Savills PLC (LON:SVS) have said that annual performance will be at the upper end of performance on Monday, causing shares to spike.
Savills shares spiked 7.27% on Monday to 1,232p. 13/1/20 11:04BST.
The firm said that annual performance will be at the higher end of guidance due to “excellent” performance in the UK, significant growth in the US and a strong performance from Savills Investment Management.
The estate agent said that despite political and economic challenges, including Brexit complications and Hong Kong turmoil, which led to lower volumes of activity that performance remained strong.
“The strength of Savills positions in both markets contributed to a resilient performance through increased market share”.
The UK market performed excellently in both commercial and residential markets, which drove strong results.
In the Asia pacific segment, this areas performed below expectations as a result of political unrest, however growth in North America helped improve year on year profits which pushed overall performance up.
Savills brushes of political unrest
“Savills Investment Management performed ahead of our expectations with both new product launches and significant capital deployed by our Major Account Investment Team. In addition, we benefited from performance fees on certain products, reflecting continued strong investment performance across the business.”
“Looking to the year ahead, increased political stability in the UK should maintain improved sentiment in real estate markets. Global investor demand for secure income, restricted supply and expectations of continued low interest rates suggest that the medium and long term dynamics of the UK real estate market should remain largely positive. Nevertheless, some caution may remain until the full impact of Brexit is better understood. Certain other global markets continue to be overshadowed by macro-economic and political uncertainties. As a result of these factors, at this early stage in the year the Board’s expectations for 2020 remain unchanged.”
Savills grow from mixed August update
In August, the firm saw its profits dip during the first half of 2019, despite seeing Group revenue jump on a year-on-year basis.
The Company reported a 16% growth in first half group revenue, up 16% to £847.0 million. Despite this, its underlying profit for the period dipped 12% on constant currency, down £4 million to £38.4 million (£1.6 million relating to implementation of IFRS 16). Group profits before tax dipped 7% to £24.7 million.
Though ahead of market trends, UK Residential sales volumes were down 1.5%, however Letting revenues grew 26%. Further, Savills Investment Management revenue rose by 20% and Facilities Management revenue jumped 27%.
“Given the lag effect of significant investment in recruitment in the preceding period and facing some challenging transactional market conditions, we had anticipated a slight decline in profits for the first half of 2019. The Group has delivered a resilient first half performance reflecting both the robustness and geographic diversity of our market positions generally, and the strength of our less transactional businesses.”
Estate Agent market competitors
A UK based competitor in the form of Countrywide PLC (LON:CWD) recently announced the sale of their Lambert Smith Hampton Business.
The UK estate agent also announced a share consolidation on the basis of 1 new share for every 50 existing shares. The reduction in the number of overall issued shares is expected to improve market liquidity by reducing the volatility and spread.
Countrywide will sell Lambert Smith Hampton to John Bengt Moeller, who is chair of Great Global Holdings Ltd, a holding company for several UK and international companies.
Both the sale and share consolidation will be discussed at the upcoming annual general meeting. The verdict is expected to be announced by early 2020.
Purple Bricks continue to struggle
Purplebricks (LON:PURP) have said that cash is still following out of the business due to the closure of most of its overseas operations.
Over the six-month period, cash fell from £62.8m to £41.6m. This is expected to fall to £33.8m by the end of April 2020 and it is not expected to fall much further during the next 12 months. Net assets were £90.3m at the end of October 2019.
Additionally, the CEO announced his departure back in May. Purplebricks added that its US operations were also under review to assess its performance and associated risks, moving forward.
Paul Pindar, Non Executive Chairman, said: “The Board is delighted to have an executive of Vic Darvey’s calibre to take on the leadership of our business for its next important phase of development. We have a lot to do and Vic has a clear vision of the priorities we need to address.
Shareholders of Savills should be impressed that the firm has managed to shrug off both political and economic uncertainties to deliver a strong year of trading. There will be hope that has Brexit negotiations unfold, more clarity is provided within the property market.
