Savills plc (SVS) Earnings Call Transcript & Summary

So a very good morning, ladies and gentlemen, and welcome to this morning's virtual presentation of Savills' Preliminary Results for 12 months ending December 31, 2020. I've never thought I'd say this, but it's actually quite nice wearing a suit and tie again, although perhaps I do need a bit of a haircut. Looking back to March of last year, none of us could have anticipated the global impact of the pandemic on all aspects of our personal and business lives, the tragedy and hardship felt by so many during the period but now the genuine hope and optimism as we are starting to see vaccines rollout and the world can think again about being physically connected. Savills has multi-sector expertise in its DNA, allowing us to advise on all elements of real estate, whether they are those hardest hit by the effects of the pandemic or those that have risen both in investor and occupier demand during the period. What is likely to be a lasting legacy will be a focus on ESG, data and technology, and we're continuing to invest in these key areas. Today's presentation will highlight our results, the actions we took as a management team and also the reaction to the pandemic as we -- as well as the steps we talk to reshape and refocus the business. Simon will then take you through a detailed financial review, highlighting our continued financial strength before I finish with our strategic focus going forward as well as the outlook for the year ahead. Finally, I want to thank our enormously dedicated workforce around the world, our loyal clients and also all our shareholders for their continued support. Savills has and continues to be open for business in every area of the world. Next, we will do this in person. Okay, moving on to the highlights. Despite an unprecedented fall in transactional volumes across the market, I'm pleased to announce a very resilient set of results, highlighting the strength and balance of the group. This balance allowed us to partially mitigate the effects of transaction advisory revenues, which fell, but maintained group revenue at GBP 1.74 billion, a 9% revenue year-on-year. Underlying profit reduced 32.6% to GBP 96.6 million as a result of our revenues being significantly more weighted to the less transactional businesses such as property management and consultancy, which carry lower margins. By taking decisive actions early on the course of the pandemic, we were able to strengthen our balance sheet, increasing the net cash position to GBP 177.7 million. Thanks to these early actions and our fundamental strength, we have resumed our annual dividend policy and are proposing a final ordinary dividend of 17p per share, reflecting the continued resilience of our less transactional business lines. Whilst transactional advisory revenues fell during the year, this was also partially mitigated by the outperformance of our global residential business. Balancing also by the property management and consultancy revenues, equally resilient was our investment management business, outperforming our original expectations. I also want to highlight the standout performance from both the U.K. and APAC regions as a whole, with profit levels more or less in line with the previous year. Taking into account the exceptionally difficult market conditions, particularly transactional, I'm very pleased with these results, which reflect both the diversity of the group as well as the continued strategy to maintain our bench strength, servicing our clients to the highest level and gaining share as markets recover. Turning now to our broad geographic spread. Our strategy remains to provide the highest level of service on a consistent basis across all the regions in which we operate. And this slide clearly illustrates how we are able to achieve this. We maintained our overall staffing level across the business, growing employee numbers in certain sectors, such as property management, reflecting our commitment to invest for the future. Finally, I think it is useful to reflect on the proportion of the year when markets across the various regions were impacted by forms of lockdown, ranging, as you'll see, from 20% across APAC, increasing to 30% plus in Europe and 40% in the U.K. In fact, in some markets, they were locked down for the majority of the year: Singapore, nearly 60%; Malaysia, 80%. As a backdrop, I think it's also important to highlight the impacts on our markets, and I'll now turn to some of the global macro themes. And I think the word unprecedented is one of the most overused during 2020 but so accurately describes some of the themes and impacts that emerged as a result of the pandemic. From a real estate perspective, there are obvious winners and losers. The demand for real estate investments have actually grown with strong fundraising during the period as well as allocations increasing towards property. This will underpin values in many sectors. In addition, the phenomenal growth of online retail continues. By way of example, online in the U.K. rose from 20% to 37% of all retail sales; in Greater China, from 34% to 45% over the year, prompting a significant rise in demand for logistics. The structural change in retail created a number of record operator failures, unfortunately, and our deserted city centers and travel restrictions impacted heavily on the hotel and hospitality sectors. Also talk about the demise of the office sector, I believe, is very overblown. Flexible working may be here to stay, but the benefits of collaboration and teamwork are best served often in an office environment. I'll echo the comments made by David Solomon, the CEO of Goldman Sachs, on working from home. He says, "This is not ideal and it's not the new normal." Many other businesses are now recognizing the long-term disadvantages of remote working. Interest in life science, data and technology sectors has reached new highs as have demands for all forms of residential, a sector in which Savills' brand is synonymous. To try and coin a single adjective, which reflects some of the trends that we've seen, it would be better, whether applied to accommodation, amenity, location or specification and sustainability. And this provides an enormous opportunity for us to give high-value consultancy advice to our clients. This slide will be familiar to many of you. It clearly shows our continued and increased weighting to more defensive and recurring revenue streams, such as property management, which has grown from 34% to 39% of overall group revenue, but also continued growth in consultancy and investment management. I've also highlighted the resilience of the transactional -- residential transactional revenues, which totaled some 10% of group revenue. Whilst the biggest negative impact was, unsurprisingly, on commercial transaction revenues, which reduced from 34% to 28% year-on-year. The individual pie charts I've shown indicate the weighting on a regional basis and are useful explaining the balance of our business, emphasizing the resilience of the U.K. and APAC regions because of their strategic balance, whilst there is clear focus to continue to grow the scale of our property management to consultancy services in Central, Europe and the Middle East as well as consultancy services in North America. Moving on to our strategic actions for the year. At the half year results in August last year, I highlighted the swift response we took to managing costs, including salary reductions across the senior management team worldwide, limiting all discretionary spend but, on an unimportant note, maintaining vital investment, particularly in data and technology. Our full philosophy was and remains to keep our workforce fully engaged during the period, limiting the use of any furlough or government support schemes. In the U.K., this was primarily focused around limited use of furlough in the residential transaction markets when we were legally obliged to close due to the lockdown restrictions, but these subsidies were fully repaid during the period. I mentioned earlier that our staff numbers grew in many regions during the year, and this included the creation of many new and enhanced consultancy service lines, which I'll detail shortly, but also considerable growth in logistics, science and multifamily sectors, the sheds, men's and beds, where we have successfully built our market share. Despite the obvious headwinds, we continue with our full graduate recruitment and emerging leaders programs worldwide, ensuring our future bench strength is also reinforced. This allows us to be very well positioned to make -- take market share through the next recovery. And out of adversity comes opportunity for us, and this included those many new service lines. In light of the new landscape, occupiers and investors continue to place great demands on their real estate needs, whether through the war for talent, location, rightsizing their accommodation or through sustainability and efficiency. Our consultancy services have evolved to meet these needs, linking workforce and workplace analytics for occupiers. We've also developed a comprehensive suite of services in smart building design and technology, and also launched Savills' office fit last year, incorporating standards such as BREEAM, WELL and WiredScore. Within the flexible office sector, we've combined all our services into Savills Flex, incorporating our market-leading Workthere brokerage business, now operating across 10 countries, and pivot a dedicated landlord operating management advisory service. Also extending our use of technology, we carried out over 20,000 accompanied virtual viewings last year and had over 35 million visits to our website globally, up almost 50% on the previous year. And we continue to provide remote inspections to our clients as well as remote auctions at which we have now sold over GBP 300 million worth of property, achieving a 76% success rate despite the continued lockdowns. We've also extended our sustainability and energy consultancy, covering green energy, waste, infrastructure and carbon offsetting. And during the year, we advised on a number of national woodland creation schemes, resulting in over 4.75 million trees being planted. Finally, drawn on our experience from real estate management, we've looked at reopening facilities safely for all our clients, and we've innovated our services to include thermal monitoring, remote access, deep cleaning and also ventilation. Now turning on to the individual markets. In the U.K., the transactional markets were hit substantially from March onwards, with activity across the commercial investment and office leasing remaining subdued throughout the rest of the year. Many investors and occupiers have adopted a wait-and-see approach, a combination of Brexit and the pandemic. And this was particularly evident across Central London where office take-up fell by 60% year-on-year, and the retail sector was also a major casualty. The silver lining to all of this was residential where we experienced record ever sales volumes in Q3 and Q4 of last year, heavily weighted to the country markets, and this trend continues. Focused on supporting our clients across all sectors, we took on the property management of 12 Intu shopping centers, totaling some 13 million square feet, a great achievement to take on during the pandemic. We also strengthened our residential core market business, growing our market share in London by 19%, maintaining our #1 market position in market share on sales above both GBP 5 million and GBP 20 million, and also transacting the largest single apartment deal of the year at 1 Grosvenor Square for an excess of GBP 140 million. The market doesn't stop during a pandemic. Our commercial investment teams also had a very busy year, holding on to top spot in Central London, maintaining its leading position across retail, together with commanding a 50% market share in the residential capital markets. Highlights in this area included acquiring the largest estate in Mayfair on behalf of Deka; and also Dolphin Square in Victoria for AXA IM. Finally, our Savills science team grew significantly during the year, advising Brookfield on its acquisition of Harwell Science Park in Oxford as well as advising on the redevelopment of Bletchley Park, a full runner to this current science park revolution. Despite overall market volume falls, we maintained our overall revenue to within 2% of the previous year. And we remain positive about a recovery from Q2 onwards, reflecting continued buoyancy in the residential and logistics markets, progressive improvements in capital markets as those travel restrictions lift but also office and retail leasing remaining probably subdued for the short term. Now moving on to APAC. Again, a number of markets experienced the downturn, but there was a strong second half recovery, particularly in China, Taiwan and Vietnam, all of whom experienced GDP growth linked to the success in managing the pandemic. Hong Kong experienced dramatically reduced investment volumes with few prime sales and a significant reduction in office rents over the year. This is in contrast to Mainland China where volumes fell but are recovering and office leasing volumes are starting to pick up. Across Greater China, the residential markets also held up well, with volumes increasing by 10% year-on-year. We also experienced a good Q4 recovery in a number of other markets, particularly Korea and Japan, with improvements now underway in Singapore, India and Australia. In Greater China, we maintained our #1 position in commercial investment transactions with a market share of 57% in Hong Kong and 32% across the region. We transacted some of the largest deals, including the Gopher Centre in Shanghai and LG Twin Towers in Beijing. We also expanded our teams focused on the greater bay areas and significantly grew our activities in both property management and facilities management where we are one of the largest providers. Outside Greater China, we maintained our market-leading positions in both South Korea and Vietnam, whilst our main focus was on our valuation and consultancy business growth. We continued also our drive in the logistics sector with substantial organic growth in South Korea, Vietnam, Australia and New Zealand. And across our platform, we actually transacted $12.36 billion of transactions despite the travel restrictions. We also opened a new office in Hyderabad, India where our business, established only in 2018, continues to grow well. We also advised on a number of major corporate occupiers across the region, acting for Telstra, Lazada, DHL. And a word on retail too, there is activity in the sector across the region where we represented Huawei and Polestar in China as well as Louis Vuitton in Vietnam, all major flagship deals. This improving activity and our strength in property management allowed us to reduce the revenue reduction to 8%. And looking forward, we are seeing good momentum in China and Vietnam but with improvements occurring across the entire region. Moving on to North America. As many of you know, our primary focus here is across the office and logistics sector where national office leasing volumes fell by 40% year-on-year, in fact, the most pronounced fall in recent history. The most impacted major markets included Los Angeles, New York and San Francisco where volumes dropped between 50% and nearly 70% as most occupiers continued to assess their needs in light of the pandemic. In line with other world markets, logistics was the star performer with take-up 27% increase during the year, whilst commercial investment volumes fell by 31%. More or less a year ago today, I announced the acquisition of MACRO Consulting, our project management platform, a highly regarded business addition, comprising 90 staff across the U.S. Whilst this was only just before the world actually went into its first lockdown, I am really delighted we completed this. The integration is going exceptionally well, and the business is growing, allowing the entire Savills business to service clients, including Comcast, Disney and Netflix, both in the U.S. and across our global markets. This focus of growth on our consultancy skills continues, particularly in logistics and supply chain, and this will be a key focus for our business next year. The new offices we opened in 2019 in Calgary, Detroit and Nashville, all performed above expectations, and we opened 1 new office in Charleston, South Carolina. Other significant activity included the expansion of Seattle and Houston as well as the strengthening of our New York tenant rep team. During the year, we secured major mandates from Palmer Logistics, Panasonic and Lazards as well as some significant key assignments from the U.S. government. We also acted on the largest commercial deals in 4 national markets. Therefore, despite national leasing volumes falling by 40%, we took share -- market share in a number of markets, reducing our own revenue reduction to 27% overall. In terms of the outlook, we are seeing resiliency already across Washington, D.C. and the Southeast markets. And we are confident that activity will start to resume in the second half of the year. There is considerable demand to upgrade and the new normal may be more of the old normal than we think. Next, Central Europe and the Middle East. Similarly to the U.K., markets were significantly impacted, particularly office leasing and commercial investment volumes. The focus from investors is very much on residential multifamily and logistics. And the stronger economies of Germany, France and the Netherlands remain the most robust with -- and the recovery will somewhat be dictated by the successful rollout of the vaccine programs, which are now underway across the region. At our interim results last year, I mentioned the acquisition of OMEGA, our new property management platform in Germany to strengthen this business line across the region. Our success in this sector has continued, winning significant new mandates from Commerz Real and St Martins in France; IMMO Finance in the Czech Republic; as well as Union and HANSAINVEST in the Netherlands. Across this platform, our area under management grew by 13% year-on-year. We've also enhanced our sector coverage across residential and multifamily and built new teams in project management in the Czech Republic and the Middle East, which has allowed us to provide greater integrated services. Our consultancy services were also appointed on Hellinikon, Athens, the largest regeneration scheme in the whole of Europe, totaling some 67 million square feet. In the office sector, we acted for Facebook on its new headquarters in Dubai; for Zoom, obviously, one of the real winners of last year on its European headquarters in Amsterdam; as well as acting for Blackstone on their largest single office leasing deal in Berlin, totaling some 900,000 square feet. And continuing the life sciences theme, we've been appointed by Trinity College in Dublin on their 1 million square foot Silicon Docks complex, a major science and innovation hub. Inevitably, transaction markets varied across the region, with our revenues reducing by 23% year-on-year, but we are now beginning to see confidence improve, particularly in the Nordics, Spain and the Middle East, but activity will no doubt be weighted towards the second half. Finally, Savills investment management. I mentioned in my introduction that whilst global capital raising for real estate fell in 2020, it still remained high, and there is no doubt a flight to quality in the selection of investment managers which SIM has directly benefited from. The fall in investment volumes was mainly due to 2 factors: inevitably, the limitations on international travel and the imposition of lockdowns as well as a polarization of investor demand to multifamily and logistics where competition increased and reduced liquidity in the stock supply. A continued re-weighting from -- away from the retail sector continued. The obvious pandemic impact on hospitality and concerns potentially over the office sector from working from home added to this equation, albeit core market strengthened. In terms of our own business development, we grew our overall assets under management to GBP 21.1 billion, achieved 4 new fund launches, whilst our existing funds maintained their strong performance, as can be seen from the chart on the right. With the benefit of this success, we strengthened our platform during the year with new teams, both in the Nordics, Malaysia as well as Australia, and we also appointed a new Head of Product Strategy and Development in London. Due to the reduction of performance fees I highlighted earlier, our revenue reduced by 11% year-on-year. And looking forward, transaction volumes will increase as travel restrictions lift and we are focused on the continued growth of SIM to cater for this. As a group, we are committed to 9 of the UN Sustainable Goals, improving the impacts that our operations have on the world and the communities in which we live, advancing our own policies in line with this commitment. Our commitment to reducing emissions has resulted in the global business reducing greenhouse gas by 36.3% since 2018. As a whole, our business is planning to move towards a net carbon zero as soon as practical, with our U.K. business leading the way, and we've already implemented a plan to deliver it -- towards delivering a net zero goal by 2030. Elsewhere in the world, we have advanced our objectives and targets for GHG reductions across North America, APAC, Europe and the Middle East, while seeking supply commitment to work towards carbon neutrality. As one can imagine, there is a large amount of planning going on in our business around the globe and in line with the regulations, we will be announcing our overall corporate plans by this time next year. Within Savills, our people are our assets. We are committed to developing this talent evidenced by apprenticeship and graduate programs, improving diversity and inclusion whilst protecting and promoting health and well-being, with mental health particularly highlighted by the effects of this pandemic. I will now hand over to Simon to take you through the financial review.

Thank you very much, Mark, and good morning, everybody. This first slide represents the basic anatomy of a highly challenging but ultimately robust performance this year. And I draw your attention to 2 things. The first is the degree of resilience in our earnings given the significant reduction in revenue and profit from our transactional businesses, and we'll go on to look at that in a moment. Secondly, the impact of our tactical management during the pandemic. Mark has talked about the operational tactics around bench strength and client service. The strong net cash position is the outcome of our global team's financial focus during the period, of which more in a moment. Finally, this led us to reinstate the ordinary dividend. And on that point, this slide shows the distributions made or declared in respect of each year. As we entered, you'll recall, the pandemic, we canceled the 2019 final ordinary and supplemental dividends, which are shown, for completeness, in red on this chart. The dark numbers showed those distributions actually paid or proposed, and you will note that we've not declared a supplementary interim dividend based on transactional performance for obvious reasons. But we have maintained the totality of the ordinary dividend supported by our less transactional businesses. And because there's still a significant amount of uncertainty around the globe, we feel that this is the right balance to strike at this time. So if I now turn to our geographical performance. This slide illustrates Mark's point about the strength of the U.K. and the Asia Pacific businesses which, thanks to the relative maturity of their market positions and balance of service lines, effectively maintained their profit performance year-on-year. Equally, it shows the reliance, particularly of the U.S. business, on one transactional activity, which was the most delayed through the pandemic, being occupier leasing work. And finally, in respect to Continental Europe and the Middle East, the pandemic effect, although less dramatic financially, highlighted our focus on building scale in the less transactional service lines. And if we now turn to our service lines. If you want one slide entitled how did the pandemic affect your year, this is it. You can clearly see the GBP 50 million drop in profits in our transactional service lines year-on-year. This reflects not just the revenue fall but also our strategy of retaining those teams to help clients in circumstances where, often, they most need it. Looking to the less transactional service lines, you can see the resilience in a group of businesses which, whilst never completely immune from adverse market effects, had the collective stability to grow profit by 4% year-on-year. I'll turn now to cash flow. Net cash rose from GBP 28.5 million at the start of the year to just under GBP 178 million at the end boosted by a positive working capital movement in addition to cost savings contributing to our earnings performance. The box on the left of this slide breaks out the GBP 242 million cash generated from operations into its constituent parts. And as I indicated at the half year, in addition to the working capital unwind, the components of which you can see there, we benefited from the deferral of just under GBP 50 million of VAT from Q1 2020, which will be paid through the balance of this financial year. In the financing and investing side of this bridge on the right, the overall GBP 40 million decrease in cash outflow year-on-year is primarily associated with the cancellation of the 2019 dividends and the passing of the interim dividend last year. Of note, though, is the fact that our acquisition spend actually increased over 2019 by GBP 11.5 million. And you've heard about the 2 transactions, MACRO and OMEGA earlier, in addition to the deferred payments on past transactions. And finally, on this slide, we reduced our CapEx by just over GBP 5 million to GBP 18 million, much of which related to the continuation of our data-related projects and the enablement of remote working, both in terms of equipment in the hands of our staff around the world and enhanced security and connectivity applications to enable this mode of operation to work safely. Obviously, a significant element of the net cash position will unwind through 2021 as we recommence dividends and pay down deferred amounts. And assuming recovery kicks in over the year, we should also expect the positive working capital position from receivables to unwind somewhat as the pattern of trade normalizes towards the end of 2021. Mark has given you a lot of color around our trading performance. So I'll now go through the individual service lines for you. Starting with the commercial transaction business, the single most affected part of the group whose profit contribution declined by just over GBP 54 million year-on-year. And the narrative here is that those regions where we have the longest history and accumulated market position, the U.K. and APAC, fared far better through the pandemic than those where we are smaller or newer, being U.S. and Continental Europe. That said, we saw market share gains in our principal locations. And indeed, the revenue performance of both our leasing and capital markets businesses globally was equivalent or better than much of our international peer group. It is unfortunately a truism that, for instance, in North America where leasing volumes, as you've heard, declined by over 40%, you can't buck the market but share gains did and can continue to mitigate its effect. If we turn now to the transactional star of the show in 2020. Frankly, back in March or April last year, someone had come to me with this as their forecast for 2020, I think you can guess what my reaction might have been. In Asia, our performance reflected the general pattern and duration of lockdowns. However, in China, and in particular, in Shanghai, it was strong throughout the period. The key outperformer was, obviously, the U.K., and in particular, the residential market outside London, for reasons which have been well rehearsed. To some extent, this shouldn't have come as a huge surprise given that, that market had remained relatively flat price-wise since the Global Financial Crisis. And it became clear as we came back from the first lockdown that those buyers with equity and/or borrowing power were prepared to acquire homes with more space and amenities, which is why our traditional higher end of the market outperformed the mainstream by so much. That said, Mark has already referred to our continued growth in the core London market for transactions of circa GBP 1 million and GBP 1.5 million. This is actually more a conventional story of progressive growth in our market share against historically larger competitors in this higher volume segment. Finally, I'd say this U.K. result is exceptionally pleasing as it was achieved despite both the new homes and prime and super prime London markets showing fewer signs of recovery, primarily as a result of buyers being unable to travel. If we turn to property management. Our PM and FM business performed well during a very challenging period, both for us and for our clients. And this slide really shows the benefits of scale in APAC and the U.K. whilst in Europe, as you've heard, we continue to build our platform with the acquisition of OMEGA. And that is the first time we've had a German property management platform in the portfolio, and we're beginning to see the benefits of contract wins. In Asia, we benefited from the abatement of wage inflation in the facilities management sector, in particular, from the first lockdown, as retail and hospitality staff saw rolls in other sectors, which is less affected by the pandemic. And finally, our U.K. business performed very well, both in enabling safe returns to work and in winning new business, which will benefit future periods. If we turn to consultancy, this slide illustrates both the impact of the pandemic on the delay or deferral of projects and the impact of lower transaction volumes on consultancy services such as valuation. In the round, our consultancy businesses showed a healthy degree of stability. And you'll note that North America appears in this segment for the first time as a result of the acquisition of MACRO Consultants, the project management business. Obviously, lockdowns have affected MACRO's ability to execute existing projects for clients, but it's integrated well, as you've heard, and is part of a suite of consulting services assisting our corporate occupiers to devise their real estate strategies in the light of what people have been through. Finally, in investment management, we performed better than we had originally anticipated at the start of the year given the comparative which, as you know, had been boosted by super normal performance fees. Whilst we're obviously cautious about deploying investment capital into markets where price transparency was impaired for much of the period, we did benefit from being a top 5 manager of logistics assets in Europe and from having very strong on-the-ground asset management capabilities across the board. It was also very pleasing to see the launch of 2 new funds in Asia, being Japan Residential II and the Asia Pacific Income and Growth Fund, both of which achieved the first close in the period. And meanwhile, in Europe, we also closed 2 new funds, the European Food Retail Fund and the Logistics Fund in partnership with Vestas of Korea which, to our knowledge, is the first-ever European blind pool fund for Korean institutional investors. It should be noted that our associate real estate debt manager, DRC Capital, performed exceptionally well in the year itself, raising approximately GBP 1 billion of new capital as traditional lenders to the sector pared back their lending. In financial terms, our base management fees remained very stable. Whilst for obvious reasons, transaction fees reduced 23% year-on-year and performance fees by a similar amount. Finally, before I hand you back to Mark to look -- take you through some forward-looking observations, I'd like to put 2020 into historical context. Obviously, no two downturns and subsequent recoveries are exactly the same. But I thought it useful to show our revenue trend in comparison with the previous Global Financial Crisis-induced downturn. And there are some basic conclusions to draw from this chart. The first is the seemingly analogous nature of the impact on transaction volumes in 2008, '09 and 2020, although clearly, one was caused largely by financial drivers and the other by the biggest exogenous threat to mankind in a century. The second is the relative size of our less transactional businesses which, having tripled over the period, formed a really strong foundation for this group. And finally, the third is the trend of revenue growth being approximately 70% in favor of organic delivery versus acquisition. That said, our financial strength does allow us to continue to assess inorganic growth opportunities where we continue to favor an evolutionary bolt-on approach where we can see value. And with that, I will hand you back to Mark.

Thank you, Simon. Looking forward, our strategic priorities are consistent with those I outlined last year but reflect the changed landscape in which we are currently operating and the greater speed in which sectors have evolved. Transactionally, we'll connect our expertise across life science, logistics and residential sectors to create a fully integrated global platform whilst maintaining the experienced bench strength in some of the heavily impacted sectors, which will inevitably recover. On property management, our services will continue to grow and act as a strong backbone for our business, a key differentiator for us. Within consultancy, we have already developed a number of new services, and this will continue alongside growth in project management, occupier services and sustainability, particularly in North America and the APAC regions. In Savills investment management, our growth will focus on key markets across Europe and Asia Pac, growing our existing funds across the logistics and living sectors as well as extending our range of debt products. At all times, we will maintain tight financial control, and we will look to capitalize on opportunities, which we are sure will emerge from the second half of this year onwards. A significant amount of this growth will remain as organic, as Simon has outlined, complemented by selected bolt-ons where there is good symmetry to fulfill our priorities. Moving on to summary and outlook. I'm very pleased with the resilient performance that the business has achieved, particularly across the U.K. and APAC regions. Although it is still early in the year, I'm also pleased to report that we've made a good start in 2021. The demand for real estate advice is greater than ever. In the occupational markets, the structural changes we have seen will catalyze more activity and change. Equally, the significant dry powder behind the demand for income-producing assets will increase investment market activity, in particular, across those growth sectors we've highlighted. And finally, the timing of the market will ultimately depend on the speed of the worldwide vaccine rollout and that relaxation of lockdown and travel restrictions, and this will lend greater weighting to H2. However, we remain confident in our long-term outlook. As I finish, I would like to take the opportunity to again thank the extraordinary and courageous and committed workforce we have in Savills across the globe. More than ever, I am very proud to be their CEO. The adoption and evolution of our services as well as the dedication to client service has been exceptional. And whilst it is very satisfying to receive many accolades and awards for the work we undertook last year, I think last year, more than ever, was about giving something back to the communities we work within. Our teams worldwide played a very active role supporting a very large number of charities worldwide, fundraising and an enormous amount of voluntary work to look after those who needed it most. And this commitment to the communities in which we operate will continue as well as to the clients we are privileged to work with around the globe. Thank you very much for attending today's webinar. Simon and I will now be very happy to take any questions you have. The difficult ones to Simon, please. Thank you.

We have a few questions on the sheet already, and I will work through them and will answer them as appropriate. The first one from Chris Millington, what is the appetite for acquisitions? And what would be the target areas? Do you want to?

Yes. There is acquisition, Chris -- acquisition appetite, Chris, but only where it makes sense, as I've highlighted. I think the acceleration and growth of consultancy services and property management services, as I mentioned, both in APAC and the U.S. are key areas for us, but we're also continuing to grow our logistics capability in many other markets. And I think also our residential strength will allow us to continue to extend our activities into markets that make sense. I think, as you know, we haven't been road warriors in terms of looking at major M&A. These -- they're fraught with difficulties in terms of integration and really getting the synergies out of it. So I think you should expect us to be doing more things such as OMEGA and MACRO where it makes sense.

I think Chris' follow-up question was that we have invested substantially over recent years. And the question is, is there materially more to come? Or are we likely to see a slower rate of investment in the future? I think if I take that one, briefly, Mark, I think, obviously, your question is characterized that we did do some fairly substantial acquisitions, principally the acquisition of Studley business a few years back in the U.S. as our first major position in that market. We don't have that type of strategic imperative driving our thoughts. It is, as I've said before, and Mark has said, much more around the normal course of events, glorified recruitment or bolt-on strategy that we've talked about. I think Chris has been busy this morning in the back end of the presentation, and he also asks a third, which is, could you please comment on the trends you're seeing in the residential markets in early '21? And has the recent budget had any impact? Mark?

Well, in terms of the trends, Chris, I'm pleased to say that the momentum is continuing in the markets. We've had very strong under offer and exchange booked during January and February, so as much as we had record Q3 and Q4 in residential resales. So that momentum has continued. And I think, obviously, the extension of the stamp duty holiday, together with, obviously, things such as the mortgage guarantee scheme, will improve some parts of the market further. I think what we've seen in terms of a trend is it's about having greater amenity, more space. It is an upgrade going on. And it is weighted towards the country markets but we are seeing a resurgence in London as well. I think some of the markets, including the super prime, which probably were impacted last year because of the lack of international travel, were also seeing an increase in the number of prime sales in the first quarter as well. So overall, it looks good. How long it will continue in terms of that record quarter is something that we just got to keep a watching eye on. But so far, so good.

And we've got a few questions now from Joe Spooner. The first one, working capital clearly was strong, can you give a bit more color on how you expect that to unwind into recovery? Joe, this is the hardest question to answer because there is obviously huge uncertainty around recovery timings and trajectories in most markets. And the simple fact is, as we move towards a more normalized annual trading structure, we will see receivables grow at the year-end, and that net difference will consume capital if our hopes are to be procured. So I can't give you any real color on it. But it would not surprise me -- if you take out the deferred elements and the dividend piece, I suspect you could see probably something around the GBP 50 million, maybe GBP 60 million of working capital unwind potentially under certain circumstances. But clearly, that's a movable piece. The second one was around property and facilities management achieving strong margins, particularly in the second half of 2020. I think that is -- that achievement has sustained the margins in this division. I think it depends where you are in the world of -- our world of property management. And we have benefited in 2020 in the Asia business where we have, as you know, a huge employee base in property and facilities management. We have benefited from some specific government subsidy schemes, primarily in Hong Kong but also, to a lesser extent, across the region. And we've disclosed that, that total benefit was GBP 11.9 million. That's the total benefit for the group. In practice, about GBP 8 million to GBP 8.5 million of that is in the PM business in Asia. That obviously will unwind -- more than unwind, it just won't be repeated. But that business has put on about 30 basis points of fundamental margin increase through efficiency and IT investment. So I'd expect that to continue through the current year. The next one was, have you seen any commission rate pressure across the transactional business?

In terms of -- there's always different pressures going on, Joe. I would say the overall piece in U.K., Europe and the U.S. has maintained at the current rates. And that's true also in residential in the U.K. I think if there's any pressure, there's been some on the sales in APAC. So we've seen some pressure on commission rates, particularly in Hong Kong and 1 or 2 other markets. However, I don't think there's anything substantial there. And in truth, with difficult leasing markets, we often see fees actually -- because it's difficult, fees actually, does sometimes increase because landlords realize the difficulty in actually attracting tenants in, it takes time, and they need to be committed to achieving that. So I think at the moment, it's pretty stable.

I think that's it in terms of questions. So you've got a last chance if anybody has any further questions, otherwise, I'll hand over to Mark to close.

Okay. Well, thank you very much, indeed, today for attending. We look forward to seeing you in person next time. And thank you again for your continued support, and be safe. Thank you.

Thank you very much.