Savills shares dive as property group suffers ‘obvious challenges’

Savills has cut its forecasts for the financial year after a tough first-half saw underlying profits sink 72 per cent.

The group has blamed ‘obvious challenges’ in global property markets as ever-higher interest rates continue to hamper demand, meaning the group’s expectations for the year ‘have reduced somewhat’. 

Savills shares fell sharply on Thursday and were down 8.47 per cent or 84.00p to 907.50p this morning, having fallen over 19 per cent in the last year. 

The group saw revenue for the six months ending 30 June slip 3 per cent to £1.01billion, which bosses credited as a good result having ‘weathered both the inflationary cost conditions and reduced transaction volumes well, increasing market share’.

Savills’ underlying profit margin fall from 5.7 per cent to 1.6 per cent during the period.

The group said lower expectations reflect anticipated losses in its transaction business, as well as ‘staff cost inflation and the maintenance of our professional staff roster to service clients’.

Underlying earnings per share dropped from 32.4p to 9.2p, while Savills ended the first half with a net cash position of £12.9million,against £149million at the same point last year.

Mark Ridley, chief executive of Savills, said: ‘During 2023, global real estate markets have faced the obvious challenges associated with inflation and the related steep rise in interest rates. 

‘Different regions have varied in the pace of their adjustment to current conditions and all have experienced a material decline in trading volumes during that adjustment process. 

‘Market participants, whether investors or occupiers, seek greater certainty on the trajectory of interest rates over the next 18 months, something which has become somewhat clearer in recent weeks than for much of the period.’

But in more positive news for investors, the group increased its interim dividend to 6.9p, up from 6.6p the previous year. 

Ridley added: ‘In prolonged uncertain conditions, it remains challenging to predict accurately the timing of individual market recoveries. Accordingly, our range of expectations for the year as a whole has reduced somewhat.’ 

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.