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16 Businessupdate Isle of Man Examiner, March 2006 ISLAND ONLINE Each month GORDON LLOYD-WEST answers questions on technology issues. Oh no, not another version of Windows! Q: I saw an article in the UK press saying Microsoft is releasing a new version of Windows — is this true A: I’m afraid it is and the bad new is that life is going to get even more complicated. Microsoft has been working for some years towards an operating system (OS) that moves away completely from the old MS-DOS system that made Bill Gates his original fortune. The new OS, Vista, due out later this year will put all Microsoft systems on the same footing as the Windows Server system, currently used mainly by businesses. A key reason for this is security with most PCs now being connected to some form of network, even if only via a broadband link. It will also do away with the different OS versions for specific devices such as the Tablet PC and have a more ‘Apple Mac’ style user interface. The problem for many people is that the new OS will require a clear decision over whether you are a ‘home’ or ‘business’ user as well as what multimedia facilities you need. There are versions for Home Basic, Home Premium, Business, Enterprise and an ‘Ultimate’ version with varying levels of software to manage networking, entertainment/gaming, security and data management. I suspect, however, that most business users who currently use Windows XP Professional will need the ‘Ultimate’ version to get all they need. A full description of the new OS can be found on the Microsoft website. Q: We hear a lot about using the internet to save money on telephone calls but is it really viable to use these systems in a small business in the Isle of Man A: It is true that systems such as ‘Skype’, which I have discussed several times in this column, are not generally appropriate for businesses. VoIP systems do not use standard telephone numbers but an ‘IP address’ similar to an email address and most businesses don’t want to use one phone to call out on OUT WITH THE OLD: Microsoft has been working for some years towards an operating system (OS) that moves away completely from the old MS- DOS system that made Bill Gates his original fortune and another to receive calls. There is, however, a range of systems coming on to the market now that allow anyone with a broadband connection to the internet to use their existing telephone system to access VoIP. These are generally referred to as ‘Gateway’ systems because they ‘route’ certain outgoing calls over the internet but allow incoming calls to be passed straight through. The issue for most businesses is, of course, whether the cost of such a unit is justified by the savings on calls but I think that the price of such devices is now at a level where they are worth a look for most small businesses. Q: Does the new ‘chip & pin’ system affect e-commerce websites selling goods using systems such as ‘Worldpay’ A: No. All transactions on these types of e-commerce payment systems are treated as ‘card holder not present’ by the payment clearing systems that handle them. What this means in practice is that, whereas a shop using ‘chip & pin’ can get a refund for a payment that is refused by the cardholder’s bank or credit card company, you will not. This usually limits the amount that vendors will accept or means that goods are not dispatched until payment is cleared. You need to read the small print carefully before implementing such a system. iomtoday.co.im Ask Gordon Find out more about the issues dealt with this week, as well as many more, at www.gordonlloydwest.com. And ask Gordon a question using the website form provided.
Isle of Man Examiner, March 2006 Businessupdate 17 PORTFOLIO PETER SHARKEY Peter.Sharkey@btinternet.com EQUITIES M&B’s one of those gems During idle moments — and I can assure you, there have not been too many of those recently — I make a point of examining what I call peripheral businesses, ones that do not necessarily fit my ideal criteria for stock selection, but which remain worthy of perusal because, well, you just never know… Over the past few years, I’ve looked at all sorts of angles and different sectors, with varying degrees of success, and about 18 months ago, I decided to start compiling a database of companies that had what I considered to be an undervalued asset base. Granted, that’s a subjective notion, but having decided to ignore intangibles, I concentrated instead upon examining the value of each organisation’s realisable assets. What makes this exercise rewarding is the occasional discovery of an absolute gem. I define a gem as a profitable, non-property sector company which nonetheless owns huge chunks of real estate and where the people running the business are concentrating upon doing precisely that, rather than trying to turn it into a completely different beast. Of course, the assets can sometimes be used as security for borrowings, although the level of debt must never exceed the value of the company’s tangible assets. According to my criteria, a gem becomes even more attractive when its UK property portfolio has not been valued for years — the longer, the better. Late last year, which feels like the last time I enjoyed an idle moment, I identified the pub chain Mitchell and Butler as one of my ‘peripheral’ businesses. There was nothing particularly scientific about this selection, merely that I had reached the letter ‘m’ in my alphabetic trawl through organisations which I felt might be of interest. During the course of my analysis, however, M&B began to sparkle. Turnover had risen steadily between 2003 and 2005, from £1.5bn to £1.67bn, while operating profits had increased at a slightly slower rate, but were still a shade under £300m. What really started making M&B appear seductive, however, was its freehold property portfolio. More than 85 per cent of the pub chain’s 2,000-odd estate was freehold properties, valued in the books at £3.85bn; they were last valued in 2003. I heard a little bell ring when I read this, because at the time, M&B had a market capitalisation of £2.1bn and around £1.6bn-worth of borrowings. I deemed a modest dabble was in order, buying M&B at 410p, although I was a bit miffed when they fell back towards 390p in January, despite some early rumblings of a potential takeover. Perhaps another modest dabble then… Step forward Robert Tchenguiz, who, it is reported, has approached Goldman Sachs with a proposal to launch a joint bid for M&B. He has yet to make a formal offer for the chain, although his interest caused the share price to surge towards 490p, enough to ensure I raised a glass to him last week. Tchenguiz already owns some 1,200 pubs and bid for Spirit’s 1,800-strong chain last year, although he lost out to Punch Taverns. He would appear to have everything in place to launch a genuine bid for M&B, after which several analysts believe he could leverage the freehold estate to release as much as £500m, especially as M&B’s ratio of debt to earnings is considerably lower than the sector average. I suspect that although Tchenguiz probably doesn’t keep a list of ‘peripheral businesses’, he knows a gem when he sees one and there is little doubt that in his eyes, Mitchell and Butler falls firmly into that category. Like most people, I remained blissfully unaware of the fact that 2006 is the European Year of Worker Mobility, although when I discovered this potentially life-changing information, my immediate thought was, ‘Who decides upon such labels and what is the EU planning to celebrate its Maoist-sounding project’ A visit to the appropriate EU website informed me that ‘As the EU strives for more “Growth and Jobs” (sic) helping workers to move to new countries/sectors has become even more important.’ What’s this The EU not only embracing, but actively encouraging, one of the most significant aspects of Britain’s competitive advantage Apparently so. Moreover, it plans spending 10 million euros to raise ‘mobility awareness’ and will screen ‘mobility evenings’ on ‘a European TV channel’. Sounds like riveting stuff. I mention this not to poke fun at the EU, but because early next month just six weeks after the EYOWM was launched, the UK Government plans to impose severe restrictions on labour mobility, with potentially damaging consequences for the British economy. On April 6, the UK Government will introduce its mandatory ‘Property Licence’ for properties it deems are ‘houses in multiple occupation’ (HMO), namely houses of three or more floors let to five or more people. Under the provisions PROPERTY An assault on landlords of the 2004 Housing Act, property owners failing to register for a fiveyear licence could be fined up to £20,000. However, in addition to being fined, landlords who do not register with the local authority in which the property is located could discover they have committed a criminal act and may find themselves subject to a rent repayment order, permitting local authorities to seize up to 12 months rent. The effects of this hateful landlord levy will be severalfold. First, it will push the cost of owning investment property up by thousands of pounds: one local authority has already suggested its licence fee will be ‘around £1,100’; others may go higher. Second, it will invariably push rentals up too, especially for students, who tend to be the people most likely to occupy an HMO as tenants. Third, some landlords will feel the additional tax makes it uneconomic to remain in the buy-to-let sector and will sell up altogether, thus reducing the stock of private rented accommodation. According to the UK Government department responsible for introducing the law, it is designed to ‘eliminate poor housing for the vulnerable’, although in truth, the licence fee will merely fund another layer of bureaucrats who, after April, will be able to formally identify rented property and retain the owner’s details on file. Of course, the next legislative step will be explained as some form of ‘rationalisation’ or even promoted in the name of ‘fairness’. ‘Why,’a housing minister will almost certainly ask within the next few years, ‘should one body of private landlords have to pay a licence fee and others not We believe there should be a standard fee, etc, etc…’ That’s right. The real estate in which you have invested as an adjunct to your pension will soon be hit with yet another form of taxation. But if that were not enough, two particular aspects of this odious legislation annoy me more than anything else. First, UK structural unemployment levels are lower than elsewhere in the EU precisely because the UK already enjoys a high degree of labour mobility. It is well oiled by a supply of private sector accommodation, much of which falls into the HMO category. If this disappears, or its operational costs rise, labour mobility will be hampered. Second, the teams of bureaucrats funded by this invidious licence fee will have to justify their existence; they will do so by imposing extra costs upon landlords — insisting that extra fire doors be installed in properties, or completely useless additional kitchen facilities be installed in lounge areas. It is galling to note that local authorities have been able to do this at least for the past 20 years, but most have been too inefficient to do it properly. No new law was required; the legislation already existed, although when the latest one comes into force, many landlords may decide they’ve had enough of assisting labour mobility and consider investing elsewhere. < I’m 32, two kids, a house to run, haven’t studied since Duran Duran were No 1. I’ll never get a degree > Think again. Over a quarter of students on our degree programmes are people who have changed lifestyles and careers by coming to the Isle of Man International Business School… and most thought the chance had passed them by before coming to speak to us. You could be eligible for government funding and our part time study options mean that you can easily organise your studies around other commitments. So do yourself (and maybe your family)* a favour and call our friendly team on 693709 to arrange an informal visit to find out about the options available to you. * According to researchers, a graduate can expect to earn significantly more over their lifetime compared to those with just A-levels.
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