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Last checked at 
8 Jul 2008 07:00
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SAVILLS PLC
("Savills" or "the Company")
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Trading Update
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Savills, the international property services company, is pleased to announce a trading update for the half year endedΒ 30 June 2008. The CompanyΒ will be announcingΒ itsΒ results for the half year endedΒ 30 June 2008Β onΒ ThursdayΒ 28 August 2008.
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Overview
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Trading conditions for ourΒ UKΒ and US Commercial Capital Markets businesses and our UK Residential and Mortgage Broking businesses have continued toΒ deteriorateΒ with volumes downΒ significantlyΒ on the comparable period in 2007. These difficult trading conditions have now spread toΒ manyΒ parts ofΒ EuropeΒ whereΒ the number of transactions is decliningΒ as financing becomes more difficult to obtain.
Our TransactionalΒ businesses inΒ AsiaΒ continuedΒ to be more resilientΒ 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.Β
Main Business Streams
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Transactional
UKΒ Commercial
TheΒ UKΒ investment marketsΒ continuedΒ to be constrained by the credit squeeze and uncertainty on pricing,Β with overall volumes downΒ significantlyΒ onΒ the comparableΒ period inΒ 2007. Prime yields broadly stabilised, however,Β there wasΒ a continued softening in secondary yields.Β UKΒ tenant demand continued to be fairly resilient across most sectors,Β with a focus on prime properties and locations. Rental growthΒ wasΒ subdued in most sectors.Β These difficult markets have led to a fall in overall volumes for our UK TransactionalΒ business.Β
UKΒ Residential
Mainstream UK Residential marketsΒ haveΒ 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 creditΒ squeeze. Within Savills' core prime markets, transaction volumes inΒ LondonΒ are down about 45% year on year, with prices being adjusted downwards by approximately 7.5% in centralΒ LondonΒ in the first six months of 2008. Prime country propertyΒ was initially lessΒ affectedΒ thanΒ LondonΒ but is now following suit. The very top end of the prime market, particularly where values exceed Β£5m, has so far proved relatively immune to the downturn. Overall, these challenging markets have led to aΒ significantΒ fall in transaction volumes for our UK Residential business and weΒ continue to takeΒ appropriate action to reduce costs.
Europe
Europe's major commercial property marketsΒ are increasingly feelingΒ the impact of the global creditΒ squeeze.Β Although,Β there is still cross-border and domestic investor demand for correctly priced assets, our European Transaction businesses have seenΒ significantlyΒ reduced volumesΒ due to the difficulty in obtaining debt finance andΒ dealsΒ takingΒ longer toΒ complete.Β
Asia
The creditΒ squeezeΒ and economic uncertainty is starting to impactΒ uponΒ Asia.Β This is most pronounced in theΒ moreΒ developed Asia Pacific countries, such asΒ AustraliaΒ andΒ Japan.Β However,Β Hong KongΒ andΒ SingaporeΒ haveΒ remained relatively stableΒ withΒ property transactions in line with 2007 levels. In particular, the occupational markets have held up wellΒ across the regionsΒ and rents have risen in the first half of 2008.Β Our teams continuedΒ to secure instructionsΒ and overallΒ our AsianΒ businesses haveΒ hadΒ a strong six months.Β
USΒ
Despite difficulties in the markets andΒ theΒ extended time needed for deals to close, ourΒ USΒ businessΒ continues to perform in line with our expectations.
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Consultancy
OurΒ UKΒ Consultancy businesses have performed well,Β withΒ areas such as valuations,Β socialΒ housing,Β building consultancy, healthcare,Β research and planning experiencingΒ strongΒ demand. Our European ConsultancyΒ businesses have been affected by the market slowdownΒ but weΒ have continued to investΒ in these businesses,Β which we believe will bring benefits over the longer term.Β Asian demand for consultancy services remains solid. Expansion into new markets such asΒ MacauΒ hasΒ compensated forΒ aΒ reduction in IPO-relatedΒ activity.
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Property and facilities management
OurΒ UKΒ Property Management businesses have benefited fromΒ strong organic growthΒ and staff recruitment.Β Revenues in our European Property ManagementΒ businessesΒ are ahead ofΒ the same period inΒ 2007,Β andΒ weΒ have continued to invest for the longer term.Β InΒ Asia, theΒ Property Management businesses haveΒ performedΒ well and continue to underpin our business activities inΒ the region.Β
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Financial Services
Trading conditions within theΒ UKΒ mortgage sector are proving extremely tough with transaction volumes downΒ byΒ aboutΒ 40%. A combination of a lack of liquidity combined with tightening underwriting criteriaΒ and higherΒ fundingΒ costsΒ haveΒ resulted in very challenging trading conditions and we are taking appropriate actionΒ to reduceΒ costs.
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Fund Management
Cordea Savills isΒ consolidating its position andΒ 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.Β In light of the creditΒ squeezeΒ and global economic uncertainty, no new funds were launched in the first half of 2008. AΒ distribution office has been opened inΒ SingaporeΒ in order to expand ourΒ investorΒ client base intoΒ Asia.Β
Outlook
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The outlook for ourΒ UKΒ and USΒ CommercialΒ Capital Markets, UK Residential and UK Mortgage Broking businessesΒ continues to depend on how quickly confidence returns to financial markets,Β whichΒ currentlyΒ show no sign of improvement.Β Conditions inΒ EuropeΒ haveΒ deteriorated as the impact of theΒ creditΒ squeezeΒ is increasinglyΒ felt.
Overall, our Transaction businesses inΒ AsiaΒ continue toΒ trade wellΒ in increasingly challenging markets. Our Consultancy, Property Management and Fund Management businesses,Β whilst not immune to the impact of the credit squeeze, continue to enjoy good demand for their services.Β
We are taking appropriate action to reduce costs whilst continuing to invest selectively where we see good opportunities.
As in previous years, we expectΒ theΒ overallΒ outcomeΒ toΒ be weighted towards the second half. However, trading conditionsΒ forΒ ourΒ TransactionalΒ businessesΒ in many of our markets makes predictions of full year performance very difficult.
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Contacts 020 7638 9571
Savills
Jeremy Helsby, Group Chief Executive
Mark Dearsley, Group Finance Director
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Citigate Dewe Rogerson
George Cazenove
Lindsay NotonΒ
ENDΒ
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