The increased rate of stamp duty levied at the top end of the market has taken its toll on Strutt & Parker’s bottom line, resulting in what the management team has deemed “a disappointing year”.
Not 12 months on from announcing “the best set of results that the firm has ever reported”, the venerable consultancy saw annual revenues to the end of April 2016 dip from £111.3m to £107.7m and operating profits tumble from £28.4m to £18.9m, as increased staff and other operating costs combined with well-documented headwinds.
Senior Partner Andy Martin blamed the decline in year-on-year trading – the first since he took the reins in 2009 – on the “continuance of political uncertainty” and “political actions that have changed the dynamics of the higher end of the residential market”. Turnover in the London resi division fell from £15.041m to £14.503m.
Acquisitions made during the 2015/2016 financial year included Home Counties-based estate agencies Roberts Newby (Gerrard’s Cross) and Edwards & Elliott (Ascot and Wentworth), and planning consultancy AKA Planning.
Andy Martin: “Whilst our revenues and operating profits remain strong, they are down on the previous year. We experienced a full year’s reflection of the increase in the top rate of SDLT to 12%, which had particular ramifications for the London market. We also saw the full impact of recent political events and fiscal decisions which have undoubtedly affected confidence in the markets we trade, including the introduction of SDLT for second home purchases and the announcement of the Referendum on our membership of the European Union. Whilst this vote was timed for June 2016, after our year end, it effectively hit trading in all of our transactional markets due to the further uncertainty this brought to the economic environment from the beginning of 2016.
“The addition of Roberts Newby to our ranks is part of our plan to increase our trading exposure in the prime areas of the Home Counties, and the acquisition of Buckinghamshire’s leading estate agent will be essential in achieving that. Similarly Edwards & Elliott has provided us with a team of experts well-placed to capitalise on the markets in and around Ascot and Wentworth. Growing our national development & planning team is a key part of our desire to grow and diversify. Two years ago we had 19 planners and now we have 36, representing one of the largest planning teams within a multi-disciplinary property adviser and AKA Planning is a key part of this strategy.
“The challenges we faced in 2015/16 have not dissipated as the UK economy faces continued uncertainty, despite the potential attractiveness of a significant fall in the value of sterling for foreign investors. This has increased our desire for greater diversity by growing our exposure to more repeatable professional and management lines. We have strengthened our ties with Christies International Real Estate and through them with Christies Auction House, continuing to build upon our relationships in Europe and the Far East.”
Here’s Martin’s strategic review statement in full…
For the first time since taking over as Senior Partner I am reporting a decline in year on year trading. This is as much to do with the continuance of the political uncertainty that I reported in my strategic review last year, as well as the result of political actions that have changed the dynamics of the higher end of the residential market, which is where our residential business is focused.
In summary, our revenues moved from £111.3m in the year ended 30 April 2015 to £107.7m in the year ended 30 April 2016. Acquisitions and expansion across all areas of the business resulted in increased staff and other operating costs, reducing operating profits from £28.4m to £18.9m.
This was a year in which we saw the full of the impact of recent political events and fiscal decisions and has undoubtedly affected confidence in the markets we trade in. Firstly, we experienced a full year’s reflection of the increase in the top rate of SDLT to 12%, which had particular ramifications for the London market. Thankfully the uncertainty around the General Election was removed early on in our trading year, but we were faced with another move affecting our residential trade with the increase in SDLT for second home purchases and the announcement of the Referendum on our membership of the European Union. Whilst this vote was timed for June 2016, after our year end, it effectively hit trading in all of our transactional markets due to the further uncertainty this brought to the economic environment from the beginning of 2016, remembering also that this came following a collapse in stock markets around the world in the latter half of 2015 reflecting concerns over China’s economic slowdown and a general fall in confidence in markets. As we have moved into the new financial year these trading uncertainties not only continue but we are still experiencing the overall impact of the vote to leave the European Union on our markets and the resulting change in leadership of our government.
The bright spots for us were another strong performance by our Commercial Business and another solid year from our Consultancy Business. This again has emphasised the benefits of our trading diversity but regrettably does not compensate for a slowdown in trading volumes in our traditional residential markets.
During the course of the year we continued with plans to increase our trading exposure to the prime areas of the Home Counties, firstly by buying Roberts Newby and welcoming Simon Roberts as a new Partner based in Gerrard’s Cross, and secondly the acquisition of Edwards & Elliott giving us exposure in the Ascot and Wentworth areas. I am particularly pleased with the way that the seamless integration of these businesses has been achieved by our teams.
We extended our senior presence in the Oxford market by welcoming Giles Lawton to the Partnership and in the Commercial area our aims to move into new and up and coming markets saw Richard Harris joining as a Partner to lead the growing activity in Alternative Investments,, This gives us new or added exposure to investment markets in the private rented sector, retirement homes and also hotels.
In our National Development and Planning Division, reinforcing our desire to grow and diversify, we promoted John McLarty as a Full Partner in Planning and acquired AKA Planning Limited, assimilating it into our Guildford Planning office. In the Consultancy Division, in a further expansion of our business, we promoted Richard White and Ross Houlden as Full Partners and shortly after the end of the financial year we concluded the acquisition of John Clegg & Co, welcoming Jon Lambert as a Full Partner and giving us exposure to Forestry through one of the UK’s leading firms. In support of our strengthening Retail market group within the Commercial Division we promoted Rob Williams to Full Partner in charge of Retail Agency.
As we move into a new financial year it is clear that the challenges we faced in 2015/16 have not dissipated as the UK economy faces continued uncertainty, despite the potential attractiveness of a significant fall in the value of sterling for foreign investors. This has increased our desire for greater diversity by growing our business away from transaction exposure to more repeatable professional and management lines and building upon the fantastic brand that Strutt & Parker has become. We have strengthened our ties with Christies International Real Estate and through them with Christies Auction House, continuing to build upon our relationships in Europe and the Far East. We have also promoted our new alliance with capital advisory partners, Bayhead Advisors.
Overall, a disappointing year but we are clear about our trading potential and the need to continue with the overall strategy that we have put in place within our new five-year plan. This has been a very active year for the management of the business and I should acknowledge and thank all of the partners, professional staff and support functions that continue to work so hard to deliver these results.