CBRE posts £4m Q2 loss and is set for further cuts

News

Mike Phillips

01 August 2009

CB Richard Ellis this week revealed it made a $6.6m (£4m) net loss in the second quarter of the year, primarily due to one-off costs related to its staff reduction programme.

But shares in the company soared 8% to $10.75 as investors showed their approval of the deep cost-cutting.

The world’s largest property services companysaidit has targeted another $100m of cost reductions, taking the total to $600m since the start of the downturn.

The $6.6m loss for the three months to 30 June compareswith a net profit of $16.6m in the same period last year. Costs associated with staff reductions totalled $17m for the latest quarter, part of a $22.5m total of one-off charges.

The companysaid that, excluding one-off costs, it made a net profit of $9.7m -a 70% drop on the same period last year.Global turnover was down 26% to $956m.

CBRE’s European operations showed the worst performance. Operating income was down 88% on Q2 2008 to $3.4m. Revenue fell 41% to $177m.

Earlier this year, CBRE raised $600m in new equity and subordinated debt to ensure it had sufficient headroom to avoid breaching covenants on existing loans.

Chief executive Brett White said this had put the firmon a firmer footing, with debt having dropped from $2.7bn at the end of the first quarter to $2.4bn at the end of the second.

“During the [second] quarter we raised $600m in new capital, which we are using to lower our secured bank debt, obtain loan amortisation and maturity extensions, and ensure our financial strength throughout this economic downturn,” he said.

White added that there were not yet any signs of a sustained recovery in the global property market.

“While remaining keenly focused on helping our clients to succeed in the current weak environment, we continue to position CBRE for an inevitable rebound in the global commercial real estate market,” he said.

“When the recovery comes, the moves we have made to streamline our operations and improve efficiencies, while preserving our essential geographic platform and broad service offering, will enable us to capture disproportionate market share and provide substantial operating leverage to drive bottom line earnings.”

Operating income for CBRE’s business in the Americas fell 44% to $26.5m, while revenue fell 23% to $601.6m. Operating income in Asia Pacific fell 50% to $10.9m, while revenue dropped 21% to $122.7m.

Analyst Will Marks of JMP Securities said of the results: “Total revenue declined 28% against our expectation for a decline of 26%, yet EBITDA of $91m easily topped our $68m estimate. While Q2 EBITDA was well below the $115m from Q2 08, the EBITDA margin actually improved to 9.5% from 8.7%.”

CB Richard Ellis this week revealed it made a $6.6m (£4m) net loss in the second quarter of the year, primarily due to one-off costs related to its staff reduction programme. But shares in the company soared 8% to $10.75 as investors showed their approval of the deep cost-cutting. The world’s largest property services companysaidit has targeted another $100m of cost reductions, taking the total to $600m since the start of the downturn. The $6.6m loss for the three months to 30 June compareswith a net profit of $16.6m in the same period last year. Costs associated with staff reductions totalled $17m for the latest quarter, part of a $22.5m total of one-off charges. The companysaid that, excluding one-off costs, it made a net profit of $9.7m -a 70% drop on the same period last year.Global turnover was down 26% to $956m. CBRE’s European operations showed the worst performance. Operating income was down 88% on Q2 2008 to $3.4m. Revenue fell 41% to $177m. Earlier this year, CBRE raised $600m in new equity and subordinated debt to ensure it had sufficient headroom to avoid breaching covenants on existing loans. Chief executive Brett White said this had put the firmon a firmer footing, with debt having dropped from $2.7bn at the end of the first quarter to $2.4bn at the end of the second. “During the [second] quarter we raised $600m in new capital, which we are using to lower our secured bank debt, obtain loan amortisation and maturity extensions, and ensure our financial strength throughout this economic downturn,” he said. White added that there were not yet any signs of a sustained recovery in the global property market. “While remaining keenly focused on helping our clients to succeed in the current weak environment, we continue to position CBRE for an inevitable rebound in the global commercial real estate market,” he said. “When the recovery comes, the moves we have made to streamline our operations and improve efficiencies, while preserving our essential geographic platform and broad service offering, will enable us to capture disproportionate market share and provide substantial operating leverage to drive bottom line earnings.” Operating income for CBRE’s business in the Americas fell 44% to $26.5m, while revenue fell 23% to $601.6m. Operating income in Asia Pacific fell 50% to $10.9m, while revenue dropped 21% to $122.7m. Analyst Will Marks of JMP Securities said of the results: “Total revenue declined 28% against our expectation for a decline of 26%, yet EBITDA of $91m easily topped our $68m estimate. While Q2 EBITDA was well below the $115m from Q2 08, the EBITDA margin actually improved to 9.5% from 8.7%.”