Debenham's profits collapse

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The Independent Online

City Editor

The moribund property market claimed another victim yesterday as Debenham Tewson & Chinnocks announced a slump in profits for the six months to October and slashed its dividend from 1.5p a share to just 0.6p.

Debenham's shares, which have already tumbled from a high of 156p at the beginning of 1994, fell a further 6p yesterday to 41p, barely above the low level they reached in the depths of the propery industry's recession in 1992.

Richard Lay, chairman, said he remained cautious on the short-term outlook for the industry. "Activity in the property market remained at a subdued level throughout 1995, with tenant demand showing few signs of recovery and with capital values lower by the calendar year-end."

Turnover in the first half was almost maintained at pounds 27.75m (pounds 28.1m) but pre-tax profits collapsed from pounds 1.79m to pounds 937,000 as over-capacity in the surveying industry and little demand for agency work created wafer- thin margins.

Mr Lay said: "As I have said before, we suffer both from the weakness of the market itself and from the continuing significant over-capacity in the property advisory profession in a market which is markedly smaller than it was five years ago. This has led to fee levels being cut to uneconomic levels."

Debenham has at least survived the longer-than-expected property recession, which at the end of last year dragged one of surveying's better-known names into receivership. Colliers Erdman Lewis had to be rescued by Conrad Ritblat, the agency interest of British Land's chairman John Ritblat, after failing with the loss of more than 50 jobs.

Mr Lay said he believed there was a growing awareness of the fact that high-quality work was unsustainable in an unrealistically priced market. Debenham, Mr Lay said, would not take on any new work other than at an acceptable profit and he encouraged the rest of the industry to follow suit.

During the period Debenham acted on some high-profile property deals, including the sale by British Coal of 5,000 non-operational properties covering 150,000 acres.

Since the end of the first half, the firm has advised the purchasers of the former MI5 headquarters in Curzon Street, a deal which has freed up one of the best development sites in central London. It is also working for Lloyd's of London in the insurance market's sale and leaseback plans for its trophy headquarters in the City.