Tempus: Dry rot

Savills, the upmarket estate agent, announced today that it would be reviewing its dividend policy early next year after issuing its second profit warning in two months.

The company, best known for selling country houses through advertisements in glossy magazines, said it expected underlying profits for 2008 to be "significantly below" current market forecasts after failing to enjoy its usual seasonal pick up in deal activity.

It said that while some deals were completing, many transactions that were at an advanced stage had either been delayed or were being scrapped altogether.

While its UK residential and commercial businesses as well as its Asian division had performed as expected in the final quarter, its continental European, US and mortgage broking businesses had all experienced a big fall off in volumes.

Shares of Savills, which issued a profit warning in the middle of October, fell by 29.75p to 220.25p in early trading, down 12 per cent, as analysts cut their pre-tax profit forecasts from about £40 million to £31 million. Last year it made £85 million.

The company said that while its property management division continued to see good demand, its consultancy, fund management and financial services operations had all been affected by market conditions to varying degrees.

It said that, despite the decline in trading, it was well placed to weather the storm as it had a strong balance sheet and committed bank facilities until 2011.

It said it was also continuing to reduce its dependance on property deals and would be able to make further cost cuts, raising the spectre of fresh job losses.

It admitted that its ability to maintain its dividend policy would depend on future trading, adding: "The board will consider its dividend policy in light of the full-year result for 2008 and trading in the early part of 2009. "

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