May 13, 2003
Chairman’s remarks
We reported very fully on our current activities in the Annual Report published a few weeks ago. As I commented in my Statement, 2002 was a very challenging year for all businesses and as a Group we are, of course, extremely dependent upon the well-being of our customers.
Property markets across the world, particularly in the UK, were bifurcated with demand for well-leased investment properties remaining positive, which has resulted in stability in property values. Conversely occupancy demand has weakened over the year and these conditions continue to prevail into 2003.
The demand for offices in central business districts and high-tech locations has been particularly affected by the downturn in world trade but industrial usage has remained more stable and retail space has remained very positive.
In general the rate of rental growth has declined, though it remains positive for both industrial and retail property.
I am pleased to be able to report that since the year-end occupancy across the Group has improved, albeit by a small proportion. When we link this to the fact that some 80 per cent of current rental income is contracted for 10 years and beyond, we are in a very strong position.
Looking towards the future, market recovery does depend upon business confidence being restored but it is difficult in times of geopolitical turmoil and economic uncertainty to predict both the rate and timing of such recovery. There is no doubt that the greater clarity over the Iraq situation has improved sentiment but it still has a long way to go to restore confidence within our customer base to invest and expand. These conditions could well present us with attractive opportunities to expand our portfolio in the nearer term.
Our new Chief Executive, Ian Coull, has been conducting a thorough review of the Group’s business and the Board will be discussing this with management in the coming weeks. Ian has confirmed that he believes our overall strategy is sound and that he sees the priorities in delivering our activities in a more efficient and effective way. We will report further on this review in due course.
In the meantime Slough Estates has a resilient strategy, a strong core income stream, a powerful balance sheet and a well-leased development programme. We have a very talented and experienced management team here in the UK and overseas who can deliver our expectations. We therefore remain confident that these strengths will ensure that the Group’s prospects continue to be sustainable.