Final Results - Part 1
Savills PLC
6 March 2001
Part 1
FOR IMMEDIATE RELEASE 6 MARCH 2001
STRONG PROFIT GROWTH FROM SAVILLS
Savills plc, the international property adviser, today announced preliminary
results for the eight months ended 31 December 2000, the first results to
reflect the Company's new financial year-end. To help shareholders understand
the progress made over the last year, pro forma figures have been prepared
from management accounts for 12 month periods to December 2000 and December
1999.
* Group pre-tax profit £17.4m
- pro forma pre tax profit up 26% to £25.9m (1999 - £20.6m).
* Group turnover £156.7m
- pro forma turnover up 60% to £213.5m (1999 - £133.4m).
* Earnings before interest, tax, depreciation and amortisation (EBITDA) £20.9m
- pro forma EBITDA up 34% to £30.5m (1999 - £22.7m).
* Basic earnings per share 18.7p
- pro forma increase of 12% to 31.1p per share (1999 - 27.7p).
* Final dividend of 6.0p per share representing a 20% pro rata increase
over the total dividend of 7.5p for the twelve months ended 30 April 2000.
Richard Jewson, Chairman of Savills plc, commented:
'These are an excellent set of figures, particularly in the last two months of
the period. They reflect a very strong performance from all three of our
traditional businesses, transactional, consultancy and property management. We
are pleased with the progress we have made in developing our facilities
management and financial services businesses which will provide more stable
long-term earnings and complement our traditional businesses.
'We are confident that the prospects for the property industry and the markets
in which we operate are generally good. In the UK, tenant demand remains
strong, the investment sector is helped by falling interest rates and the
residential market appears set to continue to perform well. In the rest of
Europe, markets should benefit from continuing economic growth. In Asia
Pacific the market outlook remains positive with the economic recovery in many
Asian countries gaining momentum.
'These results demonstrate that we have laid the foundation for Savills,
together with our US affiliate Trammell Crow Company, to be the leading
international provider of property services.'
*** Chairman's Statement, Group Chief Executive's Review of Operations,
Financial Review & Preliminary Announcement of Results follow***
For further information, please contact:
Savills plc 020 7499 8644
Aubrey Adams, Group Chief Executive
Grandfield 020 7417 4170
Charles Cook/Harry Hunt
Savills plc. Registered in England No. 2122174.
Registered Office 20 Grosvenor Hill, Berkeley Square, London, W1K 3HQ
CHAIRMAN'S STATEMENT
RESULTS
These are the first set of figures for an accounting period reflecting our new
31 December year-end and, as such, are for an eight-month accounting period.
To a large extent they reflect the interim figures for the six months to 31
October 2000 which were announced on 19 December 2000. To help shareholders
understand the progress we have made over the last year, we have prepared from
our management accounts pro forma figures for 12 month periods to December 2000
and December 1999.
Headline figures for the period were encouraging. In the eight-month period to
31 December 2000 Group turnover amounted to £156.7m, generating operating
profit of £13.5m, pre-tax profits of £17.4m and earnings per share of 18.7p.
Cash balances were £29.7m; debt of £11.2m relates to properties held for
resale.
Pro forma figures for the 12 months to 31 December 2000 were: turnover of £
213.5m (1999 - £133.4m); operating profit of £21.5m (1999 - £19.6m); pre-tax
profit of £25.9m (1999 - £20.6m); and earnings per share of 31.1p (1999 -
27.7p).
DIVIDEND
As indicated in the interim announcement, the Directors are recommending a
dividend for the eight-month period of 6.0p. On a pro rata basis, this
represents a 20% increase over the total dividend of 7.5p for the year ended
30 April 2000. This increase reflects both our confidence in the outlook for
the current year and our stated commitment to pursuing a progressive dividend
policy to ensure that shareholders are able to benefit from the Company's
financial success.
HIGHLIGHTS
The year 2000 has been one of the most important years in the development of
Group strategy, during which we have laid the foundation for Savills, together
with our US affiliate Trammell Crow Company, to be the leading provider of
property services. Particular achievements were:
* In April we acquired the Hong Kong based First Pacific Davies Limited,
now called FPDSavills Asia Pacific Limited, from First Pacific Company. We
are very pleased with the performance of the Asia Pacific business to date
and believe that there are significant growth prospects in the region.
* In June we formed a strategic alliance with Trammell Crow Company, the
premier real estate advisory business in the US. We are delighted with the
way that the relationship is developing and there are already significant
new business opportunities that have arisen for both companies. In
particular our joint venture, Trammell Crow Savills, which provides
facilities management services, has the scope to grow rapidly and become a
significant profit contributor in the future.
Both of these major strategic moves are fundamental to the continuing
development of our international business. Under the terms of the strategic
alliance, Trammell Crow Company acquired 6.25m Savills shares (representing
10% of the issued share capital) from First Pacific Company and has an option,
exercisable from 2003, to increase this holding up to 20%. First Pacific
Company has been a shareholder since 1997 and, following the sale to Trammell
Crow Company, has recently indicated that it intends to sell its remaining
19.6% shareholding in order to concentrate on its core businesses in Asia
Pacific.
Our UK business has performed well in the period and we continue to look for
opportunities to grow it through acquisition and recruitment; the total number
of staff in the UK has grown 24% to 1,876 over the period. At the same time we
see tremendous potential in the rest of the EU and a strong profit performance
in 2000 lays the basis for expanding from a position of strength.
Within the Savills Finance Holdings sub group Savills Financial Services
(which incorporates Savills Private Finance and the NetMortgage businesses) is
growing rapidly and we are looking at a number of options to allow this
business to reach its full potential as quickly as possible.
Much has been talked about the impact of the Internet on various sectors of
business and the property industry is no exception. We continue to make
substantial investments in our information technology systems including our
website and web enabled business systems. We are the largest shareholders in
Primelocation.com, the leading platform for residential property e-commerce.
BOARD AND STAFF
With the reshaping of the business the Board of Savills plc has changed to
reflect the natural succession planning and requirements of the Group in the
future. Jeremy Helsby took over from Justin Roberts as Chairman of FPDSavills
Commercial Limited with effect from 1 January 2001. Justin Roberts has made a
significant contribution to the development of our Commercial business over
the last five years and I am delighted that he will remain with us to focus on
investment and property management. As reported last July, Rupert
Sebag-Montefiore took over from Geoffrey van Cutsem as Managing Director of
FPDSavills Limited; Geoffrey remains with us in an executive capacity.
Together with the appointment of Robert McKellar during the period as Finance
Director we have an exceptionally strong and experienced senior management
team who will drive the business forward in the future.
Victoria Mitchell stood down from the Board on 31 December 2000 at her own
request but happily remains with the Group as a consultant. She has made a
tremendous contribution in her 13 years on the Board.
On 1 August 2000, we were delighted to welcome Charles McVeigh to the Board as
an independent Non-Executive Director. Charles is co-Chairman of Schroder
Salomon Smith Barney Europe and brings an invaluable global perspective to our
business. E Stevenson Belcher has replaced H Pryor Blackwell as one of the
Directors nominated by Trammell Crow Company where he has also recently
assumed overall responsibility for international business development. He will
be working closely with our senior directors here and this is a clear
demonstration of the commitment Trammell Crow Company has to our strategic
alliance.
As ever our key strength is our staff and their hard work and talent are the
reason for the excellent results that we have just reported. I am delighted
that they have been able to share again in this success through our reward
system.
OUTLOOK
We are confident that the prospects for the property industry and the markets
in which we operate are generally good. In the UK, tenant demand remains
strong, the investment sector is helped by falling interest rates and the
residential market appears set to continue to perform well. In the rest of
Europe, markets should benefit from continuing economic growth. In Asia
Pacific the market outlook remains positive with the economic recovery in many
Asian countries gaining momentum.
Richard Jewson, Chairman
GROUP CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
As mentioned in the Chairman's Statement, the year 2000 has been an eventful
year for the Savills Group and the eight-month period to 31 December 2000 saw
significant development in the geographic spread of our business along six
increasingly distinct business lines.
The proportion of our business which is outside the UK is now 40% and we are
therefore less exposed to individual regional economies. The nature of our
business is also changing and to give a clearer understanding of this we are
now reporting revenue according to six main business streams which are set out
below. These six business streams are relatively distinct although there is
clearly considerable cross fertilisation between them. In order to encourage
this we continue to manage our transactional advice, consultancy and property
management businesses on a regional basis. This also allows us to maintain
strong financial control which has always been a feature of the Savills Group.
TRANSACTIONAL ADVICE
The Transactional Advice business stream comprises commercial, residential and
agricultural agency and investment advised on purchases and sales and
represents 45% of our total turnover. During the eight months turnover was £
70m, generating profit before interest and tax of £11.8m. Whilst this business
is to a large extent contingent on the successful completion of a transaction
(and therefore potentially more uncertain than consultancy) a large proportion
of the revenue is repeat business from long standing corporate and
institutional clients. It is accordingly generally recurrent in its nature
and, given the broad spread of services and the geographical diversity of the
Group, the exposure to any one transaction or client is small. Profit margins
on this type of business are typically higher than pure consultancy or
advisory work.
Commercial Agency
The Group's Commercial Agency teams produced record results for the period and
the strong performance from the offices in mainland Europe was particularly
encouraging.
In the UK, the West End offices recorded a sharp increase in turnover over the
previous 12 months and were involved in transactions totalling over 430,000 sq
ft of accommodation, representing a significant market share of the 4.13m sq
ft of offices leased in the West End during the 2000 calendar year. Notable
instructions included advising on the sale of Cleveland House, St James's
Square, a 73,000 sq ft prime core development.
Savills' European offices had a very successful year advising on several major
transactions in Germany, Spain and France. The Frankfurt office of FPDSavills
advised the German open ended fund Commerz Grundbesitz Invest (CGI) on the
forward funding of a 43,000 sq m office investment in the Rive Gauche
development area in Paris. The project, which will be developed by Shaftesbury
and Capital & Continental, overlooks the River Seine and will provide some of
the highest quality accommodation to come onto the Parisian market. Completion
will be in spring 2003. FPDSavills have now advised CGI on the acquisition of
five major investments in the buoyant Paris market with a completed value in
excess of FF 9 billion.
The Commercial Agency activities in Hong Kong have been encouraging, as large
multinational companies, global IT and financial institutions capitalised on
attractive rental rates to expand their offices. As a result, the vacancy rate
for grade A buildings has reduced significantly and rental rates have improved
noticeably. FPDSavills' strong market position allowed it to generate
substantial revenue and helped strengthen the Group's relationship with many
substantial global clients. In a testing market, industrial property sales
were generally of small units although the team was also successful in
completing a number of larger transactions during the period. At the Hong Kong
Science Park, FPDSavills leased 320,000 sq ft to a cross section of technology
companies.
Residential Agency
After a buoyant start to the financial period, the UK residential market
experienced quite a slow down during the early autumn. However, against
seasonal trends, we experienced a strong finish to the period with excellent
sales achieved at the very top of the house market.
In total, almost £1.1 billion of properties were sold in the eight-month
period. The average price of a house sold by FPDSavills is around £500,000 in
the country and in excess of £1.25m in London. Central London values increased
by about 15% and in the country by about 9% during the calendar year.
During the last twelve months we have opened new residential offices in
Bishop's Stortford, Bristol, Manchester, Wimbledon and Windsor. Our UK network
of 46 offices, including 14 in London, gives us by far the most extensive
network in the prime residential market.
The residential auction department has continued to grow impressively whilst
maintaining one of the highest average lot values (in excess of £150,000) in
the residential market. In its second full year of operation, the department
has doubled the value of properties sold to in excess of £56m and has
increased its ranking in terms of value sold from ninth to fifth.
The residential market in Hong Kong proved to be extremely tough over the
period with values remaining flat and transaction volumes depressed by
continuing nervousness over the direction of the government housing policy as
well as negative equity concerns. As a result the residential sales department
experienced a difficult eight months, but the prestige homes division
maintained its leading market position.
New Homes
During the period we continued to expand our UK New Homes operations, with new
offices opening in Bristol and Manchester, reflecting our greater focus on
larger urban schemes, where we anticipate the greatest future growth. From 1
May to 31 December 2000 we sold 1,322 new homes in the UK totalling £434m, at
an average value of £328,000. The 'pipeline' of future business, on schemes
where we are already providing consultancy advice, indicates strong earnings
in the next few years.
In Hong Kong, developers proved reluctant to dispose of luxury projects,
preferring to defer their disposals until 2001.
Development
The development land side of our business has continued to see rapid growth
over the last 18 months. Our planning and development teams are now advising
on 20,000 acres of potential development land.
Increasingly our involvement in development opportunities leads us to offer
expert advice on mixed use development where we are uniquely positioned to
integrate our broad range of property skills to produce well-balanced mixed
development schemes, particularly on urban or brownfield sites. Our
regeneration team in London advises clients on many large brownfield urban
schemes.
In Hong Kong, FPDSavills completed both the development consultancy and
project marketing for the Hong Kong Science Park, a government sponsored
scheme of some 3.5m sq ft.
Residential Lettings
The UK residential lettings division was restructured during the period and
now forms a platform for significant expansion of the business. The prime
central London teams performed well in a relatively strong market where the
client base consists mainly of investors and owner-occupiers keen to hold on
to their properties in London whilst having moved to the country. With the
overall lettings market predicted to increase FPDSavills is well placed to
service the demand. Out of London lettings operate in a more difficult market
with lower letting values and varying standards of stock.
In Hong Kong, luxury residential rents rose by 6% over the calendar year,
driven primarily by demand from financial services staff and greater increases
were seen at the top end of the market where availability was limited. In a
competitive market, FPDSavills was successful in retaining major corporate
clients and in completing several sole agencies for the letting of a number of
key properties.
Agricultural Agency
UK farmland values have held up remarkably since their peak in 1997, average
prices being just 19% down to December 2000 compared with a fall in farm
incomes of 70% over the same period.
Limited supply and a strong residential market, particularly in the south and
west, have been contributory factors and significant premiums have been
achieved for holdings with good access to London, attractive principal houses
and amenity, from non-farming buyers who bought 39% of farms offered for sale
by FPDSavills during 2000. Demand for commercial holdings in areas of little
amenity, where value traditionally reflects profitability, is less strong and
a successful sale can often be dependent upon interest from neighbours. The
current foot and mouth crisis will not help confidence in the commercial farm
sector particularly in stock rearing areas.
Commercial Investment
The period under review was another outstanding one for the UK Commercial
Investment department. The investment team has continued to work closely with
a number of mainstream clients, including Pillar Property plc, Phillips & Drew
Fund Management, Grantchester plc, Chartwell Land Ltd and Morley Fund
Management.
In addition, the team has undertaken sales and acquisitions for a number of
new clients including Standard Life, Deutsche Property Asset Management, Rugby
Estates plc, Mansford Holdings Ltd and Westdeutsche Landesbank. Notable
transactions include: acting on behalf of Westdeutsche Landesbank in the joint
venture purchase with British Land plc of four city offices with a total value
of £350m; the purchase of Garrard House, 31/45 Gresham Street, London for a
private Irish syndicate in the sum of £85m; the sale of the 75% holding in
Cannon Bridge, Dowgate Hill, London on behalf of General Electric Pension Fund
in the sum of £103m; and the purchase of the London Underground portfolio,
consisting of 26 properties throughout Greater London, on behalf of Norwich
Union for the sum of £97m. On the retail warehouse side, the team acted on
behalf of Haslemere in the sale of Broadwalk Retail Park, Walsall, for £17.2m
to Foreign & Colonial.
In Hong Kong sales values remained flat as a result of subdued market
sentiment but our team performed strongly and completed a number of headline
deals including the sale of 8 Wyndham Street for HK$500m and the disposal of
116-112 Gloucester Road for HK$400m.
In Australia our team arranged the sale of two of the largest properties in
Sydney. Following an international marketing campaign we concluded the sale of
the Market City retail centre for A$105m and followed this with the sale of
the office tower at 201 Kent Street for A$200m.
Retail
Despite a lack of consumer confidence in retail generally in the UK, the
retail warehouse sector from a property perspective has continued to perform
well. The Retail Warehouse team has advised B&Q plc upon six major new store
acquisitions throughout the country providing approximately 900,000 sq ft of
retail floor space. Letting advice has been given to Chartwell Land at the
retail park developments at Northampton and Romford which provide a combined
floor space of approximately 350,000 sq ft of retail accommodation.
In Hong Kong, improving consumer confidence and the return of overseas
visitors to Hong Kong helped buoy the retail market. Our retail team
successfully leased space to a number of newcomers including Mango from Spain
and Morton's from the USA and concluded a number of deals in the restaurant
sector.
Fund Management
Fund Management, operating from the UK, enjoyed a highly successful
eight-month period. Clients enjoyed another strong year of performance whilst
the disinvestment programme for the Boots Pension Fund was successfully
concluded, triggering the payment of performance fees.
A highlight of the period was the launch of the Charities Property Fund at the
end of September. The Fund has been designed to allow Charities to benefit
from the high yield available on property whilst preserving the valuable
exemption from stamp duty. It is the aim to grow the Fund to £100m within 12
months.
Savills Investment Management Limited, the Group's IMRO regulated subsidiary,
will handle regulated business such as launching and promoting property
vehicles and managing indirect property instruments such as unit trusts and
limited partnerships.
CONSULTANCY
Our consultancy business generates fee income from a wide range of
professional property services including valuation, building consultancy,
landlord and tenant, rating, planning, strategic projects and research. Profit
before interest and tax for the eight months was £3.5m on turnover of £23.2m.
This was an excellent performance by the various professional teams throughout
the Group.
Whilst separated for reasons of client confidentiality this business is highly
complementary with our transaction work and we believe that our knowledge of
the markets is vital to the quality of the advice we provide. Market changes
provide new opportunities for expansion as evidenced by the increase in
business in Asia Pacific from clients who require objective property and
planning advice as the region recovers from the downturn.
Valuation
The Commercial Valuation department has had another successful trading period,
increasing turnover (on an annualised basis) by 13.5%. We continue to provide
valuations of the Canary Wharf Estate for accounts, financing and other
purposes. Elsewhere, we have valued many other commercial and development
properties with values exceeding £100m. Our core business is independent
valuations for banks for loan security purposes, and the major German banks
continue to be important clients. During the trading period we worked on
valuations for securitisation purposes, including a further portfolio of
Sainsbury's superstores. The Hotels Valuation department further established
itself as the market-leader advising on hotels in the UK and Europe for all
the major lending institutions. Valuations were undertaken over assets in
excess of £750m, including serviced apartments, health clubs and associated
leisure properties.
The London based Residential Valuation department had a further successful
eight-month period. They now have an exceptionally wide client base which, for
loan security work, includes UK clearing and private banks, building
societies, merchant and foreign banks. A growing part of their business has
come from the valuation of residential development sites. They also provided
valuation advice to British Land during their acquisition of a central London
residential portfolio in excess of £150m. During the period this department
valued over £800m of residential stock.
Our Hong Kong valuation team experienced unprecedented business growth over
the period and both the mortgage valuation and corporate sections of the
department were strengthened. Properties valued ranged from the largest
high-end residential site on Hong Kong Island to a variety of houses, hotels
and shopping centres in Hong Kong, Macau and mainland China.
Building Consultancy
Our UK Building Consultancy department had another successful year continuing
its trend of increasing income and profit by more than 20% for the fifth
successive year. Our focus on office fit out has secured an increased market
share including the project management of a wide range of corporate
headquarters within the financial, legal and manufacturing sectors.
In only its second year of full operation CMI Project Services Limited, our
major scheme project management subsidiary, has secured two substantial new
build commissions; a 93,000 sq m commercial office development in Docklands;
and a 58,500 sq m luxury residential apartment building.
Within the residential sector we project managed the restoration of Knebworth
House. In the social housing sector we have consolidated our position as
market leaders and are advising Glasgow City Council on the condition of its
100,000 properties, including 275 high-rise tower blocks.
Landlord and Tenant
In London and the South East, the differential between office rents set five
years ago and current open market rents is greater than at any time for 15
years. Strong rental growth has also reduced the number of properties that
remain over-rented as a result of the recession of the early 1990's, hence the
rent review business is going through a growth phase.
Our London based Landlord and Tenant department is capitalising on these
positive market conditions, and benefits from having an experienced and
respected team. As well as focusing on the core markets, they have a high
profile in the out of town retail market, where they have now worked for 50
landlord clients on retail warehousing rent reviews.
In Hong Kong, the grade 'A' office leasing market over the period was fuelled
by demand from financial services, IT, telecommunications and insurance
companies and rents rose significantly across all districts. Notable deals
included the lease restructuring and rent review of 70,000 sq ft of office
space for Standard Chartered Bank as well as the leasing of 60,000 sq ft in
Olympian Plaza to Honeywell.
Rating
The UK business rates team continues to advise commercial property occupiers
and to assist them to reduce their rates' bills. In the period, outstanding
appeals from the 1995 Revaluation were dealt with as well as preparation for
appeals after the 2000 Revaluation took effect on 1 April 2000.
Planning
The last year has seen significant changes affecting planning, with ground
breaking government advice on sustainable development, the publication of the
White Papers on Urban and Rural Development, and the establishment of the
Greater London Authority. The planning teams have been at the forefront of
advising clients on the implications, as the planning arm of the Company
continues to expand and diversify. Acting for a range of developers and
landowners, a number of urban regeneration and masterplanning exercises are
currently underway. Examples include regeneration proposals at the Elephant
and Castle, SE1 for Pinnacle Estates Ltd and at Colliers Wood for Countryside
Properties plc. Successes include the 2m sq ft Swan Valley business park in
Northampton, part of an urban expansion project of 4,000 houses, commercial
and leisure development, and the new shopping park adjacent to junction 27 of
the M62 for Pillar Property plc/Hermes. A notable new client for the Southern
region is the South West Regional Development Agency.
Strategic Projects
Operating throughout the UK, Strategic Projects undertakes planning and
implementation of major infrastructure projects for the telecommunications,
energy and utility sectors. A new telecommunications business team has been
established to draw together the Group's expertise in this field. The work
tends to follow the capital investment programmes of major UK companies
particularly in the wake of deregulation. Over the past two to three years
there has been a trend away from major projects in electricity, to new
pipeline projects, and now an increasing focus upon telecommunications. Most
notable has been the success of winning the contract from Nacap Telecoms Ltd
to design and deliver, ready for construction, 1,200km of underground cable
route between Birmingham, Glasgow, Edinburgh and Nottingham, part of the £332m
national network being created by 186K Ltd (a subsidiary of Lattice).
Research
FPDSavills London based research department remains unique in offering a full
range of research services to clients across all UK and many overseas real
estate sectors: commercial, residential and rural. As well as monitoring and
forecasting all the major, mainstream real estate markets, FPDSavills has made
a name in emerging and specialist markets such as residential investment,
property and agricultural estates.
Notable transactions included advising the Housing Corporation on risk
assessment in the private rented sector and producing the first ever
ground-breaking report on the London serviced apartment market.
Our Hong Kong and Shanghai based research teams continue to build on their
reputation as leaders in the provision of regional property research. Whilst
also advising a number of prominent private clients, the research team played
an active role in several headline consultancy projects including work for the
Hong Kong Science Park Company, Pacific Century Cyberworks and the Airport
Authority.
PROPERTY MANAGEMENT
Our property management business generates fee income from managing
commercial, residential and agricultural properties for owners. Working
closely with the other parts of our business we aim to add value to our
clients by actively managing assets to optimise returns. During the period
turnover was £31.0m generating a profit before interest and tax of £2.0m. We
believe this business has a strong base and we are putting particular effort
into expanding our coverage and investing substantially in new IT systems.
Commercial and Residential Management
The period saw the formation of a National Commercial Property Management Team
in the UK which has been created to win and service UK wide portfolio
management instructions. The first contract awarded under this new structure
was the UK Retail Park and Retail Parade portfolios for Henderson Global
Investors which comprise a total of 520 tenants with a rent roll of over £50m.
Our Australian subsidiary, Byvan Pty Limited, is the leading manager of
shopping centres in Australia with over 2.4m sq m of shopping centres and
markets under management. Byvan's retail property management portfolio of over
150 shopping centres and markets makes the company more than 40% larger than
its main industry competitor. With a sophisticated data base system capturing
turnover information from 8,000 retailers around the country, Byvan is an
industry leader in benchmarking shopping centre performance and in the
provision of professional advisory services to property owners and major
national retailers.
In Hong Kong, FPDSavills Property Management, which focuses on management of
prime residential and commercial properties, obtained its ISO 14001
Certificate for Environmental Management Systems and received two independent
awards for providing outstanding property management services last year. The
company achieved better than expected profits despite operating in difficult
market conditions due to the depressed property market.
The UK corporate residential management business consolidated its position
with the successful integration of the residential portfolio management
business acquired from Bradford & Bingley in 1999.
Land and Farm Management
Our land management business continues to consolidate its leading market
share. The problems facing the agricultural community have enforced the need
for substantial re-structuring within rural businesses and our ability to
identify new business streams on behalf of clients has been an important
source of new work. Over recent months we have been extending our management
into corporate rural businesses where there is substantial growth potential.
Despite difficult trading conditions in the agricultural sector, our
specialist farming subsidiary Aubourn Farming, continues to successfully
expand its business and technical consultancy service in line with its
strategic objective of developing a national business.
FACILITIES MANAGEMENT
The Facilities Management business provides a comprehensive range of services
to occupiers of property ranging from strategic advice through project
management to all the services relating to a building. The fee based income is
typically received under a long-term contract for major corporate occupiers
and therefore is some of the most secure revenue. For the eight-month period
turnover was £23.6m generating profit before interest and tax of £2.3m.
Our facilities management operations consist of two main parts:
* FPDSavills Guardian which provides a range of property management
services, primarily in Hong Kong, including Hong Kong government
outsourcing contracts.
* Trammell Crow Savills, the new corporate outsourcing joint venture
formed with Trammell Crow Company.
The global market opportunity for corporate real estate services is estimated
to be US$100 billion of which only a small percentage is currently outsourced.
With the increasing trend for major business to focus on core activities we
believe there is tremendous potential to develop this business further in
Europe and Asia. We are fortunate that Trammell Crow Company is recognised as
the leading corporate real estate outsourcing business in the US and our joint
venture will benefit considerably from their expertise in this market.
Guardian achieved record profits for the period as its major operating
subsidiaries reported solid achievements against revenue and profit targets.
Serco-Guardian, the joint venture company with Serco Plc which is engaged in
Facility Management business in Hong Kong, successfully won the renewal tender
for the management contract for two tunnels for another term of six years,
which, together with the profits from the other service contracts, contributed
to Guardian's excellent performance.
Trammell Crow Savills (TCS) was formed in June 2000 as a global real estate
outsourcing company, to deliver corporate real estate services to
multinational companies in Europe and Asia Pacific. Trammell Crow Company and
Savills plc, have agreed to use TCS as the vehicle for all their real estate
outsourcing and corporate real estate client work internationally.
TCS was formed through the injection of Trigon (now called Trammell Crow
Savills (UK) Limited), our Facilities Management subsidiary, and the
FPDSavills European Corporate Services team. In September 2000, coverage was
extended through the acquisition by TCS of FPDSavills Asia Pacific's
subsidiary, Construction Management International, and work on several major
projects in Japan, Korea and Singapore has already commenced.
Trammell Crow Savills' clients include American Express Services Europe
Limited, BP Exploration Co Ltd, British Airways plc, Cisco Systems Ltd, City
Reach International Ltd, Ernst & Young and Getronics.
PROPERTY TRADING
Our property trading subsidiary Grosvenor Hill Ventures undertakes
co-investment through joint ventures as well as direct investment but always
with the ultimate intention of bringing in an external partner. Whilst it is
not common practice for UK institutions to require co-investment by advisers
we believe that it is a trend that will develop particularly as US based
opportunity funds become more influential in the market. The profit before tax
and interest for the period of £0.2m on turnover of £5.7m reflects the initial
launch costs of the investment property, Yorkshire Mill Village, the retail
scheme in West Yorkshire, which amounted to £1.2m.
Grosvenor Hill Ventures, the principal co-investment vehicle, had another
active year which saw the successful sale of three completed co-investment
projects and the completion of the refurbishment and re-branding of Yorkshire
Mill Village.
FINANCIAL SERVICES
The Financial Services division is comprised of a corporate finance advisory
business (Savills Finance Limited) and private client financial services
business (Savills Financial Services ('SFS')) which is primarily focusing on
residential mortgage broking and associated financial products. For the
eight-month period, turnover was £3.3m and the loss before interest and tax of
£0.7m reflects the costs of developing the business.
SFS is an example of the way we are looking to extend and maximise the value
of the Savills brand. We believe there is a particular opportunity at the top
end of the financial services market to create the UK's leading high end
branded personal financial services distribution business. Its subsidiary
Savills Private Finance is now established as a leading residential mortgage
broker which is successfully extending the range of services it offers to its
considerable client base.
Savills Financial Services
During the period the Savills Private Finance subsidiary sustained its growth
record with like for like total income for the eight months up by 46%. The
highlight of the period was the arrangement of a £11.5m individual loan -
possibly the largest mortgage ever arranged on a single UK residential
property. We have expanded the team and further offices have been opened.
During January we increased the consulting staff by 14, with further increases
planned for this year, with particular focus in the financial planning arena.
Our Internet presence, NetMortgage, has made steady progress through its
chosen route of partnership marketing. During January the marketing
partnership with BT came into operation. With the majority of the development
costs already written off, the future overhead cost of NetMortgage has been
minimised enabling the business to develop in line with consumer trends.
Savills Finance Limited
The eight-month period has been one of consolidation with the Schroder
Residential Property Unit Trust building up to a portfolio value of
approximately £30m by 31 December 2000. Savills Finance has benefited from a
number of other advisory transactions and plans are in place to expand this
activity during the forthcoming 12 months whilst exploring opportunities for a
broader deployment of the residential fund management expertise.
Killik
During the period a 4.9% interest in Killik & Co was sold generating a profit
of £1.35m. Since the period-end we have agreed to sell our remaining 10% in
Killik.
Aubrey Adams, Group Chief Executive
FINANCIAL REVIEW
RESULTS FOR THE PERIOD
Group turnover for the eight months ended 31 December 2000 was £156.7m
generating a pre-tax profit of £17.4m and earnings per share of 18.7p.
On a pro forma basis turnover for the 12 months to 31 December 2000 was £
213.5m, an increase of 60% on the 1999 figures. Pre-tax profit on the same
basis increased from £20.6m to £25.9m. These increases reflect a very strong
performance in our European and Commercial businesses. At the same time we
have invested substantially in developing Savills Financial Services and in
particular the Internet based business, NetMortgage, resulting in a pre-tax
loss of £1.9m. The initial launch costs of Yorkshire Mill Village have also
been treated as an expense in the period giving rise to a pre-tax loss of £
1.2m.
ACQUISITIONS AND DISPOSALS
During the period we completed a number of acquisitions and disposals of
businesses or interests in ventures, both in the UK and overseas.
On 10 May 2000 the Group announced its proposal for the formation of a
strategic alliance with Trammell Crow Company, which completed on 30 June
2000, to provide a full range of property services to customers of Savills plc
and to customers of Trammell Crow Company in Europe and the US. A new
outsourcing joint venture company, Trammell Crow Savills, was established to
focus primarily on the development of significant opportunities in the
outsourcing industry in Europe. Savills' Corporate Services division and its
wholly-owned facilities management subsidiary, Trammell Crow Savills (UK)
Limited (formerly Trigon Limited), were transferred into the joint venture.
Trammell Crow Company's contribution includes the referral of the European
element of significant global outsourcing contracts developed in the US.
Trammell Crow Savills is 49% owned by Savills plc. Trammell Crow Company
acquired a 10% interest in Savills plc from First Pacific Company and two
representatives were appointed to the Board of Savills plc as Non-Executive
Directors.
On 15 September 2000 the Group extended its coverage of the strategic alliance
with Trammell Crow Company to cover the Asia Pacific region. Trammell Crow
Savills (Asia Pacific) Limited, a newly formed subsidiary of Trammell Crow
Savills of which Savills plc owns 49%, acquired the Asian construction
management business from FPDSavills Asia Pacific.
On 22 December 2000 the Group disposed of a 4.9% interest in the stock broking
partnership, Killik & Co.
TREASURY ACTIVITIES AND POLICIES
The Group's treasury operations are co-ordinated and managed in accordance
with policies and procedures approved by the Board. They are designed to
reduce the financial risks faced by the Group, which primarily relate to
funding and liquidity, interest rate exposure and currency rate exposures.
The Group's financial instruments comprise borrowings, some cash and liquid
resources and various other items such as trade debtors and trade creditors
that arise directly from its operations. The Group does not engage in trades
of a speculative nature.
Further details of financial instruments are provided in Note 17 to the
Accounts. The Board reviews and agrees policies for managing each of the
above-mentioned risks. These have remained unchanged during the period under
review and are summarised below.
Interest Rate Risk
The Group finances its operations through a mixture of retained profits and
bank borrowings, at both fixed and floating interest rates. (It then uses
interest rate caps, when appropriate, to manage its exposure to interest rate
fluctuations). At the period-end, 45.7x% of the Group's borrowings were at
floating rates. The Group has no set policy with regard to the proportion of
debt it maintains at fixed rates of interest.
Liquidity Risk
The Group prepares an annual funding plan approved by the Board which sets out
the Group's expected financing requirements for the next 12 months. Short-term
flexibility is achieved through overdraft facilities. At the period-end, 0.6x%
of the Group's borrowings were due to mature in more than five years' time.
Foreign Currency Risk
Approximately 5% of the Group's turnover was derived from Mainland Europe and
35% from Asia Pacific in the period. Our policy is for each business to borrow
in local currencies where possible. The Group does not actively seek to hedge
risks arising from foreign currency transactions due to their non-cash nature
and the high costs associated with such hedging.
BORROWING
The Group retains substantial short-term money market facilities with its
bankers which are currently not utilised. The purpose of these facilities is
to provide working capital for the core Group businesses. In addition, loan
facilities are used within Grosvenor Hill Ventures Limited to finance specific
property projects. These loans are project specific and without recourse to
the parent company.
NET INTEREST RECEIVABLE
Net interest receivable decreased to £448,000 (year to 30 April 2000 - £
714,000).
TAXATION
The taxation charge increased to 34.1% of the profit before tax compared with
30.6% during the year to 30 April 2000, largely due to the effect of the tax
saving resulting from the set up of the Savills QUEST in the year to 30 April
2000.
EARNINGS AND DIVIDEND
Earnings per share amounted to 18.7p (year to 30 April 2000 - 27.8p). This
calculation excludes the shares held by the Employee Benefit Trust and the
Qualifying Employee Share Trust.
The Board is recommending a dividend of 6.0p (net) for the eight months. On a
pro rata basis, this represents a 20% increase over the total dividend of 7.5p
for the year ended 30 April 2000. The dividend will be paid on 4 May 2001 to
shareholders on the register at 17 April 2001.
SHARE CAPITAL
During the eight-month period ended 31 December 2000, 37,340 shares were
issued to participants in the Savills plc United Kingdom Executive Share
Option Scheme and 8,652 to participants in the Savills Sharesave Scheme. A
further 2,822 shares were issued to the Qualifying Employee Share Trust,
bringing the total number of ordinary shares in issue at
31 December 2000 to 62.6m (at 30 April 2000 - 62.5m).
CASH FLOW AND LIQUIDITY
Net cash inflow from operating activities totalled £18.8m which, after
allowing for cash flows including taxation, dividends, investments and capital
expenditure (see below), produced a net increase in cash of £6.9m. At 31
December 2000, prior to the payment of period-end bonuses, the Group's cash at
bank and in hand amounted to £29.7m. This was deposited with banks and
financial institutions with top credit ratings for periods not exceeding six
months, to match known outgoings.
The Group continues to operate a centralised treasury function, which is not a
separate profit centre but purely provides a service to the operating
companies.
INVESTMENTS AND CAPITAL EXPENDITURE
Cash outflow from Group investments and capital expenditure amounted to £16.1m
(before taking account of cash within acquired subsidiaries of £0.2m).
BALANCE SHEET VALUE
No value is attributed in the Group balance sheet to internally generated
intangibles such as brand name or intellectual property rights.
Robert McKellar, Finance Director
SAVILLS plc
PRELIMINARY ANNOUNCEMENT OF RESULTS
period ended 31 December 2000
8 months Year to
to
31.12.00 30.04.00
£'000 £'000
Turnover - continuing operations
Existing operations 161,180 142,587
Acquisitions 887 -
Less: Share of joint ventures (5,377) (651)
Total Group turnover 156,690 141,936
Operating profit
Group - existing operations 13,455 18,868
- acquisitions 15 -
Operating profit 13,470 18,868
Share of operating profit of joint ventures 851 4
Share of operating profit of associated 516 568
undertakings
Operating profit including share of joint 14,837 19,440
ventures & associated undertakings
Profit on disposal of interests in 793 22
subsidiary undertakings
Profit on disposal of interest in associated 1,350 -
undertaking
Profit before interest 16,980 19,462
Net interest
Group 392 709
Joint ventures 59 6
Associated undertakings (3) (1)
Total net interest 448 714
Profit on ordinary activities before 17,428 20,176
taxation
Taxation on profit on ordinary activities (5,941) (6,166)
Profit on ordinary activities after taxation 11,487 14,010
Minority interests (959) (344)
Profit for the financial period 10,528 13,666
Dividends paid & proposed (3,359) (4,008)
Profit for the period transferred to 7,169 9,658
reserves
Basic earnings per share 18.7p 27.8p
Basic earnings per share before interest, 37.1p 46.1p
tax, depreciation & amortisation
Diluted earnings per share 17.0p 25.4p
Dividend per share 6.0p 7.5p
SAVILLS plc
SUMMARY GROUP BALANCE SHEET
at 31 December 2000
31.12.00 30.04.00
£'000 £'000
Intangible 29,883 33,202
assets
Tangible assets 29,248 21,345
Investments
Investments in joint
ventures
Share of gross assets 3,729 2,420
Share of gross (2,028) (846)
liabilities
1,701 1,574
Investments in 6,994 1,529
associated undertakings
Other investments 5,586 4,021
Total investments 14,281 7,124
Total fixed 73,412 61,671
assets
Working capital (1,736) 306
Cash 29,696 29,058
Net current assets 27,960 29,364
Long-term creditors & (23,718) (20,996)
provisions
Net assets 77,654 70,039
Called up equity share 3,129 3,127
capital
Reserves - Share premium 40,867 40,845
account
- Profit & loss account 33,069 25,636
Shareholders' funds 77,065 69,608
Minority interests 589 431
77,654 70,039
STATEMENT OF TOTAL RECOGNISED GAINS & LOSSES
31.12.00 30.04.00
£'000 £'000
Profit for the financial period 10,528 13,666
Currency translation differences on 264 203
foreign currency net investments
Total gains & losses recognised since
last annual report 10,792 13,869
SAVILLS plc
CONSOLIDATED CASH FLOW STATEMENT
Period ended 31 December 2000
8 months to Year to
31.12.00 30.04.00
£'000 £'000
Net cash inflow from operating activities 18,778 20,167
Dividends received from joint ventures & 1,147 445
associated undertakings
Net cash inflow from returns on investments 9 806
& servicing of finance
Tax paid (4,731) (6,006)
Net cash outflow from capital expenditure (16,155) (10,878)
& financial investment
Net cash inflow / (outflow) from acquisitions 232 (9,715)
& disposals
Equity dividends paid (2,549) (3,401)
Cash outflow before use of liquid
resources & financing (3,269) (8,582)
Net cash inflow from management of liquid 5,316 216
resources
Net cash inflow from financing 4,827 7,894
Increase / (decrease) in cash for the period 6,874 (472)
SAVILLS plc
PRO FORMA CONSOLIDATED PROFIT & LOSS ACCOUNT
year ended 31 December 2000
Year to Year to
31.12.00 31.12.99
£'000 £'000
Unaudited Unaudited
Turnover - continuing operations
Existing operations 150,958 134,053
Acquisitions 68,522 -
Turnover including share of joint ventures 219,480 134,053
Less share of turnover of joint ventures (5,971) (644)
Total Group turnover 213,509 133,409
Operating profit
Group - existing operations 19,441 19,629
- acquisitions 2,067 -
Operating profit 21,508 19,629
Share of operating profit of joint ventures 887 (32)
Share of operating profit of associated 711 467
undertakings
Operating profit including share of joint ventures 23,106 20,064
& associated undertakings
Loss on disposal of property - (59)
Profit on disposal of interests in subsidiary 793 22
undertakings
Profit on disposal of interest in associated 1,350 -
undertaking
Profit on ordinary activities before interest 25,249 20,027
Net interest
Group 557 595
Joint ventures 65 (17)
Associated undertakings (3) (8)
Total net interest 619 570
Profit on ordinary activities before taxation 25,868 20,597
Taxation on profit on ordinary activities (8,053) (6,818)
Profit on ordinary activities after taxation 17,815 13,779
Minority interests (939) (311)
Profit for the financial period 16,876 13,468
Basic earnings per share 31.1p 27.7p
Basic earnings per share before interest, tax, 56.2p 46.8p
depreciation & amortisation of goodwill (EBITDA)
Pro forma figures taken from management accounts.
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