London, UK – Knight Frank LLP (“Knight Frank”), the leading independent global residential and commercial property consultancy, today announced its final results for the year ended 31 March 2011.
· Group turnover up 7% to £308.4m (2010: £288.0m)
· Group profit before tax up 10% to £101.9m (2010: £92.3m*)
· All regions profitable with particular strength in the UK and Asia Pacific
· Strong balance sheet with minimal intangible assets - net assets £125.1m (2010: £99.8m*)
· Net cash in bank £90.6m (2010: £74.0m)
· Unutilised £30m revolving credit facility
Nick Thomlinson, senior partner and chairman of the Knight Frank Group said:
Overview
“I am pleased to report continuing strong performance across the group with all regions delivering profits in variable trading conditions. In the UK, our residential business once again out-performed the market and our commercial division exploited the improved transactional activity. Our European business has traded profitably in difficult markets and we have continued to expand our operations in Asia Pacific, with strong performances in Australia, India, Greater China and Singapore. We remain focused on developing our global network with particular emphasis on progressing our relationships and businesses in the Middle East and Africa.
“Our global strategy remains focused on organic growth in key markets with the best people. This year we have opened offices in Dubai, South Africa, Austria and Switzerland and expanded our network in China, Australia, India and the UK.
“We remain cautious about the outlook for the year ahead, considering the ongoing economic uncertainty around the world, and have strengthened our balance sheet by retaining profits for investment in the business. We have fantastic people and our business is in good shape.
"Our staff are key to our growth and future success. In 2011 we significantly expanded our membership with the introduction of Salaried Members, a change that had universal support from our staff and Members. We hire the best people in key areas and provide training and development to ensure we continue to service our clients to the highest level. Our graduate scheme continues to thrive - this year we have taken on 26 new graduates across the commercial and residential divisions. Our people are the lifeblood of the organisation and I thank them for their continued hard work.
“We consider remaining independent and retaining our partnership culture to be central to our strategy. We continue to focus on global growth, expansion in core areas and growing our market share. We need to ensure that we remain a robust business with the best people who can provide the best level of service to our clients.”
Residential property market outlook
UK
The UK's main residential story in the 12 months to March 2011 was the strength of the prime central London market. Capital values across London rose by 9% and rents by 17% over the period, driving demand and pushing transactional activity back towards pre-crash levels. International buyers have had a noticeable prescence, with Knight Frank selling properties to more than 60 different nationalities in 2012-11.
Ongoing economic weakness has ensure that London's performance has not rippled out across the UK in the same way as was seen in previous cycles, although performance was boosted by strong country house sales volumes in the Home Counties.
Looking ahead, there are significant headwinds facing the UK residential market, with the regions furthest from London likely to be most affected by weaker economic performance and consumer confidence. The prime marlets in London and the regions should see healthier trading conditions, with equity-rich buyers aiding activity. London should see even further price growth over the next few months.
Europe
Outside the UK, prime markets in Europe have seen at least a partial recovery in activity, if not pricing over the past year. The key trend across the prime European markets has been for activity to be concentrated in the more established rather than emerging markets. Good examples on this include locations like Tuscany, southern France, Switzerland and Paris, which have all seen strengthening demand over the past 12 months - something we expect to continue into 2012.
Asia Pacific
Prices continue to rise in the Asia Pacific region, although policy intervention across China, Hong Kong and Singapore has contributed to a sharp decline in the rate of price growth in those markets. Whether this intiative will prevent the market from overheating will be a key concern in the coming year. But we remain positive that the market fundamentals - notably sustained demand - will ensure healthy trading conditions in 2012.
Commercial property market outlook
UK
The past twelve months have been a difficult time for the UK economy, with the on-going Eurozone crisis and signs that growth has slowed. Forecasts for UK GDP have been cut for this year and next, resulting in challenging market conditions for commercial property. This has been reflected in the industry benchmark index, IPD, which has seen capital growth slide almost to a halt, with offices compensating for the more embattled retail and industrial sectors. Within these three main property sectors there is a distinct regional bias towards London and the South East. There is also a quality bias towards prime and, in some markets, good quality secondary.
Europe
The uncertainties surrounding the European economic outlook have adversely affected occupier and investor confidence. Office rental growth in the first half of 2011 was generally restricted to markets in the most strongly performing economies, including Stockholm, Moscow and the German cities. Prime rents are likely to show little movement over the rest of the year, although some growth may result from tightening supply levels in certain locations, as the availability of city centre space is falling in markets such as Paris and Frankfurt.
For Europe as a whole, investment volumes in the first half of 2011 were up on the same period last year, though activity eased in a number of peripheral markets. Increased investor interest has been observed in Germany, the Nordic region and Central Europe. With investors remaining cautious, a continued polarisation between the performance of prime and secondary property markets is likely, with demand remaining largely focused on well-let prime assets in markets perceived to have strong economic fundamentals.
Asia-Pacific
Asia continues to be the fastest growing region of the global economy and robust demand for commercial space was maintained in most markets in the first half of 2011. Significant rental increases were recorded in major cities including Singapore, Shanghai and, most notably, Hong Kong, where Grade A office rents have risen by more than 50% since the middle of 2009. However, the expected recovery in the Japanese market was delayed in the aftermath of the Fukushima earthquake and office rents in Tokyo remain under downward pressure.
Overall, Asia-Pacific commercial investment volumes in the first half of 2011 were up moderately on the previous year, largely driven by increased activity in Australia and China. There was evidence of greater numbers of North American and European investors being active in the region but global economic uncertainties may cause investors to act cautiously over the coming months.
United States
Despite a loss of momentum in the US economy, commercial property markets have made a gradual recovery during 2011, with improved leasing activity causing office vacancy rates to edge downwards and rents to rise moderately in many major markets. Occupier demand has been strongest in global gateway cities and technology markets such as New York, Washington and San Francisco. Investment volumes in 2011 have been well up on 2010, although activity is expected to slow in the second half of the year.
Middle East & Africa
The civil unrest seen in parts of the Middle East and North Africa has led to uncertainty in a number of the region’s property markets, causing occupiers and investors to concentrate their activities in countries perceived as relatively safe havens, such as the UAE. Many Middle Eastern markets currently have an oversupply of office space, as building projects started prior to the market downturn are completed. Vacancy rates in Dubai and Abu Dhabi are likely to remain high for some time, enabling occupiers to upgrade to newer offices with landlords offering competitive rents.
The economies of sub-Saharan Africa are generally growing at a healthy pace, aided by robust levels of foreign direct investment, with Chinese investors being particularly active. Other than South Africa, commercial property markets remain largely underdeveloped, though new opportunities for investment are emerging. Kenya is developing as a location for IT outsourcing and call centre operations and infrastructure upgrades in Lagos, Nigeria, are helping to open up new parts of the city as viable office locations.
Corporate responsibility
"We encourage our people to take two days off a year to participate in corporate social responsibility in local communities. This year Knight Frank employees participated in Give and Gain days across London. We will continue to take part in these days and are committed to giving back to the different local communities where our business is based.
“LandAid continues to be our charity of choice and we will also continue to support the endeavours of our employees on their individual and personal charity adventures.”
Consolidated Profit and Loss Account
|
2011 |
2010* |
|
£M |
£M |
|
|
|
Turnover |
308.4 |
288.0 |
|
|
|
Operating profit |
97.9 |
91.1 |
|
|
|
Share of operating profits of associated undertakings |
2.0 |
1.5 |
|
|
|
Profit before interest and taxation |
99.9 |
92.6 |
|
|
|
Interest receivable and similar income |
2.5 |
0.8 |
Interest payable and similar charges |
(0.5) |
(1.1) |
|
|
|
Profit on ordinary activities before taxation |
101.9 |
92.3 |
Tax on profit on ordinary activities |
(4.5) |
(3.1) |
|
|
|
Profit before members’ remuneration and profit shares |
97.4 |
89.2 |
|
|
|
Members’ remuneration charged as an expense |
(24.2) |
(21.2) |
Minority interest – equity |
(0.5) |
(0.5) |
|
|
|
Profit available for discretionary division among members |
72.7 |
67.5 |
Consolidated Balance Sheet
|
2011 |
2010* |
|
£M |
£M |
Fixed assets |
|
|
Intangible assets |
1.9 |
3.7 |
Other fixed assets |
17.2 |
16.2 |
|
|
|
Current assets |
|
|
Cash at bank and in hand |
91.7 |
76.8 |
Other net current assets |
40.3 |
28.3 |
|
|
|
Net current assets |
124.0 |
105.1 |
|
|
|
Creditors: amounts falling due after more than one year |
(1.3) |
(2.7) |
|
|
|
Provisions for liabilities and charges |
(9.6) |
(7.0) |
|
|
|
Net assets excluding pension liabilities |
132.2 |
115.3 |
|
|
|
Pension liabilities |
(7.1) |
(15.5) |
|
|
|
Net assets |
125.1 |
99.8 |
*Under UK Accounting Standards the treatment and presentation of members' and non-members' remuneration differ significantly. Knight Frank expanded its membership in 2011. For comparability the results for 2010 have been adjusted to be fully consistent with the results for 2011.
For further information, please contact:
Nick Thomlinson
|
Senior partner and chairman, Knight Frank
|
+44 (0) 20 7861 1001
+44(0)7767 222 575
|
Alice Mitchell
|
Commercial PR manager, Knight Frank |
+44 (0)20 7861 5168
+44 (0)7827 239 258
|
Notes to Editors
Knight Frank LLP is the leading independent global property consultancy. Headquartered in London, Knight Frank and its New York-based global partner, Newmark Knight Frank, operate from 209 offices, in 43 countries, across six continents. More than 6,840 professionals handle in excess of US$755 billion (£521 billion) worth of commercial, agricultural and residential real estate annually, advising clients ranging from individual owners and buyers to major developers, investors and corporate tenants. For further information about the Company, please visit
www.knightfrank.com.