Savills has reported a 10% increase in revenue during 2018 but it has warned that transactional activity is waning.
Despite political and economic headwinds, it generated £1.76bn and also saw its underlying profit tick up by 2% to £143.7m, resulting in a 3% rise in earnings per share to 77.8p.
Group chief executive Mark Ridley warned: “The year ahead is overshadowed by macroeconomic and political uncertainties across the world. It is difficult to accurately predict the impact of these issues on corporate expansionary activity and investor demand for real estate. At this stage, we expect to see declines in transaction volumes in a number of markets and growth in our less transactional business lines.”
He later told EG: “In the last quarter of last year, investment volumes saw a dramatic 40% [year-on-year] reduction, and I do believe this quarter will have a similar uncertainty attached to it. That is because of the continued Brexit equation, and people are just watching and waiting and won’t commit. That said, if a direction of travel starts to be laid out then I think that will start to move and change, and the UK looks like relatively good value.”
Revenue from Savills’ UK commercial business dropped by 3% to £98.4m, which the company attributed in large part to a drop-off in retail deals due to “a combination of structural and Brexit-related impacts”.
“Challenging conditions” in its UK residential business did not prevent Savills from maintaining its numbers in the subsector, winning considerable market share in a weak market. Revenue grew by 2% to £131.5m, though its residential transaction advisory business saw a 6% drop-off in profit to £17.6m.
Ridley added: “You take some of the metrics – London [residential] volumes were down 8.8% year-on-year but we sold 4% more houses in London than during the same period, so we are taking market share from our peer group. We are doing that because we have high-quality teams with great experience. Our fee levels are absolutely stable so people are not saying we want the cheapest. In a hard market they want the best advice they can get, and that is playing to our strengths.”
During the year, Savills bought Cluttons’ Middle East business, property management business Broadgate Estates, property services company the Currell Group and a 25% stake in debt fund manager DRC (with the option to buy the remaining 75% at a later date). Ridley said that while the company would be on the lookout for more opportunities, he expected it to be cautious in its outlook.
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