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Why Savills has been tarred with the wrong brush

Savills is not a pure estate agent, but its shares have been clobbered all the same
March 11, 2016

Savills (SVS) delivered record profits in 2014 and 2015, yet over the past seven months the share price has fallen by a third, as estate agents have taken a pounding. The only flaw here is that turnover from UK residential transactions makes up less than 10 per cent of group turnover, and underlying profits for 2015 in this part of the business were down just £1.9m from the previous year.

IC TIP: Buy at 679p

In fact, Savills' diverse revenue stream performed strongly enough to lift underlying profits by a fifth to £121.4m. In the UK, revenue from commercial transactions grew by 17 per cent to £98.8m, underpinned by strong occupier demand, limited supply and rising rents. A solid performance in Hong Kong helped to lift revenue in the Asia-Pacific commercial division by 16 per cent to £112m.

In the US, the Savills Studley platform was boosted by three bolt-on acquisitions, which helped to lift underlying profits by more than half to £18.8m. In the UK, there was also plenty of consultancy work, and underlying profits rose by 12 per cent to £21.8m.

Analysts at Numis Securities have upgraded their forecasts and expect adjusted pre-tax profits of £124m and EPS of 65.3p for 2016, from £121.4m and 63.2p last year.

SAVILLS (SVS)
ORD PRICE:679pMARKET VALUE:£936m
TOUCH:677-680.5p12-MONTH HIGH:991pLOW: 651p
DIVIDEND YIELD:1.8%PE RATIO:14
NET ASSET VALUE:264p**NET CASH:£151m

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20110.7240.021.513.5
20120.8152.029.410*
20130.9070.139.810.5*
20141.0884.746.811*
20151.2898.647.012*
% change+19+16+0+9

Ex-div: 14 Apr

Payment: 16 May

*Excluding special dividends of 6p in 2012, 8.5p in 2013, 12p in 2014 and 14p in 2015. **Including intangible assets of £295m, or 214p a share.