Savills H1 Earnings Call Highlights

Savills delivered strong first-half growth: Revenue rose 8.7% to more than £1.2 billion, underlying EBITDA increased 32% to nearly £74 million, and underlying profit before tax climbed 47% to £34.3 million. The company raised its interim dividend 5.4% to 7.8 pence per share. Transaction activity and recurring businesses both improved: Commercial transaction revenue increased 19%, while less transactional revenue rose 6% to £776 million and generated a 28% increase in profit. U.K. market-share gains and cost-saving measures supported margins despite uneven regional conditions. The Eastdil Secured acquisition expands Savills’ U.S. presence: Completed on July 31, the deal is expected to significantly increase earnings, although refinancing and integration costs remain. Savills maintained its full-year outlook, citing strong pipelines and resilience from its less transactional operations.

Savills reported higher first-half revenue and profit as improving transaction markets, market-share gains and cost-saving measures supported earnings, while the property advisory group completed its acquisition of Eastdil Secured at the end of July. Group CFO Nick Sanderson said revenue rose 8.7% to more than £1.2 billion, driven predominantly by organic growth. Underlying EBITDA increased 32% to almost £74 million, while underlying profit before tax climbed 47% to £34.3 million, or nearly 49% on a constant-currency basis. Underlying earnings per share were stated at £0.179, and the company raised its interim dividend 5.4% to 7.8 pence per share. Sanderson said the dividend increase remained consistent with Savills’ policy of progressively growing the ordinary dividend, supported by less transactional earnings and supplemental distributions.

Management said the performance came despite uneven market conditions across the regions in which Savills operates. Global investment-market volumes rose 18% in the first half, with the U.S. market accounting for much of the recovery after growing 24%. However, Savills had “next to no exposure” to the U.S. capital-transactions market before the Eastdil deal, Simon said. Commercial transaction revenue rose 19%, including a 22% increase in capital-transactions revenue. In the U.K., capital-transactions revenue increased 17% even as market volumes declined 12%, which management attributed to market-share gains. The company also cited improving activity in Australia and a more positive market backdrop in Greater China, albeit from a low base. Occupier advisory revenue increased 23%, led by North American leasing. Sanderson said larger office leasing deals increased in the U.S. and that pipelines for the second half were strong across office and industrial properties.

Residential revenue rose 3% overall, although U.K. residential revenue declined 9%. Sanderson attributed the decline principally to a one-time negative income-recognition effect tied to the U.K. Renters’ Rights Act. On a like-for-like basis, he said the U.K. residential leasing business grew. Management said secondary residential sales rose 2%, supported by market-share gains in transactions above £5 million. Middle East revenue rose 34%, reflecting a strong first quarter, though escalating conflict constrained new-development sales from the second quarter. Simon said the company had not seen evidence of expatriate repatriation from the region.

Less transactional revenue increased 6% to £776 million, representing 63% of total group revenue. Management described these operations, including property and facilities management, consulting and investment management, as an important sourc...