Savills makes first loss since 1992 after asset writedowns
Thursday 12 March 2009
Savills, the upmarket estate agent, has suffered its first annual loss since 1992 after the financial crisis forced it to write down the value of acquisitions and investments.
The company slashed its final dividend to 3p from 12p, halving the 2008 payout to 9p, and warned that 2009 would be "another challenging year".
Underlying pre-tax profits fell 61 per cent to £33.2m last year as UK residential business slowed dramatically. The prime central London property market fell 18 per cent, faster than the wider UK, as City bonuses dried up.
The £7.7m pre-tax loss was caused by £45.4m of writedowns on past acquisitions and investments in the property fund Cordea Savills.
Peter Smith, the chairman, said: "2008 was a difficult year which saw our markets deteriorate progressively with no region immune to the economic downturn. Globally, markets have continued to deteriorate and in the light of these difficult conditions the board is adopting a very cautious outlook for 2009."
Mr Smith said the company had cut £22m of costs last year, excluding reductions in staff bonuses. He said another £20m of cost cuts were planned for 2009. The bonus pool fell 47 per cent to £59.7m.
Jeremy Helsby, the chief executive, said big falls in house prices, combined with the sharp fall in sterling, would attract interest from cash-rich foreign investors this year. But a more widespread recovery would require an increase in the availability of mortgage credit along with a general restoration of economic confidence, he added.
In the US, investment sales slumped 87 per cent between the first quarter of 2007 and the final quarter of 2008, Mr Helsby said. In Manhattan, where prices are heavily geared to the financial sector, sales volumes dropped 93 per cent over the same period.
Mr Helsby said he would continue expanding in consultancy and property management businesses to reduce reliance on sales. Profits from transactions dropped 93 per cent to £3.2m, but consultancy profits fell 27 per cent to £16.3m. Property management increased profits 29 per cent to £14.2m.
"A return to higher levels of activity will depend on how quickly confidence returns to the financial markets. However, we remain well positioned to seize opportunities as and when they arise," Mr Helsby said.
Savills shares fell 8.7 per cent to 230p but are still up 2.8 per cent this year.
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