Savills’ profits surge on the back of Asian investments

Positive news for Savillis as they record significant boost pre-tax profits for the start of 2017. What is the cause of the strong growth and what will the second half of the year hold for Savillis?

Savillis announce strong profit growth to the first half of 2017
International estate agents Savills recorded a 27 per cent pre-tax profit rise in the first half of the year with strong performances in Asia, Europe and the UK commercial market offsetting a slight decline in UK residential revenue.Group profits in the first six months of 2017 reached £32.4 million compared to £25.5 million in the first half of last year.

Brexit could undermine future investment in UK says Savillis

The company revealed that 78 per cent of sales made through its London office went to buyers from outside of the UK. But Savills added in a statement that legislative changes in China and continuing Brexit uncertainty could undermine overseas investment in London in the future.“Additional controls over the export of capital from China are likely to reduce current levels of international real estate investment from that region,” it said. “In May 2017, the Hong Kong government implemented further cooling measures which are likely to have an impact on volumes in the second half of the year.”Savills said that many overseas investors accepted that occupational risk had increased due to Brexit, but “still see the UK as comparatively secure in a global context”.Weaker sterling, which has fallen markedly since last year’s EU referendum, had also made UK real estate a more attractive investment, particularly from the Asia Pacific region.However, Savills said that, in the UK residential market over the first half of 2017, transaction fee income was down four per cent to £55 million, with fewer properties changing hands and sales in new developments dropping by six per cent on the corresponding period last year.“Increased levels of political and economic uncertainty created by the general election and the ongoing negotiations to leave the EU make it difficult to predict market volumes for the rest of the year,” the company said.

Strong growth in Asia delivers strong first half to 2017

Jeremy Helsby, group chief executive of Savills, commented, “Savills has delivered a great first-half performance across the group driven, in particular, by strong growth in Asia and a resilient performance in the UK.“In line with our overall growth strategy, we have continued to build on the Savills Studley platform in the US, particularly our capital markets business, with recruitment and incremental acquisition activity across the country.“In addition, we have continued to invest in our Asian platform and, since the period end, in Europe we have announced the acquisitions of Larry Smith and Aguirre Newman, further strengthening our positions in Italy and Spain respectively.“Continued growth in our less transactional businesses, significant overseas earnings and strong market shares in many of our most important transactional locations position the group to withstand short term reductions in local activity and to capitalise on the opportunities which we expect to emerge.“In an environment of ongoing political and economic uncertainty, we continue to anticipate that our performance for the full year will be in line with the board’s expectations.” 
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Analysts at Numis said in a note that the investments Savills was making positioned it well to continue to perform well.“We have upgraded 2017 estimates slightly, although we think the risk remains on the upside,” they said. “In our view, Savills is well placed to show further progress given its diversification by geography and end-market and the fact it is strengthening its business in the US and Europe through team hires and acquisitions.”For related news and features, visit our Residential Property section.

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