Savills plc (SVS) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to this morning's virtual presentation of Savills' interim results for the 6 months ending 30th of June 2023. I emphasized in March this year the increased economic uncertainty which we were facing and its direct impact on the real estate markets in which we operate. And the rapid and continued rate interest rate rises that have occurred in most markets in order to obtain stubborn inflationary pressures has led to one of the most dramatic reductions in real estate transactional volumes since the global financial crisis. This has affected confidence in both the investment and occupational markets alike. For investors, the increased cost and reduced availability of debt has meant many have adopted a wait-and-see approach as pricing recalibrates. The result of this has been investment volumes in global real estate falling by 55% year-on-year. Our occupiers, in particular, in the office sector, decisions are also being deferred due to high fit-out costs as well as the impact of flexible working policies affecting their future occupational needs. Office leasing volumes in major markets fell between some 17% and 29% during the period, with vacancy rates significantly increasing. And even in the resilience we have experienced over the last few years in the residential and the logistics sector are also affected, albeit this is more of a normalization of demand rather than the very buoyant conditions these sectors experienced through and post-COVID. We are starting to see some green shoots in specific markets where inflation may have already peaked. And the likelihood of future interest rate rises, or reductions, is now starting to restore some confidence. One thing is for certain, there are strong pressures on real estate to continue to evolve further, whether it's the drive to attract and look after employees, provide greater amenity or enhanced sustainability and also improve supply chain security against a backdrop of increased global risk. What is evident across our client base is the need for advice, with greater emphasis on consultancy, on asset management and property management services, alongside accurate market intelligence. Now moving on to our highlights. Despite the major reduction in transactional volumes I've highlighted, I'm pleased to announce a resilient set of results highlighting the strength and balance of our global business. The balance has allowed us to partially mitigate the significant pause in transaction advisory revenues, and I'm pleased to report group revenue for the period of just over GBP 1 billion, a reduction of 2.5% year-on-year. Underlying profit was significantly impacted as a result of our revenues being more weighted to the less transactional business lines of property management and consultancy, which inevitably carry lower margins, as well as our strategy of maintaining core transactional bench strength. The overall result of this was reduced group underlying profit to GBP 16.3 million. The drivers of the performance has been the strong balance, as I said, provided by the less transactional businesses, which achieved an aggregate to revenue increase of 9% year-on-year, with the star performer being Property & Facilities Management, which increased revenues by 16% during the period. Due to the market conditions I highlighted earlier, commercial transaction revenue decreased by 20% overall as markets contracted across all regions. Increased mortgage costs also affected residential transaction revenue, down 22% overall, albeit we saw an increase in the APAC region as market momentum improved in the Greater China region. It's also worth highlighting the robust performance of our Investment Management platform, which, despite a significant reduction in transactional activity, revenue decreased by only 4% during the period, with assets under management reducing by 11% overall. We continue to adopt a policy of conservative gearing and maintaining a strong balance sheet, with net cash position of GBP 12.9 million for the period. In light of this performance, we are declaring an interim dividend of 6.9p per share. This is supported by the strong performance of our less transactional business. Taking into account the exceptionally difficult conditions experienced during the period, I am pleased with these results, supported by a robust balance sheet, which allowed us to undertake selective continued investment and maintain our key operational bench strength as transactional volumes start to recover. Against this backdrop, we continue to maintain strong cost discipline, enhancing efficiency across our platform. Turning now to the diversity of our revenue. I've mentioned the increase in revenue provided by our nontransactional businesses, which now represent over 2/3 of our overall group revenue and the highest relative proportion since the COVID year of 2020. The largest component of this is Property & Facilities Management, representing 43% of our total revenue globally. And in the major markets in which we operate, we are regarded as the leading provider, and we now manage over 2.5 billion square feet of assets, together with a further 1 billion square feet in joint venture with our clients. The principal driver of our growth here is organic, looking after our clients with great care, and thereby winning greater market share. Our portfolio of consultancy services, representing 19% of our revenue, also experienced growth in project management as well as sustainability consultancy under our Savills Earth platform, which continues to experience very strong demand worldwide from our clients. Finally, it is worth noting the continued geographic weighting and diversification of our global revenues. Greater weighting in particular towards the APAC region, where we continue to invest in many key developing markets, which will add strategic value to our business going forward. Moving on now to our strategic growth and that focus. Despite the turbulence in the transactional markets, it is vital we continue to take a long-term view on this growth, as well as providing innovative services to our clients during very challenging times. Opportunities obviously arise from adversity, and in particular, the enormous pressure on refinancing has allowed us to grow our debt advisory and recovery services. We also continue to invest in our rapidly expanding Global Occupier Solutions platform, managing portfolios on behalf of corporate occupiers, where there is strong demand for enhanced efficiency and improved amenity. Strong demand for improved sustainability is accelerating obsolescence, particularly evident in the secondary office markets, where there is an urgent need for repositioning or repurposing. In light of this, we have developed Green Fit, a specialist project management service. In March, I highlighted our focus on growth of our global residential platform, and I'll update you shortly on some of the key initiatives we have already completed since then. We're also focused on the growth of our retail services platform in prime luxury markets, where demand has actually recovered significantly post-pandemic. We also continue to invest in development of our industrial and logistics platform. We are seeing manufacturing demand recover and greater interest now in developing markets due to labor inflation and also increased geopolitical uncertainty, with a rise on onshoring. While investor demand is subdued, it remains much stronger in a number of specialist sectors, and our focus on living, debt, natural capital investment products, plays to this demand going forward. Finally, bearing in mind the significant advancement of AI, we are progressively applying this where relevant across our platform, in particular, areas such as Property & Facilities Management and valuation and consultancy to provide greater efficiency of service and more accurate data analytics. Turning now to the U.K. and in particular, the commercial markets. The factors I highlighted earlier have had a significant impact in the U.K., particularly on commercial investment volumes, which, as you can see, fell 54% year-on-year, with all sectors affected. However, London is one of the fastest global markets to recalibrate, and it's recapturing its crown as the world's top destination for cross-border investment. Office take-up across the 6 major regional cities remain fairly resilient, particularly in Grade A, due to a flight to quality, while secondary markets are falling sharply. And logistics leasing, whilst falling back significantly, is only 1% below the pre-COVID average. Focusing on performance of our own business. Whilst our revenues fell back some 7% year-on-year, a significant offset to reduce transactional revenues was strong growth in property management, where our teams won new mandates from Patrizia, Tritax and Global Mutual, whilst our project management teams are also exceptionally busy expanding our framework agreements with the Cram Estate and Amazon, amongst others. Our portfolio valuations platform also continued to grow, with new mandates from ARA and M&G, and we invested in our debts and loan servicing teams. Global Occupier solutions continues to gain market share, and our U.K.-based team successfully secured new mandates from Epsom and Linklaters. Whilst highlighting the growth of our less transactional businesses, our transactional teams took significant market share. In London, our commercial investment team achieved a share of over 40% and advising on some of the largest transactions in the first half, including Winchester House and the sale of New Street Square, whilst our market share on national sales exceeded 15%. Finally, Savills Earth were instructed on the decarbonization of Mirastar's portfolio across Europe, as well as securing approval for the largest solar farm in the U.K. Now moving on to residential. Inevitably, the rapid increase in mortgage costs has particularly affected the mainstream market, with completions here down 18% year-on-year as well as the market experiencing price falls, with agreed sales behind pre-pandemic levels by circa 9%. The prime markets held up better where there is less dependence on mortgage finance, and particularly in Central London, whilst prime regional markets have seen price reductions and agreed sales over GBP 1 million are down 17% on the prior year. Conversely, rental markets remain exceptionally strong, with prime rents growing by 3% nationally, reflecting stock shortages in many markets. We are obviously experiencing great resilience in sales in prime London, where we increased our market share to over 30% on sales of about GBP 5 million. More difficult conditions continue nationally and in particular, new build development sales regionally. But our Residential Lettings business increased its volume by 8%, as well as expanding its Letting platform in London with 6 new hubs. We also continue to invest in our auctions team, where we sold over GBP 260 million of stock during the period, up 20% on the prior year, and our multifamily capital markets business has retained its very dominant position in the U.K., transacting over GBP 1.7 billion of stock and acting for clients including Goldman Sachs, Legal & General and [indiscernible] on some of the largest transactions in the sector. Turning on to Asia Pacific. As widely reported on, we have also seen our momentum slow in the region, particularly during the second quarter in China. The most resilient markets are Singapore and Japan, with some recovery underway in Hong Kong and South Korea, whilst leasing volumes remain subdued across all main office markets. Moving on to our own business. Whilst our revenues in the region were broadly stable, we have been particularly impacted by reductions in commercial transaction markets, offset by strong growth in Property & Facilities Management as well as growth in the residential markets in we operate, in particular, Greater China. Despite the reduced transactional volumes, we maintained our leading market share in commercial investment in Singapore and also Hong Kong, which currently stands at 37%. And we also undertook some of the largest transactions in the period, including a single sale in Hong Kong for over USD 750 million, and also in South Korea, where we traded Seoul City Tower for over USD 350 million. Following on from the recent acquisition of AMS, a facilities management business in Singapore, we've also developed new green energy and sustainability teams, as well as growing our master planning and development consultancy services here. And in line with our overall group strategy, we've also expanded our Global Occupier Solutions platform across 4 more countries, as well as investing in the growth of our industrial and logistics teams in both India and Australia. To strengthen our property management platform further in Australia, we've just acquired Site8, a specialist retail property management platform, and have also recently established a new international residential sales team in Singapore. Moving on to North America. Well, here, in line with other markets, rapid interest rate rises since the beginning of the year have affected competence and market momentum. The direct result of this has been the stalling of investment volumes falling to a low equal in 2011, and with particular weakness also in the office sector. This is compounded by occupational demand for offices remaining subdued, with low densities continuing due to flexible working policies, particularly affecting the West Coast and the tech sector. This has resulted in national office availability increasing to almost 25%, with significant rental falls therefore. In terms of our business performance, our overall revenues reduced by 7%, which taking into account we are primarily involved in office leasing activity for corporate occupiers, was a respectable result compared with the national fall in leasing activity exceeding 17%. Following on some of the divisional reorganization we undertook in North America, which I outlined in March, our Global Occupier Solutions platform has accelerated growth, in fact, already exceeding the revenues generated during the full year last year and securing new mandates including [indiscernible], Northmarq, ATA Restoration, amongst many others. We have also continued to grow our project management to workplace consultancy services to support this growth. We've also expanded our industrial and logistics capability in Canada and selected U.S. markets, including supply chain consultancy. And during the year, our teams undertook some of the largest deals, including a large distribution deal in L.A., acting on a 1.4 million square foot facility as well as advising Sony Pictures on a 225,000 square foot office relocation. Moving on to Continental Europe and the Middle East. Well, here, overall forecasts continue to suggest sluggish growth across the Eurozone, but there are inevitably significant regional variations. Confidence has weakened over the main northern European markets, resulting in investment volumes here declining by over 59% year-on-year. Again, particular weakness in offices. And occupational markets have also been adversely affected, with office take-up across the Eurozone down 29%, with Germany being the most impacted market. Turning to our own business. Whilst our revenues grew by 9%, our transactional revenues fell by 19% year-on-year, offset by an increase in lower-margin revenue from property management and consultancy. Our strategy to invest in less cyclical revenues has been supportive during this difficult period, with strong growth achieved by our Germany property management platform as well as growth in Ireland and Spain. The growth was reflected by winning key new mandates in Germany from Patrizia, P3 and Bearings, as well as pan-European management portfolios for [indiscernible] and Realty Income. While the strategy of maintaining transactional bench strength, our market share in commercial investment has increased significantly in Italy, Spain and also Ireland, where we increased our market share to 36%. And in line with our global residential strategy, we acquired [indiscernible] in auto as well as B-Living in Italy, a prime residential business with offices in Milan and Rome. And in the Middle East, we're also seeing a strong resurgence of activity, particularly in UAE and KSA, and we've recently doubled the size of our team in KSA in opening a new office in Jeddah. Our Global Occupier Solutions team continue to perform well, winning new European mandates for Dell Technologies, NBC Universal, Comcast and Johnson Matthey. Finally, turning on now to Investment Management. Well here, a lack of liquidity in target markets with limited distress to date has meant that values has taken time to mark to market, creating challenges for capital deployment in the short term. Whilst liquidity is starting to improve, particularly in the office sector, other sectors such as multifamily and European logistics remain under constrained supply. Within our own business, our overall revenue reduced by 4% during the period, primarily due to this reduced transactional activity. And we continue to focus on 4 principal themes, namely European logistics, the living sector, debt and natural capital. Whilst capital raising, therefore, remains challenging, our relationship with Samsung Life progressed as well, with over USD 900 million now committed or invested to date, with further equity provision also anticipated. And this gives us considerable drive now to invest once liquidity improves and market transparency on repricing has evolved slightly further. Due primarily to the execution of the strategic realization program on behalf of our investors, our assets under management experienced a modest decline, decreasing by 11% to EUR 23.7 billion. But this highlights the resilience of our strategy and our business model, and we've continued to invest, extending our debt platform into Australia and growing our business also in Japan. Finally, Savills Investment Management were rightly awarded the Property Fund Manager of the Year in real estate at the recent Property Week Awards, a fitting accolade to the strong track record of performance for our investors. I will now hand over to Simon to talk you through the financial review.

Thank you very much, Mark. Good morning, everybody. You've had a pretty good exposition, I think, of the highlights of the period. So what I would like to do is just reiterate the robustness of that revenue performance, as we saw the less transactional businesses largely replacing the reduction in revenue from transaction volumes reducing in the market. This is quite important, because it's also during what we believe is the low point in the period or thereabouts in world real estate markets. The other point about margin is that we've not only committed to maintaining our core roster and bench strength at a time when our clients need our advice almost more than ever. But we have, in fact, also continued to acquire and recruit during this period. And finally, as anticipated, you'll see the reduction in net cash down at the bottom of this slide, as the above factors increased our normal seasonal working capital about outflow in the first half, and I'll talk a bit more about that in a moment. But notwithstanding that, we increased the dividend -- the interim ordinary dividend, which is supported by, as you know, the less transactional businesses. And by way beside, I would add that dividend has grown by 2.5x inflation on an annualized basis consistently for well over a decade since we first instituted the structure. So now if we turn to the performance of our business segments, I think there are really 3 key overarching themes to take away from this. The first is the obvious reduction in transaction revenues against to maintain staff roster and including salary inflation, and that's the impact you can see there on the bottom line -- top line and bottom line, respectively. The second is the growth in the less transactional businesses was driven really in this period by property management, the lowest of the 3 margins under normal circumstances. And finally, you can see the effect that market status and particularly the sentiment attached there, too, has on parts of our consultancy business. We've talked a bit about those parts that are growing, but we've also seen parts of the consultancy portfolio slow down during the period for obvious reasons. And we've also mentioned the impact of reduced transaction fees in investment management, which is the other market-related element, if you like, to the less transactional piece. Before we turn to the geographical performance, so I would like to make 1 point, I look picked up in the release itself, and it's in the most miniscule writing at the bottom of this slide. But as you're aware, the central unallocated costs that we don't allocate up to the individual segments or regions have improved substantially period-on-period. Now, part of that improvement is fundamental cost control and performance expectation in terms of central incentive programs, et cetera. But a part of it and actually the significant part has been the return of investment income, and particularly, interest income on group cash balances, which helps to defray some of those central costs. So that's the rationale for that movement. So let's now move into the geographic performance of our business. In the U.K., the loss of transactional revenue was substantially mitigated by, as you know, the increased less transactional revenues, with a consequent reduction in margin you can see there. In Asia, the story is very similar. But I think the 1 aspect of this 6 months, which was probably not as we expected, was the relative slowdown in Mainland China. We had expected, post the Chinese New Year and the elimination of lockdown restrictions, a greater level of recovery during the period, which simply hasn't happened for a variety of reasons that you'll all be very familiar with already anyway. So that's probably the downside piece during the period. Meanwhile, in North America, as you already heard, our revenue performance clearly outperformed the leasing market. And you can see the impact of trading at or around that breakeven level. Finally, in Continental Europe and the Middle East, revenue growth came largely from Property Management and Investment Management outweighing reductions in transactional service lines, particularly associated with more northern countries in that region, including Germany and the Netherlands and France. And these markets are the ones that contributed the majority of that bottom line transactional loss, which you'll see impacted here overall. So if we turn now to cash flow. The most obvious bridging item period to period is the negative working capital movement that we'd always have in the first half, as prior year's bonus payments are made in full and the accrual rate on the current year is much, much lower at the halfway stage. And in this instance, in a down year, lower in an absolute sense as well. That movement alone accounted for GBP 211 million of the outflow. Everything else was largely as we would have expected it to be. Expenditure on all the other cash and the cash flow was broadly similar to the previous period, except we clearly didn't have a special dividend in the first half of '23, which we did in '22. And over on the far right of that bridge, you can see that FX on cash balances held was a negative nearly GBP 18 million as opposed to a positive GBP 17 million the year before. Now we're obviously in the second half, looking forward to our traditional accumulation of cash. And it may interest you to know, again, as an aside, that at the end of last month, July, the net cash position of the group had moved from the GBP 12.9 million you see here to just over GBP 57 million. So we expect that to continue through the period. I would add by way of context, that we have maintained through the COVID period and into the rising interest rate cycle, a much higher level of liquidity than we have historically maintained. And that was deliberate. It may have been considered by some as balance sheet inefficient. But we are unique among the international firms in being cash-positive at this period, having maintained our bench strength and continued to invest in the business in the form of acquisitions and recruitment during one of the most severe transactional downturns the industry has seen. And indeed, our cash position today, if you look at it, actually, much more resembles the pre-COVID historical norm of cash flow pattern than it does the performance of the last 2 or 3 reporting cycles. I think that's enough on cash. I'll turn now to the performance of our individual business lines. You've had a lot of details, so I'll try and summarize a bit. Starting with the commercial transaction business. Obviously, the global rise in interest rates is the key catalyst to reduced activity as markets recalibrated at their own pace, with a possible couple of exceptions being Japan and Singapore, South Korea in particular. So if we start there in Asia Pac, Japan is a strong outlier, and the work we've done over recent years in Singapore has also started to pay dividends in our business. And as I've said before, the slower-than-anticipated pace of recovery in China is the principal difference between our original expectation and the outturn during the period. Turning to the U.K., the markets you've heard recalibrating past, and the focus is primarily on prime sustainable stock, but with retail improving as well. And in Continental Europe and the Middle East, the individually largest markets, as I've said, in the North were weak. As you move progressively South, they were more resilient, and the Middle East was improving well during the period. And in North America, market share gains and activity in the southern states at least partially mitigated the effect of reductions in major corporate HQ activity in the traditional metropolis markets of New York, San Francisco, et cetera. Also, as part of the North American reorganization we talked about at the full year and Mark just mentioned, we did conduct a cost reduction exercise in the U.S. market, and that will bear fruit over the next 18 to 24 months as we seek to improve our margin over the next 5 years. If I turn now to residential. The inevitable reduction from the post-COVID bonanza in the U.K. residential market, particularly regional, has slowed down as we knew it would. We did also experience a significant reduction in the institutional residential business of PRS, BTR, et cetera as clients came to -- got to grips with the impact of increased funding cost on those operating models. However, it's also worth noting, and I think this is important, that the residential performance in the first half of 2023 is still one of our top 3 performances in the last decade in terms of revenue and substantially ahead of 2019 in the pre-COVID period. We turn to Asia. As Mark said, we saw growth in China, and that was against obviously a pretty soft comparative, where China, in particular, was in the throes of COVID and lockdown-related restrictions, which obviously had lifted during this period. But it was good to see growth start to come back. So we turn now to property management. The 1 area not adversely affected by macroeconomic interest rate challenges, and which delivered double-digit growth in both revenue and profits during the period. In Asia, revenue benefited from the full year effect of the acquisition of AMS that Mark mentioned, the facility manager in Singapore, which was in the second half of last year. Absent that, revenue growth was actually 10%, which is still at the sort of top end of our normalized expectations for growth in that business. However, as AMS was marginally loss-making, during the integration period, that did have an impact on the bottom line of the business in Asia Pac. In the U.K., we saw good growth in FM, in particular. And the overall margin has started to revert to historical normality both through that growth and the return of finance income, which better offsets that interest, which better offsets the administrative costs of what is a very large treasury function on behalf of clients. And finally, in Continental Europe and the Middle East, strong revenue growth in Germany helped to improve the H1 loss position to near breakeven that you see here. We turn to Consultancy. There's no rating point, I will say -- you'll recall that last time I indicated that -- salary cost inflation was particularly weighted towards our professional staff in the consultancy arena, and that was last year. That is still continues to be the case across the board, which does obviously impact the margin across this business. But in terms of trading reforms, in the U.K., revenue growth, as Mark said, came from project management, sustainability and natural capital-related consultancy services, which offset reductions in some of the longer-range service lines such as development or major infrastructure-type projects. And these latter naturally tend to get put on the back burner during difficult market conditions. And that's the sort of sentiment point I referred to earlier. In Asia Pacific, we saw reductions in our principal service lines of development consultancy and valuation, as we expect, in all the major markets and some cost inflation, which put us temporarily into loss in that period. And in Continental Europe, it's a very similar story to Asia Pacific. In North America, you can see the impact of the status, particularly in the tech sector, which constitutes quite a significant part of our consultancy in the Americas. And cost inflation, in particular in project management, together with the impact of the deferral of some quite high profile and more profitable project management projects during this period. Now I'll finally turn now to Investment Management. As you've heard, the major revenue difference period-on-period was the lack of transaction fee income, which was down by 67%. And for obvious reasons, as a fiduciary investor, we have to make sure we are deploying capital at the right moment into any market. This was offset, though, by a small increase in performance fees as we disposed off a number of long-held, particularly logistics assets in Northern Europe, which have performed exceptionally well. And as Mark said, base management fees remained stable, and in fact, represent over 80% of the revenue of the business as of today. I'm glad to say that Samsung has met its initial contractual capital commitment, 1.5 years only into the first 5-year term of the relationship, although much of that capital remains undeployed for obvious reasons, as I said earlier, at the end of June. And if you combine that with our other capital raising, and Savills Investment Management is sitting on dry powder of about GBP 1.7 billion for debt and equity products in due course. In the coming months, we expect product launches in living, in Asian and European debt, and we also expect some quite exciting developments in the arena of natural capital. So on that upside, I'll hand you back to Mark to conclude.

Thanks, Simon. Great. Thank you. Overall, our results represent a resilient performance, driven by our less transactional businesses and in particular, strong growth in Property & Facilities Management. Whilst we have experienced significant weakness in the transactional markets, there are signs of recovery in certain markets as pricing recalibrates and confidence starts to return. In addition, we are continuing to experience strong demand for our consultancy services, as I've highlighted, and particularly around ESG and improved sustainability. And we also remain fully on track to meet our own corporate commitments in this area. Due to our strategy to maintain core transactional bench strength, we are carrying forward very strong capital transaction pipelines, which will launch as market conditions improve. And our reputation and conservative approach to gearing and the maintenance of our balance sheet strength allows us to continue to selectively invest in areas of strategic growth within the key themes that we've outlined. That said, the prolonged interest rate uncertainty is continuing to affect transactional markets and has reduced the range of possible outcomes somewhat for 2023. We do, however, expect progressive improvement in transactional activity through the balance of the year and into 2024. Finally, I would like to thank all our worldwide staff for their amazing continued efforts in supporting our brand base under extremely challenging positions. I'm very proud of the passion and the professionalism that they continue to exhibit, as well as the innovation we're able to develop in enhancing our service provision. This now ends the formal part of our presentation, and Simon and I will be very keen to take any questions that you have. Thank you very much. We've got some around...

And we do have 3 questions, all from Mr. Chris Millington. Thank you. And the first one is, could you please comment on the expected level of operational gearing in the transactional business when volumes return? And yes, this is an important factor because clearly, it is the positive side of the coin of retaining our bench strength during difficult times. It depends entirely, Chris, on the nature of the transactional business you're talking about. But very broadly speaking, between lease -- commercial leasing, residential investment sales and commercial investment, I would expect somewhere between 30% and 45% of incremental revenue to fall through to the bottom line as revenues improve. So I hope that answers your question.

Maybe I should get the next one.

Second one, I think, is for Mark, would you?

Yes. So comment on the scale of our current pipeline of work from a historical context. Chris, again, the whole policy of maintaining the bench strength allows us to take market share. And I've mentioned a few of those stats in the presentation. I would say, therefore, in those markets where we are strongest, our pipeline is stronger than ever. We've obviously got to make sure we can realize it, as market conditions improve, we will be able to achieve that, particularly in capital markets transactions. That's where we're seeing the strongest pipelines, and they are higher than historic levels. I think leasing is probably normalized market volumes, but certainly, capital markets would be higher going forward.

I think Chris has got another one, which says, can you comment on June, July trading in the light of the rise in cost of debt over the period? And yes, I suppose that was the relative rise from about 12 weeks before now, when I think the general mood music was that interest rates have possibly peaked and then subsequently turned out not to have done. And the general mood is obviously higher for longer, probably the best way of putting it. We had a strong June, I should say, without a doubt. And we've started the second half absolutely in line with our expectations, including some quite sizable transactions that have been cooking for some time. So -- and that's basically Europe and in Asia actually, as well as the U.K. So I think we're -- I'd say we're in line is probably the right way of putting it.

And again, I think, residentially, we also had a good July. So that's positive.

And then Clyde has asked a question -- a perfectly valid question. I'd say. Are there more plans to address costs, especially thinking about the European business? And I think that's...

[indiscernible].

I think the first step, it always looks worse, a difficult time to the market because we are retaining bench strength deliberately, and therefore sacrificing margin deliberately in order to benefit as we come into recovery by having held clients when they can't do anything. That philosophy is holding true. There's no doubt about that. Clearly, we are focused on discretionary costs. We have been, and will continue to be. And that's the area that we look to continue to make sensible savings in. I would say that things like travel and entertainment have remained at the kind of 75%, 79% of pre-COVID levels that we articulated in the last couple of years. And that is actually very creditable, in my view, in an environment where particularly air travel costs have gone up by at least 25% on a unit basis. So we are doing less but -- and paying less than we did in previous periods. But I don't know...

Yes. No, I just think the piece around that is right. In particular, sort of the buildup of our pipelines in Europe is strong. So markets like Italy, as markets like Germany, Spain, we are maintaining -- and Ireland. We are growing that pipeline. So that, again, it's timing as to when that can come through. We're being very cost-efficient in where we invest. And primarily, where we're investing is in the less transactional markets that Simon has outlined. But we are maintaining that core bench strength there nonetheless. So we do believe that's the right strategy going forward.

And there are a couple of more questions. Again, Clyde's asked, what should we thinking about H2 central costs? Sadly, it probably won't be as low as they were in the first half, where we didn't distinctly benefit from the sort of savings I was talking about and the interest income. I think in practice, we were about just over 16 -- some GBP 16.5 million for last year as a whole. I think it is likely that we'll move up to something around about the GBP 10 million mark to be GBP 9 million through -- about GBP 9 million through GBP 12 million, I suggest is a sensible range for the full year, that is, if that answers the question. And then Clyde has also asked, how is your acquisition pipeline looking? And are you looking to step up investment?

So again, it's very selective, Clyde, around the themes that we've already outlined to you. So I just start with those, the big themes, definitely expansion -- continued expansion of our global residential platform. So you've seen the 2 acquisitions we've made. And we're looking at potential opportunities in the APAC region as well. So that's one thing. The second theme being Global Occupier Solutions, the growth of that platform and adding services, consultancy services alongside -- what's required alongside that. So those are 2 very important plans. I think there are other themes out there, which we are very carefully looking at that flexible leasing. We know our work on that platform has continued to do well, and we're seeing still strong demand for that type of product. So we may look to substantiate that. And actually, retail, I highlighted retail, retail through that recalibration, prime luxury markets are also doing well. So we are considering whether we need to increase our bench strength there. So nothing enormous. These are sensible acquisitions and they're very selective in the themes we talk about.

And then finally, Mark, Houston said, can you shed more light on Green Fit? Is it a consultant recommending various supply chains to report properties or an actual fit-out business in its own right?

Yes.

So holistic.

Yes. It's more of the former rather than the latter. So we do have capability in different markets to actually undertake fit out. But the Green Fit is very much more around marshaling of these services to ensure that we can use our green knowledge and credentials to actually make sure the product is fit for purpose going forward. But as said, we do undertake this sort of work in different markets, but it's very carefully constructed as to how we achieve that to ensure that we maintain reduced risk.

And lies substantially within the project management business.

It does. It does. And it's boots on the ground doing this. This is not just theoretical consultancy. It's actually making sure that the product achieves what's required.

I think unless there are any more questions, I think that is it. So Mark, you want to close?

Okay. Well, thank you all very much for joining. For those of you in the U.K., you're going to get a couple of days of summer, that's returned before it's blown away at the weekend. So thank you very much indeed, and thank you for your continued interest and support. We look forward to speaking to you at the year-end.