Investment Insider: For businesses, the Games created both winners and losers
Sunday 04 November 2012
Who would have guessed that the Olympics would have had such a positive impact on the UK economy in the third quarter? According to the Office for National Statistics, they helped lift economic output. Ticket sales alone added 0.2 per cent to economic activity, which grew at its fastest for more than five years.
That said, the Olympics brought mixed blessings to many businesses. While some companies were boosted by the increase in economic activity, others were hampered by lost production and consumer lethargy. For example, Aggreko, a supplier of temporary power and temperature control, said the Games boosted revenues by £59m. But it didn't prevent it racking up bad debts. Even Ocado said Olympic events influenced ordering patterns over the summer. It would appear that consumers were busy channel-hopping rather than grocery shopping.
Halfords received a boost following the UK's cycling successes in the Tour de France and the Olympics. It posted a 4.6 per cent rise in sales over the summer, helped by a 15 per cent surge in cycling sales. Spurred by demand for racing bikes, Halfords is homing in on the "mamil" – the middle-aged man in Lycra.
EasyJet found that holidaymakers put their plans on hold until after the last medal was awarded. But security firm G4S was perhaps the most high-profile casualty. Its failure to recruit enough guards for the event cost two directors their jobs. It also made a provision of £50m for the loss of the Olympic contract.
Toymaker Hornby said it misjudged the demand for Games merchandise. A scramble for memorabilia in June did not carry through to August.
For some businesses the Olympics will be seen as a roaring success, for others it was as a financial disaster. As investors though, we need to look at the bigger picture by ignoring the Olympic blip and focus on the underlying business. A good business will be a good investment even if it had been hobbled by the Games. A rubbish one will still be rubbish even if it got a boost.
David Kuo is director of financial advice website fool.co.uk
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