Estate agency Savills (LSE: SVS) edged further away from recent record highs on Wednesday after the release of full-year trading numbers.
The company announced that group revenue skipped 13% higher during 2016, to £1.45bn, a result that helped pre-tax profit rise 1% to £99.8m.
Chief executive Jeremy Helsby commented that “we entered 2017 with a continuation of global macro-economic concerns, rising bond yields, uncertainty over the impact of Brexit negotiations in the UK and Continental Europe and a new administration in the US.”
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Reassuringly he added that Savills has “started the year well and our expectations for the full year remain unchanged.” But I’m not so upbeat on its prospects. Brexit-related tensions will rise in the months ahead and I believe the agency may come under pressure as homeowners become increasingly reluctant to put their properties on the market.
And more specifically, Savills may also be struck by extra cooling in the hothouse London homes market.
A steady record of double-digit earnings growth has seen Savills emerge as a strong growth dividend bet over many years. But with the bottom line anticipated to slow markedly looking ahead — expansion of just 1% is pencilled-in for 2017, for instance — I reckon shareholder rewards could also come under pressure.
A dividend of 29p for last year is anticipated by the number crunchers to advance to 29.7p in 2017, yielding 3.4%. But in my opinion, the possibility of pressure mounting on the listings market this year and beyond puts Savills’ progressive dividend policy on uncertain footing.
Tune out
I am also less than convinced by the earnings outlook over at Dixons Carphone (LSE: DC) as retail conditions look set to become ever more tough.
The toll of Brexit continues to cast a pall over the high street, heavy sterling weakness since June’s referendum steadily pushing up prices for UK consumers. The latest CPI survey showed inflation hitting a three-and-a-half-year high of 2.3% in February, up from 1.8% the prior month and sailing above broker forecasts.
Retail activity is already on the back foot, latest British Retail Consortium numbers showing non-food sales in Britain falling 0.4% in the three months to February. This is the first such quarterly fall since November 2011, and bodes particularly badly for Dixons Carphone and its high-priced gadgets.
The City expects the retailer to generate earnings growth of 6% and 4% in the periods to April 2017 and 2018 respectively, and thus keep its progressive dividend policy in business. Indeed, payouts of 10.7p and 11.2p per share are pencilled-in for this year and next, up from 9.75p in fiscal 2016 for figures that yield 3.5% and 3.7%.
However, I reckon payouts could come under significant pressure from next year onwards should, as is quite possible, Dixons Carphone’s revenues head significantly lower. I reckon cautious investors should give the company a miss at the present time.
