Half-year Report

RNS Number : 6233H

Savills PLC

05 August 2021

 

5 August 2021

Savills plc

('Savills' or 'the Group')

STRONG RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2021 REFLECT PROGRESSIVE RECOVERY IN GLOBAL REAL ESTATE MARKETS

Savills plc, the international real estate advisor, today announces its unaudited results for the six months ended 30 June 2021.

Key Financial Information

· Group revenue £932.6m, up £141.2m (18% as reported and 21% in constant currency*) (H1 2020: £791.4m)

· Group underlying profit** before tax £66.1m, up £52.9m (H1 2020: £13.2m)

· Group profit before tax £63.8m, up £56.1m (H1 2020: £7.7m)

· Underlying basic earnings per share 35.8p (H1 2020: 7.0p)

· Basic earnings per share 34.6p (H1 2020: 3.9p)

· Interim dividend of 6.0p (H1 2020: 0.0p)

· Net cash £106.7m*** (H1 2020: Net cash £9.4m) 

* Revenue and underlying profit for the period are translated at the prior period exchange rates to provide a constant currency comparative (see Note 9).

** Underlying profit before tax ('underlying profit') is calculated on a consistently reported basis in accordance with Note 3 and Note 8 to the Interim Financial Statements.

*** Net cash reflects cash and cash equivalents net of borrowings and overdrafts in the notional pooling arrangement (see Note 14).

Trading performance - Key highlights

· Transactional Advisory revenues up 30% in recovering markets.

· Less transactional businesses, in aggregate 61% of Group revenue, continue to perform well with revenue up 11%.

· Property and Facilities Management revenue up 6%, Consultancy revenue up 20%.

· Commercial Transaction revenue increased 15% overall with strong growth in the UK and Asia Pacific.

· Record UK Residential Transaction Advisory performance with revenue up 97%, a continuation of the exceptional recovery experienced from H2 2020.

· Savills Investment Management revenue up 25%. Base management fees up 20%, with period end Assets under Management ('AUM') up 16% at €23.7bn.

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

"I am delighted that our strategy of maintaining full operating strength and high levels of client service through the pandemic has proven successful through the progressive recovery of many markets in which we operate. We have a strong balance sheet and are focused on continuing to develop our global businesses through the recovery period, maintaining a first class service to our clients and safeguarding our staff.

"Our Transactional businesses have benefited from improving sentiment in most markets, although travel restrictions still represent an obstacle to cross-border capital deployment. In particular, our Residential Transaction business delivered an exceptionally strong performance in the first half albeit we expect activity to return to more normal levels, particularly in the UK, during the second half of the year compared with a strong comparative period in H2 2020.

"Our Consultancy business has performed well and our Less Transactional service lines as a whole provide a strong platform for the Group, in which we continue to invest.

"In summary, the combination of strong trading in the less transactional service lines, improving transactional markets (including the completion of previously delayed transactions) alongside continued cost management, has resulted in a record first half performance for the Group. Looking ahead, we expect some discretionary cost to start to normalise and certain of our markets to moderate in the second half of the year and, while pandemic risks continue including the current lock downs in a number of Asian markets, we are confident in the Group's ability both to benefit from progressive recovery in transactional markets and to continue to execute our growth strategies. Assuming no new material disruption the Board expects the performance for the year as a whole to be meaningfully ahead of its previous expectations."

For further information, contact:

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

The analyst presentation will be held at 9.30am today by webinar . A recording of the presentation will be available from noon at  www.ir.savills.com .

Overview

The Group traded better than anticipated and substantially ahead of the prior year equivalent period. Residential markets, particularly in the UK, have continued strongly, and the Commercial Transaction business benefited both from improving sentiment in many markets and from the completion of transactions which were postponed or delayed during the lockdowns of Q4 2020. Our Less Transactional businesses performed well and continue to present attractive investment opportunities for the Group.

In the six months to 30 June 2021, Savills delivered revenue of £932.6m, an increase of 18% (21% in constant currency) (H1 2020: £791.4m). Underlying profit was £66.1m, 401% higher than the first half of 2020 (H1 2020: £13.2m) (412% increase in constant currency). The Group's underlying profit margin was 7.1% (H1 2020: 1.7%). This reflects both an increase in transactional revenues in the period, as many of the markets in which the Group operates began to recover, and the benefit of abnormally low levels of marketing, travel and entertainment/events related expenses, which we expect to normalise over time.

This record first half performance has contributed to the Group's continued strong liquidity position with net cash of £106.7m at period end (H1 2020: £9.4m). 

Reported profit before tax, including deferred consideration provisions and transaction-related and restructuring costs was £63.8m (H1 2020: £7.7m).

The COVID-19 impact

In 2020, COVID-19 had a significant impact on investor and occupier activity as the pandemic spread across the world. H1 2021 saw commercial markets showing varying speeds of recovery from the pandemic, reflecting different local lockdown restrictions, rates of vaccination and international travel restrictions. Investor focus worldwide continues to be on logistics, residential and life sciences in particular, with improving sentiment towards other commercial sectors.

Residential markets, particularly in the UK, have continued strongly as the pandemic has catalysed the drive for space in most markets worldwide. This is particularly evident in the disproportionately strong market for houses, which continued to experience extraordinary levels of activity through H1 2021 in many markets.

In the Asia-Pacific region, commercial investment transaction volumes grew by 8% year-on-year in H1 2021. The recent wave of infections caused by the Delta variant and associated lockdown measures has somewhat tempered the positive market momentum which had begun to take hold during the second quarter.

In Europe, H1 2021 investment volumes declined by 15% against the same period in 2020. There has clearly been a focus on core investment locations of which the UK and Germany are key, but different approaches to, and speed of, vaccination programmes by various countries have had an impact on the trajectory of recovery in individual markets and sectors.

In the US, office market recovery has been uneven but the vaccination programme has induced increasingly positive momentum in many States. Corporates are both reoccupying existing space which had previously been scheduled for sub lease and are considering upgrading the quality of space in market conditions which are highly conducive to that strategy. H1 office demand though remains well below pre-pandemic levels (down 42% vs H1 2019), although leasing volumes in key markets such as New York, Los Angeles, and Chicago, improved through Q2.

Business development during the period

During the pandemic, the Group has continued to focus on strategic development of the business, which has been enabled by the Group's strong balance sheet. In the first half of this year, Savills Investment Management completed the accelerated acquisition of the outstanding 75% of DRC Capital (a related party), the specialist Debt Investment Manager.

The Group also recently announced a significant strategic partnership between Savills Investment Management and Samsung Life Insurance ('SLI') to accelerate the future growth of the Savills Investment Management ('SIM') business. Under this agreement Savills will sell an initial 25% stake in SIM to SLI, which, in turn, is committing to invest at least US$1bn into SIM products over the initial five year term of the relationship. Subject to regulatory approvals and customary pre-closing conditions, this transaction is expected to complete in Q4 2021.

The Group acquired T3 Advisors, a leading Real Estate advisor in the Life Science and Technology sectors in North America, as well as further strengthening our market leading position in Spain by acquiring a property management business from Knight Frank.

In addition to the acquisitive growth in our business, we continue to undertake significant organic growth initiatives across the platform, with significant team hires and development across all our regions, with particular focus on North America, Greater China and Continental Europe and the Middle East ('CEME').

Technology continues to be an important focus for the Group, and we continue to benefit from the investment we have made both internally and externally, through Grosvenor Hill Ventures, across the globe and from our own digital transformation programmes. During the period we led a funding round into Income Analytics jointly with MSCI. This exciting business is a data technology firm which provides investors with proprietary global rental default risk measures on commercial real estate income at tenant, asset, fund and portfolio levels. This platform is being adopted across our business as it clearly has broad utility across numerous advisory, leasing, property management and investment service lines.

Business review

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

Revenue	H1 2021 £m	H1 2020 £m	Change
Transaction Advisory	362.0	278.5	30%
Consultancy	173.4	144.6	20%
Property and Facilities Management	359.0	337.8	6%
Investment Management	38.2	30.5	25%
Unallocated/Central	-	-	n/a
Group revenue	932.6	791.4	18%

Underlying profit	H1 2021 £m	H1 2020 £m	Change
Transaction Advisory	29.1	(14.7)	n/a
Consultancy	18.8	10.2	84%
Property and Facilities Management	19.2	17.7	8%
Investment Management	7.1	4.3	65%
Unallocated cost	(8.1)	(4.3)	(88%)
Group underlying profit	66.1	13.2	401%

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

Revenue	H1 2021 £m	H1 2020 £m	Change
UK	417.4	298.8	40%
Asia Pacific	287.2	279.7	3%
CEME	114.0	107.4	6%
North America	114.0	105.5	8%
Unallocated/Central	-	-	n/a
Group revenue	932.6	791.4	18%

Underlying profit	H1 2021 £m	H1 2020 £m	Change
UK	53.1	15.0	254%
Asia Pacific	24.0	11.8	103%
CEME	(4.1)	(4.4)	7%
North America	1.2	(4.9)	n/a
Unallocated cost	(8.1)	(4.3)	(88%)
Group underlying profit	66.1	13.2	401%

Transaction Advisory

Revenue	H1 2021 £m	H1 2020 £m	Change
UK	142.7	83.8	70%
Asia Pacific	74.3	54.8	36%
CEME	39.9	38.1	5%
North America	105.1	101.8	3%
Total	362.0	278.5	30%

Our Transaction Advisory revenues increased by 30% over H1 2020 (34% in constant currency), substantially driven by high volumes of activity in Residential markets. The Commercial Transaction business benefited from both improving sentiment in many markets and the completion of transactions which were postponed or delayed during the lockdowns of Q4 2020. As a consequence the Transaction Advisory business delivered a strong return to underlying profit of £29.1m (H1 2020: £14.7m loss).

UK Commercial

UK Commercial Transaction fee income increased 25% to £38.5m (H1 2020: £30.9m), with significant growth outside the capital. With travel restrictions in place and return to work guidance not issued until July, Central London investment and leasing activity was more muted in the first half, although demand is beginning to re-emerge.

Commercial property investment totalled £25.3bn in the first six months of 2021, a 19% rise on the same period in 2020. All commercial property sectors apart from Leisure have seen year-on-year improvements in investment activity, with the largest rises being in the retail and logistics sectors. In the office occupational market, the rate of recovery in leasing activity is defined by corporate "return to the office" strategies, with central London recovering more slowly than the key regional cities. 

Increased revenue and continued low levels of  discretionary spend resulted in an underlying profit margin of 13.5% (H1 2020: 2.9%) representing an underlying profit of £5.2m (H1 2020: £0.9m).

UK Residential

Our UK Residential Transaction business experienced a record first half performance, with revenue up 97% to £104.2m (H1 2020: £52.9m). Both second-hand and new home sales were up significantly.

In the second hand agency business, revenues increased by 155%, reflecting both the weak comparative period in which lockdown all but eliminated the key 2020 Spring sales season, and continuation of the abnormally high level of post lockdown activity which commenced in H2 2020. Savills overall transaction volumes exchanged were up 131% in London and 204% in the regional markets. The average value of London and regional residential property sold by Savills in the period was stable at £1.9m (H1 2020: £1.9m) and £1.2m (H1 2020: £1.2m) respectively.

Revenue in the New Homes business was up 37% on H1 2020, reflecting the overall market trend. National new homes exchanges for H1 2021 were 55% up on H1 2020 (London up 17%, the regions up 79%). The London new homes business continues to be affected by the relative scarcity of international buyers in the capital due to travel restrictions, whilst the regional business has thrived during the market conditions experienced over the first half of 2021.

Our Private Rented Sector ('PRS') transactional business delivered a robust performance, although revenues were down 27% on H1 2020, a period which benefited from some individually significant transactions. H1 2021 performance was 37% higher than the H1 2019 equivalent.

As a result of the performance noted above, underlying profits in the UK residential transaction business increased substantially to £20.5m (H1 2020: £1.6m).

Asia Pacific Commercial

Commercial Transaction fee income in Asia Pacific increased by 46% (50% in constant currency) to £60.5m (H1 2020: £41.5m). Despite the emergence of localised COVID-19 related restrictions during the period, the Group experienced significant improvements in transactional activity in Japan, Australia, Singapore and Mainland China. These strong performances offset marginal revenue declines in Hong Kong and Vietnam, the latter particularly associated with the impact of the pandemic.

Overall the Asia Pacific commercial transaction business resulted in an underlying profit for the period of £7.4m (H1 2020: £4.4m loss).

Asia Pacific Residential

Residential Transaction fee income in Asia Pacific increased by 4% to £13.8m (H1 2020: £13.3m) (8% in constant currency). This was driven by significant revenue growth in Mainland China. In Hong Kong, the impact of travel restrictions reduced revenue from international residential sales, which was partially offset by growth in domestic transactions.  

Underlying profits in the region, improved by the trading performance in China and the benefit of cost savings in Hong Kong, increased by 131% to £3.7m (H1 2020: £1.6m).

CEME

In CEME, there was a modest recovery across the region with transaction fee income up 5% to £39.9m (H1 2020: £38.1m) (6% in constant currency). Growth in Ireland, France, Sweden and the Middle East offset period on period reductions in the Netherlands and Germany, each of which had strong comparatives in H1 2020 as a result of individually significant transactions during that period. Overall, the CEME business posted an underlying loss of £8.5m (H1 2020: £9.8m loss) for the first half of the year, reflecting the modest growth in revenues and continued investment in new teams and technology.

North America

In North America, where the Group is substantially dependent upon leasing activity by corporate occupiers, the business delivered a resilient performance with revenue up 3% (13% in constant currency) to £105.1m (H1 2020: £101.8m). Given the strong national vaccination programme, improving activity levels indicate that corporates are beginning to give serious consideration to their longer term real estate needs, which should be a precursor to improved transaction levels. We continue to anticipate progressive recovery through H2 2021.

The North American business recovered to deliver an underlying profit of £0.8m for the period (H1 2020: £4.6m underlying loss).

Consultancy

Revenue	H1 2021 £m	H1 2020 £m	Change
UK	109.9	92.2	19%
Asia Pacific	36.2	32.4	12%
CEME	18.4	16.3	13%
North America	8.9	3.7	141%
Total	173.4	144.6	20%

The Consultancy business delivered a strong performance during the period, with all regions showing significant revenue growth. The 20% increase in revenue (21% in constant currency) to £173.4m (H1 2020: £144.6m) included a full period of ownership of Macro Consultants LLC ('Macro'), the US project management consultancy acquired in March 2020.

In the UK, there were strong performances in Development, Housing, Project Management and Building Consultancy. Underlying profit margin improved to a 10 year high of 12.8% from 6.6% in H1 2020. 

In Asia Pacific, revenue growth in Valuations and Research, most notably in Mainland China, Hong Kong, Singapore and Australia, offset lower project management revenues due to pandemic-related delays in project completions and new project starts. On a constant currency basis, underlying profit increased 5% on the prior period. 

In the CEME business, strong performances in the Middle East, France, Italy and Ireland contributed to the 13% growth in revenue. On a constant currency basis, underlying profit remained flat reflecting investment in new teams in Spain and the Middle East.   

Significant growth in North America Consultancy revenue reflected a full period of revenue from Macro, which was acquired in March 2020 and the resumption of building and fit out projects as pandemic restrictions lifted. In addition, the Group has undertaken further investment in Consultancy services with acquisitions and recruitment in life sciences (the acquisition of T3 Advisors in June 2021) and workplace solutions. 

Underlying profit of the Consultancy business increased by 84% to £18.8m (H1 2020: £10.2m).

Property and Facilities Management

Revenue	H1 2021 £m	H1 2020 £m	Change
Asia Pacific	173.7	190.0	(9%)
UK	145.2	110.1	32%
CEME	40.1	37.7	6%
Total	359.0	337.8	6%

Our Property and Facilities Management business increased global revenues by 6% (10% in constant currency) to £359.0m (H1 2020: £337.8m). Savills total area under management increased 3% since H1 2020 to 2.40bn sq ft, inclusive of the Group's effective share of square footage managed in joint ventures (H1 2020: 2.33bn sq ft).

In Asia Pacific, revenues were down 9% (3% in constant currency) reflecting the termination of some significant, albeit low margin, facilities management contracts in Hong Kong and South Korea. This was partially mitigated by growth elsewhere in the region, in particular in Mainland China and Australia. Decline in revenue and the wind down of pandemic-related employment support schemes resulted in a 16% decrease (11% in constant currency) in underlying profit to £10.4m (H1 2020: £12.4m).

In the UK, Commercial Property and Facilities Management benefited from the former Intu shopping centre management contracts, which were won in H2 2020. These contracts contributed significantly to the 32% increase in Commercial Property and Facilities Management revenue. UK Residential Property and Facilities Management revenue reflected an increase in residential lettings income of 9%, despite a slower recovery in student and corporate lettings.

In CEME, fee income was up 6% (7% in constant currency) reflecting the Omega acquisition in Germany in H2 2020 and further contract wins in France and the Middle East. The business however recognised an underlying loss of £0.6m (H1 2020: £0.2m underlying profit), which reflects growth and new business costs in Spain and France.

Underlying profit for the Property and Facilities Management business increased by 8% to £19.2m (H1 2020: £17.7m).

Investment Management

Revenue from Investment Management increased by 25% to £38.2m (H1 2020: £30.5m). Base management fees represented approximately 78% (HY 2020: 82%) of Investment Management gross revenues and grew by 20% during the period. Transaction fees declined during the period as the pandemic affected time to transact in many markets. The effect of this was mitigated by both performance fees and one month of full consolidation of DRC Capital (acquired at the end of May 2021).

75% of funds (by AUM) continued to exceed their benchmark returns on a five year rolling basis, and this track record contributed to resilient capital raising activity, albeit at lower overall levels, reflecting continued challenging capital raising conditions.

AUM increased by 16% to €23.7bn (H1 2020: €20.4bn).

Underlying profit for Investment Management increased by 65% to £7.1m (H1 2020: £4.3m), representing an 18.6% underlying profit margin (H1 2020: 14.1%).

Unallocated/central revenue and cost

The unallocated cost segment represents other costs, expenses and net interest not directly allocated to the operating activities of the Group's business segments. The H1 increase in unallocated net costs of 88% to £8.1m (H1 2020: £4.3m) primarily reflects increases to the profit-related bonus provision.

Transaction-related and restructuring costs

During the period the Group incurred an aggregate restructuring charge of £0.1m (H1 2020: £1.0m) and transaction-related costs of £5.6m (H1 2020: £1.8m). The restructuring charge reflects the IFRS 2: "Share-based Payment" charge of deferred shares issued in relation to the restructuring upon acquisition of Aguirre Newman at the end of 2017. Transaction-related costs in the period primarily represent provisions for future consideration payments which are contingent on the continuity of recipients' employment at the time of payment and professional advisory fees in relation to significant transactions in the period. The majority of the charge relates to the most recent acquisitions in the US, CEME and the Investment Management business (see Note 8).

Earnings and financial position

The Group's underlying profit margin in the period was 7.1% (H1 2020: 1.7%). This reflects both the recovery of the transaction advisory businesses in the period and the continuation of lower than normal levels of expenditure on travel, entertainment and marketing throughout the Group.

Basic earnings per share for the six months to 30 June 2021 substantially increased to 34.6p (H1 2020: 3.9p). Underlying basic earnings per share increased to 35.8p (H1 2020: 7.0p).

The impact of foreign exchange movements on the translation of results from our overseas businesses resulted in a decrease in revenue of £25.4m and a £1.5m decrease in underlying profit and a £1.1m decrease in reported profit before tax.

For internal cash management purposes, the Group maintains a notional cash pooling arrangement whereby credit cash balances (cash) and debit cash balances (overdrafts) for the participating bank accounts are notionally offset. These balances have been grossed up and presented separately on the statement of financial position for each period presented (refer to Notes 4 and 19). The change in presentation does not have an impact on net assets, net current assets or cash and cash equivalents net of borrowings reported by the Group. 

At 30 June 2021, net cash was £106.7m (30 June 2020: £9.4m net cash). Including the gross effect of the notional cash pooling balances, at 30 June 2021 the Group had cash balances of £481.5m (30 June 2020: £391.2m), less overdraft balances within the notional cash pooling arrangement of £187.7m (30 June 2020: £155.6m) and borrowings of £187.1m (30 June 2020: £226.2m), with £373.1m of credit facilities remaining available for utilisation (30 June 2020: £334.3m). In H1 2020, the Group had benefited from the deferral, at no cost, of VAT/Sales Tax liabilities totalling £61.2m. By 30 June 2021, approximately £30.0m of that deferral had been paid. 

The funding level of the defined benefit Savills Pension Scheme in the UK, which is closed to future service based accrual, improved during the period as a result of a higher discount rate reducing the value of the fund's liabilities. The plan was in a surplus position of £4.5m at 30 June 2021 (HY 2020: £10.6m liability).

Interim Dividend

In view of the overall performance of the Group and the continued strength of the Less Transactional businesses, which support the ordinary distribution, the Board has declared an interim dividend of 6.0p (H1 2020: 0.0p; H1 2019: 4.95p). The dividend will be payable on 6 October 2021 to shareholders on the register at 3 September 2021.

Principal risks and uncertainties

The key risks and uncertainties relating to the Group's operations for the next six months were considered to remain largely consistent with those disclosed in the Group's Annual Report and Accounts 2020. These are listed below, please refer to pages 33 to 38 thereof or to our investors' page on www.savills.com.

· Business conditions, general economy and geopolitical issues

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

· Recruitment and retention of high-calibre staff

· Reputational and brand risk

· Legal risk

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

· Operational resilience/Business Continuity (including pandemics)

· Business conduct

· Changes in the regulatory environment/regulatory breaches

· Acquisition/integration risk

· Environment and sustainability

Summary and outlook

We are delighted that our strategy of maintaining full operating strength and high levels of client service through the pandemic has proven successful through the progressive recovery of many markets in which we operate. We have a strong balance sheet and are focused on continuing to develop our global businesses through the recovery period, maintaining a first class service to our clients and safeguarding our staff.

Our Transactional businesses have benefited from improving sentiment in most markets, although travel restrictions still represent an obstacle to cross-border capital deployment. In particular, our Residential Transaction business delivered an exceptionally strong performance in the first half albeit we expect activity to return to more normal levels, particularly in the UK, during the second half of the year compared with a strong comparative period in H2 2020.

Our Consultancy business has performed well and our Less Transactional service lines as a whole provide a strong platform for the Group, in which we continue to invest.

In summary, the combination of strong trading in the less transactional service lines, improving transactional markets (including the completion of previously delayed transactions) alongside continued cost management, has resulted in a record first half performance for the Group. Looking ahead, we expect some discretionary cost to start to normalise and certain of our markets to moderate in the second half of the year and, while pandemic risks continue including the current lock downs in a number of Asian markets, we are confident in the Group's ability both to benefit from progressive recovery in transactional markets and to continue to execute our growth strategies. Assuming no new material disruption the Board expects the performance for the year as a whole to be meaningfully ahead of its previous expectations.

Mark Ridley    Nicholas Ferguson CBE
Group Chief Executive    Chairman

STATEMENT OF DIRECTORS' RESPONSIBILITIES

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

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

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

The Directors of Savills plc are listed in the Company's Report and Accounts for the year ended 31 December 2020. A list of current Directors is maintained on the Savills plc website: www.savills.com.

By order of the Board

J Mark Ridley, Group Chief Executive

Simon Shaw, Group Chief Financial Officer

4 August 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. Undue reliance should not be placed on such statements, which are based on current expectations and are subject to a number of risks and uncertainties that could cause actual results to differ materially from any expected future results in forward-looking statements.

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

Independent review report to Savills plc

Our conclusion

We have been engaged by Savills Plc to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 which comprises the condensed interim consolidated income statement, the condensed interim consolidated statement of comprehensive income, the condensed interim consolidated statement of financial position, the condensed interim consolidated statement of changes in equity, the condensed interim consolidated statement of cash flows and the related explanatory notes 1 to 22.

We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 is not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Basis for Conclusion

We conducted our review in accordance with International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 2, the annual financial statements of the group will be prepared in accordance with UK adopted IFRSs. The condensed consolidated interim set of financial statements included in this half-yearly financial report has been prepared in accordance with UK adopted International Accounting Standard 34, "Interim Financial Reporting".

Responsibilities of the directors

The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Auditor's Responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statement in the half-yearly financial report. Our conclusion, is based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Use of our report

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Ernst & Young LLP

London

4 August 2021

Savills plc

Condensed interim consolidated income statement

for the period ended 30 June 2021

		Six months to 30 June 2021	Six months to 30 June 2020	Year ended 31 December 2020
		(unaudited)	(unaudited)	(audited)
	Note	£m	£m	£m
Revenue	7	932.6	791.4	1,740.5
Less:
Employee benefits expense		(621.0)	(514.1)	(1,153.7)
Depreciation		(32.0)	(31.8)	(64.3)
Amortisation of intangible assets		(5.0)	(4.6)	(9.6)
Other operating expenses		(211.7)	(226.1)	(419.1)
Impairment losses on financial assets		(0.3)	(5.7)	(8.7)
Other gains / income		3.5	0.1	0.8
Other losses / expenses		-	-	(0.1)
Operating profit		66.1	9.2	85.8
Finance income		0.8	1.6	3.4
Finance costs		(7.7)	(8.1)	(16.2)
		(6.9)	(6.5)	(12.8)
Share of post-tax profit from joint ventures and associates		4.6	5.0	10.2
Profit before income tax		63.8	7.7	83.2
Income tax expense	10	(15.4)	(2.2)	(15.2)
Profit for the period		48.4	5.5	68.0
Attributable to:
Owners of the parent		48.2	5.4	67.6
Non-controlling interests		0.2	0.1	0.4
		48.4	5.5	68.0
Earnings per share
Basic earnings per share	12(a)	34.6p	3.9p	49.0p
Diluted earnings per share	12(a)	33.7p	3.8p	47.9p
Supplementary income statement information
Reconciliation to underlying profit before income tax
Profit before income tax		63.8	7.7	83.2
- restructuring and transaction-related costs	8	5.7	2.8	6.5
- other underlying adjustments	8	(3.4)	2.7	6.9
Underlying profit before income tax	8	66.1	13.2	96.6

Notes 1 to 22 are an integral part of these condensed interim financial statements.

Savills plc

Condensed interim consolidated statement of comprehensive income

for the period ended 30 June 2021

	Six months to 30 June 2021 (unaudited)	Six months to 30 June 2020 (unaudited)	Year ended 31 December 2020 (audited)
	£m	£m	£m
Profit for the period	48.4	5.5	68.0
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	8.2	(1.4)	6.5
Changes in fair value of financial assets at FVOCI, net of tax	(0.1)	(7.4)	(6.9)
Tax on other items that will not be reclassified	(1.7)	0.3	(1.2)
Total items that will not be reclassified to profit or loss	6.4	(8.5)	(1.6)
Items that may be reclassified subsequently to profit or loss:
Currency translation differences	(12.6)	32.9	1.8
Tax on items that may be reclassified	2.4	(1.2)	(0.3)
Total items that may be reclassified subsequently to profit or loss	(10.2)	31.7	1.5
Other comprehensive (loss)/income for the period, net of tax	(3.8)	23.2	(0.1)
Total comprehensive income for the period	44.6	28.7	67.9
Total comprehensive income attributable to:
Owners of the parent	44.4	28.6	67.5
Non-controlling interests	0.2	0.1	0.4
	44.6	28.7	67.9

Notes 1 to 22 are an integral part of these condensed interim financial statements.

Savills plc

Condensed interim consolidated statement of financial position

at 30 June 2021

		30 June 2021 (unaudited)	30 June 2020 restated*  (unaudited)	31 December 2020 restated*  (audited)
	Note	£m	£m	£m
Assets: Non-current assets
Property, plant and equipment		64.0	68.6	64.9
Right of use assets		229.4	232.5	252.8
Goodwill	15	434.5	394.8	379.4
Intangible assets		46.2	51.3	49.8
Investments in joint ventures and associates	15	34.0	55.1	51.8
Deferred income tax assets		44.3	40.5	42.8
Financial assets at fair value through other comprehensive income ('FVOCI')	6	32.5	25.0	27.4
Retirement benefit asset	16	4.5	-	-
Contract related assets		3.2	1.5	1.4
Trade and other receivables		33.4	35.1	31.8
		926.0	904.4	902.1
Assets: Current assets
Contract related assets		8.8	7.6	8.0
Trade and other receivables		443.5	427.2	496.6
Income tax receivable		3.7	4.0	1.9
Derivative financial instruments	6	0.2	0.1	0.4
Cash and cash equivalents**	19	481.5	391.2	547.4
		937.7	830.1	1,054.3
Liabilities: Current liabilities
Borrowings	18	39.0	78.0	12.2
Overdrafts in notional pooling arrangement**	19	187.7	155.6	209.1
Lease liabilities		44.7	47.5	45.2
Derivative financial instruments	6	0.6	0.2	0.3
Contract liabilities		15.1	9.2	10.8
Trade and other payables		486.4	430.0	604.9
Income tax liabilities		15.0	11.8	10.2
Employee benefit obligations	16	21.6	23.2	19.2
Provisions		11.1	10.2	8.3
		821.2	765.7	920.2
Net current assets		116.5	64.4	134.1
Total assets less current liabilities		1,042.5	968.8	1,036.2
Liabilities: Non-current liabilities
Borrowings	18	148.1	148.2	148.4
Lease liabilities		237.6	228.6	259.0
Derivative financial instruments		0.6	-	0.6
Other payables		13.8	15.0	10.5
Retirement and employee benefit obligations	16	13.5	21.5	14.9
Provisions		18.1	14.0	15.6
Deferred income tax liabilities		5.5	4.9	5.6
		437.2	432.2	454.6
Net assets		605.3	536.6	581.6

Equity:
Share capital		3.6	3.6	3.6
Share premium		97.3	97.2	97.2
Other reserves		76.9	121.0	90.0
Retained earnings		426.8	314.0	390.1
Equity attributable to owners of the parent		604.6	535.8	580.9
Non-controlling interests		0.7	0.8	0.7
Total equity		605.3	536.6	581.6

Notes 1 to 22 are an integral part of these condensed interim financial statements.

* See Note 4 for details on the prior period restatement.

** Included within cash and cash equivalents are cash balances of £193.3m (30 June 2020: £156.6m, 31 December 2020: £242.0m) that are operated within a notional cash pooling arrangement together with overdraft balances of £187.7m (30 June 2020: £155.6m, 31 December 2020: £209.1m) presented above in current liabilities. See Note 19 for further details.

Savills plc

Condensed interim consolidated statement of changes in equity

for the period ended 30 June 2021

	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 2021 (audited)	3.6	97.2	90.0	390.1	580.9	0.7	581.6
Profit for the period	-	-	-	48.2	48.2	0.2	48.4
Other comprehensive (loss)/income:
Changes in fair value of financial assets at FVOCI	-	-	(0.1)	-	(0.1)	-	(0.1)
Re-measurement of defined benefit pension scheme and employee benefit obligations	-	-	-	8.2	8.2	-	8.2
Tax on other items directly taken to other comprehensive income	-	-	-	0.7	0.7	-	0.7
Currency translation differences	-	-	(12.6)	-	(12.6)	-	(12.6)
Total comprehensive (loss)/income for the period	-	-	(12.7)	57.1	44.4	0.2	44.6
Employee share option scheme:
- Value of services provided	-	-	-	11.1	11.1	-	11.1
Purchase of treasury shares	-	-	-	(8.3)	(8.3)	-	(8.3)
Shares issued	-	0.1	-	-	0.1	-	0.1
Disposal of financial assets at FVOCI	-	-	(0.2)	0.2	-	-	-
Transfer between equity accounts	-	-	(0.2)	0.2	-	-	-
Dividends (Note11)	-	-	-	(23.6)	(23.6)	(0.2)	(23.8)
Balance at 30 June 2021 (unaudited)	3.6	97.3	76.9	426.8	604.6	0.7	605.3

	Attributable to owners of the parent
	Share capital	Share premium	Other reserves	Retained earnings	Total	Non-controlling interests	Total equity
	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2020 (audited)	3.6	97.2	95.5	306.2	502.5	0.7	503.2
Profit for the period	-	-	-	5.4	5.4	0.1	5.5
Other comprehensive (loss)/income:
Changes in fair value of financial assets at FVOCI, net of tax	-	-	(7.4)	-	(7.4)	-	(7.4)
Re-measurement of defined benefit pension scheme and employee benefit obligations	-	-	-	(1.4)	(1.4)	-	(1.4)
Tax on other items directly taken to other comprehensive income	-	-	-	(0.9)	(0.9)	-	(0.9)
Currency translation differences	-	-	32.9	-	32.9	-	32.9
Total comprehensive income for the period	-	-	25.5	3.1	28.6	0.1	28.7
Employee share option scheme:
- Value of services provided	-	-	-	11.2	11.2	-	11.2
Purchase of treasury shares	-	-	-	(6.5)	(6.5)	-	(6.5)
Balance at 30 June 2020 (unaudited)	3.6	97.2	121.0	314.0	535.8	0.8	536.6

	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 2020 (audited)	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 other comprehensive income	-	-	-	(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 (audited)	3.6	97.2	90.0	390.1	580.9	0.7	581.6

Notes 1 to 22 are an integral part of these condensed interim financial statements.

Savills plc

Condensed interim consolidated statement of cash flows

for the period ended 30 June 2021

		Six months to 30 June 2021 (unaudited)	Six months to 30 June 2020 (unaudited)	Year ended 31 December 2020 (audited)
	Note	£m	£m	£m
Cash flows from operating activities
Cash generated from operations	13	63.3	35.7	289.8
Interest received		0.7	1.5	3.4
Interest paid		(7.1)	(7.5)	(15.0)
Income tax paid		(13.7)	(13.6)	(29.6)
Net cash generated from operating activities		43.2	16.1	248.6
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		0.6	0.1	0.1
Proceeds from sale of equity investments		0.3	1.5	1.9
Proceeds from sale of interests in joint ventures, associates and other investments		-	0.6	0.7
Dividends received from joint ventures and associates		6.1	3.2	10.8
Repayment of loans by joint ventures and associates		-	-	0.1
Loans to joint ventures and associates		(1.0)	(0.3)	(1.4)
Loans to other parties		-	-	(5.5)
Acquisition of subsidiaries, net of cash acquired		(40.9)	(9.3)	(11.2)
Deferred consideration paid in relation to prior year acquisitions		(4.1)	(6.4)	(15.3)
Purchase of property, plant and equipment		(7.9)	(5.5)	(12.8)
Purchase of intangible assets		(2.1)	(2.9)	(5.3)
Purchase of investment in joint ventures, associates and equity investments		(5.8)	(0.5)	(5.5)
Net cash used in investing activities		(54.8)	(19.5)	(43.4)
Cash flows from financing activities
Issue of shares		0.1	-	-
Proceeds from borrowings		26.9	76.6	46.1
Repayments of borrowings		(0.1)	(32.5)	(67.3)
Payment of debt arrangement fees		(0.4)	-	-
Principal elements of lease payments		(21.8)	(22.6)	(47.7)
Purchase of treasury shares		(8.3)	(6.5)	(8.3)
Dividends paid		(23.8)	-	(0.4)
Net cash (used in)/received from financing activities		(27.4)	15.0	(77.6)
Net (decrease)/increase in cash, cash equivalents and bank overdrafts		(39.0)	11.6	127.6
Cash, cash equivalents and bank overdrafts at beginning of period		338.2	209.8	209.8
Effect of exchange rate fluctuations on cash held		(5.6)	14.1	0.8
Cash, cash equivalents and bank overdrafts at end of period	19	293.6	235.5	338.2

Notes 1 to 22 are an integral part of these condensed interim financial statements.

NOTES

1. General information

Savills plc ('the Company') is a public limited company incorporated and domiciled in England, United Kingdom. The address of its registered office is 33 Margaret Street, London W1G 0JD.

This condensed consolidated interim financial information was approved for issue by the Board of Directors on 4 August 2021.

This condensed consolidated interim financial information does not comprise statutory financial statements within the meaning of section 434 of the Companies Act 2006. The financial information presented for the year ended 31 December 2020 is derived from the statutory accounts for that year. Statutory financial statements for the year ended 31 December 2020 were approved by the Board of Directors on 10 March 2021 and delivered to the Registrar of Companies.  The auditor's report on these accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

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

2. Basis of preparation

The annual financial statements of Savills plc will be prepared in accordance with UK-adopted international accounting standards ('UK-adopted IFRSs'). This condensed consolidated interim financial report for the half-year reporting period ended 30 June 2021 has been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and in accordance with IAS 34 'Interim Financial Reporting' as contained in UK-adopted international accounting standards.

The interim report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual financial statements for the year ended 31 December 2020, which has 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.

Going concern

Management has performed a detailed going concern assessment to test the Group's liquidity and banking covenant compliance up until the end of 2022 based on latest financial forecasts. These forecasts are taking into account the Group's performance over the period and positive prospects (see 'Summary and outlook' section for more information) as well as the principal risks and uncertainties facing the business (see 'Principal risks and uncertainties' section). In addition, sensitivity analysis has been performed to assess liquidity availability and covenant compliance over the period until December 2022, looking at the level of decline in the base case forecast that could be withstood before the leverage ratio covenant would be breached. The results of this sensitivity analysis showed that the Group has sufficient headroom to withstand the impact of a severe global economic downturn. Based on the Group's net cash position of £106.7m at the period end, the operating cash flow generated over the period and the level of undrawn facilities available (see Note 18 for information on the current level of undrawn facilities), alongside the assessment noted above, the Directors consider that the Group has adequate resources in place until at least the end of 2022 and have therefore adopted the going concern basis of accounting in preparing the interim financial information. 

3. Accounting policies

Except as described below, the accounting policies applied and methods of computation used are consistent with those of the annual financial statements for the year ended 31 December 2020, as described in those financial statements.

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

Adoption of standards, amendments and interpretations to standards

Standards, amendments and interpretations adopted for use in the United Kingdom and mandatorily effective for the first time for the financial year beginning 1 January 2021 that are not relevant or considered to have a significant impact on the Group and its financial statements include the following:

Amendments to IFRS 9, IAS 39, IFRS 7 , IFRS 4 and IFRS 16	Interest rate benchmark reform impact - Phase 2
Amendments to IFRS 16	Covid-19 related rent concessions
Amendments to IFRS 4	Extension of the temporary exemption from applying IFRS 9

There are no other standards that are not yet effective that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

Use of non-GAAP measures

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

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

· amortisation of acquired intangible assets (excluding software);

· the difference between IFRS 2, 'Share-based Payment' ('IFRS 2'), charges related to outstanding bonus-related deferred share awards and the estimated value of the current year bonus pool expected to be allocated to deferred share awards (refer to Note 8 for further explanation);

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

· significant transaction costs related to business combinations and disposals.

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

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

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

A reconciliation between GAAP and underlying measures are set out in Note 8 (underlying profit before tax), Note 9 (constant currency) and Note 12(b) (underlying basic earnings per share and underlying diluted earnings per share).

4. Prior period restatement

Notional cash pooling arrangement

For internal cash management purposes, the Group maintains a notional cash pooling arrangement with Barclays Bank PLC, whereby credit cash balances (cash) and debit cash balances (overdrafts) for the participating bank accounts are notionally offset. There is no overdraft cost or charge associated with any pooled overdraft that is offset by pooled cash balances. Refer to Note 19 for further details.

While the Group has legal right of offset of these balances in the arrangement, it was determined that the cash pooling arrangement did not meet the requirements for offsetting in accordance with IAS 32: "Financial Instruments: Presentation" for each period presented and the pooled cash and pooled overdraft balances within the notional pooling arrangement cannot be presented net in the statement of financial position. Accordingly, the presentation has been amended to show these balances on a gross basis separately on the statement of financial position as at 30 June 2021 in accordance with IAS 32. The prior period comparatives have been restated in accordance with IAS 8: "Accounting Policies, Changes in Accounting Estimates and Errors" to meet the presentation requirements of IAS 32. The change in presentation increases cash and cash equivalents within current assets and increases current liabilities with the overdraft balances in the notional pooling arrangement but does not have an impact on the reported net assets, net current assets, profit for the period, the statement of cash flows or cash and cash equivalents net of overdrafts disclosed by the Group. 

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

	30 June 2020 reported £m	Restatement £m	30 June 2020 restated £m
Statement of financial position
Cash and cash equivalents	235.6	155.6	391.2
Assets: Current Assets	674.5	155.6	830.1
Overdrafts in notional pooling arrangement	-	155.6	155.6
Liabilities: Current Liabilities	610.1	155.6	765.7

	31 December 2020  reported £m	Restatement £m	31 December 2020 restated £m
Statement of financial position
Cash and cash equivalents	338.3	209.1	547.4
Assets: Current Assets	845.2	209.1	1,054.3
Overdrafts in notional pooling arrangement	-	209.1	209.1
Liabilities: Current Liabilities	711.1	209.1	920.2

As at 1 January 2020, the value of cash and cash equivalents and overdrafts in the notional pooling arrangement that were offset totalled £160.8m. Accordingly, the adjustment resulted in an increase in cash and cash equivalents from £209.9m to £370.7m and the separate presentation of overdrafts within the notional pooling arrangement of £160.8m. The adjustment therefore increases the total current assets from £790.1m to £950.9m and total current liabilities from £723.6m to £884.4m as at 1 January 2020.

Control of management companies

Following a review of the control over certain management companies in the CEME division in H2 2020, management have determined that the Group does not have control over these entities as defined by IFRS 10. These entities have not been consolidated in the 31 December 2020 financial statements, nor in the current period interim financial statements. The impact on the prior period comparative interim financial statements at 30 June 2020 is not material and no restatement has been made.

5. Estimates

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

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2020, with the exception of changes in estimates that are required in determining the provision for income taxes. In addition, refer to Note 17 for information on the updated expected credit loss provision in relation to trade receivables.

6. Financial risk management

Financial risk factors

The Group's activities expose it to a variety of financial risks including foreign exchange risk, interest rate risk, credit risk and liquidity risk. The condensed interim financial statements do not include all financial risk management information and disclosures as required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as at 31 December 2020. There have been no changes in any risk management policies since the year end.

Fair value estimation

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

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

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

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

The following table presents the Group's assets and liabilities that are measured at fair value at 30 June 2021:

£m	Level 1	Level 2	Level 3		Total
2021
Assets
Financial assets held at FVOCI
- Listed	1.1	-	-		1.1
- Unlisted	-	12.0	19.4		31.4
Derivative financial instruments	-	0.2	-		0.2
Total assets	1.1	12.2	19.4		32.7
Liabilities
Derivative financial instruments	-	0.6	0.6		1.2
Total liabilities	-	0.6	0.6		1.2

The following table presents the Group's assets and liabilities that are measured at fair value at 31 December 2020:

£m	Level 1	Level 2	Level 3		Total
2020
Assets
Financial assets held at FVOCI
- Listed	1.5	-	-		1.5
- Unlisted	-	7.2	18.7		25.9
Derivative financial instruments	-	0.4	-		0.4
Total assets	1.5	7.6	18.7		27.8
Liabilities
Derivative financial instruments	-	0.3	0.6		0.9
Total liabilities	-	0.3	0.6		0.9

The following table presents the Group's assets and liabilities that are measured at fair value at 30 June 2020:

£m	Level 1	Level 2	Level 3		Total
2020
Assets
Financial assets held at FVOCI
- Listed	0.9	-	-		0.9
- Unlisted	-	5.7	18.4		24.1
Derivative financial instruments	-	0.1	-		0.1
Total assets	0.9	5.8	18.4		25.1
Liabilities
Derivative financial instruments	-	0.2	-		0.2
Total liabilities	-	0.2	-		0.2

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

There were no changes in valuation techniques during the period.

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

Valuation techniques

Level 1

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

Level 2

The fair value of Level 2 unlisted financial assets at FVOCI is determined using valuation techniques using observable market data, where available, and rely as little as possible on entity estimates. The fair value of investment funds is based on underlying asset values determined by the Fund Manager's audited annual financial statements. These instruments are included in Level 2.

The fair value of derivative financial instruments relating to forward foreign exchange contracts and interest rate caps are determined by using valuation techniques using observable market data. The fair value of derivative financial instruments is based on the market value of similar instruments with similar maturities. These instruments are included in Level 2.

Level 3

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

Unlisted equity securities included in Level 3 fall under two categories. The first, where cost has been determined as the best approximation of fair value. Cost is considered the best approximation of fair value in these instances either due to insufficient more recent information being available and/or there being a wide range of possible fair value measurements due to the nature of the investments and cost is considered the best estimate of fair value within the range. The second, where management have determined the fair value of the unlisted equity security based upon the latest trading performance of the investments, cash flow forecasts of the investments and applying these to a discounted cash flow valuation and/or considering evidence from recent fundraising initiatives undertaken.

The derivative financial liability classified as Level 3 relates to a put option, the fair value of which is derived from management's best estimate of the average EBITDA forecast of the relevant business.

The following table presents changes in Level 3 items for the period ended 30 June 2021:

	Derivative financial instruments £m	Unlisted equity securities £m
Opening balance 1 January 2021	0.6	18.7
Additions	-	0.7
Closing balance 30 June 2021	0.6	19.4

7. Segment analysis

Six months to 30 June 2021	Transaction Advisory	Consultancy	Property and Facilities Management	Investment Management	Unallocated	Total
(unaudited)	£m	£m	£m	£m	£m	£m
Revenue
United Kingdom
- commercial	38.5	85.6	127.0	19.6	-	270.7
- residential	104.2	24.3	18.2	-	-	146.7
Total United Kingdom	142.7	109.9	145.2	19.6	-	417.4
CEME	39.9	18.4	40.1	15.6	-	114.0
Asia Pacific
- commercial	60.5	36.2	173.7	3.0	-	273.4
- residential	13.8	-	-	-	-	13.8
Total Asia Pacific	74.3	36.2	173.7	3.0	-	287.2
North America	105.1	8.9	-	-	-	114.0
Total revenue	362.0	173.4	359.0	38.2	-	932.6
Underlying profit/(loss) before tax
United Kingdom
- commercial	5.2	10.2	8.5	3.9	(8.1)	19.7
- residential	20.5	3.9	0.9	-	-	25.3
Total United Kingdom	25.7	14.1	9.4	3.9	(8.1)	45.0
CEME	(8.5)	2.3	(0.6)	2.7	-	(4.1)
Asia Pacific
- commercial	7.4	1.9	10.4	0.6	-	20.3
- residential	3.7	-	-	-	-	3.7
Total Asia Pacific	11.1	1.9	10.4	0.6	-	24.0
North America	0.8	0.5	-	(0.1)	-	1.2
Underlying profit/(loss) before tax	29.1	18.8	19.2	7.1	(8.1)	66.1

Six months to 30 June 2020	Transaction Advisory	Consultancy	Property and Facilities Management	Investment Management	Unallocated	Total
(unaudited)	£m	£m	£m	£m	£m	£m
Revenue
United Kingdom
- commercial	30.9	74.0	93.3	12.7	-	210.9
- residential	52.9	18.2	16.8	-	-	87.9
Total United Kingdom	83.8	92.2	110.1	12.7	-	298.8
CEME	38.1	16.3	37.7	15.3	-	107.4
Asia Pacific
- commercial	41.5	32.4	190.0	2.5	-	266.4
- residential	13.3	-	-	-	-	13.3
Total Asia Pacific	54.8	32.4	190.0	2.5	-	279.7
North America	101.8	3.7	-	-	-	105.5
Total revenue	278.5	144.6	337.8	30.5	-	791.4
Underlying profit/(loss) before tax
United Kingdom
- commercial	0.9	5.0	4.7	1.3	(4.3)	7.6
- residential	1.6	1.1	0.4	-	-	3.1
Total United Kingdom	2.5	6.1	5.1	1.3	(4.3)	10.7
CEME	(9.8)	2.4	0.2	2.8	-	(4.4)
Asia Pacific
- commercial	(4.4)	2.0	12.4	0.2	-	10.2
- residential	1.6	-	-	-	-	1.6
Total Asia Pacific	(2.8)	2.0	12.4	0.2	-	11.8
North America	(4.6)	(0.3)	-	-	-	(4.9)
Underlying profit/(loss) before tax	(14.7)	10.2	17.7	4.3	(4.3)	13.2

Year ended 31 December 2020	Transaction Advisory	Consultancy	Property and Facilities Management	Investment Management	Unallocated	Total
(audited)	£m	£m	£m	£m	£m	£m
Revenue
United Kingdom
- commercial	79.8	164.1	204.9	26.9	-	475.7
- residential	153.2	41.7	40.1	-	-	235.0
Total United Kingdom	233.0	205.8	245.0	26.9	-	710.7
CEME	98.2	37.5	68.6	36.4	-	240.7
Asia Pacific
- commercial	103.9	69.1	368.3	7.5	-	548.8
- 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
Total 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
- residential	23.0	5.9	3.4	-	-	32.3
Total United Kingdom	32.5	23.5	17.2	5.6	(13.9)	64.9
CEME	(12.3)	2.4	(0.1)	7.8	-	(2.2)
Asia Pacific
- commercial	3.3	6.5	27.7	1.4	-	38.9
- 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

Operating segments reflect internal management reporting to the Group's chief operating decision maker, defined as the Group Executive Board ('GEB'). The GEB assesses the performance of operating segments based on a measure of underlying profit before tax which adjusts reported pre-tax profit by profit/(loss) on disposals, share-based payment adjustment, significant restructuring costs, transaction-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 reported profit before tax is provided in Note 8.

8. Underlying profit before tax

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

	Six months to 30 June 2021 (unaudited)	Six months to 30 June 2020 (unaudited)	Year ended 31 December 2020 (audited)
	£m	£m	£m
Reported profit before tax	63.8	7.7	83.2
Adjustments:
- Amortisation of acquired intangible assets (excluding software)	2.7	2.3	4.9
- Share-based payment adjustment	(2.8)	0.4	1.2
- Loss on disposal of joint ventures and associates	-	-	0.1
- Restructuring costs	0.1	1.0	1.5
- Transaction-related costs	5.6	1.8	5.0
- Other exceptional items	(3.3)	-	0.7
Underlying profit before tax	66.1	13.2	96.6

The adjustment for share-based payments relates to the impact of the accounting standard for share-based compensation. The annual bonus is paid in a mixture of cash and deferred shares and the proportions can vary from one year to another. Under IFRS the deferred share element is amortised to the income statement over the vesting period whilst the cash element is expensed in the year. The adjustment above addresses this by adding to or deducting from profit the difference between the IFRS 2 charge in relation to outstanding bonus-related share awards and the estimated value of the current year bonus pool to be awarded in deferred shares. This adjustment is made in order to align the underlying staff cost in the year with the revenue recognised in the same period.

Restructuring costs includes costs of integration activities in relation to significant business acquisitions. Costs in the period ended 30 June 2021 and period ended 30 June 2020 relate primarily to the IFRS 2: "Share-based Payment" charge for deferred shares issued in relation to the restructuring upon acquisition of Aguirre Newman in 2017.

Transaction-related costs includes a net £3.6m charge for future consideration payments which are contingent on the continuity of recipients' employment in the future (30 June 2020: £2.3m). For the period ended 30 June 2021, a significant portion of the charge related to recent acquisitions in the US (Macro acquisition in 2020 and T3 acquisition in 2021), CEME (Omega acquisition in 2020 and Aguirre Newman acquisition in 2017) and Savills IM business (DRC acquisition in 2021). For the period ended 30 June 2020, a large portion of the charge related to recent acquisitions in the UK and US. In the current period, transaction-related costs also consist of £1.6m of professional advisory transaction fees (30 June 2020: £0.1m) and £0.4m of interest in relation to discounted deferred consideration (30 June 2020: £0.2m). In the prior period, transaction-related costs also included a £0.8m credit in relation to the Cluttons Middle East acquisition in 2018.

Other exceptional items reflects the fair value gain recognised on the re-measurement of the Group's holding in its associate, DRC, prior to the Group's acquisition of the remaining equity interest in this business (refer to Note 15 for further details on the acquisition of DRC). In the year ended 31 December 2020, other exceptional items reflects the past service cost on the UK defined benefit scheme, which is the estimated cost of equalising GMPs for historic transfers-out of the scheme; this followed a High Court ruling issued on 20 November 2020.

9. Constant Currency

The Group generates revenues and profits in various territories and currencies because of its international footprint. Those results are translated on consolidation at the foreign exchange rates prevailing at the time. These exchange rates vary from period to period, so the Group presents some of its results on a constant currency basis. This means that the current period results are retranslated using the prior period exchange rates. This eliminates the effect of exchange from the period on period comparison of results.

The constant currency effect on revenue, reported profit and underlying profit is summarised below:

	Six months to 30 June 2021 £m	Constant Currency effect £m	Six months to 30 June 2021 at Constant Currency £m
Revenue	932.6	(25.4)	958.0
Profit before tax	63.8	(1.1)	64.9
Underlying profit before tax	66.1	(1.5)	67.6

The constant currency effect on the Group's segmental results for the current period is presented below:

Six months to 30 June 2021 - Constant Currency Effect	Transaction Advisory	Consultancy	Property and Facilities Management	Investment Management	Unallocated	Total
(unaudited)	£m	£m	£m	£m	£m	£m
Revenue
United Kingdom
- commercial	-	-	-	-	-	-
- residential	-	-	-	-	-	-
Total United Kingdom	-	-	-	-	-	-
Europe & the Middle East	(0.4)	(0.3)	(0.4)	-	-	(1.1)
Asia Pacific
- commercial	(1.8)	(0.2)	(11.2)	(0.3)	-	(13.5)
- residential	(0.5)	-	-	-	-	(0.5)
Total Asia Pacific	(2.3)	(0.2)	(11.2)	(0.3)	-	(14.0)
North America	(9.5)	(0.8)	-	-	-	(10.3)
Total revenue	(12.2)	(1.3)	(11.6)	(0.3)	-	(25.4)
Underlying profit/(loss) before tax
United Kingdom
- commercial	-	-	-	-	-	-
- residential	-	-	-	-	-	-
Total United Kingdom	-	-	-	-	-	-
Europe & the Middle East	-	(0.1)	(0.1)	-	-	(0.2)
Asia Pacific
- commercial	(0.3)	(0.2)	(0.7)	-	-	(1.2)
- residential	-	-	-	-	-	-
Total Asia Pacific	(0.3)	(0.2)	(0.7)	-	-	(1.2)
North America	(0.1)	-	-	-	-	(0.1)
Underlying profit/(loss) before tax	(0.4)	(0.3)	(0.8)	-	-	(1.5)

10. Income tax expense

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

	Six months to 30 June 2021 (unaudited)	Six months to 30 June 2020 (unaudited)	Year ended 31 December 2020 (audited)
	£m	£m	£m
UK
- Current tax	11.6	2.0	13.3
- Deferred tax	(3.2)	(2.0)	(4.4)
Foreign tax
- Current tax	7.8	6.6	13.2
- Deferred tax	(0.8)	(4.4)	(6.9)
Income tax expense	15.4	2.2	15.2

The forecast Group effective tax rate is 24.1% (30 June 2020: 28.6% and 31 December 2020 reported effective tax rate: 18.3%), which is higher (30 June 2020: higher, 31 December 2020: lower) than the UK standard effective annual rate of corporation tax of 19% (30 June 2020 and 31 December 2020: 19%). This reflects permanent disallowable expenses, including transaction-related costs and the effect of the annual rate adjustment to the full year forecast rate. The Group underlying effective tax rate was 24.4% (30 June 2020: 27.1% and 31 December 2020: 18.5%).

11. Dividends

	Six months to 30 June 2021 (unaudited)	Six months to 30 June 2020 (unaudited)	Year ended 31 December 2020 (audited)
	£m	£m	£m
Amounts recognised as distribution to equity holders in the period:
In respect of previous period
Ordinary final dividend of 17.0p per share (2019: £nil)	23.6	-	-
Supplemental interim dividend of £nil per share (2019: £nil)	-	-	-
In respect of current period
Interim dividend of £nil per share (2020: £nil)	-	-	-
	23.6	-	-
Proposed interim dividend for the six months ended 30 June 2021	£8.4m

The Board has declared an interim dividend for the six months ended 30 June 2021 of 6.0p per ordinary share (30 June 2020: £nil) to be paid on 6 October 2021 to shareholders on the register on 3 September 2021. The interim dividend has not been recognised in these interim financial statements. It will be recognised in equity in the year to 31 December 2021.

12(a). Basic and diluted earnings per share

	2021	2021	2021	2020	2020	2020
	Earnings	Shares	EPS	Earnings	Shares	EPS
Six months to 30 June (unaudited)	£m	million	pence	£m	million	pence
Basic earnings per share	48.2	139.3	34.6	5.4	138.3	3.9
Effect of additional shares issuable under option	-	3.7	(0.9)	-	2.6	(0.1)
Diluted earnings per share	48.2	143.0	33.7	5.4	140.9	3.8
				2020	2020	2020
				Earnings	Shares	EPS
Year to 31 December (audited)				£m	million	pence
Basic earnings per share				67.6	138.0	49.0
Effect of additional shares issuable under option				-	3.1	(1.1)
Diluted earnings per share				67.6	141.1	47.9

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

	2021	2021	2021	2020	2020	2020
	Earnings	Shares	EPS	Earnings	Shares	EPS
Six months to 30 June (unaudited)	£m	million	pence	£m	million	pence
Basic earnings per share	48.2	139.3	34.6	5.4	138.3	3.9
- Amortisation of acquired intangible assets (excluding software) after tax	1.7	-	1.2	1.5	-	1.1
- Share-based payment adjustment after tax	(2.0)	-	(1.4)	0.4	-	0.3
- Restructuring costs after tax	0.1	-	0.1	0.8	-	0.6
- Transaction-related costs after tax	5.2	-	3.7	1.5	-	1.1
- Other exceptional items after tax	(3.3)	-	(2.4)	-	-	-
Underlying basic earnings per share	49.9	139.3	35.8	9.6	138.3	7.0
Effect of additional shares issuable under option	-	3.7	(0.9)	-	2.6	(0.2)
Underlying diluted earnings per share	49.9	143.0	34.9	9.6	140.9	6.8
				2020	2020	2020
				Earnings	Shares	EPS
Year to 31 December (audited)				£m	Million	pence
Basic earnings per share				67.6	138.0	49.0
- Amortisation of acquired intangible assets (excluding software) after tax				3.3	-	2.4
- Share-based payment adjustment after tax				1.1	-	0.8
- Loss on disposal of joint ventures and associates after tax				0.1	-	0.1
- Restructuring costs after tax				1.5	-	1.1
- Transaction-related costs after tax				4.1	-	3.0
- Other exceptional items after tax				0.6	-	0.4
Underlying basic earnings per share				78.3	138.0	56.8
Effect of additional shares issuable under option				-	3.1	(1.3)
Underlying diluted earnings per share				78.3	141.1	55.5

13. Cash generated from operations

	Six months to 30 June 2021 (unaudited)	Six months to 30 June 2020 (unaudited)	Year ended 31 December 2020 (audited)
	m	m	m
Profit for the period	48.4	5.5	68.0
Adjustments for:
Income tax (Note 10)	15.4	2.2	15.2
Depreciation	32.0	31.8	64.3
Amortisation of intangible assets	5.0	4.6	9.6
(Gain)/loss on disposal of property, plant and equipment and intangible assets	(0.3)	-	0.8
Fair value gain on associate (Note 15)	(3.3)	-	-
Loss on disposal of joint ventures and associates	-	-	0.1
Net finance cost	6.9	6.5	12.8
Share of post-tax profit from joint ventures and associates	(4.6)	(5.0)	(10.2)
Increase in employee and retirement obligations	5.5	4.8	3.4
Exchange movement and fair value movements on financial instruments in operating activities	(1.0)	0.7	2.4
Increase in provisions	5.4	0.6	0.5
Charge for share-based compensation	11.1	11.2	19.8
Operating cash flows before movements in working capital	120.5	62.9	186.7
Decrease in trade and other receivables and contract related assets	47.6	157.0	84.5
(Decrease)/increase in trade and other payables and contract liabilities	(104.8)	(184.2)	18.6
Cash generated from operations	63.3	35.7	289.8

Foreign exchange movements resulted in a £6.5m increase in current and non-current trade and other receivables (30 June 2020: £23.6m increase and 31 December 2020: £0.3m decrease) and a £7.4m increase in current and non-current trade and other payables (30 June 2020: £25.3m increase and 31 December 2020: £2.3m decrease).

14. Analysis of cash net of debt

Six months to 30 June 2021	At 1 January	Cash flows	Non-cash movements recognised in income statement	Other non- cash movements	Movements through business combinations	Exchange movements	At 30 June
(unaudited)	£m	£m	£m	£m	£m	£m	£m
Cash and cash equivalents, net of overdrafts in notional pooling arrangement	338.3	(41.8)	-	-	2.9	(5.6)	293.8
Bank overdrafts	(0.1)	(0.1)	-	-	-	-	(0.2)
	338.2	(41.9)	-	-	2.9	(5.6)	293.6
Bank loans	(12.1)	(26.8)	-	-	-	0.1	(38.8)
Loan notes	(150.0)	-	-	-	-	-	(150.0)
Transaction costs	1.6	0.4	(0.1)	-	-	-	1.9
Cash and cash equivalents net of borrowings	177.7	(68.3)	(0.1)	-	2.9	(5.5)	106.7
Lease liabilities	(304.2)	26.3	(4.4)	(4.4)	-	4.4	(282.3)
Cash and cash equivalents net of debt	(126.5)	(42.0)	(4.5)	(4.4)	2.9	(1.1)	(175.6)

Cash subject to restrictions in Asia Pacific amounts to £28.7m (30 June 2020: £27.2m and 31 December 2020: £41.1m) which is cash pledged to banks in relation to property management contracts and cash remittance restrictions in certain countries. These amounts are consolidated.

15. Acquisition of subsidiaries

DRC Capital LLP ('DRC')

On 28 September 2018, the Group acquired a 25% interest in DRC, a commercial real estate debt investment advisor. This transaction included a call option to acquire the remaining 75% of the business on the 28 September 2021. The call option date was accelerated and exercised on 28 May 2021.

Total acquisition consideration is provisionally determined at £49.6m, £18.3m of which relates to the fair value of the initial 25% investment (equity accounted as an associate) and £31.3m was settled on completion.

In addition to the above, an earn-out is payable in September 2024 and is measured against income targets. The maximum earn-out payment under the agreement caps the total consideration for DRC at £80.0m. The earn-out consideration 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.

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

The fair value exercise is in progress and goodwill of £49.2m has been provisionally recognised. Goodwill is attributable to the experience and expertise of the team and the strong industry reputation. It is not expected to be deductible for tax purposes.

The acquired business contributed revenue of £4.8m and profit of £1.5m to the Group for the period from 28 May 2021 to 30 June 2021. Had the acquisition been made at the beginning of the financial year, revenue would have been £11.6m and profit would have been £5.3m. Prior to acquisition, the Group recognised its share of profits from DRC as an associate of £1.1m in the income statement and also recognised a fair value gain of £3.3m within Other gains / income in the income statement in relation to the carrying value of its investment in DRC, prior to DRC becoming a wholly owned subsidiary of the Group.

Due to the timing of the acquisition, the fair values of the assets acquired and liabilities assumed are provisional and will be finalised within 12 months of the acquisition date. These are summarised below:

	Provisional fair value to the Group
	£m
Non-current assets: Property, plant and equipment	0.3
Contract related assets	1.9
Current assets: Contract related assets	0.1
Trade and other receivables	0.6
Cash and cash equivalents	2.8
Total assets	5.7
Current liabilities: Trade and other payables	(4.1)
Contract liabilities	(1.2)
Net assets acquired	0.4
Goodwill	49.2
Purchase consideration	49.6
Consideration satisfied by:
Cash paid	31.3
Fair value of existing 25% associate investment	18.3
	49.6

The fair value of trade and other receivables is £0.6m, all of which relates to trade receivables. The gross contractual amount for trade receivables is £0.7m, of which £0.1m is expected to be uncollectible.

T3 Advisors ('T3')

On 11 June 2021, the Group acquired 100% of the equity interest in T3, a real estate advisor and consultant for life sciences and technology sectors in the US.

Total acquisition consideration is provisionally determined at £12.4m, all of which was settled on completion.

In addition to the above, further fixed payments, retention bonuses and earn-out payments (contingent on revenue and operating margin targets) are payable in each year up until June 2028. The maximum value of these payments total £8.6m and are 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.

Transaction-related costs of £0.4m have been expensed as incurred to the income statement.

The fair value exercise is in progress and goodwill of £11.6m has been provisionally recognised. Goodwill is attributable to the experience and expertise of key staff members and is deductible for tax purposes over a 15 year period.

The acquired business contributed revenue of £1.3m and profit of £0.3m to the Group for the period from 11 June 2021 to 30 June 2021. Had the acquisition been made at the beginning of the financial year, revenue would have been £4.3m and profit would have been £0.6m.

Due to the timing of the acquisition, the fair values of the assets acquired and liabilities assumed are provisional and will be finalised within 12 months of the acquisition date. These are summarised below:

	Provisional fair value to the Group
	£m
Non-current assets: Other non-current assets	0.1
Current assets: Trade and other receivables	1.6
Total assets	1.7
Current liabilities: Trade and other payables	(0.9)
Net assets acquired	0.8
Goodwill	11.6
Purchase consideration	12.4
Consideration satisfied by:
Cash paid	12.4
	12.4

The fair value of trade and other receivables is £1.6m, all of which relates to trade receivables. The gross contractual amount for trade receivables is £1.6m, all of which is expected to be collectible.

Update to provisional fair value of prior period acquisition

There are no changes to the provisional fair values in respect of acquisitions reported in the Group's 2020 Annual Report.

16. Retirement and employee benefit obligations

Defined benefit plans

The Group operates two defined benefit plans.

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

The Savills Fund Management GMBH Plan (the 'SFM Plan') is a Germany-based plan which provides final salary benefits to 9 active employees and 106 former employees. The plan is closed to future service-based benefit accrual.

Significant actuarial pension assumptions are detailed in the Group's Annual Report and Accounts 2020 and are the same as at 31 December 2020 except for the following:

	UK Plan			SFM Plan
	Six months to 30 June 2021	Six months to 30 June 2020	Year ended 31 December 2020	Six months to 30 June 2021	Six months to 30 June 2020	Year ended 31 December 2020
Expected rate of salary increases	3.25%	3.25%	3.25%	2.50%	2.50%	2.50%
Projection of social security contribution ceiling	-	-	-	2.25%	2.25%	2.25%
Discount rate	1.90%	1.50%	1.40%	1.45%	1.55%	1.07%
Inflation assumption	3.10%	3.10%	2.80%	1.75%	1.75%	1.75%
Rate of increase to pensions in payment
- accrued before 6 April 1997	3.00%	3.00%	3.00%	-	-	-
- accrued after 5 April 1997	3.00%	3.00%	2.70%	-	-	-
- accrued after 5 April 2005	2.10%	2.20%	2.00%	-	-	-
- pension promise before 1 January 1986	-	-	-	2.25%	2.25%	2.25%
- pension promise after 1 January 1986	-	-	-	1.75%	1.75%	1.75%
Rate of increase to pensions in deferment
- accrued before 6 April 2001	5.00%	5.00%	5.00%	-	-	-
- accrued after 5 April 2001	2.30%	2.30%	2.10%	-	-	-
- accrued after 5 April 2009	2.30%	2.30%	2.10%	-	-	-

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

UK Plan	30 June 2021 £m	30 June 2020 £m	31 December 2020 £m
Present value of funded obligations	305.4	339.4	333.0
Fair value of plan assets	(309.9)	(328.8)	(330.4)
(Surplus) / liability recognised in the statement of financial position (included in retirement benefit asset / retirement and employee benefit obligations)	(4.5)	10.6	2.6

SFM Plan	30 June 2021 £m	30 June 2020 £m	31 December 2020 £m
Present value of funded obligations	14.5	15.2	16.3
Fair value of plan assets	(14.4)	(14.1)	(14.6)
Liability recognised in the statement of financial position (included in retirement and employee benefit obligations)	0.1	1.1	1.7

The amount recognised within the income statement in relation to the UK Plan for the period ended 30 June 2021 is a net interest cost of £nil (30 June 2020: net interest cost of £0.1m, 31 December 2020: net interest cost of £0.2m and past service cost of £0.7m).

The amount recognised within the income statement in relation to the SFM Plan for the period ended 30 June 2021 is a current service cost of £nil (30 June 2020: £nil, 31 December 2020: £nil).

Included in retirement and employee benefit obligations is £35.0m relating to holiday pay and long service leave (30 June 2020: £33.0m, 31 December 2020: £29.8m).

17. Trade receivables - Loss allowance

The Group has no significant concentrations of credit risk. The trade receivables balance is spread across a large number of different customers and geographic regions.

Local management have assessed the expected credit losses for trade receivables as a result of the ongoing uncertainty arising from COVID-19 and the expected loss rates have been reviewed based on their judgement as to the ongoing impact of the pandemic on their trade receivables portfolio. Overall, the expected loss rate on trade receivables has increased to 8.1% (31 December 2020: 7.7%) primarily due to more balances being greater than 90 days past due. This is to be expected given current economic conditions and uncertainty arising due to the pandemic however local management continue to closely monitor cash collections and regularly engage with all clients. 

A summary of trade receivables and the loss provision has been provided below:

30 June 2021	Current	More than 30 days past due	More than 90 days past due	More than 180 days past due	Total
Gross carrying amount (£m)	226.8	54.3	25.8	38.1	345.0
Loss allowance provision (£m)					(28.0)
Net trade receivables (£m)					317.0
Expected loss rate					8.1%

30 June 2020	Current	More than 30 days past due	More than 90 days past due	More than 180 days past due	Total
Gross carrying amount (£m)	167.4	82.5	36.3	46.6	332.8
Loss allowance provision (£m)					(28.2)
Net trade receivables (£m)					304.6
Expected loss rate					8.5%

31 December 2020	Current	More than 30 days past due	More than 90 days past due	More than 180 days past due	Total
Gross carrying amount (£m)	275.6	55.6	22.4	35.3	388.9
Loss allowance provision (£m)					(29.9)
Net trade receivables (£m)					359.0
Expected loss rate					7.7%

18. Borrowings

Movements in borrowings are analysed as follows:

			£m
Opening amount as at 1 January 2021			160.6
Additional borrowings (net of transaction costs)			26.6
Repayments of borrowings (including overdraft movement)			(0.1)
Amortisation of transaction costs			0.2
Foreign exchange movement			(0.2)
Closing amount as at 30 June 2021			187.1

	30 June 2021	30 June 2020	31 December 2020
	£m	£m	£m
Current
Bank overdrafts	0.2	0.1	0.1
Unsecured bank loans	38.8	77.9	12.1
Non-current
Loan notes	150.0	150.0	150.0
Transaction costs	(1.9)	(1.8)	(1.6)
	187.1	226.2	160.6

The Group has the following undrawn borrowing facilities:

	30 June 2021	30 June 2020	31 December 2020
	£m	£m	£m
Floating rate
- expiring within one year or on demand	36.1	35.7	36.1
- expiring between 1 and 5 years	337.0	298.6	361.1
	373.1	334.3	397.2

The Group holds a £360m multi-currency revolving credit facility ('RCF'), which includes a £90m accordion facility. In June 2021 the Group extended the maturity date of the RCF by a further year to June 2025. As at 30 June 2021 £24.0m (30 June 2020: £62.0m, 31 December 2020: none) of the RCF was drawn. The remaining unsecured bank loans reflect a £14.1m utilisation of a revolving credit facility in North America for working capital purposes, which is repayable within one year and denominated in US dollars (30 June 2020: £15.0m, 31 December 2020: £11.4m) and a £0.7m working capital loan in Thailand, which is repayable on demand and denominated in Thailand baht (30 June 2020: £0.9m, 31 December 2020: £0.7m).

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.

19. Notional pooling arrangement

For internal cash management purposes, the Group maintains a notional cash pooling arrangement with Barclays Bank PLC, whereby credit and debit cash balances for the participating bank accounts are notionally offset. There is no overdraft cost or charge associated with any pooled overdraft that is fully offset by pooled credit cash balances. As at 30 June 2021, the notional cash pooling arrangement included cash balances of £193.3m presented in cash and cash equivalents (30 June 2020: £156.6m, 31 December 2020: £242.0m) and overdrafts of £187.7m (30 June 2020: £155.6m, 31 December 2020: £209.1m) presented in current liabilities. This represents as at 30 June 2021 surplus pooled credit cash balances of £5.6m (30 June 2020: surplus pooled credit cash of £1.0m, 31 December 2020: surplus credit pooled cash £32.9m).  

For the purpose of the statement of cash flows, cash and cash equivalents net of overdrafts comprise the following:

	30 June 2021	30 June 2020	31 December 2020
	£m	£m	£m
Cash and cash equivalents	481.5	391.2	547.4
Overdrafts in notional pooling arrangement	(187.7)	(155.6)	(209.1)
Bank overdrafts (see Note 18)	(0.2)	(0.1)	(0.1)
	293.6	235.5	338.2

20. Related party transactions

As at 30 June 2021, there were £2.9m of loans outstanding to joint ventures and £0.7m of loans outstanding to associates (30 June 2020: £3.5m of loans outstanding to joint ventures and £0.8m of loans outstanding to associates, 31 December 2020: £4.1m loans outstanding to joint ventures and £0.7m of loans outstanding to associates).

On 28 May 2021, the Group acquired the remaining 75% share in DRC Capital (a related party), refer to Note 15 for more information.

There were no other material related party transactions during the period. All related party transactions take place on an arm's-length basis under the same terms as those available to other customers in the ordinary course of business.

21. 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 can be estimated reliably and settlement is probable.

22. Seasonality

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

In the current year, UK residential markets, following the continuation of the stamp duty holiday, have performed strongly in the first half and a tempering of residential transaction levels in some markets is anticipated in the second half of the year. Commercial investment markets are showing varying speeds of recovery across the Globe and, subject to further pandemic outbreaks, we expect this trend to continue through the year, although cross-border activity will depend upon how soon travel and quarantine restrictions can be eased. The seasonality of results in the current year therefore may not necessarily follow that of previous years, prior to the pandemic.

SHAREHOLDER INFORMATION

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

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

 

END

 

 

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