Final Results
Savills PLC
02 March 2004
FOR IMMEDIATE RELEASE TUESDAY 2 MARCH 2004
OUTSTANDING PROFITS FROM SAVILLS
Savills plc, the international property adviser, today announced results for the
year ended 31 December 2003.
• Pre-tax profit of £35.3m (2002 - £20.4m)
• Turnover up 7% to £301.7m (2002 - £282.3m)
• Group operating profit up 25% to £36.5m (2002 - £29.2m)
• Group operating profit margins, excluding sale of trading properties,
were 11.7% (2002 - 10.4%)
• Basic earnings per share 39.2p (2002 - 15.1p) and basic earnings per
share excluding sale of trading properties, impairment and amortisation of
goodwill 39.8p (2002 - 31.3p)
• Final dividend up 47% to 10.0p per share (2002 - 6.8p) making a total
for the year of 13.6p per share (2002 - 10.2p)
Richard Jewson, Chairman of Savills plc, commented:
'This has been an outstanding year in the life of the Company and I am delighted
to report an excellent set of results following strong performances from all our
operating businesses. This was achieved despite a difficult start to the year,
plagued by the war in Iraq, which affected international financial markets. This
is testament to the work and commitment of our dedicated staff.
Confidence in investment markets remains strong as does activity in the prime
residential market in the UK. If economies throughout the world continue to
recover as generally expected, we believe that the Company is well placed to
take advantage of the opportunities that will emerge.'
***Chairman's Statement and Review of Operations
Preliminary Announcement of Results to Follow***
Savills plc. Registered in England No. 2122174. Registered Office 20 Grosvenor
Hill, Berkeley Square, London W1K 3HQ
For further information, contact:
Savills 020 7409 9923
Aubrey Adams, Group Chief Executive
Robert McKellar, Finance Director
Grandfield 020 7417 4170
Marc Popiolek
Geoff Callow
CHAIRMAN'S STATEMENT
RESULTS
This has been an outstanding year in the life of the Company and I am delighted
to report an excellent set of results following strong performances from all our
operating businesses. This was achieved despite a difficult start to the year,
plagued by the war in Iraq, which affected international financial markets.
While profits in the second half have historically exceeded the first half, this
was exceptionally pronounced this year, with year end pre-tax profit of £35.3m
(2002 - £20.4m) exceeding original expectation. 2003 turnover increased by 7% to
£301.7m (2002 - £282.3m). Group operating profit was £36.5m (2002 - £29.2m).
Group operating profit margins, excluding sale of trading properties were 11.7%
(2002 - 10.4%). This is testament to the work and commitment of our dedicated
staff.
A reduced effective tax rate of 35.2% (2002 - 49.6%), together with increased
profit meant that basic earnings per share has increased substantially to 39.2p
(2002 - 15.1p). Shareholders' funds increased to £97.1m (2002 - £88.5m) and cash
balances to £71.9m (2002 - £53.4m).
DIVIDEND
The Board is recommending a final dividend of 10.0p per share to those
shareholders on the register on 13 April 2004, payable on 12 May 2004, making a
total for the year of 13.6p (2002 - 10.2p). Whilst a step change in quantum the
increase is in line with our progressive dividend policy, which remains
unchanged and reflects long-term confidence in the business.
HIGHLIGHTS
In the UK we have continued to broaden the range of services we are able to
offer our clients by opening a new office in Esher and a Financial Services
office in Canary Wharf and by the targeted recruitment of new staff with
particular expertise. Further office openings are planned in 2004. The
investment markets have been particularly strong, and our agency teams have been
active and successful. We are expanding our existing Fund Management capability
with a view to increasing funds under management materially and expect to launch
a number of products in 2004. We anticipate that the Government's commitment to
Real Estate Investment Trusts will create opportunities for us as well as
raising awareness of property as an important investment class.
Research, which we published during the year, illustrated the economic
advantages of mixed-use development, which is so clearly attractive to policy
makers. Savills, with our expertise in residential as well as commercial
development, is uniquely qualified to give comprehensive advice to land owners
and developers. This business will continue to grow with a newly formed
Mixed-Use team.
We have strengthened our strategic alliance with Trammell Crow Company who have
now increased their majority holding in Trammell Crow Savills (TCS), a real
estate outsourcing services business including facilities management. We have
written off our remaining investment. Real estate outsourcing services is
Trammell Crow Company's core business and accordingly TCS is being branded as
'Trammell Crow Company'. Through our alliance we are able to offer a full range
of services in Europe to their USA clients, and vice versa.
In Europe we purchased the remaining 47% of FPDSavills Immobilien Beteiligungs-
GmbH, increased our holding in our Dutch operation from 40% to 61% and continued
to build the scale of our offices in financial centres throughout Europe. We
remain committed to growth by recruitment.
In Asia and Australia we continue to make progress, and are particularly pleased
that our Chinese offices are now profitable.
At the Annual General Meeting (AGM) held on 7 May 2003 shareholders gave
authority for a limited purchase of Savills shares for cancellation of up to 5%
of the issued share capital. During the year ended 31 December 2003, 2,130,000
shares were repurchased for cancellation under this programme. As announced on
30 December 2003, the Company undertook an irrevocable, non-discretionary
programme to re-purchase its own shares during the close period. During this
period the Company bought 100,000 shares for cancellation. The Company may make
further purchases of shares under this authority in the open period up to the
AGM to be held on 5 May 2004.
BOARD AND STAFF
As announced at the time of our Trading Update in June 2003, David Wong, Chief
Executive of FPDSavills Asia Pacific Limited, retired from the Company at the
end of 2003 and accordingly resigned as a Director of Savills plc on 30 June
2003. I would like to thank him for his contribution to the Group.
Savills has a committed and talented staff whose ability to add value to our
clients is the basis for the excellent results. Several key new appointments
have been made, broadening and strengthening the range of the services that we
offer to clients. Our reward system enables us to attract and retain outstanding
people and has proved a real incentive, whilst providing shareholders with
increased earnings and dividends.
OUTLOOK
Confidence in investment markets remains strong, as does activity in the prime
residential market in the UK. If economies throughout the world continue to
recover as generally expected, we believe that the Company is well placed to
take advantage of the opportunities that will emerge.
Richard Jewson, Chairman
Group Chief Executive's
Review of Operations
2003 ended on a high note with pre-tax profits of £35.3m ahead of expectations.
This was an excellent result given the difficulties faced at the beginning of
the year, when financial markets were unusually influenced by external events,
in particular the war in Iraq and SARS. Residential markets struggled at the
start of the year but performed exceptionally well with increased demand and
activity towards the end of 2003. The commercial agency markets generally
remained strong and, despite a slow start, increased investor confidence meant
that the investment market in particular ended the year well.
The Savills European offices enjoyed another profitable year's trading. During
the year we increased the holding in our Dutch operation from 40% to 61%, giving
us a majority stake. We also strengthened our presence in Italy and Berlin and
new strategic associations were established in Lisbon, Stockholm, Dublin and
Belfast, so as to provide our clients with a seamless service in these European
markets. In the UK we opened new offices in Esher and Canary Wharf and four
other offices will be opened in the coming months.
On 22 January 2004 we announced the strengthening of the Strategic Alliance
Agreement with our strategic partner in the US, Trammell Crow Company.
We remain committed to developing and expanding our business organically both in
the UK and Internationally. This is achieved by recruiting new staff, investing
in new areas of business and where appropriate opening new offices.
Transactional Advice
The Transactional Advice business stream comprises commercial, residential,
agricultural agency and investment advice on purchases and sales. During the
year turnover was £119.4m (2002 - £124.1m), representing 40% of our total
turnover, generating profit before interest and tax of £18.0m (2002 - £20.0m).
Commercial Investment
The first quarter of 2003 was difficult with investor confidence affected by the
then impending war with Iraq and volatile financial markets. During the summer,
driven by improving financial prospects, trading conditions improved and
property was strongly in demand from private individuals and Funds, both UK and
foreign, all attracted by the relatively high secure yields offered by
commercial property investments.
Notable European investment transactions during the year included: the purchase
of the Bodio Centre in Milan on behalf of DEGI for €211m, the purchase of a
major shopping centre in Essen in Germany for €115.5m on behalf of Credit Suisse
Euroreal, the purchase of a very large retail and office centre in Antwerp,
Belgium, again for Credit Suisse Euroreal, and the sale of 280, Castellana in
Madrid on behalf of Lar Grosvenor for €75m.
Our London and Manchester Investment teams were involved with a number of other
significant transactions including:
• the purchase of Heywood Distribution Park, Manchester on behalf of
Moorfield Estates for £120m;
• the acquisition by Hammerson Plc of Drakehouse Retail Park, Sheffield at
a price of £60m; and
• providing investment valuation advice on the acquisition of Nassica
Retail and Leisure Park, Madrid for €120m for Pillar European Retail
Warehouse Fund.
The West End Agency team achieved a creditable performance in difficult market
conditions. Income was generated primarily in the occupier consultancy business
where activity remained stable. Key transactions included advising CIT Group on
the purchase from Mapeley of the 100,000 sq ft Abbey House, Baker Street for
redevelopment.
Other significant deals included:
• the sale and leaseback of the LDV headquarters at Drews Lane, Washwood
Heath, Birmingham for AXA SunLife Plc c/o AXA Real Estate in partnership
with LDV Limited. The site comprises 25.58 hectares (63.2 acres) of land
and 125,401.4 sq m (1,349,854 sq ft) of buildings;
• the letting of 43,000 sq ft at 20 Soho Square, a new development by IVG
Asticus Real Estate, the largest letting in Soho in 2003;
• the letting of 70,000 sq ft at Woolgate Exchange, 25 Basinghall Street,
EC2 on behalf of the German Bank, West LB; and
• the letting of 90,000 sq ft at 1 St John's Lane, EC1 for Standard Life and
Bee Bee Developments.
The transactional markets in Hong Kong were difficult in the first six months of
the year but rebounded strongly. The effect of SARS and the war in Iraq affected
the office rental market where marked decreases in demand were experienced and
average vacancy rates peaked at 15%. In Shanghai transactional income increased
by 45% and the Chinese business has begun to make a positive contribution.
Residential Agency
The residential market experienced a slow start to 2003 with concerns over the
economy and job cuts in the City. In London prime property was especially badly
affected, with sales turnover down as much as 50% at the start of the year.
However, from the summer, there was a turnaround in the prime residential
markets dominated by a lack of supply; although the prime London market saw
price falls of about 2.5%, the country residential markets held up well with
price increases in most parts. In total about 2,200 properties were sold during
the year, equating to £1.8bn in value. Our average property sold for about £1.4m
in London and £0.63m in the country. Highlights include the sale of Puttenham
Priory with a price guide of £7m, and our Edinburgh office achieved a new record
in the sale of a country house in Scotland.
Purchasing Advice
Prime Purchase, our independent subsidiary which acts for retained buyers of
residential property in both central London and the country, has completed its
second successful and profitable year. In 2003, a country office was established
in Hampshire adding to its existing headquarters in Sloane Square. Of particular
note was the work in relation to the acquisition, off market, of a multi-million
pound penthouse in South Kensington and a 4,000 sq ft family house in Wimbledon
village. In the country, highlights included the purchase of Chartknolle, a 245
acre residential farm in West Dorset together with a Georgian house of over
1,500 sq ft to the West of Cirencester which was acquired privately.
Residential Letting
2003 was another tough year for the Residential Lettings business. Prime central
London was particularly affected as a result of the knock on effects from the
downturn in the financial markets since 2001. There was also a greater than
usual number of landlords selling, to cash in on capital growth, which in turn
created lower rental yields. The Home Counties departments in Windsor, Bishops
Stortford and Sevenoaks all experienced significant growth in their income.
Auctions
The Auctions department again had a good year selling 640 lots with a value
totalling £140m at an average success rate of 87%. Residential and commercial
properties were sold in Manchester, Liverpool, Birmingham and across the South
East to Bristol and the West Country. Notable sales included a west London site
by the A40 at £1.66m, an industrial investment in Middlesex at over £2.6m and a
portfolio of 17 residential properties in Bristol selling for £2.5m.
New Homes
The New Homes division turned in a strong performance in 2003 having been
involved in 3,200 residential unit sales with a 52% uplift in those derived from
our provincial offices. Notable successes included the sale of 173 units at
Glasgow Harbour for Cala City Limited, 92 units sold at The Arena, Nottingham
for Crosby Homes and over 65 reservations at Westminster Green, London for
Clementine Investments Limited. A feature of the market is bulk sales, sometimes
discounted, to specialist investors.
International New Homes
Our International New Homes business has expanded quickly over the last twelve
months by concentrating on new homes in sought after resort areas around the
world. The team now comprises eleven individuals responsible for over 400
property sales in seven countries. Current high profile projects include:
• The Palm, Dubai - 1,800 units;
• Provence Country Club, France - 170 units;
• Arc 1950 Ski Village, French Alps - 750 units;
• Villa Nova, Barbados - 10 units;
• Casa Grande, Marbella, Spain - 57 units; and
• Carlyon Bay, Cornwall - 511 units.
Development
The Development department experienced another growth year with significant
development achieved both in terms of transactional and consultancy
instructions. Major development transactions included land sales for developers
such as Crest, Countryside and Taylor Woodrow as well as disposals for various
NHS trusts and the MOD. The Development Consultancy business has expanded
significantly with further instructions from a number of the Regional
Development Agencies, including SWERDA, WDA, Advantage West Midlands and SEEDA.
The Development team advised on more than 30,000 acres of development land, 81%
of transactions were on brownfield or urban sites.
In response to client demand a specialist Mixed-Use team has been formed so as
to provide unified advice on large strategic sites where a number of
specialisations are required.
Highlights last year included:
• representing the University of Oxford in successful negotiations to
acquire the Radcliffe Infirmary site at a price of over £40m;
• property advisers on the Meridian Delta Ltd's 10m sq ft proposals to
develop the land around the Millennium Dome; and
• advising CRL, the Pillar/Hammerson joint venture, on the potential for
the further development of over 10m sq ft of mixed-use land including the
land around Brent Cross Shopping Centre.
Our Telecoms team have steadily increased their share of the market and now have
a strong relationship with four of the five operators. The electricity and gas
sectors have provided steady business with further growth in 2004 expected. A
new and potentially exciting area of business, comes from a joint venture with
an international wind developer.
Farm and Estate Agency
Despite difficulties caused by uncertainty over the review of the Common
Agricultural Policy, FPDSavills continued to sell and buy a number of high
profile agricultural estates for clients including the sale of the largest
sporting estate of the year, East Allenheads Grouse Moor, for an asking price of
£10m.
Other highlights included:
• the sale of Hungerford Park (2,013 acres);
• the sale the Wansdyke Estate in Berkshire (1,335 acres); and
• the purchase of Cokenach Estate in Hertfordshire (1,700 acres).
Retail and Leisure
The Retail Warehouse team continued to perform well benefiting from its national
coverage in three offices, continued market penetration and enlarged client
base. The department currently advises on many of the UK's leading retail parks
including: Monks Cross, York; Birmingham Fort; Middlebrook, Bolton and
Manchester Fort. This year saw our appointment by Boots Properties Plc to advise
on their town expansion programme in the South and Midlands. We have established
a Retail Warehouse department in Paris reflecting our strategy to expand into
Europe.
The Leisure team successfully let or acquired over 250,000 sq ft of retail and
leisure this year. Key openings in 2003 included Xscape in Castleford, a £60m
centre opened in October 2003.
Hotels and Healthcare
2003 was a record year for our Hotels team having increased their turnover by
50% and profits by 70%.
Notable sales were the 5 Queens Moat House managed hotels for the Bank of
Scotland which will now be managed by other operators. We also successfully
leased two major hotels to Europe's largest hotel operator and advised on an
investment sale for Lombard Finance.
The Healthcare department continued to expand and during the year over £420m of
health related properties were valued or sold.
Key transactions in the sector include:
• the Healthcare department were retained by The Medical Property
Investment Fund to provide valuation advice on medical centres following the
successful launch of a fund, which raised £400m of equity; and
• we are also advising on five LIFT projects (public, private partnerships
in primary healthcare) where developments are planned with a combined value
in excess of £250m.
Fund Management
2003 was an important year for Fund Management seeing the department break the
£1bn barrier for funds under management for the first time. A highlight of the
period was the progress of the Charities Property Fund which now stands at £136m
with over 308 investors. The team has been strengthened by further recruitment
and John Partridge, formerly Global Director of Property, Henderson Global
Investors, was appointed during the year to head the team. We intend to expand
this business substantially in the next two years.
Consultancy
Our Consultancy business generates fee income from a wide range of professional
property services including valuation, building consultancy, landlord and
tenant, rating, planning, strategic projects and research. Profit before
interest and tax for the year was £7.6m (2002 - £6.3m) on turnover of £49.1m
(2002 - £43.0m).
Valuation
The Residential Valuation team continued to broaden its areas of operation, both
geographically and by property type. The team undertook a number of different
and varied valuations during the year including: the valuation of several sites
in the Home Counties and South West owned by Beechcroft Ltd; a mixed development
site, for loan security purposes, of private and affordable housing and retail
space adjacent to the Royal Free Hospital in north west London and a substantial
number of ground rent portfolios across the Country. The team are also advising
Westminster City Council in connection with its interest in Dolphin Square,
London SW1, a well-known block of over 1,000 flats and commercial property.
The Commercial Valuation department had another successful year expanding the
existing team in Manchester and establishing a new Commercial Valuation team in
Edinburgh, providing clients with a more comprehensive national coverage. During
the year we assisted in the bidding process for the potential takeover of the
Canary Wharf Group. The core business of the department continues to be
valuations for lenders for loan security purposes, for which we provided advice
to over 50 lending organisations during the year.
Building Consultancy
The Building Consultancy division continued to enjoy successful growth
increasing both turnover and profit. This was achieved by increasing market
share across the retail, housing and office sectors. In the retail and leisure
sector we co-ordinated the technical due diligence of two landmark shopping
centre development projects to facilitate the purchase and forward funding of
Chelsfield's 130,000 sq m Whitecity development in west London and AM
Development's 62,000 sq m redevelopment of Victoria Square, Belfast.
Our specialist team focusing on the social housing sector had another year of
significant expansion with substantial growth in the number of stock condition
surveys undertaken and procurement advisory work. We worked with Local
Authorities and Housing Associations throughout the Country, including several
large London Authorities. Our work included completion of the Glasgow City
Council stock transfer of 81,000 properties, the largest to have ever taken
place, and we took the business overseas for the first time undertaking work for
the State Government of Victoria in Australia. In addition, we have diversified
into new business streams including providing consultancy in relation to the
Private Finance Initiative (PFI) in the social housing sector.
A key instruction by our Project Management division was the successful
completion of a major refurbishment and relocation in the City of London for
insurance broker, Alexander Forbes. This prestigious project involved the
transformation of a tired Eighties building into a modern flexible headquarters
for 750 staff.
Following strategic restructuring at the half year, the residential Building
Consultancy team achieved improved turnover reflecting a concentration on higher
value architectural and project management business throughout the UK. A
department specialising in residential refurbishments has been established in
central London.
Landlord and Tenant
2003 was another excellent year for the Landlord and Tenant department, with
income up 21% and profit up 27%. These figures were the result of a combination
of factors, with the strongest income streams again produced by Central London
Offices and Out-of-Town Retail.
Office rental levels in the City of London have fallen but West End demand
remains strong. Income streams from the out-of-town retail warehouse market
remains stable.
Rating
During the year the Business Rates team continued to settle appeals achieving an
average reduction of 14% with successful appeals. Acting for both developers/
owners and tenants, the department recently concluded appeals on over 400,000 sq
ft of new offices in west London. The total saving in rateable value was in
excess of £1.7m and the clients' annual rate bills were reduced by 18% on
average. The department had again been instructed by operators of UK Motorway
Service Areas to advise on business rates matters. The instruction covers
approximately 80 service areas with a combined rateable value of many millions
and spans several years.
Planning
The Planning division had another successful year and is now based in nine
locations across the Country. The London team in particular has grown during the
year and an urban design team has been added at Southampton. Acting for a
diverse range of private and public sector clients, the Planning division is
active in the residential, commercial, retail, institutional, regeneration and
energy sectors.
Notable projects during the year included:
• securing a major development area of 1,000 dwellings, leisure,
education, facilities and transport infrastructure at Worthing for a
consortium of developers;
• producing a development brief and design codes for a sustainable
mixed-use community, part of the eastward expansion of Milton Keynes, for
English Partnerships; and
• advising the Highways Agency on the development implications of the M1
widening.
A Commercial Planning team based at Grosvenor Hill has now been strengthened
with further recruitment planned in London and Manchester.
Housing Consultancy
The Housing Consultancy department now operates from four offices nationally
with approximately 35% of turnover from repeat annual valuations. We continue to
increase the range of advice on offer as our customers diversify and move into
or devise new forms of tenure. In Kingston Upon Hull, we completed the first
stage of an asset management strategy for the Council's 32,000 housing stock. In
north London, we advised a housing association on a 950 unit mixed tenure
residential redevelopment of an ex-council estate and in Bradford we provided
valuations for the six new social landlords acquiring the Council's 25,000
homes.
The Affordable and Student Accommodation Projects team is a new department to
service growing demand for affordable, key worker and good quality student
housing.
Key projects in 2003 include:
• advising several major developers with regard to the Section 106
affordable housing elements of their projects;
• advising on the acquisition and disposal of two major student
accommodation portfolios; and
• disposing of four mixed-use development sites that emerged from advising
our public sector clients.
Research
The Research team has been key in providing vital information and predictions in
all sectors of property, to a wide variety of clients, covering development,
investment, government, and housing associations. Our feasibility studies were
not confined to residential; major projects included an economic overview of
Belfast for a report addressing the forward funding of a £250m shopping centre
and analysis for a public inquiry into the likely demand for over 1m sq ft of
offices within Croydon town centre.
Research consultancy services were provided on several large, strategic
residential-led schemes which will deliver in excess of 15,000 new housing
units.
Outside the UK, we recently contributed to the due diligence report for the
acquisition of an office building in Milan. We have completed the first stage of
advising, on the feasibility of the development of an international standard
business park and retail scheme as part of a 1.1m sq m mixed-use development in
Cyprus and we recently advised a major international shopping centre developer
on the feasibility of the development of a 47,000 sq m out-of-town retail scheme
in Greece.
Property Management
The Property Management business continued to perform in line with expectation,
generating fee income from managing commercial, residential and agricultural
properties for owners. During the year, turnover was £57.8m (2002 - £56.4m),
generating a profit before interest and tax of £3.9m (2002 - £3.1m).
Commercial and Residential Management
The Commercial Management business has continued to perform strongly both
throughout the UK and Europe. We have continued to invest in the business
through recruitment and have expanded the teams in Glasgow, the West End and
City offices as well as centralising our Management Accounts team in Manchester.
The business continues to focus on the management of central London office
properties for German open-ended funds, including properties on Paternoster
Square and the recently completed Victoria Plaza. The team also manages UK funds
(including Diageo and Charities) and Henderson's expanding portfolio of retail
warehouse properties.
2004 will see the formation of a further team specialising in Shopping Centres
and strengthened links with our offices in Paris, Madrid and Amsterdam have
resulted in European wide management instructions for various clients.
The Property Management businesses in Asia were able to maintain 2002 profit
levels despite increased competition and fee cutting, through a combination of
cost cutting and securing additional contracts. With commercial office rents
expected to rise in Hong Kong, pressure on fee levels from landlords is
anticipated to reduce in 2004.
Property management income in China has grown by over 27% in 2003 on the back of
a strong agency presence and growing demand for professional property management
services on the mainland. Elsewhere in Asia, FPDSavills has closed the Agency
businesses in Thailand and the Philippines, and has taken measures to reduce
staffing and costs in Singapore.
In Australia the business suffered from extremely high insurance premium costs
and a high cost structure in its Property Management business, both these issues
have been addressed.
Land and Farm Management
Despite a difficult market the Rural Property group has had a successful year
with high margins. The business concentrated on organic growth in specialist
areas such as renewable energy, taxation and expert witness. We expanded our
management team by recruitment and also by acquisition, the latter including
Smith Woolley's Norwich office.
Aubourn, our specialist farming and rural business consultancy subsidiary, has
continued to develop the range of services it can provide. In 2003 it succeeded
in gaining over £3.5m of grant support for clients seeking to develop and
diversify their core businesses. The reform of EU farm policy in 2004 is
expected to provide further opportunities for the expansion of the company's
consultancy services.
Facilities Management
FPDSavills Guardian, our Facilities Management operation in Hong Kong, made
profits before interest and tax of £0.4m (2002 - loss £2.3m) on turnover of
£27.7m (2002 - £29.8m).
Through our alliance with Trammell Crow Company we are able to provide
comprehensive property outsourcing services throughout Europe. In December 2003
Trammell Crow Company increased their majority holding in Trammell Crow Savills
(TCS) and we have written off our remaining investment. Outsourcing is a core
offering of Trammell Crow Company and conversely is not now considered a
mainstream Savills activity. We remain totally committed to supporting the
business, which will continue to refer the execution of transactional business
to Savills wherever possible.
Property Trading and Investment
Grosvenor Hill Ventures, our principal property trading subsidiary had an
excellent year. They successfully concluded the sale of The Mill Discount
Department Store, Yorkshire, for a cash consideration of £9.5m representing the
written down book value.
They also made three notable disposals: two properties at Wishaw and Lisburn,
both held by companies in which we had a 50% interest together with external
co-investors and a property at Redditch. These sales made a significant
contribution in the second half and profit before interest and tax for the
Property Trading and Investment business for the year was £5.1m (2002 - loss of
£4.7m) on turnover of £32.3m (2002 - £17.0m).
The business continued to make selective investments in the
out-of-town retail sector throughout 2003 and three properties remain within the
portfolio. It is anticipated that these will be used to provide initial seed
assets for funds or will be disposed of in due course. The focus for business
activities in the future will be to provide seed capital for the property fund
business.
The Group's interest in Managed Office Solutions (GHV), our managed office space
business, continued to make good progress. We believe this business has a strong
base and the focus is now to expand and add new centres.
Financial Services
The Financial Services division is mainly comprised of Savills Private Finance
Limited, which provides residential mortgage broking services, commercial debt
broking services and associated financial products. The division had a record
year with profit before interest and tax of £3.9m (2002 - £1.6m) on a turnover
of £15.5m (2002 - £12.0m).
Savills Private Finance continues to build this quality business and is now
recognised as the leading provider of mortgage finance to the high net worth
market. Of particular note, 2003 saw Savills Private Finance voted Mortgage
Broker of the Year by the mortgage banks. Organic growth is taking place through
selective recruitment of key staff dedicated to the quality service associated
with the Group. The company is now operating from 12 locations throughout the
UK, with further offices planned for 2004.
Aubrey Adams, Group Chief Executive
SAVILLS plc
CONSOLIDATED PROFIT & LOSS ACCOUNT
year ended 31 December 2003
Year to Year to
31.12.03 31.12.02
Notes £'000 £'000
------------------------------ ------- -------- --------
Turnover - Group & share of joint ventures
Other continuing operations 273,165 268,727
Sale of trading properties 28,987 14,049
Acquisitions 850 -
Less: Share of turnover of joint ventures (1,310) (442)
-------- --------
Total Group turnover 2&3 301,692 282,334
------------------------------ ------- ======== ========
Operating Profit
Other continuing operations 31,408 27,942
Sale of trading properties 4,714 1,266
Acquisitions 367 -
-------- --------
Group operating profit 2&3 36,489 29,208
Share of operating profit of joint ventures 30 9
Share of operating loss of associated undertakings 4 (1,559) (3,928)
-------- --------
Operating profit including share of joint ventures &
associated undertakings 34,960 25,289
Loss on disposal of interests in subsidiary
undertakings - (216)
Profit on disposal of interest in associated
undertakings - 53
Profit on disposal of investments 521 -
Permanent diminution in value of investment
property - (4,332)
-------- --------
Profit on ordinary activities before interest 2&3 35,481 20,794
Net interest
Group (208) (289)
Joint ventures (2) (13)
Associated undertakings (7) (111)
-------- --------
Total net interest (217) (413)
-------- --------
Profit on ordinary activities before taxation 2&3 35,264 20,381
Taxation on profit on ordinary activities 5 (12,409) (10,115)
-------- --------
Profit on ordinary activities after taxation 22,855 10,266
Equity minority interests (838) (1,722)
-------- --------
Profit for the financial year 22,017 8,544
Dividends paid & proposed 6 (7,584) (5,803)
-------- --------
Profit for the year transferred to reserves 14,433 2,741
------------------------------ ------- ======== ========
Basic earnings per share 7(a) 39.2p 15.1p
Adjusted basic earnings per share excluding sale of
trading properties, impairments and amortisation of
goodwill 7(b) 39.8p 31.3p
Diluted earnings per share 7(a) 36.0p 13.8p
Dividend per share 6 13.6p 10.2p
------------------------------ ------- -------- --------
SAVILLS plc
SUMMARY GROUP BALANCE SHEET
at 31 December 2003
31.12.03 31.12.02
£'000 £'000
--------------------- ------ -------- ------- --------
Fixed assets
Intangible assets 36,021 30,115
Tangible assets 26,762 21,740
Investments
Investments in joint ventures
Share of gross assets 901 845
Share of gross liabilities (361) (303)
------ -------
540 542
Investment in associated undertakings 280 4,247
Other investments 2,833 3,302
------ -------
Total investments 3,653 8,091
-------- --------
Total fixed assets 66,436 59,946
-------- --------
Current assets
Property held for sale 8,081 24,656
Work in progress 2,801 2,736
Debtors 82,074 71,632
Cash at bank & short-term deposits 71,871 53,435
------- -------
164,827 152,459
Creditors - amounts falling due
within one year (103,753) (95,811)
-------- --------
Net current assets 61,074 56,648
-------- --------
Total assets less current liabilities 27,510 116,594
-------- --------
Creditors - amounts falling due
after
more than one year (19,521) (21,877)
Provisions for liabilities & charges (10,306) (5,578)
-------- --------
Net assets 97,683 89,139
======== ========
Capital & Reserves
Called up equity share capital 3,070 3,159
Share premium account 42,237 41,512
Profit & loss account 51,707 43,834
Capital redemption reserve 107 -
-------- --------
Equity shareholders' funds 97,121 88,505
Equity minority interests 562 634
-------- --------
97,683 89,139
--------------------- ------- ======== ========
SAVILLS plc
CONSOLIDATED CASH FLOW STATEMENT
year ended 31 December 2003
Year to Year to
31.12.03 31.12.02
Notes £'000 £'000
----------------------------- ------ -------- --------
Net cash inflow from operating activities 8(a) 60,563 46,272
Dividends from joint ventures & associated
undertakings 349 444
Net cash outflow from returns on investments &
servicing of finance (1,466) (1,037)
Tax paid (11,086) (9,063)
Net cash outflow for capital expenditure &
financial
investment (10,717) (4,283)
Net cash outflow from acquisitions & disposals (7,604) (3,681)
Equity dividends paid (5,840) (5,586)
-------- --------
Cash inflow before use of liquid resources &
financing 24,199 23,066
Net cash outflow from management of liquid
resources (9,425) (5,635)
Net cash outflow from financing (4,326) (7,325)
-------- --------
Increase in cash 8(b) 10,448 10,106
----------------------------- ------ ======== ========
SAVILLS plc
STATEMENT OF RECOGNISED GAINS & LOSSES
year ended 31 December 2003
Year to Year to
31.12.03 31.12.02
£'000 £'000
------------------------------ -------- --------
Profit for the financial year
Group 23,738 12,137
Joint ventures 6 5
Associated undertakings (1,727) (3,598)
-------- --------
22,017 8,544
Currency translation differences on foreign currency net
investments (2,304) (1,630)
-------- --------
Total recognised gains & losses for the year 19,713 6,914
------------------------------ ======== ========
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Year to Year to
31.12.03 31.12.02
£'000 £'000
------------------------------ -------- --------
Profit for the financial year 22,017 8,544
Dividends (7,584) (5,803)
-------- --------
Retained profit for the year 14,433 2,741
Issue of share capital 743 298
Purchase of own shares (4,256) -
Currency translation differences (2,304) (1,630)
-------- --------
Net increase in shareholders' funds 8,616 1,409
Shareholders' funds at beginning of year 88,505 87,096
-------- --------
Shareholders' funds at end of year 97,121 88,505
------------------------------ ======== ========
NOTES
1. Basis of preparation
The results for the year ended 31 December 2003 have been extracted from audited
financial statements. The accounts have been prepared under the historical cost
convention, modified to include the revaluation of investment properties and in
accordance with applicable United Kingdom accounting standards on a consistent
basis with prior years.
The financial information in this statement does not constitute statutory
accounts within the meaning of s240 of the Companies Act 1985. The statutory
accounts for the year ended 31 December 2002, on which the auditors have given
an unqualified audit report, have been filed with the Registrar of Companies.
2. Segmental Analysis
Property
Year to Trans- Property Facilities Trading
31 actional Consult- Manage- Manage- & Invest- Financial Holding
December Advice ancy ment ment ment Services Company Total
2003 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
--------- ------- ------- -------- -------- -------- -------- -------- -------
Total
Group
turnover 119,377 49,133 57,785 27,651 32,285 15,461 - 301,692
--------- ======= ======= ======== ======== ======== ======== ======== =======
Group
operating
profit/
(loss) 18,047 7,555 3,538 1,889 5,109 3,386 (3,035) 36,489
Profit/
(loss)
before
interest &
taxation 17,953 7,555 3,898 411 5,109 3,867 (3,312) 35,481
Net
interest (217)
ordinary --------
activities
before tax 35,264
--------- ======== ======== ======== ======== ======== ======== ======== ========
Property
Year to Trans- Property Facilities Trading
31 actional Consult- Manage- Manage- & Invest Financial Holding
December Advice ancy ment ment ment Services Company Total
2002 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
--------- ------- ------- -------- -------- -------- -------- -------- -------
Total
Group
turnover 124,143 42,992 56,411 29,811 16,975 12,002 - 282,334
--------- ======= ======= ======== ======== ======== ======== ======== =======
Group
operating
profit/
(loss) 19,967 6,336 2,569 2,323 (336) 1,558 (3,209) 29,208
Profit/
(loss)
before
interest &
taxation 19,962 6,336 3,087 (2,272) (4,668) 1,558 (3,209) 20,794
Net
interest (413)
Profit on --------
ordinary
activities
before tax 20,381
--------- ======== ======== ======== ======== ======== ======== ======== ========
3. Geographical analysis of turnover, Group operating profit & profit before
interest & tax (PBIT)
Total Group Total Group
Group operating Group operating
Year turnover profit PBIT turnover profit PBIT
to
31 December 2003 2003 2003 2002 2002 2002
£'000 £'000 £'000 £'000 £'000 £'000
----- ------ ------ -------- -------- ------- -------- -------- -------
United Kingdom 206,715 31,228 30,044 184,145 22,798 14,570
Rest of Europe 12,198 2,122 2,068 12,090 3,581 3,577
Asia 82,779 3,139 3,369 86,099 2,829 2,647
-------- -------- ------- -------- -------- -------
301,692 36,489 35,481 282,334 29,208 20,794
----- ------ ------ ======== ======== ======= ======== ======== =======
Profit before interest and tax for the year ended 31 December 2003 for Asia is
shown after charging goodwill amortisation of £1,544,000 (2002 - £1,338,000).
The profit before interest and tax for the year ended 31 December 2003 for Europe
is shown after charging goodwill amortisation of £278,000 (2002 - £205,000).
The profit before interest and tax for the year ended 31 December 2003 for the
UK is shown after charging goodwill amortisation of £661,000 (2002 - £584,000).
4. Share of operating loss of associated undertakings
Year to Year to
31.12.03 31.12.02
£'000 £'000
------ ------ ------ -------- -------- -------- -------- -------- --------
Share of operating loss from interest in associated undertakings (193) (1,278)
Goodwill amortisation on investment in associated undertakings (180) (245)
Impairment of goodwill in Trammell Crow Savills Limited (1,186) (2,405)
-------- --------
(1,559) (3,928)
------ ------ ------ -------- -------- -------- -------- ======== ========
5. Taxation
The taxation charge has been calculated on the basis of the underlying rate in each
jurisdiction adjusted for any disallowable charges.
Year to Year to
31.12.03 31.12.02
£'000 £'000
------ ------ ------ -------- -------- -------- -------- -------- --------
United Kingdom corporation tax (11,007) (7,371)
Foreign taxation (2,431) (2,930)
Deferred Tax 1,029 186
-------- --------
(12,409) (10,115)
------ ------ ------ -------- -------- -------- -------- ======== ========
6. Dividends Year to Year to
31.12.03 31.12.02
£'000 £'000
------- ------- ------- ------- ------ ------ ------ -------- --------
Ordinary interim dividend of 3.6p per share
(2002 - 3.4p per share) 2,021 1,940
Ordinary proposed final dividend of 10p per share
(2002 - 6.8p per share) 5,563 3,863
-------- --------
7,584 5,803
------- ------- ------- ------- ------ ------ ------ ======== ========
The Directors have recommended a final dividend for the year to 31 December
2003 of 10 pence per ordinary share and, assuming approval at the Annual General
Meeting, this will be paid on 12 May 2004 to shareholders on the register as at
13 April 2004.
7. Earnings per share
(a) Basic & diluted earnings per share
Year to Earnings Shares EPS Earnings Shares EPS
31 December 2003 2003 2003 2002 2002 2002
£'000 '000 Pence £'000 '000 Pence
------- ------- ------- -------- ------- ------ ------- ------ -------
Basic earnings per
share 22,017 56,207 39.2 8,544 56,574 15.1
Effect of additional
shares
issuable under option - 4,900 - - 5,116 -
-------- ------- ------ ------- ------ -------
Diluted earnings per
share 22,017 61,107 36.0 8,544 61,690 13.8
---------------- ======== ======= ======= ======= ====== =======
(b) Adjusted basic earnings per share excluding sale of trading properties,
impairments and amortisation of goodwill
Year to Earnings Shares EPS Earnings Shares EPS
31 December 2003 2003 2003 2002 2002 2002
£'000 '000 Pence £'000 '000 Pence
------- ------- ------- -------- ------ -------- -------- -------- --------
Basic earnings per share
as in part (a) above 22,017 56,207 39.2 8,544 56,574 15.1
Add back permanent
diminution
in value of investment
property - - - 4,332 - 7.7
Add back impairment of
fixed assets - - - 1,173 - 2.1
Add back impairment of
goodwill in Trammell
Crow
Savills Ltd 1,186 - 2.1 2,405 - 4.2
Amortisation of
goodwill 2,483 - 4.4 2,127 - 3.8
Less sale of trading
properties after tax (3,300) - (5.9) (886) - (1.6)
-------- ------- -------- ------- ------- --------
Adjusted basic earnings
per
share excluding sale of
trading
properties, impairments
and amortisation of
goodwill 22,386 56,207 39.8 17,695 56,574 31.3
---------------- ======== ======== ======== ======== ======== ========
8. Notes to consolidated cash flow statement
(a) Reconciliation of operating profit to net cash Year to Year to
inflow from operating activities 31.12.03 31.12.02
£'000 £'000
------ ------ ------ ------ ------ ------- ------- -------- --------
Operating profit 36,489 29,208
Depreciation charges 4,923 5,388
Impairment on tangible fixed assets - 1,173
Amortisation of goodwill 2,303 1,882
Loss on the sale of fixed assets 121 127
Decrease/(increase) in property held for
sale 16,575 (2,890)
Increase in work in progress (82) (91)
Increase in debtors (8,180) (10,398)
Increase in creditors 2,726 17,574
Increase in provisions 4,269 2,651
Increase in provision for share options
granted 951 1,159
Provision against fixed asset
investments 468 489
-------- --------
Net cash inflow from operating
activities 60,563 46,272
-------------------- ------ ------- ------- ======== ========
Year to Year to
(b) Reconciliation of net cash flows to
net funds 31.12.03 31.12.02
£'000 £'000
------ ------ ------ ------ ------ ------- ------- -------- --------
Increase in cash 10,448 10,106
Cash outflow from decrease in debt 787 7,607
Capital element of finance leases repaid 26 16
Increase in liquid resources 9,425 5,635
Loans disposed with subsidiaries - 2,665
Loan notes issued on acquisition of
subsidiary - (490)
Exchange movements (2,205) (1,493)
-------- --------
18,481 24,046
Net funds at beginning year 30,498 6,452
-------- --------
Net funds at end of year 48,979 30,498
--------------- ------ ------ ------- ------- ======== ========
8. Notes to consolidated cash flow
statement
At Cash Exchange At
(c) Analysis of changes in net funds 01.01.03 flows movement 31.12.03
£'000 £'000 £'000 £'000
--------------- ------ ------ ----- ---- -------- ------- --------- --------
Cash at bank 31,543 10,555 (325) 41,773
Overdrafts (403) (107) 2 (508)
-------
10,448
Liquid funds on one month deposit 1,613 7,195 8,808
Liquid funds - short-term deposit 20,279 2,230 (1,219) 21,290
-------- ------- --------- --------
53,032 19,873 (1,542) 71,363
Debt - due within one year (694) (2,185) (82) (2,961)
- due after one year (21,757) 2,972 (589) (19,374)
Finance leases (83) 26 8 (49)
-------- ------- --------- --------
30,498 20,686 (2,205) 48,979
--------------- ------ ------ ----- ---- ======== ======= ========= ========
Copies of this statement are being sent to shareholders and are available from:
Savills plc, 20 Grosvenor Hill, Berkeley Square, London W1K 3HQ
Telephone: 020 7409 9928 Fax: 020 7491 0505 Email: vgrady@fpdsavills.co.uk
Contact: Victoria Grady
In addition, with prior notice, copies in alternative formats i.e. large print,
audio tape, braille are available if required from:
Lloyds TSB Registrars, The Causeway, Worthing, West Sussex BN99 6DA
This information is also available on the Company's website at: www.fpdsavills.com
End
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