Savills profits knocked by Brexit and Hong Kong protests

Property agent Savills has posted falling half-year profits after Brexit uncertainty and political unrest in Hong Kong took their toll.

The group reported a 12% fall in underlying pre-tax profits, on a constant currency basis, to £38.4 million for the six months to June 30.

On a statutory basis, pre-tax profits dropped 7% to £24.7 million.

Savills said UK residential property market sales by volume remained “challenging” and at the lowest level since the financial crisis as underlying profits in the division plunged 44% to £3.5 million.

But the group said it outperformed the market with a 1.5% fall in UK residential revenues to £57.3 million despite ongoing woes in the central London sector.

Group-wide transaction advisory profits halved to £9.9 million – down 54% with currency effects stripped out – which it said reflected a “decline in capital markets activity in some of our key commercial markets and the impact of investment in key teams”.

Shares fell 2% after the figures.

Group chief executive Mark Ridley said: “In many markets, particularly the UK and Hong Kong, political and economic uncertainty has considerably reduced the volume of real estate trading activity in recent months, although occupier demand remains robust.”

Britain’s residential and commercial property markets have been knocked by Brexit uncertainty and recent ramped-up fears of a no-deal withdrawal.

Savills, which operates worldwide, has also seen the Hong Kong market hit by recent mass political protests.

Underlying profits in the Asia-Pacific commercial transaction arm dropped 26% to £4.2 million, while residential profits in the region tumbled 48% to £1.4 million.

But Savills said it had expected a fall in first-half profits and stuck by full-year forecasts, citing a “robust pipeline of activity for the second half”.

Results for the half-year were also helped by a robust performance in its investment management division, where underlying profits almost doubled – up 93% to £5.6 million on revenues 20% higher.

Chris Millington, an analyst at Numis Securities, said Savills was benefiting from its “less transactional businesses, which have offset material declines in some transactional markets”.

“Whilst profits are second half-weighted, the group’s pipeline of business is strong and, in our view, it is clear Savills is taking market share,” he added.