J. Saville Gordon Group

Citation

Temple, P. (1998), "J. Saville Gordon Group", Journal of Property Valuation and Investment, Vol. 16 No. 1. https://doi.org/10.1108/jpvi.1998.11216aad.004

J. Saville Gordon Group

J. Saville Gordon Group

Accounts for Year to April 1997

Saville Gordon's strategy is the acquisition and intensive management and development of industrial properties but its recent record belies an optimistic mission statement dedicated to attractive shareholder returns. The reality is that profits have been unexciting for the last couple of years, falling modestly each of the last two years. Dividends and NAV have been flat over the same period.

These comparisons are a little unfair, however, because the years in question have been ones of transformation, with the now-discontinued interests in pipeline equipment and stockholding adversely affected by changes in metal prices, and profits also held back by weak construction industry demand. Profits in this area last year were £700,000 compared to £2.1m in the previous period. By contrast rental income rose from £10.5m to £11.8m and profits from continuing property activities from £9.1m to £9.8m.

The pipeline business was sold (at a small profit) for £3.8m in the year under review and the year was also marked by the acquisition of a £46.3m industrial property portfolio , a rights issue of £45m, and the appointment of Roger Carey (ex-MEPC and Slough Estates) as chief executive, all of which occurred in March.

SG already had sizeable property interests before this acquisition, but the result of the move was to raise the value of the property investment portfolio from £126m to £181m at the year end, with annual rental income running at around the £17m mark. The move towards the end of the year also shifted the balance away from retail, raising the proportion represented by industrial from 38 per cent to 58 per cent, an interesting contrast with the strategy adopted by Grantchester, for instance.

Portfolios were acquired in the Midlands and the SE from Peel and from Royal London Mutual, representing a cross section of property. The RLM portfolio was generally built comparatively recently to a high specification. The Peel properties are based around estates developed on former mill properties, although the largest asset is a large trading estate in Worcestershire which alone produces more than half of the retail income for the two portfolios combined. The purchases were made on yields of around 11.7 per cent, although this reflects a wide disparity, with the newer properties not yet reversionary and the mill properties yielding 15 per cent. Voids overall are around 14 per cent but the application of specialist management skills to these areas offers some scope for improvement on this score.

The Hartlebury property in Worcestershire in particular is capable of substantial further development, with 24 acres identified as capable of development and buoyant demand for space in the area. Development for alternative uses is being explored at the northern based mill estates.

Comparison with Slough Estates is inevitable, given Roger Carey's past association with (and departure from) it, and shareholders may well find that rivalry with Slough proves a powerful generator of returns over the next few years, always assuming that the climate remains favourable for businesses of this type.