South: Strong half-year for Savills despite UK slowdown

Savills has posted robust half-year results thanks to strong performances in its residential business and many of its international commercial markets, and despite lower UK commercial deal flows in part driven by the EU Referendum vote.

For the six months ended June 30, Savills’ group revenue was up 14% (10% in constant currency) to £622.7 million, as against  £547m in the first half of 2015. The group’s underlying profit before tax was up 11.5% (8% in constant currency) to £42.8m (as against £38.4m in 2015). Underlying basic earnings per share were also up 9% to 21.8p, while group profit before tax was down 3% to £25.5m and basic earnings per share down 1% to 11.6p. The interim dividend, however, increased 10% to 4.4p per share.

Savills reported a number of further highlights. There was continued expansion in the US through bolt-on acquisitions and recruitment; global property-management revenue was up 23% and consultancy revenue lifted 9%; and Savills’ investment-management revenue lifted 96% with assets under management increasing 116% to €17.1 billion thanks to the contribution from the acquisition of SEB business in August 2015.

On the downside, UK commercial-transaction fee income declined 23% to £32.1m (as against £41.9m in 2915), primarily as a result of a significant reduction in transaction volumes in advance of the EU referendum. Underlying profits for the UK commercial-transaction business declined by 54% to £2.7m (as against £5.9m).

Jeremy Helsby, group chief executive of Savills, said: “The resilience of our less transactionally-focused businesses, combined with our geographic diversity, more than offset reductions in transactional activity in certain markets.”

He added: “Looking to the second half at this stage, in the traditionally quieter summer period and so soon after the EU Referendum result, it is not possible to obtain a clear read on the direction of activity in a number of the group’s principal markets, although the fundamental attributes of real estate as an investment class remain strong. The Board currently has no reason to change its expectations for the full year.” 

Savills also reported that in Central London, many of the hitherto significant buyers (Sovereign Wealth, International Private Equity) elected to remain largely on the sidelines during the period, but this opened the way for private wealth from areas such as the Middle East to transact. Overall though, investment-trading volumes for the UK market declined by circa 34%. In the regional markets, investment transaction revenue declined more sharply during the period, whilst leasing volumes remained relatively stable.

The leasing market however, remained relatively robust by comparison with historical averages, although overall take-up declined from the highs of 2015, particularly in the London market.

Credit: CoStar