Review of Operations

In the most difficult of markets and with unprecedented harsh trading conditions, Savills has achieved underlying pre-tax profits for the year of £33.2m. I am very pleased with these results which were earned from our businesses across the globe. These are a testament to the robustness and flexibility of the Savills business model, the spread of our business, the quality of our people and the loyalty of our clients.

In 2008, we had to make a number of difficult decisions in respect of redundancies and restructuring. Whilst we continue to actively manage our cost base during 2009 and beyond, we will not take actions which could damage our business or limit growth opportunities when markets recover. This is how we ensure that we can best serve our clients and constitutes real investment in our business.

Our strategy is laid out in detail in Global Strategy. My aim, since becoming Chief Executive last May, has been to make sure we stay focused on our strategy, continuing to advance our aspiration to be the real estate advisor of choice in our chosen markets, whilst also continually monitoring the markets and adapting our services and business model to suit the extreme conditions in which we now find ourselves.

In my new role I have spent much time visiting many of our offices both in the UK and overseas, listening to our people and our clients and making sure we are working as a team cross-selling our services and getting the most from each other. I have prioritised three areas on which to concentrate to ensure we emerge from this recession a stronger and better business.

The first is client service, to ensure that we all remain absolutely focused on and committed to always going 'the extra mile' for our clients. In bad times, as well as good, clients want to be advised by the very best. They also want to know that their advisors are part of a wider integrated network that provides them with access to market intelligence, contacts and the highest quality advice. We must continually listen to our clients, understand their changing needs in these difficult markets and adapt our services to meet their requirements.

My second priority is to ensure that Savills is well positioned. In the past, Savills has successfully seized growth opportunities as and when they arose, and grown in times of weak markets. With the world around us changing rapidly, we must continually think forward, understand trends, interpret what these trends mean for our clients and adapt our business accordingly. We must constantly evolve our ways of working to develop the right structures and systems to improve our client service and provide the optimum environment for our talented people to operate in. We must strive to deliver the highest levels of service to our clients, with the greatest efficiency.

To this end, in 2008, we established a new Group Executive Board (GEB) which comprises the Heads of our major businesses, the Group Chief Financial Officer and Group Company Secretary, with the aim of ensuring that we have a cohesive and integrated management structure and approach. The GEB is responsible for the day to day management of the Group. It is also responsible for making strategic recommendations to the plc Board and then executing Savills' global growth strategy. This ensures that best business practices across our global network are captured and shared. It also allows us to offer our clients an integrated and international platform and consistency of service under the Savills brand.

My third priority is to ensure that, even in these difficult times, we are looking to invest for the future. In 2008, the focus has been on maximising opportunities from our existing teams and investing in new business streams (such as corporate finance) and new markets (such as Belgium and Mexico). Out of uncertainty comes opportunity and in weak markets there is usually a 'flight to quality' by clients. We have certainly experienced this at Savills, particularly in our Consultancy, Property Management and Valuation businesses globally where clients require quality advice and a trusted name on their reports. We believe this 'flight to quality' will continue in 2009 and, across all property sectors due to the strength of the Savills brand and reputation. We aim to take market share as a result of this ongoing trend.

Our strong balance sheet and profitable track record will help us to remain the employer of choice and continue to attract top quality people in our chosen markets. We continue to invest in our businesses and to hire exceptional talent in areas where we expect to see future growth.

I am delighted that the quality of our work and the strength of the Savills brand have been recognised with a number of awards. In the recent Business Superbrand table Savills has been ranked the number one Superbrand in the Real Estate Sector. This is a fantastic accolade and demonstrates the strength of the Savills brand in our industry.

In Ireland, Savills became the first property agent to win three accolades at the annual Irish Property Awards. We were awarded Retail Agent of the year, Investment Agent of the year, and Residential Agent of the year.

In the UK, we won Industrial Agent of the Year, Scottish Professional Team of the year, and North West Investment Team of the year. Our Property Management teams also won three industry recognised management awards including an Investor in People (IIP) accreditation. Our Planning and Regeneration team were named Planning Consultancy of the Year by the Royal Town Planning Institute. All these awards demonstrate the very high quality of our teams across the country. Further awards are detailed in Our Responsibilites.

If we are to achieve our aim of being the global real estate advisor of choice in our chosen markets we must ensure that our unique Savills culture endures and that all of us at Savills share a common set of agreed core values. In Our Responsibilites we have summarised what I believe those values to be. It is important that these core values are agreed upon and nurtured throughout the business.

A key focus, as always, is to retain and attract the best individuals in all our chosen markets. In order to provide better career progression for our people in the UK, we have launched the Savills Leadership Programme. Through this we will identify and develop our future leaders through an inspirational training and leadership programme to ensure that Savills' strengths and culture continue in the future.

Our people recognise the attractions of working at Savills and we are delighted that, for the second year running, Savills has won The Times Graduate Recruitment Awards, Best Property Employer prize. This is in addition to being the Target Property Employer of Choice for three consecutive years. This is an important achievement, and we take great pride in the fact that Savills is a destination of choice for so many graduates.

During 2008, property, like all asset classes, suffered significant falls in value across the world. However, as we enter 2009, we believe that these significant falls in values, coupled with dramatic falls in sterling against most major currencies, will provide an interesting and exciting buying opportunity for some investors, particularly international investors, which may see 2009 as a unique opportunity to invest in UK property.

However, due to the continuing lack of bank debt finance and forced sellers in the market, and scarcity of high quality investment grade product in the UK, we believe that the volume of transactions in 2009 will be significantly lower than in recent years. In Europe property values have not fallen as far and as quickly as in the UK with the result that there remains a mismatch between vendors' expectation on price and buyers' requirements.

Until this gap is reduced, transaction volumes in Europe will remain low.

In Asia due to the volatility of their markets there is a considerable reluctance from investors, particularly international, to commit to property acquisitions. However, these markets will soon represent buying opportunities for experienced local buyers, many of whom are private and have cash available.

During 2008 we continued to invest in our capital markets teams, particularly in Europe, and we intend to maintain these teams throughout the downturn to ensure that we are in the best position to advise our clients when markets improve.

My first year as Savills Group CEO has, undoubtedly, been a very challenging year. These results demonstrate that we have a flexible business model that can deliver value for shareholders in both strong and weak markets.

With the outlook remaining uncertain, we anticipate a difficult year ahead. However, the strength of our balance sheet, the diversity of our business streams and the quality of our people mean we are well positioned to ride out the downturn and then deliver controlled, sustainable long-term growth for our shareholders.

We remain alert to the challenges ahead and will continue to focus on cost discipline, prudent capital management and, most importantly, providing the very highest service to our clients.