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Commercial Property News
DTZ profits plunge as recession bites
DTZ today posted an 87% fall in profits and cut its dividend as it struggled to deal with the upheaval in the market.
The firm, one of the big four global real estate advisers, with offices across the UK, said profits slumped from £38m to £20.6m in the 12 months to the end of April. That was despite a 44% increase in revenues to £446.3m.
Chief executive Mark Struckett said the world was experiencing a substantial economic downturn with "general recessionary pressures" across many sectors.
Pre-tax profit fell to £5.6m in the year to April 30, from £41.8m the year before. The steep reduction was partly the result of £11.7m of costs associated with investments in the troubled US market, reorganisation costs after its acquisition of Donaldsons, and redundancy payments.
Mr Struckett said: "While the initial focus was on the financial crisis, there is now more evidence of general recessionary pressure across many sectors. This inevitably has an impact on occupational demand and we expect this to dampen rental growth and performance around the world although some areas, particularly in developing markets, continue to perform well.
"New construction is now being deferred in many parts of the world and for most sectors of commercial property."
He continued: "The major repricing that occurred on investment property in the UK first is generally spreading. In addition to reflecting the prospective weakening in some occupational markets, on which all investment value is ultimately based, the markets will also take note of the recent rise in long term rates driven by fears of inflation. This, combined with absence of debt availability, means that there could be further falls in capital value before the significant sources of equity that are available are encouraged to recommence purchasing."
DTZ said its decision to cut its full-year dividend to 6.5p from 11.5p was 'a prudent measure in more uncertain markets'.
Chairman Tim Melville-Ross said: 'Economic conditions have continued to deteriorate, especially as a result of the credit crisis prompted by the subprime mortgage difficulties in the US. These have had a substantial impact on property markets generally and inevitably our business.'
DTZ's commercial business, which sells and lets office space in the City and beyond, has been hit by falling property values and lower rents. The company said the correction following the 'shock' in financial markets had been 'quick and traumatic'.
Melville-Ross said: 'It is difficult to predict how financial and property markets throughout the world will develop over the next two or three years. We believe the broad spread of our activities over many geographic markets and sectors will stand us in good stead even in a prolonged downturn, and should ensure that we are best positioned to deliver growth and value for our shareholders on the recovery of financial and real estate markets worldwide.'
The firm, which bought retail specialist Donaldsons for £60m last year, is looking for a new chief executive as Mark Struckett plans to stand down. It cut 200 staff following the acquisition and reduced its headcount by a further 50 last month.
The firm, one of the big four global real estate advisers, with offices across the UK, said profits slumped from £38m to £20.6m in the 12 months to the end of April. That was despite a 44% increase in revenues to £446.3m.
Chief executive Mark Struckett said the world was experiencing a substantial economic downturn with "general recessionary pressures" across many sectors.
Pre-tax profit fell to £5.6m in the year to April 30, from £41.8m the year before. The steep reduction was partly the result of £11.7m of costs associated with investments in the troubled US market, reorganisation costs after its acquisition of Donaldsons, and redundancy payments.
Mr Struckett said: "While the initial focus was on the financial crisis, there is now more evidence of general recessionary pressure across many sectors. This inevitably has an impact on occupational demand and we expect this to dampen rental growth and performance around the world although some areas, particularly in developing markets, continue to perform well.
"New construction is now being deferred in many parts of the world and for most sectors of commercial property."
He continued: "The major repricing that occurred on investment property in the UK first is generally spreading. In addition to reflecting the prospective weakening in some occupational markets, on which all investment value is ultimately based, the markets will also take note of the recent rise in long term rates driven by fears of inflation. This, combined with absence of debt availability, means that there could be further falls in capital value before the significant sources of equity that are available are encouraged to recommence purchasing."
DTZ said its decision to cut its full-year dividend to 6.5p from 11.5p was 'a prudent measure in more uncertain markets'.
Chairman Tim Melville-Ross said: 'Economic conditions have continued to deteriorate, especially as a result of the credit crisis prompted by the subprime mortgage difficulties in the US. These have had a substantial impact on property markets generally and inevitably our business.'
DTZ's commercial business, which sells and lets office space in the City and beyond, has been hit by falling property values and lower rents. The company said the correction following the 'shock' in financial markets had been 'quick and traumatic'.
Melville-Ross said: 'It is difficult to predict how financial and property markets throughout the world will develop over the next two or three years. We believe the broad spread of our activities over many geographic markets and sectors will stand us in good stead even in a prolonged downturn, and should ensure that we are best positioned to deliver growth and value for our shareholders on the recovery of financial and real estate markets worldwide.'
The firm, which bought retail specialist Donaldsons for £60m last year, is looking for a new chief executive as Mark Struckett plans to stand down. It cut 200 staff following the acquisition and reduced its headcount by a further 50 last month.
Wed, 9th Jul 2008