2017 Report
and Accounts
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Our vision
To advise private, institutional
and corporate clients seeking
to acquire, manage, lease,
develop or realise the value
of prime residential and
commercial property in the
world’s key locations.
Contents
Overview
01 Group highlights
02 Savills at a glance
Strategic Report
04 Chairman’s statement
08 Our business explained
10 Market insights
14 Key performance indicators
16 Chief Executive review
22 Chief Financial Officer’s review
25 Risks and uncertainties facing
the business
30 Corporate responsibility
Governance
Financial statements
38 Corporate Governance Statement
78 Independent auditor’s report
38 Chairman’s introduction
85 Consolidated income statement
40 Leadership
44 Board of Directors
46 Group Executive Board
47 Effectiveness
50 Accountability
51 Audit Committee report
56 Compliance with the UK Corporate
Governance Code
58 Directors’ Remuneration report
86 Consolidated statement of
comprehensive income
87 Consolidated and Company
statements of financial position
88 Consolidated statement of
changes in equity
89 Company statement of
changes in equity
90 Consolidated and Company
statements of cash flows
74 Directors’ report
91 Notes to the financial statements
76 Directors’ responsibilities
151 Shareholder information
Savills plc
Report and Accounts 2017
Overview
Strategic report
Governance
Financial statements
Group highlights
Revenue
£1,600.0m
(2016: £1,445.9m)
Breadth
of service
(non-transactional)
53%
(2016: 54%)
Underlying
profit*
Underlying
profit margin*
£140.5m
(2016: £135.8m)
8.8%
(2016: 9.4%)
Underlying
earnings
per share*
75.8p
(2016: 72.5p)
Operating
cash
generation
£111.7m
(2016: £93.3m)
Statutory
pre-tax profit
margin
7.0%
(2016: 6.9%)
Property under
management
(sq ft)
1.9bn
(2016: 1.8bn)
Statutory
profit after tax
£81.1m
(2016: £67.7m)
Assets under
management
€16.5bn
(2016: €16.2bn)
Statutory
earnings
per share
58.8p
(2016: 48.8p)
Geographical
spread
(% non-UK)
61%
(2016: 60%)
*
Underlying profit is calculated by adjusting reported pre-tax profit for profit/loss on disposals,
share-based payment adjustment, impairments, amortisation of acquired intangible assets
(excluding software), restructuring costs and acquisition-related costs refer to Note 2.2 to the
financial statements for further explanation of underlying profit measures).
Savills plc
Report and Accounts 2017
01
Savills at a glance
Savills is a global real estate services provider listed on the
London Stock Exchange. We have an international network
of over 600 offices and associates and over 34,000 staff
throughout the Americas, the UK, Continental Europe, Asia
Pacific, Africa and the Middle East, offering a broad range of
specialist advisory, management and transactional services
to clients all over the world.
UK
Revenue
£627.1m
(2016: £578.3m)
Offices
124
(2016: 130)
Employees
5,554
(2016: 5,136)
See page 11
Continental
Europe
Revenue
£182.4m
(2016: £170.6m)
Offices
45
(2016: 35)
Employees
1,206
(2016: 1,103)
See page 10
North
America
Revenue
£224.8m
(2016: £211.1m)
Offices
30
(2016: 30)
Employees
775
(2016: 676)
See page 12
02
Savills plc
Report and Accounts 2017
Overview
Strategic report
Our services
Transaction
Advisory
The Transaction Advisory
business stream comprises
commercial, residential, leisure
and agricultural leasing, tenant
representation and investment
advice on purchases and
sales.
See page
18
Consultancy
Provision of a wide range
of professional property
services including valuation,
building and housing
consultancy, environmental
consultancy, landlord
and tenant, rating,
development, planning,
strategic projects, corporate
services and research.
See page
20
Property
and Facilities
Management
Management of commercial,
residential, leisure and
agricultural property for owners.
Provision of a comprehensive
range of services to occupiers
of property, ranging from
strategic advice through project
management to all services
relating to a property.
See page
20
Investment
Management
Investment management of
commercial and residential
property portfolios for
institutional, corporate or
private investors, on a pooled
or segregated account basis.
See page
21
Savills plc
Report and Accounts 2017
03
Continental
Europe
Revenue
£182.4m
(2016: £170.6m)
Offices
45
(2016: 35)
Employees
1,206
(2016: 1,103)
Asia Pacific
Revenue
£565.7m
(2016: £485.9m)
Offices
67
(2016: 60)
Employees
26,894
(2016: 25,446)
See page 12
Financial statementsGovernance
Chairman’s statement
“ The resilience and
breadth of our
operations across the
globe, with continuing
growth in key market
shares, delivered
a further strong
performance in 2017.”
Nicholas Ferguson CBE, Chairman
1866
Panic of 1866
(Europe)
1929
Wall Street Crash
1973
The OPEC Oil
Price Shock
1875
1855
Savill & Son is
founded by Alfred
Savill
1900
1925
1950
1975
1980
1985
1990
1995
2000
1929–1939
The Great Depression
1855 – Savills first trades as a business
Over 150 years of resilience…
04
Savills plc
Report and Accounts 2017
Total
dividend
30.2p
(2016: 29.0p)
Underlying
profit
£140.5m
(2016: £135.8m)
Statutory profit
before tax
£112.4m
(2016: £99.8m)
Results
The Group’s underlying profit for the year
increased by 3.5% to £140.5m (2016:
£135.8m), on revenue which improved by
11% to £1.6bn (2016: £1.45bn). The Group’s
statutory profit before tax increased by 13%
to £112.4m (2016: £99.8m).
Overview
Savills delivered a further strong performance
in 2017. In addition to substantial commercial
transaction volumes in both the UK and a
number of Asian and European markets,
the relative resilience of Savills UK
Residential transaction business, which
achieved year-on-year revenue growth in
challenging markets, was of particular note.
This again demonstrated the importance of
Savills strengths in prime markets of many
of the world’s key cities where we increased
market share. Currency movements also
had a positive effect on the Group
contributing approximately £3.9m in
underlying profit and £2.8m in statutory
profit before tax on translation.
Our Transaction Advisory revenue grew by
13%, our Consultancy business revenue by
14% and our Property Management revenue
by 9%, including the full year effect of the
2016 UK acquisition of GBR Phoenix Beard.
Against the uncertain backdrop of world
markets, Savills Commercial Transaction
business grew revenue by 15% with strong
performances in many markets including the
UK and significant growth in the Asia Pacific
region, in particular, Hong Kong, China,
Japan and Australia. Our Residential
businesses withstood challenging conditions
achieving revenue growth of over 6%. Finally,
Savills Investment Management Assets under
Management (‘AUM’) increased to £14.6bn
(2016: £13.9bn). Investment Management
revenue declined as anticipated, reflecting the
reduced level of disposal transactions from
the liquidating SEB German Open Ended
Funds we inherited as part of the acquisition
of SEB Asset Management in 2015.
The reduction in transaction fees in the
Investment Management business, together
with a decline in the volume of larger
complex transactions in the US and the
costs of expansion in a number of markets
restricted the underlying profit margin to
8.8% (2016: 9.4%). The statutory pre-tax
profit margin remained stable at 7.0% (2016:
6.9%), with lower acquisition-related costs
and profits on disposal of investments
offsetting the aforementioned expansion
costs and decline in the US business.
1875
1900
1925
1950
1975
1980
1985
1990
1995
2000
1988
Savills listed
on the London
Stock Exchange
2000
Acquired FPD
Savills (Asia)
1987
Black Monday
1997
The Asian Crisis
1997
First link with Asia
…during a history of financial crisis
Savills plc
Report and Accounts 2017
05
Financial statementsGovernance Strategic reportOverview Chairman’s statement continued
Business development
Savills strategy is to be a leading advisor in
the key markets in which we operate. Our
global strategy is delivered locally by our
experts on the ground with flexibility to
adapt quickly to changes in circumstances
and opportunities. They are supported by
our regional and cross-border investment
and occupier services specialists. Over the
last few years we have acquired a number
of complementary businesses and added
teams and individual hires to our strong
core business.
During 2017, we continued to build our US
presence with the acquisition of Cresa
Orange County, a tenant representation
business in California and the hire of a
significant new capital markets team in New
York. In Asia Pacific, we made some
significant hires in investment sales teams in
Beijing and Shanghai. In Continental Europe,
the acquisitions of Aguirre Newman in Spain,
Larry Smith in Italy and SB management in
the Czech Republic and the recruitment of
Industrial teams in Amsterdam and Warsaw
further strengthened our presence across
the continent. In the UK, we completed a
number of team hires across our business
lines together with the acquisitions of a
residential lettings business (Granville
Residential Ltd – Marlow) and a
commercially focused business in Guernsey
(Montagu Evans Channel Islands Ltd).
Emerging technology continues to be a focal
area in the real estate industry and also for
our business. We have continued to invest in
our own technology platform in order both to
deliver innovative solutions to our clients
through data analysis and insight and to
drive internal efficiencies. One example is
the formation of Workthere.com, Savills
innovative response to the changing
requirements of occupiers seeking serviced
office/co-working space in global cities.
In addition, we have reviewed a significant
number of investment opportunities in the
field of emerging technology and our
proprietary investment arm, Grosvenor Hill
Ventures (“GHV”), has made a number of
investments in promising technology
opportunities. GHV comprises a small
technology team led by the Group CFO
with a remit to support external technology-
based businesses with the capability of
significantly enhancing or disrupting
traditional business models in real estate
services. Our largest investment to date is
in YOPA, the digital hybrid residential UK
estate agent. During the last 12 months it
has grown to become the 10th largest agent
in the UK. We have also invested in
Proportunity, an Artificial Intelligence (“AI”)
based start-up focused on real estate
valuation. Finally, in December we invested
in VuCity, the first digital “smart Cities”
platform which is focused on making
planning applications faster and easier for
sponsors and Local Authorities to progress.
Board
The Board of Savills announced in January
that Jeremy Helsby will retire as Group Chief
Executive at the end of 2018 after a 39 year
career at Savills, 11 of them as Group Chief
Executive. Jeremy will be succeeded by Mark
Ridley, currently CEO of Savills UK and Europe,
with effect from 1 January 2019. Mark will join
the Board of Savills plc as Deputy Group Chief
Executive on 1 May 2018.
Dividends
An initial interim dividend of 4.65p per share
(2016: 4.4p) amounting to £6.3m was paid
on 4 October 2017, and a final ordinary
dividend of 10.45p (2016: 10.1p) is
recommended, making the ordinary
dividend 15.1p for the year (2016: 14.5p). In
addition, a supplemental interim dividend of
15.1p (2016: 14.5p) was declared, based
upon the underlying performance of our
Transaction Advisory business. Taken
together, the ordinary and supplemental
dividends comprise an aggregate
distribution for the year of 30.2p per share,
representing an increase of 4% on the 2016
aggregate dividend of 29.0p. The final
ordinary dividend of 10.45p per ordinary
share will, subject to shareholders’ approval
at the Annual General Meeting on 8 May
2018, be paid alongside the supplemental
interim dividend of 15.1p per share on
14 May 2018 to shareholders on the
register at 13 April 2018.
2005
Savills 150th
Anniversary & Rebrand
2015
Savills acquired
Smiths Gore and SEB
2009
Eurozone crisis
2005
2010
2015
2007–2008
The Financial Crisis
2013
New Global HQ
2014
Studley rebrands
as Savills Studley
06
Savills plc
Report and Accounts 2017
People
I would like to express my thanks to all
our staff worldwide for their hard work,
commitment and continued focus on client
service, enabling the Group to deliver this
record performance in 2017.
Outlook
We have made a solid start to 2018 with a
pipeline of business carried over from last
year in many markets, although this is
against the backdrop of heightened market
uncertainty, geopolitical risks and rising
interest rates. We anticipate some tempering
of the strong transaction volumes of recent
times in some markets. However, at this
early stage in the year our expectations for
2018 currently remain unchanged.
Nicholas Ferguson CBE
Chairman
Case Study
Stratford, London
Savills acted on behalf of Blackstone and Catalyst Capital on the disposal of
The Stratford Centre in London. Prior to sale, the investment team provided
long-term, strategic advice to the vendor. At the point of the sale the 206,000
sq ft (28,428 sq m) asset was fully let to retailers including Sainsbury’s, Lidl,
New Look and Boots and benefitted from planning consent for 587 residential
units. Savills was able to seamlessly combine residential and retail market
capabilities to fully promote the asset management and development
potential of the scheme. The highly targeted marketing campaign resulted in
a sale for £141.5m, a significant premium to the asking terms and reflecting
a sub 5% NIY.
2017
Listed on
the London
Stock
Exchange
International
network of
600+ offices
and associates
34,000+
employees
worldwide
The UK’s
leading
agency group
Group
revenue of
£1.6bn
2017
Acquired
Aguirre Newman
Savills plc
Report and Accounts 2017
07
Financial statementsGovernance Strategic reportOverview Our resources
and relationships
Our business
model
Our business explained
Our business model illustrates
in simple terms how we create
shareholder value through
improving the strength of our
premium brand, and through
the delivery of profits and
dividends to shareholders.
We treat every client as an
individual and take time to
understand what they need and
how we can best service them.
We have built our brand and reputation on
the quality of our people, relationships,
resources and processes. Savills has a
strong and well embedded culture, founded
on an entrepreneurial approach and
underpinned by our values and operational
standards. All that we do is underpinned by
strong governance, a disciplined approach
to risk management and high standards of
responsibility, which supports the
sustainable development of our business.
More detail of our governance structure,
policies and practices can be found later
in this Annual Report on pages 38 to 59.
We are committed to delivering a high
quality service and creating long-term
relationships with our clients. Because of our
personal approach to business, our people
are fundamental to our business and we
encourage an open and supportive culture
in which every individual is respected. We
strive to provide an environment in which
our people can flourish and succeed.
This allows us to recruit, motivate and
retain talented people and build on our
status as an employer of choice.
We work hard to ensure that our people
enjoy working at Savills’ promoting their
personal and professional development.
We encourage them to develop their
careers within the Group, nurturing the
entrepreneurs and leaders of the future
to share in the success of the business.
We firmly believe that our people are key to
delivering excellent service to our clients and
achieving our objectives; they give us
a unique perspective of the markets in which
we operate and connect our clients with real
estate opportunities and market intelligence.
To be the real estate adviser of choice in our
markets, and deliver superior financial
performance, we aim to employ people of
the highest quality supporting the delivery of
the highest standards of client service. By
choosing Savills, our clients have access to
over 34,000 staff with a broad range of
experience, skills and local knowledge,
based in offices in key real estate locations
across the globe and benefit from our
extensive market research material.
Our value
creation
08
Savills plc
Report and Accounts 2017
Outstanding
people
Long-term client
relationships
Intellectual
property
Financial
Local knowledge
Entrepreneurial
approach
Client care
programmes
High quality
servicer
Market
intelligence
Brand and
reputation
Prudent capital
structure
Strong cash
generation
Defensive, scale business
Cyclical high-margin
businesses
Property
and facilities
management
32%
Consultancy
17%
Investment
management
4%
Revenue
by business
Commercial
transactions
36%
Residential
transactions
11%
Our values
Governance
Underpinned by
Pride in everything we do
Board oversight
Take an entrepreneurial approach
to business
High standards of governance
Help our people fulfil their
true potential
Always act with integrity
Disciplined
approach to risk
Risk mitigation to limit exposure
to any one market or economy
Business and geography
diversification
Shareholders
Clients
People
Community
Dividends
30.2p
Underlying
profit
Underlying
earnings
per share
75.8p
£140.5m
High quality service
Client care
Client relationship
management team
Training and development
Restructured training
programme
Employee engagement
Achieved One Star status
Diversity
UK Diversity Group
Reducing
environmental impact
Carbon emission reduction
Community investment
Community engagement
programmes
Savills plc
Report and Accounts 2017
09
Financial statementsGovernance Strategic reportOverview Case Study
Gibson Hotel, Ireland
Savills completed the sale of The Gibson Hotel, Dublin for
approximately €87m to Deka Immobilien
Market insights
Spotlight on Europe
The European economy enjoyed the strongest period of
economic growth in more than a decade, despite lingering
political uncertainty. Business expansion continued to drive
office demand, often driven by the tech sector and by
M&A activity.
Consumer confidence was improving with demand for prime
high streets driven by Fashion, Sports, Beauty and Technology
brands, opening large inspirational flagship/lifestyle stores, as
well as by the expanding presence of F&B. Additionally big box
retailers were experimenting with smaller stores in tight, fast
growing urban locations, with the additional benefit of easier
pick-up and delivery services for online orders.
Demand for logistics space has been rising across Europe,
driven by improved economic conditions, rising trade volumes,
and expanding e-commerce. Last mile logistics strengthened
demand for mid-sized distribution centres, while the need for
large-scale distribution centres in traditional logistics hubs
continued to grow.
In 2017 the total investment volume across our markets totalled
€234bn, a 7% increase year on year thanks to strong investment
growth in the second half of the year. Cross border investment
accounted for over 50% of the total (compared to 44% the
previous year), with Asian investors overtaking the US to become
the largest overseas investors in Europe. Offices continue to be
the asset class of choice accounting for 46% of the total
investment volume. However, lack of stock and competitive
pricing was driving investors to other asset classes. Of particular
note, the industrial sector saw the biggest increase in investor
demand accounting for 15% of the total investment volume, up
from 11% in 2016 and 9% in 2015.
UK Case Study – Property Management
Royal Exchange, Internal Courtyard
We act on behalf of the Landlord in managing The Royal
Exchange located adjacent to Bank Station in the heart of the
City of London. Opened in 1844 by Queen Victoria, this iconic
and historic Grade I listed mixed-use scheme comprises over
30 contemporary retailers as well as four restaurants and cafés
at ground and mezzanine levels comprising approximately
40,000 sq ft.
The Royal Exchange is a luxury destination where the City
converges to meet, eat and shop. It offers an unrivalled collection
of boutique shopping and dining, specially curated for the Square
Mile. Occupiers include Hermès, Smythson, Watches of
Switzerland, Boodles and Tiffany & Co. amongst others.
The impressive central courtyard is used for numerous large
scale events including weddings and also serves as backdrop for
television filming.
Savills have been involved with The Royal Exchange since 2014
providing management and building consultancy services.
10
Savills plc
Report and Accounts 2017
Overview
Strategic report
Governance
Financial statements
Spotlight on UK
The commercial property investment market in the UK surprised on the upside in 2017,
with turnover for the full year of just under £66bn against our forecast at the start of 2017
of £55bn. This meant that 2017 was the second best year on record, a surprising result
given the negativity around Brexit that was rife at the start of last year.
Just under half of last year’s acquisitions were by non-domestic investors, with this
proportion rising to 80% in the Greater London market. The single most active source
of capital was Asia Pacific, whose investors put over £13bn into the UK market, much
of which went to London. However, both European and American investors also
invested more in the UK in 2017 than they had in 2016.
While the office market remained the most active of the three main sectors last year,
the biggest growth in activity was in the industrial sector where the global appetite for
income security combined with an enthusiasm for the growth prospects for
distribution property. Other income-producing asset classes also saw a sharp
increase in investor demand last year.
Occupational demand improved year on year in the office markets both inside and
outside London, with steady take-up and low supply remaining the theme in the
industrial sector. Retail markets remained challenged by cautious tenant demand.
Price growth across the UK’s residential markets slowed in 2017. Buyer sentiment was
affected by underlying political and economic uncertainty and the prospect of gradual
increases to the cost of debt over the medium term. The focus of residential
investment continued to shift away from private individuals toward institutions as the
build to rent sector continued to gather momentum, while the fiscal and regulatory
environment for buy to let investors became less hospitable.
On the flip side, the residential development sector benefitted from continued
Government support and a strong political focus on increasing housing delivery.
The prime housing markets continued to remain price sensitive, not least because of
greater exposure to transactional and other capital taxes, particularly for overseas
buyers. Values in the prime central London market fell by a further 4.0% over the course
of the year, meaning that they sat 15.9% below their 2014 peak at the end of 2017.
Elsewhere price adjustments have been much less significant, though prices for high
value homes fell marginally across the commuter zone. However, transaction levels over
£1m remained relatively robust, particularly in the markets outside of London.
Case Study
Kensington House, Phillimore Gardens
Beautifully presented freehold detached house on Phillimore Gardens backing onto
Holland Park was sold by Savills Kensington in January 2017. The house featured an
incredible indoor swimming pool and wonderful garden.
Savills plc
Report and Accounts 2017
11
Case Study
Signature Tower, Seoul
Transaction Advisory
Savills represented one of South Korea’s largest single office
property deals in the last decade, which was also the biggest
amongst the transactions Savills Asia Pacific advised on in 2017.
Shinhan BNP Paribas, has successfully sold Signature Towers
Seoul, a 17-storey premium class office asset which extends to
99,991 sq m, located in Seoul’s CBD for approximately USD640
million (KRW726 billion).
Case Study
W.W. Norton
Savills Studley advised publisher W.W. Norton on a short-term
lease extension and expansion while conducting a thorough
search for alternative locations. With viable options in hand, the
team then helped W.W. Norton secure a long-term lease renewal
for 95,000 sq ft in its prime Midtown Manhattan location at an
aggressive rent, including a substantial work allowance to cover
a staged renovation.
Market insights continued
Spotlight on Asia
Across both developed and emerging Asia a broadly positive
economic environment alongside a stable political landscape
saw markets continue to perform well during 2017 as low
interest rates and ample liquidity proved to be broadly
supportive of both transactions volumes and asset prices.
Despite concerns over debt levels in China and slowing
growth, as well as a greater propensity for protectionism in
some regional markets, no single risk factor succeeded in
undermining investor confidence in local real estate. The
appetite for land in Asia’s rapidly changing cities remained
undimmed and sales of development sites hit record levels in
2017 led by China. Hong Kong also saw a notable growth in
land sales (+78% YoY) supported by buyers from the mainland.
Sales of income producing assets surged during the year
despite exceptionally low yields and a scarcity of good quality
stock. We note that investors are also beginning to explore a
broader realm of asset classes beyond simply office and retail.
In Japan, Asia’s second largest market, investors took a greater
interest in second tier cities such as Osaka and Yokohama,
driven partly by heavily compressed yields in Tokyo. The appeal
of Australia endured for the security of its more mature
commercial markets but scarcity and historically low yields had
a negative impact on volumes. Cross border activity remained
a feature of the Asia-Pacific markets in 2017 and while activity
from European and North American investors slowed, Asian
investors took up the slack. Both Hong Kong and Singapore
have remained important financial intermediaries for global real
estate capital flowing into and out of the region.
Spotlight on North America
A strengthening US economy, particularly in tech and industrial
sectors, compensated for slowing international investment.
US economic growth in 2017 outpaced the previous year
significantly, with real GDP rising by 2.3%, versus 1.5% in 2016.
Overall commercial leasing activity slowed slightly in 2017 in
major US markets such as Chicago, Los Angeles, New York,
San Francisco/Silicon Valley and Washington, DC. Demand for
office space, however, increased in the energy-dependent
markets of Houston and Denver, as well as in the Sunbelt
markets of Atlanta, Austin and Dallas. Asking rent remained
relatively stable in most major markets in 2017. The exception
to this was in several significant tech markets (Austin, Boston,
San Francisco/Silicon Valley) which all experienced 5% or
higher growth in asking rent.
Investment sales activity declined for the second straight year.
However the tech markets (Boston, San Francisco/Silicon
Valley and Seattle) continued to be strong and there was
increased investment activity in secondary markets (Charlotte,
Raleigh/Durham, Nashville, Pittsburgh and Portland). Investor
interest in the industrial sector remained high — it was the only
asset class to see sales volumes increase in 2017.
12
Savills plc
Report and Accounts 2017
Overview
Strategic report
Governance
Financial statements
Case Study
IKEA, Sweden
Investment Management
2017 saw the launch of Nordic Fund III – Retail, a closed ended fund
targeting Core+ retail in capital and regional cities across Sweden,
Finland, Denmark and Norway. It targets dominant/under-managed
assets including retail warehouse parks, local food anchored
shopping centres and high street stores. It is a follow on fund to
Nordic Fund I – Retail, which outperformed its benchmark by 2.6%
over 5 years, and is led by a local team of 15 investment
professionals. The Fund has thus far raised £129m and has made its
first acquisitions, purchasing retail parks from IKEA in Sweden.
Spotlight on Investment Management
168 private equity real estate funds raised total capital of
$93bn in 2017, a drop from the $117bn raised in 2016.
However, the average amount raised in final closings by private
closed ended funds rose from $496m in 2016 to $533m. The
fall in number of closed ended private funds was the fifth
straight year of declines, from a high of 339 funds closing in
2013. However, this fall in number of closed funds is not
matched by a fall in private equity dry powder, with Preqin
reporting that there was $249bn dry powder available versus
$238bn 12 months prior. However, 47% of funds closed in
2017 did not meet their fund raising targets – a five year high.
The weight of money and continued improvement of occupier
market fundamentals continued to see capital values increase
while yields decrease. PERE noted that the trend for more
opportunistic and value added funds fell in 2017, from 63% to
60% of investors strategies. Increase in debt funds grew
substantially, from 18% in 2016 to 29% in 2017.
Investors continued to look to North America for investments,
with 41% of funds for the continent. Europe was the second
biggest focus, with 24% of all funds European focused,
continuing an increase in interest in the continent. From
2011–13, Europe accounted for 19% of capital. From 2014–17,
this has risen to 27%. The largest funds continued to gain in
market share, with the six largest funds in the market
accounting for nearly half of capital sought by the top 20.
Number of closed-
ended real estate
funds closed in 2016:
Average amount of
capital raised by
private equity real
estate funds in 2016:
168
$533m
(down from 183 in 2016)
(up from $496m in 2016)
Total capital raised
in 2016:
Total capital available
to fund managers:
$93bn
$249bn
(down from $117bn in 2016)
(up from $238bn in 2016)
Savills plc
Report and Accounts 2017
13
Key Performance Indicators
Financial KPIs
Revenue
£1,600.0m
Cash generation
£111.7m
Underlying profit
£140.5m
2017
2016
2015
2014
2013
£1,600.0m
2017
£1,445.9m
£1,283.5m
£1,078.2m
£904.8m
2016
2015
2014
2013
£111.7m
£93.3m
£122.0m
£96.1m
£70.8m
2017
2016
2015
2014
2013
£140.5m
£135.8m
£121.4m
£100.5m
£75.2m
The measure
The measure
The measure
Revenue growth is the increase/
decrease in revenue year-on-
year.
The amount of cash the
business has generated from
operating activities.
Underlying profit growth is the
increase/decrease in underlying
profit year-on-year.
The target
The target
The target
To deliver growth in revenue
from expansion both
geographically and by
business segment.
To maintain strong cash
generation to fund working
capital requirements,
shareholder dividends and
strategic initiatives of the Group.
To deliver sustainable growth
in underlying profit.
Non-Financial
KPIs
Breadth of service offering
53.3% non-transactional
income
Geographical spread
61.0% non-UK
Property under
management
1,945.2 million sq ft
2017
2016
2015
2014
2013
53.3%
54.3%
51.9%
54.1%
60.4%
2017
2016
2015
2014
2013
61.0%
60.0%
56.3%
53.5%
48.9%
2017
2016
2015
2014
2013
1,945.2m sq ft
1,757.8m sq ft
2,043.1m sq ft
2,090.0m sq ft
2,031.7m sq ft
The measure
The measure
The measure
Revenue by type of business.
The target
To maintain a healthy balance of
transactional and less or
non-transactional business
revenues.
Geographical diversity is
measured by the spread of
revenues by region.
The target
To progressively balance the
Group’s geographical exposure
through expansion in our chosen
geographic markets.
Total square footage property
under management.
The target
To progressively increase the
global square footage under
management.
14
Savills plc
Report and Accounts 2017
Underlying profit margin
8.8%
Underlying earnings
per share
75.8p
Statutory profit
after tax
£81.1m
Statutory earnings
per share
58.8p
2017
2016
2015
2014
2013
8.8%
9.4%
9.5%
9.3%
8.3%
2017
2016
2015
2014
2013
75.8p
72.5p
63.2p
55.2p
43.1p
2017
2016
2015
2014
2013
£81.1m
£67.7m
£64.9m
£62.7m
£51.4m
2017
2016
2015
2014
2013
58.8p
48.8p
47.0p
46.8p
39.8p
The measure
The measure
The measure
The measure
Profitability after all operating
costs but before the impact of
exceptional costs and taxation.
The target
To deliver growth in operating
margin by improving the
efficiency with which services
are offered.
Earnings per share (‘EPS’) is the
measure of profit generation.
Underlying EPS is calculated by
dividing underlying profit by the
weighted average number of
shares in issue.
The target
To deliver growth in underlying
EPS to enhance shareholder
value.
Statutory profit after tax growth
is the increase/decrease in
statutory profit after tax
year-on-year and over a
longer term.
The target
To deliver sustainable
long-term growth in statutory
profit after tax.
Statutory EPS is the measure of
statutory profit generation and
is calculated by dividing
statutory profit after tax by the
weighted average number of
shares in issue.
The target
To deliver growth long-term
growth in statutory EPS to
enhance shareholder value.
Assets under
management
€16.5bn
2017
2016
2015
2014
2013
€7.2bn
€5.1bn
€16.5bn
€16.2bn
€17.1bn
The measure
Growth in assets under
management of our investment
management business, Savills
Investment Management.
The target
To increase the value of
investment portfolios through
portfolio management, new
mandates and the launch of
new funds.
Savills plc
Report and Accounts 2017
15
Financial statementsGovernance Strategic reportOverview Chief Executive’s review
“ Profit growth in Asia
Pacific and the UK,
alongside the continued
development of our
operations in
Continental Europe,
enabled Savills to
deliver strong results
in 2017.”
Jeremy Helsby, Group Chief Executive
Our strategy
Our strategy is to deliver value as a leading real
estate advisor to private, institutional and
corporate clients seeking to occupy, acquire,
manage, lease, develop or realise the value of
prime residential and commercial property in the
world’s key locations. The key components of
our business strategy are as follows:
#1
Commitment to clients
– we aim to deliver the
highest standards of client
service through
professional, motivated
and high calibre people
16
Savills plc
Report and Accounts 2017
6
31
(17)
(59)
6
3
2
7
20
(24)
6
3
Key operating highlights
Strength in key commercial markets,
geographical diversity and the resilience
of our residential businesses drove an
improved performance for Savills in 2017.
UK
Asia Pacific
Continental Europe
• Transaction Advisory revenues up 13%.
Strong performances in the UK and Asia
Pacific including Hong Kong, China,
Australia and Japan.
North America
Unallocated
Total
Revenue £m
Underlying profit/(loss) £m
2016 % growth
2017
2016 % growth
626.0
565.7
182.4
224.8
1.1
578.3
485.9
170.6
211.1
–
1,600.0
1,445.9
8
16
7
6
n/a
11
2017
76.5
55.6
11.2
7.8
72.1
42.6
13.5
18.9
(10.6)
(11.3)
140.5
135.8
• Growth in revenues in Continental Europe
with profits impacted by start-up costs in
the Czech Republic and recruitment
there and in the Netherlands.
On a constant currency* basis Group revenue grew by 7% to £1,551.6m, underlying profit
grew by 1% to £136.6m and statutory profit before tax grew by 10% to £109.6m. Our Asia
Pacific business represented 35% of Group revenue (2016: 34%) and our overseas
businesses as a whole represented 61% of Group revenue (2016: 60%). Our performance
by service line is set out below:
• Savills Studley’s revenue up 6% but
profitability impacted by investment in a
new capital markets team in New York.
• Further growth from our less-
transactional services with Consultancy
revenue up 14% and Property
Management revenue up 9%.
• Savills Investment Management
performed ahead of our expectations,
with AUM up 5% to £14.6bn.
Overall the Group increased underlying profit
by 3.5% to £140.5m (2015: £135.8m).
On a statutory basis, profit before tax
increased 13% to £112.4m (2016: £99.8m).
Savills geographic and business diversity
were key to achieving the year’s result.
Our performance analysed by region was
as follows:
*
Revenue and underlying profit for the year are
translated at the prior year exchange rates to
provide a constant currency comparison.
Revenue £m
Underlying profit/(loss) £m
2016 % growth
2017
2016 % growth
Transaction Advisory
746.2
660.8
Property and Facilities
Management
Consultancy
Investment Management
Unallocated
Total
513.1
273.1
66.5
1.1
472.8
240.3
72.0
–
1,600.0
1,445.9
13
9
14
(8)
n/a
11
2017
81.5
25.3
31.0
13.3
80.0
23.6
25.9
17.6
(10.6)
(11.3)
140.5
135.8
Overall, our Commercial and Residential Transaction Advisory business revenues together
represented 47% of Group revenue (2016: 46%). Of this, the Residential Transaction Advisory
business represented 11% of Group revenue (2016: 11%). Our Property and Facilities
Management businesses continued to perform well, growing overall revenue by 9% and
represented 32% of Group revenue (2016: 33%). Our Consultancy businesses represented
17% of revenue (2016: 17%) where improved performances within the UK were supported by
an increase in valuation work in our international operations. There was a reduction of revenues
in the Investment Management business of 8%, which had been anticipated due to the
exceptionally high level of disposals in 2016 from the SEB German Open Ended funds, which
are in liquidation. Investment Management revenue represented 4% of Group revenue in the
year (2016: 5%).
People
The UK business won a number of national awards including Residential Advisor of the Year
at the 2017 Estates Gazette Awards, Commercial Agent of the Year at the 2017 Props
Award, Industrial Agency Team of the Year at the Property Week Awards 2017, Times
Graduate Employer of Choice in property for the eleventh year and No.1 Real Estate Super
brand for the ninth consecutive year. Savills were also awarded European Broker of the Year
at the Property Investor Europe (PIE) awards, and in Hong Kong won Best Deal of the Year
for the sale of the West and East Towers of One Harbour Gate at the RICS Hong Kong
Awards, an international award honouring outstanding achievement for the real estate
industry in Hong Kong. Savills Investment Management was also recognised with three
funds winning best performer awards from MSCI/IPF and Property Investor Europe during
the year. These awards are a testament to the strength of our people and I thank them all for
their continued commitment, loyalty and hard work.
#2
#3
#4
#5
Business
diversification
Geographical
diversification
Maintenance of our
financial strength
Strength in both
residential and
commercial
property
Savills plc
Report and Accounts 2017
17
Financial statementsGovernance Strategic reportOverview Chief Executive’s review continued
The Savills Group advises on commercial, rural, residential
and leisure property. We also provide corporate finance advice,
investment management and a range of property-related
financial services. Operations are conducted internationally
through four business streams:
Transaction Advisory
2017 clearly demonstrated both the
importance of having a breadth of
transactional business around the
world, and our strong market position
in the main real estate transactional
markets/sectors.
In the UK the commercial leasing and
investment markets performed better than
expected in 2017, as both occupiers and
investors adopted a more realistic view of how
and where Brexit-related risks might fall. Of
particular note was the very strong
performance of our commercial teams in Asia
Pacific, in particular in Hong Kong, China,
Australia and Japan. The Savills Global
Residential business also proved highly
resilient in challenging markets, contributing
to the increase in revenue and profit delivered
by our Transaction Advisory business as a
whole. Revenue grew by 13% to £746.2m
(2016: £660.8m) and underlying profit
increased by 2% to £81.5m (2016: £80.0m).
The effect of significant business
development costs in the US, including the
recruitment of a New York capital markets
team, reduced the underlying profit margin
of the Transaction Advisory business as a
whole to 10.9% (2016: 12.1%).
UK Residential
Our UK Residential business revenue grew by
4% to £128.9m (2016: £124.4m). In the
second-hand estate agency business,
revenues benefited from a growth in the
average sales value, which was 6.9% higher
than in 2016, along with a slightly higher
average fee charged, offsetting a fall in the
number of exchanges, (down 3% on 2016).
In the “Core” London market, the number of
exchanges grew by 4%, helped by a fall in
average values, whereas outside the capital,
which represents 55% of second hand
agency residential revenue, the opposite
trend occurred with the number of exchanges
down 5%, as a result of higher property
prices. In both regions revenues increased
approximately 4% on 2016.
In the new homes business, revenue grew
by 2%, reflecting a growth in average
transaction value of 3%, despite a 7%
reduction in the number of exchanges.
Whilst there was muted activity in the UK
farmland market, pending clarification on trade
and subsidies post-Brexit, there was continued
demand for amenity estates, especially across
the South and South West of England.
Our Residential Capital Markets team saw
significant institutional investor appetite in
student housing and private rented sector
markets. This resulted in revenue growth
of almost 25%, although planning delays
and construction market challenges
represent significant supply side constraints
in these markets.
As a result of the above factors, the UK
Residential Transaction Advisory business
recorded a 7% increase in underlying profits
to £18.7m (2016: £17.5m).
Asia Pacific Residential
The Residential Transaction Advisory
business in Asia is focused primarily on new
development, secondary sales and leasing
of prime properties in selected markets. It
excludes mixed use developments, which
are accounted for within the Commercial
Transaction Advisory business. Overall, the
Asia Pacific Residential business increased
revenues by 16% to £44.3m (2016: £38.1m)
which represented an 11% increase in
constant currency. This was principally
driven by a number of high end residential
sales in Hong Kong and an increase in
project sales in Singapore where the
residential market began to show signs of
recovery following government relaxation of
Revenue
£746.2m
2017
2016
2015
2014
2013
Underlying profit
£81.5m
Contribution to Group revenue
(%)
£746.2m
£660.8m
£618.0m
2017
2016
2015
2014
2013
£494.6m
£358.2m
£81.5m
£80.0m
£76.9m
£67.8m
53%
47%
£47.2m
+13%
YOY change
+2%
YOY change
18
Transaction Advisory
Rest of Group
Savills plc Report and Accounts 2017 certain cooling measures. Our residential
business in Australia was restructured during
the year resulting in reduced revenues but
improved profitability. In China, the
Government continues to impose restrictions
on second home ownership, impacting
negatively both sales and profitability. The
net effect of all these factors resulted in a
94% increase in underlying profit to £6.4m
(2016: £3.3m), 88% in constant currency.
Asia Pacific Commercial
The Asia Pacific Commercial business
performed strongly in 2017, driven by
improved revenue and profitability in Hong
Kong, Japan, Australia and Mainland China.
The Hong Kong market continued to be
attractive to Mainland Chinese investors and
our market share remained strong at
approximately 40%. In Japan, transactional
revenue increased by 75% following the
completion of several significant transactions.
In Australia the impact of previous investment
in new talent coupled with the restructuring
under the new leadership team resulted in an
increase in market share, improving both
revenue and profitability. Over the past 18
months, we have invested significantly into
our investment sales team in Mainland China,
particularly in Shanghai and Beijing, the
benefit of which came through in 2017 as
both transaction volumes and market share
increased. The Singapore performance
was negatively impacted by a reduction
in investment volumes and commercial
leasing fees.
Reported revenue rose by 30% to £168.4m
(2016: £129.7m) which represented a 24%
increase in constant currency.
The positive effect of higher volumes
offset business development and service
expansion costs in the region, leading
the Asia Pacific Commercial Transaction
Advisory business to record a 31% increase
in underlying profit to £26.9m (2016:
£20.6m). This represented a 25% increase
in constant currency.
UK Commercial
Revenue from UK commercial transactions
increased 18% to £101.6m (2016: £86.0m).
Most commercial leasing and investment
markets performed better than anticipated in
2017, as both occupiers and investors
adopted a more realistic view of how and
where Brexit-related risks might fall. The
overall investment volume into UK commercial
property in 2017 was just under £66bn, a
27% increase on the year before. The
importance of non-domestic investors was
significant, with £31bn invested in the UK last
year by non-domestic investors (the second
highest volume historically). In the London
office market the proportion was even higher,
with 80% of investment coming from
non-domestic investors and £8.4bn from Asia
Pacific alone. Savills was the leading adviser
in London for the second year in succession,
with a market share of 30%.
A number of cities and regions such as
Southern California, San Francisco, and
Philadelphia enjoyed strong performances
during the year. The performance of these
offices helped offset the effect of deferrals
which particularly affected the Washington
DC region in respect of Government-
related transactions.
Generally, investors remained heavily biased
towards asset classes that offer comparative
income security, and this meant that logistics
and alternative asset classes rose in
popularity offsetting a decline in activity in
retail, particularly shopping centres.
The occupational markets also performed
well, with office leasing activity in central
London 24% up year-on-year. Furthermore,
the total office take-up in the top six regional
cities in the UK reached its highest ever level
in 2017, due to a combination of a natural
ripple effect outwards from London and the
South East, and a degree of insulation
against the potential Brexit risk.
The logistics sector was many investors’
sector of choice in 2017, although
occupational take-up was at its long-term
average level. Availability of prime logistics
space remains tight across the UK, and this
will support both rents and land prices
going forward. Retail remained a fairly
binary sector in 2017, with tourist-focused
markets like London and Edinburgh
performing well due to the effects of the
weak pound, while the rest of the UK
remained flat in the face of falling real
earnings growth for UK consumers.
These factors, together with the significant
investment made in assembling and
supporting our new New York Capital
markets team and the lag effect of team lifts
in California and Denver, led to a decrease
in North American underlying profit of 59%
to £7.8m (2016: £18.9m), a 60% decline in
constant currency.
Continental Europe
The Continental European Commercial
Transaction Advisory business grew
revenue by 9% to £78.2m (2016: £71.5m).
This was driven by the continued strength
of our Irish business across both Investment
and Leasing/Tenant Rep and strong
performances from Germany, the
Netherlands, Spain and Italy. The
performance was also set against
developing Logistics expertise in the
Netherlands and Poland as well as
significant investment in opening an office
in Czech Republic, building Investment and
Leasing capabilities through team lifts there.
During the year we continued to build on our
Continental European platform with the
acquisitions of Larry Smith in Italy and on the
29 December 2017, the acquisition of Aguirre
Newman in Spain.
The strength of our national Commercial
transaction business, supported by our
strong international network, led to a 17%
increase in underlying profit to £17.2m
(2016: £14.7m).
As a result of these additional costs, the
Continental European Transaction Advisory
business recorded an underlying profit of
£4.5m (2016: £5.0m), 10% lower than in
2016, 22% on a constant currency basis.
North America
During the year, we continued to build on our
North American tenant representation
platform, Savills Studley, through both
recruitment and bolt-on acquisitions. Our
North American revenue grew by 6% to
£224.8m (2016: £211.1m). In constant
currency this equated to a year-on-year
increase of 2%. Savills Studley executed
transaction volumes 24% higher than the
previous year, which largely offset a
significant reduction in the large complex
transactions for which this business is noted.
Much of this is deferral through uncertainty
rather than cancellation and the pipeline of
activity for 2018 is robust.
Savills plc
Report and Accounts 2017
19
Financial statementsGovernance Strategic reportOverview Chief Executive’s review continued
Property and Facilities Management
Consultancy
Global Consultancy revenue increased
by 14% to £273.1m (2016: £240.3m), 12%
in constant currency, and underlying
profit grew by 20% to £31.0m (2016:
£25.9m), 12% in constant currency.
UK
Consultancy service revenue in the UK was
up 12% at £204.9m (2016: £183.1m). There
were strong performances in the planning
and development teams, along with
revenue growth in building and project
consultancy, hotels and leisure and lease
consultancy. Following completion of the
integration of the business of Smiths Gore,
approximately £14.0m of revenue and
£1.2m of underlying profit, which had
hitherto been recognised in the rural
property management business, was
reallocated to the Consultancy business
segments. Overall underlying profit from
the UK Consultancy business increased
by 8% to £23.9m (2016: £22.2m).
Asia Pacific
Revenue in the Asia Pacific Consultancy
business increased by 21% to £45.7m
(2016: £37.9m), 14% in constant currency.
There was significant growth in Hong Kong
and also in China, where revenues were
well ahead of 2016 in both the valuation and
research consultancy teams. There were
also improving trends in Australia, South
Korea, Singapore and Vietnam.
Consequently, underlying profit increased
by 113% to £5.1m (2016: £2.4m), 104%
up on a constant currency basis.
Continental Europe
Our Continental European Consultancy
business, which principally comprises
valuation and underwriting advisory
services, increased revenue by 17% (9%
in constant currency) to £22.5m (2016:
£19.3m). In particular, there were stronger
performances in Germany, France, the
Netherlands and Spain. Underlying profit
increased by 54% (38% in constant
currency) to £2.0m (2016: £1.3m).
Our Property and Facilities Management businesses continued to
perform well, growing revenue by 9% (5% in constant currency) to
£513.1m (2016: £472.8m). Underlying profit increased by 7% to £25.3m
(2016: £23.6m), 5% in constant currency.
Asia Pacific
The Asia Pacific region grew revenue by
10% (5% in constant currency) to £300.9m
(2016: £273.8m). The Property and Facilities
Management business is a significant
strength in the region, representing 53%
of Savills Asia Pacific revenue and
complementing our Transaction Advisory
businesses. The total square footage under
management in the region was up 5%
to approximately 1.49bn sq ft (2016:
approximately 1.41bn sq ft), primarily due to
new contracts in Mainland China and Hong
Kong. In Hong Kong, which represented
approximately 55% of Asia Pacific Property
and Facilities Management revenue, the
business grew revenue by 7% in local
currency. Overall the underlying profit of
the Asia Pacific Property Management
business grew 6% (2% in constant
currency) to £15.4m (2016: £14.5m).
UK
Overall, our UK Property Management
teams, comprising Commercial, Residential
and Rural, grew reported revenue by 4% to
£165.8m (2016: £158.9m). Following
completion of the integration of the business
of Smiths Gore, approximately £20.0m of
revenue and £1.6m of underlying profit,
which had hitherto been recognised in the
rural property management business, was
reallocated to the other business segments;
adjusting for this, like-for-like revenue growth
was approximately 17%. The Residential
management business and the UK
Commercial business together grew area
under management by 22% to
approximately 353m sq ft (2016: 289m sq ft).
Our Residential Property Management
businesses, including Lettings, increased
revenue by 8%. Underlying profit for the UK
Property Management business grew 4%
to £11.7m (2016: £11.3m).
Continental Europe
In Continental Europe revenue grew by 16%
(8% in constant currency) to £46.4m (2016:
£40.1m) with growth particularly in Ireland,
France, the Netherlands and Poland
offsetting lower revenues in Sweden. In
addition, the Larry Smith acquisition in Italy
contributed revenues of £1.9m. By the year
end the total area under management had
increased by 94% to 106.9m sq ft, with Larry
Smith contributing 5m sq ft and Aguirre
Newman, in Spain, which completed on 29
December 2017, adding a further 38m sq ft.
The net effect of these factors was an
improvement in the underlying loss for the
year to £1.8m (2016: loss £2.2m).
Revenue
£513.1m
2017
2016
2015
2014
2013
+9%
YOY change
Underlying profit
£25.3m
2017
2016
2015
2014
2013
+7%
YOY change
£513.1m
£472.8m
£390.7m
£338.6m
£329.0m
£25.3m
£23.6m
£21.1m
£18.6m
£17.6m
Contribution to Group revenue
(%)
69%
32%
Property and Facilities Management
Rest of Group
20
Savills plc
Report and Accounts 2016
Revenue
£273.1m
2017
2016
2015
2014
2013
+14%
YOY change
Underlying profit
£31.0m
2017
2016
2015
2014
2013
+20%
YOY change
£273.1m
£240.3m
£230.3m
£217.0m
£191.6m
£31.0m
£25.9m
£24.7m
£23.4m
£17.6m
Investment Management
Following Savills Investment Management’s
record result in 2016, the expected decrease
in disposal activity from the liquidating SEB
German Open Ended Funds caused revenue
to decrease by 8% (11% in constant
currency) to £66.5m (2016: £72.0m). This
generated an underlying profit of £13.3m
(2016: £17.6m). Assets under management
(‘AUM’) increased to £14.6bn (2016:
£13.9bn), as the £1.9bn of new capital raised
in the year outweighed the effect of
liquidation distributions to unit holders of the
former SEB German Open Ended Funds.
Transactions of approximately £4.8bn (2016:
£4.4bn) were executed on behalf of fund
investors, a record annual volume. This
included £2.58bn of disposals and £2.23bn
of acquisitions.
Investment performance continued strongly
with the majority of our Fund products
continuing to exceed their benchmarks over
a five year term. Indeed this performance
was recognised publicly when three funds
won significant awards during the year: The
Charities Property Fund was named Core
Fund of the year by Property Investor
Europe; The Diageo Core Fund was the best
performing segregated Pension Fund (above
£350m) at the MSCI/IPF Awards; and The
Boccaccio Fund was the best performing
Italian Specialist Fund at the MSCI European
Property Investment Awards.
Revenue
£66.5m
2017
2016
2015
2014
2013
£66.5m
£72.0m
£44.5m
£28.0m
£26.0m
-8%
YOY change
Underlying profit
£13.3m
2017
2016
2015
2014
2013
£4.4m
£2.9m
-24%
YOY change
£13.3m
£17.6m
£10.9m
Contribution to Group revenue
(%)
Jeremy Helsby
Group Chief Executive
Contribution to Group revenue
(%)
83%
17%
96%
4%
Consultancy
Rest of Group
Investment Management
Rest of Group
21
Savills plc Report and Accounts 2017Financial statementsGovernance Strategic reportOverview Chief Financial Officer’s review
“ A combination of
resilience and growth
across our businesses
contributed to a strong
performance which
supports an improved
distribution to
shareholders for 2017”
Simon Shaw, Group Chief Financial Officer
Financial highlights
22
Savills plc
Report and Accounts 2017
Group revenue
up 11% to £1.6bn
(£1.55bn in constant
currency, 2016:
£1.45bn)
Underlying profit
up 3.5% to £140.5m
(£136.6m in
constant currency,
2016: £135.8m)
Underlying profit margin
Underlying profit margin decreased to
8.8% (2016: 9.4%), reflecting a decline in
substantial transaction activity in the US,
the anticipated reduction in Investment
Management profits following the reduced
level of disposal transactions from the SEB
German Open Ended Funds and the costs
of expansion in a number of regions.
Taxation
The tax charge for the year reduced to
£31.3m (2016: £32.1m), reflecting an
effective tax rate on statutory profit before
tax of 27.8% (2016: 32.1%). The
improvement in the 2017 effective tax rate
is primarily due to the reduction in non-
deductible acquisition costs, with the final
consideration for the Studley acquisition
paid in May 2017. In both years, the
Group’s effective reported tax rate is higher
than the UK effective rate of tax of 19.25%
(2016: 20.0%), reflecting the effect of these
non-deductible acquisition costs and the
geographic diversity of the Group’s profits.
The underlying effective tax rate at 25.8%
(2016: 26.1%) was lower primarily because
of the reduction in the rate of UK tax.
Restructuring, acquisition-
related costs and goodwill
During the year the Group recognised a
total of £29.0m in restructuring and
acquisition-related costs (2016: £34.5m).
These comprised an aggregate
restructuring charge of £7.7m primarily in
relation to the integration of the GBR
Phoenix Beard, Smiths Gore and SEB
acquisitions (2016: £5.8m) and acquisition-
related costs of £21.3m (2016: £28.7m).
These costs consist of £2.1m (2016: £1.5m)
of transaction related costs and £1.4m
in respect of Savills Investment
Management’s 2014 acquisition of
Merchant Capital (2016: £3.9m). In addition,
there was a £17.8m (2016: £23.3m) charge
for future consideration payments which
are contingent on the continuity of
recipients’ employment in the future.
The majority of this charge relates to the
2014 acquisition of Studley.
This principally reflected higher acquisition
activity in the year, in particular the final
payment of $67.4m to former partners of
Studley and the initial payment of €54.3m for
the acquisition of Aguirre Newman on 29
December 2017 (consisting of €42.0m of the
initial purchase price, with the excess being
working capital adjustments).
At the year end, an impairment review
established that a charge of £2.3m (2016:
nil) was recognised relating to the goodwill
on the Group’s Swedish property
management business. The residual
value of goodwill relating to the Swedish
business is not considered material.
These charges have been excluded from
the calculation of underlying profit in line
with Group policy.
Earnings per share
Basic earnings per share increased 20%
to 58.8p (2016: 48.8p), reflecting a 20%
increase in statutory profit after tax.
Adjusted on a consistent basis for
exceptional restructuring, acquisition-
related costs, impairment charges, profits
and losses on disposals, certain share-
based payment adjustments and
amortisation of acquired intangible assets
(excluding software), underlying basic
earnings per share increased by 5% to
75.8p (2016: 72.5p).
Fully diluted earnings per share increased
by 21% to 57.5p (2016: 47.7p). The
underlying fully diluted earnings per share
increased by 4% to 74.1p (2016: 71.0p).
Cash resources, borrowings
and liquidity
Year end gross cash and cash equivalents
decreased 7% to £208.8m (2016: £223.6m).
Gross borrowings at year end increased to
£110.2m (2016: £35.8m). These principally
comprise £106.0m drawn under the
Group’s multi-currency revolving credit
facility (‘RCF’).
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 where to remit it
would result in the Group suffering
withholding taxes.
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 £111.7m
(2016: £93.3m) reflecting the Group’s
increased operating profits. As much of the
Group’s revenue is 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. The Group has
a RCF of £300.0m, with an accordion
facility of a further £60.0m, which expires
on 15 December 2020.
Statutory profit
before tax up
13% to £112.4m
(£109.6m in
constant currency,
2016: £99.8m)
Underlying basic
EPS grew 5% to
75.8p (2016: 72.5p)
Statutory basic
EPS grew 20% to
58.8p (2016: 48.8p)
Final ordinary and
supplementary
dividends total 25.55p
per share (2016:
24.6p) taking the total
dividend for the year
up 4% to 30.2p per
share (2016: 29.0p)
Savills plc
Report and Accounts 2017
23
Financial statementsGovernance Strategic reportOverview
Chief Financial Officer’s Review continued
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.
In a period when sterling weakened
against all major currencies, the net impact
of foreign exchange rate movements
represented a £48.4m increase in revenue
(2016: £90.6m increase) and an increase of
£3.9m in underlying profit (2016: £9.0m
increase). Refer to Note 3.2 to the financial
statements for further information on
foreign exchange risk.
Simon Shaw
Group Chief Financial Officer
Treasury policies and objectives
The Group Treasury policy is 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 does not engage
in trades of a speculative nature and only
uses derivative financial instruments to
hedge certain risk exposures. The Group’s
financial instruments comprise borrowings,
cash and liquid resources and various other
items such as trade receivables and trade
payables that arise directly from its
operations. Surplus cash balances are
generally held with A rated banks or better.
Interest rate risk
The Group finances its operations through
a mixture of retained profits and bank
borrowings, at both fixed and floating
interest rates. Borrowings issued at variable
rates expose the Group cash flow to
interest rate risk, which is partially offset by
cash held at variable rates. Borrowings
issued at fixed rates expose the Group to
fair value interest rate risk. Group policy is
to maintain at least 70% of its borrowings in
fixed rate instruments.
Liquidity risk
The Group prepares an annual funding
plan which is approved by the Board and
sets out the Group’s expected financing
requirements for the next 12 months.
These requirements are ordinarily
expected to be met through existing
cash balances, loan facilities and
expected cash flows for the year.
Capital and shareholders’ interests
During the year 0.2m shares (2016: nil) were
issued to participants under the
Performance Share Plan. 1.9m (2016: 1.9m)
new shares were issued in the final
instalment of deferred consideration for the
acquisition of Studley. The total number of
ordinary shares in issue at 31 December
2017 was 141.9m (2016: 139.8m).
Savills Pension Scheme
The funding level of the Savills Pension
Scheme in the UK, which is closed to future
service-based accrual, improved during the
year as a result of an increase in the value of
the plan assets and contributions made
during the year. The plan deficit at the year
end amounted to £19.5m (2016: £40.8m).
Net assets
Net assets as at 31 December 2017 were
£441.7m (2016: £407.0m). This movement
reflected increased tangible assets and
receivables derived from the Group’s
trading performance and the effect of
acquisitions, primarily Aguirre Newman.
Key performance indicators (‘KPIs’)
The Group uses a number of KPIs to
measure its performance and review the
impact of management strategies.
These KPIs are detailed under the Key
Performance Indicators section on pages
14 and 15. The Group continues to review
the mix of KPIs to ensure that these best
measure its performance against its
strategic objectives, in both financial and
non-financial areas.
Financial policies and risk
management
The Group has financial risk management
policies which cover financial risks
considered material to the Group’s
operations and results. These policies are
subject to continuous review in light of
developing regulation, accounting standards
and practice. Compliance with these policies
is mandatory for all Group companies and is
reviewed regularly by the Board. Refer to
Note 3 to the financial statements for further
information on financial risk management.
24
Savills plc
Report and Accounts 2017
Risks and uncertainties facing the business
The Board is responsible for the Group’s system of risk
management and internal control. Risk management is
recognised as an integral part of the Group’s activities.
Identifying and managing our risks
The Board determines the Group’s appetite
for risk in pursuit of strategic objectives, and
the level of risk that can be taken by the
Group and its operating companies. Savills
businesses worldwide are responsible for
executing their activities in accordance with
the risk appetite set by the Board,
complemented by the Code of Conduct,
Group policies and delegated authority limits.
Risk is assessed across the Group using a
systematic risk management model covering
both external and internal factors and the
potential impact and likelihood of those risks
occurring. Risk assessments are
incorporated into risk registers at Group and
business level, which evolve to reflect the
reduction/increase in identified risks and the
emergence of new risks. Where it is
considered that a risk can be mitigated
further to the benefit of the business,
responsibilities are assigned and action
plans are agreed.
The Group Director of Risk & Assurance
facilitates the risk assessment and evaluation
process with Group and regional /business
unit management on behalf of the Board and
challenges risk findings and the internal
control framework to ensure that these are
effective. Group policies and delegated
authority levels set by the Board provide the
basis against which risks are reviewed and
escalated to the appropriate level within the
Group, up to and including the Board, for
review and confirmation.
We have a clear framework for identifying
and managing risk, both at an operational
and strategic level. Our risk identification and
mitigation processes have been designed to
be appropriate to the ever-changing
environments in which we operate.
The following chart summarises our business risk management structure.
PLC BOARD
PLC AUDIT COMMITTEE
GROUP EXECUTIVE BOARD
GROUP RISK COMMITTEE
EXECUTIVE COMMITTEES
GROUP RISK
HEADS OF GROUP
FUNCTIONS
HEADS OF OPERATING
COMPANIES
Key risks:
Key risks:
Heads of Group functions
identify the key risks and
develop mitigation actions
Heads of operating companies
create a register of their top
risks and mitigation actions
Review and confirmation
Review and confirmation by the Board
Process
Risks and mitigation reviewed by Audit Committee
after validation by the Group Risk Committee and
Executive Boards/Committees
Ongoing review and control
There is ongoing review of the risks and the controls
in place to mitigate these risks
Review and assessment
Group Director of Risk & Assurance consolidates the
operating companies functional and Group risks to
compile the Group’s key risks. Any significant programme/
project risks are also considered.
25
Savills plc Report and Accounts 2017Financial statementsGovernance Strategic reportOverview Risks and uncertainties facing the business continued
Roles and responsibilities
The Board continuously reviews the Group’s
key risks and is supported in the discharge
of this responsibility by various committees,
specifically the Audit Committee and the
Group Risk Committee.
The risk management roles and
responsibilities of the Board, its Committees,
and business management are set out
below, and all of these responsibilities have
been met during the year.
1. Board
Responsibilities
• Approve the Group’s strategy
• Determine Group appetite for risk in
achieving its strategic objectives
• Establish the Group’s systems of risk
management and internal control
The Audit Committee supports the Board
by monitoring risk and reviewing the
effectiveness of internal controls, including
systems to identify, assess, manage and
monitor risks.
Actions
• Receive regular reports on Internal
and External Audit and other
assurance activities
• Receive regular risk updates from
the businesses
• Determine the nature and extent of
the principal Group risks and assess
the effectiveness of mitigating actions
• Annually review the effectiveness
of risk management and internal
control systems
• Approve the Group risk management
policy
2. Group Executive Board
Responsibilities
• Strategic leadership of the
Group’s operations
• Ensure that the Group’s risk management
and other policies are implemented and
embedded
• Monitor that appropriate actions are
Actions
taken to manage strategic risks and key
risks arising within the risk appetite of
the Board
• Consider emerging risks in the context
of the Group’s strategic objectives
• Approve Group Policies
• Monthly/quarterly finance and
performance reviews
Group Risk Committee
• Monitor the application of risk appetite
and the effectiveness of risk management
processes. The Group Risk Committee
and Board also consider the Group’s
overall risk appetite in the context of the
negative impact that the Group can
sustain before it risks the Group’s
continued ability to trade
Actions
• Review of risk management and
assurance activities and processes
3. Subsidiary Executive
Committees’ Responsibilities
Responsibilities
• Responsible for risk management and
internal control systems within their
regions/businesses
Monitoring the discharge of their
responsibilities by operating companies.
Actions
• Review key risks and mitigation plans
• Review results of assurance activities
• Regularly review operational, project,
functional and strategic risks
• Review mitigation plans
• Plan, execute and report on assurance
activities as required by region or Group
The Group’s overall risk management
framework is further enhanced by the
contributions of specialist committees,
for example, I.T. Security.
Savills regularly reviews and enhances its risk
management process and seeks advice from
independent advisers where applicable.
Principal risks
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. Our
consideration of the key risks and
uncertainties relating to the Group’s
operations, along with their potential impact
and the mitigations in place, is set out below.
There may be other risks and uncertainties
besides those listed below which may also
adversely affect the Group and its
performance. More detail can be found in
the Audit Committee Report on pages 51
to 55.
In summary, our principal risks are:
1. Economic/country risks, particularly the
impact of a global economic downturn
2. Achieving the right market positioning
in response to the needs of our clients
• Escalate key risks to Group management
3. Recruitment and retention of high-
and Group Executive or plc Boards
calibre staff
4. Heads of the Group functions
and operating companies
Responsibilities
• Maintain an effective system of risk
management and internal control within
their function/operating company
4. Reputational and brand risk
5. Legal risk
6. Failure or significant interruption to
IT systems causing disruption to
client service
7. Business conduct
8. Changes in the regulatory environment
9. Acquisition/integration risk
26
Savills plc
Report and Accounts 2017
Risk
Description
Mitigation
1
Economic/country
risks, particularly the
impact of a global
economic downturn
Change from 2016
Increase
Strategic objective:
Geographic diversification/
Financial strength
Global market conditions are currently
volatile, with economic uncertainty in
some sectors and markets, particularly
the UK after the Brexit vote, the threat by
the US to impose tariffs and the perceived
increased risk of the US/North Korea
tensions escalating with consequential
economic impact. Group earnings and/
or our financial condition could be
adversely affected by these and other
macro-economic uncertainties. Savills
operates in a number of countries where
the transactional business is the largest
component and thereby increases the level
of economic risk.
There is a currency risk from operating in a
large number of countries.
2
Achieving the right
market positioning
in response to the
needs of our clients
The markets in which we operate are highly
competitive. Competition could lead to a
reduction in market share and/or a decline
in revenue. Our focus is on retaining existing
clients as well as engaging with new clients.
Our service offering continuously evolves
and improves to meet the changing needs
of our clients.
Change from 2016
No change
Strategic objective:
Business diversification/Strength
in Residential and Commercial
markets/Geographical diversification/
Commitment to clients
The strength of Savills business and brand and the focus on
client service.
Our strategy of diversifying our service offering and
geographic spread mitigates the impact on the business of
economic downturns and weak market conditions in specific
geographies, but these factors cannot entirely mitigate the
overall risk to earnings. To manage these risks, we continually
focus on our cost base and seek to improve operational
efficiencies.
Contingency plans are in place to enable us to respond
quickly to market information and economic trends. Continual
monitoring of market conditions and market changes against
our Group strategy, supported by the reforecasting and
reporting in all of our businesses, are key to our ability to
respond rapidly to changes in our operating environment.
The actual impacts of Brexit are still unclear, but we are
monitoring developments closely.
Our exposure to countries with economies which are currently
weak is balanced by our business in more stable markets.
When considering new market entry we undertake due
diligence including the impact assessment of political and
economic issues in that particular country.
We manage currency risk in local operations through natural
hedging and matching revenue and costs in the same currency.
To remain competitive in all markets, we continue to promote
and differentiate our strengths whilst focusing on providing the
quality of service that our clients require.
We continue to invest in the development of client relationships
globally and associated systems/digital technology to support
our client service offering.
3
Recruitment and
retention of
high-calibre staff
We recognise that the future success of
our business is dependent on attracting,
developing, motivating and retaining people
of the highest quality.
We continue to invest in the development of our people and our
training and development programmes across the businesses.
Our partnership style culture and profit-sharing approach to
remuneration is combined with selective use of share-based
and other rewards to incentivise and retain our best people for
the long-term benefit of the Group.
Change from 2016
No change
Strategic objective:
Financial strength/Commitment
to clients
4
Reputational
and brand risk
Change from 2016
No change
Strategic objective:
Strength in Residential and
Commercial markets/Commitment
to clients
Savills is a strong brand with an excellent
reputation in the markets in which we
operate. The Group’s reputation could be
damaged as a result of negative media
coverage. We recognise the need to
maintain this reputation by ensuring the
quality of the service we provide.
We recognise that our brand strength is vital to maintaining
market share in established and new markets. A brand
management programme is in place to ensure the brand’s
positioning and identity is clearly and consistently promoted.
Our social media policy is supported by guidance and training
as well as ongoing monitoring. All external statements have to
be appropriately approved.
We recognise that the quality of the service we offer is vital to
maintaining the brand. We have in place policies, controls and
processes to monitor the quality of our client service to support
our programme of continuous improvement.
The Group has well established corporate social responsibility
programmes.
Savills plc
Report and Accounts 2017
27
Financial statementsGovernance Strategic reportOverview Risks and uncertainties facing the business continued
Risk
Description
Mitigation
Legal risk
5
Change from 2016
No change
Strategic objective:
Financial strength/Commitment
to clients
6
7
Failure or significant
interruption to our IT
systems causing
disruption to client
service
Change from 2016
Increase
Strategic objective:
Financial strength/Commitment
to clients
Business conduct
Change from 2016
No change
Strategic objective:
Business diversification/Geographical
diversification/Commitment to clients
The Group has a range of policies in place including client
acceptance, legal and regulatory compliance, procurement,
contractor management and valuation.
We have Best Practice groups, policies, procedures and
training which are designed to deliver the relevant contractual
obligations and thereby mitigate against the risk of such
actions/claims being made and where such claims occur,
to limit liability, particularly in relation to consultancy services
such as valuations. Such policies are regularly reviewed.
The Group maintains professional indemnity insurance to
respond to and mitigate the Group’s financial exposure to
such claims.
As described below, our strong emphasis on appropriate
business conduct by all our employees, contractors and
associates further mitigates this risk.
Specific back-up and resilience requirements are built into
our systems. Our critical infrastructure is set up so far as is
reasonably practical to prevent unauthorised access and
reduce the likelihood and impact of a successful attack.
Our data centres are accredited to international information
security standards.
Business continuity and disaster recovery plans are in place to
cover the residual risks that cannot be mitigated.
We are continuously reviewing our resilience to cyber security
attacks due to the constant threat.
We have programmes to promote compliance with our Code of
Conduct, particularly in areas of higher risk such as procurement.
We have a zero tolerance approach to breaches of our Code of
Conduct.
Failure to fulfil our legal or contractual
obligations to clients could subject the
Group to action and/or claims from clients.
The adverse outcome of such actions/
claims could negatively impact our
reputation, financial condition and/or the
results of our businesses. For example:
• in accepting client engagements, Group
companies may be subject to duty of
care obligations. Failure to satisfy these
obligations could result in claims being
made against the relevant operating
Company;
• in our Property Management business,
we may be responsible for appointing
third party contractors that provide
construction and engineering services.
Failure to discharge these responsibilities
in accordance with our obligations could
result in claims being made against the
operating companies;
• in our valuation consultancy businesses,
we can be subject to claims alleging the
over-valuation of properties.
Major failures in our IT systems may result
in client service being interrupted or data
being lost/corrupted causing damage to our
reputation and consequential client and/or
revenue loss.
There is a risk that an attack on our
infrastructure by a malicious individual or
group could be successful and impact the
availability of critical systems.
We operate in international markets that
may present business conduct-related risks
involving, for example, fraud, bribery or
corruption.
Failure by the Group and its employees to
observe the highest standards of integrity and
conduct in dealing with clients, suppliers and
other stakeholders could result in civil and/
or criminal penalties, regulatory sanction,
debarring and/or reputational damage.
28
Savills plc
Report and Accounts 2017
Risk
Description
Mitigation
We are required to meet a broad range of regulatory
compliance requirements in each of the markets in which
we operate. For example:
• some of our operations have regulatory licences;
• in the UK, the Financial Conduct Authority (‘FCA’)
regulates the conduct of Savills Capital Advisors
and, both generally and in relation to the Alternative
Investment Fund Managers Directive, Savills
Investment Management, and the insurance
intermediary services provided to clients by Savills
UK; our businesses are regulated by The Royal
Institution of Chartered Surveyors (‘RICS’);
• Savills Investment Management entities are variously
regulated by the Bank of Italy, FCA in Japan, BaFin in
Germany and CSSF in Luxembourg;
• various countries, corporate entities and individuals
are subject to financial sanctions, which require
continuous monitoring in response to global events.
Failure to satisfy regulatory compliance requirements
may result in fines being imposed, adverse publicity,
brand/reputation damage and ultimately the withdrawal
of regulatory approvals.
We also have a number of key statutory obligations
including the protection of the health, safety and
welfare of our staff and others affected by our activities.
Environmental reporting requirements place
data-gathering responsibilities on our business in
common with other listed companies. Our current
priorities are on achieving readiness for the General
Data Protection Regulation.
The structuring and integration of acquisitions is critical
to realising the benefits sought. People, systems and
processes are key components
Our Group Policy Framework, which sets out
our standards for professional, regulatory,
statutory compliance and business conduct,
is reviewed regularly.
To support this Framework each business has
its own regulatory and statutory compliance resources
who monitor regulatory developments and maintain
the internal processes and controls required to fulfil our
compliance obligations.
Our compliance environment, at all levels, is subject
to regular review by internal audit and external
assurance providers.
We apply the Group acquisitions policy and
procedures and use professional advisers in the
due diligence process, and allocate responsibility and
accountability to individuals for integration. Post-
acquisition reporting keeps the Board aware
of progress against plan.
8
Changes in the
regulatory
environment
Change from 2016
Increase
Strategic objective:
Commitment to clients
9
Acquisition/
integration risk
Change from 2016
No change
Strategic objective:
Business diversification/Geographical
diversification/Strength in Residential
and Commercial markets/Financial
strength
Viability Statement
The UK Corporate Governance Code (the ‘Code’) requires the Company to issue a viability statement stating whether the Board believes that the
Group is able to continue to operate and meet its liabilities, taking into account its current position and principal risks. In accordance with the Code,
the Directors have assessed the viability of the Group over a three-year period to 31 December 2020, taking account of the Group’s current position
and the potential impact of the principal risks documented in the Strategic Report on pages 2 to 35. This longer-term assessment supports the
Board’s statements on both viability, as set out below, and going concern as set out on page 50.
The Directors have concluded that the three-year period is appropriate for this assessment being consistent with the period covered by the
Group’s strategic plan and the cyclical nature of property markets.
In assessing viability the Directors considered a number of factors including the resilience of the Group, taking account of its current position
and prospects, the Group’s strategic plan, the principal risks and uncertainties facing the business and the Board’s risk appetite as detailed
in the Strategic Report on pages 2 to 35. The strategy and associated principal risks which underpin the Group’s three-year plan, are
reviewed by the Directors at least annually. The Directors also satisfied themselves that they have the evidence necessary to support the
statement in terms of the effectiveness of the internal control environment in place to mitigate risk.
Sensitivity analysis was undertaken on the three year plan, including financing projections, to flex the financial forecasts under a variety of
scenarios, which involve applying different assumptions to the underlying forecast both individually and in aggregate, including assessing the
potential impact of a severe economic downturn analogous to that experienced during the Global Financial Crisis in 2008/09. The results of this
sensitivity analysis showed that the Group would be able to withstand the impact of such scenarios over the period of the financial forecast.
Performance against the three year plan is monitored on an ongoing basis, including regular Board briefings provided by the Heads of the
Principal Businesses on the progress made by those businesses. These reviews consider both the market opportunity and the associated
risks. These risks are considered within the Board’s risk appetite framework.
Based on the results of this review, the Directors confirm that they have a reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the three-year period ending 31 December 2020.
The Directors also considered it appropriate to prepare the financial statements on the going concern basis as explained in Note 2.1 to the accounts.
Savills plc
Report and Accounts 2017
29
Financial statementsGovernance Strategic reportOverview the most difference: People, Clients,
Environment and Community. Through a
localised approach and by focusing on these
key areas we give our businesses the freedom
to adapt quickly and to respond at a local level
to new opportunities in the markets in which
they operate. The Board receives annual and
ad hoc updates on CR activities and progress.
To ensure that we can readily identify emerging
issues and respond to them on a timely basis,
we continue to include the consideration of
CR-related issues in our Key Risk Registers.
Corporate Responsibility
Savills is committed to being a good
corporate citizen in all aspects of its
operations and activities. The Company,
therefore, holds itself accountable for
its social, environmental and economic
impacts on the people and places
where it does business.
All of our businesses are required to
comply with local legal standards as an
absolute minimum.
We endeavour to manage our impact in a
responsible and sustainable manner. To fulfil
this aim the Group actively embraces
a range of policies and practices that aim to
foster a positive approach towards corporate
responsibility as an integral part of our
day-to-day activities.
We focus on those key areas where we
believe we can make a difference and our
localised approach provides the flexibility
required to have meaning and impact at a
local level. At Savills, we learn through
experience and we actively encourage our
businesses to share their experiences and
develop best practice to ensure that we
continue to improve as an organisation.
Responsibility for our CR programme sits with
the Group Chief Executive and the Board. CR
strategy is co-ordinated by our CR Steering
Group, comprising senior representatives from
a range of businesses and central teams. The
strategy is implemented and delivered at
country level focusing on four aspects of CR
which we believe are key to the success of our
business and where we believe we can make
Our Business Principles
Pride in
Everything
We Do
We
• Take great pride in delivering the highest quality service.
• Go the extra mile.
• Seek to employ only the best people.
• Enjoy what we do.
Take an
Entrepreneurial
Approach to
Business
We
• Seek out new markets and opportunities for clients.
• Take a creative and entrepreneurial approach to delivering value.
• Are forward-thinking, and always aim to build long-term client relationships.
• Aim to be a leader in every market we enter.
Help our People
Fulfil Their True
Potential
We
• Encourage an open and supportive culture in which every individual is respected.
• Help our people to excel through appropriate training and development.
• Share success and reward achievement.
• Recognise that our people’s diverse strengths combined with good teamwork produce the best results.
• Believe that a rewarding workplace inspires and motivates.
• Strive to provide an environment in which our people can flourish and succeed – this allows us to recruit,
motivate and retain talented people and build on our status as an employer of choice.
• Engage with our people to communicate our vision and strategy through well-established internal channels.
Always Act
With Integrity
We
• Behave responsibly.
• Act with honesty and respect for other people.
• Adhere to the highest standards of professional ethics.
30
Savills plc Report and Accounts 2017 Our People
It is our vision to be the real estate
advisor of choice in our selected
markets and deliver superior financial
performance and this can only be
achieved through the dedication,
commitment and excellence of
our people.
Our people strategy remains focused on
supporting delivery of the highest standards
of client service through motivated and
engaged people. We believe that a positive
culture is essential to high quality client
service. This positive culture is encapsulated
in our business philosophy and our values.
Our reputation has been built on our people
and we believe that staff whose behaviours
reflect in our business philosophy deliver the
excellent client service that we strive to
provide. Our business philosophy also
captures our commitment to ethical,
professional and responsible conduct and our
entrepreneurial, value-enhancing approach.
Our people strategy highlights are set out
below.
Employee engagement
We continue to focus on employee
engagement through a number of areas of
focus. For example, in the UK we are
improving the capability of our leaders and
managers through our key programmes
Empower, Engage and Inspire. We have
improved the clarity of our reward and
benefits through the use of a new Total
Reward Statement, so that all our employees
clearly see the full reward package. We take
employee wellbeing seriously and have
introduced a wellbeing programme, which
includes Savills focused events and
committing to the Time to Change pledge, for
increased recognition of mental health in the
workplace, on World Mental Health Day.
Developing our people for
the long term
We want people to grow their careers at
Savills and develop the skills and talent
needed to grow our business. We firmly
believe in the value of developing future
talent from within the Group and the wider
business community and we are working
hard to help nurture the entrepreneurs and
leaders of the future.
We continue to invest significantly in the
development of all our people, for whom
we recognise that career development and
progression is very important.
We deliver training and development in all
areas including management and leadership,
client and business skills and professional
and technical skills. We recognise that
personal development occurs in many ways
and we encourage all our staff to attend
conferences, internal events, and participate
in projects to supplement their Continuous
Professional Development (‘CPD’).
For example, in the UK, the format of our
training varies from one-hour masterclasses,
webinars, and video content, to two-day
pitching courses and management and
leadership workshops. We encourage and
support all our staff to complete their CPD
and all our internal courses/programmes have
CPD points associated with them. All of this is
supported by a dedicated training team, who
offer individual career development advice
and a dedicated page on the Company
intranet which pulls together all the
information our people need to plan their
personal development. In order to manage
individual development and ongoing learning,
we have launched a Learning Management
System (LMS) in the UK. The LMS is mobile
compatible, allows individuals to track and
manage their development, watch video
podcasts and download course materials.
In Asia, we are progressively extending our
CPD programme, tailoring it as appropriate
to best meet local requirements.
We have also extended our CPD programme
across the US.
Our graduates are our future leaders. They
are given responsibility from the day they join
the business, in teams which highly value
their contribution, allowing them to be
involved in some of the world’s most
high-profile transactions and developments.
Graduates are surrounded by experienced
professionals and team members from
whom they can seek advice and learn.
Individual achievement is rewarded and
Savills looks for graduates with
entrepreneurial flair and diverse skills. In the
UK, Savills were proud to be named The
Times Graduate Employer of choice for
Property for the 11th year in a row and we
continue to see a record number of
applicants for this and our student summer
scheme and work placement programmes.
In 2017 Savills was also ranked 83 (up 11
places) in the Times Top 100 Graduate
Employers and number 1 on “Rate my
Placement” for our summer scheme
programme. We continue to work with some
of our UK industry peers, the Changing the
Face of Property (‘CTFOP’ group), on
initiatives such as an apprenticeship
programme to offer jobs to school leavers.
In the US, Savills we implemented a Young
Leaders Programme and our Savills Studley
Academy, a multi-year business mentorship
programme aimed at harnessing the talent
of the rising stars, is now in it’s second year.
In 2017, in Asia Pacific, we ran four Inspire
courses in Greater China, North Asia, South
East Asia and Australia; a two-year course
for emerging leaders of the business who will
be assigned a lifetime mentor and schooled
in the art of business leadership. In 2018 we
are launching the Inspire Programme for the
next generation of leaders in the business.
31
Savills plc Report and Accounts 2017Financial statementsGovernance Strategic reportOverview Corporate Responsibility continued
Our People continued
A diverse and inclusive culture
We look to create an inclusive culture in which
difference is accepted and valued. We believe
that our inclusive approach gives us a
competitive advantage and underpins the
success of our business by giving us the ability
to select our people from the highest quality
individuals in the widest available pool of talent.
The UK Government has introduced
legislation that will require employers with
250 or more UK employees to disclose
information on their gender pay gap. The
gender pay picture for Savills UK, calculated
in accordance with the published
requirements has been published on
the Savills UK’s website.
As an organisation committed to diversity in its
workforce, we will continue to strengthen our
policies, processes and practices to develop
our diversity and inclusion plans within the
Group’s markets and geographies, in
alignment with our corporate goals. We will
continue to endeavour to improve the
representation of women at Board and senior
levels within the organisation and to sustain an
inclusive culture in which all talent can thrive.
UK – Savills Diversity Group
One of our initiatives was to launch a Diversity Group in the UK which is now in its
third year. The objective is to highlight the diversity of our business and ensure that we
are communicating clearly and effectively about our people and our clients. This year
has seen a number of significant activities for our Diversity group. We have launched
“unconscious bias” training led by the UK Executive Committee, which is now part of
all development programmes including Company induction. Wellbeing and mental
health have also been key areas of focus. Other Initiatives which the Diversity Group
continue to be involved in include:
1. Savills with schools
Our current graduates attend a local state secondary school to deliver presentations about
careers in property. This highlights the variety of roles in real estate as well as opportunities
for students to engage on an individual basis.
2. Careers in property
Savills Graduate team collate a guide to the real estate industry, looking at careers in
the industry from governing bodies, educational institutions and employers to provide
candidates with a comprehensive guide to joining the industry. This is currently shared
with all UK university careers services in the UK. We also support the Property Needs
You and Urban Plan campaigns in schools.
3. Apprenticeships
Savills Surveying Apprentices join teams across the UK. After six years in the business
they will gain their BSc in Real Estate and their full MRICS status.
4.Changing the Face of Property (CTFOP)
We continue to be a member of the CTFOP group, a collaboration of employers,
governing bodies and education providers who work together to raise awareness of the
industry, and drive equality. We attend the Skills London as well as a number of career
fairs, and supported the Trailblazer Apprenticeship scheme with RICS. We also ran a
number of internal diversity events for our Gender and LGBT groups. We also
participated in the London Pride March with the rest of the CTFOP companies.
Our people come from a wide range of
backgrounds and have a diverse range of
skills and experience. We believe that we
have created a culture in which those skills,
experience and perspectives are nurtured
and encouraged. As an example of our
commitment to diversity, in the UK we are
focused on increasing the diversity of our
business in order to reflect the needs of our
clients and have achieved the RICS Equality
Mark. We are fully engaged in a diversity
programme ‘Changing the Face of Property’
which focuses on improving diversity across
social and economic background, disability,
LBGT, age and gender. We have also
improved our maternity policy, introduced
mentoring and coaching for women and held
a number of events with clients and keynote
speakers. In addition, we proactively review
our promotions to ensure that the numbers
going forward for promotion, by gender, are
in line with the make-up of the division. For
the LBGT network, we have held a number
of events, participated in the London Pride
March and we are now listed on the
Stonewall Diversity Index.
We believe that creating an inclusive and
diverse culture supports the attraction and
retention of talented people and supports
effective performance. We respect our
people for who they are, their knowledge,
skills and experience as individuals and as
valued members of the Savills team. We
work together to bring out the best in each
other and to sustain the strong working
relationship ethic that has nurtured our ‘can
do’ attitude. As at 31 December 2017 our
total global workforce of 35,398 colleagues
comprised 19,327 males and 16,071
females. Of these, 184 were senior
executives (163 males, 21 females)
comprising members of the Group Executive
Board and Board members of the corporate
entities whose financial information is
incorporated in the Group’s 2017
consolidated accounts in this Annual Report.
The Company’s Board of Directors
comprised seven members – six males
and one female.
32
Savills plc Report and Accounts 2017 Our Clients
Excellent client service is at the core
of our business. We strive to develop
strong, long-term partnerships with our
clients and to deliver an exceptional and
personal client experience which is
tailored to our clients’ requirements and
needs. We do this by ensuring we have
specialist teams who can deliver the
best quality advice throughout the
property life cycle. We work hard to
ensure that in managing our client
relationships we are solutions-oriented,
pro-active and focused on excellent
client communication.
Gaining a deep understanding of our clients’
businesses through an ongoing dialogue is
fundamental to delivering a service which
meets their needs. Client review meetings are
a vital part of our approach to client care. We
invest in an independent client review
programme to understand how well we plan
and execute the services we provide, how well
we communicate and what additional value
we give our clients. This provides an important
independent rating of the standard of our client
service which is reviewed regularly and used
to refine the Savills client experience.
In the UK, for example, Savills top clients have
a dedicated client relationship lead (client
advocate) whose core responsibility is to act
as a focal point for client servicing enquiries,
and, in particular, to allow any service issues
on current instructions to be quickly identified
and addressed. These client advocates also
play a key role in reviewing our performance
with our clients, in tandem with the client
review programme, ensuring we understand
where we have met or exceeded expectations
and those areas in which we can do better.
Ultimately this approach provides a complete
insight into our clients’ priorities so that we can
make the appropriate skills, expertise and
resources available.
We recognise that there are clients that
benefit from a full Savills service offering.
To deliver the best value to these clients we
have a client management programme in
place with a dedicated Client Relationship
Management (‘CRM’) team. Each of these
clients has a tailored client care plan which
includes a review of the current year, key
client priorities, client communications and
interactions, financials and importantly,
agreed actions and responsibilities. Our
client teams are further supported by a
central client management system which
consolidates client data into readily
accessible client intelligence reports, ensuring
we are providing the joined up approach
our clients expect.
We are progressively extending this approach
globally, tailored to meet local requirements.
Our Responsibility to the Environment
Across our global business Savills is
committed to reducing the impact that
our operations have on the natural
environment and to minimising the risk
of injury and ill health staff and others
who are affected by our businesses by
providing safe and healthy working
environments.
Safe working practices form an integral part
of our day-to-day business and we aim to find
practical solutions to health and safety risks.
To this end, our safety strategy is focused on
priorities such as reducing occupational
exposure to workplace hazards, maintaining
regulatory compliance and seeking to
continuously develop and strengthen our
health and safety arrangements.
Environmental impact
Across our global business, Savills is
committed to reducing the impact that our
operations have on the natural environment.
By actively seeking to reduce our
environmental impact, we are able to achieve
increased operational efficiencies and
savings, both internally and for our clients.
As one of the leading real estate advisors,
Savills acknowledges the importance of
demonstrating leadership in this area. This
includes measuring, and being accountable
for, our global environmental impact.
For example, in Australia, we engage
proactively with several key industry and
not-for-profit environmental groups, including
Property Council Australia, The Green
Building Council and Sydney’s Better
Building Partnership.
As part of this continuing drive to mitigate our
impacts, and as a hallmark of quality, our
offices continue to work to secure ISO14001
2004 status: the international standard for
environmental management systems. 255
Savills teams in the UK have now achieved this
accreditation. During 2018 the accreditations
in place will transition to the revised 2015
edition of the 140001 international standard.
In Hong Kong, Savills continues to participate
in various environmental protection activities,
such as Chinese New Year Waste Electrical
and Electronic Equipment Recycling
Collection Services (awards were obtained by
25 our managed buildings), Wood Recycling
and Tree Conservation Scheme and a
scheme on Source Separation of Commercial
and Industrial Waste.
In the UK, Savills has worked to improve the
environmental performance of its own office
estate through a series of waste and energy
management initiatives. During 2017, Savills
moved to a national contract for the disposal
of non-hazardous waste streams, the new
contract currently covers 75% of some 127
offices. Moving to a national contract has
enabled the introduction of enhanced
recycling facilities at a local level, as well as
additional control over the final destination
of our waste, avoiding landfill disposal
wherever possible.
Greenhouse gas emissions
Our Greenhouse Gas Emissions Statement
includes all emission sources required under
the Companies Act 2006 (Strategic Report
and Directors’ Report) Regulations 2013 for
the financial year to 31 December 2017,
compared against our baseline year to
31 December 2013. For comparative
purposes, data is also shown for our
previous reporting year, 2016.
Scope
We continue to expand the scope of our
data collection regularly. In consequence,
we are now reporting on GHG emissions at
a more granular level from our UK, Europe,
US, Canada, Australia, New Zealand, Hong
Kong, Japan, Singapore, and key Chinese
operations. In subsequent years, we will
continue to strive to add to this list where
emission activities are found to be material
and where reliable activity data is available.
33
Savills plc Report and Accounts 2017Financial statementsGovernance Strategic reportOverview Corporate Responsibility continued
Our Responsibility to the Environment continued
Methodology
To coordinate the collection of GHG data
worldwide, a network of Environmental
Reporting Nominees (ERN) has been
established, reporting to the Group Legal
Director & Company Secretary. Specialist
third party verified environmental reporting
software has been adopted by this network
to ease data collection, ensure data quality,
disseminate results effectively, and complete
emission calculations more efficiently.
The adopted reporting methodology is the
GHG Protocol Corporate Accounting and
Reporting Standard. Through the ERN
network we have attempted to calculate
greenhouse gas emissions using actual
activity data for the reporting period,
wherever possible. In the instances where
activity data was not found to be wholly
reliable or readily available, we have
determined the relevant emissions by using
a range of standard carbon accounting
measures, including extrapolating data and
use of indicator based estimation (floor area
and head count). To allow easier comparison
between reporting locations and year on year
results, a standardised per capita intensity
ratio (based on the number of full-time
equivalent employees) has been utilised. We
consider that this is the most effective means
of reflecting our wide range of activities in a
quantifiable common factor.
As evident in the table below, our total
emissions decreased by approximately
4.49% in 2017.
Total Global GHG Emissions1
GHG Emissions Scope 1 (Direct)
GHG Emissions Scope 2 (Indirect)
Total Gross Emissions (Scope 1 + 2)
Total Employees (FTE yr. av.)
GHG FTE Intensity Ratio3
Notes:
2017
tCO2e
2,479
6,050
8,530
8,243
1.03
2016
tCO2e
2,518
6,450
8,968
7,998
1.12
2013
base-line2
tCO2e
1,292
5,132
6,424
4,508
1.42
1 Emissions factors based on Defra/DECC Guidelines 2011 and other globally recognised methodologies.
2 Total global emissions for Carbon Reporting 2013: UK, Rest of Europe, Australia/New Zealand and Hong Kong only.
3 Total gross emissions, divide by total full-time equivalent employees (FTE) year average.
The corresponding figures for our per capita
intensity ratio show a 7.7% reduction
compared to the previous year, which is
particularly pleasing given our global FTE
numbers increased by more than 3% during
the reporting period. When measured against
our base year of 2013, this now represents an
improvement of more than 20%.
This substantial reduction has been achieved
through progressive initiatives to improve the
environmental efficiency of our offices,
including more energy efficient lighting, better
climate control and IT upgrades. These
measures are complemented by broader
sustainability strategies at the corporate level
and include the application of green building
principles during the selection/refurbishment
of our occupied spaces, space consolidation,
and the continued focus on improving energy
metering/monitoring.
Environmental Objective
Group Executive Board
Commitment
Savills is confident in making
continued steady reductions to our
corporate environmental footprint in
the coming years. To that end, the
Group Executive Board, in October
2017, resolved to adopt a global
objective of a 5% total global reduction
target over a 3 year period, calculated
against the 2016 reported GHG
emissions figures, normalised by
utilising the Full Time Equivalent (FTE)
year average employee numbers.
Our Responsibility to our Community
Our offices and our people are actively
involved in their communities through our
support of charitable causes and other
social and business organisations, including
making financial, in kind and time
contributions.
We believe that the community engagement
programmes that we have developed have a
positive impact on the areas where our
people live and ensure that Savills is firmly
engaged with the communities we serve.
We are a membership of FTSE4Good*,
evidencing our commitment to
meeting globally recognised corporate
responsibility standards.
*
The FTSE Group confirms that Savills plc has been independently assessed according to the FTSE4Good criteria, and has satisfied the requirements to remain a constituent of
the FTSE4Good Index Series. Created by the global index company FTSE Group, FTSE4Good is an equity index series that is designed to facilitate investment in companies that
meet globally recognised corporate responsibility standards. Companies in the FTSE4Good Index Series have met stringent environmental, social and governance criteria, and are
positioned to capitalise on the benefits of responsible business practice.
34
Savills plc Report and Accounts 2017 Spotlight on Community
Fundraising in the US
Project WeCan in Asia
Savills Studley is dedicated to promoting
leadership, volunteerism and support of
charitable organisations. Our employee-
led initiatives focus on children’s health,
wellness and education, cancer research
and community-based projects that
better the local environment.
One of our signature CR initiatives is the
JDRF Real Estate Games which is a
day-long Olympics-style event in which
commercial real estate firms in the
Washington, DC region compete to raise
funds for T1D diabetes research. The
event has grown to become our industry’s
premier fundraiser. It now includes more
than 130 companies and 2,500
participants with plans to expand to
New York, Chicago and Los Angeles.
It was Savills first year as part
of the Project WeCan which aims
to empower local secondary
schools. This year, we sponsored
Pui Ying Secondary School in
Aberdeen. Savills has participated
a number of events associated
with this project, including inspiring
talks by our management at the
sponsored school hall, and
attended the signature event, the
Young Innovators Bazaar. We
believe our support and advice
for the students will enhance
their skills including leadership,
entrepreneurship, communication
and project management.
Supporting the charity YoungMinds
Savills Graduate Charity Committee have been supporting the charity YoungMinds
which works to improve the wellbeing and mental health of children and young people.
The charity helps young people, their parents, the professionals who work with them
and the policy makers in the government to improve mental health for children and
young people in the UK. As part of its commitment to the charity, Savills held
fundraising events as part of YoungMinds #HelloYellow week, championing the
wellbeing and mental health of young people.
Caring Company 10
consecutive years
In recognition of Savills Guardian’s
efforts in support of charitable causes,
Savills Guardian continues to hold the
‘Caring Company 10 consecutive years’
logo as acknowledgement of Savills
Guardian’s participation in the Caring
Company Scheme.
35
Savills plc Report and Accounts 2017Financial statementsGovernance Strategic reportOverview Governance
38 Corporate Governance Statement
38 Chairman’s introduction
40 Leadership
44 Board of Directors
46 Group Executive Board
47 Effectiveness
50 Accountability
51 Audit Committee report
56 Compliance with the UK Corporate
Governance Code
58 Directors’ Remuneration report
74 Directors’ report
76 Directors’ responsibilities
36
Savills plc
Report and Accounts 2017
Overview
Strategic report
Governance
Financial statements
Savills plc
Report and Accounts 2017
37
Chairman’s introduction
“ On behalf of the Board, I am pleased
to introduce our 2017 Corporate
Governance Report. Governance best
practice continues to evolve and in this
year’s report we describe the Group’s
compliance with the 2016 UK Corporate
Governance Code (the ‘Code’) and
explain how the Board and its
Committees have operated in 2017.”
The Main Principles of the Code provide the
framework for the reporting model which we
continue to use. Our approach to:
• Leadership is set out on pages 40 to 46
• Effectiveness is described on
pages 47 to 49;
• Relations with Shareholders and
Other Stakeholders is described on
page 50; and
• Accountability is described on
pages 50 to 55.
The Board is committed to maintaining the
highest standards of corporate governance,
which are fundamental to discharging our
responsibilities. As Chairman, it is my role to
ensure the highest standards of governance
are promoted by the Board and to ensure
that the Group is governed and managed in
the best interests of shareholders and wider
stakeholders. This includes encouraging
open discussion and constructive challenge.
In this report, we set out our governance
framework and explain how robust and
effective corporate governance practices
enable the Group to deliver its strategy and
create long-term shareholder value. Further
information on our strategy and business
model can be found on pages 2 to 35.
To support the Board, in 2017 we extended
the remit of the Nomination Governance
Committee to include the monitoring of the
Company’s compliance with applicable
codes and other requirements of corporate
governance and the Committee was
renamed the Nomination & Governance
Committee.
We continue to work hard to maintain a
culture where ‘doing the right thing’ is at the
core of how we do business. As custodian
of Savills culture the Board demands
openness and transparency to maintain an
environment in which honesty, integrity and
fairness are valued and practised by our
people every day. The Board’s behaviour and
the values it demonstrates set the tone to
guide our people’s behaviour and ensure that
we live by and demonstrate the right values
which in turn enable entrepreneurial and
prudent management to deliver long-term
success for the Group and its stakeholders.
Overview
Leadership
• The Group’s current corporate
governance structure
Effectiveness
• The Board’s composition and
independence
Accountability
•
Internal controls and
risk management
• The role of the Board and its
• Board induction and development
• Going concern
Committees
• Board and Committee performance
• Dialogue with Shareholders
• How the Board operates
evaluation
• Board activities during the year
• Nomination & Governance
Committee report
• Audit Committee report
38
Savills plc
Report and Accounts 2017
It is important in my role as Chairman to
ensure that the Board has the right blend of
skills and experience. As an international
business, we benefit from our Non-
Executive Directors’ knowledge of and
involvement with other businesses in Hong
Kong and China, Europe and the US. At
least half of the Board members throughout
the year were Independent Non-Executive
Directors (excluding me, as Chairman). The
details of their skills and experience are,
along with those of the other Board
members, set out on pages 44 and 45.
In accordance with the Code, each Director
will stand for re-election at the 2018 AGM
on 8 May 2018. The Board also reviews
Non-Executive Director independence on
an annual basis and takes into account the
individual’s experience, their behaviour at
Board meetings and their contribution to
unbiased and independent debate. The
Board considers that all of the Non-
Executive Directors bring considerable
management expertise and strong
independent oversight. All of the Non-
Executive Directors are considered by the
Board to be independent, including Charles
McVeigh, notwithstanding his long service.
The Board is committed to a culture that
attracts and retains talented people to deliver
outstanding performance and further
enhance the success of the Group.
The Board recognises the benefits of having
diversity across all areas of the Group. We are
committed to eliminating discrimination and
encouraging diversity amongst our people.
Our aims are that our business will be truly
representative of all sections of society and
that each employee feels respected and able
to give their best. The Company’s policy on
diversity applies across all levels of the Group
and further details of the policy can be found
in the Corporate Responsibility (‘CR’) section
on pages 30 to 35.
In line with the requirements of the
Code we continue to test the Board’s
effectiveness and performance annually
through a formal evaluation.
This is facilitated by an independent external
consultant at least once every three years.
JCA Consultants externally facilitated the
review in 2016, so this year’s evaluation was
conducted in-house, led by the Chairman and
facilitated by the Group legal director &
Company Secretary. The process, key
conclusions and areas of focus for 2018 are
set out on page 49. Following this review, I am
satisfied that the Board continues to perform
effectively and in particular I am confident that
the Board has the right balance of skills,
experience and diversity of personality to
continue to encourage open, transparent
debate and challenge.
The Board recognises the recommended
term for Non-Executive Directors within the
UK Corporate Governance Code and it is
mindful of the need for suitable succession.
In 2018 we have started the process of
recruiting a further Non-Executive Director.
On 16 January 2018 we announced that,
after 11 years in the role, Jeremy Helsby
intended to retire as Group Chief Executive
Officer at the end of the 2018 financial year.
During 2017 the Board, through the
Nomination & Governance Committee,
completed the process to recruit his
successor. Following a comprehensive
review, it was agreed that Mark Ridley,
currently CEO of Savills UK and Europe,
should be offered the role of Group Chief
Executive Officer with effect from 1 January
2019, and to join the Board as an additional
Executive Director and Deputy Group Chief
Executive Officer effective from 1 May 2018.
During the year, the Audit Committee
reviewed the FRC’s Guidance on Audit
Committees. The Audit Committee was
satisfied that the Company complies with
the 2016 Code, and has considered the
Guidance on Audit Committees.
At our AGM in 2017, we received support
for our Directors’ Remuneration Report and
Policy from 99% of Shareholders voting.
The 2017 Remuneration Report (pages 58
to 73) provides a summary of the Policy
approved by shareholders at the 2017 AGM
and a detailed review of the Remuneration
Committee’s activities, and bonus and share
scheme performance, in 2017.
We believe that engaging with our
Shareholders and encouraging an open,
meaningful dialogue between Shareholders
and the Company is vital to ensuring mutual
understanding. We are in regular contact
with our major Shareholders and potential
Shareholders through a regular, scheduled
programme of meetings as part of our
continuing commitment to this open and
transparent dialogue. You can read more
about Shareholder engagement on page 50
and in the meantime, my fellow Directors
and I look forward to continued dialogue
and meeting with Shareholders at our AGM
in May where I will be happy to answer any
further questions.
Overall I remain happy with the Board’s
activity across our governance agenda.
However, we will continue to challenge
ourselves and the business and to consider
and to learn from our decisions to ensure
that we build upon the existing strength of
our governance structure.
Nicholas Ferguson CBE
Chairman of Savills plc
14 March 2018
Remuneration
• Statement by Remuneration
Committee Chair
• Remuneration Committee Report
UK Corporate Governance Code (April 2016)
The UK Corporate Governance Code 2016 (the “Code”) is the standard against which we
measured ourselves in 2017. A copy of the Code is available from the Financial Reporting
Council’s website at www.frc.org.uk. We are pleased to confirm that we complied with all
of the provisions set out in the Code for the period under review. Further information
about how the Board complies with the Main Principles is set out on pages 56 to 57 of
this Annual Report.
Savills plc
Report and Accounts 2017
39
Financial statementsGovernance Strategic reportOverview Leadership
Our governance framework
Board
(Chairman,
two Executive
Directors
and four
Non-Executive
Directors)
Audit
Committee
• Has primary responsibility for providing entrepreneurial leadership
• Oversees the overall strategic development of the Group
• Sets the Group’s values and standards
• Ensures that the Group’s businesses act ethically and that obligations to Shareholders are understood and met
• Delegates the management of the day-to-day operation of the business to the Group Chief Executive,
supported by the Group Executive Board subject to appropriate risk parameters.
Matters reserved to the Board
• The Board has adopted a formal schedule of matters specifically reserved to it for decision-making.
A full schedule of matters reserved for the Board’s decision along with the Terms of Reference of
the Board’s principal Committees can be found on the Company’s website at
www.savills.com/en/company-information/corporate-governance.aspx
• Responsible for assisting the
Board in fulfilling its financial and
risk responsibilities, and in
particular for ensuring that the
financial statements are fair,
balanced and understandable
• Oversees financial reporting,
internal control, risk management
and reviews the work of the Internal
and External Auditors
• Advises the Board on the
appointment of the External
Auditors.
Chair: Liz Hewitt
Number of meetings
in the year: 4
See pages 51 to 55
Remuneration
Committee
• Responsible for the broad
policy governing senior staff
pay and remuneration
• Sets the actual levels of all elements
of the remuneration of the Executive
Directors
• Reviews the remuneration
of Group Executive Board
members.
Chair: Rupert Robson
Number of meetings
in the year: 4
See pages 58 to 73
CR Steering
Group
• Coordinate Corporate Responsibility (‘CR’) activity to deliver Savills
agreed goals
• Oversees Savills CR Strategy for the Group globally and
recommending changes to it when appropriate
• Monitors Group-wide CR progress and performance and identifying to
the Group Executive Board areas where action needs to be taken
• Ensures that key CR responsibilities and achievements are
communicated to all staff globally and externally to interested parties
• Gathers and records information about all existing CR programmes
and initiatives taking place within the Group
• Helps to determine indicators and measures that will be used to
ascertain performance against prioritised CR impact areas
• Helps to identify on any external indices, initiatives, codes and
standards for Savills to use or adopt to help validate CR performance
• Responsible for overseeing preparation of the CR section of the
Annual Report.
40
Savills plc
Report and Accounts 2017
Nomination &
Governance
Committee
Executive
Committees
• Responsible for size, structure and
composition of the Board
• Reviewing and progressing
appointments to the Board
• Responsible for succession planning
to ensure that the Board is refreshed
progressively such that the balance
of skills and experience available to
the Board remains appropriate to the
needs of the business
• Makes recommendations to the
Board on the membership of the
principal Committees of the Board.
• Monitoring of the Company’s
compliance with applicable codes
and other requirements of
Corporate Governance.
Chair: Nicholas Ferguson
Number of meetings
in the year: 3
See pages 47 to 49
Lead each Principal Business
• Responsible for the day-to-day
management of the relevant
Principal Business
• Oversees the development and
implementation of strategy, capital
expenditure, and investment
budgets for the ongoing review
and control of Group risks,
reporting on these areas to the
Group Executive Board and, as
necessary, the Board for approval
•
Implements Group policy
• Monitors financial and operational
performance of the relevant
Principal Business and other
specific matters delegated to it by
the Group Executive Board.
Group Chief
Executive
• Responsible
for the
day-to-day
management
of the Group
Group
Executive
Board
Group Risk
Committee
• Key executive management
committee of the Group
• Responsible for the day-to-day
management of the Group
• Oversees the development and
implementation of strategy, capital
expenditure, and investment
budgets, for the ongoing review
and control of Group risks,
reporting on these areas to the
Board for approval
•
Implements Group policy
• Monitors financial and operational
performance of the Group and
other specific matters delegated to
it by the Board.
Chair: Group Chief Executive
Composition: Group Chief
Financial Officer, the Heads of the
Principal Businesses and the Group
Legal Director & Company Secretary
•
Identifies and evaluates Group
level risks
• Reviews and challenges risks
reported by subsidiaries
• Champions the ongoing Group-
wide development of risk
management and the internal
controls framework
• Monitors internal audit and other
sources of assurance on the
effectiveness of internal controls.
Savills plc
Report and Accounts 2017
41
Financial statementsGovernance Strategic reportOverview Leadership continued
Attendance at Board and Committee meetings
The Board met formally eight times during the year. Attendance at all Board and Committee meetings by Directors is as shown in the
table below.
Non-Executive Directors
Nicholas Ferguson1
Tim Freshwater
Liz Hewitt
Rupert Robson
Charles McVeigh
Executive Directors
Jeremy Helsby3
Simon Shaw3
Board
meetings
attended
Meetings
eligible to
attend
Audit
Committee
meetings
attended
Meetings
eligible to
attend
Nomination &
Governance
Committee
meetings
attended
Meetings
eligible to
attend
Remuneration
Committee
meetings
attended
Meetings
eligible to
attend
8
8
8
8
8
8
8
8
8
8
8
8
8
8
– 1
4
4
4
–
– 4
– 5
– 1
4
4
4
–
– 4
– 5
3
3
3
3
–
3
3
3
3
3
–
3
– 2
4
4
4
–
– 2
4
4
4
–
1 The Chairman attended two Audit Committee meetings by invitation
2 The Chairman attended four Remuneration Committee meetings by invitation
3 Members of the Group Executive Board
4 The Group Chief Executive attended four Audit Committee meetings by invitation
5 The Group Chief Financial Officer attendees four Audit Committee meetings by invitation
How the Board Operates
The Board has formally adopted a schedule of matters reserved to it for decision. A full schedule of matters reserved for the Board’s decision
along with the Terms of Reference of the Board’s principal Committees can be found on the Company’s website at www.savills.com/en/
company-information/corporate-governance.aspx.
The Board and Committee meetings are structured to allow open discussion. To enable the Board to discharge its duties, each Director
receives appropriate and timely information. Board papers are circulated electronically via a secure portal, giving Directors sufficient time
to consider and digest their contents. When unable to be present in person, Directors may attend by audio or video conference.
When Directors are unable to attend a Board or Committee meeting, their views on the key items of business to be considered at that
meeting are relayed in advance to the Chairman of that meeting in order that these can be presented at the meeting and be considered
in the debate.
Regular attendance at Board meetings by the Heads of Principal Businesses on matters of significance ensures that the Board has the
opportunity to discuss business risks and opportunities with leaders from across the Group. The Group Legal Director & Company
Secretary provides the Board with updates and reports covering legal developments and regulatory changes. The Chairman, together
with the Group Legal Director & Company Secretary, ensures that the Directors receive management information, including financial,
operating and strategic reports, in advance of Board meetings.
At its meetings during the year, the Board discharged its responsibilities and received updates on the Group’s financial performance,
key management changes, material new projects, investment proposals, financial plans, and legal and regulatory updates.
42
Savills plc
Report and Accounts 2017
Board activity in 2017
The diagram below shows the key areas of
Board activity during the year. One of the
Board’s meetings during the year was
specifically devoted to the review and
reconfirmation of the Group’s strategy.
This meeting benefited from presentations
and discussions with a number of the Heads
of the Principal Businesses. The delivery of
strategic plans continues to be monitored
and reviewed by the Board and periodic
updates on progress and market
developments will be presented by the
Heads of the Principal Businesses as part of
this continuous review process.
y
g
e
t
a
r
t
S
F
i
n
a
n
G o vernance
a
n
d
I
n
R
t
i
e
s
r
k
n
a
M
l
a
C
n
o
Five Key Areas of Board
activity during the year
n
t
r
o
l
a
g
e
m
e
n
t
c
i
a
l P
erformance
h i p a n d People
s
r
L e a d e
Leadership
and people
• Agreed the appointment of Mark Ridley as Group Chief Executive Officer (effective 1 January 2019)
as successor to Jeremy Helsby and Mark Ridley’s appointment to the Board as an additional
Executive Director and Deputy Group Chief Executive Officer effective from 1 May 2018
• Reviewed senior management succession plans
• Considered long term incentive arrangements for the US, and introduced a new long term incentive
plan (based on the models successfully implemented elsewhere in the Group) to incentivise and
further motivate fee earners and to better align US fee earners and shareholders interests
• Reviewed the composition of the Board and its Committees
Strategy
• Reconfirmed the Group’s strategy, in particular an in-depth review of Savills US future growth plans
• Reviewed the Group’s target delivery and achievement of goals
• Evaluated the performance of acquisitions completed in 2016 against expectations, including GBR
Phoenix Beard in the UK, and acquisitions made by Savills Studley in the US
• Considered and approved significant acquisitions completed during the year, including the
acquisitions of Aguirre Newman in Spain and Larry Smith in Italy
• Reviewed the Group’s Technology Strategy, including cyber strategy, and approved investments in
two technology start-ups which are focussed on developing software which would enhance the
Group’s client offering
• Considered and approved the Group’s Going Concern and Viability Statements
Internal control
and risk management
• Reviewed and confirmed the principal risks facing the Group which are described in detail in
pages 25 to 29
• Reviewed the Group’s risk register and the effectiveness of the systems of internal control and
risk management
• Received updates on the risk and internal control environments within the Group’s Asia Pacific,
European and UK businesses and the Group’s Tax & Treasury functions
Governance
• Noted developments in legal and regulatory matters globally, and the revisions to the Group’s
established processes to reflect such developments, in particular the introduction of new anti-money
laundering regulations across Europe and in China and the implementation of the UK regulations
prohibiting the facilitation of tax evasion
• Considered the output from the 2017 formal Board evaluation and effectiveness review and agreed
improvement opportunities
Financial performance
• Considered the financial performance of the Group
• Reviewed the half yearly and annual financial statements and approved the Annual Report
• Considered the capital allocation, financing and funding of the Group
• Considered and approved the 2017 interim and supplemental dividends, and recommended the final
dividend to shareholders
Savills plc
Report and Accounts 2017
43
Financial statementsGovernance Strategic reportOverview
Leadership continued
Board of Directors
Nicholas Ferguson CBE
Chairman of Savills plc and Chairman of
the Nomination & Governance
Committee
Jeremy Helsby
Group Chief Executive
Simon Shaw
Charles McVeigh
Group Chief Financial Officer
Independent Non-Executive Director
Appointment to the Board
Appointment to the Board
Appointment to the Board
Nicholas was appointed to the Board
as a Non-Executive Director on
26 January 2016 and became
Chairman in May 2016.
Jeremy joined Savills in 1980 and
was appointed to the Board in 1999.
Simon joined Savills as Group
Chief Financial Officer in March 2009.
Appointment to the Board
Charles was appointed to the Board
as a Non-Executive Director on
1 August 2000.
Background and
relevant experience
Background and
relevant experience
Background and
relevant experience
Background and
relevant experience
Nicholas has held a number of leadership
roles in the private equity and investment
sectors. He was co-founder of Schroder
Ventures (the private equity group which
later became Permira) of which he served
as Chairman from 1984 to 2001. He later
served as Chairman of SVG Capital plc, a
publicly quoted private equity group, from
April 2005 to November 2012.
He was Chairman and Chief Executive
Officer of Savills Commercial and Savills
Europe for seven years until he was
appointed as Group Chief Executive on
7 May 2008.
Simon is a Chartered Accountant.
He was formerly Chief Financial Officer of
Gyrus Group PLC, a position he held for
five years until its sale to the Olympus
Corporation. Simon was Chief Operating
Officer of Profile Therapeutics plc for five
years and also worked as a corporate
financier, latterly at Hambros
Bank Limited.
Formerly, he was Co-Chairman of
Citigroup’s European Investment Bank
and served on the Boards of Witan
Investment Company plc, Clearstream,
the London Stock Exchange, LIFFE,
British American Business Inc and was
a member of both the Development
Board and Advisory Council of the
Prince’s Trust, he was also a
Non-Executive Director of Petropavlovsk
plc until mid 2015. He was appointed by
the Bank of England to serve on the City
Capital Markets Committee and the
Legal Risk Review Committee and was
a member of the Fulbright Commission.
Charles has recently become Chairman
of Rubicon Fund Management, a
successful London based hedge fund.
He is Vice Chairman of the European
Advisory Board as well as senior
Advisor to the private bank of Citigroup.
Other appointments
Other appointments
Other appointments
Other appointments
Nicholas was Chairman of Sky Plc from
April 2012 to May 2016, having been
appointed to the board as a Non-
Executive Director in June 2004 and
having previously served as Deputy
Chairman and Senior Independent
Non-Executive Director. Chairman of
African Logistical Properties; and
Chairman and founder of The Kilfinan
Group, which provides mentoring by
Chairmen and CEOs to heads of charities.
None
Non-Executive Chairman of Synairgen plc.
A Senior Adviser at Citigroup, Charles is a
Trustee of the Landmark Trust and the
Natural History Museum Development
Board, he is on the Board of the
Countryside Alliance and is a former
Board member of EFG-Hermes.
Committee Membership
Committee Membership
Committee Membership
Committee Membership
Remuneration and Nomination &
Governance Committees.
Nomination & Governance Committee.
None
None
44
Savills plc
Report and Accounts 2017
Tim Freshwater
Liz Hewitt
Rupert Robson
Independent Non-Executive Director
Senior Independent Director
Independent Non-Executive Director and
Chair of the Audit Committee
Independent Non-Executive Director and
Chair of the Remuneration Committee
Appointment to the Board
Tim was appointed to the Board as
a Non-Executive Director on
1 January 2012.
Appointment to the Board
Appointment to the Board
Liz was appointed to the Board
as a Non-Executive Director on
24 June 2014.
Rupert was appointed to the Board
as a Non-Executive Director on
23 June 2015.
Background and
relevant experience
Background and
relevant experience
Background and
relevant experience
Tim is Chairman of Goldman Sachs Asia
Bank Limited and was formerly Chairman
of Corporate Finance for Goldman Sachs
(Asia). He was also Chairman of
Grosvenor Asia Pacific Limited until 2013.
Before joining Goldman Sachs, Tim
worked at Jardine Fleming, becoming
Group Chairman in 1999, and was a
partner at Slaughter and May from
1975 to 1996.
Liz previously held senior executive roles
at Smith & Nephew plc and 3i Group plc
having spent her early career with
Gartmore, CVC and 3i as a private equity
investor. She qualified as a Chartered
Accountant with Arthur Andersen.
Rupert has held a number of senior roles
in financial institutions, most recently
Chairman of Charles Taylor plc and
Non-Executive Director of London Metal
Exchange Holdings Limited, Tenet Group
Limited and OJSC Nomos Bank. Prior to
that he was Global Head, Financial
Institutions Group, Corporate Investment
Banking and Markets at HSBC and Head
of European Insurance, Investment
Banking at Citigroup Global Markets.
Other appointments
Other appointments
Other appointments
Non-Executive Director of Swire Pacific
Limited, Corney & Barrow Group Limited,
Chelsfield Asia Limited (former name:
Dymon Asia Real Estate Limited)
and Hong Kong Exchanges and
Clearing Limited.
Non-Executive Director of Melrose
Industries PLC and Novo Nordisk A/S.
External member of the House of Lords
Commission.
Chairman of TP ICAP plc, Sanne Group
plc, EMF Capital Partners & Governor of
Sherborne School.
Committee Membership
Committee Membership
Committee Membership
Audit, Remuneration and Nomination &
Governance Committees.
Audit, Remuneration and Nomination &
Governance Committees.
Audit, Remuneration and Nomination &
Governance Committees.
Savills plc
Report and Accounts 2017
45
Financial statementsGovernance Strategic reportOverview Leadership continued
Group Executive Board
Jeremy Helsby
Simon Shaw
Group Chief Executive
(See Board of Directors on pages 44 and 45 for photograph and full biography).
Group Chief Financial Officer
(See Board of Directors on pages 44 and 45 for photograph and full biography).
Chris Lee
Group Legal Director &
Company Secretary
Mark Ridley
Chief Executive – Savills UK and Europe
Raymond Lee
Chief Executive – Hong Kong, Macau
and Greater China
Simon Hope
Global Head of Capital Markets
Appointment to the Group
Executive Board
Appointment to the Group
Executive Board
Appointment to the Group
Executive Board
Appointment to the Group
Executive Board
Chris joined Savills in June 2008 and was
appointed to the Group Executive Board
in August 2008. He has ultimate
responsibility for legal, regulatory and
compliance issues globally.
Background and
relevant experience
He held equivalent roles with Alfred
McAlpine plc, Courts plc and Scholl plc
between 1997 and 2008, prior to which
he was Deputy Group Secretary of Delta
plc from 1990 to 1997.
Mark was appointed to the Group
Executive Board when it was formed in
February 2008.
Raymond was appointed to the Group
Executive Board in January 2011.
Simon was appointed to the Group
Executive Board when it was formed in
February 2008.
Background and
relevant experience
He became Chief Executive of Savills UK
and Europe in October 2014, previously
holding the position of Chief Executive
for Savills UK following the merger of the
Commercial and L&P businesses in
January 2013. He previously served as
Chairman and Chief Executive of Savills
Commercial Limited from January 2008
and prior to this was Head of the
Manchester office which he opened for
Savills from the time he joined in July
1996.
Background and
relevant experience
He joined Savills in 1989. In 2003,
Raymond became the Managing Director
in Hong Kong and Macau and in 2010 was
appointed CEO of Greater China. Raymond
is a Fellow member of the Hong Kong
Institute of Directors and holds an honorary
fellowship at the Quangxi Academy of
Social Science. Raymond is also an
Honorary Doctor of Management at
Lincoln University and holds a Fellowship at
the Asian College of Knowledge
Management (ACKM). He became a fellow
member of the Royal Institute of Chartered
Surveyors (RICS) in 2016.
Background and
relevant experience
He joined Savills in September 1986 and
he is Head of our Global Capital Markets
business. He is also a member of the
Board of the Charities Property Fund,
Chairman of Tilstone LLP and co-founder
and non-executive of the Warehouse REIT.
Justin O’Connor
Chief Executive Officer – Savills
Investment Management
Mitch Steir
(alternate member with Michael Colacino)
Chairman & CEO – Savills Studley
Michael Colacino
(alternate member with Mitch Steir)
President – Savills Studley
Christian Mancini
Chief Executive Officer – Asia Pacific
(ex Greater China)
Appointment to the Group
Executive Board
Justin was appointed to the Group
Executive Board in September 2010.
Background and
relevant experience
He joined Savills Investment Management
in January 2004 as Head of Business
Development. He was subsequently
appointed Chief Executive in January
2006. Justin previously held a number
of senior positions at Henderson
Global Investors, Lend Lease and the
AMP Society.
46
Savills plc
Report and Accounts 2017
Appointment to the Group
Executive Board
Mitch was appointed to the Group
Executive Board when Studley, Inc.
joined Savills in May 2014.
Appointment to the Group
Executive Board
Michael was appointed to the Group
Executive Board when Studley, Inc.
joined Savills in May 2014.
Appointment to the Group
Executive Board
Christian was appointed to the Group
Executive Board on 1 July 2016.
Background and
relevant experience
Christian was made CEO of Savills Japan
in 2007 and appointed CEO of Savills
Northeast Asia in 2012.
Background and
relevant experience
He joined Studley, Inc. in October 1991
and became president in 2002.
Other appointments
Other appointments
Michael serves on the Real Estate Board
of New York’s Board of Governors and the
Advisory Board of the Zell-Lurie Real
Estate Center at Wharton and is on the
Harvard Alumni Real Estate Board.
Christian also serves as non-executive
director in Savills Asset Advisory, the
wholly-owned asset management
subsidiary of Savills Japan Co, Ltd
created in May 2012
Background and
relevant experience
He joined Studley, Inc. in 1988 after
beginning his commercial real estate
career at Huberth & Peters in New York.
Other appointments
Mitch serves on the Boards of The
Museum of the City of New York, the Film
Society of Lincoln Center, The Realty
Foundation of New York, The Avenue of
Americas Association, The Mount Sinai
Hospital Surgery advisory board and the
Citizens Budget Commission.
Effectiveness
Nomination & Governance Committee Report
The Nomination & Governance Committee (“Committee”) has an important role
to play in ensuring that the Board and its principal Committees have the right mix
of skills, experience and diversity to deliver Group strategy and to create value.
The Committee keeps under review and evaluates the composition of the Board
and its Committees to maintain the appropriate balance of skills, knowledge and
independence to be able to function effectively.
Committee Members
• Nicholas Ferguson (Chair*)
• Tim Freshwater
• Liz Hewitt
• Rupert Robson
• Jeremy Helsby (Executive
Director)
*
save in circumstances where the
Chairman’s succession is considered
Key Objectives
The primary objectives of the
Committee are
• to review the size and
composition of the Board and
its key Committees and to plan
for the Board’s progressive
refreshing, with regard to
balance and structure.
• to monitor of the Company’s
compliance with applicable
codes and other requirements
of Corporate Governance
Key responsibilities
• responsible for size, structure and composition of the Board
• reviewing and progressing appointments to the Board
• responsible for succession planning to ensure that the Board is
refreshed progressively such that the balance of skills and experience
available to the Board remains appropriate to the needs of the business
• makes recommendations to the Board on the membership of
the principal Committees of the Board.
• to keep under review the Company’s compliance with applicable
Codes and other requirements of Corporate Governance
More detailed information on the role and responsibilities of the Committee can be found in
the Committee’s Terms of Reference which can be accessed on the Company’s website at
www.savills.com.
Committee meetings
The Committee met three times during 2017 and each meeting had
full attendance. Members of the Committee also attend the
Company’s AGM at which there is an opportunity to meet with
Shareholders. Any other Director, the Group Legal Director &
Company Secretary or an external advisor may be invited by the
Committee to attend the meetings from time to time, as appropriate.
Committee Terms of Reference
During the year the remit of the Committee was extended to
include the monitoring of the Company’s compliance with
applicable Codes and other requirements of Corporate
Governance and the Committee was renamed the Nomination &
Governance Committee. The revised Terms of Reference for the
Committee to this effect were submitted to the Board for formal
approval and adopted on 15 June 2017.
Board composition and balance
Balance of Non-Executive Directors and Executive Directors
Non-Executive Chairman – 1
Non-Executive Directors – 4
Executive Directors – 2
Length of tenure of Non-Executive Directors
0–4 years – 3
5–9 years – 1
10+ years – 1
At all times during the year at least half of the Board members, excluding the Chairman, were
Independent Non-Executive Directors.
Chairman and Chief Executive
The roles of Chairman and Group Chief Executive are distinct and
separate and their roles and responsibilities are clearly established.
The Chairman leads the Board and has particular responsibility for
the effectiveness of the Group’s governance. In promoting a culture
of openness he ensures the effective engagement and contribution
of all Executive and Non-Executive Directors. To help ensure a
proper dialogue with all Directors, the Chairman meets periodically
with the Directors individually and the Non-Executive Directors as a
group (and without the Executive Directors). The Group Chief
Executive has responsibility for all Group businesses and acts in
accordance with the authority delegated by the Board. There are a
number of areas where the Board has delegated specific
responsibility to management, including responsibility for the
operational management of the Group’s businesses as well as
reviewing strategic issues and risk matters in advance of these
being considered by the Board and/or its Committees. The Board
considers that throughout the year the Company was in full
compliance with the Code.
Assessment of the Independence of Non-Executive Directors
The Chairman is committed to ensuring the Board comprises a
majority of Independent Non-Executive Directors who objectively
challenge management, balanced against the need to ensure
continuity in the Board. On an annual basis, the Board reviews the
independence of its Non-Executive Directors, particularly those
with long service. The Non-Executive Directors are responsible for
bringing independent and objective judgement and scrutiny to
matters before the Board and its Committees. The Board considers
that all of the Non-Executive Directors bring considerable expertise,
strong independent oversight and continue to and are Independent
Non-Executive Directors, being independent of management and
having no business or other relationship which could interfere
materially with the exercise of their judgement. In particular,
notwithstanding his long service on the Board, the Board continues
to consider that Charles McVeigh remains entirely independent in
character and judgement. His experience provides valuable insight,
knowledge and continuity. The Board recognises the benefit of
progressively refreshing its membership and therefore is
commencing the search for a Non-Executive Director in 2018.
Time commitment and conflicts
The Board is satisfied that the Chairman and each of the Non-
Executive Directors committed sufficient time during the year to
enable them to fulfil their duties as Directors of the Company.
Savills plc
Report and Accounts 2017
47
Financial statementsGovernance Strategic reportOverview
that the Board continues to best meet the
needs of the Company and its Shareholders.
The biographies of the Board members
appear on pages 44 and 45.
The Committee has sought to maintain a
balance of skills and experience on the Board
and its Committees. The Company adopts a
formal, rigorous and transparent procedure
for the appointment of new Directors and key
senior executives and we continue to recruit
based on merit with consideration given to
diversity in its widest sense. Before making an
appointment, the Committee assesses the
balance of skills, knowledge, independence,
experience and diversity of the Board and, in
view of this assessment, will draw up a
description of the role and competencies
needed, with a view to appointing the
best-placed individual for the role. In making
a recommendation to the Board on a
Non-Executive Director appointment, the
Nomination & Governance Committee
specifically considers the expected time
commitment of the proposed Non-Executive
Director and other commitments they may
already have. The Company uses recruitment
consultants to assist the Committee in
delivering its objectives and responsibilities
and the search firms are required to present a
mix of suitable male and female candidates.
No Director is involved in decisions regarding
his or her own succession.
The Committee is aware that the number of
women on Boards remains a topic for debate
for companies and regulators. We fully agree
with the spirit and aspirations of the Davies
Report to increase the number of women on
company Boards. All appointments to the
Board are made on merit and within this
context, whilst having regard to the
recommendations of the Davies Report,
the Board continues to view diversity in the
widest sense, with a view to appointing the
best-placed individual for the role. Appointing
the best people to the Board is critical to the
success of the Company and our focus
remains on attracting the right talent and skills
irrespective of gender or diversity.
Effectiveness continued
The Companies Act 2006 places a duty on
each Director to avoid a situation in which he
or she has or can have a direct or indirect
interest which conflicts or may conflict with
the interests of the Company. A Director will
not be in breach of that duty if the relevant
matter has been authorised by the other
Directors in accordance with the Articles.
The Board has adopted a set of guiding
principles on managing conflicts and
approved a process for identifying current
and future actual and potential conflicts of
interest. The Nomination & Governance
Committee review authorised conflicts at
least annually or if and when a new potential
conflict situation was identified or a potential
conflict situation materialised. During 2017,
actual and potential conflicts of interest that
were identified by each Director were
subsequently authorised by the Nomination
& Governance Committee, subject to
appropriate conditions in accordance with
the guiding principles. Procedures adopted
to deal with conflicts of interest continue to
operate effectively and the Board’s
authorisation powers continue to be
exercised properly in accordance with the
Company’s Articles of Association.
Committee activities during the year
The Committee has standing items that it
considers regularly under its Terms of
Reference; for example, the Committee
considered and approved Directors’
potential conflicts of interest and reviewed its
own Terms of Reference (which are reviewed
at least annually or as required, eg to reflect
changes to the Code or as a result of
changes in regulations or best practice).
Group Chief Executive Succession
On 16 January 2018 we announced that, after
11 years in the role, Jeremy Helsby would retire
as Group Chief Executive Officer at the end of
the 2018 financial year. During the 2017
financial year the Board, through the
Committee, commenced the process to
identify and appoint a new Group Chief
Executive Officer who would succeed Jeremy
Helsby effective 1 January 2019. The process,
which included evaluation of the merits of
selecting an external candidate, was
undertaken by the Committee and led by the
Chairman. The Committee undertook a series
of reviews to scope out the key skills,
experience, characteristics and requirements
for the role. The Committee agreed that, taking
into account all relevant available information,
Mark Ridley, currently Chief Executive of Savills
UK and Europe,was the strongest candidate. A
meeting of the Committee formally considered
Mark Ridley’s suitability for the role. The
Committee noted his considerable existing
knowledge of the Group (as a member of the
48
Savills plc
Report and Accounts 2017
Group Executive Board since its establishment
in 2008) and its business and his proven track
record as Chief Executive of Savills UK
(since 2008) & Europe (since 2013). The
Committee unanimously concluded that it
should recommend that Mark Ridley be
offered the role of Group Chief Executive
Officer with effect from 1 January 2019, and
that he should join the Board as an additional
Executive Director and Deputy Group Chief
Executive Officer effective from 1 May 2018.
Further details on Mark Ridley’s skills and
experience is set out on page 46.
In addition, and specifically during the year,
the Committee:
• reviewed the Group’s senior level
succession plans to ensure that these
remained appropriate;
• reviewed and approved the succession
plan for senior management in the UK
businesses to be implemented on Mark
Ridley’s appointment to the Board as
Deputy Group Chief Executive;
• considered Board succession planning
including the tenure, mix and diversity of
skills and experience of the existing
Board Members in the context of the
Group’s strategy;
• considered the proposed reappointment
of the Non-Executive Directors, before
making a recommendation to the Board
that each Non-Executive be proposed to
shareholders for re-election at the 2018
AGM; and
• considered and authorised the Directors’
actual and potential conflict of interests.
In consultation with the Chairmen of the
Board Committees, the Nomination &
Governance Committee will continue to
monitor the needs of the Board and its
Committees in the context of the delivery
of the Group’s strategy, with the aim of
ensuring that the Group’s succession
planning policy evolves such that there is an
identifiable supply of talent and experience
available to the Board and its Committees
from which to select successors.
Board composition, succession
planning and diversity
Board succession is a key topic at Committee
meetings and we recognise the importance of
planning for the future and of having
succession plans in place which introduce
new skills and perspectives to the Board and
which complement the experience of the
existing Board members. The Committee
continues to keep the Board’s composition
under review and considers how that
composition might be enhanced to ensure
We have noted the recommendation in the Hampton Alexander
Review published in 2016 that a target of 33% female Board
representation be achieved by FTSE 350 companies by 2020,
and also the recommendations of the Parker Review Committee
published in October 2017 relating to ethnic diversity on Boards.
In relation to the Non-Executive Directors, in 2018 we will commence
the search for a further Non-Executive Director. In this search the
Board is conscious of its objective of further strengthening diversity
at Board level.
Governance
The Committee reviewed the Company’s compliance with the
Code and was satisfied that the Company complied with the Code.
The Committee would continue to receive updates on corporate
governance developments and consider the impact of those
developments on the Company
Nicholas Ferguson CBE
Committee Effectiveness
Chairman of the Nomination & Governance Committee
I am pleased to report that the recent Board performance evaluation
concluded that the Nomination & Governance Committee continues
to operate effectively.
14 March 2018
Board effectiveness review
This year’s process
The Board recognises that it continually
needs to monitor and improve its
performance. In line with the effective
governance requirements of the Code, the
Board reviews its own performance and that
of the Directors and of its Committees
annually.
An externally facilitated Board evaluation was carried out in 2016 facilitated by Alice
Perkins of JCA. This year’s annual review was facilitated by the Group Legal Director &
Company Secretary.
In relation to the 2017 evaluation, each Director and the Group Legal Director & Company
Secretary completed a questionnaire and the Chairman collated and presented the
responses of the evaluation for consideration by the Board.
Conclusions from the 2017 review
Areas of focus for 2018
The conclusion from this year’s evaluation
was that the Board and its Committees
continued to operate to a high standard and
continued to provide effective leadership and
exert the required levels of governance and
control.
The review had reconfirmed the need to
ensure that effective succession plans were
in place at Board, Group Executive Board
and Business Executive Committee level.
This will be a key focus in 2018.
To ensure that the Board and Nomination & Governance Committee have good visibility
over the business leaders at Business Executive Committee level, the Board will to meet
with senior management at business level more regularly;
To ensure that the Board maintains a good understanding of investor views, the Board will
undertake formal six monthly reviews, facilitated by the Company’s brokers, of the investor
feedback after the Full and Half Year Results and the AGM. The Chairman and Senior
Independent Director to continue to offer themselves to investors to receive feedback in
relation to performance or governance issues following the publication of the Group’s full
year results and notice being given convening the AGM, in addition to being available as
necessary to investors if concerns could not be addressed to the Executive Directors;
The Board to continue to review its procedures, effectiveness and development and to
seek to improve and evolve its standards of performance.
As a result of the evaluation, the Board considers the performance of each Director to be effective and concluded that both the Board and
its Committees continue to provide effective leadership and exert the required levels of governance and control. Shareholders would
therefore be recommended to re-elect Board Members at the AGM in May.
Board Development
To ensure a full understanding of Savills and its businesses,
following their appointment to the Board, each Director undergoes a
comprehensive and tailored induction programme which introduces
the Director to the Group’s businesses, its operations, strategic
plans and key risks. New Directors are also provided with
information on relevant share dealing policies, Directors’ duties,
Company policies and governance. The induction also includes one
to one briefings from the Heads of the Principal Businesses and an
introduction to each Group business’s development strategy.
The Group Legal Director & Company Secretary, whose appointment is
a matter reserved for the Board, is responsible for advising and
supporting the Chairman and the Board on company law and
corporate governance matters and for ensuring that Board procedures
are followed, as well as ensuring that there is a smooth flow of
information to enable effective decision making. The Group Legal
Director & Company Secretary is further responsible for ensuring that
the Directors receive regular updates on developments in legal and
regulatory matters. All the Directors have access to the advice and
services of the Group Legal Director & Company Secretary and
through him have access, if required, to independent professional
advice in respect of their duties at the Company’s expense.
Savills plc
Report and Accounts 2017
49
Financial statementsGovernance Strategic reportOverview The AGM provides the Board with a valuable
opportunity to communicate with private
Shareholders and is generally attended by all
of the Directors. Shareholders are given the
opportunity to ask questions before and
during the meeting and to meet Directors
following the conclusion of the formal part of
the meeting. In accordance with the Code,
the level and manner of voting of proxies
lodged on each resolution at the AGM is
declared at the meeting and published on
the Company’s website. The notice of the
AGM is sent out at least 20 working days
before the meeting and at least 14 working
days notice is given before other general
meetings in accordance with the Code.
Details of the resolutions to be proposed at
the 2018 AGM in May can be found in the
AGM Notice which accompanies this Report
and Accounts.
In accordance with the Articles of
Association, electronic and paper proxy
appointments and voting instructions must
be received not later than 48 hours before a
general meeting.
The Group’s website includes a specific
investor relations section containing all RNS
announcements, share price information and
annual reports available for download. The
Company has taken advantage of the
provisions within the Companies Act 2006
which allow communications with
Shareholders to be made electronically
where Shareholders have not requested
hard copy documentation. Details of the
information available to Shareholders can be
found on page 153.
Accountability
Internal control and risk management
The principal risks and uncertainties faced
by the Group and the associated mitigating
actions for these are set out on pages 25
to 29.
The Board has overall responsibility for the
Group’s systems of risk management and
internal control across the Group and
for reviewing their effectiveness. This
responsibility includes the determination
of the nature and extent of the principal
risks the Board is willing to take to achieve
its strategic objectives and for ensuring
that an appropriate culture has been
embedded throughout the organisation.
Risk management is implemented from the
top down. The Board is supported by the
Audit Committee in discharging its oversight
duties with regard to internal control and
risk management.
Whilst the Board is responsible for ensuring
that an appropriate culture has been
embedded throughout the organisation and
establishing and maintaining the Group’s
system of risk management and internal
control to safeguard Shareholders’
investments and the Group’s assets (and for
reviewing the effectiveness of this system),
such a system is designed to manage rather
than eliminate the risk of failure to achieve
business objectives and can provide only
reasonable and not absolute assurance
against material misstatement or loss. The
Board has established an ongoing process
for identifying, evaluating and managing the
Group’s principal risks. The Board’s attitude
and appetite to risk is communicated to the
Group’s businesses through the strategy
planning processes. The Audit Committee
monitors the ongoing status and progress of
action plans against key risks on a regular
basis and reports its findings to the Board.
Going concern
The Group’s business activities, together
with the factors considered likely to affect its
future development, performance and
position are set out in the Strategic Report
on pages 2 to 35. The financial position of
the Group, its cash flows, liquidity position
and borrowing facilities are described on
page 23. In addition, Note 3 to the financial
statements includes the Group’s objectives,
policies and processes for managing its
capital, its financial risk management
objectives, details of its financial instruments
and hedging activities, and its exposures to
credit risk and liquidity risk.
50
Savills plc
Report and Accounts 2017
The Group has considerable financial
resources, including a £300m committed
revolving credit facility (augmented by a £60m
‘accordion’ option which can be activated to
increase the facility to £360m) that extends to
December 2020. The Group has a broad
geographic presence, service offering and
extensive client spread ensuring that the
Group is not over-dependent on one
geography, service line or client. As a
consequence, the Directors believe that the
Group is well placed to manage its business
risks successfully.
After making appropriate enquiries, the
Directors have a reasonable expectation that
the Company and the Group have adequate
resources to continue as a going concern for
at least 12 months from the date of this
Report. Accordingly, they continue to adopt
the going concern basis in preparing the
Report and Accounts.
Dialogue with Shareholders
In accordance with the Code, the Board
recognises the importance of
communication with its Shareholders and
fully supports the principles encouraging
dialogue between companies and their
Shareholders in the Code. The Group Chief
Executive and Group Chief Financial Officer
have primary responsibility for investor
relations and lead a regular programme of
meetings and presentations with analysts
and investors. This includes presentations
following the publication of the Company’s
full and half year results. This programme
maintains a continuous two-way dialogue
between the Company and Shareholders,
and helps to ensure that the Board is aware
of Shareholders’ views on a timely basis. The
full Board is kept informed of any issues
raised at these meetings and the views of
Shareholders on a regular basis to ensure
that they understand the views of
Shareholders. The Board also normally
receives feedback twice each year from its
corporate brokers on investors’ and the
market’s perceptions of the Company. The
Chairman and the Senior Independent
Director are also available to meet
Shareholders if so required. The Company
has enjoyed and is appreciative of the
significant Shareholder support that it has
had in recent years in relation to the Group’s
Remuneration Policy and continues to
welcome Shareholder views with regard to
the Group’s Remuneration Policy.
Audit Committee Report
As Chair of the Audit Committee (the
“Committee”), I am pleased to present the
Audit Committee’s report for the financial
year ended 31 December 2017. The aim of
this report is to explain the work undertaken
by the Committee during the year and how it
has met the disclosure requirements as set
out in the 2016 Corporate Governance Code
(the ‘Code’) and what it has done to address
continued regulatory change. The key
matters considered in the year are set out on
pages 53 and 54. The report provides an
overview of the significant issues that the
Audit Committee assessed and details the
Committee’s major considerations and
activities during the 2017 financial year in
ensuring that the Company’s governance
processes remain appropriate, robust, of a
high standard and are rigorously applied.
The Committee has a key role in ensuring
the integrity of the Group’s financial
statements, internal controls and the
effectiveness of its risk management
processes. The Committee also has a role in
representing the interests of Shareholders by
monitoring the activities and conduct of
management and the auditors.
During the year, the Committee focused on
the effectiveness of the Group’s internal
controls and reviewed the principal risks, to
ensure the alignment of these with the
Company’s strategic objectives. It monitored
the effectiveness of the control environment
through the review of reports from Internal
Audit, management and the External Auditor
and ensured the quality of the Company’s
financial reporting by reviewing the 2016
Report and Accounts and the 2017 Half Year
Financial Statements. The Audit Committee
also reviewed the Company’s 2017 Annual
Report. The Committee also considered the
processes supporting the assessment of the
Group’s longer-term solvency and liquidity in
support of the viability statement. Looking
ahead, the Committee will continue to monitor
changes in regulation and continue to focus
on the audit, assurance and risk processes
within the Principal Businesses. The
Committee considered its compliance with
the Code and the FRC Guidance on Audit
Committees. The Committee believes that it
has addressed both the spirit and the
requirements of both.
The members of the Committee need to
have the right balance of skills and
experience to deliver its responsibilities.
During the year, the Board carried out an
internally facilitated evaluation of its
performance and that of its Committees.
The Board is satisfied that the Committee
members possess relevant experience and
appropriate levels of independence and that
its members have the depth of financial and
commercial experience across various
industries which is essential for the effective
working of the Committee.
At the request of the Board, the Committee
has reviewed the content of this year’s
Annual Report and Accounts and has
advised the Board that, in its opinion, the
Report taken as a whole is fair, balanced and
understandable and it provides the
information necessary for Shareholders to
assess the Group’s position, performance,
business model and strategy.
The Committee noted the unqualified
opinion from the External Auditor on the
2017 Annual Report.
Liz Hewitt
Chair of the Audit Committee
Savills plc
Report and Accounts 2017
51
Financial statementsGovernance Strategic reportOverview Audit Committee Report continued
Role of the Committee
The Committee is authorised to investigate
any matter within its Terms of Reference
(a copy of which can be found in the
governance section of the Company’s
website at www.savills.com/en/company-
information/corporate-governance.aspx).
The Terms of Reference were reviewed and
updated in June 2017. The Committee has
access to the services of the Group Legal
Director & Company Secretary and, where
necessary, the authority to obtain external
legal or other independent professional
advice to fulfil its duties.
The Committee’s key role is to assist the
Board in discharging its duties and
responsibilities for financial reporting, internal
control, the effectiveness of the risk
management process and in making
recommendations to the Board on the
appointment of the External Auditor.
The Committee is responsible for the scope
and results of the External Audit work, its
cost effectiveness and for ensuring the
independence and objectivity of the External
Auditor. The Committee is also responsible
for reviewing the Group’s whistle-blowing
arrangements as they relate to matters of
financial integrity, including ensuring that
appropriate arrangements are in place for
employees to be able to raise, in confidence,
matters of alleged financial improprieties and
for ensuring that appropriate follow-up
actions are taken.
Composition
The Committee is a fundamental element of
the Company’s governance framework. The
Committee is chaired by Liz Hewitt. Three
Independent Non-Executive Directors, Liz
Hewitt, Tim Freshwater and Rupert Robson
are members of the Committee. Members of
the Committee are appointed by the Board
following recommendations by the
Nomination & Governance Committee and
membership is reviewed annually by the
Nomination & Governance Committee as
part of the annual Board performance
evaluation. There were no changes to the
membership of the Committee during the
2017 financial year. As at 31 December 2017
and up to the date of this Report, the
Committee comprised entirely Independent
Non-Executive Directors. The Committee
members collectively have a broad range of
financial and commercial experiences that
enables them to provide oversight of both
financial and risk matters, and to advise the
Board accordingly. The Board considers that
Liz Hewitt, as Chair of the Committee,
possesses recent and relevant financial
experience and that all Committee members
have relevant financial experience as
required by the Code. Biographical details
of the Committee members are shown on
pages 44 and 45.
The Company provides an induction
programme for new Committee members
which includes an overview of the business,
its financial dynamics and risks, and
meetings with senior management.
Committee members are expected to have
an understanding of the principles of, and
recent developments in, financial reporting
and internal controls, risk management, and
Internal and external audit roles and
responsibilities.
Engagement
The Chair of the Committee meets informally,
and is in regular contact with the Group Chief
Financial Officer, Group Director of Risk
Assurance and the Group Legal Director &
Company Secretary and prior to each
Committee meeting, meets with each of
them and the External Auditor individually.
In addition to its members, a standing
invitation has been extended by the
Committee to the Non-Executive Chairman
and Group Chief Executive Officer to attend
the Committee’s meetings. The Group Chief
Financial Officer, Group Financial Controller,
Group Director of Risk & Assurance, Group
Legal Director & Company Secretary and the
External Auditor attend each of the
Committee’s meetings. Other senior
executives from across the Group are invited
to present reports to assist the Audit
Committee in discharging its duties. At least
once a year, the Committee meets with the
External Auditor and the Group Director of
Risk & Assurance without management
being present.
The Chair of the Committee also attends the AGM to respond to shareholder questions on its activities.
The Committee met four times during the year and reports to the Board after each Committee meeting. Attendance at meetings during 2017
is shown in the table below:
Committee member
Liz Hewitt
Tim Freshwater
Rupert Robson
Member since
June 2014
January 2012
June 2015
Meetings
attended
Meetings
eligible to
attend
% of eligible
meetings
attended
4
4
4
4
4
4
100%
100%
100%
During the year, in addition to its established
review processes, the Committee
considered and reviewed a number of other
areas. These included updates on the risk
and internal control environments within the
Group’s Asia Pacific, European and UK
businesses as well as the effectiveness of
the Tax & Treasury functions. In addition,
with the increasing pace of technological
change, the Committee considered and
reviewed the Group’s IT strategy,
complementing the Board’s review of the
Group’s Technology Strategy, with particular
focus on cyber security. The Committee
specifically considered the processes and
assessment of the Group’s prospects and
viability made by management to support
the viability statement which can be found at
page 29. The Committee’s review included
consideration of the time period adopted,
the processes supporting the assessment of
the Group’s longer-term solvency and
liquidity which support the viability
statement. The Committee considered and
provided input into the determination of
which of the Group’s principal risks might
have an impact on the Group’s longer-term
solvency and liquidity. It also reviewed the
results of management’s scenario modelling,
including severe downside modelling, and
the stress testing of those financial models
supporting the viability analysis and
challenged management as to the
appropriateness of the assumptions made.
52
Savills plc
Report and Accounts 2017
Activities of the Committee
To enable the Committee to carry out its duties and responsibilities effectively it works to a structured programme of activities and meetings
aligned with the annual financial reporting cycle. This includes items that the Committee considers regularly in accordance with its Terms
of Reference. In addition to its core work, the Committee undertakes additional work in response to the evolving audit and external
reporting landscape.
The Committee relies on information and support from management across the business, receiving reports and presentations from business
management, the Heads of Key Group functions, Internal Audit and the External Auditor, which it challenges as appropriate. Following each
meeting, the Committee Chair reports on the main discussion points and any actions arising from these to the Board.
Responsibilities
How the Committee discharged its responsibilities
Mar
June
Financial Reporting Reviewed and discussed the key accounting considerations and
judgements reflected in the Group’s results for the half year
Dec
Aug
X
Reviewed and discussed the key accounting considerations and
judgements reflected in the Group’s results
Reviewed going concern status and considered whether any asset
impairments were required
Reviewed the viability statement and considered the processes
supporting the assessment of the longer-term solvency and liquidity
External Audit
Agreed the external audit strategy and scope
Considered and, where appropriate, approved the instruction of the
Group’s External Auditor on non-audit assignments
Reviewed and considered the External Auditor Report, including
the External Auditor observations on the Group’s internal control
environment
Discussed the External Auditor performance
Met with the External Auditor without management present to discuss
their remit and any concerns
Discussed and agreed the External Auditor remuneration in respect of
audit services provided
Assessed the External Auditors’ independence and recommended
their reappointment to the Board
Reviewed the Group’s arrangements by which staff can, in confidence,
raise concerns about possible improprieties in matters of financial
reporting or other matters. The Committee also considers any reports
made under these arrangements
Considered and approved the remit of the Internal Audit function and
the Internal Audit plan
Received and considered reports from the Group’s Internal Audit
team covering various aspects of the Group’s operations, controls
and processes and monitored the progress made by management in
addressing recommendations arising out of these reports
Monitored and reviewed the effectiveness of the Group’s Internal
Audit function in the context of the Group’s overall risk management
arrangements
Met with the Group Director of Risk & Assurance privately to discuss
his remit and any concerns
Reviewed the effectiveness of the Group’s risk management system
and internal controls in place to manage the Group’s principal risks
Reviewed and considered the Group’s risk register
Reviewed risk management arrangements for the Group’s regional
businesses by receiving presentations from the Chief Operating/
Financial Officers of the Principal Businesses
Compliance,
Whistleblowing
and Fraud
Internal Audit
Internal Controls
and Risk
Management
Systems
X
X
X
X
X
X
X
X
X
X
X
X
Reviewed the Committee’s own performance, composition and
Terms of Reference, and recommended any changes the Committee
considers necessary for Board approval
X
X
X
X
X
X
X
X
X
X
X
X
X
X
Savills plc
Report and Accounts 2017
53
Financial statementsGovernance Strategic reportOverview Accountability continued
During the year the Financial Reporting Council’s Corporate Reporting Review Team (‘CRRT’) carried out a review of the Company’s Annual
Report for the year ended 31 December 2016. The response by the Company to the request for information was discussed with the Chair of
the Audit Committee prior to responding to the CRRT. Details of the enquiry raised by the CRRT and the Company’s response thereto were
also considered by the Committee. The CRRT have closed their enquiries with no requirements to restate any disclosures. Undertakings
were given to enhance certain disclosures in the future in response to the CRRT review. The Committee was satisfied that the enhancements
proposed and agreed with the CRRT have been appropriately incorporated in the Company’s Annual Report for the year ended
31 December 2017.
As part of its monitoring of the integrity of the financial statements, the Committee considers the appropriateness of the accounting policies
proposed for adoption and whether management has made appropriate estimates and judgements. To support its decision-making, the
Committee seeks support from the External Auditor in these areas. The key reporting judgements considered by the Committee and
discussed with the External Auditor during the year were:
Matter considered
Action
Impairment of
goodwill
Aguirre Newman
acquisition
Provisions for
litigation
Debtor
recoverability
Compliance
with regulatory
requirements
The Committee received reports from management on the carrying value of the Group’s businesses, including goodwill.
The Committee reviewed management’s recommendations, which were also considered by the External Auditor. After
review, the Committee was satisfied with the assumptions and judgements applied by management and, with the
support of the External Auditor, concluded that, other than the impairment charge of £2.3m recognised against Sweden,
no further impairment of carrying values was required.
The Committee considered the accounting treatment of the acquisition of Aguirre Newman by the Group on
29 December 2017 for a total acquisition consideration provisionally determined at £55.1m, with £48.2m settled in
cash on completion and the remainder relating to the discounted value of deferred consideration of £6.9m payable in
five equal annual instalments from December 2018. A further £15.5m is payable in five equal annual instalments from
December 2018 subject to executive Shareholders remaining actively engaged in the business over a period of up to
five years. With respect to management’s fair value exercise (which is provisional at 31 December 2017), following
review, the Committee was satisfied with the recognition of the £3.4m of separate intangible assets.
The Committee reviewed the provisions held in relation to significant legal matters and assessed the appropriateness
of these as at 31 December 2017 taking into account the Group’s insurance cover and the advice received from
external counsel to ensure that appropriate provision had been made. The Committee agreed with the position taken by
management in respect of these matters.
The Committee considered the recoverability of trader receivables and was satisfied that there were no issues arising
During the year the Committee reviewed the Group’s policies and procedures around regulatory risks including but not
limited to:
Whistleblowing reports; and
Anti-bribery and corruption.
After review, the Committee was satisfied that no material regulatory fines or penalties had been incurred and that no
significant issues had been identified in this area.
Internal Audit
During 2017, Internal Audit services were
delivered by the Group’s Director of Internal
Audit with support in delivery by EY. The
Board’s responsibility for internal control and
risk is detailed on page 43 and is
incorporated into this Report by reference.
The Committee approved the annual Group
audit plan, and received progress against
that plan during the year. The Committee
ensured that Internal Audit was appropriately
resourced with the skills and experience
relevant to the operations of the Group and
that information was made available to it to
enable it to fulfil its mandate to the
appropriate professional standards.
The Committee monitors the status of
internal audit recommendations and
management’s responsiveness to their
implementation and challenge both Internal
Audit and management where appropriate
to provide assurance that the control
environment is robust and effective.
In assessing the performance of Internal
Audit, the Committee considered and
monitored its effectiveness in the context of
the Company’s risk management system
and took into account management’s
assessment of and responsiveness to the
Internal Auditor’s findings and
recommendations and reports from the
External Auditor on any issues identified
during the course of their work.
The Committee reviewed Internal Audit
reports on a regular basis and the Group
Director of Risk & Assurance attended
meetings and presented to the Committee.
Internal Control and Risk
Management
The Committee, on behalf of the Board,
undertook a robust review of the
effectiveness of the system of risk
management and internal control.
54
Savills plc
Report and Accounts 2017
In performing its review of effectiveness,
the Committee reviewed and assessed the
following reports and activities:
•
Internal Audit reports on the review of the
controls across the Group and its
monitoring of management actions
arising from these reviews;
• management’s own assessment of risk
and the performance of the system of
risk management and internal control
during 2017;
• reports from the Group Director of Risk
& Assurance including reports on
Group-wide risk assessment activity and
annual self-assessment findings; and
• reports from the External Auditor on any
issues identified during the course of
their work.
The Committee and the Board considered
that the information received was sufficient
to enable a review of the effectiveness of the
Group’s internal controls in accordance with
the FRC’s Guidance on Risk Management,
Internal Control and Related Financial and
Business Reporting.
External Audit
The Committee has primary responsibility for
overseeing the relationship with the External
Auditor, including assessing the External
Auditor’s performance, independence and
effectiveness, recommending the
appointment, reappointment or removal of
the External Auditor, and negotiating and
agreeing the external audit fees. The
Committee holds private meetings with the
External Auditor at the March and August
Committee meetings to provide additional
opportunity for open dialogue and feedback
to/from the Committee and the External
Auditor without management being present.
The Committee chair also meets with the
external lead audit partner outside the formal
Committee process throughout the year.
The Committee monitored the performance
of the External Auditor during the year
and carried out a review of the effectiveness
of the External Audit process and
considered the reappointment of
PricewaterhouseCoopers LLP (‘PwC’) and
the appropriateness of its fees. The review
covers a broad range of matters including
amongst other matters, the quality of staff,
its expertise, resources and the
independence of the audit. The Committee
considered the External Audit plan for the
year and assessed how the External Auditor
had performed. In deciding whether to
recommend the reappointment of PwC, the
Committee considered the robustness of
their challenge and findings on areas which
require judgement, the strength and depth of
the lead partners and feedback from the
Group’s management.
The Committee formally concluded the
assessment of the performance of the
External Auditor at the December
Committee meeting and made a
corresponding recommendation on the
appointment of PwC for the forthcoming
financial year to the Board. Shareholders
formally appoint the External Auditor at the
AGM in May. There were no significant
findings arising from the evaluation this year
and the Committee concluded that both the
audit and the audit process were effective.
The Committee considered the
appropriateness of the reappointment of
PwC as the Group’s External Auditor and it
was satisfied that it should recommend to
the Board their reappointment as the
Group’s External Auditor.
In light of the assessment and review
undertaken during the year, the Board
endorsed the Committee’s recommendation
that PwC be re-appointed as the External
Auditor for a further year and that their
re-appointment would be put to the
shareholders at the 2018 AGM.
PwC has been the Company’s Auditor
since 2001, following a tender for the
External Audit. The senior partner
responsible is rotated every five years to
ensure objectivity and the last lead partner
change took place at the close of the 2015
audit. The Committee continues to review
the auditor appointment and the need to
tender the audit, ensuring compliance with
the Code. The Committee has considered
the timing of a potential External Audit
tender timetable and processes and
concluded that the tender process should
take place at the end of the next lead audit
partner term in 2020. The Committee is
satisfied that the proposed retender of audit
services in 2020 was in the best interests of
the shareholders of the Company.
An important aspect of managing the
External Auditor relationship, and of the
annual effectiveness review, is ensuring that
there are adequate safeguards to protect
auditor objectivity and independence. In
conducting its annual assessment, the
Committee reviews the External Auditor’s
own policies and procedures for
safeguarding its objectivity and
independence. The Committee’s
assessment of PwC’s independence is
underpinned by the Group’s policy on the
use of PwC for the provision of non-audit
services. In accordance with the Group’s
policy in place to 31 December 2017, the
following non-audit services were not
provided by the External Auditor:
• bookkeeping or other services related to
the accounting records or financial
statements;
• taxation services (except for de minimis
amounts, outside of Europe and outside
the scope of the Group audit);
• financial information systems design and
implementation;
•
Internal Audit outsourcing services;
• management functions or human
resources advice; or
• advising on senior executive (including
Executive Director) remuneration.
To further safeguard the independence of the
Company’s External Auditor and the integrity
of the audit process, recruitment of senior
employees from the External Auditor is not
allowed for an appropriate period after they
cease to provide services to the Company.
During the year, PwC was paid £1.8m for
audit services and £0.8m for non-audit
services, principally for advice on
transaction-related matters. Details of the
fees paid to the External Auditor can be
found in Note 72 on page 108. During the
financial year ending 31 December 2017,
contracts for non-audit services in excess of
£0.1m require Committee approval and the
Chair of the Audit Committee is notified of
new instructions for the delivery of non-audit
services below this level.
The Committee was satisfied that in view of
their knowledge and experience of the
Company, that when PwC was used, it was
best placed to provide such non-audit
services and that their objectivity and
independence had not been impaired by
reason of this further work. In line with the
Company’s policy for the financial year
ending 31 December 2017 on the provision
of non-audit work, the Committee reviewed
the provision of non-audit work provided by
the External Auditor on a case-by-case
basis. The Committee was satisfied that the
overall levels of audit related and non-audit
fees were not material relative to the income
of the External Auditor firm as a whole.
The restrictions (FRC’s Revised Ethical
Standard for Auditors June 2016) on the
supply of non-audit services that the
External Auditor can provide, including the
cap on the amount of non-audit fees that
can be billed and a list of prohibited services,
were effective for the Group from 1 January
2017. As a result the Group’s policy on using
the External Auditor for non-audit
engagements was reviewed in 2016 and
subsequently amended to reflect these
additional restrictions. As part of the Group’s
monitoring system, all non-audit instructions
with the External Auditor must be approved
by either the Group Chief Financial Officer or
the Group Financial Controller and
management must seek approval from the
Committee for all non-audit contracts in
excess of £0.1m. The Group’s policy also
requires that non-audit fees must not exceed
70% of the average External Audit fees billed
over the previous three years.
The Directors confirm that, insofar as they
are each aware, there is no relevant audit
information of which PwC is unaware and
each Director has taken the steps that ought
to have been taken as a Director to be aware
of any relevant audit information and to
establish that PwC is aware of that
information.
Savills plc
Report and Accounts 2017
55
Financial statementsGovernance Strategic reportOverview Compliance with the UK Corporate
Governance Code
The UK Corporate Governance Code 2016 (the “Code”) is the standard against which we measured ourselves in 2017 and the Board fully
supports the principles set out in the Code. The Main Principles have been applied as follows:
A. Leadership
A1 The Board’s Role
The Board met formally eight times during
the year with specific focus on strategy,
performance, leadership and risk,
governance and finance. There is a schedule
of matters reserved for the Board.
A2 Clear Division of Responsibilities
The roles of the Chairman and Group Chief
Executive are clearly defined. The Chairman,
Nicholas Ferguson, is responsible for the
leadership and effectiveness of the Board,
and the Group Chief Executive, Jeremy
Helsby is responsible for leading the
day-to-day management of the Group within
the strategy set by the Board.
A3 Role of the Chairman
The Chairman sets the Board’s agenda,
manages the meeting timetable (in
conjunction with the Group Legal Director &
Company Secretary) and promotes a culture
of open and constructive dialogue during
meetings.
The Chairman, on appointment, met and
continues to meet the independence criteria
set out in B.1.1 of the Code.
A4 Role of the Non-Executive Directors
The Chairman promotes an open and
constructive environment in the boardroom
and actively invites the Non-Executive
Directors’ views. The Non-Executive
Directors provide objective, constructive and
rigorous challenge to management and meet
regularly in the absence of the Executive
Directors.
B. Effectiveness
B1 The Board’s Composition
The Board is made up of a majority of
Independent Non-Executive Directors,
excluding the Chairman.
The Board has determined that each
Non-Executive Director is independent in
character and judgement, commits sufficient
time and energy to the role, and continues to
make a valuable contribution to the Board
and its Committees, including Charles
McVeigh, notwithstanding his long service.
The Nomination & Governance Committee’s
primary objective is to review the
composition of the Board. In making
appointments to the Board, the Nomination
& Governance Committee assesses the
56
Savills plc
Report and Accounts 2017
balance of skills, knowledge, independence,
experience and diversity required in order to
maintain an effective Board.
B2 Board appointments
The Nomination & Governance Committee
leads the appointment of new Directors to
the Board.
B3 Time commitment
On appointment, Directors are notified of the
time commitment expected of them.
The Non-Executive Directors have ensured
that they have sufficient time to carry out
their duties.
B4 Development
To ensure a full understanding of Savills and
its businesses, on appointment each new
Director undergoes a comprehensive and
tailored induction programme which
introduces the Director to the Group’s
businesses, its operations, strategic plans,
key risks and its governance policies. The
induction also includes one to one meetings
with the Heads of the Principal Businesses
and an introduction to each Group
business's development strategy.
B5 Provision of information and support
To enable the Board to discharge its duties,
each Director received appropriate and
timely information, including detailed papers
in advance of Board meetings.
Each Director has access to the advice and
services of the Group Legal Director &
Company Secretary and through him have
access to independent professional advice
in respect of their duties at the Company’s
expense.
B6 Board and Committee performance
evaluation
During 2017, the Board’s annual evaluation
was led by the Chairman and facilitated by
the Group Legal Director & Company
Secretary. The process and key findings are
explained on page 49 of the Annual Report.
B7 Re-election of the Directors
All Directors are subject to election by
Shareholders at the AGM. All Directors will
stand for re-election by Shareholders at the
AGM on 8 May 2018. Directors’ biographies
are set out on pages 44 to 45 of the Annual
Report, enabling Shareholders to take an
informed decision when determining their
re-election
C. Accountablity
C1 Financial and business reporting
The Strategic Report is set out on pages 2
to 35 of the Annual Report and provides
information about the performance of the
Group, the business model, strategy and the
principal risks and uncertainties.
The Directors’ going concern statement is
given on page 50 of the Annual Report.
C2 Risk management and internal
control
The Board sets out the Group’s risk appetite
and, through the Audit Committee, annually
reviews the effectiveness of the Group’s risk
management and internal control systems.
The Directors carried out a robust
assessment of the principal risks including
those that would threaten the business
model, future performance, solvency or
liquidity. Those risks and how they are being
managed or mitigated is set out in the
Annual Report at pages 25 to 29.
Taking account of the Company’s current
position and principal risks, the Directors
assessed the viability of the Group over a
three-year period. The Directors have a
reasonable expectation that the Group will
be able to continue in operation and meet its
liabilities as they fall due over the three-year
period. The viability statement is set out on
page 29 of the Annual Report.
The Board monitors the Group’s risk
management and internal control systems
and, at least annually, carries out a review of
the effectiveness of the Group’s systems of
internal control, covering all material controls,
including financial, operational and
compliance. The activities of the Audit
Committee are summarised on pages 51
and 55 of the Annual Report.
C3 Audit Committee and Auditors
The Board has satisfied itself that Liz Hewitt
has recent and relevant financial experience
and is confident that the collective
experience of the members enables it to be
effective. The fact that a person has been
identified as having recent and relevant
financial experience does not impose
additional duties, obligations or
responsibilities on that Audit Committee
member. The Committee also has access to
the financial expertise of the Group and its
external and internal auditors and can seek
further professional advice at the Company’s
expense, if required.
The Group Legal Director & Company
Secretary ensures that it receives information
and papers in a timely manner to enable full
and proper consideration of agenda items.
These agenda items are agreed in advance
in its annual meeting activity plan.
The main roles and responsibilities of the
Audit Committee are set out in written Terms
of Reference which are available on our
website. The Committee is authorised to
investigate any matter within its Terms of
Reference and has access to the services of
the Group Legal Director & Company
Secretary and, where necessary, the
authority to obtain external legal or other
independent professional advice in the
fulfilment of its duties.
The Committee has responsibility for reviewing
the Group’s whistleblowing arrangements,
including ensuring that appropriate
arrangements are in place for employees to be
able to raise, in confidence, matters of alleged
impropriety, and for ensuring that appropriate
follow-up actions are taken.
The Audit Committee’s role is to assist the
Board in discharging its duties and
responsibilities for financial reporting, internal
control and in making recommendations to
the Board on the appointment of the
independent External Auditors. The
Committee is responsible for the scope and
results of the audit work, its cost
effectiveness and the independence and
objectivity of the External Auditors.
C4 Tenure of Auditor
At the 2017 AGM, shareholders approved
the re-appointment of PwC as the
Company’s External Auditor.
The Audit Committee has assessed whether
suitable accounting policies have been
adopted and whether management have
made appropriate judgements and
estimates. The main areas of judgement
considered by the Committee during 2017
are presented on page 54 of the Annual
Report. The Audit Committee keeps under
review the independence and objectivity of
the External Auditor, including the review
of audit fee proposals and non-audit fees.
The Committee reported on how the
effectiveness of PwC was assessed for
the 2017 financial year on page 55 of the
Annual Report.
D. Renumeration
D1 Levels and components of
remuneration
The Group’s focus and business policy is
founded on the premise that staff in the real
estate advisory sector are motivated through
highly incentive-based (and therefore variable)
remuneration consistent with the Group’s
partnership style culture, which also ensures
that the Group’s reward arrangements are
consistent with – and sensitive to – the
cyclical nature of real estate markets.
The Group’s Remuneration Policy is
designed to deliver these objectives and to
provide the reward potential necessary for
the Company to attract, retain and motivate
the high-calibre individuals on whom its
continued growth and development depend.
Reflecting this philosophy, the salaries for the
Executive Directors, Group Executive Board
members and senior fee-earners are set
significantly below market medians for similar
businesses, with a greater emphasis on the
performance-related elements of profit share
and/or, outside of the UK, commission in the
total reward package.
The Committee is mindful of its responsibility
to reward appropriately, but not excessively,
and rigorously assesses competitive
positioning in setting remuneration and
determining targets to ensure that reward
properly reflects performance, that it
supports the delivery of our strategic and
operational objectives and that it is fair to
management and Shareholders alike.
The Remuneration Policy was reviewed in
2016/17 and approved by Shareholders at
the 2017 AGM (as required by the Directors
Remuneration Regulations 2013).
D2 Procedure
The Remuneration Committee is principally
responsible for determining Company policy
on senior executive remuneration and for
setting the remuneration arrangements of
the Executive Directors and reviewing those
of the members of the Group Executive
Board. The Committee (excluding the
Non-Executive Chairman) also determines
the level of fees payable to the Non-
Executive Chairman.
The Committee is advised by FIT
Remuneration Consultants LLP, who provide
an independent commentary on matters
under consideration by the Committee and
updates on market developments, legislative
requirements and best practice, and
internally by the Group Legal Director &
Company Secretary.
The Remuneration Committee’s terms of
reference are available on our website. An
overview of what the Committee has done
during the year is provided on pages 58 to
73 of the Annual Report.
E. Relations with Shareholders
E1 Shareholder engagement and
dialogue
The Group Chief Executive Officer and
Group Chief Financial Officer lead a regular
programme of meetings and presentations
with analysts and investors, including
presentations following the publication of
the Company’s full and half year results.
This programme maintains a continuous
two-way dialogue between the Company
and Shareholders, and helps to ensure
that the Board is aware of Shareholders’
views on a timely basis. The Board also
normally receives feedback twice each
year from the Company’s corporate
brokers on investors’ and the market’s
perceptions of the Company.
The Chairman and the Senior Independent
Director are also available to meet with
Shareholders if so required.
E2 Constructive use of the general
meetings
The AGM provides the Board with a valuable
opportunity to communicate with private
Shareholders and is generally attended by
all of the Directors.
The Notice of Meeting and related papers for
the AGM are sent to Shareholders at least 20
working days before the meeting.
Savills plc
Report and Accounts 2017
57
Financial statementsGovernance Strategic reportOverview Directors’ Remuneration Report
Annual statement
“ On behalf of the Board, I am pleased
to introduce our 2017 Directors’
Remuneration Report (the ‘Report’) which
sets out Savills philosophy and policy in
relation to Directors’ remuneration and
how this was implemented in the year
ended 31 December 2017. ”
Governance
This Report has been
prepared on behalf of the
Board by the Remuneration
Committee (the ‘Committee’)
in accordance with the
requirements of the
Companies Act 2006 and the
Large and Medium-sized
Companies and Groups
(Accounts and Reports)
(Amendment) Regulations
2013 (‘Regulations’) and the
auditable disclosures referred
to in the External Auditor’s
Report on pages 78 to 84 as
specified by the UK Listing
Authority and the Regulations.
Included within this Report we have
summarised the Remuneration Policy
(‘Policy’) approved by shareholders at the
2017 AGM rather than reproduce the Policy in
full. This gives an overview on the directors’
annual remuneration framework and the full
Policy is available on our website. The Annual
Report on Directors’ Remuneration will be
presented to Shareholders for approval at the
AGM on 8 May 2018.
Our remuneration philosophy
As previously reported, our long-standing
focus and business philosophy is founded on
the premise that staff in our sector are
motivated through highly incentive and
performance based (and, therefore, variable)
remuneration consistent with our partnership
style culture. We firmly believe that this
approach best aligns shareholders’ and
management’s interests and incentivises
superior performance and the creation of
long-term shareholder value. This approach
also ensures that our reward arrangements
are consistent with and sensitive to the
cyclical nature of real estate markets.
The Policy is designed to deliver these
objectives and to provide the reward potential
necessary for the Company to attract, retain
and motivate the high-calibre individuals on
whom its continued growth and development
depend. Reflecting this philosophy, the
salaries for the Executive Directors, Group
Executive Board members and senior
fee-earners are set significantly below market
medians for similar businesses, with a greater
emphasis on the performance-related
elements of profit share and/or, outside the
UK, commission in the total reward package.
The Committee is mindful of its responsibility
to reward appropriately, but not excessively.
As such, it places great emphasis on the
calibration of Executive Director remuneration
and structure against internal relativities,
whilst also rigorously assessing competitive
positioning in setting remuneration. Finally, it
determines targets to ensure that reward
properly reflects performance, that it supports
the delivery of our strategic and operational
objectives and that it is fair to management
and Shareholders alike. Overall, we continue
to expect employment costs over the cycle to
be in the range of 65%–70% of revenues.
2013–2017 Overview
Underlying
Profit
+87%
Dividend
Payments to
Shareholders*
+68%
Executive
Director
Remuneration**
+1%
Total
Shareholder
Return
+74%
*
The dividend cost for 2017 comprises the cost of the final dividend recommended by the Board (amounting to £14.3m), payment of which is subject to shareholder approval at the Company’s
Annual General Meeting (‘AGM’) scheduled to be held on 8 May 2018, the cost of the supplemental dividend (£20.6m) declared by the Board on 15 March 2018 (payable to shareholders on the
Register of Members as at 13 April 2018) and the interim dividend (£6.3m) paid on 4 October 2017.
**
Executive Director remuneration comprises the remuneration paid to the Group Chief Executive Officer and Group Chief Financial Officer job holders between 1 January 2013 and
31 December 2017. Since 1 July 2010 the Executive Director representation on the Board has comprised these job holders.
58
Savills plc
Report and Accounts 2017
2017 performance and remuneration
Annual performance-related profit share
Savills delivered excellent performance in
2017, against the backdrop of heightened
uncertainty over global economic prospects,
geopolitical risks and rising interest rates,
with particularly strong performances in our
transactional businesses in the UK, and in a
number of European and Asia Pacific
markets and the relative resilience of Savills
UK Residential transaction business is of
particular note.
Key financial highlights for the year included:
• Revenue of £1.6bn, representing growth
of 11% on 2016;
• Underlying profit before tax of £140.5m
which represented 3.5% growth on
2016 and;
• Transaction Advisory revenues up 13%,
Consultancy revenues by 14% and
Property Management by 9%
We further progressed our strategy of
being the leading advisor in the key markets in
which we operate, by adding complementary
businesses and teams to our strong core
business. In particular during 2017 we:
• continued to build our US platform with
the acquisition of Cresa Orange County, a
tenant rep business in California, and the
hire of a significant new capital markets
team in New York;
• strengthened our investment sales teams
in Beijing and Shanghai with significant
new hires;
•
in Europe, acquired Aguirre Newman in
Spain, Larry Smith in Italy and SB
Property Services in the Czech Republic,
along with the recruitment of industrial
teams in Amsterdam and Warsaw; and
• continued to invest in our own technology
platform, and invested in promising
external technology based businesses
which have the potential to significantly
enhance or disrupt traditional business
models in the real estate sector.
At the beginning of 2017, the Committee set
stretching financial targets for the 75% of the
performance-related profit share relating to the
delivery of Underlying Profit before Tax
(‘UPBT’). The Group delivered a very strong
financial performance in 2017, notwithstanding
the market uncertainties noted above. As
such, the Executive Directors received 77% of
the maximum potential award in relation to
financial performance. This compares with an
allocation of 100% of the maximum potential
award in relation to financial performance in the
previous year. The absolute amount of this
element of the bonus is accordingly down
by approximately 15%. In relation to the
objectives-based element which accounts for
up to 25% of annual award, the Executive
Directors were deemed to have performed
towards the top end of their personal strategic
and operational objectives. Full details of the
annual performance-related profit share
awards approved by the Committee for the
Executive Directors are included along with the
other elements of remuneration in the total
remuneration table on page 62 of this Report.
2018 remuneration
We were very pleased that shareholders
gave over 98% approval to our renewal of
our Policy at the 2017 AGM and we are not
seeking to amend our Policy at the 2018
AGM. An overview of the key decisions for
2018 is as follows:
• Base salaries: we have an established
approach of offering low base salaries,
relative to market medians (which approach
applies to the Executive Directors, Group
Executive Board Members and other senior
fee earners). Salaries continue to be
reviewed each year (although not
necessarily increased; where an increase is
agreed in principle but not implemented,
the notionally increased base salary
(“Reference Salary”) will be used as the
base when future salary increases are
considered). For 2018, the Committee
approved a 2.5% increase in base salaries
(applied to the Executive Directors’
Reference Salaries as at 1 March 2017) for
the Executive Directors effective 1 March
2018.
• Benefits & pension: no changes are
proposed and these continue to be set
below market rates.
• Annual performance-related profit share: in
line with our Policy, the maximum
opportunity for 2018 is increased in line with
the increase in RPI for 2017. For 2018, the
cap on the profit share opportunity will
therefore be, for the Group Chief Executive
Officer, £2.134m and for the Group Chief
Financial Officer, £1.6m, being 4.1% higher
than the cap applying in 2017, reflecting
year on year growth in RPI (2017 caps:
Group CEO £2.05m; Group CFO
£1.5375m). Annual awards will continue to
be determined as follows:
•
75% based on a Group UPBT
performance
• 25% on the achievement of pre-set
personal strategic and operational
objectives
• The Group UPBT payment scale will be
adjusted for any acquisitions/disposals in
the year which impact Group UPBT by
more than 7.5% (on an annualised basis).
In such cases the scale will be adjusted
to neutralise the benefit of any overage
above the 7.5% level.
• Performance Share Plan: annual grant to
be made at the existing award levels of
200% of base salary for the Group Chief
Executive Officer and the Group Chief
Financial Officer. The EPS growth and
relative total shareholder return targets
will remain unchanged from those
applying in 2017, but are subject to
ongoing review to ensure that these
continue to provide meaningful targets in
the light of market developments and the
Group’s strategic objectives.
Director changes
As announced on 16 January 2018, Mark
Ridley, currently CEO of Savills UK and Europe,
will become an Executive Director on 1 May
2018 joining the Board then as Deputy Group
Chief Executive and will succeed Jeremy
Helsby upon the latter’s retirement as Group
Chief Executive Officer effective 1 January
2019. As Deputy Group Chief Executive,
effective 1 May 2018 the remuneration
package will consist of a salary of £255k p.a.
and an annual performance-related profit
share maximum opportunity of £1.867m, with
75% based on a mixture of Group UPBT
performance and 25% on the achievement of
pre-set personal strategic and operational
objectives (in 2018, both salary and the
performance related profit share opportunity
will be pro-rated to reflect the 1 May 2018
appointment date). He will also receive a
Performance Share Plan grant in line with the
other Executive Directors. Upon Mark Ridley’s
appointment as Group Chief Executive Officer,
the package will be increased to the same level
as that of the outgoing CEO (subject to any
inflation-related adjustments to salary and/or
bonus potential).
Following his retirement from the Board at the
end of 2018, Jeremy Helsby will remain an
advisor to the Company supporting the
management team of the Savills US business.
Governance developments
As a Committee, we continue to monitor
best practice developments in executive
remuneration and consider whether any
amendments to the Policy are appropriate.
The Committee is appreciative of the
significant Shareholder support that it has
enjoyed in recent years and welcomed
Shareholders’ endorsement of the 2016
Annual Remuneration Report along with the
renewal of the Policy at the 2017 AGM. We
hope that you find this year’s Annual
Remuneration Report equally clear and
informative and that you will continue to
support us by voting in favour of the
resolution at this year’s AGM on 8 May 2018.
Rupert Robson
Chairman of the Remuneration Committee
Savills plc
Report and Accounts 2017
59
Financial statementsGovernance Strategic reportOverview
Directors’ Remuneration Report continued
Annual Report on Remuneration
As at 31 December 2017 and up to the date of this Report, the
Committee comprises the Independent Non-Executive Directors.
Biographical details relating to each of the Committee members are
shown on pages 44 and 45.
The Committee met four times during the year. The principal agenda
items considered by the Committee during the year were as follows:
• reconfirming the Group’s Policy in the context of best practice
and corporate governance developments;
• agreeing performance targets for both the annual performance-
related profit share and Performance Share Plan awards;
• preparing an Annual Remuneration Report consistent with the
legislation relating to executive remuneration;
• agreeing the remuneration packages of the Executive Directors,
including the proposed package for the Deputy Group Chief
Executive and reviewing those of Group Executive Board
members; and
• approving the grant of Performance Share Plan awards.
Advisors to the Committee
In determining Executive Director remuneration, the Committee has
access to detailed external information and research on market
trends and peer practice provided by its independent external
advisor, FIT Remuneration Consultants. FIT Remuneration
Consultants are members of the Remuneration Consultants Group,
and adhere to the voluntary code of conduct in relation to executive
remuneration consulting in the UK. FIT Remuneration Consultants’
fees are based on a time and material basis, within the parameters
of an overall annual budget. In 2017, FIT Remuneration Consultants
received fees of £57,703 plus VAT in relation to advice provided to
the Committee. FIT Remuneration Consultants provided no other
services to the Group during the year.
The Committee is satisfied that the advice received from FIT
Remuneration Consultants during the year was entirely objective
and independent. The Committee will continue to keep these
arrangements under review to ensure that they remain appropriate
to the needs of the Committee in developing remuneration policy
to support the delivery of Group strategy.
The Committee is also advised internally by the Group Legal Director
& Company Secretary (save in relation to matters concerning his
own remuneration).
Given the fundamental role that remuneration plays in the success
of the Group, in terms of the recruitment, motivation and retention of
high-quality staff, the Group Chief Executive Officer attends
meetings by invitation and is consulted on the remuneration
package of the Group Chief Financial Officer.
Terms of Reference
The Committee’s Terms of Reference, which are reviewed annually,
or by exception to take account of regulatory changes or best
practice, are available from the Group Legal Director & Company
Secretary upon request or can be viewed on the Company’s website
(www.savills.com).
Role of the Committee
The principal role of the Committee is to support the Group to
achieve its strategic objectives by designing a remuneration policy
consistent with the Group’s business model such that we have the
ability to attract, recruit, retain and motivate the high-calibre
individuals needed to deliver the Group’s strategy while promoting
the long-term interests of the Company. The Committee also
considers the broader implications of the Policy to mitigate any
potential environmental, social or governance implications. The
Committee is responsible for the broad policy governing senior staff
pay and remuneration. It sets the actual levels of all elements of the
remuneration of the Executive Directors and reviews that of Group
Executive Board members. The Policy remains under periodic
review to ensure that it remains consistent with the Company’s scale
and scope of operations, supports business strategy and growth
plans and helps drive the creation of shareholder value. The
Committee also oversees the operation of Savills’ employee share
schemes.
Committee members and attendees
As shown in the table below, the Committee comprises the
Independent Non-Executive Directors:
Committee member
Position
Status
Rupert Robson
Chair of the Committee
Independent
Tim Freshwater
Member of the Committee Independent
Liz Hewitt
Member of the Committee Independent
Committee attendee
Position
Status
Nicholas Ferguson Non-Executive Chairman
Jeremy Helsby
Group Chief Executive
Officer
Chris Lee
Group Legal Director &
Companys ecretary
Attends by invitation
(except when his
own remuneration
is discussed)
Attends by invitation
(except when his
own remuneration
is discussed)
Provides advice
and support
(except when his
own remuneration
is discussed) as
well as acting as
Secretary to the
Committee
Simon Shaw, Group Chief Financial Officer, may be invited to attend
meetings to provide an overview of market conditions and the
Group’s prospective financial performance.
Meetings
Attendance table
Committee member
Rupert Robson
Tim Freshwater
Liz Hewitt
60
Savills plc
Report and Accounts 2017
Meetings
attended
Meetings
eligible to attend
4
4
4
4
4
4
Directors’ Remuneration Report continued
Remuneration Policy
The Group’s remuneration arrangements for the Executive Directors, Group Executive Board members and senior fee-earners are structured
to provide a competitive mix of variable performance-related (ie annual performance profit share and longer-term incentives) and fixed
remuneration (principally base salary) to reflect individual and corporate performance. The objective is to set targets which provide an
appropriate balance between being achievable and stretching.
In determining the remuneration of the Executive Directors and reviewing that of the Group Executive Board members, the Committee
reviews the role and responsibility of the individual, their performance, the arrangements applying across the wider employee group and
internal pay relativities. It also considers sector and broader market practice in the context of the prevailing economic conditions and
corporate performance on environmental, social and governance issues.
Overview of the Policy
A summary of the Policy for Executive Directors and how it will be applied for 2018 is set out below.
Element
Base salary
Pension
Summary of approach
Application of Policy for 2018
Base salaries are set significantly below market
median levels, in line with the Group’s philosophy to
place greater emphasis on variable, performance-
related remuneration.
• The Committee has approved an increase in the
base salaries of the Executive Directors of 2.5%
(which will be applied to 2017 ‘Reference Salaries’)
effective 1 March 2018.
• Salaries in 2018 will therefore be as follows
• Group Chief Executive Officer: £289,000
• Deputy Group Chief Executive Officer (effective
1 May 2018): £255,000
• Group Chief Financial Officer: £221,000
Pension contributions/salary supplements for 2018 are:
• Group Chief Executive Officer: 14% of salary
• Deputy Group Chief Executive Officer (effective
1 May 2018): 14% of salary
• Group Chief Financial Officer: 18% of salary
Pension benefits are provided through a Group
personal pension plan, as a non-pensionable salary
supplement or as a contribution to a personal
pension arrangement.
The CEO receives a pension from the legacy defined
benefit pension plan but no longer accrues benefits
under the plan.
Benefits
Benefits include:
Benefits in line with Policy.
Medical insurance benefits;
Annual car/car allowance (up to £10,000)
Permanent Health Insurance;
Life Insurance; and
Relocation expenses.
Annual performance-
related profit share
Reflects the Group’s annual profit performance
and personal performance against pre-set objectives
and overall contribution.
Performance Share Plan
In line with the Group’s philosophy that there is
greater emphasis (than under listed company norms)
on variable performance-related pay. Consequently,
50% of any award payable above an amount equal
to base salary is deferred into shares for three years.
Malus and clawback provisions apply.
Awards of shares are made subject to a three-year
performance period. Any vested awards will then be
subject to an additional two-year holding period.
The maximum award potential remains at 200% of
base salary, subject to an overall annual maximum of
shares with a value of £1m on award per participant.
Malus and clawback provisions apply.
The maximum potential annual profit share awards for
2018 are:
• Group Chief Executive Officer: £2.134m
• Deputy Group Chief Executive Officer (effective
1 May 2018): £1.867m (pro-rated)
• Group Chief Financial Officer: £1.6m.
For 2018 profit share awards, 75% will be based on
the Group’s annual profit performance and 25% will
be based on the delivery of strategic and operational
performance goals. The Committee reserves its ability
to vary these proportions or apply different/additional
measures in future years.
The awards for 2018 will be up to 200% of base salary.
For 2018 Performance Share Plan awards, 50% of
the award will vest subject to Earnings Per Share
performance and 50% will vest subject to relative
TSR performance against the FTSE Mid 250 Index
(excluding investment trusts).
Share Ownership
Guidelines
Achieved through share purchase and/or retention
of any after-tax shares which vest pursuant to the
Group’s share plans until the guideline is met.
500% of base salary for the Group Chief Executive
Officer, (effective 1 May 2018) Deputy Chief Executive
Officer and Group Chief Financial Officer.
Savills plc
Report and Accounts 2017
61
Financial statementsGovernance Strategic reportOverview Directors’ Remuneration Report continued
Annual Report on Remuneration
Total remuneration for 2017
Set out below are details of Executive Director remuneration for 2017.
Executive Directors’ ‘single figure’ for the financial year ended 31 December 2017 and as a comparison for the financial year ended
31 December 2016 (audited).
Salary (1)
Benefits(2)
Pension: contribution
Annual profit share – cash(3)
Annual profit share – deferred shares(3)
Near term remuneration
Jeremy Helsby
Simon Shaw
2017
£
275,000
10,837
38,500
961,000
686,000
1,971,337
2016
£
275,000
11,055
38,500
1,314,800
598,200
2,237,555
2017
£
210,000
11,216
37,800
723,000
513,000
1,495,016
2016
£
210,000
11,216
37,800
1,040,000
435,000
1,734,016
The aggregate near term remuneration paid to the Executive Directors in the year ended 31 December 2017 was £3.47m (2016: £3.97m).
Notes:
1 Benefits comprise private medical insurance and car allowance.
2 The 2016 figures exclude any charity/pension waiver. Jeremy Helsby waived £45,000 and Simon Shaw waived £25,000 in favour of contributions to registered charities.
3 (See the table below) For 2017 the notional value of the PSP award with a performance period which ended on 31 December 2017 (ie where the award will vest in April 2018) has been valued
based on the number of shares that will vest and the three month average share price for the period to 31 December 2017 (949.2p per share). For 2016, the value shown has been updated to
reflect the actual market sale price at the date of vesting which was 868.1p per share and Dividend Shares. The estimates provided for long-term share-based reward in last year’s report in
respect of 2016 were: Jeremy Helsby £259,665 and Simon Shaw £144,256. The actual value has been split between the relevant value on the date of the original award of the relevant shares
(the PSP – performance element) and subsequent increase in value (PSP – share price appreciation).
Gain on long-term share-based awards
Performance Share Plan – performance element(3)
(for 2017: notional)
Performance Share Plan – share appreciation element(3)
(for 2017: notional)
Long-term share-based reward
(non-cash – for 2017: notional)(3)
Total ie ‘Single Figure’ (for 2017: part notional)
Jeremy Helsby
Simon Shaw
2017
£
Notional
2016
£
Actual
2017
£
Notional
2016
£
Actual
462,546
225,000
294,339
125,000
72,879
132,059
46,376
73,362
535,425
2,506,762
357,059
2,594,614
340,715
1,835,731
198,362
1,932,378
The information in this table has been audited by the Auditor, PricewaterhouseCoopers LLP.
Performance-related remuneration for 2017
Annual performance-related profit share
UPBT performance-related element
The following near-term performance measures applied to the 2017 annual performance-related profit share arrangements:
75% of the award was based on profit performance, defined as UPBT performance. The Committee set targets at a level which were
significantly higher than the previous year. The target range and Savills performance were as follows:
Minimum (0% of element)
Mid-point (62.5% of element)
Maximum target
(100% of element)
Savills UPBT performance
Bonus award (% of element)
£96m
£128m
£160m
£140.5m
77%
There was straight-line vesting between minimum, mid-point and maximum.
Reflecting the Group’s very strong performance in 2017, awards at 77% of the maximum potential were earned by the Executive Directors
in respect of the UPBT performance-related element (2016: 100%).
The remaining 25% of annual performance-related profit share awards was based on individual performance against key strategic and
operational objectives. The Executive Directors were each awarded 90% of this 25%.
62
Savills plc
Report and Accounts 2017
The Committee set strategic and operational objectives for the Executive Directors which were aligned with value creation for Savills.
Details of Jeremy Helsby’s achievement against the key objectives set included the following:
• building out the Group’s US Capital Markets offering and driving the continued development of Savills Studley’s tenant rep and occupier
services platforms;
• developing a long-term incentive plan for senior management and fee earners in Savills Studley to align further fee earners’ and
shareholders’ interests;
•
further strengthening and broadening the management team across Asia;
• continuing the expansion of Savills European platform by strengthening teams and broadening its geographic and service line
offerings through selective acquisitions, principally Aguirre Newman in Spain, Larry Smith in Italy and SB Property Services in the
Czech Republic; and
• enhancing further the Group’s cross-border offering, to ensure the provision of seamless servicing to clients seeking advice or support
outside of their home market.
Details of Simon Shaw’s achievement against the key objectives set included the following:
• the further development of the Group’s own technology platform to deliver innovative solutions to our clients through data analysis and
insight and to drive internal efficiencies;
•
identifying and investing in external technology-based businesses with the capability of significantly enhancing or disrupting traditional
business models in real estate services;
• playing a leading role in the identification of strategic acquisition opportunities and the execution of the Aguirre Newman acquisition in
Spain; and
• developing and implementing management succession plans in Savills Investment Management; and
• delivering a targeted increase in the scale of Savills Investment Management, particularly through organic fund raising with £1.9bn of new
equity raised in 2017.
For Jeremy Helsby and Simon Shaw, in line with the Policy, 50% of their overall awards, above an amount equal to their respective base
salaries, was deferred for a further three-year period in the form of shares.
Long-term incentives
The PSP award granted in 2015 will vest in April 2018, subject to performance in the three years to 31 December 2017. Following an
assessment of Savills performance against targets set at grant, the Committee determined that 84.1% of the award should vest.
The targets and Savills performance were as follows:
Weighting
Threshold target
(25% vesting)
Maximum target
(100% vesting)
Savills performance
Vesting (% of
maximum)
Relative TSR versus FTSE Mid 250
index (excluding investment trusts)
50%
Equal to index
by 8% p.a.
by 6.3% p.a.
83.7%
Outperform index
Outperform index
% EPS growth
50%
RPI plus 3% p.a.
compounded
RPI plus 10% p.a.
compounded
RPI plus 8.6% p.a.
compounded
84.5%
Non-Executive Directors fees (audited)
The Non-Executive Director fees for 2017 were as follows:
Basic fee
Additional fees
Senior Independent Director
Remuneration Committee Chairman
Audit Committee Chairman
2017 Total
2016 Total
Nicholas Ferguson
(Chairman)
Tim Freshwater
Liz Hewitt
Charles McVeigh
Rupert Robson
£193,333
£51,000
£51,000
£51,000
£51,833
£6,500
£193,333
£149,406
£57,500
£53,200
£12,500
£63,500
£60,000
£51,000
£50,000
£8,750
£60,583
£57,500
The information in this table has been audited by the Auditor, PricewaterhouseCoopers LLP.
The fees payable to the Non-Executive Directors are determined by the Non-Executive Chairman and the Executive Directors after
considering external market research and individual roles and responsibilities. The fees for the Non-Executive Chairman are determined
by the Remuneration Committee.
Savills plc
Report and Accounts 2017
63
Financial statementsGovernance Strategic reportOverview Directors’ Remuneration Report continued
Annual Report on Remuneration continued
The current fee payable to Nicholas Ferguson as Chairman is £200,000 p.a..
The current base fee for the Non-Executive Directors is £52,000 p.a., with additional fees payable to the Senior Independent Director
(£8,000 p.a.), the Remuneration Committee Chairman (£10,000 p.a.) and the Audit Committee Chairman (£15,000 p.a.).
These fees have not been increased for 2018.
The Non-Executive Directors do not participate in incentive arrangements or share schemes.
Operation of Policy in 2018
Base salary
The Committee approved a 2.5% salary increase (against 2017 Reference Salaries) for the Executive Directors for 2018, effective
1 March 2018. The base salaries of the Executive Directors effective 1 March 2018 are therefore as follows:
• Group Chief Executive Officer: £289,000 p.a.;
• Group Deputy Chief Executive Officer: £255,000 p.a. (effective 1 May 2018); and
• Group Chief Financial Officer: £221,000 p.a..
In line with our Policy, the base salaries for the Executive Directors continue to be positioned significantly below market median against
the FTSE 250.
Variable remuneration
Annual performance-related profit share
The maximum annual performance-related profit share opportunity for 2018 will be:
• £2.134m for the Group Chief Executive Officer;
• £1.867m for the Group Deputy Chief Executive Officer (effective 1 May 2018); and
• £1.6m for the Group Chief Financial Officer.
For the 2018 performance-related profit share, 75% of award potential will reflect the Group’s UPBT performance and 25% of award potential
will reflect delivery against a mix of personal, strategic and operational objectives.
The Committee considers prospective disclosure of individual objectives to be commercially sensitive and disclosure will therefore be on a
retrospective basis.
The Committee retains a general discretion to reduce the pay-out level to reflect exceptional events over the performance period.
Performance Share Plan
The remuneration policy is for maximum awards of 200% of base salary. The PSP awards for 2018 will be up to two times each Executive
Director’s base salary.
Awards will vest subject to the satisfaction of EPS targets for 50% of the award as follows:
• 25% (ie threshold) of the element to vest if the Company’s EPS growth is RPI plus 3% p.a. compounded;
• 100% (ie the maximum) of the element to vest if the Company’s EPS growth is RPI plus 8% p.a. compounded or more; and with straight-
line vesting between the two points.
The Committee considers that if EPS growth of RPI plus 8% p.a. were achieved from the strong 2017 EPS base starting position, this would
represent outstanding performance for shareholders.
The other 50% of the award will vest subject to the satisfaction of relative TSR performance versus the FTSE Mid 250 Index (excluding
investment trusts) (‘the Index’) as follows:
• 25% (ie threshold) of the element to vest if the Group’s TSR performance equals that of the Index;
• 100% (ie the maximum) of the element to vest if the Group’s TSR performance outperforms the Index by 8% p.a.; and with straight-line
vesting between the two points.
The awards made to Executive Directors will also be subject to a holding period so that any PSP awards for which the performance vesting
conditions are satisfied will not normally be released for a further two years from the third anniversary of the original award date. Dividend
accrual for PSP awards will continue until the end of the holding period.
64
Savills plc
Report and Accounts 2017
Relative spend on pay
To provide context and outline how remuneration for Executive Directors compares with other disbursements, such as dividends and
general employment costs the table below illustrates general employment costs, Executive Director reward, tax charges and dividend
payments to shareholders in 2017 and 2016.
Employment costs
Underlying profit before tax
Dividend payment to Shareholders
Executive Director remuneration
Tax
2017
£m
1,061.7
140.5
41.1
4.0
103.7
2016
£m
948.6
135.8
38.9
4.4
99.9
%
increase
12
3
6
-10
4
The information in this table has been audited by the Auditor, PricewaterhouseCoopers LLP.
• Employment costs (excluding arrangements for Executive Directors) comprise basic salaries, profit share and commissions, social
security costs, other pension costs and share-based payments.
• Tax comprises corporation tax, employers’ social security and business rates and equivalent payments.
• The dividend cost for 2017 comprises the cost of the final dividend recommended by the Board (amounting to £14.3m), payment of which
is subject to shareholder approval at the Company’s AGM scheduled to be held on 8 May 2018, the cost of the supplemental dividend
(£20.6m) declared by the Board on 15 March 2018 (payable to shareholders on the Register of Members as at 13 April 2018) and the
interim dividend (£6.3m) paid on 4 October 2017 and is based on the number of shares in issue as at 31 December 2017.
• Executive Director remuneration is the remuneration paid to the Group Chief Executive Officer and Group Chief Financial Officer role
holders and comprises basic salaries, profit share, social security costs, pension costs and share-based payments.
Total shareholder return and Group Chief Executive Officer remuneration
The total shareholder return delivered by the Company over the last nine years is shown in the chart below. Over this period the Company
has delivered total shareholder return of 22% per annum (FTSE 250 (excluding investment trusts): 18% per annum; FTSE 350 Super Sector
Real Estate: 10% per annum). Savills was ranked 54th by TSR performance in the FTSE 250 (excluding investment trusts) and ranked
second (of 18 companies) by performance in the FTSE 350 Super Sector Real Estate over the nine years to 31 December 2017.
Total Shareholder Return ('TSR') (rebased)
9 years to 31 December 2017
600
500
400
300
200
100
0
Dec
08
Jun
09
Dec
09
Jun
10
Dec
10
Jun
11
Dec
11
Jun
12
Dec
12
Jun
13
Dec
13
Jun
14
Dec
14
Jun
15
Dec
15
Jun
16
Dec
16
Jun
17
Dec
17
Jun
18
Dec
18
Savills
FTSE 250 (excluding investment trusts)
FTSE 350 Super Sector Real Estate
The Board believes that the FTSE 250 Index (excluding investment trusts) remains the most appropriate index against which to compare TSR
over the medium term as it is an index of companies of similar size to Savills. Savills TSR relative to that of the FTSE 350 Super Sector Real
Estate Index is also shown, as this index better reflects conditions in real estate markets over recent years.
Savills plc
Report and Accounts 2017
65
Financial statementsGovernance Strategic reportOverview Directors’ Remuneration Report continued
Annual Report on Remuneration continued
Pay for performance
Year
2017
2016
2015
2014
2013
2012
2011
Total Single Figure
Remuneration £’000
UPBT £m
UPBT annual %
change
2,507
2,595
2,298
3,279
2,630
1,786
1,268
140.5
135.8
121.4
100.5
75.2
58.6
50.4
+3.5
+12
+21
+34
+28
+16
+7
Annual
variable element:
performance-related
profit share – annual
award against
maximum potential
%
Long-term Incentive
fully vested
(maximum potential
of award) 100%
80
98
100
100
86
65
49
84
50
N/A
100
100
100
0
Total remuneration in the years 2012 to 2017 includes, as required, the notional value of PSP awards and executive share options which
vested (but were not exercised) in those years (note that no PSP awards were made in 2013 with the consequent effect on Total Single
Figure Remuneration in 2015 compared to the 2013, 2014, 2016 and 2017 years). The awards granted in 2008 lapsed in 2011.
Group Chief Executive Officer pay increase in relation to all UK employees
Group Chief Executive Officer
All UK employees
Notes:
Percentage change in remuneration
from 31/12/2016 to 31/12/2017
Percentage change
in base salary %
Percentage change
in benefits %
Percentage change
in profit share award
%
2.5%
-0.3%
2%
-2.4%
-13.9%
5.1%
1.
Salary, benefits and bonus is compared against full-time equivalent UK employees. The UK workforce was chosen as a suitable comparator group as Jeremy Helsby is based in the UK
(notwithstanding his global role and responsibilities) and is in line with Policy benefits which vary across the Group by reference to local market conditions and practice. (Audited information.)
2. The base salary for the Group Chief Executive Officer continues to be positioned significantly below the market median against the FTSE 250.
Pensions disclosure
From March 2015, the Group Chief Executive Officer has received a non-pensionable salary supplement equal to 14% of pensionable
earnings. The Group Deputy Chief Executive Officer receives an equivalent salary supplement. For the Group Chief Financial Officer,
the Company contributes 18% per annum of pensionable earnings to his personal pension plan.
The Group Chief Executive Officer no longer accrues a pension benefit under the Savills Defined Benefit Pension Plan (The ‘Plan’).
The value of the legacy benefit is shown below.
Executive Director
Jeremy Helsby
Notes
Defined benefit
pension accrued at
31 december 2017
Defined benefit
pension accrued at
31 December 2016
Defined benefit
pensions value for
2017 remuneration
table
Defined benefit
pensions value for
2016 remuneration
table
52,617
51,112
–
–
1. Jeremy Helsby reached Plan retirement age on 9 July 2015 since which date his pension increases in line with the standard provisions of the Plan applicable to all pensioners.
2. As Jeremy Helsby is now in receipt of pension benefits, no remuneration amount is applicable relating to the Plan.
66
Savills plc
Report and Accounts 2017
Share interests
Details of shares in the Company which the Directors beneficially held or had a beneficial interest in as at 31 December 2017 are shown
below. Where any vested PSP awards in the future are subject to a holding period requirement, the vested PSP award shares (discounted
for anticipated tax liabilities) will count towards the shareholding requirements:
Executive Directors
Jeremy Helsby
Simon Shaw
Number of
shares (including
beneficially held
under the SIP)
Unvested
shares subject
to performance
conditions (PSP)
Deferred share
bonus plan awards
(vesting not subject
to performance
conditions) (DSBP)
564,849
155,864
206,550
125,366
224,024
161,210
Extent to which
shareholding
guideline met
390%
141%
The Company currently applies shareholding requirements that the Group Chief Executive Officer and Group Chief Financial Officer hold
shares to the value of five times their respective base salaries. New Executive Directors will be expected to build holdings to this level over
time, principally through the retention of shares released to them (after settling any tax due) following the vesting of share awards.
Non-Executive Directors
Nicholas Ferguson
Tim Freshwater
Liz Hewitt
Charles McVeigh
Rupert Robson
At 31 December
2017
29,286
–
3,400
–
7,981
As at 14 March 2018, no Director had bought or sold shares since 31 December 2017.
The Sharesave Scheme
No Directors hold outstanding options under the Sharesave Scheme and no options were exercised during the year.
Scheme interests granted in 2017
The following table sets out details of awards made under the PSP in 2017.
Type of award
Basis of award
(face value)
Performance period
% vesting
for threshold
performance
% vesting
for maximum
performance
Jeremy Helsby
Nil-cost options
£550,000
Performance criteria
– 50% of award
Earnings per share growth
Simon Shaw
Nil-cost options
£420,000
1 January 2017 to
31 December 2019
25%
100%
– 50% of award
Relative total shareholder
return against the FTSE 250
(excluding investment trusts)
Awards were also made during the year under the Deferred Share Bonus Plan. Details of awards under this plan are set out on page 68.
Savills plc
Report and Accounts 2017
67
Financial statementsGovernance Strategic reportOverview Directors’ Remuneration Report continued
Annual Report on Remuneration continued
The Performance Share Plan (‘PSP’)
Number of shares
Directors
Jeremy Helsby
Simon Shaw
At
31 December
2016
75,000
67,073
77,084
Awarded
during year
Vested
Lapsed
during year
during year
–
–
–
37,500
37,500
–
–
–
–
–
–
20,833
20,833
–
–
–
–
–
–
–
62,393
41,666
42,682
35,038
–
–
–
–
47,646
Closing mid-
market price
of a share the
day before
grant
At
31 December
2017
–
67,073
77,084
62,393
–
42,682
35,038
47,646
600.0p
820.0p
713.5p
881.5p
600.0p
820.0p
713.5p
881.5p
Market value
at date of
vesting
First
vesting date
868.1p
12.08.17
–
–
–
23.04.18
27.04.19
22.05.20
868.1p
12.08.17
–
–
–
23.04.18
27.04.19
22.05.20
Awards over 58,333 shares, together with a further 5,645 shares in lieu of dividends, vested under the PSP to Executive Directors during the
year. A subscription cost of 2.5p nominal value per share is payable on actual receipt of shares. The total pre-tax gain on awards vested
during the year was £553,822.
The Deferred Share Bonus Plan (‘DSBP’)
Number of shares
Directors
Jeremy Helsby
Simon Shaw
Awarded
during year
Vested during
year
Closing
mid-market
price of a share
the day before
grant
At
31 December
2017
At
31 December
2016
70,767
73,170
86,463
–
–
–
–
64,391
53,048
54,146
60,240
–
–
–
–
46,824
70,767
–
–
–
53,048
–
–
–
-
73,170
86,463
64,391
–
54,146
60,240
46,824
653.0p
820.0p
705.5p
929.0p
653.0p
820.0p
705.5p
929.0p
Market value
at date of
exercising
910.4p
–
–
–
910.4p
–
–
–
Normal
vesting date
13.05.17
24.04.18
14.03.19
18.04.20
13.05.17
24.04.18
14.03.19
18.04.20
Under the DSBP awards over 123,815 shares and 10,339 shares in lieu of dividends vested to Executive Directors during the year. The total
pre-tax gain on awards vested during the year was £1,221,306. No DSBP awards lapsed.
During the year, the aggregate gain on the exercise of share options and shares vested was £1,775,128. The mid-market closing price of the
shares at 29 December 2017, the last business day of the year, was 993p and the range during the year was 687p to 993p.
Exit payments
No Executive Director left the Company during the year ended 31 December 2017. No payments for compensation for loss of office were
paid to, or receivable by, any Director for that or any earlier year.
External Directorships
Savills recognises that its Executive Directors may be invited to become non-executive Directors of other companies. Such non-executive
duties can broaden experience and knowledge which can benefit Savills. Subject to approval by the Board and any conditions which it might
impose, the Executive Directors and Group Executive Board members are allowed to accept external non-executive Directorships and retain
the fees received, provided that these appointments are not likely to lead to conflicts of interest. For non-executive Directorships which are
considered to arise by virtue of an Executive Director’s or Group Executive Board member’s position within Savills, the fees are paid directly
to Savills.
During 2017, Simon Shaw received a fee of £30,000 in relation to his continuing appointment as Non-Executive Chairman of Synairgen plc
which he was permitted to keep (as this appointment is not linked to his role within the Company).
68
Savills plc
Report and Accounts 2017
Service contracts
The Executive Directors have rolling service contracts which are terminable on 12 months’ notice by either the Company or the
Executive Director.
Directors
Jeremy Helsby
Mark Ridley
Simon Shaw
Contract date
1 May 1999
1 May 2018
16 March 2009
The Non-Executive Directors and the Chairman have letters of appointment. In line with the UK Corporate Governance Code, all Directors
are subject to annual re-election at the AGM. The Chairman’s letter of engagement allows for six months’ notice. Appointment of other
Non-Executive Directors may be terminated by either party with three months’ notice.
Director
Nicholas Ferguson
Tim Freshwater
Liz Hewitt
Charles McVeigh
Rupert Robson
Date appointed to Board
End date of current letter of appointment
26 January 2016
1 January 2012
25 June 2014
1 August 2000
23 June 2015
25 January 2019
31 December 2020
30 June 2020
AGM May 2019
22 June 2018
The Directors’ service contracts and letters of appointment are available for inspection at our City office, 15 Finsbury Circus, London
EC2M 7EB.
Shareholder votes on remuneration matters
The table below shows the voting outcomes for the 2016 Annual Remuneration Report and the Directors’ Remuneration Policy at the AGM
held on 9 May 2017.
Number of
votes ‘For’ and
Number of votes
discretionary % of votes cast
‘Against’ % of votes cast
Total number of
votes cast
Number of votes
‘Withheld’*
2016 Annual Directors’ Remuneration Report 106,174,260
Directors’ Remuneration Policy
104,842,007
98.98%
98.35%
1,089,770
1,753,512
1.02% 107,264,030
1,996,488
1.65% 106,595,519
2,665,000
* A vote withheld is not a vote in law.
Savills plc
Report and Accounts 2017
69
Financial statementsGovernance Strategic reportOverview Directors’ Remuneration Report continued
Annual Report on Remuneration continued
Policy table extract from the Directors’ Remuneration Policy approved by shareholders at the 2017 AGM
The following sets out the table of remuneration elements from the Remuneration Policy, which was approved by shareholders at the 2017
AGM. To provide consistency with the remainder of the Report, salaries shown are 2018 salaries and annual performance-related profit
share levels have been updated for the operation of the Policy in 2018.
Operation
Potential
Performance measures
Purpose and
link to strategy
Base salary
• A core component
of the total reward
package, which
package overall
is designed to
attract, motivate
and retain
individuals of the
highest quality.
The Committee considers base
salary levels annually taking into
consideration:
• the Group’s philosophy to place
greater emphasis on variable
performance-related remuneration
• the individual’s experience
• the size and scope of the role
• the general level of salary reviews
across the Group
• appropriate external market
competitive data.
Pension
• Provides
appropriate
retirement
benefits.
• Rewards
sustained
contribution.
Defined contribution pension
arrangements are provided.
HMRC approved salary and profit
share sacrifice arrangements are in
place. Pension benefits are provided
either through a Group personal
pension plan, as a non-pensionable
salary supplement, contribution to a
personal pension arrangement,
or equivalent arrangement for
overseas jurisdictions.
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Savills plc
Report and Accounts 2017
Set significantly below market median levels with
greater emphasis on the performance-related
elements of reward. For 2018, the Committee approved
an increase in base salaries (which was applied to 2017
Reference Salaries) of 2.5% effective
1 March 2018 as follows:
n/a
• Group Chief Executive Officer: £289,000
• Deputy Group Chief Executive Officer: £255,000
• Group Chief Financial Officer: £221,000
The Committee retains the flexibility to award base
salary increases taking into consideration the factors
considered as part of the annual review. Although base
salaries are reviewed annually, in line with the Group’s
philosophy, the Committee may elect to only notionally
rather than actually increase base salaries for Executive
Directors. In such circumstances this notionally
increased Reference Salary would be used as the base
for future base salary increases.
The annual base salary for any existing Executive
Director shall not exceed £500,000.
For 2018 the pension contributions/supplements are:
n/a
• Group Chief Executive Officer:
14% of annual base salary.
• Deputy Group Chief Executive Officer:
14% of annual base salary.
• Group Chief Financial Officer:
18% of annual base salary.
As part of the funding arrangements agreed when
Savills’ Defined Benefit Pension Plan (‘the Plan’) was
closed to future accrual in 2010, the Group Chief
Executive Officer receives a minimum contribution of
14%. The maximum contribution will be no more than
the maximum contribution for all other former members
of the plan. The maximum annual pension contribution
for the current Chief Financial Officer is 18%.
The Plan is closed to future accruals. However, legacy
arrangements will be honoured.
New recruits would normally participate in defined
contribution arrangements or take a non-pensionable
salary supplement.
The level of contribution would be determined at the
time of appointment and may be set at a higher level
than that set out above, although a contribution limit of
20% of annual base salary per Executive Director has
been set for the duration of this Policy. For international
appointments, the Committee may determine that
alternative pension provisions will operate, and when
determining arrangements, the Committee will have
regard to the cost of the arrangements, market practice
in the relevant international jurisdiction and the pension
arrangements received elsewhere in the Group.
Purpose and
link to strategy
Benefits
Operation
Potential
Performance measures
• To provide market
Benefits currently comprise:
competitive
benefits.
• Medical insurance benefits
• Car/car allowance
• Permanent Health Insurance
• Life insurance
Other benefits may be provided
if the Committee considers
it appropriate.
Where an Executive Director is
located in a different international
jurisdiction, benefits may reflect
market practice in that jurisdiction.
In the event that an existing
Executive Director or new
Executive Director is required
by the Group to relocate, other
benefits may be provided including
(but not limited to) a relocation
allowance, housing allowance
and tax equalisation.
Annual performance-related profit share
• To encourage
the achievement
of challenging
financial, strategic
and/or operational
targets.
• Further alignment
with Shareholders’
interests through
deferral of a
significant amount
of any award into
shares.
Annual profit share awards
reflect the Group’s annual profit
performance and personal
performance and contribution.
Awards are delivered part in cash
and part in shares subject to a
minimum cash threshold of 100%
of annual salary. Thereafter, 50% of
any award is delivered in shares.
The share element of any award is
normally deferred for a period of
three years.
The number of shares in that
part of the award deferred for
three years is increased at the
time of vesting to reflect the value
of dividends declared over the
deferral period. Alternatively the
cash equivalent is paid.
The Committee may exercise
its judgement to adjust (on a
downwards only basis) individual
annual bonus payouts should
they not reflect overall business
performance or individual
contribution.
Malus/clawback provisions apply,
allowing for the reduction of awards
as explained in the notes to
this table.
Car allowance (currently up to a
maximum of £9,000 p.a.).
n/a
There is no overall maximum as the
cost of insurance benefits depends
on the individual’s circumstances,
but the provision of taxable benefits
will normally operate within an annual
limit of 30% of an Executive Director’s
annual base salary.
The Committee will monitor the
costs in practice and ensure that the
overall costs do not increase by more
than the Committee considers to be
reasonable in all the circumstances
Relocation expenses are subject
to a maximum limit of £200,000
(£300,000 in the case of an
international relocation) plus,
if relevant, the cost of
tax equalisation.
In line with the Group’s philosophy,
there is greater emphasis on variable
performance-related pay, while base
salaries are set significantly below
market median levels.
The maximum potential annual profit
share awards for 2018 are:
• £2.134m for the Group Chief
Executive Officer.
• £1.867m for the Deputy Group
Chief Executive Officer.
• £1.6m for the Group Chief
Financial Officer.
For a new executive director the
Committee would determine the
appropriate normal maximum
taking into account the role and
responsibility, subject to a maximum
of £2.134m p.a.
Each of these caps will increase in line
with the rate of any increase in RPI
for the preceding financial year (if
there is no increase in RPI, the cap
will remain unchanged).
For 2018 the weighting will be 75% in
relation to the Group’s annual profit
performance, defined as underlying profit
before tax performance, and 25% in relation
to delivery against a mix of personal,
strategic and operational objectives. The
Committee reserves the right to vary these
proportions in subsequent years and/or to
add additional or substitute measures to
ensure that incentive remains appropriate
to business strategy.
The scale for the profit share element of any
award will be disclosed annually in arrears.
Unless the Committee determines
otherwise, this scale will normally be
adjusted for any acquisitions/disposals
in a single year which impact (on an
annualised basis) UPBT by more than 7.5%.
In such cases the scale will be adjusted to
neutralise the benefit of any overage above
the 7.5% level.
If there is significant transaction that results
in the scale becoming inappropriate then
Shareholders will be consulted about any
adjustment to the scale.
The award potential at threshold is 25%.
As the arrangement is an annual profit
share there is no pre-set award level for
on-target performance.
Savills plc
Report and Accounts 2017
71
Financial statementsGovernance Strategic reportOverview Directors’ Remuneration Report continued
Annual Report on Remuneration continued
Purpose and
link to strategy
Operation
Performance Share Plan (‘PSP’)
Potential
Performance measures
• To drive and
reward the delivery
of longer-term
sustainable
shareholder value,
aid retention
and ensure
alignment of senior
management
and shareholder
interests.
Awards of shares subject to a performance
period of normally no less than three years.
A holding period will apply so that Executive
Directors may not normally exercise vested
PSP awards until the fifth anniversary of the
award date.
PSP awards may be in the form of nil cost
options or conditional awards over shares.
Awards may incorporate an award of
tax-advantaged Company Share Option
Plan options.
Maximum annual award potential
of 200% of salary (plan rules limit).
Subject to an overall maximum of
£1m per annum per participant.
For a new Executive Director, the
Committee would determine the
appropriate normal maximum
taking into account the role
and responsibility, subject to a
maximum of 200% of base salary
p.a. (or if lower £1m p.a.).
The Committee awards dividend equivalents
on a reinvested basis in respect of dividends
paid over the vesting or any subsequent
holding period.
Malus/clawback provisions apply, allowing
for the reduction of awards as explained
in the notes to this table.
The Committee may adjust vesting of
awards if it considers that the outcome
of the measurement of the performance
conditions does not accurately reflect the
underlying performance or financial health
of the Company. In the event the Committee
proposed to make an upward adjustment,
the Committee would consult with major
shareholders in advance. The Committee may
adjust or amend awards in accordance with
the PSP rules.
Performance conditions for future
awards are reviewed annually to
ensure that the measures and
their targets remain appropriate
to business strategy and are
sufficiently challenging, and that the
relative balance of the performance
measures remains appropriate
for properly incentivising and
rewarding the creation of longer-term
sustainable Shareholder value.
Performance conditions are currently
based on two measures:
• Relative TSR against the FTSE
250 (excluding investment trusts)
or other appropriate comparator
group
• Earnings per share.
The Committee may review the
performance measures for the PSP
to ensure they remain aligned to
the strategy. The Committee would
consult with major shareholders in
advance of a change in performance
measures used for the PSP.
No more than 25% of an award vests
for threshold performance.
UK tax advantaged all-employee share plans
• Share plans
available to all UK
employees in the
Group who satisfy
the statutory
requirements.
Executive Directors are eligible to participate
in any of the Group’s all-employee share plans
on the same terms as other UK employees.
Maximum Partnership Shares in
accordance with statutory limits.
The Company does not presently
offer Free Shares, Matching
Shares or Dividend Shares.
n/a
Shareholding Guidelines
• To encourage
share ownership
by the Executive
Directors and
ensure interests
are aligned.
Executive Directors are expected to purchase
and/or retain all shares (net of tax) which vest
under the Group’s share plans (or any other
discretionary long-term incentive arrangement
introduced in the future) until such time as they
hold a specified value of shares.
500% of base salary for all
Executive Directors.
n/a
Only beneficially owned shares and vested
share awards (including PSP vested awards
subject to a holding period discounted for
anticipated tax liabilities) may be counted for
the purposes of the guidelines. Share awards
do not count towards this requirement prior
to vesting.
Once shareholding guidelines have been met,
individuals are expected to retain these levels
as a minimum. The Committee will review
shareholdings annually in the context
of this Policy.
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Savills plc
Report and Accounts 2017
Malus and clawback
Malus (being the forfeiture of unvested awards) and clawback (being the ability of the Company to reclaim paid amounts as a debt)
provisions apply to the annual performance-related profit share and the PSP. These provisions may be applied where the Committee
considers it appropriate to do so following: a material misstatement of the Group’s financial results; serious misconduct by the individual; a
factual error in calculating an award or vesting; and other exceptional developments which have an actual or potential material adverse effect
on the value or reputation of the Group as determined by the Committee.
Clawback will apply for a two-year period post the vesting of awards. In the event of a regulatory or criminal inquiry being ongoing at that
point, the clawback period will be extended to a six-month period post the conclusion of such an inquiry.
Remuneration Policy for Non-Executive Directors
Approach to fees
Operation
Other items
Fees for the Chairman and other
Non-Executive Directors are set at an
appropriate level taking into consideration
individual roles and responsibilities, the time
commitment required and external
market practice.
Fees will generally be increased annually in
line with increases in RPI over the previous
12 months.
All fees for membership of the Board
are subject to the maximum payable to
Non-Executive Directors as stated in the
Company’s Articles of Association (currently
£500,000 for the Chairman and NED
base fees) and within an additional limit
determined by the Non-Executive Chairman
and the Executive Directors on behalf of
the Board of £200,000 for any additional
responsibility or other special fees.
Fees payable to the Non-Executive Directors
are determined by the Non-Executive
Chairman and the Executive Directors on
behalf of the Board.
Fees payable to the Chairman are
determined by the Committee.
The Non-Executive Director fee policy
is to pay:
• a basic fee for membership of the Board
• Committee chairmanship and Senior
Independent Director fees to reflect
the additional responsibilities and time
commitment of the roles.
The Chairman receives an all-inclusive fee
for the role.
Additional fees for membership of a
Committee or chairmanship or membership
of subsidiary boards or other fixed fees may
be introduced, if considered appropriate.
Non-Executive Directors are not entitled to
participate in any of the Group’s incentive
arrangements or share schemes.
Non-Executive Directors do not currently
receive any taxable benefits (however, they
are covered by Directors’ and Officers’
liability insurance).
Expenses incurred in the performance
of Non-Executive duties for the Company
may be reimbursed or paid for directly
by the Company, including any tax due
on the benefits.
Additional benefits may be provided
in the future if the Board considered
this appropriate.
Savills plc
Report and Accounts 2017
73
Financial statementsGovernance Strategic reportOverview Directors’ Report
In accordance with the UK Financial
Conduct Authority’s Listing Rules (LR
9.8.4C), the information to be included in
the Annual Report and Accounts, where
applicable, under LR 9.8.4, is set out in
this Directors’ Report.
Operations
The Company and its subsidiaries (together
the ‘Group’) operate through a network of
offices and associates throughout the
Americas, the UK, Continental Europe, Asia
Pacific, Africa and the Middle East.
Results for the year
The results for the Group are set out in the
consolidated income statement on page 85
which shows a reported profit for the
financial year attributable to the shareholders
of the Company of £80.1m (2016: £66.9m).
Dividend
An interim dividend of 4.65p per ordinary
share amounting to £6.3m (2016: £5.9m)
was paid on 4 October 2017. It is
recommended that a final dividend of 10.45p
per ordinary share (amounting to £14.3m) is
paid, together with a supplemental interim
dividend of 15.1p per ordinary share
(amounting to £20.6m) and to be declared
by the Board on 15 March 2018, on 14 May
2018 to shareholders on the register at
13 April 2018. More details of the proposed
dividend and the Company’s performance
can be found in the Chairman’s statement
on pages 4 to 7.
Principal developments
The principal developments of the business
are detailed in the Strategic Report on pages
4 to 35 and incorporated into this Report by
reference.
The principal risks and uncertainties are
detailed on pages 25 to 29 and incorporated
into this Report by reference.
Directors
Biographical details of the current Directors
are shown on pages 44 and 45. All the
Board members served throughout the year.
As at 31 December 2017 the Board
comprised the Non-Executive Chairman,
two Executive Directors and five
Independent Non-Executive Directors.
Interests in the issued share capital of the
Company held at the end of the period
under review and up to the date of this
Report by the Directors or their families are
set out on page 67 of the Remuneration
Report. Details of share options held by the
Directors pursuant to the Company’s share
option schemes are provided in the
Remuneration Report on page 67 and 68.
It is the Board’s policy that the GEB
Members should retain at least 105,000
shares (value at 31 December 2017:
£1,042,650) in the Company and that
the Group Chief Executive Officer and
Group Chief Financial Officer hold shares
to the value of five times their respective
base salaries (£1,375,000 and
£1,050,000 respectively).
Directors’ interests in significant
contracts
No Directors were materially interested in
any contract of significance.
Statement of Directors’
responsibilities
In accordance with the Code and the
Disclosure Guidance and Transparency
Rules (‘DTR’) DTR4, the Directors’
Responsibilities Statement is set out on
page 76 and is incorporated into this
Report by reference.
Corporate Governance Statement
In accordance with the Code and DTR
7.2.9R, the Corporate Governance
Statement on pages 38 and 39 is
incorporated into this Report by reference.
Management Report
This Directors’ Report, on pages 74 and 75,
together with the Strategic Report on pages
4 to 35, form the Management Report for
the purposes of DTR 4.1.5R.
Additional Information Disclosure
Pursuant to regulations made under the CA
2006 the Company is required to disclose
certain additional information. Those
disclosures not covered elsewhere within
this Annual Report are as follows:
Share capital and major
shareholdings
The issued share capital of the Company
as at 31 December 2017 comprised
141,931,341 2.5p ordinary shares, details of
which may be found on pages 137 and 138.
The Company has only one class of share
capital formed of ordinary shares. All shares
forming part of the ordinary share capital
have the same rights and each carries
one vote.
Votes may be exercised for general meetings
of the company, by members in person, by
proxy or by corporate representatives (in
relation to corporate members). The Articles
provide a deadline for the submission of
proxy forms (electronically or by paper) of not
less than 48 hours before the time appointed
for the holding of the general meeting or the
adjourned meeting (as the case may be).
There are no unusual restrictions on the
transfer of ordinary shares. The Directors
may refuse to register a transfer of a
certificated share unless the instrument of
transfer is: (i) lodged at the registered office
of the Company or any other place as the
Board may decide accompanied by the
certificate for the shares to be transferred
and such other evidence as the Directors
may reasonably require to show the right of
the transferor to make the transfer; or (ii) in
respect of only one class of shares.
The Directors may also refuse to register a
transfer of a share (whether certificated or
uncertificated), whether fully paid or not, in
favour of more than four persons jointly.
As at 31 December 2017 the Company had
been notified of the following interests in the
Company’s ordinary share capital in
accordance with DTR 5:
Shareholders
Aggregate of Standard
Life Aberdeen plc
affiliated investment
management entities
with delegated voting
rights on behalf of
multiple managed
portfolios
Old Mutual Plc
Note:
Number of
shares
%
12,270,237
6,685,646
8.65
4.71
No other changes to the above have been disclosed to the
Company in accordance with DTR 5, between 31 December
2017 and 15 March 2018.
As at 31 December 2017, the Savills plc 1992
Employee Benefit Trust (the ‘EBT’) held
4,819,684 ordinary shares and the Savills
Rabbi Trust held 800,000 ordinary shares.
Any voting or other similar decisions relating
to these shares held in trust are taken by the
trustees, who may take account of any
recommendation of the Company. During
the year the EBT waived all but 0.01p per
share of its dividend entitlement. In
December 2017 the EBT Trust Deed was
amended so that future Savills plc dividends
will be waived in full.
The Savills Rabbi Trust does not currently
waive Savills plc dividends. For further
details of the trusts please refer to Note 2.21
to the financial statements.
74
Savills plc
Report and Accounts 2017
Purchase of own shares
In accordance with the Listing Rules, at the
AGM on 9 May 2017 shareholders gave
authority for a limited purchase of Savills
shares of up to 10% of the issued share
capital of the company. During the year, no
shares were purchased under the authority.
The Board proposes to seek shareholder
approval at the AGM on 8 May 2018 to
renew the Company’s authority to make
market purchases of its own ordinary shares
of 2.5p each for cancellation or to be held in
treasury. Details of the proposed resolution
are included in the Notice of AGM circulated
to shareholders with this Annual Report (the
‘AGM Notice’).
Change of control
There are no significant agreements which
take effect, alter or terminate in the event of
change of control of the Company except
that under its banking arrangements, a
change of control may trigger an early
repayment obligation.
Articles of Association
The Company’s Articles are governed by
relevant statutes and may be amended by
special resolution of the shareholders in a
general meeting.
The Company’s rules about the appointment
and replacement of Directors are contained
in the Articles. The powers of the Directors
are determined by UK legislation and the
Articles in force from time to time.
Unless determined by ordinary resolution of
the Company, the number of Directors shall
be not less than three and not more than 18.
A Director is not required to hold any shares
in the Company by way of qualification.
However, as more fully described on page
72, in accordance with Board policy, the
members of the GEB (which includes the
Executive Directors) are expected to build-up
and maintain a shareholding in the
Company. The Board may appoint any
person to be a Director and such Director
shall hold office only until the next AGM
when he or she shall then be eligible for
reappointment by the shareholders. The
Articles provide that each Director shall retire
from office at the third AGM after the AGM at
which he or she was last elected. A retiring
Director shall be eligible for re-election.
However, in accordance with the Code, all
Directors of the Company are subject to
annual re-election.
Annual General Meeting
The AGM is to be held at 33 Margaret Street,
London W1G 0JD at 12 noon on 8 May 2018;
details are contained in the AGM Notice
circulated to shareholders with this Report.
Half Year Report
Like many other listed public companies, we
no longer circulate printed Half Year reports
to shareholders. Instead, Half Year results
statements are published on the Company’s
website. This is consistent with our target to
reduce printing and distribution costs.
Political contributions
The Company made no political
contributions during the year (2016: £nil).
Employees’ policies and
involvement
The Directors recognise that the quality,
commitment and motivation of Savills staff
are key elements to the success of the
Group. See pages 31 and 32 for more
information as to employee engagement.
The Group provides regular updates covering
performance, developments and progress to
employees through regular newsletters, video
addresses, the Group’s intranet, social media
and through formal and informal briefings.
These arrangements also aim at ensuring that
all of our staff understand our strategy and to
build knowledge on the part of employees of
matters affecting the performance of the
Group. The Group also consults with
employees so as to ascertain their views in
relation to decisions which are likely to affect
their interests.
Employees are able to share in the Group’s
success through performance-related profit
share schemes (see page 71 for more
details) and for UK employees (including
Executive Directors), share plans which
include a Sharesave Scheme and a Share
Incentive Plan (‘SIP’). The Sharesave
Scheme is an HMRC-approved save-as-
you-earn share option scheme which allows
participants to purchase shares out of the
proceeds of a linked savings contract at a
price set at the time of the option grant.
Participants may elect to save up to £500
per month and options may normally be
exercised in the six months following the
maturity of the linked three-year savings
contract. The potential for extending the
Sharesave Scheme internationally remains
under consideration. The SIP is also
HMRC-approved and through which
participants may make regular purchases of
shares (up to the current statutory limit of
£150 per month) from pre-tax income.
Shares under the SIP normally vest after five
years, free from income tax and national
insurance contributions.
Human rights and equal
opportunities
We support the principles of the UN
Universal Declaration of Human Rights and
the Core Principles of the International
Labour Organization.
It is Group policy to provide employment on
an equal basis irrespective of gender, sexual
orientation, marital or civil partner status,
gender reassignment, race, colour,
nationality, ethnic or national origin, religion
or belief, disability or age. In particular, the
Group gives full consideration to applications
for employment from disabled persons.
Where existing employees become disabled,
it is the Group’s policy, wherever practicable,
to provide continuing employment and to
provide training and career development and
promotion to disabled employees.
Independent Auditors
In accordance with Section 489 of the CA
2006, a resolution for the reappointment of
PricewaterhouseCoopers LLP as Auditors of
the Company will be proposed at the
forthcoming AGM.
Whistleblowing
The Group encourages staff to report any
concerns which they feel need to be brought
to the attention of management. Whistle-
blowing procedures, which are published on
the Group’s intranet site, are available to staff
who are concerned about possible
impropriety, financial or otherwise, and who
may wish to ensure that action is taken
without fear of victimisation or reprisal.
Greenhouse gas emissions
Details of the Group’s global greenhouse gas
emissions for the financial year under review
can be found on page 34 and are
incorporated into this Report by reference.
By order of the Board
Chris Lee
Group Legal Director & Company Secretary
14 March 2018
Savills plc
Registered in England No. 2122174
Savills plc
Report and Accounts 2017
75
Financial statementsGovernance Strategic reportOverview Forward-looking statements
Forward-looking statements have been
made by the Directors in good faith
using information up until the date on
which they approved the Annual Report
and Accounts. Forward-looking
statements should be regarded with
caution due to uncertainties in
economic trends and business risks.
14 March 2018
Directors’ responsibilities
Directors’ responsibility statement
The Directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable
law and regulation.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law the Directors
have prepared the Group and parent
Company financial statements in
accordance with International Financial
Reporting Standards (IFRSs) as adopted by
the European Union. Under company law
the Directors must not approve the financial
statements unless they are satisfied that they
give a true and fair view of the state of affairs
of the Group and parent Company and of
the profit or loss of the Group and parent
Company for that period. In preparing the
financial statements, the Directors are
required to:
• select suitable accounting policies and
then apply them consistently;
• state whether applicable IFRSs as
adopted by the European Union have
been followed, subject to any material
departures disclosed and explained in
the financial statements;
• make judgements and accounting
estimates that are reasonable and
prudent; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the Group
and parent Company will continue in
business.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Group and
parent Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Group and parent
Company and enable them to ensure that
the financial statements and the Directors’
Remuneration Report comply with the
Companies Act 2006 and, as regards the
group financial statements, Article 4 of the
IAS Regulation.
The Directors are also responsible for
safeguarding the assets of the Group and
parent Company and hence for taking
reasonable steps for the prevention and
detection of fraud and other irregularities.
The Directors are responsible for the
maintenance and integrity of the Group
and parent Company’s website. Legislation
in the United Kingdom governing the
preparation and dissemination of financial
statements may differ from legislation in
other jurisdictions.
The Directors consider that the Annual Report
and Accounts, taken as a whole, is fair,
balanced and understandable and provides
the information necessary for shareholders to
assess the Group and parent Company’s
performance, business model and strategy.
Each of the Directors, whose names and
functions are listed on pages 44 and 45
confirm that, to the best of their knowledge:
• the Group and parent Company financial
statements, which have been prepared in
accordance with IFRSs as adopted by
the European Union, give a true and fair
view of the assets, liabilities, financial
position and profit of the Group and profit
of the parent Company; and
• the Directors’ Report includes a fair review
of the development and performance of
the business and the position of the Group
and parent Company, together with a
description of the principal risks and
uncertainties that it faces.
In the case of each Director in office at the
date the Directors’ Report is approved:
• so far as the director is aware, there is no
relevant audit information of which the
Group and parent Company’s auditors
are unaware; and
• they have taken all the steps that they
ought to have taken as a Director in order
to make themselves aware of any relevant
audit information and to establish that the
Group and parent Company’s auditors
are aware of that information.
On behalf of the Board
Jeremy Helsby
Group Chief Executive
Chris Lee
Group Legal Director & Company Secretary
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Savills plc
Report and Accounts 2017
Overview
Strategic report
Governance
Financial statements
Financial
statements
78
Independent auditor’s report
85 Consolidated income statement
86 Consolidated statement of comprehensive income
87
Consolidated and Company statements
of financial position
88 Consolidated statement of changes in equity
89 Company statement of changes in equity
90
Consolidated and Company statements of
cash flows
91 Notes to the financial statements
151 Shareholder information
Savills plc
Savills plc
Report and Accounts 2017
Report and Accounts 2016
77
77
Independent auditor’s report
to the members of Savills plc
Report on the audit of the
financial statements
Opinion
In our opinion, Savills plc’s Group financial
statements and Company financial
statements (the “financial statements”):
• give a true and fair view of the state of the
Group’s and of the Company’s affairs as
at 31 December 2017 and of the Group’s
profit and the Group’s and the
Company’s cash flows for the year then
ended;
• have been properly prepared in
accordance with IFRSs as adopted by
the European Union and, as regards the
Company’s financial statements, as
applied in accordance with the provisions
of the Companies Act 2006; and
• have been prepared in accordance with
the requirements of the Companies Act
2006 and, as regards the Group financial
statements, Article 4 of the IAS
Regulation.
We have audited the financial statements,
included within the Report and Accounts (the
“Annual Report”), which comprise: the
Consolidated and Company statements of
financial position as at 31 December 2017;
the Consolidated income statement, the
Consolidated statement of comprehensive
income, the Consolidated and Company
statements of changes in equity and the
Consolidated and Company statements of
cash flows for the year then ended; and the
notes to the financial statements, which
include a description of the significant
accounting policies.
Our opinion is consistent with our reporting
to the Audit Committee.
Basis for opinion
We conducted our audit in accordance
with International Standards on Auditing
(UK) ('ISAs (UK)') and applicable law. Our
responsibilities under ISAs (UK) are further
described in the Auditors’ responsibilities
for the audit of the financial statements
section of our report. We believe that the
audit evidence we have obtained is
sufficient and appropriate to provide a
basis for our opinion.
To the best of our knowledge and belief, we
declare that non-audit services prohibited by
the FRC’s Ethical Standard were not
provided to the Group or the Company.
Other than those disclosed in the Directors’
Report, we have provided no non-audit
services to the Group or the Company in the
period from 1 January 2017 to 31 December
2017.
Our audit approach
Context
Savills plc is listed on the London Stock
Exchange and is structured across four
business lines: Transactional Advisory,
Property Consultancy, Property and Facilities
Management, and Investment Management
Services. The Group financial statements are
a consolidation of reporting units that make
up the four business lines, spread across four
geographical regions: UK, North America,
Europe and Asia Pacific.
Overview
Materiality
• Overall Group materiality: £7.0 million
(2016: £6.8 million), based on 5% of
Group underlying profit before tax as
defined in note 2.2 to the financial
statements.
• Overall parent company materiality: £2.3
million (2016: £2.3 million), based on 1%
of total assets.
Audit scope
• We conducted audit work in the UK,
Germany, Spain, US, Hong Kong, China,
South Korea, Singapore, Japan and
Australia, and across all four of the
Group’s business lines.
• Audits of the complete financial
information were performed on the
businesses in the UK, US, Hong Kong,
Shanghai (China Central), Australia and
South Korea, as well as the German
Investment Management business.
• We carried out procedures on parts of
the business which accounted for 86%
(2016: 83%) of Group revenues and 91%
(2016: 92%) of Group underlying profit
before tax.
Independence
We remained independent of the Group in
accordance with the ethical requirements
that are relevant to our audit of the financial
statements in the UK, which includes the
FRC’s Ethical Standard, as applicable to
listed public interest entities, and we have
fulfilled our other ethical responsibilities in
accordance with these requirements.
Key audit matters
• Goodwill impairment assessment –
particularly for European businesses
and the US (Group)
• Risk of fraud in revenue recognition in
relation to cut-off for transaction income
in the investment management and
transactional advisory businesses
(Group)
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Savills plc
Report and Accounts 2017
• Provisions for litigation (Group)
• Recoverability of trade receivables
(Group)
• Regulatory compliance obligations
(Group and Company)
• Accounting for acquisition of Aguirre
Newman (Group)
The scope of our audit
As part of planning our audit, we
determined materiality and assessed the
risks of material misstatement in the
financial statements. In particular, we
looked at where the directors made
subjective judgements, for example in
respect of significant accounting estimates
that involved making assumptions and
considering future events that are
inherently uncertain.
We gained an understanding of the legal and
regulatory framework applicable to the
group and the industry in which it operates,
and considered the risk of acts by the Group
which were contrary to applicable laws and
regulations, including fraud. We designed
audit procedures at Group and significant
component level to respond to the risk,
recognising that the risk of not detecting a
material misstatement due to fraud is higher
than the risk of not detecting one resulting
from error, as fraud may involve deliberate
concealment by, for example, forgery or
intentional misrepresentations, or through
collusion. We focused on laws and
regulations that could give rise to a material
misstatement in the Group and Company
financial statements, including those relating
to financial services and real estate services
across the Group. Our tests included
discussing compliance with internal legal
counsel, reviewing correspondence with the
Group’s solicitors and examining litigation
costs incurred by the Group over the
financial year. There are inherent limitations
in the audit procedures described above
and the further removed non-compliance
with laws and regulations is from the events
and transactions reflected in the financial
statements, the less likely we would become
aware of it. We did not identify any key audit
matters relating to irregularities, including
fraud. As in all of our audits we also
addressed the risk of management override
of internal controls, including testing journals
and evaluating whether there was evidence
of bias by the Directors that represented a
risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon,
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Goodwill impairment assessment – particularly for
European businesses and the US (Group)
Refer to page 54 (Audit Committee Report), page 94 and
(Significant Accounting policies) and pages 119 to 121 (notes).
Focusing on the US and Sweden businesses, we evaluated and
challenged the Directors’ future cash flow forecasts and the process
by which they were drawn up, and tested the underlying value in use
calculations. We compared management’s forecast with the latest
Board-approved budget and found them to be consistent.
The Group carried £351.3m of goodwill at 31 December 2017
(2016: £309.8m) of which £57.8m related to new acquisitions
made during 2017.
We challenged:
The carrying value of goodwill is contingent on future cash flows
of the underlying cash generating units (‘CGUs’) and there is a risk
that if these cash flows do not meet the Directors’ expectations, the
goodwill will be impaired.
The Group’s performance in Europe improved during 2017 with the
exception of Sweden, where an impairment charge of £2.3m was
recognised reflecting recent performance in challenging market
conditions. After the impairment charge, the value of the Sweden
CGU at 31 December 2017 was £2.7m. There was significant
headroom in management’s impairment models for the other
European CGUs.
We focused our assessment on the US, which holds £148.1m of
goodwill and other intangible assets, as the profitability of that
business declined in 2017.
Risk of fraud in revenue recognition in relation to cut-off
for transaction income in the investment management
and transactional advisory businesses (Group)
Refer to page 98 (note 2 to the financial statements) for the
Directors’ disclosures of the related accounting policies,
judgments and estimates.
Our specific audit focus was on the risk that revenue may be
recorded in the incorrect period in respect of transaction fees in the
transactional advisory and investment management businesses, in
light of the incentive schemes for management in those businesses
designed to reward performance.
The recognition of revenue is largely dependent on the date the
underlying transaction is deemed to be completed, which is typically
the point at which unconditional exchange has been achieved.
• the key assumptions for short and long term growth rates in the
forecasts by comparing them with historical results, as well as
economic and industry forecasts for the relevant international
property markets; and
• the discount rate used in the calculations by assessing the cost
of capital for the Group and comparable organisations, and
assessed the specific risk premium applied to each CGU
in question.
We performed sensitivity analysis on the key assumptions within
the cash flow forecasts. This included sensitising the discount
rate applied to the future cash flows, and the short and longer
term growth rates and profit margins. We ascertained the extent
to which a reduction in these assumptions both individually or in
aggregate would result in goodwill impairment, and considered
the likelihood of such events occurring. We did not regard this to
be reasonably possible.
We were satisfied that the impairment charge recorded in Sweden
was reasonable and that no other goodwill impairments were
required in the 2017 financial statements.
For material transactions, we evaluated the commercial rationale and
the revenue recognition process adopted and determined that the
related revenue had been recorded on a consistent basis across the
Group in accordance with Group policies and applicable IFRSs.
We tested a sample of revenue transactions to underlying contracts
and third party completion documentation, for example, property
sales completion statements, or asset or property management
contracts, determining that these sales had taken place and were
recorded in the correct period.
There were no material issues identified by our testing of revenue
recognition in the period.
Savills plc
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Financial statementsGovernance Strategic reportOverview Independent auditor’s report continued
Key audit matter
How our audit addressed the key audit matter
Provisions for litigation (Group)
Refer to page 54 (Audit Committee Report), page 97 (Significant
Accounting Policies) and page 105 (notes).
In order to assess the accuracy and completeness of the provisions
held at the balance sheet date, we performed the following
procedures:
The Group is subject to a number of legal claims in the normal
course of business. The calculation of provisions against these
claims is judgmental, given the range of possible outcomes on
each claim. The number of new claims has continued to decline
in recent years.
• Obtained and read the legal claim letters and accompanying third
party documentation received by the Group;
• Obtained and read the legal insurance contract, and verified that
the terms were appropriately accounted for;
Our audit procedures took into account both the potential exposure
and the extent to which liabilities are likely to crystallise, as well as
the adequacy of the insurance cover held by the Group.
• Met with the Group’s internal and external legal counsels to
consider in detail a number of cases, including the potential
exposure after taking into account the Group’s insurance cover;
• Checked the amounts and other details in respect of each new
claim to the relevant supporting documentation;
• Reviewed the outcome of prior year estimates of litigation
provisions to help assess the reliability of the estimates this year;
• Reviewed the legal cases settled during the year and, where
relevant, traced the related cash payments to bank statements;
and
• Examined board minutes, legal expenses incurred during the year
and any litigation-related matters arising after the year-end.
We determined based on these procedures that the Directors
had made reasonable judgments in their assessment process for
determining the level of provision held.
Our procedures did not identify any further legal cases other than
those identified by management.
Recoverability of trade receivables (Group)
• Requested confirmations for a sample of client debtor balances;
Refer to page 54 (Audit Committee Report), page 95 (Significant
Accounting Policies) and page 130 (notes).
The Group is exposed to a risk of default in respect of trade
receivables, and there is therefore a risk that the net valuation of
receivables could be overstated. This risk is factored into our audit
approach with respect to the provision against trade receivables.
In order to test the recoverability of trade receivables, we performed
the following procedures:
• Where a response to our request was not received, we sought to
agree the relevant trade receivables balances to post year end
cash receipts;
• Where both a response and cash had not been received post
year-end, we performed alternative procedures, by agreeing
amounts recorded to underlying sales contracts and completion
documentation;
• Discussed and assessed the reasons that the amounts were not
yet paid with local management teams. We also evaluated the
Group's credit control procedures, and assessed the ageing
profile of trade receivables, focusing on older debts;
• We challenged management as to the recoverability of the older,
unprovided amounts, corroborating management explanations
with underlying documentation and correspondence with the
customer; and
• We inspected management’s bad debt provision calculations and
ensured that these were consistent with Group policy, and that
they provided appropriate cover over older uncollected debts
We did not encounter any issues through these audit procedures that
indicated further provisioning against trade receivables was required.
Based upon the above, we are satisfied that management had taken
reasonable judgments that were supported by the available evidence
in respect of the relevant receivables.
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Report and Accounts 2017
Key audit matter
How our audit addressed the key audit matter
Regulatory compliance obligations (Group and Company)
The Group is subject to Financial Services, Chartered Surveyor, tax,
anti-bribery and anti-money laundering laws and regulations across
a number of jurisdictions in which it operates.
We updated our understanding of the legal and regulatory framework
within which the Group operates, discussed the Group’s approach
to regulatory compliance with management and with internal legal
counsel, and evaluated management’s internal control procedures.
The Company is subject to those laws and regulations applicable
in the UK.
Failure to comply with any of these applicable laws and regulations
could have a material impact on the results of the Group and the
reputation for integrity on which it relies.
The Directors did not identify any material instances of non-
compliance in the year.
Accounting for acquisition of Aguirre Newman (Group)
Refer to page 54 (Audit Committee Report), page 94 (Significant
Accounting Policies) and page 126 (notes).
The Group completed the acquisition of Aguirre Newman, a
Spanish real estate advisory business, on 29 December 2017.
The acquisition did not include Aguirre Newman’s South American
business, which was carved out of the acquisition balance sheet.
Accounting for the acquisition required a provisional fair value
exercise, including valuing separately identifiable intangible assets.
This can be a particularly subjective process, given the range of
assumptions that are adopted to determine the valuations, including
the applicable discount rate used in the fair value calculations.
Based on an exercise performed by external valuation experts,
the Directors identified £3.4m of intangibles relating to Aguirre
Newman’s brand, order back-log and its customer contracts
and relationships.
We considered that appropriate procedures are in place to identify
any instances of non-compliance that would have a material impact
on the results and reputation of the business.
We read relevant correspondence with regulators to support
management’s assertions, as well as board minutes and internal
audit reports. We examined legal expense accounts and considered
the results of our audit work in other areas to determine whether
there was any evidence of non-compliance with applicable laws
and regulations.
We identified no evidence of such instances of non-compliance with
applicable laws and regulations.
In order to test the components of the acquisition, we performed the
following procedures:
• Reviewed technical papers prepared by management in respect
of the acquisition and inspected all relevant contracts and
information;
• Tested the adjustments made to carve out the net assets of the
Aguirre Newman South American business from the acquired
balance sheet;
• Assessed the provisional fair value calculation of the assets
acquired, including assessing the completeness and quantum of
adjustments made by management;
• Reviewed the work performed on the purchase price allocations
by management’s external experts, to ensure that the relevant
intangible assets have been appropriately identified and
reasonably valued;
• Evaluated the competency and objectivity of management’s
external valuation expert;
• Challenged the key assumptions used in the valuation model,
including the discount rate
• Challenged management’s identification and valuation of other
known and contingent liabilities associated with Aguirre Newman;
• Understood what management have done to assess the control
environment of the entity and align accounting practices; and
Based upon the above, we are satisfied that the Directors had
taken reasonable judgments in accounting for the acquisition of
Aguirre Newman.
Savills plc
Report and Accounts 2017
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Financial statementsGovernance Strategic reportOverview Independent auditor’s report continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which
they operate.
Taken together, our full scope audit procedures accounted for 86% (2016: 83%) of Group revenues and 91% (2016: 92%) of Group
underlying profit before tax.
The Group’s accounting process is structured around a local finance function in each of the territories in which the Group operates. In
Europe, these functions maintain their own accounting records and controls and report to a Head Office finance team in the UK through
submission of management reporting packs. In Asia Pacific, these functions similarly report to a regional finance team in Hong Kong, and in
the US the local functions report to the US finance team in New York. At a Group level, a separate finance team consolidates the reporting
packs of Europe, Asia Pacific, UK, North America and the central functions.
In our view, due to their significance and/or risk characteristics, as defined in our areas of focus, those businesses in the UK and US, Hong
Kong, Shanghai (China Central) and Australia within the Asia Pacific region, and the German Investment Management business, required an
audit of their complete financial information. We used component auditors from PwC network firms who are familiar with the local laws and
regulations in each of the identified territories outside the UK to perform this audit work.
Specific risk-based audit procedures were performed by local teams in Beijing, Chengdu, Tokyo and Singapore, focusing on revenue and
receivables based on the audit risks we had identified in these areas. Specific audit procedures were also performed by a local team in
Spain over the Aguirre Newman balance sheet, following the acquisition on 29 December 2017.
Based upon Group materiality, we did not carry out detailed audit procedures on Savills Europe other than Aguirre Newman. Local audit
teams perform statutory audits of subsidiary companies in Europe where required by local legislation. These audits were carried out to the
same timetable as the Group audit and, accordingly, we were able to incorporate the results of their work into our overall risk assessment.
In order to direct and supervise the Group audit, the Group engagement team sent detailed instructions to significant component audit
teams. This included communication of the areas of focus above and other required communications. The Group engagement team held
regular meetings throughout the year with all significant component audit teams. The Group team visited the audit teams located at the
Savills Asia Pacific head office in Hong Kong, given the significance of this region to the Group, the US head office in New York, and also
visited Savills regional offices in Shanghai and Beijing. This ensured that we had a comprehensive understanding of the results of their work
– particularly insofar as it related to the identified areas of focus.
The Group consolidation, financial statement disclosures and a number of complex items were audited by the Group engagement team at
the head office. These included pensions, tax and share-based payments.
Taken together, these procedures gave us the evidence we needed for our opinion on the financial statements as a whole.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on
the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate
on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
£7.0 million (2016: £6.8 million).
Group financial statements
How we
determined it
Rationale for
benchmark
applied
5% of Group underlying profit before tax as defined in note 2.2 to the
financial statements.
Based on our professional judgment, we determined materiality by
applying a benchmark of 5% of underlying profit before tax. We believe
that underlying profit before tax is the most appropriate measure as
it eliminates any disproportionate effect of exceptional charges and
provides a consistent year-on-year basis for our work. It is the key
measure used by management and the Group’s investors.
Parent company financial statements
£2.3 million (2016: £2.3 million).
1% of total assets of the Company.
We determined that as the Company is a
non-trading holding company, total assets
to be an appropriate benchmark.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of
materiality allocated across components was between £1.0 million and £5.7 million. Certain components were audited to a local statutory
audit materiality that was also less than our overall group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £0.3 million (Group audit)
(2016: £0.3 million) and £0.3 million (Company audit) (2016: £0.3 million) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
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Report and Accounts 2017
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add or draw attention to in
respect of the Directors’ statement in the financial statements about whether the directors
considered it appropriate to adopt the going concern basis of accounting in preparing the
financial statements and the directors’ identification of any material uncertainties to the
Group’s and the Company’s ability to continue as a going concern over a period of at
least 12 months from the date of approval of the financial statements.
We have nothing material to add or to draw
attention to. As not all future events or
conditions can be predicted, this statement
is not a guarantee as to the Group’s and
Company’s ability to continue as a going
concern.
We are required to report if the Directors’ statement relating to Going Concern in
accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge
obtained in the audit.
We have nothing to report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report
thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any
form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to
be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based
on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act
2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006, (CA06), ISAs
(UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described below
(required by ISAs (UK) unless otherwise stated).
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report
for the year ended 31 December 2017 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements. (CA06)
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did
not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency
or liquidity of the Group
We have nothing material to add or draw attention to regarding:
• The Directors’ confirmation on page 26 of the Annual Report that they have carried out a robust assessment of the principal risks facing
the Group, including those that would threaten its business model, future performance, solvency or liquidity.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The Directors’ explanation on page 29 of the Annual Report as to how they have assessed the prospects of the Group, over what period
they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the Directors’ statement that they have carried out a robust assessment of the
principal risks facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially less in scope
than an audit and only consisted of making inquiries and considering the Directors’ process supporting their statements; checking that the
statements are in alignment with the relevant provisions of the UK Corporate Governance Code (the “Code”); and considering whether the
statements are consistent with the knowledge and understanding of the Group and Company and their environment obtained in the course
of the audit. (Listing Rules)
Savills plc
Report and Accounts 2017
83
Financial statementsGovernance Strategic reportOverview Appointment
Following the recommendation of the Audit
Committee, we were appointed by the
members on 30 April 2001 to audit the
financial statements for the year ended
31 December 2002 and subsequent
financial periods. The period of our total
uninterrupted engagement is 16 years,
covering the years ended 31 December
2002 to 31 December 2017.
John Waters (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory
Auditors
London
14 March 2018
Independent auditor’s report continued
Other Code Provisions
We have nothing to report in respect of our
responsibility to report when:
• The statement given by the Directors, on
page 76, that they consider the Annual
Report taken as a whole to be fair,
balanced and understandable, and
provides the information necessary for
the members to assess the Group’s and
Company’s position and performance,
business model and strategy is materially
inconsistent with our knowledge of the
Group and Company obtained in the
course of performing our audit.
• The section of the Annual Report on page
54 describing the work of the Audit
Committee does not appropriately
address matters communicated by us to
the Audit Committee.
• The Directors’ statement relating to the
Company’s compliance with the Code
does not properly disclose a departure
from a relevant provision of the Code
specified, under the Listing Rules, for
review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’
Remuneration Report to be audited has
been properly prepared in accordance with
the Companies Act 2006. (CA06)
Responsibilities for the financial
statements and the audit
Responsibilities of the directors for the
financial statements
As explained more fully in the Directors’
Responsibility Statement set out on page 76,
the Directors are responsible for the
preparation of the financial statements in
accordance with the applicable framework
and for being satisfied that they give a true
and fair view. The Directors are also
responsible for such internal control as they
determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the
Directors are responsible for assessing the
Group’s and the Company’s ability to
continue as a going concern, disclosing as
applicable, matters related to going concern
and using the going concern basis of
accounting unless the Directors either intend
to liquidate the Group or the Company or to
cease operations, or have no realistic
alternative but to do so.
Auditors’ responsibilities for the audit
of the financial statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from material
misstatement, whether due to fraud or error,
and to issue an auditors’ report that includes
our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee
that an audit conducted in accordance with
ISAs (UK) will always detect a material
misstatement when it exists. Misstatements
can arise from fraud or error and are
considered material if, individually or in the
aggregate, they could reasonably be
expected to influence the economic
decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities
for the audit of the financial statements is
located on the FRC’s website at: www.frc.
org.uk/auditorsresponsibilities. This
description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has
been prepared for and only for the
Company’s members as a body in
accordance with Chapter 3 of Part 16 of the
Companies Act 2006 and for no other
purpose. We do not, in giving these
opinions, accept or assume responsibility
for any other purpose or to any other person
to whom this report is shown or into whose
hands it may come save where expressly
agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception
reporting
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
• we have not received all the information
and explanations we require for our audit;
or
• adequate accounting records have not
been kept by the Company, or returns
adequate for our audit have not been
received from branches not visited by us;
or
• certain disclosures of Directors’
remuneration specified by law are not
made; or
• the Company financial statements and
the part of the Directors’ Remuneration
Report to be audited are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from
this responsibility.
84
Savills plc
Report and Accounts 2017
Consolidated income statement
for the year ended 31 December 2017
Revenue
Less:
Employee benefits expense
Depreciation
Amortisation of intangible assets and impairment of goodwill
Other operating expenses
Other operating income
Profit on disposal of available-for-sale investments and joint ventures
Loss on disposal of available-for-sale investments
Operating profit
Finance income
Finance costs
Share of post-tax profit from joint ventures and associates
Profit before income tax
Comprising:
– underlying profit before tax
– restructuring and acquisition-related costs
– other underlying adjustments
Income tax expense
Profit for the year
Attributable to:
Owners of the parent
Non-controlling interests
Earnings per share
Basic earnings per share
Diluted earnings per share
Underlying earnings per share
Basic earnings per share
Diluted earnings per share
Notes
6
2017
£m
2016
£m
1,600.0
1,445.9
9.1
16
15
7.1
7.1
8
8
11
11
17.1
8
8
8
12
14.1
14.1
14.2
14.2
(1,061.7)
(953.5)
(13.5)
(9.3)
(418.5)
0.9
5.9
–
103.8
2.8
(4.1)
(1.3)
9.9
112.4
140.5
(29.0)
0.9
112.4
(31.3)
81.1
80.1
1.0
81.1
58.8p
57.5p
75.8p
74.1p
(12.7)
(6.9)
(382.7)
2.5
0.5
(0.4)
92.7
1.6
(2.4)
(0.8)
7.9
99.8
135.8
(34.5)
(1.5)
99.8
(32.1)
67.7
66.9
0.8
67.7
48.8p
47.7p
72.5p
71.0p
Savills plc
Report and Accounts 2017
85
Financial statementsGovernance Strategic reportOverview Consolidated statement of comprehensive income
for the year ended 31 December 2017
Profit for the year
Other comprehensive income/(loss)
Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit pension scheme obligation
Tax on items that will not be reclassified
Total items that will not be reclassified to profit or loss
Items that may be reclassified subsequently to profit or loss:
Fair value gain/(loss) on available-for-sale investments
Currency translation differences
Tax on items that may be reclassified
Total items that may be reclassified subsequently to profit or loss
Other comprehensive (loss)/income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interests
Notes
10.2
12
17.2
12
2017
£m
81.1
14.1
(2.8)
11.3
0.3
(16.2)
2.3
(13.6)
(2.3)
78.8
77.8
1.0
78.8
2016
£m
67.7
(35.2)
7.2
(28.0)
(0.6)
52.6
(0.7)
51.3
23.3
91.0
90.0
1.0
91.0
As permitted by Section 408 of the Companies Act 2006, the income statement and statement of comprehensive income of the Company
are not presented as part of these financial statements. The Company has produced its own income statement and statement of
comprehensive income for approval by its Board. The Company receives dividends from subsidiaries and charges subsidiaries for the
provision of Group-related services. The profit after income tax of the Company for the year was £64.0m (2016: £80.9m).
86
Savills plc
Report and Accounts 2017
Consolidated and Company statements of financial position
as at 31 December 2017
Assets: Non-current assets
Property, plant and equipment
Goodwill
Intangible assets
Investments in subsidiaries
Investments in joint ventures and associates
Deferred income tax assets
Available-for-sale investments
Retirement benefit surplus
Derivative financial instruments
Non-current receivables
Assets: Current assets
Work in progress
Trade and other receivables
Current income tax receivable
Derivative financial instruments
Cash and cash equivalents
Liabilities: Current liabilities
Borrowings
Derivative financial instruments
Trade and other payables
Current income tax liabilities
Employee benefit obligations
Provisions for other liabilities and charges
Net current (liabilities)/assets
Total assets less current liabilities
Liabilities: Non-current liabilities
Borrowings
Trade and other payables
Retirement and employee benefit obligations
Provisions for other liabilities and charges
Deferred income tax liabilities
Net assets
Equity:
Share capital
Share premium
Shares to be issued
Other reserves
Retained earnings
Equity attributable to owners of the parent
Non-controlling interests
Total equity
Notes
16
15
15
17.3
17.1
18
17.2
10.2
23
19
23
20
22
23
21
24.2
24.1
22
21
10.2 and 24.2
24.1
18
25
27
27
Group
2017
£m
2016
£m
68.2
351.3
34.4
–
30.0
36.9
24.6
1.3
–
15.7
562.4
6.0
490.6
2.3
0.5
208.8
708.2
110.1
0.1
592.7
16.4
11.2
11.4
741.9
(33.7)
528.7
0.1
35.6
35.5
12.9
2.9
87.0
441.7
3.5
91.1
–
98.4
247.2
440.2
1.5
441.7
59.7
309.8
29.2
–
28.9
36.5
20.8
–
0.1
9.6
494.6
5.3
419.4
4.3
0.2
223.6
652.8
35.8
0.3
550.2
17.5
9.2
10.2
623.2
29.6
524.2
–
44.9
57.0
11.7
3.6
117.2
407.0
3.5
91.1
11.3
103.9
195.8
405.6
1.4
407.0
Company
2017
£m
1.7
–
2.7
123.7
–
2.2
–
–
–
–
130.3
–
7.9
2.6
–
90.8
101.3
–
–
13.1
–
0.1
–
13.2
88.1
218.4
–
–
1.1
0.6
–
1.7
216.7
3.5
91.1
–
38.2
83.9
216.7
–
216.7
2016
£m
1.9
–
1.4
118.7
–
2.5
–
–
–
–
124.5
–
16.5
1.3
–
88.3
106.1
–
–
21.3
–
0.1
–
21.4
84.7
209.2
–
–
2.3
1.9
–
4.2
205.0
3.4
91.1
11.3
26.9
72.2
205.0
–
205.0
The consolidated and Company financial statements on pages 85 to 150 were authorised for issue by the Board of Directors on
14 March 2018 and were signed on its behalf by:
J C Helsby
S J B Shaw
Savills plc
Registered in England
No. 2122174
Savills plc
Report and Accounts 2017
87
Financial statementsGovernance Strategic reportOverview
Consolidated statement of changes in equity
for the year ended 31 December 2017
Attributable to owners of the parent
Share
capital
£m
Share
premium
£m
Shares to
be issued
£m
Other
reserves*
£m
Retained
earnings**
£m
Notes
Non-
controlling
interests
£m
Total
£m
3.5
91.1
11.3
103.9
195.8
405.6
Balance at 1 January 2017
Profit for the year
Other comprehensive income/(loss):
Remeasurement of defined benefit pension
scheme obligation
Fair value gain on available-for-sale investments
Tax on items directly taken to reserves
Currency translation differences
Total comprehensive income for the year
10.2
17.2
12
Transactions with owners:
Employee share option scheme:
– Value of services provided
Purchase of treasury shares
Shares issued
Disposal of available-for-sale investments
Dividends
13
Total
equity
£m
407.0
81.1
1.4
1.0
–
–
–
–
14.1
0.3
(0.5)
(16.2)
80.1
80.1
14.1
–
14.1
0.3
(0.8)
(0.5)
–
(16.2)
93.4
77.8
1.0
78.8
14.5
14.5
(17.2)
(17.2)
–
–
–
(1.2)
–
–
–
–
14.5
(17.2)
–
(1.2)
–
(39.3)
(39.3)
(0.9)
(40.2)
98.4
247.2
440.2
1.5
441.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.3
0.3
(16.2)
(15.6)
–
–
11.3
(1.2)
–
–
–
–
–
–
–
–
(11.3)
–
–
–
Balance at 31 December 2017
3.5
91.1
Attributable to owners of the parent
Share
capital
£m
Share
premium
£m
Shares to
be issued
£m
Other
reserves*
£m
Retained
earnings**
£m
Notes
Non-
controlling
interests
£m
Total
equity
£m
Total
£m
91.1
22.9
39.1
207.8
364.3
Balance at 1 January 2016
Profit for the year
Other comprehensive income/(loss):
Remeasurement of defined benefit pension
scheme obligation
Fair value loss on available-for-sale investments
Tax on items directly taken to reserves
Currency translation differences
Total comprehensive income for the year
Transactions with owners:
Employee share option scheme:
– Value of services provided
Purchase of treasury shares
Shares issued
Dividends
Transfer between reserves
Transactions with non-controlling interests
10.2
17.2
12
13
3.4
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.6)
–
52.4
51.8
66.9
66.9
(35.2)
(35.2)
–
6.5
–
38.2
(0.6)
6.5
52.4
90.0
–
–
13.4
13.4
(23.2)
(23.2)
(11.6)
11.6
–
0.1
–
–
–
–
1.4
–
(1.4)
(3.6)
–
(3.6)
0.7
0.8
365.0
67.7
–
–
–
0.2
1.0
(35.2)
(0.6)
6.5
52.6
91.0
–
–
–
13.4
(23.2)
0.1
–
0.6
1.4
–
(3.0)
407.0
Balance at 31 December 2016
3.5
91.1
11.3
103.9
195.8
405.6
*
Included within other reserves on the face of the statement of financial position are the capital redemption reserve, merger relief reserve, foreign exchange reserve and revaluation reserve as
disclosed in Note 27.
**
Included within retained earnings on the face of the statement of financial position are treasury shares, share-based payments reserve and the profit and loss account as disclosed in Note 27.
88
Savills plc
Report and Accounts 2017
(35.4)
(35.4)
(0.9)
(36.3)
Company statement of changes in equity
for the year ended 31 December 2017
Balance at 1 January 2017
3.5
91.1
11.3
Share
capital
£m
Share
premium
£m
Shares to
be issued
£m
Notes
Profit for the year
Other comprehensive income:
Remeasurement of defined benefit
pension scheme obligation
Tax on items directly taken to reserves
10.2
12
Total comprehensive income
for the year
Employee share option scheme:
– Value of services provided
– Exercise of share options
Distribution for Employee Benefit Trust
Shares issued
Dividends
13
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 December 2017
3.5
91.1
–
–
–
–
–
–
–
(11.3)
–
–
Share
capital
£m
Share
premium
£m
Shares to
be issued
£m
Notes
Balance at 1 January 2016
Profit for the year
Other comprehensive income:
Remeasurement of defined benefit
pension scheme obligation
Tax on items directly taken to reserves
10.2
12
Total comprehensive income
for the year
Employee share option scheme:
– Value of services provided
– Exercise of share options
Distribution for Employee Benefit Trust
Shares issued
Dividends
Balance at 31 December 2016
13
3.4
–
–
–
–
–
–
–
0.1
–
3.5
91.1
22.9
–
–
–
–
–
–
–
–
–
91.1
–
–
–
–
–
–
–
(11.6)
–
11.3
Attributable to owners of the Company
Capital
redemption
reserve*
£m
0.3
–
–
–
–
–
–
–
–
–
Merger
relief
reserve*
£m
23.6
–
–
–
–
–
–
–
11.3
–
Other
reserves*
£m
3.0
–
–
–
–
–
–
–
–
–
Share-
based
payments
reserve**
£m
5.0
–
–
–
–
Retained
earnings**
£m
67.2
64.0
Total
equity
£m
205.0
64.0
0.7
0.3
0.7
0.3
65.0
65.0
2.4
(1.9)
–
–
–
–
2.4
(11.5)
(13.4)
(3.0)
(3.0)
–
–
(39.3)
(39.3)
0.3
34.9
3.0
5.5
78.4
216.7
Attributable to owners of the Company
Capital
redemption
reserve*
£m
0.3
–
–
–
–
–
–
–
–
–
Merger
relief
reserve*
£m
12.0
–
–
–
–
–
–
–
11.6
–
Share-
based
payments
reserve**
£m
Other
reserves*
£m
3.0
–
3.5
–
Retained
earnings**
£m
56.9
80.9
Total
equity
£m
193.1
80.9
–
–
–
–
–
–
–
–
–
–
–
2.4
(0.9)
–
–
–
(1.9)
0.2
(1.9)
0.2
79.2
79.2
–
(10.3)
(23.2)
–
2.4
(11.2)
(23.2)
0.1
(35.4)
(35.4)
0.3
23.6
3.0
5.0
67.2
205.0
*
Included within other reserves on the face of the statement of financial position are the capital redemption reserve, the merger relief reserve and other reserves as disclosed above.
**
Included within retained earnings on the face of the statement of financial position are share-based payments reserve and retained earnings as disclosed above.
Savills plc
Report and Accounts 2017
89
Financial statementsGovernance Strategic reportOverview
Consolidated and Company statements of cash flows
for the year ended 31 December 2017
Group
2017
£m
Notes
30
145.1
2016
£m
117.8
1.6
(1.3)
(24.8)
93.3
0.2
5.1
2.0
7.5
1.2
–
(4.4)
(6.8)
(12.8)
(4.7)
(12.6)
(25.3)
0.1
144.6
(141.2)
–
(23.2)
(3.3)
0.3
(36.3)
(59.0)
9.0
182.2
32.2
223.4
Company
2017
£m
49.9
0.9
–
1.5
52.3
–
–
–
–
3.6
(8.6)
–
–
(0.9)
(1.6)
–
(7.5)
–
–
–
2016
£m
70.3
1.0
–
3.9
75.2
–
–
–
–
–
(9.0)
–
–
(0.5)
(1.1)
–
(10.6)
0.1
–
–
(3.0)
(23.2)
–
–
–
(39.3)
(42.3)
2.5
88.3
–
90.8
–
–
–
(35.4)
(58.5)
6.1
82.2
–
88.3
2.7
(2.1)
(34.0)
111.7
0.1
4.6
0.4
8.3
–
(0.6)
(39.8)
(67.9)
(23.1)
(8.8)
(9.4)
(136.2)
–
181.5
(110.6)
–
(17.2)
–
–
(40.2)
13.5
(11.0)
223.4
(7.2)
205.2
Cash flows from operating activities
Cash generated from operations
Interest received
Interest paid
Income tax (paid)/received
Net cash generated from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Proceeds from sale of available-for-sale investments
Proceeds from sale of interests in joint ventures and associates
Dividends received from joint ventures and associates
Repayment of loans by joint ventures, associates and subsidiaries
Loans to joint ventures, associates and subsidiaries
Acquisition of subsidiaries, net of net cash acquired
Deferred consideration paid in relation to current and prior year acquisitions
Purchase of property, plant and equipment
Purchase of intangible assets
17.4
16
15
Purchase of investment in joint ventures, associates
and available-for-sale investments
17.1 and 17.2
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Proceeds from borrowings
Repayments of borrowings
Contribution to Employee Benefit Trust
Purchase of treasury shares
Purchase of non-controlling interests
Proceeds from disposal of non-controlling interests
Dividends paid
Net cash received from/(used) in financing activities
27
17.4
17.4
13
Net (decrease)/increase in cash, cash equivalents and bank overdrafts
Cash, cash equivalents and bank overdrafts at beginning of year
Effect of exchange rate fluctuations on cash held
Cash, cash equivalents and bank overdrafts at end of year
20 and 22
90
Savills plc
Report and Accounts 2017
Notes to the financial statements
Year ended 31 December 2017
1. General information
Savills plc (the ‘Company’) and its subsidiaries (together the ‘Group’) is a global real estate services Group. The Group operates through
a network of offices in the UK, Continental Europe, Asia Pacific, North America, Africa and the Middle East. Savills is listed on the London
Stock Exchange and employs 34,429 staff worldwide.
The Company is a public limited company incorporated and domiciled in the United Kingdom. The address of its registered office is
33 Margaret Street, London W1G 0JD.
These consolidated financial statements were approved for issue by the Board of Directors on 14 March 2018.
2. Accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated, and are also applicable to the parent Company.
2.1 Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS
Interpretations Committee interpretations as adopted by the European Union and with those parts of the Companies Act 2006 applicable
to companies reporting under IFRS.
The financial statements are prepared on a going concern basis and under the historical cost convention as modified by the revaluation
of available-for-sale investments and derivative financial instruments.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates and for management
to exercise judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 5.
2.2 Use of non-GAAP measures
The Group believes that the consistent presentation of underlying profit before tax, underlying effective tax rate, underlying basic earnings
per share and underlying diluted earnings per share provides additional useful information to shareholders on the underlying trends and
comparable performance of the Group over time. The ‘underlying’ measures are also used by Savills for internal performance analysis and
incentive compensation arrangements for employees. All the adjustments made to the GAAP measures are considered exceptional and/or
non-operational in nature. These terms are not defined terms under IFRS and may therefore not be comparable with similarly-titled profit
measures reported by other companies. They are not intended to be a substitute for, or superior to, GAAP measures.
The term ‘underlying’ refers to the relevant measure of profit, earnings or taxation being reported excluding the impact (pre and post-tax
where applicable) of the following items:
• amortisation of acquired intangible assets (excluding software);
• the difference between IFRS 2 charges related to outstanding bonus-related deferred share awards and the estimated value of the
current year bonus pool expected to be allocated to deferred share awards (refer to Note 8 for further explanation);
•
items that are considered exceptional by size or nature including restructuring costs, impairments of goodwill, intangible assets and
investments and profits or losses arising on disposals of subsidiaries and other investments; and
• significant acquisition costs related to business combinations.
The underlying effective tax rate represents the underlying income tax expense expressed as a percentage of underlying profit before tax.
The underlying income tax expense is the income tax expense excluding the tax effect of the adjustments made to arrive at underlying profit
before tax and other tax effects related to these adjustments.
Underlying basic earnings per share and underlying diluted earnings per share both utilise the underlying profit after tax measure instead of
GAAP earnings. The weighted average number of shares remain the same as the GAAP measure.
A reconciliation between GAAP and underlying measures are set out in Note 8 (underlying profit before tax) and Note 14.2 (underlying basic
earnings per share and underlying diluted earnings per share).
The Group also refers to revenue and underlying profit on a constant currency basis which are both non-GAAP measures. Constant
currency results are calculated by translating the current year revenue and underlying profit using the prior year exchange rates.
This measure allows the Group to assess the results of the current year compared to the prior year, excluding the impact of foreign
currency movements.
Savills plc
Report and Accounts 2017
91
Financial statementsGovernance Strategic reportOverview 2. Accounting policies continued
2.3 Consolidation
The consolidated financial statements include those of the Company and its subsidiary undertakings, together with the Group’s share of
results of its associates and joint ventures.
(a) Subsidiaries
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to,
variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries
are fully consolidated from the date on which control is transferred to the Group.
Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated. Profits
and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies adopted by the Group.
Investments in subsidiaries held by the Company are held at cost, less any provision for impairment.
(b) Acquisition of subsidiaries
The Group applies the acquisition method of accounting to account for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair
values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis,
either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of the acquiree’s identifiable net assets.
Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Contingent consideration only
applies to situations where contingent payments are not dependent on future employment of vendors. Payments dependent on future employment
are expensed to the income statement over the relevant period of employment as required by IFRS 3 (revised). Subsequent changes to the fair
value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 in profit or loss. Contingent
consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.
Acquisition-related costs are expensed as incurred.
(c) Changes in ownership interests in subsidiaries without change of control
Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as
transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share
acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests
are also recorded in equity.
(d) Disposal of subsidiaries
When the Group ceases to control any retained interest in a subsidiary, the entity is remeasured to its fair value at the date when control is
lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of
subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously
recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related
assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
(e) Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between
20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity
method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of
the profit or loss of the investee after the date of acquisition. The Group’s investment in associates includes goodwill (net of any accumulated
impairment loss) identified on acquisition (see Note 17.1).
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement with a corresponding
adjustment to the carrying amount of the investment. Dividends received or receivable from associates are recognised as a reduction in the
carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate,
including any other unsecured receivables, the Group does not recognise further losses unless it has incurred legal or constructive
obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies
of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.
The carrying amount of associates is tested for impairment in accordance with the policy described in Note 2.9.
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Notes to the financial statements continuedYear ended 31 December 2017 (f) Joint arrangements
The Group applies IFRS 11 to all joint arrangements. Under IFRS 11 investments in joint arrangements are classified as either joint operations
or joint ventures depending on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint
arrangements and determined them to be joint ventures. Joint ventures are accounted for using the equity method of accounting, the
investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the investor’s share of the profit
or loss of the investee after the date of acquisition.
The Group’s share of its joint venture’s post-acquisition profits or losses is recognised in the income statement with a corresponding
adjustment to the carrying amount of the investment. Dividends received or receivable from joint ventures are recognised as a reduction in
the carrying amount of the investment. When the Group’s share of losses in a joint venture equals or exceeds its interests in the joint ventures
(which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group does not
recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group’s interest in the joint
ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group.
The carrying amount of joint ventures is tested for impairment in accordance with the policy described in Note 2.9.
2.4 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief
operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been
identified as the Group Executive Board.
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns
that are different from those of other business segments. A geographical segment is engaged in providing products or services within
a particular economic environment that is subject to risks and returns that are different from those of segments operating in other
economic environments.
As the Group is strongly affected by both differences in the types of services it provides and the geographical areas in which it operates, the
matrix approach of disclosing both the business and geographical segments format is used.
Revenues and expenses are allocated to segments on the basis that they are directly attributable or the relevant portion can be allocated on
a reasonable basis.
2.5 Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in sterling, which
is also the Company’s functional and presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.
Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other
comprehensive income as qualifying cash flow hedges.
Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss and are recognised in
the income statement, except for available-for-sale equity investments, which are recognised in other comprehensive income. Non-monetary
items carried at historical cost are reported using the exchange rate at the date of the transaction.
(c) Group entities
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to the
Group’s presentational currency at foreign exchange rates ruling at the reporting date. Exchange differences arising from this translation of
foreign operations are taken directly to the foreign exchange reserve. When a foreign operation is disposed of, in part or in full, the relevant
amount in the foreign exchange reserve is transferred to the income statement.
The income and expenses of foreign operations are translated at an average rate for the year where this rate approximates to the foreign
exchange rates ruling at the dates of the transactions.
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2.6 Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure directly attributable to acquisition.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable
that the future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably.
Provision for depreciation is made at rates calculated on a straight-line basis to write-off the assets over their estimated useful lives
as follows:
Freehold property
Short leasehold property (less than 50 years)
Equipment and motor vehicles
50 years
Over unexpired term of lease
3–10 years
Residual values and useful lives are reviewed and adjusted if appropriate, at each reporting date.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
2.7 Goodwill
Goodwill represents the excess of the cost of acquisition of a subsidiary or associate over the Group’s share of the fair value of identifiable
net assets acquired.
In respect of associates, goodwill is included in the carrying value of the investment.
Goodwill is carried at cost less accumulated impairment losses. Separately recognised goodwill is tested annually for impairment, or more
frequently if events or changes in circumstances indicate potential impairment. An impairment loss is recognised for the amount by which
the carrying value exceeds the recoverable amount. The recoverable amount is the higher of value-in-use and fair value less costs of
disposal. Impairment losses on goodwill are not reversed.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or
groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The Group
allocates goodwill to each business segment in the geographical region in which it operates (Note 15).
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
2.8 Intangible assets other than goodwill
Intangible assets acquired as part of business combinations and incremental contract costs are valued at fair value on acquisition and
amortised over the useful life. Fair value on acquisition is determined by third party valuation where the acquisition is significant.
Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software.
Costs associated with maintaining computer software programmes are recognised as an expense as incurred.
Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the
Group are recognised as intangible assets when the following criteria are met:
•
it is technically feasible to complete the software product so that it will be available for use;
• management intends to complete the software product and use or sell it;
• there is an ability to use or sell the software product;
•
it can be demonstrated how the software product will generate probable future economic benefits;
• adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and
• the expenditure attributable to the software product during its development can be reliably measured.
Measurement subsequent to initial recognition is at cost less accumulated amortisation and impairment.
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Notes to the financial statements continuedYear ended 31 December 2017 Amortisation charges are spread on a straight-line basis over the period of the assets’ estimated useful lives as follows:
Customer relationships
Order backlogs
Contracts – investment, property management and other existing business contracts
Brands
Computer software
3–15 years
2 years
2–20 years
2 years
3–5 years
Acquired investment management contracts relating to open-ended funds have been attributed indefinite useful lives, reflecting the open-
ended nature of the funds, the Group’s intention to continue with the management of the funds for the foreseeable future and the
expectation that these contracts are expected to generate net cash inflows for the Group for this foreseeable period.
2.9 Impairment of other non-financial assets
Assets that have indefinite useful lives are not subject to amortisation or depreciation and are tested annually for impairment or whenever
an indicator of impairment exists. Assets that are subject to amortisation or depreciation are reviewed for impairment whenever an
indicator of impairment exists. An impairment loss is recognised to the extent that the carrying value exceeds the higher of the asset’s
fair value less cost to sell and its value-in-use. Prior impairments of non-financial assets (other than goodwill) are reviewed for possible
reversal at each reporting date.
Value-in-use is determined using the discounted cash flow method, with an appropriate discount rate to reflect market rates and specific
risks associated with the asset.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows
(cash-generating units). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
2.10 Financial instruments
Financial assets and liabilities are recognised on the Group’s statement of financial position at fair value when the Group becomes party
to the contractual provisions of the instrument. Subsequent measurement depends on the classification and is discussed in paragraphs
2.11–2.16.
Financial assets and liabilities are offset and the net amount reported in the balance sheet where there is a legally enforceable right to offset
the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another party. On derecognition of a financial asset in
its entirety, the difference between the asset’s carrying amount and the sum of consideration received is recognised in profit or loss.
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The
difference between the carrying amount of the financial liability derecognised and the consideration paid is recognised in profit or loss.
2.11 Available-for-sale investments
Available-for-sale investments are stated at fair value, with changes in fair value being recognised in other comprehensive income. When
such investments are disposed or become impaired, the accumulated gains and losses, previously recognised in other comprehensive
income, are recognised in the income statement.
2.12 Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost less provision for impairment.
Receivables are discounted where the time value of money is material.
A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will
enter bankruptcy or financial reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is
impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate.
The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the
income statement within ‘other operating expenses’. When a trade receivable is uncollected, it is written off against the allowance
account for trade receivables. Subsequent recoveries of amounts previously written off are credited against ‘other operating expenses’ in
the income statement.
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2.13 Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held on call with banks, together with other short-term highly liquid
investments with original maturities of three months or less and working capital overdrafts, which are subject to an insignificant risk of
changes in value. Bank overdrafts are included under borrowings in the statement of financial position.
2.14 Bank borrowings
Interest-bearing bank loans and overdrafts are initially measured at fair value, net of transaction costs incurred, and subsequently measured
at amortised cost using the effective interest rate method.
2.15 Trade payables
Trade payables are initially measured at fair value and subsequently measured at amortised cost, using the effective interest rate method.
Trade payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities.
2.16 Derivative financial instruments and hedging
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at fair value.
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and if so, the
nature of the item being hedged.
Certain derivatives do not qualify for hedge accounting. In these cases, changes in the fair value of all derivative instruments are recognised
immediately in the income statement.
2.17 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds. When share capital is repurchased, the amount of consideration paid, including directly attributable
costs, is recognised as a charge to equity. Repurchased shares which are not cancelled, or shares purchased for the Employee Benefit
Trust, are classified as treasury shares and presented as a deduction from total equity.
2.18 Taxation
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it
relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive
income or directly in equity.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the
countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in
tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on
the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the
initial recognition of goodwill; deferred income tax is not accounted for if it arises from the initial recognition of an asset or liability in a
transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and
are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates except for deferred income
tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income tax assets and liabilities relate to income tax levied by the same taxation authority on either the same
taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
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Notes to the financial statements continuedYear ended 31 December 2017 2.19 Pension obligations
The Group operates both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the
Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the
fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. A defined
benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on
one or more factors, such as age, years of service and compensation.
The asset or liability recognised in the statement of financial position in respect of defined benefit pension plans is the present value of the
defined benefit obligation at the reporting date less the fair value of plan assets. The defined benefit obligation is calculated annually by
independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting
the estimated future cash outflows.
The defined benefit scheme charge consists of net interest costs, past service costs and the impact of any settlements or curtailments and
is charged as an expense as they fall due.
All actuarial gains and losses are recognised immediately in other comprehensive income in the period in which they arise.
The Group also operates a defined contribution Group Personal Pension Plan for new entrants and a number of defined contribution
individual pension plans. Contributions in respect of defined contribution pension schemes are charged to the income statement when
they are payable. The Group has no further payment obligations once the contributions have been paid. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.
The net defined benefit cost is allocated amongst participating Group subsidiaries on the basis of pensionable salaries.
2.20 Share-based payments
The Group operates equity-settled share-based compensation plans. The fair value of the employee services received in exchange for the
grant of the options is recognised as an expense.
All equity-settled share-based payments are measured at fair value at the date of grant. Fair value is predominantly measured by use of the
Actuarial Binomial option pricing model. The fair value determined at the grant date of the equity-settled share-based payments is expensed
on a straight-line basis over the vesting period. Non-market vesting conditions are included in assumptions about the number of options that
are expected to vest. At the end of each reporting period, the Group revises its estimate of the number of options that are expected to vest
based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement,
with a corresponding adjustment to equity.
Any cash proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium
when the options are exercised.
2.21 Employee Benefit Trust and Savills Rabbi Trust
The Company has established the Savills plc 1992 Employee Benefit Trust (the ‘EBT’) and the Savills Rabbi Trust (the ‘Rabbi Trust’), the
purposes of which are to grant awards to employees, to acquire shares in the Company pursuant to the Savills Deferred Share Bonus Plan
and the Savills Deferred Share Plan and to hold shares in the Company for subsequent transfer to employees on the vesting of the awards
granted under the schemes. The assets and liabilities of the EBT and Rabbi Trust are included in the Group statement of financial position.
Investments in the Group’s own shares are shown as a deduction from equity.
2.22 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that
the Group will be required to settle that obligation and the amount has been reliably estimated. Provisions are measured at the Directors’
best estimate of the expenditure required to settle the obligation at the reporting date and are discounted to present value where the
effect is material.
(a) Professional indemnity claims
Provisions on professional indemnity claims are recognised when it is probable that the Group will be required to settle claims against it as a
result of a past event and the amount of the obligation can be reliably estimated. The Group recognises a provision up to the limit of its
self-insured liabilities in respect of any claim, with the excess of any self-insured element settled by professional indemnity insurance cover.
The professional indemnity insurance cover is spread across a panel of insurers so that it is highly unlikely that the Group would be liable for
any settlement in excess of the self-insured element of any given claim. As a result, the amount of the claim in excess of the self-insured
element is not included in the professional indemnity claims provision.
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(b) Dilapidation provisions
The Group is required to perform dilapidation repairs and restore properties to agreed specifications on leased properties prior to the
properties being vacated at the end of their lease term. Provision for such cost is made where a legal obligation is identified and the liability
can be reasonably quantified.
(c) Onerous leases
A provision is recognised where the costs of meeting the obligations under a lease contract exceed the economic benefits expected to be
received and is measured as the net least cost of exiting the contract, being the lower of the cost of fulfilling it and any compensation or
penalties arising from the failure to fulfil it.
(d) Restructuring provision
A provision is recognised when there is a present constructive obligation to meet the costs of restructure. This arises when there is a detailed
formal plan for the restructuring, identifying at least the business or part of the business concerned, principal locations affected and the
location, function and approximate number of employees to be compensated for terminating their services and when the plan has been
communicated to those affected by it, raising an expectation that the plan will be carried out.
2.23 Revenue
Revenue comprises the fair value of the consideration received or receivable for the provision of services in the ordinary course of the
Group’s activities. Revenue is shown net of value-added tax and amounts due to third parties and after elimination of revenue within
the Group.
(a) Residential transactional fees
Generally, where contracts are unconditional, revenue is recognised on exchange of contracts. However, for new home developments
revenue is recognised on a staged basis, following the terms of the contract, to reflect the Group’s obligations to find a buyer and to further
support the client after exchange of contracts through to completion of the build and contract, which can be a number of years later. For
these developments, revenue recognition commences when the underlying contracts are exchanged, with total revenue from the contract
recognised by the date of completion.
(b) Commercial transactional fees
Generally, revenue is recognised on the date of completion or when unconditional contracts have been exchanged.
(c) Property consultancy
Revenue in respect of property consultancy represents commissions and fees recognised on a time basis, fixed fee or percentage of
completion. Percentage of completion is principally measured by the proportion of actual costs incurred in relation to the best estimate
of total costs expected for completion of the contract.
(d) Property and facilities management
Revenue represents fees earned for managing properties and providing facilities and is generally recognised in the period the services are
provided using a straight-line basis over the term of the contract.
(e) Investment management
Revenue represents commissions and fees receivable, net of marketing costs in accordance with the relevant fee agreements.
Annual management fees are recognised, gross of costs, in the period to which the service has been provided, in accordance with the
contracted fee agreements. Transaction fees are recognised on the date of completion of a purchase or sale transaction. Distribution fees
are recognised on the completion of a signed subscription agreement and performance fees are recognised as earned and when approved
by the fund.
(f) Work in progress
Work in progress generally relates to consultancy revenue and is stated at the lower of cost and net realisable value. Cost includes an
appropriate proportion of overheads.
(g) Interest income
Interest income is recognised on a time-proportion basis using the effective interest method.
(h) Dividend income
Dividend income is recognised when the right to receive payment is established.
(i) Other income
Other income includes interest and dividend income on available-for-sale investments plus fair value gains and losses on assets at fair
value through profit or loss.
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Notes to the financial statements continuedYear ended 31 December 2017 2.24 Leases
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as
finance leases.
Finance lease assets are initially recognised at an amount equal to the lower of their fair value and the present value of the minimum lease
payments at inception of the lease. The assets are then depreciated over the lower of the lease terms or the estimated useful lives of
the assets.
The capital elements of future obligations under finance leases are included as liabilities in the statement of financial position. Leasing
payments comprise capital and finance elements and the finance element is charged to the income statement.
The annual payments under all other lease agreements (operating leases) are charged to the income statement on a straight-line basis over
the lease term. Benefits received and receivable as an incentive to enter into the operating lease are also spread on a straight-line basis over
the lease term.
A lease is classified as onerous where the unavoidable costs of meeting the obligations under the contract exceed the economic benefits
expected to be received under it.
2.25 Dividends
Dividend distributions are recognised as a liability in the Group’s financial statements in the period in which they are approved by the
Company’s shareholders.
Interim dividends are recognised when paid.
2.26 Adoption of standards, amendments and interpretations to standards
Standards, amendments and interpretations endorsed by the EU and mandatorily effective for the first time for the financial year beginning
1 January 2017 that are not relevant or considered to have a significant impact on the Group and its financial statements include the following:
Amendments to IAS 7
Amendments to IAS 12
Disclosure Initiative
Recognition of Deferred Tax Assets for Unrealised Losses
The following standards and amendments to published standards are mandatory for accounting periods beginning on or after 1 January 2018,
and have not been early adopted:
•
•
•
IFRS 15, ‘Revenue from contracts with customers’ (‘IFRS 15’), including amendments, is effective for accounting periods beginning on or
after 1 January 2018. The standard establishes a principles based approach for revenue recognition and is based on the concept of
recognising revenue for obligations only when they are satisfied and the control of goods or services is transferred. It applies to all
contracts with customers, except those in the scope of other standards. It replaces the separate models for goods, services and
construction contracts under the current accounting standards. The implementation of IFRS 15 will result in some refinement in the timing
of recognition of investment management performance fees and the amortisation period for contract costs however the impact of this
refinement is not material.
IFRS 9, ‘Financial instruments’, including amendments, effective for accounting periods beginning on or after 1 January 2018. This
standard addresses the classification, measurement and recognition of financial assets and financial liabilities. It replaces the guidance in
IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement
model and establishes three primary measurement categories for financial assets: amortised cost, fair value through other
comprehensive income and fair value through profit and loss. The basis of classification depends on the entity’s business model and the
contractual cash flow characteristics of the financial asset. There is now a new expected credit losses model that replaces the incurred
loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the
recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. The
Group’s available-for-sale investments will be renamed in accordance with IFRS 9, with the only change in accounting treatment being
that fair value re-measurements in reserves will not be recycled to the income statement upon disposal of the investment. Otherwise, the
application of IFRS 9 will not have a material impact on the amounts reported in the Group’s consolidated financial statements.
IFRS 16, ‘Leases’, effective for the accounting periods beginning on or after 1 January 2019. The standard addresses the classification,
measurement and recognition of leases with the objective of ensuring that lessees and lessors provide relevant information that faithfully
represents those transactions. The standard supersedes IAS 17 ‘Leases’. The standard is expected to have a significant impact on the
consolidated financial statements of the Group. On adoption, lease agreements will give rise to both a right of use asset and a lease
liability for future lease payables. Depreciation of the right of use asset will be recognised in the income statement on a straight-line basis,
with interest recognised on the lease liability. This will result in a change to the profile of the net charge taken to the income statement
over the life of the lease. These charges will replace the lease costs currently charged to the income statement. The Group continues to
assess the full impact of IFRS 16, however, the impact will greatly depend on the facts and circumstances at the time of adoption and
upon transition choices adopted. It is therefore not yet practicable to provide a reliable estimate of the financial impact on the Group’s
consolidated results.
Other standards, amendments and interpretations not yet effective and not discussed above are not relevant or considered significant to
the Group.
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3.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks. The Group has in place a risk management programme that seeks to limit the
adverse effects on the financial performance of the Group. The Group uses financial instruments to manage material foreign currency and
interest rate risk.
The treasury function is responsible for implementing risk management policies applied by the Group and has a policy and procedures
manual that sets out specific guidelines on financial risks and the use of financial instruments to manage these.
3.2 Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risks primarily with respect to the euro, Hong Kong dollar and US
dollar. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign
operations. When there is a material committed foreign currency exposure the foreign exchange risk will be hedged. The Group may finance
some overseas investments through the use of foreign currency borrowings. The Group does not actively seek to hedge risks arising from
foreign currency translations due to their non-cash nature and the high costs associated with such hedging.
The sensitivity analysis has been prepared for the major currencies to which the Group is exposed. Recent historical movements in these
currencies has been considered and it has been concluded that a 5–10% movement in rates is a reasonable benchmark.
For the years ended 31 December, if the average currency conversion rates against sterling for the year had changed with all other variables
held constant, the Group post-tax profit for the year would have increased or decreased as shown below:
Movement of currency against sterling
-10.0%
-5.0%
+5.0%
+10.0%
(1.0)
(1.5)
0.9
1.0
(12.3)
(12.1)
(1.3)
(0.5)
0.8
1.1
(13.7)
(11.4)
(0.5)
(0.8)
0.5
0.5
(6.5)
(6.3)
(0.7)
(0.3)
0.4
0.5
(7.2)
(6.0)
0.6
0.9
(0.5)
(0.6)
7.1
7.0
0.7
0.3
(0.4)
(0.6)
7.9
6.6
1.2
1.8
(1.1)
(1.2)
15.1
14.8
1.5
0.6
(0.9)
(1.3)
16.7
13.9
£m
2017
Estimated impact on post-tax profit
Euro
Hong Kong dollar
US dollar
Estimated impact on components of equity
Euro
Hong Kong dollar
US dollar
2016
Estimated impact on post-tax profit
Euro
Hong Kong dollar
US dollar
Estimated impact on components of equity
Euro
Hong Kong dollar
US dollar
100
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 3.3 Interest rate risk
The Group has both interest-bearing assets and liabilities. The Group finances its operations through a mixture of retained profits and bank
borrowings, at both fixed and floating interest rates. Borrowings issued at variable rates expose the Group cash flow to interest rate risk,
which is partially offset by cash held at variable rates. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. Group
policy is to maintain at least 70% of its borrowings in fixed rate instruments.
For the year ended 31 December 2017, if the average interest rate for the year had changed with all other variables held constant, the
Group’s post-tax profit for the year and equity would have increased or decreased as shown below:
£m
2017
Estimated impact on post-tax profit and equity
2016
Estimated impact on post-tax profit and equity
£m
2017
Increase in interest rates
+0.5%
+1.0%
+1.5%
+2.0%
0.3
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Decrease in interest rates
-0.5%
-1.0%
-1.5%
-2.0%
Estimated impact on post-tax profit and equity
(0.5)
(0.9)
(0.9)
(0.6)
2016
Estimated impact on post-tax profit and equity
(0.5)
(0.5)
(0.2)
(0.2)
The rationale behind the 2.0% sensitivity analysis is based upon historic trends in interest rate movements and the short-term expectation
that any increase or decrease greater than 2.0% is unlikely to occur.
3.4 Credit risk
Credit risk arises from cash and cash equivalents, available-for-sale investments, derivative financial instruments and deposits with banks
and financial institutions, as well as credit exposures to clients, including outstanding receivables and committed transactions. The Group
has policies that require appropriate credit checks on potential customers before engaging with them. A risk control framework is used to
assess the credit quality of clients, taking into account financial position, past experience and other factors.
Individual risk limits for banks and financial institutions are set based on external ratings and in accordance with limits set by the Board.
The utilisation of credit limits is regularly monitored.
As at the reporting date, no significant credit risk existed in relation to banking counterparties. No credit limits were exceeded during the
reporting year, and management does not expect any losses from non-performance by these counterparties. There were no other significant
receivables or individual trade receivable balances as at 31 December 2017. Refer to Note 19 for information on the credit quality of trade
receivables and the maximum exposure to credit risk arising on outstanding receivables from clients.
The table below shows Group cash balances split by counterparty ratings at the reporting date:
Counterparty rating (provided by S&P)
AA-
A+
A
A-
BBB+ or below
Total
2017
£m
24.7
30.2
96.6
16.6
40.7
208.8
2016
£m
23.1
65.1
101.7
13.7
20.0
223.6
Savills plc
Report and Accounts 2017
101
Financial statementsGovernance Strategic reportOverview 3. Financial risk management continued
3.5 Liquidity risk
The Group maintains appropriate committed facilities to ensure the Group has sufficient funds available for operations and expansion.
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.
Management monitors rolling forecasts of the Group’s liquidity reserve comprising undrawn borrowing facilities (Note 22) and cash and cash
equivalents (Note 20) on the basis of expected cash flow. This is carried out at local level in the operating companies of the Group in
accordance with Group practice as well as on a Group consolidated basis.
The table below analyses the Group’s financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based
on the remaining period from the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows.
£m
2017
Borrowings
Finance leases
Derivative financial instruments
Trade and other payables
2016
Borrowings
Derivative financial instruments
Trade and other payables
Less than a year
1 and 2 years
2 and 5 years
Over 5 years
Between
Between
110.1
–
0.1
538.0
648.2
35.8
0.3
497.8
533.9
–
0.1
–
13.9
14.0
–
–
18.6
18.6
–
–
–
18.6
18.6
–
–
24.2
24.2
–
–
–
5.2
5.2
–
–
2.1
2.1
3.6 Capital risk management
The Group’s objectives when managing capital are:
• to safeguard the Group’s ability to provide returns for shareholders and benefits for other stakeholders; and
• to maintain an optimal capital structure to reduce the cost of capital.
The Group’s overall strategy remains unchanged from 2016.
Savills plc is not subject to any externally-imposed capital requirements, with the exception of its regulated entities within the Savills
Investment Management group and its FCA (Financial Conduct Authority) regulated entity, Savills Capital Advisors Ltd, in the UK. All
regulated entities complied with the relevant capital requirements during the year ended 31 December 2017. The Savills Investment
Management group has regulated entities in the UK, Jersey, Luxembourg, Germany, Italy, Japan, Singapore, Hong Kong and the US. For
more information on Savills Investment Management group’s regulated entities and regulatory requirements, please visit www.savillsim.com.
In order to maintain an optimal capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
The Board has put in place a distribution policy which takes into account the degree of maintainability of the Group’s different profit streams
and the Group’s overall exposure to cyclical Transaction Advisory profits, as well as the requirement to maintain a certain level of cash
resources for working capital and corporate development purposes. The Board will recommend an ordinary dividend broadly reflecting the
profits derived from the Group’s less volatile businesses. In addition, when profits from the cyclical Transaction Advisory business are strong,
the Board will consider and, if appropriate, recommend the payment of a supplemental dividend alongside the final ordinary dividend. The
value of any such supplemental dividend will vary depending on the performance of the Group’s Transaction Advisory business and the
Group’s anticipated working capital and corporate development requirements through the cycle. It is intended that, in normal circumstances,
the combined value of the ordinary and supplemental dividends declared in respect of any year are covered at least 1.5 times by statutory
retained earnings and/or at least 2.0 times by underlying profits after taxation. The Group complied with this policy throughout the year.
102
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 The Group’s policy is to borrow centrally, if required, to meet anticipated funding requirements. These borrowings, together with cash
generated from operations, are then on-lent or contributed as equity to certain subsidiaries. The Board of Directors monitors a number of
debt measures on a rolling forward 12-month basis including: gross cash by location; gross debt by location; cash subject to restrictions;
total debt servicing cost to operating profit; gross borrowings as a percentage of EBITDA (earnings before interest, tax, depreciation and
amortisation); and forecast headroom against available facilities. These internal measures indicate the levels of debt that the Group has and
are closely monitored to ensure compliance with banking covenants and to confirm that the Group has sufficient unused facilities. The Group
complied with all banking covenants throughout the year and met all internal counterparty exposure limits set by the Board.
The capital structure is as follows:
£m
Equity
Cash and cash equivalents
Bank overdrafts
Borrowings
Net cash
3.7 Categories of financial instruments
Financial assets:
Available-for-sale investments
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Total financial assets
Financial liabilities:
Borrowings
Trade and other payables
Derivative financial instruments
Total financial liabilities
Group
Company
2017
441.7
208.8
(3.6)
(106.6)
98.6
2016
407.0
223.6
(0.2)
(35.6)
187.8
2017
216.7
90.8
–
–
2016
205.0
88.3
–
–
90.8
88.3
Available-
for-sale
financial
assets
2017
£m
Loans and
receivables
2017
£m
Financial
asset at fair
value 2017
£m
Total
carrying
amount
2017
£m
Financial
asset at fair
value 2016
£m
Available-
for-sale
financial
assets
2016
£m
Loans and
receivables
2016
£m
–
–
0.5
–
0.5
24.6
–
–
–
24.6
–
440.0
–
208.8
648.8
24.6
440.0
0.5
208.8
673.9
–
–
0.2
–
0.2
20.8
–
–
–
20.8
–
363.0
–
223.6
586.6
Total
carrying
amount
2016
£m
20.8
363.0
0.2
223.6
607.6
Financial
liabilities at
fair value
2017
£m
Financial
liabilities at
amortised
cost 2017
£m
Total
carrying
amount
2017
£m
Financial
liabilities at
fair value
2016
£m
Financial
liabilities at
amortised
cost 2016
£m
Total
carrying
amount
2016
£m
–
–
0.1
0.1
110.2
573.6
–
110.2
573.6
0.1
683.8
683.9
–
–
0.3
0.3
35.8
542.7
–
35.8
542.7
0.3
578.5
578.8
Savills plc
Report and Accounts 2017
103
Financial statementsGovernance Strategic reportOverview 3. Financial risk management continued
3.8 Fair value estimation
The following table presents the Group’s assets and liabilities that are measured at fair value at 31 December 2017:
£m
2017
Assets
Available-for-sale investments
– Unlisted
Derivative financial instruments
Total assets
Liabilities
Derivative financial instruments
Total liabilities
Level 1
Level 2
Level 3
Total
–
–
–
–
–
24.6
0.5
25.1
0.1
0.1
–
–
–
–
–
24.6
0.5
25.1
0.1
0.1
The following table presents the Group’s assets and liabilities that are measured at fair value at 31 December 2016:
£m
2016
Assets
Available-for-sale investments
– Unlisted
Derivative financial instruments
Total assets
Liabilities
Derivative financial instruments
Total liabilities
Level 1
Level 2
Level 3
Total
–
–
–
–
–
20.8
0.2
21.0
0.3
0.3
–
–
–
–
–
20.8
0.2
21.0
0.3
0.3
Level 1 instruments are those whose fair values are based on quoted market prices. The Group has no Level 1 instruments.
The fair value of unlisted available-for-sale investments is determined using valuation techniques using observable market data where
available and rely as little as possible on entity estimates. The fair value of investment funds is based on underlying asset values determined
by the Fund Manager’s audited annual financial statements. The fair value of other unlisted investments is based on price earnings models.
These instruments are included in Level 2.
The fair value of derivative financial instruments is determined by using valuation techniques using observable market data. The fair value
of derivative financial instruments is based on the market value of similar instruments with similar maturities. These instruments are included
in Level 2.
If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. The Group has no Level
3 instruments.
104
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 4. Offsetting financial assets and financial liabilities
The table below shows the amounts of financial assets and financial liabilities before and after offsetting. The amounts offset in the balance
sheet were established in accordance with IAS 32. The assets and liabilities offset stem from the multi-currency cash pooling implemented
within the Group.
£m
As at 31 December 2017
Assets
Cash and cash equivalents
Liabilities
Bank overdrafts
As at 31 December 2016
Assets
Cash and cash equivalents
Liabilities
Bank overdrafts
Gross financial
assets/
(liabilities)
Amounts offset
in the balance
sheet
Net amount in
the balance
sheet
371.1
(162.3)
208.8
(165.9)
162.3
(3.6)
375.7
(152.1)
223.6
(152.3)
152.1
(0.2)
5. Critical accounting estimates and management judgements
5.1 Accounting estimates
Estimates are continually evaluated and are based on historical experience, current market conditions and other factors including
expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.
Changes in accounting estimates may be necessary if there are changes in circumstances on which the estimate was based, or as a result
of new information or more experience. The estimates that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are discussed below.
(a) Pension benefits
The present value of the defined benefit pension obligations depends on a number of factors that are determined on an actuarial basis
using a number of assumptions including the discount rate. Any changes in these assumptions will impact the carrying amount of pension
obligations. The Group determines the appropriate discount rate at the end of each year. In determining the appropriate discount rate, the
Group considers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid
and that have terms to maturity approximating the terms of the related pension liability. Other key assumptions for pension obligations are
based in part on current market conditions. Additional information is disclosed in Note 10.2.
(b) Income taxes
The Group is subject to income taxes in numerous jurisdictions. Judgement is required in determining the provision for income taxes.
There are transactions and calculations for which the ultimate tax determination is uncertain. Where the final tax outcome of these matters
is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the
period in which such determination is made.
(c) Deferred taxes
The recognition of deferred tax assets is based upon whether it is probable that sufficient and suitable taxable profits will be available in the
future, against which the reversal of temporary differences can be deducted. Recognition, therefore, involves judgement regarding the future
financial performance of the particular legal entity or tax group in which the deferred tax asset has been recognised, especially with regard
to the extent that future taxable profits will be available against which losses can be utilised.
(d) Valuation of intangible assets and useful life
The Group has made assumptions in relation to the potential future cash flows to be determined from separable intangible assets acquired
as part of business combinations. This assessment involves assumptions relating to potential future revenues, appropriate discount rates
and the useful life of such assets. These assumptions impact the income statement over the useful life of the intangible asset.
(e) Provisions
The Group and its subsidiaries are party to various legal claims. Provisions made within these financial statements and further details are
contained in Note 24.1. Additional claims could be made which might not be covered by existing provisions or by insurance as detailed in
Note 28.
5.2 Management judgements
In the course of preparing the financial statements, no judgements have been made in the process of applying the Group’s accounting
policies, other than those involving estimations, that have had a significant effect on the amounts recognised in the financial statements.
Savills plc
Report and Accounts 2017
105
Financial statementsGovernance Strategic reportOverview 6. Segment analysis
Operating segments reflect internal management reporting to the Group’s chief operating decision maker, defined as the Group Executive
Board (GEB). The operating segments are determined based on differences in the nature of their services. Geographical location also
strongly affects the Group and both are therefore disclosed. The reportable operating segments derive their revenue primarily from
property-related services. Refer to the Group overview on page 3 and the segmental reviews on pages 18 to 21 for further information
on revenue sources.
Operations are based in four main geographical areas. The UK is the home of the parent Company with segment operations throughout
the region. Asia Pacific segment operations are based in Hong Kong, Macau, China, South Korea, Japan, Taiwan, Thailand, Singapore,
Vietnam, Australia, Indonesia, Malaysia and Myanmar. Continental Europe segment operations are based in Germany, France, Spain, the
Netherlands, Belgium, Sweden, Italy, Ireland, Poland and Czech Republic. North America segment operations are based in a number of
states throughout the US and in Canada. The sales location of the client is not materially different from the location where fees are received
and where the segment assets are located.
Within the UK, both commercial and residential services are provided. Other geographical areas, although largely commercial-based, also
provide residential services, in particular Hong Kong, China, Vietnam, Singapore, Australia, Taiwan and Thailand.
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, acquisition-related costs,
amortisation of acquired intangible assets (excluding software) and impairments. Segmental assets and liabilities are not measured or
reported to the GEB, but non-current assets are disclosed geographically on page 107.
The segment information provided to the GEB for revenue and underlying profit for the year ended 31 December 2017 is as follows:
2017
Revenue
United Kingdom – commercial
– residential
Total United Kingdom
Continental Europe
Asia Pacific – commercial
– residential
Total Asia Pacific*
North America
Revenue
Underlying profit/(loss) before tax
United Kingdom – commercial
– residential
Total United Kingdom
Continental Europe
Asia Pacific – commercial
– residential
Total Asia Pacific
North America
Underlying profit/(loss) before tax**
Transaction
Advisory
£m
Consultancy
£m
Property and
Facilities
Management
£m
Investment
Management
£m
Other
£m
Total
£m
101.6
128.9
230.5
78.2
168.4
44.3
212.7
224.8
746.2
17.2
18.7
35.9
4.5
26.9
6.4
33.3
7.8
81.5
160.2
44.7
204.9
22.5
45.7
–
45.7
–
273.1
17.1
6.8
23.9
2.0
5.1
–
5.1
–
31.0
135.1
30.7
165.8
46.4
300.9
–
300.9
–
513.1
9.0
2.7
11.7
(1.8)
15.4
–
15.4
–
25.3
24.8
–
24.8
35.3
6.4
–
6.4
–
66.5
5.0
–
5.0
6.5
1.8
–
1.8
–
1.1
–
1.1
–
–
–
–
–
422.8
204.3
627.1
182.4
521.4
44.3
565.7
224.8
1.1
1,600.0
(10.6)
–
(10.6)
–
–
–
–
–
37.7
28.2
65.9
11.2
49.2
6.4
55.6
7.8
13.3
(10.6)
140.5
106
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 The segment information provided to the GEB for revenue and underlying profit for the year ended 31 December 2016 is as follows:
2016
Revenue
United Kingdom – commercial
– residential
Total United Kingdom
Continental Europe
Asia Pacific – commercial
– residential
Total Asia Pacific*
North America
Revenue
Underlying profit/(loss) before tax
United Kingdom – commercial
– residential
Total United Kingdom
Continental Europe
Asia Pacific – commercial
– residential
Total Asia Pacific
North America
Underlying profit/(loss) before tax**
Transaction
Advisory
£m
Consultancy
£m
Property
and Facilities
Management
£m
Investment
Management
£m
Other
£m
Total
£m
86.0
124.4
210.4
71.5
129.7
38.1
167.8
211.1
660.8
14.7
17.5
32.2
5.0
20.6
3.3
23.9
18.9
80.0
145.3
37.8
183.1
19.3
37.9
–
37.9
–
240.3
16.3
5.9
22.2
1.3
2.4
–
2.4
–
25.9
130.4
28.5
158.9
40.1
273.8
–
273.8
–
472.8
8.7
2.6
11.3
(2.2)
14.5
–
14.5
–
23.6
25.9
–
25.9
39.7
6.4
–
6.4
–
72.0
6.4
–
6.4
9.4
1.8
–
1.8
–
–
–
–
–
–
–
–
–
–
(11.3)
–
(11.3)
–
–
–
–
–
387.6
190.7
578.3
170.6
447.8
38.1
485.9
211.1
1,445.9
34.8
26.0
60.8
13.5
39.3
3.3
42.6
18.9
17.6
(11.3)
135.8
* Revenues of £243.7m (2016: £204.7m) are attributable to the Hong Kong and Macau region.
**
Transaction Advisory underlying profit before tax includes depreciation of £6.6m (2016: £5.7m), software amortisation of £0.8m (2016: £0.8m) and share of post-tax profit from joint ventures
and associates of £2.2m (2016: £2.3m). Consultancy underlying profit before tax includes depreciation of £2.0m (2016: £2.0m), software amortisation of £0.4m (2016: £0.5m) and share of post-
tax loss from joint ventures and associates of £nil (2016: £.01m profit). Property and Facilities Management underlying profit before tax includes depreciation of £3.4m (2016: £3.4m), software
amortisation of £1.3m (2016: £0.7m) and share of post-tax profit from joint ventures and associates of £7.7m (2016: £6.3m). Investment Management underlying profit before tax includes
depreciation of £0.4m (2016: £0.4m) and software amortisation of £0.4m (2016: £0.5m). Included in Other underlying loss is depreciation of £1.1m (2016: £1.2m), software amortisation of £0.3m
(2016: £0.4m) and share of post-tax loss from joint ventures and associates of £nil (2016: £0.1m).
The Other segment includes costs and other expenses at holding company and subsidiary levels, which are not directly attributable to the
operating activities of the Group’s business segments.
A reconciliation of underlying profit before tax to profit before tax is provided in Note 8.
Inter-segmental revenue is not material. No single customer contributed 10% or more to the Group’s revenue for both 2017 and 2016.
Non-current assets by geography are set out below:
Non-current assets
United Kingdom
Continental Europe
Asia Pacific
North America
Total non-current assets
2017
£m
2016
£m
131.1
96.7
87.6
169.8
485.2
125.3
45.1
87.4
169.7
427.5
Non-current assets include goodwill and intangible assets, plant, property and equipment, investments in joint ventures and associates and
retirement benefits. Available-for-sale investments, non-current receivables and deferred tax assets are not included.
Savills plc
Report and Accounts 2017
107
Financial statementsGovernance Strategic reportOverview 7. Operating profit
7.1 Operating profit
Operating profit is stated after charging/(crediting):
– Net foreign exchange losses/(gains) (excluding net losses on forward foreign exchange contracts)
– Net loss on forward foreign exchange contracts
– Provision for receivables impairment
– Restructuring costs*
– Acquisition-related costs**
– Operating lease costs
– Other income – dividend and investment income
Group
2017
£m
0.3
0.2
7.2
7.7
21.3
54.6
(0.9)
2016
£m
(1.4)
–
7.2
5.8
28.7
48.9
(2.5)
*
Restructuring costs include staff related costs of £5.1m (2016: £3.7m) and an onerous lease charge of £2.3m (2016: £nil) arising from integration activities in relation to the acquisitions of Smiths
Gore and GBR Phoenix Beard in the UK and Savills Investment Management’s acquisition of SEB.
** Refer to Note 8 for a further breakdown of acquisition-related costs.
7.2 Fees payable to the Company’s auditors, PricewaterhouseCoopers LLP, and its associates
Audit services
Fees payable to the Company’s auditors for the audit of parent Company
Fees payable to the Company’s auditors for the audit of the Company’s subsidiaries
Taxation advisory services
Audit-related assurance services
Other assurance services
Total
Group
2017
£m
0.2
1.6
1.8
–
0.2
0.6
0.8
2.6
2016
£m
0.2
1.4
1.6
0.2
0.1
0.3
0.6
2.2
108
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 8. Underlying profit before tax
Statutory profit before tax
Adjustments:
Amortisation of acquired intangible assets (excluding software)
Impairment of goodwill
Share-based payment adjustment
Net profit on disposal of available-for-sale investments and joint ventures
Restructuring costs
Acquisition-related costs
Underlying profit before tax
2017
£m
112.4
3.9
2.3
(1.2)
(5.9)
7.7
21.3
140.5
2016
£m
99.8
4.0
–
(2.4)
(0.1)
5.8
28.7
135.8
The adjustment for share-based payments relates to the impact of the accounting standard for share-based compensation. The annual
bonus is paid in a mixture of cash and deferred shares and the proportions can vary from one year to another. Under IFRS, the deferred
share element is amortised to the income statement over the vesting period whilst the cash element is expensed in the year. The adjustment
above addresses this by adding to or deducting from profit the difference between the IFRS 2 charge in relation to outstanding bonus-
related share awards and the estimated value of the current year bonus pool to be awarded in deferred shares. This adjustment is made to
align the underlying staff cost in the year with the revenue recognised in the same period.
An impairment charge of £2.3m was recognised in the year relating to the goodwill of the Group’s Swedish property management business.
Refer to Note 15 for further details.
Profit on disposal includes profits recognised in relation to the disposals of the Group’s available-for-sale investments, SPF Private Clients
Limited (£5.3m) and Cordea Savills German Retail Fund (£0.6m).
Restructuring costs includes costs of integration activities in relation to recent significant business acquisitions (primarily GBR Phoenix Beard
and Smiths Gore in the UK and Savills Investment Management’s acquisition of SEB).
Acquisition-related costs include £10.2m of provisions for the future payments in relation to the acquisition of Studley, Inc. which are expensed
through the income statement to reflect the requirement for the recipients to remain actively engaged in the business at the payment date.
Acquisition-related costs also include £1.4m for payments in relation to Savills Investment Management’s acquisition of Merchant Capital (Japan)
in May 2014, £2.1m of transaction related costs (primarily Aguirre Newman and Larry Smith) and £7.6m of provisions for future payments relating
to acquisitions in the UK (primarily GBR Phoenix Beard and Smiths Gore) and North America.
Savills plc
Report and Accounts 2017
109
Financial statementsGovernance Strategic reportOverview 2016
£m
7.7
5.9
13.6
1.9
0.4
2.4
18.3
2016
122
–
–
–
9. Employees
9.1 Employee benefits expense
Basic salaries and wages
Profit share and commissions
Wages and salaries
Social security costs
Other pension costs
Share-based payments
9.2 Staff numbers
The monthly average number of employees (including Directors) for the year was:
Group
Company
2017
£m
530.5
426.7
957.2
63.0
27.0
14.5
1,061.7
2016
£m
497.6
360.8
858.4
58.5
23.2
13.4
953.5
2017
£m
8.2
5.8
14.0
2.0
0.3
2.4
18.7
Group
Company
United Kingdom
Continental Europe
Asia Pacific
North America
2017
5,554
1,206
26,894
775
34,429
2016
5,136
1,103
25,446
676
32,361
2017
125
–
–
–
125
122
The average number of UK employees (including Directors) during the year included 96 employed under fixed-term and temporary contracts
(2016: 139).
9.3 Key management compensation
Key management
– Short-term employee benefits
– Post-employment benefits
– Share-based payments
Group
2017
£m
28.0
0.2
3.3
31.5
2016
£m
20.1
0.2
3.3
23.6
The key management of the Group for the year ended 31 December 2017 comprised Executive Directors and the GEB members. Details of
Directors’ remuneration is contained in the Remuneration report on pages 58 to 73.
During the year seven (2016: five) GEB members made aggregate gains totalling £3.5m (2016: £1.2m) on the exercise of options under PSP,
DSP and DSBP schemes (2016: DSBP schemes).
Retirement benefits under the defined benefit scheme are accruing for three (2016: three) GEB members and benefits are accruing under a
defined contribution scheme in Hong Kong for two (2016: two) GEB members.
110
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 10. Pension schemes
10.1 Defined contribution plans
The Group operates the Savills UK Group Personal Pension Plan, a defined contribution scheme, a number of defined contribution individual
pension plans and a Mandatory Provident Fund Scheme in Hong Kong, to which it contributes. The total pension charges in respect of these
plans were £26.9m (2016: £23.0m). The amount outstanding as at 31 December 2017 in relation to defined contribution schemes is £1.9m
(2016: £1.5m).
10.2 Defined benefit plan
The Group operates two defined benefit plans.
The Pension Plan of Savills (the ‘UK Plan’) is a UK-based plan which provided final salary pension benefits to some employees, but was
closed with regard to future service-based benefit accrual with effect from 31 March 2010. From 1 April 2010, pension benefits for former
employees of the UK Plan are provided through the Group’s defined contribution Personal Pension Plan.
The UK Plan is administered by a separate Trust that is legally separated from the Company. The board of the pension fund is composed of
six trustees. The board of the pension fund is required by law and by its Article of Association to act in the interest of the fund and of all
relevant stakeholders in the scheme. The board of the pension fund is responsible for the investment policy with regard to the assets of the
fund. The contributions are determined by an independent qualified actuary on the basis of triennial valuations.
A full actuarial valuation of the UK Plan was carried out as at 31 March 2016 and has been updated to 31 December 2017 by a qualified
independent actuary.
The Savills Fund Management GMBH Plan (the ‘SFM Plan’) is a Germany-based plan which provides final salary benefits to 17 active
employees and 97 former employees. The plan is closed to future service-based benefit accrual.
The SFM Plan is administered by an external Trust that is legally separated from the Company. The Trust Agreement requires the trustee to
maintain the plan assets in the interest of the beneficiaries of the plan and to fulfil their pension entitlements in the event of insolvency to the
extent of the plan assets held. The Investment Committee of the fund, advised by expert investment managers, is responsible for the
investment policy with regards to the assets of the fund. The contributions are determined based on the annual valuations of an independent
qualified actuary.
A full actuarial valuation of the SFM Plan was carried out as at 31 December 2017 by a qualified independent actuary.
The table below outlines the Group’s and Company’s defined benefit pension amounts in relation to the UK Plan:
Liability in the statement of financial position
Net interest cost included in finance costs
Actuarial (gain)/loss included in other comprehensive income
Group
Company
2017
£m
19.5
1.0
(13.3)
2016
£m
40.8
0.4
33.6
2017
£m
1.1
–
(0.7)
The amounts recognised in the statement of financial position in relation to the UK Plan are as follows:
Present value of funded obligations
Fair value of plan assets
Liability recognised in the statement of financial position
Group
Company
2017
£m
298.2
(278.7)
19.5
2016
£m
298.4
(257.6)
40.8
2017
£m
16.5
(15.4)
1.1
2016
£m
2.3
–
1.9
2016
£m
16.5
(14.2)
2.3
Savills plc
Report and Accounts 2017
111
Financial statementsGovernance Strategic reportOverview 10. Pension schemes continued
10.2 Defined benefit plan continued
The movement in the defined benefit obligation for the UK Plan over the year is as follows:
At 1 January 2017
Interest expense/(income)
Remeasurements:
– Return on plan assets, excluding amounts
included in interest income
– Loss from change in financial assumptions
– Gain from change in demographic assumptions
– Experience losses
Employer contributions
Benefit payments
At 31 December 2017
At 1 January 2016
Interest expense/(income)
Remeasurements:
– Return on plan assets, excluding amounts
included in interest income
– Loss from change in financial assumptions
– Gain from change in demographic assumptions
– Experience losses
Employer contributions
Benefit payments
At 31 December 2016
Present value
of obligation
£m
298.4
7.8
Group
Fair value of
plan assets
£m
(257.6)
(6.8)
Present value
of obligation
£m
16.5
0.4
Total
£m
40.8
1.0
Company
Fair value of
plan assets
£m
(14.2)
(0.4)
–
10.2
–
(0.2)
–
(18.0)
298.2
(23.3)
–
–
–
(9.0)
18.0
(278.7)
(23.3)
10.2
–
(0.2)
(9.0)
–
19.5
–
0.6
–
–
–
(1.0)
16.5
(1.3)
–
–
–
(0.5)
1.0
(15.4)
Present value
of obligation
£m
225.7
8.3
Group
Fair value of
plan assets
£m
(209.9)
(7.9)
Total
£m
15.8
0.4
Present value
of obligation
£m
12.5
0.4
Company
Fair value of
plan assets
£m
(11.6)
(0.4)
–
65.7
(0.8)
3.7
–
(4.2)
298.4
(35.0)
–
–
–
(9.0)
4.2
(257.6)
(35.0)
65.7
(0.8)
3.7
(9.0)
–
40.8
–
3.6
–
0.2
–
(0.2)
16.5
The table below outlines the Group’s defined benefit pension amounts in relation to the SFM Plan:
(Asset)/liability in the statement of financial position
Current service cost included in employee benefits expense
Actuarial (gain)/loss included in other comprehensive income
(1.9)
–
–
–
(0.5)
0.2
(14.2)
SFM Plan
2017
£m
(1.3)
0.1
(0.8)
Total
£m
2.3
–
(1.3)
0.6
–
–
(0.5)
–
1.1
Total
£m
0.9
–
(1.9)
3.6
–
0.2
(0.5)
–
2.3
2016
£m
0.4
0.2
1.6
Section 5.2 of the SFM Plan Trust Deed provides the Trustor (Savills Fund Management GmbH, Savills Fund Management Holding AG, and
Savills Investment Management (Germany) GmbH respectively) with an unconditional right to a refund of surplus assets assuming the full
settlement of plan liabilities in the event of a plan wind-up. Furthermore, in the ordinary course of business neither Trustor nor Trustee have
any rights to unilaterally wind up, or otherwise augment the benefits due to members of the scheme. Based on these rights, any net surplus
in the scheme is recognised in full.
The amounts recognised in the statement of financial position in relation to the SFM Plan are as follows:
Present value of funded obligations
Fair value of plan assets
(Asset)/liability recognised in the statement of financial position
112
Savills plc
Report and Accounts 2017
SFM Plan
2017
£m
13.9
(15.2)
(1.3)
2016
£m
14.4
(14.0)
0.4
Notes to the financial statements continuedYear ended 31 December 2017 The movement in the defined benefit liability/(asset) for the SFM Plan over the year is as follows:
At 1 January 2017
Current service cost
Interest expense/(income)
Remeasurements:
– Return on plan assets, excluding amounts included in interest income
– Gain from change in financial assumptions
– Experience gains
Transfers
Employer contributions
Benefit payments
Exchange movement
At 31 December 2017
At 1 January 2016
Current service cost
Interest expense/(income)
Remeasurements:
– Loss on plan assets, excluding amounts included in interest income
– Loss from change in financial assumptions
– Experience gains
Benefit payments
Exchange movement
At 31 December 2016
The significant actuarial assumptions were as follows:
As at 31 December
Expected rate of salary increases
Projection of social security contribution ceiling
Rate of increase to pensions in payment
– Pension promise before 1 January 1986
– Pension promise after 1 January 1986
– accrued before 6 April 1997
– accrued after 5 April 1997
– accrued after 5 April 2005
Rate of increase to pensions in deferment
– accrued before 6 April 2001
– accrued after 5 April 2001
– accrued after 5 April 2009
Discount rate
Inflation assumption
SFM Plan
Present value
of obligation
£m
Fair value
of plan assets
£m
Total £m
14.4
0.1
0.3
–
(0.5)
(0.1)
(0.3)
–
(0.4)
0.4
13.9
(14.0)
–
(0.3)
(0.2)
–
–
0.3
(0.9)
0.4
(0.5)
(15.2)
SFM Plan
Present value
of obligation
£m
Fair value
of plan assets
£m
10.9
0.2
0.3
–
1.6
(0.2)
(0.3)
1.9
14.4
(12.2)
–
(0.3)
0.2
–
–
0.3
(2.0)
(14.0)
0.4
0.1
–
(0.2)
(0.5)
(0.1)
–
(0.9)
–
(0.1)
(1.3)
Total £m
(1.3)
0.2
–
0.2
1.6
(0.2)
–
(0.1)
0.4
SFM Plan
UK Plan
2017
2.50%
2.25%
2.25%
1.75%
–
–
–
–
–
–
2016
2.50%
2.25%
2.25%
1.75%
–
–
–
–
–
–
2.06%
1.75%
1.84%
1.75%
2017
3.25%
2016
3.25%
–
–
–
3.00%
3.30%
2.30%
5.00%
2.30%
2.30%
2.50%
3.40%
–
–
–
3.00%
3.40%
2.30%
5.00%
2.40%
2.40%
2.70%
3.50%
Savills plc
Report and Accounts 2017
113
Financial statementsGovernance Strategic reportOverview 10. Pension schemes continued
10.2 Defined benefit plan continued
Assumptions regarding future mortality are set based on actuarial advice in accordance with published statistics and experience. These
assumptions translate into an average life expectancy in years for a pensioner retiring at age 60:
Retiring at the end of the reporting year
– Male
– Female
Retiring 20 years after the end of the reporting year
– Male
– Female
SFM Plan
UK Plan
2017
83.9
88.4
86.6
91.0
2016
84.1
88.2
86.5
90.8
2017
88.8
90.3
91.0
92.7
2016
88.7
90.3
90.9
92.7
The sensitivity of the defined benefit obligation to changes in the principal assumptions is:
0.1% increase in discount rates
0.1% increase in inflation rate
0.1% increase in salary increase rate
1 year increase in life expectancy
SFM Plan
UK Plan
Impact on present value of
Impact on present value of
scheme obligations £m
scheme obligations £m
(0.2)
0.2
–
0.6
(7.1)
4.0
0.7
11.6
The sensitivity analysis presented above may not be representative of the actual change in the defined benefit obligation as it is unlikely that
the change in assumptions would occur in isolation of one another as some of the assumptions may be correlated.
Furthermore, in presenting the above sensitivity analysis, the present value of the defined benefit obligation has been calculated using the
projected unit credit method at the end of the reporting period, which is the same as that applied in calculating the defined benefit obligation
liability recognised in the statement of financial position.
Plan assets are comprised as follows:
Equity instruments
Investment funds
Liability-driven investment (LDI)
Bonds
Cash and cash equivalents
SFM Plan
UK Plan
2017
2016
2017
2016
£m
–
%
–
£m
–
%
–
15.2
100%
14.0
100%
–
–
–
–
–
–
–
–
–
–
–
–
£m
92.4
30.9
82.0
72.6
0.8
%
33%
11%
29%
26%
1%
£m
98.1
67.8
15.8
74.9
1.0
%
38%
26%
6%
29%
1%
Total
15.2
100%
14.0
100%
278.7
100%
257.6
100%
No Plan assets are the Group’s own financial instruments or property occupied or used by the Group. The fair values of the above equity and
debt instruments are determined based on quoted market prices in active markets. Although the UK Plan does not invest directly in the
Group’s financial instruments, it does invest in passive equity funds, so will have some exposure to FTSE All Share, hence indirectly to the
Savills share price.
114
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 Through the defined benefit plans, the Group is exposed to a number of risks, the most significant of which are detailed below:
(a) Asset volatility
The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform this yield, this
will create a deficit. The Plan holds a significant proportion of equities and investment funds, which are expected to outperform corporate
bonds in the long-term while providing volatility and risk in the short term.
(b) Changes in bond yields
A decrease in corporate bond yields will increase the Plan’s liabilities, although this will be partially offset by an increase in the value of the
Plan’s bond holdings.
(c) Inflation risk
Higher inflation will lead to higher liabilities. The majority of the Plan’s assets are either unaffected by or are loosely correlated with inflation,
meaning that an increase in inflation will also increase the deficit.
(d) Life expectancy
The majority of the Plan’s obligations are to provide benefits for the life of the member, so increases in life expectancy will result in an
increase in the Plan’s liabilities.
Expected contributions to post-employment benefit plans for the year ending 31 December 2018 are £9.0m. The Company expects to
contribute £0.5m.
The weighted average duration of the defined benefit obligation is 22 years for the UK Plan and 18 years for the SFM Plan.
Expected maturity analysis of the undiscounted pension benefits:
Less than
a year
£m
Between
1–2 years
£m
Between
2–5 years
£m
3.8
0.4
4.6
0.5
16.3
1.4
At 31 December 2017
Pension benefit payments
– UK Plan
– SFM Plan
11. Finance income and costs
Bank interest receivable
Fair value gain
Finance income
Bank interest payable
Unwinding of discounts on liabilities
Net interest on defined benefit pension obligation
Fair value loss
Finance costs
Net finance cost
Over
5 years
£m
594.4
19.1
Group
2017
£m
2.7
0.1
2.8
(2.1)
(0.7)
(1.0)
(0.3)
(4.1)
(1.3)
Total
£m
619.1
21.4
2016
£m
1.4
0.2
1.6
(1.3)
(0.6)
(0.4)
(0.1)
(2.4)
(0.8)
Savills plc
Report and Accounts 2017
115
Financial statementsGovernance Strategic reportOverview 12. Income tax expense
Analysis of tax expense for the year:
Current tax
United Kingdom:
Corporation tax on profits for the year
Adjustment in respect of prior years
Overseas tax
Adjustment in respect of prior years
Total current tax
Deferred tax
Representing:
United Kingdom
Effect of change in UK tax rate on deferred tax
Overseas tax
Effect of change in overseas tax rate on deferred tax
Adjustment in respect of prior years
Total deferred tax (Note 18)
Income tax expense
Group
2017
£m
14.9
0.5
15.4
23.9
(0.7)
38.6
(3.3)
(0.1)
(4.7)
1.0
(0.2)
(7.3)
31.3
2016
£m
13.0
1.1
14.1
17.5
(1.4)
30.2
(1.2)
(0.2)
5.2
–
(1.9)
1.9
32.1
The tax on the Group’s profit before income tax differs from the theoretical amount that would arise using the UK weighted average tax rate
of 19.25% (2016: 20%) applicable to profits of the consolidated entities as follows:
Profit before income tax
Tax on profit at 19.25% (2016: 20%)
Effects of:
Adjustment in respect of prior years
Adjustments in respect of foreign tax rates
Utilisation of previously unprovided tax losses
Expenses and other charges not deductible for tax purposes
Tax on joint ventures and associates
Effect of change in tax rates on deferred tax
Income tax expense
Group
2017
£m
112.4
21.6
(0.5)
2.2
(0.4)
9.7
(2.3)
1.0
31.3
2016
£m
99.8
20.0
(2.2)
2.8
(0.7)
14.1
(1.7)
(0.2)
32.1
The effective tax rate of the Group for the year ended 31 December 2017 is 27.8% (2016: 32.1%), which is higher (2016: higher) than the UK
weighted average applicable rate.
The UK corporate tax rate is to reduce to 17% on 1 April 2020. Deferred tax has been determined using the applicable effective future tax
rate that will apply in the expected period of utilisation of the deferred tax asset or liability.
116
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 The tax (charged)/credited to other comprehensive income is as follows:
Group
Company
Tax on items that will not be reclassified to profit or loss
Deferred tax (charge)/credit on pension actuarial (gains)/losses
Tax on items that may subsequently be reclassified to profit or loss
Current tax credit/(charge) on employee benefits
Current tax (charge)/credit on foreign exchange reserves
Current tax credit on retirement benefits
Deferred tax on additional pension contributions
Deferred tax on pension – effect of tax rate change
Deferred tax on employee benefits
Deferred tax credit on revaluations of available-for-sale investments
Deferred tax credit/(charge) on foreign exchange reserves
Tax on items relating to components of other comprehensive income
13. Dividends – Group and Company
Amounts recognised as distribution to equity holders in the year:
Ordinary final dividend of 10.1p per share (2015: 8.0p)
Supplemental interim dividend of 14.5p per share (2015: 14.0p)
Interim dividend of 4.65p per share (2016: 4.4p)
2017
£m
(2.8)
(2.8)
3.1
(0.3)
1.7
(1.7)
0.1
(0.8)
0.1
0.1
2.3
(0.5)
2016
£m
7.2
7.2
2.5
0.1
1.8
(1.8)
(0.3)
(2.9)
0.2
(0.3)
(0.7)
6.5
2017
£m
(0.1)
(0.1)
0.5
–
0.1
(0.2)
–
–
–
–
0.4
0.3
2017
£m
13.5
19.5
6.3
39.3
2016
£m
0.4
0.4
(0.1)
–
0.1
(0.1)
–
(0.3)
–
–
(0.2)
0.2
2016
£m
10.7
18.8
5.9
35.4
In addition, the Group paid £0.9m (2016: £0.9m) of dividends to non-controlling interests.
The Board recommends a final dividend of 10.45p (net) per ordinary share (amounting to £14.3m) is paid, alongside the supplemental interim
dividend of 15.1p per ordinary share (amounting to £20.6m), to be paid on 14 May 2018 to shareholders on the register at 13 April 2018.
These financial statements do not reflect this dividend payable.
Under the terms of the Savills plc 1992 Employee Benefit Trust (the ‘EBT’), the Trustees have waived their dividend entitlement for all shares
held by the Trust.
The total paid and recommended ordinary and supplemental dividends for the 2017 financial year comprises an aggregate distribution of
30.2p per ordinary share (2016: 29.0p per ordinary share).
Savills plc
Report and Accounts 2017
117
Financial statementsGovernance Strategic reportOverview 14. Earnings per share
14.1 Basic and diluted earnings per share
Basic earnings per share (‘EPS’) are based on the profit attributable to owners of the Company and the weighted average number of
ordinary shares in issue during the year, excluding the shares held by the EBT, 4,819,684 shares (2016: 5,706,307 shares) and the Rabbi
Trust, 800,000 shares (2016: nil).
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of dilutive
potential ordinary shares, being the share options granted to employees where the exercise price is less than the average market price
of the Company’s ordinary shares during the year and where performance conditions have been met.
The earnings and the shares used in the calculations are as follows:
Basic earnings per share
Effect of additional shares issuable under option
Diluted earnings per share
2017
Earnings
£m
80.1
–
80.1
2017
Shares
million
136.2
3.0
139.2
2017
EPS
pence
58.8
(1.3)
57.5
2016
Earnings
£m
66.9
–
66.9
2016
Shares
million
137.2
3.0
140.2
2016
EPS
pence
48.8
(1.1)
47.7
14.2 Underlying basic and diluted earnings per share
Excludes profit on disposals, share-based payment adjustment, impairment and amortisation of goodwill and intangible assets (excluding
software), impairment of available-for-sale investment and associate undertaking and restructuring costs.
Basic earnings per share
Amortisation of acquired intangible assets
(excluding software) after tax
Impairment of goodwill after tax
Share-based payment adjustment after tax
Net profit on disposal of available-for-sale
investments and joint ventures
Restructuring costs after tax
Acquisition-related costs after tax
Underlying basic earnings per share
Effect of additional shares issuable under option
Underlying diluted earnings per share
2017
Earnings
£m
80.1
2017
Shares
million
136.2
2017
EPS
pence
58.8
2016
Earnings
£m
66.9
2016
Shares
million
137.2
2.1
2.3
(1.0)
(5.9)
6.0
19.6
103.2
–
103.2
–
–
–
–
–
–
136.2
3.0
139.2
1.5
1.7
(0.7)
(4.3)
4.4
14.4
75.8
(1.7)
74.1
2.2
–
(1.8)
–
4.7
27.5
99.5
–
99.5
–
–
–
–
–
–
137.2
3.0
140.2
2016
EPS
pence
48.8
1.6
–
(1.3)
–
3.4
20.0
72.5
(1.5)
71.0
The Directors regard the adjustments on the previous table necessary to give a fair picture of the underlying results of the Group for the year.
The adjustment for share-based payment relates to the impact of the accounting standard for share-based compensation.
The annual bonus is paid in a mixture of cash and deferred shares and the proportions can vary from one year to another. Under IFRS the
deferred share element is amortised to the income statement over the vesting period whilst the cash element is expensed in the year. The
adjustment above addresses this by adding to or deducting from profit the difference between the IFRS 2 charge and the effective value of
the annual share award in order to better match the underlying staff costs in the year with the revenue recognised in the same period.
The gross amounts of the above adjustments (Note 8) are amortisation of acquired intangible assets (excluding software) £3.9m (2016:
£4.0m), impairment of goodwill of £2.3m (2016: £nil), share-based payment adjustment £1.2m credit (2016: £2.4m credit), restructuring costs
of £7.7m (2016: £5.8m), net profit on disposals of £5.9m (2016: £0.1m), acquisition-related costs of £21.3m (2016: £28.7m).
118
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 15. Goodwill and intangible assets
Cost
At 1 January 2017
Additions through business combinations
(Note 17.4)
Other additions
Disposals
Exchange movement
At 31 December 2017
Accumulated amortisation and impairment
At 1 January 2017
Amortisation charge for the year
Impairment charge
Disposals
Exchange movement
At 31 December 2017
Net book value
At 31 December 2017
Group
Company
Customer/
business
relationships
£m
Investment
and property
management
contracts
£m
Goodwill
£m
Order
backlogs
£m
Brands
£m
Computer
software
£m
Total
£m
Total
£m
358.1
22.6
26.3
6.8
–
18.8
432.6
57.8
–
–
(15.2)
400.7
48.3
–
2.3
–
(1.2)
49.4
1.5
–
–
(0.5)
23.6
19.9
0.3
–
–
(0.4)
19.8
0.9
0.3
1.3
–
–
(0.1)
27.1
10.3
2.4
–
–
0.1
12.8
–
–
(0.6)
6.5
3.9
1.2
–
–
(0.4)
4.7
–
8.8
(2.9)
(0.3)
61.8
8.8
(2.9)
(16.7)
–
–
–
1.3
24.4
483.6
–
–
–
–
–
–
11.2
3.1
–
(2.8)
(0.3)
11.2
93.6
7.0
2.3
(2.8)
(2.2)
97.9
4.4
–
1.6
(0.2)
–
5.8
3.0
0.3
–
(0.2)
–
3.1
351.3
3.8
14.3
1.8
1.3
13.2
385.7
2.7
The carrying amount of intangible assets with indefinite useful lives totals £3.2m as at 31 December 2017 (2016: £3.4m), which consists of
investment management contracts in relation to open-ended funds.
All intangible amortisation charges in the year are disclosed on the face of the income statement.
The Company’s intangible assets consist of computer software only.
Cost
At 1 January 2016
Additions through business combinations
Other additions
Disposals
Reclassification from property, plant and equipment
(Note 16)
Exchange movement
At 31 December 2016
Accumulated amortisation and impairment
At 1 January 2016
Amortisation charge for the year
Disposals
Exchange movement
At 31 December 2016
Net book value
At 31 December 2016
Goodwill
£m
311.6
5.3
–
–
–
41.2
358.1
41.7
–
–
6.6
48.3
309.8
Group
Investment
and property
management
contracts
£m
Customer/
business
relationships
£m
Order
backlog
£m
Computer
software
£m
Total
£m
20.7
–
–
–
–
1.9
22.6
17.3
0.9
–
1.7
19.9
2.7
21.2
3.3
–
–
–
1.8
26.3
7.2
1.8
–
1.3
10.3
16.0
5.5
0.1
–
–
–
1.2
6.8
2.1
1.3
–
0.5
3.9
2.9
16.6
375.6
–
4.7
(4.7)
0.7
1.5
18.8
12.0
2.9
(4.7)
1.0
11.2
8.7
4.7
(4.7)
0.7
47.6
432.6
80.3
6.9
(4.7)
11.1
93.6
Company
Total
£m
3.9
–
1.1
(0.8)
0.2
–
4.4
3.4
0.4
(0.8)
–
3.0
7.6
339.0
1.4
Savills plc
Report and Accounts 2017
119
Financial statementsGovernance Strategic reportOverview 15. Goodwill and intangible assets continued
During the year, goodwill and intangible assets were tested for impairment in accordance with IAS 36. Goodwill and intangible assets are
allocated to the Group’s cash-generating units (‘CGUs’) identified according to country of operation and business segment. In most cases,
the CGU is an individual subsidiary or operation and these have been separately assessed and tested. A segment-level summary of the
allocation of goodwill and indefinite useful life intangible assets is presented below:
2017
United Kingdom
Continental Europe
Asia Pacific
North America
Total goodwill and indefinite life intangible assets
2016
United Kingdom
Continental Europe
Asia Pacific
North America
Total goodwill and indefinite life intangible assets
15.1 Method of impairment testing
Transaction
Advisory
£m
Consultancy
£m
Property and
Facilities
Management
£m
Investment
Management
£m
26.0
59.6
15.1
147.4
248.1
9.3
16.2
4.7
–
30.2
27.4
8.7
30.6
–
66.7
2.0
5.2
2.3
–
9.5
Transaction
Advisory
£m
Consultancy
£m
Property
and Facilities
Management
£m
Investment
Management
£m
26.0
32.6
15.8
152.2
226.6
9.3
–
5.0
–
14.3
26.2
6.0
30.6
–
62.8
2.0
5.1
2.4
–
9.5
Total
£m
64.7
89.7
52.7
147.4
354.5
Total
£m
63.5
43.7
53.8
152.2
313.2
All recoverable amounts were determined based on value-in-use calculations. These calculations use discounted cash flow projections
based on financial budgets and strategic plans approved by management covering a five-year period. Cash flows beyond the five-year
period are extrapolated using a terminal value. There was a £2.3m impairment charge recognised against goodwill and intangible assets
arising from the annual impairment tests conducted (2016: £nil).
15.2 Assumptions
(a) Market conditions
In general, the models used assume that the property markets in which the Group operates (which drive its revenue growth) will remain stable.
(b) Discount rate
The discount rate applied to cash flows of each CGU is based on the Group’s Weighted Average Cost of Capital (‘WACC’). WACC is the
average cost of sources of financing (debt and equity), each of which is weighted by its respective use.
Key inputs to the WACC calculation are the risk-free rate, the equity market risk premium (the return that Savills shares provide over the
risk-free rate), beta (reflecting the risk of the Group relative to the market as a whole) and the Group’s borrowing rates.
Group WACC was adjusted for risk relative to the country in which the assets were located. The risk-adjusted discount range of rates used in
each region for impairment testing are as follows:
2017
Discount rate range
2016
Discount rate range
10.0%
10.0%
10.0%
10.0%
11.2%–18.1%
11.6%–18.1%
10.0%
10.0%
United Kingdom
Continental Europe
Asia Pacific
North America
120
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 (c) Long-term growth rate
To forecast beyond the five years covered by detailed forecasts, a terminal value was calculated, using average long-term growth rates.
The rates are based on the long-term growth rate in the countries in which the Group operates. The long-term growth rates used in each
region for impairment testing are as follows:
United Kingdom
Continental Europe
Asia Pacific
North America
15.3 Impairment charge
2017
Long-term growth
rate range
2016
Long-term growth
rate range
2.0%
1.4%–2.6%
0.8%–5.7%
2.3%
1.5%
1.5%
0.8%–5.7%
2.3%
Following impairment testing, a £2.3m charge has been recognised through the income statement (2016: £nil) relating to goodwill on the
Group’s Swedish property management business. The Swedish business operates under the European transactional and property
management segments. Key assumptions of the discounted cash flow analysis are consistent with the above assumptions in Note 15.2.
The residual value of goodwill relating to the Group’s Swedish business is not material.
15.4 Sensitivity to changes in assumptions
The level of impairment is a reflection of best estimates in arriving at value-in-use, future growth rates and the discount rate applied to cash
flow projections. Nonetheless, there are no CGUs for which management considers a reasonable possible change in a key assumption
would give rise to an impairment apart from the Group’s Swedish business, which was partially impaired during the year.
Future impairments on goodwill and intangible assets relating to any of the Group’s investments may be impacted by the following factors:
Market conditions – the expectations for future market conditions are key assumptions in the determination of the cash flow projections. For
the purposes of the impairment tests, management expects the markets to remain stable.
Cost base – the cost base assumptions reflect 2017’s costs with limited growth in the fixed cost base going forward. Commissions and profit
shares are correlated to the Group’s revenue and profits and the percentage payout. These are assumed to be consistent with existing rates.
16. Property, plant and equipment
Group
Cost
At 1 January 2017
Additions through business combinations (Note 17.4)
Additions
Disposals
Exchange movement
At 31 December 2017
Accumulated depreciation and impairment
At 1 January 2017
Charge for the year
Disposals
Exchange movement
At 31 December 2017
Net book value
At 31 December 2017
Freehold
property
£m
Short leasehold
property
£m
Equipment and
motor vehicles
£m
0.1
–
–
–
–
0.1
–
–
–
–
–
55.4
–
15.8
(0.4)
(1.1)
69.7
18.5
5.5
(0.4)
(0.1)
23.5
60.8
0.4
7.3
(8.4)
(1.8)
58.3
38.1
8.0
(8.4)
(1.3)
36.4
Total
£m
116.3
0.4
23.1
(8.8)
(2.9)
128.1
56.6
13.5
(8.8)
(1.4)
59.9
0.1
46.2
21.9
68.2
The Directors consider that the fair value of property, plant and equipment approximates carrying value.
Savills plc
Report and Accounts 2017
121
Financial statementsGovernance Strategic reportOverview 16. Property, plant and equipment continued
Group
Cost
At 1 January 2016
Additions through business combinations
Additions
Disposals
Reclassification to intangible assets (Note 15)
Exchange movement
At 31 December 2016
Accumulated depreciation and impairment
At 1 January 2016
Charge for the year
Disposals
Exchange movement
At 31 December 2016
Net book value
At 31 December 2016
Company
Cost
At 1 January 2017
Additions
Disposals
At 31 December 2017
Accumulated depreciation and impairment
At 1 January 2017
Charge for the year
Disposals
At 31 December 2017
Net book value
At 31 December 2017
Company
Cost
At 1 January 2016
Additions
Disposals
Reclassification to intangible assets (Note 15)
At 31 December 2016
Accumulated depreciation and impairment
At 1 January 2016
Charge for the year
Disposals
At 31 December 2016
Net book value
At 31 December 2016
122
Savills plc
Report and Accounts 2017
Freehold
property
£m
Short leasehold
property
£m
Equipment and
motor vehicles
£m
0.1
–
–
–
–
–
0.1
–
–
–
–
–
50.0
–
4.4
(0.4)
(0.5)
1.9
55.4
13.5
4.8
(0.4)
0.6
18.5
54.9
0.1
8.4
(8.8)
(0.2)
6.4
60.8
34.5
7.9
(8.6)
4.3
38.1
Total
£m
105.0
0.1
12.8
(9.2)
(0.7)
8.3
116.3
48.0
12.7
(9.0)
4.9
56.6
0.1
36.9
22.7
59.7
Freehold
property
£m
Equipment and
motor vehicles
£m
0.1
–
–
0.1
–
–
–
–
0.1
6.6
0.9
(0.3)
7.2
4.8
1.1
(0.3)
5.6
1.6
Freehold
property
£m
Equipment and
motor vehicles
£m
0.1
–
–
–
0.1
–
–
–
–
0.1
8.1
0.5
(1.8)
(0.2)
6.6
5.4
1.2
(1.8)
4.8
1.8
Total
£m
6.7
0.9
(0.3)
7.3
4.8
1.1
(0.3)
5.6
1.7
Total
£m
8.2
0.5
(1.8)
(0.2)
6.7
5.4
1.2
(1.8)
4.8
1.9
Notes to the financial statements continuedYear ended 31 December 2017 17. Investments and transactions
17.1 Group – Investments in joint ventures and associates
Cost or valuation
At 1 January 2017
Additions
Disposals
Loans advanced
Exchange movement
At 31 December 2017
Share of profit
At 1 January 2017
Group’s share of profit from continuing operations
Dividends received
Exchange movement
At 31 December 2017
Total
At 31 December 2017
Cost or valuation
At 1 January 2016
Additions
Disposals
Loans repaid
Exchange movement
At 31 December 2016
Share of profit
At 1 January 2016
Group’s share of profit from continuing operations
Dividends received
Exchange movement
At 31 December 2016
Total
At 31 December 2016
Joint ventures
Associates
Investment
£m
Loans
£m
Total
£m
Investment
£m
Loans
£m
9.3
0.3
(0.1)
–
(0.3)
9.2
10.4
6.2
(5.3)
(1.0)
10.3
–
–
–
0.6
–
0.6
–
–
–
–
–
9.3
0.3
(0.1)
0.6
(0.3)
9.8
10.4
6.2
(5.3)
(1.0)
10.3
2.1
0.3
(0.2)
–
(0.1)
2.1
6.8
3.7
(3.0)
–
7.5
0.3
–
–
–
–
0.3
–
–
–
–
–
Total
£m
2.4
0.3
(0.2)
–
(0.1)
2.4
6.8
3.7
(3.0)
–
7.5
19.5
0.6
20.1
9.6
0.3
9.9
Joint ventures
Associates
Investment
£m
Loans
£m
Total
£m
Investment
£m
Goodwill
£m
8.9
–
(0.7)
–
1.1
9.3
8.2
5.9
(5.6)
1.9
10.4
19.7
1.2
–
–
(1.2)
–
–
–
–
–
–
–
–
10.1
–
(0.7)
(1.2)
1.1
9.3
8.2
5.9
(5.6)
1.9
10.4
19.7
2.4
0.2
(0.8)
–
0.3
2.1
5.7
2.0
(1.9)
1.0
6.8
8.9
0.3
–
–
–
–
0.3
–
–
–
–
–
0.3
Total
£m
2.7
0.2
(0.8)
–
0.3
2.4
5.7
2.0
(1.9)
1.0
6.8
9.2
The Group does not have any joint ventures or associates that are individually material.
The joint ventures and associates have no significant liabilities to which the Group is exposed, nor has the Group any significant contingent
liabilities or capital commitments in relation to its interests in the joint ventures and associates.
Savills plc
Report and Accounts 2017
123
Financial statementsGovernance Strategic reportOverview Group
2017
£m
20.8
8.8
(5.3)
0.1
0.3
(0.1)
24.6
Group
2017
£m
14.2
2.3
0.1
1.9
0.4
5.7
2016
£m
13.2
12.4
(5.5)
–
(0.6)
1.3
20.8
2016
£m
10.0
3.0
–
2.4
0.4
5.0
24.6
20.8
Group
2017
£m
16.5
2.0
6.1
24.6
2016
£m
13.0
2.4
5.4
20.8
17. Investments and transactions continued
17.2 Group – Available-for-sale investments
At 1 January
Additions
Disposals
Additions through business combinations (Note 17.4)
Net fair value gain/(loss) transferred to other comprehensive income
Exchange movement
At 31 December
Available-for-sale investments comprise the following:
Unlisted securities
UK – equity securities
UK – investment funds
European – equity securities
European – investment funds
Asia Pacific – equity securities
Asia Pacific – investment funds
Available-for-sale investments are denominated in the following currencies:
Sterling
Euro
Other
124
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 At 31 December 2017, the Group held the following principal available-for-sale investments:
Investment
YOPA Property Ltd (registered in England and Wales)*
Vucity Ltd (registered in England and Wales)*
Proportunity Ltd (registered in England and Wales)
Cordea Savills Dawn Syndication LP (registered in England and Wales)
Serviced Land No. 2 LP (registered in England and Wales)
Cordea Savills Nordic Retail Fund (registered in Luxembourg)
Cordea Savills UK Property Ventures No. 1 LP (registered in England and Wales)
Prime London Residential Development Fund (registered in England and Wales)
Prime London Residential Development Fund II (registered in England and Wales)
Aomi Project TMK (registered in Japan)
Greater Tokyo Office Fund (registered in Jersey)
Pegaxis Pte Ltd (registered in Singapore)
Holding
22.80%
33.33%
5.11%
3.70%
1.97%
11.33%
4.17%
0.86%
1.12%
3.50%
3.25%
Principal activity
Digital hybrid agency
Digital architectural design and planning
Digital real estate valuation
Investment property fund
UK land investment fund
Retail investment property fund
UK land investment fund
London residential development fund
London residential development fund
Real estate investment
Investment property fund
15.00%
Digital property management services
*
The Group holds more than 20% of the equity interest in YOPA Property Ltd and Vucity Ltd, however does not have the power to participate in the financial and operational decisions of these
entities, does not have representation on the Board of Directors of these entities and does not participate in major policy-making processes of the entities. As a result, the Group’s investments
in YOPA Property Ltd and Vucity Ltd are treated as available-for-sale investments.
The Group recognised £nil profit on disposal in the income statement in relation to the part disposal of its investment in YOPA Property Ltd in
September 2017, with its shareholding as at 31 December 2017 now at 22.80% (2016: 30.28%), £0.6m profit on disposal of its 1.94%
shareholding in the Cordea Savills German Retail Fund and £5.3m profit on disposal of its 19.99% shareholding in SPF Private Clients
Limited. Disposals in the year also included capital distributions from the Group’s investments in the Cordea Savills Nordic Retail Fund,
Cordea Savills UK Property Ventures No. 1 LP and Serviced Land No. 2 LP
The Group does not exert significant influence over these investments, and therefore does not equity account for these investments. These
shareholdings are treated as trade investments and held at fair value.
The fair value of unlisted securities is based on underlying asset values and price earnings models. The fair value of investment funds is
determined by the Fund Manager’s annual audited financial statements.
At 31 December 2017 the Group held conditional commitments to co-invest £0.3m (2016: £0.7m) in the Greater Tokyo Office Fund, £0.2m
(2016: £0.2m) in the Cordea Savills UK Property Ventures Fund No. 1 LP, and £0.1m in the Prime London Residential Development Fund II
(2016: £0.2m).
17.3 Company – Investments in subsidiaries
Cost
At 1 January 2016
Loans advanced
At 31 December 2016
Loans advanced
Loans repaid
At 31 December 2017
Refer to Note 33 for a full list of the Group’s subsidiaries.
Shares in Group
undertaking
£m
Loans to Group
undertakings
£m
57.2
–
57.2
–
–
57.2
52.5
9.0
61.5
8.6
(3.6)
66.5
Total
£m
109.7
9.0
118.7
8.6
(3.6)
123.7
Savills plc
Report and Accounts 2017
125
Financial statementsGovernance Strategic reportOverview 17. Investments and transactions continued
17.4 Acquisitions 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:
Property, plant and equipment
Intangible assets
Deferred tax assets
Available-for-sale investments
Current assets:
Total assets
Current liabilities:
Trade and other receivables
Current income tax receivable
Cash and cash equivalents
Borrowings
Trade and other payables
Current income tax liability
Employment benefit provision
Provisions
Non current trade and other payables
Non current employment benefit provision
Deferred income tax liabilities
Net assets acquired
Goodwill
Purchase consideration
Consideration satisfied by:
Cash paid
Deferred consideration owing at the reporting date
Provisional fair value to the Group
Aguirre
Newman
£m
Cresa
Partners
Orange
County
£m
Larry Smith
£m
Other
£m
0.3
3.4
0.1
0.1
25.1
0.1
19.8
48.9
0.1
31.9
0.6
–
–
0.9
–
0.8
14.6
40.5
55.1
48.2
6.9
55.1
0.1
–
–
–
1.1
–
–
1.2
–
0.8
–
–
–
–
–
–
0.4
9.2
9.6
4.7
4.9
9.6
–
0.2
–
–
1.6
–
1.1
2.9
–
0.6
–
0.7
–
–
0.5
–
1.1
6.0
7.1
6.0
1.1
7.1
–
0.4
–
–
0.6
–
0.6
1.6
–
0.4
0.2
–
0.1
–
–
0.1
0.8
2.1
2.9
2.3
0.6
2.9
Total
£m
0.4
4.0
0.1
0.1
28.4
0.1
21.5
54.6
0.1
33.7
0.8
0.7
0.1
0.9
0.5
0.9
16.9
57.8
74.7
61.2
13.5
74.7
(a) Aguirre Newman SA (‘Aguirre Newman’)
On 29 December 2017 the Group acquired 100% of the equity of Aguirre Newman SA, the leading Spanish independent real estate advisory
business. The business provides agency, investment, management, architectural, consultancy, valuation, planning, corporate finance and
asset management services. Combined with the Group’s existing Spanish business, the Group will benefit from a leading market position
across all sectors in Spain and Portugal.
Total acquisition consideration has provisionally been determined at £55.1m, with £48.2m settled in cash on completion and the remainder
relating to the discounted value of deferred consideration of £6.9m payable in five equal annual instalments from December 2018.
A further £15.5m is payable in five equal annual instalments from December 2018, subject to the executive shareholders remaining actively
engaged in the business over a period of up to five years. As required by IFRS 3 (revised) these payments will be expensed to the income
statement over the relevant period of active engagement.
Transaction costs of £1.4m were also expensed as incurred to the income statement.
Goodwill of £40.5m and intangible assets of £3.4m relating to brand, customer relationships, customer contracts and order backlog have
been provisionally determined. Goodwill is attributed to the experience, reputation and expertise of the fee-earners and is not expected to
be deductible for tax purposes.
The business was acquired at the end of the financial year, and consequently did not contribute to the Group's revenues or underlying
profits. Had the acquisition been made at the beginning of the financial year, the business would have contributed £68.4m of revenues.
The fair value of current trade and other receivables is £25.1m and includes trade receivables with a fair value of £23.6m. The gross
contractual amount for trade receivables is £24.7m, of which £1.1m is expected to be uncollectible.
126
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017
(b) Cresa Partners Orange County, LP (‘Cresa Partners Orange County’)
On 7 February 2017 the Group acquired 100% of the equity interest in Cresa Partners Orange County, LP, expanding the Group’s
commercial real estate presence in the region.
Total acquisition consideration has provisionally been determined at £9.6m, £4.7m of which was settled on completion and the remainder
relating to the discounted value of deferred consideration of up to £4.9m (payable in February 2020 and 2021), subject to achievement of
certain income targets.
A further £4.7m is payable to certain key staff and is subject to them remaining actively engaged in the business over a period of up to six
years; £3.2m was paid during Q1 2017 and the remainder is payable in September 2018. As required by IFRS 3 (revised) these payments will
be expensed to the income statement over the relevant period of active engagement.
Goodwill of £9.2m 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.
The acquired operations were immediately integrated within the existing business. Consequently, the revenues and profits contributed by the
acquired business cannot be separately identified, however are not considered to be material for the Group.
The fair value of current trade and other receivables is £1.1m and includes trade receivables with a fair value of £0.3m, of which £nil is
expected to be uncollectible.
(c) Larry Smith srl (‘Larry Smith’)
On 1 July 2017 the Group acquired 100% of the equity interest in Larry Smith srl, a leading shopping centre and out of town management
and leasing business based in Italy.
Total acquisition consideration has provisionally been determined at £7.1m, £6.0m of which was settled on completion and the remainder
relating to deferred consideration of up to £1.1m (payable in July 2019 and 2020), subject to achievement of certain income targets.
A further £1.2m is payable in July 2019 and 2020 upon achievement of certain income targets and is deemed to be linked to continued
active engagement with the business. Therefore, as required by IFRS 3 (revised) these payments will be expensed to the income statement
over the relevant period of active engagement.
Transaction costs of £0.5m were also expensed as incurred to the income statement.
Goodwill of £6.0m and intangible assets of £0.2m relating to existing management contracts have been provisionally determined. Goodwill is
attributable to the experience and expertise of key staff and is not expected to be deductible for tax purposes.
The acquired business contributed revenue of £2.7m and underlying operating losses of £0.1m to the Group for the period from acquisition.
Had the acquisition been made at the beginning of the financial year, revenue would have been £5.8m and underlying operating profits
would have been £0.2m.
The fair value of current trade and other receivables is £1.6m and includes trade receivables with a fair value of £1.4m. The gross contractual
amount for trade receivables is £1.5m, of which £0.1m is expected to be uncollectible.
(d) Other acquisitions
During the first half of the year, the Group acquired 100% of the equity of Granville Residential Letting Ltd and Montagu Evans Channel
Islands Ltd, the former a residential lettings business based in the South East of the UK and the latter a commercial real estate service
provider in Guernsey, expanding the Savills brand across the Channel Islands. In the second half of the year, the Group also acquired 100%
of the equity of SB Property Services AS, a property management business based in Prague, Czech Republic.
Cash consideration for these transactions amounted to £2.3m. The remainder of the provisionally determined acquisition consideration
relates to deferred consideration of £0.6m.
A further £1.2m is payable to certain key staff and is subject to service conditions, £0.3m is payable in 2019, £0.7m in 2020 and £0.2m in
2021. As required by IFRS 3 (revised) these payments will be expensed to the income statement over the relevant period of employment.
Transaction costs of £0.1m were also expensed as incurred to the income statement.
Goodwill of £2.1m and intangible assets of £0.4m relating to existing management contracts have been provisionally determined. Goodwill is
attributable to the experience and expertise of key staff and is not expected to be deductible for tax purposes.
The acquired businesses contributed revenue of £1.5m and underlying operating profits of £0.1m to the Group for the period from
acquisition. Had the acquisitions been made at the beginning of the financial year, revenue would have been £2.9m and underlying operating
profits would have been £0.4m.
Savills plc
Report and Accounts 2017
127
Financial statementsGovernance Strategic reportOverview 18. Deferred income tax
Deferred income tax assets and liabilities are only offset where there are legally enforceable rights to offset current tax assets against current
tax liabilities and when the deferred income tax relates to the same fiscal authority. The deferred tax assets and liabilities are offset when
realised through current tax. The deferred income tax assets and liabilities at 31 December, without taking into consideration the offsetting
balances within the same jurisdiction, are as follows:
The movement on the deferred tax account is shown below:
Deferred tax assets
– Deferred tax asset to be recovered after more than 12 months
– Deferred tax asset to be recovered within 12 months
Deferred tax liabilities
– Deferred tax liability to be recovered after more than 12 months
– Deferred tax liability to be recovered within 12 months
Group
Company
2017
£m
29.5
7.4
36.9
(2.2)
(0.7)
(2.9)
2016
£m
29.9
6.6
36.5
(3.1)
(0.5)
(3.6)
2017
£m
1.5
0.7
2.2
–
–
–
2016
£m
1.6
0.9
2.5
–
–
–
Deferred tax asset – net
34.0
32.9
2.2
2.5
At 1 January – asset
Amount credited/(charged) to the income statement (Note 12)
Effect of tax rate change within the income statement (Note 12)
Tax credited/(charged) to other comprehensive income
– Pension asset on actuarial (gain)/loss
– Pension asset on additional contributions
– Pension asset – effect of UK tax rate change within other
comprehensive income
– Employee benefits
– Revaluations of available-for-sale investments
– Movement on foreign exchange reserves
Additions through business combinations (Note 17.4)
Exchange movement
At 31 December – asset
Group
Company
2017
£m
32.9
8.2
(0.9)
(2.8)
(1.7)
0.1
(0.8)
0.1
0.1
(0.8)
(0.4)
34.0
2016
£m
30.7
(2.1)
0.2
7.2
(1.8)
(0.3)
(2.9)
0.2
(0.3)
(0.6)
2.6
2017
£m
2.5
–
–
(0.1)
(0.2)
–
–
–
–
–
–
2016
£m
1.8
0.7
–
0.4
(0.1)
–
(0.3)
–
–
–
–
32.9
2.2
2.5
Deferred income tax assets have been recognised for tax loss carry-forwards and other temporary differences to the extent that the
realisation of the related tax benefit through future taxable profits is probable.
128
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 As at the reporting date the Group did not recognise deferred tax income tax assets of £1.4m (2016: £0.4m) in respect of losses amounting
to £5.9m (2016: £1.2m) that can be carried forward indefinitely against future taxable income.
Deferred tax assets – Group
At 1 January 2016
Amount credited/(charged) to the income statement (Note 12)
Effect of UK tax rate change within income statement (Note 12)
Tax charged/(charged) to other comprehensive income (Note 12)
Effect of tax rate change charged to other comprehensive income
(Note 12)
Transfer (from)/to deferred tax assets
Exchange movement
At 31 December 2016
Amount credited/(charged) to the income statement (Note 12)
Effect of tax rate change within income statement (Note 12)
Tax charged to other comprehensive income (Note 12)
Effect of tax rate change charged to other comprehensive income
(Note 12)
Transfer to/(from) deferred tax assets
Additions through business combinations (Note 17.4)
Exchange movement
At 31 December 2017
Deferred tax liabilities – Group
At 1 January 2016
Amount credited/(charged)to the income statement (Note 12)
Tax (charged)/credited to other comprehensive income (Note 12)
Additions through business combinations
Exchange movement
At 31 December 2016
Amount credited to the income statement (Note 12)
Effect of tax rate change within the income statement (Note 12)
Tax credited to other comprehensive income (Note 12)
Additions through business combinations (Note 17.4)
Exchange movement
At 31 December 2017
Net deferred tax asset
At 31 December 2017
At 31 December 2016
Accelerated
capital
allowances
£m
Other
including
provisions
£m
Tax losses
£m
Retirement
benefits
£m
Employee
benefits
£m
0.5
0.8
0.1
–
–
–
–
1.4
0.5
–
–
–
0.3
–
–
2.2
13.4
2.6
0.1
–
–
(1.7)
1.6
16.0
5.2
(1.0)
–
–
(0.1)
0.1
(0.6)
19.6
9.7
(7.2)
–
–
–
–
1.0
3.5
(0.9)
(0.2)
–
–
–
–
0.1
2.5
3.0
0.1
–
5.4
(0.3)
1.7
0.3
10.2
–
0.1
6.8
1.5
–
(2.9)
–
–
–
5.4
2.3
–
(4.5)
(0.8)
0.1
(0.2)
–
–
5.7
–
–
–
–
6.9
Accelerated
capital
allowances
£m
Other
including
provisions
£m
Revaluations
£m
Intangible
assets
£m
(0.2)
0.1
–
–
–
(0.1)
–
–
–
–
–
(0.6)
(0.6)
(0.3)
–
(0.1)
(1.6)
0.6
–
0.1
–
–
(0.1)
(0.9)
(0.3)
–
0.2
–
–
(0.1)
–
–
0.1
–
–
–
(1.6)
0.6
–
(0.6)
(0.2)
(1.8)
0.5
0.2
–
(0.9)
0.1
(1.9)
Total
£m
33.4
(2.2)
0.2
2.5
(0.3)
–
2.9
36.5
7.1
(1.1)
(5.3)
0.1
–
0.1
(0.5)
36.9
Total
£m
(2.7)
0.1
(0.1)
(0.6)
(0.3)
(3.6)
1.1
0.2
0.2
(0.9)
0.1
(2.9)
34.0
32.9
Savills plc
Report and Accounts 2017
129
Financial statementsGovernance Strategic reportOverview 18. Deferred income tax continued
Deferred tax assets – Company
At 1 January 2016
Amount credited to the income statement
Tax credited/(charged) to other comprehensive income (Note 12)
At 31 December 2016
Amount (charged)/credited to the income statement
Tax charged to other comprehensive income (Note 12)
At 31 December 2017
Net deferred tax asset
At 31 December 2017
At 31 December 2016
19. Trade and other receivables
Trade receivables
Less: provision for impairment of receivables
Trade receivables – net
Amounts owed by subsidiary undertakings
Other receivables
Prepayments and accrued income
Accelerated
capital
allowances
£m
Other
including
provisions
£m
Retirement
benefits
£m
Employee
benefits
£m
0.1
0.2
–
0.3
–
–
0.3
0.5
0.2
–
0.7
(0.4)
–
0.3
0.1
–
0.3
0.4
–
(0.3)
0.1
1.1
0.3
(0.3)
1.1
0.4
–
1.5
Group
Company
2017
£m
391.2
(19.9)
371.3
–
53.0
66.3
490.6
2016
£m
333.2
(19.3)
313.9
–
39.5
66.0
419.4
2017
£m
–
–
–
5.3
0.1
2.5
7.9
Total
£m
1.8
0.7
–
2.5
–
(0.3)
2.2
2.2
2.5
2016
£m
–
–
–
13.1
0.7
2.7
16.5
The carrying value of trade and other receivables is approximate to their fair value.
There is no concentration of credit risk with respect to trade and other receivables as the Group has a large number of clients internationally
dispersed with no individual client owing a significant amount. The credit quality of receivables is managed at a local subsidiary level with
uncollectible amounts being impaired where necessary.
Amounts owed by subsidiary undertakings are unsecured, interest-free and generally cleared within the month.
As at 31 December 2017, trade receivables of £280.6m (2016: £232.0m) were neither past due nor impaired and fully performing.
As at 31 December 2017, trade receivables of £19.9m (2016: £19.3m) were impaired and provided for. The individually impaired receivables
mainly relate to receivables from clients that have been affected by the uncertain economic conditions where funding and completion have
been delayed and cash flow has become uncertain.
The ageing of these receivables is as follows:
Up to 3 months
3 to 6 months
Over 6 months
Group
2017
£m
1.6
4.9
13.4
19.9
2016
£m
3.4
1.9
14.0
19.3
As at 31 December 2017, trade receivables of £90.7m (2016: £81.9m) were past due but not impaired. These relate to trade receivables
which are past due at the reporting date but are not considered impaired as there has not been a significant change in credit quality and the
amounts are still considered recoverable.
130
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 19. Trade and other receivables continued
The ageing of these receivables is as follows:
Up to 3 months
3 to 6 months
Over 6 months
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
Sterling
Euro
US dollar
Hong Kong dollar
Australian dollar
Other*
Group
2017
£m
69.4
16.1
5.2
90.7
Group
2017
£m
207.6
90.3
54.9
39.7
31.4
66.7
2016
£m
59.1
16.9
5.9
81.9
2016
£m
178.4
65.8
35.3
50.9
39.8
49.2
490.6
419.4
*
Other currencies include Chinese renminbi, South Korean won, Singapore dollar, Japanese yen, New Zealand dollar, Indonesian rupiah, Philippine peso, Malaysian ringgit, Macau pataca,
New Taiwan dollar, Thailand baht, Polish zloty, Swedish krona and Canadian dollar.
Movement on the provision for impairment of trade receivables is as follows:
At 1 January
Provisions for receivables impairment
Receivables written off during the year as uncollectible
Unused provisions released
Exchange movements
At 31 December
Group
2017
£m
(19.3)
(7.2)
2.9
3.0
0.7
(19.9)
2016
£m
(15.4)
(7.2)
2.4
2.7
(1.8)
(19.3)
The creation and release of the provision for impaired receivables have been included in other operating expenses in the income statement.
The other classes within trade and other receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above. The Group
does not hold any collateral as security.
Savills plc
Report and Accounts 2017
131
Financial statementsGovernance Strategic reportOverview 20. Cash and cash equivalents
Cash at bank and in hand
Short-term bank deposits
Group
Company
2017
£m
198.1
10.7
208.8
2016
£m
210.1
13.5
223.6
2017
£m
90.8
–
90.8
2016
£m
88.3
–
88.3
The carrying value of cash and cash equivalents approximates their fair value.
The effective interest rate on short-term bank deposits as at 31 December 2017 was 1.35% (2016: 1.21%); these deposits have an average
maturity of 53 days (2016: 49 days).
Cash subject to restrictions in Asia Pacific amounts to £41.6m (2016: £50.6m) which is cash pledged to banks in relation to property
management contracts and cash remittance restrictions in certain countries. These amounts are consolidated.
Cash and cash equivalents are denominated in the following currencies:
Sterling
Hong Kong dollar
Euro
Chinese renminbi
US dollar
Japanese yen
Australian dollar
South Korean won
Singapore dollar
Other currencies*
Group
Company
2017
£m
5.1
61.5
56.1
37.9
10.1
8.6
7.7
6.8
4.3
10.7
208.8
2016
£m
(6.3)
55.8
49.2
48.6
38.8
6.2
9.3
6.3
7.1
8.6
2017
£m
90.8
–
–
–
–
–
–
–
–
–
2016
£m
88.2
–
–
–
0.1
–
–
–
–
–
223.6
90.8
88.3
* Other currencies include Canadian dollar, Czech koruna, New Taiwan dollar, Macau pataca, Thai baht, Vietnamese dong, New Zealand dollar, Philippine peso, Polish zloty and Swedish krona.
21. Trade and other payables
21.1 Trade and other payables – current
Deferred consideration (Note 21.3)
Trade payables
Amounts owed to subsidiary undertakings
Other taxation and social security
Other payables
Accruals and deferred income*
Group
Company
2017
£m
19.3
111.6
–
46.4
46.5
368.9
592.7
2016
£m
59.1
80.9
–
44.8
30.9
334.5
550.2
2017
£m
–
1.7
2.4
0.9
–
8.1
13.1
2016
£m
–
2.9
2.3
7.2
–
8.9
21.3
*
Includes accruals for profit shares.
The carrying value of trade and other payables is approximate to their fair value.
Amounts due to subsidiary undertakings are unsecured, interest-free and repayable on demand.
132
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 21.2 Trade and other payables – non-current
Deferred consideration (Note 21.4)
Other payables
21.3 Deferred consideration – current
At 1 January
Reclassification from non-current deferred consideration (Note 21.4)
Additions through business combinations (Note 17.4)
Deferred consideration linked to employment accrued during year
Interest unwind
Deferred consideration paid
Exchange movements
At 31 December
21.4 Deferred consideration – non-current
At 1 January
Reclassification to current deferred consideration (Note 21.3)
Additions through business combinations (Note 17.4)
Deferred consideration linked to employment accrued during year
Interest unwind on discounted deferred consideration
Deferred consideration paid
Exchange movements
At 31 December
Group
2017
£m
21.6
14.0
35.6
2016
£m
23.5
21.4
44.9
Company
2017
£m
–
–
–
2017
£m
59.1
16.4
2.2
4.2
0.4
(60.4)
(2.6)
19.3
2017
£m
23.5
(16.4)
11.3
6.3
0.3
(2.8)
(0.6)
21.6
2016
£m
–
–
–
2016
£m
3.8
42.3
–
17.8
–
(6.8)
2.0
59.1
2016
£m
53.0
(42.3)
1.9
2.8
0.6
–
7.5
23.5
Savills plc
Report and Accounts 2017
133
Financial statementsGovernance Strategic reportOverview 22. Borrowings
Current
Bank overdrafts
Unsecured bank loans due within one year or on demand
Non-current
Finance leases
Group
2017
£m
3.6
106.5
110.1
0.1
0.1
110.2
2016
£m
0.2
35.6
35.8
–
–
35.8
The Company does not have any borrowings as at 31 December 2017 and 31 December 2016.
In November 2017 the Group increased the multi-currency revolving credit facility (‘RCF’) by £50.0m to £300.0m. The RCF expires on 15
December 2020 and can be increased by an additional £60.0m Accordion facility. As at 31 December 2017 £106.0m (2016: £34.0m) of the
£300.0m (2016: £250.0m) RCF was drawn.
The remaining unsecured bank loans due within one year or on demand includes a £0.4m working capital loan in Thailand and a £0.1m bank
loan in Portugal. The working capital loan in Thailand is payable on demand, denominated in Thailand baht and has an effective interest rate
of 4.3%. The bank loan in Portugal is due within one year, denominated in euros and has an effective interest rate of 2.0%.
Movements in borrowings are analysed as follows:
Opening amount as at 1 January
Additional borrowings
Borrowings acquired through business combinations (Note 17.4)
Repayments of borrowings
Foreign exchange
Closing amount as at 31 December
Group
2017
£m
35.8
184.9
0.1
(110.6)
–
110.2
The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at the reporting date are:
Less than 1 year
Between 2 and 5 years
The effective interest rates at the reporting date were as follows:
Bank overdrafts
Bank loans
The carrying amounts of borrowings are approximate to their fair value.
134
Savills plc
Report and Accounts 2017
Group
2017
£m
110.1
0.1
110.2
Group
2017
%
2.62
1.51
2016
£m
31.4
144.7
0.7
(141.2)
0.2
35.8
2016
£m
35.8
–
35.8
2016
%
7.85
1.27
Notes to the financial statements continuedYear ended 31 December 2017 The carrying amounts of the Group’s borrowings are denominated in the following currencies:
Sterling
Australian dollar
Other
The Group has the following undrawn borrowing facilities:
Floating rate – expiring within 1 year or on demand
Floating rate – expiring between 1 and 5 years
23. Derivative financial instruments
2017
Forward foreign exchange contracts – at fair value
2016
Forward foreign exchange contracts – at fair value
Interest rate cap contract – at fair value
Group
2017
£m
109.4
–
0.8
110.2
Group
2017
£m
33.5
194.2
227.7
2016
£m
34.0
1.4
0.4
35.8
2016
£m
23.2
216.0
239.2
Group
Assets
£m
Liabilities
£m
0.1
0.1
0.5
0.5
Group
Assets
£m
Liabilities
£m
0.2
0.1
0.3
0.3
–
0.3
The Company does not have any derivative financial instruments as at 31 December 2017 and 31 December 2016.
Forward foreign exchange contracts
The gross notional principal amounts of the outstanding forward foreign exchange contracts at 31 December 2017 were £94.1m (2016:
£52.3m). All contracts mature within one year and are classed as current.
Gains and losses on forward foreign exchange contracts are recognised in net foreign exchange gains and losses in the income statement.
Interest rate cap contract
The interest rate cap contract matures in December 2020.
Gains and losses on the interest rate cap are recognised in net finance costs in the income statement.
Savills plc
Report and Accounts 2017
135
Financial statementsGovernance Strategic reportOverview 24. Provisions
24.1 Provisions for other liabilities and charges
At 1 January 2017
Additions through business combinations
(Note 17.4)
Provided during the year
Utilised during the year
Released during the year
Exchange movements
Total
Less non-current portion
Current portion
2016
Current
Non-current
Total
Professional
indemnity
claims
£m
Dilapidation
provisions
£m
Onerous leases
£m
Restructuring
provision
£m
Group total
£m
13.3
–
6.4
(6.1)
(2.3)
–
11.3
6.2
5.1
6.1
–
1.3
–
(0.3)
(0.1)
7.0
5.6
1.4
0.6
–
2.0
(0.4)
(0.2)
–
2.0
1.1
0.9
1.9
0.1
3.6
(1.6)
(0.1)
0.1
4.0
–
4.0
21.9
0.1
13.3
(8.1)
(2.9)
–
24.3
12.9
11.4
Company
£m
1.9
–
–
–
(1.3)
–
0.6
0.6
–
Professional
indemnity claims
£m
Dilapidation
provisions
£m
Onerous leases
£m
Restructuring
provision
£m
Group total
£m
Company
£m
6.2
7.1
13.3
1.7
4.4
6.1
0.4
0.2
0.6
1.9
–
1.9
10.2
11.7
21.9
–
1.9
1.9
(a) Professional indemnity claims
These arise from various legal actions, proceedings and other claims that are pending against the Group and are based on reasonable
estimates, taking into account the opinions of legal counsel. The nature of the amounts provided in respect of legal actions, proceedings and
other claims is such that the extent and timing of cash flows can be difficult to estimate and the ultimate liability may vary from the amounts
provided. The non-current portion of these provisions is expected to be utilised within the next two to five years. Included are provisions for
claims relating to subsidiaries prior to their disposal.
(b) Dilapidation provisions
The Group is required to perform dilapidation repairs and in certain instances restore properties to agreed specifications prior to the
properties being vacated at the end of their lease term. These amounts are based on estimates of repair and restoration costs at a future
date and therefore a degree of uncertainty exists over the future outflows, given that these are subject to repair and restoration cost price
fluctuations and the extent of repairs to be completed. The majority of the non-current portion of these provisions is expected to be utilised
within the next two to nine years.
(c) Onerous leases
A provision is recognised where the costs of meeting the obligations under a lease contract exceed the economic benefits expected to be
received and is measured as the net least cost of exiting the contract, being the lower of the cost of fulfilling it and any compensation or
penalties arising from the failure to fulfil it. The majority of the non-current portion of these provisions is expected to be utilised within the next
two to five years.
(d) Restructuring provision
This provision comprises termination payments to employees affected by restructuring and lease termination penalties.
136
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 24.2 Employee benefit obligations
In addition to the defined benefit obligation pension scheme disclosed in Note 10.2, the following are included in employee benefit obligations:
Group
At 1 January 2017
Additions through business combinations (Note 17.4)
Provided during the year
Utilised during the year
Exchange movements
At 31 December 2017
Total
£m
25.0
1.2
9.2
(7.2)
(1.0)
27.2
The above provisions relate to holiday pay and long service leave in the UK, Asia Pacific and Continental Europe. Profit shares are included
within accruals (Note 21).
The Company had £0.1m of employee benefit obligations as at 31 December 2017 (2016: £0.1m), relating to holiday pay and long service leave.
The above employee benefit obligations have been analysed between current and non-current as follows:
Current
Non-current
25. Share capital – Group and Company
Authorised and allotted
Ordinary shares of 2.5p each:
Authorised
Issued, called up and fully paid
Movement in issued, called up and fully paid share capital:
Group
2017
£m
11.2
16.0
27.2
2017
£m
5.1
3.5
2017
Number of
shares
2016
Number of
shares
202,000,000
202,000,000
141,931,341
139,809,677
At 1 January
Issued to direct participants on exercise of options under the Sharesave
Scheme
Issued to satisfy final instalment of shares due to former Studley, Inc.
stockholders in relation to the acquisition in 2014
Issued to satisfy second instalment of shares due to former Studley, Inc.
stockholders in relation to the acquisition in 2014
Issued to direct participants under the Performance Share Plan
At 31 December
2017
Number
of shares
139,809,677
6,891
1,947,976
–
166,797
141,931,341
2016
Number
of shares
137,861,283
702
–
1,947,692
–
£m
3.5
–
–
–
–
3.5
139,809,677
2016
£m
9.2
15.8
25.0
2016
£m
5.1
3.5
£m
3.4
–
–
0.1
–
3.5
Each issued, called up and fully paid ordinary share of 2.5p is a voting share in the capital of the Company, is entitled to participate in the
profits of the Company and on winding-up is entitled to participate in the assets of the Company.
Savills plc
Report and Accounts 2017
137
Financial statementsGovernance Strategic reportOverview 25. Share capital – Group and Company continued
As at 31 December 2017, the EBT held 4,819,684 shares (2016: 5,706,307 shares) and the Rabbi Trust held 800,000 shares (2016: nil).
These shares are held as ‘treasury shares’. Any voting or other similar decisions relating to these shares are taken by the trustees of the EBT
and the Rabbi Trust, who may take account of any recommendation of the Company. The EBT waives all of its dividend entitlement. For
further details of the EBT and the Rabbi Trust refer to Note 2.21.
At the Annual General Meeting (AGM) held on 9 May 2017, the shareholders gave the Company authority, subject to stated conditions, to
purchase for cancellation up to 13,967,033 of its own ordinary shares (AGM held on 11 May 2016: 13,786,130). Such authority remains valid
until the conclusion of the next AGM or 11 November 2018, whichever is the earlier.
26. Share-based payment
The Group operates four equity-settled share-based payment arrangements, namely the Sharesave Scheme, the Performance Share Plan
(PSP), the Deferred Share Plan (DSP) and the Deferred Share Bonus Plan (DSBP). The Group recognised total expenses relating to equity-
settled share-based payment transactions of £14.5m in 2017 (2016: £13.4m). Of the total share-based payments charge, £0.6m (2016:
£0.8m) relates to the Sharesave schemes, £0.6m (2016: £1.1m) relates to PSP schemes, £4.7m (2016: £3.9m) relates to DSP schemes and
£8.6m (2016: £7.6m) relates to DSBP schemes.
Refer to the Remuneration Report for details of the various schemes, pages 58 to 73.
26.1 Movements in share schemes
2017 number of awards (‘000)
Outstanding at 1 January
Granted
Exercised/cancelled
Forfeited/lapsed
Outstanding at 31 December
Exercisable at 31 December
Weighted average exercise price for awards outstanding
at end of the year (pence)
Weighted average remaining contractual life (years)
Weighted average share price at the date of exercise for
awards exercised in the year (pence)
2016 number of awards (‘000)
Outstanding at 1 January
Granted
Exercised/cancelled
Forfeited/lapsed
Outstanding at 31 December
Sharesave
awards
1,066
–
(42)
(57)
967
–
666.2
0.5
PSP
awards
690
172
(152)
(152)
558
–
–
1.9
DSP
awards
2,333
297
(854)
(54)
1,722
–
–
1.8
DSBP
awards
3,992
1,053
(954)
(41)
4,050
–
–
1.7
652.6
868.1
912.5
918.2
PSP awards
DSP awards
DSBP awards
Sharesave
awards
1,110
80
(73)
(51)
490
200
–
–
2,251
763
(591)
(90)
1,066
690
2,333
3,633
1,521
(1,062)
(100)
3,992
–
–
1.8
–
–
1.7
670.6
722.0
Exercisable at 31 December (‘000)
Weighted average exercise price for awards outstanding
at end of the year (pence)
Weighted average remaining contractual life (years)
Weighted average share price at the date of exercise for
awards exercised in the year (pence)
–
665.7
1.4
665.7
–
–
1.3
n/a
138
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 26.2 Fair value of options
For all the DSP and DSBP schemes the fair value of awards is the closing share price before award date. The Actuarial Binomial model of
actuaries Lane Clark & Peacock LLP is used to fair value awards granted under the PSP and Sharesave schemes. The key inputs to
determine the fair value of the awards granted under the PSP scheme during 2017 are shown below.
Performance Share Plan: Awards in the year ended 31 December 2017
Share price at grant date
Risk-free rate
Volatility of Savills share price
Correlation of Savills share price to index
Employee turnover
22 May 2017
887.5p
0.4%
25% per annum
46%
Zero
The expected volatility is measured over the three years prior to the date of grant to match the vesting period of the award. The risk-free rate
is the yield on a zero coupon UK government bond at each grant date, with term based on the expected life of the option or award.
The fair values of options granted in the period are shown below.
Grant
DSBP 2017
DSP 2017
DSP 2017
PSP 2017
Grant date
18 April 2017
18 April 2017
18 September 2017
22 May 2017
Deferred period
Fair value pence
3 – 4 years
1 – 5 years
3 – 4 years
5 years
929.0
929.0
885.5
728.4
27. Retained earnings and other reserves
Share-
based
payments
reserve
£m
Treasury
shares
£m
Profit
and loss
account*
£m
Total
retained
earnings*
£m
Capital
redemption
and capital
reserve
£m
Merger
relief
reserve
£m
Foreign
exchange
reserve
£m
Revaluation
reserve
£m
Total
other
reserves
£m
Balance at 1 January 2017
28.9
(37.9)
204.8
195.8
1.7
23.6
77.6
1.0
103.9
Profit attributable to owners of the
Company
Other comprehensive income/(loss)
Employee share option scheme:
–
–
– Value of services provided
14.5
–
–
–
– Exercise of options
– Withdrawal of options
Purchase of treasury shares
Dividends
Shares issued
Disposal of available-for-sale
investments
(10.1)
13.4
(0.1)
–
–
–
–
–
(17.2)
–
–
–
80.1
13.3
–
(3.3)
0.1
–
(39.3)
–
–
80.1
13.3
14.5
–
–
(17.2)
(39.3)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11.3
–
Balance at 31 December 2017
33.2
(41.7)
255.7
247.2
1.7
34.9
–
(16.1)
–
0.5
–
(15.6)
–
–
–
–
–
–
–
–
–
–
(0.5)
61.0
(0.7)
0.8
–
–
–
–
11.3
(1.2)
98.4
* Included within profit and loss account is tax on items taken directly to equity (Note 12) as disclosed above.
Savills plc
Report and Accounts 2017
139
Financial statementsGovernance Strategic reportOverview 27. Retained earnings and other reserves continued
Share-
based
payments
reserve
£m
23.0
Treasury
shares
£m
Profit
and loss
account*
£m
Total
retained
earnings*
Capital
redemption
reserve
£m
(26.0)
210.8
207.8
Balance at 1 January 2016
Profit attributable to owners
of the Company
Other comprehensive (loss)/income
Employee share option scheme:
– Value of services provided
– Exercise of options
Purchase of treasury shares
Dividends
Shares issued
Transfer between reserves
Transactions with
non-controlling interests
–
–
13.4
(7.5)
–
–
–
–
–
–
–
–
11.3
(23.2)
–
–
–
–
66.9
(28.7)
–
(3.8)
–
(35.4)
–
(1.4)
66.9
(28.7)
13.4
–
(23.2)
(35.4)
–
(1.4)
(3.6)
(3.6)
Balance at 31 December 2016
28.9
(37.9)
204.8
195.8
*
Included within profit and loss account is tax on items taken directly to equity (Note 12) as disclosed above.
Merger
relief
reserve
£m
Foreign
exchange
reserve
£m
Revaluation
reserve £m
Total other
reserves
£m
12.0
25.2
1.6
39.1
–
–
–
–
–
–
11.6
–
–
–
52.4
–
–
(0.6)
51.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11.6
1.4
–
23.6
77.6
1.0
103.9
£m
0.3
–
–
–
–
–
–
–
1.4
–
1.7
28. Contingent liabilities
In common with comparable professional services businesses, the Group is involved in a number of disputes in the ordinary course of
business. Provision is made in the financial statements for all claims where costs are likely to be incurred and represents the cost of
defending and concluding claims. The Group carries professional indemnity insurance and no separate disclosure is made of the cost of
claims covered by insurance as to do so could seriously prejudice the position of the Group.
29. Operating lease commitments – minimum lease payments
The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Amounts due within:
Within 1 year
Between 1 to 5 years
After 5 years
Group
2017
£m
51.1
136.8
123.0
310.9
2016
£m
43.9
122.5
124.3
290.7
Company
2017
£m
7.0
28.1
70.3
105.4
2016
£m
7.8
31.4
86.2
125.4
Significant operating leases relate to the various property leases for Savills offices in the UK, Continental Europe, Asia Pacific and North
America. There are no significant non-cancellable sub-leases.
140
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 30. Cash generated from operations
Group
Company
Profit for the year
Adjustments for:
Income tax (Note 12)
Depreciation (Note 16)
Amortisation of intangible assets (Note 15)
Impairment of goodwill (Note 15)
Net profit on disposal of available-for-sale investments and joint ventures
Net finance cost/(income) (Note 11)
Share of post-tax profit from joint ventures and associates (Note 17.1)
Decrease in employee and retirement obligations
Exchange movement on operating activities
Increase/(decrease) in provisions
Charge for share-based compensation (Note 26)
Exercise of share options
Operating cash flows before movements in working capital
(Increase)/decrease in work in progress
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Cash generated from operations
2017
£m
81.1
31.3
13.5
7.0
2.3
(5.9)
1.3
(9.9)
(7.9)
(0.2)
2.3
14.5
–
129.4
(0.7)
(44.1)
60.5
145.1
2016
£m
67.7
32.1
12.7
6.9
–
(0.1)
0.8
(7.9)
(6.3)
2.4
(3.0)
13.4
–
118.7
0.3
(17.1)
15.9
117.8
2017
£m
64.0
(2.1)
1.1
0.3
–
–
(0.8)
–
(0.5)
–
(1.3)
2.4
(13.4)
49.7
–
8.6
(8.4)
49.9
2016
£m
80.9
(2.2)
1.2
0.4
–
–
(1.0)
–
(0.5)
–
0.6
2.4
(11.2)
70.6
–
4.4
(4.7)
70.3
Foreign exchange movements resulted in a £8.9m decrease in current and non-current trade and other receivables (2016: £31.9m increase)
and a £16.4m decrease in current and non-current trade and other payables (2016: £56.6m increase).
31. Analysis of cash net of debt
2017
Cash and cash equivalents
Bank overdrafts
Bank loans
Finance leases
Cash and cash equivalents net of debt
2016
Cash and cash equivalents
Bank overdrafts
Bank loans
Cash and cash equivalents net of debt
At 1 January
£m
Cash flows
£m
223.6
(0.2)
223.4
(35.6)
–
187.8
(7.6)
(3.4)
(11.0)
(70.9)
–
(81.9)
Additions
through
business
combinations
£m
Exchange
movement
£m
At 31 December
£m
–
–
–
–
(0.1)
(0.1)
(7.2)
–
(7.2)
–
–
(7.2)
208.8
(3.6)
205.2
(106.5)
(0.1)
98.6
At 1 January
£m
Cash flows
£m
Exchange
movement
£m
At 31 December
£m
182.4
(0.2)
182.2
(31.2)
151.0
9.0
–
9.0
(4.1)
4.9
32.2
–
32.2
(0.3)
31.9
223.6
(0.2)
223.4
(35.6)
187.8
Savills plc
Report and Accounts 2017
141
Financial statementsGovernance Strategic reportOverview 32. Related party transactions
There were no significant related party transactions during the year.
(a) Loans to related parties
Loans to joint ventures are disclosed in Note 17.1.
(b) Company transactions
The Company provided corporate function services to its subsidiaries at an arm’s length value of £19.4m (2016: £18.9m).
Dividends of £60.0m were received from subsidiaries during the year (2016: £80.0m). Amounts outstanding to and from subsidiaries as
at 31 December 2017 are disclosed in Notes 19, 21.
33. Group – Investments
In accordance with Section 409 of the Companies Act 2006 a full list of subsidiaries, partnerships, associates and joint ventures, the
registered office and the percentage of equity owned by the Group, as at 31 December 2017, are disclosed below. All subsidiary
undertakings are consolidated into the Group financial statements. Unless otherwise stated the share capital is wholly comprised of ordinary
shares which are indirectly held by the Company.
Fully-owned subsidiary
Corporate Real Estate Services Pty Ltd
Incoll Group Pty Ltd
Incoll Management Pty Ltd
Moores Cost Consulting Pty Ltd
Savills (ACT) Pty Ltd
Savills (Aust) Holdings Pty Ltd
Savills (Aust) Pty Ltd
Savills (NSW) Pty Ltd
Savills (QLD) Pty Ltd
Savills (SA) Pty Ltd
Savills (TAS) Pty Ltd
Savills (VIC) Pty Ltd
Savills (WA) Pty Ltd
Savills Investment Management (Australia) Pty Ltd
Savills Project Management Pty Ltd
Savills Project Services (SA) Pty Ltd
Savills Property Management (NSW) Pty Ltd
Savills Valuations Pty Ltd
Savills Canada Inc
Savills Studley Services Inc
Savills Studley Inc (Canada)
Guardian Property Services (Shanghai) Company Ltd
Larry Smith Consulting Asia Ltd
Savills Property Services (Beijing) Company Ltd
Savills Property Services (Chengdu) Company Ltd
Savills Property Services (Guangzhou) Company Ltd
Savills Property Services (Hengqin) Ltd
Savills Property Services (Shanghai) Company Ltd
Savills Property Services (Tianjin) Company Ltd
Savills Property Services (Zhuhai) Company Ltd
Savills Real Estate Valuation (Beijing) Company Ltd
Savills Real Estate Valuation (Guangzhou) Company Ltd
Country of
incorporation
Registered office
Australia
Australia
Australia
Australia
Australia
Level 25, 1 Farrer Place, Sydney, NSW 2000
Level 25, 1 Farrer Place, Sydney, NSW 2000
Level 25, 1 Farrer Place, Sydney, NSW 2000
Level 25, 1 Farrer Place, Sydney, NSW 2000
Level 25, 1 Farrer Place, Sydney, NSW 2000
(ii) Australia
Level 25, 1 Farrer Place, Sydney, NSW 2000
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Canada
Canada
Canada
China
China
China
China
China
China
China
China
China
China
China
Level 25, 1 Farrer Place, Sydney, NSW 2000
Level 25, 1 Farrer Place, Sydney, NSW 2000
Level 25, 1 Farrer Place, Sydney, NSW 2000
Level 25, 1 Farrer Place, Sydney, NSW 2000
Level 25, 1 Farrer Place, Sydney, NSW 2000
Level 25, 1 Farrer Place, Sydney, NSW 2000
Level 25, 1 Farrer Place, Sydney, NSW 2000
Level 36, Gateway, 1 Macquarie Place, Sydney, NSW 2000
Level 25, 1 Farrer Place, Sydney, NSW 2000
Level 25, 1 Farrer Place, Sydney, NSW 2000
Level 25, 1 Farrer Place, Sydney, NSW 2000
Level 25, 1 Farrer Place, Sydney, NSW 2000
181 Bay Street - Suite 200, Toronto, ON M5J 2T3
181 Bay Street - Suite 200, Toronto, ON M5J 2T3
181 Bay Street - Suite 200, Toronto, ON M5J 2T3
Room 220, Block 1, No.100 Jinyu Road, Pu Dong, Shanghai
Room 340, 3/F, No.150 Liu Lin Road, Huangpu District, Shanghai
2101 East Tower, Twin Towers, B-12 Jianguomenwai Avenue,
Chaoyang District, Beijing 100022
Room 2106, Yanlord Landmark, No.1 Section 2, Renmin South Road,
Chengdu 610016
Room 906, R&F Center, No.10 Hua Xia Road, Zhujiang New Town,
Guangzhou 510623
Room 105-19233, No. 6 Baohua Road, Hengqin New Area, Zhuhai
Unit 212, No.286 Dong Fang Road, Pu Dong, Shanghai
Unit 4607, Tianjin World Financial Center, No.2 Dagu North Road, Xiaobailou
Street, Heping District, Tianjin
Room 2204, 22/F, Tower B, China Overseas Building, Midtown,
No. 2021 Jiuzhou West Avenue, Zhuhai
Unit 01, 21/F, East Tower, Twin Towers, B-12 Jianguomenwai Avenue,
Chaoyang District, Beijing 100022
Room 2105, R&F Center, No.10 Hua Xia Road, Zhujiang New Town,
Guangzhou 510623
Unit 07, 21/F, East Tower, Twin Towers, B-12 Jianguomenwai Avenue,
Chaoyang District, Beijing 100022
Savills Valuation and Professional Services (BJ) Ltd
China
142
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 Fully-owned subsidiary
Savills Valuation and Professional Services (GZ) Ltd
Shenzhen Guardian Property Management Ltd
Swan Property Services (Beijing) Company Ltd
Savills CZ s.r.o.
SB Property Services a.s.
Savills Investment Management ApS
Savills Investment Management SAS
Piccadilly General Partner GmbH
Savills Advisory Services Germany GmbH & Co. KG
Savills Advisory Services GmbH
Savills Fund Management Holding AG
Savills Immobilien Beratungs GmbH
Savills Immobilien Beteiligungs GmbH
Savills Immobilien Management GmbH
Savills Investment Management (Germany) GmbH
Country of
incorporation
Registered office
China
China
China
Room 2105, R&F Centre, No.10 Hua Xia Road, Zhujiang New Town,
Guangzhou
Room 3, Unit A, 5/F, Anlian Plaza, No.4018 Jintian Road, Futian District,
Shenzhen 518026
2101 East Tower, Twin Towers, B-12 Jianguomenwai Avenue,
Chaoyang District, Beijing 100022
Czech Republic
V Celnici 1031/4, 110 00 Prague 1
Czech Republic
Vaclavske Namesti 793/36, Nove Mesto, 110 00 Prague 1
Denmark
France
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Germany
Østergade 13, 2/F, 1100, København K
54-56 Avenue Hoche, 75008 Paris
Rotfeder-Ring 7, D-60327 Frankfurt-am-Main
Taunusanlage 19, 60325 Frankfurt-am-Main
Taunusanlage 19, 60325 Frankfurt-am-Main
Rotfeder-Ring 7, D-60327 Frankfurt-am-Main
Taunusanlage 19, 60325 Frankfurt-am-Main
Taunusanlage 19, 60325 Frankfurt-am-Main
Hardenbergstraße 27, 10623 Berlin
Sonnenstrasse 19, Munich
Savills Guernsey Ltd
Guernsey
22 Smith Street, St Peter Port, Guernsey, GY1 2JQ
Asia Protection Security Associates Ltd
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Bridgewater Management Ltd
BTHK Property Management Ltd
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
Rooms 805-813, 8/F, Cityplaza One, 1111 King's Road, Taikoo Shing
Champion Insurance and Computer Services Ltd
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Dominion Office Centre Ltd
East Full Company Ltd
Eco-Guardian Ltd
Express Engineering Ltd
Express Maintenance Services Ltd
Gateway Contractors Ltd
Greenscape Ltd
GRVM Ltd
Guard Able Ltd
Guardian Care Ltd
Guardian Management Services Ltd
Guardian Mandarin Management Ltd
Guardian Partners Ltd
Guardian Property Agencies Ltd
Guardian Property Management Ltd
Hip Kwan Property Management Ltd
Kenda Services Ltd
Kwik Park Ltd
Larry Smith Asia Ltd
Mount Link Services Ltd
Quartey Properties Ltd
Savills (China) Ltd
Savills (Hong Kong) Ltd
Savills Asia Pacific Ltd
Savills Associates Ltd
Savills Building Services Ltd
Savills Design Ltd
Savills Engineering Ltd
Savills Guardian (Holdings) Ltd
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
Unit 1009, 10/F, Chinachem Golden Plaza, 77 Mody Road,
Tsim Sha Tsui East, Kowloon
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
23/F, Two Exchange Square, 8 Connaught Place, Central
Hong Kong
23/F, Two Exchange Square, 8 Connaught Place, Central
(ii) Hong Kong
23/F, Two Exchange Square, 8 Connaught Place, Central
Hong Kong
Whole Block, No.3 Norfolk Road, Kowloon Tong, Kowloon
Hong Kong
Rooms 805-813, 8/F, Cityplaza One, 1111 King's Road, Taikoo Shing
Hong Kong
Rooms 805-813, 8/F, Cityplaza One, 1111 King's Road, Taikoo Shing
Hong Kong
Rooms 805-813, 8/F, Cityplaza One, 1111 King's Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Savills plc
Report and Accounts 2017
143
Financial statementsGovernance Strategic reportOverview 33. Group – Investments continued
Fully-owned subsidiary
Savills India Holding Ltd
Savills Indonesia Holding Ltd
Country of
incorporation
Registered office
Hong Kong
23/F, Two Exchange Square, 8 Connaught Place, Central
Hong Kong
23/F, Two Exchange Square, 8 Connaught Place, Central
Savills Investment Management (Hong Kong) Ltd
Hong Kong
Level 54, Hopewell Centre, 183 Queen's Road East
Savills Investment Management Asia Ltd
Hong Kong
Level 54, Hopewell Centre, 183 Queen's Road East
Savills Management Services Ltd
Savills Philippines Holding Ltd
Savills Project Consultancy Ltd
Hong Kong
23/F, Two Exchange Square, 8 Connaught Place, Central
Hong Kong
23/F, Two Exchange Square, 8 Connaught Place, Central
Hong Kong
Rooms 805-813, 8/F, Cityplaza One, 1111 King's Road, Taikoo Shing
Savills Property Management Holdings Ltd
Hong Kong
Rooms 805-813, 8/F, Cityplaza One, 1111 King's Road, Taikoo Shing
Savills Property Management Ltd
Hong Kong
Rooms 805-813, 8/F, Cityplaza One, 1111 King's Road, Taikoo Shing
Savills Realty Ltd
Savills Regional Services Ltd
Savills Residence Ltd
Hong Kong
23/F, Two Exchange Square, 8 Connaught Place, Central
Hong Kong
23/F, Two Exchange Square, 8 Connaught Place, Central
Hong Kong
Rooms 805-813, 8/F, Cityplaza One, 1111 King's Road, Taikoo Shing
Savills Valuation and Professional Services Ltd
Hong Kong
23/F, Two Exchange Square, 8 Connaught Place, Central
Security and Safety Ltd
Swan Hygiene Services Ltd
Swan Pest Control Services Ltd
Tarrayon Ltd
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
The Peninsular Centre Retailers Association Ltd
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
FPD Property Services (India) Private Ltd
Savills Realty (India) Private Ltd
Actium
Anateo Ltd
HOK Financial Services
Liffey Valley Management Ltd
Mahon Point Management Ltd
Savills Advisory Services (Ireland) Limited
India
India
(ii) Ireland
(ii) Ireland
Ireland
Ireland
Ireland
Ireland
133/3 Brigade Road (Raheja Chancery Building) Richmond Town,
Bangalore, Karnataka 560025
No. 65/6, Sarjapur Ring Road, Agara, Bangalore, Karnataka 560102
33 Molesworth Street, Dublin 2
33 Molesworth Street, Dublin 2
33 Molesworth Street, Dublin 2
33 Molesworth Street, Dublin 2
33 Molesworth Street, Dublin 2
33 Molesworth Street, Dublin 2
Savills Commercial (Ireland) Ltd
(ii) Ireland
33 Molesworth Street, Dublin 2
Savills Management Resource Ireland Ltd
Savills Residential (Ireland) Ltd
White Water (Newbridge) Ltd
White Water Management Ltd
White Water Residential DAC
Larry Smith S.r.l.
Savills Italy S.r.l.
Savills Asset Advisory Company Ltd
Savills Investment Architecture Design GK
Savills Japan Company Ltd
Greater Tokyo Office Fund (Jersey) GP Ltd
Prime London Residential Development Jersey GP Ltd
Prime London Residential Development Jersey II GP Ltd
Savills (Jersey) Ltd
Savills Investment Management (Jersey) Ltd
Ireland
Ireland
Ireland
Ireland
Ireland
Italy
Italy
Japan
Japan
Japan
Jersey
Jersey
Jersey
Jersey
Jersey
33 Molesworth Street, Dublin 2
33 Molesworth Street, Dublin 2
33 Molesworth Street, Dublin 2
33 Molesworth Street, Dublin 2
33 Molesworth Street, Dublin 2
Viale Vittorio Veneto 20, 20124 Milan
Via San Paolo 7, 20121 Milan
Yurakucho ITOCIA 15/F, 2-7-1 Yurakucho, Chiyoda-ku, Tokyo 100-0006
3/F BPR Place Kamiyacho, 1-11-9 Azabudai, 1 Chome-11 Azabudai, Minato-
ku, Tokyo 106-0041
Yurakucho ITOCIA 15/F, 2-7-1 Yurakucho, Chiyoda-ku, Tokyo 100-0006
3/F Walker House, 28-34 Hill Street, St Helier, JE4 8PN
3/F Walker House, 28-34 Hill Street, St Helier, JE4 8PN
3/F Walker House, 28-34 Hill Street, St Helier, JE4 8PN
19 Halkett Place, St Helier, JE2 4WG
3/F Walker House, 28-34 Hill Street, St Helier, JE4 8PN
Cordea Savills Italian Opportunities No.2 S.a.r.l.
Luxembourg
10, rue C.M. Spoo
CS Italian Opportunities No.1 S.a.r.l.
Savills IM European Fund V GP S.a.r.l.
Savills (Macau) Ltd
Savills Project Consultancy (Macau) Ltd
Savills Property Management (Macau) Ltd
Savills (Myanmar) Ltd
Savills B.V.
Savills Holdings B.V.
144
Savills plc
Report and Accounts 2017
Luxembourg
10, rue C.M. Spoo
Luxembourg
10, rue C.M. Spoo
Macau
Macau
Macau
Myanmar
Suite 1309-1310, 13/F Macau Landmark, 555 Avenida da Amizade
Suite 1309-1310, 13/F Macau Landmark, 555 Avenida da Amizade
Suite 1309-1310, 13/F Macau Landmark, 555 Avenida da Amizade
No. 8, Unit 8-A, Centerpoint Towers, No. 65, Corner of Sule
Pagoda Road & Merchant Street, Kyauktada Township, Yangon
Netherlands
Viñoly Building, Claude Debussylaan 48, Amsterdam 1082 MD
Netherlands
Viñoly Building, Claude Debussylaan 48, Amsterdam 1082 MD
Notes to the financial statements continuedYear ended 31 December 2017 Fully-owned subsidiary
Country of
incorporation
Registered office
Savills Investment Management B.V.
Netherlands
Vida Building, Kabelweg 57, 1014 BA Amsterdam
Savills (NZ) Ltd
Savills (NI) Ltd
New Zealand
Level 8, 33 Shortland Street, Auckland Central, Auckland, 1010
Northern Ireland
1/F, Lesley Studios, 32-36 May Street, Belfast, BT1 4NZ
FPD Management Services Philippines Inc
Philippines
Sun Life Centre, 5th Avenue Corner Rizal Drive, Bonifacio Global City,
Philippines 1634
Savills Investment Management Sp Zoo
Savills Property Management Sp Zoo
Savills Sp Zoo
Aguirre Newman Portugal Consultoria Lda
Aguirre Newman Portugal Mediacao Imobiliaria Lda
Savills (SEA) Pte Ltd
Savills (Singapore) Pte Ltd
Savills Asset Management Pte Ltd
Savills Investment Management Pte Ltd
Savills Property Management Pte Ltd
Savills Residential Pte Ltd
Savills Valuation & Professional Services (S) Pte Ltd
Studley (Singapore) Pte Ltd
Savills Asset Management Pte Ltd
Poland
Poland
Poland
Portugal
Portugal
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Singapore
Ul. Miła 2, 00-180 Warsaw
Ul. Złota 59, 00-120 Warsaw
Ul. Złota 59, 00-120 Warsaw
Praça Marquês de Pombal, 16 – 7º, 1250163 Lisbon
Praça Marquês de Pombal, 16 – 7º, 1250163 Lisbon
30 Cecil Street #20-03 Prudential Tower, 049712
30 Cecil Street #20-03 Prudential Tower, 049712
20 Martin Road #03-01/02 Seng Kee Building, 239070
80 Robinson Road, #02-00, 068898
20 Martin Road #03-01/02 Seng Kee Building, 239070
30 Cecil Street #20-03 Prudential Tower, 049712
30 Cecil Street #20-03 Prudential Tower, 049712
190 Middle Road #15-01 Fortune Centre, 188979
South Korea
13F Seoul Finance Center, 136 Sejong-daero Jung-gu, Seoul
Savills Korea Advisors Realty Company Ltd
South Korea
15F Tower8, 7 Jongro5-gil Jongno-gu, Seoul
Savills Korea Company Ltd
South Korea
13F Seoul Finance Center, 136 Sejong-daero Jung-gu, Seoul
Aguirre Newman Arquitectura Barcelona SAU
Aguirre Newman Arquitectura SAU
Aguirre Newman Madrid SAU
Savills Aguirre Newman SAU
Aguirre Newman Valoraciones y Tasaciones SAU
Aguirre Newman Urbanismo SAU
Auirre Newman Barcelona SAU
Savills Consultores Inmobiliarios SA
Savills Investment Management S.L
Zaphir Asset Management SLU
Loudden Bygg-och Fastighetsservice AB
Savills Förvaltning AB
Savills Investment Management AB
Savills Sweden AB
Savills (Taiwan) Ltd
Savills Residential Services (Taiwan) Ltd
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Spain
Sweden
Sweden
Sweden
Sweden
Taiwan
Taiwan
Avda. Diagonal 609-615, Barcelona
Calle General Lacy 23, 28045 Madrid
Calle General Lacy 23, 28045 Madrid
Calle General Lacy 23, 28045 Madrid
Avda. Diagonal 609-615, Barcelona
Calle General Lacy 23, 28045 Madrid
Avda. Diagonal 609-615, Barcelona
José Abascal, 45 - 1ª planta, 28003 Madrid
Calle Velazquez 78 1, 28001 Madrid
Calle General Lacy 23, 28045 Madrid
Box 6317, 102 35 Stockholm
Sergels Torg 12, 111 57 Stockholm
Kungsgatan 56, 111 22 Stockholm
Sergels Torg 12, 111 57 Stockholm
21/F, No. 68, Sec. 5, Zhong-Xiao East Road, Taipei 110
21/F, No. 68, Sec. 5, Zhong-Xiao East Road, Taipei 110
Savills Valuation & Professional Services (Taiwan)
(iii) Taiwan
21/F, No. 68, Sec. 5, Zhong-Xiao East Road, Taipei 110
Savills (Thailand) Ltd
Savills Security and Safety Company Ltd
Thailand
Thailand
990 Abdulrahim Place Building, 26/F, Rama IV Road, Silom Subdistrict,
Bang Rak District, Bangkok
990 Abdulrahim Place Building, 26/F, Rama IV Road, Silom Subdistrict,
Bang Rak District, Bangkok
Blair Kirkman LLP
Buckleys Estate Agents Ltd
Chesterfield & Co (Rentals) Ltd
Christopher Rowland Ltd
Collier & Madge Holdings Ltd
Collier & Madge plc
Cordea Savillls SLP GP Ltd
Cordea Savillls SLP II LP
Cordea Savillls SLP LP
Cordea Savills Investments Ltd
GBR Phoenix Beard Ltd
GBR Phoenix Beard Group Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom Wemyss House, 8 Wemyss Place, Edinburgh, EH3 6DH
United Kingdom 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
United Kingdom Wemyss House, 8 Wemyss Place, Edinburgh, EH3 6DH
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
Savills plc
Report and Accounts 2017
145
Financial statementsGovernance Strategic reportOverview 33. Group – Investments continued
Fully-owned subsidiary
GBR Phoenix Beard Holdings Ltd
GBR Phoenix Beard Residential Ltd
GBR Property Consultant Ltd
Granville Residential Ltd
Grosvenor Hill Ventures Ltd
GTOF Co-Investment GP LLP
GTOF Co-Investment LP
Country of
incorporation
Registered office
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom Citypoint, 65 Haymarket Terrace, Edinburgh, Scotland, EH12 5HD
United Kingdom Citypoint, 65 Haymarket Terrace, Edinburgh, Scotland, EH12 5HD
Hanover Facilities Management Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
Hepher Dixon Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
Holden Matthews Estate Agents Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
Humphriss & Ryde Ltd
Jago Dean PR Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
LIBRA Housing Advisory Services Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
Mansfield Elstob Main Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
Moor House Management Services Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
Optic Asset Management Ltd
PCA Holdings Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
PCA Management Consultants Limited
United Kingdom 33 Margaret Street, London, W1G 0JD
Phoenix Beard Landscaping Ltd
Phoenix Beard Manpower Ltd
Phoenix Beard Trustees Ltd
Portnalls Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
Prime London Residential Development Co-Investment GP LLP
United Kingdom 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
Prime London Residential Development Co-Investment II GP LLP
United Kingdom 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
Prime London Residential Development Co-Investment II LP
United Kingdom 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
Prime London Residential Development Co-Investment LP
United Kingdom 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
Prime London Residential Development GP LLP
United Kingdom 33 Margaret Street, London, W1G 0JD
Prime London Residential Development II GP LLP
United Kingdom 33 Margaret Street, London, W1G 0JD
Prime Purchase Ltd
Rickitt Grant & Company Ltd
S F Securities Ltd
Savillls IM SLP II GP LLP
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
Savillls IM UK Income and Growth General Partner LLP
United Kingdom 33 Margaret Street, London, W1G 0JD
Savills (Europe) Ltd
Savills (L&P) Ltd
Savills (Overseas Holdings) Ltd
Savills (UK) Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
Savills Advisory Services (L&P) Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
Savills Advisory Services Ltd
Savills Asset Warehouse 1 Ltd
Savills Asset Warehouse 2 Ltd
Savills Capital Advisors Ltd
Savills Commercial (Leeds) Ltd
Savills Commercial Ltd
Savills Finance Holdings plc
Savills Financial Services Ltd
Savills Holding Company Ltd
Savills IM Dawn GP Ltd
Savills IM Holdings Ltd
Savills IM Investco Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
(i) United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
Savills IM SLP General Partner LLP
United Kingdom Wemyss House, 8 Wemyss Place, Edinburgh, EH3 6DH
Savills IM SLP III GP LLP
United Kingdom Citypoint, 65 Haymarket Terrace, Edinburgh, Scotland, EH12 5HD
146
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 Fully-owned subsidiary
Savills IM SLP III LP
Savills IM UK One Ltd
Country of
incorporation
Registered office
United Kingdom Citypoint, 65 Haymarket Terrace, Edinburgh, Scotland, EH12 5HD
United Kingdom 33 Margaret Street, London, W1G 0JD
Savills IM UK Property Ventures No.1 GP Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
Savills IM UK Two Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
Savills Investment Management (UK) Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
Savills Investment Management LLP
United Kingdom 33 Margaret Street, London, W1G 0JD
Savills Investment Management Overseas Holdings Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
Savills Italy Holding Ltd
Savills Lending Solutions Ltd
Savills Management Resources Ltd
Savills Nominee Company Ltd
Savills Telecom Ltd
Serviced Land No.1 GP Ltd
Serviced Land No.2 GP Ltd
Serviced Land No.2 JV GP Ltd
Smith Woolley Ltd
Stratland Management Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
United Kingdom 33 Margaret Street, London, W1G 0JD
The London Planning Practice Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
Wellington Holdings Ltd
BTR Capital Advisors I LLC
BTR Capital Advisors II Inc
BTR Capital Advisors III Inc
Gravitas Lease Audit Services LLC
Gravitas Real Estate Solutions LLC
Kelly, Legan & Gerard Inc
Savills (L&P) Inc
Savills America Ltd
United Kingdom 33 Margaret Street, London, W1G 0JD
United States
399 Park Avenue - 11/F, New York, NY 10022
United States
399 Park Avenue - 11/F, New York, NY 10022
United States
399 Park Avenue - 11/F, New York, NY 10022
United States
399 Park Avenue - 11/F, New York, NY 10022
United States
399 Park Avenue - 11/F, New York, NY 10022
United States
399 Park Avenue - 11/F, New York, NY 10022
United States
Unex House, 132-134 Hils Road, Cambridge CB2 8PA
United States
399 Park Avenue - 11/F, New York, NY 10022
Savills Investment Management (USA) Inc
United States
251 Little Falls Drive, Wilmington, DE 19808
Savills Investment Management Inc
United States
251 Little Falls Drive, Wilmington, DE 19808
Savills LLC
Savills Studley (GA) Inc
Savills Studley Inc
United States
399 Park Avenue - 11/F, New York, NY 10022
United States
399 Park Avenue - 11/F, New York, NY 10022
United States
399 Park Avenue - 11/F, New York, NY 10022
Savills Studley Occupier Services Inc
United States
399 Park Avenue - 11/F, New York, NY 10022
Savills Studley Securities LLC
United States
399 Park Avenue - 11/F, New York, NY 10022
SSOC LLC
Studley Asia Holdings
United States
399 Park Avenue - 11/F, New York, NY 10022
United States
399 Park Avenue - 11/F, New York, NY 10022
Studley Gravitas Real Estate Solutions LLC
United States
399 Park Avenue - 11/F, New York, NY 10022
The Great Studley Stamp Company
Savills Vietnam Company Ltd
United States
399 Park Avenue - 11/F, New York, NY 10022
Vietnam
6/F, Sentinel Place building, 41A Ly Thai To, Hoan Kiem District, Hanoi City
Savills plc
Report and Accounts 2017
147
Financial statementsGovernance Strategic reportOverview 33. Group – Investments continued
Subsidiaries of which the Group
owns less than 100%
Savills Belux Group SA
%
owned
Country of
incorporation
Registered office
99.90
Belgium
Avenue Louise 81, 1050 Brussels
Savills Property Services (Shenzhen) Company Ltd
85.00
China
Unit A, 5/F Anlian Plaza, No.4018 Jintian Road, Futian District,
Shenzhen 518026
Savills SA
Savills Valuation SAS
99.97
France
21 Boulevard Haussmann 75009, Paris
99.97
France
21 Boulevard Haussmann, 75009 Paris
Savills Fund Management GmbH
94.00
Germany
Rotfeder-Ring 7, D-60327 Frankfurt-am-Main
Savills Investment Management (KVG) GmbH
94.90
Germany
Rotfeder-Ring 7, D-60327 Frankfurt-am-Main
Absolute Result Ltd
80.20
Hong Kong
23/F, Two Exchange Square, 8 Connaught Place, Central
Savills Billion Property Management Ltd
80.00
Hong Kong
Rooms 805-813, 8/F, Cityplaza One, 1111 King's Road, Taikoo Shing
Savills Showcase Ltd
65.00
Hong Kong
Rooms 805-813, 8/F, Cityplaza One, 1111 King's Road, Taikoo Shing
PT Savills Consultants Indonesia
80.40
Indonesia
Indonesia Stock Exchange Building, Tower I, Lt. 12, Jl. Jend. Sudirman,
Kav. 52-53, Senayan, Kebayoran Baru, Jakarta Selatan
Savills Investment Management SGR S.p.A
75.00
Italy
Via San Paolo 7, 20121 Milan
Savills Investment Management (Luxembourg) S.à.r.l.
94.90
Luxembourg
10, rue C.M. Spoo
Savill Asset and Property Management BV
90.25
Netherlands
Viñoly Building, Claude Debussylaan 48, Amsterdam 1082 MD
Savills Agency BV
Savills Consultancy BV
Savills Investments BV
90.25
Netherlands
Viñoly Building, Claude Debussylaan 48, Amsterdam 1082 MD
90.25
Netherlands
Viñoly Building, Claude Debussylaan 48, Amsterdam 1082 MD
90.25
Netherlands
Viñoly Building, Claude Debussylaan 48, Amsterdam 1082 MD
Savills Nederland Holdings BV
90.25
Netherlands
Viñoly Building, Claude Debussylaan 48, Amsterdam 1082 MD
Savills Retail BV
Tagis BV
90.25
Netherlands
Viñoly Building, Claude Debussylaan 48, Amsterdam 1082 MD
90.25
Netherlands
Viñoly Building, Claude Debussylaan 48, Amsterdam 1082 MD
Tagis Property Management BV
90.25
Netherlands
Viñoly Building, Claude Debussylaan 48, Amsterdam 1082 MD
SGDN Ltd
Joint Ventures
51.00
United Kingdom Stuart House, City Road, Peterborough, PE1 1QF
%
owned
Country of
incorporation
Registered office
Anlian Savills Property Management (Shenzhen) Ltd
25.5
China
Unit B02(b), 19/F,Anlian Plaza, No.4018, Jintian Road,
Futian District, Shenzhen
Beijing BHG Savills Retail & Property Management
Company Ltd
Beijing CCP & Savills Property Services Management
Company Ltd
Beijing China Railway Savills Property Management
30.00
China
Room 107, Block 1, No 208, Lane 4, North Xiangyun Road, Daxing
District, Beijing
25.00
China
A6 West Da Wang Road, Chaoyang District, Beijing
Services Company Ltd
49.00
China
Room 926, 15 Guang An Road, Feng Tai District, Beijing
Beijing Financial Street Savills Property Management
Company Ltd
30.00
China
B1/F, Tong Tai Building, 33 Financial Street, West District, Beijing
Beijing Haizhi Savills Property Management Company Ltd
40.00
China
Room 0006, 1/F, 18 Zhong Guan Cun Avenue, Haidian District, Beijing
Beijing Jiaming Savills Property Management
Company Ltd
35.00
China
B2 Floor, No. 27 East 3rd Ring Rd North, Chaoyang District, Beijing
Beijing Oriental Savills Asset Management Company Ltd
30.00
China
Unit 303, 3/F No, 9 West Street Wangfujing, Dongcheng District, Beijing
Beijing Tianrun Savills Property Management Company Ltd
49.00
China
Unit 3501A, 35/F, No. 8 Jianguomenwai Dajie, Chaoyang District, Beijing
Beijing Zhaotai Savills Property Services Company Ltd
30.00
China
B1 Floor, 11 Fenghui Yuan, Tai Ping Avenue, Xicheng District, Beijing
Beijing Zhong Bao Savills Property Management Company Ltd
10.00
China
603 China Life Tower, 16 Chao Wai Street, Chaoyang District, Beijing
COSCO FPDSavills Property Development Company Ltd
25.00
China
East Kang Qiao Road No.1, Nanhui District, Shanghai
Everbright Savills Property Management Company Ltd
45.00
China
Room E-266, 3/F, Ru Shan Road No.227, Pilot Free Trade Zone, Shanghai
Fuzhou Hengli & Savills Property Management Company Ltd
45.00
China
Unit B, 4/F Zhongliu City, No.171, Hu Dong Road, Gu Lou District, Fuzhou
148
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 Joint Ventures
%
owned
Country of
incorporation
Registered office
Gohigh Savills (Shanghai) Property Management Company Ltd
49.00
China
Guangzhou Nansi & Savills Property Management Company Ltd
49.00
China
Savills BM Property Services Company Ltd
40.00
China
Savills Raycom Property Management (Beijing) Company Ltd
30.00
China
Shanghai No.1 and FPDSavills Property Management
Company Ltd
Shanghai Poly Savills Property Management Company Ltd
Shanxi Zhidi Savills Property Services Company Ltd
Shenzhen Qianhai Savills Property Services
Company Ltd
51.00
China
30.00
China
30.00
China
40.00
China
Suzhou Industial Park Wanrun & FPD Savills Property
Management Company Ltd
45.00
China
Tianjin TEDA Savills Property Services Company Ltd
10.00
China
Room 203D, 2/F, No. 21, Lane 596 Middle Yanan Road, Jingan
District, Shanghai
Room 1304, Feng Ze Dong Road No.106, Nan Sha Area,
Guangzhou
Room 115, No.53, Lane 749, Middle Tianmu Road, Zhabei District,
Shanghai
B1-023 Raycom Center, 2 South Road, Ke Xue Yan, Haidian District,
Beijing
Room 308-C, No.727, Zhangjiang Rd, Zhangjiang Town, Pudong
District, Shanghai
N24/F, 528 South Pu Dong Road, Pu Dong, Shanghai
4/F, block 3, No.42 Xing Shan Temple, Xi’an City
Unit 201, A Tower, No.1, Qian Wan Road, Qianhai Shengan
Cooperation District, Shenzhen
2/F, International Building, No.2 Suzhou Avenue West, Suzhou
industrial Park
8/F, B Building, No. 21 Hongda Street, Tianjin Economy &
Technology Development Zone
Wuhan Yuexiu Savills Property Services Company Ltd
40.00
China
Room 5-2, No 198 Hanzheng Street,
Qiaokou District, Wuhan
Zhongzheng Savills Property Management (Beijing) Co Ltd
49.00
China
Zhuhai Hengqin Savills Assets Operation Management
Unit 16-04C, 16/F, Building 8, No, 91 Yard, Jianguo Road,
Chaoyang District, Beijing
Company Ltd
Greenmile Ventures Ltd
Greenwall Gateway Ltd
Jiayi Savills Property Services Ltd
G.E.S. Holdings Ltd
G.E.S. Ltd
Savills Science Ltd
51.00
China
Room 105-1460, No. 6 Baohua Road, Hengqin new area, Zhuhai
50.00
Hong Kong
P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola,
British Virgin Islands
50.00
Hong Kong
7/F, Cityplaza One, 1111 King’s Road, Taikoo Shing
51.00
Hong Kong
23/F, Two Exchange Square, 8 Connaught Place, Central
50.00 Macau
50.00 Macau
Alameda Dr. Carlos D'Assumpcao, No. 181 - 187, Edf. Kong Fai
Com. 7/F, K - P
Alameda Dr. Carlos D'Assumpcao, No. 181 - 187, Edf. Kong Fai
Com. 7/F, K - P
50.00
United Kingdom 33 Margaret Street, London, W1G 0JD
Savills plc
Report and Accounts 2017
149
Financial statementsGovernance Strategic reportOverview 33. Group – Investments continued
Associates
SAS Riviera Estates
Guardian Home Ltd
KSH Guardian Property Management Ltd
Lippo-Savills Property Management Ltd
Savills Taiping Property Management Ltd
% owned
Country of
incorporation
Registered office
44.40
40.00
50.00
50.00
45.00
France
11 Avenue Jean Medecin, 06000, Nice
Hong Kong
Flat G&H, 55/F, Block 3, Metro Town, Tseung Kwan O, New Territories
Hong Kong
7th Floor, Cityplaza One, 1111 King’s Road, Taikoo Shing
Hong Kong
Room 2301, 23/F, Tower One, Lippo Centre, 89 Queensway
Hong Kong
Rooms 805-813, 8/F, Cityplaza One, 1111 King's Road, Taikoo Shing
Yuen Sang Property Management Company Ltd
50.00
Hong Kong
7th Floor, Cityplaza One, 1111 King’s Road, Taikoo Shing
Cordea Nichani India Advisers Private Ltd
Savills (Johor) Sdn Bhd
Savills (KL) Sdn Bhd
Savills (Malaysia) Sdn Bhd
Savills (Penang) Sdn Bhd
Savills (Project Management) Sdn Bhd
Rootcorp Ranganatha Ltd
Monaco Real Estates SARL
Huttons Asia Pte Ltd
25.00
45.00
45.00
45.00
45.00
45.00
25.00
51.00
48.00
India
Malaysia
Malaysia
Malaysia
Malaysia
Malaysia
Mauritius
Monaco
Ground Floor Front, 19 Kumarakrupa Road, Bangalore 560001
No. 2 Jalan Raja Abdullah, Off Jalan Sultan Ismail, 50300 Kuala Lumpur
No. 2 Jalan Raja Abdullah, Off Jalan Sultan Ismail, 50300 Kuala Lumpur
No. 2 Jalan Raja Abdullah, Off Jalan Sultan Ismail, 50300 Kuala Lumpur
No. 2 Jalan Raja Abdullah, Off Jalan Sultan Ismail, 50300 Kuala Lumpur
No. 2 Jalan Raja Abdullah, Off Jalan Sultan Ismail, 50300 Kuala Lumpur
4/F, Raffles Tower, 19 Cybercity, Ebene
10 Ter Boulevard Princesse Charlotte
Singapore
3 Bishan Place, #02-01 CPF Bishan Building, S 579838
(i) Directly owned by Savills plc.
(ii) Both ordinary and redeemable shares owned by the Group.
(iii) Partnership interest.
The total non-controlling interest at the end of the year is £1.5m (2016: £1.4m). The non-controlling interests in respect of the above
subsidiaries that the Group does not own a holding of 100% are not considered to be individually material.
There were no material transactions with non-controlling interests during the year. Refer to Note 20 for details on restrictions on the Group’s
ability to access cash in the Group’s Asia Pacific operating subsidiaries.
150
Savills plc
Report and Accounts 2017
Notes to the financial statements continuedYear ended 31 December 2017 Shareholder information
Key dates for 2018
Annual General Meeting
Financial half year end
Announcement of half year results
8 May 2018
30 June 2018
9 August 2018
Website
Visit our investor relations website www.savills.com for full up-to-date investor relations information, including the latest share price, recent
Annual and Half Year Reports, results presentations and financial news.
Shareholder enquiries
For shareholder enquiries please contact our Registrars, Equiniti (see below). For general enquiries please call our Shareholder Services
helpline on: 0371 384 2018 (overseas holders need to call +44 (0)121 415 7047. Lines are open from 8.30am to 5.30pm, Monday to Friday,
excluding bank holidays). For further administrative queries in respect of your shareholding, please access our Registrars’ website at
www.shareview.co.uk
Electronic communications
If you would prefer to receive shareholder communications electronically in future, including your Annual and half-yearly reports and notices
of meetings, please visit our Registrars’ website, www.shareview.co.uk and follow the link to ‘Register for e-communications’ under the
Shareholder Services section.
Half Year Report
Like many other listed public companies, we no longer circulate printed Half Year Reports to shareholders. Rather, Half Year results’
statements are published on the Company’s website. We believe that this is of benefit to those shareholders who do not wish to be
burdened with such paper documents, and to the Company, as it is consistent with our target of saving printing and distribution costs.
Professional advisers and service providers
Solicitors
CMS Cameron McKenna LLP
Cannon Place
78 Cannon Street
London EC4N 6AF
Registrars
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Auditor
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
Joint Stockbrokers
UBS Investment Bank
1 Finsbury Avenue
London EC2M 2PP
Numis Securities Ltd
The London Stock
Exchange Building
10 Paternoster Square
London EC4M 7LT
Principal Bankers
Barclays Bank PLC
1 Churchill Place
London E14 5HP
Savills plc
Report and Accounts 2017
151
Financial statementsGovernance Strategic reportOverview Cautionary note regarding forward-looking statements
Certain statements included in this Annual Report are forward-
looking 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. Forward-
looking statements can be identified by the use of relevant
terminology including the words: ‘believes’, ‘estimates’, ‘anticipates’,
‘expects’, ‘intends’, ‘forecasts’, ‘plans’, ‘goal’, ‘target’, ‘aim’, ‘may’,
‘will’, ‘would’, ‘could’ or ‘should’ or, in each case, their negative or
other variations or comparable terminology and include all matters
that are not historical facts. They appear in a number of places
throughout this Annual Report and include statements regarding our
intentions, beliefs or current expectations and those of our Officers,
Directors and employees concerning, amongst other things, our
results of operations, financial condition, liquidity, prospects, growth,
strategies and the businesses we operate.
Other factors that could cause actual results to differ materially from
those estimated by the forward-looking statements include, but are
not limited to:
– Global economic business conditions;
– Monetary and interest rate policies;
– Foreign currency exchange rates;
– Equity and property prices;
– The impact of competition, inflation;
– Changes to regulations, taxes;
– Changes to consumer saving and spending habits; and
– Our success in managing the above factors.
Consequently, our actual future financial condition, performance
and results could differ materially from the plans, goals and
expectations set out in our forward-looking statements.
Accordingly, no assurance can be given that any particular
expectation will be met and readers are cautioned not to place
undue reliance on forward-looking statements which speak only
at their respective dates.
The Company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future events or otherwise.
152
Savills plc
Report and Accounts 2017
Savills plc
33 Margaret Street
London W1G 0JD
T: +44 (0)20 7499 8644
www.savills.com
Registered in England
No. 2122174
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