Interim Results
Savills PLC
07 September 2005
WEDNESDAY 7 SEPTEMBER 2005
Strong performance in the first half
Savills plc, the international property adviser, today announces interim results
prepared under IFRS for the six months ended 30 June 2005.
• Group revenue for the six months was up 12.7% at £158.2m (2004 - £140.3m).
• Group profit before tax increased to £19.9m (2004 - £19.1m).
• Adjusted Group profit before tax* increased by 15.0% to £19.9m (2004 -
£17.3m).
• Basic earnings per share increased to 23.9p (2004 - 23.5p).
• Adjusted basic earnings per share* increased by 12.7% to 23.9p
(2004 - 21.2p).
• Interim dividend increased to 8.0p (2004 - 6.0p).
* After adjusting for the one-off impact of the IFRS credit relating to share
based payments (see Note 12(i) and (j)).
Peter Smith, Chairman of Savills plc, comments: 'I am delighted to report a
strong set of half year results with particularly good performance in the
commercial markets both in the UK and overseas. The UK prime residential
markets had a slower start to the year but the market improved in the second
quarter especially in London. Asia had a very strong first half. The growing
spread of Savills' business both on a geographical and product basis gives us
confidence that we are well placed to achieve a good result for the full year.'
*** 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
Aubrey Adams, Group Chief Executive
Citigate Dewe Rogerson 020 7638 9571
Simon Rigby/Sarah Gestetner/George Cazenove
There will be an analyst presentation at 9.30a.m. at Savills, 25 Finsbury
Circus, London EC2M 7EE
CHAIRMAN'S STATEMENT
RESULTS AND DIVIDEND
We reported in our Trading Update, released on 29 June 2005, that overall
Savills had performed in line with expectation and ahead of the same period last
year. Strong investment markets in the UK, Europe and Asia would ensure that
Commercial activity levels remain high in 2005.
I am very pleased to announce that turnover increased by 12.7% to £158.2m (2004
- £140.3m). Profit before tax increased to £19.9m (2004 - £19.1m) representing
an increase of 15% compared to 2004 adjusted profit of £17.3m, adjusted for the
one-off impact in 2004 of the IFRS credit relating to share based payments.
Basic earnings per share for the six months to 30 June 2005 increased to 23.9p
(2004 - 23.5p). Adjusted basic earnings per share increased by 12.7% to 23.9p
(2004 - 21.2p). This increase was due to increased profit during the period.
As previously announced on 25 April 2005, in accordance with the terms of an
Option Deed (the Deed), Trammell Crow Company (TCC) subscribed for an aggregate
of 5,243,229 Ordinary Shares at an exercise price of 701.28 pence per share
which resulted in aggregate purchase consideration of £36.77m being paid to the
Company. This took TCC's holding in total to 19.60%; under the terms of the Deed
TCC were permitted to acquire in total up to 20% in the Company. No option to
TCC remains outstanding.
The additional £36.77m in subscription monies further strengthened the already
strong balance sheet which has cash (net of debt) of £74.9m (2004 - £29.4m).
The Directors have decided to increase the interim dividend to 8.0p (2004 -
6.0p) to be paid on 1 November 2005; this increase reflects our confidence in
the business and an element of re-balancing of the interim with the final
dividend.
TRADING REVIEW
Transactional Advice
During the half year, turnover for the Transactional business was £68.2m (2004 -
£64.7m) and operating profit was £10.7m (2004 - £10.3m). Transactional income
in the UK commercial markets, Europe and Asia was ahead of the same period last
year, though there was a down-turn in the UK regional residential markets.
Leasing markets in London and the South East have started to recover with demand
increasing as a result of a more optimistic outlook from corporate tenants.
Regional markets remain resilient and there has been increasing demand for
accommodation outside London, particularly in the Thames Valley. The retail
economy softened generally over the first six months forcing many retailers to
monitor very closely their ongoing property cost plans; we have, however,
experienced a good level of demand for well located out of town sites with
flexible planning consents.
Demand in the investment market remains strong with continuing interest from
institutional investors as well as overseas buyers, although available stock
remains limited. The retail warehouse investment market, where Savills is a
market leader, remains buoyant with investors particularly attracted by quality
of income and growth prospects. The European investment market is active and
our European Investment teams had a very successful start to the year, with
several major transactions completed in the first half and a strong second half
anticipated.
The investment markets in Asia for commercial and residential stock have seen
significant increases in activity over 2004 levels, especially in Hong Kong and
mainland China. Savills' dominant position in the Hong Kong Investment Advisory
business has enabled it to transact over HK$5.6bn worth of commercial real
estate in the first six months of 2005.
Prime residential markets were undoubtedly slower at the beginning of the year,
and buyers showed some hesitancy. However, after a slow start, the market
strengthened in the late spring and early summer, with London being particularly
strong. In marked contrast to the mainstream markets, the number of completed
transactions on a like for like basis was very similar to last year.
The new homes markets became gradually more difficult throughout the first half
of the year and it remains to be seen whether the 0.25 percent interest rate cut
improves activity. Discounted bulk sales are still available to specialist
purchasers, but the individual investor is now slower at making buying
commitments with current low rates of return.
Consultancy
During the half year turnover for the Consultancy businesses was £30.1m (2004 -
£24.3m) and operating profit was £4.9m (2004 - £3.5m).
Our professional businesses have been extremely busy with our expertise in
valuations, affordable housing and social housing increasingly in demand
especially on larger scale projects. Our planning, building and housing
consultancy divisions have been strengthened and we are now able to provide a
strong presence and service both in London and the regions.
The demand for valuation services to satisfy the rise in IPOs and commercial
property purchases in mainland China has pushed revenues ahead of last year's
equivalent. Australia has also seen considerable uplift in the need for
property valuation services partly on the back of international accounting
reporting requirements.
Property and Facilities Management
During the half year, turnover for the combined Property and Facilities
Management businesses was £47.1m (2004 - £40.0m) and operating profit was £3.4m
(2004 - £2.0m).
In Asia, Property Management revenues have increased markedly due to the
addition of the Japanese Property Management business towards the end of 2004
and the increased success we have had in Greater China; winning new contracts at
satisfactory margins.
The UK Property Management business has expanded by both strategic acquisition
and organic growth. The profit from this business stream was ahead of 2004 and
the business is now well positioned to improve profitability.
Following the successful integration of a specialist Shopping Centre Management
team within the London office and recruitment of new experienced staff into
Birmingham and Leeds the overall position for Commercial Management is
encouraging.
We also continue to expand our commercial property management capabilities
throughout the rest of Europe and have recently acquired a large property
management business in France.
Property Trading and Investment
During the half year, no turnover was generated from the Property Trading
businesses (2004 - £1.2m) and a small operating loss of £0.1m was made (2004 -
£1.1m profit). As previously noted in Savills' 2004 Report and Accounts, the
Group currently holds no assets for property trading.
Fund Management
During the half year, turnover for the Fund Management business was £2.3m (2004
- £1.7m) and a profit of £0.3m was made (2004 - £0.3m loss). Cordea Savills
continues to develop its resources with the addition of staff in the UK and
Italy. During the first half, Cordea Savills' Wealth Management team launched
its Diversified Residential Opportunities Fund, a vehicle that will invest in a
portfolio of residential accommodation, typically let on long leases. Fund
management is a growing part of our business and we now have a range of funds
available for charities, institutions and individual investors.
Financial Services
During the half year, turnover for the Financial Services businesses was £10.4m
(2004 - £8.5m) and operating profit was £1.3m (2004 - £1.6m).
Savills Private Finance continues to trade well, specifically in the high net
worth mortgage broking market. Its Commercial Debt broking, Wealth Management
and Property Insurance divisions are also making significant contributions. New
offices have been opened in Leeds, Sevenoaks and York bringing the total number
of offices to twenty. The slight decrease in profit was as a result of an
increase in fixed costs associated with the investment in and growth of the
business. The business is now well placed to ensure further profit growth.
OUTLOOK
The continued underlying confidence in property as an asset class is expected to
underpin the market. This, together with the growing spread of Savills'
business both on a geographical and product basis, gives us confidence that we
are well placed to achieve a good result for the full year.
Independent review report to Savills plc
Introduction
We have been instructed by the Company to review the financial information for
the six months ended 30 June 2005 which comprises the consolidated interim
income statement, the consolidated interim balance sheet, the consolidated
interim statement of cash flows, the consolidated statement of recognised income
and expense 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.
As disclosed in Note 1, the next annual financial statements of the Group will
be prepared in accordance with accounting standards adopted for use in the
European Union. This interim report has been prepared in accordance with the
basis set out in Note 1.
The accounting policies are consistent with those that the Directors intend to
use in the next annual financial statements. As explained in Note 1, there is,
however, a possibility that the Directors may determine that some changes are
necessary when preparing the full annual financial statements for the first time
in accordance with accounting standards adopted for use in the European Union.
The IFRS standards and IFRIC interpretations that will be applicable and adopted
for use in the European Union at 31 December 2005 are not known with certainty
at the time of preparing this interim financial information.
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 disclosed accounting policies have
been applied. 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 and therefore provides a lower level of assurance.
Accordingly we do not express an audit opinion on the financial information.
This report, including the conclusion, has been prepared for and only for the
Company for the purpose of the Listing Rules of the Financial Services Authority
and for no other purpose. We do not, in producing this report, 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.
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 2005.
PricewaterhouseCoopers LLP
Chartered Accountants
1 Embankment Place
London
WC2N 6RH
7 September 2005
SAVILLS plc
CONSOLIDATED INTERIM INCOME STATEMENT (unaudited)
six months ended 30 June 2005
Six months Six months Year
to 30.06.05 to 30.06.04 to
31.12.04
Notes £'000 £'000 £'000
Revenue
Revenue 158,154 140,348 316,619
Other revenue - sale of trading properties - - 11,356
Total Group revenue 3 158,154 140,348 327,975
Less:
Employee benefits expense (95,010) (78,010) (190,922)
Depreciation expense (2,109) (1,950) (4,051)
Amortisation of intangibles (588) (337) (663)
Impairment of goodwill - - (639)
Changes in trading property stock - - (9,177)
Other operating expenses (41,885) (41,639) (75,363)
Profit on disposal of subsidiary undertakings - - 763
Profit on disposal of associated undertakings - 155 154
Profit on disposal of investment property - - 8,094
Operating profit 3 18,562 18,567 56,171
Finance costs (202) (610) (584)
Finance income 1,607 1,003 2,361
Net finance income 1,405 393 1,777
Share of post tax (loss)/profit from associates and
joint ventures (18) 137 364
Profit before tax 19,949 19,097 58,312
Taxation 4 (6,222) (5,742) (17,340)
Profit for the period 13,727 13,355 40,972
Attributable to:
Equity shareholders of the parent 13,700 13,162 40,690
Minority interest 27 193 282
13,727 13,355 40,972
Basic earnings per share 6 23.9p 23.5p 72.7p
Diluted earnings per share 6 22.1p 21.5p 66.1p
CONSOLIDATED INTERIM BALANCE SHEET (unaudited)
at 30 June 2005
30.06.05 30.06.04 31.12.04
Notes £'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 12,827 18,968 11,922
Goodwill 51,937 39,078 46,095
Intangible assets 3,605 1,128 2,549
Investment property - 6,965 -
Investments in associates and joint ventures 3,045 3,431 2,831
Other investments - 1,427 3,834
Available for sale investments 9 5,580 - -
Deferred tax assets 18,240 15,508 17,333
95,234 86,505 84,564
Current assets
Property held for sale - 8,604 -
Work in progress 3,127 3,191 2,666
Trade and other receivables 89,097 75,060 87,241
Cash and cash equivalents 77,254 51,233 89,919
169,478 138,088 179,826
LIABILITIES
Current Liabilities
Interest bearing loans and borrowings 1,092 1,318 3,823
Trade and other payables 80,485 65,602 113,367
Current income tax liabilities 3,064 3,959 8,405
Employee benefits 1,614 1,526 1,499
Provisions 372 802 665
86,627 73,207 127,759
Net current assets 82,851 64,881 52,067
Total assets less current liabilities 178,085 151,386 136,631
Non-current Liabilities
Interest bearing loans and borrowings 1,243 20,467 1,115
Trade and other payables 2,169 430 2,269
Retirement and employee benefits 29,420 38,619 27,490
Provisions 2,454 2,068 1,999
Deferred tax liabilities 914 66 62
36,200 61,650 32,935
Net assets 141,885 89,736 103,696
EQUITY
Capital and reserves attributable to equity
holders of the parent
Share capital 8 3,315 3,072 3,026
Share premium 80,665 42,569 43,114
Other reserves 1,025 (172) (1,243)
Retained earnings 56,597 43,749 58,609
141,602 89,218 103,506
Minority interest 283 518 190
Total equity 141,885 89,736 103,696
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS (unaudited)
six months ended 30 June 2005
Six months Six months Year
to 30.06.05 to 30.06.04 to 31.12.04
Notes £'000 £'000 £'000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash (used in)/generated from operations 7 (14,650) 4,538 58,004
Interest received 1,607 1,003 2,454
Interest paid (202) (610) (584)
Income tax paid (8,360) (7,073) (15,303)
Net cash (used in)/generated from operating activities (21,605) (2,142) 44,571
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of subsidiary, net of cash disposed - - 4,666
Proceeds from sale of property, plant and equipment 49 82 99
Proceeds from sale of associates, joint ventures and
investment property - 321 15,628
Dividends received 143 242 3,144
Net loans (to)/repayments received from related parties (290) 146 96
Acquisition of subsidiaries, net of cash acquired (4,694) (3,690) (10,418)
Purchases of property, plant and equipment (2,772) (2,338) (6,458)
Purchases of intangible assets (440) (330) (944)
Purchase of investment in associates, joint ventures
and other investments (41) (180) (2,715)
Net cash (used in)/generated from investing activities (8,045) (5,747) 3,098
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of share capital 37,845 338 903
Proceeds from borrowings 110 86 1,605
Repurchase of own shares (520) (327) (5,751)
Purchase of own shares for Employee Benefit Trust - (2,125) (4,238)
Repayments of borrowings (3,790) (331) (7,598)
Dividends paid (18,092) (5,697) (9,309)
Net cash generated from/(used in) financing activities 15,553 (8,056) (24,388)
Net (decrease)/increase in cash and cash equivalents (14,097) (15,945) 23,281
Cash and cash equivalents at beginning of the period 89,919 67,625 67,625
Effect of exchange rate fluctuations on cash held 1,432 (447) (987)
Cash and cash equivalents at end of period 77,254 51,233 89,919
CONSOLIDATED INTERIM STATEMENT OF RECOGNISED INCOME & EXPENSE (unaudited)
six months ended 30 June 2005
Six months Six months Year
to 30.06.05 to 30.06.04 to 31.12.04
£'000 £'000 £'000
Revaluation of available for sale investments 778 - -
Actuarial loss on defined benefit pension scheme (1,783) (6,485) (9,495)
Deferred tax on items directly taken to reserves 3,770 3,937 4,652
Foreign exchange translation differences 1,016 (308) (1,401)
Net income/(expense) recognised directly in equity 3,781 (2,856) (6,244)
Profit for the period 13,727 13,355 40,972
Less minority interest share of results of joint ventures 13 - -
Total recognised income and expense for the period 17,521 10,499 34,728
Attributable to:
Equity shareholders of the parent 17,512 10,330 34,427
Minority interest 9 169 301
17,521 10,499 34,728
NOTES
1. Basis of preparation
The financial information comprises the unaudited results for the six months to
30 June 2005 and 30 June 2004, together with the unaudited results for the
twelve months ended 31 December 2004.
Prior to 2005, the Group prepared its audited annual financial statements and
unaudited half yearly results under UK Generally Accepted Accounting Principles
(UK GAAP). The audited UK GAAP annual financial statements for 2004, which
represent the statutory accounts for that year, and on which the auditors gave
an unqualified opinion, have been filed with the Registrar of Companies. From 1
January 2005, the Group is required to prepare its annual consolidated financial
statements in accordance with International Financial Reporting Standards
(IFRS), as adopted by the European Union (EU) and implemented in the UK. As the
annual 2005 financial statements will include comparatives for 2004, the Group's
date of transition to IFRS under IFRS1 (First time adoption of IFRS) is 1
January 2004. However, in preparing the comparative figures for 2004, the Group
has chosen to utilise the IFRS1 exemption from the requirement to restate
comparative information for IAS32 and IAS39 on financial instruments.
To explain how the Group's reported performance and financial position are
affected by this change, a press release was published on the 'Adoption of
International Financial Reporting Standards' and issued on 29 June 2005. This is
available on the company's investor relations website at www.ir.savills.com. The
press release outlines the comparison of key figures under UK GAAP for 2004,
with unaudited restated IFRS results and an explanation of the principal
differences between UK GAAP and IFRS, together with the accounting policies
which are to be used under IFRS. As detailed in Note 13 the Group has made
further IFRS adjustments relating to deferred tax on share based payments and
employee benefits.
These unaudited Group results for the six months to 30 June 2005 have been
prepared on a basis consistent with the IFRS accounting policies as set out in
the press release, except with amendments in Note 13. These interim financial
statements have been prepared under the historical cost convention, except in
respect of certain available for sale investments.
Under UK GAAP, operating profit, net finance costs, taxation and minority
interests included the Group's share of joint venture's and associates' results,
whereas the income statement under IFRS only includes the Group's share of the
post tax and minority results of the joint ventures and associates on one line
before the Group's pre-tax profit.
IFRS require a different format for the cash flow statements but the main change
is that the statement explains the change in cash and cash equivalents, rather
than just cash as under UK GAAP. Cash and cash equivalents under IFRS comprise
not only cash but also short term highly liquid investments that are readily
convertible to known amounts of cash and which are subject to an insignificant
risk in changes in value. These investments comprise all of the amounts
previously disclosed as short term deposits under UK GAAP. As with cash under UK
GAAP, the IFRS cash flow statement deals with cash and cash equivalents net of
overdrafts.
These results are based on the IFRS expected to be applicable as at 31 December
2005 and the interpretation of those standards. IFRS are subject to possible
amendment by and interpretative guidance from the International Accounting
Standards Board, as well as the ongoing review and endorsement by the EU, and
are therefore still subject to change. These figures may therefore require
amendment, to change the basis of accounting and/or presentation of certain
financial information, before their inclusion in the IFRS financial statements
for the year to 31 December 2005, when the Group prepares its first complete set
of audited IFRS financial statements.
2. Adoption of new accounting standards
As noted above IAS32 and IAS39 on financial instruments are being applied from 1
January 2005 and the changes to the balance sheet as at 1 January 2005
principally reflect the measurement of available-for-sale investments at fair
value.
At 1 January 2005, these changes resulted in an increase in the value of the
Group's investments of £960,000 reflecting the valuation of certain of the
Group's listed equity investments to market value. A related deferred tax
liability arises on this adjustment in accordance with IAS 12 'Income taxes'.
Effect of changes on summarised balance sheet as at 1 January 2005
Effect of adoption of IAS 32 and 39 31.12.04 Adoption of 01.01.05
IAS 32 and
IAS 39
Note £'000 £'000 £'000
ASSETS
Other Investments 3,834 (3,834) -
Available for sale investments 9 - 4,794 4,794
Other assets 260,556 - 260,556
Total Assets 264,390 960 265,350
Deferred tax liabilities 62 288 350
Other liabilities 160,632 - 160,632
Total liabilities 160,694 288 160,982
Net assets 103,696 672 104,368
EQUITY 103,696 672 104,368
3. Segment analysis Trans- Consult-
Six months to 30 actional ancy Property & Fund Property, Financial Unallocated Total
June 2005 Advice Facilities Manage- Trading & Services
Management ment Investment
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue
United Kingdom 45,833 25,765 17,728 2,292 - 10,409 60 102,087
Rest of Europe 7,867 719 2,209 - - - - 10,795
Asia Pacific 14,528 3,576 27,168 - - - - 45,272
Total revenue 68,228 30,060 47,105 2,292 - 10,409 60 158,154
Operating profit
United Kingdom 6,582 4,331 1,114 319 (106) 1,304 (1,982) 11,562
Rest of Europe 1,717 40 254 - - - - 2,011
Asia Pacific 2,421 509 2,059 - - - - 4,989
Operating profit 10,720 4,880 3,427 319 (106) 1,304 (1,982) 18,562
Net Finance income 1,405
Share of results of associates and joint ventures (18)
Profit before income tax 19,949
Taxation (6,222)
Profit for the period 13,727
Trans-
Six months actional Consult- Property & Fund Property, Financial Unallocated* Total
to 30 June Advice ancy Facilities Manage- Trading & Services
2004 Management ment Investment
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Revenue
United Kingdom 48,457 21,273 13,255 1,676 1,226 8,478 - 94,365
Rest of Europe 4,602 313 947 - - - - 5,862
Asia Pacific 11,610 2,680 25,831 - - - - 40,121
Total revenue 64,669 24,266 40,033 1,676 1,226 8,478 - 140,348
Operating profit
United Kingdom 7,304 3,313 504 (262) 1,086 1,636 373 13,954
Rest of Europe 1,031 55 54 - - - - 1,140
Asia Pacific 1,951 102 1,420 - - - - 3,473
Operating profit 10,286 3,470 1,978 (262) 1,086 1,636 373 18,567
Net Finance income 393
Share of results of associates and joint ventures 137
Profit before income tax 19,097
Taxation (5,742)
Profit for
the period 13,355
The unallocated segment includes holding company costs, group bonuses and other expenses not directly
attributable to the operating activities of the Group's business segments.
* In 2004, the benefit of the one-off share based compensation credit as explained in note 12 (j) has not
been allocated to individual segments so as to show a comparable figure to 2005.
4. Taxation
The taxation charge has been calculated on the basis of the underlying rate in
each jurisdiction adjusted for any disallowable charges.
Six months Six months Year to
to 30.06.05 to 30.06.04 31.12.04
£'000 £'000 £'000
United Kingdom corporation tax (2,339) (3,988) (15,026)
Foreign tax (1,971) (1,267) (2,363)
Deferred tax (1,912) (487) 49
(6,222) (5,742) (17,340)
5. Dividends
Six months Six months Year to
to 30.06.05 to 30.06.04 31.12.04
£'000 £'000 £'000
Amounts recognised as distribution to equity holders in the period:
Interim dividend for the six months ended 30 June 2004 of 6.0p - - 3,394
Ordinary final dividend of 12.5p per share (2004 - 10.0p) 6,942 5,563 5,563
Special dividend of 20.0p per share (2004 - nil) 11,107 - -
18,049 5,563 8,957
Proposed interim dividend for the six months ended 30 June
2005 of 8.0p per share 4,898 - -
The Directors have recommended an interim dividend for the six months ended 30
June 2005 of 8.0 pence per ordinary share. The interim dividend will be paid on
1 November 2005 to shareholders on the register as at 30 September 2005.
6. Basic & Diluted earnings per share
Six months to Earnings Shares EPS Earnings Shares EPS
30 June 2005 2005 2005 2004 2004 2004
£'000 '000 Pence £'000 '000 Pence
Basic earnings per share 13,700 57,334 23.9 13,162 56,189 23.5
Effect of additional shares
issuable under option - 4,639 (1.8) - 5,328 (2.0)
Diluted earnings per share 13,700 61,973 22.1 13,162 61,517 21.5
Year to Earnings Shares EPS
31 December 2004 2004 2004
£'000 '000 Pence
Basic earnings per share 40,690 55,938 72.7
Effect of additional shares issuable under option - 5,647 (6.6)
Diluted earnings per share 40,690 61,585 66.1
7. Cash generated from operations Six months Six months Year to
to 30.06.05 to 30.06.04 31.12.04
£'000 £'000 £'000
Profit for the period 13,727 13,355 40,972
Adjustments for:
Taxation 6,222 5,742 17,340
Depreciation expense 2,109 1,950 4,051
Amortisation of intangibles 588 337 663
Impairment of goodwill - - 639
Net finance income (1,405) (393) (1,777)
Share of post tax loss/(profit) from associates and joint
ventures 18 (137) (364)
Profit on disposal of subsidiary undertakings - - (763)
Profit on disposal of associated undertakings - (155) (154)
Profit on disposal of investment property - - (8,094)
Loss on sale of property, plant and equipment 5 41 193
(Increase)/decrease in property held for sale - (523) 2,052
(Decrease)/increase in provisions (214) 679 481
Increase/(decrease) in employee and retirement obligations 342 208 (13,964)
Charge for share based compensation 636 587 1,144
Provision against investments in associates and joint
ventures 8 9 16
Operating cash flows before movements in working capital 22,036 21,700 42,435
(Increase)/decrease in work in progress (437) (393) 126
(Increase)/decrease in debtors (804) 4,032 (14,671)
(Decrease)/increase in creditors (35,445) (20,801) 30,114
Cash (used in)/generated from operations (14,650) 4,538 58,004
8. Share Capital
On 25 April 2005 Trammell Crow Company (TCC) exercised an option to subscribe
for 5,243,229 shares representing over 7% of the Group's share capital. This was
in accordance with the terms of an agreed Option Deed dated 9 May 2000, entered
into at the time of the Strategic Alliance. The shares were issued at a price of
701.28p, representing a 20% premium to the average closing mid-market price of
the Ordinary Shares as taken over the preceding five days prior to exercise.
9. Available for sale investments
£'000
At 31 December 2004 -
Adoption of IAS 32 & 39 - reclassification from other investments
Remeasure to fair value 3,834
960
At 1 January 2005 4,794
Additions 10
Revaluation 776
At 30 June 2005 5,580
Available-for-sale financial assets include the following:
Listed securities UK - equity securities 874
Unlisted securities UK - equity securities 1,667
Rest of world - equity securities & investment loans 37
UK - limited partnership 3,002
5,580
10. Reconciliation of movements in equity
Minority Total
Attributable to equity holders of the Group interest equity
Share Share Other Retained
capital premium reserves earnings
£'000 £'000 £'000 £'000 £'000 £'000
Balance at 31 December 2004 3,026 43,114 (1,243) 58,609 190 103,696
Adoption of IAS 32 and IAS 39 - - 672 - - 672
Balance at 1 January 2005 3,026 43,114 (571) 58,609 190 104,368
Total recognised income and
expense for the period - - 1,591 15,921 9 17,521
Employee share option scheme:
- Value of services provided - - - 636 - 636
Issue of share capital 294 37,551 - - - 37,845
Purchase of own shares (5) - (520) - (520)
Dividends - - - (18,049) (43) (18,092)
Business combinations - - - - 127 127
Balance at 30 June 2005 3,315 80,665 1,025 56,597 283 141,885
Balance at 1 January 2004 3,070 42,237 107 40,564 562 86,540
Total recognised income and
expense for the period - - (283) 10,613 169 10,499
Employee share option scheme:
- Value of services provided - - - 587 - 587
Issue of share capital 6 332 - - - 338
Purchase of own shares (4) - 4 (327) - (327)
Purchase of treasury shares - - - (2,125) - (2,125)
Dividends - - - (5,563) (134) (5,697)
Business combinations - - - - (79) (79)
Balance at 30 June 2004 3,072 42,569 (172) 43,749 518 89,736
Balance at 1 January 2004 3,070 42,237 107 40,564 562 86,540
Total recognised income and
expense for the period - - (1,420) 35,847 301 34,728
Employee share option scheme:
- Value of services provided - - - 1,144 - 1,144
Issue of share capital 26 877 - - - 903
Purchase of own shares (70) - 70 (5,751) - (5,751)
Purchase of treasury shares - - - (4,238) - (4,238)
Dividends - - - (8,957) (352) (9,309)
Business combinations - - - - (321) (321)
Balance at 31 December 2004 3,026 43,114 (1,243) 58,609 190 103,696
11. Effect of the change to IFRS on the Income Statement for the six months
ended 30 June 2004 (unaudited)
Impact of move to IFRS
Share
UK Based Employee Joint Assoc- Deferred Realloc-
GAAP Intangibles Payment Benefits Ventures iates Tax ations IFRS
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Notes 12 (a) 12 (b) 12 (c) 12 (d) 12 (e) 12 (f) 12 (h)
Total Group turnover 140,348 - - - - - - - 140,348
Operating profit 14,378 1,358 1,825 848 3 - - 155 18,567
Share of profit of joint
ventures (13) - - - 70 - - - 57
Share of profit of
associates 97 - - - - (17) - - 80
Disposals 155 - - - - - - (155) 0
Profit before interest 14,617 1,358 1,825 848 73 (17) - - 18,704
Net finance income 487 - - - (94) - - - 393
Profit before tax 15,104 1,358 1,825 848 (21) (17) - - 19,097
Income tax expense (4,967) (547) (254) 21 17 (12) (5,742)
Profit for the period 10,137 1,358 1,278 594 - - (12) - 13,355
Attributable to:
Equity holders of the
parent 9,961 1,341 1,278 594 - - (12) - 13,162
Minority interests 176 17 - - - - - - 193
10,137 1,358 1,278 594 - - (12) - 13,355
Basic earnings per share 17.7p 2.4p 2.3p 1.1p 0.0p 0.0p 0.0p 0.0p 23.5p
Diluted earnings per share 16.2p 2.2p 2.1p 1.0p 0.0p 0.0p 0.0p 0.0p 21.5p
Effect of the change to IFRS on the Balance Sheet as at ended 30 June 2004
(unaudited)
Impact of move to IFRS
Share
UK Based Employee Joint Deferred Present-
GAAP Intangibles Payment Benefits Ventures Tax Dividend ation IFRS
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Notes 12 (a) 12 (b) 12 (c) 12 (d) 12 (f) 12 (g)
Assets 207,651 1,358 (428) 9,649 2,483 4,046 - (166) 224,593
Liabilities (106,323) - 1,871 (31,464) (2,483) (18) 3,394 166 (134,857)
Net assets 101,328 1,358 1,443 (21,815) - 4,028 3,394 - 89,736
EQUITY
Shareholders' funds 100,827 1,341 1,443 (21,815) - 4,028 3,394 - 89,218
Minority interest 501 17 - - - - - - 518
101,328 1,358 1,443 (21,815) - 4,028 3,394 - 89,736
12. Explanation of adjustments for the six months ended 30 June 2004
a) IAS 38 Intangible assets
The goodwill amortisation expense for the first half of 2004, amounting to
£1,358,000 is reversed. For
acquisitions in the first half of 2004 an assessment has been made regarding the
fair value of intangible assets that were acquired.
b) IFRS 2 Share Based Payments
The following adjustments have been made at 30 June 2004:
UK GAAP IFRS 2 Total
adjustment
£'000 £'000 £'000
Deferred Share Bonus Plan (DSBP) 2,573 (634) 1,939
Executive Share Option Scheme - (56) (56)
Sharesave Scheme - (58) (58)
Impact on profit before tax 2,573 (748) 1,825
Tax (772) 225 (547)
Impact on profit after tax 1,801 (523) 1,278
This profit and loss adjustment results in an increase in profit before tax of £1,825,000 because the
amount to be charged to the bonus pool at that stage was £2,573,000, which related to the accrual of
the 2004 and 2005 DSBP grants. The reserves impact of this change is an increase of £1,443,000.
c) IAS 19 Employee Benefits
The pension deficit is updated for the valuation received from the actuaries as
at 5 April 2004 plus an allowance for any significant movements between that
date and 30 June 2004. The charge to the profit and loss account under IFRS is
equal to the current service cost which represents the increase in the pension
liability in the current period as a result of the employee's employment over
that period. The UK GAAP charge of £2,510,000 is reversed and replaced by
£1,355,000 plus a net interest charge calculated on the net deficit within the
scheme of £307,000 for the first half. This adjustment increased interim pre-tax
profit by £848,000.
The movement in the deficit for the 6 months is as follows:
£'000
Deficit as at 31 December 2003 25,528
Contributions (1,511)
Current service cost 1,355
Net financing charge 307
Actuarial loss 6,485
Gross deficit 32,164
Less deferred tax (9,649)
Net Deficit as at 30 June 2004 22,515
d) IAS 31 Joint Ventures
The changes in the income statements are to record the Group's share of profit
after tax from joint ventures as a single line and remove turnover. The results
of the remaining property joint ventures are also moved to the single line.
Share of post tax profit of joint ventures increases by £70,000 which is offset
by an increase in operating profit of £3,000, reduction in net interest income
of £94,000 and income tax expense of £21,000.
e) IAS 28 Associates
Now reported as a single line. The resulting change is to move £17,000 income
tax expense up to share of post tax profit of associates.
f) IAS 12 Deferred Tax
A deferred tax asset on share based payment awards granted before 7 November
2002 is recognised under IAS 12 in the amount of £4.0m. See Note 13 for further
explanation. Deferred tax on undistributed profits within equity accounted non-
UK investments amounted to £18,000 as at 30 June 2004, with a charge of £12,000
for the period.
g) IAS 10 Events after the balance sheet date
The interim dividend, amounting to £3,394,000 is reversed under IFRS.
h) IAS 1 Presentation of financial statements
Under IAS 1, items of income and expense may not be presented as extraordinary
items on the face of the income statement. Under UK GAAP profit on disposal of
interest in associates of £155,000 were classified as exceptionals. This is
reclassified as operating items under IFRS.
i) Adjusted profit before tax
Six months Six months
to 30.06.05 to 30.06.04
£'000 £'000
Reported profit before tax 19,949 19,097
Less IFRS adjustment for:
One-off share based payment credit - (1,825)
Adjusted profit before tax 19,949 17,272
The IFRS share based payment charge is removed to present an indication of the
impact of IFRS changes on the Group going forward. The method of bonus
calculation means that the adjustment will not impact profit levels in the
future. For further explanation see note (j) below.
j) Earnings Per Share
Basic and diluted earnings per share as at 30 June 2004:
Diluted Diluted
Earnings Shares EPS Shares EPS
£'000 '000 Pence '000 Pence
UK GAAP 9,961 56,189 17.7 61,517 16.2
IFRS adjustments:
Intangibles 1,341 - 2.4 - 2.2
Share based payment 1,278 - 2.3 - 2.1
Employee benefits 594 - 1.1 - 1.0
Deferred tax (12) - 0.0 - 0.0
IFRS 13,162 56,189 23.5 61,517 21.5
Adjusted basic earnings per share as at 30 June 2004 :
UK GAAP UK GAAP IFRS IFRS
Earnings Shares EPS Earnings EPS
£'000 '000 Pence £'000 Pence
Basic earnings per share 9,961 56,189 17.7 13,162 23.5
Amortisation of goodwill 1,341 - 2.4 - -
Less IFRS share based payment charge - - - (1,278) (2.3)
Adjusted basic earnings per share 11,302 56,189 20.1 11,884 21.2
The Directors consider the disclosure of the supplementary earnings per share
necessary in order for the impact of the amortisation of goodwill under UK GAAP
to be fully appreciated.
The IFRS share based payment charge is removed to present an indication of the
impact of IFRS changes on the Group going forward. The method of bonus
calculation means that the adjustment will not impact profit levels in the
future.
The Group operates a number of deferred share bonus and option schemes, the
largest of which is the Deferred Share Bonus Plan (DSBP). Under this non-
pensionable annual bonus scheme for Directors and senior executives, a part of
the annual bonus, at the discretion of the Remuneration Committee, may be
awarded in the form of deferred conditional rights to ordinary shares in the
Company, with the additional part of the bonus being paid out in cash. Annual
bonuses are subject to the attainment of challenging performance targets which
are specific to each individual and either relate to Group thresholds,
subsidiary company targets or a combination of both for a period not exceeding
the relevant financial year of the Company. The annual bonus pool for the Group
is fixed, based on pre-bonus profit based calculations. The element of the
bonus pool which is paid out in cash is determined by deducting share based
payment charges made against income in the performance period from the bonus
pool.
During 2004, the amount which was charged against the bonus pool for share based
payments was the UK GAAP charge, and the balance of the bonus pool was paid out
as cash bonus. The latter amount is not impacted in 2004 by the restatement of
the share based payment charge to IFRS, but in the future it will be. The
adjusted profit and EPS takes account of this one-off adjustment in 2004. 13.
Adjustment to IFRS Income Statement and Balance Sheet for the year ended 31
December 2004.
The Group announced the impact of the adoption of International Financial
Reporting Standards (IFRS) on the year to 31 December 2004 in a press release on
29 June 2005. That document was based on interpretion of 'IAS 12 Income Taxes'
at the time of publication, in relation to share based payments. Subsequent to
this date, the Group has booked further deferred tax assets in line with the
latest interpretations on IAS 12. In addition a further deferred tax asset was
booked for contributions to the Group's defined benefit pension scheme. The
impact of these adjustments is explained below.
(a) Deferred tax on share options awarded before 7 November 2002
A deferred tax asset is recognised on transition relating to the future tax
deduction expected to be received by the Group in relation to share options
awarded before 7 November 2002. Under the IFRS 1 exemption taken by the Group,
such awards are not subject to the application of IFRS 2 'Share based payment',
but are subject to the application of IAS 12 'Income taxes'. Any subsequent
increase or decrease in the value of this deferred tax asset, due to movements
in the Group's share price is adjusted against equity each period end. The value
of the asset is also increased according to the service period which has elapsed
for each series of options awarded.
Upon the exercise of such options the Group becomes entitled to a tax deduction
for the intrinsic value of the share awarded. At this time a similar amount is
released from the deferred tax asset to offset the current tax credit, received
in the period of exercise, in the income statement. As such the exercise of
options awarded pre 7 November 2002 will have no impact on the Group's total tax
charge going forward. The taxation charge for the year ended 2004 is therefore
increased by £0.7m to reflect this. (b) Defined benefit pension plan
A deferred tax asset of £5.4m is recognised during 2004 relating to lump sum and
ongoing contributions made by the Group to its Defined Benefit Pension Scheme,
which will only attract current tax deductions in future years.
(c) Net Assets at transition and for the year ended 31 December 2004
31.12.04 1.1.04
£'000 £'000
Net assets under IFRS as previously reported 94,739 84,106
IAS 12: Deferred tax on share based payments awarded pre 7 November 2002 3,570 2,434
IAS 12: Deferred tax on retirement benefit obligations 5,387 -
Net assets under IFRS 103,696 86,540
Copies of this statement are being sent to shareholders and are available from:
Savills plc, 20 Grosvenor Hill, Berkeley Square, London W1K 3HQ
Telephone: 020 7409 9928 Fax: 020 7491 0505 Email: vgrady@savills.com
Contact: Victoria Grady
In addition, with prior notice, copies in alternative formats i.e. large print, audio tape,
braille are available if required from:
Lloyds TSB Registrars, The Causeway, Worthing, West Sussex BN99 6DA
This information is also available on the Company's website at: www.savills.com
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