CoStar UK - The Leader in Commercial Property Information

JLL reports slowing EMEA Q2 profits insisting ‘fundamentals remain resilient’ despite ‘intensifying global economic uncertainty’

By James Wallace - Wednesday, August 08, 2018 13:11

JLL reported an 11% climb in group revenues within the EMEA division to $846.6m in Q2, on a local currency basis, but this obscures a fall in profitability for the quarter including a 15% year-on-year fall in capital markets revenues driven by the transaction market slowdown.

Operating results decreased by $11.4m and adjusted EBITDA decreased by $10.0m from the prior-year quarter. Adjusted EBITDA margin was 2.9% in USD and local currency for the quarter, compared with 6.1% last year.

“The decline in profitability reflects a shift in service mix toward annuity revenue, transaction and compensation timing, and increased investments in the platform and people,” JLL said in its Q2 earnings statement.

Fixed revenues rose 9% to $693.6m, while fee revenues climbed 5% to $388.3m over the three months to June 2018.  JLL’s five business lines comprise: leasing; capital markets; property & facility management; project & development services; and advisory and consulting.

The standout performer over the quarter was property & facility management, where revenues climbed 19% to top $100m for the quarter ($100.4m), driven by the Tetris fit-out business in Continental Europe. Revenues generated by JLL’s capital markets team, by contrast, slowed 15% y-o-y in local currency terms – from $92.5m in Q2 2017 to $84.1m.  

Investment in European commercial real estate slowed in the first half of 2018, with high valuations tempering the volume of transaction, notably by sovereign wealth funds and US institutions. Investment volumes slid 19% in H1 across Europe to €109.8b, including strong declines in the UK and Germany, the two most active markets in Europe. On a year-to-date basis, however, JLL’s capital Markets fee revenue increased over 2017.

Christian Ulbrich, JLL CEO, said: “Real estate fundamentals remain resilient, and we are optimistic about our full-year performance, despite intensifying global economic uncertainty.”

At the group level, total revenue climbed 12% in USD to $3.9bn, before $1.7bn in reimbursements.  Fee revenue climbed 12% to $1.4bn, including 20% gains over Q2 in project & development services and advisory and consulting divisions.

In May 2018, JLL amended its $2.75bn credit facility, extending the maturity from June 2021 to May 2023, with improved pricing and operating flexibility to support growth strategy.

Ulbrich added: “Our year-to-date performance was strong, reflecting organic revenue growth across our business segments and progress on our digital agenda and technology transformation initiatives.”

James Wallace is a freelance consultant and can be reached via Linkedin or email: jawallace32@gmail.com

Get in Touch
+44 203 205 4600