Half-year Report

RNS Number : 3167I

Savills PLC

08 August 2019

 

8 August 2019

Savills plc

("Savills" or "the Group")

RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2019

Savills plc, the international real estate advisor, today announces its unaudited results for the six months ended 30 June 2019.

Key Financial Information

· Group revenue up 16% (14% in constant currency*) to £847.0m (H1 2018: £727.8m)

· Group underlying profit** before tax down £4m (9% as reported;12% in constant currency) to £38.4m (H1 2018: £42.4m), of which £1.6m relates to the implementation of IFRS 16

· Group profit before tax down 7% to £24.7m (H1 2018: £26.7m)

· Underlying basic earnings per share 20.9p (H1 2018: 23.4p)

· Basic earnings per share 12.8p (H1 2018: 13.8p)

· Interim dividend increased 3% to 4.95p per share (H1 2018: 4.8p)

* Revenue and underlying profit for the period are translated at the prior period exchange rates to provide a constant currency comparative.

** Underlying profit before tax ('underlying profit') is calculated on a consistently reported basis in accordance with Note 3 to the Interim Financial Statements.

Highlights

· Significant growth from our less transactional businesses with revenue up 20%

· Commercial Transaction revenue growth driven by strong North American performance (up 31%) mitigating effect of reduced activity in UK and Hong Kong Transactional markets  

· UK Residential revenue down 1.5% outperforming a market backdrop of considerably lower sales volumes; UK Residential Lettings revenue up 26%

· Property and Facilities Management revenue up 27%, Consultancy revenue up 5%

· Savills Investment Management revenue up 20% as a result of fund performance and increased activity in Continental Europe. Period end AUM up 13% at €18.3bn

Commenting on the results, Mark Ridley, Group Chief Executive of Savills plc, said:

"Given the lag effect of significant investment in recruitment in the preceding period and facing some challenging transactional market conditions, we had anticipated a slight decline in profits for the first half of 2019. The Group has delivered a resilient first half performance reflecting both the robustness and geographic diversity of our market positions generally, and the strength of our less transactional businesses.

"In many markets, particularly the UK and Hong Kong, political and economic uncertainty has considerably reduced the volume of real estate trading activity in recent months, although occupier demand remains robust. Underlying demand for the secure income qualities of real estate remains high, but these macro uncertainties weigh on investor sentiment and make predictions in respect of near term market activity difficult to determine with accuracy. Continued investor demand, restricted supply and expectations of continued low interest rates suggest that, if political clarity emerges, the medium and long term dynamics of the real estate markets in which we operate remain positive.

Despite this environment, we have a robust pipeline of activity for the second half, and we currently continue to anticipate that our performance for the full year will be in line with the Board's expectations."

For further information, contact:

Savills	020 7409 8030
Mark Ridley, Group Chief Executive
Simon Shaw, Group Chief Financial Officer
Tulchan Communications	020 7353 4200
David Allchurch Elizabeth Snow

There will be an analyst presentation today at 9.30am at Savills, 15 Finsbury Circus, London, EC2M 7EB. A recording of the presentation will be available from noon at www.ir.savills.com.

Business review

The following table sets out Group revenue and underlying profit by operating segment:

Revenue	H1 2019 £m	H1 2018 £m	Change
Transaction Advisory	346.3	311.3	11%
Property and Facilities Management	335.5	263.7	27%
Consultancy	132.7	125.8	5%
Investment Management	32.5	27.0	20%
Unallocated/Central	-	-	n/a
Group revenue	847.0	727.8	16%

Underlying profit	H1 2019 £m	H1 2018 £m	Change
Transaction Advisory	9.9	19.7	(50%)
Property and Facilities Management	16.2	12.8	27%
Consultancy	11.5	10.8	6%
Investment Management	5.6	2.9	93%
Unallocated cost	(4.8)	(3.8)	(26%)
Group underlying profit	38.4	42.4	(9%)

The following table sets out Group revenue and underlying profit by geographical area:

Revenue	H1 2019 £m	H1 2018 £m	Change
UK	303.6	280.5	8%
Asia Pacific	298.4	250.4	19%
Continental Europe and the Middle East	113.3	96.6	17%
North America	131.7	100.3	31%
Unallocated/Central	-	-	n/a
Group revenue	847.0	727.8	16%

Underlying profit	H1 2019 £m	H1 2018 £m	Change
UK	22.2	23.7	(6%)
Asia Pacific	15.5	18.6	(17%)
Continental Europe and the Middle East	(1.2)	3.3	n/a
North America	6.7	0.6	1,017%
Unallocated cost	(4.8)	(3.8)	(26%)
Group underlying profit	38.4	42.4	(9%)

Overview

In the six months to 30 June 2019 Savills delivered revenue growth of 16% (14% in constant currency) to £847.0m (H1 2018: £727.8m). Underlying profit was £38.4m 9% lower than the first half of 2018 (H1 2018: £42.4m) (12% decline in constant currency). This reflected the expected decline in a number of transactional markets and the increased weighting towards our less transactional businesses. Statutory profit before tax, including deferred consideration provisions and acquisition and restructuring costs was £24.7m, (H1 2018: £26.7m).

At the beginning of the year we anticipated near term declines in transaction volumes in certain markets and an increased weighting towards the second half of the year, which we continue to expect. The UK business grew revenue by 8%, with substantial growth in Property Management mitigating declines in Transactional activity. In mainland Europe, growth in the less transactional businesses helped to offset the effect of business development costs and a significant second half weighting in transactional pipelines. Transactional growth in China and Japan helped to offset declines in other parts of the Asia Pacific region, particularly Hong Kong and Australia; and finally, North America saw strong growth with robust occupier demand benefiting some of the key markets of New York, Southern California, Atlanta and Washington DC.

The Group's underlying profit margin was 4.5% (H1 2018: 5.8%). It was affected by both the decline in Transaction activity in certain markets and compensating growth in the Property Management business. In addition, the implementation of IFRS 16 and the incremental lag effect of recent business development expenditure, particularly recruitment in Europe, Australia, China and the US, collectively comprised approximately 0.6% of the margin decline for the period. The pipeline of activity for H2 2019 is robust in these markets.

Current factors affecting Real Estate Markets

Globally, demand for income producing real estate remains strong, but, political instability and slowing global economic growth are weighing on certain markets. Amid this uncertainty and shrinking supply, investment activity fell at the start of 2019 in many markets. 

In Asia Pacific, the imposition of Sino/US trade tariffs has affected investment confidence, particularly in Hong Kong, where office investment volumes declined by 34% during the period. The domestic housing market slowdown in Australia and Singapore, and reduced retail growth in Hong Kong, Singapore and Japan, have also impacted on trading in these areas.

Real estate investment sentiment across the European continent remains positive, but slowing Eurozone growth has led to a flight to quality and a lack of supply of prime assets has restricted investment activity. Logistics assets have continued to experience yield compression as investors are pricing in future growth in demand. In the US, office demand has remained robust in the major cities.

Transaction Advisory

Revenue	H1 2019 £m	H1 2018 £m	Change
UK	88.7	92.1	(4%)
Asia Pacific	82.9	77.4	7%
Continental Europe and the Middle East	43.0	41.5	4%
North America	131.7	100.3	31%
Total	346.3	311.3	11%

Overall, our Transaction Advisory revenues increased on H1 2018 by 11% (8% growth in constant currency), driven by growth in Occupier leasing activity, particularly in North America. Leasing comprised 63% of our global transactional revenues during the period (H1 2018: 59%). Underlying profits decreased by 50% (54% in constant currency) to £9.9m during the period (H1 2018: £19.7m), reflecting a decline in capital markets activity in some of our key commercial markets and the impact of investment in key teams, the benefit of which will materialise in future periods.

UK Commercial

UK Commercial Transaction fee income decreased 7% to £31.4m (H1 2018: £33.9m), reflecting continued Brexit-related uncertainty. Investment transaction volumes for the UK as a whole were £19.7bn in H1 2019, 32% down on the same period in 2018. Investment activity in Greater London was 31% down year-on-year, while the markets outside London were down 33%.  Central London office investment volumes were also substantially down, showing a 43% year-on-year decline and the lowest first six months since 2009. In the retail sector market investment volumes fell by approximately 25% off an already low 2018 base, however our teams saw revenue decline by only 5% as they pivoted to the provision of asset advisory services and re-financing.

Against this backdrop, Savills strong position enabled our UK teams to outperform the market during the period. Demand for UK real estate, which represents good value in comparison with most international markets, remains strong and we would anticipate that transactional activity will increase if greater certainty over the UK's exit from the EU emerges in the coming months.

The occupier markets have remained more resilient, in particular the logistics sector where the H1 2019 take-up was 28% up on the long term average for the first half of the year. Take-up in the major office markets outside London reached a record high in 2018, and this strength has continued into 2019, with 3.19m sq ft of take-up across the top 10 regional cities.  This is 0.3% higher than the total for the same period in 2018.

The reduced revenues led to a decline in underlying profits for the UK Commercial Transaction business to £1.3m (H1 2018: £2.8m).

UK Residential

UK Residential Transaction market conditions remained challenging with trading volumes at the lowest level since the Global Financial Crisis. Although volumes in Prime Central London were down approximately 13%, Savills UK residential revenue declined 1.5% to £57.3m (H1 2018: £58.2m), which represented significant outperformance. In the second hand agency business, revenues grew 1%, achieved through a combination of strong performance in our markets outside London and significant growth in Core London markets, which was offset by a reduction in activity in the Prime market within Central London. Savills overall transaction volumes exchanged were up 29% in London and 6% in the regional markets. The average value of London residential property sold by Savills in the period was down 32% to £2.1m (H1 2018: £3.2m) reflecting the effect of increased transactions in the Core London market (values £0.5m-£1.5m). The average transaction value outside London grew marginally to £1.17m (H1 2018: £1.14m).

Revenue from sales of new homes was 10% down on H1 2018.  New homes reservations for H1 2019 remain consistent with H1 2018, however exchanges declined 12% reflecting an increase in the time taken to transact in current markets.

As a result of the above factors, underlying profits in the UK residential transaction business decreased by 44% to £3.5m (H1 2018: £6.3m).

Asia Pacific Commercial

Commercial Transaction fee income in Asia Pacific increased by 14% (12% in constant currency) to £68.2m (H1 2018: £59.7m). This was driven by a recovery in transaction activity in Japan, Singapore and China. The uncertainty within the Hong Kong market, together with the lag effect of investment made in growing teams in China, Singapore and Australia, negatively affected profits during the period.

Overall, underlying profits from the Asia Pacific commercial transaction business fell 26% to £4.2m (H1 2018: £5.7m).

Asia Pacific Residential

Residential Transaction fee income in Asia Pacific decreased by 17% to £14.7m (H1 2018: £17.7m) (19% in constant currency). There were significant reductions in activity as a result of 2018's cooling measures in Singapore and weaker markets in Australia and Shanghai, which were partially offset by an increase in Residential sales in Hong Kong. Underlying profits in the region declined 48% to £1.4m (H1 2018: £2.7m).

Continental Europe and the Middle East

In Europe and the Middle East, transaction fee income increased by 4% to £43.0m (H1 2018: £41.5m) (4% in constant currency) with stronger performances in the Czech Republic, Benelux, France and Sweden. There were reductions in completed transactions in Germany and Spain in the first half compared with H1 2018, however these businesses have strong pipelines for the second half and are expected to improve through the balance of the year. These factors, together with significant business development costs in the region, contributed to the underlying loss of £7.2m (H1 2018: £1.6m profit) for the first half of the year.

North America

In March the business rebranded to "Savills" and overall the North American business increased revenue during the period by 31% (24% in constant currency) to £131.7m (H1 2018: £100.3m) as a result of improved performances across the network. Core regions such as New York, Southern California, Atlanta and Washington all contributed significant revenue growth in our Occupier facing Tenant Representation business. More recently developed areas such as Denver, Raleigh and Toronto also increased revenues as new teams developed traction in those markets. As expected, the capital markets team in New York significantly reduced operating losses during the period.

In addition to the one-off rebranding exercise, the business has invested significantly in the Head Office platform for future growth increasing expenditure on areas such as technology and training.

Overall, underlying profits for North America increased significantly to £6.7m (H1 2018: £0.6m).

Property and Facilities Management

Revenue	H1 2019 £m	H1 2018 £m	Change
Asia Pacific	189.8	148.8	28%
UK	107.6	84.0	28%
Continental Europe and the Middle East	38.1	30.9	23%
Total	335.5	263.7	27%

Our Property and Facilities Management business increased global revenues by 27% (25% in constant currency) to £335.5m (H1 2018: £263.7m). Savills total area under management increased by 12% to 2.12bn sq.ft (H1 2018: 1.89bn sq ft). In Asia, increased pass through costs in Singapore and the initial periods on some significant facilities management contracts in Hong Kong/Macau increased revenue with little short term effect on profits. Strong organic growth in Asia and the UK was supplemented by the effect of the 2018 acquisitions of Broadgate Estates in the UK (14% UK revenue growth) and Cluttons in the Middle East (7% CEME revenue growth).

Underlying profit for the Property and Facilities Management business increased by 27% to £16.2m (H1 2018: £12.8m).

Consultancy

Revenue	H1 2019 £m	H1 2018 £m	Change
UK	93.4	93.0	-
Asia Pacific	22.9	20.7	11%
Continental Europe and the Middle East	16.4	12.1	36%
Total	132.7	125.8	5%

Consultancy fee income increased in the period by 5% (5% in constant currency) to £132.7m (H1 2018: £125.8m).

In the UK, strong performances in Building and Project Consultancy and Planning were partially offset by reduced activity in Housing, Lease and Leisure consultancy.

In Asia Pacific, Revenue growth in China, Japan and South Korea offset slight reductions in Australia and Singapore, where profit was also impacted by investment in a new valuations team.

In the Continental Europe and Middle East business, organic growth of 18% was driven by growth in Germany, France and Spain. This was supplemented by increased revenues from the acquisition of Cluttons Middle East (May 2018).

Underlying profit increased in the Consultancy business by 6% to £11.5m (H1 2018: £10.8m), with an improved underlying margin of 8.7 % (H1 2018: 8.6%).

Investment Management

Revenue from Investment Management increased by 20% to £32.5m (H1 2018: £27.0m). Base management fees continued to represent approximately 75% of Investment Management revenues and grew by 12% during the period. In an environment of fewer transactions (the SEB Fund disposals having completed last year), transaction-related fees declined to 11% of revenue (H1 2018: 18%) and performance fees rose to 14% of revenues (H1 2018: 5%). 85% of funds (by AUM) continued to exceed their benchmark returns on a five year rolling basis, and this track record has contributed to significant capital raising activity notwithstanding more challenging market conditions.

Assets under management increased by 13% to €18.3bn (H1 2018: €16.2bn).

Underlying profits for Investment Management increased by 93% to £5.6m (H1 2018: £2.9m).

Unallocated/central revenue and cost

The unallocated cost segment represents other costs, expenses and net interest not directly allocated to the operating activities of the Group's business segments. The H1 increase in unallocated net costs of 26% to £4.8m (H1 2018: £3.8m) reflects the impact of increased finance costs as a result of the private placement notes issued in June 2018.

Acquisition and restructuring costs

During the period the Group incurred an aggregate restructuring charge of £4.3m (H1 2018: £2.8m) and acquisition related costs of £7.1m (H1 2018: £10.7m). The restructuring charge relates principally to costs incurred in rebranding the North American business to Savills in line with the original integration plan. Acquisition costs in the period represent provisions for future consideration payments which are contingent on the continuity of recipients' employment at the time of payment. The majority of the charge relates to the 2017 acquisition of Aguirre Newman.

Earnings, financial strength and dividends

The Group's underlying profit margin in the period was 4.5% (H1 2018: 5.8%) as a result of revenues being more heavily weighted towards non-transactional business lines which carry lower margin, and the lag effect of business development costs. Basic earnings per share for the six months to 30 June 2019 decreased by 7% to 12.8p (H1 2018: 13.8p). Underlying earnings per share decreased 11% to 20.9p (H1 2018: 23.4p).

The impact of foreign exchange movements on the translation of profits from our overseas businesses resulted in an increase in underlying profit of £1.2m.

At 30 June 2019, net debt was £139.0m (30 June 2018: £94.6m net debt). At 30 June 2019 the Group had cash balances of £161.2m (30 June 2018: £158.6m) less borrowings of £300.2m (30 June 2018: £253.2m), with £252.5m of credit facilities remaining available for utilisation (30 June 2018: £293.7m).

During the period, the Group amended and extended its existing £360m revolving credit facility, to include a £90m accordion facility and extend the expiry date from December 2020 to June 2024.

The Board has declared an interim dividend of 4.95p per share (2018: 4.8p), supported by the performance of the Group's less transactional businesses. The performance of the Group's Transaction Advisory businesses will be taken into account in the consideration of any proposed final ordinary and supplemental interim dividends alongside the results for the full year.

The interim dividend of 4.95p per share will be payable on 2 October 2019 to shareholders on the register on 5 September 2019.

Principal risks and uncertainties

The key risks and uncertainties relating to the Group's operations remain largely consistent with those disclosed in the Group's Annual Report and Accounts 2018. These are listed below, please refer to pages 25 to 28 thereof or to our investors' page on www.savills.com.

·      Country/macro-economic risks, particularly in the UK and Asia and/or a global economic downturn

·      Achieving the right market positioning in response to the needs of our clients

·      Recruitment and retention of high calibre staff

·      Reputational and brand risk

·      Legal risk

·      Failure or significant interruption to IT systems causing disruption to client service

·      Business conduct

·      Changes in the regulatory environment/regulatory breaches

·      Acquisition/integration risk

In addition, specific risks which might affect the outlook for the second half are disclosed in the Summary and outlook statement below.

Summary and outlook

Given the lag effect of significant investment in recruitment in the preceding period and facing  some challenging transactional market conditions, we had anticipated a slight decline in profits for the first half of 2019. The Group has delivered a resilient first half performance reflecting both the robustness and geographic diversity of our market positions generally, and the strength of our less transactional businesses.

In many markets, particularly the UK and Hong Kong, political and economic uncertainty has considerably reduced the volume of real estate trading activity in recent months, although occupier demand remains robust. Underlying demand for the secure income qualities of real estate remains high, but these macro uncertainties weigh on investor sentiment and make predictions in respect of near term market activity difficult to determine with accuracy. Continued investor demand, restricted supply and expectations of continued low interest rates suggest that, if political clarity emerges, the medium and long term dynamics of the real estate markets in which we operate remain positive.

Despite this environment, we have a robust pipeline of activity for the second half, and we currently continue to anticipate that our performance for the full year will be in line with the Board's expectations.

Mark Ridley                                                      Nicholas Ferguson CBE
Group Chief Executive                                       Chairman

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors confirm that this condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

●	an indication of important events that have occurred during the first six months and their impact on the condensed consolidated interim financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
●	material related party transactions in the first six months of the financial year and any material changes in the related party transactions described in the last Annual Report.

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors of Savills plc are listed in the Company's Report and Accounts for the year ended 31 December 2018. A list of current Directors is maintained on the Savills plc website: www.savills.com.

By order of the Board

J Mark Ridley, Group Chief Executive

Simon Shaw, Group Chief Financial Officer

7 August 2019

Forward-Looking Statements

The financial information contained in this announcement has not been audited. Certain statements made in this announcement are forward-looking statements. Undue reliance should not be placed on such statements, which are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future results in forward-looking statements.

The Company accepts no obligation to publicly revise or update these forward-looking statements or adjust them to future events or developments, whether as a result of new information, future events or otherwise, except to the extent legally required.

Independent review report to Savills plc

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed Savills plc's condensed consolidated interim financial statements (the 'interim financial statements') in the results for the half year of Savills plc for the 6 month period ended 30 June 2019. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

What we have reviewed

The interim financial statements comprise:

·       the condensed interim consolidated statement of financial position as at 30 June 2019;

·       the condensed interim consolidated income statement and condensed interim consolidated statement of comprehensive income for the period then ended;

·       the condensed interim consolidated statement of cash flows for the period then ended;

·       the condensed interim consolidated statement of changes in equity for the period then ended; and

·       the explanatory notes to the interim financial statements.

The interim financial statements included in the results for the half year have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Group is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the directors

The results for the half year, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the results for the half year in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the results for the half year based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose.  We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the results for the half year and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers LLP

Chartered Accountants

7 August 2019

London

Savills plc

Condensed interim consolidated income statement

for the period ended 30 June 2019

		Six months to 30 June 2019	Six months to 30 June 2018	Year ended 31 December 2018
		(unaudited)	(unaudited)	(audited)
	Note	£m	£m	£m
Revenue	6	847.0	727.8	1,761.4
Less:
Employee benefits expense		(545.3)	(476.6)	(1,165.0)
Depreciation *		(30.3)	(7.3)	(14.9)
Amortisation of intangible assets and impairment of goodwill		(4.8)	(4.3)	(10.6)
Other operating expenses *		(241.0)	(216.2)	(473.3)
Other operating income		0.2	0.3	0.1
Other gains		0.3	0.1	2.9
Operating profit		26.1	23.8	100.6
Finance income		3.0	1.8	4.4
Finance costs *		(9.1)	(2.1)	(6.7)
		(6.1)	(0.3)	(2.3)
Share of post-tax profit from joint ventures and associates		4.7	3.2	11.1
Profit before income tax		24.7	26.7	109.4
Comprising:
- underlying profit before tax	6,7	38.4	42.4	143.7
- restructuring and acquisition-related costs	7	(11.4)	(13.5)	(29.1)
- other underlying adjustments	7	(2.3)	(2.2)	(5.2)
		24.7	26.7	109.4
Income tax expense	8	(7.1)	(7.8)	(32.2)
Profit for the period		17.6	18.9	77.2
Attributable to:
Owners of the parent		17.5	18.8	76.7
Non-controlling interests		0.1	0.1	0.5
		17.6	18.9	77.2
Earnings per share
Basic earnings per share	10(a)	12.8p	13.8p	56.2p
Diluted earnings per share	10(a)	12.5p	13.4p	54.6p
Underlying earnings per share
Basic earnings per share	10(b)	20.9p	23.4p	77.8p
Diluted earnings per share	10(b)	20.4p	22.8p	75.6p

Notes 1 to 17 are an integral part of these condensed interim financial statements.

* The adoption of IFRS16 in the 6 months to 30 June 2019 resulted in an increase in depreciation of £22.0m and finance costs of £4.7m. Other operating expenses decreased by £25.1m

Savills plc

Condensed interim consolidated statement of comprehensive income

for the period ended 30 June 2019

	Six months to 30 June 2019 (unaudited)	Six months to 30 June 2018 (unaudited)	Year ended 31 December 2018 (audited)
	£m	£m	£m
Profit for the period	17.6	18.9	77.2
Other comprehensive income/(loss)
Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit pension scheme obligation	(12.6)	12.8	15.7
Changes in fair value of equity investments at FVOCI	(0.8)	(0.5)	(0.1)
Tax on items that will not be reclassified	2.4	(2.5)	(2.8)
Total items that will not be reclassified to profit or loss	(11.0)	9.8	12.8
Items that may be reclassified subsequently to profit or loss:
Currency translation differences	0.4	8.1	19.3
Tax on items that may be reclassified	0.7	0.4	(0.3)
Total items that may be reclassified subsequently to profit or loss	1.1	8.5	19.0
Other comprehensive income/(loss) for the period, net of tax	(9.9)	18.3	31.8
Total comprehensive income for the period	7.7	37.2	109.0
Total comprehensive income attributable to:
Owners of the parent	7.7	37.1	108.5
Non-controlling interests	-	0.1	0.5
	7.7	37.2	109.0

Notes 1 to 17 are an integral part of these condensed interim financial statements.

Savills plc

Condensed interim consolidated statement of financial position

at 30 June 2019

		30 June 2019 (unaudited)	30 June 2018  (unaudited)	31 December 2018  (audited)
	Note	£m	£m	£m
Assets: Non-current assets
Property, plant and equipment		71.4	68.0	71.5
Right of use assets	3	238.3	-	-
Goodwill		385.7	373.9	383.8
Intangible assets		47.0	32.4	48.7
Investments in joint ventures and associates		51.7	30.6	48.3
Deferred income tax assets		31.5	32.5	29.7
Financial assets at fair value through other comprehensive income		31.3	27.4	31.2
Retirement benefit surplus	13	-	0.6	2.8
Non-current contract assets		1.2	0.8	1.3
Other receivables		28.2	15.8	19.1
		886.3	582.0	636.4
Assets: Current assets
Current contract assets		7.8	10.9	7.8
Trade and other receivables		480.9	421.4	528.3
Current income tax receivable		5.9	3.2	2.7
Derivative financial instruments		0.1	0.1	0.1
Cash and cash equivalents		161.2	158.6	223.9
		655.9	594.2	762.8
Liabilities: Current liabilities
Borrowings	14	152.1	103.6	0.4
Lease liabilities	3	45.9	-	-
Derivative financial instruments		0.1	0.6	0.1
Current contract liabilities		8.5	21.4	11.1
Trade and other payables		402.6	366.0	629.1
Current income tax liabilities		7.8	5.4	11.0
Employee benefit obligations	13	18.9	16.1	15.8
Provisions for other liabilities and charges		7.0	9.3	8.4
		642.9	522.4	675.9
Net current assets		13.0	71.8	86.9
Total assets less current liabilities		899.3	653.8	723.3
Liabilities: Non-current liabilities
Borrowings	14	148.1	149.6	149.6
Lease liabilities	3	234.2	-	-
Other payables		22.4	40.2	38.2
Retirement and employee benefit obligations	13	15.1	14.5	11.7
Provisions for other liabilities and charges		13.1	14.6	12.8
Deferred income tax liabilities		4.9	2.6	6.0
		437.8	221.5	218.3
Net assets		461.5	432.3	505.0

Equity: Capital and reserves attributable to owners of the parent
Share capital		3.6	3.6	3.6
Share premium		96.8	91.1	96.6
Other reserves		117.3	106.0	117.6
Retained earnings		243.3	231.2	286.5
		461.0	431.9	504.3
Non-controlling interests		0.5	0.4	0.7
Total equity		461.5	432.3	505.0

Notes 1 to 17 are an integral part of these condensed interim financial statements.

Savills plc

Condensed interim consolidated statement of changes in equity

for the period ended 30 June 2019

	Attributable to owners of the parent
	Share capital	Share premium	Other reserves	Retained earnings	Total	Non-controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2019 (audited)	3.6	96.6	117.6	286.5	504.3	0.7	505.0
Change in accounting policy (IFRS 16 adoption) (Note 3)	-	-	-	(9.3)	(9.3)	-	(9.3)
Balance at 1 January 2019 (restated)	3.6	96.6	117.6	277.2	495.0	0.7	495.7
Profit for the period	-	-	-	17.5	17.5	0.1	17.6
Other comprehensive (loss)/income:
Changes in fair value of equity investments at FVOCI	-	-	(0.8)	-	(0.8)	-	(0.8)
Remeasurement of defined benefit pension scheme obligation / retirement benefits	-	-	-	(12.6)	(12.6)	-	(12.6)
Tax on items directly taken to reserves	-	-	-	3.1	3.1	-	3.1
Currency translation differences	-	-	0.5	-	0.5	(0.1)	0.4
Total comprehensive (loss) / income for the period	-	-	(0.3)	8.0	7.7	-	7.7
Employee share option scheme:
- Value of services provided	-	-	-	9.0	9.0	-	9.0
Purchase of treasury shares	-	-	-	(14.0)	(14.0)	-	(14.0)
Shares issued	-	0.2	-	-	0.2	-	0.2
Dividends	-	-	-	(36.4)	(36.4)	-	(36.4)
Transactions with non-controlling interests	-	-	-	(0.5)	(0.5)	(0.2)	(0.7)
Balance at 30 June 2019 (unaudited)	3.6	96.8	117.3	243.3	461.0	0.5	461.5

	Attributable to owners of the parent
	Share capital	Share premium	Other reserves	Retained earnings	Total	Non-controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2018 (audited)	3.5	91.1	98.4	247.2	440.2	1.5	441.7
Profit for the period	-	-	-	18.8	18.8	0.1	18.9
Other comprehensive (loss)/income:
Changes in fair value of equity investments at FVOCI	-	-	(0.5)	-	(0.5)	-	(0.5)
Remeasurement of defined benefit pension scheme obligation / retirement benefits	-	-	-	12.8	12.8	-	12.8
Tax on items directly taken to reserves	-	-	-	(2.1)	(2.1)	-	(2.1)
Currency translation differences	-	-	8.1	-	8.1	-	8.1
Total comprehensive income for the period	-	-	7.6	29.5	37.1	0.1	37.2
Employee share option scheme:
- Value of services provided	-	-	-	8.6	8.6	-	8.6
Purchase of treasury shares	-	-	-	(17.4)	(17.4)	-	(17.4)
Shares issued	0.1	-	-	-	0.1	-	0.1
Dividends	-	-	-	(34.9)	(34.9)	-	(34.9)
Transactions with non-controlling interests	-	-	-	(1.8)	(1.8)	(1.2)	(3.0)
Balance at 30 June 2018 (unaudited)	3.6	91.1	106.0	231.2	431.9	0.4	432.3

	Attributable to owners of the parent
	Share capital	Share premium	Other reserves	Retained earnings	Total	Non-controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2018 (audited)	3.5	91.1	98.4	247.2	440.2	1.5	441.7
Profit for the period	-	-	-	76.7	76.7	0.5	77.2
Other comprehensive (loss)/income:
Changes in fair value of equity investments at FVOCI	-	-	(0.1)	-	(0.1)	-	(0.1)
Remeasurement of defined benefit pension scheme obligation / retirement benefits	-	-	-	15.7	15.7	-	15.7
Tax on items directly taken to reserves	-	-	0.1	(3.2)	(3.1)	-	(3.1)
Currency translation differences	-	-	19.3	-	19.3	-	19.3
Total comprehensive income for the period	-	-	19.3	89.2	108.5	0.5	109.0
Employee share option scheme:
- Value of services provided	-	-	-	18.2	18.2	-	18.2
Purchase of treasury shares	-	-	-	(25.1)	(25.1)	-	(25.1)
Shares issued	0.1	5.5	-	-	5.6	-	5.6
Dividends	-	-	-	(41.4)	(41.4)	(0.2)	(41.6)
Disposal of financial assets at FVOCI	-	-	(0.5)	0.6	0.1	-	0.1
Transfer between reserves	-	-	0.4	(0.4)	-	-	-
Transactions with non-controlling interests	-	-	-	(1.8)	(1.8)	(1.2)	(3.0)
Movement related to business combinations	-	-	-	-	-	0.1	0.1
Balance at 31 December 2018 (audited)	3.6	96.6	117.6	286.5	504.3	0.7	505.0

Notes 1 to 17 are an integral part of these condensed interim financial statements.

Savills plc

Condensed interim consolidated statement of cash flows

for the period ended 30 June 2019

		Six months to 30 June 2019 (unaudited)	Six months to 30 June 2018 (unaudited)	Year ended 31 December 2018 (audited)
	Note	£m	£m	£m
Cash flows from operating activities
Cash (used in)/generated from operations	11	(105.9)	(77.2)	147.8
Interest received		3.0	1.6	4.0
Interest paid		(4.6)	(1.4)	(5.1)
Income tax paid		(13.5)	(17.9)	(34.4)
Net cash (used in)/generated from operating activities		(121.0)	(94.9)	112.3
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		0.3	0.3	0.2
Proceeds from sale of equity investments		-	9.0	12.3
Proceeds from sale of interests in joint ventures and associates		0.5	-	1.5
Proceeds from sale of subsidiary, net of cash disposed		-	0.5	-
Dividends received from joint ventures and associates		2.4	5.0	11.2
Loans issued to joint ventures and associates		-	(0.9)	(1.1)
Disposal of subsidiaries, net of cash disposed		-	-	0.4
Acquisition of subsidiaries, net of cash acquired		(1.5)	(17.6)	(35.5)
Deferred consideration paid in relation to current and prior year acquisitions		(3.6)	(32.7)	(24.0)
Purchase of property, plant and equipment		(11.9)	(6.5)	(16.9)
Purchase of intangible assets		(3.6)	(2.6)	(5.9)
Purchase of investment in joint ventures, associates and equity investments		(0.9)	(3.3)	(25.3)
Net cash used in investing activities		(18.3)	(48.8)	(83.1)
Cash flows from financing activities
Proceeds from issue of share capital		0.2	0.1	5.6
Proceeds from borrowings		158.3	411.0	305.0
Repayments of borrowings		(9.0)	(265.0)	(261.6)
Principal elements of lease payments		(22.4)	-	-
Purchase of treasury shares		(14.0)	(17.4)	(25.1)
Purchase of non-controlling interests		(0.9)	(2.6)	(2.6)
Dividends paid		(36.4)	(34.9)	(41.6)
Net cash received from / (used in) financing activities		75.8	91.2	(20.3)
Net (decrease)/increase in cash, cash equivalents and bank overdrafts		(63.5)	(52.5)	8.9
Cash, cash equivalents and bank overdrafts at beginning of period		223.9	205.2	205.2
Effect of exchange rate fluctuations on cash held		0.1	5.3	9.8
Cash, cash equivalents and bank overdrafts at end of period		160.5	158.0	223.9

Notes 1 to 17 are an integral part of these condensed interim financial statements.

NOTES

1. General information

The Company is a public limited company incorporated and domiciled in England and Wales. The address of its registered office is 33 Margaret Street, London W1G 0JD.

This condensed consolidated interim financial information was approved for issue by the Board of Directors on 7 August 2019.

This condensed consolidated interim financial information does not comprise statutory financial statements within the meaning of section 434 of the Companies Act 2006. Statutory financial statements for the year ended 31 December 2018 were approved by the Board of Directors on 13 March 2019 and delivered to the Registrar of Companies.  The auditors' report on these accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement under section 498 of the Companies Act 2006.

This condensed consolidated interim financial information has been reviewed, not audited.

2. Basis of preparation

This condensed consolidated interim financial information for the half-year ended 30 June 2019 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2018, which have been prepared in accordance with IFRSs as adopted by the European Union.

Going concern

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able to operate within the level of its agreed facilities. Having reassessed the principal risks, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the interim financial information.

3. Accounting policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2018, as described in those financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual profit or loss.

Leases

Lease agreements give rise to both a right-of-use asset and a lease liability for future lease payables. Depreciation of the right-of-use asset will be recognised in the income statement on a straight-line basis, with interest recognised on the lease liability.

Accounting policy applied prior to 1 January 2019

Under IAS 17 (prior to transition to IFRS 16), leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership were classified as finance leases. Finance lease assets were initially recognised at an amount equal to the lower of their fair value and the present value of the minimum lease payments at inception of the lease. The assets were then depreciated over the lower of the lease terms or the estimated useful lives of the assets.

The capital elements of future obligations under finance leases were included as liabilities in the statement of financial position. Leasing payments comprise capital and finance elements and the finance element was charged to the income statement.

The annual payments under all other lease agreements (operating leases) were charged to the income statement on a straight-line basis over the lease term. Benefits received and receivable as an incentive to enter into the operating lease were also spread on a straight-line basis over the lease term.

A lease was classified as onerous where the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it.

Adoption of standards, amendments and interpretations to standards

Standards, amendments and interpretations endorsed by the EU and mandatorily effective for the first time for the financial year beginning 1 January 2019 relevant to the Group are as follows:

IFRS 16, 'Leases', replaces IAS 17 that relates to the classification, measurement and recognition of leases with the objective of ensuring that lessees and lessors provide relevant information that faithfully represents those transactions.

The Group applies the simplified transition approach and will not restate comparative amounts for the year prior to first adoption. Right-of-use assets have been measured on transition either as if the new rules had always been applied or at the amount of the lease liability on adoption (adjusted for any prepaid or accrued lease expenses and onerous lease provisions where applicable).

The Group's activities as a lessor are not material and hence there is no significant impact on the financial statements with respect to sub-leasing activities.

On adoption of IFRS 16, the group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 January 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 3.36%.

For leases previously classified as finance leases, the entity recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right of use asset and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only applied after that date.

	2019 £m
Operating lease commitments disclosed as at 31 December 2018	354.0
(Less): short-term leases recognised on a straight-line basis as expense	(5.4)
Add: adjustments as a result of a different treatment of extension and termination options	0.9
(Less): adjustments for leases committed but not yet commenced	(5.2)
Discounted using the lessee's incremental borrowing rate at the date of initial application	(46.6)
Lease liability recognised as at 1 January 2019	297.7
Of which are:
Current lease liabilities	45.2
Non-current lease liabilities	252.5
	297.7

The associated right-of-use assets for certain property leases were measured on a retrospective basis as if the new rules had always been applied. Other right-of use assets were measured at the amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at 31 December 2018.

The recognised right-of-use assets relate to the following types of assets:

	30 June 2019 £m	1 January 2019 £m
Leasehold properties	234.1	253.0
Equipment and motor vehicles	4.2	4.3
Total right-of-use assets	238.3	257.3

The change in accounting policy affected the following items in the balance sheet on 1 January 2019:

	1 January 2019 - pre IFRS 16 £m	Application of IFRS 16 £m	1 January 2019 - Restated £m
Right of use assets	-	257.3	257.3
Trade and other receivables	528.3	4.5	532.8
Trade and other payables	629.1	(10.8)	618.3
Lease liabilities (current)	-	45.2	45.2
Provisions (current)	8.4	(0.6)	7.8
Trade and other payables (non-current)	38.2	(14.7)	23.5
Lease liabilities (non-current)	-	252.5	252.5
Provisions (non-current)	12.8	(0.5)	12.3
Retained Earnings	286.5	(9.3)	277.2

Earnings per share decreased by 1.0p per share for the six months to 30 June 2019 as a result of the adoption of IFRS 16.

Use of non-GAAP measures

The Group believes that the consistent presentation of underlying profit before tax, underlying effective tax rate, underlying basic earnings per share and underlying diluted earnings per share provides additional useful information to shareholders on the underlying trends and comparable performance of the Group over time. The 'underlying' measures are also used by Savills for internal performance analysis and incentive compensation arrangements for employees. All the adjustments made to the GAAP measures are considered exceptional and/or non-operational in nature. These terms are not defined terms under IFRS and may therefore not be comparable with similarly-titled profit measures reported by other companies. They are not intended to be a substitute for, or superior to, GAAP measures.

The term 'underlying' refers to the relevant measure of profit, earnings or taxation being reported excluding the impact (pre and post-tax where applicable) of the following items:

·    amortisation of acquired intangible assets (excluding software);

·    the difference between IFRS 2, 'Share-based Payment' ('IFRS 2'), charges related to outstanding bonus-related deferred share awards and the estimated value of the current year bonus pool expected to be allocated to deferred share awards (refer to Note 7 for further explanation);

·    items that are considered exceptional by size or nature including restructuring costs, impairments of goodwill, intangible assets and investments and profits or losses arising on disposals of subsidiaries and other investments; and

·    significant acquisition costs related to business combinations.

The underlying effective tax rate represents the underlying income tax expense expressed as a percentage of underlying profit before tax. The underlying income tax expense is the income tax expense excluding the tax effect of the adjustments made to arrive at underlying profit before tax and other tax effects related to these adjustments.

Underlying basic earnings per share and underlying diluted earnings per share both utilise the underlying profit after tax measure instead of GAAP earnings. The weighted average number of shares remain the same as the GAAP measure.

A reconciliation between GAAP and underlying measures are set out in Note 7 (underlying profit before tax) and Note 10(b) (underlying basic earnings per share and underlying diluted earnings per share).

The Group also refers to revenue and underlying profit on a constant currency basis which are both non-GAAP measures. Constant currency results are calculated by translating the current year revenue and underlying profit using the prior year exchange rates. This measure allows the Group to assess the results of the current year compared to the prior year, excluding the impact of foreign currency movements.

4. Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2018, with the exception of changes in estimates that are required in determining the provision for income taxes.

5. Financial risk management

Financial risk factors

The Group's activities expose it to a variety of financial risks including foreign exchange risk, interest rate risk, credit risk and liquidity risk. The condensed interim financial statements do not include all financial risk management information and disclosures as required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 31 December 2018. There have been no changes in any risk management policies since the year end.

Fair value estimation

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

- Quoted prices (unadjusted) in active markets for identical assets and liabilities (Level 1).

- Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (Level 3).

The following table presents the Group's assets that are measured at fair value at 30 June 2019. The group had no liabilities measured at fair value at 30 June 2019:

£m	Level 1	Level 2	Level 3		Total
2019
Assets
Financial assets held at FVOCI
- Listed	1.1	-	-		1.1
- Unlisted	-	7.8	22.4		30.2
Derivative financial instruments	-	0.1	-		0.1
Total assets	1.1	7.9	22.4		31.4
Liabilities
Derivative financial instruments	-	0.1	-		0.1
Total liabilities	-	0.1	-		0.1

The following table presents the Group's assets and liabilities that are measured at fair value at 31 December 2018:

£m	Level 1	Level 2	Level 3		Total
2018
Assets
Financial assets held at FVOCI
- Listed	1.1	-	-		1.1
- Unlisted	-	10.4	19.7		30.1
Derivative financial instruments	-	0.1	-		0.1
Total assets	1.1	10.5	19.7		31.3
Liabilities
Derivative financial instruments	-	0.1	-		0.1
Total liabilities	-	0.1	-		0.1

There were no transfers between levels of the fair value hierarchy in the period.

There were no changes in valuation techniques during the period.

The fair value of all other financial assets and liabilities approximate their carrying amount.

Valuation techniques

Level 1 instruments are those whose fair values are based on quoted market prices.

Level 2 instruments include investment funds, the fair value of these funds are based on underlying asset values determined by the Fund Manager's audited annual financial statements. The fair value of other unlisted investments also included as level 2 are based on price earnings models and historical cost information.

If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3.

6. Segment analysis

Six months to 30 June 2019	Trans-action Advisory	Property and Facilities Manage-ment	Consult-ancy	Invest- ment Manage-ment	Other	Total
(unaudited)	£m	£m	£m	£m	£m	£m
Revenue
United Kingdom
- commercial	31.4	89.5	73.3	13.9	-	208.1
- residential	57.3	18.1	20.1		-	95.5
Total United Kingdom	88.7	107.6	93.4	13.9	-	303.6
Continental Europe and the Middle East	43.0	38.1	16.4	15.8	-	113.3
Asia Pacific
- commercial	68.2	189.8	22.9	2.8	-	283.7
- residential	14.7	-	-	-	-	14.7
Total Asia Pacific	82.9	189.8	22.9	2.8	-	298.4
North America	131.7	-	-	-	-	131.7
Total revenue	346.3	335.5	132.7	32.5	-	847.0
Underlying profit/(loss) before tax
United Kingdom
- commercial	1.3	5.6	6.2	2.2	(4.8)	10.5
- residential	3.5	1.2	2.2	-	-	6.9
Total United Kingdom	4.8	6.8	8.4	2.2	(4.8)	17.4
Continental Europe and the Middle East	(7.2)	0.8	2.1	3.1	-	(1.2)
Asia Pacific
- commercial	4.2	8.6	1.0	0.3	-	14.1
- residential	1.4	-	-	-	-	1.4
Total Asia Pacific	5.6	8.6	1.0	0.3	-	15.5
North America	6.7	-	-	-	-	6.7
Underlying profit/(loss) before tax	9.9	16.2	11.5	5.6	(4.8)	38.4

Six months to 30 June 2018	Trans-action Advisory	Property and Facilities Manage-ment	Consult-ancy	Invest- ment Manage-ment	Other	Total
(unaudited)	£m	£m	£m	£m	£m	£m
Revenue
United Kingdom
- commercial	33.9	69.6	73.6	11.4	-	188.5
- residential	58.2	14.4	19.4	-	-	92.0
Total United Kingdom	92.1	84.0	93.0	11.4	-	280.5
Continental Europe and the Middle East	41.5	30.9	12.1	12.1	-	96.6
Asia Pacific
- commercial	59.7	148.8	20.7	3.5	-	232.7
- residential	17.7	-	-	-	-	17.7
Total Asia Pacific	77.4	148.8	20.7	3.5	-	250.4
North America	100.3	-	-	-	-	100.3
Total revenue	311.3	263.7	125.8	27.0	-	727.8
Underlying profit/(loss) before tax
United Kingdom
- commercial	2.8	4.2	6.3	1.2	(3.8)	10.7
- residential	6.3	0.7	2.2	-	-	9.2
Total United Kingdom	9.1	4.9	8.5	1.2	(3.8)	19.9
Continental Europe and the Middle East	1.6	(0.2)	0.6	1.3	-	3.3
Asia Pacific
- commercial	5.7	8.1	1.7	0.4	-	15.9
- residential	2.7	-	-	-	-	2.7
Total Asia Pacific	8.4	8.1	1.7	0.4	-	18.6
North America	0.6	-	-	-	-	0.6
Underlying profit/(loss) before tax	19.7	12.8	10.8	2.9	(3.8)	42.4

Year ended to 31 December 2018	Trans-action Advisory	Property and Facilities Manage-ment	Consult-ancy	Invest-ment Manage-ment	Other	Total
(audited)	£m	£m	£m	£m	£m	£m
Revenue
United Kingdom
- commercial	98.4	157.1	171.5	25.7	-	452.7
- residential	131.5	33.8	44.4	-	-	209.7
Total United Kingdom	229.9	190.9	215.9	25.7	-	662.4
Continental Europe	113.1	68.9	33.4	31.6	-	247.0
Asia Pacific
- commercial	160.1	327.0	45.1	9.4	-	541.6
- residential	45.9	-	-	-	-	45.9
Total Asia Pacific	206.0	327.0	45.1	9.4	-	587.5
North America	264.5	-	-	-	-	264.5
Total revenue	813.5	586.8	294.4	66.7	-	1,761.4
Underlying profit/(loss) before tax
United Kingdom
- commercial	15.7	10.2	19.0	4.7	(13.7)	35.9
- residential	17.6	2.8	6.8	-	-	27.2
Total United Kingdom	33.3	13.0	25.8	4.7	(13.7)	63.1
Continental Europe	5.5	-	3.0	4.4	-	12.9
Asia Pacific
- commercial	21.2	19.2	4.3	1.9	-	46.6
- residential	8.3	-	-	-	-	8.3
Total Asia Pacific	29.5	19.2	4.3	1.9	-	54.9
North America	12.8	-	-	-	-	12.8
Underlying profit/(loss) before tax	81.1	32.2	33.1	11.0	(13.7)	143.7

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, significant restructuring costs, acquisition-related costs, amortisation of acquired intangible assets (excluding software) and impairments.

The Other segment includes revenue, 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 7.

7. 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 is described as 'underlying' and is used by management to assess and monitor performance.

	Six months to 30 June 2019 (unaudited)	Six months to 30 June 2018 (unaudited)	Year ended 31 December 2018 (audited)
	£m	£m	£m
Reported profit before tax	24.7	26.7	109.4
Adjustments:
- Amortisation of acquired intangible assets (excluding software)	3.7	2.6	6.6
- Impairment of goodwill and acquired intangible assets (excluding software)	-	-	0.3
- Share-based payment adjustment	(1.1)	(0.3)	(1.9)
- Profit on disposal of subsidiary and share in joint venture	(0.3)	(0.1)	(2.9)
- Restructuring costs	4.3	2.8	8.4
- Acquisition-related costs	7.1	10.7	20.7
- GMP equalisation charge	-	-	3.1
Underlying profit before tax	38.4	42.4	143.7

The adjustment for share-based payments 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 adding to or deducting from profit the difference between the IFRS 2 charge in relation to outstanding bonus-related share awards and the estimated value of the current year bonus pool to be awarded in deferred shares. This adjustment is made in order to better match the underlying staff cost in the year with the revenue recognised in the same period.

During the period, the Group disposed of a Chinese joint venture, resulting in a £0.3m profit. The profit in the period ended 30 June 2018 related to the disposal of Savills Asset Management Co. Ltd., a South Korean asset management company. 

Restructuring costs includes costs of integration activities in relation to significant business acquisitions. Costs in the period ended 30 June 2019 relate primarily to the rebranding of the North America business to Savills. Costs in the period ended 30 June 2018 relate primarily to the 2017 acquisition of Aguirre Newman in Spain.  

Acquisition related costs consist of £6.9m charge for future consideration payments which are contingent on the continuity of recipients' employment in the future (30 June 2018: £7.0m). For the periods ended 30 June 2019 and 30 June 2018, a significant portion of the charge related to the Aguirre Newman acquisition.

8. Income tax expense

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

	Six months to 30 June 2019 (unaudited)	Six months to 30 June 2018 (unaudited)	Year ended 31 December 2018 (audited)
	£m	£m	£m
UK
- Current tax	3.5	3.8	12.4
- Deferred tax	(2.1)	(1.1)	(0.5)
Foreign tax
- Current tax	6.1	5.5	20.0
- Deferred tax	(0.4)	(0.4)	0.3
Income tax expense	7.1	7.8	32.2

The forecast Group effective tax rate is 28.7% (30 June 2018: 29.2% and 31 December 2018: 29.4%), which is higher (30 June 2018 and 31 December 2018: higher) than the UK standard effective annual rate of corporation tax of 19% (30 June 2018 and 31 December 2018: 19%). This reflects permanent disallowable expenses, including acquisition costs. The Group underlying effective tax rate was 25.3% (30 June 2018: 24.5% and 31 December 2018: 25.7%).

9. Dividends

	Six months to 30 June 2019 (unaudited)	Six months to 30 June 2018 (unaudited)	Year ended 31 December 2018 (audited)
	£m	£m	£m
Amounts recognised as distribution to equity holders in the period:
Ordinary final dividend of 10.8p per share (2017: 10.45p)	14.9	14.3	14.3
Supplemental interim dividend of 15.6p per share (2017: 15.1p)	21.5	20.6	20.6
Interim dividend of 4.8p per share	-	-	6.5
	36.4	34.9	41.4
Proposed interim dividend for the six months ended 30 June 2019			£6.8m

The Board has declared an interim dividend for the six months ended 30 June 2019 of 4.95p per ordinary share (30 June 2018: 4.8p) to be paid on 2 October 2019 to shareholders on the register on 5 September 2019. The interim dividend has not been recognised in these interim financial statements. It will be recognised in equity in the year to 31 December 2019.

10(a). Basic and diluted earnings per share

	2019	2019	2019	2018	2018	2018
	Earnings	Shares	EPS	Earnings	Shares	EPS
Six months to 30 June (unaudited)	£m	million	pence	£m	million	pence
Basic earnings per share	17.5	136.3	12.8	18.8	136.3	13.8
Effect of additional shares issuable under option	-	3.7	(0.3)	-	3.9	(0.4)
Diluted earnings per share	17.5	140.0	12.5	18.8	140.2	13.4
				2018	2018	2018
				Earnings	Shares	EPS
Year to 31 December (audited)				£m	million	pence
Basic earnings per share				76.7	136.4	56.2
Effect of additional shares issuable under option				-	4.0	(1.6)
Diluted earnings per share				76.7	140.4	54.6

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

	2019	2019	2019	2018	2018	2018
	Earnings	Shares	EPS	Earnings	Shares	EPS
Six months to 30 June (unaudited)	£m	million	pence	£m	million	pence
Basic earnings per share	17.5	136.3	12.8	18.8	136.3	13.8
- Amortisation of acquired intangible assets (excluding software) after tax	2.7	-	2.0	1.9	-	1.4
- Share-based payment adjustment after tax	(1.3)	-	(1.0)	(0.3)	-	(0.2)
- Restructuring costs after tax	3.2	-	2.3	2.6	-	1.9
- Profit on disposal of subsidiary and equity investments after tax	(0.2)	-	(0.1)	(0.1)	-	(0.1)
- Acquisition-related costs after tax	6.7	-	4.9	10.3	-	7.6
- Forecast annual tax rate adjustment	-	-	-	(1.3)	-	(1.0)
Underlying basic earnings per share	28.6	136.3	20.9	31.9	136.3	23.4
Effect of additional shares issuable under option	-	3.7	(0.5)	-	3.9	(0.6)
Underlying diluted earnings per share	28.6	140.0	20.4	31.9	140.2	22.8
				2018	2018	2018
				Earnings	Shares	EPS
Year to 31 December (audited)				£m	million	pence
Basic earnings per share				76.7	136.4	56.2
- Amortisation of acquired intangible assets (excluding software) after tax				4.7	-	3.4
- Impairment of goodwill after tax				0.3	-	0.2
- Share-based payment adjustment after tax				(1.7)	-	(1.2)
- Profit on disposal of available-for-sale investments after tax				(2.9)	-	(2.1)
- Restructuring costs after tax				6.9	-	5.1
- Acquisition-related costs after tax				19.7	-	14.4
- GMP equalisation charge after tax				2.5	-	1.8
Underlying basic earnings per share				106.2	136.4	77.8
Effect of additional shares issuable under option				-	4.0	(2.2)
Underlying diluted earnings per share				106.2	140.4	75.6

11. Cash (used in)/generated from operations

	Six months to 30 June 2019 (unaudited)	Six months to 30 June 2018 (unaudited)	Year ended 31 December 2018 (audited)
	£m	£m	£m
Profit for the period	17.6	18.9	77.2
Adjustments for:
Income tax (Note 8)	7.1	7.8	32.2
Depreciation	30.3	7.3	14.9
Amortisation of intangible assets	4.8	4.3	10.3
Impairment of goodwill	-	-	0.3
Loss on disposal of property, plant and equipment and intangible assets	-	-	0.8
Profit on disposal of subsidiary and equity investments	(0.3)	(0.1)	(2.9)
Net finance cost	6.1	0.3	2.3
Share of post-tax profit from joint ventures and associates	(4.7)	(3.2)	(11.1)
Decrease in employee and retirement obligations	(3.1)	(3.7)	(7.0)
Exchange movements on operating activities	(0.1)	0.6	(0.6)
Increase/(decrease) in provisions	0.1	(0.3)	(3.2)
Charge for share-based compensation	9.0	8.6	18.2
Operating cash flows before movements in working capital	66.8	40.5	131.4
Decrease/(increase) in trade and other receivables and contract assets	41.6	60.5	(36.7)
(Decrease)/increase in trade and other payables and contract liabilities	(214.3)	(178.2)	53.1
Cash (used in)/generated from operations	(105.9)	(77.2)	147.8

12. Acquisition of subsidiaries

On 3 June 2019, the Group acquired the trade and assets of KKS Strategy LLP, a London-based workplace consultancy and design studio. Total acquisition consideration is provisionally determined at £1.5m, all of which was settled on completion. A further £1.6m is payable over instalments in June 2020, 2021 and 2022 and is deemed to be linked to continued active engagement within the business. As required by IFRS 3 (revised), these payments will be expensed to the income statement over the relevant period of engagement.

The fair value exercise is in progress and goodwill of £1.5m has been provisionally determined being equal to the cash consideration paid upon completion. No other assets were identified as part of the fair value exercise undertaken.

Update to provisional fair value of prior period acquisition

In the year ended 31 December 2018 the Group acquired Cluttons Middle East and the Currell Group along with the third party property management portfolio of Broadgate Estates Limited. As at 30 June 2019, there were no updates to the provisional fair values in respect of these acquisitions as reported in the Group's 2018 Annual Report.

13. Retirement and employee benefit obligations

Defined benefit plans

The Group operates two defined benefit plans.

The Pension Plan of Savills (the 'UK Plan') is a UK-based plan which provided final salary pension benefits to some employees, but was closed with regard to future service-based benefit accrual with effect from 31 March 2010. From 1 April 2010, pension benefits for former members of the UK Plan are provided through the Group's defined contribution Personal Pension Plan.

The Savills Fund Management GMBH Plan (the 'SFM Plan') is a Germany-based plan which provides final salary benefits to 17 active employees and 97 former employees. The plan is closed to future service-based benefit accrual.

Significant actuarial pension assumptions are detailed in the Group's Annual Report and Accounts 2018 and are the same as at 31 December 2018 except for the following:

	UK Plan			SFM Plan
	Six months to 30 June 2019	Six months to 30 June 2018	Year ended 31 December 2018	Six months to 30 June 2019	Six months to 30 June 2018	Year ended 31 December 2018
Expected rate of salary increases	3.25%	3.25%	3.25%	2.50%	2.50%	2.50%
Projection of social security contribution ceiling	-	-	-	2.25%	2.25%	2.25%
Discount rate	2.30%	2.80%	2.90%	1.42%	2.06%	2.07%
Inflation assumption	3.40%	3.30%	3.40%	1.75%	1.75%	1.75%
Rate of increase to pensions in payment
- accrued before 6 April 1997	3.00%	3.00%	3.00%	-	-	-
- accrued after 5 April 1997	3.20%	3.20%	3.20%	-	-	-
- accrued after 5 April 2005	2.30%	2.20%	2.30%	-	-	-
- pension promise before 1 January 1986	-	-	-	2.25%	2.25%	2.25%
- pension promise after 1 January 1986	-	-	-	1.75%	1.75%	1.75%
Rate of increase to pensions in deferment
- accrued before 6 April 2001	5.00%	5.00%	5.00%	-	-	-
- accrued after 5 April 2001	2.40%	2.20%	2.30%	-	-	-
- accrued after 5 April 2009	2.40%	2.20%	2.30%	-	-	-

The amounts recognised in the statement of financial position are as follows:

UK Plan	30 June 2019 £m	30 June 2018 £m	31 December 2018 £m
Present value of funded obligations	299.0	273.9	262.1
Fair value of plan assets	(295.9)	(273.3)	(264.9)
Liability/(Asset) recognised in the statement of financial position (included in retirement and employee benefit obligations)	3.1	0.6	(2.8)

SFM Plan	30 June 2019 £m	30 June 2018 £m	31 December 2018 £m
Present value of funded obligations	15.5	13.8	14.0
Fair value of plan assets	(14.7)	(14.4)	(13.7)
Liability/(Asset) recognised in the statement of financial position (included in retirement benefit surplus)	0.8	(0.6)	0.3

The amount recognised within the income statement in relation to the UK Plan for the period ended 30 June 2019 is a net interest cost of £nil (30 June 2018: £0.2m, 31 December 2018: £0.4m).

The amount recognised within the income statement in relation to the SFM Plan for the period ended 30 June 2019 is a current service cost of £nil (30 June 2018: £nil, 31 December 2018: £0.1m).

Included in retirement and employee benefit obligations is £30.9m relating to holiday pay and long service leave (30 June 2018: £30.0m, 31 December 2018: £27.2m).

14. Borrowings

Movements in borrowings are analysed as follows:

			£m
Opening amount as at 1 January 2019			150.0
Additional borrowings			156.7
Repayments of borrowings (including overdraft movement)			(6.5)
Closing amount as at 30 June 2019			300.2

	30 June 2019	30 June 2018	31 December 2018
	£m	£m	£m
Current
Bank overdrafts	0.7	0.6	-
Unsecured bank loans	151.4	102.9	0.4
Finance leases	-	0.1	-
Non-current
Loan notes	150.0	150.0	150.0
Transaction costs	(2.0)	(0.5)	(0.5)
Finance leases	0.1	0.1	0.1
	300.2	253.2	150.0

The Group has the following undrawn borrowing facilities:

	30 June 2019	30 June 2018	31 December 2018
	£m	£m	£m
Floating rate
- expiring within one year or on demand	35.9	36.2	32.1
- expiring between 1 and 5 years	216.6	257.5	360.1
	252.5	293.7	392.2

In June 2019 the Group amended and extended its existing £360m multi-currency revolving credit facility ('RCF') to include a £90m accordion facility and extend the expiry date from December 2020 to June 2024. As at 30 June 2019 £143.5m (30 June 2018: £102.5m, 31 December 2018: £nil) of the RCF was drawn.

In June 2018, the Group raised £150.0m through the issue of 7, 10 and 12 year private placement fixed rate notes.

15. Related party transactions

As at 30 June 2019, there were no loans outstanding to associates and £2.4m of loans outstanding to joint ventures (30 June 2018: £1.5m of loans outstanding to joint ventures and no loans outstanding to associates, 31 December 2018: £2.3m loans outstanding to joint ventures and no loans outstanding to associates).

There were no material related party transactions during the period. 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.

16. 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.

17. Seasonality

A significant percentage of revenue is seasonal which has historically caused revenue, profits and cash flow from operating activities to be lower in the first half and higher in the second half of each year. The concentration of revenue and cash flow in the fourth quarter is due to an industry-wide focus on completing transactions toward the calendar year end.

SHAREHOLDER INFORMATION

Like many other listed public companies, Savills no longer issues a hard copy of the Interim Statement to shareholders.

This announcement together with the attached financial statements and notes may be downloaded from the investor relations section of the Company website at www.savills.com.

 

END

 

 

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