14 March 2024 , 12:56
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Savills Estate agency has seen a drop in profits due to a quiet global property market and the costs of restructuring the business.
The company said that higher interest rates and world events have led to the lowest levels of sales in property markets for ten years. It reported a 64% fall in pre-tax profits, from £153.9 million in 2022 to £55.4 million in 2023.
This decline was made worse by one-off restructuring costs of £13.9 million, as it reorganised parts of the business which it said were likely to take longer to recover. This is thought to have been mainly in Germany and parts of continental Europe.
On an underlying basis, which takes out one-off costs, pre-tax profits fell by 42% from £164.6 million in 2022 to £94.8 million in 2023. This was mainly driven by a 19% fall in global residential sales year-on-year.
It comes at a time when there has been a well-reported slowdown in the property market over the past year, helped by higher interest rates which have pushed up the cost of borrowing, and a post-pandemic slowdown in house buying. Sales were also affected by more unstable economic conditions and uncertainties over the future role of offices leading to delays in major leasing decisions.
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But Savills said it benefited from growth within other parts of the business which are less sales-driven. Savills' consultancy and property management divisions saw a year-on-year increase in revenues of 4% and 11% respectively.
The group's CEO, Mark Ridley, commented: "Savills' resilient performance in 2023 highlights the diversity and strength of our global business. In the context of extremely challenging real estate markets, which saw the lowest levels of transaction volumes for a decade, our less transactional businesses have provided a solid platform for the group with a resilient and growing earnings stream."
Ridley also noted: "Current economic and geopolitical conditions remain uncertain and although we expect this to continue for some time, most markets appear to be past the moment of peak uncertainty. There are some early signs of underlying market improvements, which should set the course for a broader recovery during the second half of the year and into 2025."