Where Sid won and lost
Clifford German spots the lemons in the basket of privatisation stocks
Wednesday 24 April 1996
But the basket of privatisation stocks contains a number of lemons as well as oranges. The best performers by far have been the early privatisation issues, led by BP, Associated British Ports and Cable & Wireless. All three were sold in stages and in all cases the early birds got the worm. The first tranches were sold off cheaply and the subsequent offerings were offered at higher prices.
Allowing for share splits and rights issues, investors paid the equivalent of 14p a share for AB Ports in February 1983. They now have an investment worth almost 300p a share, more than a twentyfold increase in 13 years. Those who bought the second tranche of shares at the equivalent of 33.75p in April 1984 have multiplied their money almost ninefold.
This is a recurring pattern. Cable & Wireless shares were sold off in three successive tranches at the equivalent of 28p in November 1981, 68.75p in November 1983 and 146.75p in March 1985. And at the current price of 535p each they have proved a good investment, although the returns on the second and third tranches are significantly less spectacular than the ones before.
Investors paid the equivalent of 70.4p a share for the first chunk of government shares in BP sold off in 1977, and they are now worth around 590p, an eightfold gain in 19 years. The next two chunks, sold in 1979 and 1983, have multiplied fourfold, but the fourth and final tranche, which was caught up in the great crash of October 1987, has taken nearly nine years to show an 80 per cent appreciation.
Two other early issues, British Aerospace and Amersham, the healthcare group, have done well by their backers, although the second tranche of BAe cost two-and-a-half times as much as the first. BAA and British Airways, which were not privatised until 1987, have also turned out to be a good investment, with shares now worth four-and-a-half times the issue prices - far ahead of the FTSE index, which has risen about 70 per cent over the same period.
The remaining issues in the Eighties have done significantly less well, however. British Steel, privatised at 125p a share in December 1988, now stands at around 200p, although the FTSE 100 index has more than doubled over the same period. Sid paid 135p for British Gas in December 1986, and although they hit 350p two years ago the shares now languish at 250p - an average growth of 9 per cent a year - and has significantly underperformed the stock market average of 15 per cent a year over the same period.
British Gas has taken some stick from the stock market in the past two years because of the huge long-term contracts to buy gas at prices above the current market level, but persistent investors in British Telecom have little more cause to congratulate themselves. Investors who got in during the first sale in December 1984 now have a stake worth nearly three times what they paid for it. But the second and third tranches have turned out to be poor investments. The second tranche is showing a gain of 12 per cent in over four years, and investors who paid the Government 410p a share for the third and final tranche in July 1993 are sitting on a loss of about 30p a share.
Rolls-Royce was sold off in May 1987, and until recently was showing a loss. A recent spurt has taken them up to 240p, but they have underperformed the market.
Privatisation got a second wind from November 1989 onwards, when the water and electricity industries were sold off. Both sectors have comfortably outperformed the stock market, but it has needed a massive injection of takeover interest to make investors feel they have done well.
Even so, performances have varied enormously. Investors in Norweb made a phenomenal profit, walking away with almost five times their original investment in five years when they were taken over by North West Water. Seeboard, Manweb, Eastern Electricity and South West Electricity have ridden on the same bandwagon, and Southern looks set to follow. Its shares are worth almost four times what they were when investors first subscribed for them in November 1990, over a period during which the FTSE 100 share index has risen no more than 80 per cent.
The remaining regional electricity companies, which have not yet attracted a bid, have done less well for their investors, but there is a bid premium in the price of most of them, and the poorest performer, East Midlands Electricity, has more than doubled their money. Most regional electricity shareholders have also had the benefit of shares in the National Grid, which has been demerged out of the collective ownership of the regionals.
The strong performances of National Power and PowerGen also owe a lot to bid prospects, although it is the same old familiar story in that the second tranches still lag well behind the performance of the first. Investors who bought the first tranches in March 1991 have seen their money multiply three-and-a-half times, more than twice as fast as the market as a whole. But the second tranches, sold off in February last year, are showing rises of only about a third.
Northern Ireland Electricity shares have doubled in three years without the benefit of a bid, but the booby prize in the electricity sector goes to Scotland. Until recently, the two Scottish electricity companies, Scottish Hydro and Scottish Power, have been rather dull performers, sold at 240p and now standing at about 368p and 400p respectively.
Water company shares, which were privatised in November 1989, have attracted less bid speculation and underperformed electricity in spite of their high yields, but bid activity has boosted values. Northumberland, Welsh Water and North West Water lead the pack, but even those companies which have not had a sniff of a bid have turned out to be good investments. Most of them have comfortably doubled in value, compared with a market average rise of about 75 per cent since 1989.
PRIVATISATION PROFITS: THE RECORD SINCE 1977
Company Issue date Price (p) Price now x growth % pa
Amersham Feb 82 142 1005 7.07 43
AB Ports 1. Feb 83 14 291 20.79 150
2. Apr 84 33.75 291 8.62 63
Brit Aerospace 1. Jul 81 150 878 5.85 33
2. Sep 85 375 878 2.34 12
BAA Jul 87 122.5 554 4.52 40
Brit Airways Feb 87 125 555 4.44 37
Brit Gas Dec 86 135 250 1.85 9
BP 1. Jun 77 70.4 589 8.37 39
2. Oct 79 121 589 4.87 23
3. Sept 83 145 589 4.06 24
4. Oct 87 330 589 1.78 9
Brit Steel Dec 88 125 198 1.59 8
BT 1. Dec 84 130 376 2.89 17
2. Dec 91 335 376 1.12 3
3. Jul 93 410 376 0.92 -3
Cable & Wire 1. Nov 81 28 535 19.11 125
2. Nov 83 68.75 535 7.78 54
3. Mar 85 146.75 535 3.65 26
Enterprise Oil Jun 84 185 441 2.38 12
Rolls Royce May 87 170 240 1.41 5
National Power 1. Mar 91 175 605 3.46 48
2. Feb 95 340 470 1.38 33
PowerGen 1. Mar 91 175 606 3.46 48
2. Feb 95 370 468 1.26 22
Scottish Power Jun 91 240 400 1.67 14
Scottish Hydro Jun 91 240 367 1.53 11
N Ireland Elect Jun 93 220 453 2.06 37
Eastern Electricity Nov 90 240 975* 4.06 63
E Midlands Nov 90 273 669 2.45 27
London Nov 90 280 855 3.05 38
Manweb Nov 90 240 990* 4.12 63
Midlands Nov 90 120 417 3.47 46
Northern Nov 90 240 719 2.99 37
Norweb Nov 90 240 1170* 4.87 77
Seeboard Nov 90 120 535* 4.46 68
Southern Nov 90 240 891 3.71 50
South Wales Nov 90 240 849 3.54 48
South Western Nov 90 240 965 4.02 62
Yorkshire Nov 90 240 874 3.64 49
National Grid Dec 95 204 198 0.97 -9
Anglia Water Nov 89 240 614 2.56 24
Northumberland W Nov 89 240 1179* 4.91 63
Northwest W Nov 89 240 627 2.61 25
Severn Trent W Nov 89 240 603 2.51 23
Southern W Nov 89 240 778 3.24 35
Southwest W Nov 89 240 717 2.99 31
Thames W Nov 89 240 584 2.43 22
Welsh W Nov 89 240 750 3.12 33
Wessex W Nov 89 240 362 1.51 8
Yorkshire W Nov 89 240 704 2.93 30
* takeover price
Five Questions On: Mortgage affordability
Buyers beware of new-build home headaches
Women born in 1950s facing severe financial hardship over pensions could have fates changed by Ros Altmann - should she choose to help
Questions of Cash: We bought the special ceramic poppies. Then the saga began
Halifax credit card charges: bank is forcing interest rate rises on its customers
- 2 Maisie Williams has an excellent message for one confused fan
- 4 Tampon tax scrapped in Canada after petition convinces conservative government
- 5 Kate Moss on the naked Calvin Klein shoot and the obsession that ended her relationship
EU referendum: David Cameron's rules are a 'democratic disgrace', says French-born Scottish politician set to be denied a vote
British tourists complain that impoverished boat migrants are making holidays 'awkward' in Kos
A nation of inequality: How the UK is failing to feed its most vulnerable people
Australian man punched in the face for defending Muslim women from abuse on train
David Starkey 'tells Amal Clooney to shut up and stop over-promoting human rights'
EU referendum: David Cameron to deny EU migrants and under-18s the chance to vote
iJobs Money & Business
£30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...
£20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...
£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...
£55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...
Day In a Page
This four-bedroom Edwardian home offers a combination of original features and contemporary design after a renovation by the current owners.
In the pretty market town of Bungay, this grade II-listed Mill House is arranged over four floors, offering four bedrooms and three reception areas.
This four-bedroom home offers a vaulted ceiling in a breakfast room that's ideal for summer entertaining with doors that open to the patio and garden.
On the market for the first time in more than 50 years, this six-bedroom home is a project with vast potential - spread over three floors of living space.
This five-bedroom home comes with a range of outbuildings including a large barn which could be converted into a self-contained granny-flat or rental.
Surrounded by rolling countryside, this four-bedroom barn conversion comes with a self-contained, one-bedroom annexe that could serve as an office or a holiday let.
Located near Harrogate town centre, this five-bedroom Victorian terrace is arranged over three storeys while a current study serves as an optional sixth bedroom.
A ground-floor flat in a country house, located a mile from Sway; this two-bedroom home would make an ideal weekend retreat on the edge of the New Forest.
On a popular residential lane in Caterham on the Hill, this four-bedroom family home offers a secluded garden and a convenient location for local schools and public transport.
Just a short walk from Westerham green, this three-bedroom cottage has a light kitchen with exposed brickwork and double doors that lead to a south-facing garden.
In a prime spot opposite the River Thames, this one-bedroom flat has an 18sq ft reception room with glass doors that open out to a private terrace.
Set in the hills above Llanwrda Village, west Wales, this 18th-century three-bedroom farmhouse has holiday-let potential from a separate barn conversion and annexe.
This charming end-of-terrace townhouse is arranged over three floors, with two double bedrooms and a private courtyard garden located at the rear of the property.
Located in the University area, this semi-detached five-bedroom home is arranged over three floors - there's even a rear garden and off-road parking too.
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool