Savills plc (SVS) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to this morning's virtual presentation of Savills preliminary results for the 6 months ending 30th of June 2020. Thank you all for joining us, wherever you may be. It will be great to look forward to a time when we can meet in person to present the next set of results. When I last updated you on 12th of March, I commented in the summary, and I quote, "It is difficult to predict the precise impact of COVID-19 on our business with any accuracy." How those words now resonate across all the markets in which we operate. It has been a tumultuous 6 months. Within days of me saying that, we experienced lockdowns across Europe, the U.K. and North America. And by the end of the month, over 70% of our entire global workforce was working remotely. I do want to take this opportunity to thank at the outset the amazing efforts of our IT and facilities management teams to allow this switch to happen, that happened seamlessly without any major business interruption, an amazing feat in unprecedented circumstances. I would also like to take this opportunity to thank all of our staff worldwide for the amazing efforts they've put in to continue to service our global clients with such fortitude and courage, something I know our clients are enormously appreciative of. In terms of today's format, I will provide you with the highlights of our results, the operational impact of the COVID-19 pandemic on the business during the period as well as its effect on the main markets in which we operate. Simon will then take you through the financial review, and I will finish with our summary and outlook for the second half, no mean feat under current circumstances. Moving on to the highlights. Bear in mind the extreme effect that the phased lockdown had on our global business, particularly in Q2, I'm pleased to announce a resilient set of results, which highlights the diversity and underlying strength of our global business. This diversity allowed us to maintain group revenue at GBP 791.4 million, a year-on-year reduction of 6.6% despite the closure of many of the transactional markets in which we operate. Underlying profit reduced to GBP 13.2 million, a reduction of 65.6%, as a result of the revenues being more heavily weighted towards our non-transactional business, which carry low margins. It is also important to highlight the positive swing in our net cash position at the half year to GBP 9.4 million compared to H1 2019, where we reported a net debt of GBP 139 million, mainly due to the measures we have taken to preserve our cash position. Simon in his financial review will cover our dividend policy, and we will look to restart the payment of dividends as soon as is prudently appropriate. The drivers of this performance during the period were the growth of our Property and Facilities Management business and Consultancy income, which mitigated partially the decrease in transaction revenue due to the significant declines in market volumes. Our commercial transactional revenue decreased by 23%. And our U.K. residential revenue reduced by 8%. Less than the market volumes decreased during the period, and our residential revenue significantly recovered in June. And I'm pleased to say this is carried through July and beyond, which is very encouraging. Savills Investment Management revenue also reduced by 6% during the period to a level of -- this is down to a level of reduced performance fees during the period. This was partially offset by an increase in base management fees, which increased by 9%. And overall assets under management increased by 11% over the period to EUR 24.4 billion (sic) [ EUR 20.4 billion ]. Taking into account the exceptionally difficult conditions that all our businesses have experienced, I am very pleased that we traded profitably, supported by a robust balance sheet, which I believe further validates our continued strategy to grow our less transactional business lines as a counterbalance to our strong market position in the main transactional markets. Looking now at our diversified business model. It's probably no surprise to see the increase in weighting towards our defensive and more recurring income streams, which collectively grew by some 2.3% during the period and represents now 2/3 of our total global income. Property and Facilities Management increased its weighting to 43% of our total income, our biggest business line, up from 39%. In many global markets, we are the leading property and facilities management business, and we now manage over 2.3 billion square feet, together with a further 1 billion square feet in joint venture. At the last results presentation in March, I was also able to announce the acquisition of Macro Consultants, providing us with a national project management capability across North America. And I'm delighted that we are able to provide this service to our clients in these challenging times. 2 weeks ago, we exchanged on the acquisition of OMEGA, a very established property and facilities management business operating throughout Germany across all main property sectors. Germany was a key strategic gap for us, provide this comprehensive management platform, and I am delighted that we have found the right solution. It is this focus on our less transactional revenue that will continue. But we will supplement, as necessary, our strength in key transactional markets to enhance our market share. Turning now to our operational status during the pandemic. You'll see the benefits of our broad geographic spread of business become obvious when we look back at the impact and the spread of pandemic from East to West. Across the Asia Pacific region, where we have the largest number of employees and where 35% of our revenues are produced, we experienced operational lockdowns across China and Hong Kong from the 1st of January this year but moved into a phased reopening from the end of February. We have experienced second and third waves of the pandemic in a number of markets, but we now have 90% of our offices open in this region but with restrictions still in place in Australia, particularly in Victoria, but also Hong Kong, Singapore and India. Moving further west. Our offices in each country closed as the individual lockdowns started from 14th of March onwards but with a phased reopening from the 27th of April. Inevitably, we have also experienced second waves across the region, most recently in Spain and Barcelona, where we are operating a rotational system. But I'm pleased to say that all our offices are open across Europe and the Middle East. In the U.K., our offices closed on 23rd of March with a phased reopening from 18th of May. And again, we are now fully reopened. Finally, North America, our offices closed from 17th of March with a phased reopening from 4th of May, and we currently have 2/3 of our offices open. But the restrictions are still in place across California, Pennsylvania and Texas. And occupational densities in a number of our offices, particularly the major metro centers, remain restrictive. Our ability to reopen our offices safely was due to the global experience we gained through being one of the largest property managers, which allowed us to ensure all the safeguards and protocols were in place to protect both our staff and our clients as the economies emerged from lockdown. Moving on to the management actions we took as the pandemic took hold. With such operational challenges, our response was swift, lessons learned from the experience of other market downturns. To control both costs but also maintain strategic growth, we want to both hold on growth and to hold our costs, a strategy which has served us well. Simon will respond in more detail on key areas of cost control and saving, but this included salary cuts across the entire senior management team worldwide, limiting all discretionary spend attached to client entertainment, marketing, travel, reevaluating our capital expenditure as well as deferring a number of projects until there is more economic certainty. We have continued to focus growth on Consultancy and Property Management, which I mentioned, but also sectors which have benefited from changes brought on by the pandemic. This includes the structural acceleration in the change between retail and logistics, the greater demand for PRS and multifamily and also the rise in demand for life sciences. In line with this long-term focus, we have maintained our bench strength across our global workforce. And again, we have maintained the vast majority as fully operational throughout the pandemic. We are now seeing good opportunities for organic growth, and we have continued with our market-leading graduate program, which will continue in most countries. Moving onto our subsidiary reports, starting with the U.K. I've highlighted on the slide the major macro themes which obviously affected the economy during the period, so please revisit your leisure. In terms of property impact, not surprisingly, commercial investment volumes dropped by 62% in Q2, which was the weakest quarter ever, following a very strong first quarter. But we are seeing activity continuing to improve from June onwards. Likewise, take-up in the office leasing markets was down 37% in H1, London being the most heavily impacted market. The winner in terms of sectors was logistics, which experienced a record first half, with take-up totaling 22.5 million square feet, a second quarter rise of some 81% on the previous year. Finally, U.K. housing transactional volumes nationally were down 25% in H1. We are seeing this strong recovery I alluded to earlier. And as you'll see from the graph on the slide, there is a particular focus on country, and that swing is continuing. Despite these most challenging conditions and reduced volumes, I'm pleased to say that we maintained and increased our market share across many sectors, carrying out some of the largest deals during the period. In Central London, despite the lockdown, we undertook 2 of the largest office acquisitions in the city, acting for Covington & Burling and Baker McKenzie on deals totaling some 245,000 square feet. Outside London, nationally, we entered on 3 of the largest office leasing transactions at Snowhill, Birmingham; Ruskin Square in Croydon; and only a couple of weeks ago, Haymarket in Edinburgh, a total of nearly 1 million square feet. The demand for private offices remains strong despite some commentators saying all of us will be working from home in the future. Our capital markets teams were also extremely active during the period. And in PRS and multifamily, we enjoyed a market share of 75%, advising Blackstone on the largest ever private real estate transaction, which will total of GBP 4.66 billion, which was the acquisition of the iQ student accommodation portfolio. Since we were able to reopen our residential sales and lettings business, we have enjoyed best ever June and July on record. And residential property going under offer continues, and we have a strong under offer base as well. Our market share of deals over GBP 5 million has been maintained at 24%, whilst our residential development lending team transacted deals of over GBP 640 million despite this lockdown. Moving onto Asia Pacific region. By being first in, first out of the pandemic, this has led forecasters to anticipate a GDP fall of limited only to 0.2% in 2020. However, there are continuing downside risks on second and third waves. The effect of this was commercial investment volumes fell by 40% in the first half, particularly impacting retail, which is over 50% down. But logistics was again the winner, falling by only 9% during the period. Interestingly, investment volumes in China rebounded in Q2 by 67%. And China appears to be recovering quickly despite the continuing trade tensions. Other resilient markets in the region include Japan, Korea and Vietnam, all experiencing good growth, particularly in manufacturing and logistics. With the continued travel restrictions in place, it's not surprising that cross-border investment activity within the region fell some 43%, and this is likely to be subdued going forward. Despite these headwinds and reduced volumes, our teams continued to increase their market share. In capital markets, this has increased to over 60% in Hong Kong, which is market-leading, 49% in China and 47% in Korea. Flagship deals we undertook during the period include LG Twin Towers in Beijing for a price in excess of USD 1 billion; Urbanest, a student accommodation portfolio across Australia, for AUD 2.1 billion; and Parc 1 sold for USD 770 million, some of the biggest trades. Within occupied services, our teams also won notable mandates from Standard Chartered, Rio Tinto and also Clifford Chance. And the balance of our business was also maintained by significant growth in property management, increasing some 10%. And new contracts included Leatop Plaza, a 1.6 million square foot complex in Guangzhou. We were also reappointed in Hong Kong and Kowloon by the government property agency on a portfolio extending to some 10 million square feet. And in Vietnam, where we are the largest property advisory firm, we grew our property management portfolio by a further 14%. Now turning to North America. The continued impact of the pandemic is obviously still being acutely felt, particularly around California, Pennsylvania, Texas and Florida. But many other major cities remain fastly occupied, with a number of corporates talking about not returning until the beginning of 2021. On the back of this, many organizations have put real estate decisions on hold. And national office leasing volumes declined by 31% during the year, with many markets, including New York and San Francisco particularly impacted, perhaps more resilient showing in Washington, D.C. and Atlanta and other markets less reliant on mass public transport. Likewise, our commercial investment volumes in the region also fell some 26% down year-on-year. But in contrast to office leasing, the strongest investor demand still remains focused on New York and Los Angeles, with investors looking to take availability in liquidity forward. In line with the global themes I've mentioned elsewhere, the national logistics business has certainly benefited, and our market position has continued to grow, simplified by us acting for United Natural Foods on that 200 million square foot portfolio, including its distribution center network. Our team also secured a global master services agreement from the Gates Corporation on their 12 million square foot portfolio. And we were appointed by the U.S. General Services Administration on 2 major contracts as well as executing significant transactions on behalf of Genesco and Palmer Logistics. It is perhaps worth noting that the growth of our global occupier services business, this is that entire platform, is continuing, and we are continuing to build this in earnest. And we were appointed by Aberdeen Standard Investments and Siemens Gamesa, which will benefit many of our regional businesses going forward. Now moving on to Europe and the Middle East. Economies have been impacted to varying degrees during the period, and there is continuing fears, as I've mentioned, of a second wave, particularly in Spain and Luxembourg. Across Europe, the investment volumes fell less than the U.K. but still 48% down in Q2. Whilst Germany, both in terms of economic and investment activity, is actually now standing out, with investment increasing over the first half by 31.5%, and increases in some other European markets. Overall sentiment is improving, enhanced by cross-border activity from both North America and Asia Pac investors. Office leasing volumes across Europe fell by some 33% during the first half with significant declines in Frankfurt and Madrid, but we do anticipate a recovery in H2 with limited supply in most markets. Following the lead I've mentioned in other markets, investor sentiment has definitely polarized towards logistics, prime offices and multifamily, with most retail markets experiencing a downward price correction. And across the Middle East, we've also seen greater investor interest in both Saudi and Egypt. Our teams have remained active during the period, and we're again involved in some of the largest transactions, including the largest ever Berlin office leasing deal on -- for Blackstone, some 900,000 square feet. In the Netherlands, we acted on the sale of a residential portfolio of some EUR 370 million worth for Patrizia. And in Belgium, we advised AG real estate on the sale of over 1.7 million square feet of logistics assets. Our continued strategic focus is to grow Consultancy and Property Management, as I've mentioned, and notable wins include the mandate to manage the entire French portfolio for St Martins Property Corporation totaling just under 1 million square feet; the Enma Mall in Bahrain, some 550,000 square feet; and in the Netherlands, the management of the LogChain logistics portfolio, which comprises circa 10 million square feet. Last but not least, Savills Investment Management. Operating across the U.K., European and Asia Pac markets, the economic effect of the pandemic is fully reflected in my earlier regional business reports. That said, on a positive note, there remains a significant weight of capital searching for income, and real estate remains a very popular asset class. Inevitably, many transactions were put on hold in Q2 as investors wish to understand the effects of the pandemic as well as considering a rebasing of value. The same focus from institutional investors has been weighted towards multifamily, logistics and prime CBD offices, as I mentioned earlier. During the lockdown, rent collection in some sectors has been heavily impacted, particularly in retail and hospitality. And in the U.K., the March and June total rent recovery in these sectors was only circa 30% to 40%. Moving on to our own business. We have benefited from good growth in our net base management fees, growing by some 9% during the period. And our capital raising has also continued in earnest, obviously now weighted to H2, but growing our AUM, as I mentioned earlier to EUR 20.4 billion, which is an 11% increase. In Asia Pac, our Japan II fund achieved successful first flows at $500 million. And we continued to grow our European logistics platform, which now has over EUR 4.4 billion of AUM in this important sector. We traded and acquired 5 logistics parks across Poland totaling some 2.9 million square feet and, again, acquired a large logistics complex in Ansbach, Germany for EUR 124 million. We continue to focus on strategic recruitment in our platform, and this has been particularly focused towards Hong Kong, Australia, Malaysia and also in London. And again, we are focused on the growth of our debt investment business, particularly with our holding in DRC, which also won the accolade as the U.K.'s best alternative lender of the year. Before I finish, I thought it would be useful if I highlighted some key areas of service innovation during the period to further assist our plans. In adversity, there remains opportunity. And obviously, we have looked to enhance our services, particularly around safety on return to work, where we have developed new technology, both in-house and in conjunction with third-party suppliers, to provide new services, particularly around smart building technology drawn from our experience in property management worldwide and project management. We've also adapted our services as a result of the pandemic and lockdown. And examples of this include the provision of a service of virtual viewings, where we conducted 6,000 virtual viewings in the U.K. during lockdown. In July, we've carried out a further 2,000 virtual viewings, but importantly, also 21,000 real viewings, a 60% increase on the previous year. During the period, we also held 4 fully remote auctions selling some 220 properties. The focus on sustainability has also been accentuated by the pandemic, and we are very much able to provide a comprehensive suite of consultancy services from industry experts, which is in great demand from our clients. I will now hand over to Simon to take you through the financial review.

Thank you very much, Mark. Good morning, everybody. If we start with the summary. You can see the resilient revenue performance that Mark referenced very clearly, but also the impact of lockdown on our profitability. And it's important to note here that by following the similar playbook we followed to the Global Financial Crisis, we're prepared to sacrifice margin in the short-term in periods of hiatus in transactional markets in order to serve clients and remain match fit for recovery. The other main point I draw from this slide is the robustness of our cash position, as we posted net cash of GBP 9.4 million versus net debt of GBP 139 million a year ago. And I'll talk a bit more about cash in a moment. And finally, you are aware that we canceled the final dividends for 2019. And in view of the lack of certainty of the impact of COVID-19 over the coming months, the Board has not declared an interim dividend. You will note from the statement that we remain completely focused on long-term shareholder returns, of which clearly, dividend is a component, and we will look to restart distributions as soon as it's prudently appropriate. So if we turn now to the performance of our core service lines. Standing back and looking at the period in summary for a moment, what this slide tells you is that our less transactional businesses grew revenue by just over 2% and provided us with a stable profit contribution of GBP 32 million compared with GBP 33 million last time. This is a very strong key on the ship in challenging market conditions, and it enabled us to withstand the Q2-driven GBP 25 million negative profit variance year-on-year in the global transaction business. And recognizing my earlier comment about maintaining the bench strength of the group, and it is in that transactional line, indeed, you will see the negative effect on profits of that policy in the short term. Heard it over -- clearly over the years, the investors and analysts have asked the question, "What is the impact of negative transactional market sentiment on your less transactional businesses?" And in many ways, this period has stress test -- been a stress test to the answer to that question. And the empirical evidence that you can see here is one of resilience through the property management consultancy and investment management columns. As we've always maintained, they're not typically immune, but they are very, very defensive in those businesses. Finally, I'm particularly pleased to see the pretax profit margin on the Property Management business improve over the period slightly, and I'll talk a bit more about that in a moment. But if we now do come and decide to look at geographical performance, there's a general observation to be made here that in those locations where we have the broadest service offerings, being the U.K. and Asia, our overall performance displays relative resilience even in the most highly impaired markets. This observation underlines the strategic point that Mark has made about our continued strategy of building the breadth of service around the world. So it's no coincidence to see that the 2 acquisitions we've made so far in 2020 are of less transactional businesses, being Project Management in North America and Property Management in Europe and the Middle East, respectively. So if we turn now to cash flow, and I apologize that this is a rather busy slide. But I've included a comparative from H1 last year, so you've got the period-on-period movements readily to hand. As the first 3 columns show, in the first half of 2020, we generated net cash from operations of just over GBP 13 million compared with an outflow of GBP 125 million in H1 2019. And this was primarily to do with the collection of the very large receivables balance at year-end, which I referenced in March, sales tax deferrals as well, which represented a significant positive swing in the working capital arm. The remainder of our bridge comprises mainly financing and investing lines, which collectively represented a net cash outflow of GBP 32.2 million during the period compared with GBP 88 million last time around. And the significant items in this saving were obviously the cancellation of the final dividends of approximately GBP 36 million last time and a GBP 13 million positive swing in finance costs and FX. Our acquisition spend actually increased by just over GBP 10 million, primarily as a consequence of the Macro deal in March, whilst our CapEx spend was reduced by GBP 7 million. And I would note that the CapEx that we did approve was primarily directed towards systems and our long-term data and analytics and digitization programs, where helpfully, the cost of outsourced development resource has reduced significantly during COVID-19. If we turn now to the performance of our core business lines and start with commercial transaction business. You can see the impact of COVID-19 on our businesses around the world very clearly here. In most locations, as Mark said, market share gains at least partially mitigated the significant decline in market volumes you've heard about already. In Asia , where we've contended with COVID for the longest period of time, we've started to see recovery in a number of markets, albeit the trajectory is likely to be buffeted by further infection waves and associated lockdowns as we go forward. During the period, there was a negative variance in the pretax line of GBP 8.6 million year-on-year. The U.K. business has shown incredible resilience helped by some significant market share gains, one example being that we advised on 37% of the capital value transacted in London during the period, a clear market-leading position. This also speaks volumes about the degree of positive sentiment in the U.K. pre-COVID. And the result of that is that we only had a negative variance on the pretax line of just about GBP 0.5 million in the period. In Europe, the relative strength of Germany mitigated declines in market activity in other parts of the region. And our overall loss increased by GBP 2.6 million year-on-year as we maintained and indeed increased our bench strength in the region. And finally, in North America, we were very glad to restrict the revenue decline to 23% against a market context of leasing volumes which contracted by a minimum of 31% year-on-year, and other commentators have recently come up with much higher numbers than that. Generally, the less significant metro cities are the ones that performed resiliently during this period. So we turn now to the residential business. Our overall performance is one of considerable resilience given the trading environment was hugely restricted during the lockdowns in Q2, which in the U.K., remember, coincided with the key spring sales season. In the U.K., reductions in both primary and secondary sales volumes in the period were partially mitigated by a very strong performance in our private rented sector, PRS, performance business. Since viewings were recommenced in -- at the end of May, we've seen a significant surge in activity in properties going under offer, although this had very limited revenue effect in these numbers. But it does bode well for the coming months as these transactions complete. And whilst a 54% reduction in profit sounds enormous, it should be noted that in this seasonal business, that represents an absolute drop of only GBP 1.9 million year-on-year. In Asia, Mainland China, in particular, showed a robust performance and mitigated much of the decline in activity in Australia and Singapore during this period. Our Asia Pac residential profits actually improved as a result of the net positive effect of the actions taken on our Australian business the previous year. If we turn now to the less transactional lines, starting with Property Management, which is the obvious standout performer in the period with growth in both revenue and profits. And you can see here, this was driven by the Asia Pacific region, where we saw good growth in the markets referenced in this slide. And additionally, we benefited from the increased availability of facilities management staff and the consequent moderation of employee cost growth. In the U.K., our business exhibited resilience in the face of lockdowns, albeit that our residential lettings business contracted during the period by 11%, although we have seen recovery during the last few weeks. And this short-term decline represents the majority of that GBP 1.7 million negative profit variance year-on-year. And on top of that, there's a little bit of extra work associated with COVID, which we didn't invoice to clients under the circumstances. In Europe and the Middle East, our business was relatively stable with a GBP 600,000 reduction in profits emanating from certain countries. We did, as you've heard, win 3 1 million-square foot plus mandates during the lockdown period. And this, together with the acquisition of OMEGA in Germany, assuming it completes towards the end of September, will further bolster our Continental European and Middle East management business hereon. Moving to Consultancy now. In the ground, our business performed as we would expect a diversified portfolio of different service lines to do, with generally stable revenues and a GBP 1.3 million reduction in profits overall period-on-period. In the U.K., which comprised our broadest portfolio of services, strong performances in certain consulting lines, referenced on the slide, couldn't completely mitigate declines in others, the 2 significant ones being planning and project management, both of which were affected by the hiatus, the latter, in particular, with restrictions over site access and supply chain interruption at times during the period. In Asia and Europe, where our consulting businesses are much more focused on valuation, we saw significant activity as both banks and owners looked to evaluate the impact of the pandemic on their portfolios. And the revenue decline was largely a result of the impact of lockdown on our development consulting advisory business during -- in the region, particularly in Mainland China. And finally, North America appears here for the first time. And that follows our acquisition of Macro Consultants in March, which is, as you recall, a high-quality project management business. And it was broadly breakeven during the postacquisition period, characterized again by the same lockdown impacts I've referenced already in project management. Turning then finally to Investment Management. This showed resilience in some challenging conditions. The negative revenue and profit variances were caused by a reduction of GBP 3 million in performance fees period-on-period. And these, remember, largely flow through to the bottom line. And this was down to the unusually high comparative that we recognize some -- where we recognized some one-off performance fees on our mandates portfolio in 2019. And obviously, by definition, one-off performance fees are not recurring. Recurring base management fees, however, grew by 9% and now represent 82% of the overall revenue of the Investment Management business. And importantly, our fund performance has continued strongly as befits the core-core plus manager with significant logistics assets and, crucially, a strong record of boots on the ground at asset management. And this enabled us to raise approximately GBP 0.7 billion of new capital despite lockdowns, which was only 21% less than the same period last year. And finally, the performance of DRC Capital, the real estate debt manager in which we hold a minority, was very strong during the period as the contraction in bank lending opened up further profitable opportunities for alternative lenders in the market. So if you summarize, the Savills Investment Management performance produced a slightly lower but much higher quality profit stream during this period. And with that, I'll hand it back to Mark.

Thanks, Simon. If I can move on now to summary and outlook. I am very proud of the performance of the business, driven by strong market share gains in some of the key global markets. The balance of the business has also very much helped us, and this is something we wish to continue to develop, particularly in Property Management and Consultancy, where we have a very strong reputation. On a sector basis, there are also opportunities which we wish to take advantage of by developing our platform further, particularly in logistics, residential and life sciences. And our policy remains the same: to maintain bench strength through to recovery whilst looking at opportunities for strategic recruitment. More recently, we are seeing signs of recovery in a number of markets and expect this to continue as the world learns to live with, rather than get through, COVID-19. Our strategy remains to invest for the long-term benefit of the business whilst maintaining the financial strength to withstand any further headwinds, which will allow us to take advantage of these growth opportunities as they arise. Thank you very much for listening. This now ends the formal part of the presentation, and Simon and I will be delighted to take any questions that you have.

And I think we have a few. I think we have. Bear with me while everybody gets sorted on the questions. Okay. The first one is from Chris Millington. And thank you, Chris. It's quite a long one, or it's multifaceted, anyway. It starts with, "What is your appetite for further acquisitions? Are there any strategically important areas you would like to improve or fill? And have opportunities changed during COVID-19?" I'll do the next ones after you've dealt with that. Mark?

Okay. Yes. So I think, Chris, I sort of don't want to belabor the point. And obviously, you've seen OMEGA as an acquisition, which will complete, subject to regulatory approval, in September. I think the acceleration of consultancy services across Asia Pac is something that we are looking to. Project management has grown and continues to grow in many of our markets, and the linkage between that and the transactional markets, particularly as people are looking at the reuse of office space, as an example, it's important that we can provide that service in every market. We've grown it organically in the Middle East during the period, and that's going well. So I think we will look at potential acquisitions, but a lot of what we do will be organic as well. And I think that is something that we are seeing opportunities for.

Thank you. The next question was expectations for net debt in the full year adjusted for deferrals. And what capital position do you see as optimal? And I probably ought to take that one. I think it's very, very difficult, candidly, to predict the outcome for the second half, and that's a combination of factors, the 2 principal ones being the degree of recovery and degree of impact of recoveries that we can already see through renewed lockdowns, localized restrictions, et cetera. So that will affect the pattern of trade. The second one, from the position of net debt is, are -- clearly, one of the biggest factors in our net debt position is the degree to which we have a large working capital position, i.e., a large receivables balance at year-end, and that is entirely unpredictable, particularly in these circumstances. But my expectations at the moment are that we are looking at broadly not a dissimilar position that we sat at the half year. And obviously, I'm making some assumptions there around the 2 points I've just made. But I don't expect there to be a significant difference. And in answer to what capital position do you see as optimal, clearly, we've always had a philosophy of limited leverage in the business. We have facilities that are very substantial, and we're not uncomfortable at times going into net debt position, as you've seen in previous periods. But we don't strike an optimal capital position. We do like to hit net cash generally at most year-ends as evidence of that policy. The next question is where do pipelines sit across the geographies? And Mark...

Yes. I'm happy to take that. Chris, in terms of geographical spread, we are -- as, obviously, the Asia Pac region went into lockdown, we're seeing improvements in pipelines coming out of sort of the stronger economies across the Asia Pac region. I've mentioned the increase in China. And also, leasing volumes are improving across China as well. And in some of the stronger markets, which have less lockdown, they are recovering quickly. Korea is definitely improving. Vietnam is improving. Singapore, obviously has still got a lockdown. Hong Kong obviously has -- still got some headwinds, too. So we're seeing that improvement in Europe. Pipelines are improving in the stronger European economies as well, as I mentioned again, particularly Germany, but also France, Netherlands, the Nordics. So we're seeing that come through. If I move into the U.K., the particular improvement in pipeline is around the residential markets. So we have -- as I mentioned, we've had very strong trading plans in June and July. And we have a -- our under offer bank is at a record level going forward as well in that sector. We are also seeing improvements in investment volumes coming through as well. So I see that improving during the second half. North America, obviously, is the last here, and as Simon has referenced, the reductions in volumes there. I think we will see some of the markets improve. And again, our teams are finding new mandates to help our occupier-based clients win. But I would say that is probably the area that needs to continue to improve over the period.

And Chris' final question is, "Can you talk about flexibility of Savills' cost base? And what actions may be taken in the event of further lockdowns or market deterioration?" And I think the key to this is in restating our philosophy, which worked brilliantly for us in the Global Financial Crisis and then the recovery thereafter, and the second I made about being prepared to sacrifice margin in the short term in order to match fit for recovery, we don't carry significant amounts of fat in our business in any event. And that's the function of our remuneration model, to be absolutely honest. If you don't produce, you, in general terms, don't receive. Clearly, we've been suppressing discretionary expenditure, and we'll continue to do that whilst we have the uncertainty that possesses at the moment. But we don't have any plans for any radical surgery on the cost base. And why do we say that? Because through COVID and currently, all the feedback from our clients is that by overservicing them in comparison with some others, there is a huge amount of goodwill that built up during the period when those clients can't actually transact. We saw this last time around a decade ago, and we fully expect to see that this time around. And we can start to see some of the impact of that in a much, much higher ratio of pitch wins that we've experienced over the last really 6 months. This new question from Joe Spooner, "Can you provide some further commentary on the H1 working capital movement? Does much of that reverse out in the second half or beyond?" Okay. There's a second subsidiary point, which I'll come on to a second as well. If you recall the cash flow slide, which I'm not technically gifted enough to put up for you at this stage, there was a yellow box in the top right-hand corner of that slide, where I've given you an ability very quickly to see the impact of the tax deferrals, which is the principal element of deferral within the cash flow performance in the period. Just to recall it for you now, reported net cash at the end of June, GBP 9.4 million; tax deferrals, and these are sales tax deferrals, predominantly in the U.K. of GBP 61.2 million, which leads you to an underlying, if you like, net debt comparison with the previous year, GBP 87 million better at GBP 52 million. Now those tax deferrals, about GBP 11 million from recollection falls to be paid during the second half of 2020, and the remainder fall due from March through to second half of 2021. And that is predominantly the U.K. element. So we -- as I said to -- in answer to the previous question, the working capital movement is basically fundamentally dependent on how trading patterns evolve through the second half and as we cut off at year-end. The second part of the question was, "The statement also talks about testing model scenarios. How extreme were they?" And that's an interesting question. I'm not going to give you every outcome that we had. But suffice to say, the COVID liquidity model, which we have largely been running our business on for the last 6 to 7 months, has a number of scenarios, as we've referenced. We have central case thesis, which was really around Q2 being the active epicenter of the COVID-19 damage on markets. But we have also further downside scenarios, which extends that damage in a significant sense through the second half and indeed, in some cases, into 2021. I'm not going to give you the readouts from those scenarios. That would be invidious. But I will say that the, if you like, the Armageddon scenario, does involve a significant reduction on the current market consensus for 2020 and 2021. And we remain comfortably within our leverage ratios of our borrowing facilities even under that scenario. So I think that's the position we can disclose. Now I don't see any more questions on the screen, unless I'm missing something. Yes, I do, Joe, a follow-up question. This is, "How are clients thinking about the future of the office post the work-from-home experiment? What opportunities does that present Savills?" Mark?

Okay. Yes, the work-from-home experiment, I think what we are seeing, Joe, is a lot of opportunity for us, particularly around project management design. And if you recall, we bought a business some 2 years ago, as KKS Savills, which is a design and workplace consultancy business with an international client base. And they and our project management teams worldwide are very busy looking at the opportunities. What we are seeing firstly is, dare I say it, is more flexible working as opposed to home working, and home working is part of that process, obviously. But I think what we've seen in our surveys, and we did survey across all our occupier client base during lockdown, was 89% of them we felt that the office was still very important and they would retain the office. But more likely is the offices will need to be changed internally to reflect the way that people will work. So I think that is the opportunity. There may be some decentralization from some city center environments, definitely, and there will definitely be a reduction in densities with offices. So for us, it's an opportunity. I generally don't think there will be an enormous impact on the amount of offices that actually the occupier base actually will occupy. But more likely, they will occupy and stay there in a different way. And I think that will be opportunities for us going forward. And actually, dare I say it, we're also seeing part of that in the residential markets. Because people working flexibly may want greater home working environments, and that will change the design and also the demand around the residential accommodation. Hopefully, that might answer that question.

Good. I think that's it for questions, unless anybody wants to stick their hand up very quickly, so to speak. And it looks like we're all done.

Okay. Well, thank you very much all of you for your interest and support. And we look forward to hopefully seeing some of you in person at our year-end results. Thank you.

Thank you.