Q4 2019 Earnings Call
Good morning at this time I would like to welcome everyone to the Jones Lang Lasalle incorporated fourth quarter earnings Conference call for your information. This conference is being recorded all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If he would like to ask the question. During this time.
Simply press Star followed by the number one on your telephone keypad. If you would like to withdraw your question press the pound Keith. Thank you I would now like to turn the conference over to Kristen Executive managing director of Investor Relations. Please go ahead.
Thank you and good morning, welcome to our fourth quarter 2019 conference call for Jones Lang Lasalle incorporated.
Earlier. This morning, we issued our earnings release, which is available on the Investor Relations section of our website along with the slide presentation intended to supplement our prepared remarks.
He says it I, our got JLL dot com.
During the call, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors.
We include reconciliations non-GAAP financial measures to gap in our earnings release and supplemental slides.
As a reminder.
Today's call is being webcast live in recorded.
A transcript of this call will also be posted on our website.
Any statements made about future results in performance plans expectations and objectives are forward looking statements.
Actual results in performance may differ from those forward looking statements as a result, the factors discussed in the annual report on form 10-K of the fiscal year ended December 31st 2019, and another reports to be filed with the FCC in the near future.
The company disclaims any undertaking to publicly update or revise any forward looking statements.
And with that I'd like to turn the call over to Christian Ulbrich, Our President and Chief Executive Officer for opening remarks.
Thank you Chris.
And welcome everyone to this review of our results for the full year and post quarter 29 team.
70, playing to our CFO will ship detailed solid financial performance.
Following my introductory remarks.
When you 19 wants a very exciting year for chair the L. with significant achievements on our beyond strategy capped off by strong financial performance.
Well the full year, we reached record adjusted EPS of Fortune dollar invites and 16% gross over prior year in local currency.
We delivered adjusted EBITDA of over 1.1 billion, representing 18% growth, all but 2018 and outpacing fee revenue rose 12%.
The fourth quarter 29 team adjusted earnings per share was $6.35.
7% higher in local currency then in Q4 2018.
Adjusted EBITDA was 494 million for the quarter, 19% increase in local currency.
These excellent results a product of strong America's performance combined was robust contribution from Lasalle investment management.
To put our performance into context real estate fundamentals remain strong amid a cautious global environment.
Pete Rose East lending up 2.6% for the year.
Slide two in our supplemental slide show overall real estate market activity.
Nobody investment volumes achieved a record here with a total of 800 billion up 4% over 2018.
Well I think allocations to real estate healthy supply and demand fundamentals and low interest rates continued to support a robust global real estate investment environment.
He think volumes remained healthy for the year.
Down 5% from a record of 20 team, but still above historical averages.
The global office vacancy rate of 10.7% remains near historic lows and leasing fundamentals remain favorable.
Reflecting on 29 team, we continued to execute against our beyond strategy with notable achievements and up the same time deliberate about financial targets, we set for the year.
Generated organic revenue growth of six person now a real estate services business adjusted EBITDA margin of 15.6% as reported and digital revenues well over 100 million, all while simultaneously executing and integrating our largest acquisition to date.
This performance puts us solidly on the path to achieving our 2025 talk.
The completion of the H. up acquisition marks a transformational action delivering all up young strategy adopting our capital markets revenue.
The strategic combination will continue to accelerate the gross and differentiation of our foodservice capital markets globally.
Biting our clients was seamless expertise and all aspects of the investment process.
The acquisition. So many accepted shale Ellis one off the top two commercial real estate firms by U.S. investment sales activity. According to real capital analytics and created a market leading debt and equity origination platform.
Yeah overall very piece would be integration progress and realization of synergies that's definitely will discuss in more detail in just a couple of moments.
But what kind of attrition has been higher than anticipated.
On the estimated the opportunity for cross selling what other saw the slides.
Basketball, we remain confident that those cross selling opportunities well more than offset any short term impact you to broker losses.
Illustrating the power off the combined platform, we had several transactions in the first six months, but JLL was awarded the mandate for not only the sale and financing, but the leasing assignment as well.
Additionally, we announced the formation of Gelato technologies and 29 team.
Hello technologies brings together all off Gillette's technology products and services to help our clients tap into our digital expertise rich data pool and vast resources to navigate t. really seeking.
It's a clear differentiator that will enhance future market share gains in revenue gross while driving margin expansion opportunities for channel.
In summary, I'm very pleased with our performance this year, but I'm confident our team will continue to execute and delivering 2020.
With that I will tell him to cold over to Stephanie who will discuss our results in more detail.
Thank you Christian and welcome to everyone on our call.
I'm pleased to report the JLL delivered record full year results across fee revenue adjusted EBITDA and adjusted earnings per share.
Driven by solid real estate services organic growth.
Contributions from the acquired HSS business and exceptional results from the south.
Before I get into more specific.
Quick reminder, that we report percentage changes in local currency unless otherwise noted.
Well the your consolidated revenue totaled 18 billion and consolidated fee revenue reached 7.1 billion.
Each representing 12% growth against 2018.
That's Christian noted our full year 2019, adjusted EBITDA surpassed the 1 billion dollar Mark for the first time coming in at 1.1 billion.
This represents a tremendous accomplishment made possible by our 93000 JLL employees around the world.
Real estate services fee revenue increased 13% for the year and with balance between organic growth and contribution from recent acquisition.
Organic growth of 6% with broad based with the most notable increases in leasing and project and development services.
New client wins and expansion of mandate with corporate solutions client generated 7% growth and our outsourcing business.
Fourth quarter fee revenue growth of 13% was led by the Americas, which benefited from the agent that acquisition and strong result, and through project in development services and advisory and consulting across all geographic segment.
Our lifestyle business had an exceptional quarter, achieving nearly 30% advisory fee growth combined with significant incentive fees.
A record top line results converted well an impressive adjusted EBITDA margin of 20.8% in Q4 and 15.6% for the year.
Which was near the top of the 14% to 16% target range. We provided you last quarter.
For the year, the 90 basis point net expansion reflected contribution primarily from organic or yes growth and data.
Bind with investments in growth initiative, including quite facing technology.
Please refer to slide five of our supplemental slides for further details.
Turning to our balance sheet net debt was 861 million an increase from a year ago, reflecting cash outflows to acquire HFSA.
Partially offset by fourth quarter debt repayment.
That's left from operations totaled 735 million for the quarter of which approximately 80% with utilized for debt repayment.
Consistent with our cash use priorities previously communicated.
We finished the year well positioned with net debt to adjusted EBITDA.
<unk> 0.8 times, a decline from 1.4 times in the third quarter.
We did not repurchase any shares during the fourth quarter.
As we move to 2020, we will continue to prioritize debt repayment and remain committed to maintaining an investment grade balance sheet.
For the year Kessler from operation with 484 million, representing approximately 70% of adjusted net income.
Compared to 2018 casebook them operations declined by 120 million, primarily due to its just that integration and acquisition charges and higher tax payment from previous years.
Moving to our segment result.
America fee revenue increased 22% for both the fourth quarter and full year with growth achieved across all our service line.
Excluding 2019, M&A contribution fee revenue improved 3% for the quarter and 9% for the year.
For the quarter growth was led by both projects in development services and advisory and consulting.
Which speaks to jail ehealth ability to offer diversified strategic services to our clients.
Our leasing business achieved strong full year growth across all major asset classes with increased average deal size.
Leasing fee revenue with relatively flat this quarter, reflecting resilience again.
Okay did decline and office market growth absorption and its de prior year comparable 35%.
On a full year basis leasing led the 9% organic growth achieved in the Americas.
Capital markets fee revenue more than doubled in the fourth quarter as a result of combining our legacy business with each other.
For the fourth quarter, except that contributed fee revenue of 209 million and since the July 1st acquisition 395 million.
As Christian noted CHF integration is going well we are encouraged by the strong first six months performance.
We made good progress identifying and realizing a portion of the synergies and are on track to achieve our stated targeted annual run rate EBITDA synergies of 28 million in the first 12 months and 60 million over two to three years.
For 2019, we met our goal of generating 10 million in synergies.
Primarily through cost reduction.
Savings are generated through our office combination and by eliminating duplicative research marketing and public company costs.
Last month, we successfully completed the transition of HFSA financial and HR system, resulting in unified platform.
Americas' adjusted EBITDA margin was an impressive 22.6% for the quarter and 18.4% for the year.
An improvement versus the prior year of 330 basis points and 210 basis points respectively.
Margin expansion for the year was evenly balanced between positive organic gains and accretion related to the contribution from HFSA.
It's worth highlighting that the Americas has more than doubled full year adjusted EBITDA since 2016.
Turning to EEMEA fee revenue results for both the quarter and the full year were largely in line with 2018.
For the year growth from property and facility management projects in development services, and advisory and consultancy, largely offset lower transactional activity, particularly in the UK and Germany.
Noteworthy during the fourth quarter was the divestiture of our property management businesses in Continental Europe, which impacted our revenue result.
Leasing fee revenue declined 5% for both the quarter and the here.
Capital market fee revenue declined 7% for the quarter, an 8% for the year.
For the year, France, and Spain showed the most significant growth.
Adjusted EBITDA margin was 13.7% for the quarter and 5.4% for the year a decrease against 2018, a 450 basis points and 230 basis points respectively.
The decrease was largely driven by a notable decline in higher margin transactional fee revenue, particularly in capital markets.
Our EMEA leadership team remains very focused on cost management initiatives and driving profitability.
Moving to Asia Pacific performance continues to be positive.
Revenue increased 2% in Q4 and 6% for the year.
Helping a mark to revenue increased 50% for the quarter and 24% for the year compared with 2018.
For the quarter growth was broad based across all markets and most notable in Japan and Singapore.
Partially offsetting with a decline in leasing a 15% for the quarter.
Which reflected slowing market conditions amid geopolitical tensions and following a strong prior year quarter.
For the year office market gross absorption was down 12% driven by a combination of economic uncertainty and the impact of continued tight vacancy condition.
Your graphically across all service lines, India, Japan, and Australia, but full year APAC revenue growth with offsets from greater China.
Adjusted EBITDA margin expanded to 21.7% for the quarter and 14.3% for the full year.
And improvement against 2018, a 40 basis points and 110 basis points respectively.
The expansion reflected positive service mix from organic growth in capital markets as well as continued cost management initiatives.
Turning to our investment manage business.
Without fee revenue rose, 23% for the quarter and was well balanced between incentive an annuity fee growth.
Advisory fees, which serve as an annuity measure to the underlying health of our investment management business grew an impressive 27% for the quarter and 21% for the year.
Gains were driven by successful capital raising and deployment of Lasalle margin accretive or open end funds across the globe.
Without raised 2.7 billion for the quarter, bringing the full year to 8 billion of capital raise.
Just under 50% of the new capital raise represented cross border flows.
As noted in our remarks last quarter, we had a few sizable transactions in the pipeline among them a significant deal in Japan that successfully closed in December driving incentive fees to 80 billion for the quarter and 138 million for the year.
Our equity earnings for the quarter totaled 3 million and 33 million for the year largely attributable to fair value adjustments for Lasalle manage publicly traded Japanese right.
But that was adjusted EBITDA margin was 30% for the quarter and full year, a strong 490 basis point improvement in Q4.
For the quarter without benefited from record annuity margins.
Higher equity earnings and incentive fee growth, although on a full year basis incentive fees declined against a record 2018.
Without assets under management totaled 67.6 billion, demonstrating continued strong capital raising efforts and momentum and scalable high margin products.
To summarize our outstanding 2019 results reflected the strength of our geographically diversified presence along with benefits from the transformational HSS acquisition.
Our focus on growth investments digital innovation and operational rigor.
Delivered through our leading integrated global platform positions us well for strong future performance.
Consistent with our 2025 beyond strategy in 2020, we expect 6% to 8% organic fee revenue growth in our real estate service business and consolidated adjusted EBITDA margin in the 14% to 16% range.
And now back to Christian for closing remarks.
Question.
Thank you Stephanie.
Looking up to 2020 market outlook economic and geopolitical uncertainty will continue to impact the global economy, but GDP Paul costs, it to moderate by 10 basis points to 2.5%.
Most economists forecast the risk of precession to remain low.
Any impact from the Corona by rose needs to be seat.
JLL research outlook for commercial real estate global investment volumes remained elevated.
But the long term trend of rising asset allocation the sector, how about research for cost reflects some moderation and those volumes from the record levels seen in 2019.
Investors conviction that the performance of the real estate sex have remained strong and is supported by robust supply and demand fundamentals in many global markets and healthy spreads to risk free rates.
Well leasing office demand is forecasted to moderate but remain other healthy levels.
In some markets activity will be constrained by elect calc available space.
We remain convinced and our ability to grow our business in this environment and good 2020 to deliver results consistent with our 2025 long term growth targets as Stephanie previously mentioned.
The remain mindful Apollo goal within the broader context of corporate citizenship.
We're very pleased to see but the responsibility of the global corporates and the world businesses have to play more generally has gained tremendous momentum.
This responsibility is a critical part of our beyond strategy.
And we're very focused on delivering a sustainable future.
All of our stakeholders.
On the back of our longstanding values, we have replaced and shorten shalev helped us to we shape the future real estate pull up at a world.
This helps to explain not what we do what why we do it.
And so that's a guiding principle that unites our entire organization.
Mitigating climate change and limiting our carbon footprint in line with the aim so for Paris climate agreement is one element of it.
We formed our global sustainability boarding twentytwo and started to wrong and major global sustainability campaign in 2015 under the headlines of building a better tomorrow.
Having achieved our current wronged alpha environmental targets well ahead of schedule, we are setting new science be targets.
In line with those efforts he joined the world economic forms a lines of seal climate lead us.
I met recently with this group of fellow business leaders in Davos, She disgust global efforts to reach net zero carbon emissions by 2050 and sit initiatives and it bounce off the 2020, United Nations climate change CR P. 26, but will be held in the UK in November.
Also a doubles gen loss on deals it's one of the five foaming pop and that's in the launch of Bloomberg screen, a major multi platform global initiatives focused on climate change news analysis and solutions.
We believe it is essential for the business community to pool knowledge.
Resources and best practices to help address the management and mitigation of climate change damaging emissions.
Our involvement in Blue book Green as an example of gel or working with other leading global businesses to address climate change.
Yeah, well will play a full and that septic pops consistent with our coal commitment shaping the future off when the state court, but a world.
Finally, we are delighted sub JLL has again been included on functions annual list off the world's most admired companies, which was announced last month.
Close these pat's remarks, I would like to recognize and thank all of our people around the world for continuing to so I'll walk flights and shareholders and shale else so well.
In particular, I would like to recognize Trish Maxim, our chief administrative officer, and global Executive fourth member for her incredible work JLL.
She recently announced so decision to retire at the end of March often impressive and wide range in Korea.
She has played a key rollout JLL and the development of the young strategic vision.
And the ability ambition on the execution of our transformation program.
As well as being a trusted advisor to the board of directors and to me personally.
Thank you Trish.
Your contribution to jail over the past eight years and wishing you the very best on the next chapter.
Now, let's take your questions.
Operator, please explain the queuing they process.
I would now like.
This time I would like to remind everyone in order to ask a question. Please press star and the number one on your telephone keypad.
Okay, how to star one on your telephone keypad. Your first question comes from Anthony Paolone from JP Morgan.
Minus open.
Hi, Thank you and good morning.
So I'm just wondering if we could start on Asia Pacific How should we think about say at least the next couple of quarters given that you know the geopolitical disruption Hong Kong and the virus like how do we think about that in your broader.
Growth forecast for 2020.
[noise] attrition here.
I think it's too early to really call on that we are right up the start of situation, which is very hard to read from the outside a when we look back to the saw spiros. The market's rebounded very very quickly up the times. So it didn't really impacted.
The longer term performance.
In that yeah in the real estate markets, but we don't know whether we have a comparable situation to the south virus or whether it is different and so for the time being as a bit of a paulson the market. Our people are working from home as most companies keep that people at home.
But we will come back to that topic after the first quarter.
I'd I'd add a bit to Christians remarks of you know reminder, our our business in Asia Pacific is well diversified so we've more than 50% of businesses annuity base. So as we're probably seeing the largest impacts happen in the transactional size short term.
On the capital markets on the leasing, but no we're pretty balanced there in China represents a little less than a endless 5% of our total fee revenue across the globe.
Okay and on.
Just another follow up on Asia, I think you mentioned properties and facilities management. The annuity fee stream I think that was impacted I think by some contract timing in the fourth quarter does that.
Like self correcting one key were to cure or do you have some tough comps for a couple of quarters there.
Yeah that is a timing issue on that one for you're exactly right. Tony So that should self correct a in 2020 on that one.
[noise], Okay, and then more broadly.
You mentioned, the 14% to 16% margins for real estate services component I don't have all the data in front of me to make that comparison precisely with 29 team can you maybe just talk about some of the puts and takes.
That we should expect in 2020.
Sure and just a clarification on that the 14% to 16% is our total JLL and not just ARIA.
So obviously with the 15.6% that we had this here.
The kind of puts and takes would be obviously, we're really pleased with the Lasalle performance. That's influencing that number it's our second highest on record performance. So we would not expect obviously that would be something that was easily repeated as we head into 2020, so that will represent obviously detraction from.
The margin expansion year on year, and I think as you heard in our prepared remarks, the leasing business, particularly in the U.S., we think going double digit consecutively growth for the past five quarters. So while we're very enthusiastic about 2020 on that that's also something that is and it's hard to repeat.
Right and you see that also in our Q4 results you know in leasing. So those are the things that are weighing in that mix that would still keep us very comfortable in that 14% to 16% range [noise].
If you will for 2020.
Okay. You had I think it was 35 basis points a drag from just growth initiatives and 29 cave will there be more of those are just that flip the other way or how does that work.
Sure. So it doesn't put the other way I think what's notable in the 2019, we've talked about on previous calls is our investment in our platform ERP systems. We're cycling that now so you're seeing a little less spend on the technology investments. That's just a function of not repeating those and.
Yes, so we would expect going forward to have about a 50, 50% balance and tech and on a tech spend going forward largely will vary a little bit you know year on year, and then would the cash flows I think you saw US report, we're heavily investing obviously on organically back into the business. So we will keep.
Our foot on the gas with priority investment.
Okay, great. Thank you.
Thank you.
Next question comes from Jade Rahmani from KBW. Your line is open.
Thanks, very much just wanted to confirm regarding your guidance what the fee revenue baseline for real estate services is on what you're projecting 6% to 8% growth should we take the consolidated summary for real estate services of 6.636 billion.
And just multiply that by a one plus 6% and 8%, respectively, which would be a range of 7.0 to 7.2 billion for real estate services fee revenue or.
Ah should we take the reported result for 2019 and subtract HF.
And grow that by six 8%.
Yes, so height Jade I would definitely use the former so that 6% to 8% is organic constant currency just as a reminder, so were 6.3. So we're saying that that is the base and that we intend to stay within that range as our target operating a four topline growth.
Our yet.
So that's the way that I wouldn't okay. So the first set of numbers I, just mentioned well what you're referring to.
Yes, exactly Jay.
Okay.
I was wondering can you just give some commentary around deal pipelines and how they're shaping up there's been a lot of news with respect to co working there's also I'm starting to here the way VC fund investments are managing their or their their capital spend their budgets I feel like there is a.
Pullback brewing I've also heard some anecdotes about sublease space in certain markets picking up so we'd like to get some sense of overall deal pipelines and if there any areas of concern with respect to other co working or have VC funded tech companies.
Well, if you heard from our ambitions to growing 20, 26% to 8%.
Topline revenue deal pipeline is continued to be seen very strong the dry powder on the capital markets from is on a record high and there's a lot of money waiting to get into that asset class and so despite the very strong.
Homes off the last two years, we expect volumes to be about in line with the previous years on the capital markets side on the leasing side. The picture is slightly more mix or the U.S. in most markets will continue to be very strong deal pipeline is very strong.
And so.
We expect that we will see a very nice performance there.
No. This regarding stefani's earlier comments that we had very very top we have very very tough comps, but still about on that level in EMEA. It is a bit more market by market.
In some markets, it's actually the supply side, which is not available to the extent, where we could fill it by demand and so we expect volumes debt to be slightly lower than the previous year.
But still very healthy demand.
And so the only area all console and for US for the time being is actually indeed, greater China and the wider in pick up the current situation there.
Especially in the first quota ASO said earlier, it's too early to take a coal for the whole year, but overall, we are we're quite confident with regards to deal pipeline on the transactional site and then your specific question around co working we obviously saw a decline in that.
In the fourth quarter.
It was about 4% off our leasing revenues for JLL, a we expect gotten number to go a slightly down although the demand from occupiers full splunk space is continued to grow.
But obviously the way we are doing revenues was flicks based provide us is as well as for the provide us we work for them as well as we work for the occupy us the occupy a site will continue to grow.
Flex based provide us themselves are slightly more muted in there a gross pipeline at the moment.
In terms of the leasing outlook.
Overall in the first and second quarter's a of last year, you had a double digit growth. The thing it was up close to 20% for the first quarter nearly 13% in the second quarter should we be projecting positive growth in the leasing business overall and the comps or even tougher in America is or isn't a reasonable to expect there'd be.
Declines on a year over year basis.
Well, we always plan for gross.
Yeah, we are gross company and we have shown in the past that we are excellent and taking market share and that is our expectation for 2020 as well.
I think we won't see the same type of gross in the Americas, what we have seen over the last couple of quarters, but I'm still very confident that we will see gross we probably will see as the comparison is slightly easier for us we probably see more gross in EMEA and as I said, we are slightly more concerned.
Around the outlook for Asia Pacific knocked down to jail, l., but down to the overall at the moment very uncertain market environment.
Okay turning to Hfive.
His retention of key producers tracking close to your expectations and are there any early in the year performance compensation payouts that we should be aware of that could impact departures.
[noise] well first and foremost we're incredibly pleased how that integration has been going so far in as we said in our prepared remarks, we had a slightly higher volcker attrition rate than we forecasted before we merged the two companies.
But as we also said in his prepared remarks, what we under estimated this our opportunity to take benefit of cross selling between the different service lines, and so oh or a slightly longer period, we absolutely convinced that the loss of revenues, which we will.
From broker departure, I will be more than offset by those cross selling opportunities.
HM F S. Our legacy business has shown in the past and enormous.
Zillions and the ability to grow in every market in vitamins. So you will see us see a more than confident that we're looking forward to a great to hear from those two merchant service lines.
And in terms of the.
The timing of compensation are there any large payouts early in the year.
That take place.
No. We are very relaxed with regard to the question, whether there will be more broker attrition.
Are you kind of tough decisions behind us with regard to that Moshe It is business as usual now people. We all people all fire it up to demonstrate great services to our clients in 2020.
Okay. Thanks, just the last one I appreciate the comments you made about corporate governance and climate change there would be initiatives the companies doing to address that.
You know on the revenue side is there are you thinking about developing or do you currently have advisory consulting services around building owners initiatives to address sustainability and building resiliency is this a meaningful revenue opportunity for a company and integrated full service company like JLL.
Oh, and a company, which delivered 18 billion of revenues meaningful listen pick world, but it is a very important.
Area for us it's because it is the right thing to do and four we already bought into a sustainability advisory business back in 2008 in the UK in that business has been growing very fast since then well the last couple of years, we're trying to extend that to a global business.
And we have hundreds of exports a wrong that topic, who advising our clients and yes. It will show very significant gross rates over the next couple of yes, but before it will be meaning pool within the the benchmark of.
1 billion it will take some time.
Thank you very much.
Your next question comes from Stephen Sheldon from William Blair. Your line is open.
Thanks, Good morning, one at one of the seeking to provide a little more detail on the slight pickup in broker attrition was that more in the legacy JLL producer base or the HF that base any way to roughly quantify the impact as a percentage of producers and timing wise I guess my did that start to pick up.
It was about twice as high on the jailer legacy side than on the Hfive site.
Which is not surprising as the Hfive business, which came in.
Is a very strong business with a very strong leadership and that was the reason why we were so keen to get together with them.
It it took place kind of over the course of the third quarter and I would say in the kills 90 to 120 days of coming together. It slowed down then in November December that's why we believe that this is pretty much behind us.
And you know, we're not talking about any super disturbing numbers you see the performance of our capital markets business, It's still very strong.
Though the attrition was slightly higher than we expected I was still surprised about the revenue per produce up because we would have thought that the revenue per producer will be slightly lower in the third and the fourth quarter.
But we were positively surprised and so despite that attrition rate the number so still very strong.
Got it that's helpful.
And then second just not one of the stand out items in the quarter was the Americas adjusted EBITDA margin sounds like roughly half of the margin expansion was driven by cost containment. So wanted to ask generally where you are in terms of driving more efficiency in the Americas operations is there's still quite a bit of margin expansion potential for standardized in around.
Platforms, you pulled out.
As we look out over the next few years.
Well, one one element of driving gross into an organization like ours is really taking advantage of scale and.
Our investment into the ERP platforms.
Has being a very much driven by that approach that we want to.
Become more cost effective and.
Increase the overall productivity of our organization and we are on a journey there and we have a couple of more ideas, where we see opportunity to take cost out. So we're very optimistic with regards to becoming a more efficient organization going forward.
Thank you.
Your next question comes from Jason Weaver from Compass point Your line is open.
Hi, Thanks, and good morning, Stephanie I was just going back to the EBITDA margins for a moment given the 2019 momentum or are you still expecting more mixed shift away from a transactional business with that 14% to 16% outlook.
Hi, Jason So no I think it's except for the Lasalle mix shift I think we're pretty comfortable with how the business should shape and 2020, obviously, it's early in the year. So its not something that you know we give.
Precise guidance on but we're still expecting the leasing business to perform well capital markets, we're coming off of obviously a record volume, but there's still expected to be strong and its Christian noted you know the combination of Hften Americas legacy business should should propel us there.
I would say that our corporate solutions business is still continuing to really improve on their transformation Christian reference that so we've brought in obviously on a new leadership that organizes us as a vertical and we're very focused on product development in that area. So we will continue to see margin expansion come from the core.
But solution side of the house.
And just one further given the incentive fees that you realize that will sell when I take that to imply you're expecting a weaker pay for realizations coming into 2020.
Yeah, Yeah, Yeah, Jason it's always very hard to predict the incentive fees I think it's very fair. This year just to remind everyone were down 36% versus the prior year and this is our second record. So I think it's reasonable to assume that those will be coming down its early days and I think we've committed line.
Last time to giving a giving you all updates as soon as we get more precision into the year, but right now I would assume that that is not a level that we could repeat going into 2020.
Okay. Thank you and just one more finally, what's your leverage down back below one turn can you expand a bit on your capital return priorities, whether that dividend more debt repayment or possible new acquisitions and if so in what areas.
Yes, so we're definitely a very pleased with the cash flow results, we were able to pay down 600 million of about 850 million of the hfive that so within the first six months. So we'll continue to prioritize that debt repayment to extinguish that in the 2020 years. So that's a high priority.
For Us and then I think investing it back into the business with organic opportunities.
So, we'll probably get down to a level that looks something like we did and 20.
2018, once we normalize and 2020, we did launch a share repurchase program. So we we will evaluate that every quarter, we did not do any repurchases.
This quarter, but we'll continue also to keep that on the radar screen and then we'll announce our plans for dividend later on in the course of the year.
Okay. Thank you.
Your next question comes from Michael Funk from Bank of minutes of America Securities. Your line is open.
Hi, Good morning, how you doing.
A couple of a couple if I could you know first me I knew you mentioned that the EMEA growth had been hampered by supply not being there what are your comment specifically on the on the UK market into kind of what degree.
Brexit the Brexit uncertainty has maybe.
Affected that market and you know if you're seeing any you change you know post as opposed to vote.
Or I'm, you know separation late last year I'm in a follow on one more there as well you know you're guiding saw I mean I. Appreciate that just wondering I'm, you know what kind of market share gains or implied in your guidance for 2020.
Thank you very much.
Well you specifically to the UK after the vote in December that wasn't immediate uptake in the business. So December came in significantly stronger than.
Otherwise without that vote for that time being we'd expect the UK to half a stronger here than it had in 29 team, but what weights to be seen is how the conversations between the UK and and Europe will actually.
You actually will go over the course of the he is so we have to see how the third into force, Florida will play out.
Well, all we expect full JLL, specifically, a much better performance in 2020 in our EMEA business than in our email business 2019, which is less down to the market, but more down to all the decisions in the activities we have.
Being taking in 2019 to prepare yourself for 2020.
And so this is slightly independent off the overall market performance.
Okay, one more if I if I if I could please.
You also mentioned that leasing in the U.S. expectations based obviously on a tight market.
I mean, if any commentary about maybe that tightness loosening up in specific markets in 2020.
Expectations for before more supply, maybe helping the leasing activity.
Well in India, you pay specifically the London market is very tight on new quality space, it's pretty much leased out and and add developers have being very disciplined was coming was new developments to market no sure enough with clarity on the political.
Cool side that will be more developments coming to market, but it takes a couple of years. So it's nothing which will be kind of a sole overnight and that's situation was tight markets is pretty much true all across the mature economies in Europe, and so we expect alley.
Rental levels to stay.
Very high in Europe in comparison.
And a healthy market environment for landlords.
So taking your comments from the call and then to the question today had their permit.
It sounds like on a multi year out what kind of saying, you're not giving that guidance for the multiyear outlook given relatively.
Low cap rates.
Hi, occupancy right, leading the tight markets you know it feels as if you know maybe kind of flattish to marginally down is a good way to maybe.
Think about the market in general and then you can kind of grow low to mid single digits topline.
Through market share gains, but is that kind of kind of the market lay out that we have right now.
Ah, yes, it's a way of describing it I mean, it's not only market share gains hits, we are coming with new products.
On our technology side, we mentioned earlier sustainability, and then specifically down to Jay and L. A we will drive cost down and become a more efficient platform and that will help us to drive profit growth going forward.
Great. Thank you for the time.
Thank you Michael welcome the so called.
Oh, Thank you very much.
Your next question comes from Jade Rahmani from KBW. Your line is open.
Hi, This is Ryan Thomas I'll go on for Jay Thanks for taking a follow up everyone I'm not sure. If I hear me here are you shy or on the call, but I was wondering if you could provide an update on adoption of the technologies in JLL Sparks portfolio.
Hi, JLL clients and how those investments are performing overall, what you say that those investments in the JLL spark portfolio or performing in line with expectations.
Yeah, we are incredibly incredibly pleased please.
The performance of Chello technologies, which we have put together on the first so October when we brought all I'll technology within JLL together, whether its its platform technology client facing technology or our investments into the prop tick area.
This is something where we see us as a real leaders in our industry and a clear differentiator for our clients and the revenue grows which we are experiencing from those product is very pleasing to us and we have a high ambitions going forward on that top.
Nick.
And I think it can you give us an update on.
I'm sorry go ahead Stephanie.
Yes, just to Echo on Christian said, we have a reminder, weve ring fenced 100 million to invest in real estate technologies, so to our spark funds and so we're progressing you know with those investments very very well and they're already starting to obviously be commercialized and beta tested within.
Our own accompanying and starting to do that with clients. So we're pleased with those developments in the leadership that hearing you shire, bringing to that.
And can you give us an update on how much of that 100 million has been invested so far and what areas of this product ecosystem you think are.
Areas, where you think are most attractive uses of that capital going forward.
We have invested roughly 40% so fall off that money.
And the deal flow that deal pipeline is very strong and it's such a broad range of of areas I think that or kind of.
Beyond this call here, if we were to go into too much detail here, but we are looking at every type of product, which is helping our clients to be more successful with their real estate.
Portfolios or investments that is kind of the key criteria is it technology, which helps our clients to be more successful with their real estate benches.
Great. Thanks for that color and taking a follow up.
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There are no further questions at this time of I'll now turn the call back over to management for closing remarks.
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[noise], there's no further questions coming in we will close today's call. Thank you for participating and Stephanie I look forward to speaking with you again following the first quarter.
This concludes today's conference call you may now disconnect.
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