Chairman's Statement
2008 was a difficult year which saw our markets deteriorate progressively with no region immune to the economic downturn. Through a combination of the hard work of our people, rigorous early focus on our cost base and the benefits of our diversified business model, both in terms of geography and services, we have produced a resilient performance.
Results
The Group's underlying profit before tax was £33.2m (2007: £85.5m), on revenues of £568.5m (2007: £650.5m). After exceptional items, the Group's reported loss before tax was £7.7m (2007: profit £85.9m).
Developments
Despite the tough markets, we have continued to diversify our business, investing selectively in establishing new teams, such as our UK Corporate Finance Advisory team, a Valuations team in China, a Retail consultancy team in Amsterdam and Corporate Recovery teams in the UK, US and Asia. New offices were opened in Mexico, the Channel Islands, Belgium and Germany. We have also strengthened existing teams and integrated some to capitalise on their combined resources and skills base.
In 2008, the Group disposed of its 50% stake in Infinergy Limited to its joint venture partner in that business for £23m payable in three installments: £4m on completion, £9m in October 2008 and £10m in December 2009. The 2008 payments have been received and the 2009 payment is subject to a bank guarantee. This sale realised an exceptional profit on disposal of £16.9m.
Cost savings
In virtually all our businesses we pay salaries that are generally below market rates. These are augmented by profit shares (commonly known as bonuses) and commissions based on the performance of the business unit concerned. The lower level of activity across the Group has been matched by a fall in the amount of variable remuneration; profits before bonuses and commissions were down by 52%, and bonuses and commissions fell by 47%.
We have taken action on other costs and have achieved savings of £22m during 2008, excluding profit related bonuses and commissions.The cost of achieving these savings was £2m. The full annualised benefit of these savings will be close to £28m. Our cost base remains under continuous review and we have already identified approximately £20m of further savings which will be secured in 2009.
Impairments
We have reviewed the carrying value of goodwill and intangibles in connection with previously acquired businesses and our co-investments in Cordea Savills managed funds. We have considered the effect of the global financial crisis and future levels of activity, and have recognised an impairment charge of £45.4m. In addition, we have incurred costs in relation to the closure of some offices. These charges have been identified as exceptional and excluded from the underlying results.
Dividend
In light of the significantly lower level of profits in 2008 and continued difficult trading conditions, the Board has recommended a reduced final dividend for 2008 of 3.0p per share to those shareholders on the register on 14 April 2009, payable on 13 May 2009.The Board considers the preservation of cash to be of paramount importance both to safeguard the business against the risk of markets deteriorating further and to enable the Group to seize opportunities as they present themselves. The recommended final dividend gives a total rebased ordinary dividend for the year ended 31 December 2008 of 9.0p (2007: 18.0p).
Board
On 7 May 2008, Aubrey Adams retired from Savills after 18 years (eight of which were as Group Chief Executive). I would like to thank Aubrey for his tremendous contribution to the business. Jeremy Helsby, who succeeded Aubrey, has already had a significant impact on the Group.
On 26 November 2008, we announced that Mark Dearsley, Group Finance Director, had decided to leave the Company to join Partnership Assurance with effect from 13 February 2009. Mark made an important contribution in a short time and leaves the Group in a strong position.
We engaged an outside advisor to assist us in the appointment of Mark's successor and I am pleased to announce that Simon Shaw will join the Board as Group Chief Financial Officer on 16 March 2009.Simon is a Chartered Accountant and is currently non-executive Chairman of Synairgen plc. He was Chief Financial Officer of Gyrus Group PLC from 2003 until its sale to Olympus Corporation in 2008, having previously been Chief Operating Officer of Profile Therapeutics plc between 1998 and 2003. Between 1991 and 1997 he was a corporate financier, latterly at HambrosBankLimited. Simonisalsoamember of the techMARK Advisory Group of the London Stock Exchange, which advises the Exchange on matters of Technology and Mediscience.
Our people
2008 has been a difficult year which has seen streamlining in many areas of our business. On behalf of the Board, I wish to express my thanks to all our people worldwide for all their support and help during this difficult time.
Outlook
Globally, markets have continued to deteriorate and in the light of these increasingly difficult conditions the Board is adopting a very cautious outlook for 2009.
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.
We are well placed in relation to many of our competitors, and our strong financial position and robust balance sheet, with committed bank facilities until 2011 are a major strength. The steps we are taking to reduce costs combined with our strategy of reducing dependence on transactional income will continue to serve us well and we are confident that we are positioned to seize the opportunities when they arise.