The Investment Column: Bid hopes make United a hold

Just like its fashions, Alexon is good value
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The Independent Online

Manchester United's annual results failed to score with the City yesterday, dealers marking the shares down 2.8 per cent to 253.5p after the football club revealed turnover and pre-tax profits had fallen.

Manchester United's annual results failed to score with the City yesterday, dealers marking the shares down 2.8 per cent to 253.5p after the football club revealed turnover and pre-tax profits had fallen.

The club is now a constant target for takeover speculation with the American Glazer family having taken a large stake and Cubic Expression, the investment vehicle of the Irish racing tycoons John Magnier and JP McManus, also sitting there as a dominant force. However, the results will have left them none the wiser if either party really has been seriously weighing up a bid.

Fewer matches played at Old Trafford meant top-line revenues were down from £173m to £169m. This was because of few fixtures in the Carling Cup, the club said. The headline-grabbing fall in pre-tax profits from £39.3m to £27.9m was the result of an accounting peculiarity. Gains from the sale of David Beckham to Real Madrid were reinvested in new signings, the result of which is an increase in the club's amortisation charge and a fall in pre-tax profits and earnings per share.

However, for Manchester United the more relevant figure is operating profits before depreciation and player amortisation which showed that the underlying trading of the company is in solid, if unspectacular form. At this level, the company recorded a 5.9 per cent increase to £58.3m. It also reassured shareholders that its progressive dividend policy will be maintained. The basic dividend was up a decent 6 per cent to 2.65p-a-share.

On traditional measures the stock is expensive, trading at 35 times earnings. However, it would be foolish to sell with the possibility of a bid lurking. Hold.

Just like its fashions, Alexon is good value

When it comes to value, you can't knock Alexon, the fashion group behind brands such as Dash, Ann Harvey and Kaliko. Not only are the clothes it sells in its department store concessions as cheap as chips, but the shares are a bit of a steal too, trading at a big discount to the rest of the sector.

What you can knock, however, is its recent trading figures. Poor clothing sales in the six months to the end of July meant yesterday's interim results missed forecasts.

Sales were weakest across its Bay Trading estate, which caters for the fickle 15 to 25-year-olds market. Underlying sales across the 148 shops fell 6 per cent. Luckily some of its other brands, such as Eastex and Alex & Co, fared better, so group sales only slipped 1 per cent.

Better news on gross margins, which edged higher after the group shut its last UK manufacturing site, meant pre-tax profit rose 10 per cent to £10m.

Alexon's multigenerational approach to fashion, not to mention multi-size (it has brands catering for the very fat and very small) makes it the stock market's most diversified retailer. There is scope for growth from opening new concessions - it currently has just more than 1,000 in the UK - and improving the ranges on offer in Bay Trading. Autumn has also been better, after a tricky August.

Hardly a sexy stock but, like the staples it sells, a worthy enough retail holding. Good value. Buy.

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