Final Results

RNS Number : 6159R

Savills PLC

10 March 2016

 

10 March 2016

Savills plc

('Savills' or 'the Group')

PRELIMINARY RESULTS FOR THE FULL YEAR ENDED 31 DECEMBER 2015

Savills plc, the international real estate advisor, today announces record results as the Group benefits from its broad spread of services across the globe.

Key financial highlights

·      Group revenue up 19% to £1,283.5m (£1,271.0m in constant currency, 2014: £1,078.2m)

·      Underlying profit up 21% to £121.4m (£120.1m in constant currency, 2014: £100.5m)

·      Group profit before tax up 16% to £98.6m (2014: £84.7m)

·      Underlying profit margin increased to 9.5% (2014: 9.3%)

·      Underlying basic EPS grew 14% to 63.2p (2014: 55.2p)

·      Final ordinary and supplementary interim dividends total 22.0p per share (2014: 19.25p) taking the total dividend for the year up 13% to 26.0p per share (2014: 23.0p)

* Underlying profit before tax ('underlying profit') is calculated on a consistent basis in accordance with Note 3 to the preliminary statement.

Key operating highlights

The strength of our commercial market positions and the resilience of our residential businesses underpinned an improved performance for Savills in 2015.

·     Transaction Advisory revenues up 25% driven by the contribution from Savills Studley in the US, continued recovery in Continental European markets, market share gains in Asia and a strong performance in the UK

·     Record revenue in the UK on the back of continued strength of commercial markets despite weaker Residential performance

·     Growth in profits in Continental Europe following improved market conditions and the benefit of management actions taken in recent years

·     Further growth from non-transactional services with Consultancy revenue up 6% and Property Management revenue up 15%, with the UK acquisition of Smiths Gore contributing to this increase

·     Savills Investment Management more than doubled profits and Assets Under Management ('AUM') with the acquisition of SEB Asset Management

Commenting on the results, Jeremy Helsby, Group Chief Executive, said:

"Overall in 2015, Savills delivered a record performance across the Group. Our US expansion programme continued well and our Asia Pacific business showed resilience in the face of changeable markets. In the UK the strength of our position in the commercial market offset market weakness in the residential sector. The Continental European business continued to build profitability and Savills Investment Management substantially enhanced its position with the acquisition of SEB Asset Management AG.

We have made a good start to 2016 with a solid pipeline of business carried over from last year in many markets, although the impact of global macro-economic and political concerns on real estate markets worldwide is uncertain.

At this stage, we retain a cautious view on some Asian markets, particularly the Tier 2 Chinese cities, and we expect the UK residential and commercial investment markets to be subdued, for the former, as Stamp Duty reforms take effect and, more generally, in the run up to the EU referendum in June.

However, the strength of our enlarged US operation, the increased size of our Investment Management, Property Management and Consultancy businesses and the breadth of our UK business together with further improvement in Continental Europe, all bode well for the future of your Company. Accordingly, the Board's expectations for the year as a whole remain unchanged."

For further information, contact:

Savills	020 7409 8934
Jeremy Helsby, Group Chief Executive
Simon Shaw, Group Chief Financial Officer
Tulchan Communications	020 7353 4200
Peter Hewer

There will be an analyst presentation today at 9.30am at Savills, 15 Finsbury Circus, London, EC2M 7EB.

A short video interview explaining our results, together with the results presentation is available on www.savills.com from 9.00am GMT.

Chairman's statement

Successful implementation of our US growth strategy, the acquisitions of SEB Asset Management in Europe and Smiths Gore in the UK, and improved business activity in many of our key markets resulted in record revenue and profits in 2015

Results

The Group's underlying profit for the year increased by 21% to £121.4m (2014: £100.5m), on revenue which improved by 19% to £1,283.5m (2014: £1,078.2m). The Group's statutory profit before tax increased by 16% to £98.6m (2014: £84.7m).

Overview

With investors globally seeking secure income in a historically low interest rate environment, the allocation to Real Estate in investment portfolios has continued to grow.  2015 again demonstrated the importance of Savills strengths in the prime markets of many of the world's key cities. Furthermore, the continued development of our US business, where a number of complementary acquisitions were completed by Savills Studley during the year, enhanced our position further in that market. On 31^st August, Savills Investment Management  (formerly "Cordea Savills") completed the acquisition of SEB Asset Management AG and, as a result of the acquired business completing a substantial one-off transaction at the end of the year, our profits from Investment Management activities increased substantially over the previous year.

Our Transaction Advisory revenue grew by 25%, our Consultancy revenue by 6% and our Property Management revenue by 15%, boosted by the acquisition of Smiths Gore in the UK. We enjoyed a strong year in most of the commercial markets in which we operate including record performances in the UK, US and Asia and a further improvement in profits from our businesses in Continental Europe. Our Residential businesses weathered changeable conditions in a number of the world's prime markets with UK revenue down by only 1% year-on-year. In Asia, the size and stability of our Property Management business, strong performances in China, Australia and Korea and significant market share gains in the commercial capital markets business in Hong Kong, collectively helped to mitigate the effect of subdued investment volumes in Hong Kong, Singapore and mainland China.

In Continental Europe, improved market conditions benefited our predominantly transaction orientated businesses with revenue increasing by 10% (22% in constant currency) and profitability further improved. Savills Investment Management, enhanced through the acquisition of SEB Asset Management delivered a substantially improved performance across its European platform increasing Assets Under Management ('AUM') by 138% (to €17.1bn), revenue by 59% and profits by 148%.

The Group's underlying profit margin increased to 9.5% from 9.3% in 2014, despite the negative effects of the slow down in UK Residential markets and the effect of business development expenditure in the US. Considerable performance improvement in the broader UK market, the substantial increase in profits from Investment Management together with the profit improvement in Continental Europe were the principal contributors to that increase.

Business development

Over the last ten years the global real estate market has been characterised by significant cross border flows of capital and multi-national occupier requirements. The property services industry has seen a degree of consolidation as organisations have sought to rebalance their portfolio of services, grow into new markets or take advantage of weakness in the competition. During this period we have built the business around our core strategy of servicing investor and occupier requirements in the world's key locations and maintaining a differentiated position from the competition, based around the quality of our property intelligence and the capability of our organisation to add value in both the commercial and residential markets.

Savills strategy is to be a leading advisor in the key markets in which we operate. Our global strategy is delivered locally by our experts on the ground with flexibility to adapt quickly to changes in circumstances and opportunities. They are supported by our regional and cross-border investment and occupier service specialists. Over the last few years we have acquired a number of complementary businesses and added teams and individual hires to our strong core business. During 2015, we continued to build on the 2014 acquisition of Savills Studley with a number of transactions in the US and the acquisition of our first operation in Canada. In Asia Pacific, we acquired a significant interest in our first operation in Malaysia, a Residential business in Sydney and established our first occupier-focused business in India.

We also focused on building our longer term management businesses with the acquisition of Smiths Gore, a long-established leading firm in rural and estate management in the UK, property management businesses in London and Singapore and the SEB investment management business based in Frankfurt and Singapore.

Board

On 26^th January we announced that I would retire as Chairman at the forthcoming Annual General Meeting in May and that Nicholas Ferguson would succeed me. During this year we have reviewed the composition of the Board and, in addition to Nicholas' appointment, we have also appointed Rupert Robson as non-executive Director and Chair of the Remuneration Committee and, in succession to Martin Angle, Liz Hewitt as Chair of the Audit Committee. Having served on the Board for ten years, latterly as Senior Independent Director, Martin will also retire at the conclusion of the AGM. I thank him for his enormous contribution over the years and his particular support last year in respect of the Board review process and Chairman succession.

Tim Freshwater will become Senior Independent Director on Martin's retirement.

Dividends

An initial interim dividend of 4.0p per share (2014: 3.75p) amounting to £5.3m was paid on 12 October 2015, and a final ordinary dividend of 8.0p (2014: 7.25p) is recommended, making the ordinary dividend 12.0p for the year (2014: 11.0p). In addition, a supplemental interim dividend of 14.0p (2014: 12p) is declared, based upon the underlying performance of our Transaction Advisory business. Taken together, the ordinary and supplemental dividends comprise an aggregate distribution for the year of 26.0p per share, representing an increase of 13% on the 2014 aggregate dividend of 23.0p. The final ordinary dividend of 8.0p per ordinary share will, subject to shareholders' approval at the Annual General Meeting on 11 May 2016, be paid alongside the supplemental interim dividend of 14.0p per share on 16 May 2016 to shareholders on the register at 15 April 2016.

People

I would like to express my thanks to all our staff worldwide for their hard work, commitment and continued focus on client service, enabling the Group to deliver this record performance in 2015. I retire knowing that Savills is in very capable hands.

Outlook

We have made a good start to 2016 with a solid pipeline of business carried over from last year in many markets, although the impact of global macro-economic and political concerns on real estate markets worldwide is uncertain.

At this stage, we retain a cautious view on some Asian markets, particularly the Tier 2 Chinese cities, and we expect the UK residential and commercial investment markets to be subdued, for the former, as Stamp Duty reforms take effect and, more generally, in the run up to the EU referendum in June.

However, the strength of our enlarged US operation, the increased size of our Investment Management, Property Management and Consultancy businesses and the breadth of our UK business together with further improvement in Continental Europe, all bode well for the future of your Company. Accordingly, the Board's expectations for the year as a whole remain unchanged.

Peter Smith

Chairman

Review of operations

The strength of our key commercial market positions and the resilience of our residential businesses drove an improved performance for Savills in 2015.

As anticipated, we experienced quieter market  conditions in certain markets worldwide including Singapore, Taiwan, Japan and Tier 2 cities in China, but improved trading conditions in markets elsewhere including  Australia, Tier 1 Chinese cities, Vietnam and Korea which together with the effect of increased market share in Hong Kong, counter-balanced the shortfall.

The US business, enhanced by a number of bolt-on acquisitions by Savills Studley, delivered good growth.

Savills Investment Management (formerly "Cordea Savills") achieved a significant change in scale with the acquisition in Germany of SEB Asset Management in August 2015. This was reflected in underlying profit growth of over 145% and AUM growing to €17.1bn (2014: €7.2bn).

Continued recovery in Continental Europe saw the business increase profits substantially.

Overall the Group increased underlying profit by 21% to £121.4m (2014: £100.5m).

On a statutory basis, profit before tax increased 16% to £98.6m (2014: £84.7m).

Savills geographic and business diversity were key to achieving the year's result.

Our performance analysed by region was as follows:

	Revenue £m			Underlying Profit/(Loss) £m
	2015	2014	% growth	2015	2014	% growth
UK	560.1	502.4	11	71.7	65.1	10
Asia Pacific	401.1	355.0	13	34.2	34.7	(1)
Continental Europe	129.8	108.5	20	8.9	2.0	345
United States	192.5	112.3	71	18.8	12.4	52
Unallocated Cost	n/a	n/a	n/a	(12.2)	(13.7)	11
Total	1,283.5	1,078.2	19	121.4	100.5	21

Excluding the acquisitions of Smiths Gore and SEB Asset Management and assuming a full year comparative for Studley in the US, Group revenue grew by 10% year-on-year. Our Asia Pacific business represented 31% of Group revenue (2014: 33%) and our overseas businesses as a whole represented 56% of Group revenue (2014: 53%).  Our US business represented 15% of Group Revenue (2014:10%).

Our performance by service line is set out below:

	Revenue £m			Underlying Profit/(Loss) £m
	2015	2014	% growth	2015	2014	% growth
Transaction Advisory	618.0	494.6	25	76.9	67.8	13
Property Management	390.7	338.6	15	21.1	18.6	13
Consultancy	230.3	217.0	6	24.7	23.4	6
Investment Management	44.5	28.0	59	10.9	4.4	148
Unallocated Cost	n/a	n/a	n/a	(12.2)	(13.7)	11
Total	1,283.5	1,078.2	19	121.4	100.5	21

Overall our Commercial and Residential Transaction business revenues together represented 48% of Group revenue (2014: 46%). Of this, the Residential Transaction Advisory business represented 12% of Group revenue for the year (2014: 14%). Our Property and Facilities Management businesses continued to perform well, growing overall revenue by 15% driven by the acquisition of Smiths Gore in the UK and strengthened performances in Asia Pacific and Continental Europe. The business remained essentially constant as a proportion of group revenue at 31% (2014: 31%). Our Consultancy businesses represented 18% of revenue (2014: 20%) where a strong UK performance was counter-balanced by a reduction in activity in Continental Europe. The Investment Management business, strengthened by the acquisition of SEB Asset Management in August 2015, achieved substantial growth in revenue and profit, to represent 3.5% of revenue (2014: 2.6%).

Transaction Advisory

2015 clearly demonstrated the strength of our geographic spread of businesses as improved performances in a number of countries outweighed the anticipated reduction in activity in mainland China, and Singapore. This, in conjunction with the performance of our US business and further recovery in certain Continental European markets together with a strong performance in the UK commercial market, successfully offset the reduction in activity in the UK residential market and resulted in the increase in revenue, profit and margin delivered by our Transactional Advisory business as a whole. Revenue grew by 25% to £618.0m (2014: £494.6m) and underlying profit increased by 13% to £76.9m (2014: £67.8m).

The effect of a weak Singapore market and expansion costs in Asia Pacific Residential, together with the reduction in volumes in the UK Residential business reduced the underlying profit margin of the Transaction Advisory business as a whole to 12.4% (2014: 13.7%).

UK Residential

Our UK Residential business revenue declined by 1% to £127.9m (2014: £129.2m). This performance was driven by slightly weaker resale volumes, as anticipated, largely offset by stronger sales of development projects and a significant increase in the growing Private Rental Sector (PRS) and Housing and Residential Healthcare transaction revenues. The prime residential market, where Savills is a market leader, was adversely affected by the fiscal changes of the 2014 Autumn Statement and the impact of the General Election on our overall volume of UK transactions, which decreased by 1% year on year. In the  resales market, the focus on growing our share in the core London market, with average selling prices in the range £0.8m-£1.5m, largely mitigated the reduction in market volumes in the Prime and Super Prime end of the market, so that our overall volume of resale transactions in London decreased by approximately 4.5% year on year with a 15% reduction in Savills average sales value to £2.8m. In the Country market both the volume of exchanges and the Savills average value, at £1.1m, were unchanged year on year. These trends were reflected in the reduction in the overall value of UK residential property (excluding new developments) sold by Savills during the year to £5.9bn (2014: £6.6bn). In the new development market we saw a significant increase in transactions with the value of property exchanged increasing by 7% to £3.0bn, buoyed by continued strong interest in high quality developments in both the London and Country markets and good levels of stock availability.

During the year we opened new residential offices in Earls Court, Shoreditch and Ealing, all of which are focused on the Core London market. In addition, outside London we took on a number of mixed service offices, such as Petworth, Taunton and Lichfield with the acquisition of Smiths Gore.

The 2015 Autumn Statement heralded some significant further changes to the taxation of Residential Property in the UK, which take effect from April 2016. In the intervening period we have experienced a noticeable increase in transaction volumes.

Against this backdrop, the UK Residential Transaction Advisory business recorded a 10% decrease in underlying profits to £17.8m (2014: £19.7m).

Asia Pacific Residential

The Residential Transaction Advisory business in Asia is focused primarily on new developments and secondary sales and leasing of prime properties in selected markets. It excludes mixed use developments, which represent a significant proportion of the region's activity and are accounted for within the Commercial Transaction Advisory business. Overall, the Asia Pacific Residential business recorded a 41% increase in revenue to £30.5m (2014: £21.6m). Growth in our existing Australian business, together with the acquisition of the business of Cordeau Marshall in Sydney, were the principal drivers of growth in addition to strong performances from the prime markets of Shanghai and Hong Kong. Singapore markets experienced continuing decline in volumes as the impact of controls, particularly on overseas buyers, and excess supply negatively affected demand. This not only affected our principal Singapore business but also materially reduced the contribution from our minority stake in Huttons, our mid-market associate company in that market, and led directly to the region reporting a 16% decrease in underlying profit to £3.1m (2014: £3.7m).

Asia Pacific Commercial

The Asia Pacific Commercial business enjoyed a somewhat stronger year than we originally expected, driven by substantially improved earnings in Hong Kong, Mainland China, Singapore and Korea, which largely offset the impact of revenue shortfalls in Japan, Taiwan and Australia. Our market share in a relatively quiet Hong Kong investment market grew significantly to circa 50%. The policy of strengthening connections between the financial markets of Shanghai and Hong Kong led to us advising many Chinese financial services businesses on the lease or acquisition of office space in Hong Kong.  The underlying markets of Mainland China and Hong Kong remained relatively subdued, particularly in the retail sector. Revenue rose by 16% to £111.9m (2014: £96.3m).

In mainland China, where we have 15 offices, the investment market remained weak but greater activity in leasing and tenant representation transactions, including office and mid-tier retail brands, resulted in a 21% increase in Transaction Advisory revenues year-on-year. It is clear that in recent months activity has focused strongly on the Tier 1 Cities of Beijing and Shanghai.  Our Hong Kong and Korean Commercial transaction revenues increased by 58% and 19% respectively, helping to offset reductions in revenue in Japan, Australia and Taiwan. The relative difference in profitability between Japan and Hong Kong, together with business development and service expansion costs in the region led to the Asia Pacific Commercial Transaction Advisory business recording a 2% decrease in underlying profit to £16.3m (2014: £16.7m).

UK Commercial

Revenue from UK commercial transactions increased 17% to £98.8m (2014: £84.1m). This performance reflected another strong year for the UK investment market as a whole, with high activity levels in both London and the regional markets and continued strong interest from overseas investors. In addition the leasing and occupier markets were characterised by high levels of occupier demand, limited supply and rising rental values. These factors, alongside expectations of continued low interest rates, combined to create benign conditions in the UK as a whole. 

The Central London occupier market saw continued strong tenant demand in 2015, albeit not at the record levels achieved in 2014.   Professional services, Insurance and the TMT sectors contributed to this rise in activity. The vacancy rate in the City continued to fall to 4.5% which contributed to a 10% increase in City rents. Take-up in the West End of London was up 4% on the total for 2014 at 4.4m sq ft, and the vacancy rate dropped below 3%.

Our regional businesses benefited from the recovery in tenant demand for office space with take-up inside the M25 and the top eight regional city office markets rising by 4% to reach 10.5m sq. ft. 

As economic conditions improved in regional markets, we saw a significant recovery in investment volumes as investors sought improved returns outside London. All asset classes benefited, with logistics and retail being particularly strong.

The continuation of a robust market in both London and the regions resulted in the UK Commercial Transaction Advisory business increasing underlying profit by 21% to £16.9m (2014: £14.0m) with margin improvement to 17.1% (2014: 16.6%).

US

During the year, we continued to build on our US platform Savills Studley, through both recruitment and three bolt-on acquisitions. Our US revenue grew by 71% to £192.5m (2014: £112.3m), which equated to 12% assuming a full 2014 comparable period for Studley. In addition, the US business contributed significantly to our global occupier services business, referring significant client projects to many parts of Savills Asia Pacific, UK and European network.

The acquisitions we completed during the year both enhanced our tenant representation platform (eg the Cooper Brady Partnership in Silicon Valley) and extended our service offering (eg KLG in New York and Vertical Integration in Tampa Florida, both occupier consultancy practices). In December we completed the acquisition of Real Facilities Inc. of Toronto which established Savills first owned office in Canada. 

A number of cities such as, New York, Chicago, Los Angeles and Washington enjoyed a very strong performance during the year.   In the investment markets we concluded some substantial transactions across the US.

Our US business posted a 52% increase in underlying profit for the year to £18.8m (2014: £12.4m). This equated to 17% on a full 2014 comparable.

Continental Europe

The Continental European Commercial Transaction Advisory business saw revenue increase by 10% to £56.4m (2014: £51.1m). In constant currency the underlying increase was 22%. There was a substantial improvement in Germany, where Savills benefited from strong performances in Frankfurt and Munich and from the opening of an office in Stuttgart. Transactional Advisory revenues also improved significantly in France, Spain, Sweden, Belgium and Poland and Ireland maintained its market leading position.  

During the year we continued to build on our Continental European platform with recruitment into investment, leasing and tenant representation services and the opening of a new office in Barcelona.

Despite these additional costs, the Continental European Transaction Advisory business recorded an increase in underlying profit of over 200% to £4.0m (2014: £1.3m).

Consultancy

Global Consultancy revenue increased by 6% to £230.3m (2014: £217.0m) and underlying profit grew by 6% to £24.7m (2014: £23.4m).

UK

Consultancy service revenue in the UK increased by 9% to £182.8m (2014: £168.2m). Strong performances from Energy and Rural Projects, Building and Project Consultancy, Development and Housing Consultancy offset a flat performance in valuation. Overall underlying profit from the UK Consultancy business increased by 12% to £21.8m (2014: £19.4m).

Asia Pacific

Revenue in the Asia Pacific Consultancy business increased by 3% to £31.0m (2014: £30.0m) with increased valuation assignments in Hong Kong, Japan, Vietnam and Singapore being offset by a reduction in development feasibility work in Mainland China. This, together with the costs of service line expansion, particularly in our Valuation business in Singapore and Australia, reduced underlying profit by 15% to £2.2m (2014: £2.6m).

Continental Europe

Our Continental European Consultancy business, which principally comprises valuation and underwriting advisory services, saw revenue decrease by 12% (2% in constant currency) to £16.5m (2014: £18.8m). There were stronger performances in Ireland, France and Spain, which partially offset a decline in underwriting revenue in Germany. Profitability was adversely impacted by recruitment costs in a number of markets and underlying profit for the year declined to £0.7m (2014: £1.4m).

Property and Facilities Management

Our Property and Facilities Management businesses continued to perform well, growing revenue by 15% overall to £390.7m (2014: £338.6m). Underlying profit increased by 13% to £21.1m (2014: £18.6m).

Asia Pacific

The Asia Pacific region grew revenue by 10% to £227.7m (2014: £207.1m). The Property and Facilities Management business is a significant strength for Savills in Asia, representing 57% of total Asia Revenue and complementing our Transaction Advisory businesses in the region. The total square footage under management in the region was down 5% to approximately 1.8bn sq ft (2014: approx. 1.9bn sq ft). In mainland China, revenue increased by 10% and profits grew by 11%. In Hong Kong, Property and Facilities Management revenue grew by 13% and profits by 11% reflecting continued pricing pressure in the market. In Singapore, revenue grew 38%, boosted by the acquisition of Ace Body Corporate Management Pte Limited. Overall the underlying profit of the Asia Pacific Property Management business grew 8% to £12.6m (2014: £11.7m).

UK

Overall, our UK Property Management teams, comprising Commercial, Residential and Rural, grew revenue by 28% (10% excluding acquisitions) to £133.9m (2014: £104.9m) thanks in part to the acquisition of the business of Smiths Gore on 31 May 2015 and Collier & Madge on 19 May 2015, together with some significant contract wins in both London and the regions. These acquisitions significantly enhanced our positions in rural land management and London office management respectively. The Residential management business and the UK Commercial business together grew area under management by 26% to approximately 218m sq ft (2014: 174m sq ft). The core UK Commercial Property Management business performed well with revenue growth of 34% and a 26% improvement in underlying profit (including the Smiths Gore and Collier & Madge acquisitions). Our Residential Property Management businesses, including lettings, increased revenue by 7%. Underlying profit was affected by the costs of expanding the lettings teams and the full year effect of the cost of the centralised letting administration service in London. Overall the net effect of revenue growth and investment in the combined UK businesses improved underlying profit by 15% to £10.9m (2014: £9.5m).

Continental Europe

In Continental Europe revenue grew by 9% to £29.1m (2014: £26.6m) with growth generally across the region offset by revenue reductions in France and Spain, due to some management portfolios being sold. In the Netherlands, revenue was boosted by the acquisition, effective 5 August 2015 of Tagis B.V., a project and property management business with which we had worked closely for a number of years. By the year end the total area under management had increased by 5% to 47.6m sq ft. Improvements in profitability in most locations were largely offset by increased losses in France, Spain and Sweden. The net effect of these factors was a marginal improvement in the underlying loss for the year to £2.4m (2014: loss £2.6m).

Investment Management

2015 was a transformational year for our Investment Management business as it was rebranded to Savills Investment Management effective 1 July, from "Cordea Savills" in anticipation of the acquisition of SEB Asset Management AG, a well established European investment manager based in Frankfurt, with an Asia Pacific platform based in Singapore. The transaction completed on 31 August 2015. Overall, Savills Investment Management revenue increased by 59% to £44.5m (2014: £28.0m). Assets Under Management (AUM) increased by 138% to €17.1bn (2014: €7.2bn), although it should be noted that approximately one third of the AUM is in funds to be liquidated or otherwise wound up by mid 2017. During the year, transactions of approximately €4.1bn were executed on behalf of fund investors, including the significant disposal of the Potsdamer Platz portfolio on 31st December 2015. In addition, €1.7bn of new capital was raised through the launch of 7 new products, including new funds, new separate accounts and investment mandates, and inflows into existing open-ended funds. Much of the period since September has been spent on integrating the acquisition, and repositioning it to enhance the focus on institutional business. Overall the investment management business improved the underlying profit margin to 24% (2014: 16%) and increased underlying profits by 148% to £10.9m (2014: £4.4m).

Summary

Overall in 2015, Savills delivered a record performance across the Group. Our US expansion programme continued well and our Asia Pacific business showed resilience in the face of changeable markets. In the UK the strength of our position in the commercial market offset market weakness in the residential sector. The Continental European business continued to build profitability and Savills Investment Management substantially enhanced its position with the acquisition of SEB Asset Management AG.

Financial review

Underlying profit margin

Underlying profit margin increased to 9.5% (2014: 9.3%) reflecting the effect of improved margins in the UK Commercial business, Continental Europe and Investment Management, which offset reduced margins in the Asia Pacific, UK Residential and US businesses, much of the latter being associated with business development expenditure.

Taxation

The tax charge for the year increased to £33.7m (2014: £22.0m). The effective tax rate on reported profits increased to 34.2% (2014: 26.0%) reflecting the effect of non-deductible acquisition costs. Of these the most significant is the charge for employment-linked deferred consideration in respect of the 2014 acquisition of Studley Inc.

The underlying effective tax rate remained consistent at 28.3% (2014: 26.6%), the slight rise reflecting increased profits in higher tax regions such as the US and Continental Europe.

Restructuring and acquisition related costs

During the period the Group incurred an aggregate restructuring charge of £1.6m (2014: £0.9m) and acquisition related costs of £23.3m (2014: £16.6m). These costs included £2.8m of transaction and integration costs associated primarily with the acquisitions of Smiths Gore in the UK and SEB Asset Management in Germany. In addition, there was a £20.5m (2014: £9.9m) charge for future consideration payments which are contingent on the continuity of recipients' employment in the future. This charge primarily relates to the acquisition of Studley, Inc.

These charges have been excluded from the calculation of underlying profit in line with Group policy.

Earnings per share

As a result of the restructuring and acquisition costs referred to above, Basic earnings per share increased marginally to 47.0p (2014: 46.8p). Adjusted on a consistent basis for restructuring, acquisition related costs and impairment charges, profits and losses on disposals, certain share-based payment adjustments and amortisation of intangible assets (excluding software), underlying basic earnings per share increased by 14% to 63.2p (2014: 55.2p).

Fully diluted earnings per share increased by 2% to 46.4p (2014: 45.3p). The underlying fully diluted earnings per share increased by 17% to 62.3p (2014: 53.4p).

Cash resources, borrowings and liquidity

Year end gross cash and cash equivalents increased 15% to £182.4m (2014: £158.1m). This principally reflected improved profits during the period, and the realisation of the cash benefit of deductions for tax losses utilised in the US.

Gross borrowings at year end increased to £31.4m (2014: £3.9m). These included £1.2m in respect of a working capital loan in Australia and £30.0m drawn under the Group's multi-currency revolving credit facility ('RCF'). Net cash at the year end was therefore £151.0m (2014: £154.2m).

Cash is typically retained in a number of subsidiaries in order to meet the requirements of commercial contracts or capital adequacy. In addition, cash in certain territories is retained principally to meet future growth requirements.

The Group's cash flow profile is biased towards the second half of the year. This is as a result of seasonality in trading and the major cash outflows associated with dividends, profit related remuneration payments and related payroll taxes in the first half. The Group cash inflow for the year from operating activities was £122.0m (2014: £96.1m), primarily as a result of improved trading in the Transaction Advisory business. As much of the Group's revenue is transactional in nature, the Board's strategy is to maintain low levels of gearing, but retain sufficient credit facilities to enable it to meet cash requirements during the year and finance the majority of business development opportunities as they arise. In December 2015, the Group entered into a new five year revolving credit facility ('RCF') of £250m with an accordion facility of a further £50m. The new RCF expires on 15 December 2020.

Capital and shareholders' interests

During the year, 0.7m (2014: 0.6m) new shares were allotted to participants under the Performance Share Plan. 1.9m new shares were issued in the first of three instalments of deferred consideration for the acquisition of Studley. 3.9m shares remain to be issued in equal instalments on 30 May 2016 and 2017. In accordance with IFRS, all EPS measures for the year include the dilutive effect of this future obligation. The total number of ordinary shares in issue at 31 December 2015 was 137.9m (2014: 134.9m).

Savills Pension Scheme

The funding level of the Savills Pension Scheme, which is closed to future service-based accrual, improved during the year as a result of a minor increase in long-term interest rates on the rate at which liabilities are discounted and the effect of planned contributions by the company on asset values. The plan deficit at the year end amounted to £15.8m (2014: £19.4m).

Net assets

Net assets as at 31 December 2015 were £365.0m (2014: £330.3m). This movement reflected increased tangible assets, receivables and cash balances derived from the Group's trading performance and acquisitions.

Foreign currency

The Group operates internationally and is exposed to foreign exchange risks. As both revenue and costs in each location are generally denominated in the same currency, transaction related risks are relatively low and generally associated with intra group activities. Consequently, the overriding foreign currency risk relates to the translation of overseas profits and losses into Sterling on consolidation. The Group does not actively seek to hedge risks arising from foreign currency translations due to their non-cash nature. As a result of the weakening of Sterling against the US Dollar, and currencies highly correlated thereto, the net impact of foreign exchange rate movements in 2015 was a £12.5m increase in revenue and an increase of £1.3m in underlying profit.

Savills plc

Consolidated income statement

for the year ended 31 December 2015

		2015	2014
	Notes	£m	£m
Revenue	2	1,283.5	1,078.2
Less:
Employee benefits expense		(858.1)	(699.3)
Depreciation		(11.2)	(8.4)
Amortisation of intangible assets		(5.7)	(4.6)
Other operating expenses		(321.3)	(290.1)
Other operating income		1.1	0.7
Profit on disposal of available-for-sale investments, joint ventures and associates		2.9	2.0
Operating profit		91.2	78.5
Finance income		1.8	1.5
Finance costs		(1.3)	(2.3)
		0.5	(0.8)
Share of post-tax profit from joint ventures and associates		6.9	7.0
Profit before income tax		98.6	84.7
Comprising:
- underlying profit before tax	2, 3	121.4	100.5
- restructuring and acquisition related costs	3	(24.9)	(17.5)
- other underlying adjustments	3	2.1	1.7
		98.6	84.7
Income tax expense	4	(33.7)	(22.0)
Profit for the year		64.9	62.7
Attributable to:
Owners of the parent		64.3	62.1
Non-controlling interests		0.6	0.6
		64.9	62.7
Earnings per share
Basic earnings per share	6(a)	47.0p	46.8p
Diluted earnings per share	6(a)	46.4p	45.3p
Underlying earnings per share
Basic earnings per share	6(b)	63.2p	55.2p
Diluted earnings per share	6(b)	62.3p	53.4p

Savills plc

Consolidated statement of comprehensive income

for the year ended 31 December 2015

	2015	2014
	£m	£m
Profit for the year	64.9	62.7
Other comprehensive (loss)/income
Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit pension scheme obligation	(3.5)	(15.9)
Tax on items that will not be reclassified	0.7	3.3
Total items that will not be reclassified to profit or loss	(2.8)	(12.6)
Items that may be reclassified subsequently to profit or loss:
Fair value gain on available-for-sale investments	0.4	0.3
Fair value loss on available-for-sale investment released to income statement	-	0.3
Currency translation differences	4.2	6.1
Tax on items that may be reclassified	2.5	1.4
Total items that may be reclassified subsequently to profit or loss	7.1	8.1
Other comprehensive income/(loss) for the year, net of tax	4.3	(4.5)
Total comprehensive income for the year	69.2	58.2
Total comprehensive income attributable to:
Owners of the parent	68.6	57.6
Non-controlling interests	0.6	0.6
	69.2	58.2

Savills plc

Consolidated statement of financial position

at 31 December 2015

			2015	2014
		Notes	£m	£m
Assets: Non-current assets
Property, plant and equipment			57.0	43.2
Goodwill		9	269.9	228.0
Intangible assets			25.4	17.5
Investments in joint ventures and associates			26.7	22.2
Deferred income tax assets			33.4	42.0
Available-for-sale investments			13.2	11.7
Retirement benefits			1.3	-
Non-current receivables			4.6	3.9
			431.5	368.5
Assets: Current assets
Work in progress			5.7	3.2
Trade and other receivables			374.2	307.9
Current income tax receivable			1.2	4.3
Derivative financial instruments			0.1	-
Cash and cash equivalents			182.4	158.1
			563.6	473.5
Liabilities: Current liabilities
Borrowings		10	31.4	3.9
Derivative financial instruments			0.2	-
Trade and other payables			455.7	406.0
Current income tax liabilities			12.0	14.7
Employee benefit obligations			7.3	6.6
Provisions for other liabilities and charges			8.8	9.3
			515.4	440.5
Net current assets			48.2	33.0
Total assets less current liabilities			479.7	401.5
Liabilities: Non-current liabilities
Trade and other payables			69.0	21.5
Retirement and employee benefit obligations			27.3	29.2
Provisions for other liabilities and charges			15.7	17.3
Deferred income tax liabilities			2.7	3.2
			114.7	71.2
Net assets			365.0	330.3
Equity: Capital and reserves attributable to owners of the parent
Share capital			3.4	3.4
Share premium			91.1	90.1
Shares to be issued			22.9	34.9
Other reserves			39.1	22.5
Retained earnings			207.8	178.6
			364.3	329.5
Non-controlling interests			0.7	0.8
Total equity			365.0	330.3

Savills plc

Consolidated statement of changes in equity

for the year ended 31 December 2015

	Attributable to owners of the parent
	Share capital	Share premium	Shares to be issued	Other reserves	Retained earnings	Total	Non-controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2015	3.4	90.1	34.9	22.5	178.6	329.5	0.8	330.3
Profit for the year	-	-	-	-	64.3	64.3	0.6	64.9
Other comprehensive income/(loss):
Remeasurement of defined benefit pension scheme obligation	-	-	-	-	(3.5)	(3.5)	-	(3.5)
Fair value gain on available-for-sale investments	-	-	-	0.4	-	0.4	-	0.4
Tax on items directly taken to reserves	-	-	-	-	3.2	3.2	-	3.2
Currency translation differences	-	-	-	4.2	-	4.2	-	4.2
Total comprehensive income for the year	-	-	-	4.6	64.0	68.6	0.6	69.2
Transactions with owners:
Employee share option scheme:
- Value of services provided	-	-	-	-	11.1	11.1	-	11.1
Purchase of treasury shares	-	-	-	-	(14.9)	(14.9)	-	(14.9)
Shares issued	-	1.0	(12.0)	12.0	-	1.0	-	1.0
Dividends	-	-	-	-	(30.3)	(30.3)	(0.4)	(30.7)
Transactions with non-controlling interests	-	-	-	-	(0.7)	(0.7)	(0.3)	(1.0)
Balance at 31 December 2015	3.4	91.1	22.9	39.1	207.8	364.3	0.7	365.0

		Attributable to owners of the parent
			Share capital	Share premium	Shares to be issued	Other reserves	Retained earnings	Total	Non-controlling interests	Total equity
			£m	£m	£m	£m	£m	£m	£m	£m
	Balance at 1 January 2014		3.4	90.1	-	17.1	159.4	270.0	0.8	270.8
	Profit for the year		-	-	-	-	62.1	62.1	0.6	62.7
	Other comprehensive income/(loss):
	Remeasurement of defined benefit pension scheme obligation		-	-	-	-	(15.9)	(15.9)	-	(15.9)
	Fair value gain on available-for-sale investments		-	-	-	0.3	-	0.3	-	0.3
	Fair value loss on available-for-sale investment released to income statement		-	-	-	0.3	-	0.3	-	0.3
	Tax on items directly taken to reserves		-	-	-	-	4.7	4.7	-	4.7
	Currency translation differences		-	-	-	6.1	-	6.1	-	6.1
	Total comprehensive income for the year		-	-	-	6.7	50.9	57.6	0.6	58.2
	Transactions with owners:
	Employee share option scheme:
	- Value of services provided		-	-	-	-	10.5	10.5	-	10.5
	Purchase of treasury shares		-	-	-	-	(12.1)	(12.1)	-	(12.1)
	Share-based payment settlement		-	-	-	-	(3.6)	(3.6)	-	(3.6)
	Shares to be issued		-	-	34.9	-	-	34.9	-	34.9
	Disposal of available-for-sale investments (net of tax)		-	-	-	(1.3)	-	(1.3)	-	(1.3)
	Dividends		-	-	-	-	(24.9)	(24.9)	(0.3)	(25.2)
	Transactions with non-controlling interests		-	-	-	-	(1.6)	(1.6)	(0.3)	(1.9)
	Balance at 31 December 2014		3.4	90.1	34.9	22.5	178.6	329.5	0.8	330.3

Savills plc

Consolidated statement of cash flows

for the year ended 31 December 2015

		2015	2014
	Notes	£m	£m
Cash flows from operating activities
Cash generated from operations	7	140.5	113.6
Interest received		2.0	1.6
Interest paid		(0.6)	(2.0)
Income tax paid		(19.9)	(17.1)
Net cash generated from operating activities		122.0	96.1
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		0.2	0.1
Proceeds from sale of available-for-sale investments		-	4.0
Proceeds from sale of interests in joint ventures and associates		5.3	-
Proceeds from sale of assets held for sale		-	8.5
Deferred consideration received in relation to prior year disposals		-	1.4
Dividends received from joint ventures and associates		4.8	5.4
Repayment of loans by joint ventures and associates		-	0.8
Acquisition of subsidiaries, net of cash acquired	9	(24.4)	(18.1)
Deferred consideration paid in relation to current and prior year acquisitions		(40.3)	-
Purchase of property, plant and equipment		(20.0)	(12.7)
Purchase of intangible assets		(1.7)	(1.5)
Purchase of investment in joint ventures, associates and available-for-sale investments		(6.0)	(2.5)
Net cash used in investing activities		(82.1)	(14.6)
Cash flows from financing activities
Proceeds from issue of share capital		1.0	-
Proceeds from borrowings	10	139.3	99.9
Repayments of borrowings	10	(112.0)	(105.8)
Share-based payment settlement		-	(3.6)
Purchase of own shares for Employee Benefit Trust		(14.9)	(12.1)
Purchase of non-controlling interests	8	(1.0)	(1.9)
Dividends paid	5	(30.7)	(25.2)
Net cash used in financing activities		(18.3)	(48.7)
Net increase in cash, cash equivalents and bank overdrafts		21.6	32.8
Cash, cash equivalents and bank overdrafts at beginning of year		158.1	122.2
Effect of exchange rate fluctuations on cash held		2.5	3.1
Cash, cash equivalents and bank overdrafts at end of year		182.2	158.1

NOTES

1. Basis of preparation

The results for the year ended 31 December 2015 have been extracted from the audited financial statements. The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) and IFRIC interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The financial information in this statement does not constitute statutory accounts within the meaning of s434 of the Companies Act 2006.  The statutory accounts for the year ended 31 December 2015, on which the auditors have given an unqualified audit report, have not yet been filed with the Registrar of Companies.

The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

2. Segment analysis

	Transaction Advisory	Consultancy	Property and Facilities Management	Investment Management	Other	Total
Year ended to 31 December 2015	£m	£m	£m	£m	£m	£m
Revenue
United Kingdom
- commercial	98.8	138.3	107.1	16.7	-	360.9
- residential	127.9	44.5	26.8	-	-	199.2
Total United Kingdom	226.7	182.8	133.9	16.7	-	560.1
Continental Europe	56.4	16.5	29.1	27.8	-	129.8
Asia Pacific
- commercial	111.9	31.0	227.7	-	-	370.6
- residential	30.5	-	-	-	-	30.5
Total Asia Pacific	142.4	31.0	227.7	-	-	401.1
United States	192.5	-	-	-	-	192.5
Total revenue	618.0	230.3	390.7	44.5	-	1,283.5
Underlying profit/(loss) before tax
United Kingdom
- commercial	16.9	15.4	9.2	4.3	(12.2)	33.6
- residential	17.8	6.4	1.7	-		25.9
Total United Kingdom	34.7	21.8	10.9	4.3	(12.2)	59.5
Continental Europe	4.0	0.7	(2.4)	6.6	-	8.9
Asia Pacific
- commercial	16.3	2.2	12.6	-	-	31.1
- residential	3.1	-	-	-	-	3.1
Total Asia Pacific	19.4	2.2	12.6	-	-	34.2
United States	18.8	-	-	-	-	18.8
Underlying profit/(loss) before tax	76.9	24.7	21.1	10.9	(12.2)	121.4

	Transaction Advisory	Consultancy	Property and Facilities Management	Investment* Management	Other	Total
Year ended to 31 December 2014	£m	£m	£m	£m	£m	£m
Revenue
United Kingdom
- commercial	84.1	126.9	79.8	16.0	-	306.8
- residential	129.2	41.3	25.1	-	-	195.6
Total United Kingdom	213.3	168.2	104.9	16.0	-	502.4
Continental Europe	51.1	18.8	26.6	12.0	-	108.5
Asia Pacific
- commercial	96.3	30.0	207.1	-	-	333.4
- residential	21.6	-	-	-	-	21.6
Total Asia Pacific	117.9	30.0	207.1	-	-	355.0
United States	112.3	-	-	-	-	112.3
Total revenue	494.6	217.0	338.6	28.0	-	1,078.2
Underlying profit/(loss) before tax
United Kingdom
- commercial	14.0	13.1	7.3	2.5	(13.7)	23.2
- residential	19.7	6.3	2.2	-	-	28.2
Total United Kingdom	33.7	19.4	9.5	2.5	(13.7)	51.4
Continental Europe	1.3	1.4	(2.6)	1.9	-	2.0
Asia Pacific
- commercial	16.7	2.6	11.7	-	-	31.0
- residential	3.7	-	-	-	-	3.7
Total Asia Pacific	20.4	2.6	11.7	-	-	34.7
United States	12.4	-	-	-	-	12.4
Underlying profit/(loss) before tax	67.8	23.4	18.6	4.4	(13.7)	100.5

*Following the acquisition of SEB Asset Management AG in August 2015 the investment management segment is split between the United Kingdom and Continental Europe.

Operating segments reflect internal management reporting to the Group's chief operating decision maker, defined as the Group Executive Board (GEB). The GEB assesses the performance of operating segments based on a measure of underlying profit before tax which adjusts reported pre-tax profit by profit/(loss) on disposals, share-based payment adjustment, restructuring costs, acquisition related costs, amortisation and impairment of goodwill and intangible assets (excluding software) and impairment of available-for-sale investments, joint ventures or associates.

The Other segment includes costs and other expenses at holding company and subsidiary levels, which are not directly attributable to the operating activities of the Group's business segments.

A reconciliation of underlying profit before tax to reported profit before tax is provided in Note 3.

3. Underlying profit before tax

The Directors seek to present a measure of underlying performance which is not impacted by exceptional items or items considered non-operational in nature. This measure of profit is described as 'underlying' and is used by management to measure and monitor performance.

	2015	2014
	£m	£m
Reported profit before tax	98.6	84.7
Adjustments:
- Amortisation of intangible assets (excluding software)	3.6	2.6
- Impairment of available-for-sale investments	-	0.6
- Share-based payment adjustment	(2.8)	(2.9)
- Profit on disposal of available-for-sale investments, joint ventures and associates	(2.9)	(2.0)
- Restructuring costs	1.6	0.9
- Acquisition related costs	23.3	16.6
Underlying profit before tax	121.4	100.5

The adjustment for share-based payment relates to the impact of the accounting standard for share-based compensation. The annual bonus is paid in a mixture of cash and deferred shares and the proportions can vary from one year to another. Under IFRS the deferred share element is amortised to the income statement over the vesting period whilst the cash element is expensed in the year. The adjustment above addresses this by deducting from profit the difference between the IFRS 2 charge and the effective value of the annual share award in order better to match the underlying staff costs in the year with the revenue recognised in the same period.

Profit on disposal of associates includes a £2.3m profit from the disposal of the assets held in BTR Capital Fund III and BTR Miller Capital Fund in July 2015. These were funds held in the US.

Profit on disposal of joint ventures includes £0.3m recognised in Asia, £0.1m in recognised in relation to Savills Jersey Ltd which became a subsidiary undertaking and £0.2m recognised in respect of two joint ventures in Spain which also became subsidiary undertakings.

Acquisition related costs include £18.0m of provisions for the future payments in relation to the acquisition of Studley, Inc. which are expensed through the income statement to reflect the requirement for the recipients to remain actively engaged in the business at the payment date. Acquisition related costs also includes £2.5m of provisions for future payments and £2.8m of transaction and integration costs in relation to the acquisitions in the United Kingdom, United States and Continental Europe during 2015. Refer to Note 9 for further details.

4. Income tax expense

The income tax expense has been calculated on the basis of the underlying rate in each jurisdiction adjusted for any disallowable charges.

	2015	2014
	£m	£m
United Kingdom
- Current tax	13.2	14.8
- Deferred tax	(1.4)	(1.9)
Foreign tax
- Current tax	14.7	12.2
- Deferred tax	7.2	(3.1)
Income tax expense	33.7	22.0

5. Dividends

	2015	2014
	£m	£m
Amounts recognised as distribution to equity holders in the year:
Ordinary final dividend for 2014 of 7.25p per share (2013: 7.0p)	9.4	9.0
Supplemental interim dividend for 2014 of 12.0p per share (2013: 8.5p)	15.6	11.0
Interim dividend of 4.0p per share (2014: 3.75p)	5.3	4.9
	30.3	24.9

The Board recommends a final dividend of 8.0p (net) per ordinary share (amounting to £10.7m) is paid, alongside the supplemental interim dividend of 14.0p per ordinary share (amounting to £18.7m), to be paid on 16 May 2016 to shareholders on the register at 15 April 2016. These financial statements do not reflect this dividend payable.

The total paid and recommended ordinary and supplemental dividends for the 2015 financial year comprises an aggregate distribution of 26.0p per ordinary share (2014: 23.0p per ordinary share).

6(a). Basic and diluted earnings per share

	2015	2015	2015	2014	2014	2014
	Earnings	Shares	EPS	Earnings	Shares	EPS
Year to 31 December	£m	million	pence	£m	million	pence
Basic earnings per share	64.3	136.8	47.0	62.1	132.7	46.8
Effect of additional shares issuable under option	-	1.9	(0.6)	-	4.4	(1.5)
Diluted earnings per share	64.3	138.7	46.4	62.1	137.1	45.3

6(b). Underlying basic and diluted earnings per share

	2015	2015	2015	2014	2014	2014
	Earnings	Shares	EPS	Earnings	Shares	EPS
Year to 31 December	£m	million	pence	£m	million	pence
Basic earnings per share	64.3	136.8	47.0	62.1	132.7	46.8
- Amortisation of intangible assets (excluding software) after tax	2.0	-	1.5	1.5	-	1.1
- Impairment of available-for-sale investment after tax	-	-	-	0.6	-	0.5
- Share-based payment adjustment after tax	(2.2)	-	(1.6)	(2.2)	-	(1.7)
- Restructuring costs after tax	1.5	-	1.1	0.9	-	0.7
- Profit on disposal of available-for-sale investments joint ventures and associates after tax	(1.9)	-	(1.4)	(2.0)	-	(1.5)
- Acquisition related costs after tax	22.7	-	16.6	16.7	-	12.6
- Net tax effect following acquisition	-	-	-	(4.4)	-	(3.3)
Underlying basic earnings per share	86.4	136.8	63.2	73.2	132.7	55.2
Effect of additional shares issuable under option	-	1.9	(0.9)	-	4.4	(1.8)
Underlying diluted earnings per share	86.4	138.7	62.3	73.2	137.1	53.4

7. Cash generated from operations

		2015	2014
		£m	£m
Profit for the year		64.9	62.7
Adjustments for:
Income tax (Note 4)		33.7	22.0
Depreciation		11.2	8.4
Amortisation of intangible assets		5.7	4.6
Loss on sale of property, plant and equipment		-	0.2
Profit on disposal of available-for-sale investments, joint ventures and associates		(2.9)	(2.0)
Net finance (income)/cost		(0.5)	0.8
Share of post-tax profit from joint ventures and associates		(6.9)	(7.0)
Decrease in employee and retirement obligations		(5.5)	(7.4)
Exchange movements on operating activities		(0.8)	0.5
Decrease in provisions		(2.8)	-
Impairment of available-for-sale investment included within other operating expenses		-	0.6
Charge for share-based compensation		11.1	10.5
Operating cash flows before movements in working capital		107.2	93.9
(Increase)/decrease in work in progress		(0.9)	0.1
Increase in trade and other receivables		(47.3)	(44.1)
Increase in trade and other payables		81.5	63.7
Cash generated from operations		140.5	113.6

8. Transactions with non-controlling interests

Under IFRS 10, transactions with non-controlling interests must be accounted for as equity transactions, therefore no goodwill has been recognised. Acquisition costs related to these transactions were not significant.

In April 2015, the Group acquired an additional 30% of the shares in its Swedish facilities management business, Loudden Bygg-och Fastighetsservice AB ('Loudden'), for consideration of £0.7m. This takes the Group's shareholding to 100%. The carrying amount of Loudden's net assets on the date of acquisition was £0.4m. The Group recognised a decrease in non-controlling interest of £0.2m. The amount charged to retained earnings in respect of the transaction was £0.6m.

In May 2015, the Group acquired an additional 0.72% of the shares in Savills (Aust) Holdings Pty Limited, for consideration of £0.1m. This takes the Group's shareholding to 100%. The carrying amount of Savills (Aust) Holdings Pty Limited net assets on the date of acquisition was £16.8m. The Group recognised a decrease in non-controlling interest of £0.01m. The amount charged to retained earnings in respect of the transaction was £0.1m.

In July 2015, the Group acquired an additional 4% of the shares in Savills Property Management Pte. Ltd. Singapore, for consideration of £0.1m. This takes the Group's shareholding to 55%. The carrying amount of Savills Property Management Pte. Ltd.  net assets on the date of acquisition was £1.7m. The Group recognised a decrease in non-controlling interest of £0.1m. The amount charged to retained earnings in respect of the transaction was £nil.

9. Acquisition of subsidiaries

The fair values of the assets acquired and liabilities assumed are provisional and will be finalised within 12 months of the acquisition date. These are summarised below:

	Provisional fair value to the Group
	Smiths Gore £m	SEB £m	US £m	Other £m	Total £m
Property, plant and equipment	0.6	0.7	0.1	0.2	1.6
Intangible assets	7.1	1.5	2.5	0.7	11.8
Deferred tax assets	-	1.8	-	-	1.8
Retirement benefits	-	0.9	-	-	0.9
Current assets: Work in progress	1.4	-	-	0.2	1.6
Trade and other receivables	8.5	7.3	0.7	1.4	17.9
Cash and cash equivalents	0.1	13.6	0.8	1.2	15.7
Total assets	17.7	25.8	4.1	3.7	51.3
Current liabilities: Trade and other payables	2.7	16.0	0.3	1.1	20.1
Provisions for other liabilities and charges	0.4	0.3	-	-	0.7
Non-current trade and other payables	-	-	-	1.1	1.1
Net assets acquired	14.6	9.5	3.8	1.5	29.4
Goodwill	18.5	1.8	10.3	6.9	37.5
Purchase consideration	33.1	11.3	14.1	8.4	66.9
Consideration satisfied by:
Net cash paid	17.5	7.4	9.5	5.7	40.1
Transfer from joint ventures	-	-	-	0.3	0.3
Deferred consideration owing at reporting date	15.6	3.9	4.6	2.4	26.5
	33.1	11.3	14.1	8.4	66.9

(a) Smiths Gore

On 31 May 2015 the Group acquired the trade and assets of partners of Smiths Gore, a market leader in the provision of rural property management services for private clients, institutions and the public sector throughout the United Kingdom. The acquisition complements the Group's existing rural business in the United Kingdom, providing a more balanced business with an enhanced focus on management services and expanding the geographical reach of the rural business in the United Kingdom.

Total acquisition consideration is provisionally determined at £33.1m, of which £17.5m was settled in cash on completion. The remainder of the acquisition consideration relates to discounted deferred consideration of £15.6m, of which £12.1m is payable on the 3rd anniversary of completion and £2.7m payable on the 5th anniversary of completion. The deferred payments payable on the 3rd and 5th anniversary of completion are contingent and subject to achievement of certain performance targets. As at the reporting date it is expected that these targets will be achieved. £0.8m has been paid prior to the year end.

Further to this, up to £4.2m is also payable to certain key staff, salaried partners and fixed share partners by the 3rd anniversary of completion subject to them being actively engaged in the business at the time of payment. As required by IFRS 3 (revised) these payments are expensed to the income statement over the relevant period of active engagement (2015: £1.6m).

Transaction costs of £0.7m were also expensed as incurred to the income statement.

Goodwill of £18.5m and intangible assets of £7.0m relating to client relationships have been provisionally determined. Goodwill is attributed to the experience, reputation and expertise of the fee earners and is not expected to be deductible for tax purposes.

The acquired business contributed revenue of £19.4m and underlying operating profit of £2.3m to the Group for the period from 1 June 2015 to 31 December 2015. Had the acquisition been made at the beginning of the financial year, revenue would have been £32.5m and underlying operating profit would have been £2.9m.

The fair value of current trade and other receivables is £8.5m and includes trade receivables with a fair value of £6.0m. The gross contractual amount for trade receivables is £6.1m, of which £0.1m is expected to be uncollectible.

(b) SEB Asset Management AG ('SEB')

On 31 August 2015 the Group acquired 100% of the equity of SEB, an international real estate investment manager.

Total acquisition consideration is provisionally determined at £11.3m, of which £7.4m was settled in cash on completion. The remainder of the acquisition consideration relates to discounted deferred consideration of £3.9m which is payable on the 2nd anniversary of completion.

Transaction and integration costs of £1.9m were also expensed as incurred to the income statement.

Goodwill of £1.8m and intangible assets of £0.9m relating to client relationships have been provisionally determined. Goodwill is attributed to the experience, reputation and expertise of the fee earners and is not expected to be deductible for tax purposes.

The acquired business contributed revenue of £16.8m and underlying operating profit of £6.5m to the Group for the period from 1 September 2015 to 31 December 2015. Had the acquisition been made at the beginning of the financial year, revenue would have been £35.2m and underlying operating profit would have been £8.7m.

The fair value of current trade and other receivables is £7.3m and includes trade receivables with a fair value of £5.4m. The gross contractual amount for trade receivables is £5.4m, all of which is expected to be collectible.

(c) US acquisitions

In April 2015, the Group acquired 100% of the assets of the Cooper Brady Partnership, a leading commercial real estate services firm specialising in tenant representation in the Silicon Valley, California. The Group also acquired 100% of the equity of Vertical Integration, Inc. and KLG Advisors (Kelly Legan & Gerard, Inc.). Vertical Integration, Inc. provides full-service real estate solutions for corporate and government entities and KLG Advisors provides corporate real estate advisory services. These acquisitions significantly strengthen the Group's Occupier Services offerings in the US.

Total acquisition consideration for these transactions is provisionally determined at £14.1m. Cash consideration payable on completion of these transactions amounted to £9.5m. Deferred consideration of up to £4.6m is payable in instalments by the 3rd anniversary of completion, of which £0.8m is subject to achievement of certain revenue targets. As at the reporting date it is expected that these targets will be achieved.

Further to this, £2.7m is payable in instalments by the 4th anniversary of completion and is subject to certain employment conditions. As required by IFRS 3 (revised) these payments are expensed to the income statement over the relevant period of employment (2015: £0.7m).

Transaction costs of £0.4m were also expensed to the income statement.

Goodwill of £10.3m and intangible assets of £2.5m relating to the order backlog (£0.9m) and client contracts (£1.6m) has been provisionally determined. Goodwill is attributable to the experience, reputation and expertise of key staff and is not expected to be deductible for tax purposes.

The acquired businesses contributed revenue of £11.2m and underlying operating profit of £0.5m to the Group for the period from April 2015 to 31 December 2015. Had the acquisitions been made at the beginning of the financial year, revenue would have been £13.7m and underlying operating profit would have been £0.9m.

The fair value of current trade and other receivables is £0.7m and includes trade receivables with a fair value of £0.7m. The gross contractual amount for trade receivables is £0.7m, all of which is expected to be collectible.

(d) Other acquisitions

During the year, the Group also acquired 100% of Colliers & Madge plc, a London based commercial property management business, Savills (Jersey) Ltd a residential agency in Jersey, Ace Body Corporate Management Pte Ltd a property management business in Singapore, Real Facilities Inc. and related companies a full service commercial real estate firm committed exclusively to representing tenants in Toronto, Tagis B.V. and Tagis Property Management B.V. a project and property management  business in the Netherlands, Savills Activos Adjudicados S.L. a property consultancy business in Spain and Savills High Street Retail S.L an occupier services business in Spain.

The Group also acquired the trade and assets of Cordeau Marshall Pty Ltd a residential agency in Australia and ProDirections Ltd., a project management consultancy in New Zealand.

Cash consideration for these transactions amounted to £5.7m. The remainder of the acquisition consideration relates deferred consideration of £2.4m, £1.5m of which is payable within one year of the reporting date.

A further £1.2m is subject to service conditions and will be expensed to the income statement over the period of service.

Transaction costs of £0.2m were also expensed as incurred to the income statement.

Goodwill of £6.9m and intangible assets of £0.7m relating to customer contracts have been provisionally determined. Goodwill is attributable to the experience and expertise of key staff and strong industry reputation and is not expected to be deductible for tax purposes.

The acquired businesses contributed revenue of £5.9m and underlying operating profit of £0.8m to the Group for the period from acquisition to 31 December 2015. Had the acquisitions been made at the beginning of the financial year, revenue would have been £11.1m and underlying operating profit would have been £1.5m.

10. Borrowings

Movements in borrowings are analysed as follows:

			£m
Opening amount as at 1 January 2015			3.9
Additional borrowings (including overdraft)			139.5
Repayments of borrowings			(112.0)
Closing amount as at 31 December 2015			31.4

		2015	2014
Current		£m	£m
Bank overdrafts		0.2	-
Unsecured bank loans due within one year or on demand		31.2	3.9
		31.4	3.9

The Group has the following undrawn borrowing facilities:

		2015	2014
		£m	£m
Floating rate
- expiring within one year or on demand		19.8	19.8
- expiring between 1 and 5 years		220.0	150.0
		239.8	169.8

On 26 May 2015 the Group exercised the remaining £30m Accordion facility, increasing the multicurrency revolving credit facility ('RCF') to £180m from £150m. On 15 December 2015 the £180m RCF was cancelled and replaced with a new £250m RCF, which expires on 15 December 2020 and can be increased by an additional £50m Accordion facility. As at 31 December 2015 £30m of the £250m RCF was drawn.

11. Related party transactions

There were no significant related party transactions during the year. All related party transactions take place on an arm's-length basis under the same terms as those available to other customers in the ordinary course of business.

As at 31 December 2015, loans outstanding to joint ventures amounted to £1.2m (2014: £1.9m).

12. Contingent liabilities

In common with comparable professional services businesses, the Group is involved in a number of disputes in the ordinary course of business. Provision is made in the financial statements for all claims where costs are likely to be incurred and represents the cost of defending and concluding claims. The Group carries professional indemnity insurance and no separate disclosure is made of the cost of claims covered by insurance as to do so could seriously prejudice the position of the Group.

Directors' responsibility statement

The Savills Report and Accounts for year end 31 December 2015 contains a responsibility statement in the following form:

Each of the Directors confirm that, to the best of their knowledge:

·     the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

·     a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties that it faces.

In accordance with Section 418, Directors' Reports shall include a statement, in the case of each Director in office at the date the Directors' Report is approved, that:

·     so far as the Director is aware, there is no relevant audit information of which the Company's Auditor is unaware; and

·     he/she has taken all the steps that he/she ought to have taken as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.

On behalf of the Board

Jeremy Helsby

Group Chief Executive

Chris Lee

Group Legal Director and Company Secretary

9 March 2016

Forward-looking statements

The financial information contained in this announcement has not been audited. Certain statements made in this announcement are forward-looking statements and are therefore subject to risks, assumptions and uncertainties that could cause actual results to differ materially from those expressed or implied because they relate to future events. These forward-looking statements include, but are not limited to, statements relating to the Company's expectations.

Copies of the Annual Report and Accounts for the year ended 31 December 2015 will be circulated to shareholders on 4 April 2016 and will also be available from the investor relations section of the Company website at www.savills.com or from:

Savills plc, 33 Margaret Street, London, W1G 0JD

Telephone:  [phone]

In addition, with prior notice, copies in alternative formats i.e. large print, audio tape, braille are available if required from:

Equiniti, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA

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