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CBRE reports record 2017 earnings and revenue

By Paul Norman - Thursday, February 08, 2018 14:17

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CBRE said strong occupier outsourcing and leasing fee revenue growth ahead of expectations had helped drive a strong fourth quarter and capped off a year that had seen record earnings and revenue.

Reporting its Q4 and full year results for 2017 CRE president and chief executive officer Bob Sulentic said: “Our fourth-quarter results capped another excellent year for CBRE. Fee revenue was up 9% in local currency and adjusted earnings per share rose 6%.

"Our performance significantly exceeded the expectations we discussed on our third quarter earnings call, and was led by occupier outsourcing and leasing fee revenue growth of 17% and 11% respectively, in local currency. Revenue and earnings for 2017 reached all-time highs, and we made important strategic gains across the company,” he added.

2017 marked the 8th consecutive year of double-digit adjusted earnings per share growth for CBRE.

Looking ahead to 2018, Sulentic said: “We regard the macro environment as a supportive backdrop for our business, and we continue to operate within an industry poised for long-term growth. This is due to the growing acceptance of outsourced commercial real estate services, the increasing capital allocation to commercial real estate as an institutional asset class, and the continuing consolidation of activity within our industry to the highest-quality, globally diversified market leaders.”

Martin Samworth, CEO CBRE EMEA, said: “2017 was another record year for CBRE in EMEA with strong revenue gains and double digit adjusted EBITDA growth in local currency. These excellent results reflect the broad diversification of our EMEA business today and include impressive growth and market share gains across all lines of our transactional and outsourcing business in our major markets. We start 2018 in great shape and with an unrivalled service offer and platform which allows us to achieve exceptional outcomes for our clients.”

For full year 2018, CBRE expects to achieve adjusted earnings per share in the range of $3.00 to $3.15. This represents an increase of 13% at the midpoint of the range with 8% attributable to EBITDA growth and 5% attributable to the combined net effect of a lower expected tax rate due to US corporate tax reform, interest savings and higher depreciation & amortisation.

Revenue for full-year 2017 totaled $14.2bn, an increase of 9%. Fee revenue increased 8% (same local currency) to $9.4bn.

On a GAAP basis, net income increased 21% and earnings per diluted share increased 20% to $691.5m and $2.03 per share, respectively.

Adjusted net income rose 19% to $924.5m, while adjusted earnings per share improved 18% to $2.71 per share.

EBITDA increased 23%  to $1.7bn and adjusted EBITDA increased 10% (9% local currency) to $1.7bn. Adjusted EBITDA margin on fee revenue increased 32 basis points to 18.2%.

Revenue for the fourth quarter totaled $4.3bn, an increase of 13% (11% local currency). Fee revenue increased 11% (9% local currency) to $3bn.

On a GAAP basis, net income decreased 36% and earnings per diluted share decreased 37% to $168.4m and $0.49 per share, respectively.

Adjusted net income for the fourth quarter of 2017 rose 7% to $337.9m, while adjusted earnings per share improved 6% to $0.99 per share.

CBRE said it produced solid revenue growth in all three of its global regions in the fourth quarter of 2017.

APAC saw a 13% (11% local currency) revenue increase, supported by solid growth across the region, most notably in Australia, India, Japan and Singapore.

In the Americas, revenue increased 11% (12% local currency), with strong growth in Canada, Mexico and the United States.

EMEA revenue rose 17% (9% local currency), driven by Spain and the UK.

Revenue growth across CBRE’s global business lines was largely organic.

Global occupier outsourcing achieved growth of 19% (17% local currency) in revenue and 20% (17% local currency) in fee revenue. Acquisitions contributed 1% to the revenue growth rate and 2% to the fee revenue growth rate in the quarter.

Growth was broad-based across the three global regions, led by India, the United Kingdom and the United States.

Leasing revenue rose by double digits, increasing 13% (11% local currency).

APAC produced 17% (same local currency) leasing revenue growth, paced by Australia, Greater China and Japan.

Americas leasing revenue rose 12% (same local currency), with strong performance in Brazil, Canada and the United States.

EMEA leasing revenue rose 12% (3% local currency), led by France.

Revenue edged up 1% (down 1% local currency) for the capital markets businesses – property sales and commercial mortgage origination – on a combined basis.

Among the capital markets businesses, global property sales revenue was flat (down 2% local currency), "consistent with the decline in market volumes globally".

EMEA remained robust with sales revenue up 29% (20% local currency). Several countries drove this outcome, including Germany, Italy, Netherlands, Spain and the United Kingdom.

APAC sales revenue fell 7% (down 8% local currency) compared with a very strong fourth quarter of 2016, when sales surged 42% (35% in local currency).

Americas sales revenue declined 8% (same local currency), as strong gains in Canada and Mexico were offset by lower activity in the United States, which saw revenue decrease in line with the decline in market volumes.

The other capital markets business, commercial mortgage origination, saw revenue increase 5% (same local currency). This is on top of the 36% growth achieved in the fourth quarter of 2016. Loan volume growth "remained healthy", particularly with conduit lenders due to higher CMBS activity.

Recurring revenue from CBRE’s growing loan servicing portfolio increased 31% (30% local currency). At the end of the fourth quarter, the loan servicing portfolio totaled approximately $174 billion, up 20% from year-end 2016.

Property management services produced growth of 14% (12% local currency) for revenue and 16% (14% local currency) for fee revenue. Growth was strong worldwide, most notably in APAC.

Valuation revenue rose 3% (flat local currency).

CBRE also announced plans to call its $800m of 5% bonds due in 2023 in March 2018, which will be funded with cash on hand and borrowings under its credit facility.

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