Tim Melville-Ross, Chairman of DTZ, made the following statement at the Group’s AGM at 11.00am today at One Curzon Street, London W1:

"The Group’s results for the year to 30 April 2008 were inevitably impacted by the deterioration in global economic conditions which had – and continue to have - a substantial impact on property markets generally. Despite this, I was pleased to report in July that our underlying profitability remained at a creditable level and in line with revised market expectations.

Revenue for 2007/08 increased substantially by 44% to £446.3 million, boosted by the impact of acquisitions, and, encouragingly, organic growth of 15%. Despite this increase, however, profit before tax and exceptional items reduced by 46% to £20.6 million, largely as a result of the change in mix of our income streams with much of our capital markets business particularly affected by difficult economic conditions.

We regard the continuing prudent management of the business as vital to ensure that we are well placed in the future to benefit from the return of more normal market conditions and thereby deliver long-term value to our shareholders. We have, therefore, focused even greater emphasis on managing our cost base. Various measures were put in place from Autumn 2007, including selective recruitment restrictions which resulted in a net reduction of around 200 jobs through natural wastage by the end of the last financial year. Since then, ongoing measures are expected to generate further savings in this financial year of at least £15 million. This, together with lower variable remuneration reflecting trading, should substantially offset the impact of reduced transactional volumes.

In addition, the Board firmly believes that we must remain focused on the development of the Group’s strategy to work with clients to create leading edge property, investment and business solutions worldwide. It is this established strategy that has allowed the Group to generate profits in these difficult market conditions, albeit at reduced levels, with both our geographic and skill diversifications broadening the range of income sources to give us some protection from adverse developments in certain areas.

Market and economic climate

The economic outlook has continued to deteriorate since our year-end report to shareholders and it now appears likely that the economic consequences of the credit crunch and rising inflation will be felt until 2010 at least. The global economy is now so integrated that it is unlikely that one region can effectively decouple from another. However, the varying economic conditions in different parts of the world is providing a degree of protection to organisations like DTZ that have the capability to operate a broad range of activities across most global markets.

Real estate market and trading conditions

The impact of these difficult economic conditions is now being felt in real estate markets around the world, but to different degrees and over different timescales. Thus market difficulties experienced first in the US and the UK are now being felt in continental Europe and in most Asia Pacific markets.

Real estate investors have become increasingly cautious and this will be reflected in further re-pricing in a number of markets. However, significant equity funds are available for investment, and, at the right levels, real estate will again become a favoured asset class. There are purchasers in the market, but they are demanding and cautious. In many locations, there is a gap between vendor and purchaser expectations although the public emergence of distressed situations and associated pricing may assist increased market activity, albeit from a low base.

Occupational market activity is also inevitably being affected, with tenant demand reflecting general economic conditions and selectively putting pressure on rental values, although a more modest development programme than in past cycles means there is unlikely to be a large vacancy overhang in most major markets.

While these underlying conditions impact on transactional activity, our strong teams in non-transactional areas have generally shown robust performance during the year to date.
There is still good demand for valuation services, in part prompted by these volatile economic conditions, while our long established corporate recovery team has been very busy and is operating in over 20 countries. There are also good levels of activity in both professional services and consulting, prompted by demand for outsourcing property management, requirements for project management and building consultancy skills, and for corporate strategy and consolidation advice for occupiers.

Outlook

We expect the Group’s results for the year to follow the normal pattern and be weighted towards the second half. However, in the current market conditions it is more than usually difficult to forecast full year results which inevitably will be affected by economic, market and corporate trends.

With a focus on attracting quality business, building our market presence and ensuring a proper attention to cost control without undermining the capacity of the business to respond when market conditions improve, we believe that the Group is positioned to deliver growth and value for our shareholders in the medium term.

source : DTZ