REG - Savills PLC - Year End Trading Update

SavillsAnnouncement

11/01/2024 07:00

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RNS Number : 3084Z  Savills PLC  11 January 2024

 

 

11 January
2024

SAVILLS PLC

("Savills" or the "Group")

 

Year-End Trading Statement

 

Performance in line with expectations following prolonged recalibration of
markets

 

 

Savills plc, the global real estate advisor, publishes the following trading
statement in respect of the year ended 31 December 2023.

 

Throughout the year, real estate markets across the globe have been challenged
by significantly increased interest rates, geopolitical events and, on a more
asset specific level, uncertainties over the future role of offices and the
valuation of existing stock in the era of sustainability.

 

These factors together with certain location-specific issues significantly
reduced transactional activity in Global markets during the year. Those most
affecting Group performance were:  North America, Greater China, Australia
and Northern Europe, particularly the largest markets of Germany and France.
In addition, economic uncertainty led to delays in corporate occupier
commitments to new leasing activity, particularly in the metropolitan office
markets of the USA and Northern Europe.

 

The value recalibration process has yet to catalyse market liquidity, with the
majority of lending banks continuing to extend existing loan terms, albeit we
are now starting to see lenders beginning to exercise their security rights.
 This began to have a positive effect on market activity towards the year end
and should be a catalyst for improved volumes in H1 2024.

 

The consequence of this was that global market conditions remained extremely
subdued for longer than originally anticipated at the start of 2023, and
resulted in the Group's Transactional businesses experiencing a significant
reduction in profits for the year.

 

Savills strength across  our Less Transactional service lines continued to
provide a resilient earnings stream, with the Group's Consultancy and Property
Management businesses performing well, underpinning Savills overall
performance. Consequently, the Group expects that its full year performance
for 2023 will be in line with the expected range of outcomes*.

 

The speed with which individual investment markets are recalibrating varies
around the Globe; however, it is clear that the UK prime Commercial market has
re-priced to a point where it represents value, particularly for assets with
strong sustainability credentials, for which there is significant occupier
demand. In addition our Prime residential business has performed well,
particularly in central London. As anticipated a year ago, residential markets
outside London were more subdued as volumes reverted to more normal levels of
activity after the abnormal conditions during and post-pandemic. Indeed our UK
business overall delivered a very strong performance in difficult market
conditions.

 

Our European and North American businesses, being the most exposed to
Transactional service lines, felt the greatest impact of prolonged uncertain
market conditions, resulting in trading losses for the year. In contrast the
strength and diversity of our Asia Pacific business enabled the Group to
withstand significant reductions in activity, particularly in both Australia
and Greater China, to post a profit, albeit reduced year on year.

 

Our Investment Management business traded in line with our expectations
although deployment of capital was inevitably reduced given lack of price
transparency in most markets. At the year end, Savills Investment Management
had significant investment "dry powder" for both real estate equity and debt
opportunities, including Samsung having committed its first $1bn to support a
number of fund products.

 

As a result of prevailing market conditions during 2023, the real estate
services industry as a whole undertook a number of rounds of significant cost
reduction and reorganisation actions. In line with our strategy during the
Global Financial Crisis, as well as more recently through the pandemic and
supported by our strong financial position, Savills continued to maintain its
core bench strength ensuring that we provided the highest level of service to
our clients throughout the year and remain well positioned for market
recovery. We did, however, review certain markets and sectors where the
anticipated time frames for market recovery remain protracted. This resulted
in selective restructuring in certain transactional and support teams.
 Alongside this, we continued to acquire businesses and recruit high quality
talent in markets which have become much more conducive to reasonably-priced
business development.

 

In the year ahead, challenging macro conditions are expected to continue for
some time; however most markets appear to be either at, or past, the moment of
peak uncertainty, with sentiment turning towards reductions in the cost of
capital being likely during 2024.  We expect re-financing driven activity and
the sustainability agenda to be positive for transaction volumes, and thereby
price transparency, in a number of markets. There also remain, for the near
term at least, questions over office utilisation in certain locations, perhaps
most keenly felt in the North American metropolitan markets of the Eastern and
Western seaboards.

 

Whilst it is too early to determine the 2024 outlook with clarity, we believe
that H1 2024 will see underlying market improvements, which should set the
course for broader recovery in most of our markets during the second half of
the year.  This, together with the benefit of our targeted restructuring
programme, should lead to substantive overall improvement in performance in
2024 and set the foundation for further improvement thereafter, when the
Group's performance should more clearly reflect our globally diversified and
strengthened position in many markets.

 

Savills intends to report 2023 full year results on 14 March 2024.

 

*The range of current analyst forecasts (excluding any forecasts which have
not been updated within the last 6 months) for 2023 Underlying Profit Before
Tax is £85m-£97.1m with an average of £91.3m

 

 

For further information, contact:

Savills    020 7409 8934

Mark Ridley, Group Chief Executive Officer

Simon Shaw, Group Chief Financial Officer

 

 Teneo Communications    020 7353 4200

Jo Blackshaw / Elizabeth Snow

 

Forward looking statements

Certain statements in this announcement are forward-looking statements
relating to the Group's operations, performance and financial position based
on current expectations of, and assumptions and forecasts made by,
management.  They are subject to a number of risks, uncertainties and other
factors which could cause actual results, performance or achievements of the
Group to differ materially from any outcomes or results expressed or implied
by such forward-looking statements. The Group's principal risks are described
in the 2022 Savills plc Annual Report which can be viewed online at
http://www.savills.com (http://www.savills.com) . Such forward looking
statements should therefore be construed in light of such risks, uncertainties
and other factors and undue reliance should not be placed on them. They are
made only as of the date of this announcement and no representation,
assurance, guarantee or warranty is given in relation to them including as to
their accuracy, completeness, or the basis on which they are made.  No
obligation is accepted to publicly revise or update these forward-looking
statements or adjust them as a result of new information or for future events
or developments, except to the extent legally required. Nothing in this
Statement should be construed as a profit forecast.

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