Savills issues profit warning as brokers see transactions dry up

International property adviser Savills warned on Friday that its profits this year would be less than expected as a result of a 'sharp reduction in transaction volumes'.

The company said in a statement: 'In recent weeks investor confidence has been severely impacted by the recent turmoil in financial markets, which has led to a sharp reduction in transaction volumes. While we currently expect the full year to be weighted towards the second half, in light of weaker economic conditions we expect underlying profit before tax to be below the current range of analyst forecasts.'

Earlier this year Savills beat analysts’ expectations for 2007 by reporting a 14% increase in profit to £85.5 mln.

Conceding it is not immune to the crisis, the London-based listed company said 2008 would be more challenging. The firm said its Consultancy and Property Management businesses remain robust but fund raising has been modest and transaction fees lower than planned. 'A return to higher levels of transactional activity will depend on how quickly confidence returns to financial markets. The steps we are continuing to take to reduce costs, our strong balance sheet, with committed facilities until 2011, and our successful strategy of reducing dependence on transactional income will continue to serve us well in these markets.'

Savills' share price has fallen 23% this year compared to a drop of 34% on the FTSE All-Share Real Estate Index. Savills share fell up as much as 7% following the Friday's profit warning but ultimately the company closed at 220 pence, just 0.75 down on the close the day before.

Savills listed peers have also experienced high volatility this year. DTZ, which has a market capitalisation of £40 mln, is even rumoured to be a possible takeover target. The company’s share price in London has dropped more steeply than the real estate market in the last 12 months. The share has fallen from 424 pence in October 2007 to 67.75 pence on Friday.

New York-listed CBRE, the largest commercial real estate services company in the world with a market capitalisation of $1.28 bn, has seen an 88% decline in its net income for the second quarter of this year. Its share price has dropped 73% in the last 12 months. Last Monday the share opened at $9.72 only to drop 35% over the next five days to close on $6.32.

Chicago-based Jones Lang LaSalle, the number two property services firm with a market capitalisation of just over $1 bn, reported a decline of almost 70% in net income for the second quarter of 2008. JLL’s share price in New York has fallen almost 67% in the12 months, and in the last week dropped 14% to close on $31.12.