Savills allays rate hike concerns as profit surges 54% (UK)

Savills plc, the up-market real estate agency, delivered a sharp jump in first half profit as property markets recovered strongly after being hit the year before by the war in Iraq, and the company sought to allay fears that recent rises in UK interest rates could hurt business.

Savills posted pretax profits for the six months to June 30 up 54 pct to 15.1 mln stg on sales up 22 pct to 140.3 mln.

House broker ABN Amro had forecast pretax profit of 15.5 mln stg.

'2003 was quite a difficult half-year because of all the problems there were then -- Iraq, SARS and everything else and we´ve seen a very strong bounce back,' chief executive Aubrey Adams told AFX News.

He said conditions had improved across the markets in which Savills operates.

Adams went on to say that the recent series of interest rate rises in the UK -- where Savills makes around three-quarters of its profit -- was not expected to have much impact on business, with demand for exclusive properties likely to prove resilient.

'We think there´s been a bit of slowing up in the market but it´s certainly not a crash,' he said, adding that turnover had been considerably higher than the same period last year.

Savills did admit though that demand from buy-to-let investors, who were taking a more cautious view as interest rates moved up, had dropped off.

The company said leasing markets in London and the south east of England had started to pick up, with demand increasing as a result of a more optimistic outlook from corporate tenants, while regional UK markets remained 'resilient'.

It added that demand for property from institutional investors and overseas buyers remains strong, as does demand for retail warehouses where Savills is a market leader.

Savills went on to report that the Hong Kong property market -- it earns a further 18 pct of profit in Asia -- had performed 'exceptionally well' in the first half, contrasting the poor performance of last year when the business was badly affected by the SARS outbreak.

Adams said the company is aiming to expand its operations in continental Europe, where it confines its activities to the commercial property market, after the business swung back into profit in the first half.

The group hiked its interim dividend 67 pct to 6.0 pence per share.
Source: Freeman

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