Savills paints gloomy outlook as profits drop 72%

Real estate advisor Savills said it is cutting its forecasts for the financial year after a tough first half which saw profits sink 72%.

The stock was down nearly 2% at 972.74p in early trade on Thursday.

Savills is the latest in a string of real estate and housebuilding companies to report challenging operating conditions, owing mainly to higher borrowing costs for mortgage holders, and the wider cost-of-living crisis.

Revenues for the six months ended 30 June were down 3% year-on-year at £1.01bn, but underlying profit sank to just £16.3m from £59.2m the year before. The underlying profit margin meanwhile shrank to just 1.6% from 5.7%.

Accordingly, underlying earnings per share dropped from 32.4p to 9.2p.

The company blamed losses in its transaction business, as well as staff cost inflation.

It ended the first half with a net cash position of £12.9m, compared with £149m at the same point in 2022.

Nevertheless, the company chose to increase its interim dividend to 6.9p, up from 6.6p the year before.

Savills, which operates over 700 offices across the world, said market activity in the UK, Asia Pacific and Continental Europe in particular has been slow, specifically in Germany, France and the Nordic region.

"In prolonged uncertain conditions, it remains challenging to predict accurately the timing of individual market recoveries," said chief executive Mark Ridley. "Accordingly, our range of expectations for the year as a whole has reduced somewhat."

In other news, Savills also announced that Nicholas Ferguson, the outgoing chair who announced his retirement in March, will be replaced by Stacey Cartwright, currently a senior independent director. Cartwright, due to take over at the end of 2023, has been serving on the board since 2018.