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(Alliance News) - Savills PLC on Thursday said its profit for the first half of 2019 dropped on a substantial investment in recruitment and tough transactional market conditions, despite revenue growth.
For the six months to the end of June, the FTSE 250-listed estate agent reported a pretax profit of GBP24.7 million, down 7% from GBP26.7 million the year before. This was despite revenue increasing 16% year-on-year to GBP847.0 million from GBP727.8 million.
The group's profit was tied down by increased expenses for employee benefits at GBP545.3 million, up from GBP476.6 million, and a rise in other operating expenses to GBP241.0 million from GBP216.2 million.
Savills's underlying profit margin was 4.5% for the period, compared to 5.8% the prior year, affected by a decline in transactional activity, as well as the implementation of accounting standard IFRS 16 and the lag effect of recent investments in recruitment across the group's regional markets. IFRS 16 governments the treatment of property leases.
In Savills's Transaction Advisory division, which is its largest, underlying profit fell by 50% to GBP9.9 million, reflecting a decline in capital markets activity, despite 11% growth in revenue to GBP346.3 million.
Savills declared an interim dividend of 4.95 pence per share, up 3% from 4.8p the year before.
Looking ahead, Savills said it has a "robust" pipeline of activity for the second half, and continues to expect its performance for 2019 to be in line with management expectations.
"Given the lag effect of significant investment in recruitment in the preceding period and facing some challenging transactional market conditions, we had anticipated a slight decline in profits for the first half of 2019. The group has delivered a resilient first half performance reflecting both the robustness and geographic diversity of our market positions generally, and the strength of our less transactional businesses," said Chief Executive Mark Ridley.
"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. Underlying demand for the secure income qualities of real estate remains high, but these macro uncertainties weigh on investor sentiment and make predictions in respect of near term market activity difficult to determine with accuracy," Ridley added.
Shares in Savills were down 1.8% at 930.50 pence on Thursday.
