Savills plc Results for the six months ended 30 June 2019 8 August 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 1 Introduction, Highlights & 2 3 Financial Review Management Progress Market Update 3
Introduction, Highlights and Market Update 4
Highlights Performance Overview Drivers Significant growth from less transactional businesses with revenue up 20%, profit up 26% Group Revenue £847.0m +16.4% ( cc +14.3%) Commercial Transaction revenue growth driven by strong North American performance Group UPBT £38.4m (up 31%) mitigating effect of reduced activity in Transactional markets in UK and Hong Kong -9.4% ( cc -12.3%) UK Residential Transactional revenue down Group UEPS 20.9p 1.5% against a market backdrop of considerably (2018 H1: 23.4p) lower sales volumes; UK Residential Lettings up 26% Net Debt £139.0m Property and Facilities Management revenue (2018 H1: £94.6m) up 27%, Consultancy revenue up 5% Dividend 4.95p Savills Investment Management revenue up +3.1% 20% as a result of fund performance and increased activity in Continental Europe. Period end AuM up 13% to € 18.3bn cc = constant currency 5
Savills Diversified Business Model Defensive, Scale Businesses Revenue by Business Cyclical, High-Margin Businesses Property Management – 39% Commercial Transactions – 32% Consultancy – 16% Residential Transactions – 9% Investment Management – 4% • High-return, but cyclical earnings 41% • Recurring revenue streams with less 59% exposure to transaction environment • 79:21 split Commercial vs. Residential (2018-H1: 43%) (2018-H1: 57%) • Strong Property Management business • 63:37 Commercial split Tenant rep/leasing vs. Capital markets • 2.12bn ft 2 under management • € 18.3bn AUM Combination of cyclical and less cyclical service lines 6
Broad Geographic Spread Over 39,000* employees in 70 countries Over 31,000 employees in 700 offices in more than 60 countries 1,726 Employees 6,323 43 Employees Offices 133 Offices 227 811 29,985 Employees 8 Employees Employees 32 Offices 63 Offices Offices Revenue Revenue Revenue Revenue 580 £131.7m £303.6m £298.4m £113.3m (16% of Total) Employees (36% of Total) (35% of Total) (13% of Total) *Staff numbers – Weighted average to 30 th June 2019 7
UK Market Dynamics Macro themes • Sluggish GDP growth of 0.3% in the last 3 months with Revenue uncertainty increasing £303.6m • Sterling devaluation continues (-4.65% v $ this year) as risk of no Growth deal Brexit increases 8% YOY • Structural change continues in the Retail markets with high numbers of CVA ’ s Market statistics • UK Commercial property investment volumes down 32% year on year (43% in Central London, the weakest first half since 2009) • Office take up outside London experienced a record first half across top 10 regional cities (3.19m sq. ft), with London office markets resilient • Logistics take up in H1 19 stands at 15.4 million sq. ft, 28% above long term average • UK Housing transactions volumes down 4.5% in H1 but mainstream national prices increase 1.2% (-4.4% in London)
Asia Pacific Asia Pacific Investment Volumes Market Dynamics Q1 Q2 Q3 Q4 700 Macro themes 600 Revenue 500 £billions • Caution increasing in a number of key markets, £298.4m particularly Hong Kong and China with trade tensions, 400 political unrest and slower GDP growth (6.3% H1 China) Growth 300 • Commercial confidence is increasing in Australia following 19% YOY 200 the General Election • GDP growth is increasing in Japan, with continued political 100 stability 0 • Cooling measures have had an impact on the residential 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 market in Singapore, with market slowdowns in Australia and Shanghai Source: Real Capital Analytics Market statistics • Hong Kong office investment volumes down 34% in H1 over the previous year, with Retail volumes down 52% • Overall investment volumes across China increased by 17% over H1, but outbound capital flows remained subdued • Overall Leasing volumes reduced by c.20%, but with rental growth in a number of core markets • Total investment activity across Asia Pacific in Q2 was up 1.3% - Offices, 11.5% - Industrial and down 18.5% - Retail Source: Savills 9
North America US Commercial Investment Volumes – Major Metros Market Dynamics Market Dynamics $200 Q1 Q2 Q3 Q4 $150 Macro themes Revenue • Real GDP growth of 2.1% for Q2 (3.5% Q2 2018) $100 £131.7m • Slowing domestic growth and recent interest rate cut, seen as Growth $50 an insurance measure to maintain economic momentum 31% YOY $0 • Unemployment rate reduced to 3.6% (3.9% Q2 2018) with a 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 slowdown in corporate earnings beginning to emerge $bn *Source: Real Capital Analytics, Savills, Includes all Commercial Property Types Market statistics • Office Leasing volumes remain strong in Q2, with 65 million US Annual Commercial Office Leasing Volume 350 sq. ft taken up, 8.4% up on Q1 Total volume (sq ft; million) 300 • Activity focused on New York, Los Angeles and Washington, 250 but with increases in other top tier markets 200 • Take up growth fueled by growth sectors including Technology, Financial Services and Co-Working, with overall 150 US availability down 60 bps, a 3.9% increase year on year 100 • Commercial office investment volumes up 15.2% across 50 major metros with particular emphasis on New York and San 0 Francisco 2014 2015 2016 2017 2018 H1 2019 Source: Savills, Includes New Leases and Renewals
Europe & Middle East Market Dynamics Macro themes • GDP growth slowing substantially in Germany and Italy, also Revenue affecting France and the Netherlands £113.3m • Continued regional political and global economic uncertainty Growth affecting UAE 17% YOY • Investor demand strong, but polarised towards less risky assets and volumes affected by lack of liquidity Market statistics • European Investment volumes down 15% YOY in H1 2019 • Major country investment down in largest markets, but sharply up in Spain (53%), Sweden (71%) and Italy (46%) • Paris eclipses London as the most popular destination for Cross Border Investment in H1 ( € 6.5 bn, London: € 5.6 bn) • Office Leasing volumes up 3%, but with significant increases in Madrid (+25%) and Brussels (+20%) • Middle East: Stable office market dynamics and increased activity in Saudi Arabia. Over supply an issue in some markets
Savills Investment Management Historical Fundraising Market Dynamics 140 45 Number of funds Aggregate Capital Raised USD bn 40 120 • Brexit and European geopolitical concerns impacting 35 on investment activity and equity raising Revenue 100 30 Capital Raised (USD bn) Number of funds £32.5m 80 25 • Growth Concerns around general pricing across all asset 20 60 classes – late cycle 20% YOY 15 40 10 • Increasing level of regulatory and risk compliance 20 5 0 0 • Trend to consolidation of small investment managers Percentage AUM outperforming respective benchmarks figures to Q1 2019 • Managers fees continue to be under the spotlight Last 5 yrs Last 3 yrs 100% 89% • 86% Overall equity raised by Managers in H1 significantly 90% lower than H1 18 in European markets 80% 65% 70% 60% 50% • Weight of money targeting the sector remains above 40% average for real estate given the need for income 30% 20% 10% 0% Target Actual Actual
Financial Review 13
Summary Underlying Result 6 months ended 30 June (£m) 2019 2018 % chg Revenue 847.0 727.8 +16.4% Underlying PBT 38.4 42.4 (9.4)% Underlying PBT margin 4.5% 5.8% (1.3)% pts Underlying basic earnings per share 20.9p 23.4p (10.7)% Dividend per share 4.95p 4.80p +3.1% Net debt 139.0 94.6 +46.9% Net assets 461.5 432.3 +6.8% 14
Revenue and underlying PBT by business Transaction Property Investment Advisory Management Consultancy Management £m +11% 400 +27% 346.3 335.5 350 2018 311.3 300 263.7 2019 250 +5% Revenue 200 132.7 150 125.8 +20% 100 32.5 27.0 50 0 25 (50)% Combined revenue and UPBT growth of 20% and 26% respectively 19.7 20 +27% 16.2 +6% 15 12.8 UPBT 11.5 10.8 9.9 10 +93% The figures in these charts 5.6 exclude costs of £4.8m in 5 2019-H1 (2018-H1 £3.8m) not 2.9 allocated to the operating activities of the group ’ s business segments 0 Margin 6.3% 2.9% 4.9% 4.8% 8.6% 8.7% 10.7% 17.2% 15
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