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 This information is provided by RNS The company news service from the London Stock Exchange

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