Cushman & Wakefield

(69.34% of share capital through EXOR S.A.)

 

The data presented and commented on below is taken from C&W Group’s consolidated accounting data as of and for the quarter ended March 31, 2012, prepared in accordance with International Financial Reporting Standards (“IFRS”), unless otherwise noted. 

In order to correctly interpret C&W Group’s performance, it should be noted that a significant portion of C&W Group’s revenue is seasonal, which can affect its ability to compare the financial condition and results of operations on a quarter-by-quarter basis. Historically, this seasonality has caused its revenue, operating income, net income and cash flows from operating activities to be lower for the first two quarters and higher in the third and fourth quarters of each year. The concentration of earnings and cash flows in the fourth quarter is due to a number of factors, including an industry-wide focus on completing transactions toward the calendar year-end. This has historically resulted in lower profits, or a loss, for the first and second quarters, with profits growing or losses decreasing in each subsequent quarter.

    Change  
$  million QI 2012 QI 2011 Restated (a) Amount % QI  2011 Published
Net revenues (Commission and service fee) (A) 296.7 297.2 (0.5) (0.2) 297.2
Reimbursed costs - managed properties and other costs (B) 106.1 82.7 23.4 28.3 82.7
Gross revenues (A+B) 402.8 379.9 22.9 6.0 379.9
           
(Negative) Positive EBITDA  (13.5) 3.7 (17.2) n.s. (15.6)
Operating loss (24.3) (8.7) (15.6) n.s. (28.0)
Loss attributable to owners of the parent (25.2) (13.7) (11.5) 83.9 (26.4)
           
U.S. GAAP Results  (*)          
(Negative) Positive EBITDA  (15.8) 4.7 (20.5) n.s. (14.7)
Loss attributable to owners of the parent (18.7) (9.6) (9.1) 94.8 (23.2)
a) Data restated following changes in accounting policies effective January 2012. In the first quarter of 2012, C&W Group voluntarily changed its accounting policies regarding the recognition, for interim period reporting, of (1) discretionary incentive plan expenses and (2) certain commission expenses that are tied to the achievement of defined levels of cash collections (“commission bonus program”). Prior to these changes, the Company recognized the discretionary incentive plan expenses, for interim periods, on a straight-line basis based on the latest estimate of the full-year discretionary incentive compensation expense expected to be incurred such that each quarterly reporting period would bear an equal amount of the expense, and recorded its quarterly commission bonus program expense based on a percentage derived from the prior full year’s relationship of actual commission bonus program expense to the related actual Leasing and Capital Markets transactional revenue. Effective January 1, 2012, the Company (1) changed to a proportionate method to account for the discretionary incentive plan expenses under which the Company records its quarterly expense in proportion to the actual amount of pre-incentive compensation EBITDA earned for the quarter in accordance with the funding rate calculation, and (2) adopted a new accounting policy for its commission bonus program under which the quarterly expense is recorded based on the actual achievement of the related cash collections metrics in that quarter. (*) The difference between loss attributable to owners of the parent, as determined under IFRS, and loss attributable to owners of the parent, as determined under accounting principles generally accepted in the United States of America (“U.S. GAAP”), is primarily due to the accounting for compensation-related taxes and charges, the non-controlling interests’ put option rights and income taxes. The difference between the Earnings before interest, taxes, depreciation and amortization (“EBITDA”) under IFRS, as discussed below, and the EBITDA under U.S. GAAP is attributable to those same items, excluding the income tax impacts.
$ million 31/03/2012 31/12/2011 Change
Equity attributable to owners of the parent 761.3 779.1 (17.8)
Consolidated net financial position (118.2) 9.0 (127.2)

For the first quarter of 2012, C&W Group continued with the execution of its growth initiatives, including balancing its service platform and making strategic hires. As the firm is focused on enhancing its recurring revenue streams, certain of these activities have been in the Corporate Occupier & Investor Services (“CIS”) business, which have led to significant global assignments in the first quarter of 2012 with Kraft, Unilever and Symantec and year-over-year revenue growth in this business.

C&W Group experienced gross revenue growth of 6.0% to $402.8 million in the first quarter of 2012, while its commission and service fee revenue of $296.7 million were consistent with the prior year quarter. Driven primarily by a modest increase in operating expenses of $13.0 million in support of the Company’s strategic growth initiatives, C&W Group’s EBITDA declined $17.2 million to negative EBITDA of $13.5 million in the first quarter of 2012, as compared with positive EBITDA of $3.7 million in the prior year quarter. The decline in EBITDA resulted in an increase in the loss attributable to owners of the parent of $11.5 million to $25.2 million in the quarter ended March 31, 2012, as compared with $13.7 million in the quarter ended March 31, 2011.

For the three months ended March 31, 2012, gross revenues increased $22.9 million, or 6.0%, to $402.8 million, as compared with $379.9 million for the same period in the prior year. Foreign exchange increased gross revenue by $3.9 million.

Commission and service fee revenues, which exclude reimbursed costs - managed properties and other costs, decreased $0.5 million, or 0.2%, to $296.7 million for the three months ended March 31, 2011, as compared with $297.2 million for the same period in the prior year. Foreign exchange increased commission and service fee revenue by $3.5 million.

C&W Group’s commission and service fee revenue performance for the first quarter of 2012, as compared with the prior year quarter, reflects continued growth in its CIS and Valuation & Advisory (“V&A”) businesses across all geographic regions. This revenue growth was offset by declines in Leasing and Capital Markets, which reflect a slowdown in transactional activity resulting from the sluggish economic growth, weak job creation, and the on-going economic challenges in Europe.

The following presents the breakdown of gross and commission and service fee revenues by geographical area:

    Change
$  million QI 2012 QI 2011 Amount %
Americas 294.6 287.3 7.3 2.5
EMEA 81.4 68.1 13.3 19.5
Asia  26.8 24.5 2.3 9.4
Gross revenues 402.8 379.9 22.9 6.0
         
Americas 216.8 217.1 (0.3) -0.1
EMEA 60.1 61.9 (1.8) -2.9
Asia  19.8 18.2 1.6 8.8
Commission and service fee revenues 296.7 297.2 (0.5) -0.2

The Americas region, including the United States, Canada and Latin America, comprised 73.1% of both gross and commission and service fee revenues for the quarter ended March 31, 2012, as compared with 75.6% and 73.0% of gross and commission and service fee revenues, respectively, for the same period in 2011.

EMEA comprised 20.2% and 20.3% of gross and commission and service fee revenues, respectively, for the quarter ended March 31, 2012, as compared with 17.9% and 20.8% of gross and commission and service fee revenues, respectively, for the same period in 2011.

For the same period, Asia comprised 6.7% of both gross and commission and service fee revenues, respectively, as compared with 6.4% and 6.1% of gross and commission and service fee revenues, respectively, for the same period in the prior year.

For the first quarter of 2012, C&W Group’s global service lines, including Leasing, CIS, Capital Markets, V&A and Global Business Consulting comprised 50.1%, 25.4%, 11.2%, 12.4% and 1.0% of commission and service fee revenues, respectively, as compared with 52.1%, 22.1%, 13.4%, 11.1% and 1.0%, respectively, for the first quarter of 2011.

From a service line perspective, the decline in commission and service fee revenue for the quarter ended March 31, 2012 was primarily driven by decreases in Capital Markets and Leasing revenues of $6.8 million, or 17.0%, and $6.4 million, or 4.1%, respectively, primarily in the Americas and EMEA regions, as the tepid economic conditions dampened transactional activity, and, to a lesser extent, a decline in Global Business Consulting revenue of $0.8 million, or 22.7%, partially offset by continued growth in the CIS and V&A businesses, which saw increases in global revenues of $9.7 million, or 14.8%, and $3.8 million, or 11.5%, respectively. The decrease in transactional activity was evidenced by the decreases in U.S. Leasing of $8.4 million, or 7.6%, U.S. Capital Markets of $2.1 million, or 9.6%, EMEA Leasing of $1.4 million, or 6.5%, and EMEA Capital Markets of $4.8 million, or 35.8%. The increase in CIS revenue was primarily driven by increases in the Facilities Management and Property Management segments of the business across the regions. CIS revenues also included revenue from Corporate Occupier Solutions Limited (“COS”), relating to which the remaining 50% ownership interest was acquired on April 30, 2011.

Commission expense decreased $4.5 million, or 4.5%, to $95.6 million for the three months ended March 31, 2012, as compared with $100.1 million for the same period in the prior year. Commission expense as a percentage of commission and service fee revenues in the U.S. decreased to 47.4% for the first quarter of 2012, as compared with 49.1% a year ago.

Cost of services sold increased $6.6 million, or 40.5%, to $22.9 million for the three months ended March 31, 2012, as compared with $16.3 million for the same period in 2011. The increase in cost of services sold is primarily due to increases in EMEA, Latin America, and Asia Pacific of $3.0 million, $2.7 million and $1.0 million, respectively. The increase in EMEA is primarily attributable to the acquisition of the remaining 50% ownership interest in COS in April 2011. The increases in Latin America and Asia Pacific are primarily driven by higher CIS revenues, more specifically in Project Management.

Total operating expenses increased $13.0 million, or 6.9%, to $202.5 million for the first quarter of 2012, as compared with $189.5 million for the same period last year. Foreign exchange increased operating expenses by $2.9 million. Excluding foreign exchange, operating expenses increased $10.1 million, or 5.0%. This increase was primarily driven by increases in employment expenses, due to higher headcount and salary increases and other operations-related costs in support of C&W Group’s strategic growth initiatives.

At the operating income level, C&W Group’s results decreased by $15.6 million, to an operating loss of $24.3 million for the first quarter of 2012, as compared with an operating loss of $8.7 million in the prior year quarter.

The loss attributable to owners of the parent increased by $11.5 million to $25.2 million for the quarter ended March 31, 2012, as compared with $13.7 million for the prior year quarter, as reported under IFRS.

As reported under U.S. GAAP, the Company’s loss attributable to owners of the parent increased $9.1 million to a loss attributable to owners of the parent of $18.7 million for the quarter ended March 31, 2012, as compared with a loss attributable to owners of the parent of $9.6 million for the same period in the prior year.

Excluding the first quarter timing impact of the payment of incentive compensation this year versus the second quarter last year, Group’s net financial position was essentially unchanged year-over-year. 

Including the impact of this timing item, Group’s net financial position decreased $57.4 million to a negative $118.2 million (principally debt in excess of cash) as of March 31, 2012, as compared with a negative $60.8 million as of March 31, 2011. 

C&W Group remains focused on achieving its goals, and looks forward to the balance of 2012 expecting year-over-year revenue and EBITDA growth, as compared with 2011. There is caution regarding the global economy, including the slow job growth and the on-going difficulties in Europe, which impacted C&W’s performance during the last quarter of 2011 and the first quarter of 2012. C&W Group continues to believe that the 2012 economic landscape should strengthen during the second half, as underlying economic fundamentals come to the fore and the real estate markets improve, and is committed to continuing its investment in the firm during 2012.

Commercial Register No.64236277 Legal notes | Credits