Savills plc, the global real estate advisor, publishes the following trading statement in respect of the year ended 31 December 2021.
Since the trading update on 9th November 2021, the Group has experienced an extraordinarily strong final trading period, particularly in the UK and Asia Pacific regions alongside improved performances in Continental Europe and the Middle East (“CEME”) and North America; both of which have more than eliminated the losses of 2020. All Savills businesses have exceeded their forecasts notwithstanding the impact of renewed pandemic-related restrictions in many locations. In particular, commercial capital transactions and Prime Residential Agency experienced much stronger completion volumes than previously anticipated. Our Less Transactional businesses have also outperformed their previous expectations.
In addition, as previously disclosed, the Group has benefited from substantially lower levels of discretionary expenditure in respect of travel, entertaining and marketing events in particular. These are expected to revert to more normal levels over the course of 2022.
As a result of this strong trading performance coupled with the benefit of abnormally low levels of discretionary expenditure, the Group expects Underlying Profit Before Tax (“UPBT”) for 2021 to be very significantly ahead of the upper end of its previous range of expectations.
Despite the backdrop of pandemic–related uncertainty in 2021, the UK performed exceptionally well across all business lines. There were notably strong performances from the Transactional Business lines, albeit Commercial office leasing volumes remained below historic averages in the majority of markets. Savills’ strengths in both logistics and retail warehousing, both of which enjoyed significant volume increases year-on-year, also contributed to our overall outperformance. The UK prime residential market continued to perform exceptionally strongly through the last quarter and volumes in the Prime Central London market clearly began to improve. Currently there is a definite shortage of sale stock, so despite outperformance in 2021, our expectation of a moderation of activity in 2022 remains intact.
Our commercial investment activities benefited from significant increases in trading volumes, indeed the last quarter of 2021 saw volumes in EMEA exceed the five year average. This was partly due to an unwinding of pandemic driven delays as capital, which would ordinarily have been invested earlier, but for pandemic-related uncertainty, was increasingly deployed through 2021.
Our Asia Pacific business as a whole performed well ahead of our expectations. Hong Kong sales activity and market share remained strong through the period and Australia, Singapore and Japan also enjoyed strong trading activity in the final quarter.
Savills Investment Management outperformed its expectations with the benefit of the acquisition of DRC Capital from the end of May in strong markets for real estate debt investment, together with new fund launches and strong investment performance from the majority of our products. The latter in particular gave rise to higher than anticipated performance fees in the final quarter.
Looking to the year ahead, the Group’s previous expectations remain unchanged at this early stage. Inflationary pressures in many markets will result in employment costs increasing at the highest rate for many years and we anticipate that discretionary costs will progressively normalise. In respect of trading revenues, at this stage, we anticipate some normalisation of commercial capital transaction volumes and a moderation of levels of activity in some residential markets, particularly in the UK.
Savills intends to report 2021 full year results on 10 March 2022.
Forward looking statements
Certain statements in this announcement are forward-looking statements relating to the Group’s operations, performance and financial position based on current expectations of, and assumptions and forecasts made by, management. They are subject to a number of risks, uncertainties and other factors which could cause actual results, performance or achievements of the Group to differ materially from any outcomes or results expressed or implied by such forward-looking statements. The Group’s principal risks are described in the 2020 Savills plc Annual Report which can be viewed online at https://www.savills.com. Such forward looking statements should therefore be construed in light of such risks, uncertainties and other factors and undue reliance should not be placed on them. They are made only as of the date of this announcement and no representation, assurance, guarantee or warranty is given in relation to them including as to their accuracy, completeness, or the basis on which they are made. No obligation is accepted to publicly revise or update these forward-looking statements or adjust them as a result of new information or for future events or developments, except to the extent legally required. Nothing in this Statement should be construed as a profit forecast.