REG - Savills PLC - AGM Statement

SavillsAnnouncement

17/05/2023 07:00

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RNS Number : 6286Z  Savills PLC  17 May 2023

 

17 May 2023

SAVILLS PLC

("Savills" or "the Company")

Trading update

 

Ahead of its Annual General Meeting (AGM) to be held at 12 noon today at
Savills, 33 Margaret Street, London W1G 0JD, Savills plc, the international
real estate advisor issues the following trading update:

 

·      As capital values progressively adjust to higher interest rates
global capital transaction volumes for the year to date are at the lowest
levels seen for a decade; this has clearly impacted the Group's Commercial
transaction business in the early part of the year.

·      Leasing markets have remained more resilient across most sectors,
although office take up is heavily skewed to prime stock with strong
sustainability credentials.

·      Although volumes are lower than last year, as expected, prime
residential markets have performed well with a particular emphasis on the
London market.

·      Sentiment in China has improved significantly since the end of
COVID restrictions, albeit this has yet to show materially in the Group's
revenue line.

·      Savills less transactional businesses have performed in line with
expectations.

·      H1 2023 will be materially impacted by the ongoing recalibration
of global investment markets; and whilst the range of potential outcomes for
the year as a whole has widened since year-end, we continue to expect
progressive improvement in the second half of the year as markets start to
recover.

 

Mark Ridley, Group Chief Executive, commented:

 

"During this period of adjustment, I am delighted with the response of our
people both in helping clients facing challenging circumstances and in seeking
longer term business development initiatives, which our strong balance sheet
enables us to pursue at this opportune time. The strength of our less
transactional businesses has helped underpin the Group's performance overall.
The anticipated market corrections in 2023 are happening largely as
anticipated. As greater certainty over the future pattern of global interest
rates is emerging, we expect progressive recovery through the third and fourth
quarters of the year and into 2024."

 

Trading Update

 

In the Asia Pacific region, Japan and Korea have traded well and sentiment in
mainland China has significantly improved since the New Year. Elsewhere,
markets are correcting to the prevailing level of interest rates. Our
substantial Property and Facilities Management business in the region
continues to perform well.

 

In the UK, our performance has been largely in line with expectations, driven
primarily by the good levels of activity in the prime residential markets and
some recovery in retail. Other commercial capital markets have been severely
impacted as pricing adjusts, however we have enjoyed an unusually high market
share in prime transactional markets, which has partially mitigated the
significant decline in volumes. Partly because post-Brexit, UK yields did not
compress as far as other international markets, we believe that prime real
estate valuations have largely corrected and we await improving sentiment into
which to launch a very attractive pipeline. Our less transactional service
lines have performed in line with our expectations to date.

 

In Continental Europe and the Middle East, where Savills is highly dependent
upon transactional activity, volumes, particularly in the major markets of
Germany and France, have been severely reduced during the period. Leasing
momentum remains subdued and across capital markets, yields have moved out
considerably, and the correction, although not yet complete, is well underway.
This has had a significant impact on our business in the year to date.

 

In North America, where the Group is substantially dependent upon leasing
activity by corporate occupiers, our business performance has been in line
with our expectations, albeit individual transaction sizes are  currently
much reduced.

 

Savills Investment Management has traded in line with our expectations. In an
environment which remains challenging for the deployment of equity capital
 and valuations adjust to prevailing debt costs, our business has experienced
the expected impact on both base management and performance fees during the
period.

 

Summary and Outlook

 

In the year to date, global commercial investment volumes have either reached
or approached their lowest levels in many years. As a result, at this early
stage, the range of outcomes for the year as a whole has widened, however our
prime commercial leasing, residential, consultancy and property management
businesses all continue to trade in line with expectations.

 

Although it is impossible accurately to predict the timing of individual
market recoveries, we remain optimistic that  markets will start to improve
in the second half and we are seeing early signs of this in some areas.
Confidence in the ongoing recovery and level of transactional velocity through
the latter part of the year will be key to supporting our view that 2024 will
show transaction volume growth in most markets. In the meantime, we continue
to pursue opportunities to develop our business both through targeted
recruitment and selective acquisition.

 

We anticipate announcing the Group's Half Year Results for the six months to
30 June on 10 August 2023.

 

For further information, contact:

 

Savills
 
020 7409 8934

Mark Ridley, Group Chief Executive Officer

Simon Shaw, Group Chief Financial Officer

 

Teneo
 
                        020 7353 4200

Mark Burgess

Will Palfreyman

Jo Blackshaw

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