal • Investor demand strong, but challenges of liquidity and pricing £247.0m • Integration of Aguirre Newman business, office HQ relocation in Madrid and expansion of Resi business • Slowing economic growth in core Europe particularly Growth France Germany & Italy 35% YOY • Increased political & economic uncertainty in UAE • Strengthened Office Leasing in Paris & Lyon Sweden Market statistics • New CEO & new Capital Markets team in Stockholm • European investment volumes down -7.5%, primarily due Italy to lack of liquidity • New High Street Retail Agency team • Major country investment down -15%, but Poland +16%, Poland Ireland +35%, Portugal +80% as investors seek smaller markets • Strengthened Logistics business in Leasing & Capital Markets • Office leasing volumes down 2% as availability tightens (average European vacancy rate 5.7%) Netherlands • Prime CBD office rents in Europe grew 3.4% on average, • New office opening in Utrecht secondary 5.5% on average Middle East • UAE capital and rental values remain under downward • Integration of Cluttons multi-sector business across 5 Gulf pressure Countries
13 Savills Investment Management (SIM)
Market Dynamics Business Development Focus: Growth of AUM and launch of products focused on • Brexit & European Geo-Political concerns impacted on equity raising and investment activity UK, Europe & Asia Pacific markets
• Concerns around general pricing across all asset • AUM increased by 12% to £16.4bn (£14.6bn in 2017) classes – late cycle • Transacted over £3.8bn (£2.8bn acquisitions and £1bn disposals) • Increasing level of regulatory compliance Revenue • Continued strong Investment performance £66.7m • Acquired 25% of DRC, leading specialist Debt Fund • Continued consolidation of smaller investment Manager managers Growth • Raised £2.4bn of new equity across 22 products 0% YOY • Successful disposition Japan I; significant • Weight of capital targeting property sector remains outperformance; Japan II strong first close well above average • Integrated Zaphir Asset Management and grew AUM in Spain • Brexit worries reduce activity in final quarter of 2018 • Search for new Global CEO of SIM approaching particularly for Retail funds conclusion
• Real Estate debt and alternatives increasingly attractive asset classes
14 Financial Review
15 Summary Underlying Result
Year ended 31 December (£m) 2018 2017 % chg
Revenue 1,761.4 1,600.0 +10.1%
Underlying PBT 143.7 140.5 +2.3%
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 73.9 98.6 (25.1)%
Net assets 505.0 441.7 14.3%
16 Dividends
Year ended 31 December 2018 2017 % 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) 42.7 41.2 3.6%
17 Revenue and Underlying PBT by Region
UK Asia Pacific North America E&ME £m +6% 662.4 700 626.0 +4% 587.5 2017 600 565.7 500 2018 400 +18% +35% Revenue 300 264.5 224.8 247.0 182.4 200 100 - 0% 90 80 76.5 76.8 70 (1)% 60 55.6 54.9 50 UPBT 40 30 +64% +15% The figures in these charts exclude revenues of £0.0m 20 12.8 11.2 12.9 (2017: £1.1m) and other net 7.8 10 costs of £13.7m (2017: £10.6m) not allocated to the operating 0 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 Revenue and Underlying PBT by Service Line
Transaction Property Investment Advisory Management Consultancy Management £m +9% 900 813.5 800 746.2 +14% 2017 700 586.8 600 513.1 2018 500 +8% Revenue 400 294.4 300 273.1 0% 200 100 66.5 66.7 0 0% 90 81.5 81.1 80 Combined revenue and UPBT growth of 11% and 10% respectively 70 60 50 UPBT +27% +7% 40 32.2 31.0 33.1 25.3 (17)% The figures in these charts 30 exclude revenues of £0.0m 20 13.3 (2017: £1.1m) and other net 11.0 costs of £13.7m (2017: £10.6m) 10 not allocated to the operating activities of the group’s 0 business segments
Margin 10.9% 10.0% 4.9% 5.5% 11.4% 11.2% 20.0% 16.5%
19 Cashflow Performance
Cash generation from operations of £147.8m 300 (2017:£145.1m) 23.9 Acquisition spend £87.0m (2017: £117.1m) 250 143.7 16.4
12.3 200 £m 87.0 150 22.6 5.6 25.1 100 41.6 1.1 9.8
50 98.6 34.4 73.9
0 Net cash at 31- UPBT Non-cash itemsWorking capital Cash flows Acquisition Capex Purchase of Proceeds from Dividends paid Interest Tax Foreign Net cash at 31- Dec-2017 from spend - current EBT shares issue of shares exchange Dec-2018 investments & deferred
20 Commercial Transaction Advisory
2018 Revenue £636.1m (+11%) 2018 UPBT £55.2m (-2%) £m £m 300 25 264.5 21.2 250 20 200 15.7 160.1 15 12.8 150 113.1 98.4 10 100 5.5 5 50
- - 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 Residential Transaction Advisory
2018 Revenue £177.4m (+2%) 2018 UPBT £25.9m (+3%)
£m £m 140 131.5 20 17.6 18 120 16 100 14 80 12 10 8.3 60 45.9 8 40 6 4 20 2 0 - Asia Pacific UK Asia Pacific 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 Property Management
2018 Revenue £586.8m (+14%) 2018 UPBT £32.2m (+27%) £m £m 350 327.0 25 300 19.2 20 250 190.9 200 15 13.0
150 10 100 68.9 5 50 - - - 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 Consultancy
2018 Revenue £294.4m (+8%) 2018 UPBT £33.1m (+7%) £m £m 250 30 215.9 25.8 200 25 20 150 15 100 10 45.1 4.3 50 33.4 5 3.0
0 - 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 Investment Management
2018 Revenue £66.7m (2017: £66.5m) 2018 UPBT £11.0m (-17%) £m £m 35 5.0 4.7 31.6 4.4 4.5 30 25.7 4.0 25 3.5 20 3.0 2.5 1.9 15 2.0 9.4 10 1.5 1.0 5 0.5 - - 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 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 Portfolio
Total Realised Net Percentage Company Business Investment Notes to date Investment Ownership Cost
“Digital Hybrid” Grown to become 8th largest UK Residential Agent £16.0m £3.6m £12.4m 21.3%1 Estate Agent, clear no.2 to (UK) PurpleBricks amongst all hybrids.
Digitally enabled Tenant Autonomous start up within Savills. Rep for co-working / Launched in 8 countries. 2018 £1.0m N/A £1.0m 100%
serviced offices revenue > £1.2m 100% growth in yr (Global) 2.
AI approach to real Stake taken in consideration for use estate valuation N/A N/A N/A 5% of Savills data and market know how (UK) to prove models.
The “Smart-City” digital Largest most accurate City model in platform £6m N/A £6m 33%2 existence. Licensed by 18/32 London (UK) Boroughs. Interest from Global Cities.
Tenant focused residential block Currently in use in 54 Condos (c. £250k N/A £250k 19.7% management tool 26,000 tenants). (Singapore)
1 Ordinary and preference shares 2 Ordinary shares and redeemable preference shares 27 Key Priorities & Summary & Outlook
28 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 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 Connecting people and property since 1855