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Commercial Property News
Savills H1 results delight the market
Savills, in it's H1 interim statement today, said it has bounced to solid profit again on the back of recovery in London residential markets and the continued property boom in Asia.
Profit before tax recovered to £14.4 million in the six months to the end of June, up from a flat performance in the same period last year, after a 23% increase in group revenue to £304.4million. Basic earnings per share increased to 7.9p, from 0.7p in the period last year, with an interim dividend maintained at 3p per share.
As with many property consultancies, which generate profits from fees on investment and leasing transactions as well as corporate advisory work, Savills was hard hit by the downturn in the global property market during the recession.
However, most property markets have either stabilised or staged a recovery in the past year, while others such as China and other commodity-rich countries in the region have continued to experience strong growth.
Savills has benefited from this recovery, with profits driven by increased transactional work in the Asia Pacific and the UK residential market. The group restructuring carried out during the downturn also had a positive impact, with losses narrowing by more than half in Continental Europe to £4million, where markets have tended to lag behind those in strong recovery. Shares in Savills were up 3.6p, or 1.1%, at 328.6p in trading this morning.
Jeremy Helsby, chief executive of Savills, said: “We have had a strong first half particularly through the recovery of transaction markets in the UK and asia-pacific, which are core to the group’s success. At the same time we have substantially reduced losses in the Continental European business and are seeing some improvement in the US market.”
However, Savills has maintained its cautious outlook for the second half of the year given worries that Chinese policy could cool its residential market and the threat of a sustained slowdown in the UK housing market.
On the commercial business, the continued low levels of debt availability and uncertainty over the economic recovery is expected to keep transaction levels lower and fees more competitive.
Savills has, however, picked up a number of key instructions recently, most notably the job to help sell a £900 million portfolio of UK properties on behalf of St Martins, the Kuwait state-backed property investor.
Jeremy Helsby, Group Chief Executive of Savills plc, said:
"We have had a strong first half particularly through the recovery of transaction markets in the UK and Asia Pacific, which are core to the Group's success. At the same time we have substantially reduced losses in the Continental European business and are seeing some improvement in the US market.
Looking to the second half, factors such as the Chinese Government's desire to contain overheating in the residential market, continued concerns over economic growth in many countries and prolonged low levels of debt availability indicate that the recovery is likely to flatten off during the coming months. Since Q4 2009 we have consistently maintained a cautious outlook for the second half of 2010, and with such uncertainties remaining we currently have no reason to change that view.
Over the last two years we have successfully restructured and re-positioned Savills businesses to address the market conditions that they face, and we are now well placed to take advantage of business opportunities as they arise."
Overall, transaction advisory revenues rose 57%, consultancy was up 12% and property and facilities management climbed 8%.
Charlie Foster, analyst at Oriel Securities, said: “Investors seeking to buy Savills cheaply will be disappointed, but we regard the current rating of 18.2 times future earnings as attractive in absolute terms and in light of the upside risk from continued strong growth.
“With sentiment wobbling and Savills opaque visibility, we will await the December trading statement with interest. History points towards the final quarter having a binary impact on the full year.”
Profit before tax recovered to £14.4 million in the six months to the end of June, up from a flat performance in the same period last year, after a 23% increase in group revenue to £304.4million. Basic earnings per share increased to 7.9p, from 0.7p in the period last year, with an interim dividend maintained at 3p per share.
As with many property consultancies, which generate profits from fees on investment and leasing transactions as well as corporate advisory work, Savills was hard hit by the downturn in the global property market during the recession.
However, most property markets have either stabilised or staged a recovery in the past year, while others such as China and other commodity-rich countries in the region have continued to experience strong growth.
Savills has benefited from this recovery, with profits driven by increased transactional work in the Asia Pacific and the UK residential market. The group restructuring carried out during the downturn also had a positive impact, with losses narrowing by more than half in Continental Europe to £4million, where markets have tended to lag behind those in strong recovery. Shares in Savills were up 3.6p, or 1.1%, at 328.6p in trading this morning.
Jeremy Helsby, chief executive of Savills, said: “We have had a strong first half particularly through the recovery of transaction markets in the UK and asia-pacific, which are core to the group’s success. At the same time we have substantially reduced losses in the Continental European business and are seeing some improvement in the US market.”
However, Savills has maintained its cautious outlook for the second half of the year given worries that Chinese policy could cool its residential market and the threat of a sustained slowdown in the UK housing market.
On the commercial business, the continued low levels of debt availability and uncertainty over the economic recovery is expected to keep transaction levels lower and fees more competitive.
Savills has, however, picked up a number of key instructions recently, most notably the job to help sell a £900 million portfolio of UK properties on behalf of St Martins, the Kuwait state-backed property investor.
Jeremy Helsby, Group Chief Executive of Savills plc, said:
"We have had a strong first half particularly through the recovery of transaction markets in the UK and Asia Pacific, which are core to the Group's success. At the same time we have substantially reduced losses in the Continental European business and are seeing some improvement in the US market.
Looking to the second half, factors such as the Chinese Government's desire to contain overheating in the residential market, continued concerns over economic growth in many countries and prolonged low levels of debt availability indicate that the recovery is likely to flatten off during the coming months. Since Q4 2009 we have consistently maintained a cautious outlook for the second half of 2010, and with such uncertainties remaining we currently have no reason to change that view.
Over the last two years we have successfully restructured and re-positioned Savills businesses to address the market conditions that they face, and we are now well placed to take advantage of business opportunities as they arise."
Overall, transaction advisory revenues rose 57%, consultancy was up 12% and property and facilities management climbed 8%.
Charlie Foster, analyst at Oriel Securities, said: “Investors seeking to buy Savills cheaply will be disappointed, but we regard the current rating of 18.2 times future earnings as attractive in absolute terms and in light of the upside risk from continued strong growth.
“With sentiment wobbling and Savills opaque visibility, we will await the December trading statement with interest. History points towards the final quarter having a binary impact on the full year.”
Thu, 26th Aug 2010