Savills doubles losses on European business as revenue shrinks further

UK-listed property adviser Savills booked underlying losses of £8.8 mln in 2011 (2010: £4.3 mln loss) on its European transaction business after revenue from its Continental European commercial unit contracted by 14% to £26 mln in 2011 from £30.2 mln the year before. After two years of restructuring, Savills made further cuts in Italy, Spain and the Netherlands last year, giving rise to a small restructuring charge and impairment provision.

Overall, Savills lifted net profit by 9% to £40 mln (EUR 48 mln) last year as revenues rose 7% to £721 mln, largely thanks to strong international demand in Savills' core high-end residential business in London. The residential business recorded an 11% increase in revenues to £14.8 mln.

Savills said its European business had been hit by negative sentiment in most markets in the second half of 2011. In France, transaction advisory revenue was up year-on-year, boosted by significant investment in the firm's leasing resources. Germany and Ireland were relatively flat in comparison to 2010 while other regions saw declines of between 10% and 50%.

In the fourth quarter Germany’s performance, which had been strong in the first half, declined as a result of economic uncertainty and the fact that the German banks reduced lending to the sector.

By contrast, Savills' US and Chinese businesses and its fund management arm Cordea Savills performed well over the year. Cordea Savills recorded 38% profit growth.

China propelled Savills' business in Asia. Profits in mainland China, excluding Hong Kong increased by 43% to £7.3 mln from £5.1mln in 2010. 'In Asia, we expect a somewhat reduced volume of transactions but the impact of this should be largely mitigated by further growth in China and in our non-transactional businesses across the region,' group CEO Jeremy Helsby said.