Property firm Savills has posted a three per cent slip in profit before tax in 2018 as it warned of a decline in transaction volumes over the year ahead.
Group revenue rose 10 per cent to £1.76bn.
Profit before tax declined three per cent to £109.4m.
Gross cash and cash equivalents increased seven per cent to £223.9m.
Basic earnings per share dropped four per cent to 56.2p due to a fall in profit after tax.
Why it’s interesting
The results are in line with a trading update published by Savills in January, which maintained the firm’s full-year expectations but warned of challenging conditions in 2019.
The property group said its revenue growth was driven by a “robust” performance in the second half of the year. The firm said strong trading in its less transactional business lines - such as property and facilities management and consultancy - was also key.
The results come during a torrid time for the sector, as Brexit uncertainty, US trade policy and higher long-term treasury yields all took their toll.
Chief executive Mark Ridley told City A.M. more clarity in the Brexit negotiations is needed to help steady investor jitters. “If there's a direction of travel that will improve market conditions,” he said.
Savills was also impacted by currency movements, which it said wiped more than £20m off its revenue, and its pre-tax profit was hit by a one-off minimum pension charge.
Despite this, Savills’s UK residential business proved resilient, posting a two per cent growth in revenues and increasing market share.
The FTSE 250 firm said it had made a “solid start” to 2019, but its outlook will not calm investor nerves. The company said it expects to see a decline in transaction volumes as macro-economic and political uncertainties hit investor demand.
Ridley said the firm expects a “subdued” first quarter in commercial investment but hopes for a boost in second half trading. Overall, Savills forecasts flat growth over the year.
The firm said it has made further investments in online estate agent Yopa, which it states is the sixth largest estate agent in the UK.
Last week rival firm LSL Property Services announced a massive writedown of the value of its stake in Yopa. But chief financial officer Simon Shaw told City A.M. Savills is “highly supportive” of the property tech company.
Shares in the property company were down more than seven per cent this morning.
What Savills said
Chief executive Mark Ridley said: “Savills delivered both revenue and underlying profit growth in 2018, driven by a robust second half of the year.
“In addition to maintaining or growing our share of transactional markets, the performance of our less transactional business lines was key to this performance.
“We have made a solid start to 2019; however, the year ahead is overshadowed by macro-economic and political uncertainties across the world. It is difficult accurately to 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; accordingly we retain our expectations for the group's performance in 2019.”