Company Announcements

Review of operations

Savills geographic and business diversity were key to achieving the year's result. Our performance analysed by region was as follows:

On a constant currency basis Group revenue increased by 26% to £2,196.8m, underlying profit increased 112% to £204.4m and reported profit before tax increased by 124% to £186.3m. Our Asia Pacific business represented 29% of Group revenue (2020: 33%) and our overseas businesses as a whole represented 57% of Group revenue (2020: 59%). Our performance by service line is set out below:

Overall, our Commercial and Residential Transaction Advisory business revenues together represented 42% of Group revenue (2020: 38%). Of this, the Residential Transaction Advisory business represented 11% of Group revenue (2020: 10%). Our Property and Facilities Management businesses continued to perform well, growing year-on-year and representing 35% of Group revenue (2020: 39%). Our Consultancy businesses represented 18% of revenue (2019: 19%). The Investment Management business had a strong performance, with revenue increasing by 58%. It represented 5% of Group revenue (2020: 4%).

Transaction Advisory

Overall, our Transaction Advisory revenues increased by 34% (38% on constant currency basis) to £892.9m (2020: £667.2m). Globally our Commercial Capital Transaction business revenue increased by 44% and our Leasing and Occupier focused transactional revenues grew by 30%. Our Global Residential business revenue increased by 31%.

Underlying profits grew 403% to £97.6m (2020: £19.4m), with an increased underlying profit margin of 10.9% (2020: 2.9%), as a result of the upturn in activity across most of our key markets.

Asia Pacific Commercial

Revenue from the Asia Pacific Commercial Transactional business increased by 47% to £153.0m (2020: £103.9m), an increase of 51% in constant currency, and exceeding 2019 revenues by 10%.

Investment markets recovered in the majority of our key markets, notably Hong Kong, Australia, Singapore and Japan as investors started to deploy capital after the slow-down in 2020. The exceptions were in Mainland China and South Korea where demand remained somewhat subdued. In China, both continued pandemic-related restrictions and the impact of recoverability of the bonds issued by certain major developers, affected investor sentiment. In South Korea by contrast, 2021 represented a reversion to more normal levels of activity after an unusually strong performance in 2020.

Leasing activity in the region also improved, notably in Australia and Singapore, as corporates which had delayed making longer term lease decisions during 2020, began to commit to new leases.

Overall the Asia Pacific Commercial Transactional business resulted in an underlying profit of £20.6m, more than six times higher than the previous year (2020: £3.3m) with a margin of 13.5% (2020: 3.2%).

UK Commercial

UK Commercial Transactional revenue grew by 44% to £115.2m (2020: £79.8m), reflecting improvement in both the investment and leasing sectors.

Our capital markets revenues increased by 53%, representing a combination of market share gains and overall market recovery; UK commercial property investment volumes in 2021 were approximately £65bn, being 38% higher than the same period in 2020. Retail warehousing and industrial sectors experienced the strongest recovery, sectors in which Savills enjoys strong market positions. Our leasing revenues grew by 36% on 2020 (13% growth on 2019), with growth across our sector specialisms including Retail.

Improved revenue allied to significantly reduced discretionary costs in comparison with normal market conditions, combined to improve Underlying profit by 126% to £21.5m (2020: £9.5m 2019: £12.3m) representing a significant increase in margin to 18.7% (2020: 11.9%).

North America

Revenue from the North America Transactional business increased by 28% to £263.6m (2020: £205.2m), an improvement of 36% in constant currency.

Being mainly a transactional business focused primarily on occupiers, the business recovered as anticipated from the impact of Covid in 2020. The overwhelming majority of North American revenue relates to occupier leasing transactions and improved by 27% to £240.6m (2020: £190.1m). This compares favourably with the overall leasing volume in the US market, which increased 20% over 2020.  

Capital markets revenues improved by 52% to £23.0m (2020: £15.1m).

In addition, during the period discretionary expenditures such as travel and entertainment were suppressed, helping to deliver a recovery to underlying profit of £10.3m (2020: loss of £7.5m)

Continental Europe and the Middle East

In CEME, transaction fee income increased by 27% to £124.4m (2020: £98.2m); an improvement of 30% in constant currency. Our Investment revenues grew year-on-year by 25%, with significant recovery across the region, most notably in Ireland and Spain, whilst investment volumes in EMEA (excluding UK) reached €261bn in 2021, 4% above the previous five year average. Leasing revenues also recovered in 2021, with all three of our principal sectors up year-on-year (office by 18%, industrial by 41% and retail by 14%).

Our three largest contributors in this segment are Ireland, Germany and Spain. Ireland recovered significantly, having fallen by 65% in 2020, reaching 88% of the 2019 pre-pandemic level. The majority of this improvement derived from capital transactions where Savills is clear market leader. Revenues in Germany were down 2%, but up 1% on a constant currency basis, with reductions in Investment and Office leasing offset by growth in Industrial transactions. On a constant currency basis, revenues in Germany were 3% higher than in 2019, having been one of the few global locations to have achieved revenue growth in 2020. The 12% increase in revenues in Spain was also principally due to improved investment markets. In general transactional activity, particularly in respect of investment, progressively recovered across the rest of CEME region which collectively delivered revenues of approximately 98% of 2019 pre-pandemic levels.

As a result underlying profit increased to £1.4m (2020: £12.3m loss, 2019: £5.4m profit).

UK Residential

UK Residential Transactional revenue grew by 38% to £210.7m (£153.2m), with significant improvement in second hand agency revenues (up 48% year-on-year), supported by robust performances in both new homes and our Private Rented Sector (PRS) capital markets teams.

The UK housing market performed strongly in 2021 delivering double digit house price growth and the highest level of transactional activity since 2007. The prime housing markets performed particularly strongly with activity levels remaining buoyant despite the end of the extended stamp duty holiday, although there were reduced levels of available stock by the end of the year. Prime transactions were more heavily weighted to the regional markets outside London, as buyers continued to reassess their housing needs in the search for space. The prime central London market continued to be predominantly driven by UK resident buyers and activity was resilient; indeed sales in the £5m+ market exceeded £5.5bn for the first time since 2014. Overall Savills saw transaction levels increase by 45% on 2020, with exchanges of 7,412 in 2021 (2020: 5,128). The strong housing market underpinned sales of new homes which, in turn, fed strong demand for consented and strategic development land.

Revenue in the New Homes business increased by 13% in 2021. The Regional business outperformed 2020 with revenue increasing by 27% and London revenues remained stable. The Regional teams recorded 3,208 (70%) of the total reservations; a 24% improvement on 2020. In the London new homes market sales activity outside the central zone enjoyed similarly robust market conditions as the UK generally. However, in the more central prime locations, which are more dependent upon international buyers, activity continued to be relatively subdued as a result of international travel restrictions during much of the year.

Underlying profit increased by 69% to £38.9m (2020: £23.0m) reflecting a pre-tax margin of 18.5% (2020: 15.0%).

Asia Pacific Residential

Revenue from the Asia Pacific Residential Transaction business decreased by 3% to £26.0m (2020: £26.9m), a fall of 1% in constant currency. Whilst there was revenue growth in many of our markets including Mainland China and Australia, and an increased contribution from our joint venture in Singapore (Huttons), this was more than offset by reductions in activity in Hong Kong, where fewer prime transactions with mainland buyers took place during the period.

Underlying profits grew by £1.5m to £4.9m (2020: £3.4m) supported by the higher profit contribution from Huttons, our residential joint venture agency in Singapore, and the benefit of cost reductions across the region.

Property and Facilities Management

Our Property and Facilities Management businesses continued to perform well, with revenues growing by 9% to £745.6m (2020: £681.9m); 12% in constant currency. Savills total area under management increased by 4% to 2.45bn sq. ft. (2020: 2.35bn sq. ft.). Underlying profit increased by 10% to £49.1m (2020: £44.8m), 13% in constant currency.

Asia Pacific

In our Asia Pacific Property Management segment, revenues were £356.7m, a decline of 3% year-on-year (2020: £368.3m); a 1% increase in constant currency. There was 10% revenue reduction in facilities management (40% of the total revenue in this segment) as a result of certain contracts not being renewed in Hong Kong and South Korea, which was partially offset by a 2% increase in property management (which accounts for the other 60% of revenue in this segment). In Singapore, our investment in 2020 resulted in trading ahead of our expectations in 2021.

Underlying profits in 2021 were affected by the removal of 2020's COVID-19 employment subsidies comprising a net year-on-year reduction of approximately £5m. The trail effect of 2020 subsidies meant that the underlying profit margin for the region continued to be the top end of the normalised margin range of 7.2% (2020: 7.5%) for this service line. In absolute terms, profit declined by only £1.9m (£0.7m on a constant currency basis) to £25.8m.

UK

The UK Property Management business grew revenues by 23% to £300.6m (2020: £245.0m) reflecting significant contracts won in 2021 and the full year effect of contracts won in 2020. The Residential Property Management Lettings team, which is also included in this segment, had a successful year, with revenues increasing by 10%, primarily as a result of the number of managed and tenanted properties increasing by 11% and 9% respectively.

The higher revenues, along with a continued drive to improve efficiencies, increased underlying profit by 28% to £22.0m (2020: £17.2m).

Continental Europe and the Middle East

In the CEME Property Management business revenues were up by £19.7m (29%) to £88.3m (2020: £68.6m); 33% on a constant currency basis. During August 2020 we acquired a German property management business, OMEGA Immobilien Management GmbH and OMEGA Immobilien Service GmbH ('Omega'), which contributed £11.5m of revenue to this segment in 2021 (2020: £3.6m). There was also revenue growth in the Middle East, following expansion in Egypt and an increase in ownership of the business in Saudi Arabia (previously a joint venture interest). Elsewhere, contract wins in Ireland, Spain and the Netherlands, and the full year effect of 2020 wins in France all contributed to the growth in this segment.

The Building and Project Consultancy platform, which is included in this segment at this early stage of its development, continued to expand with recently created teams in Italy, France, Poland and Sweden supplementing the significant growth in the Middle East.

As a result of the above factors underlying profit increased to £1.3m (2020: underlying loss of £0.1m).

Consultancy

As clients across the Globe sought advice through the pandemic and in preparation for recovery, global Consultancy revenue increased by 24% to £396.7 (2020: £320.6m); 25% on a constant currency basis. Underlying profit increased by 49% to £47.0m (2020: £31.5m); 52% on a constant currency basis.

UK

The UK Consultancy businesses, comprising a broad range of advisory activities, increased revenue by 19% to £244.0m (2020: £205.8m). Our Housing teams saw significant revenue growth through the impact of Government legislation on the sector and increased post lockdown access to housing stock for survey work, which had been delayed from 2020. The remaining principal Consultancy services (Building Consultancy, Planning, Development and Valuations) all registered increased revenue through the progressive recovery in general activity and increased focus on ESG in all aspects of Real Estate. This element of our advisory service, which is addressed by a suite of services branded "Savills Earth" now comprises c. 120 professionals and is becoming a significant driver of Real Estate decisions across all sectors.

Underlying profit increased by 41% to £33.1m (2020: £23.5m).

Asia Pacific

In the Asia Pacific Consultancy segment, revenues increased by 18% to £81.3m (2020: £69.1m); 19% on a constant currency basis. Three of our largest businesses in the region (China, Hong Kong and Singapore) experienced increased market demand, whilst in Australia where we currently offer the broadest suite of services in the region, pandemic restrictions were significant throughout the period and revenues increased by 2%, with growth in Valuations being offset by reductions in Project Management due to COVID-19-related contract delay and/or cancellations.

Cost increases and the impact of an internal re-organisation between segments in China, restricted profitability overall with underlying profit increasing by 2% (6% on a constant currency basis) to £6.6m (2020: £6.5m).

Continental Europe and the Middle East

Revenues increased by 10% to £41.3m (2020: £37.5m), 14% on a constant currency basis.

In Spain, which represents approximately 25% of CEME Consultancy, revenue increased by 14%, whilst in Germany, lower volumes of transactional related valuation work led to a 21% decline in revenue year-on-year. All other countries collectively registered good growth in revenue.  

Underlying profits grew by 4% on a reported basis to £2.5m (2020: £2.4m); 13% in constant currency.

North America

As part of our strategy to diversify our income streams by building up our Consultancy practices, in March 2020 we announced the acquisition of Macro Consultants LLC, a national project management consultancy business, and in June 2021 we acquired T3 Advisors, a workplace solutions advisory firm specialising in the life science and technology sectors.

As a result of a strong performance of these two acquisitions, the North America Consultancy revenues were £30.1m (2020: £8.2m) with an underlying profit of £4.8m (2020: underlying loss of £0.9m).

Investment Management

Our Investment Management business achieved revenue growth of 58% to £111.8m (2020: £70.8m); 60% in constant currency. Base Management fees (representing 70% of revenue) increased by 30% year on year including the benefit of the acquisition of the remaining partnership interests in Real Estate Debt investor,  DRC Capital LLP (May 2021). These were supplemented by a 12% increase in transaction fees and a supernormal increase of over 90% in performance fees.

During the year we announced the strategic relationship with Samsung Life Insurance of South Korea ('SLI), The transaction completed on 31 December 2021 involving the sale of 25% of Savills Investment Management to SLI and the latter's commitment to invest at least $1bn, predominantly seed capital, into funds managed by Savills Investment Management through the initial 5 year term of the agreement.

Assets under management at 31 December 2021 increased by 14% to £21.7bn (2020: £19.0bn) and £2.5bn of capital was raised during the year (2020: £1.7bn).

Underlying profit, which was enhanced by the supernormal level of performance fee income increasing profit margin to 22.8%, grew 72% to £25.5m (2020: £14.8m); 75% in constant currency.

Financial review

Profit margin

Underlying profit margin increased to 9.3% (2020: 5.6%), reflecting the significantly higher levels of transactional activity and the abnormally low levels of discretionary expenditure in respect of travel, entertaining and marketing events in particular.

Reported pre-tax profit margin increased to 8.5% (2020: 4.8%).

Taxation

The tax charge for the year increased to £36.4m (2020: £15.2m), representing an effective tax rate on reported profit before tax of 19.9% (2020: 18.3%). The Group's effective reported tax rate is marginally higher than the UK effective rate of tax of 19% as a result of profits in higher tax jurisdictions and non-deductible transaction-related costs.  

The underlying effective tax rate increased to 18.7% (2020: 18.5%).

Transaction-related costs

During the year the Group recognised a total of £17.0m in transaction-related costs (2020: £5.0m). This increase reflects a higher volume of business development activity year-on-year. These costs primarily relate to future consideration payments, associated with acquisitions, which are subject to a future service condition (2021: £13.9m, 2020: £4.0m). The largest individual components of this charge in 2021 relate to the acquisition of DRC Capital LLP and the acquisition of Macro Consultants LLC in 2020.

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

Earnings per share

Basic earnings per share increased 114% to 104.9p (2020: 49.0p), reflecting a 116% increase in reported profit after tax. Adjusted on a consistent basis for exceptional restructuring, transaction-related costs, profits and losses on disposals, certain share-based payment adjustments, amortisation and impairment of intangible assets arising from business combinations, impairments of goodwill and exceptional fair value gains and losses, underlying basic earnings per share increased 105% to 116.5p (2020: 56.8p).

Fully diluted earnings per share increased by 108% to 99.8p (2020: 47.9p). The underlying fully diluted earnings per share increased 100% to 110.9p (2020: 55.5p).

Cash resources, borrowings and liquidity

Cash and cash equivalents, net of overdrafts in notional pooling arrangements, at year end increased 45% to £491.2m (2020: £338.3m). This increase reflected: strong trading results, the higher cash outflows associated with corporate acquisition activity and the reinstatement of dividend payments in the year, together with the cash proceeds received from the sale of the Group's 25% interest in Savills Investment Management. 

Gross borrowings at year end decreased to £150.5m (2020: £160.6m). These principally comprise £150.0m (2020: £150.0m) of 7, 10 and 12 year fixed rate notes which were issued in June 2018, in 2020 borrowings also included £11.4m drawn under a revolving credit facility in North America. The Group's UK revolving credit facility ('RCF') was undrawn at the end of the year (2020: undrawn), with a total of £422.2m (2020: £397.2m) of undrawn borrowing facilities available to the Group. At the year end, cash and cash equivalents net of gross borrowings was £340.7m (2020: £177.7m).

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

The Group's net inflow of cash is typically greater in the second half of the year. This is as a result of seasonality in trading and the major cash outflows associated with dividends, profit related remuneration payments and related payroll taxes in the first half. The Group cash inflow for the year from operating activities was £302.7m (2020: £241.4m).

With a large proportion of the Group's revenue typically being transactional in nature, the Board's strategy is to maintain low levels of gearing, but retain sufficient credit facilities to enable it to meet cash requirements during the year and finance the majority of business development opportunities as they arise.

Capital and Shareholders' interests

During the year 1.1m (2020: 8,504) new ordinary shares were issued on the exercise of options by participants of the Group's SAYE schemes. The total number of ordinary shares in issue (before the impact of shares held by the Savills plc 1992 Employee Benefit Trust and the Savills "Rabbi" Trust) at 31 December 2021 was 144.2m (2020: 143.1m)

Savills Pension Scheme

The funding level of the defined benefit Savills Pension Scheme in the UK, which is closed to future service-based accrual, improved substantially during the year primarily as a result of the increase in the yield on AA-rated corporate bonds. The plan was in a surplus position of £17.4m at the year-end (2020: £2.6m liability).

Net assets

Net assets as at 31 December 2021 were £753.4m (2020: £581.6m). This movement reflects the Group's trading performance alongside the actuarial gain on the defined benefit pension plans and proceeds from the sale of the Group's 25% interest in the Savills Investment Management group to Samsung Life in December 2021.

Foreign currency

The Group operates internationally and is exposed to foreign exchange risks. As both revenue and costs in each location are generally denominated in the same currency, transaction related risks are relatively low and generally associated with intra Group activities. Consequently, the overriding foreign currency risk relates to the translation of overseas profits and losses into sterling on consolidation. The Group does not actively seek to hedge risks arising from foreign currency translations due to their non-cash nature.

The net impact of foreign exchange rate movements during the year represented a £49.8m decrease in revenue and a £4.1m decrease in underlying profit.

Principal risks and uncertainties

The Directors have carried out a robust assessment of the principal risks facing the Company - including those that would threaten its business model, future performance, solvency or liquidity. Further detail on these principal risks will be provided in the Group's Annual Report and Accounts 2021, which will be available on publication at www.ir.savills.com on 4 April 2022. The identified principal risks are summarised below:

·      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

·      Business conduct

·      Changes in the regulatory environment/regulatory breaches

·      Acquisition/integration risk

·      Environment and sustainability

Savills plc

Consolidated income statement

for the year ended 31 December 2021

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

Supplementary income statement information

Savills plc

Consolidated statement of comprehensive income

for the year ended 31 December 2021

Savills plc

Consolidated statement of financial position

at 31 December 2021

* See Note 1(b) for details on the prior period restatement.

** Included within cash and cash equivalents are cash balances of £201.5m (2020: £242.0m) that are operated within a notional cash pooling arrangement together with overdraft balances of £198.5m (2020: £209.1m) presented above in current liabilities. See Note 8 for further details.

Savills plc

Consolidated statement of changes in equity

for the year ended 31 December 2021

Savills plc

Consolidated statement of cash flows

for the year ended 31 December 2021

* See Note 1(b) for details on the prior period restatement.

NOTES

1(a). Basis of preparation

The results for the year ended 31 December 2021 have been extracted from the audited financial statements. The financial statements have been prepared in accordance with UK adopted international accounting standards.

The financial statements are prepared on a going concern basis and under the historical cost convention as modified by the revaluation of loans receivable, equity investments and derivative financial instruments held at fair value.

The financial information in this statement does not constitute statutory accounts within the meaning of s434 of the Companies Act 2006. The statutory accounts for the year ended 31 December 2021, on which the auditors have given an unqualified audit report, have not yet been filed with the Registrar of Companies.

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

1(b). Prior year restatement

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 8 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 31 December 2021 in accordance with IAS 32. The prior period comparative has 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:

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.

Presentation of deferred consideration linked to continuing employment within the Statement of Cash Flows

In accordance with the requirements of IAS 7: "Statement of Cash Flows", the Group's policy is to classify payments of deferred/contingent consideration in relation to historic business acquisitions that are linked to continuing employment within cash flows used in operating activities and all other payments of deferred/contingent considerations under IFRS 3: "Business Combinations" are classified as cash used in investing activities. Following a review prompted by an enquiry carried out by the Financial Reporting Council ('FRC') on the Group's 2020 Annual Report & Accounts, it was noted that certain cash flows relating to employment linked deferred consideration payments were incorrectly classified as an investing activity as opposed to an operating activity in the Group's consolidated Statement of Cash Flows. This has been corrected in this Annual Report and Accounts, with prior year comparatives for the period ended 31 December 2020 represented accordingly in accordance with IAS 8.

The scope of the review performed by the FRC was to consider the Group's compliance with UK reporting requirements. Due to their inherent limitations these reviews are not intended to provide assurance that corporate accounts are correct in all material aspects. The FRC's review does not benefit from a detailed knowledge of the business or an understanding of the underlying transactions entered into. The FRC's letters are written on the basis that the FRC accepts no liability for reliance on them by the Company or any third party.

The table below shows the impact of the prior year restatement on the Group's Statement of Cash Flows and Note 7 - Cash Generated From Operations: 

This prior year restatement does not have an impact on reported profit, earnings per share, assets, liabilities or the overall net cash flows disclosed by the Group and relates solely to classification within the Statement of Cash Flows.

Presentation of share of post-tax profit from joint ventures and associates within the Income Statement

Following a review of the Group's share of post-tax profit from joint ventures and associates and the presentation of this in the Group's Income Statement, management have determined that the Group's joint ventures and associates are an integral part of the business and the share of post-tax profit from joint ventures and associates should have been included within operating profit, consistent with IASB's view in IAS 1.BC56. This position has been corrected in the current year and prior period comparatives have been restated in accordance with IAS 8.

The table below shows the impact of the prior year restatement on Group's Income Statement:

This prior year restatement does not have an impact on reported profit after tax, earnings per share, the Statement of Financial Position or the Statement of Cash Flows. 

2. Segment analysis

Operating segments reflect internal management reporting to the Group's chief operating decision maker, defined as the Group Executive Board ('GEB'). The GEB primarily manages the business based on the geographic location in which the Group operates.

The operating segments are identified as the following regions: the UK, CEME, Asia Pacific and North America. The Savills Investment Management business is also considered a separate operating segment. The reportable operating segments derive their revenue primarily from property-related services. Within the UK and Asia Pacific, both commercial and residential services are provided. Other segments are largely commercial-based.

The GEB also reviews the business with reference to the nature of the services in each region. Therefore, the Group has presented its segment analysis below in a matrix with the primary operating segments based on regions in which the Group operates.

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, significant transaction-related costs, amortisation and impairment of intangible assets arising from business combinations, impairment of goodwill and other items that are considered non-operational and material (fair value gain on associates/joint ventures and fair value loss on a transaction-related call option in the current year, GMP equalisation charge in the prior year).

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

3. Underlying profit before tax

The Directors believe that the consistent presentation of underlying profit before tax provides additional useful information to Shareholders on the underlying trends and comparable performance of the Group over time by excluding significant non-operational costs/income from the GAAP measures. This 'underlying' measure is also used by the Group for internal performance analysis and incentive compensation arrangements for employees.

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 non-GAAP measures may be materially higher or lower than GAAP measures and should not be regarded as a complete picture of the Group's financial performance.

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: "Share based payments" charge in relation to outstanding bonus-related share awards and the estimated value of the current year bonus pool to be awarded in deferred shares. This adjustment is made to align the underlying staff cost in the year with the revenue recognised in the same period.

Impairment of goodwill in the year relates to the Indonesia and Sweden cash generating units. Impairment on intangible assets arising from business combinations relate to property management contracts in South Korea and Japanese investment management contracts relating to closed funds. 

Profit on disposal recognised primarily in relation to the disposal of holdings in joint ventures in China. In the prior year, loss on disposal was recognised in relation to disposal of a portion of the Group's holding in a joint venture in China, which is now treated as an FVOCI equity investment, and a part disposal of an associate in Singapore.

Restructuring costs includes costs of integration activities in relation to significant business acquisitions. Charges in the current and prior year primarily relate to the ongoing cost of deferred shares, with a five year vesting period, issued in relation to the restructuring upon acquisition of Aguirre Newman in 2017.

Transaction-related costs primarily relate to provisions for future payments in relation to business acquisitions, which are expensed through the income statement to reflect the requirement for the recipients to remain engaged actively in the business at the payment date (2021: £13.9m charge, 2020: £4.0m charge). The largest individual components of this charge in 2021 relate to the acquisition of DRC Capital LLP and the acquisition of Macro Consultants LLC in 2020. These costs are employee benefits expenses. In addition, transaction-related costs include a £1.4m charge relating to prepaid amounts issued as part of business acquisitions that are linked to continued active engagement in the business (2020: £2.5m), £0.6m of unwinding of interest on deferred consideration and non-current future payments in relation to business acquisitions that are linked to employment (2020: £0.3m) and £1.1m of professional fees incurred on transactions (2020: £0.7m). Of these items, prepaid amounts that are linked to active engagement in the business are recorded as employee benefits expenses in the income statement, unwinding of interest is recorded as a finance cost in the income statement and all other charges/(credits) are recorded within other operating expenses. In the prior year, transaction-related costs also included a £1.8m credit relating to the re-measurement of contingent deferred consideration payments and a £0.7m credit in relation to a working capital adjustment on the Cluttons Middle East acquisition in 2018.

In the current year, a fair value gain was recognised on the re-measurement of the Group's holding in its associate, DRC, and a joint venture in Indonesia, prior to the Group's acquisition of the remaining equity interest in these businesses (refer to Note 9 for further details on the acquisition of DRC and the Indonesian business). In addition, a fair value loss was recognised on the fair value measurement of the Samsung Life call option, which gives Samsung Life the right to purchase up to an additional 10% shareholding in the Savills Investment Management group subject to the quantum of capital it has invested in SIM products during the initial 5 year term.

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

4. Income tax expense

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

5. Dividends

The Group paid £0.4m (2020: £0.4m) of dividends to non-controlling interests.

The Board recommends a final dividend of 12.75p (net) per ordinary share (amounting to £18.4m), alongside the supplemental interim dividend of 15.6p per ordinary share (amounting to £22.5m) and a special dividend of 27.05p (amounting to £39.0m), to be paid on 17 May 2022 to Shareholders on the register at 8 April 2022. These financial statements do not reflect this dividend payable.

The total paid and recommended ordinary, supplemental and special dividend for the 2021 financial year comprises an aggregate distribution of 61.4p per ordinary share (2020: 17.0p per ordinary share).

6(a). Basic and diluted earnings per share

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

7. Cash generated from operations

* See Note 1(b) for details on the prior period restatement.

Foreign exchange movements resulted in a £0.3m increase in current and non-current trade and other receivables (2020: £0.3m decrease) and a £5.9m increase in current and non-current trade and other payables (2020: £2.3m decrease).

8. 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 31 December 2021, the notional cash pooling arrangement included cash balances of £201.5m presented in cash and cash equivalents (December 2020: £242.0m) and overdrafts of £198.5m (31 December 2020: £209.1m) presented in current liabilities. This represents as at 31 December 2021 surplus pooled credit cash balances of £3.0m (31 December 2020: surplus pooled credit cash £32.9m).  

For the purpose of the Statement of Cash Flows, cash and cash equivalents net of overdrafts comprise the following:

9. Acquisition of subsidiaries

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

DRC Capital LLP ('DRC')

On 28 September 2018, the Group acquired a 25% equity interest in DRC, a commercial real estate debt investment manager. This transaction included a call option to acquire the remaining 75% equity interest 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 £49.1m, £17.8m 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 £0.5m have been expensed as incurred to the income statement and classified within other operating expenses.

Goodwill of £27.8m has been determined. 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. Intangible assets recognised on acquisition include £17.7m of investment management contracts, £6.7m of customer relationships and £2.9m in relation to the brand. 

The acquired business contributed revenue of £16.6m and profit of £7.6m to the Group for the period from 28 May 2021 to 31 December 2021. Had the acquisition been made at the beginning of the financial year, revenue would have been £23.3m and profit would have been £11.9m. 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 £2.8m 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.

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 £12.6m, 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 June 2024 up until June 2028. The maximum value of these payments total £8.7m 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 £0.6m have been expensed as incurred to the income statement and classified within other operating expenses.

Goodwill of £5.8m has been determined. Goodwill is attributable to the experience and expertise of key staff members and is deductible for tax purposes over a 15 year period. Intangible assets recognised on acquisition include £5.2m of customer relationships.

The acquired business contributed revenue of £12.6m and profit of £0.9m to the Group for the period from 11 June 2021 to 31 December 2021. Had the acquisition been made at the beginning of the financial year, revenue would have been £17.0m and profit would have been £1.8m.

The fair value of trade and other receivables is £2.7m, all of which relates to trade receivables. The gross contractual amount for trade receivables is £2.7m, all of which is expected to be collectible.

Other acquisitions

During the year, the Group acquired the remaining 51% of Cluttons Saudi Arabia Company Limited (previous 49% ownership equity accounted for as a joint venture) and the remaining 49% economic interest in the Savills Indonesia business (previous 51% economic ownership equity accounted for as a joint venture). In addition, the Group acquired 60% of Merx Holdings (SG) Pte Ltd ('Merx Group'), a project management consulting firm operating in Asia.

Cash consideration for these transactions amounted to £1.3m. The remainder of the acquisition consideration relates to deferred consideration of £0.4m, payable within one year of the reporting date, and £2.0m relates to the fair value of the initial investment in both Saudi Arabia and Indonesia (previously equity accounted for as joint ventures).

Goodwill of £7.0m has been provisionally determined. Goodwill is attributable to the experience and expertise of key staff and strong industry reputation and is not expected to be deductible for tax purposes.

10. Transactions with non-controlling interests

Under IFRS 10, transactions with non-controlling interests must be accounted for as equity transactions. During the year, the Group undertook the following transactions with non-controlling interests:

Part disposal of interests in subsidiaries

In December 2021, the Group disposed of 25% of the shares in Savills IM Holdings Ltd ('Savills IM Group') to Samsung Life Company Ltd for consideration of £71.7m, of which £63.7m was received in cash on completion. This takes the Group's shareholding to 75%. The carrying amount of the Savills IM group net assets on the date of disposal was £112.7m. The Group recognised an increase in non-controlling interest of £28.2m. The amount recognised as a profit to retained earnings in respect of this transaction was £39.3m, which is net of transaction-related costs of £4.2m.

11. Borrowings

Movements in borrowings are analysed as follows:

The Group holds a £360.0m multi-currency revolving credit facility ('RCF'), which includes a £90.0m accordion facility. In June 2021 the Group extended the maturity date of the RCF by a further year to June 2025. As at 31 December 2021 none (2020: none) of the RCF was drawn. The unsecured bank loans reflect a £0.7m working capital loan in Thailand, which is repayable on demand and denominated in Thailand baht (2020: £0.7m) and a £0.2m working capital loan in Indonesia, which is repayable on demand and denominated in Indonesian Rupiah (2020: none). The prior year unsecured bank loans also included a £11.4m utilisation of a revolving credit facility in North America for working capital purposes, which was repayable within one year and denominated in US dollars (2021: none).

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

The Group has the following undrawn borrowing facilities:

12. Related party transactions

As at 31 December 2021, there were £0.2m of loans receivable from joint ventures and £1.5m of loans receivable from associates (2020: £4.1m loans receivable from joint ventures and £0.7m of loans receivable from associates).

Refer to Note 9 for information with respect to full acquisition of joint ventures and associates in the year.

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.

13. Annual report and accounts

Copies of the Annual Report and Accounts for the year ended 31 December 2021 will be circulated to shareholders on 4 April 2022 and will also be available from the investor relations section of the Company website at www.ir.savills.com or from:

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

Telephone:  020 7499 8644

Directors' responsibilities in respect of the financial statements

We confirm that to the best of our knowledge:

·    the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

·    the Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. We consider the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

The contents of this announcement, including the responsibility statement above, have been extracted from the annual report and accounts for the year ended 31 December 2021, which will be available on publication at www.ir.savills.com. Accordingly, this responsibility statement makes reference to the financial statements of the Company and the Group and the relevant narrative appearing in that annual report and accounts rather than the contents of this announcement.

On behalf of the Board

Mark Ridley

Group Chief Executive

Chris Lee

Group Legal Director and Company Secretary

10 March 2022

Forward-looking statements

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

END