DTZ Holdings plc: Interim Management Statement and board change

DTZ today reports its Interim Management Statement for the period since 1 November 2008.

On 19 December 2008, DTZ released its half year results and also announced a Firm Placing and Placing and Open Offer and on 16 January 2009 reported that it had raised approximately £48.7 million before expenses. The fundraising exercise also enabled the Group to renegotiate its banking facilities on favourable terms which, together with the equity raised, substantially strengthened the Group’s balance sheet. Given market conditions, we continue to ensure that we maximise our working capital efficiency and are taking the necessary steps to continue to protect our capital base.


Market and trading conditions


Since the announcement in December, the global economic environment has continued to deteriorate, with a correspondingly negative impact on confidence and levels of activity in the commercial property market.


This has resulted in a decline in commercial property investment transaction levels, exacerbated by the lack of availability of debt finance. In addition, activity in the occupational property markets has similarly decreased, with the deteriorating economic environment affecting tenants’ relocation decisions. Prospects of pressures on rental levels are in turn impacting valuations across the board, further affecting investment markets.


These weakening market conditions are reflected in the Group’s trading position, alongside that of our peers worldwide. Accordingly, the Group is achieving lower than expected revenues and maintains a cautious outlook for 2009/10.


Restructuring


DTZ has been very transparent in disclosing its plans to continue to restructure and reorganise the business. In our half-year results, we reported that restructuring and cost cutting measures already put in place would provide annualised cost savings of £15 million for the year ending 30 April 2009, with further savings of £15 million anticipated for the year ending 30 April 2010. The actions to achieve these savings have now been implemented in an accelerated timeframe. In light of the ongoing difficult market conditions outlined above, the Group is already in advanced stages of identifying additional cost savings and it is anticipated these will deliver at least a further £20 million of savings to those mentioned above during the 2009/10 financial year, bringing the total to at least £50 million.


A review of underperforming operations across the Group is well underway. As part of this, the offices in Portugal and Austria were closed in the first quarter of 2009. The business will continue to take decisive action across its geographies and business lines to enhance efficiency, profitability, and margins.


In addition, the Group has taken active steps to improve and streamline management through the introduction of a simpler and more accountable reporting structure. This process has been further enhanced by the creation of an executive committee, reporting directly to Group CEO Paul Idzik, with responsibility for overseeing financial performance, accountability and management discipline. Senior appointments to this committee demonstrate DTZ’s clear commitment to strengthen the Group’s operational and financial performance by drawing on top level managerial experience and skills to complement DTZ’s existing wealth of real estate expertise.


People


As previously announced, following the successful conclusion of the fundraising, Killian O’Higgins, Robert Peto, David Gray, Dag Detter and Les Cullen resigned from the Board and Frank Piédelièvre, Pascal Derrey and François Tardan were appointed as Non-Executive Directors.


We announced on 17 February 2009 that the Group’s Finance Director, Colin Child, had indicated his desire to seek new challenges outside the Company. The Group has now appointed Bob Rickert, Chief Operating Officer, to the additional post of Chief Financial Officer (“CFO”), supported by James Thomson as Deputy CFO. In light of this, Colin Child will step down from the Board and will leave the Company with immediate effect.


Outlook


Historically, the Group has generated a higher proportion of its annual revenue in the second half of the year. At the time of the half-year results, we expected this to apply in the current financial year, but noted the difficulty in making accurate predictions in the face of unprecedented and turbulent market conditions. Since December, as illustrated by the steep decline in stock markets and economies across the world, there has been a significant ongoing deterioration in trading conditions and the Board’s current view is that the Group will report a loss before taxation and exceptional items for the year to 30 April 2009 significantly greater than previously anticipated.


We are also carrying out a review of the carrying value of goodwill and intangibles of previously acquired businesses and it is likely that further significant non-cash impairment charges will be reported in the current financial year.


The Group continues to act decisively across its businesses and these measures will provide a sound base on which the Group will be well positioned to benefit as the markets start to recover.

source : DTZ