Tough times for Savills

Still, there’s no escaping the fact that the here and now remains pretty awful. The management has found no noteworthy green shoots to speak about. The best guess of chief executive, Jeremy Helsby, is that the first of Savills’ many international markets to recover may be London residential property, due to the amount of money waiting to be invested and the increased attractiveness to foreign buyers following sterling’s fall. However, even this seems some way off, with the group expecting another year of low transaction numbers in 2009. Many other markets continue to deteriorate, with Asia Pacific regarded as being in a particularly perilous state.

The group has been making the most of the pain in its markets, though, to offer advice to those hit hardest by the downturn. While transaction-based revenues have been battered, it's moving into new promising areas such as corporate finance. Activities undertaken by this division very much reflect the times, including debt advice, recovery consultancy and loan restructuring. Getting involved with the down-and-outs of the property market has yet to lead to any noticeable rise in bad debts so no new provisions have yet been needed for non-payment of bills. Savills also says it has noted a “flight to quality” prompted by the downturn, which has helped it win market share in areas such as consultancy, management and valuations.

In order to adapt to lower revenues, the group has reduced costs by cutting staff and closing offices. Annualised savings of £28m have already been made and a further £20m of savings have been identified. The cost of this restructuring, and impairments to goodwill, have resulted in £50.8m of exceptional costs which was partially offset by a £16.9m exceptional profit from the sale of Savills’ share of a joint venture.