Estate agents are among the least popular professionals (or so opinion pollsters — the 12th least popular — claim). They know that sense of dread when someone at a cocktail party says: “Hi, I’m Simon. Excuse the beard — there’s no time to shave when you’re setting up a hospital for orphaned puppies in a war zone. What do you do for a living?”
However, the professional embarrassment should be a lot less excruciating if you work for Savills.
On Wednesday, the upmarket property group’s results showed how unlike a UK estate agent it has become.
Nowadays, 54 per cent of its £1.4bn revenues are not from selling delightfully-presented and much sought-after property, but from managing, consulting on, and investing in it. And some 60 per cent of those revenues now come from Asia, Europe and the US. So awkward cocktail party introductions should be much less of a problem — certainly for Savills’ German, Italian and Singaporean investment managers, Roland Döhn, Giuseppe Oriani and Volker Wanka.
For shareholders, too, diversification can avoid uncomfortable moments. Revenues classified by Savills as “less transactional” — ie not from selling or letting property — now exceed the group’s total revenues in pre-crisis 2007, including estate agency.
Margins differ considerably across these less transactional operations, but all are growing their profits.
Property management — maintaining buildings from London to Beijing — now accounts for one-third of group revenues, after a 21 per cent annual rise in sales to £473m. So although the underlying profit margin dipped a little to 5 per cent, underlying pre-tax profit still rose to £23.6m.
But it is the relatively stable nature of the business, which is awarded on long-term contracts, that investors may welcome. It is these less transactional activities on which the ordinary dividend, which was increased by 21 per cent, is based. Savills’ supplemental dividend, which rose 4 per cent, is based on property transactions.
Consultancy — providing valuations and other services to owners — is now 16 per cent of revenues, but contributes more profit than property management thanks to a near 11 per cent margin.
Investment management, meanwhile, delivers 5 per cent but is growing via acquisitions, and achieves consistent margins of 25 per cent.
None of this changes the fact that Savills still relies on the health of a pre-Brexit UK property market for 53 per cent of its pre-tax profit — which the company acknowledges as a risk factor in its cautious 2017 outlook. Nor the fact that it still employs lots of estate agents, some of whom you may be pleased to encounter at parties.
But it should perhaps change the fact that Savills’ shares trade on 13 times 2017 earnings, when those earnings already contain deferred 2016 sales and its global peers’ shares trade on 14.5 times.
Redrow re-read
Redrow’s Unscheduled Trading Update: a new translation from The Lombard University Press.
“Redrow is pleased to announce that its trading and performance continues to be robust, as a consequence of a record order book and a further increase in legal completions.”
Redrow is pleased to pounce upon any excuse to remind shareholders in Bovis — Hello! Hello! Bovis shareholders! Can you hear us? — that we still want to buy your company, and could clearly bid a bit higher than the small discount to the undisturbed market price we offered last time. And look: we’ve flogged a few more houses — aren’t we strong?
“The board is confident that Redrow is on track to deliver at least £306m profit before tax for the financial year.”
The board is confident that if we put an exact figure on it — which we would never normally do in a trading update — we can claim “materiality” as a reason for sending this out via the stock exchange.
“As required by Rule 28.1(a) of the City Code on Takeovers and Mergers, PwC, as reporting accountants to Redrow, and Barclays, as financial adviser to Redrow, have each provided the reports required under that Rule”.
As is probably not required, we just thought we’d remind you that we really do want to talk about a takeover.
“Enquiries: Redrow plc +44 (0) 1244 527 411”
You will be hearing from us soon. Or why not call us? We’re still here.
Pompey circumstance
News that former Disney chief executive Michael Eisner is in talks to buy Portsmouth Football Club brings the prospect of big investment in the fourth-tier outfit. But it also raises two questions. Does Mr Eisner realise the would-be sellers are the Pompey Supporters’ Trust — ie, the supposed fans? And does the man who currently dresses up as match-day mascot Nelson the Dog realise Mr Eisner’s big box office hit was The Little Mermaid?