Savills shares plunge despite huge climb in profits

Revenue and profits at Savills for the six months to the end of June soared, but the company warned that things might not be so sunny for the rest of the year. The warning took a severe toll on shares in the company.

Revenue was up 23% to £304.4m compared with £247.6m in the first half of last year.

Underlying profit before tax also rose massively to £17.2m compared with £2.5m last year.

The company, which reported yesterday, said the results reflect “a significant recovery in a number of the transactional markets in which we operate, particularly compared with the weak market conditions in the same period last year”.

But it warned that “the improvement in transaction activity in key markets may not continue throughout the coming months”.

Jeremy Helsby, group chief executive, said: “We have had a strong first half, particularly through the recovery of transaction markets in the UK and Asia Pacific, which are core to the group’s success. At the same time we have substantially reduced losses in the
continental European business and are seeing some improvement in the US market.
 
“Looking to the second half, factors such as the Chinese Government’s desire to contain overheating in the residential market, continued concerns over economic growth in many countries, and prolonged low levels of debt availability, indicate that the recovery is likely to flatten off during the coming months.”

UK residential fee income increased by 44% to £39.2m compared with £27.3m in the first six months of 2009.

Savills said this reflected “a very strong first quarter followed by a slightly subdued market around the General Election and subsequent Budget”.

The company added: “In 2009 the London market was characterised by shortage of supply and increasing, primarily equity financed, demand. Since the second quarter there has been greater market equilibrium as higher levels of supply have provided buyers with more options and less urgency to transact quickly.”

The City took note of the cautious outlook and the shares fell 18.5p (5.6%) to 311p, making Savills yesterday’s worst performer in the FTSE 250.