Interim Results
Savills PLC
04 September 2002
FOR IMMEDIATE RELEASE WEDNESDAY 4 SEPTEMBER 2002
Savills plc, the international property advisers, today announced interim
results for the six months ended 30 June 2002
• Group turnover for the six months was up 27.4% at £141.7m (2001 -
£111.2m).
• Group operating profit including share of joint ventures & associated
undertakings increased by 43.0% to £11.5m (2001 - £8.0m).
• Reported Group pre-tax profit rose by 5.9% at £10.7m (2001 - £10.1m).
• Basic earnings per share were 10.0p (2001 - 11.0p).
Richard Jewson, Chairman of Savills plc, comments: 'I am delighted to report a
strong set of half year results at a time when financial markets continue to be
volatile and there are widespread concerns about the level of corporate
profitability. The current strength of the property markets in which we operate
gives the Directors grounds for cautious confidence about the prospects for the
Group.'
*** Chairman's Statement and Interim Results follow ***
Savills plc. Registered in England No. 2122174. Registered Office 20 Grosvenor
Hill, Berkeley Square, London W1K 3HQ
For further information, contact:
Savills 020 7499 8644
Richard Jewson, Chairman
Aubrey Adams, Group Chief Executive
Grandfield 020 7417 4170
Harry Hunt/Gareth Penn
CHAIRMAN'S STATEMENT
RESULTS AND DIVIDEND
We reported in our Trading Update announced on 2 July 2002 that, despite the
continuing weaknesses in commercial leasing and Asian transactional markets, the
investment, residential and Asian property markets gave us confidence in
prospects for the property sector generally. This continues to be the case and
I am delighted to report a strong set of half year results at a time when
financial markets continue to be volatile and there are widespread concerns
about the level of corporate profitability.
I am very pleased to announce that profit before tax for the six months ended 30
June 2002 has increased by 5.9% to £10.7m (2001 - £10.1m). Earnings per share
before interest, taxation, depreciation and amortisation of goodwill increased
by 13.5% to 27.8p (2001 - 24.5p). Basic earnings per share were 10.0p (2001 -
11.0p). Turnover was up 27.4% at £141.7m (2001 - £111.2m); of this £14.1m
related to property sales. The balance sheet remains strong, with a cash
balance of £22.2m. Continuing the policy of progressive dividend increasing in
line with Group performance, the Directors have declared an increased interim
dividend of 3.4p (2001 - 3.25p) to be paid on 25 October 2002.
The effective tax charge for the period of 38.3% (2001 - 35.2%), combined with
increased minority interests due to the significant increase in profit from the
European operations, has resulted in a reduced basic EPS of 10.0p (2001 -
11.0p).
TRADING REVIEW
Transactional Advice
During the half year, turnover for the Transactional Advice businesses was
£58.6m (2001 - £47.5m), operating profit was £8.7m (2001 - £4.6m) and profit
before taxation was £8.6m (2001 - £4.7m).
The outstanding performance of our Transactional Advice business derives in part
from the strength of the property investment market, where there continues to be
significant demand from a broad range of UK and overseas buyers, both private
and institutional. Some of the continuing demand for high quality investments
reflects investors' lack of confidence in other markets.
Tenant demand for offices in London and the South East is being adversely
affected by the downturn, particularly in the technology-based industries and
the financial sector.
Residential markets remain strong both in London and the country. The new homes
market has been particularly buoyant despite widespread concern in the press
about the buy-to-let market.
There has been a substantial increase in contribution from our investment
business in mainland Europe, where we have built up a particularly strong market
position. The Asian Investment team also performed well in what is generally a
very difficult market. In Australia the market has been largely unaffected by
the economic downturn elsewhere and the business is making an increased
contribution to Group results.
Consultancy
During the half year, turnover for the Consultancy businesses was £18.8m (2001 -
£17.4m), operating profit was £2.6m (2001 - £2.3m) and profit before taxation
was £2.7m (2001 - £2.4m).
We continue to expand our UK Consultancy business, particularly the Commercial
Valuation and Building Consultancy divisions, where we have recently made a
number of senior appointments resulting in the expansion of our client base.
These new appointments are both in our London and regional offices.
Property Management
During the half year, turnover for the Property Management businesses was £26.7m
(2001 - £23.6m), operating profit was £1.3m (2001 - £1.6m) and profit before
taxation was £1.7m (2001 - £2.1m).
The UK Commercial Property Management division has secured a number of notable
new instructions, in particular benefiting from the arrival of the International
Investment team, where a number of new investment clients also transferred their
UK property management contracts to Savills. This, together with a strong Hong
Kong operation, should ensure marked growth in management income. Further
investment in accounting systems and software throughout the Group's Property
Management business has reduced profits for the period.
Facilities Management
During the half year, turnover for the Facilities Management businesses was
£16.7m (2001 - £15.9m), operating profit was £1.1m (2001 - £850,000) and the
loss before taxation was £2.1m (2001 - profit of £761,000).
Our facilities management business in Hong Kong remains competitive and is
performing in line with expectations.
As reported in June, our joint venture with Trammell Crow Company
(TrammellCrowSavills) has had a frustrating half year pursuing two potentially
very large outsourcing contracts for German companies, neither of which has
materialised. As a result there is a write-off of pursuit costs together with
other operating losses totalling £1.5m and the goodwill carrying value of
TrammellCrowSavills in Europe has been written down from £3m to £1.5m. We and
Trammell Crow Company have reviewed the future marketing strategy for
TrammellCrowSavills and will concentrate on smaller scale outsourcing projects.
We both remain committed to making our strategic alliance successful,
concentrating on servicing clients' outsourcing requirements in the UK and
Europe.
Property Trading
During the half year, turnover for the Property Trading businesses was £15.6m
(2001 - £1.8m), operating profit was £1.5m (2001 - loss of £59,000) and profit
before taxation was £515,000 (2001 - loss of £1.1m).
The Group's principal trading arm has made a number of sales during the half
year, showing a satisfactory investment return and is continuing to progress
further purchases within its strategy for joint investment. The changes being
made to the tenant mix at The Mill Discount Department Store in Yorkshire are
nearing completion and trading has improved on the same period in 2001.
Financial Services
During the half year, turnover for the Financial Services businesses was £5.4m
(2001 - £5.2m), operating profit was £646,000 (2001 - loss of £99,000) and
profit before taxation was £644,000 (2001 - £2.1m).
Our private client Financial Services business continues to perform well, with
results ahead of plan. The prospects for this business remain excellent. The
reduction in profit compared with 2001 is due to a one-off profit on the sale of
the interest in Killik & Co in the previous period.
BOARD
We were pleased to announce the appointments of Fields Wicker-Miurin and Tim
Ingram as Non-Executive Directors with effect from 27 June 2002. Fields has
over 20 years' experience in the financial and professional services sectors in
the USA, UK and Europe. She is currently a Non-Executive Director of United
Business Media plc, an External Member of the Executive Board of the DTI and a
member of the NASDAQ Technology Advisory Council. Tim also has over 20 years'
experience, largely in banking and finance both abroad and in the UK. He is
currently Chief Executive of Caledonia Investments plc, a Non-Executive Director
of The Sage Group plc and was previously an Executive Director at Abbey National
plc.
We also announced in June that, at his own request, David Craig resigned as a
Non-Executive Director with effect from 30 June 2002 and I would like to thank
him for his considerable contribution since his appointment in 1995.
In addition, on 28 August 2002 Derek McClain, Chief Financial Officer of
Trammell Crow Company, replaced E Stevenson Belcher as one of the Directors
nominated to the Board under the terms of our strategic alliance.
OUTLOOK
The current strength of the property markets in which we operate gives the
Directors grounds for cautious confidence about the prospects for the Group.
Richard Jewson
Chairman
4 September 2002
INDEPENDENT REVIEW REPORT TO SAVILLS plc
Introduction
We have been instructed by the Company to review the financial information which
comprises, the profit and loss account, balance sheet, cash flow statement,
statement of total recognised gains and losses, reconciliation of movement in
shareholders' funds and related notes. We have read the other information
contained in the interim report and considered whether it contains any apparent
misstatements or material inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the Directors. The Directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of Group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2002.
PricewaterhouseCoopers
Chartered Accountants
1 Embankment Place
London
WC2N 6RH
4 September 2002
Interim Results
(Unaudited)
Notes Six month to Restated Restated
30.06.02 Six months Year to
£'000 to 30.06.01 31.12.01
£'000 £'000
Turnover - Group & share of joint ventures
Other continuing operations 127,921 115,603 239,269
Disposal of property held for sale 14,050 - 650
Less: share of turnover of joint ventures (236) (4,362) (4,483)
Total Group turnover 3 141,735 111,241 235,436
Operating profit - continuing operations
Other continuing operations 12,922 8,048 17,963
Disposal of property held for sale 1,258 - 194
Acquisitions 147 - 81
Group operating profit 2 & 3 14,327 8,048 18,238
Share of operating profit of joint ventures 47 690 708
Share of operating loss of associated
undertakings 4 (2,918) (729) (773)
Operating profit including share of joint ventures
& associated undertakings 11,456 8,009 18,173
(Loss)/profit on disposal of interests in
subsidiary undertakings (217) - 435
Profit on disposal of interests in joint ventures - - 1,052
Profit on disposal of interests in associated
undertakings - 2,387 2,455
Profit on disposal of property - - 121
Profit on disposal of investment - - 53
Profit on ordinary activities before interest 3 11,239 10,396 22,289
Net interest
Group (526) (376) (719)
Joint ventures (6) 30 16
Associated undertakings (57) 4 (36)
Total net interest (589) (342) (739)
Profit on ordinary activities before taxation 2 10,650 10,054 21,550
Taxation on profit on ordinary activities 5 (4,084) (3,535) (6,881)
Profit on ordinary activities after taxation 6,566 6,519 14,669
Equity minority interests (928) (374) (1,108)
Profit for the financial period 5,638 6,145 13,561
Dividends paid & proposed 6 (1,943) (1,820) (5,490)
Profit for the financial period transferred to
reserves 3,695 4,325 8,071
Basic earnings per share 7 10.0p 11.0p 24.2p
Diluted earnings per share 7 9.1p 9.9p 21.8p
Basic earnings per share before interest,
taxation, depreciation & amortisation of goodwill
(EBITDA) 7 27.8p 24.5p 51.6p
Summary Group Balance Sheet
Restated Restated
30.06.02 30.06.01 31.12.01
£'000 £'000 £'000
Fixed assets
Intangible assets 30,924 29,163 29,738
Tangible assets 27,844 29,605 29,137
Investments:
Investments in joint ventures
Share of gross assets 572 3,674 589
Share of gross liabilities (38) (1,748) (31)
534 1,926 558
Investments in associated
undertakings 3,099 6,347 5,936
Other investments 3,067 4,364 4,419
Total investments 6,700 12,637 10,913
Total fixed assets 65,468 71,405 69,788
Current assets
Property held for sale 8,977 19,468 25,446
Work in progress 3,244 2,853 2,473
Debtors 72,670 66,407 62,578
Cash at bank & short term deposits 22,236 17,661 40,299
107,127 106,389 130,796
Creditors - amounts falling due
within one year (61,776) (64,547) (87,178)
Net current assets 45,351 41,842 43,618
Total assets less current liabilities 110,819 113,247 113,406
Creditors - amounts falling due after
more than one year (14,702) (27,075) (22,568)
Provisions for liabilities & charges (4,786) (2,350) (2,843)
Net assets 91,331 83,822 87,995
Capital & reserves
Called up equity share capital 3,156 3,130 3,146
Share premium account 41,413 40,885 41,227
Profit & loss account 45,804 39,053 42,723
Equity shareholders' funds 90,373 83,068 87,096
Equity minority interests 958 754 899
91,331 83,822 87,995
Consolidated Cash Flow Statement
Six months Six months Year to
to 30.06.02 to 30.06.01 31.12.01
Notes £'000 £'000 £'000
Net inflow/(outflow) from operating 8 (a) 9,748 (7,123) 25,991
activities
Dividends received from joint ventures &
associated undertakings 224 851 1,047
Net cash outflow from returns on
investments & servicing of finance (1,185) (1,117) (1,846)
Tax paid (5,523) (5,146) (10,548)
Net cash outflow from capital expenditure
& financial investment (1,653) (3,049) (6,436)
Net cash (outflow)/inflow from
acquisitions & disposals (1,187) 1,423 2,144
Equity dividends paid (3,661) (3,369) (5,203)
Cash (outflow)/inflow before use of
liquid resources & financing (3,237) (17,530) 5,149
Net cash inflow from management of liquid
resources 4,779 8,241 1,911
Net cash (outflow)/inflow from financing (14,530) 6,106 6,232
(Decrease)/increase in cash for the 8 (b) (12,988) (3,183) 13,292
period
Statement of Total Recognised Gains & Losses
Restated Restated
Six months Six months Year to
to 30.06.02 to 30.06.01 31.12.01
£'000 £'000 £'000
Profit for the financial period
- Group 8,146 6,215 13,700
- Joint ventures 43 601 610
- Associated undertakings (2,551) (671) (749)
5,638 6,145 13,561
Currency translation differences on foreign
currency net investments (614) 1,091 859
Total recognised gains & losses for the
period 5,024 7,236 14,420
Prior year adjustment - FRS19 'Deferred
Tax' 568 - -
Total recognised gains & losses 5,592 7,236 14,420
Reconciliation of Movements in Shareholders' Funds
Restated Restated
Six months Six months Year to
to 30.06.02 to 30.06.01 31.12.01
£'000 £'000 £'000
Profit for the financial period 5,638 6,145 13,561
Dividends (1,943) (1,820) (5,490)
Retained profit for the period 3,695 4,325 8,071
Issue of share capital 196 19 377
Currency translation differences (614) 1,091 859
Goodwill previously written off to reserves - - 156
Net increase in shareholders' funds 3,277 5,435 9,463
Shareholders' funds at beginning of period
(opening shareholders' funds at 1 January
2001 was originally £77,065,000 before
adding prior year adjustment of £568,000) 87,096 77,633 77,633
Shareholders' funds at end of period 90,373 83,068 87,096
Notes
1. Basis of preparation
The unaudited accounts for the six month period ended 30 June 2002 have been
prepared under the historical cost convention, modified to include the
revaluation of investment properties and in accordance with applicable United
Kingdom accounting standards on a consistent basis with prior periods, except as
noted below.
Financial Reporting Standard No. 19 - 'Deferred Tax' (FRS 19) has been adopted
for the first time by the Group in this interim report.
In previous years the Group has complied with Statement of Standard Accounting
Practice 15 - 'Deferred Taxation' (SSAP 15). SSAP 15 required provision for
deferred taxation to be made using the liability method to the extent that net
deferred tax assets or liabilities were likely to crystallise in the foreseeable
future. FRS 19 requires deferred tax to be recognised on all timing differences
that have occurred by the balance sheet date which give rise to an obligation to
pay more tax in the future, or the right to pay less tax in the future. This has
resulted in a deferred tax asset of £1.0m being recognised at 30 June 2002 (at
30 June 2001 - £1.0m). The restatement of the prior year figures had no impact
on the tax charge to 30 June 2001 or to 31 December 2001.
Apart from the above, the statement has been prepared applying the accounting
policies described on pages 39 and 40 of the Report and Accounts of Savills plc
for the year ended 31 December 2001 and should be read in conjunction with the
Report and Accounts.
The financial information in this statement does not constitute statutory
accounts within the meaning of s240 of the Companies Act 1985. The statutory
accounts for the year ended 31 December 2001, on which the auditors have given
an unqualified audit report, have been filed with the Registrar of Companies.
2. Segmental analysis
Property Facilities
Transactional Manage- Manage- Property Financial Holding
Advice Consultancy ment ment Trading Services Company Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Six months to
30 June 2002
Total Group
turnover 58,600 18,776 26,722 16,704 15,554 5,379 - 141,735
Operating
profit/(loss) 8,736 2,618 1,264 1,146 1,513 646 (1,596) 14,327
Profit/(loss)
before
taxation 8,646 2,658 1,655 (2,105) 515 644 (1,363) 10,650
Six months to
30 June 2001
Total Group
turnover 47,478 17,363 23,556 15,922 1,757 5,165 111,241
-
Operating
profit/(loss) 4,619 2,309 1,574 850 (59) (99) (1,146) 8,048
Profit/(loss)
before
taxation 4,734 2,369 2,050 761 (1,086) 2,124 (898) 10,054
Notes
3 Geographical analysis of turnover, Group operating profit and profit
before interest & tax (PBIT)
Group Group
operating operating
Turnover profit PBIT Turnover profit PBIT
30.06.02 30.06.02 30.06.02 30.06.01 30.06.01 30.06.01
£'000 £'000 £'000 £'000 £'000 £'000
United Kingdom 91,182 10,388 7,355 67,538 7,336 8,944
Rest of Europe 6,511 2,568 2,386 3,519 218 232
Asia 44,042 1,371 1,498 40,184 494 1,220
141,735 14,327 11,239 111,241 8,048 10,396
Profits before interest and tax for the six months ended 30 June 2002 for Asia
are shown after charging amortisation of £1,026,000 (six months ended 30 June
2001 - £597,000). The profits before interest and tax for the six months ended
30 June 2002 for Europe are shown after charging amortisation of £103,000 (six
months ended 30 June 2001 - £89,000).
4. Share of operating loss of associated undertakings
Six months Six months Year to
to 30.06.02 to 30.06.01 31.12.01
£'000 £'000 £'000
Share of operating loss from interest in associates (1,253) (641) (553)
Goodwill amortisation on investment in associates (165) (88) (220)
Impairment of investment in TrammellCrowSavills (1,500) - -
(2,918) (729) (773)
5. Taxation
The tax charge has been calculated on the basis of the underlying rate in each
jurisdiction adjusted for any disallowable charges.
6. Dividends
The Directors have declared an interim dividend for the six months ended 30 June
2002 of 3.4 pence per ordinary share (2001 - 3.25 pence). The interim dividend
will be paid on 25 October 2002 to the shareholders on the register as at 27
September 2002. The number of shares in issue is currently 63,115,618.
Notes
7. Earnings per share
The calculation of earnings per share is based on the following weighted average
number of shares:
Six months Six months Year to
to 30.06.02 to 30.06.01 31.12.01
'000 '000 '000
Basic Earnings per share 56,427 56,103 56,112
Diluted earnings per share 61,977 62,363 62,228
For the six months to 30 June 2002, earnings are adjusted by £10.0m (six months
to 30 June 2001 - £7.6m, 12 months to 31 December 2001 - £15.4m) representing
interest, taxation, depreciation and amortisation of goodwill in order to
calculate the adjusted basic earnings per share.
8. Notes to consolidated cash flow statement
(a) Reconciliation of operating profit to net cash inflow from operating activities
Six months Six months Year to
to 30.06.02 to 30.06.01 31.12.01
£'000 £'000 £'000
Operating profit 14,327 8,048 18,238
Depreciation charges 2,790 2,852 5,840
Amortisation of goodwill 903 852 1,748
Loss on the sale of fixed assets 2 13 679
Decrease/(increase) in property held
for sale 12,789 (3,667) (9,645)
(Increase)/decrease in work in (784) (66) 357
progress
(Increase)/decrease in debtors (10,162) (4,303) 984
(Decrease)/increase in creditors (13,716) (12,414) 5,074
Increase in provisions 2,068 136 589
Movement in provision for ESOP share
options granted 1,239 1,426 1,427
Provision for diminution in value of
fixed asset investments 292 - 700
Net cash inflow/(outflow) from
operating activities 9,748 (7,123) 25,991
Notes
8. Notes to consolidated cash flow statement (continued)
(b) Reconciliation of net cash flows to net funds
Six months Six months Year to
to 30.06.02 to 30.06.01 31.12.01
£'000 £'000 £'000
(Decrease)/increase in cash (12,988) (3,183) 13,292
Cash outflow/(inflow) from
decrease/ (increase) in debt 14,719 (6,145) (6,073)
Capital element of finance 9 54 218
leases repaid
Decrease in liquid resources (4,779) (8,241) (1,911)
Finance leases & loans
acquired with subsidiaries - - (62)
Loans disposed with 2,665 - -
subsidiaries
Exchange movements (1,153) - 739
(1,527) (17,515) 6,203
Net funds at beginning of 6,452 249 249
period
Net funds at end of period 4,925 (17,266) 6,452
(c) Analysis of changes in net funds
Disposals
At Cash (excluding cash Exchange At
01.01.02 flows & overdraft) movement 30.06.02
£'000 £'000 £'000 £'000 £'000
Cash at bank 23,755 (12,521) - (320) 10,914
Overdraft (1,538) (467) - - (2,005)
(12,988)
Liquid funds on one
month deposit 1,713 (928) - - 785
Liquid funds on
short term deposit 14,831 (3,851) - (443) 10,537
38,761 (17,767) - (763) 20,231
Debt
- due within (9,693) 9,202 111 (187) (567)
one year
- due after (22,517) 5,517 2,554 (203) (14,649)
one year
Finance leases (99) 9 - - (90)
Net funds 6,452 (3,039) 2,665 (1,153) 4,925
Copies of this statement are being sent to shareholders and are available from:
Savills plc, 20 Grosvenor Hill, Berkeley Square, London W1K 3HQ
Telephone: 020 7409 9920 Fax: 020 7491 0505 Email: meast@fpdsavills.co.uk
Contact: Michaela East
In addition, with prior notice, copies in alternative formats i.e. large print,
audio tape, braille are available if required from Lloyds TSB Registrars, The
Causeway, Worthing, West Sussex BN99 6DA.
This information is also available on the Company's website at:
www.fpdsavills.com
End
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