In a statement Chief Executive Michael Holmes said: 'The uncertainty in both the commercial real estate market and the mid to highprice London residential real estate market that developed in April and early May has hardened into a sharp reduction in the volume of transactions completed in May and June.

'This has adversely affected our traditional property agency and advisory activities at a time of year when, through typical seasonality, we normally earn the major part of our profit. Therefore it is now clear that our profit for the year to 30 June 2001, to be announced in September, is likely to be substantially below last year's figure and significantly below the market's expectation,' Holmes said.He added that cost-cutting measures had already been put in place. 'Discretionary spending has been cut and action is being taken to streamline our cost base for the future, on the assumption thatthe volume reduction might continue for some time,' he said.

Chesterton shares closed in London at 25.5p, down 8.5p on the day.