Savills sees recovery signs in commercial real estate
- Transaction advisory revenues lead the decline in sales
- Recovery of dividend at 17p per share
A more robust performance from SavillsThe Real Estate and Facility Management (SVS) business helped mitigate the impact of falling investment activity in global real estate markets over the past year, resulting in pre-tax profits that were above market consensus.
The company was the only segment to see sales growth of 2 percent over the past year, led by order wins in the UK. This was offset by declines in transaction advisory, with the former showing a drop in sales of almost a fifth.
The sharpest decline in transaction advisory revenues was recorded in North America, as corporate users were reluctant to rent new space. It was followed by the Asia-Pacific region, which has limited investment in cross-border travel-dependent markets such as Australia and Singapore. Business in the UK has been more resilient as the market share increased.
Real estate investment markets have improved somewhat in London, said managing director Mark Ridley. That recovery in demand will be limited by the ability of overseas buyers to travel, he said. However, he added, “Those with boots on the ground in Britain got it.” This includes US investors and private equity groups.
Savills has benefited from diversifying its revenue by geography and business area against exceptional disruptions. The stock is trading at 17 times projected earnings for the next 12 months, above the five-year average, which appears to be a fair measure of the group’s outperformance against the broader post-pandemic market. Stop.
Last IC view: Hold, 914p, March 12, 2020
| SAVILLS (SVS) | ||||
| ORDER PRICE: | 1,100p | MARKET VALUE: | £ 1.57bn | |
| TOUCH: | 1,099-1,101p | 12 MONTHS HIGH: | 1,193p | LOW: 620p |
| DIVIDEND RESULT: | 1.5% | RELATIONSHIP: | 22nd | |
| NET ASSET VALUE: | 406p * | NET DEBT: | 22% | |
| Year ended December 31 | Revenue (£ billion) | Profit before tax (£ m) | Earnings per share (p) | Dividend per share (p) ** |
| 2016 | 1.45 | 100 | 48.8 | 14.5 |
| 2017 | 1.60 | 112 | 58.8 | 15.1 |
| 2018 | 1.76 | 109 | 56.2 | 15.6 |
| 2019 | 1.91 | 116 | 60.6 | 4.95 |
| 2020 | 1.74 | 83.2 | 49.0 | 17th |
| % Change | -9 | -28 | -19 | +243 |
| Ex-Div: | 8 Apr | |||
| Payment: | May 18 | |||
| * Includes intangible assets of £ 429 million or 300 pence per share. ** Excluding special dividend of 15.6 pence in 2018. | ||||