CBRE Group INC reports strong financial results for first-quarter 2017
CBRE Group, INC. reports strong financial results for first-quarter 2017
| 28 April 2017
Revenue of $3.0 billion, up 5% (7% local currency)
Fee Revenue of $1.9 billion, up 5% (7% local currency)
GAAP EPS of $0.38, up 58%; Adjusted EPS of $0.43, up 19%
CBRE Group, Inc. (NYSE:CBG) today reported strong financial results for the first quarter ended March 31, 2017.
“We have been keenly focused for some time on a strategy to make CBRE a more balanced and capable enterprise that produces highly differentiated outcomes for our clients,” said Bob Sulentic, CBRE’s president and chief executive officer. “In support of this strategy, we have made targeted organic investments and acquisitions aimed at bolstering our talent base, service offering and operating platform. These investments have allowed us to significantly improve our ability to provide integrated solutions to our clients around the world as well as our digital and consultative capabilities. All of this has positioned us to better satisfy our clients and take market share.
This was clearly evident in our first quarter results, with excellent top- and bottom-line organic growth across our regional services businesses globally. This growth came against a backdrop of lower sales market volumes in many parts of the world. Our earnings were further enhanced by the steps we took in late 2015 and 2016 to calibrate our costs while also investing in our strategy.”
First-Quarter 2017 Results
• Revenue for the first quarter totaled $3.0 billion, an increase of 5% (7% local currency1). Fee revenue2 increased 5% (7% local currency) to $1.9 billion. Organic fee revenue, which excludes contributions from all acquisitions completed after first-quarter 2016, increased 4% (6% local currency).
• On a GAAP basis, net income and earnings per diluted share both increased 58% to $129.6 million and $0.38 per share, respectively. Adjusted net income3 for the first quarter of 2017 rose 20% to $144.8 million, while adjusted earnings per share improved 19% to $0.43 per share.
• The adjustments to GAAP net income for the first quarter of 2017 included $27.0 million (pre-tax) of non-cash acquisition-related amortization and $11.9 million (pre-tax) of integration costs associated with the Global Workplace Solutions acquisition. These costs were partially offset by a $15.2 million (pre-tax) reversal of carried interest incentive compensation and a tax benefit associated with the aforementioned adjustments of $8.4 million.
• EBITDA4 increased 21% (22% local currency) to $306.5 million and adjusted EBITDA4 increased 7% (8% local currency) to $303.2 million. Adjusted EBITDA margin on fee revenue was 15.8%.
First-Quarter 2017 Segment Review
The following tables present highlights of CBRE segment performance during the first quarter of 2017 (dollars in thousands):
CBRE exhibited broad strength across its regional services businesses in the first quarter of 2017.
• The Americas, the company’s largest business segment, posted revenue growth of 7% (same in local currency).
• Asia Pacific (APAC) saw revenue rise 10% (9% local currency), with particularly strong growth in Greater China, India and Singapore.
• Revenue growth in Europe, the Middle East & Africa (EMEA) was adversely affected by foreign currency movement, principally the depreciation of the British pound sterling. In local currency, EMEA revenue rose 9%, but was flat when converted to U.S. dollars. Germany, Spain and Switzerland paced the region’s growth for the quarter.
In the United Kingdom, overall revenue rose 8% in local currency, with solid growth across virtually all business lines. Growth of 9% in leasing and 5% in sales (both in local currency) reflected continued improvement in market sentiment following the European Union referendum (Brexit) vote and market share gains for CBRE.
Revenue growth was also solid across most global business lines and was almost entirely organic.
• Global occupier outsourcing revenue rose 4% (8% local currency), while fee revenue increased 4% (9% local currency). o Emblematic of the strong gains this business is making internationally, notable growth was achieved in Canada, India, Spain and the United Kingdom, among other countries. o The company signed 29 occupier outsourcing contracts in EMEA and APAC (combined), while 16 were signed in the global health care sector.
• The capital markets businesses – commercial mortgage services and property sales – continued to perform very well. Combined, these businesses grew 7% (8% local currency).
• Commercial mortgage services grew at a double-digit clip, with revenue up 13% (14% local currency). o The company’s loan volume growth was driven by increased originations with life insurance companies. o CBRE’s loan servicing portfolio stood at approximately $150.0 billion, up about $18.0 billion, or 14%, from the year-earlier quarter.
• Property sales revenue increased 5% (6% local currency), despite a notable slowdown in global market volumes, especially in the United States. o EMEA sales revenue increased 8% (16% local currency), aided by robust growth in France, Spain and Switzerland. o APAC sales revenue dipped 1% (4% local currency). Improved performance in Greater China and Singapore was offset by a decline in Japan, which had an exceptionally strong first quarter in 2016 when sales revenue rose 67%. o The Americas saw revenue rise by 6% (same in local currency), bolstered by significant gains in Canada. Revenue growth of 2% in the United States stood in stark contrast with the 13% market volume decline, as reported by Real Capital Analytics (RCA). CBRE picked up 130 basis points of market share, according to RCA.
• Leasing revenue increased 4% (same in local currency). o Both APAC and EMEA recorded double-digit growth before currency effects. o In the U.S. growth was 1% on top of very strong growth of 20% in the first quarter of 2016.
• Property management and valuation achieved solid growth, fueled by double-digit growth (in local currency), in both business lines in EMEA and APAC. o Revenue from property management services rose 7% (8% local currency), while fee revenue increased 6% (7% local currency). o Valuation revenue increased 6% (7% local currency) for the first quarter.
• In the Global Investment Management segment, assets under management (AUM) totaled $86.5 billion. o In local currency, AUM increased $0.9 billion from the first quarter of 2016, but decreased by $3.2 billion when measured in U.S. dollars. o Approximately 60% of AUM, excluding securities, is in Europe and denominated in euro or British pound sterling.
• In the Development Services segment, projects in process totaled $5.9 billion, down $1.2 billion from the first quarter of 2016, while the pipeline rose $2.0 billion to $5.1 billion.
CBRE completed two acquisitions during the quarter – Floored, Inc., a leading Software as a Service (SaaS) platform for commercial real estate, and Capstone Financial Solutions LLC, a technology-enabled national commercial mortgage services specialist. Earlier this month, the company acquired Mainstream Software, Inc., a leading SaaS platform for facilities management.
“We are pleased with the excellent performance our people produced in the first quarter. As we look ahead, we are increasingly energized by our market position and prospects,” Mr. Sulentic said. “Our business has positive momentum and our people – supported by our increasingly robust operating platform – are well positioned to capitalize on a generally favorable macro environment. At the same time, it is important to remember that the first quarter is typically our seasonally lightest quarter for revenue and earnings, and the impact of our cost savings actions is particularly pronounced this quarter. As always, we caution against extrapolating first quarter performance to the full year and we are not updating guidance only three months into the year.”
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.