4 - 10 January 2001

Investors Corner

The Market
On the last trading day of the year, UK oil stocks fell as the price of crude dropped, with BP Amoco and BG leading the declines. Meanwhile, Vodafone shares climbed higher after it secured management control of Spain’s number two mobile phone company. The FTSE 100 Index fell 0.7 points to 6,222.5, a drop of 10.2 per cent on the year. Three shares advanced for every two that declined, on the Friday half-day session, in the FTSE All Share Index, which gained 2.12 points to 2,982.81, down 8 per cent for the year.
Vodafone rose 12.25 pence, or 5.4 per cent to 245.5 pence, adding almost 33 points to the FTSE 100 Index. The world’s largest wireless phone company will pay about $1.6 billion in shares to buy 8.1 per cent of Spain-based Airtel, the companies swapping the stakes after the market close.

Helical Bar
During the six months to 30 September 2000 Helical Bar, a property group, generated a level of development profits normally achieved only in a full year. This exceptional performance arose primarily from the letting of 100 Wood Street, London EC2.
Looking forward, the 140,000 square feet office development at The Meadows, Camberley pre-funded by Scottish Widows is due for completion at the end of 2001. In July Helical Bar announced an office campus development of 340,000 square feet in five buildings, funded by Prudential, on a 22-acre site at The Heights, Weybridge, to be completed by Spring 2002.
Recently Helical were selected as development partner by NCP on the re-development of their car park in Brewer Street, London W1. This proposed mixed use scheme is likely to comprise 80,000 square feet of offices, 40,000 square feet of residential and 20,000 square feet of retail space with completion due in 2003. The company has also acquired a site in Madrid for the development, in partnership with occupiers, of a telehousing building.
Helical Retail, its joint venture with Oswin Developments and now led by Jonathan Cox, has two retail developments under way. At Boltongate Retail Park a 122,000 square feet retail warehouse is being built for B&Q, funded by HSBC. At Oakenshaw Road, Solihull a 12,500 square feet retail warehouse, pre-sold to Nestle Pension Fund, will also be completed next Summer. In Middlesbrough, a small portfolio of five shops next to the Captain Cook Square development, completed last year, have been sold, with a further four shops on the market.
Due to the successful letting at 100 Wood Street, Helical Bar has had an exceptionally good six months. The repositioned investment portfolio and its development programme enable the company to benefit from increased demand for space and rising rent levels in London and the South East.

Land Securities
Over the past six months Land Securities, the property group, has made a good start in implementing the strategy outlined in May when it announced that it would be restructuring the group into development and asset management divisions and seeking to create additional earnings streams by optimising the returns from property. In line with its strategy to concentrate on acquisitions that provide Land securities with the opportunity to add significant value through active management or redevelopment it has purchased or agreed to purchase over £400 million of property since 1 April. These acquisitions not only offer good short term running yields, but also long term redevelopment opportunities.
Land Securities’ value of the portfolio at 30 September 2000 was almost £7.2 billion. At the same date, the annual rent roll, net of ground rents and excluding the same properties, was £474.7 million, 6.6 per cent of this figure. For some time now, Land Securities has been carrying out research into the effects that new technology is having on traditional business models, including those applying to all real estate asset classes. As a result it is establishing a focus group within Land Securities, to concentrate on developing and implementing strategies to ensure: firstly, that its buildings are ‘e- enabled’ and, secondly, that it increases earnings from technology-based value-added services. In particular, Land Securities is in discussions with potential service partners to provide “broadband” wiring to its office and retail portfolio.
The relatively benign outlook for the world economy has been upset recently by a number of factors, which include substantial oil price increases, mounting political concerns in the Middle East, a very weak euro and volatility in many stock markets. Nevertheless, with the current very low vacancy rates in all sectors and limited supply in the pipeline, the fundamentals for the direct property market remain sound.

Great Portland Estates
Great Portland Estates, the property group, announced that the entire industrial, distribution, retail warehousing and other non-core retail holdings were sold, together with regional offices offering limited growth prospects. Aggregate proceeds amounted to £305 million and since 30 September further disposals of £12 million have been effected; this means that within twenty months Great Portland Estates sold some 73 properties to realise £411 million.
Great Portland Estates has succeeded in increasing rents north of Oxford Street by 10 per cent since March, and, within 15 months of purchase, 28 Savile Row (12,000 square feet) has been completely refurbished and 66 per cent let at rents well above original expectations. This was one of the properties on the Pollen Estate where its active involvement resulted in a highly satisfactory outcome, through the profitable sale of its beneficial stake in the Pollen Trust and the simultaneous regearing of its long leasehold interests.
With regard to its medium-term office development programme, good progress is being made with the relevant planning authorities at Frimley (81,000 square feet), 22/25 Northumberland Avenue, WC2 (18,000 square feet), 190 Great Portland Street, W1 (135,000 square feet) and the scheme at Mortimer Street/Great Titchfield Street, W1 (240,000 square feet). In the City, a consortium is being formed with two adjoining landowners to investigate the redevelopment potential of a large site incorporating its holdings in St. Mary Axe, Camomile Street and Bishopsgate, EC2.
Great Portland Estates believes that although current economic conditions appear to remain relatively calm, there are some indications that the United Kingdom property market is slowing down. It does not expect the very strong rental and capital growth of the last two to three years to be sustained. Nevertheless, Great Portland Estates claims that there is still good potential within its chosen spheres of operation and that shareholder value will best be realised by its strategy of continued investment and development in London and in South East offices.

BOC
BOC, the industrial gases supplier, announced that the recovery in the US and worldwide steel industry that began in the closing months of 1999 gathered momentum during the first half of 2000 and created additional demand for industrial gases. The US economy continued to grow strongly, particularly in technology based industries but the pace of growth was slower in the second half.
Manufacturing output in the UK remained relatively depressed. The impact of new tonnage projects in the south Pacific region and the development of BOC’s Afrox health care business, following its successful integration with PresMed, offset less buoyant economic conditions in Australia and South Africa.
The economic recovery that began weakly the year before in most Asian markets gathered momentum in 2000 and the beneficial impact of better sales volumes on profits was magnified by productivity and business efficiency programmes which had been implemented in several of BOC’s Asian companies.
In Gases and Related Products, BOC reported that the volume of work to be executed by Process Plants diminished during 2000, while a significant reduction of fixed costs was insufficient to offset the whole impact of the reduced workload. Unrecovered costs in Process Plants were therefore greater than in 1999 and the financial performance was an increasingly negative influence on the overall operating profit of the gases business as the year progressed.
BOC’s sales of bulk and tonnage gases in the UK during the fourth quarter were similar to a year ago but operating profit was lower due to non-recurrent charges booked in the quarter - principally from the early adoption of a revision to a new UK accounting standard on fixed assets. BOC’s gases businesses in North America continued to make strong progress, while in Africa, turnover for the year increased by 34 per cent and operating profit was up 17 per cent in 2000, partly because of the inclusion of results from the PresMed hospitals for a full year instead of just one month in 1999.
The industrial sectors of southern Africa suffered from slower growth of demand and reduced investment by customers. Investment confidence was generally low and manufacturing output in South Africa was affected by the political developments in Zimbabwe, which had been an important export market for South African manufacturers.
In Australia, economic growth was focused on the service and technology sectors while the growth of industrial manufacturing slowed. Turnover of bulk and tonnage gases increased in Australia and New Zealand mainly as a result of higher on-site sales volumes under new and existing supply schemes, resulting in a strong profit improvement. BOC’s gases company in Japan, OSK, achieved a significant improvement in turnover and in trading profit in 2000.
The turnover of BOC’s gases businesses in north Asia was up 19 per cent in 2000, mainly as a result of new process gas solutions investments in Korea and China. In 2000, most of the countries of south east Asia continued their recovery from the economic downturn. Markets in the export-oriented electronics, glass, chemicals and food industries experienced solid growth, while the construction and metals fabrication sectors remained flat.

Scoot.com
Over the last few years Scoot, the business directory services company, worked very hard to create a unique value proposition for its buyers and sellers. As predicted, it is starting to experience a rapid acceleration of operating momentum with its subscriber base up 36 per cent in the first six weeks of the current quarter alone. Scoot’s objective is to deploy its proprietary assets effectively across Europe whilst keeping its business on a clear path to profitability.
On 30 September the Scoot subscriber base was 30,069. This represented an increase of 29 per cent over the previous quarter. At 10 November, the subscriber base reached 40,812, up 36 per cent since 1 October. Growth achieved in the current quarter has been derived by the Scoot/LooT direct sales forces. From mid-November, the company is expected to further benefit from subscriber growth with the gradual introduction of indirect sales channels, such as the one signed with The Carphone Warehouse.