Good morning, ladies and gentlemen, welcome to this morning's presentation of Savills preliminary results for the 12 months ending 31st December, 2022. It's a virtual presentation. I think Simon and I had the foresight not to drag you across London with the travel disruption that we're all encountering at the moment. The format of today's presentation will be familiar to many of you. I will provide the highlights of our results with an overview of the macro themes that we've experienced during the year, as well as summarizing the key business development initiatives.
Simon will then take you through a detailed financial review of the segments of all our businesses, and I will conclude by highlighting our summary and outlook for the year, our usual double act. At our half year presentation in August last year, I highlighted the effect market reaction to the increasing geopolitical uncertainty as well as the fast inflationary pressures and the effects of central bank intervention. The interest rate rises we've anticipated have become a reality with the cost of debt in most major markets increasing by over 250 basis points. The fastest increase we've experienced for over 30 years, affecting all segments of the real estate markets. The speed of the recalibration of pricing has now created a more positive backdrop for both occupiers and investors alike.
Many markets remain well balanced on a supply-demand basis without an oversupply of new development, which was characterized at the beginning of the global financial crisis. In fact, the reopening of markets have created strong momentum for occupiers to rethink their requirements and upgrade to match their objectives on sustainability, as well as improved amenity for their workforce. This is already fueling rental growth in some prime markets despite the difficult economic outlook. We are going fast forward through a period of price discovery, and this price transparency will allow investors to regain confidence and commitment to deploy in the real estate markets. There remains considerable equity or dry powder seeking these opportunities, and we are seeing increased cross-border activity already without the constraints of COVID related restrictions.
Turning to the highlights, I'm pleased to announce that group revenue rose to almost GBP 2.3 billion, representing a 7% year-on-year increase. We were slightly ahead of our own expectations, despite difficult markets, and most importantly, substantially ahead of the 2019 pre-COVID comparative period. Our group underlying profits reduced by 17.8% to GBP 164.6 million, reflecting the anticipated increase in both staff and normalized discretionary costs, as well as the greater weighting to our less transactional revenue streams. Our policy of maintaining balance sheet strength has resulted in a net cash position of GBP 307.4 million, allowing us to continue with our strategy of investing in the business going forward.
In light of this performance, we are proposing a final ordinary dividend of GBP 0.356, supporting the resilient performance of our less transactional businesses and also reflecting our confidence in our overall business model going forward. This slide clearly highlights the drivers of this performance, as well as the impact on transactional revenue of continued restrictions across the APAC region. Of particular note is the strong growth we experienced across our less transactional businesses, led by property management, up 13%. Finally, our results also reflect our continued investment within the platform, recruiting and retaining the best people and enabling them with enhanced technology. This is aligned to a clear focus also on improving the sustainability of our own business, on which I'll update you later, as well as providing leading consultancy services across the full spectrum of ESG to our clients.
Moving now on to our diversity of our revenue by both sector and segment. We have concentrated our investment in key markets where our clients require our services. Whilst we have seen consistent revenue growth across all geographic regions, we have seen faster regional growth in APAC, North America, and also Continental Europe and Middle East, resulting in 58% of our total revenues now generated outside the U.K. On a service line basis, the strong balance between our less transactional or more recurring income alongside strong transactional services has continued, and our largest service line globally is property management. It's therefore no surprise that you'll continue to see us add to this platform where we are rightly regarded as the leading provider in the majority of the markets in which we operate.
Our property management portfolio has increased to almost 2.5 billion sq ft, thanks primarily to winning a number of key mandates from our global client base. This recurring income stream is complemented by the depth of our consultancy services, representing 18% of our overall revenues, thanks in particular to growth from project management. Our transactional businesses, accounting for around 40% of our revenues, also continue to take market share. 75% of this is from commercial transactions and 25% from residential. Now turning to a slide you've seen before, our 10-year revenue growth. Despite a period of turbulence over the last three years, we have continued to consistently grow our group revenue, averaging around 11% per annum growth and representing total growth around 250% during the period.
It's also perhaps worth highlighting that 10 years ago, more than half of our revenue was generated by the U.K. business alone. On to key market themes. I highlighted briefly at the start of the presentation some of the macro themes that have affected and continue to affect global market activity. Due to the uncertain economic outlook and also increased recessionary concerns, and the significant interest rate hikes, real estate markets are grappling to cope with a rapid repricing. Moving on to market sentiment. Investors have moved to a more defensive strategies as we enter this period of price discovery, with a hesitancy to commit too early. The same hesitancy has also affected occupational demand, particularly in office markets where hybrid working has remained significant. A move down the risk curve has meant prime has done better.
Even here, factors such as obsolescence, sustainability, and demand for more amenity are affecting both occupier and investor sentiment. All sectors are impacted, and the bull run enjoyed by logistics is also rebalancing, particularly due to reduced demand from retailers for just-in-time or just-in-case space, supporting disruptions in their supply chains. Finally, the residential sector has shown greater resilience at the upper end, and this continues. Reduced availability has created supply shortages as well as significant affordability challenges. How have the markets reacted to these macro themes? Starting with investment, what you can see from the first graph on this slide that overall global investment volumes fell 19% during the year, with a 60% fall in the final quarter, particularly affecting the secondary office markets, with more resilience shown across specialist sectors such as life sciences and data centers.
Whilst the total capital raised for real estate investment was down 30% year-on-year, this was in comparison to an exceptionally strong 2021, resulting in a strong cumulative effect with significant dry powder waiting to deploy, particularly for value-add and opportunist strategies. Green shoots of confidence are already appearing in some markets, including London, Singapore, Japan, and Australia. We're also seeing improved activity across Greater China. Therefore, we anticipate increasing volumes coming forward in H2 as price transparency emerges. Moving on to the occupational markets and leasing. Well, as lockdown lifted, we saw a rebound in office leasing volumes, weighted obviously to the first three quarters, with global volumes up 10% and particularly strong performances in London and the main European markets, as well as parts of North America, whilst inevitably volumes fell across Greater China.
The final quarter was obviously a very different story with significant falls. This has resulted in increased vacancy rates now in most markets. Takeup, as I said, was polarized to Grade A, with occupiers firmly focused on sustainability. In London, over 52% of all office take-up was rated BREEAM excellent or above. The percentage of stock actually matching this rating is less than 22%. You'll also see on the slide that office absorption in North America by age of building was only positive in the more modern part, i.e., eight years or less old. Looking forward, most prime markets have limited development supply, in contrast, as I said, to the GFC earlier. This has created an environment for rental growth. We're already seeing the start of this in a number of prime markets, including London, Paris, and Berlin.
Markets weighted to the finance and tech sectors continue to struggle with hybrid working and low occupancy levels, the lowest currently on the West Coast of North America. Moving on to residential. Here, transactions volumes fell in the U.K. mainstream markets, it was 5% above the normal pre-pandemic levels. Mainstream markets grew for the first three quarters before seeing a fall due to the high costs of mortgages. As is often the case, prime remains stronger, with sales over GBP 1 million up 5% year-on-year. Prices increases that were experienced in both prime London and prime country. We do, however, anticipate house price falls this year before stabilizing in 2024.
Internationally, 25 of the 30 prime global cities recorded positive capital value increases during 2022, as well as strong rental growth. Contrasted obviously by Hong Kong, where we saw the greatest fall in prices, transactional volumes also dropping by 45%. We are now seeing gradual improvement here too as cross-border activity increases. Having now set the scene with this market backdrop, our strategic focus going forward is to provide our clients with fully integrated services under the three key groupings that you can see on this slide. For global investors, there is a need definitely for greater project management services linked to the ability to enhance asset performance through active property management. There is also strong investor interest in natural capital and green energy.
Occupationally, we are focused on providing our clients with a comprehensive platform of services, including lease administration and transaction management, running their operational portfolios with greater efficiency through strategic benchmarking. Finally, the opportunity in global residential markets is clear for us. We are focused on prime domestic and also resort markets. This also includes providing expert development consultancy as well as block management services for investors. Reflecting this continued strategy, and I want to highlight the progress we have made across the key regions of our business, starting here in the U.K. As you'll see from the graph, overall revenues grew 3% despite the headwinds we encountered in transactional markets, driven by strong performances in property management and consultancy.
During the year, we opened a new residential office in London and acquired two specialist businesses in licensed leisure and also the automotive sector to provide consultancy services on the switch to electric vehicles. In residential transactions, I'm pleased to say we retained our position as the number one agent in prime London and also in the country markets, with almost 28% market share in London. Of particular note is our 40% market share in multifamily investment deals, transacting some of the largest portfolios last year, including the corporate disposal of Gladman Developments. Our commercial transaction teams were also extremely active. Nationally, our office leasing teams transacted approximately 26% of all the office space in the main regional markets.
In London, we undertook some of the largest deals, including 215,000 sq ft for Kirkland & Ellis and 321,000 sq ft to Clifford Chance. Our occupier solutions teams also secured significant new mandates from Aberdeen, from Zoom, Jaguar Land Rover, and our property management platform continued to also grow their portfolio with key appointments from the Church Commissioners for England, PATRIZIA, and Columbia Threadneedle. Our leading position in rural and forestry has allowed us to transact 24% of all land deals during the year. Our philosophy of developing future bench strength is clearly identified in the U.K., where we now have over 380 graduates and 222 apprentices in training, creating future talent for the business. Onto the APAC region.
Revenue growth here was principally driven by, again, consultancy and property management, particularly the latter achieving over 14% growth. Not surprisingly, transactional revenue decreased significantly in Hong Kong and Greater China, offset by strong performances in Japan, Singapore, and South Korea as those markets unlocked. Our regional strategy here for some time has been to develop our less transactional businesses. As you can see in the second chart here, the pie chart, this now totals almost 75% of our revenue. We have added further to this in project management with new teams across Southeast Asia and Japan, as well as the acquisition last year of AMS, a major facilities management business based in Singapore with over 1,500 staff.
It's also worth highlighting the growth we've achieved in India, the largest ever organic start that we've undertaken, and where we now have 8 offices and employ over 700 employees, and this will have a material future impact on growth in this region. The importance of this is clearly shown by the clients that we are operating with, and this includes UBS, Technicolor, Dyson, and Sony. During 2022, this business actually leased over 3 million sq ft of offices and undertook project management assignments for a further 8 million sq ft of offices. A terrific start. We maintained our strong market share in all key APAC markets, particularly Hong Kong and Singapore, and transacted some of the largest deals in the region, including the investment sale of the Tanglin Shopping Centre in Singapore and also the Goldin Global Centre in Hong Kong.
Our South Korean data center also had a very large market share, advising on 6 new centers. Finally, our residential joint venture platform in Singapore, Huttons, continues to grow with over 5,000 brokers. Onto North America. We experienced positive rental growth of 15% year-on-year as markets recovered, particularly in the Northeast and Southern regions, offsetting weaker recovery in Los Angeles and San Francisco, as well as Washington. In North America, we are heavily weighted to transactional services, but growing in consultancy. In particular, our weighting is to tenant advisory and leasing in the office sector, with the remainder of our revenue emanating from growth in property management. We have now introduced a national divisional structure across North America with a clear focus on global occupier solutions.
To assist this development, we acquired an established lease administration platform to enlarge our existing capability. We also grew our national logistics platform, including new teams in Canada and the opening of a brand-new office in Montreal. We continued to strengthen our tenant rep capabilities, including, again, a market-leading team joining us in New York. During the year, we acted on some of the largest transactions across markets, representing Allen & Overy and also Freshfields Bruckhaus Deringer on their new headquarters. Our global occupier solutions team secured new mandates from NorthMarq and HNTB. Our project management teams continued to act for clients, including Willis Towers Watson and Walt Disney, again, showing the depth of experience and expertise we have. Okay, moving on to Europe and the Middle East.
Here, our revenues grew by 11%, particularly influenced by growth in property management, which increased 24%. We also experienced a good result in consultancy, up 7%, and a more modest increase in our transactional revenue of 4%, impacted by the volume reductions, particularly in Central and Eastern Europe, and Germany and Poland in particular. We developed our European property management platform further, including an acquisition of a platform in Poland, and appointed new heads of occupier solutions and lease administration across the region. The Middle East area also continues to be a particularly important opportunity for us, and we've grown our operations across the region, opening new teams in logistics and also opened in Pakistan.
We have established specialist capital markets teams now operating across multifamily and also data centers throughout the region, and we've also grown our flexible office platform, Workthere, which operates across 11 countries worldwide, but 6 are in Europe. Last year, we acted for 300 companies for their requirements. Our European occupier solutions team secured brand-new mandates from Philips in both EMEA and APAC regions and Lactalis Group across 39 countries, whilst our market share in capital markets also continued to improve, and we ranked in the top 3 across most markets. It's also too important to highlight the growth of our European property management platform, winning new mandates for TrizecHahn, EQT Exeter, and CBREi. Our retail property management portfolio in Spain has doubled, and in Germany, our portfolio has grown by over 260% over the last two years. Some growth indeed.
Finally, Savills Investment Management. Well, here revenue growth was limited by the obvious headwinds affecting both capital raising and also the challenges of deploying in markets with falling values. That said, this also follows a particularly strong year for growth in the previous year, therefore consolidating our position. Assets under management totaled GBP 22.1 billion at the year-end, reflecting a number of disposals undertaken during the year. We have started this year with a strong pipeline. Most importantly, we have maintained our strong track record, with 94% of our assets under management outperforming their five-year benchmarks. In terms of business development, our clear focus is growth in the living sector. During the year, we acquired Pitmore, an experienced multifamily platform, as well as Simply Affordable Homes, allowing us to maximize growth in this important segment.
We also continued our organic growth with new teams in European logistics and Asia debt. During the second half of the year, not surprisingly, capital raising, both across debt and equity, became even more challenging, but we raised over GBP 1.6 billion of new equity and undertook GBP 3.1 billion worth of equity transactions. Looking forward, we have capital commitment from Samsung Life Insurance, our strategic partner, to invest in four major investment products. Turning now to ESG and, in particular, climate, culture, and community. Well, as I said earlier, as a global business, we are committed to minimizing our impact on the environment, and our target is to achieve net zero carbon emissions by 2040.
During last year, our Scope 1 and Scope 2 carbon emissions reduced by almost 18% against our base year, reflecting the positive progress we continue to make. We have adopted science-based net-zero targets and achieved a 30% improvement in the FTSE4Good rating. Our Savills Earth consultancy platform also continues to provide consultancy services on all elements of the green agenda, and a recent example of this is our appointment by Trinity College, Cambridge to undertake a decarbonization review of the Cambridge Science Park. Moving on to culture. We are totally committed to providing an inclusive culture and improve diversity across our global platform, and I'm pleased to say, again, good progress is being made. Last year, we were named an exemplar in the Estates Gazette 2022 LGBTQ attitudes and actions.
In North America, we were a finalist in the Crain's New York Business Diversity Awards. In the U.K., we were appointed Apprenticeship Employer of the Year at the Personnel Today Awards, as well as winning The Times Graduate Employer of Choice for Property for the 16th year running. Within the community, we also take our responsibility very seriously, and during the year, over 14,500 volunteer hours were given to a number of charities, with charity support in excess of GBP 5.1 billion in the U.K. alone. I will now hand over to Simon to take you through the financial review.
Thank you very much, Mark. Good morning, everybody. I think in summary, in markets which were increasingly challenging through the course of the year, and particularly the universal weakness experience in the sector in the final quarter, which is traditionally the strongest for this sector, 7% revenue growth was a pretty good result, and allowed us to mitigate the effect of wage inflation to a great extent. And to take on the chin the anticipated increase in discretionary costs post the COVID year, which I heralded this time last year. This flowed through to continued strong cash position, and I'll talk about our dividend in a moment, which actually has gone up year-on-year on a normalized basis.
Overall, I think it was, given the abnormally strong result in 2021, if you'd handed us this result in March last year, given the economic and geopolitical events which ensued, we'd have very happily taken it. This is why. If we look at our 2022 performance against the relatively clean comparative of 2019, you can see decent progression on pretty well every performance metric. Obviously the margin is slightly different, but we must remember that many of our transactional markets were highly compromised, particularly in the last quarter of last year. Or, indeed, in the case of China, were pretty inaccessible throughout the period through the COVID-related restrictions, and that is material to our business, as you know.
I think in summary, we've not only handled the pandemic period pretty well, but, and the geopolitical and economic issues of 2022, but we've actually enhanced our business quite substantially in this intervening period. I'll turn now to that dividend. The cancellation of the 2019 final dividend, which you'll remember we, as many companies did, went through in March 2020 as COVID took hold, which was 27.05p. That was subsequently declared as a special dividend last year. You can see that in the third last line of this slide. What that does in terms of total distribution is put a normal comparison out of kilter. Hence, if you look at the middle of this slide, you can see the normal distribution per policy.
We've put the dividend up by just under 4% to GBP 0.356, compared with last year's GBP 0.3435 normalized. That is obviously despite the reduction in profits during the year. You should see that as a focus of, or as evidence of our confidence as we look forward. Effectively, dividend-wise, normal service has been resumed with our bifurcated dividends that you know only too well. What I'll do now is turn to our performance. Very good result at the revenue line, pretty much across the board, Mark's talked about that. I would say that with the specific exception of North America, business mix did have an impact on profitability, and COVID restrictions in Greater China also had a significant impact in the Asia-Pacific region, as you know.
A substantial element of the overall profit reduction year-over-year came from the anticipated increase in discretionary costs around travel and entertainment, marketing events, et cetera. Remembering that I said last year that in 2021 we benefited from a GBP 30 million underspend in these captions. In 2022, approximately 2/3 of that returned as markets reopened. That's about GBP 21 million came back. This was completely consistent with what we expected, obviously it's a significant cost swing year-over-year when you look at our profit performance between the two years. Perhaps the more valid comparison underlying all of this, is that these costs now represent about 2.7% of revenue compared with 3.5% back in 2019. I think we have genuinely made some quite useful efficiency savings for the longer term.
This, together with staff cost inflation and our philosophy of maintaining bench strength through challenging short-term markets, is really the summary of our year-on-year profit movement. More of which you can see on the next slide as we look at our service lines. On the left-hand side there, looking at the global transaction business, that 320 basis point reduction in margin year-on-year comprises the aggregate effect of loss-making businesses in mainland China and in Germany for principally COVID and geopolitical economic reasons respectively. Together with the staff cost inflation I've talked about, which is particularly notable in the U.S., and maintenance of transactional teams throughout the challenging period. The other key moving parts on this really are, firstly in the property management business, the next column.
We didn't have the benefit of the GBP 4.3 million of pre-tax profit related to employment subsidies in the Asia-Pac region, particularly Hong Kong, which were in that number, profit number in 2021. That puts that margin progression slightly out of kilter. Although I would say that the margin you can see there for 2022 is a much more normalized margin. Secondly, the impact of wage inflation in particular was most significant within our consultancy businesses, and I think I added that point at the half-year and again and last year. Finally, the relative reduction in performance and transaction fees did impact the Investment Management profitability together with investment that we made in future growth following the Samsung transaction. We'll talk a bit more about that in a moment.
If we turn now to our cash flow, the reduction in cash generated from operating activities year-on-year is a function fundamentally of the lower pre-tax profits and the anticipated circa GBP 100 million swing in working capital from release to consumption, which always happens in a down year, as among other movements. The principal one is that the profit related bonus paid in the year on the previous year's higher profits obviously outweighs the accrual rate within the year on the current performance. Other year-on-year movements to note would be the following. A significant GBP 28 million reduction in acquisition spend as candidly, we pulled back on a couple of transactions on price in particular.
One should note that, you know, the corporate M&A market has to recalibrate and is recalibrating values, just as much, if not more than, the property market that underlies us all. Secondly, a GBP 54 million increase in the dividend payment, as a result of that special dividend I mentioned earlier. Those are the two major items. Other pluses and minuses largely cancel themselves out through the rest of that bridge, with the exception of the 13% increase in CapEx during the year, and a significant reduction in cash inflows from divestments, remembering that we had GBP 63 million in that column positive in 2021 as a result of the Samsung transaction.
As we go through what we hope is the sort of nadir in most property markets in this first and second quarter of 2023, as the whole world gets used to higher, or if you're my age, normal interest rates, it's not wholly surprising to see a situation, well, like we see out of the window and in the news, over the last few days. I think current markets are just another example of why a conservative financial structure doesn't just equip us to withstand pretty much anything the world economy decides to throw at us, but it does enable us to be crucially on the front foot when it comes to making judicious acquisitions at an opportune time. With that, let's now turn to the performance of our businesses.
Starting with the commercial transaction business, you can see 6% revenue growth overall, which was fundamentally made up of growth in leasing and a marginal reduction in capital transactions. This mix, together with the maintenance of the Savills roster and wage inflation, affected profitability. Additionally, in Asia, you can see the impact of Greater China being largely inaccessible for most of the year. In Continental Europe, you can see the effect of the loss-making year in Germany, which is, as you all know, is the largest real estate market in that region. Finally, in North America, we saw good decent revenue growth, aided by the full year effect of previous acquisitions and some of the hires that Mark has mentioned. However, investment and some of the investments that Mark has mentioned in particular, and staff cost inflation significantly hampered profitability during this period.
We turn to the residential markets. We'd have been very happy with this result at the start of the year, coming off the back of a super abnormal performance post-pandemic in 2021. What characterized the U.K. performance? Well, the prime markets remained very robust, particularly in London, and that includes London development sales. It's no coincidence, though, or frankly, a statement of the obvious, that markets which are characterized by a very high equity component in transactions are undoubtedly more resilient to rises in interest rates. In Asia, this is simply a story of Hong Kong and China COVID restrictions and rising interest rates outweighing improvements in Singapore in particular. If we turn now to our less transactional businesses, starting with property management.
In Asia, we saw good revenue growth, but profits were held back year-over-year by that employment subsidy point I mentioned earlier, and by staff cost inflation and the mainland Chinese restrictions. In the U.K., we saw good profitable growth in both commercial management and the residential lettings element of our management business. Whilst in continental Europe, recent acquisitions, particularly OMEGA in Germany, but not forgetting Spain and Poland, are beginning to build towards a sustainable scale business, which is good news as we look forward. We move on to consultancy. This is definitely a mixed story among our portfolio of consultancy services. In the U.K., there was an impact from business mix, as I said. For instance, the valuation segment, which is about 25% of our global consultancy services, was not immune to the reduction in volumes in transaction markets.
It couldn't be. Inflationary cost pressures, particularly on salaries, as I've mentioned before, is particularly focused in this area. Or was, I should say, particularly focused in this area. In Asia, the relatively thin margin was affected by reduced valuation work in Hong Kong and the frictional integration costs associated with our acquisition of Merx in the project management business in Singapore and Hong Kong. In Continental Europe, we saw good growth in consultancy business profits in the three regions referenced in this slide. Finally, in North America, decent growth, particularly in project management, was impacted at the bottom line by cost inflation and a reduction in activity in the tech sector for reasons you'll all be more than familiar with.
If I turn now to finally to Investment Management business, and even before the interest rate rises of last year, we were anticipating a down year Investment Management following the abnormally high level of performance fees in the previous year. In the event, Investment Management outperformed its initial expectations, thanks to the impact of really strong fund performance and resilient valuations, leading to strong base management fees. Of course, we should expect those portfolio valuations to mark to market over this first half, particularly Q1 and probably laterally in Q2 this year. The financial results by region that you can see on this slide effectively represent the ebb and flow of transaction and performance fees between the two years, i.e., where they were located and where they were located in the previous year.
This favored the European business and adversely affected Asia-Pacific and the U.K. in comparison with the prior period. The U.K. platform also bore the brunt of investment into new fund strategies to be seeded by Samsung, such as the living and logistics strategies that Mark has referenced. In addition, there was a relative reduction in the non-discretionary mandate activity, including some performance fees, as our teams here focused on these important new launches and the two corporate acquisitions Mark talked about, Pitmore and Simply Affordable Homes, that support them.
Capital raising was reasonably resilient despite the headwinds, including the denominator effect, which is clearly impacting everybody's allocation to the alternative asset sector. We have started 2023 well in this business and have some exciting products on the stocks for launch. We really just look forward to improved market conditions through the course of, particularly the second half, in which to launch them. With that, I will hand you back to Mark.
Thanks, Simon. Finishing up on the summary and outlook. As Simon has said, we are pleased with the 2022 performance, slightly ahead of our original expectations despite the challenging markets. More importantly, the group's performance was substantially ahead of the 2019 pre-COVID comparative period and driven by strong growth in our less transactional businesses. Looking forward, we continue to navigate uncertain macro conditions and in particular, the effect of higher interest. We go back one slide. Sorry, I went one. The higher interest rates, which is leading to a period of price recalibration. Whilst this is rapid compared with previous cycles we've experienced, it is creating hesitancy and reducing near-term transactional volumes in most sectors.
We therefore anticipate that the first half of this year will remain challenging, more so than the first half of 2022. I'm pleased to say that we have started the year broadly in line with our expectations and anticipate a progressive recovery during H2 and into 2024. Thanks to the strong balance sheet that Simon's mentioned, our strategy remains clear to maintain our bench strength, particularly across the transactional markets in anticipation of the market recovery, as well as seeking opportunities for strategic growth in the areas I highlighted earlier. Finally, moving on to investment in our people. It gives me an opportunity to thank our truly amazing worldwide workforce.
The accolades that they continue to win needs no explanation as shown on this slide. We're continuing to make very strong, significant progress in all areas, diversity, inclusion, and the training that I mentioned earlier. We are one of the largest employers of apprentices and graduates in real estate as a whole, and we take this responsibility extremely seriously, growing this future bench strength within a culture of professionalism and with a passion to provide our clients the best services possible. Having returned from a number of long overdue, overseas visits, I'm reminded so clearly about the enthusiasm and commitment of all our staff, and I am very, very proud to be their CEO.
Finally, I would like also like to thank all of you and also our clients and our shareholders for their continued support. That now ends the end of the webinar, and Simon and I will look at the questions that are already arriving on the screen, and hopefully we can try and answer those for you. Thank you for your attendance.
Thank you, Mark. The questions that have come up thus far. First one is from Joseph Spooner. "Did the rebound of discretionary costs complete in 2022, or is there further for them to normalize in 2023? Are salary pressures ongoing, and what do you anticipate on that front for 2023?" That's the first two of them. The next one is, "Consultancy revenue up 4%, PBT down 20%. Mix was one factor, but was there also a challenge in passing on inflation to clients?" The final piece, which is probably quite a general question for most people is, "We've spoken about the need for real estate price to recalibrate to new conditions. Any sense of how far through that process we are?" Shall I start with the top of the list?
Yes, and then work through it.
I'll hand over as we work down it.
Yeah.
The first question, the rebound of discretionary costs in 2022. I think we're at a sensible run rate. I think that 2.7% versus 3.5% of revenue, given that these costs generally move consistent with revenue, being travel and entertainment, client entertainment, and marketing and events. I think we're in the right zone, which is actually, spookily enough, exactly in the 75%-80% of pre-COVID levels that I hoped it was going to be and said this time last year and in fact in the previous period. I don't think we'll see that ratio move too drastically. Obviously, it can, you know, move around that sort of level in any given period. I think we're probably there or thereabouts. The salary pressures, I think, candidly, without, you know, judging.
Hope to be judged.
I think the overall pressure is definitely lower than this time last year, where a lot of pain was being felt. Particularly, and this is in the professional services industry generally, particularly at the mid to lower tier or the younger group of employees. We've gone a long way to address that. I think we will have some salary increase this year by definition, but it's, I don't think it's going to be quite as drastic as it was last year. Where are we now? The next one's consultancy revenue. "Was there a challenge in passing on wage inflation?" There's probably a timing difference actually in truth in passing on wage inflation. It takes a little time to work itself through, particularly on longer assignments that have been pre-contracted. I think we are playing a bit of catch up on pricing, which is not unusual. I think the primary point was the nature of the revenue was geared slightly more towards the less profitable service lines compared with, say, valuation. That's the main point of the change.
Yeah, I think that's right.
I think, Mark, do you want to talk about price?
Yeah, I'll just finish off. I think the consultancy piece, as you say, the mix, Simon, was a factor. Some of the higher value consultancy services like planning, development consultancy inevitably sort of ebbed with some of the transactional volumes. They are coming back. In terms of, you know, where the price recalibration is, in a number of markets, it's happened quicker. Some of the prime markets, London, and the U.K. in particular, but also some of the main European markets have also recalibrated faster. So I believe actually we've seen the majority of that recalibration already occurring, much quicker than, say, I mentioned earlier, that I've seen in the cycles that I've experienced with real estate. This has been a lot quicker, which is positive as an outlook.
I also would say positivity in the APAC region. I mentioned the fact that, you know, Greater China has been sort of, not being able to play a full part because of the COVID restrictions. That is now changing. I really do see the APAC region having gone through the recalibration there too. I think we're advanced through it. I can't say there won't be any further price adjustments, but I think the majority is done. I think that will help investors come forward and start to commit and deploy into the market in the second half. Hopefully that answers the question. Shall we go on to Chris?
Next one is from Christopher Millington.
Yeah
Four -part question again. The first part is, "Could you comment on the current residential pipeline and your experience in early 2023 for listings and new buyer inquiries?"
Yeah.
Mark, do you want to trade off for that?
Shall I pick that one up? Yeah, look, actually, Chris, positive. A couple of things occurring. I mean, obviously, we operate in the upper end of the market, as you know, and that is the most resilient part. We are seeing good requirements. We're also seeing one of the things that held back was lack of stock, so stock levels have increased. That is positive, so we do end up with a good book of work going forward. I'd say that probably in terms of demand, I would say new buyer inquiry is stronger in the U.K., in London than they are nationally. Prime country is still holding up pretty well. In the other parts of our residential platform outside the U.K., again, we're seeing improving demand going forward.
There has been a hesitancy, and in markets like Shanghai, which is also an important part of our residential platform, we're again seeing, you know, better inquiries from new buyers, improving in most markets.
I think the next question was please comment on your clients' experience in accessing credit, "And do you think factors such as SVB will make this more difficult?" Honest answer on the latter point, I think it's too early to say. We have found pretty reasonable access to debt, both from the banking system and from the alternative lenders, over the course of the last 12, 14 months or so. In fact, one of the things I suspect is the case is that it's a pretty good time to be an alternative lender.
I'm very glad that we have DRC SIM in our Investment Management stable, 'cause I think nimble lenders will do quite well over the coming period. So far we've not seen significant difficulties in accessing credit. Clearly, it's become more expensive. That's a given. Therefore perhaps sentiment for people who've not experienced that level of debt cost is the thing that may have held people back somewhat. We haven't seen the taps...
No. I think also it's worth mentioning the level of leveraging.
Yeah.
You know, the gearing within the markets is much lower than previous cycles. Chris, you know, there is more equity. And there's also a, you know, a desire to recapitalize as necessary. You know, for us, you know, we don't mind seeing some volume increases as well if we've got motivated sellers as well as motivated buyers.
Yeah.
That will be positive for our transactional business. I don't think it's as Simon said, I think it's quite balanced at present.
I think the third question is, "What is our desire to make acquisitions, pipeline and potential firepower?" Obviously, we are not going to give complete disclosure on all of that and to Mark.
Yeah
O ther areas of interest.
Well, well, well, thanks to the prudency of, you know, as our, the way that we operate, you know, it does give us the opportunity to acquire in a market where, you know, there's opportunities for repricing. Certainly that is something we're carefully looking at. Chris, we've been looking obviously in acquisition terms, we've been looking at more resilient recurring income, so property management, project management, facilities management, those types of income, and they're more likely to be acquisitions than organic because of the scale you need. The other area I would say maybe acquisitions may be in residential, where obviously our brand is very strong and we've been operating well, and again, the residential markets and the prime markets remain attractive to us. I can see that on acquisitions. A lot of what we do.
That would be overseas.
That would be overseas. Yeah, absolutely. They would be international. Outside that it's primarily organic, you know, and I think the opportunities where we've seen, you know, some opportunities as other of our peer group have maybe shed staff and we have maintained our bench strength. You know, it gives us opportunities to look at picking up, you know, good gaps. And we'll do that, you know, as the market continues to recover.
Needless to say, as the only service firm in this sector worldwide with net cash at year end, the December 2022, I think we're in a pretty good position to finance anything we are likely to want to do in the coming period. Your final question, Chris, is "How should we think about operational gearing when volumes return?" I think that's clearly because we are conservatively financed, we are able to take that decision to maintain our bench strength or our roster, particularly in the transactional teams when times are tough, and this isn't altruism. You know, some of the best work that is done for clients is when they can't actually transact. It's in helping them to work through solutions that they need.
To some extent, as one of our colleagues very fondly says, "No profits is the applause for good work." We're doing a lot of the good work at the moment, and we are looking forward to the applause turning up as markets recover through probably the back end of this year, but very much so in 2024. That will undoubtedly be assisted by that operational gearing in business.
I think in particular, Chris, that would be Greater China. You know, we've maintained our bench strength there through thick and thin.
Yeah.
As that market now is unlocking, you know, Great, Mainland China unlocking very recently, you know, we are seeing the opportunities to, you know, the revenue increases are gonna come through in the second half.
I think that is it for the questions at the moment. I'm just seeing if there's a refresh or anything. No?
No.
You got one second to fire in another question if you would like to. Otherwise, we'll thank you for listening.
Yeah. Thank you very much for joining, as I say, and we look forward to updating you in August. Thanks very much for your support. Bye-bye now.
Bye.