Alistair Elliott, senior partner and group chairman commented: “Set against the backdrop of the Covid-19 pandemic, which continues to cause global economic uncertainty and market hesitation, we are pleased with this strong set of results demonstrating the firm’s ongoing resilience. We have stayed focussed on the two critically important components of our business: our people and our clients. We are incredibly proud of our people who have adapted to the new working environments, designed to ensure the safety and well-being of them and their families. We have continued to provide support, advice and world-class research to our broad range of clients in these fast moving times.
“Our turnover shows a 6% growth on the prior year, with solid growth of our activities in India, Greater China, Spain and France as we continue to enhance our global platform. This is supported by the continued upward trend of our core UK market presence. Hesitation, due to Covid-19, in the final part of the year resulted in a slight drop in profits with a number of transactions deferring into the following year. Despite the earlier restrictions regarding Covid-19, our performance in Asia Pacific remained resilient and we saw improved margins in Europe. Overall most markets performed well. The partnership remains resolute in its plans to continue to invest in the people and markets where we can best service our clients. This well diversified income stream backed by a strong balance sheet gives us the perfect platform to progress from.
“Our connected global platform, extensive range of services and consultancy advice have proven invaluable. As the pandemic has reached markets around the world in varying strengths and at different times, through close collaboration, we have learnt from each other and taken decisions to protect the long-term future of the firm. Our partnership model means we are able to provide careful and considered advice to clients as they look to navigate these challenging market conditions. We are committed to retaining our independence by ensuring that ownership remains with the people who work in the business. Continuing to trade debt free is an absolute priority.”
This year – the markets
“It is extremely difficult to generalise, given all of the circumstances and the impact the real estate sector is experiencing. However, we are trading ahead of expectations at the half year point and, from our perspective, areas such as lease advisory, valuations, property management and most consultancy services have held up extremely well with some producing really strong performances.
“Whilst believing in the intrinsic and long-term value of the workplace, we are working closely with occupiers and landlords to establish how work environments might best adapt for the future needs. Logistics is maintaining its strength. The retail industry continues to be restructured, food and beverage likewise. Most alternative sectors, especially the private rented sector, supported by strong demographics and changing patterns of consumption are holding up well and present opportunities for the medium to long-term.
“For residential, a key strength of Knight Frank, since we have been able to reopen our offices and properly re-engage with our clients and customers, activity has picked up considerably. The last quarter was especially busy for the UK’s country market, even in comparison with previous years. It is a heartening reminder that our breadth gives us greater resilience.”
Priorities for growth
“The Knight Frank Group has more than 20,000 people (up 5%) across nearly 488 owned and associated offices in 57 territories with a combined annual turnover in excess of £2.6bn. We are focused on a number of key growth areas to drive the business forward. We have diversified across our residential, commercial and consultancy businesses and have sharpened our focus on ESG. We are working with the Carbon Trust on our firm-wide net zero strategy and will shortly be setting clear target dates for the achievement of net zero, in accordance with the Science Based Targets Initiative (SBTI). This is a critical adaptation of our own business model whilst also ensuring that we can advise our clients on the challenges and opportunities. We continue to place strong strategic focus on our logistics, senior living, healthcare and automotive teams, and Knight Frank Finance.
“We have continued, even in these more uncertain times, to ensure we have the best skills in our business. In the UK, we hired Kathi Leon as group head of internal communications, Stephen Beard, as head of data centres, to implement a global strategy in this key area, and Stuart Baillie, supported by a team of 12 to relaunch our planning offering. Across our network, we have hired Sarah Cervinka to head our Munich office and Katherine Lu as managing director of Beijing. At the group executive board level, along with the planned changes announced last year – Tim Hyatt has taken over the residential business and Matt Tweedie joined the firm as group finance director – we have appointed Alexandra Innes as a non-executive advisor. The newly shaped board has been working incredibly closely to manage the short-term challenges as well as ensure we stay focussed on our long-term ambitions.
“Our emphasis on retaining and attracting the best people throughout the business remains unchanged. Our full UK graduate intake for this year joined in October and we continue to develop our apprentice scheme. Our business balance initiatives are a central focus for the group executive board. We acknowledge we have much to do in the UK to improve balance and we have an agenda for change, which is gathering momentum and already delivering results. For the last two years, we have been working with external consultants to help us achieve this, including Wiser, 20-first and Jane Hollinshead. We set ourselves targets for our internship programme this year with 20% BAME, 50% state educated, 50% non-real estate degree 50% men and women and achieved them all. We have set similar targets for next year’s graduates and general recruitment to improve further on our balance into the future.
“Wellbeing is being attributed a greater priority now more than ever and, linked in parallel, the ESG agenda is only gathering more momentum, which is heartening. Respecting government guidance and social distancing, offices have wherever possible remained open and with strict hygiene protocols in place. It reminds me just how important it is for our people to meet and collaborate as a key aspect of work but also for the individual’s development and mental well-being. Virtual meetings and interaction can only go so far.”
This year’s trading
“For many years now we have not fully distributed our profits and this has allowed us to develop a strong cash reserve. We have underpinned by our business model of long-term organic growth, rather than acquisition, ensuring our balance sheet is not inflated with goodwill, nor burdened with debt. We are confident in our platform and our planning in each region and country suggests we will avoid the need for debt.
“In the spring, with a great deal of uncertainty as to what the next few months trading would offer, our group executive board decided it would be prudent to furlough staff in the UK and claim the appropriate grants. As we closed last financial year and began the new one, new budgets were formulated and plans developed. With markets stalled and our offices closed, it was the right decision for the time. Now as we pass the half-year point, income year to date is better than expected and, consequently, we have engaged with HMRC to establish the mechanisms upon which we will return these sums.
“As we look to the future, we believe that next year offers an exciting prospect, albeit the sector will continue through some structural change as a consequence of this year’s events, presenting opportunities and challenges in equal measure. Occupational markets across all sectors are broad and dynamic – each will have a different response and we are analysing this daily to inform the advice we give. Whilst markets remain constrained, we are committed to growing our business organically in those areas our clients need us most.”
Matt Phillips, head of Knight Frank’s Cardiff office said: “These strong financial results were reflected in the South Wales market, where Knight Frank enjoyed an excellent year. Since the end of the financial year in March the country has experienced remarkable changes due to the covid pandemic which still poses enormous challenges in this region. Even so, Knight Frank has been able to continue to grow at a measured pace in recent months, strengthening teams where opportunities arise or where growth of the business requires.
“This ongoing performance reflects the quality of our Cardiff based team, together with our ability to liaise closely with the wider Knight Frank partnership network in terms of contacts, global reach, experience and cutting edge research. In these challenging economic times the Knight Frank partnership model and culture really does shine through. We remain fully committed to what we consider a very exciting business outlook in the Principality and are looking to grow further moving forward.”