Becks departure is the sign to sell out of United

Best to give Misys a miss; News flow at Johnston remains good
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The Independent Online

Setting aside for a moment the national tragedy of it all, the raw financials of the sale of David Beckham are great for Manchester United. The company will make up to £25m from the sale of an asset which is nearing the end of its productive life and which is valued at zero on the United balance sheet. In two years' time, Beckham would have been a free agent able to transfer clubs without a penny being paid to his former employer.

Shareholders won't get their hands on the cash, though, since the first lorryload of Real Madrid cash, totalling £7.5m, will no sooner have been delivered to Old Trafford than it will be on its way back out again. Whether the destination of that cash is Paris St Germain, for the purchase of Ronaldinho, or a variety of smaller clubs, United were making it clear yesterday that the Beckham proceeds will be invested in the squad.

The rest of the cash coming in instalments from Real Madrid over four years will focus the stock market's attention on how strong the United balance sheet is. It has no debt. And with the Old Trafford gates swinging open 60,000 times a fortnight, there is a lot of cash coming in and there is already scope for a special dividend later this year.

Some of the sharpest suits in the City reckon the shares will soar before a presentation on 4 July about plans to exploit media rights on the internet and overseas. This is the only significant area of financial growth for United, since gates are not likely to outstrip inflation. Investors with a gambling streak might score well from buying Manchester United shares now, but they need to be ready to take their profits quickly if they are to avoid an early bath.

The departure of Beckham severely curtails United's marketability in the Far East. It also seems certain that media rights in the UK are coming down in price.

Up 4p to 149p, Manchester United is no fantasy football stock. It has weak long-term earnings growth up front, the risk of a poor run on the pitch makes the midfield look shaky, and there is no chunky dividend in defence. Avoid.

Best to give Misys a miss

The flow and ebb of the dot.com tide has left some odd combinations of businesses inside some of the stock market stars of that mad period. Misys, for instance, is a perfectly boring software company selling a vast array of efficiency-improving products to banks and hospitals. And it is also one of the UK's bigger networks of financial advisers. There once was a plan to hook up all these IFAs to a Misys network and then start selling products direct to the public via internet portals. That never happened, and now Misys plans to float them all off again next year.

In the meantime, this business - to be called Sesame, for no discernable reason - has seen sales decline by 5 per cent in the year to 31 May, as the number of advisers fell and customers continued to be disinterested in stock market saving. The decline was of a piece with Misys' biggest division, its banking and securities software group, where sales to cash-strapped investment banks were poor and the overall revenue decline in the past year was 8 per cent.

There was no guidance with yesterday's update on how current trading is going and what the outlook for the coming year looks like. Investors will have to wait for the results statement in a month's time for that, although the recent share price rise suggests many believe the outlook has improved markedly.

There is certainly a lot of optimism priced in with the shares up 17.5p to 256.5p yesterday, and the stock looks pricey. The US-focused healthcare business is definitely still growing, but the declining dollar and constraints on state budgets could soon put paid to that. Sell.

News flow at Johnston remains good

The media sector has seen quite a bounce since the end of the Iraq war but Johnston Press can claim to have enjoyed a bigger boom than many. The regional newspaper group, whose 243 titles include the Yorkshire Post and the Stamford Mercury, saw its shares jump to an all-time high of 433.5p yesterday, giving the company a market value of £1.2bn.

Part of the reason is that Johnston operates in local newspapers, which have been more resilient than their national rivals. With less exposure to expensive display advertising and a greater weight of classified ads in sectors such as property and cars, regional titles have been able to steer a safer path through the media downturn's choppy waters.

Trading for the first five months of the financial year has seen modest growth in advertising revenue, which is 2 per cent higher than the same period last year, with all major classified sections showing growth. Property was the strongest as the cooling in the market meant estate agents had to advertise their wares in the local newspaper rather than selling them straight off the For Sale signs. Display advertising, though, is being held back by lower demand from national advertisers.

Johnston also said cost savings from the acquisition a year ago of Yorkshire Post publisher Regional Independent Media are now expected to be north of £10m, compared with £9m previously.

So far so good, then, although the shares now trade on a hefty forward multiple of earnings of 15 times. That looks to be up with events for now as further cooling in the property and jobs market could dent revenues. Hold.

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