Savills Regulatory News (SVS)

17 Nov 2009 07:00



17 November 2009

SAVILLS PLC

("Savills" or "the Company")

Interim Management Statement

Savills plc, the international real estate advisor, publishes the following Interim Management Statement (IMS) for the period from July to date.

Summary and Overview 

Since June our UK Residential and Asia Pacific businesses have performed strongly whilst our European business has continued to face challenging market conditions. Overall our businesses have performed creditably, and we have continued to reduce costs whilst maintaining the operating capacity of our transaction teams around the world to take advantage of any improvement in market conditions. The balance sheet remains strong and we continue to anticipate that performance for the year will be consistent with our expectations.

Transactional Advice

Commercial

In the UK, investment market activity has focused on properties with long leases in prime locations with high quality tenants, for which there is demand from buyers globally. The limited supply of these assets means that transactional volumes remain significantly reduced and high investor interest has compressed investment yields accordingly. For the majority of the period, there has been little or no investment activity beyond this prime asset type, although there are some recent signs that investors are starting to look at the next tier down. Occupational agency markets have continued to be challenging although there has been some improvement in the London office market in particular.

In Asia Pacific, particularly Hong Kong and China, the transaction business improved in the third quarter driven by strong demand from investors in the region. Lately there are indications that this lending-based rally may not be sustainable in the medium term.

In Continental Europe there continued to be little investment activity, although recently there has been an increase in investor interest in markets such as Paris where international investors typically show interest early in recovering markets. In contrast our Irish business has continued to be adversely affected by the economic situation in that country. Overall, the Continental European businesses continue to be challenged by the relative lack of transaction activity, the cost and time taken to achieve material cost savings in many European jurisdictions and the continued adverse effect of currency translation.

In the United States the real estate investment market has remained largely inactive. Savills New York, our US capital markets business, has completed a number of transactions and performed in accordance with our expectations.

Residential

Our UK Residential Agency business has continued to perform strongly since June driven by recovery in the prime markets of London and the South East. There are some signs of calming since the end of September alongside the seasonal slowdown in new instructions. This, together with the prospect of a general election and increased taxation in the second quarter of 2010, indicates that we should be cautious about further improvements in the market in the short term, but can take comfort from its improved stability into the fourth quarter of this year. 

Consultancy

The range of our consultancy services in the UK in particular has continued to provide some stability to overall revenues with strong performances in areas such as Housing Consultancy partially compensating for other services for which the markets remain challenging. Our Valuation practices in the UK and Continental Europe have continued to experience significant volumes driven by the banks' reviews of their loan portfolios, but competitive pressure has resulted in continuation of the significant fee discounting we experienced in the first half of the year. In Asia Pacific a strong third quarter for transactions also improved the performance of our Hong Kong and mainland Chinese Valuation teams and other consultancy businesses. 

Property Management

UK Property Management has continued to perform strongly since the half year benefiting from new mandates won in the last twelve months and a continued focus on efficiency of operations. In the principal Asia Pacific markets of Hong Kong and China the business has continued to grow in line with our expectations.

Financial Services and Fund Management

Revenue at Savills Private Finance has stabilised over the period since June with some signs of improvement in the UK mortgage market, albeit off a very low base. This, together with the cost cutting carried out earlier in the year has ensured that the business has traded in line with our expectations.

Revenue at Cordea Savills remains in line with expectations with reduced fees primarily as a result of lower transaction volumes. We have continued to see significant net inflows into the core open-ended funds, and positive developments in the outstanding restructuring of some of our closed-end opportunistic funds.

Effect of Cost Savings

The Group has benefited from an increase in cost savings during the period which are tracking ahead of our expectations at over £60m for the year compared with the 2008 cost base. In difficult market conditions, this has enabled us to continue to invest in our business by maintaining much of our global capacity in transaction advisory services and selectively recruiting high quality talent without adversely affecting our performance expectations for the year as a whole. 

For further information, contact:

Savills 020 7409 8844

Jeremy Helsby, Group Chief Executive 

Simon Shaw, Group Chief Financial Officer

Tulchan Communications 020 7353 4200

John Sunnucks

Forward looking statements

Certain information included within this statement is forward-looking and by its nature involve risks and uncertainties because it relates to events and depends on circumstances that will occur in future. 

Forward-looking statements include, without limitation, projections relating to results of operations and financial conditions, market estimates, the Company's plans and objectives for future operations, including future revenues, financial plans and expected expenditures and divestments. 

There are a number of factors which could cause actual results and developments to differ materially from those expressed or implied by these forward looking statements including a number of factors outside the Company's control. All forward-looking statements in this report are based upon information known to the Company on the date of this IMS. The Company gives no undertaking to update forward looking statements whether as a result of new information, future events or otherwise.