Member Article

Knight Frank reports strong profits and record turnover

Alistair Elliott, senior partner & group chairman of Knight Frank, which has Yorkshire offices in Leeds, Sheffield and Harrogate, commented: “I am pleased to report another set of strong results which pay testament to our unique partnership model.

“ Whilst profit levels are constrained, they are nonetheless very encouraging given the significant investment we have made in people during the year and the relative weakening of certain markets during our fourth quarter.

“ Our focus on strategic recruitment of outstanding people in key locations is paying dividends, demonstrated by our growth in market share and our ability to complete market-leading deals. With no debt and strong profits every year, we are in robust shape to continue the development of our business and address the future cycles. Our focus on profit delivery will continue.“

Results for the year ended 31 March 2016: • Group turnover up 4.0% to £460.9m (2015: £443.1m) • Group profit before tax down 4.7% to £152.6m (2015: £160.1m) • Strong balance sheet with net assets at £223.7m (2015: £210.8m)

“In the UK we had a second successive record year in the regional commercial markets, launched our 30th residential office in London and delivered particularly impressive performances from our specialist sector teams, residential lettings and our investment management arm, Knight Frank Investment Management, which now has more than £1bn under management.

“Across our group we have seen double digit growth in India, Greater China, the Middle East and Africa and have made great progress in strategic recruitment, notably in Berlin, London, Paris, Hong Kong, Shanghai, Singapore and Sydney. We’ve also significantly grown our capital markets capabilities within NGKF in the US to comprise a leading team of more than 345 people across the states. “While the EU referendum result clearly contributed to a downturn in pricing, sentiment and activity volumes, our experience confirms it is important not to overstate this impact.

“In the prime UK residential sales market (£750k+), there has been a 20% fall in the number of exchanges since the referendum compared with the same period last year. Despite this weakness in sales, the number of offers being made on properties is only 6% lower and the number of offers being accepted by vendors is actually 5% higher than a year earlier.

“On the demand side, the volume of prospective residential buyers registering in the prime market through July and August this year has been consistently higher than in 2015. We expect this rise to feed through to an improvement in sales volumes in the final calendar quarter of this year.

“However, we don’t expect annualised growth as the higher stamp duty rates on prime residential property introduced last year and the additional rate of stamp duty on second homes and investment properties introduced in April have reduced liquidity in the market below the levels we saw prior to 2015.

“In the UK commercial property market, the immediate aftermath of the EU referendum led to concerns that drove a sharp adjustment in REIT prices and the suspension of trading in a number of daily-priced retail funds. However, this initial financial market reaction corrected quickly, with REITs reversing much of their falls and retail funds working through strategies to re-open.

“This shock to the investment market should be considered in the context of industry trends already in motion in the first half of 2016 which had already seen a slowing of investment volumes following a record year in 2015. Pricing was also already softening in many markets as is consistent with the late phase of the cycle.

“Whilst a few transactions were aborted because of the EU referendum, many continued, albeit at a slower pace, as investors took time to assess the changing economic environment. In July and August Knight Frank was involved in completing transactions that had an aggregate value 47% lower than for the same two-month period in 2015. This is consistent with the wider market for the first half of the year, with 2016 volumes 45% lower than prior year,” said Mr Elliott.

This was posted in Bdaily's Members' News section by Robert Beaumont .