Savills has reported a 12% increase in revenue and a 28% increase in underlying pretax profit as it sets its sights on expansion in 2014.
In 2013 the property services firm delivered a record group revenue of £904.8m – up from £806.4m the previous year – and underlying group pretax profit of £75.2m buoyed by the strong residential and improving commercial market.
The group’s underlying pretax profit margin increased by 100 bps to 8.3%.
Chairman Peter Smith said that after considering the longer-term strategic and geographic development of the business in 2013, the board concluded “that the current strategy of…expansion, both organically and by acquisition, is the right approach”.
“As part of this, we have considered how best to build on Savills’ capabilities in the US and will continue to investigate options for expansion in that market,” he said.
He added that the board has also looked at expanding the geographical coverage of its Cordea Savills investment management platform, whose assets under management increased by 17% to £4.2bn during the period.
It delivered an 11% increase in revenue to £26m, but saw profit fall by 19% to £2.9m as a result of acquisition and restructuring costs.
During the year Cordea Savills took its first step outside Europe, agreeing to buy Tokyo-based fund manager Merchant Capital KK, which has around £250m AUM, for around £300,000.
The acquisition is expected to complete in the second quarter of 2014.
Looking at the group geographically, the UK was the strongest region, delivering 16% hike in revenue to £462.3m, and a 26% rise in underlying profit to £55.3m.
This was followed by Asia Pacific, where revenue came in at £354.4m on 7% growth owing to a sharp slowing in the Hong Kong and Singapore market, and profit was up by 9% to £32.6m.
Continental Europe and the US delivered narrowing losses of £3.9m and £1.6m respectively with revenue growth up 16% and 11%.
By service line, transaction advisory led the way, delivering 16% growth in revenue to £358.2m and a 48% surge in profit to £47.2m.
Property management was up by 9% to £329m although underlying profit slipped by 2% to £17.6m. Consultancy saw revenue grow by 11% and profits rise by 26% to match property management on £17.6m.
Investment management delivered the shallowest profit by service line as above.
The agent said trading volumes in the UK prime residential market rose by 8% year-on-year and the value of property sold increased 15% to £6.1bn.
In London volumes rose by 13% with a similar increase in average price to £3.2m and it intends to open four offices in London this year, matching last year’s openings in the capital.
The UK residential transaction advisory business overall increased its revenue by 22% to £118m and its underlying profit rose by 34% to £19m. UK commercial transaction advisory revenue was up by 22% to £73.4m and underlying profit increased by 58% to £10.3m.
In the Asia Pacific, residential recorded a 23% increase in revenue to £22.7m and a 28% rise in underlying profit to £5.9m.
Asia Pacific commercial revenue grew by 1% as improved earnings in Australia, Korea and Japan offset falling volumes in Hong Kong. Overall, the Asia Pacific commercial transaction advisory business recorded a 14% increase in underlying profit to £16.6m.
The firm’s total dividend for the year is up by 19% to 19p a share.
Group chief executive Jeremy Helsby said: “I am delighted to report a strong set of results with revenues up by 12% to a record high of £904.8m and underlying profits up by 28%.
“These results demonstrate the strength of our position in the prime residential and commercial markets of the world’s key cities and the benefit of the investment that we have made across the business to expand our service lines.
“We have made a solid start to 2014 with performance in line with management expectations.
“In the UK, we expect continuing demand for London property and recovery in the regional markets, although availability of commercial stock, in particular, is increasingly a challenge.
“In Asia, whilst we expect the reduction in trading volumes in Hong Kong to persist for at least the first half of the year, this should be mitigated, in part, by the strength of other regions across Asia.
“We also expect to show a continued improvement in our businesses in continental Europe and the US. Looking ahead, we are well positioned with a clear strategy for extending the depth and breadth of our services in the world’s key markets.”
bridget.oconnell@estatesgazette.com
