Savills Regulatory News (SVS)

8 Jul 2008 07:00



SAVILLS PLC

("Savills" or "the Company")

Trading Update

Savills, the international property services company, is pleased to announce a trading update for the half year ended 30 June 2008. The Company will be announcing its results for the half year ended 30 June 2008 on Thursday 28 August 2008.

Overview

Trading conditions for our UK and US Commercial Capital Markets businesses and our UK Residential and Mortgage Broking businesses have continued to deteriorate with volumes down significantly on the comparable period in 2007. These difficult trading conditions have now spread to many parts of Europe where the number of transactions is declining as financing becomes more difficult to obtain.

Our Transactional businesses in Asia continued to be more resilient notwithstanding the more challenging market conditions. Demand for our Consultancy, Property Management and Fund Management services, although not immune to the impact of the credit squeeze, remained good. 

Main Business Streams

Transactional

UK Commercial

The UK investment markets continued to be constrained by the credit squeeze and uncertainty on pricing, with overall volumes down significantly on the comparable period in 2007. Prime yields broadly stabilised, however, there was a continued softening in secondary yields. UK tenant demand continued to be fairly resilient across most sectors, with a focus on prime properties and locations. Rental growth was subdued in most sectors. These difficult markets have led to a fall in overall volumes for our UK Transactional business. 

UK Residential

Mainstream UK Residential markets have softened further. A weakening outlook for the economy has compounded the effect of the reduced accessibility to, and increased costs of, mortgage finance resulting from the credit squeeze. Within Savills' core prime markets, transaction volumes in London are down about 45% year on year, with prices being adjusted downwards by approximately 7.5% in central London in the first six months of 2008. Prime country property was initially less affected than London but is now following suit. The very top end of the prime market, particularly where values exceed £5m, has so far proved relatively immune to the downturn. Overall, these challenging markets have led to a significant fall in transaction volumes for our UK Residential business and we continue to take appropriate action to reduce costs.

Europe

Europe's major commercial property markets are increasingly feeling the impact of the global credit squeeze. Although, there is still cross-border and domestic investor demand for correctly priced assets, our European Transaction businesses have seen significantly reduced volumes due to the difficulty in obtaining debt finance and deals taking longer to complete. 

Asia

The credit squeeze and economic uncertainty is starting to impact upon Asia. This is most pronounced in the more developed Asia Pacific countries, such as Australia and Japan. However, Hong Kong and Singapore have remained relatively stable with property transactions in line with 2007 levels. In particular, the occupational markets have held up well across the regions and rents have risen in the first half of 2008. Our teams continued to secure instructions and overall our Asian businesses have had a strong six months. 

US 

Despite difficulties in the markets and the extended time needed for deals to close, our US business continues to perform in line with our expectations.

Consultancy

Our UK Consultancy businesses have performed well, with areas such as valuations, social housing, building consultancy, healthcare, research and planning experiencing strong demand. Our European Consultancy businesses have been affected by the market slowdown but we have continued to invest in these businesses, which we believe will bring benefits over the longer term. Asian demand for consultancy services remains solid. Expansion into new markets such as Macau has compensated for a reduction in IPO-related activity.

Property and facilities management

Our UK Property Management businesses have benefited from strong organic growth and staff recruitment. Revenues in our European Property Management businesses are ahead of the same period in 2007, and we have continued to invest for the longer term. In Asia, the Property Management businesses have performed well and continue to underpin our business activities in the region. 

Financial Services

Trading conditions within the UK mortgage sector are proving extremely tough with transaction volumes down by about 40%. A combination of a lack of liquidity combined with tightening underwriting criteria and higher funding costs have resulted in very challenging trading conditions and we are taking appropriate action to reduce costs.

Fund Management

Cordea Savills is consolidating its position and pursuing a strategy of controlled growth in 2008 following the rapid expansion of the business and its product range over the last few years. The focus in this current year is on investing equity raised and delivering investment performance. In light of the credit squeeze and global economic uncertainty, no new funds were launched in the first half of 2008. A distribution office has been opened in Singapore in order to expand our investor client base into Asia. 

Outlook

The outlook for our UK and US Commercial Capital Markets, UK Residential and UK Mortgage Broking businesses continues to depend on how quickly confidence returns to financial markets, which currently show no sign of improvement. Conditions in Europe have deteriorated as the impact of the credit squeeze is increasingly felt.

Overall, our Transaction businesses in Asia continue to trade well in increasingly challenging markets. Our Consultancy, Property Management and Fund Management businesses, whilst not immune to the impact of the credit squeeze, continue to enjoy good demand for their services. 

We are taking appropriate action to reduce costs whilst continuing to invest selectively where we see good opportunities.

As in previous years, we expect the overall outcome to be weighted towards the second half. However, trading conditions for our Transactional businesses in many of our markets makes predictions of full year performance very difficult.

Contacts 020 7638 9571

Savills

Jeremy Helsby, Group Chief Executive

Mark Dearsley, Group Finance Director

Citigate Dewe Rogerson

George Cazenove

Lindsay Noton 

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