Q4 2021 Jones Lang LaSalle Inc Earnings Call
Okay.
Good morning at this time I would like to welcome everybody to the Jones Lang Lasalle incorporated fourth quarter earnings Conference call.
For your information This conference call is being recorded.
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After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question simply press star followed by one on your telephone keypad.
If you would like to withdraw your question.
The power Okay. Thank you I would now like to turn the conference call over to Chris Stent Executive managing director of Investor Relations. Please go.
Thank you and good morning, welcome to our fourth quarter 2021 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 slide presentation intended to supplement our prepared remarks.
Please visit IR dot <unk> dot com.
During the call, we will reference certain non-GAAP financial measures, which we believe provide useful information for investors.
We include reconciliations of non-GAAP financial measures to GAAP in our earnings release and presentation.
As a reminder, today's call is being webcast live and recorded.
A transcript of this conference call will also be posted on our website.
Any statements made about future results and performance plans expectations and objectives are forward looking statements.
Actual results and performance may differ from those forward looking statements as a result of factors discussed in the annual report on Form 10-K of the fiscal year ended December 31, 2020 and in other reports filed with the SEC.
The company disclaims any undertaking to publicly update or revise any forward looking statements.
I will now turn the call over to Christian Ulbrich, our <unk>.
And Chief Executive Officer for opening remarks.
Thank you Chris.
Hello, and thank you all for joining our fourth quarter earnings call.
This morning, <unk> reported impressive fourth quarter and full year financial results.
The recovery, we have seen over the past year continues to accelerate led by strength in our leasing and capital markets businesses.
Our closely integrated one channel held philosophy and market, leading products and services are resonating with clients.
I would like to express my gratitude to all JL employees will be outstanding service provided two hour by 2021.
This dedication to serve our clients has led us to transform <unk> into a more efficient global enterprise right.
Three years ago, we embarked upon an ambitious multiyear transformation.
Hence the seamless global integration of our services and expertise.
During this time, we've made several organizational design changes oriented around business lines instead of geographies.
Realignment will enable jail al to reduce structural complexity and leverage best practices.
Celebrating growth.
Today, we are announcing the final phase of this transformation process, which will align our external reporting with how we internally manage CT business.
Effective with our first quarter 2022 earnings release, we will begin reporting under five key business line segment instead of our current geographic based structure.
This new reporting structure will make it stand out.
For investors to understand and will provide enhanced transparency of our business lines.
Ken will discuss the reporting change in more detail shortly.
Turning to the current market environment.
<unk> continued to improve.
Build significantly vary by geography.
The global office leasing market, the emergence and rapid spread of the Omicron Varian has brought additional uncertainty to the return to office timeline.
Despite this uncertainty we have not noticed it.
So nickel impact in our leasing numbers as companies continue to take a longer term view of the future office needs.
As research indicates that in the fourth quarter, all three global regions breakfast that positive net absorption in the office market for the first time since the onset of the pandemic, creating a solid foundation for the ongoing recovery.
Asia Pacific Office leasing volumes have already recover to 2019 levels, while Europe and the U S remained slightly below 2019 levels.
<unk> to show improvement.
In the U S. Specifically fourth quarter office leasing volumes were down 23% compared to pre pandemic levels. As a reminder, U S office leasing volumes were down 44% just two quarters ago.
Overall, we continue to believe office demand will recover to pre pandemic levels and that the Opex will remain the center of the book ecosystem.
Shifting to other sectors activity in the industrial and multifamily markets remained robust in the fourth quarter.
High demand and tight supply continued to define the industrial space, leading to rent increases and record low vacancy rates.
Viscosity of ports and other key logistical areas is driving a supply demand imbalance and additional supply will be needed to meet growing demand in these industrial markets.
Global capital markets transactions volume reached an all time high in 2021.
Investment activity, so 54% to $1 three trillion supported by an improving global economy and high levels of liquidity.
Cross border capital flows, which were at a depressed level in 2020 accelerated throughout 2021 and closed the year at record high levels.
The combination of accelerating cross border capital flows and significant levels of dry powder bode well for sustaining recent growth rates, where they need capital markets.
Similar to the trends in DC strong performance in the industrial logistics and multifamily sector.
<unk> capital markets volume in 2021.
The office and retail sectors improved as the year went on although their shelf transaction volume remains below pre pandemic levels.
Fundamentals in the multifamily market remained strong and shows no signs of cooling off.
Other markets are recovering while rent increases and coupled with market specific.
Global Investor interest in multifamily assets remained high in the fourth quarter.
This is evidenced by two of the sector's largest deals being completed in Germany during the quarter.
Institutional investors, we remain active in Asia Pacific, particularly in Japan and Australia.
Let's now shift our attention to <unk> performance as I mentioned at the beginning fourth quarter and full year financial results were very strong and broad based.
Fourth quarter consolidated revenue rose, 23% to $5 9 billion and fee revenue increased 42% to $2 8 billion in local currency.
Revenue benefited from strong performance in our leasing and capital markets businesses, which recorded growth of 68% and 62% respectively.
Adjusted EBITDA of $622 million represented an increase of 50% from the prior year with adjusted EBITDA margin expanded from 21, 3% to 22, 4% in local currency.
Adjusted net income totaled $447 million for the quarter and adjusted diluted earnings per share was $8 66.
Our adjusted EBITDA results in the fourth quarter benefited from $103 million of equity earnings primarily a result of an increase in the market value of our strategic technology investments.
Technology is the key differentiator for <unk> and our focus continues to be to bring the best technology to our clients and drive the productivity of our brokerage account patches.
For the full year consolidated revenue rose, 15% to $19 4 billion and fee revenue increased 31% to $8 $1 billion in local currency.
Adjusted EBITDA for the year rose, 73% to $1 5 billion, reflecting a margin of 18, 6%.
Our full year adjusted EBITDA margin was towards the upper end of our 16% to 19% target range driven by the strong gains in our higher margin transactional businesses investment gains in <unk>, and Lasalle and disciplined cost management.
We continue to repurchase shares in the fourth quarter, returning over $150 million to shareholders. This spring some of our full year return on capital to over 340 million up significantly from $100 million in 2020 and $43 million in 2019. In addition, I'm pleased to announce that the.
Board has authorized a new $1 5 billion dollar share repurchase program.
We remain committed to investing in the business to drive future growth, while also returning capital to shareholders.
I will now turn the call over to Karen Brendan will provide further detail on the results for the fourth quarter and fiscal year.
Thank you Christian.
Fourth quarter results reflect a strong finish to a year that began with considerable uncertainty.
Our investment in our people and global platform over the last several years allowed us to enhance our competitive position.
Our lives on accelerating the business momentum and deliver full year results.
We're well ahead of both our initial expectations and 2019 model.
Over the course of 2021, we made significant progress on our strategic priority.
Investing to meet the evolving needs of our clients, while also accelerating our return of capital to shareholders.
The robust business fundamentals.
Along with our continued effort to improve our operating and capital efficiency.
Belted in nearly $800 million of free cash flow in 2021.
Reflecting a cash conversion ratio of approximately 80%.
Moving to a detailed review of operating performance I'll remind everyone that variances are against the prior year period in local currency unless otherwise noted.
Our fourth quarter consolidated real estate services fee revenue increased 42% driven by strength in the Americas and transaction based revenue globally.
Compared to a strong fourth quarter of 2019 real estate services fee revenue grew by 19%.
The real estate services, adjusted EBITDA margin of 21, 8% compared with 21.0% a year earlier and 21% in the fourth quarter of 2019.
The growth of our transaction based revenues and $83 million of equity earnings from Diablo technologies more than offset higher commissions and incentive compensation related to differences in business mix.
The impact of Covid related discrete items.
The expected reduction of certain 2020 non permanent savings.
And incremental investments in our people and technology.
Turning to the Americas capital markets and leasing land broad based fee revenue graph.
Fee revenue increased by 56% compared to the fourth quarter of 2020 with growth across most service line.
Compared to the fourth quarter of 2019 fee revenue increased by approximately 31%, which is an acceleration from the third quarter increase of 25% relative to 2019.
Within Americas capital markets unprecedented strength in industrial multifamily and alternative.
Along with improving activity in our retail office and hotel sector and a surge in cross border capital flows.
To record transaction activity that drove 75% growth in fee revenue over the prior year quarter and.
And a 62% increase compared with fourth quarter 2019.
Fee revenue from U S investment advisory sales more than doubled and U S debt and equity advisory increased approximately 60% from the prior year quarter.
Our multifamily debt origination and loan servicing businesses maintained strong momentum highly.
Highlighted by loan servicing fee revenue growth of approximately 34%.
Our full year of 2022 U S capital markets pipeline is up 47% compared with this time last year.
Our optimism for healthy growth opportunity and in your head.
Americas leasing fee revenue growth of 74% over the prior year quarter was led by a rebound in the office sector and continued strength in industrial.
Tagged with fourth quarter 2019, Americas leasing fee revenue increased 22%.
Wrong industrial sector growth more than offsetting a not fully the colored office sector.
We saw a significant increase in transaction size versus a year ago, and the comparative 2019 quarter with average deal size up 33% and 25% respectively.
Deal volume as measured by the number of transactions has also increased meaningfully versus last year up 35% and return to the 2019 level.
From a profitability standpoint, the Americas adjusted EBITDA margin increased to 27, 5% from 25% in 2020 and 22, 5% in 2019.
Growth in transactional revenues and their loyalty equity earnings more than offset the expense pressures impacting the consolidated real estate services margin.
And <unk> fee revenue grew 24% of our fourth quarter 2020, and one per ton versus the comparative 2019 quarter, driven primarily by higher leasing and capital markets volumes as economic activity and investor sentiment improved.
Leasing fee revenue increased 55% versus fourth quarter 2020, and 22 first time of our fourth quarter 2019 with growth across all asset classes, most notably the office and industrial sectors.
For the quarter senior capital market grew 45% versus 2020, and 14 per ton compared with 2019 driven.
Driven by accelerated recovery in our key market and a significant increase in the number of large deals.
Dan, Yes, fourth quarter profitability to decline versus the prior year due to several factors.
Including the expected reduction of certain 2020, non permanent savings and discrete items.
Higher incentive compensation due to differences in business mix.
And incremental investments in our people and technology platform.
We're encouraged by the growth within India and remain focused on improving the margin profile for that region.
Within Asia Pacific quarterly fee revenue grew across all service lines, except property and facility management.
It was flat compared to the prior year.
Led by the office sector Asia Pacific leasing fee revenue with particularly strong growth accelerated to 49% from 33% in the third quarter and was up 20% versus the fourth quarter 2019.
Higher commissions due to differences in business mix.
The reduction of certain 2020, non permanent cost savings and incremental investments in our people and technology platform drove a decline in Asia Pacific profitability.
Partially offset by the growth in our higher margin transaction based revenue.
Fueled primarily by new client wins and contract extensions in the Americas in India, Our global work dynamics fee revenue grew 7% versus the prior year with growth of annuity like business more than offsetting the absence of Covid related project work in 2020.
Work dynamics fee revenue was up 3% compared with 2019.
The global real estate services outsourcing market opportunity remains compelling and we believe GE allow us well positioned for continued growth.
Turning to Lasalle valuation increases and continued robust capital raising drove an 11% increase in assets under management and translate into advisory fee revenue growth.
In addition, strong investment performance across the platform by the $56 million of incentive fees in the quarter.
Considering with south approximate $12 billion of dry powder at year end and $8 $2 billion of capital raised over the past year, including $1 8 billion in the fourth quarter.
That's a continuation of the recent Lasalle advisory fee growth trends in 2022.
Equity earnings on Lasalle approximate $350 million co investment portfolio totaled $18 million in the quarter about half of which with cash.
I'll expand briefly on our jail all technologies investment.
The strategic rationale of our early stage prop tech investment on prior earnings call.
At year end, the fair value of our J L. L T investment total to approximately $350 million.
From nearly $100 million in your earlier driven in part by approximately $140 million of valuation increases.
Beyond the investment returns, which were substantially a function on subsequent financing round at higher valuation.
The investments and inform our strategic direction allow us to evaluate and test technology solutions for our clients and generate incremental revenue.
Shifting now to an update on our balance sheet and capital allocation.
Along with the growth in our business and resiliency of our cash flows our balance sheet remains solid.
As indicated by our net leverage at <unk>, two times and liquidity of $3 $2 billion at year end.
This provides a strong foundation to execute on our strategic priorities, which are first to invest in our business and capabilities to better serve our clients and drive long term profitable growth.
And second to return capital to shareholders.
As Christian mentioned, we did both in 2021.
We invested in our people and global platform completed acquisition totaling approximately $415 million.
And made strategic investments of over $100 million net of distributions and our jail, all key initiatives and Lasalle co investment.
In addition, we repurchased $343 million of shares representing about 43% of free cash flow generated in 2021.
Investment opportunities remain dynamic and we intend to maintain flexibility to capitalize on organic investments and select M&A opportunities alongside continued share repurchases to drive long term shareholder value.
Looking ahead, our underlying business fundamentals and investments in growth initiatives, along with positive industry trends and the global economic outlook provided an attractive backdrop for continued business momentum and fee revenue growth in 2022.
We continue to expect to operate within our 16% to 19% adjusted EBITDA margin target for the full year of 2022.
Actively managing a return of certain expenses and inflation, while also investing in growth initiatives.
Like 2021.
Snick that pace of economic growth and evolution of the pandemic and the amount of equity earnings amongst other factors will influence, where we will land within our target margin range.
We expect our 2022 full year effective tax rate to be similar to 2021 at approximately 22%.
Just on our assumption that meaningful changes the tax code will not be implemented until later this year.
I also know that we are closely monitoring the escalation NGL political events in Ukraine.
It's too early to comment on a potential business implications. Our focus is the safety and wellbeing of our people clients and suppliers.
Before closing I'll briefly elaborate on the segment reporting change Christian announced in his remarks.
Beginning with our first quarter 2022, we will transition our reporting to five business line segment comprising markets advisory capital market.
Work dynamic.
J L L technologies and Lasalle.
Additional service line revenue detail will be provided within each segment.
Profitability will continue to be reported at the segment level.
The new financial reporting structure, better aligns with how we've evolved our management structure over the past several years and improved transparency, making it easier for investors to understand our performance and our key drivers.
We will provide a quarter and two full years that route statements in advance of the first quarter earnings release.
In closing I'd like to express deep gratitude to my Jello colleagues for their astounding collective effort in 2021.
Embracing our one Belo philosophy to deliver exceptional service to our clients.
<unk> substantial long term value for all stakeholders.
Kristian back to you.
Thank you Karen.
Improving global economic trends, increasing allocations of capital to the CRE industry and positive investor sentiment provide a favorable market backdrop as we enter 2022.
Geopolitical turbo lenses continued to be the main limiting factor from ongoing growth of our target market.
The outlook for 2022, it's less tied to the pandemic and the past two years.
Labor markets are tight and attracting and retaining top talent will be a key focal point for organizations in the coming years.
Inflation is likely to remain high in 2022.
Interest rates will stay deeply negative despite all the expected drivers of interest rates by relevant central banks.
And that environment real estate continues to be a standout asset class.
The tight labor market combined with the significant inflation that resulted in rising compensation cost.
We take every effort to make use of our global platform and our superior tech infrastructure to hire the talent wherever we can find it streamline our processes and support the productivity of our producers to continue to raise the revenue per head.
In closing our fully integrated suite of services and industry, leading technology platform makes shale a preferred partner for clients around the globe.
We remain well situated to capitalize on the continued macroeconomic recovery and favorable underlying trends bolstering the commercial real estate industry.
I continue to be very optimistic in jail as ability to achieve sustained growth and create meaningful shareholder value not only in 2022, but also for the years to come.
Operator, please explain the Q&A process.
Yeah.
Thanks Keith.
At this time I would like to remind everyone in order to ask a question. Please press star.
Then the number one on your telephone keypad will pulse, but just a moment to compile the question and answer roster.
Our first question comes from Stephen Sheldon with William Blair. Your line is now open. Please go ahead.
Hey, good morning team.
On the strong into the year.
Curious I'm curious, how you're thinking about trends in market share I guess relative to the rest of the industry. It seems like market share gains for <unk>.
Some of your big peers have maybe picked up some in 2021. So it doesn't seem like that's the case and if so.
What are some of the factors driving that and how are you thinking about the media.
Longer term central to continue gaining share.
Hi, It's Christian good morning.
Yes.
The very large companies tend to win additional market share. This is a trend not only within our industry business of trains and many other industries as well.
<unk> demonstrated that very nicely.
Actually on the leasing side over the full year of 2021, and we continue to do well.
In our book dynamics business as well as in our capital markets business and I don't see any reason why that should change over the foreseeable future.
Being heavily into technology.
And attracting.
Strongest talent in the industry and that drives at the end of the day additional market share wins.
Great and then.
I guess on the technology side would love it gets more detail on the building engines acquisition or maybe.
What you envision doing with that.
Asset overtime I know they have quite a few integrations with other solutions, including some of the gains in your own.
Portfolio, I guess, you're going to invest in this and kind of build out its capabilities, even more of a timing.
And how could additional M&A and maybe factor into that.
Well, let's.
So you have seen over the last 10 years, so a lot of technology.
And took the building space.
Gibson.
Types of application, which enable with building owners to operate the buildings and the building occupiers to have a better experience and the ability all of those applications need to find a home otherwise it becomes a pretty cumbersome task to operate them and we believe that building.
<unk> can be.
A home for all these applications blood cells, we have invested into several of those.
These within our spark venture capital fund.
And we are now getting any of those products into our building software and are trying to bring that as fast as possible to our clients.
Because we believe that it really adds value to them and makes the building much more attractive operation more efficient.
Great. Thanks.
Thanks for the color and congrats again on adults.
Okay.
Thank you.
Our next question comes from the line of Patrick I shouldn't say of Raymond James Your line is open. Please go ahead.
Thank you and good morning can you speak to your expectations around 2022 equity earnings and Lasalle incentive fees.
Sure Good morning, Patrick So first just to.
Take a step back on equity earnings and what happened in 2022, we had approximately $209 million on a full year basis with $63 million from the filing of $141 million from J O L T.
Both of those are higher than anticipated for the full year basis.
And as you think about what comprises those first going to Lasalle.
We have both the distributions of cash.
Cash flow from the underlying properties as well as changes in valuations, both realized and unrealized in the case of 2021.
We had a little under 40% of the equity earnings that we realized were actually as a result of reversals of valuation declines that occurred at the onset of the Covid pandemic and so that just points to the fact that they were higher than typical in 2020 one.
Going forward into 2022.
Again, we don't provide specific figures in guidance on those because they are related to changes in fair market value, which are outside our control, but typically if you look at what the Lasalle equity earnings has been.
As a percentage of the co investment portfolio. They were in the high single digits as it relates to the <unk> portfolio.
Those are this is the first year that we've really realized significant activity. Since we began investing in prop tech and we does reflect strong valuation increases over the course of the year.
Again, those are changes in fair market value, we're not forecasting what those will be in 2022, but we don't expect them to be at the same level as they were in 2021.
Got it is there a second part to that.
Yes.
Oh go ahead.
Yeah, sorry, I thought it was the second part of your question I think it was on the incentive fees for Lasalle.
Right.
Just on the incentive fees those are also revenue.
Streams that are related to.
Changes in fair market value and realized thousand many cases, and so again something that we're not going to provide a specific expectation on I will give you some context on that over the last eight years those averaged $110 million a year.
But anywhere from a low of $40 million in a single year to a high of $215 million in a year.
It's still very early in the year for us to say, where we think we're going to end up in that range. At this stage, we would say we expected at the lower end of the range and you'll have seen that typically our incentive fees are recognized more in the second half of the year than the first half of the year, but they've gotten very early in the year.
We'll update you further as the year progresses.
Got it thank you.
To follow up on Joes old technologies.
Do you guys have an expected timeframe in which you would look to monetize those investments or maybe buying a majority interest in some of those technologies that seem most promising.
Well first of all I think it's important to remind us that the reason why we are having that venture capital fund is too.
Be very early in identifying future technology, which will help our clients to have a better performance in the buildings or better experiences occupiers. That's the main driver.
And so.
Yeah.
Trying to bring those products as early as possible to them and integrate them into our service offering.
Those products, which.
We believe have a potential to become mainstream we will obviously look whether we can increase our share in those companies or potentially take them over completely if you will have noted thats, what we pick the skyline.
And with others, we will potentially exit them.
Any other venture capital funds after six to eight years.
Got it. Thank you and then maybe one more for me if I could.
Free cash flow was down in 2020 , one versus 'twenty 'twenty. Despite obviously a much better year overall can you discuss some of the puts and takes to your free cash flow generation in 2021, and then perhaps more importantly kind of what are your broad expectations in 2022.
Yeah, we were actually very pleased with the cash flow generated in 2021 relative to 2020.
Do you know if you rewind back to 2020, it was a year where.
Everyone was focused on pulling back on.
On investment and.
We were in that in that same mode as well.
Into 2021, we had primarily changes in working capital, which would have resulted in the.
Reduction and.
The free cash flow right.
As a percentage of the adjusted net income.
Yeah.
Thank you.
Yeah.
Thank you.
Your next question comes from the life. The line of Anthony <unk> from J P. Morgan. Your line is not like pen. Please go ahead.
Great. Thank you.
My first question is can you give some brackets surround things like capital markets leasing.
Maybe facilities for 2020 to fee revenue growth.
Thank you guys appreciate it.
This is.
If you had asked US that question a week ago, we would have.
Said to you that we expect another.
Pretty strong vehicles forwards.
They have started the year with.
Kate momentum.
Yeah, there's still some catch up post COVID-19 to be expected in Asia Pacific and Europe less so in the U S. Because the U S. As we covered already very strongly but with the events of the last couple of days I think we should all just refrain from making any specific forecast.
And wait how the things are really playing out going forward.
Okay, you'd mentioned I think maybe Karen I think it was 40% the capital markets pipeline currently versus the spark lights up 40% versus this time last year and so I guess, maybe a twofold question on that.
One how far out is that pipeline does that give you a sense as towards the next month's revenue next six months like what is that right or how should we think about that precisely.
Folding into your numbers and then also do you have a comparable type figure for leasing.
Yeah. So for the first question that's on a full year basis. So it's everything in our pipeline right from early stage to more advance and socialize together and an indication of the level of activity and interest.
Property owners and speaking about considering a thousand in the year of 2022.
And as it relates to leasing pipeline.
We also we certainly track that.
Don't believe recorded a specific number this time around but we entered the year with healthy pipelines as.
As well.
Okay and then.
The share buyback.
I guess did you buy any shares in the fourth quarter I may have missed that I don't know if there was in the release I kind of missed it.
And just otherwise.
How are you thinking about that for 2022.
Yes, we did repurchase shares in the fourth quarter, a little over $150 million.
And we do intend to continue with share repurchases in 2022.
In line with our capital allocation strategy.
Okay do you think thats a pretty good clip.
$50 million, a quarter type level or do you.
Thank you have more capacity.
Yeah.
So I think it's good to just take a step back and say what are we looking to do with our balance sheet right now we're in a really strong position at this moment as we were last year and so we first prioritize investing in our business for organic growth.
Look to M&A opportunities and third to return cash to shareholders and we have the flexibility to do all three and we intend to do that over the course of the year.
Okay, and then just a last ditch.
One I understand that youre going to change.
The disclosure around where your bucket revenue and such.
Changing the definition of adjusted EBITDAR or adjusted EPS or were those numbers roll up under the same definition is just different buckets.
And those will be the same definition just different bucket.
Okay. Thank you.
Sure.
Yeah.
Operator is there anyone else in the queue for questions.
Our last question comes from Kate Wendt Hanmi of K B W. Your largest seller of pen. Please go ahead.
Thank you very much can you say as to whether.
Theres any deals that are being re traded or pooled put on hold at this point.
I imagine that yes, there will be.
Listen the situation develops.
Pretty much on Thursday, only and it is way too early to make any immediate coals.
On that.
You buy a profit building.
At this point in Europe , you may want to kind of take your time until you sign and see how the next couple of days play out.
I would.
Strongly recommend that we refrain from making any taking.
Taking any conclusions on the current situation and working vacations that we'll have as I said its way too early to do that.
To do so.
Thanks, and I do think it's a smart on your part not to really provide less in the way of guidance at this point for 2022 other than the high level expectations.
I wanted to ask about the financial reporting changes are there any business implications.
That will slow down or is this just purely.
Financial in nature.
Yes, the changes really reflects the changes to the financials reflect the changes in the business that have happened over the last few years.
Okay.
Okay. So theres no new leadership or there's no changes in reporting responsibilities or.
Various business units report.
No that states all the same new leadership changes, it's just a very strong emphasize on our one <unk> approach that we are trying to sell our clients.
And types of products.
As one company, which as you know we have a lot of clients, which go across countries and across.
And we believe that in that new structure that is synthesized even more so.
In our previous more geographic structure.
And do you guys have an all encompassing business line that you would think of it internally as occupier outsourcing as some call it.
I believe that that would all still within work dynamics. What do you do you have such a such a group corporate solutions or occupier outsourcing.
Well as you rightly say, that's part of what's dynamic spaces.
We obviously also so occupiers on a trunk actual basis in our markets advisory business.
The tenant rep side, but the moment declines.
Trying to get into a contractual longer term relationship.
Whether it's outsourcing completely on Pops that would fall under all work dynamics business.
So it's more around how clients are buying the products rather than whether it's specifically an occupier client and investor client.
Thank you one of your peers made a large acquisition in the project management space.
Has a decent sized.
Energy management footprint and actually sustainability services called out in the presentation under work dynamics can you talk about infrastructure overall, and if growing the infrastructure services, Dave I'll provide.
Outside of traditional commercial real estate is a growing area of focus is a big priority that you expect J L. L. Two.
Tried to.
Take advantage of going forward.
Well the infrastructure is one of those words, which are sluggish dangerous because you can put a little things are unknown.
That headline.
We see tremendous growth opportunities in our core competency around real estate and we are touching infrastructure only so far as it relates to.
Two our sustainability business so far.
Financing Windfarms plenty wind farms biomass.
Those type of infrastructure falls under our sustainability.
Capabilities.
One is that we want to continue to focus on the real estate as an asset class.
Okay. So outside of real estate it would be only a small.
Part of <unk> core services.
For the time being that is the case you know once we have.
Achieved market shares, which make it unlikely for us to further grow with me.
Refocus our activities a little bit, but this is still out there.
And then just looking at your adjusted EBITDA margins by geographic region.
I would say on the apex side, it seems that that business is at scale and achieving.
What you might consider normalized EBITDA margins.
We do believe that's the case and then can you talk to what it will take to get EMEA.
Start to generate.
EBITDA margins, perhaps in the mid teen range, maybe you would consider that.
Proprium target for the India business.
Well I think it's very important to understand that our business is very much driven by scale.
And as a service provider or cost increases, which we have to take a we offset by by growth and by gaining additional scale and do you see that very nicely in the U S. How that is driving margins and so.
We have to look at individual markets.
And in those individual markets, where there is enough scale, we can drive very healthy margins.
And in those markets, which are very small, but we still continue to yourself in because it is important for some of our clients in.
In the large market predominantly.
U S corporate client and investor clients. It is very hard to.
To make meaningful returns and EMEA has the disadvantage that it is bill.
Buildup by a large number of very very small markets notwithstanding that point.
We have taken a very significant actions to improve the margins.
EMEA and again, if you had asked me that question a week ago I would've been very.
So we are optimistic that we would see a very significant increase in the margin profile of our EMEA business in 2022 and going forward with the latest development, which will hit Europe .
Slightly.
More strongly than other parts of the world I will be hesitant to make any predictions on that.
And just the long term do you think that something in the low to mid teens is a reasonable reasonable market.
Expectations for EMEA or are there you know.
Compensation related and other fixed costs related expenses that just make that that geography naturally lower margins and I'm, just saying adjusted for business mix.
Yeah, I mean, we are well aware of our cost of capital and so we are trying to achieve.
Achieve returns A&D businesses, where English as a minimum achieve our cost of capital.
And so that will also be our ambition for EMEA, but once again, we are servicing in EMEA are in countries, which we only keep running because they are relevant for our clients, where we do a very significant part of the business and the higher margin territories.
Therefore, the overall mix of those planes.
Attractive to us even up the expense if we have to serve them.
And a small <unk>.
P country, where we cannot achieve the type of margins, we would like to see so this.
This is not something which we.
We see that geographically as you asked the question it's more important for us.
Overall client relationships is delivering the returns, which we would like to see.
Okay. Thank you for taking the questions.
Thanks Kim.
Minder.
Let's move on in order to ask a question. Please press Star then the number one on your telephone keypad.
Okay.
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