Savills (LON:SVS) shares retreated on Thursday after the high-end real estate agency blamed a slump in first-half profit on continued tough market conditions and increased investment as it warned that Brexit-related uncertainty would continue to impact the UK property market.
The real estate service provider posted an underlying profit before tax of £42.4mln for the six months to the end of June - down 12% - on revenues 2% higher at £727.8mln. The group nudged the interim divided up 3% to 4.8p per share and said its expectations for the year remained unchanged.
The property group said its residential transaction divisions in the UK delivered revenue growth of 6%, while its new development sales revenue increased 17%. The growth in average transaction value was 9%, it said.
On the commercial side, Savills said it had seen an influx of non-domestic investors in London's office market during the period with transactions worth £9bln going through in the first half, 71%of which were to non-domestic investors.
During the period Savills completed the acquisition of Cluttons Middle East, providing the group with a strategic platform for growth in this region. In addition, in the UK it enhanced its property management platform with the acquisition of the third party property management portfolio of 'Broadgate Estates' from British Land.
UK house prices hit a record high in July but the market remains “soft”, mortgage provider Halifax said earlier this week.
Shares in Savills were 2.8% down at 839.50p in early trade.
"The business typically generates some 65-70% of its pretax profit in the second half. To meet our FY18E number (2018 pretax profit of £146mln), Savills needs to generate 71% of profits in the second half of 2018," Peel Hunt analysts said in a note to clients, adding that it was reluctant to alter Savills' forecasts given the business is so second half weighted.
Jeremy Helsby, Savills' Group CEO said in the results statement that the company's performance had been "resilient", reflecting its geographic diversity, breadth of operations, recent business investment activity and the strength of its UK residential business.
“In line with our overall growth strategy, we have continued to invest across the business, which has affected profits in the short term. We have a robust pipeline of activity for the second half, despite an environment of escalating political and economic uncertainty, and we continue to anticipate that our performance for the full year will be in line with the Board's expectations," said Helsby.
-- Updates share price, adds analyst comment --