Final Results

RNS Number : 8745R

Savills PLC

11 March 2021

 

11 March 2021 

Savills plc

("Savills" or "the Group")

PRELIMINARY RESULTS FOR THE FULL YEAR ENDED 31 DECEMBER 2020

FULL YEAR PERFORMANCE REFLECTS STRENGTH OF GLOBALLY DIVERSIFIED BUSINESS

Savills plc, the international real estate advisor, today announces its preliminary results for the year ended 31 December 2020.

Key financial highlights

· Group revenue down 9% to £1.74bn (2019: £1.91bn*) as resilient revenues from less transactional services significantly mitigated reduction in transaction volumes

· Underlying** profit before tax £96.6m (2019: £143.4m)

· Statutory profit before tax £83.2m (2019: 115.6m)

· Statutory basic earnings per share ('EPS') 49.0p (2019: 60.6p)

· Final ordinary dividend of 17.0p reflecting the resilience of the less transactional business performance

· Net cash £177.7m (2019: £28.5m)

*   See Note 1(b) for details on the prior year restatement of revenue.

** Underlying profit before tax ('underlying profit') is calculated on a consistently reported basis in accordance with Note 3 to this Preliminary Statement.

Key operating highlights

· Resilient performance reflects geographic diversity (59% non-UK revenue) and strength of less transactional service lines (62% of Group revenue, versus 57% in 2019)

· Less transactional services revenues down 1% as Property and Facilities Management businesses performed well, underlying profit up 4% to £91.1m

· Savills global Transaction Advisory revenues declined by 19% as the pandemic significantly reduced the volume of transactions worldwide

· Increased Commercial Transaction Advisory market share, outperforming in many markets including North America, Asia Pacific and UK

· UK and Asia Pacific profits down only 4% and 1% respectively, supported by Property Management and Consultancy

· Savills UK Residential grew revenues by 10% as the market recovered strongly from mid-year

· Savills Investment Management outperformed expectations (against a record 2019 comparative boosted by strong performance fees) with revenue down 11% and increased Assets Under Management ('AUM') to £19.0bn (2019: £17.7bn)

· Continued investment in people, technology leadership and innovation in sustainability

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

"Savills delivered a robust performance in 2020 reflecting the strength and resilience of our global, diversified business. We continued to grow our less transactional service lines and increase our market share, outperforming in many of our transactional markets despite the challenging conditions. Much of this outperformance is due to our strategy of retaining the strength of our teams and focussing resolutely on addressing both the pandemic-related, and longer term, needs of our clients.

"We remain confident in the long term attraction of real estate as an asset class and although macro-economic uncertainty resulting from COVID-19 clearly remains, we see enhanced investor demand for income and improvements in leasing activity as occupiers increasingly seek to address their requirements. Savills has a strong balance sheet and we remain focused on growing our less transactional businesses, increasing our share of the global transactional markets and enhancing the resilience of the business overall. We have made a good start to 2021 and see opportunities for business development emerging during the course of the year."

The analyst presentation will be held at 9.30am today by webinar. For joining instructions please contact [e-mail]. A recording of the presentation will be available from noon at  www.ir.savills.com .

For further information, contact:

Savills	020 7409 8934
Mark Ridley, Group Chief Executive Simon Shaw, Group Chief Financial Officer
Tulchan Communications	020 7353 4200
Elizabeth Snow David Allchurch Will Palfreyman

Chairman's statement

Savills performed well in very challenging conditions, by maximising cash flow and focusing on assisting our clients around the globe.

Results

Against the backdrop of significantly reduced leasing and capital transaction volumes in all major real estate markets, the Group's revenue declined by 9% to £1.74bn (2019: £1.91bn) with reductions in Transaction Advisory revenues mitigated by both share gains in our major markets and a resilient revenue performance from our less Transactional service lines. Underlying profit for the year declined by 33% to £96.6m (2019: £143.4m). The Group's statutory profit before tax decreased by 28% to £83.2m (2019: 115.6m).

Overview

Savills delivered a resilient revenue and profit performance in 2020 in the face of challenging market conditions. The relative stability of our less Transactional businesses, particularly Property Management, helped to offset the impact of material COVID-19 related declines in transaction volumes across the world. Currency movements had a marginal effect on the Group, decreasing revenue by £4.3m and increasing underlying profit and statutory profit before taxation by £0.1m.

Overall, our Transaction Advisory revenue declined by 19%, our Consultancy business revenue declined by 5% and our Property Management revenue grew by 2%. The UK Commercial Transaction Advisory business delivered a resilient performance with a revenue decline of 15% against a 19% decline in investment transaction volumes for the market as a whole.

Our UK Residential business had an extraordinary year; having lost the Spring selling season in the first lockdown, its recovery was strong and sustained as buyers sought greater space and amenities. Revenues grew by 10% year-on-year driven in large part by the strength of regional country markets. In Asia Pacific, the pandemic closed a number of key markets early in the year and subsequent actions saw recovery stutter in a number of markets before improving towards the year end. Commercial and Residential Transaction advisory revenues both declined by 25% year-on-year in the Asia Pacific region. In both Continental Europe and the Middle East ('CEME') and North America the decline in transaction volumes resulted in losses for the year. In CEME, Commercial Transaction revenues declined by 23% year-on-year. In North America, where we are almost wholly focused on corporate occupier transactions, we delivered a resilient performance (revenue decline of 30%) against a market decline in transaction volumes of c. 40%.

Savills Investment Management had a stronger year than originally anticipated after a "supernormal" year of performance fees in 2019.  A number of important product launches and significant capital deployed increased Assets Under Management ('AUM') to £19.0bn (2019: £17.7bn).

The reduction in transaction volumes globally, alongside growth in our lower margin but stable Property Management business, resulted in a reduction to Group underlying profit margin to 5.6% (2019: 7.5%).

The impact of the aforementioned factors on the Group underlying profit margin were partially offset by lower acquisition-related charges and restructuring costs and decreased amortisation of intangible assets acquired on business combinations. The statutory pre-tax profit margin declined to 4.8% (2019: 6.0%).

COVID-19 impact and response

Savills has shown considerable resilience in a year in which the sector faced many challenges, particularly to transactional advisory businesses worldwide. The cycle of lockdowns and other measures, such as travel restrictions, from Q1 2020 had a significant global impact on the ability and preparedness of both investors and occupiers of real estate to transact. As a consequence, in major markets, both investment and leasing volumes contracted markedly compared with 2019 and previous periods.

The Group was quick to adopt a number of operational and financial initiatives to minimise the impact of the pandemic on the business as a whole. Savills strategy was to minimise discretionary expenditure while maintaining our staffing levels to ensure seamless service to clients around the world. In addition the Board suspended distributions to shareholders pending greater visibility of future market recovery. The consequence, particularly of retaining our staff, has been improved market share in most of our markets. This both partially mitigated the impact of volume declines in transactional markets and improved our win ratio of tenders for less Transactional real estate services such as Consultancy and Property Management. Additional cash management activities, including taking the opportunity in H1, at no cost, to defer certain predominantly VAT/sales tax payments of £49.2m (repayable through 2021), ensured that the Group remained in a robust financial position through the period and finished the year with net cash of £177.7m (2019: £28.5m).

Business development and focus on technology

Savills strategy is to be a leading multi-sector property advisor in the key markets in which we operate. Our global strategy is delivered locally by our experts on the ground with flexibility to adapt quickly to changes in circumstances and opportunities. They are supported by our global cross-border investment, residential and occupier services specialists. Over the last few years we have acquired a number of complementary businesses and added teams and individual hires to our strong core business. Despite the pandemic, we continued to focus on strategic development of the business enabled by the Group's strong balance sheet. In the UK, we were awarded the property management contract for the majority of shopping centres formerly part-owned and managed by Intu plc, which comprised approximately 13m sq. ft. of retail management and necessitated significant on-boarding costs as we took on related staff and systems.

In CEME, we acquired OMEGA Immobilien Management GmbH and OMEGA Immobilien Service GmbH ('Omega') in August 2020, which provides us with a small but high quality Property Management business in Germany upon which we will build over the coming years.

In North America, we acquired Macro Consultants LLC ('Macro') in March 2020, a national Project Management specialist and part of our strategy to broaden our less Transactional service lines in the region.

Finally in Asia Pacific, we recruited in both Consulting services and brokerage, most notably in the Greater Bay area of China and in Japan. In Singapore, we merged our mass market residential agency business into Huttons Capital Pte Ltd, our long standing associate, in which we hold a significant minority equity interest.

The pandemic has accelerated technology adoption in almost every industry, and real estate is no exception. As the pandemic spread across the globe, much of the early focus was on ensuring staff could continue to advise clients remotely which, due to the investment in our underlying technology platform across the Group in recent years, was swiftly enacted.

In many sectors and geographies we quickly adapted or extended our services. In the UK, where we are one of the largest property auctioneers, we pivoted to offering live-streamed remote auctions within days. This capitalised on the recent launch of our bespoke auctioning platform and, enabled us to increase our market share by over 50%.

"Virtual viewings" were swiftly adopted for both residential and commercial properties, through virtual tours and individual client-tailored and accompanied remote viewings. Our recently upgraded public facing websites received over 35 million visitors during the year, an increase of approximately 50% year on year.

Despite the pandemic we continued to maintain, and in some places increase, our capital expenditure into our internal technology initiatives particularly in respect of the digitisation of processes and the use of data to provide commercial insight.

As a leading property manager across the world we continue to be at the forefront of technology advice and adoption for building management. This has become particularly relevant during the pandemic to enable safe reopening after lockdown. The increasing focus in recent years on sustainability, coupled with the continued need to improve the efficiency of buildings, has driven substantial innovation in this arena. As a consequence of this trend, we now advise landlords on the technology fit-out and running of their assets through our Smart Building Consultancy.

We have continued to develop our technology offering for occupiers within our Knowledge Cubed platform that continues to be deployed into new clients across the world. This "app based" platform supports the management of an occupier's real estate portfolio providing an award-wining analytics capability.

Many of these initiatives, and numerous others, continue to capitalise on the investments in our centralised data consolidation across real estate, client, financial and other geospatial data, and investment into the latest platforms for its visualisation.

We continued to manage our portfolio of investments through Grosvenor Hill Ventures, our technology-focused investment subsidiary. Of particular note was YOPA, the digital hybrid estate agency, which continued to take market share in the mainstream UK residential markets, and VU.CITY whose online city collaboration continues to attract new architects, developers and planning clients as well as being utilised by numerous teams across our own business.

Board

As previously announced, on 1 January 2021 Philip Lee and Richard Orders joined the Plc Board as Non-Executive Directors. Rupert Robson will retire from the Board at the Annual General Meeting in May and Tim Freshwater will retire from the Board on 31 December 2021. I thank them both for their enormous contribution to the Board over the years. Tim also stepped down as Senior Independent Non-Executive Director on 31 December 2020, and has been replaced in this capacity by Stacey Cartwright.

Dividends

As a result of the uncertainty caused by the pandemic, the final dividend and supplemental interim dividend for 2019 were cancelled and no interim ordinary dividend was declared during 2020. A final ordinary dividend of 17.0p is recommended, reflecting the resilience of the less Transactional business performance in 2020, making the aggregate ordinary dividend 17.0p for the year (2019: 4.95p, interim ordinary dividend). Due to the impact of the pandemic on the Group's transactional profits during 2020 and the advisability of maintaining liquid resources through 2021, no supplemental interim dividend is declared. The final ordinary dividend of 17.0p per ordinary share will, subject to shareholders' approval at the AGM on 12 May 2021, be paid on 18 May 2021 to shareholders on the register at 9 April 2021.

People

Our strategy was to maintain our staff strength and continue to ensure the future growth of the business. To that end, we maintained both our graduate recruitment programme and the emerging leaders programmes we run across the globe.

I would like to express my thanks to all our staff worldwide for their hard work, their flexible approach during challenging times and relentless focus on client service, which enabled the Group to deliver these results.

Summary and Outlook

Savills delivered a good performance in 2020 in some of the most challenging market conditions experienced by this sector. This reflects the strength and resilience of our global diversified business as we continued to grow our less Transactional service lines and outperform in many of our transactional markets.

Whilst it remains too early to predict the direction of market activity in the near term, global investor demand for secure income, restricted supply and expectations of continued low interest rates underpin the medium and long term attraction of real estate as an asset class. The pace and efficacy of mass vaccination programmes and consequent release from lockdowns and travel restrictions will dictate the rate at which transactional markets recover from here to reflect underlying demand. With the operating environment currently restricted in most markets, and the range of potential outcomes for 2021 being unusually broad, the Board considers it inappropriate to resume guidance at this stage. However, in general terms, we currently expect transactional activity to remain broadly suppressed in the first half of 2021 with improvement commencing in some individual markets thereafter with the potential for progressive recovery through the balance of the year.

We remain focused on growing our less Transactional businesses, increasing our share of the global transactional markets and enhancing the resilience of the business overall. While we continue to monitor the impact of global uncertainties on investor and occupier demand for real estate, we have made a good start to 2021 and see opportunities for business development activity emerging during the course of the year.

Nicholas Ferguson CBE

Chairman

Review of operations

The diversity of the Group, both geographically and in our service offering and the resilience of our residential businesses underpinned a resilient performance in 2020.

Our performance analysed by region was as follows:

	Revenue £m			Underlying profit/(loss) £m
	2020	2019	% growth	2020	2019	% growth
UK	710.7	727.5	(2)	78.8	81.9	(4)
Asia Pacific	575.7	627.1	(8)	42.3	42.6	(1)
Europe & the Middle East	240.7	265.8	(9)	(2.2)	15.8	n/a
North America	213.4	293.0	(27)	(8.4)	17.3	n/a
Unallocated	-	-	n/a	(13.9)	(14.2)	n/a
Total	1,740.5	1,913.4	(9)	96.6	143.4	(33)

On a constant currency basis Group revenue declined by 9% to £1,744.8m, underlying profit decreased 33% to £96.5m and statutory profit before tax decreased by 28% to £83.1m. Our Asia Pacific business represented 33% of Group revenue (2019: 33%) and our overseas businesses as a whole represented 59% of Group revenue (2019: 62%). Our performance by service line is set out below:

	Revenue £m			Underlying profit/(loss) £m
	2020	2019	% growth	2020	2019	% growth
Transaction Advisory	667.2	828.2	(19)	19.4	69.8	(72)
Property and Facilities Management	681.9	667.9	2	44.8	35.2	27
Consultancy	320.6	338.1	(5)	31.5	34.5	(9)
Investment Management	70.8	79.2	(11)	14.8	18.1	(18)
Unallocated	-	-	n/a	(13.9)	(14.2)	n/a
Total	1,740.5	1,913.4	(9)	96.6	143.4	(33)

Overall, our Commercial and Residential Transaction Advisory business revenues together represented 38% of Group revenue (2019: 43%). Of this, the Residential Transaction Advisory business represented 10% of Group revenue (2019: 9%). Our Property and Facilities Management businesses continued to perform well, with year-on-year revenue growth, representing 39% of Group revenue for the year (2019: 35%). Our Consultancy businesses represented 19% of revenue (2019: 18%) reflecting a year-on year decrease of 5%. The Investment Management business had a solid performance, after a record year in 2019, which included a number of one-off performance fees, with revenue declining by 11%. It represented 4% of Group revenue (2019: 4%).

Transaction Advisory

Overall, our Transaction Advisory revenues declined by 19% (at both prevailing rates and in constant currency) to £667.2m (2019: £828.2m). Globally our Commercial Capital Transaction business revenue declined by 24% and our Leasing and Occupier focused transactional revenues declined by 26%. Our Global Residential business revenue increased by 3%.

Underlying profits decreased 72% to £19.4m (2019: £69.8m), with a reduced underlying profit margin of 2.9% (2019: 8.4%), as a result of the effect of the global pandemic on market activity throughout the period.

Asia Pacific Commercial

Revenue from the Asia Pacific Commercial Transaction business decreased by 25% to £103.9m (2019: £138.6m), a fall of 24% in constant currency.

The pandemic took effect earliest in mainland China and Hong Kong and spread to affect transaction volumes significantly, not least through the imposition of travel restrictions which slowed both domestic and cross-border capital flows. In both markets, Savills increased market share despite significantly reduced transaction volumes to finish the year as the leading commercial investment adviser in Greater China.

Those markets which are typically most dependent upon cross border capital were particularly affected, namely Singapore, Hong Kong and Australia. Conversely, those countries with strong domestic trade, namely China, South Korea and Vietnam, were better able to withstand the impact. Indeed in South Korea and Vietnam we experienced strong year-on-year growth in transactional revenues. In Australia and Singapore, the combination of lockdowns, lack of incoming cross-border activity and continued recruitment costs, resulted in the commercial transaction businesses making a loss for the year. Overall, leasing markets remained subdued as corporates continued to defer significant long term decisions. In general, having been first into the pandemic, the region was also the first to start to see signs of recovery as lockdowns eased.

As a result of the reduction in revenues and despite a significant level of cost reduction, the underlying profits in the region declined by 73% to £3.3m (2019: £12.4m).

UK Commercial

Revenue from the UK Commercial Transactional business decreased by 15% to £79.8m (2019: £94.2m) as the COVID-19 pandemic affected both the investment and leasing markets. Despite the arduous trading conditions our national Investment teams maintained continuous contact with clients despite the challenge of remote working and delivered a resilient performance in a market where investment transaction volumes fell year-on-year. National Logistics continued to be the growth sector and despite market leasing volumes in the office sector declining by 50-70% in some locations, our increased market share resulted in revenues outperforming the market. In London, where the market volume declines were significant, we also out-performed the market in both the investment and leasing sectors.

As a result of the declining revenues, partially offset by discretionary cost saving measures implemented during the year, underlying profit before tax was down 23% to £9.5m (2019: £12.3m).

North America

Being overwhelmingly a transactional business primarily focused on occupiers, the North American business was materially affected by the COVID-19 pandemic. The general theme was one of corporate occupiers postponing longer term strategic decisions in favour of short term roll-over transactions, with leasing market volumes falling by 40% nationally and by between 50% and 68% in some of the larger Metro Office markets (e.g. New York, Chicago and San Francisco).

Against that backdrop, the Savills business saw a revenue decline of 30% to £205.2m (2019: £293.0m), a fall of 29% in constant currency. This relative outperformance was due to some significant head office transactions in both the Technology and Healthcare/Life Sciences sectors and a robust performance by our US Government transaction teams. The regions where we most significantly out-performed the market were Northern New Jersey, South Florida, Houston, Atlanta and Philadelphia.

During the period we undertook a CEO succession programme and sought to minimize discretionary expenditure. As a result of the above factors the North American transactional business recorded an underlying loss of £7.5m (2019: £17.3m profit) for the year as a whole.

Europe and the Middle East

In Europe and the Middle East transaction fee income declined by 23% to £98.2m (2019: £127.5m), a fall of 24% in constant currency. This reflected subdued investment and leasing markets as a result of significant lockdown periods and an inability to travel across all of our markets. Those markets which are typically dependent upon cross-border activity suffered the worst declines in market volume. Ireland, one of our historically strongest markets with significant exposure to US capital, was the most affected with revenue declining by 57% year-on-year. In Germany, Spain, the Netherlands, Belgium and Sweden we successfully outperformed the market volume declines, however restructuring costs (Germany and Ireland) and recruitment in a number of locations (Sweden, Portugal and Czech Republic) further impacted the performance of the transactional business. The effect of all these factors was that the business produced an underlying loss of £12.3m for the year (2019: £5.4m underlying profit).

UK Residential

Our UK Residential Transaction business experienced an extraordinary recovery from the end of the first lockdown through to the year end. Revenue increased by 10% year-on-year to £153.2m (2019: £139.1m). Our second hand agency business increased revenue by 18% year-on-year, benefiting from the surge in activity after the first national lock down from June onwards as people reassessed their housing needs, coupled with the effect of lower stamp duty rates. This was particularly the case outside of the capital, with the number of exchanges increasing by 26% year-on-year, and the average value of residential properties sold by Savills increased by 11% from £1.13m to £1.26m. In London, whilst the recovery was slower to emerge, the number of exchanges was up 25%, with the average value of residential properties sold by Savills decreasing by 8% from £2.13m to £1.96m, reflecting a greater proportion of activity and market share gains in the Core London market (values c £1.5m).

The new homes and prime London markets were slower to recover, with the inability of overseas buyers to travel during and between lockdowns, which limited the ability to transact. As a consequence, our new homes revenues fell by 11% year-on-year. The number of exchanges fell by 10% to 3,505 (2019: 3,905) with the average value of properties sold by Savills increasing by 1% year-on-year.

Our PRS residential transactional business had another strong year of market leadership advising on some of the largest transactions ever undertaken in the UK such as the £4.7bn IQ student portfolio.

The combination of higher revenues and discretionary cost savings resulted in underlying profit increasing by 29% year-on-year to £23.0m (2019: £17.8m).

Asia Pacific Residential

Revenue from the Asia Pacific Residential Transaction business decreased by 25% to £26.9m (2019: £35.8m), a fall of 24% in constant currency. There were significant reductions in activity levels in Hong Kong, Australia, Singapore and Vietnam. However, in mainland China which is our biggest revenue contributor in this segment, a reasonably robust market emerged from lockdown enabling us to maintain revenues broadly in line with the prior year. International residential sales in Hong Kong continued to perform well as individuals sought investment opportunities overseas. 

Underlying profits of £3.4m were 26% lower than the prior year (2019: £4.6m) reflecting a lower profit contribution from our joint venture in Singapore, but offset by cost reductions, most notably in Australia as a result of the cost rationalisation program of 2019.

Property and Facilities Management

Our Property and Facilities Management businesses continued to perform well despite the global pandemic, with revenues growing by 2% at £681.9m (2019: £667.9m). Savills total area under management increased by 2% to 2.35bn sq. ft. (2019: 2.30bn sq. ft.). Underlying profit increased by 27% to £44.8m (2019: £35.2m), 28% in constant currency.

Asia Pacific

The Asia Pacific Property Management business showed stability throughout the year with a revenue decrease of 1% to £368.3m (2019: £372.5m), an equivalent decline in constant currency. Revenue reductions in South Korea, China and Australia, were almost entirely offset by higher revenues as a result of contract wins and ad hoc fees in Hong Kong, Vietnam, Singapore and Japan, with the latter benefitting from additional set-up fees on new contracts.

A number of the terminating contracts, most notably in South Korea, were in facilities management with no contribution to margin. In addition, the effect of the pandemic and lockdown on the retail and leisure industries in particular meant that staff cost inflation, which has been an issue in recent years, abated significantly in Hong Kong and mainland China. These factors, together with cost saving measures implemented in Australia, Hong Kong and Singapore led to a significant increase in underlying profit to £27.7m (2019: £19.2m).

UK

The UK Property Management business was able to demonstrate the beneficial effect of a diversified offering by growing revenues and profits despite the prolonged periods of lockdown throughout 2020. Revenue grew by 6% to £245.0m (2019: £231.1m) and some very significant contracts were won during the period, which should benefit 2021 and beyond. The Residential Property Management Lettings team, which is also included in this segment, remained resilient, with revenues falling by only 2% despite the challenging market conditions impacting London lettings significantly.

The higher revenues, along with a continued drive to improve efficiencies, enabled the underlying profit to increase by 9% to £17.2m (2019: £15.8m).

Europe and the Middle East

In the Europe and Middle East Property Management business revenues were up by £4.3m (7%) to £68.6m (2019: £64.3m), which was 6% on a constant currency basis. At the end of August we acquired a German property management business, OMEGA Immobilien Management GmbH and OMEGA Immobilien Service GmbH ('Omega'), which contributed £3.6m of revenue to this segment. There was also revenue growth in the Middle East and the Netherlands, offsetting reductions in Sweden, Ireland and France.

In addition to the Omega acquisition, there were significant recruitment costs to enhance our capabilities in Spain, France, Italy, the Czech Republic and the Middle East, which resulted in an underlying loss for the year of £0.1m (2019: £0.2m profit).

Consultancy

Global Consultancy revenue decreased by 5% to £320.6m (2019: £338.1m) and underlying profit fell by 9% to £31.5m (2019: £34.5m). Currency movements had a negligible impact on results in the Consultancy business.

UK

The UK Consultancy businesses mainly comprised of Valuations, Planning, Development, Housing Services, Building and Project Consultancy, Energy Projects and Rural. With the exception of Rural, Housing Consultancy and Lease Consultancy, all of these services showed resilience despite experiencing slightly reduced activity as a result of the COVID-19 pandemic. The main consequence, was the delay or deferral of a number of consultancy projects into 2021. Revenues of £205.8m were 10% below the prior year (2019: £229.9m).

Underlying profit fell by 13% to £23.5m (2019: £27.0m).

Asia Pacific

The Asia Pacific Consultancy business showed considerable resilience during the pandemic. Revenues, which primarily comprise Valuations, Research and Project Management, decreased by 1% to £69.1m (2019: £69.6m), slightly ahead of the prior year on a constant currency basis. The biggest contributors to this robust performance were Australia, Japan, Singapore and South Korea, predominantly as a result of increased levels of portfolio advisory valuation and research activity which outweighed the decline in the security valuations associated with transaction volumes. Singapore was further buoyed as investments made in previous years started to gain traction. The project management revenues remained resilient, particularly in Australia.

Resilient revenues together with cost savings led to an increase in underlying profits of 41% to £6.5m (2019: £4.6m).

Europe and the Middle East

In the Europe and Middle East business, which is primarily made up of valuations, revenues decreased by £1.1m (3%) to £37.5m (2019: £38.6m), down 4% on a constant currency basis. Reductions in Ireland, Spain and France were partially offset by growth in Germany, Poland and the Netherlands and the commencement of new Consultancy services in the Czech Republic and the Middle East.

Underlying profits fell by £0.5m (17%) to £2.4m (2019: £2.9m) at both prevailing exchange rates and on a constant currency basis.

North America

As part of our strategy to diversify our income streams in North America by building our Consultancy practices, in March 2020 we announced the acquisition of Macro Consultants LLC, a national project management consultancy business.

As a result of the effect of the lock downs on the construction industry, the business experienced some hiatuses with a consequent effect on revenue and profits. However we also won a number of exciting new assignments both in North America and through referrals from the US into other regions. North America Consultancy revenues were £8.2m (2019: £nil) with an underlying loss of £0.9m (2019: £nil).

Investment Management

Having enjoyed a supernormal year of performance fees in 2019, we anticipated a reduction in both revenue and profit in 2020. In the event, revenue from our Investment Management business reduced by 11% to £70.8m (2019: £79.2m) and the business performed ahead of our expectations with both new fund launches and strong investment performance from the majority of our products. The pandemic did have an impact on capital raising and deployment as our strategy was to adopt a cautious approach to the deployment of capital in markets where, for much of the period, there was limited price transparency. Despite this, we raised a total of approximately £1.7bn (2019: £3.1bn) for real estate equity, and our associate, DRC Capital, raised over £1.0bn for debt strategies. We successfully launched two new funds in the Asia Pacific region and two in Europe.

Our AUM increased by 7% to £19.0bn (2019: £17.7bn) and base fund management fees remained highly resilient. Our transaction fee income declined by 23% over the period, reflecting reduced deployment, and our performance fees declined by a similar amount; both of these were better than anticipated at the start of the pandemic.

As a result of the above factors, underlying profit decreased by 18% to £14.8m (2019: £18.1m).

Financial review

Underlying profit margin

Underlying profit margin decreased to 5.6% (2019: 7.5%), reflecting the significantly lower levels of transactional activity as a consequence of the global pandemic and the greater proportion of lower margin, but stable revenues from our less Transactional service lines.

Taxation

The tax charge for the year decreased to £15.2m (2019: £32.0m), reflecting an effective tax rate on statutory profit before tax of 18.3% (2019: 27.7%). The Group's effective reported tax rate is marginally lower than the UK effective rate of tax of 19% reflecting lower permanent disallowable expenses and higher non-assessable income.

The underlying effective tax rate reduced to 18.5% (2019: 25.1%).

Restructuring and acquisition-related costs

During the year the Group recognised a total of £6.5m in restructuring and acquisition-related costs (2019: £25.2m). These comprised an aggregate restructuring charge of £1.5m (2019: £11.5m), which related principally to the ongoing costs of deferred shares issued in relation to the restructuring upon acquisition of Aguirre Newman in 2017.

The reduction in acquisition-related costs in 2020 to £5.0m (2019: £13.7m) reflected a reduction in corporate acquisition activity year-on-year. These costs related to future consideration payments, associated with past acquisitions, which are subject to a future service condition. The largest components of this charge relate to the acquisitions of Currell Group in 2018 and Aguirre Newman in 2017.

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

Earnings per share

Basic earnings per share decreased 19% to 49.0p (2019: 60.6p), reflecting a 19% decrease in statutory profit after tax. Adjusted on a consistent basis for exceptional pension charges, restructuring, acquisition-related costs, profits and losses on disposals, certain share-based payment adjustments and amortisation of acquired intangible assets (excluding software), underlying basic earnings per share decreased 27% to 56.8p (2019: 78.0p).

Fully diluted earnings per share decreased by 19% to 47.9p (2019: 58.8p). The underlying fully diluted earnings per share decreased 27% to 55.5p (2019: 75.7p).

Cash resources, borrowings and liquidity

Gross cash and cash equivalents at year end increased 61% to £338.3m (2019: £209.9m). This increase primarily reflected the effect of cost savings and a positive year-on-year movement in working capital together with the cancellation of the final dividend for 2019 and no declaration of an interim dividend for 2020. In addition the Group took the opportunity to defer tax (primarily sales tax) payments of £49.2m, at no cost during the initial lockdown period. The majority of which is expected to be paid by the end of 2021.

Gross borrowings at year end decreased to £160.6m (2019: £181.4m). These principally comprise £150.0m (2019: £150.0m) of 7, 10 and 12 year fixed rate notes which were issued in June 2018, along with £11.4m drawn under a revolving credit facility in North America. The Group's UK revolving credit facility ('RCF') was undrawn at the end of the year (2019: £32.5m), with £397.2m (2019: £373.3m) of undrawn borrowing facilities in total available to the Group. At the year end, net cash was £177.7m (2019: £28.5m).

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

The Group's net inflow of cash is typically greater in the second half of the year. This is as a result of seasonality in trading and the major cash outflows associated with dividends, profit related remuneration payments and related payroll taxes in the first half. The Group cash inflow for the year from operating activities was £248.6m (2019: £95.4m).

With a large proportion of the Group's revenue typically being transactional in nature, the Board's strategy is to maintain low levels of gearing, but retain sufficient credit facilities to enable it to meet cash requirements during the year and finance the majority of business development opportunities as they arise. Given the significant pandemic-related decline in Transactional activity in 2020, this strategy underpinned the financial stability of the Group's balance sheet.

Capital and shareholders' interests

During the year no shares (2019: 45,176) were issued to participants under the Performance Share Plan and 8,504 (2019: 87,938) new shares were issued to participants on exercise of options under the Group's SAYE schemes. The total number of ordinary shares in issue at 31 December 2020 was 143.1m (2019: 143.1m).

Savills Pension Scheme

The funding level of the defined benefit Savills Pension Scheme in the UK, which is closed to future service-based accrual, improved during the year primarily as a result of an increase in asset values. The plan was in a liability position of £2.6m at the year-end (2019: £9.4m liability).

During the prior year the Group incurred an additional exceptional charge of £0.7m in respect of the equalisation of the Guaranteed Minimum Pension ('GMP') on the UK defined benefit pension plan.

Net assets

Net assets as at 31 December 2020 were £581.6m (2019: £503.2m). This movement reflects the Group's trading performance alongside the actuarial gain on the UK defined benefit pension plan.

Foreign currency

The Group operates internationally and is exposed to foreign exchange risks. As both revenue and costs in each location are generally denominated in the same currency, transaction related risks are relatively low and generally associated with intra group activities. Consequently, the overriding foreign currency risk relates to the translation of overseas profits and losses into sterling on consolidation. The Group does not actively seek to hedge risks arising from foreign currency translations due to their non-cash nature. The net impact of foreign exchange rate movements represented a £4.3m decrease in revenue (2019: £20.7m increase) and a £0.1m increase to underlying profit (2019: £1.4m increase). Refer to Note 3.2 to the financial statements for further information on foreign exchange risk.

Savills plc

Consolidated income statement

for the year ended 31 December 2020

		2020	2019 Restated*
	Note	£m	£m
Revenue	2	1,740.5	1,913.4
Less:
Employee benefits expense		(1,153.7)	(1,240.5)
Depreciation		(64.3)	(60.6)
Amortisation of intangible assets		(9.6)	(10.4)
Other operating expenses		(419.1)	(482.0)
Impairment losses on financial assets		(8.7)	(6.5)
Other operating income		0.8	0.5
Other (losses)/gains		(0.1)	1.7
Operating profit		85.8	115.6
Finance income		3.4	6.5
Finance costs		(16.2)	(18.3)
		(12.8)	(11.8)
Share of post-tax profit from joint ventures and associates		10.2	11.8
Profit before income tax		83.2	115.6
Income tax expense	5	(15.2)	(32.0)
Profit for the year		68.0	83.6
Attributable to:
Owners of the parent		67.6	82.9
Non-controlling interests		0.4	0.7
		68.0	83.6
Earnings per share
Basic earnings per share	7(a)	49.0p	60.6p
Diluted earnings per share	7(a)	47.9p	58.8p

Supplementary income statement information

Reconciliation to underlying profit before income tax
Profit before income tax		83.2	115.6
- restructuring and acquisition-related costs		6.5	25.2
- other underlying adjustments		6.9	2.6
Underlying profit before income tax		96.6	143.4

* See Note 1(b) for details on the prior year restatement of revenue and other operating expense

Savills plc

Consolidated statement of comprehensive income

for the year ended 31 December 2020

	2020	2019
	£m	£m
Profit for the year	68.0	83.6
Other comprehensive income/(loss)
Items that will not be reclassified to profit or loss:
Re-measurement of defined benefit pension scheme and employee benefit obligations	6.5	(23.2)
Changes in fair value of financial assets at FVOCI, net of tax	(6.9)	(0.3)
Tax on other items that will not be reclassified	(1.2)	4.4
Total items that will not be reclassified to profit or loss	(1.6)	(19.1)
Items that may be reclassified subsequently to profit or loss:
Currency translation differences	1.8	(21.0)
Tax on items that may be reclassified	(0.3)	3.8
Total items that may be reclassified subsequently to profit or loss	1.5	(17.2)
Other comprehensive loss for the year, net of tax	(0.1)	(36.3)
Total comprehensive income for the year	67.9	47.3
Total comprehensive income attributable to:
Owners of the parent	67.5	46.6
Non-controlling interests	0.4	0.7
	67.9	47.3

Savills plc

Consolidated statement of financial position

at 31 December 2020

			2020	2019
		Note	£m	£m
Assets: Non-current assets
Property, plant and equipment			64.9	68.9
Right of use assets			252.8	226.2
Goodwill		9	379.4	374.2
Intangible assets			49.8	44.5
Investments in joint ventures and associates			51.8	51.4
Deferred income tax assets			42.8	32.7
Financial assets at fair value through other comprehensive income ('FVOCI')			27.4	32.6
Contract related assets			1.4	1.6
Trade and other receivables			31.8	27.3
			902.1	859.4
Assets: Current assets
Contract related assets			8.0	7.5
Trade and other receivables			496.6	568.9
Income tax receivable			1.9	3.6
Derivative financial instruments			0.4	0.2
Cash and cash equivalents			338.3	209.9
			845.2	790.1
Liabilities: Current liabilities
Borrowings		10	12.2	33.4
Lease liabilities			45.2	45.3
Derivative financial instruments			0.3	0.1
Contract liabilities			10.8	10.8
Trade and other payables			604.9	589.9
Income tax liabilities			10.2	17.2
Employee benefit obligations			19.2	16.2
Provisions			8.3	10.7
			711.1	723.6
Net current assets			134.1	66.5
Total assets less current liabilities			1,036.2	925.9
Liabilities: Non-current liabilities
Borrowings		10	148.4	148.0
Lease liabilities			259.0	221.8
Derivative financial instruments			0.6	-
Other payables			10.5	17.7
Retirement and employee benefit obligations			14.9	20.5
Provisions			15.6	12.6
Deferred income tax liabilities			5.6	2.1
			454.6	422.7
Net assets			581.6	503.2
Equity
Share capital			3.6	3.6
Share premium			97.2	97.2
Other reserves			90.0	95.5
Retained earnings			390.1	306.2
Equity attributable to owners of the parent			580.9	502.5
Non-controlling interests			0.7	0.7
Total equity			581.6	503.2

Savills plc

Consolidated statement of changes in equity

for the year ended 31 December 2020

	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 2020	3.6	97.2	95.5	306.2	502.5	0.7	503.2
Profit for the year	-	-	-	67.6	67.6	0.4	68.0
Other comprehensive income/(loss):
Re-measurement of defined benefit pension scheme and employee benefit obligations	-	-	-	6.5	6.5	-	6.5
Changes in fair value of financial assets at FVOCI, net of tax	-	-	(6.9)	-	(6.9)	-	(6.9)
Tax on other items directly taken to reserves	-	-	-	(1.5)	(1.5)	-	(1.5)
Currency translation differences	-	-	1.8	-	1.8	-	1.8
Total comprehensive income for the year	-	-	(5.1)	72.6	67.5	0.4	67.9
Employee share option scheme:
- Value of services provided	-	-	-	19.8	19.8	-	19.8
Purchase of treasury shares	-	-	-	(8.3)	(8.3)	-	(8.3)
Disposal of financial assets at FVOCI	-	-	(0.4)	(0.2)	(0.6)	-	(0.6)
Dividends	-	-	-	-	-	(0.4)	(0.4)
Balance at 31 December 2020	3.6	97.2	90.0	390.1	580.9	0.7	581.6

	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	3.6	96.6	117.6	277.2	495.0	0.7	495.7
Profit for the year	-	-	-	82.9	82.9	0.7	83.6
Other comprehensive income/(loss):
Re-measurement of defined benefit pension scheme and employee benefit obligations	-	-	-	(23.2)	(23.2)	-	(23.2)
Changes in fair value of financial assets at FVOCI, net of tax	-	-	(0.3)	-	(0.3)	-	(0.3)
Tax on other items directly taken to reserves	-	-	-	8.2	8.2	-	8.2
Currency translation differences	-	-	(21.0)	-	(21.0)	-	(21.0)
Total comprehensive income for the year	-	-	(21.3)	67.9	46.6	0.7	47.3
Employee share option scheme:
- Value of services provided	-	-	-	17.8	17.8	-	17.8
Purchase of treasury shares	-	-	-	(14.1)	(14.1)	-	(14.1)
Shares issued	-	0.6	-	-	0.6	-	0.6
Dividends	-	-	-	(42.8)	(42.8)	(0.5)	(43.3)
Disposal of financial assets at FVOCI	-	-	(0.8)	0.8	-	-	-
Transactions with non-controlling interests	-	-	-	(0.6)	(0.6)	(0.2)	(0.8)
Balance at 31 December 2019	3.6	97.2	95.5	306.2	502.5	0.7	503.2

Savills plc

Consolidated statement of cash flows

for the year ended 31 December 2020

		2020	2019
	Note	£m	£m
Cash flows from operating activities
Cash generated from operations	8	289.8	132.6
Interest received		3.4	6.4
Interest paid		(15.0)	(17.8)
Income tax paid		(29.6)	(25.8)
Net cash generated from operating activities		248.6	95.4
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		0.1	0.2
Proceeds from sale of equity investments		1.9	4.5
Proceeds from sale of interests in joint ventures, associates and other investments		0.7	2.1
Dividends received from joint ventures and associates		10.8	10.5
Repayment of loans by joint ventures and associates		0.1	-
Loans to joint ventures and associates		(1.4)	(1.1)
Loans to other parties		(5.5)	(6.1)
Acquisition of subsidiaries, net of cash acquired	9	(11.2)	(1.5)
Deferred consideration paid in relation prior year acquisitions		(15.3)	(5.0)
Purchase of property, plant and equipment		(12.8)	(16.2)
Purchase of intangible assets		(5.3)	(7.3)
Purchase of investment in joint ventures, associates and equity investments		(5.5)	(8.4)
Net cash used in investing activities		(43.4)	(28.3)
Cash flows from financing activities
Proceeds from issue of share capital		-	0.6
Proceeds from borrowings		46.1	158.1
Repayments of borrowings		(67.3)	(125.2)
Financing fees paid		-	(1.8)
Principal elements of lease payments		(47.7)	(45.0)
Purchase of treasury shares		(8.3)	(14.1)
Purchase of non-controlling interests		-	(0.1)
Dividends paid	6	(0.4)	(43.3)
Net cash used in financing activities		(77.6)	(70.8)
Net increase/(decrease) in cash, cash equivalents and bank overdrafts		127.6	(3.7)
Cash, cash equivalents and bank overdrafts at beginning of year		209.8	223.9
Effect of exchange rate fluctuations on cash and cash equivalents held		0.8	(10.4)
Cash, cash equivalents and bank overdrafts at end of year		338.2	209.8

NOTES

1(a). Basis of preparation

The results for the year ended 31 December 2020 have been extracted from the audited financial statements. The financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

The financial statements have been prepared on a going concern basis.

The financial information in this statement does not constitute statutory accounts within the meaning of s434 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2020, on which the auditors have given an unqualified audit report, have not yet been filed with the Registrar of Companies.

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

1(b). Prior year restatement

Following a review of the control over certain management companies in the CEME division, management have determined that the Group does not have control over these entities as defined by IFRS 10. These entities have been removed from the consolidated Group accounts and the prior period comparatives have been restated in accordance with IAS 8.

The table below shows the impact of the prior year restatement on the primary financial statements:

	2019 reported £m	Restatement £m	2019 restated £m
Income statement
Revenue	1,930.0	(16.6)	1,913.4
Other operating expenses	(498.6)	16.6	(482.0)

No adjustment has been made to the 2019 cash flow or statement of financial position as the impact is not considered material.

2. Segment analysis

	Transaction Advisory	Consultancy	Property and Facilities Manage- ment	Investment Manage- ment	Unalloc-ated	Total
Year ended to 31 December 2020	£m	£m	£m	£m	£m	£m
Revenue
United Kingdom - commercial	79.8	164.1	204.9	26.9	-	475.7
United Kingdom - residential	153.2	41.7	40.1	-	-	235.0
Total United Kingdom	233.0	205.8	245.0	26.9	-	710.7
Europe & the Middle East	98.2	37.5	68.6	36.4	-	240.7
Asia Pacific - commercial	103.9	69.1	368.3	7.5	-	548.8
Asia Pacific - residential	26.9	-	-	-	-	26.9
Total Asia Pacific	130.8	69.1	368.3	7.5	-	575.7
North America	205.2	8.2	-	-	-	213.4
Revenue	667.2	320.6	681.9	70.8	-	1,740.5
Underlying profit/(loss) before tax
United Kingdom - commercial	9.5	17.6	13.8	5.6	(13.9)	32.6
United Kingdom - residential	23.0	5.9	3.4	-	-	32.3
Total United Kingdom	32.5	23.5	17.2	5.6	(13.9)	64.9
Europe & the Middle East	(12.3)	2.4	(0.1)	7.8	-	(2.2)
Asia Pacific - commercial	3.3	6.5	27.7	1.4	-	38.9
Asia Pacific - residential	3.4	-	-	-	-	3.4
Total Asia Pacific	6.7	6.5	27.7	1.4	-	42.3
North America	(7.5)	(0.9)	-	-	-	(8.4)
Underlying profit/(loss) before tax	19.4	31.5	44.8	14.8	(13.9)	96.6

	Transaction Advisory	Consultancy	Property and Facilities Manage-ment*	Investment Manage-ment	Unalloc-ated	Total
Year ended to 31 December 2019	£m	£m	£m	£m	£m	£m
Revenue
United Kingdom - commercial	94.2	180.3	190.1	33.2	-	497.8
United Kingdom - residential	139.1	49.6	41.0	-	-	229.7
Total United Kingdom	233.3	229.9	231.1	33.2	-	727.5
Europe & the Middle East*	127.5	38.6	64.3	35.4	-	265.8
Asia Pacific - commercial	138.6	69.6	372.5	10.6	-	591.3
Asia Pacific - residential	35.8	-	-	-	-	35.8
Total Asia Pacific	174.4	69.6	372.5	10.6	-	627.1
North America	293.0	-	-	-	-	293.0
Revenue	828.2	338.1	667.9	79.2	-	1,913.4
Underlying profit/(loss) before tax
United Kingdom - commercial	12.3	19.4	12.1	9.0	(14.2)	38.6
United Kingdom - residential	17.8	7.6	3.7	-	-	29.1
Total United Kingdom	30.1	27.0	15.8	9.0	(14.2)	67.7
Europe & the Middle East	5.4	2.9	0.2	7.3	-	15.8
Asia Pacific - commercial	12.4	4.6	19.2	1.8	-	38.0
Asia Pacific - residential	4.6	-	-	-	-	4.6
Total Asia Pacific	17.0	4.6	19.2	1.8	-	42.6
North America	17.3	-	-	-	-	17.3
Underlying profit/(loss) before tax	69.8	34.5	35.2	18.1	(14.2)	143.4

*  Property and Facilities Management 2019 revenue has been restated, with revenue decreased by £16.6m in the Europe & Middle East division. There is no change to underlying profit. Refer to Note 1(b) for further details. 

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 statutory profit before tax by profit/(loss) on disposals, share-based payment adjustment, significant restructuring costs, acquisition-related costs, amortisation of acquired intangible assets (excluding software) and other items that are considered exceptional by size or nature.

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

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

3. Underlying profit before tax

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

	2020 £m	2019 £m
Statutory profit before tax	83.2	115.6
Adjustments:
Amortisation of acquired intangible assets (excluding software)	4.9	6.9
Share-based payment adjustment	1.2	(2.6)
Loss/(profit) on disposal of joint ventures and associates	0.1	(1.7)
Restructuring costs	1.5	11.5
Acquisition-related costs	5.0	13.7
GMP equalisation charge	0.7	-
Underlying profit before tax	96.6	143.4

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 to align the underlying staff cost in the year with the revenue recognised in the same period.

Loss on disposal recognised in relation to disposal of a portion of the Group's holding in a joint venture in China, which is now treated as an FVOCI equity investment and a part disposal of an associate in Singapore. In the prior year, profit on disposal included profits recognised in relation to the proceeds received in relation to legacy real estate funds in North America and disposal of a portion of the Group's holding in a joint venture in China.

Restructuring costs includes costs of integration activities in relation to significant business acquisitions. Charges in the year primarily relate to the ongoing cost of deferred shares, with a 5 year vesting period, issued in relation to the restructuring upon acquisition of Aguirre Newman in 2017. In the prior year, charges related to costs incurred in rebranding the North American business to Savills in line with the original integration plan and the final reorganisation within the German Investment management business associated with the SEB acquisition of 2015.

Acquisition-related costs include a net £4.7m (2019: £12.4m) provision for future payments in relation to business acquisitions, which are expensed through the income statement to reflect the requirement for the recipients to remain engaged actively in the business at the payment date. These relate to acquisitions in the UK (£1.8m - primarily Currell Group), North America (£1.8m) and Europe & the Middle East (£1.1m - primarily Aguirre Newman). In the prior year, these costs related to acquisitions in the UK (£5.0m - primarily Currell Group), North America (£2.9m) and Europe & the Middle East (£4.5m - primarily Aguirre Newman). In addition, acquisition-related costs includes £0.3m of unwinding of interest on deferred consideration payments (2019: £0.5m), £0.7m of transaction costs (2019: £0.8m) and a £0.7m credit in relation to a working capital adjustment on the Cluttons Middle East acquisition in 2018.

Guaranteed Minimum Pension ('GMP') equalisation charge in the year reflects the past service cost on the UK defined benefit pension scheme, which is the estimated cost of equalising GMPs for historic transfers-out of the scheme; this follows a High Court ruling issued on 20 November 2020.

4. Government subsidies

During the year, the Group received £23.4m of wage-related subsidies from governments globally in respect of employment support schemes due to the Covid-19 pandemic. After repayments (principally of UK Furlough receipts) and other provisions, the net positive impact of such receipts on the Group's operating profit in the year was £11.9m.

5. Income tax expense

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

	2020	2019
	£m	£m
United Kingdom
- Current tax	13.3	12.8
- Deferred tax	(4.4)	(3.3)
Foreign tax
- Current tax	13.2	22.8
- Deferred tax	(6.9)	(0.3)
Income tax expense	15.2	32.0

6. Dividends

	2020	2019
	£m	£m
Amounts recognised as distribution to equity holders in the year:
In respect of the previous year
Ordinary final dividend of £nil per share (2018: 10.8p)	-	14.8
Supplemental interim dividend of £nil per share (2018: 15.6p)	-	21.3
In respect of the current year
Interim dividend of £nil per share (2019: 4.95p)	-	6.7
	-	42.8

The Group paid £0.4m (2019: £0.5m) of dividends to non-controlling interests.

On 1 April 2020, the proposed ordinary final dividend and supplemental interim dividend for 2019 were withdrawn in order to retain sufficient cash reserves to mitigate the effect of the uncertainty over the impact of COVID-19.

The Board recommends a final dividend of 17.0p (net) per ordinary share (amounting to £23.8m) is paid on 18 May 2021 to shareholders on the register at 9 April 2021. These financial statements do not reflect this dividend payable.

The total paid and recommended ordinary dividend for the 2020 financial year comprises an aggregate distribution of 17.0p per ordinary share (2019: 4.95p per ordinary share).

7(a). Basic and diluted earnings per share

	2020	2020	2020	2019	2019	2019
	Earnings	Shares	EPS	Earnings	Shares	EPS
Year to 31 December	£m	million	pence	£m	million	pence
Basic earnings per share	67.6	138.0	49.0	82.9	136.7	60.6
Effect of additional shares issuable under option	-	3.1	(1.1)	-	4.2	(1.8)
Diluted earnings per share	67.6	141.1	47.9	82.9	140.9	58.8

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

	2020	2020	2020	2019	2019	2019
	Earnings	Shares	EPS	Earnings	Shares	EPS
Year to 31 December	£m	million	pence	£m	million	pence
Basic earnings per share	67.6	138.0	49.0	82.9	136.7	60.6
- Amortisation of  acquired intangible assets (excluding software) after tax	3.3	-	2.4	5.1	-	3.7
- Share-based payment adjustment after tax	1.1	-	0.8	(2.2)	-	(1.6)
- Loss/(profit) on disposal of joint ventures and associates after tax	0.1	-	0.1	(1.2)	-	(0.9)
- Restructuring costs after tax	1.5	-	1.1	9.3	-	6.8
- Acquisition-related costs after tax	4.1	-	3.0	12.8	-	9.4
- GMP equalisation charge after tax	0.6	-	0.4	-	-	-
Underlying basic earnings per share	78.3	138.0	56.8	106.7	136.7	78.0
Effect of additional shares issuable under option	-	3.1	(1.3)	-	4.2	(2.3)
Underlying diluted earnings per share	78.3	141.1	55.5	106.7	140.9	75.7

8. Cash generated from operations

	2020	2019
	m	m
Profit for the year	68.0	83.6
Adjustments for:
Income tax (Note 5)	15.2	32.0
Depreciation	64.3	60.6
Amortisation of intangible assets	9.6	10.4
Loss on disposal of property, plant and equipment and intangible assets	0.8	1.4
Loss/(profit) on disposal of joint ventures and associates	0.1	(1.7)
Net finance cost	12.8	11.8
Share of post-tax profit from joint ventures and associates	(10.2)	(11.8)
Increase/(decrease) in employee and retirement obligations	3.4	(9.5)
Exchange movements and fair value movements on financial instruments in operating activities	2.4	(0.2)
Increase in provisions	0.5	3.4
Charge for share-based compensation	19.8	17.8
Operating cash flows before movements in working capital	186.7	197.8
Decrease/(increase) in trade and other receivables and contract assets	84.5	(50.7)
Increase/(decrease) in trade and other payables and contract liabilities	18.6	(14.5)
Cash generated from operations	289.8	132.6

Foreign exchange movements resulted in a £0.3m decrease in current and non-current trade and other receivables (2019: £13.0m decrease) and a £2.3m decrease in current and non-current trade and other payables (2019: £15.3m decrease).

9. Acquisition of subsidiaries

The fair values of the assets acquired and liabilities assumed as part of the Group's acquisitions in the year are provisional and will be finalised within 12 months of the acquisition date. These are summarised below:

		Provisional fair value to the Group
		Macro	Omega	Total
		£m	£m	£m
Property, plant and equipment		-	0.1	0.1
Right-of-use asset		1.3	0.5	1.8
Intangible assets		7.2	3.3	10.5
Current assets:	Trade and other receivables	-	0.9	0.9
	Cash and cash equivalents	-	2.4	2.4
Current liabilities:	Trade and other payables	-	(1.0)	(1.0)
	Borrowings	-	(0.7)	(0.7)
	Lease liabilities	-	(0.3)	(0.3)
	Income tax liability	-	(0.3)	(0.3)
	Employment benefit provisions	-	(0.1)	(0.1)
Non-current liabilities:	Lease liabilities	(1.3)	(0.2)	(1.5)
	Deferred tax liabilities	-	(1.0)	(1.0)
Net assets acquired		7.2	3.6	10.8
Goodwill		3.3	1.8	5.1
Purchase consideration		10.5	5.4	15.9
Consideration satisfied by:
Cash paid		9.3	4.3	13.6
Discounted value of deferred consideration		1.2	1.1	2.3
		10.5	5.4	15.9

Macro Consultants LLC ('Macro')

On 1 March 2020 the Group acquired 100% of the equity interest in Macro Consultants LLC, complementing our existing services while accelerating the expansion of Savills advisory and management service platform in the United States.

Total acquisition consideration is determined at £10.5m, £9.3m of which was settled on completion and the remainder relating to the discounted value of deferred payments of £1.2m. The deferred payments are payable in 6 separate instalments between September 2021 and September 2027.

In addition to the above, an earn-out is payable on an annual basis between 2021 until 2027 and is measured against revenue and income targets. The maximum earn-out payment under the agreement totals £23.3m and is deemed to be linked to continued active engagement with the business. As required by IFRS 3 (revised), the expected value of these payments will be expensed to the income statement over the relevant period of engagement.

Acquisition-related costs of £0.2m have been expensed as incurred to the income statement.

Goodwill of £3.3m has been determined. Goodwill is attributable to the experience and expertise of key staff and strong industry reputation and is expected to be deductible for tax purposes over a period of 15 years. Intangible assets recognised on acquisition include £6.7m of customer relationships and £0.5m in relation to the brand.

The acquired business contributed revenue of £8.2m and a loss of £0.9m to the Group for the period from 1 March 2020 to 31 December 2020. Had the acquisition been made at the beginning of the financial year, revenue would have been £10.2m and the loss would have been £1.2m.

OMEGA Immobilien Management GmbH and OMEGA Immobilien Service GmbH ('Omega')

On 31 August 2020 the Group acquired 100% of the equity interest in OMEGA Immobilien Management GmbH and OMEGA Immobilien Service GmbH, property and facilities management businesses offering services for offices, shopping centres, residential complexes and car parks across Germany. 

Total acquisition consideration is provisionally determined at £5.4m, £4.3m of which was settled on completion and the remainder relating to a deferred payment in 2022 totalling £1.1m. 

In addition to the above, an earn-out is payable in 2023 and is based on average future EBITDA targets. The maximum earn-out payment under the agreement totals £4.5m and is deemed to be linked to continued active engagement with the business. As required by IFRS 3 (revised), the expected value of these payments will be expensed to the income statement over the relevant period of engagement.

Acquisition-related costs of £0.5m have been expensed as incurred to the income statement.

The fair value exercise is in progress and goodwill of £1.8m has been provisionally determined. Goodwill is attributable to the experience and expertise of key staff and is not expected to be deductible for tax purposes.

The acquired business contributed revenue of £3.6m and a profit of £0.4m to the Group for the period from 31 August 2020 to 31 December 2020. Had the acquisition been made at the beginning of the financial year, revenue would have been £9.9m and the profit would have been £0.9m.

10. Borrowings

Movements in borrowings are analysed as follows:

			£m
Opening amount as at 1 January 2020			181.4
Additional borrowings			46.1
Repayments of borrowings (including overdraft movement)			(67.3)
Addition through business combination (Note 9)			0.7
Non-cash movement			0.4
Foreign exchange			(0.7)
Closing amount as at 31 December 2020			160.6

	2020	2019
	£m	£m
Current
Bank overdrafts	0.1	0.1
Unsecured bank loans due within one year or on demand	12.1	33.3
	12.2	33.4
Non-current
Loan notes	150.0	150.0
Transaction costs (issuance of loan notes and RCF arrangement fees)	(1.6)	(2.0)
	148.4	148.0
	160.6	181.4

The Group holds a £360.0m multi-currency revolving credit facility ('RCF'), which includes a £90.0m accordion facility, expiring in June 2024. As at 31 December 2020 none (2019: £32.5m) of the RCF was drawn. The unsecured bank loans reflect a £11.4m utilisation of a revolving credit facility in North America for working capital purposes, which is repayable within one year and denominated in US dollars (2019: £nil) and a £0.7m working capital loan in Thailand, which is repayable on demand and denominated in Thailand baht (2019: £0.8m).

The Group holds £150.0m of long term debt through the issuance of 7, 10 and 12 year fixed rate private note placements in the US institutional market, which were issued in June 2018.

The Group has the following undrawn borrowing facilities:

		2020	2019
		£m	£m
Floating rate
- expiring within one year or on demand		36.1	45.3
- expiring between 1 and 5 years		361.1	328.0
		397.2	373.3

11. Related party transactions

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. There were no transactions with associates in the year (2019: £0.2m income received from an associate).

As at 31 December 2020, loans outstanding to joint ventures amounted to £4.1m (2019: £2.8m) and loans outstanding to associates amounted to £0.7m (2019: £0.6m).

12. Contingent liabilities

In common with comparable professional services businesses, the Group is involved in a number of disputes in the ordinary course of business. Provision is made in the financial statements for all claims where costs are likely to be incurred, in the case of claims in relation to the provision of professional services where these will not be met by the Group's professional indemnity insurers, and represents the cost of defending and concluding claims.

Directors' responsibility statement

The Savills Report and Accounts for year end 31 December 2020 contains a responsibility statement in the following form:

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

· the Group and parent company financial statements, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with international financial reporting standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group and profit of the parent company; and

· the Directors' Report includes a fair review of the development and performance of the business and the position of the group and parent company, together with a description of the principal risks and uncertainties that it faces.

In the case of each Director in office at the date the Directors' Report is approved:

· so far as the Director is aware, there is no relevant audit information of which the Group and parent company's auditors are unaware; and

· they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Group and parent company's auditors are aware of that information.

On behalf of the Board

Mark Ridley

Group Chief Executive

Chris Lee

Group Legal Director and Company Secretary

11 March 2021

Forward-looking statements

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

Copies of the Annual Report and Accounts for the year ended 31 December 2020 will be circulated to shareholders on 6 April 2021 and will also be available from the investor relations section of the Company website at www.ir.savills.com or from:

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

Telephone:  [phone]

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