Forget the headline numbers from DTZ this week – a pretax loss of £3.4m, revenue down by around 4% to £341.3m – it’s the contrasting, underlying national numbers that reveal most.
In the year to 30 April, UK revenue fell to £128.3m from £145.7m, while profits slumped to £3.1m from £8.7m. Cross the Channel and performance improved markedly. The continental Europe, Middle East and Africa region posted its second successive year of improved performance, with profit before tax and exceptional items of £2.4m, compared with a loss of £3.3m last year.
Look further afield and performance is more impressive. The Asia-Pacific region posted rising revenue (up 8% to £106.3m), while profit before tax and exceptional items continued its (albeit modest) climb, up to £8.8m from £8.7m.
What does this mean for a debt-laded business in play? Talks with potential bidders – 55% shareholder SGP and Australian services firm UGL – are “ongoing”. Other rumours continue to fly. An MBO? Boston Consulting Group? NIA Global?
The smart money is still on SGP, though there was a major caveat in this week’s statement: “There is no certainty that any offer will be forthcoming.”
What DTZ needs is certainty; a lack of it is inarguably curbing its recovery. At the very least, too much management time is having to be devoted to reassurance: of staff and of clients, existing and potential.
Assuming that certainty does result from a deal, this week’s results will give any new owner pause for thought, not least around the firm’s future branding. If it’s SGP and, as mooted, the business is flipped to BNP Paribas Real Estate, could DTZ go the way of King Sturge? That threat seems to have receded. What UGL – a £1.5bn firm with interests in natural resources, property management and rail – may think is less obvious.
But let’s return to this week’s numbers: UK profit shrinking to £3.1m; EMEA profit more modest at £2.4m; and Asia Pacific profit growing to £8.8m. Global economic power is shifting east and DTZ is the market leader in China. It’s a compelling story for any suitor. Not only that, providing he can be kept on side, an acquirer would end up working with DTZ’s head of Asia Pacific CY Leung, one of the most influential businessmen in Hong Kong. Indeed, some suggest Leung may resist any deal that kills the DTZ brand. If you were acquiring that business would you want to ditch the brand?
So buy, buy DTZ? There’s a strong case. But bye bye DTZ? Surely not.
The simmering row over the Crossrail compensation scheme is coming to the boil. This week Hammerson kicks off the first of potentially hundreds of compensation disputes over compulsory purchase orders. Its claim relates to a CPO on its delayed 200,000 sq ft Triangle office site in Paddington, W2. Lawyers are hoping – sorry, expecting – that there will be many similar claims. A pre-trial review of the case begins next month.
