Knight Frank has reported record pretax profit despite a dip in turnover.
The partnership, which this year celebrates its 125th anniversary, saw profit rise by 23% to £173.7m for the year ended 31 March 2021, up from £141.1m in 2020 – a period before the impact of the coronavirus pandemic had really hit.
Staff costs reduced from £248.2m to £231.7m during the period, with “other operating costs” also cut from £162.2m to £127.9m.
Turnover fell by 7% during the year under review from £549.6m to £512.7m.
“I am incredibly proud of what everyone has done,” said senior partner and group chairman Alistair Elliott. “I don’t cherish a crisis but I’m quite happy to roll up my sleeves and get on with it and that is exactly what we did, and good fortune and the structure of our business has enabled us to deal with the crisis in a way that I could never have imagined.”
He added: “Without an ounce of arrogance or complacency, to have produced a record profit makes me incredibly proud of everyone in the organisation and more excitingly, gives us confidence that our platform is absolutely fine for the future.”
Explaining how the firm was able to produce record profit off a smaller turnover, Elliott said: “Swift market re-engagement, in parallel with costs constraints, resulted in our profit growing by 23% on the previous year. As a group we reduced our marketing spend, our people travelled less and our staff costs lowered – all factors that have positively impacted the firm’s profitability.”
He said that a reduction in transactional activity across capital markets had led to the decline in turnover, but it had been kept to just 7% due to the occupational markets showing a “far strong position” than the firm had expected. Knight Frank’s UK residential business, particularly its country operation, also helped stabilise the business, with record demand.
“The pandemic resulted in global property markets experiencing one of the most disruptive years on record,” added Elliott. “In particular, office, retail and logistics property investors and occupiers have had to reconsider their real estate strategies, while residential markets in many global hubs saw a boom in demand and pricing spurred by record low interest rates and lifestyle changes.
“We believe the coming year will see greater clarity for the key markets – as people continue to return to workspaces and cities once again take centre stage for home buyers and businesses alike. The year will also see continued growth in ESG-led investment requirements and a search for income as we enter a rate tightening cycle. Investor focus will lead to continued innovation across property markets globally.”
Looking ahead, Knight Frank is working on plans to further develop its global business following its recent switch in partnership from Newmark to Cresa. Elliott said the group had planned to develop its occupier services around the world and was exploring a fresh new partnership that would enable it to find the right platform to grow its capital markets advisory reach globally.
He added that trading for the current year, which will be his final year at the partnership before William Beardmore-Gray, head of KF’s London commercial and global occupier businesses, takes over as senior partner on 1 April 2022, was “really strong”. He added that profit margins for the 2022 financial year would “undoubtedly” be impacted following a re-engagement of investment in the business, however.
Elliott concluded: “I am incredibly excited by the depth and breadth of real estate, and think that it has reasserted itself in the global arena for investment.”
To send feedback, e-mail samantha.mcclary@eg.co.uk or tweet @samanthamcclary or @EGPropertyNews
