Enjoying the perks of a shareholder
| by Andrea Page 03 Jan 2004 Topic: Personal Finance |
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Andrea Page looks at the fringe benefits of holding certain shares There is such a thing as a free lunch, or at least a cheaper one, if you own shares in Groupe Chez Gerard or City Centre Restaurants. These are just two of many UK companies which reward shareholders with discounts on anything from food to a new house. Shareholder perks should be viewed as no more than an appetiser - the primary criteria for investing in any company must always be its share price and dividend yield prospects. Perks tend to come from traditional sectors rather than telecom, media and technology companies, says Emma Rees, spokesperson for Barclays Stockbrokers, whose free perks guide covers 129 companies. Independent financial adviser (IFA), The Millfield Partnership, also offers a guide, while stockbrokers, The Share Centre, and IFA, Hargreaves Lansdown, have on-line versions. It's always worth calling the company prior to investing, in case of corporate or policy changes. (Although Debenhams is expected to be acquired and its shares delisted at time of writing, existing shareholders will continue to get 12.5% off purchases via a store card, at least for the time being.) 'Some perks are quite useful day to day,' says David Jeal, The Share Centre's marketing manager, citing Big Food Group. It sends vouchers with each interim report for ongoing discounts on food and appliances at Iceland stores. Many are travel-related and could be handy if, for example, you own a holiday home. 'Although we wouldn't advise anyone to buy shares just for the perks, I do know some expats who live in Andorra who have bought the minimum holding of P&O shares to gain the discount on the ferry crossing to get home to the UK, because the nearest airport is miles away in Barcelona,' says Emma Rees. Shareholders with at least 600 of P&O's concessionary stock get 25%-50% off return ferry trips with a car on four main routes (and half these discounts for a holding of 300 shares). The full discount would mean investing £1,038 - that would take 40% or £161 off the cost of the Portsmouth-Cherbourg sailing for a family of four's two-week trip next July. Regular fly-drivers to countries in Europe, the Middle East, Africa and Asia, where car rental group Avis Europe operates, could also save money over time. Invest £388 on a chunk of 350 shares and you could recoup nearly half that outlay when renting a VW Golf for two weeks in Italy next July (normally £418). Certain rewards are potentially worth thousands; housebuilders Barratt Developments, Bellway, Persimmon and Redrow all discount the price of a new home. On paper, Bellway's £625 reduction per £25,000 of purchase price looks the most tempting, but also illustrates why you should like the stock, not just the perk. As the minimum requirement of 2,000 shares would set you back £12,500, the perk only kicks in for higher-end homes. Redrow's 1% discount is for investors with 2,500 shares, an investment of £7,450, and can be used in tandem with other promotions. All four housebuilders only offer the discount once you've held the shares for 12 months so there's a time delay to factor in, especially for off-plan purchases. Nick Raynor, investment adviser at The Share Centre, says rising interest rates, high levels of building and the difficulty for many first-time buyers in getting on the property ladder could impact profit margins in the sector, and isn't expecting much share price performance over 12 months. He points out that the hotel industry did pick up during 2003 as people apparently felt sufficiently confident to spend more, a trend that could continue into next summer, barring major shocks. If so, he thinks it could take Hilton Group's share price to around £2.50. And you only need one share to earn perks including 15% off meals and drinks in Hilton hotels and 10% off fees at its LivingWell health clubs. Around half the companies researched by Barclays Stockbrokers require no minimum shareholding. Their perks include 20% off a purchase at Laura Ashley and 20% discounts at various Mulberry stores. Shareholders can subscribe half-price to publisher EMAP's consumer magazines, while City Centre Restaurants shareholders can dine out with up to nine others eight times a year at restaurants including Caffe Uno and Est Est Est, and get 25% off the total bill. Check for restrictions, especially if you invest to claim a perk. For example, Laura Ashley's discount only covers full-price goods and Eurotunnel, which offers 30% off three return or six single car journeys, charges a supplement for caravans and camper vans. And there may be a deadline - Next's 25% discount voucher is issued on 1 April and is valid for six months, while to claim P&O's discounts you must be on the share register by the preceding year end. Nominee shareholders In the age of low-cost sharedealing, your broker may well hold shares for you in a nominee account. This means you're not automatically entitled to claim any perks because it's the nominee company, not you, who is listed on the share register. The majority of companies will let nominee shareholders enjoy perks, although you must first ask your broker to identify you to the company registrars. Some low-cost on-line brokers may not be willing to incur even this small cost: Barclays Stockbrokers, Hargreaves Lansdown and The Share Centre will all notify companies or pass back perks without charge. Only 14 companies researched by Barclays won't offer perks to nominee shareholders. 'We feel that's unfair because by buying in the nominee's name they are saving the company cost and time,' says David Jeal. These include Barratt Developments, Centrica, Eurotunnel, N Brown Group, P&O and Travis Perkins. Looking ahead, shareholder benefits may evolve in future. 'Investomers' (customers who are also shareholders) are two-and-a-half to five times more profitable than non-investing customers, claims shareholder relationship management company ComputersharePepper UK. They need loyalty programmes that can be tailored to reflect their interests and their relationship with the company. 'It's about making shareholders happier and more involved with the company, which will drive revenue,' says business development director Mark Sheppard. 'Nobody has adapted the learning from customer loyalty programmes and applied it to shareholder loyalty, but it's not that big a leap.' Part of this could involve incentives for shareholders who elect to receive company information like the annual report in electronic format. RMC and Kingfisher have signed up to ComputersharePepper and Future Forest's incentive scheme to plant a tree for each shareholder who signs up for e-communications, and BT is directly offering a range of special offers on its own and third party products to shareholders who get on board. (All share prices/calculations at time of writing.)
Barclays Stockbrokers, 0845 608 9000, www.stockbrokers.barclays.co.uk Andrea Page is a freelance journalist writing on investment, property and lifestyle issues for a range of UK and international titles including Bloomberg Money and FT Expat magazines. | |